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Saturday, October 2, 2021

Weekend reading links

1. Steve Mnuchin is the latest addition to the US Government-Business revolving door,

Japan’s SoftBank has followed Saudi Arabia’s Public Investment Fund and Abu Dhabi’s Mubadala in backing a new $2.5bn private equity fund set up by former US Treasury secretary Steven Mnuchin just eight months after he left office. Mnuchin launched Liberty Strategic Capital earlier this year after serving four years in the Trump administration. The fund is intended to focus on financial services and technology... During his time as Treasury secretary, Mnuchin nurtured close ties with a number of Gulf countries. His last foreign trip in office, around the time of the January 6 attacks on the US Capitol, involved stops in Saudi Arabia, Qatar, the UAE and Kuwait. In late October 2018, Mnuchin met Prince Mohammed, despite international outrage over the murder of journalist Jamal Khashoggi...

It has become common for former Treasury secretaries to turn to private equity after leaving public office. John Snow, who served under George W Bush, moved to Cerberus Capital Management, while Tim Geithner, Barack Obama’s first Treasury secretary, is president of Warburg Pincus. Jack Lew, Obama’s second Treasury secretary, is a managing partner at Lindsay Goldberg, and Hank Paulson, who also served under Bush, is executive chair of a climate investment fund at TPG.

2.  How marginal income tax rate in the US has evolved over time.

3. From Adam Tooze's newsletter

4. Article in The Ken (or this) on the growth challenges facing MedPlus, India's second largest mostly offline Pharma retail chain. 

Gangadi had claimed that MedPlus would establish 5,000 stores by 2011. In 2015, it revised that projection upward to 10,000 stores by 2019. Today, the chain’s store count stands at just 2,100. Apollo Pharmacy, MedPlus’ fiercest competitor, has nearly double that. “A promoter is always ambitious. One can talk of 5,000 stores, but how do you get that kind of money? For each store you need Rs 20 to 25 lakh ($27,000-34,000), of which Rs 6-8 lakh ($8,000-10,850) is deployed towards capital expenditure, and Rs 15-18 lakh ($20,350-24,400) goes towards inventory. Are you geared up for this at the same time? You have to be reasonable when you come at the ground level,” says a former executive of the company.

The report indicates that while off-line chains have a 0.6-1X revenue valuation, their online only counterparts command 3-4X valuation.

5. As Angela Merkel leaves office, NYT has a feature on her 16-year term. While she has several achievements, she'll perhaps be most remembered for her bold step of admitting nearly a million migrants in 2015-16. This is a striking factoid,

Germany’s immigrant population has become the second largest in the world, behind the United States. When Ms. Merkel came into office in 2005, 18 percent of Germans had at least one parent who was born outside the country. By now it is one in four.

This summary is apt,

Many of her postwar predecessors had strongly defined legacies. Konrad Adenauer anchored Germany in the West. Willy Brandt reached across the Iron Curtain. Helmut Kohl, her onetime mentor, became synonymous with German unity. Gerhard Schröder paved the way for the country’s economic success. Ms. Merkel’s legacy is less tangible but equally transformative. She changed Germany into a modern society — and a country less defined by its history.
This is most interesting, a great example of keeping apart personal and professional choices,
“She saw where the country was going and allowed it to go there,” said Roland Mittermayer, an architect who married his husband shortly after Ms. Merkel invited conservative lawmakers to pass a law permitting same-sex marriage, even though she herself voted against it... Ms. Merkel never backed same-sex marriage outright, but she allowed lawmakers to vote for it, knowing that it would go through.

6. Tamal Bandopadhyay has a very good primer on the new bad bank, the National Asset Reconstruction Company Limited (NARCL). It would aggregate bad assets and manage them till their resolution. In return for the assets, NARCL would offer banks 15% of the value in cash and 85% in the form of Security Receipts, and receive a government guarantee of Rs 30,600 Cr. An India Debt Reconstruction Corporation Limited (IDRCL) which is majority owned by the private sector, would then take the bad assets off the NARCL balance sheet and resolve them. In the first phase, Rs 2 trillion worth assets are being transferred to NARCL from the banks. These assets have been valued at 18% or Rs 36000 Cr, thereby leaving banks with Rs 5400 Cr in upfront cash receipt. NARCL will have a tenure of five years to resolve these and other assets subsequently transferred to it. 

This promises to be one of the most interesting experiments in India's financial markets. How much will the banks ultimately recover from this process? What share of assets will be revived and what will have to be liquidated? What incentive and other distortions will emerge from this in the financial and political markets? How good will NARCL and IDRCL be in their corporate governance? Can the IDRCL avoid either willingly or unwillingly being captured by private equity and other financial market interests? Will the IDRCL be able to avoid crony capitalist tendencies? 

7. Interesting graphic highlighting the shifting composition of farmer incomes

The three important takeaways - the share income from farming itself is declining and only a little more than a third of the farmer's income; the share of income from non-farm business has almost halved; and the shape of income from animal husbandry has quadrupled. 

8. This's a stunning data about corporate democracy in Indian board rooms,
194 of the 48,000+ resolutions (less than 0.5 per cent) assessed by IiAS in the last six years have been turned down.
The reasons can be found in the data on the ownership and voting patterns in listed Indian companies. 
For all the occasional headlines, promoters remain firmly in the saddle. Just 8% of NSE 500 companies are institutionally owned and held widely. 

9. Britain's truck drivers shortage has caused gas stations to run dry,
The government is sending out a letter to nearly 1 million people who hold a license to drive a heavy goods vehicle, urging them back onto the road. And it is relaxing visa restrictions for thousands of foreign workers, in the hope of luring them into temporary work in Britain... Tens of thousands of drivers from the European Union have left the country — in large part because Brexit made it clear they were not wanted — and prospective drivers couldn’t take their qualification tests for over a year because of the pandemic. Long dominated by men, the drivers industry has done little to add women to its ranks. As a result, Britain has a shortage of up to 100,000 truck drivers, according to the Road Haulage Association... Prime Minister Boris Johnson upended his post-Brexit immigration rules when he approved the issuance of five thousand temporary visas for foreign drivers until the end of the year... 

For truck drivers who have long felt underappreciated and increasingly stressed by difficult work conditions, lower pay and neglected truck stops, the fact that employers are struggling to find workers wasn’t a surprise... The emergence of long-overlooked drivers as an essential cog in the nation’s economy is reminiscent of the first year of the pandemic. Workers who had been considered low-skilled and who were poorly paid — many of them migrants — captured the nation’s attention and gained newfound respect. Across Britain, people came out onto their doorsteps to clap for National Health Service workers. Supermarket assistants and public transport employees were no longer invisible, and featured on the front covers of publications like British Vogue. 

10. A new study by Krishna Kumar Choudhary, Sayan Das, and Prachinkumar Ghodajkar uses data from three rounds of the National Family Health Survey (NFHS) (II 1998-99, III 2005-06, and IV 2015-16) to show a trend of decline in heights among women and men in India. A summary,

Between NFHS-III (2005-’06) and NFHS-IV (2015-’16)... women between 15-25 saw a decline in their mean height by 0.12 cm, while women between 26-50 showed an improvement by 0.13 cm. During the same period, men between 15-25 saw a decline of 1.10 cm in their mean height and those between 26-50 years had a decline of 0.86 cm... For women in the ages 15-25, between NFHS-III and NFHS-IV, the average height of tribal women saw a decline of 0.42 cm while women from the poorest wealth fell by 0.63 cm. This is significantly worse than the average decline for the entire age group (0.12 cm)... In the age group of 26-50, women from the poorest wealth category saw a significant decline in their average height – 0.57 cm – while women from the middle, richer and richest wealth categories saw their average heights improve. Women from urban areas saw their average heights improve by 0.20 cm while rural women only saw an increase of 0.06 cm.

However, a friend informs that the magnitude of the decline is tiny and perhaps not meaningful enough to draw any inference.  

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