IPL amidst Pandemic or is it Padnemic!!

IPL has had so far 13 editions of experience- in India, South Africa, UAE once each and UAE again now.IPL  finals have been a brutally fought match till now. Mumbai Indians have emerged winners 4 times and Chennai Super kings thrice victorious. Dhoni led Chennai Super Kings have entered finals so far 9 times in 12 finals and that is phenomenal domination. Elections drove IPL out of India once in 2009 to South Africa and now the COVID pandemic has both delayed and moved the tournament to UAE in the current year. Wikipedia says that this is the most-watched Twenty 20 tournament in the world and the second-best paying sporting league globally.(link)

What are the specialties of the IPL tournament. It has had its share of scandals, scams, match-fixing cases, betting cases (betting in a game banned in India) and even Dhoni's Chennai Super Kings had to be suspended from the tournament for 2 consecutive years. One of the IPL heads who led IPL in its formative years is an alleged economic offender and is still at large having sought asylum in UK.

The Cricket tournament has had a tumultuous journey over the years, but still attracts addicted followers and ardent cricket lovers. Of course people from the old school still dismiss it as a big tamasha and not worth watching. Die-hard traditional cricket lovers continue to blame this auctioning of cricketers as nothing but cattle sale in our village backyards and cannot digest it as an offshoot of the modern evolution of the game as a business.

But all this has not diminished the viewership of the tournament over the TV. It is one big entertainment India enjoys as a cricket frenzy nation. TVs that have seen their ad revenues dwindling due to the pandemic have been resurrected by this tournament. Even though the public is not allowed to view these matches in the stadium. the telecast has added spice by inserting the artificial crowd roar, noise, trumpeting, jingles, etc. to make TV viewing lively and energetic. Perhaps the players on the field miss these mesmerising crowd roars in Indian stadiums egging them to perform better on the field. Some of the first week games which ended in a tie spilling over to Super overs have been a great exhibition for the game of Cricket.

Pandemic has bowled a googly at the economy, but IPL has partially offset its impact on the businesses by reviving the enthusiasm and the fun-filled colorful spirit of this cricket-loving country.With festive time just around the corner, hope this mood of optimism and enthusiasm catch up with the rest of the economy also.

I hear somebody murmuring COVID evolved from bats but IPL is played with bats wielding batsmen only.Pandemic is now Padnemic!!

Indian politicians -their precept and practice

 It is said "there is a world of difference between precept and practice"- more so with our politicians and the gap widens when they speak about it more.!!

It is generally thought that Political lies are always for exploiting the ignorance of the public. Mostly they are manipulative for winning the elections. But there are times like Obama lies about Health care inorder to push through some legislation to benefit the larger society(link).

However coming to India, Politicians throw promises at the people mainly to win elections and then they renege on the promises made.

In the recent few weeks there are lot of accusations by the Opposition parties against the Central Govt that Question Hour in the ensuing Parliament has been abolished muzzling the freedom of MPs to ask Govt questions about peoples' problems to elicit answers from the Govt. But there are two stark statistics contradicting the so-called champions of freedom of expression in the Opposition. In the last few years Question hour in the parliament has been wasted for 60% of the time by the unruly Oppositions marring the proceedings of the house. Another interesting point is that in the Opposition ruled West Bengal Question Hour has been suspended by the Govt in view of the prevailing pandemic.!!

So this is clearly double standards adopted by the Opposition and it is raised against the Central Govt only to embarrass it and score some brownie points in the media.

Many of the Opposition ruled State Govts prune the budget of the local bodies saying that the State level finances are severely constrained. But if the Central Govt does it, all of them raise their voices against the Centre saying that the Central-State relationship is severely undermined and the trust of cooperative federalism has been betrayed by the Centre. They have no such qualms when they repress the local bodies by not releasing the funds to them. These are the doublespeak adopted by the opposition parties as a matter of right and pride.Our society does not relish this behaviour of politicians which they do not understand.

Centre and States are like two important organs of the body which is India. Both must work in tandem and in coordinated rhythm. Brain cannot let the Heart down and Heart cannot afford to stop blood supply to Brain. They cannot be at loggerheads with each other. This is the fundamental concept which Politicians must keep in their minds while performing and discharging their Constitutional duties.

India, its agriculture lending a helping hand during the pandemic!

 India's agriculture has hit a new high when the entire country is under lockdown and the industry has hit the rock bottom.Kharif sowing as on 5th Sep20 has reached 1095 lakh hectares which is 6% more than what was the sown area in kharif season 19-20.The acreage of paddy has grown by 8% to 396 lac hec.over previous year.The acreage under Oilseeds has grown by 12% to 195 LH; Pulses by 5%  to 137 LH; Cotton by 3% to 129 LH and Coarse cereals by 2% to 179 LH.This has been facilitated by 9% increase in rainfall during June-Sep 20 to 795mm.

All five summer grown Oilseeds has seen higher than anticipated increase in their respective MSPs  and better procurement during the initial months of Covid pandemic phase.The increase in Minimum Support Prices including that of Paddy announced at the beginning of Kharif season in june 20 has really helped in increasing the sowing area and in augmenting the revenue of the farmer.

That apart, India has witnessed a 23% increase in farm exports dominated by Rice and Sugar, in the Q1 of Fy 20-21. These are all heartening news from the agri sector.

However the worrying patches, in the otherwise bright outlook,are the outstanding dues of over Rs.14.2K Cr. of Sugar Mills in UP to the cane growers. The State Govt has raised the FRP(Fair & Remunerative Price) by Rs.10 on an average as a policy measure during this cane crushing season, starting Oct 1.Sugar Mills have approached the Govt for a subsidy to pay the farmers in order to tide over the Covid induced difficulties.

Modi Govt has also constituted a Agri Infra Fund of Rs.1 lac cr. The Infra Fund is for catalysing the Agri-infra development and help build pivotal infrastructures like warehouses, cold storage, and nurture farm assets. This will bring about a increase in Agri share of GDP in the economy from 15% approx and thus improve the livelihood of those dependant on agriculture.(link GDP).

Modi Govt has promised doubling of farmers' income  by 2022 which is a daunting task ahead and Govt. is well focussed on this with far reaching structural changes made in the last few months by amending Essential Commodities Act and by liberalising farm trade , land leasing for agriculture across the country.

Now the country is looking forward to the Rabi season.

Tax, STT and Windfall tax.

The only thing certain about Tax is, it is always taxing. 

India abolished LTCG(Long Term Capital Gains) tax some years back while STT(Securities Transaction Tax) was introduced. After few years Arun Jaitley,the then FM at the Central Govt, thought it fit to reintroduce LTCG Tax from Fy 18-19, with an exemption if STT had been paid on the transaction. Now many Economists have recommended for abolition of LTCG tax showing the distortion it brings in transactions involving Digital Gold, unlisted shares and the black money generation it encourages in all and sundry especially in Real estate transactions.

The arguments against LTCG Tax are strong and valid. The vagueness it brings in matters of valuation brings lot of confusion and uncertainty giving the incentive to hide part of the consideration received. What demo wanted to flush out, LTCG Tax has encouraged inadvertently. It has sent wrong signals across the economy.

What is the remedy then. One simple alternative is to bring Transaction Tax similar to STT as Gold Transaction Tax and Real Estate Transaction Tax.

Recently Mohandas Pai, on LTCG Tax wrote a column in FE correctly stating that LTCG Tax is anathema to simpler taxation philosophy since it creates a mindset of evasion among tax payers.He has called for abolition of LTCG tax forthwith by rightly pointing out few perverse taxing rates especially with ref. to LTCG tax rates on the sale of unlisted shares.

Once LTCG Tax is abolished  Central Govt may want another avenue for Tax revenue and for that I would recommend Gold Transaction Tax and Real Estate Transaction Tax on the same lines that of STT. These Taxes will be much simpler to comprehend and easier to comply with. Even administering it by IT dept will be easier.

Now there is a clamor for a Windfall tax from the stock exchange transactions, as people who dabble in Stock exchanges are generally from well off sections of the society. When the whole nation is battling pandemic induced economic woes, it is quite natural to expect the group of well-heeled rich to contribute something extra by way of tax to the country's cause in fighting this economic downturn. But this windfall tax must be a one-time tax or it can be a temporary increase in STT for 2/3 years.

My preference would be for a temporary increase in STT for 2/3 years.

Inflation, Monetary policy and India

 The minutes of the recent meeting of Monetary Policy Committee  of RBi which were released this week, contain some interesting mentions. One of the news columns said that RBI minutes mention 'uncertainty' 12 times, 'growth' 43 times and 'inflation' 147 times It has expressed concern over inflation and it seems to be valid as CPI has remained above 6% which is more than the tolerance limit of RBI. Alongside, India is experiencing severe GDP growth pangs as its IIP has remained in the negative territory in the first quarter and in July also. Services sector is in a deeper mess except of course ITES, SAAS etc. which have been affected to a lesser extent. It looks like only Agri sector has not been impacted adversely so far ,as the progress of monsoon has been satisfactory and the spatial dispersion also fairly good.

The RBI Deputy Governor Mr.Michael Patra had said : "If inflation persists above the upper tolerance band for one more quarter, monetary policy will be constrained by the mandate to undertake remedial action, including an immediate and more than a proportionate response to head off the build-up of inflation pressures and prevent it from getting generalized." So, to sum it up ,we have classic case of "stagflation"- a combo of GDP slowdown and inflation.!

CPI in India has a higher weightage for food and fuel indices and these two are certainly not amenable to monetary policy measures. In India fuel price is driven more by Govt . policy measures and it is feeding into inflation with its rippling effects on the rest of the economy widespread.When pandemic is restricting economic activities profiteering becomes rampant in vegetable and food prices. When the supply chain and free movement of people and commodities happen, the inflation tendencies will come down. Cost push inflation of food prices will not listen to monetary policy signals in the short term in Indian conditions. As India is driven more by cash , there is a quite a lag in food inflation responding to monetary policy measures, if at all it is significant. May be hoarding and black marketing of these vegetables,cereals ,staples etc. may come down a little bit.However Govt. initiatives through Essential commodities and anti-hoarding sticks used by Govt. through other means incl. emergency imports may be more effective in the short term to bring down food prices.

When the economy is awash with liquidity, the prices in general have tendencies to go north .More so when the supply constraints remain elevated due to lockdowns,e-passes and uncertainties compounded by fear for life and livelihood affecting the income. In these circumstances. RBI should look at high CPI as extraordinary during the pandemic period and should start looking at Core inflation now and then revert back to CPI only after the pandemic is seen plateauing.In the meantime, RBI may seek a temporary amendment for its inflation targeting, switching to Core inflation in times of extraordinary circumstances like a pandemic,global financial crises etc. and then have a glide path back to CPI inflation targeting after the crest of the crises is over.

Covid, Cricket and Character!

 Cricket has weathered many a winter and smothered many a vagary as a gentleman's game. Cricket was played during Spanish flu times also and UK's Wisden has not recorded any disruption in the progress of the cricket season in 1918 and 1919. But Cricket was severely restricted during World war 1 when all the major cricket playing nations were involved in the war.Cricket was also played less during World War II since England was involved in the war in full measure. But during all these periods of distress, Cricket was played in India with the least disruptions.

In fact, Wisden which has recorded death of English cricketers during World War 1 and 2 in all cricket playing nations , has not even mentioned one indian cricketer dying during Spanish flu days.This has to be seen in the light of total death toll of 17 million who died in india during Spanish flu years.

So even in 1918 and during World wars everybody around the world believed that India could somehow manage and survive humanitarian crises.

But this Covid 19 apart from being a dangerous pandemic , has also become a statistician's delight. of course not as enjoyable as cricket statistics. But still there is a everyday scorecard and the top states are vying with each other to remain on top with highest Covid 19 nos. Tracking, Tracing , Testing and Treating has given huge opportunities for multifold statistics and different tools to be employed across the country and the globe.

there are 3 day moving average, 5 day average, 7 day moving averages of tested, positive, discharged, active, deaths etc.etc. and colorful graphs of percentage growths of each one of them which compete with each other for eyeball grabs.

All the news channels have a separate ticker like in a Cricket match and hour to hour scores update pushes up your BP and make you a Covid patient , if not one already. Many people have stopped seeing news reporting in any channel and if they see one by mistake wait with bated breath,holding their chests with clenched fists as if hearing an India scorecard in a World cup cricket match.

Of course, the statisticians, epidemiologists, virologists give dire prediction every 15 days constantly reminding us that Covid nos. will surge and there will be a deluge in the next two months and this has been going on for the last 4 months.They have been predicting wildly exaggerated nos. and some statisticians can track all these predicted nos. of various agencies and give out the comparisons with the actuals. Such comparisons can provide another play with graphs, colours etc.

In all this round-robin play what is missing is character.Only few have been able to hold their forte not to rock the boat and rattle the gullible.Like lenders and banks looking for people with character to lend ,this pandemic has given a clarion call to those with character to come to the rescue. You can find people with capital, capacity to repay but finding a person with Character ,which is willingness to repay, is difficult. Character being  a rare commodity in these days of rising NPAs,  Bankers will nod their heads in agreement with me. In Cricket also we have seen people like Rahul Dravid, the Wall, VVS Lakshman, who have displayed great character to steady the ship, in crisis situations. Cricket captains like Mike Brearley of England, Pataudi and Dhoni of india, have shown stoic demeanour in the face of dire situations while leading their Teams. But a World cup winning cricket captain Imran Khan is the PM of Pakistan during this pandemic.But like in his heydays he is spitting venom at his rivals even outside the cricket arena. Is Cricket not making PM ,a gentleman? 

However,  I am not losing hope since our PM, himself, is a man who displays great Character even if he has not played cricket and is known to have sold & served Tea perhaps even during Tea breaks while others were busy playing Test Cricket!!

Be cautious and there is no need to spread fear and panic about both Covid and Economy! Drink hot Tea and take good rest!

RBI monetary policy and the state of the Indian economy

 RBI's recent Monetary Policy announcement after MPC considered the latest economic factors, CPI etc , came out with no repo rate cut. Primarily because CPI is elevated and at an uncomfortable level as far as RBI is concerned.since the mandated and stated objective of RBI is now inflation control, RBI has decided to hold the rate this time despite the economic slowdown calling for a steep rate cut.RBI also mentioned that this year would see real GDP contraction after more than four decades, but still decided to save the powder for a more rainy day or for a day when the bang will be worth its buck.

India is facing rising prices also esp. food prices, fuel prices and therefore is experiencing a cost push inflation. There is a school of economists who say the inflation is fueled by easy liquidity floating in the economy and the stock exchange boom , gold price rise all indicate to easy money into areas where some quick money can be made.Even RBI is predicting a rise in inflation levels in Q2 but has refrained from an inflation forecast.

Gold price,as Ruchir Sharma in today's TOI blog(link )puts it, rises due to uptick in demand whenever interest rate is lower than the inflation rate. But Gold being a safe haven investment booms when the rest of the economy sees more volatility elsewhere esp. in stable investments. There is a rush of outflow from equity MFs in July but is it going to Debt MFs or to stock market or to gold  is anybody's guess.But there is greater desperation driving up buying Gold rather than preference as an investment.

All this paint a confusing story but with tinges of liquidity bulge which may become an inflation down the road, unless the productive resources are used for assets and jobs creation. But the silverlinings are shallow oil prices, decent monsoon, burgeoning foreign exchange reserves and surplus in current account balance. So, cost push factors in inflation are slightly mitigated in the near to short term.

CII 's recent 111th Business Outlook survey,July 2020, which was released last month revealed that out of three indeces Current situation index, Expectation index, Business confidence index, the Current Situation Index of Q1 of Fy 20-21 is similar to the levels of Q4 of Fy 19-20! Only the Expectations and Business Confidence levels in the economy have deteriorated during Q1 of Fy 20-21 as compared to earlier quarter.

Dr.Manmohan Singh in his BBC interview has also clearly said that this human crisis created by the pandemic calls for greater spending and greater borrowings by the GOI, even upto another 10% of GDP for tackling health, military and economic challenges of the country. His wise words would be worthy of listening now.(link)

But this borrowing must have a clear exit clause linking it to FRBM Act requirement of glided fiscal deficit path to 3% of GDP eventually in the short to medium term of 3/4 years. Only this can bring back investors into the country. Otherwise Fiscal profligacy is the scourge of the growing economies like India.

There are no simple answers but quick actions,as outlined by PM in his speech on the occasion of  Ram janmasthan Temple laying foundation,have to be taken by the Govt. Quoting from Kamba Ramayana he said "காலம் தாழ ஈண்டு இனும் இருத்தி போலாம்" என்றான் இராமன்" which essentially means we should not procrastinate taking actions to rectify the situation. A well focused fiscal stimulus, vaccine or no vaccine, is an urgent imperative.

Minimalism-இருந்தும் ,இல்லாமல் இரு!

 Minimalism is an old concept but is gaining ground these days when Covid 19 pandemic is trying to devour the entire world.

Minimalism is all about living with less. This is not a fad but a way of life of renunciation and deep withdrawal from worldly pleasures, which has a profound effect on the psychology of humans.

In India, many of our Saints and philosophers have talked about leading life of penance ,sacrifice and total detachment. Even wealthy persons of yester years led a life like that of a Trustees of their wealth. Gandhiji also said this in his seven sins of life:

"Wealth without work; Pleasure without Conscience;Science without humanity;Knowledge without character; Politics without principle; Commerce without Morality; Worship without sacrifice"

It is said that Gandhiji also laid lot of stress on wealthy businessmen and persons to remember that they are Trustees not owners of their wealth which provide them an opportunity to serve the people at large and for social welfare.

Minimalist philosophy emphasizes on getting rid of excess stuff and living life with less and less of worldly possessions.

This is similar to the concept of leading a life like that of water on Lotus leaf. It is a status of living attached but detached explained in Bhagavad Gita. Nishkamya karma yoga in Gita is a path on the same lines without any attachment to the results. If you stretch it , this will show that the emphasis is on being not selfish but living for the sake of greater good of the society.

In Tamilnadu, siddhars gave a concept of "இருந்தும் இல்லாமல் இரு" which is nothing but minimalism of modern era. Siddhars extended this concept even to knowing the meaning of our existence. According to them God Dhakshinamurthy symbolises total silence and  inward withdrawal of soul to know thyself. Arunagirinathar was delighted at being advised by the Lord "to remain in silence".Even getting rid of words or speech is the best way to realise the truth about oneself.

This is Minimalism at its maximum!

Government's asset monetisation

Policy prescriptions are flying thick and fast and on my part, I am adding one more .

All Economists including me are prescribing deficit monetisation, pump priming etc. taking a leaf out of Modern Monetary Theory.

As against this,Central Govt. has an alternative which is called Asset monetisation, according to me.Govt calls it Disinvestment/Divestment of PSUs. When the whole world is reeling under Covid pandemic , will there be a suitor for Air India?

Even if there is a good buyer will he be willing to pay the right price for Air India.What will be the benchmark for its valuation when the whole industry is bogged down by this pandemic and its repercussions on the travel industry.

In such unprecedented situations , it is best advised not to go in for outright sale transactions of Government stake in PSUs including Air India, BPCL,etc.

Similarly, other intangible but real assets are Spectrum waves (link), Mining/Abiotic  ,Biotic Resources which are hidden inside the Earth, Ocean ,Space etc., Potential Renewable energy sources, which have future economic value and can add to GDP when suitably exploited without degrading the environment.

If these resources are valued properly, and India identifies these assets in terms of monetising its strengths, then India will have to look for its Enterprise value and raise suitable resources upfront for its current requirements in investing in its infra development.

In fact even lands owned by Indian Airports Authority can be used better by allowing usage of its land underground for commercial purposes.Even some of the defence lands can be wisely used under the ground for commecial purposes without in any way jeopardising defence security.

Immediate prescription for demand stimulus!

Sri. Krishnamurthy Subramanian, Chief Economic Advisor to Central Govt,yesterday, has gone on record saying that further demand stimulus measures will be announced after vaccine becomes available. Why should we link stimulus to vaccine availability is not clear. What kind of vaccine he is expecting and if the vaccine falls short of his expectations whether he would not allow roll out of stimulus?

It may become too late to wait till then.Why because, the common man has started saving his meagre earnings due to his fear about his future earnings and not due to Covid pandemic per se.In order to allay his fear about his employment and future earnings, Govt must sacrifice some near term revenue and announce some economic incentives  for kick starting the economy.What better place to start than with Indirect Tax cuts.

Auto sector is the biggest in manufacturing in terms of GDP and reducing GST on it from 28% and converge it with Revenue Neutral Rate(RNR) of 18% will give a huge boost to demand, and thereby to the generation of employment.The multiplier effect will be huge on the rest of the economy with ripple effects cascading throughout the economy.Difficult times demand drastic steps in terms of revenue sacrifice by Govt in the near term.The Govt.will get back more than half its sacrificed revenue by way of huge jump in volumes of goods and services produced.The feel good factor this can generate will negative the fear over the pandemic and will give a greater fillip to PM's call for "Atma nirbhar Bharat" and "Make in India" initiatives.So, one should not wait for Vaccines to announce this.We must do it on war footing.

We have anecdotal examples at hand. Like Mr.Mukesh Ambani bringing in huge FDI even during Covid without waiting for it to end, the Govt. must take a cue from his proactive action and give this relief to the economy.Thiruvalluvar also says "தூங்குக தூங்கிச் செயற்பால் தூங்கற்க தூங்காது செய்யும் வினை."(Sleep over such actions as may be slept over, but not over such actions which require quick actions)

 This calls for immediate action on the ground to kickstart demand and to restore the confidence of common man in his future earnings, income, and employment.