Tuesday, February 20, 2018

Profligacy of Government is a Taxpayer's Burden?

It all started as a co-incidence.

The elevation of Jerome Powell and Prime Minister Modi's Indian Budget presentation.The markets - both Indian and the Dow were at record highs.There was not a single cloud on the horizon.Stocks were jumping 3-4% on a daily basis.Some doubled in a mere 3 months.

Investors found it unbelievable.Thing is,just when they started to believe and put their money where their heart said,the markets started to tank.

Offcourse,it has not been as spectacularly bad as the infamous "Black Monday" of the fateful October 1987 but the jitters are obvious.

The application of Longterm Capital Gains Tax on stocks held over one financial year at 10% has affected sentiment.We are now probably the most highly taxed market in the world?

Every Finance Minister has found it convenient to add the dreaded word "cess" to every annual budget.The hike seen as nominal when added to the various taxes  costs a whopper.

In these 3 years so many expectations have been belied.Other than some necessary reforms the policies or (mis)policies of the previous government continue in some form or the other.

Yes the Public Relations have been spectacular.That is one of the few positives.presenting India to the world as a destination has been worked upon.

The roads still in shambles,the infrastructure pathetic,agricultural practises still 18th Century,the dependence on the Monsoon undiminished.Profligacy of the Government has become a cross to be borne by the taxpaying public.

The emergence of the Punjab National Bank that is equivalent to one third of their capitalization has been a shocker.Yet the government and the leaders slumber on in their belief that they are doing a fantastic job.

The RBI is counting demonetized currency even after a year,the audits are sloppy and a premier institution's reputation lies in tatters.Commentators who till last month were predicting this to be India's decade.....century.....are at best silent and at worst being vocally negative.

The truth lies somewhere in between.

Systems need to be overhauled.More so attitudes.The Rulers and the ruled equation needs a new formula,afterall the demography is skewed in favour of youth!
Indian leadership?

Amidst the gloom & doom,I have 6 Reasons to feel upbeat and hopeful for the future :-

1.Corporate India is shrugging off demonetization and GST and volumes are up

2.Crude oil(which we import for 80% of our needs) is attracting fresh investments and likely to              remain in a band of $60 - $80

3.There are no alternatives to equity so the populance will shrug off the LTCG tax and focus more         on returns

4.This market correction globally would have blown off some of the froth,mind you I say some of         rather than all of it as I see the time correction continuing till mid April 2018 at least

5.The need to overhaul infrastucture globally will be very positive for commodities and the sole             factor of China growing exponentially or not would not matter as much

6.All these 'scams' are good for the system as some long delayed measures have to be implemented       and can no longer to swept off and hidden as the public demand grows for creating a safer and             more risk averse structure

It is important not to get stampeded into thinking that all is lost as there is always hope.The macro fundamentals of the Indian economy remain on keel.Remain invested,avoid greed and try to rationalise whatever good or bad news comes on the grapevine !!

Isn't it darkest just before dawn ?