While the rain did its best to derail the plans, the Mint Roundtable, part of the sixth edition of Mint Mutual Fund Conclave held in Mumbai on 26 July, on the state of the economy saw a full house. We were debating the key issues that face the economy with thought leaders in the financial sector and Bibek Debroy, chairman of the Prime Minister’s Economic Advisory Council. It was like a Delhi meets Mumbai kind of an evening. Constrained by Chatham House rules, the finer details of the discussion are not being put in the public domain, but here are the broad areas of discussion.
Round Table highlights
It looked as if the rain would derail the annual Mint Mutual Fund Conclave in Mumbai where every year we debate issues related to the industry and investors. This year since we had the chairman of the Prime Minister’s Economic Advisory Council, Bibek Debroy, giving the keynote, we decided to have a closed-door roundtable where he would interact with some financial sector leaders to have a candid conversation about issues like the real GDP numbers, the budget, the slowdown that industry says is palpable and the changed rulebook of this government. There is worry among employees, investors and the industry on the slowdown in the economy. Wealth managers peg their advice and asset management decisions on potential growth, and if this number is in doubt, the ground moves from under the feet. But as the rain did not keep away the financial sector leaders or the delegates, there was an animated debate. Here are a few takeaways from the conversation and the event.
Why should a business paper get into the business of short-listing investment-worthy mutual funds? I ask this question, not from the readers’ point of view, but from our own. The whole thing is fraught with problems that make the final list almost not worth the effort. First, what if despite the hard work of putting in place number-based filters (returns, risk and portfolio characteristics) and then making the shortlist of funds jump through the qualitative hoops (that includes talking to the fund managers and other information sources), some of the funds that get on the list mis-fire? That you end up with egg on your face is a minor problem, the bigger issue is that it affects real money of real people who have trusted you. While there is no foolproof way to give a 100% risk-free portfolio without it being only made of government securities, we do recommend holding at least two funds from each category to reduce the risk of a particular scheme malfunctioning due to factors beyond reasonable control. Therefore, diversification across asset classes, within asset classes and across fund houses is recommended.
Promising to be the elephant that accepts a few mounds of rice from a small paddy field when given voluntarily, rather than come in and trample the entire field in the quest for that paddy, finance minister Nirmala Sitharaman sounded the trumpet call on tax evasion. This was bad news for the super rich in India who earn more than ₹2 crore as they will pay much more tax than before due to the new surcharge. This is certainly more than just a few mounds of rice and is going to impact both consumption and savings by this category of people. This is clearly an eat-the-rich budget. No change in rates, slabs or deductions for the rest of the people.
Tax revenue forms the fuel that drives the spending of a government. Security, courts, regulators, infrastructure, utilities and a host of business, enterprise, labour, consumer and investor enablers are funded by the government using this tax revenue. As citizens, we want the classic retail investor deal—highest return for no risk—or the highest level of government services at no tax, or lowest possible tax. But the journey to a $5 trillion economy, an audacious growth target of over 12% a year, will not happen without deep change in who pays how much tax and how the government removes the various arbitrages from within the tax system.