Chillin' out till it needs to be funded
We may not beat China in size but then they are simply efficient and overpoweringly unemotional, right! Well India is mostly an ‘OVERWEIGHT’ call even at this time with most banks and economists and a lot of them are preaching fiscal prudence also in our Hindu way if you please. Check out Niall Ferguson, he mostly agrees with me.
After a couple of months of a bull run, continuing good economic reports and the subtle warnings unheeded by inflation, Now is the time, many participants in the Indian markets would like a breather. The internecine bickering in trades when whole days go by in dull 5 point bands and new bullish levels are lost by a whisker because of the shorts thinking the market is over priced, it is a well nigh trading battle in the markets. But the world outside the market ( if you say so!) has been trying to create a new level of mature regulation for India Inc as a flourishing property and a thriving market and regulation is being recreated at different fronts at the same time.
We recognise the need for new laws?
We had the foreshight to table a new Direct Tax Code, GST Law, the new Company Law and settle some disputes between IRDA, SEBI and RBI as well. We did not however, have the wherewithal to turn any of them into viable laws, the watered down versions of Direct Taxes, GST, and even new FDI in Retail and Defence about to bring down the crumbling edifice it suddenly looks. All the new regulation discussed in 2009 , started at a very different all things ready kind of deal but all of them were seeming threats to established corporates and auditors and could not stand the veracity of their ideas for even one draft. A revenue positive Tax code required bringing the new code to much the old edifice, a GST law and a retail FDI law are being blackballed by states whio do have enough of their own cash but cannot face up to overpowering change from a strong center.
Changing the leopard’s spots
As Rajan Mittal also mentioned, going back on retail FDI after proposing such a wonderful workaround in terms of back office/ procurement support for local businesses and even exclusive licensing shows that a “Bombay Club” is alive and kicking and well in control in the bureaucracy and the reform agenda is going along only slower than it did in the previous decade. The state governments have been able to call the federal govt despite being in a weak fiscal position and we are all waiting to live by rules of the last decade if at least those are approved. Time to move on though, India is still one of the luckier ones with a functioning government and a direction which is still a secular upside, one that will come and go in hiccups without any new ideas being born. Retail FDI will not clear for more than 49% Foreign investment Cap, GST will be a very high amount and services will not transition in the first instance, subsidy out-go(s) will remain and direct taxes will net the same as they did last year with cosmetic 5% shavings off the top in rates not good for the store to get much more. Enough has been achieved and unfortunately there will always be a umbrella comparison with other markets whence the Indian Economy and its markes will continue to be pulled into unnecessary restraint. Life goes on.
New Company Law already has five or ten different ‘handshakes’ with SEBI where there is going to be internecine argument on turf. RBI still has to clarify its position in the nations Economic decision making and inflation is well and truly out of control, interest rates likely to end up in the double digits before market analysts turn around on their hypotheses and
figure out what works. If you are looking for investment advice then it could not be simpler. Stay invested and buy whenever you can afford a little more of India and keep it for some time. After all, even if we decided to go in for capital convertibility as one of the final steps, it would be just much more of the same.
More new laws
In the mean time, India has also reworked Double taxation and Information sharing treaties with Switzerland, served tax notices on reinsurance premiums, accepted Chinese on the board of the Indian GM subsidiary and vainly tried to stop Chinese equipment in Telecom and power ( much like Chines clothes and steel are unwelcome in US) and is fighting a diplomatic war on all its fronts but that leaves it unfazed and there is a distinct thaw in relations with ‘big brother’ USA