24.01.2008

• How are our IT companies facing the rupee appreciation?
• In the last 15 months, the rupee has appreciated 14% to 15% and every 1% rise has a margin impact of 40 to 50 basis points (0.40 to 0.50 %) for them.
• Wipro will cover the currency at a particular level for the entire tenure of a project so that the margins are protected.
• Satyam BPO has gone back to the table a couple of times for rupee-triggered price renegotiation and is also attempting outcome-linked contract structures.
• Both Wipro and Infosys have managed price increases in the range of 3% to 5% from both existing and new customers.
• Can you notice the different strategies adopted by different companies?
• On stock market turbulence
• When there is turbulence in the stock markets, it is but natural that all sorts of suggestions will be thrown up for proper monitoring and reform. Are investors not aware of the inherent risks when they are betting their money? I am surprised that governments appear to be deriving lot of satisfaction when there is buoyancy in the markets and lose their nerve when there is a fall. Whatever may be our opinions on the matter, what matters to you and me is that it is quite possible that you will be asked questions in interview about such times.
• One such possible query could be: “Do you feel that there is any structural weakness / deficiency in the Indian markets? If so, how would you address them?” For such a question, today’s ET editorial offers the best answer. Look at it:
• First is the lack of depth. The fear of FIIs pulling out was enough to send the market into a vertiginous fall. More institutional players – such as pension funds — are required to balance out investment horizons and to provide markets with adequate depth.
• Second, enough discussion has already taken place about the need for a robust securities lending and short selling infrastructure. It’s time to implement it immediately if heterogeneity is what is needed.
• Finally, if there is one lesson to be learnt from the recent trading it is this: there might be enough liquidity in the system, but the temporary mismatches in transferring liquidity from one part of the system to another is causing bouts of desperation. The solution is to ease such flows within the system.
• The crisis in rural health care
• This is one excellent piece that appeared in today’s ET. You can’t afford to miss it. It is by Arvind Panagariya.
• The article gives the details of organisation of the rural health care in India very well. Couldn’t get a better account elsewhere so far.
• I don’t want to do a précis about it. You must read it; read it and read it. Don’t know that the link leads to it? Then click here to read it.
• About our exports
• The government is thinking of weeding out some time worn export incentive schemes. These will be schemes of marginal use and low utility like the EPCGS (Export Promotion Capital Goods Scheme) etc.
• Our exports target for the current year is $160 bn. We are likely to see our exports touching $150 bn.
• The next year’s target is pegged at $200 bn.
• A new investment instrument for our markets
• It is a DCB – Domestic Convertible Bond.
• It would allow investors to trade their debt component and equity options separately.
• It will be like a convertible debenture making regular coupon and principal payments, and also giving the bondholder the option to convert the bond into a stock.
• The instrument will be largely aimed at institutional players. Active presence of institutional investors was important to bring liquidity in the debt market.
• Revival plan for irrigation
• Government is thinking of coming out with a National Project concept for this. It will cover 14 ventures and the identified projects will get 90% funds directly from the Centre, and states will have to fork out only 10%.
• Since 1996-97, the Centre has spent Rs. 20,598 crores under AIBP (Accelerated Irrigation Benefit Programme). States have added another Rs. 15,000 crores for this. Despite this, the net farm area that is officially irrigated has remained static at 53 to 55 mn hectares.
• Studies point out that between 1995-96 (before AIBP was launched) and 2003-04 (the last year for which official data is available), the gross irrigated area has risen from 46.5 mh (million hectares) to 49.3 mh for all cereals, from 3 mh to 3.3 mh for pulses and from 3.9 mh to 4 mh for sugarcane. Moreover, even this marginal increase has been offset by declines in oilseeds (from 7.3 mh to 6.5 mh) and cotton (from 3.2 mh to 2.6 mh). In effect, the over Rs 35,000-crore public money infusion into AIBP have not benefited the farmer.
• Want to know how we have been faring under various Plans? Look at this figure.
• The actual irrigation potential created so far is about 101 mn hectares. The average cost of irrigation works out to Rs. 1 lakh per hectare.