Long have been Inflation troubling India, now it’s the turn of Deflation..
Inflation for the week ended 28 February was recorded to be 2.43%.
Few points that I stumbled upon in these few days..
Firstly, the wholesale price index (WPI) for that week stood at 227.7, lower than the 227.8 recorded for the week ended April 5 last year. That means unless the index rises in the next five weeks, the rate of inflation will turn negative. Also, with the rabi harvest round the corner, a fall in the general price level would not be surprising.
Secondly, The reason nobody's cheering is that your shopping cart items are not getting any cheaper. The indices for food articles and foodgrains are 8% and 11% higher than a year ago, respectively. In other words, while the average rise in prices of all commodities that constitute the WPI has been less than 2.5%, these essential consumption items have seen a sharp rise in prices over the last year. As the relative less well-to-do sections spend most of their income on food, the inflation they actually feel will be closer to 8% than to 2.5%. For the bottom rung of the population, which spends almost 90% of its income on food, the situation is particularly bad. Even the lower middle class families spend almost 60% of their income on food items, the prices of which continue to rise.
Thirdly, The government, however, has more reason to worry. Even as inflation in food articles remains high, prices of industrial products have been declining. The index for organic and inorganic chemicals has fallen by 20.8% over the last year and that for non-ferrous metals by 9.7%. This clearly means that the demand for most of the industrial items is declining due to the bleak economic outlook and hence the businessmen and investments in this section will shy away or rather businessmen have already started searching for safer havens. IIP(Index for Industrial Production) is going to get a further knock and this time in the gut.
Fourthly, falling inflation will raise the demand for the treasury bonds and hence many might report capital gains and Banks, but ofcourse becomes a good pick for the coming week or so. Capital gains on bonds will lead to decline in the T bill interest rate and hence the Indian economy can expect a further rate cut from RBI. And subsequently rate cuts from all the leading banks. This leads to realty also being a very good pick.
By
Riddhiman Jain.
source :
Sunday, March 15, 2009
Saturday, January 17, 2009
World's Youngest CEO - Suhas Gopinath - Globals Inc.
Even though it is off the hook from the EFA articles....I found it to be interesting.....
Suhas is now 21 years old. When he was just 14, this guy from Bangalore, India founded a company called Globals, Inc in San Jose, California. The reason for trying his luck in the United States rather than his native country was because there are laws in India that prevented him — then as a minor — to start a company legally. Starting with only 4 employees, he now employs around 400 students between India and the U.S.A.
For more refer
http://www.spiegel.de/international/0,1518,482231,00.html
Suhas is now 21 years old. When he was just 14, this guy from Bangalore, India founded a company called Globals, Inc in San Jose, California. The reason for trying his luck in the United States rather than his native country was because there are laws in India that prevented him — then as a minor — to start a company legally. Starting with only 4 employees, he now employs around 400 students between India and the U.S.A.
For more refer
http://www.spiegel.de/international/0,1518,482231,00.html
Thursday, September 25, 2008
Why are we here?????
Source: Article by Wayne Mulligan
Prescript: This article is generally a "wrapper" article that will explain the current primitive scenario well...
Financial Crises - A simplified version
So let's go through it step-by-step, from the beginning until this weekend when the Government announced a $700 billion bailout of the financial services industry.
I. It all started in the housing and mortgage market:
Basically, lenders were loaning money to whoever wanted to buy a home. Credit score, income and assets became irrelevant terms as brokers and local lenders rushed to issue new mortgages.
It seemed like a relatively "low risk" strategy at the time to many banks. Reason being, they figured that even if people stopped paying their mortgages, the housing market was doing so well that folks could just sell the house for a profit and pay back the remainder of the mortgage.
And that's really where the trouble started.
II. Then the Investment Banks Got Involved:
Mortgage Backed Securities (MBS) are nothing new on Wall Street. They're sort of like bonds, meaning there's a "principle amount" (the amount being loaned) and interest coupons (or payments) that would be paid monthly on the loan. However, MBS's aren't single loans.
Instead, these loans were really thousands of individual mortgages all pooled together to create a single, tradable security.
This is another reason why many lenders were happy to keep giving out mortgages to folks (even if they didn't qualify). Local lenders knew that they'd be able to package up all those mortgages and just sell them right to the big investment banks and not have to worry.
The banks then turned around and would trade these Mortgage Backed Securities like they would a stock or a bond - trying to pocket profits in between each trade.
III. Bubbles
The basic assumption in this whole mess was that housing prices would continue to rise each year.
In fact, that assumption turned out to be pretty accurate. According to the S&P Case-Schiller Index, home prices nearly doubled across the country from 2001 - 2006.
That's because it was so easy to get a mortgage, everybody wanted to buy a home. Thus spurring demand and in turn driving up prices further. It sort of became a self fulfilling prophecy, which in turn became a full-fledged housing bubble.
And just like any good bubble, it eventually had to pop!
IV. The "After-Pop"
So after the housing market finally started to tumble, the financial services industry went into a year-long death spiral. Here's the basic sequence of events:
People couldn't afford their mortgages anymore.
They couldn't sell their homes for more than they paid due to falling prices
So they defaulted on their loans - this happened to millions of people!
The big investment banks which now owned all the mortgages suddenly realized that these "assets" were virtually becoming worthless in a very short period of time.
So the banks had to take massive write-downs on these loans. The way this works is the banks were considering these baskets of mortgages as assets on their balance sheets. Once the assets went from being worth $100 to $1, the banks basically lost 99% of their value.
When that happened it made it very difficult for the banks to get loans themselves (imagine applying for a loan when all you have is a pack of bubble gum and the clothes on your back - it's not likely to happen).
When the banks couldn't get their own loans they were either going to be forced into bankruptcy (Lehman Brothers) or had to be swallowed up by healthier firms (Bear Stearns, Merrill Lynch, etc.)
V. How the Government Got Involved
Ever since Bear Stearns went under the government has played a fairly prominent role in this whole mess.
But it wasn't until we almost saw the implosion of Fannie Mae and Freddie Mac that the government really made its presence felt.
Fannie Mae and Freddie Mac are sort of like "buyers of last resort" in the mortgage market. They were established to maintain liquidity in these markets in the event of the large banks being unable to trade their Mortgage Backed Securities.
So in the end, Freddie and Fannie were sitting on trillions of dollars in bad home loans.
And while these companies were private organizations they were however government sponsored organizations. So if the government had let either one of these companies fail then it might've made it very difficult for the United States to keep selling debt to big foreign buyers, like China. Remember, it's US's ability to sell their debt to other countries that has been funding its operations (e.g. wars, etc.) for the last several years.
VI. How AIG and Insurance Fit In
AIG came into the picture when it began selling "insurance" to the big banks.
This technically wasn't insurance, but that was mainly due to clever wording on the part of AIG management. Because for all intents and purposes, they were basically insuring the mortgages held by the banks - this type of insurance was called a "Credit Default Swap", or a CDS.
Basically, the banks would pay AIG a monthly fee and in turn AIG would promise to make the bank whole on any mortgages that defaulted (sure sounds like insurance to me).
At the time I'm sure this sounded like a good idea because everybody assumed housing prices would continue to rise.
Well we all know how that turned out and that's why in the end AIG was left holding the bag for billions of dollars in bad loans.
VII. The Bailout
So that brings us to where we are today: On the eve of the largest government bailout of the private sector in the history of this country.
The implications for these actions are vast and complex.
On the one hand, the government has to do this; the alternatives are too disastrous to even comprehend. On the other hand, what type of message does this send to the banks going forward? That it's ok to engage in risky, reckless behavior and they'll always get bailed out in the end?
With inputs from Mahesh Jakhotia
Riddhiman Jain
Prescript: This article is generally a "wrapper" article that will explain the current primitive scenario well...
Financial Crises - A simplified version
So let's go through it step-by-step, from the beginning until this weekend when the Government announced a $700 billion bailout of the financial services industry.
I. It all started in the housing and mortgage market:
Basically, lenders were loaning money to whoever wanted to buy a home. Credit score, income and assets became irrelevant terms as brokers and local lenders rushed to issue new mortgages.
It seemed like a relatively "low risk" strategy at the time to many banks. Reason being, they figured that even if people stopped paying their mortgages, the housing market was doing so well that folks could just sell the house for a profit and pay back the remainder of the mortgage.
And that's really where the trouble started.
II. Then the Investment Banks Got Involved:
Mortgage Backed Securities (MBS) are nothing new on Wall Street. They're sort of like bonds, meaning there's a "principle amount" (the amount being loaned) and interest coupons (or payments) that would be paid monthly on the loan. However, MBS's aren't single loans.
Instead, these loans were really thousands of individual mortgages all pooled together to create a single, tradable security.
This is another reason why many lenders were happy to keep giving out mortgages to folks (even if they didn't qualify). Local lenders knew that they'd be able to package up all those mortgages and just sell them right to the big investment banks and not have to worry.
The banks then turned around and would trade these Mortgage Backed Securities like they would a stock or a bond - trying to pocket profits in between each trade.
III. Bubbles
The basic assumption in this whole mess was that housing prices would continue to rise each year.
In fact, that assumption turned out to be pretty accurate. According to the S&P Case-Schiller Index, home prices nearly doubled across the country from 2001 - 2006.
That's because it was so easy to get a mortgage, everybody wanted to buy a home. Thus spurring demand and in turn driving up prices further. It sort of became a self fulfilling prophecy, which in turn became a full-fledged housing bubble.
And just like any good bubble, it eventually had to pop!
IV. The "After-Pop"
So after the housing market finally started to tumble, the financial services industry went into a year-long death spiral. Here's the basic sequence of events:
People couldn't afford their mortgages anymore.
They couldn't sell their homes for more than they paid due to falling prices
So they defaulted on their loans - this happened to millions of people!
The big investment banks which now owned all the mortgages suddenly realized that these "assets" were virtually becoming worthless in a very short period of time.
So the banks had to take massive write-downs on these loans. The way this works is the banks were considering these baskets of mortgages as assets on their balance sheets. Once the assets went from being worth $100 to $1, the banks basically lost 99% of their value.
When that happened it made it very difficult for the banks to get loans themselves (imagine applying for a loan when all you have is a pack of bubble gum and the clothes on your back - it's not likely to happen).
When the banks couldn't get their own loans they were either going to be forced into bankruptcy (Lehman Brothers) or had to be swallowed up by healthier firms (Bear Stearns, Merrill Lynch, etc.)
V. How the Government Got Involved
Ever since Bear Stearns went under the government has played a fairly prominent role in this whole mess.
But it wasn't until we almost saw the implosion of Fannie Mae and Freddie Mac that the government really made its presence felt.
Fannie Mae and Freddie Mac are sort of like "buyers of last resort" in the mortgage market. They were established to maintain liquidity in these markets in the event of the large banks being unable to trade their Mortgage Backed Securities.
So in the end, Freddie and Fannie were sitting on trillions of dollars in bad home loans.
And while these companies were private organizations they were however government sponsored organizations. So if the government had let either one of these companies fail then it might've made it very difficult for the United States to keep selling debt to big foreign buyers, like China. Remember, it's US's ability to sell their debt to other countries that has been funding its operations (e.g. wars, etc.) for the last several years.
VI. How AIG and Insurance Fit In
AIG came into the picture when it began selling "insurance" to the big banks.
This technically wasn't insurance, but that was mainly due to clever wording on the part of AIG management. Because for all intents and purposes, they were basically insuring the mortgages held by the banks - this type of insurance was called a "Credit Default Swap", or a CDS.
Basically, the banks would pay AIG a monthly fee and in turn AIG would promise to make the bank whole on any mortgages that defaulted (sure sounds like insurance to me).
At the time I'm sure this sounded like a good idea because everybody assumed housing prices would continue to rise.
Well we all know how that turned out and that's why in the end AIG was left holding the bag for billions of dollars in bad loans.
VII. The Bailout
So that brings us to where we are today: On the eve of the largest government bailout of the private sector in the history of this country.
The implications for these actions are vast and complex.
On the one hand, the government has to do this; the alternatives are too disastrous to even comprehend. On the other hand, what type of message does this send to the banks going forward? That it's ok to engage in risky, reckless behavior and they'll always get bailed out in the end?
With inputs from Mahesh Jakhotia
Riddhiman Jain
Friday, September 19, 2008
Its pouring dollars!!!Can we have it???
Pre Script: Thank you all for the comments and the criticism too!!!But i would appreciate if you post your comments queries or criticism here rather than on GTALK.
Pre Script2: For the Critics...The previous two posts were compiled, the data was accumulated from sources and was filtered and presented. The data is bound to be taken form somewhere. So these posts, you cannot call them copied but ya compiled..
Frantic Injection of huge amount of dollars in the Financial System...
Its pouring Dollars friend!!!!(and weirdly, water here in Pilani)
Are we going to get some of it??????or only financial institutions will take it home and clear their Bad Debts????(Quite Obvious meaning...)
$247 billion... FED????? Let me put it in figures
247,00 crores or 247000 million or 247000000000 Dollars........ or 1136200000000 rupees at Dollar to ruppee being 46.. This has already surpassed the total budget of the Government of India for the last fiscal.
So much of dollars?????? Into the market!! FED is ready to weaken dollar against the currencies!!!!
But den this just FED..
Bank of Japan(BoJ) injects 3 trillion yen into markets..Now i cannot handle the amout of zeroes trillion has...
Russian President Dmitry Medvedev, pledges $20 billion( Dont know the conversion in roubles!!!) injection into the stock market and also cut oil taxes.
China to scrap down duty on stock purchases and buy shares in three of the biggest banks in China to boost investors confidence..
India???????Nothing!!!!!!!!!Just supporting!! No 'explicit' injection of Liquidity! No rates cuts!! No 'explicit' heavy purchases in Stock markets?????Why?????
So far we Indians have shown strong resilience to such great pressures. Our markets follow the Global trend but by the end of day recover and negate off most of the losses. With these kind of dramatic pull backs, you might be proud to be an Indian..
The only dominant fallout in India is ICICI hit, by Lehmann bankruptcy,of $350 million,large but relatively meager..
Apart from ICICI, No explicit hit.
This shows how fundamentally strong we are and the extent to which we have decoupled(Yes!!Again the literal meaning will suffice.) from the Global turmoil.
Injection of humongous amount of dollars!! What does this predict???
It simply states how pathetic the present state is.. It states how disastrous future can be. It shows how vulnerable are the Policy makers.. It shows how the world is coupled to THE US(our Uncle SAM!!).
After Bear Sterns, we got Merill Lynch. After Merill lynch we got Fannie Mac and Freddie Mae bailout??. Then the bankruptcy of Lehman.(FED negotiating a proper price for Barclays to buy most of Lehman though!!). AIG $85.8 billion bailout..
What next?????
Morgan stanley??? Goldmann Sachs....???
Haven't it been for the timely intervention of FED, we would have had the same Great Depression of the 1930's when classical economics was followed. 200 banks were closed down,people were on roads and all this just because of a simple assumption- "There exists some restoring forces or an Invisible Hand that will rehabilitate the situation and equilibrium will be restored".
Where is India heading???? The Sensex just kissed our previous estimate of 12.5k. (Very soon than expected though!!). There's ambiguity, fear in the minds of people. Certainty has certainly taken a hit. Half the analysts, optimistic, predict sensex might be resilient and 12k would not be breached but the pessimistic half think that 12k support would be broken and not only broken but shattered.
What does this mean for us??? We students???? Placements worse!! No recourse there!! Acads??? always worse!! So no recourse there!!!
What i believe if we go by the analysis of the pessimists or the optimists fate would never again give us this opportunity.
Let it breach the psychological 12k and make the market conducive and affordable.Then we plunge in our saved pocket money( Or watever) into these so called Efficient Demand Supply driven markets.
But den, the other side of the coin says OIL has started gaining its lost ground, Inflation will not allow the market to have its run. FII( Foreign Institutional investors) sucking out money. Already a billion dollar has been sucked out in the first half of the September.
What to believe??? what theory to go by???
But den its worth to take the risk!!
Its an opportunity that takes a lifetime to come... I dont think so again can we see such great economical, political or psychlogical state of affairs.
How i wish i could exploit it!!!!How i wish i could.......
By
Riddhiman Jain
Wednesday, September 17, 2008
Save my Rupee...Uncle SAM!!!!
Save my rupeee.... Save my Money.
Leave me Dollar, forgive me for appreciating against you...
The rupee posted its biggest fall in a decade on Tuesday 16th September 2008, hit by risk aversion and banks arbitraging a weaker offshore rate, although suspected central bank intervention stopped the slide just short of 47 per dollar.
Confused?????Let me Explain...
The recent attacks on the financial markets have turned out to be a money making opportunity for players with overseas presence. Multinational banks operating in India, large corporates and diamond houses have cashed in on the difference that has surfaced in the dollar-rupee exchange rate between the Mumbai currency market and the unregulated, unofficial, offshore markets Singapore, Dubai and London.
The difference (that reflects the arbitrage opportunity) was as high as 40 paise to one rupee last week. Its the outcome of hedging and foreign portfolio managers taking big bets that the rupee will slip further against the US currency. Such bets, which primarily boil down to these players shorting( Selling the rupee in the anticipation of a fall without actually owning it) the Indian currency, have made the rupee weaker in the overseas market than in India. In other words dollar has become stronger in offshore market than what is quoted here.
Corporates and Institutions that have the flexibility and the wherewithal have profited by buying the dollar in India and selling it on the offshore market- better known as Non deliverable Forward market(NDF).
As the name suggests, all deals in the NDF markets are forward deals settled in dollars.(Just for the readers-A forward contract is an agreement between two parties to buy or sell an asset at a specified point of time in the future. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time of trade is not the time where the securities themselves are exchanged.).
Its not a spot market( immediate dealing market) since rupee, a non-convertible currency, cannot be 'delivered' on the offshore market. So the deals are settled in cash. On maturity of the forward contract, the differnce between the Forward rate( Future rate) and the RBI(local) refernce rate on the date of maturity is either paid or received in dollar by the party. The RBI refernce rate is based on the 12pm rates of the few active banks in Mumbai.
The following example might make it clearer...
The one month forward dollar was 45.83 in India against 45.96 on the NDF market. Many corporates will take advantage of this differnce- buying forward in India and selling forward abroad to lock in a gain of 13 paise.
Therefore this has lead to shooting up of Volumes and and therefore banks are ( Yes!!! banks have to be paid a margin for NDF positions) charging less margin for NDF trades. Its a billion dollar market which believes that rupee will fall faster than the official exchange rate.
Under the prevailing onslaught of arbitragers its only RBI who is selling the dollar and we can say it, without any doubt, that it is the intervention of RBI that accounts for the difference in the rupee rates.
Adding to it,there is lot of oil, equity and NDF-related dollar demand, and even importers are covering near-term imports.( Importers tend to loose by Dollar gain..Its easy Think!!!)
On a black Sunday for Wall Street, 10 of the world's biggest banks also agreed to establish a $70 billion emergency fund while the Federal Reserve said for the first time it will accept stocks in exchange for cash loans.
Such is the case where FED agreed to take the most unsecured form of collateral( Equity) for Cash loans. This depicts the pitiful situation of the Financial system across the globe. This would nothing but worsen the situation for the short term and hurt sentiments.
Hence, Uncle Sam is drowning so are the third world countries.....
Compiled By
Riddhiman Jain
For refernce please refer here
Leave me Dollar, forgive me for appreciating against you...
The rupee posted its biggest fall in a decade on Tuesday 16th September 2008, hit by risk aversion and banks arbitraging a weaker offshore rate, although suspected central bank intervention stopped the slide just short of 47 per dollar.
Confused?????Let me Explain...
The recent attacks on the financial markets have turned out to be a money making opportunity for players with overseas presence. Multinational banks operating in India, large corporates and diamond houses have cashed in on the difference that has surfaced in the dollar-rupee exchange rate between the Mumbai currency market and the unregulated, unofficial, offshore markets Singapore, Dubai and London.
The difference (that reflects the arbitrage opportunity) was as high as 40 paise to one rupee last week. Its the outcome of hedging and foreign portfolio managers taking big bets that the rupee will slip further against the US currency. Such bets, which primarily boil down to these players shorting( Selling the rupee in the anticipation of a fall without actually owning it) the Indian currency, have made the rupee weaker in the overseas market than in India. In other words dollar has become stronger in offshore market than what is quoted here.
Corporates and Institutions that have the flexibility and the wherewithal have profited by buying the dollar in India and selling it on the offshore market- better known as Non deliverable Forward market(NDF).
As the name suggests, all deals in the NDF markets are forward deals settled in dollars.(Just for the readers-A forward contract is an agreement between two parties to buy or sell an asset at a specified point of time in the future. The price of the underlying instrument, in whatever form, is paid before control of the instrument changes. This is one of the many forms of buy/sell orders where the time of trade is not the time where the securities themselves are exchanged.).
Its not a spot market( immediate dealing market) since rupee, a non-convertible currency, cannot be 'delivered' on the offshore market. So the deals are settled in cash. On maturity of the forward contract, the differnce between the Forward rate( Future rate) and the RBI(local) refernce rate on the date of maturity is either paid or received in dollar by the party. The RBI refernce rate is based on the 12pm rates of the few active banks in Mumbai.
The following example might make it clearer...
The one month forward dollar was 45.83 in India against 45.96 on the NDF market. Many corporates will take advantage of this differnce- buying forward in India and selling forward abroad to lock in a gain of 13 paise.
Therefore this has lead to shooting up of Volumes and and therefore banks are ( Yes!!! banks have to be paid a margin for NDF positions) charging less margin for NDF trades. Its a billion dollar market which believes that rupee will fall faster than the official exchange rate.
Under the prevailing onslaught of arbitragers its only RBI who is selling the dollar and we can say it, without any doubt, that it is the intervention of RBI that accounts for the difference in the rupee rates.
Adding to it,there is lot of oil, equity and NDF-related dollar demand, and even importers are covering near-term imports.( Importers tend to loose by Dollar gain..Its easy Think!!!)
On a black Sunday for Wall Street, 10 of the world's biggest banks also agreed to establish a $70 billion emergency fund while the Federal Reserve said for the first time it will accept stocks in exchange for cash loans.
Such is the case where FED agreed to take the most unsecured form of collateral( Equity) for Cash loans. This depicts the pitiful situation of the Financial system across the globe. This would nothing but worsen the situation for the short term and hurt sentiments.
Hence, Uncle Sam is drowning so are the third world countries.....
Compiled By
Riddhiman Jain
For refernce please refer here
Monday, September 15, 2008
Blood Bath... A bomb blast in the markets!!
Terrorists - Lehmann brothers, Merill lynch, Bear Sterns( arrested long back) had been planting bombs here in the markets for over a week. Some of them were detonated by the Indian Investors, many were silent ones but the one that blasted today 15th September, 2008 at 9.55 was the worse of its kind.. Pulling the index down 728 points and the NIFTY index down below 4000. Not even a single blue chip survived the explosion. Reliance Infrastructure ricocheted by 9% . RIL breaching its psychological 1900 mark. Even IT sector was not spared. Satyam down 8.85%..
Investors dumped shares across the board. Realty counters faced the brunt of the bear onslaught. Technology and power shares also took a sharp knock.
The crack on Dalal Street widened as global financial worries mounted. The US financial system took a turn for the worse after investment bank Lehman Brothers' filed for bankruptcy, troubled insurer American International Group asked the Fed for a lifeline and Bank of America agreed to buy Merrill Lynch.
With Lehman and Merrill out of the picture, three of the top five US investment banks have effectively departed the scene in less than six months. Bear Stearns was acquired in a fire sale by JPMorgan in March.
On a black Sunday for Wall Street, 10 of the world's biggest banks also agreed to establish a $70 billion emergency fund while the Federal Reserve said for the first time it will accept stocks in exchange for cash loans.
Tracking the weak sentiment globally, the Bombay Stock Exchange 30-share barometer tumbled by 724.99 points or 5.18 per cent at 13,275.82.
The previous terrorist OIl is nw trading below $100 a barrel...Still no respite..
Inflation now is all set to take a forward leap again. 13.5% is its next target( Base Effect). Rupee weakening by arbitragers now....
Next target 12.5k!!! Lets see how far will this take us!!
Hey mighty Lord, Spare us from this turmoil.
Investors dumped shares across the board. Realty counters faced the brunt of the bear onslaught. Technology and power shares also took a sharp knock.
The crack on Dalal Street widened as global financial worries mounted. The US financial system took a turn for the worse after investment bank Lehman Brothers' filed for bankruptcy, troubled insurer American International Group asked the Fed for a lifeline and Bank of America agreed to buy Merrill Lynch.
With Lehman and Merrill out of the picture, three of the top five US investment banks have effectively departed the scene in less than six months. Bear Stearns was acquired in a fire sale by JPMorgan in March.
On a black Sunday for Wall Street, 10 of the world's biggest banks also agreed to establish a $70 billion emergency fund while the Federal Reserve said for the first time it will accept stocks in exchange for cash loans.
Tracking the weak sentiment globally, the Bombay Stock Exchange 30-share barometer tumbled by 724.99 points or 5.18 per cent at 13,275.82.
The previous terrorist OIl is nw trading below $100 a barrel...Still no respite..
Inflation now is all set to take a forward leap again. 13.5% is its next target( Base Effect). Rupee weakening by arbitragers now....
Next target 12.5k!!! Lets see how far will this take us!!
Hey mighty Lord, Spare us from this turmoil.
Friday, September 12, 2008
Deflating the Inflating Economies......
And we are the Back!!!!
After a long break we are back.
Lot had been happening in and around India these days. In this post I try to cover and explain each of the events in a simplified manner.
I have been getting feedback that the articles I write, go over the head. (OHT). I request the readers, to comment on the part that they din understand and I promise I will get back to them with proper explanation.
Pre Script: This one is large but keep reading u will find it very informative.
Oh My God Oil has come down to 102?????????
Fannie and Freddie takeover??
Wholesale Price index slipping these days???
NSG Waiver!!!!Boon for India???
TATAs out of Singur???
Introduction of new derivatives!!!Currency derivates, Interest rate futures and Credit derivatives???
Duvurri Subbarao new governor, RBI!!
So much have we missed.......
Oil plunged as concerns that Hurricane Gustav would cause severe damage to the US oil sector eased after the storm weakened i.e. investors discounted the potential damage from the storm and due to continuous strengthening of dollar against all currencies on account of increased risk aversion by investors. The other reason includes Sustained dollar demand from oil companies in the light of low crude oil prices and inadequate dollar supplies that weighed on the rupee sentiment. Rupee fell down to its two year low of 45.39 a dollar.
India's crude oil import price has dropped to below $100 a barrel, first time since April, but a cut in domestic retail prices is a distant possibility given the fact that state-run oil firms are still losing money on fuel sales. A cut in petrol and diesel prices may not be economically feasible as Indian Oil, Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 1,65,300 crore on fuel sales this fiscal. IOC, BPCL and HPCL together are losing about Rs 400 crore per day on fuel sales
IOC, the company that controls about 54 per cent of the market, is projected to lose Rs 90,630 crore on fuel sales this fiscal. Fuel prices in India are pegged at $68 per barrel, much lower than $99 a barrel so The government has to make good half of this revenue loss by issue of oil bonds. The Finance Ministry has already taken an over Rs 22,000 crore hit in revenues by way of duty cuts announced in June and a price reduction at this stage may upset its applecart. Retailers are at present losing Rs 6.31 per litre on petrol, Rs 13.69 on diesel, Rs 31.39 on kerosene and Rs 312.58 per 14.2-kg LPG cylinder. The government is also all set to introduce dual prices for diesel, the largest consumed petroleum fuel in the country. Bulk buyers like industrial consumers, power plants, defence establishments and SEZs may have to pay a market price which would be around Rs 22/ litre costlier than the subsidised diesel.
The Wholesale price Index continues its declining streak for the third continuous week down to 12.1% from a high of 12.6. All credit to the respite provided by softening of global crude prices. Now we can finally say that the government’s supply side measures have begun to work and so is the case with RBI’s tight monetary policies. A further interest rate hike by RBI can be seen in its October review of monetary policies as this cool off might be temporary, inflation might peak to high of 13% in the third quarter of this fiscal due to increase in prices of food items. This year yield has not been to the mark owing to the lousy monsoon. However decreasing crude oil prices coupled with good monsoon would stabilise the inflation in near future. The major concern for the ministry and RBI being Inflation and as seen in the recent past they are ready to trade well between growth and Economy.
Duvvuri Subbarao, the new RBI Governor sounded positive on growth, though.
He said “ Origins of Inflation lie largely in prices of food, metals and crude. Food is an annual, if not bi-annual, phenomenon and responses have already kicked in. Even in metals such as steel although the supply response is lumpy, I think both around the world and in our country, supply response has kicked in. The movement in crude prices have been in response to the supply-demand factors and US situation and the position of the dollar. So these responses have also come in.”
Nothing seems to be positive even in the global Front except for the news of Freddie Mac and Frannie Mae, US ailing mortgage giants, bailout be the US government. China and Japan the biggest buyers of Freddie Mac and Frannie Mae bonds praised the US government for its rescue. This might no doubt stabilize the current MBS( Mortgage backed securities) market in the US and the global financial market and will help Japan, Europe and United Kingdom remove one source of anxiety that has plagued markets and helped push them towards recession but this move more or less seems to be sign of the perilous state of the global financial system than of a imminent recovery. I find it difficult to see how it is bullish that the heavy hand of government is needed to such an extent. This takeover of Fannie and Freddie is a testament to how broken the financial system is at this time. Financial firms have posted over $500 billion credit losses and write-downs since credit markets seized up a year ago after the defaults on US home loans. This risk of collapse of the lenders and a US housing firm though are just one of the threats looming over the world economy. What we see is the US government not putting in immediate cash but putting its credibility on the line, its a tremendous help but it might not solve any problems.
All in all the global sentiment seems pretty negative.
Mukesh Ambani Group firm Reliance Industries' market capitalisation fell below the Rs 3 trillion mark, as its shares were battered and slipped below Rs 2,000 on the BSE.
Even Tata Motors haven’t been doing well. All seems to be not so well at Singur front. The dhaar na undertaken by Mamta Banerjee and her agitators had forced the TATA’s to stop work on NANO plant. The demand of the agitators is the return of the land to the farmers who had to give up in order to accommodate the car plant. Even after the so called solution drawn between the TATA’s and the Mamta Banerjee, Trinamool Congress chief, by the in power CPI government’s governor, Gopal Krishna Gandhi, the stalemate continues as vendors like Sona Kayo, Rico, Lumax, Endurance, Caparo Engineering, Sharda Motors, Exide have put on hold further investment in singur. If critical suppliers are not near the mother plant, singur, of NANO, it will affect the pricing of the ultra low cost car.
But as we believe not even the turmoil in singur could cast a shadow on India’s potential to attract overseas investment. One example (singur) cannot be example for the whole country. This kind of problem one can face in any country. Of course the event provides us with something to learn. The recent NSG waiver can discount this tumult.
Nuclear supplier nations adopted by consensus a US initiative to lift a 34-year-old embargo on nuclear trade with India. NSG( Nuclear Supplier's Group) rules ban nuclear trading with India because it refuses to sign the Non-Proliferation Treaty, developed atomic bombs in secret and conducted its first nuclear test in 1974.
The United States wants a special waiver from NSG rules for India, so it can share civilian nuclear technology with New Delhi. The United States argues the deal would bring India into the NPT( Non-Proliferation treaty) fold and help combat global warming by allowing it to develop low-polluting nuclear energy.
Critics say the deal undermines international non-proliferation efforts and accuse the nuclear powers of pursuing commercial and political gains.
There had been three main sticking points: termination of trade if India tests, no transfer of enrichment and reprocessing technology and an annual review of the agreement.
But the crunch issue appeared to be nuclear testing, since New Delhi has not signed the Comprehensive Test Ban Treaty.
Overall this NSG waiver has lifted obstacles to India buying products and technologies associated with civilian uses of nuclear technology (and selling these to) most significant nuclear powers save the US. The implications are not just for nuclear energy alone- our existing reactors running short of fuel would be able to run at full capacity and we would be able to set up new nuclear plants. Vital sectors of economy stand to benefit from access to a range of products and technologies that had, till now, been outside India’s reach. Many advances in materials, technologies, communications, computing, signaling, chemical processing, avionics etc. are deemed sensitive technologies not accessible to nuclear have-nots. Access to these technologies will improve efficiencies across the board of India from weather forecasting to oil refining. Sectors that stand to gain are power, Defence, IT, Insurance and Pharma. IT can help in terms of software services, data management and control & automation. Also, the R&D skills from Pharma may play a crucial role in handling the sensitive technologies which India will get access to. They may even be useful in handling of chemical transformations and temperature controls in the nuclear plants. This NSG clearance has opened up business opportunities worth Rs. 1,20,000 crore in the next 15 years adding around 18-20 nuclear reactors at the cost of Rs 5000- 6000 crore each. The Nuclear deal will also enable addition of new capacity and help fulfill the target of adding 63,000 MW by 2030. These developments sholud benefit Infrastructure and power companies such as NTPC, Jindal, L & T, Tata Power and Reliance Power. Other companies that have traditionally not been in this field may also make a foray in this sector given the magnitude of the business potential. This deal would open gates for huge private investments by international companies and players into the Indian Economy.
Further, adding to these set of good news, there might be soon a materialization of the proposal on introduction of new derivatives like currency derivatives, interest rate futures and credit derivatives.
Do comment....
Compiled BY Riddhiman Jain
After a long break we are back.
Lot had been happening in and around India these days. In this post I try to cover and explain each of the events in a simplified manner.
I have been getting feedback that the articles I write, go over the head. (OHT). I request the readers, to comment on the part that they din understand and I promise I will get back to them with proper explanation.
Pre Script: This one is large but keep reading u will find it very informative.
Oh My God Oil has come down to 102?????????
Fannie and Freddie takeover??
Wholesale Price index slipping these days???
NSG Waiver!!!!Boon for India???
TATAs out of Singur???
Introduction of new derivatives!!!Currency derivates, Interest rate futures and Credit derivatives???
Duvurri Subbarao new governor, RBI!!
So much have we missed.......
Oil plunged as concerns that Hurricane Gustav would cause severe damage to the US oil sector eased after the storm weakened i.e. investors discounted the potential damage from the storm and due to continuous strengthening of dollar against all currencies on account of increased risk aversion by investors. The other reason includes Sustained dollar demand from oil companies in the light of low crude oil prices and inadequate dollar supplies that weighed on the rupee sentiment. Rupee fell down to its two year low of 45.39 a dollar.
India's crude oil import price has dropped to below $100 a barrel, first time since April, but a cut in domestic retail prices is a distant possibility given the fact that state-run oil firms are still losing money on fuel sales. A cut in petrol and diesel prices may not be economically feasible as Indian Oil, Bharat Petroleum and Hindustan Petroleum are projected to lose Rs 1,65,300 crore on fuel sales this fiscal. IOC, BPCL and HPCL together are losing about Rs 400 crore per day on fuel sales
IOC, the company that controls about 54 per cent of the market, is projected to lose Rs 90,630 crore on fuel sales this fiscal. Fuel prices in India are pegged at $68 per barrel, much lower than $99 a barrel so The government has to make good half of this revenue loss by issue of oil bonds. The Finance Ministry has already taken an over Rs 22,000 crore hit in revenues by way of duty cuts announced in June and a price reduction at this stage may upset its applecart. Retailers are at present losing Rs 6.31 per litre on petrol, Rs 13.69 on diesel, Rs 31.39 on kerosene and Rs 312.58 per 14.2-kg LPG cylinder. The government is also all set to introduce dual prices for diesel, the largest consumed petroleum fuel in the country. Bulk buyers like industrial consumers, power plants, defence establishments and SEZs may have to pay a market price which would be around Rs 22/ litre costlier than the subsidised diesel.
The Wholesale price Index continues its declining streak for the third continuous week down to 12.1% from a high of 12.6. All credit to the respite provided by softening of global crude prices. Now we can finally say that the government’s supply side measures have begun to work and so is the case with RBI’s tight monetary policies. A further interest rate hike by RBI can be seen in its October review of monetary policies as this cool off might be temporary, inflation might peak to high of 13% in the third quarter of this fiscal due to increase in prices of food items. This year yield has not been to the mark owing to the lousy monsoon. However decreasing crude oil prices coupled with good monsoon would stabilise the inflation in near future. The major concern for the ministry and RBI being Inflation and as seen in the recent past they are ready to trade well between growth and Economy.
Duvvuri Subbarao, the new RBI Governor sounded positive on growth, though.
He said “ Origins of Inflation lie largely in prices of food, metals and crude. Food is an annual, if not bi-annual, phenomenon and responses have already kicked in. Even in metals such as steel although the supply response is lumpy, I think both around the world and in our country, supply response has kicked in. The movement in crude prices have been in response to the supply-demand factors and US situation and the position of the dollar. So these responses have also come in.”
Nothing seems to be positive even in the global Front except for the news of Freddie Mac and Frannie Mae, US ailing mortgage giants, bailout be the US government. China and Japan the biggest buyers of Freddie Mac and Frannie Mae bonds praised the US government for its rescue. This might no doubt stabilize the current MBS( Mortgage backed securities) market in the US and the global financial market and will help Japan, Europe and United Kingdom remove one source of anxiety that has plagued markets and helped push them towards recession but this move more or less seems to be sign of the perilous state of the global financial system than of a imminent recovery. I find it difficult to see how it is bullish that the heavy hand of government is needed to such an extent. This takeover of Fannie and Freddie is a testament to how broken the financial system is at this time. Financial firms have posted over $500 billion credit losses and write-downs since credit markets seized up a year ago after the defaults on US home loans. This risk of collapse of the lenders and a US housing firm though are just one of the threats looming over the world economy. What we see is the US government not putting in immediate cash but putting its credibility on the line, its a tremendous help but it might not solve any problems.
All in all the global sentiment seems pretty negative.
Mukesh Ambani Group firm Reliance Industries' market capitalisation fell below the Rs 3 trillion mark, as its shares were battered and slipped below Rs 2,000 on the BSE.
Even Tata Motors haven’t been doing well. All seems to be not so well at Singur front. The dhaar na undertaken by Mamta Banerjee and her agitators had forced the TATA’s to stop work on NANO plant. The demand of the agitators is the return of the land to the farmers who had to give up in order to accommodate the car plant. Even after the so called solution drawn between the TATA’s and the Mamta Banerjee, Trinamool Congress chief, by the in power CPI government’s governor, Gopal Krishna Gandhi, the stalemate continues as vendors like Sona Kayo, Rico, Lumax, Endurance, Caparo Engineering, Sharda Motors, Exide have put on hold further investment in singur. If critical suppliers are not near the mother plant, singur, of NANO, it will affect the pricing of the ultra low cost car.
But as we believe not even the turmoil in singur could cast a shadow on India’s potential to attract overseas investment. One example (singur) cannot be example for the whole country. This kind of problem one can face in any country. Of course the event provides us with something to learn. The recent NSG waiver can discount this tumult.
Nuclear supplier nations adopted by consensus a US initiative to lift a 34-year-old embargo on nuclear trade with India. NSG( Nuclear Supplier's Group) rules ban nuclear trading with India because it refuses to sign the Non-Proliferation Treaty, developed atomic bombs in secret and conducted its first nuclear test in 1974.
The United States wants a special waiver from NSG rules for India, so it can share civilian nuclear technology with New Delhi. The United States argues the deal would bring India into the NPT( Non-Proliferation treaty) fold and help combat global warming by allowing it to develop low-polluting nuclear energy.
Critics say the deal undermines international non-proliferation efforts and accuse the nuclear powers of pursuing commercial and political gains.
There had been three main sticking points: termination of trade if India tests, no transfer of enrichment and reprocessing technology and an annual review of the agreement.
But the crunch issue appeared to be nuclear testing, since New Delhi has not signed the Comprehensive Test Ban Treaty.
Overall this NSG waiver has lifted obstacles to India buying products and technologies associated with civilian uses of nuclear technology (and selling these to) most significant nuclear powers save the US. The implications are not just for nuclear energy alone- our existing reactors running short of fuel would be able to run at full capacity and we would be able to set up new nuclear plants. Vital sectors of economy stand to benefit from access to a range of products and technologies that had, till now, been outside India’s reach. Many advances in materials, technologies, communications, computing, signaling, chemical processing, avionics etc. are deemed sensitive technologies not accessible to nuclear have-nots. Access to these technologies will improve efficiencies across the board of India from weather forecasting to oil refining. Sectors that stand to gain are power, Defence, IT, Insurance and Pharma. IT can help in terms of software services, data management and control & automation. Also, the R&D skills from Pharma may play a crucial role in handling the sensitive technologies which India will get access to. They may even be useful in handling of chemical transformations and temperature controls in the nuclear plants. This NSG clearance has opened up business opportunities worth Rs. 1,20,000 crore in the next 15 years adding around 18-20 nuclear reactors at the cost of Rs 5000- 6000 crore each. The Nuclear deal will also enable addition of new capacity and help fulfill the target of adding 63,000 MW by 2030. These developments sholud benefit Infrastructure and power companies such as NTPC, Jindal, L & T, Tata Power and Reliance Power. Other companies that have traditionally not been in this field may also make a foray in this sector given the magnitude of the business potential. This deal would open gates for huge private investments by international companies and players into the Indian Economy.
Further, adding to these set of good news, there might be soon a materialization of the proposal on introduction of new derivatives like currency derivatives, interest rate futures and credit derivatives.
Do comment....
Compiled BY Riddhiman Jain
Tuesday, September 9, 2008
Sunday, August 24, 2008
Few Breathers in the current Gloom!
Greed, fear, hope, Regret, Misery, Lust, and guilt. And so the seven deadly sins roll out untamed. What stands now??? Will not be there few hours later!!!Forget tomorrow!!
In the midst of all the negative cues and fallacies, here's some very optimistic outlook of the present scenario....
Firstly, Observed glut in Global savings, but investment climate in the developed countries not so conducive to productive investment. So, the global savings will seek an outlet. Developing countries like India display a strong urge to grow, will continue to attract these funds. Future or say long run seems very fruitful and rewarding no matter where the Inflation or GDP takes us this fiscal year but the fundamentals of economy being so strong and robust that the bears will succumb.
Secondly, The main channel through which the global forces can impact India are Exports and Capital inflows. Capital inflows this quarter have been depressing but then so far we haven't been affected by the global slowdown on the export front. Though export of services has been affected to an extent, but so far there has not been any serious impact on the export of IT and ITES (IT Enabled Services).
Thirdly, it is unanimously reckoned that developed countries are under pressure to cut costs and this could lad to increased outsourcing to countries like India and China due to availability of Cheap and efficient labour.
Fourthly, Easing oil prices would ease pressures on the balance payments, Inflationary pressures(though domestic prices would not ease simultaneously as Oil Cos. continue to bleed). Already Trade deficit (Excess of Imports over Exports) expected this year is 10.4% this year up from previous year 7.7%. Easing Oil would decrease this figure as Oil exports bill will decrease. Also the off budget liabilities (oil & fertilizer subsidies) shall tank. Iran, Israel, Russia being the Spoilsports. The Bad men!!!!!!!
Fifthly, Recently IIP data (April June 08-09) of 5.4% down from 10.3% during the corresponding quarter last year, have shown a reasonably good growth in consumption goods indicating investment growth would be sustained (No wonder why FMCG sector shows strong resilience in spite of the strong market crash) but there is a decline in savings rate both public and private Corporate savings thus widening the CAR (Current Account Deficit).
Electricity Generation, an IIP component grew by just 2% in the first quarter (against 8% last year) which is totally unacceptable and unreasonable for a fast growing economy like INDIA. So quite reasonably, we can expect substantial improvement in the sector for the next three quarters. This would help to achieve robust industrial growth expectation of 7.5% for the whole fiscal year. PowerGrid, NTPC, Reliance Power (for obvious reasons) become hot picks.
Sixthly, Fiscal revenues to be buoyant because of revenue from disinvestments (reduction in capital investment) & Telecom( 3G) licensing. This would moderate the fiscal deficit (amount by which a government spending exceeds its income over a particular period of time) and help it to cool off to the expected 2.5% of GDP by the end of this fiscal.
These points might seem too optimistic, affirmative but INDIA continues to be a hot selling cake that every one yearns to have. India enjoys certain growth enablers such as its culture of tolerance, educational base, skilled individuals, economic factors like a well-developed entrepreneurial class, vast natural resources, strong resilience, strong democratic foundations, secular fabric and finally its young population.
All these would definitely catapult the economy in the coming quarters.
In the midst of all the negative cues and fallacies, here's some very optimistic outlook of the present scenario....
Firstly, Observed glut in Global savings, but investment climate in the developed countries not so conducive to productive investment. So, the global savings will seek an outlet. Developing countries like India display a strong urge to grow, will continue to attract these funds. Future or say long run seems very fruitful and rewarding no matter where the Inflation or GDP takes us this fiscal year but the fundamentals of economy being so strong and robust that the bears will succumb.
Secondly, The main channel through which the global forces can impact India are Exports and Capital inflows. Capital inflows this quarter have been depressing but then so far we haven't been affected by the global slowdown on the export front. Though export of services has been affected to an extent, but so far there has not been any serious impact on the export of IT and ITES (IT Enabled Services).
Thirdly, it is unanimously reckoned that developed countries are under pressure to cut costs and this could lad to increased outsourcing to countries like India and China due to availability of Cheap and efficient labour.
Fourthly, Easing oil prices would ease pressures on the balance payments, Inflationary pressures(though domestic prices would not ease simultaneously as Oil Cos. continue to bleed). Already Trade deficit (Excess of Imports over Exports) expected this year is 10.4% this year up from previous year 7.7%. Easing Oil would decrease this figure as Oil exports bill will decrease. Also the off budget liabilities (oil & fertilizer subsidies) shall tank. Iran, Israel, Russia being the Spoilsports. The Bad men!!!!!!!
Fifthly, Recently IIP data (April June 08-09) of 5.4% down from 10.3% during the corresponding quarter last year, have shown a reasonably good growth in consumption goods indicating investment growth would be sustained (No wonder why FMCG sector shows strong resilience in spite of the strong market crash) but there is a decline in savings rate both public and private Corporate savings thus widening the CAR (Current Account Deficit).
Electricity Generation, an IIP component grew by just 2% in the first quarter (against 8% last year) which is totally unacceptable and unreasonable for a fast growing economy like INDIA. So quite reasonably, we can expect substantial improvement in the sector for the next three quarters. This would help to achieve robust industrial growth expectation of 7.5% for the whole fiscal year. PowerGrid, NTPC, Reliance Power (for obvious reasons) become hot picks.
Sixthly, Fiscal revenues to be buoyant because of revenue from disinvestments (reduction in capital investment) & Telecom( 3G) licensing. This would moderate the fiscal deficit (amount by which a government spending exceeds its income over a particular period of time) and help it to cool off to the expected 2.5% of GDP by the end of this fiscal.
These points might seem too optimistic, affirmative but INDIA continues to be a hot selling cake that every one yearns to have. India enjoys certain growth enablers such as its culture of tolerance, educational base, skilled individuals, economic factors like a well-developed entrepreneurial class, vast natural resources, strong resilience, strong democratic foundations, secular fabric and finally its young population.
All these would definitely catapult the economy in the coming quarters.
QWERTY Economics
Superior technological products need not always dominate the market! Wondering? Let Economics explain… Even today people use badly designed keyboards and suffer from pain in their hands. In 1936 August Dvorak designed a new keyboard. People using QWERTY (these are first five keys on the top row) keyboards did not prefer DVORAK keyboards because there would be compatibility problems. People who first used the QWERTY keyboard influenced subsequent users to us them and so on. So, the market was filled with QWERTY users. QWERTY, hence, remains the accepted design. This suggests that superior technology need not be the reason for product dominance. Consumer decision process plays a vital role. Economics calls this decision process "path dependence". That is, our decisions are based on others who earlier, took their decisions. And so it goes on.
NeuroEconomics
Weird, huh? Not very, in the world of stock market. Neuroeconomics is the science of the way our brain reacts when we take a decision. This incorporates using brain-scanning technologies to observe the way neurons react when you make decisions. Neuroeconomists, for instance, study how emoticeuticals (drugs that stabilize emotions) help equity traders take decisions during market crashes. By studying similar market conditions when traders did not take emoticeuticals, neuroeconomists may be able to measure change in behavior and accordingly design drugs to improve their decision taking ability.
Saturday, August 23, 2008
Uncle Sam in deep waters
Recently,I read an article by Martin Feldstein, Professor of Economics,Harvard posted at his blog named a tale of two monetary policies.It commented on the monetary policies by the European Central Bank and the Federal Reserve to rein in inflation.It was interesting to learn that both were facing similar problems but pursuing different policies.Fed had cut down the interest rates and ECB had increased the same.I have my own bit of reasoning to believe why the Fed decided to take a different route altogether. I understand that the Fed does not want to raise interest rates because that would just plain hit the economy in the gut with the left fist. The politicians would scream. The people would go mad.But when the Fed wimps out, the dollar declines in value. And the cost for foreign imports, such as oil, rises. That hits the economy in the gut with the right fist. One way or the other — a left or a right to the gut — our Uncle Sam is getting beat up.The only medicine that one could prescribe is the stabilization of dollar.Its simple if the dollar stabilizes, oil should level off. And we could see the market begin to recover.But mind you this itself is a hard nut to crack! But let me discuss this in terms of energy and oil and in terms of Rising U.S. Energy Costs…
In June, as you know, the price of oil just rocketed up (as the dollar fell). I follow oil like a hawk, and even I was astonished at the pricing trajectory. I really thought that profit taking and the general negative impact on the world economy would have to slow down oil’s rise. But no, oil kept moving up.Of course now it took a back seat.But then I kept wondering at that time… Who the heck is buying this oil? Are you broke yet?But somebody is buying the expensive oil, and we are in the midst of the greatest transfer of wealth in history. Entire nations are being impoverished. Interestingly,other nations are being enriched beyond their wildest dreams.
Rising energy prices, and the related transfers of wealth, are among the great strategic movements of our time. Since the dawn of the oil age, U.S. has had some semblance of control over energy prices. Heck, at one point, prices were so low that the state of Texas empowered the Railroad Commission of Texas to stabilize prices.
It’s a long story, but the West has, more or less, always had a handle on energy prices, even in the face of OPEC, over the last 40 years or so. At the end of the day, the West could have faced down the major oil exporters and kept some sort of lid on the upside of energy pricing. Not any more.
The people who sell oil are, of course, more than happy to take US money. They are ecstatic, truth be told. In a matter of a few years, Western energy demand is moving the wealth of many generations into new hands. Some nations are getting rich, while others are getting poor — fast.
A few years ago, Russia was a post-Soviet basket case. Now the Russians are buying up much of Western Europe.
A few years ago, the United Arab Emirates was a dusty backwater. Now the UAE is becoming a world destination, and its sovereign wealth fund is buying the Chrysler Building in New York.
Meanwhile, expensive oil is breaking the backs of the middle classes in the U.S. and many other countries. Wait until next winter, when millions of households in the U.S. and Europe cannot afford to heat their homes. Ugh!
And world economic growth is stalling as oil prices rise. So it really seems as if the rising prices have to moderate and it actually did .Finally, a breather. Whew! .Whatever my point is straight n simple and it is a opinion shared by many, the cracks in US economy are getting deeper and there is very little it can do to regain its glory of the 90’s .Its showtime for the third world . We all know every dog has its day.And I would like to believe that Uncle Sam knows it well too.
In June, as you know, the price of oil just rocketed up (as the dollar fell). I follow oil like a hawk, and even I was astonished at the pricing trajectory. I really thought that profit taking and the general negative impact on the world economy would have to slow down oil’s rise. But no, oil kept moving up.Of course now it took a back seat.But then I kept wondering at that time… Who the heck is buying this oil? Are you broke yet?But somebody is buying the expensive oil, and we are in the midst of the greatest transfer of wealth in history. Entire nations are being impoverished. Interestingly,other nations are being enriched beyond their wildest dreams.
Rising energy prices, and the related transfers of wealth, are among the great strategic movements of our time. Since the dawn of the oil age, U.S. has had some semblance of control over energy prices. Heck, at one point, prices were so low that the state of Texas empowered the Railroad Commission of Texas to stabilize prices.
It’s a long story, but the West has, more or less, always had a handle on energy prices, even in the face of OPEC, over the last 40 years or so. At the end of the day, the West could have faced down the major oil exporters and kept some sort of lid on the upside of energy pricing. Not any more.
The people who sell oil are, of course, more than happy to take US money. They are ecstatic, truth be told. In a matter of a few years, Western energy demand is moving the wealth of many generations into new hands. Some nations are getting rich, while others are getting poor — fast.
A few years ago, Russia was a post-Soviet basket case. Now the Russians are buying up much of Western Europe.
A few years ago, the United Arab Emirates was a dusty backwater. Now the UAE is becoming a world destination, and its sovereign wealth fund is buying the Chrysler Building in New York.
Meanwhile, expensive oil is breaking the backs of the middle classes in the U.S. and many other countries. Wait until next winter, when millions of households in the U.S. and Europe cannot afford to heat their homes. Ugh!
And world economic growth is stalling as oil prices rise. So it really seems as if the rising prices have to moderate and it actually did .Finally, a breather. Whew! .Whatever my point is straight n simple and it is a opinion shared by many, the cracks in US economy are getting deeper and there is very little it can do to regain its glory of the 90’s .Its showtime for the third world . We all know every dog has its day.And I would like to believe that Uncle Sam knows it well too.
Friday, August 15, 2008
Analogy: GrassHopping- Backward Classes!!!
This one came in as a comment to my last post. I found it very interesting so thought should share it up...
It actually explains the widening gap between the Rich and the poor...
It goes like this...
*OLD VERSION*
The ant works hard all summer laying up supplies for the winter. The grasshopper thinks the ant's a fool and laughs & dances & plays the summer away. Come winter, the ant is warm and well fed. The grasshopper has no food or shelter so he dies out in the cold.
*MODERN VERSION*
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks the ant's a fool and laughs & dances & plays the summer away. Come winter, the shivering grasshopper calls a press conference and demands to know why the ant
should be allowed to be warm and well fed while others are cold and starving. NDTV, BBC, CNN show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. The World is stunned by the sharp contrast. How can this be that this poor
grasshopper is allowed to suffer so?
Arundhati Roy stages a demonstration in front of the ant's house. Medha Patkar goes on a fast along with other grasshoppers demanding that grasshoppers be relocated to warmer climates during winter. Amnesty International and Koffi Annan criticize the Indian Government for not upholding the fundamental rights of the grasshopper. The Internet is flooded with online petitions seeking support to the grasshopper (many promising Heaven and Everlasting Peace for prompt support as against the wrath of God for non-compliance) . Opposition MP's stage a walkout. Left parties call for
" Bharat Bandh" in West Bengal and Kerala demanding a Judicial Enquiry.CPMin Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among ants and grasshoppers.
Lalu Prasad allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly named as the 'Grasshopper Rath'. Finally, the Judicial Committee drafts the Prevention of Terrorism against
Grasshoppers Act [POTAGA]", with effect from the beginning of the winter.
Arjun Singh makes Special Reservation for Grass Hopper in educational Insititutions & in Govt Services.
The ant is fined for failing to comply with POTAGA and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government and handed over to the grasshopper in a ceremony covered by NDTV.
Arundhati Roy calls it "a triumph of justice". Lalu calls it 'Socialistic Justice'. CPM calls it the revolutionary resurgence of the downtrodden' Koffi Annan invites the grasshopper to address the UN General Assembly. Many years later...The ant has since migrated to the US and set up a multi billion dollar company in silicon valley.100s of grasshoppers still die of starvation despite reservation somewhere in India...
As a result, India has lost a lot of hard working ants and is still feeding the grasshoppers...
India still remains a developing country!!!
It actually explains the widening gap between the Rich and the poor...
It goes like this...
*OLD VERSION*
The ant works hard all summer laying up supplies for the winter. The grasshopper thinks the ant's a fool and laughs & dances & plays the summer away. Come winter, the ant is warm and well fed. The grasshopper has no food or shelter so he dies out in the cold.
*MODERN VERSION*
The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter. The grasshopper thinks the ant's a fool and laughs & dances & plays the summer away. Come winter, the shivering grasshopper calls a press conference and demands to know why the ant
should be allowed to be warm and well fed while others are cold and starving. NDTV, BBC, CNN show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. The World is stunned by the sharp contrast. How can this be that this poor
grasshopper is allowed to suffer so?
Arundhati Roy stages a demonstration in front of the ant's house. Medha Patkar goes on a fast along with other grasshoppers demanding that grasshoppers be relocated to warmer climates during winter. Amnesty International and Koffi Annan criticize the Indian Government for not upholding the fundamental rights of the grasshopper. The Internet is flooded with online petitions seeking support to the grasshopper (many promising Heaven and Everlasting Peace for prompt support as against the wrath of God for non-compliance) . Opposition MP's stage a walkout. Left parties call for
" Bharat Bandh" in West Bengal and Kerala demanding a Judicial Enquiry.CPMin Kerala immediately passes a law preventing Ants from working hard in the heat so as to bring about equality of poverty among ants and grasshoppers.
Lalu Prasad allocates one free coach to Grasshoppers on all Indian Railway Trains, aptly named as the 'Grasshopper Rath'. Finally, the Judicial Committee drafts the Prevention of Terrorism against
Grasshoppers Act [POTAGA]", with effect from the beginning of the winter.
Arjun Singh makes Special Reservation for Grass Hopper in educational Insititutions & in Govt Services.
The ant is fined for failing to comply with POTAGA and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government and handed over to the grasshopper in a ceremony covered by NDTV.
Arundhati Roy calls it "a triumph of justice". Lalu calls it 'Socialistic Justice'. CPM calls it the revolutionary resurgence of the downtrodden' Koffi Annan invites the grasshopper to address the UN General Assembly. Many years later...The ant has since migrated to the US and set up a multi billion dollar company in silicon valley.100s of grasshoppers still die of starvation despite reservation somewhere in India...
As a result, India has lost a lot of hard working ants and is still feeding the grasshoppers...
India still remains a developing country!!!
Monday, August 11, 2008
SINGH MIGHT BE THE KING; BUT THE PEOPLE ARE STILL FOOL
Happy Singh rules Bollywood charts:
Happy Singh's goofball antics are all set to rewrite box office history with a staggering weekend take of Rs 28 crore for Singh is Kinng .
This has supposedly surpassed the two other mega-flicks which saw an unprecedented initial hoopla, Om Shanti Om with Rs 26 crore and Dhoom 2 with Rs 24 crore as their opening weekend collections. And with trade pundits predicting a first-week run of Rs 40 crore for the Akshay stunner, the Singh is Kinng juggernaut might just steamroll competition with collections mounting to nearly Rs 100 crores at the end of a three-four week run.
Considering that the film is billed at a production cost averaging Rs 50 crore, it’s easy to see Happy Singh grinning his way to the bank. Blockbuster hits like OSO and Dhoom 2 have a first-week take of Rs 36 crore and Rs 34 crore respectively.
Source :TOI
http://timesofindia.indiatimes.com/articleshow/3349699.cms
Poor country, struggling middle and lower middle class, poverty a major problem, terrorism a major major concern, and some stupid movie makes more money than would be needed to feed millions of unfed Indians. Reminds me everytime I see a ball game on Yankee TV about the claim America is at War. And then you see the scantily clad cheerleaders, the thousands of screaming fans, the over-paid and underworked ball players, and the stupid ads and you wonder where's the sacrifice and where's the desire to conserve while this war is going on. Some things never change. Waste!
Imran, NJ USA
(comment in response to the above news)
Minimum earning required, as per WORLD BANK, to live at above poverty line, for underdeveloped countries like India,China etc, about US$ 1.0 per day or US$ 30 per month i.e. Rs. 1,410
POVERTY LINE definition, as per Government of India, see below for explanation, at Rs. 10 per day, per person, approx. i.e. Rs. 300.
The World Bank's definition of the poverty line**, for under developed countries, like India, is US$ 1/day/person or US $365 per year. As per this definition, more than 75% of all Indians are, probably, below the poverty line!
As per the Government of India, poverty line for the urban areas is Rs. 296 per month and for rural areas Rs. 276 per month, i.e. people in India who earn less than Rs. 10 per day. As per GOI, this amount will buy food equivalent to 2200 calories per day, medically enough, to prevent death. At this level of earning, even in a poor country like India, survival on Rs. 10 per day is a nightmare! This actually translates to Rs. 3650 per year or US $ 75 per year.
On what basis have our planners decided this definition of "Poverty Line"?
Does it mean that one is expected to spend his entire earnings on fooding only? How and where is he or she supposed to cook it? What about the minimum needs in education, housing, health services, clothing,and other basic necessities? Are we supposed to live on pavements and sleep under trees from birth till death? YOU BE THE JUDGE!
Source: http://www.wakeupcall.org/administration_in_india/poverty_line.php
The first step towards eradicating poverty is to understand just how many of us are poor, and what that means. Thus far the government's measurement of poverty has simply been a self-serving one, and it's time we adopted a more honest calculation.
Compiled by:Lalit Kumar,Riddhiman Jain
Happy Singh's goofball antics are all set to rewrite box office history with a staggering weekend take of Rs 28 crore for Singh is Kinng .
This has supposedly surpassed the two other mega-flicks which saw an unprecedented initial hoopla, Om Shanti Om with Rs 26 crore and Dhoom 2 with Rs 24 crore as their opening weekend collections. And with trade pundits predicting a first-week run of Rs 40 crore for the Akshay stunner, the Singh is Kinng juggernaut might just steamroll competition with collections mounting to nearly Rs 100 crores at the end of a three-four week run.
Considering that the film is billed at a production cost averaging Rs 50 crore, it’s easy to see Happy Singh grinning his way to the bank. Blockbuster hits like OSO and Dhoom 2 have a first-week take of Rs 36 crore and Rs 34 crore respectively.
Source :TOI
http://timesofindia.indiatimes.com/articleshow/3349699.cms
Poor country, struggling middle and lower middle class, poverty a major problem, terrorism a major major concern, and some stupid movie makes more money than would be needed to feed millions of unfed Indians. Reminds me everytime I see a ball game on Yankee TV about the claim America is at War. And then you see the scantily clad cheerleaders, the thousands of screaming fans, the over-paid and underworked ball players, and the stupid ads and you wonder where's the sacrifice and where's the desire to conserve while this war is going on. Some things never change. Waste!
Imran, NJ USA
(comment in response to the above news)
Minimum earning required, as per WORLD BANK, to live at above poverty line, for underdeveloped countries like India,China etc, about US$ 1.0 per day or US$ 30 per month i.e. Rs. 1,410
POVERTY LINE definition, as per Government of India, see below for explanation, at Rs. 10 per day, per person, approx. i.e. Rs. 300.
The World Bank's definition of the poverty line**, for under developed countries, like India, is US$ 1/day/person or US $365 per year. As per this definition, more than 75% of all Indians are, probably, below the poverty line!
As per the Government of India, poverty line for the urban areas is Rs. 296 per month and for rural areas Rs. 276 per month, i.e. people in India who earn less than Rs. 10 per day. As per GOI, this amount will buy food equivalent to 2200 calories per day, medically enough, to prevent death. At this level of earning, even in a poor country like India, survival on Rs. 10 per day is a nightmare! This actually translates to Rs. 3650 per year or US $ 75 per year.
On what basis have our planners decided this definition of "Poverty Line"?
Does it mean that one is expected to spend his entire earnings on fooding only? How and where is he or she supposed to cook it? What about the minimum needs in education, housing, health services, clothing,and other basic necessities? Are we supposed to live on pavements and sleep under trees from birth till death? YOU BE THE JUDGE!
Source: http://www.wakeupcall.org/administration_in_india/poverty_line.php
The first step towards eradicating poverty is to understand just how many of us are poor, and what that means. Thus far the government's measurement of poverty has simply been a self-serving one, and it's time we adopted a more honest calculation.
Compiled by:Lalit Kumar,Riddhiman Jain
Friday, August 8, 2008
Is Rupee Strengthening an option to curb Inflation????
"Bringing down inflation from the current high levels and stabilising inflation expectations assume the highest priority in the stance of monetary policy,”
RBI in its Quarterly review
9% repo rate, 9% CRR.
Where are we heading to????
Wholesale Price Inflation is currently at whopping 12.1% for the week ended July 26 touching a 13 year high.
Consumer Price Inflation data is not avaliable for the recent week but it is less alarming than Wholesale inflation but has easily breached tolerable levels of 5%.
Majority economists predict the worse is yet not done!!! If majority is to be believed than what will be the immediate next move by the government or the RBI?? Many leading Economists have been intrigued by this question and all have their own way of answering. One interesting answer i came across was Rupee strenghthening.
My assumptions and knowledge, though little, predict this method not viable and has many fallouts.
But lets see what and how Rupee Strengthening cures this WideSpread Social Disease.
A stronger rupee increase Importers margin. How??????? Importers pay in dollars. A stronger rupee means they have to pay less to the foreign suppliers and inturn this increases their profit margin.
How importers making profit can help curb inflation???? If you think about,its quite obvious.
Increase in imports will introduce stiff competition in our domestic market and inducing thereby an explicit downward pressure on the commodity prices. Hence checking the major price increase. This will also be inline with the principles of FREE MARKET, free entry of new players.
All said and done, 4 reasons for not Strengthening rupee in the current scenario.
First, more imports means lesser domestic commodity demand. The IIP(Index for Industril Production) numbers released a month back were pathetic and had an adverse effect on the market. In the midst of all such volatality, Markets wont be able to take another blow in the form of lower IIP numbers. Already interest rates have done the spoil that they had to and now IIP would kill the RBI expectations of Indian GDP to be around 7.9.
Second, a weaker dollar will have a direct impact on American Economy, NASDAQ. And American fall will trigger up a fall in Indian markets also due to Arbitrage and many other reasons. Already the Gulf blames weaker dollar for soaring Crude Prices.
Third, FII's are largely dollar based.Since Dollar reaps lesser Rupees, FII's in India will be at loss. India will therefore become less rewarding for the FII's. This will lead to FII's investing in other developing sound markets like China.
Fourth, but obvious a reason, Exporters loss. Exporters are paid in dollars, that reap them lesser rupees and hence hitting their bottomline hard.
Other non viable option avaliable is increasing the supply side of the graph. But given time and the infrastructure constraints increasing supply becomes a humoungous task. Therefore as we see, to tame Inflation we have to forgo Growth by a percentage or so. Or putting it other way, the opportunity cost of curbing Inflation will be growth be it further interest rates hike or the less likely, rupee strengthening.
Riddhiman Jain
RBI in its Quarterly review
9% repo rate, 9% CRR.
Where are we heading to????
Wholesale Price Inflation is currently at whopping 12.1% for the week ended July 26 touching a 13 year high.
Consumer Price Inflation data is not avaliable for the recent week but it is less alarming than Wholesale inflation but has easily breached tolerable levels of 5%.
Majority economists predict the worse is yet not done!!! If majority is to be believed than what will be the immediate next move by the government or the RBI?? Many leading Economists have been intrigued by this question and all have their own way of answering. One interesting answer i came across was Rupee strenghthening.
My assumptions and knowledge, though little, predict this method not viable and has many fallouts.
But lets see what and how Rupee Strengthening cures this WideSpread Social Disease.
A stronger rupee increase Importers margin. How??????? Importers pay in dollars. A stronger rupee means they have to pay less to the foreign suppliers and inturn this increases their profit margin.
How importers making profit can help curb inflation???? If you think about,its quite obvious.
Increase in imports will introduce stiff competition in our domestic market and inducing thereby an explicit downward pressure on the commodity prices. Hence checking the major price increase. This will also be inline with the principles of FREE MARKET, free entry of new players.
All said and done, 4 reasons for not Strengthening rupee in the current scenario.
First, more imports means lesser domestic commodity demand. The IIP(Index for Industril Production) numbers released a month back were pathetic and had an adverse effect on the market. In the midst of all such volatality, Markets wont be able to take another blow in the form of lower IIP numbers. Already interest rates have done the spoil that they had to and now IIP would kill the RBI expectations of Indian GDP to be around 7.9.
Second, a weaker dollar will have a direct impact on American Economy, NASDAQ. And American fall will trigger up a fall in Indian markets also due to Arbitrage and many other reasons. Already the Gulf blames weaker dollar for soaring Crude Prices.
Third, FII's are largely dollar based.Since Dollar reaps lesser Rupees, FII's in India will be at loss. India will therefore become less rewarding for the FII's. This will lead to FII's investing in other developing sound markets like China.
Fourth, but obvious a reason, Exporters loss. Exporters are paid in dollars, that reap them lesser rupees and hence hitting their bottomline hard.
Other non viable option avaliable is increasing the supply side of the graph. But given time and the infrastructure constraints increasing supply becomes a humoungous task. Therefore as we see, to tame Inflation we have to forgo Growth by a percentage or so. Or putting it other way, the opportunity cost of curbing Inflation will be growth be it further interest rates hike or the less likely, rupee strengthening.
Riddhiman Jain
Friday, July 18, 2008
Cow Economy (Absurd & Simple ideas succeed)
Seems like now a day’s everyone is speaking on the Inflation.....
How has the world changed in the 20th century….I almost spent some 15k in the last 30 days of my ps1…Each and every price has hiked…
Yesterday night I was going through the thesis written by J.C.Kumaraapa on the Cow Economy[He did his B.Sc. in Business Administration at Syracuse and M.A. in Economics at Columbia University under Prof. Dr. Seligman. His thesis, "Public Finance and our (Indian) Poverty" changed him from an European loyalist to a committed Indian nationalist.]….. I will try explaining it to you of whatever little I know about the cow economy…...Cow economy is basically a concept of using cows as an economic tool all over the country to reduce the inflation and the nuclear wars happening over the earth.
80 % of India live in rural areas and the place where we live consist of only 20 %. This concept is for the greater good. All the capital resources are becoming scarce because of over population and the wars...All these things can stop once ppl start utilizing the cow economy......
Implementing the cow economy might be very difficult. It looks like some weird idea...Sometimes these sort of ideas succeed tremendously.
Who thought that the sweetened water will one day become a global based company.....who thought that ITC e choupal would succeed ….Look at this website
http://www.milliondollarhomepage.com/
It earned a million dollar for making a website (bhai 5 crores within 4 months)………….It’s all based around pixel advertising and generating big traffic for advertisers. Visitors play for free - all they have to do is click on the ads for chances to win the jackpot. The more they click, the more chances
they have - and the more traffic you receive.
Now coming to the Cow Economy idea...The cow is the foundation of one of the greatest economies in the world.
How the Cow Economy will help the developing countries like India:
1).DEFENCE---Causes of War :
The recent bomb blasts at blore....ahmedabad...etc have some one behind them...who do not want india to flourish....Being centralized in nature the whole India is affected because of the blasts in some city....
Once India becomes decentralized no one would be interested in putting up the bombs....
When we use the cow and cattle wealth as helpers in our production there is a natural limit to the quantity of production in comparison to the state of affairs that ensues when coal or other such resources of power are utilized, on the expenditure of which there can be no natural limit. Thus the self-sufficiency or the measures of it which is attainable in a cow economy is distorted and disturbed when we depart from it. When the quantity of produce increases, markets are to be sought for it. Europe’s hunt for the markets in the last two centuries was motivated by this economic factor; thus as soon as man changed over from animal economy to power economy violence became necessary. They fought with each other for markets. The result was the first World War-when the countries depending upon the coal economy fought with each other for the market areas.
In the cow and the horse-centered economies we have unlimited sources as we could breed as many bullocks and horses as we needed and, therefore, there being no restriction on the amount available, it does not arouse anybody’s greed or jealousy; but coal and petrol being limited in their supply and quantity, uses of such sources of power lead to friction amongst nations as the source dries up. It is now well recognised that these global wars are in no small measure due to different nations seeking to get control over oil fields. Hence the coal and oil economies lead to conflict amongst nations.
2).Fossil Fuels….
In our villages, the traditional cow dung cake along with firewood is the common fuel. In cities like Bombay if electricity or gas is not available, may. be on account of strike or damage to the plants even for a day than what disorder and discontent life hell is created. Then if these 575000 villages are Deprived of their only source of fuel what would be the result? Even the thought is staggering.
Life needs cooked food. For 82% population of India in villages, kerosene gas or electricity is neither available nor within the villager’s means. For them the only economic and easily available fuel is cow dung cakes and firewood. Cow-dung cake ash becomes a very good fertilizer."
3).Farming:
The bullock pulls the plough, manures the land by its dung, and feeds itself on the left over stalks of the cereal crops which man consumes.
We have nearly 40 crore acres under the crop. To switch this area over to mechanised farming, we shall need five million tractors against which we have today only a meagre 31000.To make these tractors we will need 30 mm. tons of steel and our annual production of steel is 4.5 min. tons.And as we have during the last 20 years made 12000 locomotives, 0.6 min. trucks and automobiles, what a long span of time shall we need to make the needed five million tractors?
The problem of farming does not solve itself by employing 5 ml. tractors at the cost afore-estimated. No cow, no manure. So we shall need to make fertilizers. Our annual needs would be .40 min. tons (against our fourth Plan target of 1.6 min. tons) of different fertilizers Let us see how cow slaughter has contributed to our spiraling costs and unemployment. Unlimited slaughter of cattle and imported economic policies of the Government have brought about a steep price rise.
On account of the bullock and the manure shortage, our food production per acre Is diminished by stages on one hand and on the other hand, because of the ghee and milk shortage cereal consumption increased. The Imbalance between consumption and supply thus created. resulted In higher and higher prices. An accepted principle of economy is that when food prices rise all
other things and commodities start up the price ladder.
4). TRANSPORT:
Our agriculture and industry produce about 1,000 mln. tons. This 1,000 mln. tons of commodities have to be transported from fields to factories and from factories to the consuming centres which are spread over this vast areas, and the major bulk of this transport is carried by the bullock.
For transport we have 12.1 min. bullock-carts, 3,58,000 railway wagons and 2,20,000 motor trucks. Obviously, if these 12.1 mln. bullock-carts were to be removed from the operation, our transport and distribution system, and as a result both agriculture and industries and the resultant national life, would be in a chaos, for the reason that the railway carries only 180 mln. tons and trucks only 120 min. tons. whereas the balance 70 per cent, or 700 mln. tons, is carried by the age old bullock-carts. Therefore it will be seen that if this poor bullock is done with either by slaughter or by negligence, nothing but chaos will result.
Slaughter your cow, and your bullock supply is slaughtered.. Neither trucks nor railways can be built up to replace this transport for obvious economic and technical reasons, roads and so on. A farmer grows food in his field If he has bullocks he would bring his produce to city in his cart and therein he incurs no extra expenses. But once we slaughtered bullocks, his produce has to be transported by truck and of course the cost thereof, resulting in higher price of his produce, will be borne.
This is not imagination, it is a fact based on careful study.
To this our city-educated youth may reply- "If the bullock is inefficient, scrap it, and use the tractor and other modern devices." The only difficulty about accepting this advice is that it is impracticable under present conditions. It is of no use telling us what should be done at some future date. We have to face the problems of our people today, and suggest means of improving their condition under present circumstance and within the resources now available to them. Which villager can afford a tractor and other modern agricultural machinery ?
This thesis if seen has got a great impact for India…..at least this should be implemented in the 82 % of the India…..
NOTE: The thesis on Cow Economy was written by J.C. Kumarappa.This thesis attempts to bring out the most important phase of the basic Indian economy thrown overboard in its stride by the frenzied industrial tempo. Let me state clearly that I am not against industry but most emphatically insist that all industrial development must be in consonance and in conformity with the herein discussed basic Indian economy. Industry should support and not distort this basic cow economy of the country.
PS: Ur comments are welcome. Any doubts or suggestions would help a lot……
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