21.09.2007

• The rise and rise of the rupee
• Over the past 6 months, the rupee has risen over 9%. The second fastest growing economy (India) has seen foreign portfolio and private equity investment and FDI.
• A rising rupee means:
• Bad news for export oriented businesses. Exports will become costly for the foreign importers.
• Cheaper travel or spending on holidays abroad.
• Policy makers will have to weigh the options of fiscal sops to support exporters.
• A glut of liquidity that will stoke inflationary pressures.
• Foreign investors will be happy, because they get to take back more dollars when they convert their investments.
• Defence to close all microwave links by March 2009
• Present wireless communication technologies used by the ministry of defence are based on tropo-scattering and use spectrum inefficiently. In most countries, defence forces have migrated from these technologies and have vacated the spectrum for commercial use.
• India’s first power exchange gets the CERC nod
• The CERC has approved the setting up of the country’s first power exchange – IEX, Indian Energy eXchange – for trading in power.
• In India, the scope of trading in power is considered huge, because the North and West are power hungry and power deficit regions. The East is power surplus and has lot of spare capacity, which can be effectively traded.
• Currently, short-term trading constitutes a mere 3% of the total energy market as against over 15% globally. Power markets generally operate with PPAs (Power Purchase Agreements) for long-term trading and bilateral contracts for the short-term. For very short-term requirements there is the UI (Unscheduled Interchange) regime.
• A little about UI: Power transmission happens at high voltages – typically 132 KV and above. There is a grid to which several states are connected. For example, for the southern grid, almost all the four southern states are connected. Power is supposed to be supplied at an ideal frequency of 50 Hz. But frequencies sometimes touch 48.x. The lower frequency means that there is more consumption happening than what is being produced. Whoever draws power from the grid when the frequency is low pays more for the power consumed. This payment is made to those who draw less power during this time. Say for eg., if AP has drawn more power (than its permitted quota) when the grid frequency is 48 Hz, it will have to pay more for the extra that it has drawn. This ‘more’ will be much beyond the actual cost price of the power.
• India’s retail investor
• Only 3.5 mn Indians – from a total working population of 321 mn people in the 18 to 59 age group -- invest in stocks. Or 7.2 mn invest in stocks, either directly or through mutual funds. That’s just over 2% of the total working population!
• Nobel prize winning economist Gunnar Myrdal wrote the book
• Asian Drama: An inquiry into the Poverty of Nations
• He, along with Friedrich von Hayek, won the 1974 Nobel Prize for Economics for their "pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the interdependence of economic, social and institutional phenomena.
• In “The Malaysian miracle” Joseph Stiglitz explains how Malaysia has successfully weathered the 1997 East Asian crisis and how it was a miracle economy in spite of it having all the failings of a previous colony.
• Instead of taking to communism or Russia, Malaysia looked east and invested in education and technology. It pushed for a higher savings rate, enacted a strong and effective affirmative action programme and adopted sound macroeconomic policies.
• It eschewed ideology and followed or rejected outsiders’ advice on pragmatic basis. During 1997, it did not adopt the IMF policies and as a result had the shortest and shallowest downturn of any of the afflicted economies.
• Alan Greenspan’s tenure as US Federal Reserve Chairman is marked by the following highlights:
• The economy grew 70% from 1987 through 2005
• The number of non-farm jobs increased 31.4 mn or 31% with average unemployment of 5.6%
• Annual inflation as measured by the consumer price index averaged 3.1%
• Pre-tax corporate profits jumped from $369 bn to $1.33 trillion
• The stock market quadrupled, with the S&P 500 stock index rising from 287 (the 1987 average) to 1,207 (the 2005 average)
• Yet, he called his memoir “The Age of Turbulence”. Critics say, he should have as well called it “The Age of Tranquility”.