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Indian Economic Outlook - 2014

HomeIndian Economic Outlook – 2014

For about the last 8-12 months, my main source of income has been the premium I make on writing covered calls. Being involved with the stock markets for a while now, I concluded sometime back that this was my last bet as most other options in the market had run out.  The continuous downward spiral in stock prices may soon close this final frontier as well. Now the spot price at which I started writing calls seems as high as the Empire State building and the premiums, thin as a knife.

About 6 years ago, I was working in London and I remember back then everyone wanted to be in India. From the largest global mobile service provider to the french car makers, the banks, the coffee sellers, ice cream parlours, the list was endless. They all fought hard to enter India. Even my friend Elena, who paid little attention to the Indian economic outlook was taken by the frenzy and wanted to join me to ‘perfect her yoga skills’.

During these 6 years something changed. I cannot pin point exactly what and when, but for some reason, not many want to visit my country anymore. Given that the yoga gurus are busy with political affairs and governance, Elena sure has a valid reason not to visit, but what about the others?

This may just be my personal view, but I think what happens in the absence of leadership is a power strife. Those who deserve to lead but cannot get to the throne for whatever logical or illogical reason, become either corrupt or delusional, sometimes both. What then governs such minds is the will to try and achieve the second best. They rarely get a 100% success at achieving this goal, some do. In the meantime, those who take their place at the throne, spend most of their time appeasing them. On both sides there is a bit of a compromise. The former worried to maintain their position and the latter demanding the most for maintaining their loyalty, after claiming to have forfeited the battle which they never had the courage to fight in the first place.

The result? At some point the two sides are forced to come together and devise some measures to rebuild most of what they had destroyed.

A few years back India’s GDP routinely clocked in excess of 8%. We had the biggest telecom market. Auto sales were rising @20% annually, new airlines were taking wings, companies were queuing up to set power projects. Foreign companies wanted to get into Indian retail market.

Then the news of the first scam hit us, at a time when we had invited more than half the world to our nation’s capital for the commonwealth games. Then again, there was some news about certain frequency allocations and everyone got busy with the telecom scams. Coal allocations were questioned, now the files have gone missing. Today, from railway appointments to land allotments, everything is being questioned.  So is corruption the only reason for why the celebration died?

I think the answer is no. The Governments lackadaisical (and somewhat hilarious) attitude is equally to blame.  Before we forget, about a year back, there was a power failure. No, it did not happen at my house. It happened in 19 states of north India. Twice in 2 days. The power minister offered this: “We got the electricity back in a matter of hours; people should appreciate how work is done at the grid”. Then he smiled.

For a little background now, about a month before this power failure, the then finance minister was made the President of our country. This was after his assertive stance of ensuring retrospective amendment to the income tax laws that forced one foreign investor to pay Rs. 20,300 Cr. in tax. Hmm….only if we could attract a few more investors like this one, we would have all the U.S. Dollars we need ……. somehow they are not easy to come by now, wonder why?

Anyways, this meant that someone had to take care of the finance portfolio; the experienced home minister at the time was given this charge. But now who takes care of the home ministry? Timing was on the side of the power minister. Fresh from the entertainment he offered with his rather odd demand for ‘quick grid repair’ appreciation, he was elevated to the post of the home minister.

And just how is the new finance minister faring? He is doing his bit to keep everyone entertained, that is, if you like to look at the lighter side of life. I surely do. For the rhetoric, I loved this one:

On the 16th of August, the BSE Sensex fell 769 points (4%!!) and the rupee crossed the 62 mark against the U.S. Dollar.

A very calm and composed finance minister offered this “as Thursday was a holiday, Indian market has absorbed two days of hit in one day which is why it appears to be severe hit.”

Now read it again, slowly.

And I swear it almost seemed like he pulled it off. Nobody really knew what was going on but he gave everyone that nice comforting feeling, the kind you get when the pilot says “we should cover the journey in 3 hrs, so sit back and relax”.

Over the next 3 days, the Sensex fell 693 points (another 4%!!) and the rupee crossed 65 mark to the U.S. Dollar.

I for one would never joke on this because things that are tradable like the stock markets have their own logic. These fluctuations are just what have kept me glued to such things. But seriously, if you want people to find solace in the “2 day hit in one day” theory, It is just as likely to back fire as it is to succeed.

Will someone admit that there is a problem, may be have a discussion on the Indian Economic Outlook for 2014?

I hopefully looked towards the parliament, which is in session these days. Now, I don’t expect an MP to stand up and shout “we need money in the system, we are bleeding”, but may be some acknowledgment? A little? So what are the finance minister’s friends doing in the Parliament to help him?

They are busy with the all important food security bill; set to eliminate hunger and poverty by distributing food grains worth Rs. 2 lakh crore, at a time when we are facing one of the worst economic environments I have seen in my lifetime (I am 33). After 9 years of being in power, including the years of unbelievable growth, the government suddenly turned extremely caring towards the weaker sections of our society.

So what really could be the solution? Over the course of the next 9 months, I will be voting twice (I live in Delhi) to choose those to whom I will entrust the task of using 30% of my annual income, efficiently and with all honesty and seriousness. Let’s see, what are my options? Who is talking about what? More than anything, I would like to find someone confident to step up to the top job and say, “Yes, the outlook for Indian economy looks bad, let’s get some serious work done, work in the parliament and in the ministries, let’s buy and sell some assets, let’s make people work more, earn more and spend more”.

Speaking of confidence, this morning I read yet another classic. It was like this “If India is computer, Congress its default programme”.

Really??

Indian Economic Outlook - 2014Just for fun type the words “Default Program” in Google and look at the top 10 results.

It’s about 4.30 PM on a Friday evening and the fact that I did that nonsensical research goes to show how much work I have for the day. The stock market has closed business for the week so no more call writing until Monday morning. This is my time.

Anyways, talking of default computer programs, let’s see what comes pre-installed, that is helpful? Internet Explorer version-10. Seriously, check the browser you are on and tell me how many of you are still on that thing? Ok, let’s digress for a moment. Whether you are currently using it or not, I am sure you are familiar with this message box:

That’s comforting!! I could lose some information and files? Like how many and which ones?

8-10 crucial ones, saved between the period 1993 -2013!!! (selectively gone missing??)

Since, I was engaged in the primary capital markets at the time, I can never forget the Coal India listing, a pure government monopoly which serves almost 50% of our country’s power generation needs. In 2010, the company got listed on the stock exchange amongst much fan fare. On the very first day of listing, the stock made the investors richer by 40% (it closed 40% above the price where it got listed). These days that sector too has an issue with some missing files.

Anyways, as I said, it’s a Friday evening so back to default programs. Now don’t be shy to admit this, when you saw that Send Error Report message, how many of you reported the problem? Those who did will agree with me that error reporting had some resemblance to the present day system. Waves rippled out from a picture of my computer in that box and they flew towards a bigger rack and the message kept changing, in this order (if I remember right) ….Generating report….sending report…..Thank You! And then I waited for something more, and nothing would happen. It was a boring show, so I would go back to work and a few hours later….. it would happen again…… you want to send error report? I would send it again.

And again the same show……Generating report….Sending report …..Thank You!

Again I would look around the room blank, not wanting to come to terms with the fact that nobody listens to me.

You know, I always wanted to find out about the folder where those problem reports would get collected and the guy who had the access to that folder. It would have at least a 1000 records sent by me. Seriously, technology wise, try – Mozilla.org or chrome.com, Id actually go with the first.

But again, this may exactly be the problem today. Which one will you go with? 


– 23rd August 2013; Author

About the Author

Rajat Sharma pictureRajat Sharma is a well known stock market analyst and commentator. He has covered Indian markets for over a decade and is regarded for consistently identifying early stage investment opportunities. Attorney by qualification, Rajat has done extensive work for improving corporate governance and disclosure standards.