If you are looking around for a silver lining to growth plummeting to 5% in the first quarter of 2019-20, it is that the government is clearly not trying to hide the bad economic news. Between April and June 2019, the first quarter of this fiscal year, the economy crawled at 5%, compared to 8% growth in the same period last fiscal. Gross value added grew at 4.9%. Obviously, every sector dragged. Manufacturing, around 16% of India’s economy, collapsed totally: from growing more than 12% in Q1 of last year, to stalling at 0.6% now.
Now, it is well known that car sales have crashed to 20-year lows and carmakers are shutting down factories and laying off workers. But manufacturing responds to demand from either consumption or investment. Household consumption has also fallen. Private consumption has fallen as a share of GDP by one percentage point, as compared to Q1of 2018-19, in current prices. Investment is crucial for driving growth and staging a revival and it has fallen from its peak of around 35% of GDP to stubbornly below 30%, at current prices. Mining, metals, minerals and so on are in a downward spiral. With capacity utilisation of companies below 80% and growth prospects low, companies are in no hurry to invest in augmenting plant and machinery. If investment has to revive growth, it has to come from infrastructure.
Chief economic adviser Krishnamurthy Subramanian has pegged the blame on adverse global conditions. Global conditions do matter, but India is uniquely placed as a large economy whose major activity, wealth- and job-creation, come internally, instead of depending on export markets. Surely, we cannot wait for global revival to start rebuilding lost momentum. The series of measures announced by the government are welcome, but are not sufficient in themselves.
Legal education needs a shift so that lawyers can anticipate changes in law that imperil business models.
Most lawyers find it really hard to advise innovative technology-driven businesses. The fact of the matter is that ever since law school, we’ve been trained to look for problems in the issues that our clients present us with, examining them through the lens of existing laws and testing them against relevant precedents with the sole purpose of uncovering all the different legal and regulatory risks that could affect the business we are advising. As a result, we tend to focus almost exclusively on the downsides, trying to find out all the ways in which our clients might be seen to have overstepped legal boundaries so that we can point out everything that could go wrong with them. This sort of risk-averse, backward-looking approach to innovation isn’t particularly helpful to young startups looking for validation, but it’s how we’ve been trained to provide legal advice.
It is possible to find flaws with virtually any business model. It is often precisely because of regulatory shortcomings that we point out to our clients that other, more risk-averse companies previously steered clear of innovating along the path that our clients took, preferring to focus on avenues with lower regulatory risk. On the other hand, truly disruptive business models operate so completely outside all existing legal frames of reference that they exist in a sort of regulatory limbo—neither fully regulated by existing laws nor specifically permitted. Given our lawyers’ instinct to focus on risk, we struggle to endorse either kind of business model, not realizing that most investors are willing to absorb a significant amount of risk if the potential upside is high enough.
Take ride-hailing companies, for example. Had these business models been vetted by traditional lawyers, they would most likely have been red-flagged as being too risky. In almost all jurisdictions where these companies began operations, taxi drivers needed to be licensed, or, in some way or the other, had to adhere to specific regulatory restrictions in order to be able to transport passengers around the city for a fee. If ride-hailing companies had decided to strictly abide by all the rules that could have applied to them, it is possible that the radical new model that they have implemented would have been unviable.
Instead, they went ahead with their original model despite regulatory uncertainty. They positioned themselves as platforms, arguing that their business did not even operate within the remit of taxi regulators to supervise. By skirting around the edges of regulations in this manner, they managed to grow rapidly until they became such an integral part of the fabric of urban mobility that, in most countries, they are too large to shut down. At this scale, governments around the world were forced to recognize the phenomenon of ride-sharing as legitimate and deserving of the enactment of special laws that deal with them in their own right.
It takes a different kind of lawyer to work with modern businesses—lawyers who don’t just present their clients with the risks, but help them assess the actual likelihood that any of these risks will come to pass; lawyers who can call upon their instinctual understanding of how regulators will react to models that have never previously come up for regulatory scrutiny and opine optimistically on structures that exist in the interstices of established regulatory business plans; lawyers who have the imagination to anticipate what will happen once the business expands to the point where governments are forced to reshape the regulatory fabric to account for them, and who can, therefore advise clients not just on the basis of the law as it exists today, but as it will most likely come to be.
Startups need advisers who, instead of telling them what’s not possible, can tell them what they need to change in their current structures in order to optimally achieve their business objectives; who, like former Canadian ice hockey player Wayne Gretski used to advise, have learnt to skate to where the puck is going to be.
We need to imbue our future lawyers with these skills. We need to train them how to advise clients not just on laws that currently exist, but on those that are yet to be written. We need to teach them how to anticipate new kinds of risks—to understand that just as business models can be brought to nought by changes in the law, they can just as easily come a cropper when large platforms on which they depend alter the basis on which they permit access to their service.
To do this, we need a fundamental shift in our approach to legal education. Rather than teaching students to find flaws, we should instead be encouraging them to focus on solutions. Rather than always looking backwards, we should teach them to try and figure out what the future will look like.
We will only be able to achieve any of this if we can count on visionary leadership in legal education—if the administration of our premier legal institutions can think beyond their short-term considerations and focus on the future that they need to build; if they can think for the profession they have a duty to shape, rather than the prestige of personal positions.
As I watched with anguish how, over the last week, the incumbent administration of our country’s premier law school (and my beloved alma mater), has been clashing with its students over the appointment of a new vice chancellor, I couldn’t help think that all hope for such a future is fading fast.
The Nifty has shed close to 12 per cent, since hitting record highs of near 12,100 points. Mutual Fund Investors have received very poor returns in the last 1-3 years in most largecap equity funds. However, with the markets having fallen a great deal, it may now be the right time to increase your allocation. Here are 5 largecap equity mutual funds that look good for investment.
Axis Bluechip Fund
Axis Bluechip Fund has a 5-star rating from Value Research Online. The fund manages assets to the tune of nearly Rs 7,000 crores. In line with the poor performance of the markets, the fund has delivered poor returns in the last 1 year.
However, the 3-year returns has been decent at 11.45 per cent, while the 5-year returns has been at 9.31 per cent.
This compares very well with some of the other largecap equity mutual fund schemes. Axis Bluechip Fund also has holdings in some good stocks including the likes of Kotak Mahindra Bank, ICICI Bank, HDFC Bank and Bajaj Finance. In fact, its top 4 holdings all comprise companies from the finance space. With the markets trading significantly lower, the scheme has the potential to deliver returns in the long term.
Mirae Asset Largecap Fund
This is another fund that has done remarkably well when compared to most peers. The fund has generated a return of 8.89 over the last 3 years, while the 5 years returns has been near 11 per cent.
The holdings of the fund are also in bluechip names including the likes of HDFC Bank, ICICI Bank and Reliance Industries. One can consider investing through SIPs as well, where the minimum amount one can invest is to the tune of Rs 1,000 every month.
Mirae Asset Largecap Fund has sizeable assets under management in excess of Rs 13,000 crores. Investors looking at decent returns in the medium to long term could consider this largecap fund.
SBI Bluechip Fund
This is another fund like most other funds that have failed to generate returns in a short term period of 1 year. However, in the more medium to long term, it has managed to churn decent returns, not superlative though.
The 3-year returns from the fund has been 4.68 per cent, while the 5 year returns has been closer to 8.35 per cent. While the returns in the last few years has not been that great, this can be attributed largely to the condition of the markets.
The indices themselves have generated poor returns in the last 1 year and are almost stagnant since the start of the year. However, investors who enter the scheme now are getting to enter at significantly lower levels.
Reliance Largecap Fund
This fund has a rating of 5-star from Value Research Online. The fund has generated a 5-year returns of 7.63 per cent, while the three year returns has been 6.51 per cent. The returns are not extra ordinary over the short term and is line with most mutual fund schemes which have failed to churn any great returns over the 3-5 year period and negative returns over the last 1 year. However, because the indices are down near 12 per cent from historic peaks, mutual funds now offer you opportunities.
The minimum investment in the Reliance Large Cap Fund is Rs 100 and one can invest in small sums of Rs 100 every month through SIP. Investors can look to this fund for long term investment.
ICICI Prudential Bluechip Fund
This too is a largecap Fund with a very good holding. The Fund holds shares in HDFC Bank, Infosys, ICICI Bank etc. One can invest through an SIP with a minimum sum of Rs 100. This fund is a very largecap oriented fund with assets under management to the tune of nearly Rs 21,000 crores. Go for the fund for a holding period of less than 5 years.