After a decade of pessimism, Prime Minister Narendra Modi has instilled optimism that India will have a better future
By Mohan Sule
When is the right time to assess a government's performance? Immediately after swearing in? After 100 days? Six months? Most new governments around the world enjoy a 100-day honeymoon. Unfortunately, the Narendra Modi government has been not shown any such courtesy. Precipitating the problem was the mess he inherited: policy paralysis, mounting bad loans of banks and a huge subsidy bill. Initially, surging consumer prices were the focus of the attack. Later, parliament proceedings were disrupted on the issue of return of black money. Now it is the alleged anti-agrarian bias of the government that has become the rallying point. The flirting from issue to issue is due to the lack of stickiness of any. With wholesale inflation below zero and consumer inflation below the 6% comfort level targeted for the current fiscal by the Reserve Bank of India, price rise is no longer an emotive topic. Unaccounted money resonates during times of economic hardships and not when the stock markets are buoyant. Scaling down of the rural employment guarantee scheme and the minimum support price are being blamed for farmers' woes caused by unseasonal rains. This is a 180-degree reversal from attributing the deployment of funds to dole out wages for digging holes for widening the fiscal deficit and causing rural inflation. A moderate increase in MSP against the background of plentiful of crop was praised for capping food inflation, which is allowing the RBI to begin its rate cut cycle. Currency volatility affecting imports as well exports and preoccupation with shedding debt and high-cost inventory contracted when oil prices were high are responsible for the corporate sector yet to see achche din.
As it completes a year in office, the Modi government should have reasons to feel satisfied. The increase in FDI in the insurance sector to 49% has become a reality. The initiation of e-auction to sell mines will mean that henceforth natural resources will never ever be assigned arbitrarily. There were concerns that the high price to secure mines and spectrum will result in pass-through of costs. In the present circumstances, however, transparent allocation of resources is the best possible way. The cost-benefit equation will get sorted over in the coming years, with players keeping their bids reasonable. Besides these visible reforms, behind-the-scenes triggers have been pulled. Many projects got stalled after the 2G spectrum allocation scandal followed by the cancellation by the Supreme Court of the coal blocks allocated since 1993.Promoters, too, did not display any urgency because of the global economic slump. Some projects were starved off coal and other critical inputs such as natural gas. Environmental clearances are coming without any `tax'. The high price of natural gas approved by the previous government was revised to offer a modest increase. Pooling of domestic and imported LNG will even out prices. Taking advantage of falling crude prices, diesel was deregulated. The appeal by the prime minister to the well-off to give up their subsidized LPG cylinders is Kennedysque: Ask what you can do for the country.
Bankers now can sanction loans based on commercial viability. There is consensus among multilateral and credit rating agencies that India is the growth story to watch out for. The upward revision in the outlook for the country from junk status on improving macro indicators will lower the cost of overseas borrowings. Make-in-India and Digital India have the capacity to stimulate the economy. Foreign investors are being treated on par with ordinary tax payers, whose previous seven years' tax returns can be opened for scrutiny. The Jan DhanYojna is set to be a game-changer in the goal of financial inclusion. The amendment to the land acquisition bill is a result of the prime minister's experience as Gujarat chief minister when activists stalled the Narmada dam. The mark of a leader is being firm in his convictions unlike the Gandhi scion who pandered to every section and sub-segment of the society on the eve of Lok Sabha elections. By labeling the NDA government as suit-boot ki sarkar, the Congress leader who aspires to be the next prime minister humiliated the aspiring India and the migrants who come to cities to better their and the next generation's standard of living. Mikhail Gorbachev’s perestroika triggered the fall of the Berlin Wall, freeing former Communist bloc countries from the tyranny of the Soviet Union. The heir to the dynasty of former prime ministers, who kept the animal spirits of two generations of its citizens shackled, perhaps anticipates that Modi will occupy a place in history for freeing India from cronyism, corruption and feudalism after P V Narasimha Rao in 1991 freed India from the licence raj regime.
Wednesday, May 20, 2015
Wednesday, May 6, 2015
Bogus outrage
Attempts to create a level playing field can have limited success going by the experience in the stock market
By Mohan Sule
The trigger for the outrage was innocuous. An Internet service provider offered zero rates to users clicking on the app of an e-tailer. Instead, the merchant paid the ISP for not counting the usage of data by the visitors. Competitors contended the agreement gave an unfair advantage to the trader. A grim scenario was painted of ISPs blocking sites on behalf of government or slowing access to those of smaller players who are unable to afford this extra cost. The argument is that as gatekeepers to the Internet, ISPs have to be neutral in providing access to the net and not help divert traffic to certain sites by providing exclusive lanes to speed up download. The proposition is compelling. Imagine, for instance, a hospital charging differential rates for the same treatment, depending on the economic status of the patients. Civic services like supply of water are billed as per usage and not the purchasing power of the user. Power bills and telecom tariffs are generated as per consumption. Yet, leveling the field is easier said than done. Applicants to private educational institutions can jump the queue by paying donations, disregarding scholastic achievements. Corporate hospitals hike fees to ensure that their resources are not comprised by heavy demand or to enlist specialists. Multiplexes price tickets depending on the popularity of films and screening slots. Credit card issuers routinely offer discounts for visiting certain retail outlets or fine dining restaurants. Brands woo super markets and even mom-and-pop outlets with higher margins for better display and push. This means unless some sort of discrimination is practiced, it will be impossible for many organizations set up to make profit to justify their existence.
The Securities and Exchange Board of India’s experiments to flatten the playing ground for issuers and subscribers have produced more misses than hits. The stock market regulator has strengthened norms against insider trading by enlarging the definition of who fits the bill. Deliberations of board meeting have to be conveyed to stock exchanges within minutes. Transcripts of analysts’ meets have to be posted on the company’s web site for symmetrical dissemination of information. The efforts to protect minority shareholders have been matched by easing of resource-raising. As long as they make full disclosures, companies do not need permission of any authority to list on stock exchanges. This has opened the floodgates for even dubious promoters, many of whom have subsequently vanished from the scene. On complaints about the cost of floating shares to the public and for staying listed, Sebi carved out quotas for institutional investors, throwing in a carrot of retail discount. Shares can be placed with qualified institutional investors, bypassing the small investors. Book building gives big-ticket investors influence to determine pricing as they are informally polled to find the appetite for the offer. Grading of public issues indirectly helped established companies and so will the move to cap the commission of mutual fund distributors, an avenue for small players to gain visibility.
In the debate on net neutrality, a crucial issue has been lost sight of: except for sites put up by governments and multilateral institutions, everyone is out to make money or peddle influence. B2B presence is to gain access to a wider market and B2C properties eliminate the cost of building a brick-and-mortar set-up. Blogs eventually hope to self-sustain through ads. Free content is giving way to paid subscription to meet costs if not to etch out a profit. If there is still an echo of the disastrous eyeball parameter to assign valuations to dot-coms without any cash flows reverberating across the net, it is due to startups, many put up by con artistes out to snag venture capital or private equity. The shrill follow-the-herd cries for net neutrality should recognize that telecom companies have to pay for spectrum. They are answerable to their shareholders. The choice for them is between increasing voice and data tariffs and exploring other options to lighten the pricing burden to stay competitive. Internet retailers, on the other hand, are hobbled by server breakdowns in their quest to expand market share. The result is an arrangement beneficial to all the stakeholders. It is a pity that Flipkart buckled under pressure and backed out of the zero rate plan of Bharti Airtel, which though has stayed firm in going ahead with the program. No doubt, a company has to operate in an ethical environment. But surrendering to populism at the cost of the bottom line reveals to the shareholders where its priorities are. Hopefully, investors will not forget this when the e-commerce pioneer in India comes out with an IPO.
By Mohan Sule
The trigger for the outrage was innocuous. An Internet service provider offered zero rates to users clicking on the app of an e-tailer. Instead, the merchant paid the ISP for not counting the usage of data by the visitors. Competitors contended the agreement gave an unfair advantage to the trader. A grim scenario was painted of ISPs blocking sites on behalf of government or slowing access to those of smaller players who are unable to afford this extra cost. The argument is that as gatekeepers to the Internet, ISPs have to be neutral in providing access to the net and not help divert traffic to certain sites by providing exclusive lanes to speed up download. The proposition is compelling. Imagine, for instance, a hospital charging differential rates for the same treatment, depending on the economic status of the patients. Civic services like supply of water are billed as per usage and not the purchasing power of the user. Power bills and telecom tariffs are generated as per consumption. Yet, leveling the field is easier said than done. Applicants to private educational institutions can jump the queue by paying donations, disregarding scholastic achievements. Corporate hospitals hike fees to ensure that their resources are not comprised by heavy demand or to enlist specialists. Multiplexes price tickets depending on the popularity of films and screening slots. Credit card issuers routinely offer discounts for visiting certain retail outlets or fine dining restaurants. Brands woo super markets and even mom-and-pop outlets with higher margins for better display and push. This means unless some sort of discrimination is practiced, it will be impossible for many organizations set up to make profit to justify their existence.
The Securities and Exchange Board of India’s experiments to flatten the playing ground for issuers and subscribers have produced more misses than hits. The stock market regulator has strengthened norms against insider trading by enlarging the definition of who fits the bill. Deliberations of board meeting have to be conveyed to stock exchanges within minutes. Transcripts of analysts’ meets have to be posted on the company’s web site for symmetrical dissemination of information. The efforts to protect minority shareholders have been matched by easing of resource-raising. As long as they make full disclosures, companies do not need permission of any authority to list on stock exchanges. This has opened the floodgates for even dubious promoters, many of whom have subsequently vanished from the scene. On complaints about the cost of floating shares to the public and for staying listed, Sebi carved out quotas for institutional investors, throwing in a carrot of retail discount. Shares can be placed with qualified institutional investors, bypassing the small investors. Book building gives big-ticket investors influence to determine pricing as they are informally polled to find the appetite for the offer. Grading of public issues indirectly helped established companies and so will the move to cap the commission of mutual fund distributors, an avenue for small players to gain visibility.
In the debate on net neutrality, a crucial issue has been lost sight of: except for sites put up by governments and multilateral institutions, everyone is out to make money or peddle influence. B2B presence is to gain access to a wider market and B2C properties eliminate the cost of building a brick-and-mortar set-up. Blogs eventually hope to self-sustain through ads. Free content is giving way to paid subscription to meet costs if not to etch out a profit. If there is still an echo of the disastrous eyeball parameter to assign valuations to dot-coms without any cash flows reverberating across the net, it is due to startups, many put up by con artistes out to snag venture capital or private equity. The shrill follow-the-herd cries for net neutrality should recognize that telecom companies have to pay for spectrum. They are answerable to their shareholders. The choice for them is between increasing voice and data tariffs and exploring other options to lighten the pricing burden to stay competitive. Internet retailers, on the other hand, are hobbled by server breakdowns in their quest to expand market share. The result is an arrangement beneficial to all the stakeholders. It is a pity that Flipkart buckled under pressure and backed out of the zero rate plan of Bharti Airtel, which though has stayed firm in going ahead with the program. No doubt, a company has to operate in an ethical environment. But surrendering to populism at the cost of the bottom line reveals to the shareholders where its priorities are. Hopefully, investors will not forget this when the e-commerce pioneer in India comes out with an IPO.
Subscribe to:
Comments (Atom)