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  • Vijay Kedia

    MD, Kedia Securities
    Kedia is a well-known value investor. He is better known on Dalal Street for having spotted many multibaggers pretty early. He strictly adheres to SMILE as a principle in investing; which translates into Small in size, Medium in experience, Large in aspiration and Extra-large in market potential.

Worry of a D-Street investor: Economy needs quick fix, govt thinking long term

Sensex is deceptive and does not indicate the true picture of the market and the economy.

ET CONTRIBUTORS|
Nov 22, 2019, 11.12 AM IST
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The situation seems bleak at the grassroots level and it needs both long-term as well as short-term reforms to boost the confidence of small and medium enterprises.
The Indian equity market is looking healthy from outside only because a handful of stocks are doing well. BSE benchmark Sensex is at an all-time high, but at the ground level, retail investors have lost their fortunes.

The index is deceptive, and it does not indicate the true picture of the market and the economy. I am worried, like other small investors on Dalal Street, about the ongoing economic slowdown.

Barring a couple of sectors, others have been facing a crippling slowdown. The situation in the MSME segment is worse than larger enterprises.

The situation seems bleak at the grassroots level and it needs both long-term as well as short-term reforms to boost the confidence of small and medium enterprises.

I have visited five cities in last 45 days and seen the slowdown at grassroots level. The prime 1.5-2 km MI Road in Jaipur, which is like Linking Road in Mumbai, had 5-6 boards with the message ‘available on rent’. On these locations, shops used to get rented and sold even before they got vacant. The real estate market has collapsed in Jaipur, though investors and developers themselves are to be blamed for this.

It’s a similar situation in Visakhapatnam. There I found hardly any customer in most of the shops at around 7-8 pm on a Sunday on the prime Dwaraka Nagar shopping street. It may be partly due to the slowdown and partly due to online shopping. But I saw customers at a mobile outlet and another popular shop where sarees and jewellery were on sale. Other markets were almost empty. Medium-grade restaurants had many customers.

Looks like people have made a choice to not spend much considering the ongoing slowdown in the economy. The middle class has money, but doesn’t want to spend it at this juncture. This has made the slowdown more severe.

We probably need the government to take some more serious steps to boost sentiment. The government seems to be focussing on long-term measures, just the way they do with homoeopathy medicine, to repair the economy and may look for another route to achieve its target of making Indian a $5 trillion economy. That may take a little more time. We need quicker reforms, like allopathic treatment, to get rid of this depression. In emergency, homoeopaths sometimes ask you not to avoid allopathy, as it tries to solve the problem at the roots. The government should find a similar hybrid model to cope with the economic slowdown and boost sentiment.

The Finance Minister’s recent statement, in which she said there is no slowdown in the economy, sounded strange. Economic data are showing clear signs of slowdown and even FM’s husband, an economist, criticised the government for it.

If you talk to traders or SMEs, you get the sense that their condition is bad. Their businesses are in bad shape due to demand erosion, which is leading to layoffs. Macroeconomic indicators, including nominal GDP, are at a 15-year low, unemployment is at a 45-year low, household consumption is at 40-year low and growth in electricity generation is at a 15-year low. Production of coal, cement, crude oil is down. All these indicators are telling us the slowdown is getting severe.

The biggest achievement of this government has been the cleanup it has done to the systems. Abuse of the banking system is a thing of the past. Now you won’t dare to use the political links to get loan from a bank, never to return. Never before in India’s history have defaulting company managements been changed like it is happening now; Essar Steel being the very recent example.

There is a terror in the minds of corrupt politicians and businessmen. Changes have been made in processes to eliminate corruption from government departments and tax offices. People now think ten times before indulging in corruption.

The only issue is, the steps taken by the government so far have been long term. There is an urgent need to do something at the grassroots level to solve issues like job losses and addressing core sectors of the economy. It would be foolish to claim being the fastest growing economy and compare ourselves with China, which is four-time bigger than us.

I am an optimist and hope positive changes will happen very soon. We have had similar slowdowns in the past, and it will end sooner than later. We first need to recognise the problem to be able to solve it.
(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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