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A long due post……..

Hi all……

My post was long due….

The budget was a crucial event this year as key decisions had to be taken with regards to the fiscal stimulus and inflation without compromising on growth.

The fiscal deficit target for this year was pegged at 5.5 % which was disappointing as such a target would be largely achieved by disinvestment and auction of 3G spectrum. In order to achieve a good quality fiscal deficit, non planned expenditure needs to be reduced. Hence, a target of 5% would have displayed the FM’s resolve of reducing the non planned expenditure. Another key concern is that the FM should not compromise on CAPEX in a bid to reduce the fiscal deficit as CAPEX investments give returns in the long run.

My concern was partially alleviated with the amount of Infrastructure spending announced by the Finance Minister. This would encourage the infrastructure companies to increase their volumes. Moreover, increasing the refinancing limit of IIFCL would increase the availability of cheap funds. However, certain aspects were disappointing. The increase in MAT by 300 basis points would not only result in lowering of book profits, but an increase in cement and steel prices as well which would affect the profitability of this sector. I also have doubts on the success of infrastructure bonds as money would be locked for 5-10 years for a measly rate of 5-6% making them less attractive investment options.

The Finance Minister raised a lot of smiles by raising the IT slab. This seems an illusion to me as the income that an individual would save through direct taxes would be consumed by indirect taxes due to the increase in excise duties. The hike in food prices would create additional burden on the consumers.

The increased focus on clean energy impressed me the most. With the introduction of clean energy cess and the creation of a National Clean Energy Fund, the finance minister has not only paved way for the emergence of a new sector but has also sent a strong message to the international community about India’s commitment to solve the Climate change issues. The government’s intention of transitioning to GST in 2011 is another positive step as a simplified taxation system leads to increased revenues.

 After the recession, it was imperative to reflect optimism in the budget. Although, the budget did manage to setup certain trends, it reflected a certain degree of over cautiousness too.

Something on realty!!

Well, I apologize to my readers about the delay in the budget post. I am still in the process of analyzing it and expect my first part of analysis to be out within the next 3 days. However, I read something interesting on real estate which I intend to share.

There was an interesting article on foreign debt or ECBs into the sector. Now, real estate sector is not allowed to use ECBs by the Indian government. When I tried analyzing the reason, I observed that this happened in 2007 when the economy started overheating. It was felt that if ECBs are allowed a real estate bubble could open up. Now, a burst could cause the economy to come down. Hence, a timely intervention was done to avoid this burst. I intend to discuss the real estate burst phenomenon in one of the later posts.

But interestingly, ECBs are still flowing into the sector. The mechanism is an interesting one. The Real estate company issues the bonds which are bought by NBFCs. These bonds are then listed in the stock exchange. Hence, the local finance firms act like a storage place to such bonds, and when they get the right price, they sell it to a foreign fund. All transactions done and quite legally too.

Now, in my opinion, this becomes a cause of worry. Already, the FM has realized the overheating of the economy due to which the CRR rate has been hiked and fiscal stimulus being withdrawn. With such funds being infused, we run the risk of inflation and excess liquidity. Hence, the government needs to step in and plug this loophole. One possible way could be to prevent the listing of such bonds. FIIs can only invest as long as the bonds are listed in Stock Exchanges. If we could prevent them from being listed, we could actually control the ECBs into the sector.

Goodbyes hurt the most, when you don’t get to say them!!!!!

Before I start my entry, I must thank one of my closest friends, SJ, to reignite the pensieve as I had slowly started turning into an impulsive writer. Now, to my entry:

Today, I went to watch “Karthik calling Karthik” which, of course was a brilliant movie. However, one line struck me the most, the line I write in the title above. It put my deepest thoughts in plain words, something that I had failed to express all this time.

This has happened with me not once but twice. And each time, I felt deeply impacted. Luckily for me, the first one did not actually end in a goodbye and as fate would have had it, I once again came in touch and the camaraderie was again at the same levels.

It is the second one which has always pricked me like a thorn. This person became a great friend, a person I chilled out with and suddenly the communication channels got lost. I tried contacting the person, sent emails but to no avail.

The day I was disembarking for a new phase in my life, I wanted to say a final goodbye to this person. I wanted to ask what had gone wrong, I was ready to shed my ego, just to relive those fun moments that I had with the person one last time. I wanted to say that I might have been a bit ridiculous, stupid at times, but all this was just to lighten things up. I wanted to say that I always considered the person to be a part of my special group of friends for whom I was willing to go out of the way. I wanted to say all this and much more……. But I could not.

Recently, I got a linkedin invitation. I thought that probably the temper had died down. But, as things later turned out , I was wrong.

I know that my entry may never reach the person eyes, but I’d like to say that I did whatever I could with utmost sincerity and honesty. I had made numerous attempts and had compromised with my ego to the limit. However, I was made to swallow this bitter pill. And the bitterness now stays……………

On a lighter note, I also visited Archie’s where I saw this interesting board which said “ Women are more talented than men….While men succeed after numerous attempts, they require a single attempt” I leave the interpretations open….

My next entry: II’ll analyze the budget 2010-2011.

Till then, cheerio

devzz