Archive for November, 2016

Life before & after De-mo :)

Halfway through their term, the NDA government has unleashed a tsunami by withdrawing 500 & 1000 Rs notes( De-monetization or De-mo in short !).

The opinion on the outcome of this move is sharply divided, while no doubt it has caused hardship to people, most have accepted it as the cost to clean the system of black money accumulated over ages.  This is the big bang reform that no one thought would be even remotely possible to do in such a large,diverse and to a large extent un-banked country as ours.  Let us actually forget this for the moment (difficult as this is the hottest topic in the country!) and see what has been done in last 2.5 years before this move to see where we are heading.

While our GDP has averaged at 7% since 2010, our population growth has been slowing down making the per capita GDP grow at 5.8% approx, this growth if it continues makes us one of the fastest growing economies in the world.

  1. GST – likely to become reality early next year, this by itself is a monumental reform
  2. Fuel prices deregulation – done for diesel
  3. Direct benefit transfer – partially done,
  4. Repeal unwanted laws – many redundant laws have been done away with
  5. Bankruptcy code
  6. transparency in auction of resources like spectrum, gas etc – done
  7. Jan Dhan accounts – 22 cr new accounts opened in 2 years, to put this in perspective we had 40 cr accounts opened from 1947-2014 !!

Apart from this infrastructure developments like Road, Railways and reforming Agriculture are in ‘mission mode’ to borrow the phrase from railway budget.

So this is the report for how things have moved before de-mo, and de-mo is something that will pan out over a longer time frame. The half year report card reads well and if this pace is maintained we may truly enter a period of good growth with a much cleaner economy. That is what any one would want for himself as an investor but as a citizen too as these changes can pull many people out of poverty and into productivity.

A disclaimer : All the data has been culled from publicly available sources and believed to be reliable. The idea for this note came from a investment managers perspective.