uTrade H2 Half-Yearly Newsletter 2016

uTrade H1 half yearly newsletter 2016

2016 had been a year of unexpected events, with Brexit, followed by Demonetisation in India and Trump’s victory in US presidential elections.
“De-globalisation” has become a new norm as developed nations struggle for growth and creating jobs for their own citizens; clearly evident from Brexit and Trump’s victory.

Geopolitical and Climate Change-related challenges continue to mount and threaten the social order.
After a reasonably volatile first half in 2016, Brexit shook the European and world confidence. Though the broad damage or re-allocation of financial services within European countries (away from the UK) was relatively
GST bill was passed in India, alluding to “One Nation, One Tax” (though the reality was one nation, and few taxes), raising the sentiments for Indian growth in the near future.
But on 8th November, the Indian Government in an unprecedented move decided to demonetize (i.e. discontinuation of higher denomination notes which were typically used in the parallel cash economy and harder to tax/monitor by the authorities). Whilst this may prove to be beneficial in long term, it has drastically dented the Indian economy in the short to medium term due to the following factors,

  • Indian economy works on ~85% cash transactions. The cash and banked economies are deeply
    linked. People’s habits of using cash for retail, business, and other asset transactions are fairly
    sticky. Lack of alternate cash notes in short term has been painful. To try and change that
    overnight is virtually impossible and has hurt the Indian economy.
  • GDP will drop dramatically due to sudden cash crunch and could lead to joblessness in 2017. This
    will become more evident in Q1 2017 when listed companies declare their results.
    Nevertheless, we all look forward to 2017 optimistically and hope the Indian economy can recover from
    2016 and leverage off the changes brought by the Government.
    The start-up ecosystem in India witnessed massive correction with several well-funded start-ups shutting down, unicorns like Flipkart facing mark-down (valued at $5bn compared to $15bn a year ago), and new investments drying down due to lack of sustainable investment opportunities.
    Donald Trump’s victory in the US Presidential elections was the biggest global black swan event. All the skeptics are getting around to offering him a chance to perform. In fairness, Trump is the first non-politician
    businessman President in decades. Trump’s focus on deregulation, jobs creation, moving away from consumption-driven economy (that has led to trillions of dollars of debt in the last few decades), creating a pro-business environment, investing in education and infrastructure (which almost always lead to GDP growth in the long term), engaging top business leaders to help devise future policy, bringing corporate profits
    back to America at 10% tax rate with no questions asked (should inspire Indian government to tax at 10% rather than ~90% for bringing money back into the country) seem fairly promising at the outset.
    From India’s perspective, Trumps’ focus on Indian trade partnership shall help. Though in short term, due to immigration tightening in the US (challenging for Indian IT services firms), and Interest rates rising (implying that US FDI in India shall decrease), the Indian economy will lose out.
    Blockchain continues to dominate as the latest and possibly the greatest technology with huge potential in re-organizing the world’s social-economic order. There are major developments across Blockchain
    open-source platforms (like Etherium, Multichain, R3 Corda, IBM Hyperledger), which have led to undesirable fragmentation at a very early stage of Blockchain adoption. Blockchain applications across all
    sectors including Financial Services, Healthcare, Identity management, etc. are moving gradually from Proof of Concepts to Minimum Viable Products. We believe in the next couple of years, we will embrace
    blockchain like we adopted the Internet in 1998.
    Technology-driven Automation showed glimpses of what the future might bring. With the evolution of driverless cars, virtual assistants, messaging bots, healthcare ATMs, 3D printing, Artificial Intelligence; the future shall improve human lives dramatically; while at the same time possibly imposing social challenges including joblessness and high dependence on technology usage.

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