Finance & Economy

  • Branch licensing to be done away with?
    • The Finance Ministry appears set to take up the issue with the RBI.
    • The argument in favour of the de-licensing is to do with the total number of branches available in the country at present. There are reportedly only 76,000 bank branches in the country to serve a population of 110 crores.
    • Hence it is felt that instead of waiting for reciprocity from foreign banks, all banks - foreign ones and ours alike - should be allowed to open as many branches as they deem fit.
    • A number of committees favoured branch de-licensing. The Raghuram Rajan committee has recommended a new system wherein banks would be asked to open a proportionate number of accounts in low income areas vis-a-vis high income localities, to ensure that banks give proper attention to areas with less banking penetration.
    • This graphic gives us details of bank branch penetration in India.
  • How do tax cuts (read fiscal policy or fiscal stimulus) help improve demand in the economy?
    • In normal circumstances, when income tax is reduced, disposable incomes would go up while cuts in indirect taxes (sales tax and excise) would get more goods because of a drop in prices, if reductions are passed on.
    • But tax cuts do not necessarily help in a situation where wealth destruction is prevalent; as for example the present times. Most direct tax cuts are likely to be used to repay debt, as was the case with the $100 billion tax rebates in the US. Cash-stressed corporates would, on the other hand, retain the reductions in indirect taxes as profits and not necessarily pass on the same to consumers through price cuts. Therefore, tax cuts look unlikely to cause consumer spending to go up commensurately.
  • Will India be seeing job losses in the present scenario?
    • This is an excellent debate from two experts on the job scene. A worthy read. I can't help but excerpt an excellent piece of advice from Manish Sabharwal in this context:
      • 93% of India's labour force toils in the unorganised sector where social security, job security and workplace safety are distant dreams and job adjustments are everyday reality. Economic reforms have demonstrated that economic growth is a necessary but not sufficient condition for poverty reduction. Poverty reduction comes from access. And access comes from the 3Es (education, employability and employment). This crisis is an opportunity for policymakers to review our 3E regime and fix an education system that produces unemployable people and a labour regime that breeds unorganised employment.
  • Now that every other country in the world is slipping into recession, what should companies typically do, to stay afloat in such times? If you are asked to state a few measures that you would initiate to ensure your company stays afloat, what would your response look like? Will it have any of these recommendations?
  • The problem of policy lapses in the insurance industry.
    • Do you know that the industry is seeing record policy lapses currently? Mis-selling, change in economic situation of the policy holder and the insurance agents' prodding to junk old policies in favour of new are touted as the major reasons.
    • The insurance industry has reporteldly paid out over Rs 20,000 crore in insurance commissions on new policies last year.
  • How do currency derivatives bring more advantages to currency trading?
    • Currency derivatives differ from OTC (over the counter) as they help improve the efficiency of price discovery, attracting heterogeneous participants.
    • Secondly, by virtue of scale of participation and its cost structures, the transaction cost in futures is usually much lesser than that of OTC alternatives.
    • Thirdly, compared to OTC, futures offer more price transparency, fully eliminating the counterparty risks and reach out to a larger section of population leveraging technology.
    • It is interesting to know that the daily transacted volume of forex in India is estimated at $34 billion. All of it in the OTC market. That is, it is not traded on the exchanges. Transactions are done directly between parties.
Technology & Computing
  • Look at what IBM is researching into or predicting what the future would look like!
    • Internet can be surfed by voice. Not through a keyboard or mouse.
    • Medical treatment will be based on your genetic make up; just for $100.
    • Thin-film solar cells which are 100 times thinner than silicon wafer cells. They are cost-efficient and can be printed on a flexible backing, on the sides of buildings, tinted windows, cell phones, laptops, cars and even clothing.
    • See the power of imagination! I am really amazed.
  • Why are salt tolerant crops needed?
    • According to the Central Soil Salinity Research Institute (CSSRI) at Karnal (Haryana), 6.7 million hectares (mostly in Gujarat) of farmland in the country has been affected by salinity ingress. This is detrimental to crops.
    • Farmers can now look forward to salt-tolerant transgenic crops. The Bhavnagar based Central Salt and Marine Chemicals Research Institute (CSMCRI) is developing "salt-tolerant" varieties of crops like groundnut, tobacco, cumin and banana.
    • Though three generations of the crop have been successfully grown in the laboratory, it will take 2-3 more years before the new variants of groundnut and tobacco are available commercially.
  • US Federal reserve announces a new $800 bn package
    • The aim of the two new schemes announced is to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
    • The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing finance companies. It will set up a $200-billion programme to support consumer and small-business loans.