Monday November 18, 2019
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Has the IPL taken away more than it has given?

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By Harshmeet Singh

‘Cometh the Indian summer, and comes the money spinner IPL with all its glitz and glamour!’ If the crowds at the stadium and the glamour of celebrities present are anything to go by, the success of IPL can’t be denied even by the staunchest of critics. But the ever debatable question remains, ‘Can something which includes dancing cheerleaders, late night parties and allegations of fixing be called a ‘gentleman’s game’ anymore?’ The recent allegations from a Rajasthan Royals player about being offered money to play ‘according to a predetermined plan’ has again brought the IPL into question.

Like any other form of entertainment, the IPL has its own set of controversies. The ugly face of match fixing resurfaced yet again through the doors of IPL in 2013 and engulfed three Indian players with it. Some say that corruption is inevitable when millions are at stake. But can this be taken as an excuse for hurting the dignity of the game which is worshiped by billions across the world?

Did IPL come into being for cricketing reasons?

In 2007, the Zee Entertainment Enterprises launched a private T20 cricket league, known as the ‘Indian Cricket League’, with teams from India, Pakistan, Bangladesh and World XI. Not pleased by ‘invasions’ into its territory, the BCCI wasted little time in banning most of all the players participating in the league and the stadiums that hosted the matches. Seeing the revenue potential of the ICL, the BCCI came up with the idea of IPL and roped in the best cricketers from around the world, using its deep financial reserves.

The first of the many controversies attached to the IPL took down Lalit Modi, the brain behind the league. Charged with misconduct and indiscipline, Modi was subsequently removed from the IPL and banned for life from the BCCI. Modi, in return, blamed the BCCI for conspiring against him and hatching his ouster.

IPL or the honor of representing the nation?

During a press conference at the world cup, when asked about whether associate nations should get a chance to play more games against top nations, MS Dhoni said, “Yes! But not against India! I don’t see even a few days off to play any more cricket than what we play. If you see the cricket fraternity, the nations, they have a calendar of 12 months in which they play a lot of Test matches and ODIs. I don’t know what’s the number. Our calendar is nine and a half months because in the other two and a half months, we play the IPL and the Champions League. And yet, we match every other Test-playing nation when it comes to the number of Test matches and ODI cricket. I don’t see India playing any more games.”
Citing IPL and the Champions League as an excuse to deny International matches to the associate nations isn’t in the best interest of the game. But Dhoni can’t be blamed for such scheduling. Playing for the country is, undoubtedly, the biggest honor for any sportsperson. But to say that money doesn’t matter at all would be incorrect too. A player with average skills, in the IPL, ends up making over $2 million from the 8 week long tournament, which is much more than what an Indian player would make in an entire year, if he plays regularly for India in all three formats of the game. A number of West Indies players have, in fact, refused to sign national contracts to make themselves available for domestic T20 leagues played around the world. There is no guarantee that the same won’t happen to the players of other nations.

Where is the off season now?

The rigor of International cricket results in frequent injuries to players. The ‘off season’ is usually the time when players get a chance to cope up from their stress and be available for the next International tourney with all the vigor. With the off season now being taken by the IPL, the injury management program for the players has gone for a toss! The frequent matches and daily flights give no time to the players to attend to their body and nurse their body niggle.

Where is your technique Sir?

The boom boom format of the IPL means that the players’ technique is no longer important. India’s gloomy performance in test matches in the foreign land in the past few years stands testimony to the declining technique of Indian players. The Indian players have been found wanting on alien pitches which are nowhere close to the friendly domestic pitches where the ball hardly bounces above the waistline. These days, seldom do you see any Indian player playing in England’s county cricket to sharpen his skill set. Some of the best Indian players of all time, including Sachin Tendulkar, Rahul Dravid, Saurav Ganguly, Ravi Shastri, Sunil Gavaskar and Kapil Dev, have all had notable stints in the county cricket with their respective sides. In comparison, hardly any present day cricketer (apart from Pujara) has turned towards county to play on challenging pitches to fine tune his skills.

This festival of cricket also brings a number of high points with itself. Out of the millions of aspiring cricketers, only a handful gets to wear the Indian jersey at the International stage. For the others, an opportunity to share dressing room with their idols is a dream that only an IPL contract can fulfill. The humongous pay gap between the Indian International crickets and domestic players is filled by the IPL to a certain extent, giving the much needed financial stability to lesser known players. The opinions about the IPL would always remain grey, but certain fine-tuning to minimize the shortcomings would only make the league better and brighter.

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Guest Column: Monetary ‘Teasing’ and Fiscal Expansion

Private Estimates in this regard are between 0.2 - 0.4 per cent shy of the governments estimate

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Fiscal Expansion
Unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. Pixabay

The unexpected corporate tax cuts alongside previous measures announced over the last few days by the government amount to a total fiscal expansion of around 0.8 per cent of GDP at face value. That said, private estimates in this regard are between 0.2 – 0.4 per cent shy of the governments estimate.

Here are the growth, monetary policy, and bond market aspects of the move:

Growth
With this the government has shown a clear commitment to shore up growth even with its back against the wall, fiscally speaking. Further, it has resisted an easy consumption stimulus which may have had very little multiplier effects and possibly may have eventually contributed to some macro-economic imbalances. Rather, the tax cuts will help improve corporate profits and hopefully improve our global competitiveness. Further, incentives for new units announced may also help with attracting some of the global supply chains reallocations that are underway given escalating trade tensions.

This may, however, not necessarily be a substantial shot in the arm for near-term growth prospects. The tax cuts may be used in a variety of ways, including stepping up investments, reducing debt, cutting product prices, increasing salaries, buyback and dividends, among others.

All told, the immediate pass-through and growth impulses created may be not as strong and thus the tax buoyancy hoped for on the back of stronger growth may have to wait for a while. This is especially true as general competitiveness in an increasingly challenging world requires other aspects of factor input efficiencies to fall in place as well.

Fiscal Expansion
Fiscal policy for fiscal expansion has indeed chosen to step up to the plate, then monetary policy need not be as aggressive. Pixabay

Monetary policy
Prima facie, if, unlike earlier expectation of limited further space, fiscal policy has indeed chosen to step up to the plate, then monetary policy need not be as aggressive, all else being equal. That said, the global and local context is weak enough to argue for yet some (though not substantial) incremental role for monetary easing. This is especially true because RBI Governor Das doesn’t appear to be as large a fiscal hawk, currently (indeed welcoming the bold step from the government, after observing one day prior that fiscal space seemed limited).

We would hence look for monetary “teasing” incrementally, as opposed to “easing” that we were expecting before and would expect the repo rate to bottom out in the 5 to 5.25 per cent area. The one caveat to this view is of further global growth deterioration which would then open up room for further easing, whereas liquidity policy is expected to remain one of substantial surplus.

Fiscsal Expansion
Government has shown a clear commitment to shore up growth even with its back against the wall, towards Fiscal Expansion. Pixabay

Bonds
As noted, before term spreads have been quite wide for this part of the cycle, largely reflecting the inadequate availability of risk capital versus the supply of bonds (the same inadequacy is being reflected as higher credit spreads in the loan and credit market).

Despite more than adequate liquidity now, risk capital has been cautious possibly due to lack of confidence on market risk, given the fiscal and bond supply overhang. Since a large term premium has already existed, we wouldn’t expect a significant further expansion just because the risk has now materialized.

Further we don’t expect the entire expansion to manifest in the Centre’s fiscal deficit. After sharing this with states and accounting for other levers built in, we are looking for a final fiscal deficit of 3.7 nper cent versus the 3.3 per cent budgeted. This will entail some additional bond supply eventually, but with the cushion that the Centre’s net bond supply was slated to fall substantially in the second half of the year versus the first.

Portfolio Strategy
With the prospects of monetary easing somewhat diminishing in incremental intensity, and accounting for the somewhat higher bond supply, we may expect some amount of curve steepening going forward. This may likely happen as market participants anchor themselves to 3 thoughts: One, liquidity will remain abundantly surplus. Two, repo rate is here or modestly lower. Three, prospects of a very large bond rally are somewhat diminished (although this view will evolve going forward depending also on how much net additional supply actually manifests for local absorption) . This will likely increase appeal for the front end of the curve versus the longer duration, hence creating steepening pressure.

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Reflecting the above thought, we have cut our recent duration elongation into the 10-14 year segment and are now refocussing on being overweight 5-7 year for government bonds in our active duration funds. For AAA corporate bonds, the relative value continues in up to 5 years. These segments could better align to what remains an environment of abundant surplus liquidity, a very attractive term spread, still general lack of credit growth, and continued global monetary easing. (IANS)