Category: Excerpts

I have been referring to cooking gas, fertilizer and kerosene subsidies. I must confess that I am surprised by the way words are used by experts on this matter. When a benefit is given to farmers or to the poor, experts and government officers normally call it a subsidy. However, I find that if a benefit is given to industry or commerce, it is usually called an “incentive” or a “subvention”.

We must ask ourselves whether this difference in language also reflects a difference in our attitude? Why is it that subsidies going to the well-off are portrayed in a positive manner?

Let me give you an example. The total revenue loss from incentives to corporate tax payers was over Rs 62,000 crore. Dividends and long term capital gains on shares traded in stock exchanges are totally exempt from income tax even though it is not the poor who earn them. Since it is exempt, it is not even counted in the Rs62,000 crore. Double taxation avoidance treaties have in some cases resulted in double non-taxation. This also is not counted in the Rs62,000 crore.

Yet these are rarely referred to by those who seek reduction of subsidies. Perhaps these are seen as incentives for investment. I wonder whether, if the fertiliser subsidy is re-named as “incentive for agricultural production”, some experts will view it differently.

–from Narendra Modi’s Speech at ET Global Business Summit

“2016 is the year that will separate the service dinosaurs from the savvy cannibalizers, as revenue growth slides towards negative territory and the onus shifts from selling more buttocks on seats to maintaining sexy profit margins,” added Phil Fersht, CEO of US-based HfS Research, an outsourcing-research firm.-from Mint

Data releases have become much less transparent and truthful at both a macro and a micro level. At a macro level the key issue is the ever increasing importance of China and India. China is the world’s second largest economy, but already much larger than the US in a broad swathe of sectors. India will be the world’s third largest economy within a decade. Unfortunately their rise is increasing the global cost of capital because an ever growing share of the most important data they produce is simply not credible. Currently stated Chinese real GDP growth is 7.1% and India’s is 7.4%. Both are substantially over stated. This obfuscation and distortion of data, whether deliberate or inadvertent, makes it increasingly difficult to forecast macro and hence micro as well, for an ever growing share of our investment universe.-from Nevsky Capital’s letter to clients