The Game Stimulus
By: Amit Bhushan Date: 1st Dec. 2014
The pundits are busy hankering about growth in India when almost 'all' major economies barring the USA are facing a slowdown. The era is marred by Japan in 'technical' Recession, a Europe barely managing to keep its head above the water level, while China facing the demand challenge for its manufactures with the result of a lowering of its growth prospects. The USA is managing to stave off gloominess with its firms using cheap liquidity to invest in processes/sectors where they presume will pay off over the long run and often in-sourcing manufacturing of Hi-tech goods. The bright spot is India and some of the other 'emerging markets' where domestic consumption story seems 'intact' and with likelihood of a boom of manufacturing being projected. In India, its services companies in E-commerce, Finance, IT & ITES etc. continue to expand while in the USA the services company activities continue to expand but mostly outside its shores but with a pay-off that helps bolster employment within as well.
The political leaders in India are rushing to claim the unleashing of their Reforms agenda where only possible activity that has taken place is project clearances 'lock, stock and barrel' under old policies and procedures with a few liberalization announcements where activities are yet to fructify, though it cannot be denied that some sectors like E-commerce are witness to deepening of activities shrugging off any elements of governance related doubts and the government's response has been to ensure that such doubts continue to hang around. Then we also have the situation where the growth rate has managed to beat the trend-line first and then it has started to taper off. If indeed the growth was due unleashing of Reforms, then we should have sectors which have witnessed reformation/re-set of policy and procedures and thus such sectors should be clearly ready to receive and absorb investments, and thus growth should be sustainable for some time say 3-5 years. However we only have punters upping their game in market while the real market activities yet to take off in a big way. All this yields to us is promises and dream merchants selling high hopes of future growth.
This may actually lead to conclusion that the present amelioration of growth is actually due to somewhat better understanding of rational choice options/game amongst the business leaders which has catapulted them to invest in some of the better rated choices and develop interests in such positions which may likely yield possible better returns/growth in future. However in absence of a clear reform measure, such activities may tend to slide and bring down growth rate in the process as we have witnessed. One of the ways to measure success of reforms measures is the number of entrepreneurs that have benefitted from the 'enablement framework' which is a mix of policy and procedure reforms, supporting infrastructure, credit/financial framework etc.; which remains very low though we have long lists for declaration on intents by leaders as well as a few policy reforms and a little better number of procedural streamlining. We do have intents again in fresh infra creation, while the older infra usage as well as linked activities are still embroiled in slow paced expansion with its utilization controlled through a labyrinth of official as well as unofficial hawks or a series of attendant problems like lack of power/water/sanitation/pollution control etc. or even connectivity in most states/regions; and this is one of the unresolved problem area which has not received much attention. The actual number of entrepreneurs to have benefitted from enablement framework may not be great and this has remained so even in past where the value of investments in sector was a measure of success rather than overall additional entrepreneurs being facilitated or employment creation. The present leaders do not seem to have made any changes (or even debated any) to such criterion of success in their 'pursuit of economic growth'.
While the overall global growth treads through the pain, it will take time to heal with the possibility to create a suitable infra- related economics in the populous emerging markets which are a bright spot so far and where it is possible for the developed West or Japan to sell high value Capital goods for ports, railways, telecom & broadband, road & highways as well as industrial parks for their companies to participate in these economies. As of now most such developed economies are struggling to raise domestic consumption to keep (mostly domestic) jobs afloat but with the accentuated risks of bad credit. Given the investors heckles that this policy can raise as soon as the first signs of banking distress appear, such a policy is likely to be met with continued skepticism. A re-rating of emerging economies which in totality are much less leveraged than the developed world with it multitudinous financial engineering instruments and plethora of institutions; will offer a great deal of support, however will require political 'will' in the West, coupled with 'will' amongst emerging market leaders to 'play by the rules' backed by stronger laws and institutions. Till such a time the set up takes shape, its mostly everyone on his own which is nothing new in the global marketplace but its conciousness level has gone up a bit.
By: Amit Bhushan Date: 1st Dec. 2014
The pundits are busy hankering about growth in India when almost 'all' major economies barring the USA are facing a slowdown. The era is marred by Japan in 'technical' Recession, a Europe barely managing to keep its head above the water level, while China facing the demand challenge for its manufactures with the result of a lowering of its growth prospects. The USA is managing to stave off gloominess with its firms using cheap liquidity to invest in processes/sectors where they presume will pay off over the long run and often in-sourcing manufacturing of Hi-tech goods. The bright spot is India and some of the other 'emerging markets' where domestic consumption story seems 'intact' and with likelihood of a boom of manufacturing being projected. In India, its services companies in E-commerce, Finance, IT & ITES etc. continue to expand while in the USA the services company activities continue to expand but mostly outside its shores but with a pay-off that helps bolster employment within as well.
The political leaders in India are rushing to claim the unleashing of their Reforms agenda where only possible activity that has taken place is project clearances 'lock, stock and barrel' under old policies and procedures with a few liberalization announcements where activities are yet to fructify, though it cannot be denied that some sectors like E-commerce are witness to deepening of activities shrugging off any elements of governance related doubts and the government's response has been to ensure that such doubts continue to hang around. Then we also have the situation where the growth rate has managed to beat the trend-line first and then it has started to taper off. If indeed the growth was due unleashing of Reforms, then we should have sectors which have witnessed reformation/re-set of policy and procedures and thus such sectors should be clearly ready to receive and absorb investments, and thus growth should be sustainable for some time say 3-5 years. However we only have punters upping their game in market while the real market activities yet to take off in a big way. All this yields to us is promises and dream merchants selling high hopes of future growth.
This may actually lead to conclusion that the present amelioration of growth is actually due to somewhat better understanding of rational choice options/game amongst the business leaders which has catapulted them to invest in some of the better rated choices and develop interests in such positions which may likely yield possible better returns/growth in future. However in absence of a clear reform measure, such activities may tend to slide and bring down growth rate in the process as we have witnessed. One of the ways to measure success of reforms measures is the number of entrepreneurs that have benefitted from the 'enablement framework' which is a mix of policy and procedure reforms, supporting infrastructure, credit/financial framework etc.; which remains very low though we have long lists for declaration on intents by leaders as well as a few policy reforms and a little better number of procedural streamlining. We do have intents again in fresh infra creation, while the older infra usage as well as linked activities are still embroiled in slow paced expansion with its utilization controlled through a labyrinth of official as well as unofficial hawks or a series of attendant problems like lack of power/water/sanitation/pollution control etc. or even connectivity in most states/regions; and this is one of the unresolved problem area which has not received much attention. The actual number of entrepreneurs to have benefitted from enablement framework may not be great and this has remained so even in past where the value of investments in sector was a measure of success rather than overall additional entrepreneurs being facilitated or employment creation. The present leaders do not seem to have made any changes (or even debated any) to such criterion of success in their 'pursuit of economic growth'.
While the overall global growth treads through the pain, it will take time to heal with the possibility to create a suitable infra- related economics in the populous emerging markets which are a bright spot so far and where it is possible for the developed West or Japan to sell high value Capital goods for ports, railways, telecom & broadband, road & highways as well as industrial parks for their companies to participate in these economies. As of now most such developed economies are struggling to raise domestic consumption to keep (mostly domestic) jobs afloat but with the accentuated risks of bad credit. Given the investors heckles that this policy can raise as soon as the first signs of banking distress appear, such a policy is likely to be met with continued skepticism. A re-rating of emerging economies which in totality are much less leveraged than the developed world with it multitudinous financial engineering instruments and plethora of institutions; will offer a great deal of support, however will require political 'will' in the West, coupled with 'will' amongst emerging market leaders to 'play by the rules' backed by stronger laws and institutions. Till such a time the set up takes shape, its mostly everyone on his own which is nothing new in the global marketplace but its conciousness level has gone up a bit.