Cheers! Another medal in Olympics! Boxer Vijender Kumar became the first to bring a boxing medal for India in all these years. The whole nation is proud of him. But, he could have done better as he failed the Golden Date test. He failed to convert India's third Olympic medal from bronze into silver or gold by losing his middleweight (75kg) bout today. He lost 5-8 to Cuban Emilio Correa Bayeaux in a closely contested semi-final at the Workers Gymnasium, but still his will be the first-ever-boxing medal for India. He not only missed the golden medal but also a golden date with Bollywood siren Bipasha Basu. Recently, Bipasha had said to Aaj Tak that she would go on a date with him if he manages to win the gold medal at the Olympics. This she said when she was told that she was a favorite of Vijender Kumar. But, he missed!. Though, he will be showered with lot of perks by different state governments and associations, still a date with Bipasha would had been a different thing.
Showing posts with label Views. Show all posts
Showing posts with label Views. Show all posts
August 22, 2008
August 11, 2008
'Bihari' has become an abuse
In my earlier blog on Bihar, I had written about how Bihar was rich both culturally as well as naturally. I had also mentioned how the word ‘Bihari’ has become slang in delhi. In Mumbai, North Indian from UP and Bihar are referred as “Bhaiya”. In an article in The Times of India, Mohammed Wajihuddin speaks about how Nitin Chanra responded to Raj Thackeray’s violence with a film. Nitin rightly says that Biharis could have escaped the sustained humiliation in Maharashtra, Delhi and Assam if the country’s planners had done justice to the state. I had mentioned in my earlier blog how freight equalization deprived Bihar any major industrial growth. Moreover, the meager income too vanished after the creation of Jharkhand. Most of the industries and natural resources are located in Jharkhand state now. After the creation of Jharkhand, there was a popular joke in Patna that Bihar was left with Lalu, balu (sand/dust) and baadh (flood).
I remember how I smiled when I heard that song. A noted music company took the advantage of the creation of Jharkhand and came out with a beautiful song whose message was that now everything is over, gone are the days of eating sweets, dry fruits and so on. Now the time for Biharis has come to eat just sweet potatoes. The meaning was simple; all the revenue earning resources have gone after the creation of Jharkhand.
Nitin Chandra also points out the basic difference between Biharis and Maharashtrians. I should mention here that traditionally Bihar had been culturally rich and people here have shown great mental characteristics. Who can forget the hero of 1857 Babu Kunwar Singh! Government’s lack of interest in developing Bihar and Biharis tough mental has increased the migration of people from Bihar to other states in search for livelihood. The fact is that the hungry farmers in Maharashtra are committing suicide while the equally deprived farmers in Bihar, instead of killing themselves, migrate to cities like Mumbai and Delhi and many other places.
I remember how I smiled when I heard that song. A noted music company took the advantage of the creation of Jharkhand and came out with a beautiful song whose message was that now everything is over, gone are the days of eating sweets, dry fruits and so on. Now the time for Biharis has come to eat just sweet potatoes. The meaning was simple; all the revenue earning resources have gone after the creation of Jharkhand.
Nitin Chandra also points out the basic difference between Biharis and Maharashtrians. I should mention here that traditionally Bihar had been culturally rich and people here have shown great mental characteristics. Who can forget the hero of 1857 Babu Kunwar Singh! Government’s lack of interest in developing Bihar and Biharis tough mental has increased the migration of people from Bihar to other states in search for livelihood. The fact is that the hungry farmers in Maharashtra are committing suicide while the equally deprived farmers in Bihar, instead of killing themselves, migrate to cities like Mumbai and Delhi and many other places.
August 8, 2008
Can Bihar be developed?
Bihar today is synonymous with crime. People fear traveling to this part of India because they have been continuously hearing about crimes. Laloo Prasad Yadav, Shadhu Yadav, Pappu Yadav to name a few have become a household name. These politicians represent Bihar today (am I talking about hell). So, I ask who will dare to travel or invest in this place where criminals rule. Was Bihar like this since it inception? No. Let me share some facts with my readers which will throw some lights on why Bihar is so backward. Can Bihar be developed again? Did I say developed again? Yes, Bihar was a developed state centuries ago. So, what happened which turned the table around.
Bihar was once the seat of the greatest university of the world. The university was at Nalanda where the proposed new university is being developed. This is the place where the concept of republic was conceptualized and concreted (Lichvi dynasty in Vaishali district adopted the world’s first republic government). Great people like Gautam Buddha, Mahavira Jain, Chanakya, Guru Govind Singh and the great emperor Ashoka belonged to this place. If we look at the modern times, the place was considered as the treasure of mineral reserves of the country. Yet, the country is known as one of the poorest state where there is no law and order. Development is at a meager pace. No new investments are taking place.
Fall of Bihar
There are various reasons that led to the fall of this great state. One was the zamindari system. According to Saibal Gupta who is a member secretary of the Asian Development Research Institute in Patna (capital city of Bihar), during the British rule Bihar was placed under the Permanent Settlement of 1973 by the British. According to this act, the land was not held by farmers but by the zamindars, who had the right to collect revenues and pay a percentage of that to the British. This resulted in the exploitation of the farmers as zamindars themselves did nothing to develop the land’s productivity. At the same time, the other parts of India had ryotwari system where the land belonged to the farmers, who used to pay the taxes directly to their respective states. Hence, the states were therefore interested in keeping the productivity high.
Bihar is part of the Gangetic belt. After the 1857 Independence war, people around the Gangetic belt (places like Varanasi, Patna, etc) started denouncing the Western culture. Hindi began to grow in opposition to English and in this opposition they failed to modernize and accept new ideas that were sweeping across the country. Thus, people from this part of India embraced the past and traditionalism and all odd ideas that kept Bihar backwards.
Bihar is an agrarian state. Therefore, the most important thing required to push development in this state was reforming the land act. But, land reforms failed in Bihar as politicians and bureaucrats who were to implement such reforms came from the landlord class and they ensured that such reforms should never be implemented. So, the present situation in Bihar is such that millions of farmers do not have their own land; they plough others land for their livelihood. Some have too much. Rests of the people of Bihar possess land in tiny pieces which makes it difficult to achieve good crops. Therefore, poverty continues.
The other thing that hurts Bihar is sub nationalism. When a Punjabi goes to any part of India he/she proudly says that he/she is a Punjabi. Same is true for Bengalis, Marathis, Gujaratis and rest of the Indian states. But, people in Bihar try to avoid such things. In fact, I remember how a man fought in New Delhi with a bus conductor who called him Bihari (tone was different); the word was used as a slang. Traditionally, in this part of India there have been two forms of nationalism. First is Indian and the second is his caste. A Bihari was always an Indian first and then of his caste. But, if we look at Maharashtra, a person was an Indian first, a Maharashtrian and then lastly of his caste. Does this imply something? Yes, this means there is no one to speak up for Bihar. When Bihar was partitioned during the British rule, there were hardly any voices that opposed the decision.
The most important thing that deprived Bihar from taking the path of development was the freight equalization policy. When the government of India announced the freight equalization policy, there were hardly any protests from Bihar. Even when Jharkhand was made a separate state, no compensation was demanded. Politicians in Bihar are more concerned about their developments rather than developing the state. Every politician is concerned about his caste only. The most striking part is that each caste people want their leaders to work for their caste only and not for the state. So, how can one expect this state to develop?
What does freight equalization mean? This policy implied that transport was not to be considered an input cost. This meant that a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the central government. Thus, factories were set up all along the ports or around big cities except Bihar. The policy simply destroyed Bihar’s huge competitive advantage of holding minerals. Though, the policy has been removed now but, presently Bihar lacks the infrastructure to compete with other states.
As mentioned earlier, in Bihar politicians are synonymous with criminals. People fear the politicians there. How does on become a politician in Bihar? According to the Constitution of India, a person age of not less than 25 years can file his papers for fighting election to either become an MLA (Member of Legislative Assembly) or an MP (Member of Parliament). This is in books. Just by filing papers will not make you win election. So, to win you adopt crime to induce people to vote for you. The connection between crime and politics can be traced back to the JP (Jayaprakash Narayan) Movement in the earlier decade of 70’s. He urged people to participate in politics without any ideology. Socialists were very strong in Bihar at that time. So, there was a wave such that people started joining politics even if they did not believe in the party’s ideology. The aim was to bring people for a common goal. But, this step destroyed the very structure of the party and therefore, after the end of JP Movement, the parties found hard to mobilize people to support them. This led them to turn to criminals who used their own organization and money and muscle power to mobilize support. From there onwards, criminal became a very part of Bihar politics. At present, politics has become a family affair.
With the introduction of Mandal Commision, people of Bihar today are more interested in fighting for reservation. They don’t care whether developments take place in Bihar or not. This attitude had been there even after Independence. Bihar was ruled by Congress for about 30 to 40 year just like it ruled at the centre. But that did not help. They too were just interested in exploiting the natural resources of Bihar for the benefits of other states. The present situation is that Congress finds it very difficult to find its presence today in Bihar. They hardly manage to secure votes because of their attitude towards Bihar. Not a single central university or a centre for scientific research was established in Bihar even though every year thousands of students from Bihar make it to JNU (Jawaharlal Nehru University), IIT (Indian Institute of Technology) or Delhi University. This step brotherly treatment by the central government forced Bihar more towards backwardness.
The future ahead
There are things that can be done to bring Bihar back to the development path. Almost every renowned person has spoken about ways to do this. Last year, when the former President of India, Abdul Kalam visited Bihar, he laid some visions for the development of Bihar. If Bihar government truly follow these goals apart from other goals, it can change the way people perceive Bihar to be. Nonetheless it will take time but it is possible.
Agriculture is the core competence of the state. The sector is performing badly despite having very good soil, abundant supply of irrigation water and hardworking population. Irrigation needs more focus. Government should try to facilitate water supply by providing better irrigation facilities (by digging more tube wells and linking villages so that they can use water from a common source in a particular area) and electricity. The aim should be to increase cereal production in the state; rice production from 5.5 million tonnes to about 10 to 15 million tonnes and wheat production from 4 million tonnes to about 8 to 12 million tonnes. Bihar is already a major producer of maize and there has been an announcement to set up a commodity exchange for this. Therefore, Bihar government should ensure that no hindrances are placed on their way. This market will boost not only agriculture but also employments in this area.
The Hajipur-Muzaffarpur-Samastipur belt in Bihar is known for varieties of fruits. Hajipur is known for bananas, guavas and vegetables, similarly Muzaffarpur is known for its lichi. Not long ago this area had an agro-processing unit that used to export their products. Today, the unit is shut down. It can be revived again with proper planning and execution. Dairy cooperatives should be spread to almost all the districts of Bihar. Milk is a secondary source of earning for the farmers. By boosting this sector the government can not only improve the conditions of farmers but will also generate employment.
It was not long ago when Bihar was one of the major producers of sugar in the country. The government has taken some steps to revive the old mills. The focus should be to create sugar cooperatives on the lines of Maharashtra. This will boost this sector and bring employment to large masses that had to suffer due to closure of mills a decade ago. Apart from this, the government should ensure that the central government comes out with an ethanol policy; this will be a major thrust for other companies to look for investment in Bihar.
Every year floods destroy the crops to a tune of crores of rupees. The Bihar government and the central government should discuss this with the Nepal government. Proper dams should be built to check floods. A scientific body should be formed for water management. A solution needs to be worked out.
Healthcare is very important for the state to develop. The President in his ten visions for the state had mentioned that the state government should equip all the health centers and hospitals with mobile clinics. He had also urged the government to come out with a scheme under which every citizen would contribute three rupees per month and the government would also make an equal contribution. This will lead to a consolidated fund of Rs.576 crore per annum for the people of Bihar.
There should be no compromise on the infrastructure front. Just like the Golden Quadrilateral, Bihar government can work with neighbour states to work on such projects joining their main cities. Bihar government has been demanding such corridor that would run through Patna, Ranchi, Jamshedpur and Haldiya/Paradweep Economic corridor. The government can also have talks with the Nepal government to build a secure corridor through Bihar to the nearest port. These can be achieved only if all the stakeholders work collectively through a joint forum. The above route passes through some of the richest iron ore, coal belts and other minerals. Bihar, Jharkhand, Orissa, Nepal and the Central Government should together form an SPV to execute this project.
Electricity is a constraint for any company to invest in Bihar. So, the government should invest more in power projects. It can join hands with the Nepal government to execute a project where the power would be generated in Nepal and transferred to cities in Bihar. The government should also ask the central government to allot a nuclear project in the state for power generation. All state highways should be properly connected to the national highways. All roads should be expanded. Road construction in rural areas should be fastened.
Education changes a person perspective. Therefore, state government should focus more on this sector. Demanding a central institute or IIT is ok but why keep on fighting over this issue forever. If the central government refuses to grant any of Bihar’s university a central university status then, that does not put the university to disadvantage. Why not open more colleges especially in the engineering and medical field and work towards making that a world class institutes. Nobody is stopping the state government from doing it. Why just blame central government for everything! Central government may take time to make primary education a right to education. But the state government may on its behalf can pass a bill in its legislative to make primary education compulsory within the state.
There are various NGO’s working in Bihar, Many are frauds who cheat people and the funds that they receive. Government should take steps to stop this. Good NGO’s should be strengthened. Micro finance is yet make inroads in Bihar villages. Steps should be taken to educate people about such financial schemes. Everyone knows that the banks are not eager to help poor farmers. The Credit-Deposit ratio in Bihar is one of the worst. Deposits are good but the credit by the commercial banks are poor showing their attitudes towards the poor. The government should ensure that farmers get credit on time.
Most of the people in Bihar are dependent on agriculture. Supply chain management and logistics should be strengthened to help these farmers to be able to sell their produce at better rates. Developments should be taken on all fields. This will not only build infrastructure for the future but will also generate employment. All religious places like Bodh Gaya, Vaishali, Patna and other places should be made well connected either by road or rail or by air. This will boost tourism. Patna should be developed as an ideal state. Patna is situated on the banks of Ganga and it runs parallel to the river for about a few kilometers. There are various ghats along the river. These can be built by proper planning. Imagine marine drive in Mumbai.
Though, all these steps will look like a Herculean task but once implemented it will benefit not only the people of Bihar but also India to continue on its growth path. Therefore, not only the state government but also the people of Bihar should come forward to achieve this.
Bihar was once the seat of the greatest university of the world. The university was at Nalanda where the proposed new university is being developed. This is the place where the concept of republic was conceptualized and concreted (Lichvi dynasty in Vaishali district adopted the world’s first republic government). Great people like Gautam Buddha, Mahavira Jain, Chanakya, Guru Govind Singh and the great emperor Ashoka belonged to this place. If we look at the modern times, the place was considered as the treasure of mineral reserves of the country. Yet, the country is known as one of the poorest state where there is no law and order. Development is at a meager pace. No new investments are taking place.
Fall of Bihar
There are various reasons that led to the fall of this great state. One was the zamindari system. According to Saibal Gupta who is a member secretary of the Asian Development Research Institute in Patna (capital city of Bihar), during the British rule Bihar was placed under the Permanent Settlement of 1973 by the British. According to this act, the land was not held by farmers but by the zamindars, who had the right to collect revenues and pay a percentage of that to the British. This resulted in the exploitation of the farmers as zamindars themselves did nothing to develop the land’s productivity. At the same time, the other parts of India had ryotwari system where the land belonged to the farmers, who used to pay the taxes directly to their respective states. Hence, the states were therefore interested in keeping the productivity high.
Bihar is part of the Gangetic belt. After the 1857 Independence war, people around the Gangetic belt (places like Varanasi, Patna, etc) started denouncing the Western culture. Hindi began to grow in opposition to English and in this opposition they failed to modernize and accept new ideas that were sweeping across the country. Thus, people from this part of India embraced the past and traditionalism and all odd ideas that kept Bihar backwards.
Bihar is an agrarian state. Therefore, the most important thing required to push development in this state was reforming the land act. But, land reforms failed in Bihar as politicians and bureaucrats who were to implement such reforms came from the landlord class and they ensured that such reforms should never be implemented. So, the present situation in Bihar is such that millions of farmers do not have their own land; they plough others land for their livelihood. Some have too much. Rests of the people of Bihar possess land in tiny pieces which makes it difficult to achieve good crops. Therefore, poverty continues.
The other thing that hurts Bihar is sub nationalism. When a Punjabi goes to any part of India he/she proudly says that he/she is a Punjabi. Same is true for Bengalis, Marathis, Gujaratis and rest of the Indian states. But, people in Bihar try to avoid such things. In fact, I remember how a man fought in New Delhi with a bus conductor who called him Bihari (tone was different); the word was used as a slang. Traditionally, in this part of India there have been two forms of nationalism. First is Indian and the second is his caste. A Bihari was always an Indian first and then of his caste. But, if we look at Maharashtra, a person was an Indian first, a Maharashtrian and then lastly of his caste. Does this imply something? Yes, this means there is no one to speak up for Bihar. When Bihar was partitioned during the British rule, there were hardly any voices that opposed the decision.
The most important thing that deprived Bihar from taking the path of development was the freight equalization policy. When the government of India announced the freight equalization policy, there were hardly any protests from Bihar. Even when Jharkhand was made a separate state, no compensation was demanded. Politicians in Bihar are more concerned about their developments rather than developing the state. Every politician is concerned about his caste only. The most striking part is that each caste people want their leaders to work for their caste only and not for the state. So, how can one expect this state to develop?
What does freight equalization mean? This policy implied that transport was not to be considered an input cost. This meant that a factory could be set up anywhere in India and the transportation of minerals would be subsidized by the central government. Thus, factories were set up all along the ports or around big cities except Bihar. The policy simply destroyed Bihar’s huge competitive advantage of holding minerals. Though, the policy has been removed now but, presently Bihar lacks the infrastructure to compete with other states.
As mentioned earlier, in Bihar politicians are synonymous with criminals. People fear the politicians there. How does on become a politician in Bihar? According to the Constitution of India, a person age of not less than 25 years can file his papers for fighting election to either become an MLA (Member of Legislative Assembly) or an MP (Member of Parliament). This is in books. Just by filing papers will not make you win election. So, to win you adopt crime to induce people to vote for you. The connection between crime and politics can be traced back to the JP (Jayaprakash Narayan) Movement in the earlier decade of 70’s. He urged people to participate in politics without any ideology. Socialists were very strong in Bihar at that time. So, there was a wave such that people started joining politics even if they did not believe in the party’s ideology. The aim was to bring people for a common goal. But, this step destroyed the very structure of the party and therefore, after the end of JP Movement, the parties found hard to mobilize people to support them. This led them to turn to criminals who used their own organization and money and muscle power to mobilize support. From there onwards, criminal became a very part of Bihar politics. At present, politics has become a family affair.
With the introduction of Mandal Commision, people of Bihar today are more interested in fighting for reservation. They don’t care whether developments take place in Bihar or not. This attitude had been there even after Independence. Bihar was ruled by Congress for about 30 to 40 year just like it ruled at the centre. But that did not help. They too were just interested in exploiting the natural resources of Bihar for the benefits of other states. The present situation is that Congress finds it very difficult to find its presence today in Bihar. They hardly manage to secure votes because of their attitude towards Bihar. Not a single central university or a centre for scientific research was established in Bihar even though every year thousands of students from Bihar make it to JNU (Jawaharlal Nehru University), IIT (Indian Institute of Technology) or Delhi University. This step brotherly treatment by the central government forced Bihar more towards backwardness.
The future ahead
There are things that can be done to bring Bihar back to the development path. Almost every renowned person has spoken about ways to do this. Last year, when the former President of India, Abdul Kalam visited Bihar, he laid some visions for the development of Bihar. If Bihar government truly follow these goals apart from other goals, it can change the way people perceive Bihar to be. Nonetheless it will take time but it is possible.
Agriculture is the core competence of the state. The sector is performing badly despite having very good soil, abundant supply of irrigation water and hardworking population. Irrigation needs more focus. Government should try to facilitate water supply by providing better irrigation facilities (by digging more tube wells and linking villages so that they can use water from a common source in a particular area) and electricity. The aim should be to increase cereal production in the state; rice production from 5.5 million tonnes to about 10 to 15 million tonnes and wheat production from 4 million tonnes to about 8 to 12 million tonnes. Bihar is already a major producer of maize and there has been an announcement to set up a commodity exchange for this. Therefore, Bihar government should ensure that no hindrances are placed on their way. This market will boost not only agriculture but also employments in this area.
The Hajipur-Muzaffarpur-Samastipur belt in Bihar is known for varieties of fruits. Hajipur is known for bananas, guavas and vegetables, similarly Muzaffarpur is known for its lichi. Not long ago this area had an agro-processing unit that used to export their products. Today, the unit is shut down. It can be revived again with proper planning and execution. Dairy cooperatives should be spread to almost all the districts of Bihar. Milk is a secondary source of earning for the farmers. By boosting this sector the government can not only improve the conditions of farmers but will also generate employment.
It was not long ago when Bihar was one of the major producers of sugar in the country. The government has taken some steps to revive the old mills. The focus should be to create sugar cooperatives on the lines of Maharashtra. This will boost this sector and bring employment to large masses that had to suffer due to closure of mills a decade ago. Apart from this, the government should ensure that the central government comes out with an ethanol policy; this will be a major thrust for other companies to look for investment in Bihar.
Every year floods destroy the crops to a tune of crores of rupees. The Bihar government and the central government should discuss this with the Nepal government. Proper dams should be built to check floods. A scientific body should be formed for water management. A solution needs to be worked out.
Healthcare is very important for the state to develop. The President in his ten visions for the state had mentioned that the state government should equip all the health centers and hospitals with mobile clinics. He had also urged the government to come out with a scheme under which every citizen would contribute three rupees per month and the government would also make an equal contribution. This will lead to a consolidated fund of Rs.576 crore per annum for the people of Bihar.
There should be no compromise on the infrastructure front. Just like the Golden Quadrilateral, Bihar government can work with neighbour states to work on such projects joining their main cities. Bihar government has been demanding such corridor that would run through Patna, Ranchi, Jamshedpur and Haldiya/Paradweep Economic corridor. The government can also have talks with the Nepal government to build a secure corridor through Bihar to the nearest port. These can be achieved only if all the stakeholders work collectively through a joint forum. The above route passes through some of the richest iron ore, coal belts and other minerals. Bihar, Jharkhand, Orissa, Nepal and the Central Government should together form an SPV to execute this project.
Electricity is a constraint for any company to invest in Bihar. So, the government should invest more in power projects. It can join hands with the Nepal government to execute a project where the power would be generated in Nepal and transferred to cities in Bihar. The government should also ask the central government to allot a nuclear project in the state for power generation. All state highways should be properly connected to the national highways. All roads should be expanded. Road construction in rural areas should be fastened.
Education changes a person perspective. Therefore, state government should focus more on this sector. Demanding a central institute or IIT is ok but why keep on fighting over this issue forever. If the central government refuses to grant any of Bihar’s university a central university status then, that does not put the university to disadvantage. Why not open more colleges especially in the engineering and medical field and work towards making that a world class institutes. Nobody is stopping the state government from doing it. Why just blame central government for everything! Central government may take time to make primary education a right to education. But the state government may on its behalf can pass a bill in its legislative to make primary education compulsory within the state.
There are various NGO’s working in Bihar, Many are frauds who cheat people and the funds that they receive. Government should take steps to stop this. Good NGO’s should be strengthened. Micro finance is yet make inroads in Bihar villages. Steps should be taken to educate people about such financial schemes. Everyone knows that the banks are not eager to help poor farmers. The Credit-Deposit ratio in Bihar is one of the worst. Deposits are good but the credit by the commercial banks are poor showing their attitudes towards the poor. The government should ensure that farmers get credit on time.
Most of the people in Bihar are dependent on agriculture. Supply chain management and logistics should be strengthened to help these farmers to be able to sell their produce at better rates. Developments should be taken on all fields. This will not only build infrastructure for the future but will also generate employment. All religious places like Bodh Gaya, Vaishali, Patna and other places should be made well connected either by road or rail or by air. This will boost tourism. Patna should be developed as an ideal state. Patna is situated on the banks of Ganga and it runs parallel to the river for about a few kilometers. There are various ghats along the river. These can be built by proper planning. Imagine marine drive in Mumbai.
Though, all these steps will look like a Herculean task but once implemented it will benefit not only the people of Bihar but also India to continue on its growth path. Therefore, not only the state government but also the people of Bihar should come forward to achieve this.
August 6, 2008
Does Dhoni deserve Khel Ratna?
There has been a lot of hue and cry from various quarters regarding the Rajiv Gandhi Khel Ratna award being awarded to M.S. Dhoni. No doubt he is an able captain leading the Indian team but he has also produced results, which shows how deserving he is.
The "Rajiv Gandhi Khel Ratna Award" is considered as one of the most honorable awards. There are a very few number of sports persons from various types of sports who have been succeeded to win this award so far. All these extraordinary sports persons are amongst the best produced by India ever. After its inception in the year of 1991-92, the very first recipient of the award was the world famous Chess player Vishwanathan Anand.
This award is given after looking at your performances in a year. So, one should not raise such dull questions as there had been several other great players in the past. Yes, there were great players like Kapil Dev and his gangs. But, they were at their best before the award was incorporated. No, doubt it was Kapil Dev whose heroic win at the Lords in 1983 has changed the way we look at cricket. I will say that cricket got evolved in India henceforth. So, he deserves an award but an award greater than this, say, Bharat Ratna.
The award is given only to one person in a year. Yes, they made a mistake by not awarding an award to Rahul Dravid. But not let cry over spilt milk. Ever since Dhoni was named the captain of India, things started changing in Indian cricket. Remember the last Australian tour where our players showed them that we could match their attitudes on field. Remember how he leads. Sports is not just playing good on field but also how you manage yourself off the field. So, what if he is just 3 or 4 years old in Indian cricket. He had successfully led the Indian team to a victory in T20 world cup. He truly deserves this award for his performance. Let’s, not make another mistake. Or else, after a few years we would be saying again that he deserved the award but was not awarded just like Rahul Dravid (he truly deserves the award).
The "Rajiv Gandhi Khel Ratna Award" is considered as one of the most honorable awards. There are a very few number of sports persons from various types of sports who have been succeeded to win this award so far. All these extraordinary sports persons are amongst the best produced by India ever. After its inception in the year of 1991-92, the very first recipient of the award was the world famous Chess player Vishwanathan Anand.
This award is given after looking at your performances in a year. So, one should not raise such dull questions as there had been several other great players in the past. Yes, there were great players like Kapil Dev and his gangs. But, they were at their best before the award was incorporated. No, doubt it was Kapil Dev whose heroic win at the Lords in 1983 has changed the way we look at cricket. I will say that cricket got evolved in India henceforth. So, he deserves an award but an award greater than this, say, Bharat Ratna.
The award is given only to one person in a year. Yes, they made a mistake by not awarding an award to Rahul Dravid. But not let cry over spilt milk. Ever since Dhoni was named the captain of India, things started changing in Indian cricket. Remember the last Australian tour where our players showed them that we could match their attitudes on field. Remember how he leads. Sports is not just playing good on field but also how you manage yourself off the field. So, what if he is just 3 or 4 years old in Indian cricket. He had successfully led the Indian team to a victory in T20 world cup. He truly deserves this award for his performance. Let’s, not make another mistake. Or else, after a few years we would be saying again that he deserved the award but was not awarded just like Rahul Dravid (he truly deserves the award).
August 1, 2008
Sugar at Rs.2,000 a quintal!
The sudden surge in sugar prices has made everyone redo their homework. Prices of sugar have seen a continuous bull run for the past few days. Even though the production this year was exceptionally good yet the prices are ruling firm. NCDEX December contract for M Grade Kolhapur is currently ruling at Rs.1835 a quintal which is Rs.187 more or 11 per cent higher than the August price of Rs.1648. Logically, prices should be lowest in December due to supply pressure. So, why the prices are heading northward? For this, we need to first understand the dynamics of sugar industry.
Dynamics of sugar Industry
India is the largest consumer and second largest producer of sugar in the world. Sugarcane occupies about 4.2% of the total kharif area under cultivated area and it is one of the most important cash crops in the country. Sugar is a sensitive issue in India just like onion. The economics of sugar in India is very complicated as compared to other countries. This is because in India there is two type of sugar industry; one the large mills and second, is the small cottage industries that manufacture specially gur (solidified cane juice) and khandsari (semi-white centrifugal sugar). Therefore, both these industries compete for sugar cane.
In India, sugar comes under the Essential Commodities Act, 1955 and the government involvement is at each level, right from fixing the Statutory Minimum Price (SMP) to the growers, to giving industrial licensing for establishment of sugar factory. In addition to it, the government also decides the quantity that can be sold in the open market, fixes the price of the levy quota sugar and determines the maximum stock levels for wholesalers, etc.
At present, sugar mills are forced to sell 10% of their output to government at cheaper rates (generally 20 per cent lower than the cost of the output). Government uses this sugar to meet its target under PDS (Public Distribution System) to sell sugar at cheap rates to the poor. At the same time, government authorities also decide how much of the remaining they can sell in the open market. This is done to keep the prices stable in the domestic market and is achieved through quota system wherein government announces the release of sugar quota for each quarter. For instance, the sugar quota released for this quarter, i.e., July, August and September is 30 lakh tonnes. Apart from that, buffer stock of 8 lakh tonnes is also supposed to be released in this quarter.
Government announces the SMP for sugarcane every year based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). While the Central Government regulates the sugar industry, the State Governments exercise control over supply and distribution of cane as an agricultural crop. Thus, the State Government announces State Advised Prices (SAPs) for sugarcane in respect of cane supplied to mills within their boundaries. The SAPs which mills are required to pay are generally substantially higher than the SMP. Also, every mill is given a certain boundary region. All canes grown in that region are to be compulsorily sold to the mills allotted to that region.
Current Scenario
Over the past few weeks, sugar prices have been continuously rising. There are various factors for the rise in the sugar prices. As usual, first is the demand and supply scenario.
The demand for the sugar sector seems to be good in the coming days. With strong demand, weak price will be thing of the past. It is reported that sugar prospects in Brazil and India is not good. Production is expected to decline. With the re-entering of Russia, the largest importer, prices of sugar are expected to head northward.
The world sugar fundamentals are expected to tighten next season. In 2007-08, world sugar consumption is projected at about 160 million tonnes against the expected production of 170 million tonnes. The surplus is about 10 million tonnes. But, with reports coming from various corners of the world, the production would be about 160 million tonnes the year 2008-09. The production in India, China and Pakistan is expected to be lower than the previous year. Even reports from Brazil indicate that the crop is behind the schedule.
Indian Scenario
According to the Ministry of Agriculture, the area under sugarcane for the year 2008-09 is down to 4.3 million hectares from the 5.2 million hectares in the previous year. Aberrant monsoon in the Western states like Maharashtra, Karnataka and Andhra Pradesh has created a risk of yield loss. It believed that the total output for the country will fall to about 22 to 23 million tonnes against 27 million tonnes of previous year.
Indian exports for this season have already touched 3.5 million tonnes and is about to reach 4.5 million tonnes. The reason for this is weakening rupee and firm export price. However, with the production expected to decline next year, export would not materialize as the government may ban exports of sugar to reign in the domestic prices. There is high possibility of such actions with the elections of various states which are to be conducted next year.
The report from Maharashtra is even worse. The prolonged dry spell is inducing farmers to convert their standing cane for fodder. When the rains fail, the cattle have no fodder thereby pushing up the prices for fodder. So, the farmers then choose to harvest the cane for fodder rather than waiting for the crops to mature to sell it to the sugar mills. Cane availability for this year's crushing season is expected to go down to 50 million tonnes out of total cane production of 54.4 million tonnes due to diversion. If that happens then the production will be badly affected.
Indian sugar industry typically follows a 4 to 5 or 6 year cycle. The down trends in the sugar cycle starts with improved profitability of sugar mills. This results in prompt and higher payment to the farmers resulting in low sugarcane arrears. Good payment and low arrears lead to higher area under sugarcane cultivation and bumper production. All these lead to drop in prices of sugar. When the sugar prices fall drastically, it leads to losses or low profit to sugar mills. Hence, mills are not able to pay the farmers on time leading to increase in arrears. The farmers are ultimately forced to move towards other cash crops. The production falls and prices start moving up again. This whole viscous cycle continue for about 5 to 6 years. It is believed that the current year is a peak year on sugar cycle due to bumper production since last few years. Hence, prices are expected to peak this year leading to fall in production. However, long term trend of production is of increasing in nature.
Ethanol will play an important part in rising sugar prices. It is expected that Brazil will divert more of their sugar crop towards ethanol production due to rising crude prices which have affected almost every other commodities. Also, Indian government is toying with the idea of allowing petrol blending with 10 per cent of ethanol. This will drastically affect the sugar output.
Forward prices are firming and sugar prices will begin to surge with the beginning of the festival season by mid-August.Therefore, looking at various factors one should not be surprised if the prices touch Rs.2,000 a quintal.
Dynamics of sugar Industry
India is the largest consumer and second largest producer of sugar in the world. Sugarcane occupies about 4.2% of the total kharif area under cultivated area and it is one of the most important cash crops in the country. Sugar is a sensitive issue in India just like onion. The economics of sugar in India is very complicated as compared to other countries. This is because in India there is two type of sugar industry; one the large mills and second, is the small cottage industries that manufacture specially gur (solidified cane juice) and khandsari (semi-white centrifugal sugar). Therefore, both these industries compete for sugar cane.
In India, sugar comes under the Essential Commodities Act, 1955 and the government involvement is at each level, right from fixing the Statutory Minimum Price (SMP) to the growers, to giving industrial licensing for establishment of sugar factory. In addition to it, the government also decides the quantity that can be sold in the open market, fixes the price of the levy quota sugar and determines the maximum stock levels for wholesalers, etc.
At present, sugar mills are forced to sell 10% of their output to government at cheaper rates (generally 20 per cent lower than the cost of the output). Government uses this sugar to meet its target under PDS (Public Distribution System) to sell sugar at cheap rates to the poor. At the same time, government authorities also decide how much of the remaining they can sell in the open market. This is done to keep the prices stable in the domestic market and is achieved through quota system wherein government announces the release of sugar quota for each quarter. For instance, the sugar quota released for this quarter, i.e., July, August and September is 30 lakh tonnes. Apart from that, buffer stock of 8 lakh tonnes is also supposed to be released in this quarter.
Government announces the SMP for sugarcane every year based on the recommendations of the Commission for Agricultural Costs and Prices (CACP). While the Central Government regulates the sugar industry, the State Governments exercise control over supply and distribution of cane as an agricultural crop. Thus, the State Government announces State Advised Prices (SAPs) for sugarcane in respect of cane supplied to mills within their boundaries. The SAPs which mills are required to pay are generally substantially higher than the SMP. Also, every mill is given a certain boundary region. All canes grown in that region are to be compulsorily sold to the mills allotted to that region.
Current Scenario
Over the past few weeks, sugar prices have been continuously rising. There are various factors for the rise in the sugar prices. As usual, first is the demand and supply scenario.
The demand for the sugar sector seems to be good in the coming days. With strong demand, weak price will be thing of the past. It is reported that sugar prospects in Brazil and India is not good. Production is expected to decline. With the re-entering of Russia, the largest importer, prices of sugar are expected to head northward.
The world sugar fundamentals are expected to tighten next season. In 2007-08, world sugar consumption is projected at about 160 million tonnes against the expected production of 170 million tonnes. The surplus is about 10 million tonnes. But, with reports coming from various corners of the world, the production would be about 160 million tonnes the year 2008-09. The production in India, China and Pakistan is expected to be lower than the previous year. Even reports from Brazil indicate that the crop is behind the schedule.
Indian Scenario
According to the Ministry of Agriculture, the area under sugarcane for the year 2008-09 is down to 4.3 million hectares from the 5.2 million hectares in the previous year. Aberrant monsoon in the Western states like Maharashtra, Karnataka and Andhra Pradesh has created a risk of yield loss. It believed that the total output for the country will fall to about 22 to 23 million tonnes against 27 million tonnes of previous year.
Indian exports for this season have already touched 3.5 million tonnes and is about to reach 4.5 million tonnes. The reason for this is weakening rupee and firm export price. However, with the production expected to decline next year, export would not materialize as the government may ban exports of sugar to reign in the domestic prices. There is high possibility of such actions with the elections of various states which are to be conducted next year.
The report from Maharashtra is even worse. The prolonged dry spell is inducing farmers to convert their standing cane for fodder. When the rains fail, the cattle have no fodder thereby pushing up the prices for fodder. So, the farmers then choose to harvest the cane for fodder rather than waiting for the crops to mature to sell it to the sugar mills. Cane availability for this year's crushing season is expected to go down to 50 million tonnes out of total cane production of 54.4 million tonnes due to diversion. If that happens then the production will be badly affected.
Indian sugar industry typically follows a 4 to 5 or 6 year cycle. The down trends in the sugar cycle starts with improved profitability of sugar mills. This results in prompt and higher payment to the farmers resulting in low sugarcane arrears. Good payment and low arrears lead to higher area under sugarcane cultivation and bumper production. All these lead to drop in prices of sugar. When the sugar prices fall drastically, it leads to losses or low profit to sugar mills. Hence, mills are not able to pay the farmers on time leading to increase in arrears. The farmers are ultimately forced to move towards other cash crops. The production falls and prices start moving up again. This whole viscous cycle continue for about 5 to 6 years. It is believed that the current year is a peak year on sugar cycle due to bumper production since last few years. Hence, prices are expected to peak this year leading to fall in production. However, long term trend of production is of increasing in nature.
Ethanol will play an important part in rising sugar prices. It is expected that Brazil will divert more of their sugar crop towards ethanol production due to rising crude prices which have affected almost every other commodities. Also, Indian government is toying with the idea of allowing petrol blending with 10 per cent of ethanol. This will drastically affect the sugar output.
Forward prices are firming and sugar prices will begin to surge with the beginning of the festival season by mid-August.Therefore, looking at various factors one should not be surprised if the prices touch Rs.2,000 a quintal.
July 25, 2008
Banning Futures in Agri is not a solution
Parliamentary panel has recently submitted its report to the government and has advised to the government to ban futures trading in agro-products. The reason given is that it leads to artificial rise in prices and does not benefit the Indian farmers. About 82 per cent of the farming community in India constitute of small and marginal farmers. These farmers are unable to take the advantage of forward trading and therefore, they need to be protected against any sharp fall in prices. The committee further pointed that futures trading has not been beneficial to farmers. It is the traders and middlemen who are earning at the cost of the farmers.
The panel’s view came as a shock and led to the fall in the futures market. On my earlier blog, I had written about why government should remove ban from certain commodities that were banned earlier. To a certain extent, it is true that farmers don’t benefit from the futures trading. But, there are indirect affects. They get a brief idea about what the prices are prevailing in the market. Though, this is debatable, let us not debate on this. Rather, I should ask you, would banning futures trading in agro-products heal the farmers’ problems. The answer is no. Different farmers have different problems. Small and marginal farmers cannot even afford to look at futures trading. Same is the case for equity market. So first, we must understand the purpose of this market. The purpose is price discovery. So, is it performing its function.
Let us examine this. The prices for various commodities have rose across various markets, both national and international. Prices of commodities reflect the demand and supply situation in any market. Or else, how can you explain the rise in cotton prices even after government had abolished the import duty on it. On my earlier blog, I had written about why government should remove ban from certain commodities that were banned earlier. The inflation that we are talking about is mostly imported. The rise in oil prices directly and indirectly lead to increase in prices for various commodities.
Inflation problem is not only confined to India. Almost every emerging economy is faced with this. Will the inflation rate come down after the ban? On the contrary, inflation has further increased even after the ban of certain commodities. Banning futures trading will not help. A study by NCDEX on various commodities (on my earlier blog) a few months back revealed that even after the ban prices for many essential commodities rose sharply. This reflected supply side problem. With the rising crude oil prices amid fear of depleting reserves, developed countries like US have shifted a major portion of corn and other agro-products for bio-fuel making. This has led to fewer stocks available for trade. Prices of edible oil are high because, due to high prices of crude oil, more and more vegetable oils are being diverted for use as bio-fuels. India imports soy oil heavily so, its prices in the domestic market therefore, depend on the palm oil production in Indonesia and Malaysia and soya bean production in the US, Argentina and Brazil. Moreover, rubber is an industrial commodity and not an essential one, and therefore it doesn't contribute to higher inflation. India also imports pulses heavily from abroad. Hence, price control is beyond its reach. Thus, earlier ban on commodities was a mistake that government committed under political pressure. It had nothing to do with inflation.
The other major issue is lack of knowledge. Government every year comes out with Minimum Statutory Price (MSP) for various agricultural products like wheat, rice, etc. So, do farmers get any benefit from it? The reality is that only big farmers get benefits who have large farmlands, and have knowledge of such MSP. What about small farmers who don’t know about MSP; neither he can approach government with his small amount of produce. So, the solution is not scrapping MSP because all farmers are not benefiting. The solution is to educate them. As, I have mentioned earlier there are indirect benefits of MSP. Farmers sell their produce to the middlemen who either sell to government or come to futures market for trading. So, the role of futures market becomes essential. The prices that are prevailing in the market give brief idea to the farmers at the time of sowing. They can then take their own wise decisions depending upon his analysis of the situation. Speculators are given a chance to participate to bring liquidity and stability in the market.
The panel’s view came as a shock and led to the fall in the futures market. On my earlier blog, I had written about why government should remove ban from certain commodities that were banned earlier. To a certain extent, it is true that farmers don’t benefit from the futures trading. But, there are indirect affects. They get a brief idea about what the prices are prevailing in the market. Though, this is debatable, let us not debate on this. Rather, I should ask you, would banning futures trading in agro-products heal the farmers’ problems. The answer is no. Different farmers have different problems. Small and marginal farmers cannot even afford to look at futures trading. Same is the case for equity market. So first, we must understand the purpose of this market. The purpose is price discovery. So, is it performing its function.
Let us examine this. The prices for various commodities have rose across various markets, both national and international. Prices of commodities reflect the demand and supply situation in any market. Or else, how can you explain the rise in cotton prices even after government had abolished the import duty on it. On my earlier blog, I had written about why government should remove ban from certain commodities that were banned earlier. The inflation that we are talking about is mostly imported. The rise in oil prices directly and indirectly lead to increase in prices for various commodities.
Inflation problem is not only confined to India. Almost every emerging economy is faced with this. Will the inflation rate come down after the ban? On the contrary, inflation has further increased even after the ban of certain commodities. Banning futures trading will not help. A study by NCDEX on various commodities (on my earlier blog) a few months back revealed that even after the ban prices for many essential commodities rose sharply. This reflected supply side problem. With the rising crude oil prices amid fear of depleting reserves, developed countries like US have shifted a major portion of corn and other agro-products for bio-fuel making. This has led to fewer stocks available for trade. Prices of edible oil are high because, due to high prices of crude oil, more and more vegetable oils are being diverted for use as bio-fuels. India imports soy oil heavily so, its prices in the domestic market therefore, depend on the palm oil production in Indonesia and Malaysia and soya bean production in the US, Argentina and Brazil. Moreover, rubber is an industrial commodity and not an essential one, and therefore it doesn't contribute to higher inflation. India also imports pulses heavily from abroad. Hence, price control is beyond its reach. Thus, earlier ban on commodities was a mistake that government committed under political pressure. It had nothing to do with inflation.
The other major issue is lack of knowledge. Government every year comes out with Minimum Statutory Price (MSP) for various agricultural products like wheat, rice, etc. So, do farmers get any benefit from it? The reality is that only big farmers get benefits who have large farmlands, and have knowledge of such MSP. What about small farmers who don’t know about MSP; neither he can approach government with his small amount of produce. So, the solution is not scrapping MSP because all farmers are not benefiting. The solution is to educate them. As, I have mentioned earlier there are indirect benefits of MSP. Farmers sell their produce to the middlemen who either sell to government or come to futures market for trading. So, the role of futures market becomes essential. The prices that are prevailing in the market give brief idea to the farmers at the time of sowing. They can then take their own wise decisions depending upon his analysis of the situation. Speculators are given a chance to participate to bring liquidity and stability in the market.
July 24, 2008
Government steps in to arrest the rising domestic cotton prices
Over the past few weeks, cotton prices had been rising rapidly. Government was under tremendous pressure from the domestic textile industry to ban exports of cotton. Only a fortnight ago, government had scrapped 14 per cent import duty on raw cotton and additionally withdrew 1 per cent export incentive (duty drawbacks). Even after these measures, cotton prices were heading north. So, to arrest the rising domestic cotton prices, government has placed an export restraint on cotton by stipulating mandatory registration of contracts with the Textile Commissioner before their shipment. Moreover, the Directorate General of Foreign Trade has also made it mandatory for the Customs authority to verify the contracts before clearing the cotton consignment. The restriction covers exports of cotton, cotton waste and yarn waste.
The current move is expected to have a dampening effect on cotton exports. But, if we look at the fundamentals then, this step will have a moderate effect on the cotton prices. Prices may come down initially as this will put psychological pressure on exporters. But, in the long run prices will reflect the demand and supply situation in India. India exported about 6.5 million bales of cotton in 2007-08. Cotton exports grew from 4.7 million bales in 2005-06 to 5.8 million bales in 2006-07. Exports this year are estimated to touch 8.5 million bales.
It is alleged that only about 0.4 million cotton bales are available for consumption by the domestic industry, while multinationals companies are hoarding about 2.5 million bales. With monsoons getting delayed in most of the western states in India, production is expected to take a dip. Hence, even after these measures cotton prices are expected to rule firm in near future. Therefore, to end this uncertainty government can fix a quota on exports so that domestic prices are stable.
The current move is expected to have a dampening effect on cotton exports. But, if we look at the fundamentals then, this step will have a moderate effect on the cotton prices. Prices may come down initially as this will put psychological pressure on exporters. But, in the long run prices will reflect the demand and supply situation in India. India exported about 6.5 million bales of cotton in 2007-08. Cotton exports grew from 4.7 million bales in 2005-06 to 5.8 million bales in 2006-07. Exports this year are estimated to touch 8.5 million bales.
It is alleged that only about 0.4 million cotton bales are available for consumption by the domestic industry, while multinationals companies are hoarding about 2.5 million bales. With monsoons getting delayed in most of the western states in India, production is expected to take a dip. Hence, even after these measures cotton prices are expected to rule firm in near future. Therefore, to end this uncertainty government can fix a quota on exports so that domestic prices are stable.
July 21, 2008
Should you invest in Gold ETFs?
Gold Exchange Traded Funds (ETFs) are a relatively new concept in the Indian mutual fund history. The first Gold ETF was launched in February 2007. At present, there are six gold ETFs in the Indian market, with only two having a performance history exceeding one year. Presently, investors have two options if they want to invest in gold. The first option is to buy gold physically which is the conventional method. The second option is to invest in Gold ETFs.
Are gold ETFs investments in gold? It can be yes or no; traditional sense, no. So, what is really a gold ETF investment all about? The fund house that issues these gold ETFs certificates buy gold from the physical market to the extent of your investment and when you want to liquidate your position it simply sells the gold in the physical market and the proceeds calculated at the spot prices are given to you. So, an investor in ETF is neither entitled to receive gold nor does he can sell ETF to get gold. Moreover, he cannot even exchange ETF for gold. These ETFs are listed on the NSE and can be purchased and sold on the NSE as if you are dealing in the gold bullion market, but without trading physically in gold.
Therefore, an investor invests indirectly in gold but never gets to possess the metal physically. Since, it is listed on a stock exchange; investors can buy and sell them like any other stock on the stock exchange, on a real-time basis. Hence, Gold ETFs offer a rather unique investment opportunity to investors who want to invest in gold. Investors should select the option that best suits to them.
Should you invest in Gold ETFs?
Now, the obvious question is, is it worth investing in Gold ETFs? If we look at the performance of these funds then yes. At a time when the stock market is in doldrums, investments in Gold ETFs sound good as they have proven by giving good returns. From an investment point of view, what should be the investment objectives for the investors? Well, investment objectives should be good and consistent returns.
Let’s look at some basic factors about gold. What rives gold prices? Geopolitical events, a steep rise in crude oil prices and unstable currencies (esp. dollar) drive gold price volatility. Gold moves in the opposite direction to the dollar as it is seen as an alternative asset. This is because dollar began circulating world wide after World War I, when completely damaged European powers started borrowing from the US. With the passage of the Bretton Woods international monetary agreement, dollar was the only currency pegged to gold. Other currencies were pegged to dollar.
Dollar reigned over the world for many years. But, with the introduction of the Euro, dollar started weakening. The decade of 90’s saw many emerging economies whose currencies started strengthening against dollar. Ultimately, dollar saw some competitions. With the announcement of few countries including Iran to sell crude oil only in Euro, it seems a red alert for dollar. So, as dollar weakens, gold prices strengthen. Also, with crude prices touching new sky everyday, it seems the stock market will take time to bounce back. So, as an investor you should look at every opportunities to increase your returns.
Many people argue that gold can never match the equity market returns. That seems to be true if we compare the long term returns say of 10 years. Gold is not among the top asset classes in giving long term returns. Like every other commodity, gold goes through cycles- only the cycles seems to be longer. Since last seven years, gold had an amazing run and has given very good returns.
If we look at the long term say ten years, then the returns are average. In fact, stock market has given better returns. But, in short term or rather to diversify your portfolio, investment in gold looks good. Gold is highly volatile though less than Sensex (Bombay Stock Exchange 30 share Index).
Objectives may vary from person to person. Gold ETFs offer investors a convenient means to invest in gold. But, this may not sound appropriate for all investors. So, Gold ETFs would probably be appropriate for investors who wish to invest in gold in bulk and are likely to face storage problem. Also, those investors who do not have time to do a quality check, can look at investing in gold through ETFs.
One special reason for investing in Gold ETFs can be to avoid wealth tax. If you have wealth in excess of Rs.15 lakh, you are liable to wealth tax. Gold held in physical form is counted towards this figure. But, when you invest in Gold ETFs, you are holding it as units of mutual funds. Capital gains on units sold of such MFs, is termed as long term if held for more than one year. Hence, no tax as long term capital gain tax is zero. Same is true for physical gold but, for that you will have to hold it for three years. So, this adds uniqueness to Gold ETFs.
At the same time, investors should keep in mind that there is one disadvantage of investing in gold ETFs apart from recurring expense. If a fund house declares a dividend on gold ETFs, dividend distribution tax will have to be borne by the investors.
Things to look while investing in Gold ETFs
As an investor you should avoid investing in Gold ETFs during the new fund offer (NFO) period. This is because you will have to pay an entry load during this period. Gold Benchmark Exchange Traded Scheme (Gold BeES), launched in February 2007, charged an entry load of 1.5 per cent. Similarly, UTI Gold Exchange Traded Fund, launched in March 2007, charged an entry load of 2.5 per cent. Hence, you should avoid investing in these funds during the NFO period. Instead, you can invest in these funds when they are listed on the stock exchange and thereby avoid bearing entry load. In this case, you will have to pay brokerage to the broker. Brokerage differs with different broking firms. So, you can choose that broking firm that charges brokerage less than the entry load.
Second is the other expense that you should keep in mind while investing in Gold ETFs. A pre-requisite for investing in Gold ETF is to have demat and trading account with the registered broker. You will have to pay some annual charges for the maintenance of these accounts which depends from broker to broker. Also, there is some recurring expense attached with the fund that you will have to pay.
But, if you have a bank locker, it is better you invest in physical gold as you don’t have to worry about where to store it. Also, an existing bank locker means that you don’t have to pay any additional recurring charges.
Are gold ETFs investments in gold? It can be yes or no; traditional sense, no. So, what is really a gold ETF investment all about? The fund house that issues these gold ETFs certificates buy gold from the physical market to the extent of your investment and when you want to liquidate your position it simply sells the gold in the physical market and the proceeds calculated at the spot prices are given to you. So, an investor in ETF is neither entitled to receive gold nor does he can sell ETF to get gold. Moreover, he cannot even exchange ETF for gold. These ETFs are listed on the NSE and can be purchased and sold on the NSE as if you are dealing in the gold bullion market, but without trading physically in gold.
Therefore, an investor invests indirectly in gold but never gets to possess the metal physically. Since, it is listed on a stock exchange; investors can buy and sell them like any other stock on the stock exchange, on a real-time basis. Hence, Gold ETFs offer a rather unique investment opportunity to investors who want to invest in gold. Investors should select the option that best suits to them.
Should you invest in Gold ETFs?
Now, the obvious question is, is it worth investing in Gold ETFs? If we look at the performance of these funds then yes. At a time when the stock market is in doldrums, investments in Gold ETFs sound good as they have proven by giving good returns. From an investment point of view, what should be the investment objectives for the investors? Well, investment objectives should be good and consistent returns.
Let’s look at some basic factors about gold. What rives gold prices? Geopolitical events, a steep rise in crude oil prices and unstable currencies (esp. dollar) drive gold price volatility. Gold moves in the opposite direction to the dollar as it is seen as an alternative asset. This is because dollar began circulating world wide after World War I, when completely damaged European powers started borrowing from the US. With the passage of the Bretton Woods international monetary agreement, dollar was the only currency pegged to gold. Other currencies were pegged to dollar.
Dollar reigned over the world for many years. But, with the introduction of the Euro, dollar started weakening. The decade of 90’s saw many emerging economies whose currencies started strengthening against dollar. Ultimately, dollar saw some competitions. With the announcement of few countries including Iran to sell crude oil only in Euro, it seems a red alert for dollar. So, as dollar weakens, gold prices strengthen. Also, with crude prices touching new sky everyday, it seems the stock market will take time to bounce back. So, as an investor you should look at every opportunities to increase your returns.
Many people argue that gold can never match the equity market returns. That seems to be true if we compare the long term returns say of 10 years. Gold is not among the top asset classes in giving long term returns. Like every other commodity, gold goes through cycles- only the cycles seems to be longer. Since last seven years, gold had an amazing run and has given very good returns.
If we look at the long term say ten years, then the returns are average. In fact, stock market has given better returns. But, in short term or rather to diversify your portfolio, investment in gold looks good. Gold is highly volatile though less than Sensex (Bombay Stock Exchange 30 share Index).
Objectives may vary from person to person. Gold ETFs offer investors a convenient means to invest in gold. But, this may not sound appropriate for all investors. So, Gold ETFs would probably be appropriate for investors who wish to invest in gold in bulk and are likely to face storage problem. Also, those investors who do not have time to do a quality check, can look at investing in gold through ETFs.
One special reason for investing in Gold ETFs can be to avoid wealth tax. If you have wealth in excess of Rs.15 lakh, you are liable to wealth tax. Gold held in physical form is counted towards this figure. But, when you invest in Gold ETFs, you are holding it as units of mutual funds. Capital gains on units sold of such MFs, is termed as long term if held for more than one year. Hence, no tax as long term capital gain tax is zero. Same is true for physical gold but, for that you will have to hold it for three years. So, this adds uniqueness to Gold ETFs.
At the same time, investors should keep in mind that there is one disadvantage of investing in gold ETFs apart from recurring expense. If a fund house declares a dividend on gold ETFs, dividend distribution tax will have to be borne by the investors.
Things to look while investing in Gold ETFs
As an investor you should avoid investing in Gold ETFs during the new fund offer (NFO) period. This is because you will have to pay an entry load during this period. Gold Benchmark Exchange Traded Scheme (Gold BeES), launched in February 2007, charged an entry load of 1.5 per cent. Similarly, UTI Gold Exchange Traded Fund, launched in March 2007, charged an entry load of 2.5 per cent. Hence, you should avoid investing in these funds during the NFO period. Instead, you can invest in these funds when they are listed on the stock exchange and thereby avoid bearing entry load. In this case, you will have to pay brokerage to the broker. Brokerage differs with different broking firms. So, you can choose that broking firm that charges brokerage less than the entry load.
Second is the other expense that you should keep in mind while investing in Gold ETFs. A pre-requisite for investing in Gold ETF is to have demat and trading account with the registered broker. You will have to pay some annual charges for the maintenance of these accounts which depends from broker to broker. Also, there is some recurring expense attached with the fund that you will have to pay.
But, if you have a bank locker, it is better you invest in physical gold as you don’t have to worry about where to store it. Also, an existing bank locker means that you don’t have to pay any additional recurring charges.
July 15, 2008
Tackling Inflation
Inflation is a global phenomenon as the current inflation is not confined to India alone. The continuous rise in crude prices along with price rise in essential commodities like food grains, processed foods, metals and chemicals have contributed to the present situation. Poor production and diversification of food grains for bio fuels have resulted in shortage of food grains and, hence, price rise. So far the government has taken various measures to tackle inflation. But, even after all those measures inflation crossed the double digit. So, there is a need to ensure that monetary tightness does not affect the growth momentum.
Since last few months the discussion throughout the world has been crude oil prices and inflation. In India government gives a lot more importance to WPI inflation figure. This year the inflation figure has broken all the records. It has touched a new high since last few years. It is argued that inflation this year is imported. To say in simple way, crude oil prices are pushing the inflation to record heights. India’s import of crude is almost 70 per cent. So, it can’t do anything about the crude prices. But, yes it can try to insulate the consumers from the inflation shock.
Steps taken by Government:
Government banned exports of rice, wheat, pulses and other food articles and brought down the import duty on edible oils and other food items to zero. It also raised the minimum export price for basmati rice and maize. Moreover, it simultaneously banned the trading of potato, chana, rubber and refined soya oil in the commodity market. Last year, government had banned trading in rice, turmeric, wheat and some pulses though a year later it was found that prices still went on rising. It also allowed import of steel, iron ore and cement at zero duty. Moreover, to discourage exports of these items it imposed certain export duty. Government had also requested the cement and steel companies not to increase the prices.
At the same time, Reserve bank of India (RBI) had raised the Repo rate and CRR. This was done to tighten the liquidity in the Indian market. But, raising interest rates mean curbing the demand. If the demand is curbed then there would be a slow down in the growth. So, many analysts already feel that these steps have already affected many sectors.
Can inflation be tamed?
Yes, it can be with proper planning and policies. Oil prices have risen with sudden pace not because oil consumption has increased considerably. It has increased because the speculators have become more active in oil futures. Banning speculation in futures trading will not help. What we can do is that we should allow our rupee to appreciate against dollar. If rupee becomes stronger then the price of oil for Indian company will be lower. This step will affect exports especially from the IT sector an textiles. But, government can help exporters through various ways.
Government should focus more on better supply management of food grains and other essential commodities. According to Centre’s fourth advance estimates for crop production, the country’s total food grain production in 2007-08 (June-May crop year) is pegged at an impressive 230 million tonnes; wheat alone accounting for 78 million tonnes. Rice production is estimated to be 96.34 million tonnes which is almost one million tonnes over the 95.6 million tonnes estimated in April. Hence, the most critical task for the government is to strengthen its public distribution system and creating a better infrastructure for storing the food grains.
To curb inflation, RBI has taken various monetary steps like increasing CRR and Repo rate. This is affecting the growth of the Indian economy. Therefore, instead of rate hike RBI should allow the rupee to appreciate by releasing more dollars in the economy. A stronger rupee is a bigger tool to fight against inflation as imports of crude oil and other essential commodities like pulses become much cheaper. At the same time, government should try to curb the speculative activities by merchants, traders and middlemen through better supply chain management of food grains and improving public distribution system.
Energy consumption should be brought down. We consume three times more energy, as a percentage of GDP, than the world average. This can be done through various means. A study has shown that the energy required for agriculture pumping is drastically reduced if the groundwater table is raised. Railways consume only one-third of the energy needed to move things to places as against road transport. Water transports consume even less. Therefore, government should focus on building infrastructure in this regard so that we start using these alternatives more frequently. Also, energy from non-oil sources should be developed. The private sector should be encouraged to use more renewable source like solar, wind, waves, tides, hydro and biomass to generate energy.
We lack good infrastructure. If infrastructure improves, the cost of goods and services comes down. Hence, government should quickly build highways, power plants and ports.
Centre for Monitoring Indian Economy Private Limited (CMIE) estimates the expected inflation for this year at around 5.5 per cent. This estimate is based on the expected good monsoon and overall good kharif crop. The food situation problem should not be a long-term problem. Higher prices will induce farmers to increase their produce. But, government will have to take care as higher prices do not always reach farmers. So, government must create conditions where farmers are able to sell their produce directly to consumers so that both can benefit.
Since last few months the discussion throughout the world has been crude oil prices and inflation. In India government gives a lot more importance to WPI inflation figure. This year the inflation figure has broken all the records. It has touched a new high since last few years. It is argued that inflation this year is imported. To say in simple way, crude oil prices are pushing the inflation to record heights. India’s import of crude is almost 70 per cent. So, it can’t do anything about the crude prices. But, yes it can try to insulate the consumers from the inflation shock.
Steps taken by Government:
Government banned exports of rice, wheat, pulses and other food articles and brought down the import duty on edible oils and other food items to zero. It also raised the minimum export price for basmati rice and maize. Moreover, it simultaneously banned the trading of potato, chana, rubber and refined soya oil in the commodity market. Last year, government had banned trading in rice, turmeric, wheat and some pulses though a year later it was found that prices still went on rising. It also allowed import of steel, iron ore and cement at zero duty. Moreover, to discourage exports of these items it imposed certain export duty. Government had also requested the cement and steel companies not to increase the prices.
At the same time, Reserve bank of India (RBI) had raised the Repo rate and CRR. This was done to tighten the liquidity in the Indian market. But, raising interest rates mean curbing the demand. If the demand is curbed then there would be a slow down in the growth. So, many analysts already feel that these steps have already affected many sectors.
Can inflation be tamed?
Yes, it can be with proper planning and policies. Oil prices have risen with sudden pace not because oil consumption has increased considerably. It has increased because the speculators have become more active in oil futures. Banning speculation in futures trading will not help. What we can do is that we should allow our rupee to appreciate against dollar. If rupee becomes stronger then the price of oil for Indian company will be lower. This step will affect exports especially from the IT sector an textiles. But, government can help exporters through various ways.
Government should focus more on better supply management of food grains and other essential commodities. According to Centre’s fourth advance estimates for crop production, the country’s total food grain production in 2007-08 (June-May crop year) is pegged at an impressive 230 million tonnes; wheat alone accounting for 78 million tonnes. Rice production is estimated to be 96.34 million tonnes which is almost one million tonnes over the 95.6 million tonnes estimated in April. Hence, the most critical task for the government is to strengthen its public distribution system and creating a better infrastructure for storing the food grains.
To curb inflation, RBI has taken various monetary steps like increasing CRR and Repo rate. This is affecting the growth of the Indian economy. Therefore, instead of rate hike RBI should allow the rupee to appreciate by releasing more dollars in the economy. A stronger rupee is a bigger tool to fight against inflation as imports of crude oil and other essential commodities like pulses become much cheaper. At the same time, government should try to curb the speculative activities by merchants, traders and middlemen through better supply chain management of food grains and improving public distribution system.
Energy consumption should be brought down. We consume three times more energy, as a percentage of GDP, than the world average. This can be done through various means. A study has shown that the energy required for agriculture pumping is drastically reduced if the groundwater table is raised. Railways consume only one-third of the energy needed to move things to places as against road transport. Water transports consume even less. Therefore, government should focus on building infrastructure in this regard so that we start using these alternatives more frequently. Also, energy from non-oil sources should be developed. The private sector should be encouraged to use more renewable source like solar, wind, waves, tides, hydro and biomass to generate energy.
We lack good infrastructure. If infrastructure improves, the cost of goods and services comes down. Hence, government should quickly build highways, power plants and ports.
Centre for Monitoring Indian Economy Private Limited (CMIE) estimates the expected inflation for this year at around 5.5 per cent. This estimate is based on the expected good monsoon and overall good kharif crop. The food situation problem should not be a long-term problem. Higher prices will induce farmers to increase their produce. But, government will have to take care as higher prices do not always reach farmers. So, government must create conditions where farmers are able to sell their produce directly to consumers so that both can benefit.
Inflation Eating Your Savings
What does inflation mean to anyone? Does it really affect you? If we look a few months back, everybody was talking how America will do. Will it be able to maintain its investment in India and so on! Nobody was talking about domestic issues. Now look today. Every now and then we hear the finance minister talking about current account deficit and fiscal deficit. So if a person like finance minister talks about such issues, it’s a signal that there are problems for our economy in future. Current account deficit which is 3 per cent at this moment is expected to go up to 5 per cent and fiscal deficit is expected to be pushed to 9 per cent from the current 6 per cent.
What is inflation? Inflation refers to the rise in the price of products and subsequent fall in the value of money. Suppose the price of a product today is Rs.100 and the inflation today is around 10 percent then, the price of product next year would be Rs.110. Therefore, the product that you could buy today for Rs.100 will cost you an extra Rs.10 next year. So, in other words the value of your Rs.100 has decreased by Rs.10 or the product has suffered an inflation of 10 per cent. Therefore, whether you are a salaried person or self employed, you cannot escape from the monster inflation. You need to insulate yourself from this. What are the risks?
Every investment must cover the inflation risk. Many people get it wrong. Suppose you invest in a fixed deposit that pays you 8 per cent per annum. If the expected rate of inflation is 5 per cent, the real rate of return is only 3 per cent. This is because while the Rs.100 will grow up to Rs.108, the price of the product will move from Rs.100 to Rs.105. So, a year later there is only Rs.3 addition to your wealth. Now, look at the present scenario. The expected rate of inflation this year is around 11 percent (remember crude oil is expected to record new heights every day). So, in real terms your investment has grown from Rs.100 to Rs.108 but the price of the product has risen to Rs.111. You have lost Rs.3.
Second is the interest rate risk. Interest rates are volatile. They don’t stay static. They move up and down. Interest rate risk refers to the impact that the rising interest rates have on bond values. When interest rates go up, the value of the existing bond prices come down and your yield goes up. Same is true for the reverse. Say, a company issues a bond with a face value of Rs.100 and a coupon rate of 8 per cent. Say, its current market price is Rs.100. Now look at this amongst the rising inflation. Interest rates will be increased by RBI to curb the rising inflation. Suppose, now the company issues a fresh bond with a face value of Rs.100 and a coupon of 11 per cent. Does this mean any thing to you? You will surely sell the earlier bond with a lower coupon and buy this new bond with a higher coupon. But who will buy your bond? The prices will come down to a certain level which would give a return of 11 per cent. Therefore, rising inflation may lead to interest rate hike and fall in the value of existing bond.
Then, there are default risk, liquidity risk and the re-investment risk. Liquidity risk can be when you want to exit from a bond but due to high interest rates, you have to sell at a lower price. Similarly, re-investment risk means when your deposits say in mutual fund or fixed deposits cannot be invested back at the same rate. It is invested at a lower rate.
What is inflation? Inflation refers to the rise in the price of products and subsequent fall in the value of money. Suppose the price of a product today is Rs.100 and the inflation today is around 10 percent then, the price of product next year would be Rs.110. Therefore, the product that you could buy today for Rs.100 will cost you an extra Rs.10 next year. So, in other words the value of your Rs.100 has decreased by Rs.10 or the product has suffered an inflation of 10 per cent. Therefore, whether you are a salaried person or self employed, you cannot escape from the monster inflation. You need to insulate yourself from this. What are the risks?
Every investment must cover the inflation risk. Many people get it wrong. Suppose you invest in a fixed deposit that pays you 8 per cent per annum. If the expected rate of inflation is 5 per cent, the real rate of return is only 3 per cent. This is because while the Rs.100 will grow up to Rs.108, the price of the product will move from Rs.100 to Rs.105. So, a year later there is only Rs.3 addition to your wealth. Now, look at the present scenario. The expected rate of inflation this year is around 11 percent (remember crude oil is expected to record new heights every day). So, in real terms your investment has grown from Rs.100 to Rs.108 but the price of the product has risen to Rs.111. You have lost Rs.3.
Second is the interest rate risk. Interest rates are volatile. They don’t stay static. They move up and down. Interest rate risk refers to the impact that the rising interest rates have on bond values. When interest rates go up, the value of the existing bond prices come down and your yield goes up. Same is true for the reverse. Say, a company issues a bond with a face value of Rs.100 and a coupon rate of 8 per cent. Say, its current market price is Rs.100. Now look at this amongst the rising inflation. Interest rates will be increased by RBI to curb the rising inflation. Suppose, now the company issues a fresh bond with a face value of Rs.100 and a coupon of 11 per cent. Does this mean any thing to you? You will surely sell the earlier bond with a lower coupon and buy this new bond with a higher coupon. But who will buy your bond? The prices will come down to a certain level which would give a return of 11 per cent. Therefore, rising inflation may lead to interest rate hike and fall in the value of existing bond.
Then, there are default risk, liquidity risk and the re-investment risk. Liquidity risk can be when you want to exit from a bond but due to high interest rates, you have to sell at a lower price. Similarly, re-investment risk means when your deposits say in mutual fund or fixed deposits cannot be invested back at the same rate. It is invested at a lower rate.
March 31, 2008
High time to remove ban on commodity market
Last year, Forward Market Commission (FMC) suspended the trading of many agricultural commodities in the futures market. The reason for the ban was attributed to speculation in the futures market which was believed to have had led to the high rise in prices.
The decision of the Abhijit Sen panel report is still pending. But, reports from various sources indicate that the government may lift the ban that it had imposed last year.
Recently, NCDEX came up with an analysis on price data for traded essential commodities. The movement in the actively traded commodities actually, dipped by 5.17%. Examples of such commodities are chana, soyabean, sugar and maize. These commodities have a cumulative weight of 6.65% in the whole sale price (WPI) index. On the other hand, price change in non-traded essential commodities was 9.04%. These included rice, wheat, jowar, sunflower, cotton seed, barley, etc. and have a weight of 17.6% in WPI.
Price for all traded commodities rose by 5.84%. These have a weight of 7.78% in WPI. Overall inflation last year was around 5%. Therefore, rise in prices of actively traded commodities can be said to be in line with the overall level of price inflation.
It should be kept in mind that a detailed analysis of annual price change in actively traded essential commodities that are directly consumed, excluding oilseeds and cakes, registered a fall of 0.67%. These have a weight of 5.31% in the WPI.
Therefore, the ban put by the government is in contrast with the recent findings. Prices for the agriculture commodities have rose across the board in the domestic market in line with the global commodity price trends. Reports coming from various international markets reveal that the production of many commodities has fallen. It is argued everywhere that the production might go down even more.
Hence, this mismatch in the demand and supply has led people taking various advantageous positions in the commodity markets; even speculation. But that is a part of a matured market. It is high time that the government lifts up the ban as the rise in prices was from the supply side. Also, by widening the market with various other commodities to trade, the government in fact, would further deepen and strengthen the market.
Rural India
Recently, Indian Prime Minister, Manmohan Singh said that he still remembers his old days in rural. There were no proper roads, electricity and sanity. Even schools were situated at a distance. There were many other issues. All these were few decades back.
Now come to this century. People believe most of these issues have been sorted. In fact, most of these problems are not only related to rural but also found in urban area. Let me give some for urban first. Still urban cities in India lack proper loos for public. Recently, the government in Mumbai announced to build many such.
Now come back to rural area. Whenever I visit my village, I face a lot of problems. Mind you this is 21st century. No proper roads. If roads are there they are narrow. Most of them are kuccha road. In some area you may find patches of metallic road. The last time when I saw electricity was in 1997. In those days, it would be there for a few hours in the afternoon. No drinking water facility! Many schools lack loos for the students. This is very important because one of the most important reasons for girls in rural area to discontinue their studies at a later stage is lack of toilet in the schools. Transportation is one other issue that needs to be solved.
It is said that with proper planning everything can be solved. What is planning? (unknown word for politicians). India is growing. No doubt about that. Growth should be for everyone. But here the growth is only for selective.
I believe that this is the best time for India. It is having both prime minister and finance minister of great caliber. I respect their knowledge and their capability. If all these issues can’t be tackled now then, God save us!
March 26, 2008
India’s silence on Tibet
Tibet is a complex political issue. India’s silence on this issue has raised many questions. Why is India not supporting Tibet’s cause? India’s silence on this can be termed as timid. This is because China had been claiming Arunachal Pradesh as theirs. And India has just been registering a mild complain against it. It is time for India to change its policy towards China.
Let us first look at reasons for not supporting Tibet’s cause. There are basically four reasons for India to support China. India hopes that China would support India in Kashmir issue, it would also support India’s claim for a permanent seat in the United Nations which till now has not happen, it would also support India’s nuclear case and lastly, it doesn’t want to affect the trades between the two countries.
But, when we closely look at these reasons, expect for the last one all are based on hopes. And hopes does not lead to support especially when the country in the asking is China. China has never supported India in its Kashmir cause. In fact, Pakistan encouragement to the militants in Kashmir is due to China. China is a close ally of Pakistan. So, it can always rely upon it.
Regarding, a permanent seat, China is not backing India. As far as nuclear deal is concerned, China is against this as this would mean a bigger India with which it would have to deal with. This can be judged from the fact that the communist parties in India are against the nuclear deal. It is no secret that communist parties support China. Almost all the national parties in India have commented on the Tibet issue, but the silence of the Communist parties reveal that they are with China.
The last point i.e. trade between the two countries. The trade between the two countries has been growing stronger day by day. According to data from the government, China is bound to overtake USA in terms of trade with India.
But, trade and humanitarian cannot be mixed.
One of India’s great fears is that backing Tibet will open up the door to others to back the Kashmiri independence cause or the demand of the Nagas who are hell bent to be separated from India. But, India being a neighbouring country has the responsibility to comment on issues like this. But, by being a mute spectator, India has openly supported China.
Let us first look at reasons for not supporting Tibet’s cause. There are basically four reasons for India to support China. India hopes that China would support India in Kashmir issue, it would also support India’s claim for a permanent seat in the United Nations which till now has not happen, it would also support India’s nuclear case and lastly, it doesn’t want to affect the trades between the two countries.
But, when we closely look at these reasons, expect for the last one all are based on hopes. And hopes does not lead to support especially when the country in the asking is China. China has never supported India in its Kashmir cause. In fact, Pakistan encouragement to the militants in Kashmir is due to China. China is a close ally of Pakistan. So, it can always rely upon it.
Regarding, a permanent seat, China is not backing India. As far as nuclear deal is concerned, China is against this as this would mean a bigger India with which it would have to deal with. This can be judged from the fact that the communist parties in India are against the nuclear deal. It is no secret that communist parties support China. Almost all the national parties in India have commented on the Tibet issue, but the silence of the Communist parties reveal that they are with China.
The last point i.e. trade between the two countries. The trade between the two countries has been growing stronger day by day. According to data from the government, China is bound to overtake USA in terms of trade with India.
But, trade and humanitarian cannot be mixed.
One of India’s great fears is that backing Tibet will open up the door to others to back the Kashmiri independence cause or the demand of the Nagas who are hell bent to be separated from India. But, India being a neighbouring country has the responsibility to comment on issues like this. But, by being a mute spectator, India has openly supported China.
Mahi Ve!
Mahendra Singh Dhoni, nicknamed Mahi, in a recent statement to the media has scratched the disease which was curing with passing days. According to him, his support for youngsters for the Australia’s tour has been proved right. The results are there to see.
He also said that by beating Australia, his team filled with young bloods has proved that the team can play well and beat others even if seniors are not around. No doubt about it. He has proved it.
But, Dhoni being a captain of India needs to show some sense while speaking to the media. Such statement was not required. It did not go well with many others in the game. The tour of South Africa has just begun, and by giving such statement at this juncture only creates confusion within the team.
He should not forget that the players he is referring are great players. They have proved their worth time and again. A bad patch doesn’t mean the player has lost the shine. Sachin Tendulkar by playing marvelous innings in the finals has proved that a mix of both, juniors and seniors is a must for the team to be number one. It also helped India to register its one of the greatest victory.
It is true that had India lost the series down under then, the media would have run for Dhoni’s blood. One bad patch and all is over. Statement like this will only demoralize the team. Seniors are there to guide the team. At crises, these seniors can be handy. Dhoni has been supporting Yuvraj Singh and Utappha. The later has shown some character, but regarding Yuvraj Singh, I feel the Indian team is carrying an NPA. If a certain player is not in form, give him rest. Let him get back his rhythm.
So, next time Mr. Dhoni when you make a statement like this, please be sure what you are speaking. You might feel that you are speaking your heart. But don’t forget that your heart is being read by millions of people
He also said that by beating Australia, his team filled with young bloods has proved that the team can play well and beat others even if seniors are not around. No doubt about it. He has proved it.
But, Dhoni being a captain of India needs to show some sense while speaking to the media. Such statement was not required. It did not go well with many others in the game. The tour of South Africa has just begun, and by giving such statement at this juncture only creates confusion within the team.
He should not forget that the players he is referring are great players. They have proved their worth time and again. A bad patch doesn’t mean the player has lost the shine. Sachin Tendulkar by playing marvelous innings in the finals has proved that a mix of both, juniors and seniors is a must for the team to be number one. It also helped India to register its one of the greatest victory.
It is true that had India lost the series down under then, the media would have run for Dhoni’s blood. One bad patch and all is over. Statement like this will only demoralize the team. Seniors are there to guide the team. At crises, these seniors can be handy. Dhoni has been supporting Yuvraj Singh and Utappha. The later has shown some character, but regarding Yuvraj Singh, I feel the Indian team is carrying an NPA. If a certain player is not in form, give him rest. Let him get back his rhythm.
So, next time Mr. Dhoni when you make a statement like this, please be sure what you are speaking. You might feel that you are speaking your heart. But don’t forget that your heart is being read by millions of people
March 18, 2008
Can India sustain the growth story?
Many Indians still believe that we can achieve 9% growth because we have abundant resources. No doubt India's economy is fundamentally sound. Our growth is because of consumption. But we cannot forget that US has an important role to play in everything.
Indian stock markets, a few months back was moving upward as if they were in a hurry to reach the peak. And then the market crashed. Lot have been written and spoken on decoupling theory. Consumption led Indian companies growth story sounds great but in reality, even they are not left when the west goes hammering the market.
A look at a decade back will reveal that even the Indian phenomenal growth was due to heavy spending by US. Americans borrowed a lot and spent over their disposable incomes thereby creating demand all over the world. It helped China to grow to a new height as it heavily relied on exports. At the same time, India exported competitive services to US to earn revenues.
But, India like other Asean countries needed to import huge quantities of various commodities to support its manufacturing industries and to meet the rising domestic needs. This created a viscous cycle where each country helped other country to grow. Commodities prices started rising up and the world economy started booming.
No growth can rely on over-consumption. So when the realty prices in US started falling, everyone realized the ugly fact that many people who could not repay were given huge loans. Subprime starts, markets crash. Mind you its not happening in India, still Indian markets are not left. They too get the thrashing.
Now it’s the reverse of the earlier viscous cycle. Less US spending means lesser imports from Asia, affecting India. So the countries that benefited from US overspending will now suffer. India is one among them.
The recent moves by RBI to curb liquidity in the market have shown far more affect then required. IIP figures released last week shows that the tight monetary policy has affected them badly. Now if we examine the India’s possibility to grow at 9% in the context of recent happening in the stock market, I believe that the growth story is not over. But it will slow down.
{Views expressed above are purely mine}
Indian stock markets, a few months back was moving upward as if they were in a hurry to reach the peak. And then the market crashed. Lot have been written and spoken on decoupling theory. Consumption led Indian companies growth story sounds great but in reality, even they are not left when the west goes hammering the market.
A look at a decade back will reveal that even the Indian phenomenal growth was due to heavy spending by US. Americans borrowed a lot and spent over their disposable incomes thereby creating demand all over the world. It helped China to grow to a new height as it heavily relied on exports. At the same time, India exported competitive services to US to earn revenues.
But, India like other Asean countries needed to import huge quantities of various commodities to support its manufacturing industries and to meet the rising domestic needs. This created a viscous cycle where each country helped other country to grow. Commodities prices started rising up and the world economy started booming.
No growth can rely on over-consumption. So when the realty prices in US started falling, everyone realized the ugly fact that many people who could not repay were given huge loans. Subprime starts, markets crash. Mind you its not happening in India, still Indian markets are not left. They too get the thrashing.
Now it’s the reverse of the earlier viscous cycle. Less US spending means lesser imports from Asia, affecting India. So the countries that benefited from US overspending will now suffer. India is one among them.
The recent moves by RBI to curb liquidity in the market have shown far more affect then required. IIP figures released last week shows that the tight monetary policy has affected them badly. Now if we examine the India’s possibility to grow at 9% in the context of recent happening in the stock market, I believe that the growth story is not over. But it will slow down.
{Views expressed above are purely mine}
Investing in Gold
If anything comes to my mind seeing the recent blood bath in the equity market, it is the commodity market. It is high time that you should do a rethinking on this market. Almost all the big shots in the sensex have been battered. Ask the investors and they get scared at the very mention of equity.
It is a great time to rebuild your portfolio in case you were using just equity (in the form of equity funds or direct stocks) and debt (in the form of your Employees Provident Fund, Public Provident Fund and fixed deposits) in it. Broaden your horizon. Look towards commodities.
Just like crude oil, gold too is not available in abundant. Therefore, there is a mismatch in demand and supply. Gold and crude both move against dollar almost simultaneously.
Gold as a commodity has been outperformer every time. Though it will not give you returns like equity but, still you can invest in it to hedge your risk. Gold is a natural hedge against inflation. So it will at least provide stability to your investment and keep your money heading towards inflation trend line.
The average return gold provided during 1995 to 2008 was 12.69% per year and at the same time sensex provided 23.05%. So you can see the return on gold is quite over the inflation prevailing in the economy.
The other reason for investing in gold is US economy. Every time the Fed cut rates, dollar will weaken and gold prices strengthen indicating that all is not well with the economy. Looking at the past few months in context of subprime, you can expect more cuts from the Fed. Mind you worst is not over. Therefore, gold has a good future till the subprime crisis cools down.
It is a great time to rebuild your portfolio in case you were using just equity (in the form of equity funds or direct stocks) and debt (in the form of your Employees Provident Fund, Public Provident Fund and fixed deposits) in it. Broaden your horizon. Look towards commodities.
Just like crude oil, gold too is not available in abundant. Therefore, there is a mismatch in demand and supply. Gold and crude both move against dollar almost simultaneously.
Gold as a commodity has been outperformer every time. Though it will not give you returns like equity but, still you can invest in it to hedge your risk. Gold is a natural hedge against inflation. So it will at least provide stability to your investment and keep your money heading towards inflation trend line.
The average return gold provided during 1995 to 2008 was 12.69% per year and at the same time sensex provided 23.05%. So you can see the return on gold is quite over the inflation prevailing in the economy.
The other reason for investing in gold is US economy. Every time the Fed cut rates, dollar will weaken and gold prices strengthen indicating that all is not well with the economy. Looking at the past few months in context of subprime, you can expect more cuts from the Fed. Mind you worst is not over. Therefore, gold has a good future till the subprime crisis cools down.
March 17, 2008
Should Rupee be allowed to appreciate?
Normally, currencies appreciate when the economies are doing well and the rise in their values is a cause for celebration. It is in India’s interest to allow rupee to appreciate to a certain level. This will pave the way for further liberalization of capital flow. India’s long term objective should be to allow free flow of international capital to further deepen the capital market.
With the oil prices touching a new level every day, it is high time that RBI does a rethinking on this front. India imports almost three-fourth of oil which drastically impacts the imports bill thereby affecting the balance of payments.
There are two views on this issue. Those who are against rupee appreciation argue that if rupee is allowed to appreciate further, then exports will be crippled. Exporters are already finding it difficult to match the competition from China especially in textiles. Any further appreciation and the industry may be shut down.
The IT sector which is making the most noise against rupee appreciation should have realized by now that their phenomenal growth during the last decade was due to rupee depreciation. But Indian economy apart from IT needs huge funds for infrastructure development. A big chunk of funds will have to come from abroad.
Those for the appreciation believe that foreign investment is essential to accelerate growth. India is a story now and it is bound to attract foreign capital owing to its strong economic fundamentals. If offshore capital flows drive up the currency, so be it. RBI should not intervene to stop currency appreciation. It will only flood the market with rupees.
Inflation is another concern for the RBI as well the government. A cheaper dollar means cheaper imports and lower inflation. Only a few weeks back, inflation was quite under control. But with the depreciating rupee, inflation has crossed beyond 5% which is the tolerance level for the RBI. Rising rupee is good news for the oil companies as they are already under tremendous pressure due to volatility in crude prices.
Therefore, rupee appreciation should be viewed in the broader context of its impact on the economy as a whole. The appreciation of the rupee has helped in bringing down the country’s import bill particularly that of oil imports which easily accounts for more than a third of all imports. This in turn helps the country in bringing down the trade deficit. Industry will be able to source its inputs from abroad at a cheaper price and hence can export more. Indian companies should learn to live with rupee appreciation and try to exploit it to the hilt.
Thus, rupee appreciation is good for economic health of our country but it carries certain demerits. But these demerits can be removed by the intervention of the government with certain favourable polices. Some of the steps that can be taken are reducing export duty for the exporters and waiving off the custom duty.
With the oil prices touching a new level every day, it is high time that RBI does a rethinking on this front. India imports almost three-fourth of oil which drastically impacts the imports bill thereby affecting the balance of payments.
There are two views on this issue. Those who are against rupee appreciation argue that if rupee is allowed to appreciate further, then exports will be crippled. Exporters are already finding it difficult to match the competition from China especially in textiles. Any further appreciation and the industry may be shut down.
The IT sector which is making the most noise against rupee appreciation should have realized by now that their phenomenal growth during the last decade was due to rupee depreciation. But Indian economy apart from IT needs huge funds for infrastructure development. A big chunk of funds will have to come from abroad.
Those for the appreciation believe that foreign investment is essential to accelerate growth. India is a story now and it is bound to attract foreign capital owing to its strong economic fundamentals. If offshore capital flows drive up the currency, so be it. RBI should not intervene to stop currency appreciation. It will only flood the market with rupees.
Inflation is another concern for the RBI as well the government. A cheaper dollar means cheaper imports and lower inflation. Only a few weeks back, inflation was quite under control. But with the depreciating rupee, inflation has crossed beyond 5% which is the tolerance level for the RBI. Rising rupee is good news for the oil companies as they are already under tremendous pressure due to volatility in crude prices.
Therefore, rupee appreciation should be viewed in the broader context of its impact on the economy as a whole. The appreciation of the rupee has helped in bringing down the country’s import bill particularly that of oil imports which easily accounts for more than a third of all imports. This in turn helps the country in bringing down the trade deficit. Industry will be able to source its inputs from abroad at a cheaper price and hence can export more. Indian companies should learn to live with rupee appreciation and try to exploit it to the hilt.
Thus, rupee appreciation is good for economic health of our country but it carries certain demerits. But these demerits can be removed by the intervention of the government with certain favourable polices. Some of the steps that can be taken are reducing export duty for the exporters and waiving off the custom duty.
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