Tuesday, July 2, 2013

Mandate 2014 –West Bengal: Confused, complex and rebellious

Our team travelled through 11 out of 19 districts of West Bengal in past week. What we witnessed was not totally surprising but still shocking. It seemed like a different world altogether. Most of the 90mn population lives in abysmal poverty. Persistent exploitation appears to have turned rural Bengal into a deeply disturbed society. The internal disturbance manifests itself in profound rebellion against authority and system.

We found the state completely cut off from the rest of country in terms of socio-economic development.
The key highlights of our West Bengal tour are as follows:

(a)   Over three decades of communist rule has little ideological impact on the peoples’ life. The only thing they seem to have imbibed from communist rule is rebelling against authority and system. The society is still divided on caste and religion lines. Economic disparities are as high as ever. There is little sense of “commune” or “community” insofar as economic activities are concerned. Moreover, the state mostly retains its colonial socio-economic structure – exporting raw material and labor and importing food.

(b)   The much acclaimed land reforms have apparently led to fragmentation of land holdings, making the primary economic activity of the state most uneconomical. There are virtually no signs of cooperation movement in agriculture or industry. The farming techniques are primitive.

(c)   The rebellion mostly manifests against authority on economic and political issues. The social inequality is not only accepted but to some extent protected as just. This makes the society confused and complex.

(d)   The current regime that ended the over three decades of communist rule appears to be making no difference. The people, policies, program and vision all look the same. The only change that is conspicuous is the beginning of local vs. outsider debate amongst urban middle class. Many fear that it will not be long when non-Bengali populace faces prejudice

(e)   The rebellion in the society, especially against the system has traditionally constricted the growth of industry in the state. There are no signs of any change in the offing.

(f)     The feudal superiority complex of middle and upper middle class is intact, more so in rural areas, despite long communist rule.

(g)   The most shocking observation was the gender bias.

(h)   The sense of economic well being that comes from the aggregate data is mostly derived from few pockets like port city of Haldia, capital city of Kolkata and mineral resource belt of Durgapur – Asansol. There are little signs of urbanization and modernization beyond these centers.

(i)      Employment status is poor with stagnant industry and least productive agriculture. The fabled Bhadralok is virtually non-existent outside Kolkata.

(j)      Unlike other states, the construction boom in the state is limited to few select areas.

(k)    WB is perhaps the only large state where 25p coins are in currency.


Read our special series Mandate 2014
















Thought for the day

“Ideology, politics and journalism, which luxuriate in failure, are impotent in the face of hope and joy.”
- P. J. O'Rourke (1947 - )

Word of the day

Scrum (n):
A place or situation of confusion and racket; hubbub.

 (Source: Dictionary.com)

Shri Nārada Uvāca

Agenda for Monsoon session of Parliament is set. Opposition will stage multiple walkouts demanding resignation of Ajit Singh (Jet Ethihad deal), Moily (favor to Reliance with gas price hike), Bahuguna (mismanagement of disaster), Navin Jindal (coal gate), and PM (collective responsibility for all this). Congress will try to unsuccessfully push Food Security Bill amidst din and blame it on the opposition.

Monday, July 1, 2013

Mandate 2014 – Bihar: brilliant people caught in political quagmire

In the last phase of our Discover India tour we travelled through 23 of 38 districts of Bihar state spanning across 8 divisions covering over 2300kms. With population of over 100mn people, the state is considered critical for aggregate growth and development of the country.

Traversing through this land of rich heritage, bountiful nature and brilliant people was a rather disappointing experience. Abysmal poverty, poor social and physical infrastructure, completely fractured political establishment, disinclined administration and deeply divided society on caste lines. We saw a little reflection of much acclaimed 10%+ growth beyond a few large and tier two towns.

The key observations of our Bihar states were as follows:

(a)   The state of agriculture in this predominantly agrarian state is pathetic. Frequent floods, lack of labor (major surprise) uneconomical holdings, poor marketing infrastructure, lack of formal credit, social biases, scant food processing industry and high incidence of land related litigation were some major reasons cited for lower agriculture contribution to the state economy.

(b)   Low agri growth and virtually absent private enterprise has resulted in large labor migration from the state in past 3 decades. This is a strong vicious cycle now which the administration is finding difficult to break despite sizable rise in social sector spending and mostly transparent implementation of MNREGA.

(c)   In the current popular political context, it was inevitable to look for comparisons between Bihar and Gujarat. We found many stark similarities between the two competing states. Like Gujarat, a large component of the Bihar growth could also be attributed to the repatriated money by laborers working in other states. The level of indebtedness at household level is high and exploitive. Society is polarized on caste and religious lines. Land and construction is the largest contributor to the wealth creation in past decade or so. The major differences include over-reliance on government’s provisions in case of Bihar and highly fragmented political establishment.

(d)   Power and poor water management are the most regretted infrastructure bottlenecks.

(e)   The state of education beyond large towns and cities is dismal. Most teachers in villages were found unfit to be even high school students.

(f)     Socio-economic disparities have grown substantially in past two decades. Though the current government has been largely successful in restoring the Bihari pride, the effort has not yielded significant socio-economic dividend.

(g)   The incumbent government appeared losing support of influential middle class post breaking of NDA alliance in the state. As the social division on religious line is not found to be very strong in the state, the expected dividend from minority votes may not compensate for the loss. We see  a material losses for ruling party in the next general election.

Read our special series Mandate 2014















Thought for the day

“The beginning of reform is not so much to equalize property as to train the noble sort of natures not to desire more, and to prevent the lower from getting more.”

-  Aristotle (384BC-322BC)

Word of the day

Dilly (n):

Something or someone regarded as remarkable, unusual, etc.

(Source: Dictionary.com)

Shri Nārada Uvāca

Congress support Kanimozhi for her election to Rajya Sabha and Beni Babu’s hint at understanding with Mayawati in next election, make two things clear:
(a)   Corruption will not be an issue in 2014 election.
(b)   All options for alliances are open.

Wednesday, June 26, 2013

FA-u-Q

Given the turbulence in financial markets, it is common to frequently hear some uncomfortable questions (FA-u-Q). Overwhelmed with hope, fear and greed, these questions are uncomfortable because we cannot answer those questions with any degree of certainty or confidence in the argument.  Some of the questions, we are afraid to hear are as follows:

How much more downside is left?

The potential downside in a falling market and upside in a rising market are always daily rolling targets. Technical targets are usually conditional (e.g., “if market falls below this level, it could go to that level else…) and generally do not account for exceptional moves. Price targets based on fundamental valuation and historical discounting trends are dependent on materialization of multitude of complex forecast regarding likely revenue, profitability, cash flows, capex, project execution, policy environment etc.

At the close of the market on 25th June 2013 we could say that if market sustains 5530 for two days and manages to close above 5650, we could see it going to 5780 level. Else, it would fall to 5470 and then to 5250 level. However, if 1QFY14 results disappoint or June sales figures for auto and cement continue to remain sluggish we may see earnings downgrade and potential market de-rating as macro indicators are likely to remain weak.

If this does not make sense, well it actually does not. We have just tried to evade a straight answer to an uncomfortable question.

This stock is down 75% from its 3yr high. How much more it can fall?

There are about 1100 scrips which are currently trading between 75-95% below their 3yr high levels. The number is much higher if we consider their January 2008 highs. The question is how much more these stocks could fall?

Again there could be no straight answer to this. We can just highlight that a company whose business model has failed is not worth buying or holding at any price – 75% up or 75% down is irrelevant.

Remember besides these 1100 stocks, there are 180 odd stocks which are down more than 95% since their 3yr high levels. These are the stocks which fell 80% or more after first falling 75% from their 3year high levels (from Rs.100 to Rs.25 and then to Rs5).

Is it time to buy midcaps?

Large cap ‑ midcap-small cap; long term ‑ short term; value investor – speculator etc. is nothing but jargon created to unnecessarily complicate the process of investment and compel investors to seek professional advice.

Stocks like Nestle, Idea, Hind Zinc with mkt cap close to Rs500bn are termed midcap, while JP Associate with mkt cap of Rs115bn is a NIFTY stock.

Value investors who bought large cap RIL, Infosys, Bharti, L&T etc. five years back are down close to 50%. BHEL has lost 70% in past 3yrs alone. There is no visibility that these stocks will reach their January 2008 levels even in 2015.


In our view, the approximate correct answer would be buy the companies which are relevant in today’s context, for the period they are likely to remain relevant at today’s price. 

Thought for the day

“How poor are they that have not patience! What wound did ever heal but by degrees?”
- William Shakespeare (1564-1616)

Word of the day

Palindrome(n):
A word, verse, phrase, or sentence that reads the same backward or forward.

 (Source: Dictionary.com)

Shri Nārada Uvāca

Mother Nature has sought to reclaim her abode from encroachers.
The reconstruction of Uttrakhand would be blasphemous if concrete construction is allowed again in the vicinity of sacred temples or on the banks of holy rivers.

Tuesday, June 25, 2013

Believe what you know

The market reaction to the Fed chairman’s reiteration of his long standing and much publicized position on the continuation or otherwise of quantitative easing is not puzzling to us. In our view, most investors do not believe what they already know. “I knew it” is probably the most often used regret phrase in history of mankind.

In his recent blog post BoB Mcteer, former member of FOMC put this succinctly. We feel quoting from that works well for us:

“Writing about unknown unknowns would be more interesting, but I don’t know what they are. Instead, I will focus here on some unknowns that have been bothering me. Most have to do more or less with the efficient market hypothesis, whose logic I find compelling and whose exceptions I find confounding.

Most recently, Chairman Bernanke, in his last two post-FOMC press conferences, said what most people in the markets expected him to say and what the logic of the situation called for. Given the still weak economy the present degree of quantitative easing ($85 billion of security purchases per month) would be maintained, but, if the economy strengthens sufficiently, that pace of purchases would be tapered down in the next several months and, when the economy is healthy enough to be on its own, the purchases would be ended. Short-term Interest rates would remain low some time after that. While one of the medicines would be reduced and eventually withdrawn, the economy would be much stronger before it happens.

First, I have a hard time understanding why the markets take that sensible approach so negatively, especially since it’s been articulated so frequently in the past. Second, why does it take two days to move the markets to their new, more appropriate, levels? Actually, it’s four days: two after each press conference. Do the first two days not count because the market subsequently regained some lost ground? And why does the advance after the first two not presage an advance after the subsequent two and thus render it moot?

Efficient markets help explain why active investors have a hard time beating the market and why most usually don’t. Yet, a still-huge financial sector has a vested interest in clinging to the notion that homework and skill can lead to repeatable success, whether they believe it deep in their hearts or not. But, what happened to the rule of buying on the rumor and selling on the news. That makes sense, but day after day we see markets appear to be surprised by the obvious or the telegraphed.

I’ve always been fascinated by the fact that smart, well-educated, well-trained professionals aren’t necessarily better investors than dopes like me who assume that each stock is already priced to reflect all knowns. It does make life easier, however, to assume that others have done your homework for you.  It’s like choosing your lane on the freeway. You can maneuver in and out of lanes to enhance your relative position, but as often as not you end up about where you would be if you stayed in the same lane. The others do your lane-switching work for you.


Chairman Bernanke must be tearing his hair out. He offers to help as long as it’s needed and to quit only when it’s not and we respond with sell, sell, sell.”

Thought for the day

I'd rather regret the things I've done than regret the things I haven't done.”
-          Lucille Ball     (1911-1989)

Word of the day

 Drawl (v):

To say or speak in a slow manner, usually prolonging the vowels.

 (Source: Dictionary.com)

Shri Nārada Uvāca

Who said water does not have a color?
It appears it does have color and a name also.
In an attempt to capture lucrative weather forecast market, private forecasters debunk IMD claim that the water that poured over North India was monsoon water. They claim that monsoon is yet to arrive in north India.
It seems government is at serious risk of losing another monopoly. We may soon have a weather regulator and rules for FDI in weather forecasting!

Monday, June 24, 2013

Not completely random thoughts

Ben Bernanke in his recent speech highlighted that speculation may be playing a large role in rise in price of nearly everything. Now a hint that free and easy cash might not last till infinity a great rush is seen globally to hoard cash. Historically, it has meant a vertical crash in asset prices. We do not yet know if it is different this time.

However, in domestic context we dare to think a few things that could make our worst case ugly. It is not that nobody has spoken about these things anytime. It is just that only a few are willing to believe what they know. We would like the readers to consider the following:

Rate hike: US yields are moving fast towards 3% mark. Presently INR hedging cost is close to 5%. Meaning soon it will be un-remunerative to put money in Indian debt yielding ~8%. We know but not willing to believe that the current account problem may soon become a balance of payment of problem just like 1991. Rate hike is perhaps the only option RBI has to avoid such situation till our parliamentarians could find some time to sort out the economic mess. Investors who are relieved in their debt portfolios may have something to worry here.

Banking sector crisis: The current power and road sector situation appears much worse than the 1990’s steel and cement sector situation which led development institutions like ICICI, IDBI, IFCI and UTI to the verge of bankruptcy. An illusion is sought to be created about “value” in PSU banks where window dressing is rampant. The bad loans are being refinanced at higher rates giving an impression of sustained profitability. In our view, poor asset quality and improved profitability is a definite indicator of imminent crisis, nothing else.

Public sector: We are inclined to entertain the thought of dismantling of FIPB and entire multitude of rules and regulations governing foreign investments in the country. The speed with which we are heading towards crisis would inevitably bring our audacious government on knees in front of foreign investors and most of the economy will be opened up to them for attracting capital flows. No one will remember that we almost sacrificed the government over trivial issue of opening few Wal-Mart stores

Under these circumstances, most public sector undertakings should crumble. Many like BHEL may not be able to withstand the increased global competitive intensity. The rest like Coal India will be sacrificed at the altar much like BSNL, MTNL and Air India (all coveted monopolies at one time). The nightmare would be LIC going the UTI way, given that it is being made to scavenge all the government s#$t every morning.


Gold Ponzy: One of the easy ways to stem current account slide is to initiate a gold ponzy scheme at the government level. Leveraging the ~600tonne gold held by RBI, the government may issue up to 10x gold certificates to unsuspecting gold buyers, who would flock the markets after a good crop this year. This 6000tonne gold ponzy will have greater impact if combined with gold bonds (like early 1990’s). But imagine if the ponzy runs out before the government could sustainably cure the structural current account/BoP problem. Did you get some jitter down your spine!

Thought for the day

Telling the unassimilated thoughts to go away could is deadly to quality.
-          Robert Pirsig

Word of the day

Fen (n):
Low land covered wholly or partially with water.
(Source: Dictionary.com)

Shri Nārada Uvāca

Reports suggest that partial reduction in LPG subsidies has probably led to some rise in efficiency of use.
The issue needs to be scientifically examined. If true, there is a strong case for extending the experiment to power, diesel etc. also.
 

Friday, June 21, 2013

Keep it simple — politics-II

Almost all governments in past 25years have adopted similar economic policies consistently irrespective of their form (single party or multi party) or constitution (minority or majority). The policy risk therefore in India is therefore reasonably predictable.

For example consider the following:

(a)   The process of meaningful tax reforms was started by the then finance minister V. P. Singh (Congress 1984-89) by rationalizing the tax slabs, lowering maximum marginal tax rates substantially, rationalizing wealth tax and introducing CENVAT. The recommendations of Raja J. Chelliah Committee (1991-93) on tax reforms constituted by the government (Congress 1991-96) have since formed the basis of tax reforms in India. All successive governments have implemented these recommendations. No government has sought to reverse or alter the process started by Congress government (1984-89). These recommendations form the core of the proposed Direct Tax Code.

Committees formed under the chairmanship of other members of Raja Chelliah committee like Govinda Rao, Partha Shome and Vijay kelkar etc. subsequently updated the recommendations to provide further impetus to the entire process of tax reforms in the country.

(b)   The recommendations of Narsimham Committee (1991-92) appointed by Dr. Manmohan Singh, th then finance minister in the Congress government, have largely formed the basis of financial and banking sector reforms in the country. Most successive governments have implemented the recommendations consistently. In fact, P. Chidambram, the then finance minister in United Front government (1998) had re-appointed the Narsimham Committee to make recommendations about the second generation bankin sector reforms. The report was submitted in 1999 to the NDA government which accepted the recommendations. However, almost all governments have failed in building wider consensus on these recommendations and have failed to implement many of them. But acceptance and rejection has been very consistence irrespective of the form and constitution of government.

(c)   The BJP led NDA government enacted the Fiscal Responsibility and Budget Management Act (FRBMA) in 2003. The arch rival Congress led UPA-I government implemented the same in 2004 in letter and spirit. This still forms the very basic of fiscal discipline both at central and state levels, though implementation was suspended in 2009 in the wake of global crisis and need for stimulus.
(d)   The minority government of Chandrashekhar in 1991 introduced the disinvestment policy. Every successive government since then has not only accepted the policy in principle but also tried to actively integrate into the evolving economic model. Almost all of them have consistently failed in implementing the policy.

In short, in our view, the policy risks in India from politics side are low and predictable. Instances like GAAR and DTA with Mauritius are also very predictable in proposal and retracement. The key risk is execution.

Also read other posts in this series:











Thought for the day

“Risk comes from not knowing what you're doing.”
-          Warren Buffet (1930 - )

Word of the day

Balk (v):
To stop, as at an obstacle, and refuse to proceed or to do something specified.

(Source: Dictionary.com)

Shri Nārada Uvāca

Heard the Chief Economic Advisor Mr. R. Rajan yesterday!
He must be realizing that sitting in Geneva (IMF) and criticizing the government is a fun thing. Sitting in Shastri Bhawan in Delhi and doing something is tough.

Thursday, June 20, 2013

Keep it simple — politics

Prior to 2009 elections, the scare of  communists and Mayawati coming to power was so pervasive that nobody was willing to even reason why the communists were bad and why it was not questionable for Dr. Manmohan Singh to risk the government in the extremely tough global conditions, for civil nuclear deal whose benefits, if at all, would be seen only beyond 2020.

In our view equal credit for MNREGA and RTI, two major reforms done during UPA I  should be given to the communists, who ensured that the Congress Party stays focused on the promise of inclusive growth and accountable administration.

We do not consider UPA II a coalition. TMC, NCP, DMK all have same socio-economic agenda as the Congress.

Heading into a major election, especially when the outcome is as uncertain as it could be, it is natural for investors to be jittery about the politics & policy environment and its likely impact on the financial markets.

We however find little evidence to suggest that elections, the form of government or strength of a particular party in the parliament impacts the market performance significantly. Though, usually it is common to see higher volatility during or around elections. We believe that higher volatility prior to next general election will certainly precipitate the market bottoming process.

Insofar as the fear of third front or fractured mandate is concerned we believe the investors should be relieved by the prospects of a true coalition coming to power. Because, post independence the best periods for the Indian economy have been those when a “coalition” government was in power.

It is however important to note that by “coalition” we do not mean multi party governments. In our view, coalition government means where people with different and many a time completely diverging socio-economic policies jointly participate in a government. They arrive at the common minimum agenda of agreement and focus on executing the same, hence avoiding conflicts and logjams.

The first cabinet of India post independence had R. K. Shanmukham Shetty (Finance), Shyama Prasad Mukherjee (Industries) B. R. Ambedkar (Law) and Jagjiwan Ram (Labor). These people did not subscribe to the Nehruvian socio-economic agenda, but we still got a robust socio-economic framework. The singular governments of Nehru (post BRA, RML, SPM - 1956 and 1961), Indira Gandhi (1971, 1980), Rajeev Gandhi (1984) are not really known for good governance or socio-economic reforms.

Morarji Desai (1977 – FERA dilution, Gandhian socialism), V. P. Singh (1989 – tax reforms, social justice), Chandershekhar (1990 – disinvestment, fiscal reforms), PV Narsingh Rao (1991 - liberalization, delicensing), Devegoda/IK Gujaral (1996 – dream budget), Vajpayee (1998, 1999 – divestment, infra development) and Manmohan Singh (2004 – RTI, MNREGA) were all coalition governments. These governments are all remembered for socio-economic reforms causing fundamental changes in the economy. None of these governments is remembered for non-governance, anti market policies or anti business stance.


 (…to continue tomorrow)

Also read other posts in this series:











Thought for the day

“Disability is a matter of perception. If you can do just one thing well, you're needed by someone.”
-          Martina Navratilova   (1956 -)

Word of the day

Falcate (adj):

Curved like a scythe or sickle; hooked; falciform.

 (Source: Dictionary.com)

Shri Nārada Uvāca

Uttrakhand disaster is a stern warning by the ‘Mother Nature’ to all those trying to mess with her.

Wednesday, June 19, 2013

Keep it simple – Equity market returns



Also read other posts in this series:








Thought for the day

“Nothing defines humans better than their willingness to do irrational things in the pursuit of phenomenally unlikely payoffs. This is the principle behind lotteries, dating, and religion.”
-          Scott Adams (1957 - )

Word of the day

Phosphoresce (v):

To be luminous without sensible heat, as phosphorus.
 (Source: Dictionary.com)

Shri Nārada Uvāca

Most good things keep company with problems.
Good monsoon has disrupted the normal life greatly. Expect June food inflation to spike sharply, before it comes down later.

Tuesday, June 18, 2013

Keep it simple – Interest rates

‘Interest’ is the compensation for one of the most important resource needed for production, i.e., ‘capital’.  The rate of interest in short term mostly depends on the forces of demand and supply much like for other sources of production like labor (wages), land (rent) and raw material. However, over a longer period there are many factors that structurally impact the demand and supply of capital and therefore influence the rate of interest demanded and offered for use of such capital.

The benchmark or policy rates established by the regulators or central bankers theoretically play a critical role in determination of interest rate structure in an economy under normal economic conditions. However, in extreme cases policy rates may fail to transmit to the ultimate provider or user of capital.

Indian economy presently is passing through such extreme conditions. Therefore, policy rates established by RBI are not as effective as these should be under normal circumstances.

Banks have not reduced interest rates in past one and a half year despite RBI easing the policy rates. The reason for this failure in transmitting the policy rates are varied and multiple. For example:

(a)   The default risk and therefore credit cost for banks has risen substantially in this period. Most of the credit demand is for re-financing of existing stressed loans or working capital loans. Thus increasing the risk premium.

(b)   Fiscal profligacy has kept demand for government borrowing higher whereas higher inflation and higher administered small savings rates have led to lower deposits growth (supply of funds).

(c)   Precarious BoP conditions have prevented the regulator from aggressively enforcing transmission, as lower rate could impact inflow of much needed foreign capital.

In our view, higher risk, higher demand and lower supply should keep interest rates in Indian context relatively higher for next couple of years at the least.

Also read other posts in this series:








Thought for the day

“The more a sensibilitist I am; The more I seem to want my mountains wild.”
-          Robert Frost  (1874-1963)

Word of the day

Palinode (n):
a poem in which the poet retracts something said in an earlier poem

 (Source: Dictionary.com)

Shri Nārada Uvāca

Jayalalithaa’s googly to BJP – AIDMK supports for communist D. Raja for his Rajya Sabha election.

Monday, June 17, 2013

Impact of rate cuts on equity markets

In past there is virtually no trend as to how market reacts to a rate cut or hike.

However, the only time the rate cut happened after a 5% or more market rally in the preceding month was in January 2009. The market fell 3% in the month following the rate cut.

On four occasions since 2001 Sensex has fallen 5% or more in one month preceding the rate cut. On two of these occasions, Sensex was also down one month after the cut. 

In our view, rate decision today will have little impact on the market direction in next one month.


Keep it simple – Current account deficit

Our policy makers, regulators, economic commentators and analysts have all expressed their grave concerns over the swelling current account deficit (CAD) of India. However, we have not seen any concrete steps to address the roots of the problem. Most of the efforts seem to be focused on containing the legal import of gold and attracting more foreign debt so that at least balance of payment could be maintained. Last week the finance minister suggested that if Indians could restrain themselves from buying gold for one year, current account situation will improve dramatically.

Current account measures trade, international income, direct transfers of capital, and investment income made on assets. A current account deficit occurs when a country's government, businesses and individuals import more goods, services and capital than they export.

Theoretically, CAD arising from trade deficit is never a risk in itself. The excess of imports over exports essentially means that our economy is doing better than the other economies who import from us.

However, it could pose a serious risk if it becomes structural and persists for a long period, especially for a deficit emerging market like India. Consider the following:

(a)   Substantial rise in social sector spending over past decade has led to unprecedented rise in consumption demand from lower socio-economic strata. Domestic supply has however not been able match the demand. Burgeoning middle class has been demanding more phones, computers, luxury automobiles, textile, food etc. not produced locally, besides leisure foreign travel. Young demography and rising aspirations have led to ever rising demand for global education and training as we have failed in constructing enough global standard institutions. These trends are not likely to change substantially even if our economic growth persists at current low levels.

(b)   The structure of our exports has changed in past decade in favor of engineering products and services from predominantly consumer goods earlier; meaning our exports are now highly correlated to global growth, which is not likely to improve in near future.

(c)   This structural weakness in trade composition necessitates higher capital inflows so that at least balance of payment could be maintained; meaning we have to maintain our interest rates at relatively elevated level so as to attract higher foreign capital; meaning domestic investment will continue to suffer and supply constraints will persist for longer period.

Only serious structural reforms that attract significant foreign equity capital and other resources to augment domestic supply could resolve this conundrum. The current political structure does not seem to be conducive for such reforms.

Insofar as gold is concerned – the government and RBI need to evaluate, is buying gold worse than splurging on fashion textiles brands, accessories, perfumes, luxury cars and boats, studying in third grade central European universities and holidaying abroad twice a year?



Also read:






Thought for the day

“A grievance is most poignant when almost redressed.”
-          Eric Hoffer     (1902-1983)

Word of the day

Diglossia (n):

The widespread existence within a society of sharply divergent formal and informal varieties of a language

(Source: Dictionary.com)

Shri Nārada Uvāca

In spite of everything BJP and Congress together may still get 35-40% of the votes cast in next elections.
Any front, alliance, strategy that talks about keeping them out of government is undemocratic, undesirable, and unsustainable.