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Showing posts from September, 2017

Cheap Oil: Here to Stay?

Hydraulic fracturing, also known as fracking, to extract hydrocarbon reserves trapped in shale rock formations created a riot in the energy industry a few years ago. Within a short span of time, shale oil companies were producing massive quantities of oil and gas. They were largely responsible for causing crude prices to collapse from a peak of USD 125 a barrel in 2011 to almost a fifth by 2015. However, whilst the world rejoiced, the industry itself came under pressure. Shale businesses were mostly privately held maverick corporations not coordinated under cartel arrangements. Their unsynchronised efforts to indiscriminately add to global oil supplies meant that prices fell faster than anticipated. Conventional oil producers – the Organisation of Petroleum Exporting Countries (OPEC) – were biding their time, perhaps fuelling the price decline to drive shale companies out of business. Sure enough, by the end of 2016 the top 30 shale producers were USD 130 billion in the red and anothe…

Financial Flutter

A lacklustre performance of the economy in the April-June quarter created a sense of unease amongst industry watchers. More recently, the media was abuzz with news about the Government’s intent to pump prime the economy with a spending binge in the hope that private capital would follow. Quite expectedly the markets panicked on the premise that the treasury would exceed its fiscal targets. Equities fell 2.5%, bond yields spiked 10 basis points and the Rupee dropped by about 1% to 64.8 to the dollar. Subsequently, the Finance Minister took pains to clarify that Government incentives would take a form where targets on deficits would remain sacrosanct. The fact is that private investment has been feeble and consumption remains the main driver to economic growth. The Government has been pressing ahead with infrastructure projects but clearly on their own they lack the ability to drive economic output. At the time of writing this note it was not particularly clear as to what form the Gove…


As he turned to his direct tax proposals in the Budget speech, Finance Minister Arun Jaitley cited statistics to assert that India is a tax non-compliant society. For instance, he said that only 37 million individuals filed tax returns in 2015-16. Almost 10 million of these claimed to earn less than Rs 2.5 lacs, the minimum taxable threshold of income, and only 7.6 million declared an income above Rs 5 lacs. When compared to the fact that annually over 20 million Indians travel abroad, most of whom probably earn more than Rs 5 lacs, it would seem evident that under-reporting of income is genetically ingrained in the Indian system. While this may appear to be a familiar point, it still does not reveal the true extent of tax evasion. However, a report recently published by the Income Tax Department containing an analysis of tax returns over the years, provides some pointers. The figures are worrying. In the assessment year 2014-15, the latest year for which detailed data are avai…