09.02.2007

• Controlling inflation by allowing the rupee to rise
• We have been reading for quite some time about the measures taken to control inflation. Look at the other possible measures and also a little more detail about understanding the implications of these measures.
• The supply side measures (short term) taken by the government include:
• Slashing of import duties on base metals, cement and wheat
• Curtailing export of sugar
• Importing wheat at zero duty
• Import of pulses from Myanmar and Canada
• Open market sales of wheat
• The current price rise is not just a supply side phenomenon. Another villain is now identified as the foreign capital flowing into the country. When foreign capital flows, money supply goes up as RBI purchases the inflow, giving rupees in return. RBI seeks to take back this extra money in the system by selling government securities. When the public picks up bonds, the cash flows into RBI, reducing the money supply. But such sterilization is not complete and external capital inflows lead to a rise in the money supply.
• If the rupee is allowed to appreciate, three effects would follow:
• The rupee cost of imports will come down and exports would become more expensive in the currencies of the importers. Import volumes would go up and prices would moderate. As exports are anyway on the uptick, they can do with some moderation. The comfortable forex reserves also gives us the cushion on managing the current account deficit.
• Since RBI does not mop up dollars, there would be no increase in the supply of rupees on account of dollar inflows, easing monetary build-up.
• The RBI can also go easy on sale of securities for sterilization purposes, thereby reducing the upward pressure on interest rates. The finance ministry would consider all three effects to be positive, at this juncture.
• Farmer clubs
• Farmers in Gujarat are organizing themselves into these clubs.
• These are grassroot-level informal forums organized by rural branches of banks with the support and financial assistance of NABARD for the mutual benefit of the banks concerned and rural people.
• India’s bid for non-permanent seat on UN Security Council
• This bid is for the two year term during 2011-12 in the Asia quota.
• Elections will be held only in October 2010, but canvassing for support has already started.
• Other countries in the fray for this slot include: Thailand and Kazakhstan.
• This attempt shows that the G4 (India, Germany, Japan and Brazil) are resigned to accepting that the permanent changes in the Security Council will take a longer time than this.
• PCOs in the country
• Their number has gone up by 52% due to rising demand in rural and semi-urban areas. There are about 45 lakh PCOs (Public Call Offices) i.e., the Local and STD telephone booths in the country as of Q1 2006-07.
• Urban teledensity in the country is about 40%. Rural teledensity is a paltry 2%.
• Retail’s employment potential
• On an average, at least 250 people are needed to man a 50,000 sqft format.
• A little about TPM – Total Productive Maintenance
• It is a collection of tools popularized by top Japanese manufacturing firms. This includes practices like continuous improvement, elimination of waste and rejections, visual controls, autonomous maintenance and better organized workspaces. The concept made its way into India in the early nineties, and found enthusiastic adopters among companies that targeted global markets.
• Credit card usage
• Nearly 20% of the total retail electronic payments is being done through credit cards.
• Debit card payments account for a mere 4% of the transactions.
• Madrid Protocol
• India is set to join this protocol.
• This is about international registration of trademarks.
• With this, Indian trademarks will get protection in about 71 countries who are members of this Protocol.
• CDM market
• Globally the CDM (Clean Development Mechanism) market is a good $305 crores ($3.5 bn) market.
• There are currently about 156 CDM projects in India. These give an annual average of 155 lakh (15.5 mn) CERs (Certified Emission Reductions).
• ONGC seeks oil in the Deccan plateau through virtual drilling
• Virtual drilling is a process that integrates several remote sensing technologies and produces a well log without drilling a hole. The electromagnetic log provides information on the thickness of a prospective zone and inferred permeability and porosity.
• FCV tobbacco
• India is the third largest producer of FCV (Flue Cured Virginia) tobacco.
• India’s loans from ADB and World Bank
• ADB cleared $800 crores ($8 bn) projects for India for the next three years.
• The interest rates on ADB loans is about 5.78%, and the repayment is spread over a period of 20 years with a 5 year moratorium.
• World Bank plans to lend India around $1200 crores ($12 bn) over the next three years. World Bank has two lending arms – the IDA (interest rate is about 5.3%) and the IBRD (International Bank for Reconstruction and Development).
• Today ET has an excellent editorial outlining how better returns would boost farm output. Couldn’t just write a précis of it. Read it in full here.
• Blair House Accord
• This accord gave special exemptions for the US and EU agricultural subsidy systems. This was singed in 1992. This paved the way for signing of the Uruguay Round agreement of the WTO.
• How should the Mom and Pop stores survive in the organized retail boom?
• There are about 1.30 crores (13 mn) Mom and Pop stores in India. That is these are the small scale retailers of the country.
• Some ideas on how they can survive the onslaught of the organized retail chains:
• Reconfiguring their business model to keep up with the dynamics of a changed landscape.
• Take a closer look at the finer details of their product mix, distribution, sourcing, pricing and services and make choices about having a differentiated product mix.
• Collective and bulk buying or stocking what the larger malls cannot possibly stock.
• Take advantage of the physical proximity to the customer. They can forge closer ties with the customer and use their superior understanding of the customer needs to their advantage.
• Adapt and change their products and service to suit consumer preferences as big chains take quite some time to do so.
• Identify niches and focus their efforts on the niche rather than diffuse their energies across a range of products.
• Traditionally they have been offering credit and services like home delivery. Leverage on this.