Jam and bread issues

Watching out for monsoon, deficits, consumer spending, share offerings, health of banks and foreign fund inflows in FY 2017

By Mohan Sule

Have cake, Marie Antoinette, the 18th Century Queen of France, dismissively told her famished subjects. In present times, the Narendra Modi government has suggested Jam to India’s impoverished. The three props of the modern economy— banking, tech and telecom — will be used to transmit funds to zero-balance bank accounts, verified through a unique identity system, of the marginalized population through the mobile platform. Besides claiming to be a corruption-free regime, the NDA government has distinguished itself from the previous dispensation in another area, too: coining catchphrases to simplify complex ideas. Uday, or Uday discom assurance yojna, connotes the dawn of a new era for the sick state electricity boards by transferring 25% of their debt to PSU banks. The passage of the goods and service tax or GST, which will convert India into a unified market ,will be a key event to watch out for in the new fiscal. Many expected and unexpected eruptions will keep investors on their toes. Taking a leaf from the prime minister’s packaging team, some of them have been slapped with easy-to-remember labels:

RAINFALL After two consecutive years of deficit, southwest Rains are expected to be normal this year. Increase in rural consumption and Fall in food inflation are necessary to fuel the gross domestic numbers. BOSS The state of the Bullion, Oil, Steel and Sugar industries capture the best and the worst of an integrated global economy. The appetite of Indians for gold and fuels seem insatiable. Due to import-dependency, prices move as per the state of the world economy and strength of the dollar. Of late, local steel and sugar prices, too, are influenced by external factors such as China's health and Brazil's monsoon. METCON Media and Entertainment players have a significant role in attracting surplus cash. Tech solution providers are play on exports and indicate the well being of the developed economies. Consumer durables and non-durables in the market place. TAP Sometimes they are the flavor of the market, and other times discards. Disruptions, innovations and state interventions are just a few of the dangers lurking for Telecom, Automobile and Pharmaceutical players. Crackdown and disciplinary actions by regulators and policy markers are becoming he norm. Despite the dangers of obsolescence, there is an infectious enthusiasm about their prospects.

LOGIN The digital marketplace boom has brought into the spotlight Logistics companies deployed to distribute online orders. Opening e-commerce to 100% FDI is set to see re-rating of Internet companies, knocked down by recent devaluation by big-ticket investors. BAD Higher provisioning by PSU Banks in the last two quarters of the last fiscal was the emergency surgery ordered by the Reserve Bank of India. With interest rates set to soften as the US Federal Reserve dithers over the health of America and the globe, banks are restructuring Assets and companies Deleveraging as those with cleaned up balance sheets will be in a better position to start afresh and take advantage of the India growth story. RED Foreign portfolio investment was negative for more months than positive in the last fiscal. However, foreign direct investment surged, partly blunting the adverse impact on the Rupee. Exchange reserves were at a record high as the import bill fell in tandem with plunging crude prices. Yet, the Indian currency will dance to the tune of the Dollar, which remains strong irrespective of the intermittent hiccups caused by Fed’s mixed signals on interest rate hikes. IPO The trickle of Initial public offerings last fiscal is expected to turn into a torrent as SMEs from spaces old and new issue shares. PSU stake-selloff will accelerate if the market holds up. There will be Open offers as non-core assets are sold and alliances firmed up, either to take on competition or a backseat. FIT The promise to stick to the Fiscal deficit target of 3.5% of GDP probably assumes a bubbling economy leading to better tax mop-up, disinvestment and auction proceeds and foreign fund flows. All this will ease pressure on Interest rates but might enlarge the consumption of crude. Exports will have to bounce back to keep the Trade deficit manageable.

Post-2008, acronyms did give rise to a bitter taste. Who would want to remember how the crisis in Piigs threatened to upend the globe? And that all but one brick in the Brics edifice has crumbled? However, Modi in his inimitable style has proved that policy pursuits need not to be as dry as bread but can be sweetened to tingle the taste buds.