The Hindenburg Research report has struck a massive blow to all companies owned by Gautam Adani, especially his flagship Adani Enterprises. This may have spin-off effects on other business houses, not only because two major finance entities, LIC and SBI have been severely affected by this collapse, but also because the world might now see Indian investments as tricky.

Adani stocks are rebounding to an extent, after days of hard hammering and after some of those companies announced their results. Also, Adani has said that it prepay loans amounting to $ 1.1 billion, but the source of these funds have not been disclosed. However, this barely shoves under the carpet the massive bad reputation that the group has earned and it will take a lot of time for it to come back to terms with investors, if at all.

India, as one of the major economies of the world today, is pretty much plugged into the world financial system. Whatever happens around the world has an effect on Indian financial markets. Similarly whatever happens in India will now be deeply scrutinised by world financial markets. There is too much at stake.

Indian companies take more loans from international banks than from Indian banks, because the rate of interest available abroad is way lower than what is available inside the country. This is a given. Even Adani companies had loans. However, to service those loans – which is to be able to pay back those loans with interest – these companies not only have to be in good health, they should also project a good perception to international financiers. This is particularly important in those days when the rupee is falling fast against the dollar.

The Adani companies, despite some of them being solid companies in themselves, have lost this crucial perceptive advantage.

Other major companies, functioning across different geographies, as also exporters and importers who depend on letters of credit, also depend on this perception. To put in bluntly, your son may be a class topper with a good job and a great person at heart, but if there is an allegation of theft against you, your son will find it difficult to get married in an arranged marriage market. Perception is very powerful.

The only way this problem can be dissipated is for the government to come out and speak, try to alleviate fears of the people and especially of foreign markets. Silence will definitely not help. And the recent comment by our Finance Minister, Nirmala Sitharaman, who said the BJP was not in cahoots with Adani, does not help. People are not fools, whatever Mrs Sitharaman may think.

The arguments and cross arguments in Parliament have done nothing to alleviate market fears. If anything, these have only stoked suspicion.

Let us understand one thing: the markets are in reactive mode. The markets are not, in any way, correcting any wrongdoing on the part of the Adanis. It is for the SEBI to come out and take action. And since in these times the SEBI and almost every other so-called independent organisation has lost its spine, it will be left to the government, again, to provide one for the market watchdog to even bark, forget bare its teeth and growl.

In the long run, what happens? Two very important events are in the picture. The government’s somewhat decent budget has to be within the propaganda of the government now, because the second important thing, elections, are on the way, in February itself. If the all godi media outlets are busy talking about Adani, how will the bigger picture be painted and presented to the voting public? There has been a recent directive from the BJP headquarters to its leaders to move away from discussing Adani and concentrate on propagating, across all pliant media, the supposed goodness of the budget. Remember, this is the last full budget of this government before the 2024 general elections, hence the government has to milk all the goodness contained in the budget.

It will only be with the help of the budget and other such catalysts that the BJP will be able to start its campaign in earnest. Within this critical moment Gautam Adani has become a sore thumb of discontent, instead of helping the government with the much needed funds for the elections. This is a distraction of mammoth proportions, and the government simply does not want it.

Over and above, this is a super election year, running into next year’s general elections. P[erception, again, will be key for the BJP in maintaining momentum. The Adani blip has to be reduced to that, just a blip. It is easier said than done, though. Nine elections this year will each be crucial. Each will be fought with not just a rejuvenated Congress but in some cases with deeply entrenched regional parties.

For this, the BJP will need more than enough funds to move across the plains and the hills. How will such funds be available when the main fundraiser, Gautam Adani, is somewhat landlocked at the moment? There are The Ambanis and other supporters of the BJP for sure, but no other businessman of this country can afford to be as brazen as Adani was. Adani was basically for the government and of the government. For all practical purposes, it WAS the government. Those are attributes difficult to come by in any other business house worth its salt.

The BJP seems to be distancing itself from Adani, but that, again, is easier said than done. The association is long and has withstood  the test of time. Plus, a lot of government projects have already been handed over to Adani, like the Mumbai airport, including its security. These are sticky pitches that the government needs to exit,m and exit fast, before the election pitches kick in.

Conversely, Adani could prove to be a major weak link in the entire BJP election machinery, now that the opposition has decided to use this to the hilt. A counter-narrative has to be prepared and has to be displayed and described in detail. Shouting back at Congress and other parties’ allegations in Parliament may not be enough. There has to be action on the ground and the people need to see it to believe it.

Adani, therefore, has presented the ruling dispensation at the centre with a rather steep task. One has to wait and see how the NDA handles this. There were too many eggs in one (Adani) basket, and this was the BJP’s major mistake. This time out, the BJP has to be careful not to risk all for one man.

The post BJP’s massive Adani hiccup appeared first on Views On News.

It is the old story of the carrot and the stick. Only, the purpose of the stick is a little different here. It hangs in a contraption tied to the shoulders of the common man, dangling the carrot in front of the poor aspirant, but just beyond his/her reach. That is called Bhavishya Darshan, the vision of the future. You can run fast on your weak knees, but your target will always be in the future.

Bhavishya, is not the truth, it is a concept. Better the political brain, better the vision of the future for the common man: in the dreams that are created. BTW Bhavishya (would you believe it?) is also the name of the Pension Sanctioning & Payment Tracking System of the government.

Keep this mind, while we discuss next year’s budget proposals as revealed in Finance Minister Nirmala Sitharaman’s 90-minute speech in Parliament on February 1.

When you look at an India 25 years hence – if you manage to last that long – you might suddenly notice that your financial position, vis-a-vis the country, remained unchanged. Do not be surprised, because the purpose of this budget is definitely add to the nation’s wealth, but is not to eradicate poverty. That is a subject which has not even been discussed in passing in the budget.

Let me be specific. This budget is a route map that should take it out of the woods. Instead, it misses the entire wood for the trees. Before going any further, let us look into a study that was conducted some time back by some American psychologists, on some sugarcane farmers in Maharashtra.

The poor never get to the carrot. The stick, though, keeps beating him down.  Give the sinking man a life jacket, not a vision of the distant shore.

The basic economic structure of the sugarcane farmers is that they collect 60% of their annual income in one go. That is during harvest time. This means that they are poor before harvest and somewhat on the rich side after harvest. They live in two, sort of, extreme conditions, which made this survey easier.

The psychologists did a strange thing. They asked the farmers to take an IQ test before harvest, that is, when they are poor, and one after harvest and after they have been paid for their harvest, that is, when they are on the richer side. The result the researchers found was mind boggling.

They found that before the harvest, the farmers, almost all of them, scored poorly. They fared better after having received their payments. When poor, they seemed to have lost up to 14 points of their IQ. This is comparable to the effects of alcoholism.

What does this mean? It means that people behave differently when they are pushed in a situation of scarcity, of a situation that somewhat scares them.

The basic idea may have been that the 35% growth in capex should absorb the slack from the employment reduction in reduced allotment to NREGA

The focus of the poor is not dissipated, as we believe. In fact, it has been barrowed down to just one thing: survival. It has been barrowed down to the immediate need of providing his/her family its next meal, of being able to afford rent, of being able to clothe themselves in winter, etc. They do not have the time for fancy thoughts.

This extreme narrow thought process is not a lack of ability. In fact, it enhances the senses, as we may have found in nature, but all the senses are focused on just one or two objectives.

The test also found that the poor generally lose the ability to make informed decisions on subjects. This changes abruptly when they belly is full, when they are guaranteed a basic sustenance income and they are sure they or their families will not go hungry today or tomorrow or in the near future and that they will have a roof above their heads and clothes to wear.

They suddenly start taking decisions that are more inconsonance with logic. That is where the IQ tests show growth.

One has to realise that it has been long proved that IQ tests are not absolute. They change with profession, with circumstances, with addition of knowledge etc. now it has been proven that it changes with the financial condition of the subject.

Taking these test results further into the realm of budget proposals, one can realise why this budget is unlikely to yield the proposed results. Sure, there will be top-line growth, and sure there will be more wealth in the hands of a few, but the basic economic structure of society will end up more crippled.

No budget can be all good. That is not possible. But in these trying times, let us not show the poor a heaven they might never reach.

The positives include the humongous 35% extra capex allocation, especially for infra. The budget possibly wants to prepare us for the long haul, probably looking ahead to the 2024 general elections. The minister said the country is expected to grow at 9.27 per cent in the coming year and that this is a forward looking budget, as far as 25 years ahead.

That feels so good, till you realise that the finance minister had virtually glossed over the pain of the gasping MSMEs, of the farmers, and of most of those displaced in the pandemic.

So how does a pyramid stay steady and balanced, when its base is shaky? What stopped the finance minister from addressing the immediate needs of the common man? The test result as above, meant that it was essential for the FM to put money directly in their hands. That would not only have boosted general consumption, but also allowed these people to re-establish themselves within society.

As far as MSMEs go, is there any point in extending the Emergency Credit Line Guarantee Scheme (ECLGS) till 2023 when what they really need now is life-saving oxygen? What good will more credit do to a company that does not have the capacity to take in more credit? Companies are finding it extremely difficult to service existing credit, if any.

More important was to assure for them good orders, timely payments, and a supply line that gives them breathing space. Hand-holding was necessary, not pictures of a distant, rosy future.

There was one positive that one cannot overlook. This was of the massive infra push. Apart from infra growth, here is one way it can help the poor. There has been a fall in NREGA allocation. The allocation for the next financial is Rs 73,000 crore, 25% lower than the Rs 98,000 crore revised estimate for the scheme in the current year.

But when the government is committed to a mega push for PM GatiShakti projects, such as 25,000 more of highways and 400 more Vande Bharat trains etc., they should automatically take up the NREGA slack. After all, infra is the biggest blue collar employer of any developingcountry.

The overall outlook could be different, considering which side of the prism you are looking through. No budget can be all good. That is not possible. But in these trying times, let us not show the poor a heaven they might never reach. Let us not heap more indirect taxes on them – the GST increases ensure that – so that they suffocate. Remember, when they are focused narrowly on the very basics, such as hunger, they become unproductive. The tests proved that.

What will the government do with a 10% productive population when the rest are just struggling to kleep their heads above water? That is not growth, that is not welfare, that is definitely not good goevrnnance.

Hope there are some decisions taken post budfget, so this anomaly is corrected.

The post The joke is on the Poor appeared first on Views On News.

So India failed to make its position clear on crypto currencies even in the Winter Session of Parliament and the RBI’s strong reservation against this had a lot to influence this. Finance Minister Nirmala Sitharaman had assured that a lot many of the issues will be addressed in the bill, which was to be cleared by the cabinet committee before the bill could be placed before the house. But it got stuck there.

Now it seems the Bill will not be ready before May, though there is hope for the next session of Parliament in February. That looks a bit unlikely, because the government will actually be busy with the assembly elections. Hence May looks a better bet.

The finance minister had informed Parliament that “because rapidly a lot of things had to come into play, we had started working on a new bill.” What seemed to have happened was that the bill had been constantly evolving, starting from a position where it banned all crypto currencies in India to a position where crypto currencies could possibly be treated as “crypto-asset.” This means that a idea floated earlier, of treating crypto trading as commodity trading could find a new route. Technically, this seems a good idea, without compromising on or completely negating the $ 6 billion-plus already invested in India in crypto currencies.

It was understandable early on that the government would not go for the complete ban theory. This being a very new proposition, maybe other option could be tried. However, this will probably be apposition not tried anywhere in the world so far. Hence let us give the government a little more time and see how it brings about disparate ideas together on the table. This new bill could be path breaker, not just for India, but, if properly framed, a pioneering legislation of sorts in this field.

The government crypto currency idea will be a damp squib, though. It will be just the same currency in a digital format that we have gotten used to handling for so long, and without the possibility of trade in its hard currency form, it will just be the Rupee, as over Paytm or PhonePe.

“What seemed to have happened was that the bill had been constantly evolving, starting from a position where it banned all crypto currencies in India to a position where crypto currencies could possibly be treated as “crypto-assets.”

There is a report which says that India has the most crypto users in the world, almost four times the number the US has. That could be a nomenclature problem, because the miners aren’t that many. Mining is a highly energy intensive and high capital affair, and in the absence of a future, this will go bust simply paying the electricity bills. Also, any carbon audit of these miners would land them in a soup.

But when the number of users this may be compared to the number of users of mobile phones, low priced and wide, with no solidity of return grows, what happens is that the market gets settled and there is a possibility that India could provide a settling effect on crypto valuations across the globe. Hence India will remain an important, though not a remunerative market for cryptos.

Not that the government does not know that. It wants to make the best of a bad situation.

Subhash Garg, a former secretary in the Finance Ministry’s Department of Economic Affairs, has been quoted as saying: “One cannot speculate about whether the bill will come in the monsoon session in July. There are much deeper issues. I don’t know if the government is expanding the scope of the bill. I could take even longer and perhaps, should take longer.”

He is spot on. It is also true that the inherent blockchain technology that drives cryptos, is now being used in several fields and it behoves the government to keep a tab on the developments in this field, for the betterment in other fields.

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