Just Wondering- Recession- Shrinkflation Anyone and a Twist !
A major investor out of Mumbai is honestly puzzled. He keeps wondering where is the recession when he says consumption patterns have gone awry. He is a very aware investor and has to be considering the amount he invests and commits too. He is simply amazed that while the Government and the RBI discuss inflation and the fallout, there has been a major boom in the buying of property abroad by many businessmen. Ans it's only gaining traction. And then within India in peaceful or maybe less crowded location in the hills and Goa and a couple of other places, there too a major demand for premium housing has emerged and is being attended to by builders at a fast pace.
The number of businesses suddenly emerging in the ecosystem and the wealth that has been generated is another contradiction in an economy which is apparently struggling and specially its middle class. He says an indication is the demand for gated societies for premium housing projects l. Isolated within from the world outside, landscaped and all. The major metros as per him are witnessing a surge in the prices of property, residential and commercial both and the black money component is omnipresent. Consumption patterns of high end products is also indicating it’s a surge and many high priced premium items are simply declared to be out of stock. Restaurants, mainly high end, are also fully booked. Then where as per him is the recession. The last few years have seen businesses and entrepreneurs evolve and so has conspicuous consumption. I agree as in a class at an IIM, when I inquired about the vocation of choice, most answered entrepreneurship.
He (the investor) gets multiple calls for investing and business ideas are sprouting across the nation but mainly in the major metros and then the mini metros. Obviously there has to be a demand and a market for so many calls to invest coming his way. As we went along this line of thinking I also observed that in Sector 26 Chandigarh, the line of restaurants, as per some insiders, are on a roll. Some restaurants have reported tables where an entire case (at times cases) of champagne has been consumed. The billing is itself too high for a night at times. I don’t want to quote the figures I heard but they are way high.
One angle as per some in this line is that Owners and landlords of some nearby cities are booking hotels for a couple of nights and then partying if there is no tomorrow. I don’t grudge anyone his way of enjoyment but our point of discussion is the disconnect from the real economy or is it so., After all personal wealth has to be a function of wealth generated from a business. And again a lot of payments are in cash, so much for a disastrous experiment! And then I did acknowledge the boom in real estate prices in this region too. Sometimes it seems absurd. A sector, now evolved as a good sector (locality) to live in, over a couple of decades, has booths (small shops) which would generate as per the shopkeepers low volumes of business. A booth is say 81/2 feet in width and 18 feet in length. Yet booths here have fetched prices on sale of Rs 2.06 crore !! The monthly rent as stated during discussions is Rs 70000/- now. I mean how much sales can a booth generate. That, pointed out the mid sized corporate investor is the crux. Prices cannot always factor in the future and a degree of stability. There has to be a sense of reality. That as per him makes him rethink his views as he just cannot be correct when do many such developments as we discussed are occurring around him. There could be a case of no recession, or a recession in business but an optimistic attitude as regards personal wealth, or a recession restricted to the middle class and below as per him.
I told him that his World was on a different footing than mine and I could let him know many who were struggling and looking for a ray of hope. Be that is may, if his investments are yielding returns and he finds optimism amongst the business community as regards expansion or new ventures, well then he has a right to observe that the business ecosystem he operates in does not really feel the pangs of recession. He also added the salaries of CEOs of major corporate organisations are also rising rather than being stable. Maybe the recent crash in the stock markets may lead him to review his views but he is more into raising a point about the apparent contradiction. On that we both agree.
One other point we both agreed to readily. The corporate sector has leaders who can be quite clear on letting staff go or placing on reduced salaries and that could be maybe thought over by some leaders or owners. But their own take from the business is only increasing. There are honourable exceptions of course.
And we can certainly add to it a fuel up by some infusion of funds from what we can label as underhand transactions in the officialdom but that we agreed is difficult to quantify in terms of volumes or impact. But any such infusion or addition to liquidity, then only does indicate rather lacklustre tracking of incomes and expenditures with the middle class having to carry the cost of numerous forms and tax deduction at source and what not.
But yes, we totally and absolutely agreed on the need to encourage entrepreneurship and business ventures, it’s a necessity. To grow the economy and generate employment. But as per him many a business in some metros has moved its headquarters outside India on taxation issues. But that is an aside. The point is to be reasonably positive oriented on staff salaries and compensation too. And hence as we agreed, while FMCG Companies talk of pack sizes and reduced demand as do many others, there did seem to be a story within a story here.
I leave it at this. But the point he made as an investor can well be understood and thought over.
The Twist
What I hinted. The lack of a heart. Sometimes it’s too apparent. At a happening place the Manager was puzzled when a young lady said a place had to be kept for the maids accompanying the kids. He said till now no one has stated this! Are you serious about it. It’s startling but that is what can be. We need to build a heart. It’s a must. Enjoy the wealth but build the softer skills and senses too.
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