Wednesday, February 25, 2015

"Made in India" Budget 2015

No matter how much we say that the annual 'Budget' exercise of the Indian Government is a non event,we still feel the weight of expectations come the end of February.

This year is no different.

The middle class expects tax sops.

The corporate sector expects a cut in corporate tax.

The infrastructure and real estate segment expects liquidity and easier rates to get rid of piling inventory.

This year all eyes are on the Manufacturing sector what with all the hoopla and stress on 'made in India'.

The stabilization in the USDINR rates and appreciation of renminbi are positives for MII.Increase in labour and electricity costs in China have forced many Indian corporates to manufacture here rather than import the entire product from China.ITC,Godrej,Bosch and Micromax are some examples.

Although the last couple of years in India have seen the lowest growth in decades,the general consensus is that this is the time to leverage India's demographic advantage.Additionally the Yuan has climbed 7.2% versus US dollar compared to a 26% fall in $ against the Indian Rupee(INR).

Labour costs too have risen 10% YoY in China especially in coastal regions where most of the manufacturing facilities are located.This though is not likely to make a huge difference.

Aspirations of Chinese workers has risen with the strength in their economy and a shortage of people to perform menial work is also being felt.

Places like Haridwar in Uttrakhand and Baddi in Himachal Pradesh have been joined by cities such as Vizakhapatnam and Dehra Dun which were traditionally non manufacturing areas.With the planned industrial corridors and linkages in transport as well as roads,it will create a complete advantage.

That is where the Budget 2015 is being watched for lead indicators of how this Government plans to execute the vision already communicated by the Prime Minister.

Thursday, February 5, 2015

Be Sceptical NOT Cynical....yet!

Come January or February of every year, middle class India awaits the upcoming Budget,tax concessions or raise,train fare hikes,price of white goods and a whole lot of other expectations.

The Investing community too turns crystal ball gazers,analysing and re-analysing the affect on the price of stocks and which Companies would benefit from whatever announcements happen.

After the underperformance between 2010-2013 we have seen a superb return in 2014 in India post elections with the average return close to 40% annualized.

2015 will certainly be time for a reality check.

Most stocks have run up on expectations and the entire PR machinery of the BJP government has done a commendable job in tom-tomming the various positives.they have had marvellous luck with crude prices crashing leading to a moderation in inflation - the main components that have unsettled the Indian economy for so long.

Looking behind the veil,exports are yet to pick up on MoM basis,the Current account deficit is still above comfort levels,local manufacturing is stuttering,hiring and new jobs across sectors are yet to firm up.If elections in the capital Delhi throw up a negative surprise for the BJP then the invincible looking Modi aura will suffer its first dent.

The prononcements have come think and fast but there has really been no reform 'muscle' behind anything.Its begining to look like this Government is carrying on the policies of the previous regime which they so vehemently opposed.

So should you be cynical ?
Be a sceptic not a cynic yet as there is yet time for new policy measures.

If Greece can manage an ordered exit and save the Eurozone from an economic disaster,we in india can look forward to renewed growth initiatives by the government and the RBI to further lift GDP growth above the expected 5.5%.Talk of India overtaking China are farfetched,though those who read my regular posts will know that I am a cynic on China.Their way of growing at the cost of the environment and people,the lack of transparency and nobody knows what other scams lie buried,the NPAs of Chinese state funded Banks

The Elephant may not be faster than the Dragon.It certainly is the more trustworthy!