Taxes will be lowered, but in the meanwhile, here's a hike.

BUDGET 2015

The annual Economic Survey, published a couple of days before budget day, provides the context against which the Finance Minister makes his proposals. This year’s document was uncharacteristically enthusiastic about our situation, “The changing fortunes of India have been nothing short of dramatically positive”, with a decline in inflation, the shrivelling of the current account deficit, and a sharp recovery in economic growth.

This last has most economy-watchers surprised, since it is not supported by corporate results or tax collections; worse, if it is a statistical quirk, emerging out of the new method for calculating the GDP number, it may endanger the revenue estimates on which Mr. Jaitley’s second budget is based. Taxes collected by the government depend on economic growth, and if economic activity is over-estimated by the budget, government revenues will fall short of projections, putting a stress on the fiscal deficit, and demanding greater borrowing.

The Finance Minister has, in any case, disappointed those who believe in fiscal discipline, in pushing out by one year the date by which he will reduce the government’s fiscal deficit to 3%. He also postponed by a year the introduction of two fresh commitments - the implementation of the GST, and a reduction in income tax rates for companies, from 30% to 25%. Meanwhile, he had no hesitation in raising from 12 to 14% the incidence of service tax, a hike required for it to converge with the tax levels on goods.

And, though corporate tax will go down, at a date and rate to be notified, for the time being, it will go up. The Minister's speech said ‘rich’ individuals, defined as those with stated incomes over Rs. 1 cr per annum will pay an additional surcharge on income tax. Currently standing at 10%, this got hiked to 12%; what the Finance Minister did not say, but stands in the fine print, is that there is an identical hike for companies, as well. This additional surcharge is estimated to garner Rs. 9,000 crore for the exchequer. The only consolation is that Mr. Jaitley has abandoned the wealth tax, since it has not yielded the desired revenue.

Other initiatives that could be significant were mentioned, but not fleshed out, and would seem to be statements of intent, rather than specific proposals: these include easier bankruptcy laws, and a simplification of income tax rules governing individuals. Vague promises like these belong in an internal discussion or brain-storming, rather than on the floor of the house, and speak of incomplete homework, rather like declaring that yoga will be a charity. Someone will have to explain the budgetary significance of that to me, preferably while doing a headstand!

I don’t want to sound entirely negative about the budget, since there were two proposals in it that I really liked

- the first was that the employee contribution to the ESI (Employee State Insurance) Scheme will henceforth be optional. Anyone who has visited an ESI-run hospital will welcome this move. Mr. Jaitley’s remark about employees being hostage to the scheme was spot on. So are companies, and I wonder when he will make the employer’s contribution optional, too.

- the second was allowing ‘pass-through’ in Alternative Investment Funds* (AIFs), such that gains in these funds are not taxed in the hands of the individual investors, much as for mutual funds. India needs diversified sources of financing for new business ventures, and AIFs are particularly active in private equity and venture capital deals.

On the subject of funding investment, the most startling gap, to my mind, was in the area of funding public sector banks. The Economic Survey had this to say about their performance, “the best public sector banks perform well below private sector banks on average, recognising of course that PSBs may be burdened with greater social obligations that places them at a competitive disadvantage relative to the private banks. The subtler problem with public sector ownership is that exit from debt difficulties is proving very difficult.” Given the fact that PSBs account for over 70% of the banking sector, and their balance sheets are hugely stretched, I anticipated a huge commitment to enhancing their equity base. The number, at just under Rs. 8,000 crore, seems piffling, especially for an economy which is projected to grow at over 8%.

My editor at Outlook asked me how I thought this budget measured upto the expectations of a Big Bang. “0 on 10”, I answered. However, I had no such expectations, so I needed to assess it against  

more muted norms. I find it long on hope, but short on substance, and, I suspect, pinning too much on favourable winds in the larger world, most especially continued global liquidity, and low oil prices.

Fingers crossed.

*here's the reaction of TV Gopal, Chairman of TVS Capital:
http://www.vccircle.com/byinvitation/2015/02/28/budget-2015-break-through-indian-pe-industry

What an aunt means

MASI

A eulogy to my aunt, who passed away on Feb 15th, aged 91

Masi

Ma - si

Like mother. What a lovely word!

Aunts - and if you want to be gracious to the other sex, uncles as well - are like the emotional bonus awarded to us by the cosmos.

“You have your parents’ love”, it says. “Now here is an aunt, or two, or three.”

“You have a home. Oh, take another, and a third.” Places of welcome, of refuge, of bonding; of quiet comfort and cousinly camaraderie.

For several months, when I was 3 or 4, Masi’s home was our home, when my father was away in the UK, and we moved, bag and baggage, to the Air Force station in Kanpur. My most vivid childhood memories date from then - push-starting Rattan Uncle’s car, then falling to the road as the engine caught and revved away; going into town to order a pink frock with lace inserts for Cuckoo’s birthday; and her birthday cake. “What shape do you want your cake to be ?” she asked Cuckoo. “Puss”, Cuckoo said, monosyllabic at best. “Puss!”, exclaimed Masi. “So it shall be - and so I shall call you!” The nickname stuck for several decades, till the shifting tides of politically and socially correct language dictated we jettison that name.

Words reflect the character of the times. “Doughty” is not a word you hear these days. Perhaps because people are not doughty any longer. But doughty was my Masi - Two days ago, we were recalling how Masi sat on a muda on the baked patch of land that was D 68, Defence Colony, and supervised the building of the Suri home, brick by proverbial brick. All the while, knitting us sweaters, stitch by stitch, or knit by purl - again words you hardly hear these days.

On these doughty foundations are our lives built, we who take material ease for granted, who only dimly appreciate a generation that fought the ravages of colonialism, partition, war, and

socialism  - and built our homes, our lives. Through those years, Masi lived with a chuckle and a strong sense of reality.

A quarter century ago, I took Masi a few balls of wool in a deep sea-green. “It may be the last sweater I ever knit”, she said without self-pity -  knowing her fingers were beginning to stiffen with age and arthritis.”You had better look after it”. I don’t know about looking after it, but I wore it on mountain treks and on jeep rides in deserts, in front of fireplaces and electric heaters - wore it till the threads unravelled. Sadly, the wool was not as strong as the hands that knit it.

Last week, I again encountered Masi’s acute sense of reality. Her surgery had gone well, her wounds had healed; Aarti and Kucchy had set up all the systems to look after her convalescence and physical rehabilitation. But in her eyes I saw a strong warning, an intimation that her flesh and spirit didn’t have the strength to survive. Messages are lost in translation, and in our lack of courage to accept  them, but I did share with Kucchy and Aarti

that now the only thing to do was to love her, like we would a child.

Sadly, we never love our aunts the way they loved us.

Maybe that’s the way of nature, and we are designed more to love in turn. To pass on the love and the tradition, and the sense of the past, to each succeeding generation.

In my Masi’s passing, I would like to dedicate myself to doughtiness, to reality, to family, and to our children.

And it’s such a pity, I’ll never be a loving Aunt! Better luck next time, Pia.

For my son

I wrote this to my son on his 13th birthday. Cleaning out my files, I found it today. I think I could as well have written it for him on his 16th, a few months ago.

As you grow, remember:

The World Owes You Nothing. 
You were born with enormous blessings – a healthy body, a fine mind, a family which is happy, wealthy and wise; and above all, with love. From the day you were born, you have been showered with love. Count your blessings every day of your life. Whenever you feel sorry yourself, just look outside your own little world, and remember how much you have to be grateful for.

You Can Be What You Want

Religious people say God made us in his own image. I don’t know, because I don’t know much about God and his image. But, what I do know is that we are blessed with the ability to shape our own lives. 
Want to be a dancer? 
Then dance - today, tomorrow, and the next 1000 days, and I promise you will be a good dancer. 
Put your all into it, and you will be a great dancer.
Want to be a Physicist?
Study physics - every day, for the next 2500 days, and you will know, really know physics.
Your Dadi had only one ambition – to have a happy family. She worked hard at it, and you know how that felt!
Above all, don’t look for excuses outside yourself.

Find Yourself

In your adolescence, you will want to ‘belong’ to groups or gangs. This is normal.
You will look for love and attention outside the family. This is hormonal. 
If the groups or people from which you seek attention don’t give it to you, you may go through periods of feeling low. You may, in turn, feel like rejecting the family. This, too, is normal.

But it is a mistake. 
Family ties give us an amazing amount of stability in our lives, and they are the ones that strongly abide. Home means “the place where, when you knock on the door, they have to let you in”. Whether we live in Delhi or Satoli, Bangalore, or Bangor, Maine, your parents’ door, and heart, will always be open to you, to your thoughts, and to your concerns. 
But the most amazing tie you have is to yourself. It is the one tie you carry wherever you go. Find joy in your own being, in the wonder of your own creation, in the inner workings of your own mind. Find satisfaction in your life, and you will never be lonely or depressed.

I am not suggesting you become a hermit. But remember, the most attractive people are those who cherish themselves. The most loved people are those who have found a way of living comfortably within themselves.

Find Good Friends

One of the great joys of growing up is the exploration of friendship and intimacy outside the family. Be free with the first, more discriminating with the latter. 

Cultivate discrimination. The Sanskrit word is ‘viveka’. It is one of the most valuable concepts I know. If we have viveka, we learn to tell good friends from hangers-on; true value from surface sheen, and the abiding from the temporary.

Good friends are an amazing strength – they are powerful mirrors into our life. They tell us what is best about us, and kick our ass when we are screwing up. Like every aspect of our lives, they need to be cultivated, nurtured, and valued.

But, when something excites you, truly grabs you, don’t feel scared to go it alone. Each of us is unique, which means that we will often have to walk alone.

ENJOY YOURSELF

Life offers amazing opportunities for discovery, enjoyment and abandon. Seize those chances, and grab the day.

Carpe diem

A Hit-and-Nearly Run - in 5 tweets

Hit-and-nearly-run at India Gate this morning. Rajan Yadav rams his white Figo into the rear of a labourer's cycle and backs to scoot.

A crowd gathers and I whip out my camera, so he stops. "The cycle emerged from nowhere". On the broadest road in Delhi!

"While you were looking at your phone", I guess. "No. It had fallen down, so I was looking FOR it, not AT it". Helps the labourer?

"I'll give him Rs. 250." 1 thousand, I say. "500.I only have 500". "Call a friend, or I call the cops." I call 100. He finds 1 k.

I hand the 1 k to the labourer, who isn't badly hurt. Wait for the police to arrive. Rajan, you are a callous, careless youth.

Those 5 tweets, with punctuation rectified, were my story of this Sunday morning. A Tourist Patrol vehicle of the Delhi Police arrived in a few minutes, noted my name and address, and had a brief chat with the labourer, who was loading his damaged cycle into an auto-rickshaw.

I cycled on; half an hour later, I saw a flurry of missed calls. Turned out they were from an ASI* at the Tilak Marg Police station, which had sent a van to the location, to follow up my complaint, and found no one at the spot. I told the ASI about the Tourist Patrol vehicle, and he said he had subsequently heard about their intervention.

The Delhi Police were - both in person, and on the phone - most civil and efficient.

Retail Investors are getting shut out of new ventures

Since investing is for the future, I decided to consult my 16-year old son about companies and sectors he saw as holding promise.  “Technology,” he said. “Phones, and computers.” Like Apple, I thought. That’s a US company. Samsung? Korean. There is, of course, Micromax, but that’s not yet listed. “Can’t really invest in those.” I told him. “Other gadgets?”, he offered “Like TVs, fridges, air-conditioners?” “The Koreans practically own the space”, I explained. “And none of them have listed in India” “If I was a little younger, I would have said, candy”. “Chocolates dominate candy markets around the world. And I would love to own shares in Cadbury. But that’s now owned by Mondelez, and they delisted Cadbury India a long time ago” “Amul?” he asked. That’s a cooperative federation, and its shares are not openly traded. The soft drink space is dominated by the global rivals, Pepsi and Coke, and neither of them have Indian listing. Through its Frito-Lay division, Pepsi also dominates the Indian snack food market, with Kurkure and Lay’s potato chips. The number two snack-food player, with the Bingo range, is ITC. One could buy ITC shares, but you’d be buying into a conglomerate which purveys everything from cigarettes to agarbatti, and exercise books to hotel rooms. The largest player in aviation, Indigo, is also unlisted. Times of India, the largest print media brand, is owned by Bennett Coleman, a privately held company. Among television channels, two market leaders, Sony and Star, are owned by foreign companies. The digital space is completely dominated by US brands, whether Google, Twitter, Facebook or Instagram. The battle for Indian e-tail is likely to be an intense and keenly fought one, with Flipkart and Amazon India both drawing up investment budgets that top a billion dollars, but not a paisa of that is coming from the Indian retail investor.  You get the drift - as an ordinary investor in listed Indian companies, vast swathes of business are not looking for my money. This makes me feel deprived. The figures are eloquent - in all of 2014, Indian markets have had 5 IPOs*, with an aggregate issue size of Rs. 1355 cr. To put that in context, the market cap of Indian stocks is close to 1.8 trillion US dollars, or 100,000 crores. That’s a lot of zeros, but if I got my math right, the Indian IPO market in this year of boom and optimism is .001% of the market cap. The investor is secondary to the process of raising capital! The stock market trades only in second-hand goods. The factory-fresh merchandise is ear-marked for financial intermediaries of all manner - VCs, PE funds, pension funds, investmant banks, sovereign wealth funds. I’m not writing this piece to plead for my right to invest. My intent was to explore three thoughts: • how constrained my opportunities are, which I have done above • whether regulation or other structural issues have moved the market in this direction • how an individual might expand his pallette of opportunities. *IPOs in 2014:  Shemaroo: 120 cr., Sharda 352 cr, Snowman 197 cr, Wonderla 181 cr. , Engineers India 505 cr.

The Falling IPO Market The IPO market has been falling, both in numbers and money collected, since 2007. Last year saw a late issue by Powergrid that bumped up the number (it was a 7,000 cr. IPO). But thats still tiny compared to the 34,000 cr.+ issues in 2007 and 2010, both great bull market years. This year is a bull market, by any standard, except the enthusiasm to list companies through an IPO.

In context, Zomato, Snapdeal, Ola cabs and Housing are Indian businesses that raised money from private markets (venture capital). Snapdeal alone raised 3,700 cr. - more than all the public market IPOs in 2014 put together and multipled by 2.  In the next part, we'll speak of regulatory hassles companies face when they go public, and how we can look forward to participating in a growth story that is almost exclusively restricted to non-retail investors today.

During night, wear something light

Delhi's traffic - I increasingly feel -  has passed the tipping point.

This morning, as I negotiated morning traffic at Adhchini, one car swung from the middle lane to the right, to perform a U-turn. A motorcycle plonked off the pavement at a perpendicular to the traffic, darted across a red light, and revved towards IIT Gate. A cycle-rickshaw headed directly at us, in the wrong channel. Two traffic cops on duty looked on, impervious - this is the normal state of affairs, why do you expect us to do anything about it?

The response of the senior admin is to compose doggerel and put it out on Twitter:
- Share the road with care
- Speed thrills but kills
- Don't be daring, be caring
- Caution and care, make accident rare
- Accident brings tear, safety brings cheer
- Have road sense, drive with confidence
- Drinking and driving, a bleak chance of surviving
- Alert today, alive tomorrow
- During night, wear something light

The versifiers have been deserted by their muse; this morning, I read:

-Always wear helmet Tight, and
- Stop before Stop line.

Oh dear.

8/9 The muse returned over the weekend:
-  Have road sense drive with confidence

Find Your Dreams, and Fund Them

Liberty is the rosary of choice, on which I count my many blessings.

+

I choose where to live within my nation—unlike the Chinese, who need a hukou, a residence permit.

+

I chose whom to marry—unlike millions in South Asia, whose parents arrogate that decision.

+

I choose what clothes to wear—unlike those who reside in jails, or work in banks.

+

The state curtails my many freedoms—to buy land in some parts of the nation, to have sex with other men, to read some books, or watch some films.

+

Yet, it disturbs me even more when we willingly yoke ourselves to conformity, a burden that eventually deforms us. When the stays chafe, and we notice our shoulders sag in the mirror of contemplation, we shrug. “Life’s like that.”

+

It is not, but we make it so.

+

+

Management guru Michael Porter wrote: “Strategy is about making choices, trade-offs, it’s about deliberately choosing to be different”.

2

I chose to be different very early. Within a year of joining the ranks of management trainees at a multi-national corporation, I realised that I was not meant to be a corporation man, that I needed to live in nature, to watch the peaches grow. In my spare time, I drew up business plans to run a dairy farm, or drive a tourist taxi. Most importantly, I realised I needed to build up a war-chest from which to fund my freedom. My F*** You Fund, I called it.

+

For the next two decades, I fed my fund. I changed jobs and moved homes; started a business and watched it crash; joined the stage and learned to light plays; worked with street children and shared their dreams. But I never lost sight of that FY Fund. It was my finger to the world, my faith in my own future. Irrespective of my material circumstances – and they were often strained –  I never used that money to pay for my daily life. Michael Porter again: “The essence of strategy is knowing what not to do.”

+

When I left the corporate world, I lost my company car. I didn’t replace it for 7 years, wrote TV scripts at home, and cycled to the editing studio. Expensive suits gave way to denim jeans; hand-made shoes to Hawaii chappals. Holidays were a bus ride or a friend’s car into the hills, a tent in open fields, or a run-down room in a dak bungalow. On one of these trips, waking in a clearing in a Kumaon forest, I realised the home of my dreams would be here.

+

Meanwhile, with the magic of compounding, and the deepening discipline of material restraint, the FY Fund had grown, and stretched to a small plot of fallow land, and a one-roomed cottage of stone and pine, built by a local mason. No architect, no interior designer. No furniture, except for a picnic table, and a cast-off sofa. To this day, we sleep on mattresses in the loft, and my work-space is the sill of our large window on the garden.

+

The winter view from our cottage in Satoli

During the six years we lived in our forest Eden, we had no phone, no road to our door, little money, and no shops in which to spend it. Banks, telecom and groceries were over an hour away, and we made that trip less and less often. Our financial plans for our time in the mountains were drawn up on the basis of gradual depletion, but that didn’t happen. The joy of living close to nature, close to our essential nature, and close to each other pared our needs to the bone, and we needed less and less to get by.

+

In the late 90s, dot-coms boomed, stock markets surged, and the FY Fund bloomed. As the century turned, and financial markets crashed, the fund ebbed. But our resolve didn’t, the money stretched, and my wife found off-line work to do in the quiet of our mountain home.

+

The Delhi of this decade is a different time and space, and I have a new-found familiarity with the world of business, with the adrenalin of large M&A deals and larger egos. Young professionals take 5-star holidays for granted, wear labelled clothes, and change phones with the seasons. I admire the ease with which my son’s generation leads a life of affluence, and struggle to find a balance between his need to belong and my own habits of abstinence.

+

But, above all, I pray that he will find a dream to nurture, and the focus and self-discipline to achieve it.

Published here:
http://qz.com/244258/i-can-afford-the-choice-of-not-working-full-time-it-took-two-decades-of-planning-and-discipline/