Run up to Budget 2013

So the growth targets have been lowered. Budget is round the corner, tax collections are low, there has be no sale of PSUs, the sale of spectrum has not been successful, inflation is high, diesel and gas prices are slowly creeping up, productions are being slashed, dollar to rupee parity is a constant challenge, Gold import is being controlled, FDI inflow has reduced, trade deficit has grown, debt to GDP has increased, inflation is out of control. How do we douse this wild fire without affecting the election interest? Use a spoonful of water! Cut lending rate by 0.25 points. 

The govt, will make another announcement and push the stock market and the rupee, the smart punters will square up positions over the end of the week. The common citizen will lose! Hence, expect high taxes for high income, high service tax rates, excise and custom rates to change and SOP's to be reduced. What else? Open the economy. The FDI scene with Ikea and Walmart and tax issues of Vodafone and now Shell, have sent wrong signals.

The Jet JV with Etihad has ground to a halt because of these uncertainties. Then Air Asia has decided to join the fray with Tata's and the Bhatia's. Whatever happened to Kingfisher?

The stock market is constantly slipping on uncertainty factor. So the rescue is becoming more difficult.

To top this all is the nationwide strike of banks and utilities. Violence across the country and the daily revelations of hefty bribes being paid for doing things that should have been done in the normal course.All the wasted infrastructure projects lying in ruins due to bleeding finances. The real estate prices are growing, as all this wealth is being directed there.

So let us take this forward. The bank finances all stock and debtors. The more you can offer, larger the limits. Hence, the slower your sales and faster your production, greater are your stocks and debtors. Dead and slow moving stocks and bad debts, will now add to your misery. The FI will encourage you to challenge the supply push model. In a negative demand market, this is the best way to kill the company. Then what happens next?

Have you noticed the Q3 bank results? Have you seen how good these are? How does a bank make money? By selling debt instruments. So who are they financing? Check out industry results. They are poor. Check our projected GDP growth, same answer, poor. So work out the correlation. Companies are running out of steam, negative working capital is being financed by banks. Capex would have gone the ECB way, working capital forex is not permitted by FEMA. So there it is! Look out for more corporate restructuring and cost cutting! As accountants add value to the bottom line.

Most correction in policy like, GST has in effect been pushed back till after the elections. The states have agreed on the compensation package so what does that mean? Now states will push for it and the Centre will be undecided. Such is bureaucratic life. For every twisted solution, there is a new and more complicated problem.

The solution? A patriotic Indian, simple compliance process, effective implementation, short turn around time and visible economic improvement.

(The writer is Assistant Professor, Faculty of Management Studies, Manav Rachna International University & Mr. J.S. Jassal, CA)