Wednesday 20 July 2016

Startup India: A Quick Analysis


Startup India Standup India, brainchild of Modi, is going to do wonders for the nation by creating jobs and raising the standard of living. This all-inclusive action plan will boost entrepreneurial ventures and we can expect a decent inflow of foreign funds. But before we jump the gun, let’s analyze a few of the initiatives announced.

Self-certification and registration through an app or a portal will indeed make startups’ lives so much hassle-free. This will ensure that entrepreneurs are not discouraged in registering their companies due to lack of a simple process.

Teaching students innovation and business right from an early age is going to go a long way in developing the entrepreneurial spirit throughout the country. The Atal Innovation Mission and setting up incubators will act as the trigger for interested youth and give them the right direction and supervision for their projects.

Patent protection, adoption of Intellectual Property Rights (IPRs) and legal support and assistance will make entrepreneurs feel secured and help them concentrate on their main job. Coming to the financial part of it - no income tax for three years, no capital gains tax, tax exemptions for higher values and rebate on filing patent applications – these measures would revolutionise the startup growth in the country.

And to top it all, if the startup fails, the government will assist to get it back on track; and in the worst case, it will help the startup take a faster route to exit.

This is truly a watershed moment for entrepreneurs in India; the Startup India campaign is highly commendable. Masayoshi Son, CEO of SoftBank said, “In the next 10 years India will repeat the growth China saw in the last 10 years and in my opinion, India could be bigger.”

But the major point of trouble here is the execution. We have often seen a grand vision which ultimately falters during implementation. The bane of our system has always been terrible or faulty execution.

It should not just be that governments help startups; the startups should also be involved in policy-making and startup governance. These steps should develop a healthy startup ecosystem. Next, the app, for example, for registration, should be ready and running within a few months. Who will build it, what will the cost be – these are questions that still wouldn’t have been looked at. How will teaching entrepreneurship to students and youth be included in the curriculum is not very clear, and do we even have enough qualified teachers to teach on this subject?

In no way am I demeaning the efforts of the government in trying to support new businesses, promote entrepreneurship and thus, unleash the power and energy of young India. But care should be taken to monitor the progress and the status of these action points. It is absolutely essential that we see these ideas actually see the light of the day. 

Tuesday 3 May 2016

Six months of Donald Trump as the US President: What will happen?

If at all, Donald Trump does become the next US President, it is going to send shockwaves throughout the world. The Economist Intelligence Unit has listed Trump presidency as one of the top 10 global risks and such concerns are not unfounded. As much as we have seen and liked Trump – the astute businessman and the stern interviewer, we are yet to see his political persona; the few glimpses that we see these days don’t look very promising.

Trump has a rich business experience, probably more than any previous presidents. And his supporters expect him to resurrect US economy just the way he has built the Trump Empire. One of the main talking points of his proposals – the immigration reforms, where he talks about deporting about 11 million undocumented immigrants and building a wall between Mexico and US - let’s assume he implements this first up. This will significantly reduce cheap labour and affect agriculture and allied industries badly, leading to sharp rise in food prices. According to American Action Forum, this would cost the federal government about $400 billion and reduce the GDP by $1.6 trillion; stabilising this would take 20 years.

Trump’s tax plan has garnered a lot of praise from businesses, hedge funds and individuals. But a closer look reveals an enormous tax revenue loss. Such an act would lead to more business investment, more jobs, faster GDP growth and a bigger economy but also dramatically amplify the budget deficit and the spiralling US debt. And markets are not going to react too kindly to that. Investors would be spooked and would start demanding higher interest rates on US treasury bonds.

But all these points aside, what happens to the various bilateral relations of the US? Trump has already made some scathing remarks against China, and China wouldn’t like to forget it easily. Though he looks pro-India, and traditionally Republicans are so, India won’t really feel assured of his intentions. His statement of tearing up the Iran treaty has already sent jitters in international circles, and ‘backing Putin 100% over Syria’ might not go down too well with US’ traditional allies. The first 6 months would be a testing time for all the foreign diplomats and embassies.

All this will only happen when Trump is allowed to implement all that he has preached. We have seen it umpteen times what is promised before elections is often not what actually happens after that. Trump does not have many allies in the Congress and his ideas might never get the final approval to become laws. He probably might realize soon enough that running the nation as its president is not quite like running a company as a CEO. But till then, the entire world will be on tenterhooks, not knowing what next Donald Trump would have up on his sleeves. His intentions might be to make US the strongest economy but it might end up sowing the seeds of an uncertain and unstable global future.

References

Friday 8 April 2016

Jewel..In a Traffic Jam!!

When you are studying in one of the top B-schools of the country, you invariably get opportunities to attend conferences, participate in different events and meet industry stalwarts. You also get a chance to watch a yet-to-release movie and have a tete-a-tete with the director himself. Mr. Vivek Agnihotri, the much-acclaimed TV and movie director, columnist, blogger and a debater, was kind enough to screen his new movie Buddha in a Traffic Jam at SPJIMR, Mumbai.

The title of the movie does not give out much of the storyline. But it is not difficult to guess that the name is in fact, a metaphor; it is not just unusual but conveys a deeper message. This movie is about how a smart management student studying in one of the biggest B-schools in India and the world, with fresh and noble ideas, gets entangled in the murky world of politics and corruption. The movie tries to expose the sinister nexus between the Naxals, NGOs, academia and the acclaimed scholars and their motives and does it in a quite unabashed way. It explores how students in certain universities are systematically brainwashed to become intellectual terrorists.

The movie also examines the themes of moral policing, campus politics, plight of the adivasis living in tribal areas and the middlemen who eat up all the money before it reaches the intended recipients. The movie pokes its viewers by questioning whether India, a young nation ridden with corruption and poverty, can indeed become a superpower with its never-ending fight between socialism and capitalism.

The protagonist of the movie, Vikram Pandit, played beautifully and confidently by Arunoday Singh stands for Buddha, a learned person who has ideas and the zeal to bring about a change in the society. But he can’t really attain enlightenment because he is stuck in the traffic jam of bribery, dishonesty, socialism, capitalism, the system and the establishment. Anupam Kher plays the economics professor, Prof. Batki in a very understated but effective manner and the range of emotions he shows in the movie look so effortless. Pallavi Joshi and Mahi Gill play their characters with grace and poise, just what the film needed.

Many people staying in the urban areas are not actually aware about the Naxalite movement. Maoism, the predicament of the tribals and the off-the-limit Bastar region are topics which we just read in the newspapers sometimes and ignore. I hope this movie starts a healthy debate about the various themes that it covers and engages the population that is not well-versed with these things, in meaningful conversations. Not that everyone has to agree with what is shown in the movie; we are a country where everyone has the right to voice his / her opinion (or so we think). But this movie should atleast enable the young minds to think, read and talk on these subjects.

We have a society where new ideas, new visions are not given a straight path to thrive and flourish. This Buddha is looked at as an enemy of the society, someone who is challenging the status quo and someone who needs to be taught a lesson before he sets a dangerous precedent. This traffic jam needs to be cleared if we want more Buddhas to emerge from our nation.

This corruption satire has already received nominations and awards at various prestigious film festivals around the world including Madrid, Jakarta, Mumbai and Jaipur. The film’s promotional campaign under the theme #IAmBuddha has also started to catch on.

A movie such as this is hard to release in India; finding the distributors is a nightmare. Small budgets don’t allow the movie to be strongly marketed; it deters the film from reaching all its target viewers. A must watch for all students, their teachers, the intellectuals and the establishment, this film is indeed one of the most hard-hitting movies to come out so far this year. When Vivek Agnihotri in a response to an answer said, “India needs freedom from mediocrity, inefficiency and incompetence”, I couldn’t agree more. Kudos to the director who has dared to make a film on such a topic with utmost passion and sincerity. I hope this jewel does not get lost in the traffic jam of Indian cinema as another fine movie which couldn’t reach its audience.

References

Wednesday 6 April 2016

IAIP Annual Forecast Event – Key Takeaways

The 8th Indian Association of Investment Professionals (IAIP) Annual Forecast Event held at the historic International Convention Hall of Bombay Stock Exchange (BSE) on 1st April 2016 saw large attendance from various market leaders, industry professionals, students and investors. Experts shared their views and outlook on the financial, economic, fiscal and monetary topics and indicated what they thought about the prospects of the Indian economy in the next financial year.

With assistance from my friend Pranav Pendyala, I have jotted down a few significant points discussed in the session.

General Overview

  • BSE Sensex clocked first yearly loss in the last four years
  • Negative interest rate environment in major parts of the globe has rarely happened earlier. Banks might start charging the public for keeping their money with banks.
  • Rate cut not being implemented by banks though it has been initiated by RBI. This is due to the liquidity crunch for banks. This crunch leads to higher WACC.
  • Urban consumption of goods and services is increasing along with volatility.
  • According to BASEL III regulations, more capital is being demanded on banks’ balance sheets. Private banks have an advantage over public banks as private banks already have more capital than their public counterparts.

2016-17 Projections: Survey Results


1. Best Asset Class for Risk-adjusted Returns
a.       Equities: 58%
b.      Government Bonds: 9%

2. Real GDP Growth
a.   Between 6.5% and 7.0%: 29%
b.      Between 7.0% and 7.5%: 40%

3. CPI Inflation
a.       Between 4.5% to 5.0%: 21%
b.      Between 5.0% to 5.5%: 19%
c.       Between 5.5% to 6.0%: 20%

4. 10-year GOI securities Yield
a.       Between 6.5% and 7.0%: 34%
b.      Between 7.0% and 7.5%: 39%

5. Crude Oil (Brent) prices– per barrel
a.       Between USD 35 and USD 40: 21%
b.      Between USD 40 and USD 45: 22%
c.       Between USD 45 and USD 50: 22%

6. Gold Prices
a.       Between USD 1100 and USD 1200: 29%
b.      Between USD 1200 and USD 1300: 28%

7. Average INR – USD Exchange Rate
a.       Between 66 and 68: 28%
b.      Between 68 and 70: 22%

8. Target for BSE Sensex
a.       Between 26000 and 28000: 24%
b.      Between 28000 and 30000: 35%

9. Sensex EPS (Corporate Profits)
a.       Between 0% and 10%: 44%
b.      Between 10% and 15%: 41%

10. Most critical driver for Indian Equities
a.       Government policies and reforms: 39%
b.      Corporate Results: 22%

11. Most critical concern for Indian economic growth
a.       Global Low Growth Environment: 45%
b.      Government Policies: 26%

12. Compensation expectation in Finance industry
a.       Increase between 0% and 10%: 39%
b.      Increase between 10% and 20%: 41%

Assessment of FY 2015-16

  • GDP Growth of 7.5%
  • Volatile global environment
  • Global factors have impacted the market more than domestic factors


How FY17 will be different from FY16

  • Nominal GDP growth will be almost equal to Real GDP growth
  • Big hit on banks due to NPAs
  • Rural economy should be better this year comparatively
  • Back-to-back monsoon failures for the past two years not expected to continue


References