Thankyou sir. Amazing piece. If the CAD rises (profit eq), simultaneously capital account surplus should rise to fund it. FDI, ECB, remittance, FPI flows should rise to fund the CAD which I think is captured in investments in your profit eq, this will lead to overall increase in PBT in your eq. If we rush to buy Chinese mobile devices when fiscal deficit rises, probably listed domestic mobile firm loses market share but ancillaries benefit around the Chinese mobile imports such as truckers, retail outlet selling mobile device, land lord of the facility, sales man, technician providing support. In a nut shell ideally PBT should rise even if CAD rises on back of higher fiscal deficit.
I also believe primary deficit captures real spending of any Sovereign because generally fiscal deficit does not exclude Interest payment on government debt. Government of India has run fiscal deficit ~3.5% (average of last 5 years) but average primary deficit number of last 5 years is ~0.4%.
Budget 2020-21 is the first year in last 20 years when government of India ran highest ever primary deficit of 5.9%. A lot of it went into food and fertilizer subsidy but spending is spending. One persons spending is some one else's income.
Thanks Maneesh , simplification at its best as always . Investment and savings will be the biggest factors and most important part remains the movement from unorganised to organised for stock market .
Thankyou sir. Amazing piece. If the CAD rises (profit eq), simultaneously capital account surplus should rise to fund it. FDI, ECB, remittance, FPI flows should rise to fund the CAD which I think is captured in investments in your profit eq, this will lead to overall increase in PBT in your eq. If we rush to buy Chinese mobile devices when fiscal deficit rises, probably listed domestic mobile firm loses market share but ancillaries benefit around the Chinese mobile imports such as truckers, retail outlet selling mobile device, land lord of the facility, sales man, technician providing support. In a nut shell ideally PBT should rise even if CAD rises on back of higher fiscal deficit.
I also believe primary deficit captures real spending of any Sovereign because generally fiscal deficit does not exclude Interest payment on government debt. Government of India has run fiscal deficit ~3.5% (average of last 5 years) but average primary deficit number of last 5 years is ~0.4%.
Budget 2020-21 is the first year in last 20 years when government of India ran highest ever primary deficit of 5.9%. A lot of it went into food and fertilizer subsidy but spending is spending. One persons spending is some one else's income.
Thanks Maneesh , simplification at its best as always . Investment and savings will be the biggest factors and most important part remains the movement from unorganised to organised for stock market .
Thanks Maneesh. Very insightful and refreshing macro perspective on drivers and determinants of profit pools.
Thanks Maneesh! Helps in better understanding of the macro business environment
Nicely written . Easy to understand Maneesh
Very original. Great insight...
Nice one Maneesh .. great reading on how profit pool need to be looked at .. interesting reading