Conventional wisdom has it it, if economy is growing and corporate fundamentals are strong, investing public would getting attracted especially towards stocks of companies doing well and those who are partners in growth story. During last 4 years since 2010, Indian economy has been on a downward trajectory with GDP growth showing a decelerating trend to 6.2% in 2011-12; 5% during 2012-13 and further down to 4.4% & 4.8% during first and second quarter of 2013-14. Yet, acting in a contrarian mode, foreign investors have shown extraordinary interest in Indian stocks and resorted to aggressive buying spree. During 4 years ending December 2013, they have pumped around Rs 370,000 crores (US$ 60 billion). This is more than combined investment in...
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Dr Manmohan Singh press conference – an exercise in ‘obfuscating’ facts
The 5 years of governance (2009-10 to 2013-14) under UPA II has been an economic disaster. But, Dr Manmohan Singh during his press conference on January 3, 2014 – third during last one decade of his un-interrupted stint as Prime Minister – tried to camouflage it unsuccessfully though. Having got a mandate to re-govern in 2009, it was only logical that Dr Singh should be doing an introspection on the performance of UPA Government during the last 5 years viz., 2009-10 to 2013-14. Yet, he preferred to amalgamate UPA I & UPA II and exhorted that economy had done consistently well during last one decade. To even make a reference to the performance under UPA I at current juncture is...
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Pruning LPG subsidy – one step forward, two steps back
UPA (United Progressive Alliance) Government always talks loud on economic reforms. However, it moves at a niggardly pace when, it comes to taking hard policy decisions. Moreover, there is no guarantee that it would stick to those decisions. A classic example is LPG subsidy. For decades, sale of LPG (besides diesel and kerosene) was subsidized under an administered pricing regime (APR) for petroleum products. Funds for subsidy came by way of revenue generated from sale of products like naphtha, ATF (aviation turbine fuel), fuel oil, LSHS (low sulphur heavy stock) etc at higher price. Essentially, this involved cross-subsidization by consumers of high end products like naphtha and ATF through what was euphemistically described as Oil Pool Account (OPA). OPA was...
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Is Kejriwal indulging in populism?
In a drastic shift from conventional approach to governance, immediately after being sworn in as CM of Delhi, Mr Kejriwal has got cracking and taken decisions to deliver on two major promises made in AAP’s election manifesto. These are reduction in power tariff by 50% on supplies to households consuming less than 400 units and supply of 20 kilo liter of water per family per month ‘free’ to all those families having a metered connection. For decades, established political system has either reneged on commitments given to the public or acted with a huge time lag giving much less than what was promised. Quite often, winning parties have even slept over till it is time to face electorate again. This pattern...
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2014 dawn – on shaky economic foundation
For Indian economy, 2013 has ended on a sombre note. The beginning itself was tumultuous as growth during fiscal ending March, 2013 plummeted to a decade low 5% and current account deficit (CAD) high of 4.8% GDP, US$ 88 billion in absolute terms. In the third quarter of that year ending December 31, 2012, CAD had hit a scary 6.7% of GDP. Despite reduction in subsequent quarter to a little less than 4%, overall CAD was close to 5%. This was almost double RBI comfort level of 2.5%, reminiscent of 1991 crisis. Fiscal deficit though lower than target at 4.9% was fortuitous – made possible by huge compression in plan expenditure by Rs 90,000 crores (around US$ 17 billion) and...
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Are Indian banks tottering?
The banking system in India is considered to be a rock solid foundation of its economy. Its ‘strength’ and ‘resilience’ was tested during the global financial crisis of 2008 when India survived the mayhem that gripped most parts of the world. However, a glance through the latest Financial Stability Report (FSR) would make us believe that cracks have started developing in this foundation. The Rs 81 lakh crores (US$ 1.3 trillion) banking industry is facing heightened risk. Gross non-performing assets (NPA) – a euphemism for bad loans – of 40 listed banks increased 37% to Rs 229,000 crores (US$ 37 billion) during the second quarter ending September, 2013. Besides, banks have restructured loans worth Rs 400,000 crores (US$ 64 billion)....
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Governance AAP style – will it deliver?
Despite not having an absolute majority and on ‘crutches’ from Congress whose so called ‘un-conditional’ support cannot be taken for granted (already, ex-CM has clarified that this is ‘conditional’ and issue based), the Aam Aadmi Party (AAP) under Mr Arvind Kejriwal has caught the bull by horn in deference to the wishes of majority public opinion of Delhi citizens. Mr Kejriwal draws his confidence not just from overwhelming support AAP got from public during elections and through referendum thereafter but more so from his ‘complete’ and ‘intrinsic’ surrender and dedication to the welfare of the people and no less important, his willingness to govern in an ‘open’ and ‘transparent’ manner. It is precisely this ‘openness’ and ‘transparency’ that gives him...
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Lok Pal – a potent weapon in India’s crusade against corruption
Corruption is the most formidable challenge India has ever faced. This menace has got fully entrenched in the system at every level of governance. It is the biggest enemy of development and well being of the masses. A corrupt politician or bureaucrat in charge of policy making, implementation of welfare schemes, allocation of resources, grant of approvals or licenses, making laws etc is capable of undermining good decisions and causing huge loss to exchequer. Imagine, if this malady afflicts a large cross-section of the bureaucracy and political establishment, the consequences can be horrendous. This is precisely what we have seen especially during the last decade of governance under UPA–I&II. GDP growth has plummeted to a low of less than 5%,...
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Growth held hostage to bureaucratic red-tape
In a recent address to captains of Indian industry at FICCI, Mr Rahul Gandhi, Vice-President, Congress lambasted the ‘arbitrary’ powers enjoyed by an Environment Minister as major stumbling bloc in granting approvals to projects. In this backdrop, it was not just a coincidence that the Union Minister for Environment & Forest, Ms Jayanti Natarajan submitted her resignation though this was camouflaged as being necessaited by the need to enable her focus on party work. At a time when India is trapped in to a low GDP growth trajectory of less than 5%, projects worth Rs 10 lakh crores (US$ 160 billion) are pending clearance at the level of Minister despite approval already granted by environment appraisal panels. Of projects worth...
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Hike in price of domestic gas – defaulter rewarded
In June, 2013, Cabinet had decided to double price of domestic gas from US$ 4.2 per mBtu to US$ 8.4 per mBtu from April, 2014 based on recommendations of a Committee under Dr C Rangarajan, Chairman, PM’s Economic Advisory Council (EAC). However, a notification in this regard was held back in view of a dispute with RIL-BP-Nikko operator of the D 1, 3 fields in KG basin off the AP coast. The bone of contention was a huge shortfall in supply of gas versus the committed quantity under the PSC (production sharing contract). While, Ministry of Petroleum & Natural Gas (MPNG) argued that this was due to a deliberate act on part of RIL not to drill required number of...
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