28.05.2008

• On retail yet again
• It was just yesterday that we noted something about the ICRIER study on organized retail not posing a threat to unorganized retail. Time for some more snippets worth our attention.
• The study says that in geographies where small stores were competing with organised retail their sales were down 8% and profits 9%. And that less than half the 4.2% small stores that close down every year do so because of the competition from organised retail.
• These are not the fatalities for which we should sacrifice the large externalities of organised retail. Farmers, for instance, could see a 25% increase in their realisation when they supply directly to organized retail instead of going through the government mandis.
• Clearly, it is time to stop seeing small retailers and large stores as antagonists. Both of them having their own niche. Unorganised retail has a different USP — proximity to the consumer, possibility of credit and bargaining — from large retail chains which score mostly on choice and prices. So, it is possible for smaller stores to tweak their business to survive and grow. A greater play to cash-and-carry outlets, which can supply goods to them at lower rates by sharply pruning the distribution chain, would help protect margins. Access to bank funds enabling them to extend credit to their customers can ensure there is no significant drop in sales. A general lowering of cost of doing business by reducing government interface of multiple licences would also help.
• Alarm bells on education spending?
• The cumulative expenditure of states on educational services as a percentage of total expenditure has dropped from 20% in 1995-96 to around 18% in 2007-08.
• There is also a significant deepening of inter-state differences in per capita education spending across states. Per capita fund flow to education, in 2005-06, varied from Rs 483 in UP and Rs 487 in Bihar to Rs 1,034 in Maharashtra and Kerala and Rs 1,777 in Himachal Pradesh, a difference of four times between the lowest and highest expenditures.
• Studies show that a decline in fund flow to this sector is leading to a deterioration of education infrastructure at the primary and secondary level in the states. There are reports of inadequacy of government schools, especially in the rural areas and acute shortage of trained and motivated teachers. As a result, Indian households are compelled to spend 1.4% of GDP on private education as compared to 0.7% in OECD countries, leading to education deprivation essentially among the poor.
• Should FII investment limits in debt be hiked? The RBI has taken cautious steps to increase the limits of FII investment in Indian government debt from $2 billion to $2.6 billion and further to $3.2 billion and for the corporate debt, the limit has been increased to $1.5 billion from $0.5 billion. What benefits could accrue from this move?
• It would provide a greater linkage to international interest rates;
• Lead to a long-term equilibrium in the Indian financial markets; and
• Would strengthen the growth impulses in the economy.
• Look at the fertilizer subsidy bill
• The government announced a fertiliser subsidy package of Rs 95,000 crore, more than double the amount that was announced in the Budget this year.
• Japan and its yen carry trade
• Remember the words 'unwinding of the yen carry trade' when we were noting about the evolving subprime crisis? Time to know that a reverse is happening. That is the carry trade is gaining momentum.
• The carry trade — using low-yielding currencies to buy higher-yielding ones or assets — works best when markets are calm and predictable and many analysts had expected it to fall out of favour after the credit crisis flared up in August 2007. As market volatility surged to 10-year peak and sharp swings wiped out returns made on yield differentials, many trend-following funds and speculators unwound carry trades and are still nursing their wounds.
• But why is it holding firm or perhaps making a stronger comeback?
• A growing conviction that the worst of the credit crisis is over has helped global stock markets stabilize, which typically leads to a reduction in volatility and supports carry trades.
• Experts say that worries about more US financial system troubles and rising inflation pressures will dog stocks and keep carry trades limited for some time. But eventually the carry trade trend will make more of a comeback.
• In this context it would be interesting to know that Japanese households still hold about 780 trillion yen ($7.6 trillion) in virtually no-interest cash and deposits, 10 times more than in mutual funds. Compare this with the size of the US economy? Japanese household savings are a little over 50% of the US GDP!
• Arun Sarin steps down as CEO of Vodafone!
• This is the kind of corporate career that is everybody's envy.
• Just at the age of 53, he decided to call it quits; that too when the company is in the pink of health. A look at his career graph:
• 1984: Entered telecom industry, joined Pacific Telesis Group in San Francisco
• 1995: Followed mentor Sam Ginn to newly-formed wireless communications company AirTouch
• 1999: AirTouch & Vodafone joined hands to create Vodafone-AirTouch; Sarin was made CEO
• July 2001: Joined Accel Partners and KKR to lead a new telecom venture called Accel-KKR Telecom
• July 30, 2003: Appointed CEO of Vodafone
• July 29, 2008: Stepping down as CEO of Vodafone
• Obituary: Sydney Pollack
• Hollywood filmmaker Sydney Pollack, who won a pair of Academy Awards for the epic romance Out of Africa and earned praise for acting stints in films including Tootsie and Michael Clayton, died on Monday after a battle with cancer, his spokeswoman Leslee Dart said. He was 73.
• His biggest triumph was the 1985 drama, Out of Africa. Meryl Streep played the Danish owner of a coffee plantation in Kenya, and Redford the adventurer with whom she falls in love. Nominated for 11 Academy Awards, the film won seven statuettes.
• Tax authorities are cooperating across the globe
• Cross-border collaboration has become a buzzword in global law enforcement circles. Under an OECD-negotiated treaty, 19 countries can now prosecute tax evaders within their jurisdiction. The EU passed a similar law in 2000, while Brazil, India, and South Africa began cooperating with each other to identify suspect transactions in 2006. Their targets typically conceal assets in roughly 40 nations generally seen as tax havens, which are analysed routinely by international organisations such as the OECD and the IMF.
• Almost $6 trillion is estimated to be hidden from tax authorities across the globe. To close this “tax gap”, US investigators and their comrades overseas are cooperating as never before.
• Water proof rice
• Helped by IRRI, the Manila based International Rice Research Institute, farmers in India and Bangladesh are expected to take to water proof rice cultivation in a big way.
• With the Sub-1 flood-resistant gene, farmers could produce six tonnes of rice per hectare under normal conditions and around three tonnes if the paddy was submerged for two weeks. Normal varieties would only yield 1 tonne or less if subject to that sort of submergence.
• The flood-tolerant gene is introduced to existing rice varieties through normal cross-breeding techniques and not via genetic modification.
• IRRI, which started a Green Revolution in the 1960s and 1970s with the development of high-yielding rice seeds, is also working on drought-resistant varieties of the grain to deal with a world beset by global warming.
• Latest in James Bond series
• A NEW James Bond novel is published on Wednesday, the 100th anniversary of the birth of his creator, Ian Fleming.
• ‘Devil May Care’ was penned by the award-winning British novelist Sebastian Faulks at the request of the late author’s family.
• A bit about Ian Fleming
• Fleming used to write novels in one stint at Goldeneye, his home in Jamaica, often between the months of January and March. The son of a Conservative Party politician and educated with some of Britain’s elite, Fleming was a journalist with the Reuters news agency, as well as a stockbroker, a banker and above all, playboy. He was considered too old for active service in World War II but worked for naval intelligence on a number of missions.
• In 1952, at the age of 43, he wrote his first Bond adventure, ‘Casino Royale’, on a typewriter overlooking the Caribbean Sea.
• Between 1952 and 1964, when he died, Fleming wrote 14 James Bond novels. The last — ‘Octopussy’ — was published posthumously in 1966.
• India losing out on nuclear power front?
• WITH China and Pakistan signing a nuclear cooperation agreement, Russia and US finalising their 123 Agreement and a host of other countries, including those with easy access to oil, expressing their intention of starting civilian nuclear programmes, India’s failure to move on the nuclear deal is being keenly felt within the government.
• It also comes as no comfort to the government that over 49 developing countries, according to reports, have approached the United Nations to start civilian nuclear programmes. This includes countries like Saudi Arabia, Kuwait and the United Arab Emirates which are all countries that have huge oil reserves.