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India Equity Research Reports, IPO and Stock News
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Strategy
India
The problem of inflation (and how to solve it). We analyze the causes of high
inflation in India and conclude that flawed government policies may be largely behind
high structural inflation. In our view, (1) disproportionate focus on consumption at the
cost of investment, (2) debilitating government policies and procedures and (3) low
accountability of companies entrusted with infrastructure development has led to the
current problem. We look at the supply-side issues in major sectors and make a few
suggestions, which may result in faster execution and increase supply.
When demand is more than supply, inflation will exist
The Indian government’s fiscal policy has focused on unbridled consumption through numerous
social expenditure programs and fiscal incentives over the past few years. At the same time,
sclerotic policies, dilatory processes and poor planning have led to low growth in farm productivity,
insipid infrastructure build-up and supply problems. India also faces the problem of ‘imported’
inflation given its high and growing energy deficit.
Getting the fiscal situation in order is as important as monetary tightening
We believe ongoing monetary tightening by the RBI may be ineffective in controlling inflation
without concurrent fiscal consolidation by the central and state governments. Tight liquidity and
high interest rates may damage growth without solving supply-side issues. On the other hand,
high fiscal profligacy may keep consumption and inflation high. The RBI has subtly highlighted its
limitations in controlling inflation without fiscal propriety.
Agriculture: Enough short-term solutions exist; improve logistics
Our GameChanger author Akhilesh Tilotia had identified several areas of improvement in farm
productivity and agriculture production in his The time is ripe report. We focus on issues such as
logistics and distribution that can be improved in the short term but can improve supply
dramatically with moderate investment. Longer-term solutions such as higher yields will require a
more thorough overhaul of the entire agriculture sector.
Infrastructure: Let the private sector build it; monitor and ensure enough competition
We highlight sectors where the government and regulators may need to intervene forcefully to
improve processes and timely completion of projects and in some cases, enhance competition. The
telecom mobile sector is the best example of unfettered competition leading to large price
reductions and massive volume growth. The government had awarded a number of licenses in
early 2008 to new operators to start wireless services; the award process may have been
controversial but Indian citizens have unquestionably benefited from more competition.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Strategy
India
The problem of inflation (and how to solve it). We analyze the causes of high
inflation in India and conclude that flawed government policies may be largely behind
high structural inflation. In our view, (1) disproportionate focus on consumption at the
cost of investment, (2) debilitating government policies and procedures and (3) low
accountability of companies entrusted with infrastructure development has led to the
current problem. We look at the supply-side issues in major sectors and make a few
suggestions, which may result in faster execution and increase supply.
When demand is more than supply, inflation will exist
The Indian government’s fiscal policy has focused on unbridled consumption through numerous
social expenditure programs and fiscal incentives over the past few years. At the same time,
sclerotic policies, dilatory processes and poor planning have led to low growth in farm productivity,
insipid infrastructure build-up and supply problems. India also faces the problem of ‘imported’
inflation given its high and growing energy deficit.
Getting the fiscal situation in order is as important as monetary tightening
We believe ongoing monetary tightening by the RBI may be ineffective in controlling inflation
without concurrent fiscal consolidation by the central and state governments. Tight liquidity and
high interest rates may damage growth without solving supply-side issues. On the other hand,
high fiscal profligacy may keep consumption and inflation high. The RBI has subtly highlighted its
limitations in controlling inflation without fiscal propriety.
Agriculture: Enough short-term solutions exist; improve logistics
Our GameChanger author Akhilesh Tilotia had identified several areas of improvement in farm
productivity and agriculture production in his The time is ripe report. We focus on issues such as
logistics and distribution that can be improved in the short term but can improve supply
dramatically with moderate investment. Longer-term solutions such as higher yields will require a
more thorough overhaul of the entire agriculture sector.
Infrastructure: Let the private sector build it; monitor and ensure enough competition
We highlight sectors where the government and regulators may need to intervene forcefully to
improve processes and timely completion of projects and in some cases, enhance competition. The
telecom mobile sector is the best example of unfettered competition leading to large price
reductions and massive volume growth. The government had awarded a number of licenses in
early 2008 to new operators to start wireless services; the award process may have been
controversial but Indian citizens have unquestionably benefited from more competition.
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