From the Desk of the Chairman

In the Bhagavad Gita Lord Krishna tells Arjuna that he will descend on this earth whenever and wherever there is a decline in spiritual values (loosely translated). There indeed was an occasion (among many) when the Lord was asked to make good on his promise. He indeed did, albeit through one of his ardent followers, His Holiness Srimad Jagadguru Sri Sri Sankaracharya Totakacharya Keshavananda Bharathi Sripadangalavaru. The only thing complicated about the much loved and revered seer was his name. The divine intervention happened when the Constitution of India had to be interpreted way back in 1973. The judgment in the case of Keshavananda (as the judiciary prefers to call the seer) is the second most important document in India, the first one being our Constitution itself. His Holiness who was the head of Edneer Mutt at Kasargod, Kerala passed away on 6th of September 2020. The seer protested the validity of the 29th amendment of the Constitution which legitimised the take over the Mutt’s properties by the state government. Ironically the seer lost the court battle but won the war to protect the integrity of our Constitution. The apex court in this case read the doctrine of basic structure into the Constitution thereby limiting the power of the government to amend or abrogate the founding document of our nation. The Supreme Court in this case held that the Parliament can amend any part of the Constitution so long as it did not alter or amend its basic structure or its essential features. There are very few constitutions around the world that incorporates this principle, one of them being Germany’s. By the way, in our neighborhood one other country who has this feature is Pakistan where its Supreme Court had held as early as 1963 that its government cannot alter the fundamental features of its Constitution. There were many legal luminaries who even went to the extent of saying that the judgment delivered in Keshavananda amounted to rewriting of the Constitution itself. There have been criticisms of this judgment of the apex court in arrogating to itself the status of being the first among the three branches of the governance. However, it may still be considered the best solution in the absence of a better one in a democracy like ours where there is always the danger of a majoritarian ruling dispensation usurping absolute power by means fair or foul. The Keshavananda case was heard by an unprecedented 13-judge bench. There were other consequences also to this judgment. Indira Gandhi, the then PM was so angered by the order pronounced by the Court that she superseded 3 senior most judges of the Supreme Court who gave their verdicts to preserve and protect the basic structure for the Constitution when it came to the appointment of the next Chief Justice of the Supreme Court. The irony did not end there. In just two years after this order of the Court Indira Gandhi could declare a state of emergency in the country all in the name of the very same Constitution! That one act of hers alone justified the stance of the Supreme Court in Keshavananda post facto though the Court could not prevent the imposition of Emergency. 

The more the government wants to put the Vodafone litigation behind, the more it comes back to haunt it and there seems to be no end in sight in this sordid saga. The news is just in that the parent company of Vodafone India has won an award in the Arbitration Tribunal at the Hague against the tax demand made by the Indian authorities. Now the Indian government has to take a call whether to contest this order. Though the tax demand from Vodafone is in excess of ?7,500 crores the amount that the government will have to repay the company is about ?85 crores that it has already collected from the company. The government is now in the horns of a dilemma. A decision to accept the award may be construed as a sacrifice of money due to the nation of an amount of not just ?85 crores but all of ?7500 crores. It does not end with that. It would also amount to accepting the decision of a legal authority above and beyond the Supreme Court who had earlier upheld a retrospective amendment done to the imposition of capital gains tax solely with the intention of collecting the dues from Vodafone. That was a clever move by half by the then Finance Minister Pranab Mukherjee. The international tribunal has now held that the Supreme Court of India is in breach of the guarantee of fair and equitable treatment. That was a hard one on the knuckle and a difficult one to take even though this was the making of the UPA government. At one level NDA had been speaking with a forked tongue. In principle the government has articulated in no uncertain terms that it will not go for retrospective amendments when it comes to tax laws in future. Should the government decide to appeal this verdict, it would not be in compliance of its own decisions if not in letter but definitely in spirit. Had Pranab Mukherjee been alive he would have been brisling with genuine anger at the court’s verdict as he was a statist at heart till the end. His spirit now would be wincing in disappointment.

It is nothing short of a tragedy that is unfolding in real time before us. I have spent time being a farmer. Hence my take is both anecdotal and personal. I have sold grapes directly to the traders and vegetables at the mandi. Even the lowly clerk at the mandi treats you like dirt if you are a farmer.  The farm Bills, in my opinion, have not come one day too soon. They are desperately needed reforms in the agriculture sector. Unfortunately, both the government and the opposition have made it into a prestige issue. This is one issue that ought to have been ‘sold’ both to the opposition and the nation at large by the government of the day. Instead it has chosen to ram the Bills through the Parliament. Even the optics of the process also does not look elegant. The opposition on the other hand has made it into an emotive issue by being frugal with truth behind its objections surrounding the issue. In my opinion they are indulging in a well calibrated misinformation campaign. In a democracy, for those in government, compromise is both an art and an obligation. National interest comes before political gains. Sample this. The opposition is comparing this move to the introduction of Jio in the country. I can’t think of a more facetious argument. Your envy at an Ambani’s success cannot be allowed to cloud your judgment when it comes to Jio. If you are jealous of the success of an entrepreneur, that is your problem. But the benefits that I get from his products are my real gains (even as a farmer). Come on, you can definitely do better than that.  In this political standoff I fear that the much needed reforms that the farm sector needs might get back into the cold storage. Between an intransigent government and a destructive opposition the agriculture sector is all set to board the bullock cart. The farmer deserves better. For the government getting the Bills passed is like a successful operation with the patient dead. For the opposition the dead patient is the new source for an unexpected inheritance. Together it is a case of national interest being sacrificed at the altar of political expedience. I am convinced that God is not a farmer.

The recently concluded Parliament session was one of the most consequential ones, if not for the number of Bills passed but in terms of the nature of businesses transacted. Having been in industry and having dealt with labour laws extensively during the course business I can state with conviction that the four Labour Codes passed by the Parliament in the last session is one of the most remarkable achievements of this government. It is no secret that the existing laws governing labour are more often than not followed in breach. The multiplicity and redundancy of the labour laws have already become anti labour in a larger sense by inhibiting the growth of employment opportunities. The industry had been demanding rationalisation of the statutes governing labour for quite some time. Four Codes covering Wages, Industrial Relations, Social Security and Industrial Safety have been passed by the Parliament. Out of these the one relating wages has already received the Presidential assent.  These four Codes subsume a whopping 149 laws (one dating back to 1926) besides simplifying a number of other provisions. They have brought in the much needed uniformity in the definitions of various terms used in the laws relating to labour. They now recognise the existence of gig and platform workers who had earlier fallen off the map. For the employers compliance burden would be less though the costs to comply with the new wage structure could be higher. There have been expressions of disappointment that more could be done. For one like me who have had to deal with the labour laws in the existing avatar, implementation of even a substantial portion of the proposed Codes itself would amount to remarkable progress.

The national obsession that we have developed in the context of the death of Sushant Singh Rajput shows no signs of ebbing. On the contrary it is becoming the nation’s most important priority with every passing day. It has and would continue to destroy careers of many a cine star. I wonder what is that has got the entire nation hooked to this one over powering obsession when, in the normal course, the raging pandemic must be the subject of the day. There are also other issues like the sagging economy, the farmers’ bills, the labour codes that have been passed by the Parliament that should demand our undivided attention. Even the IPL seems to have little impact on the coverage of this sordid episode. It could be a case of voyeurism on the part of the viewers deriving some kind of vicarious pleasure when they see the celebrities in distress. It is also possible that it is a case of schadenfreude when you derive some kind of sadistic pleasure out of the misfortunes of others. For all that you know, it could even be just a case of plain envy on the part of the viewers. People say our economy is sick; but it is our society that is more so. 

“Coffee Can Investing” is a remarkable book by Saurabh Mukherjee who tells you about some principles in investing in stocks that you may already know but seldom practice. The title of the book is based on a real life story of someone who bought some shares and forgot about them having stuffed the share certificates in a coffee can for a number of years. This has become a metaphor for passive investing - the act of forgetting has been turned into an art of forgetting about the stocks you buy. The author, however, identifies some essential qualities required by the stocks before you put them away in a ‘dematted’ coffee can for at least ten years. A typical coffee can portfolio should consist of companies with an annual sales growth of minimum 10% every single year for the previous 10 years. That is not all. Such companies have to give a return on capital employed (ROCE) of at least 15% to be qualified to be eligible to be put in the coffee can. The author buttresses his case with facts, figures, graphs and charts of Indian companies who have delivered handsome returns to the investors in the past by following this principle. Though the concept of staying invested in the stock market for maximum returns is nothing new, the author deserves credit for arguing the case with convincing logic. The author’s arguments based on coffee can principles would be considered counter intuitive by an average trader in the market. After all, a trader genuinely believes that he makes money by actively participating in the market and that too as often as possible even if he is told that it is the broker who makes all the gains almost always in the bargain.  The Coffee Can Portfolio is for the passive investor. Investment in stocks without a built-in element of speculation is like the concept of capitalism without bankruptcy. For those who consider trading in shares as a supplementary source of income, this book is of no use. This book is more about wealth creation than income generation. This book would also disappoint those who have the habit of declaring their daily gains in the market (no one really announces the losses they make) over their sundowners with their friends in the evenings. In short the very thought of not even looking at your portfolios for long periods of time is like robbing Sensex of the last three letters! The book is written in a simple language and not too difficult to understand unless you want to dive deep into the appendices. These appendices are also eye-openers to the readers when it comes to the market movements of winning stocks. You may consider an investment theory being associated with beverages a fad or a flippant way of looking at the serious business of trading in stocks. Far from it.  One should consider putting some stocks in the coffee can and build an additional portfolio around this core stock of stocks for trading thereby de-risking ones’ overall investments. The wealth of information that the book gives you can help growing your own wealth in the end.

In India, as in other parts of the world, when people become mere statistics as victims of Covid, the virus has tragically claimed arguably the most famous victim of them all, S P Balasubramanyan (SPB to his fans). His was the famous voice that wafted mellifluously across the Vindhyas after conquering the South. SPB had become a legend even when alive. He dominated the south Indian music scene for well over five decades. He was as famous for his music as he was for his humility so much so that the humility that he displayed won him as many fans as his proficiency in music. His singing career started in the 60s. He was more like an old wine maturing and endearing more as the years rolled by. Incredible it may seem, he sang in 16 different languages. He would be sorely missed by the music world. My headphone will not be the same again. May his soul rest in peace in the knowledge that he is survived on this earth by his music. 

Thank you.

Venkat R Venkitachalam