---------- Forwarded message --------- From: 'N Sekar' via iyer123 <iyer...@googlegroups.com> Date: Thu, Nov 30, 2023 at 9:45 AM Subject: [iyer123] From Money Control - Those interested can go to Money control and read the full interview of the MD of Morgan Stanley, India . I am sending a few selected paragraphs To: Iyer <iyer...@googlegroups.com>, Kerala Iyer < keralaiy...@googlegroups.com>, Rangarajan T.N.C. <tncrangara...@yahoo.com>, Chittanandam V. R. <chittananda...@gmail.com>, Mathangi K. Kumar < mathangikku...@gmail.com>, Yeddanapudi Markandeyulu <yeddanapu...@gmail.com>, Srinivasan Sridharan <sridhsriniva...@gmail.com>
*The market have not accounted for that (earnings overshooting) fully*. *Why is that happening? * There are three things that have happened which are noteworthy. First is that we've had macro stability (includes stability in inflation and growth) like never before. As a country we’ve changed our approach to inflation. So we've as a country changed our approach to inflation. Prior to 2015, before the law was etched, that the RBI's sole mandate is inflation, we've oscillated between growth and inflation as an objective for the central bank depending on the mood of the day. Now this macro stability has been earned from hawkishness on inflation. The other aspect of macro stability is our dependence on the world to grow. That dependence comes from two things, the trade that we do with the world and the capital that we get. *Since the last eight or nine years, we are no longer dependent on global capital markets to fund our growth*. And we are trading in a very different way from the rest of the world in terms of how our terms of trade have evolved. And we are now less susceptible to adverse movements around the world, especially in oil. The oil intensity of this economy has gone down because of two reasons—GST (goods and services tax) and the ubiquitous availability of electricity. A lot of long-term market participants will know that 15-20 years ago, diesel genset companies used to be toast of the town because every home in India needed to have a diesel genset or an inverter since the supply of electricity was not reliable. That has changed. Every single one of India’s 600,000 villages has electricity now. So our consumption of diesel as a primary source to generate electricity has declined and, therefore, consumption of oil. GST has eradicated interstate borders. Prior to 2017, trucks would line up for hours outside state borders to pay the toll tax, to pay the interstate tax, to pay all the taxes. Corruption aside, it involved a lot of fuel consumption. Trucks used to move a lot more slowly on our roads. Even cars that pass through toll nakas (booths) had to line up for hours because we did not have electronic toll nakas. That's changed. So the amount of time that we're spending on the road has reduced, therefore the amount of fuel that we're consuming has reduced. If you look at the oil intensity of India's economy, it has declined sharply in the last 15 years. Fifteen years ago, when we were a $1 trillion economy, we were consuming 100 million barrels of oil (a year). Today we're doing 150-160 million barrels. We're nearing up to $4 trillion (economy). We've quadrupled as an economy, our net oil consumption is up 60 percent. If you see our terms of trade, we are now exporting a lot more services to the world. In the last three years, our services exports on a net basis have doubled. Our market share in physical goods exports has improved. And the most critical thing is that we are no longer dependent on global capital markets to fund that saving deficit that we have. Now, since a large part of our deficit is funded by FDI (foreign direct investment), which is less sensitive, at the stock market level, our correlation with oil, with Fed funds rate and with US growth has crashed. The second piece is the focus on profits. I think this administration announced that in 2019, when they cut corporate tax rates and essentially said that we are in this economic model where we're trying to boost corporate profits, because that will lead to higher investments and more jobs and a virtuous economic cycle. It's a more reliable way to generate growth than to undertake social spending and consumption. And the third thing is this shift that happened in 2015, when we allowed retirement funds to invest in stocks. It is very similar to what (US) President (Ronald) Reagan had done in 1980 when he allowed 401K plans in America to invest in stocks and what you got then was a subsequent 20-year bull market, which only ended with the NASDAQ bubble when the index traded at 100 times earnings. We're nowhere close to that. And because our demographics are different, I think this is not a 20-year story for India, this could be a 40-year story. So the bull market is underpinned. In consumption we've just arrived at the sweet spot of $2,500, where a lot of staple consumption peaks out and discretionary consumption takes off. We have unmatched digital infrastructure, which is allowing the government to undertake social transfers, which has made it possible for banks to open accounts to the hitherto unbanked who were not commercially viable. So suddenly, financial penetration is way above our per capita income. At the current per capita income we have, the amount of financial penetration we have achieved is unparalleled in world history. So a lot of these things have happened and that underpins the economic cycle, which looks very good. My Note: Many of us are not fully aware of the structural changes the Modi Govt has brought about. There may be short term pains but our children and their children. Apart from Economics, we will also recapture our forgotten (made to be forgotten) Glory and Pride. N Sekar <http://www.avg.com/email-signature?utm_medium=email&utm_source=link&utm_campaign=sig-email&utm_content=webmail> Virus-free.www.avg.com <http://www.avg.com/email-signature?utm_medium=email&utm_source=link&utm_campaign=sig-email&utm_content=webmail> <#m_-1836435358839894260_DAB4FAD8-2DD7-40BB-A1B8-4E2AA1F9FDF2> -- You received this message because you are subscribed to the Google Groups "iyer123" group. 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