06.03.2009

Politics & the Nation
  • The link between elections, the fall of the rupee and M3
    • If you read this report, you will get a picture of what I am talking about.
    • There is a strong link among all the three of them.  When there are elections, there is an increase in inward remittances causing downward pressure on the rupee and an increase in the money circulation.
    • It is actually a no-brainer given that we know how our political system operates during elections.
  • An interesting opinion on the trend of remembering turning points or major events by the dates of their occurrence:
    • Dates give a momentary thrill, not lasting history. It’s the events that stick. You remember Quit India, you remember Emergency, you remember reforms but not the dates on which these nation-changing events were announced. Remembering the turning points in a nation’s history as just dates is nothing but trivialising history. 
    • The comment was made about in the context of such things as 9/11, 26/11 etc.  Can't disagree with this.
Finance & Economics
  • The BSE sensex tanks to 40 month low
    • Amid reports that the government has withdrawn close to One lakh crore rupees from ONGC without the consent of / information to the minority shareholders, the sensex tanked below 8200 levels.
    • Even the paring of repo and reverse repo rates by 50 basis points did not give any boost to the markets.
  • Who is King Canute?
    • "RBI as King Canute" reads the heading of today's ET editorial.  What is the story about and who is this King Canute?
    • The latest rate cuts announced brought the repo and reverse repo rates to 5% and 3.5% respectively.  
    • King Canute was a 11th century King of England and much of northern Europe.  According to an apocryphal story, Canute set his throne by the sea shore and commanded the tide to halt and not wet his feet and robes; but the tide failed to stop. Canute leapt backwards and said "Let all men know how empty and worthless is the power of kings, for there is none worthy of the name, but He whom heaven, earth, and sea obey by eternal laws." He then hung his gold crown on a crucifix, and never wore it again.
    • The story perhaps was an attempt by the European chroniclers to show the limitations of the King.  In comparing RBI to Canute, ET is trying to portray the helplessness of the RBI in the current situation.  Any amount of rate cuts cannot increase the flow of credit, as why banks are hesitant to lend is because the risk associated with lending — risk premium — has increased dramatically. 
  • What was wrong with our FRBM targets?  How could they have been set more correctly?
    • This is an excellent article that those of you with finance and economics backgrounds can hardly afford to miss reading.  Strongly recommend a full read.  For those of you who don't have the time or inclination, an excerpt:
    • Where we erred in drafting that law was in adopting absolute numerical targets for the federal government’s fiscal and revenue deficits. Initially, the rules were laid down for 2008; and later the goalposts — 3% and zero for fiscal and revenue deficits, respectively — were shifted by a year to 2009. This obsession with absolute targets was fundamentally flawed. 
    • If the FRBM Act had instead followed the Chilean model and targeted a structural budget balance that emphasised saving at least part of the tax buoyancy in good years in order to spend it in bad ones, we could have entered the current financial year with a healthier fiscal situation. We could then have opened up the spending taps without having to worry about a ratings downgrade. 
    • This is precisely what Chile is doing. The price of copper, the country’s main export, has dropped 55% in international markets in the past 12 months; Chile has also been hit hard by the worldwide credit crunch. The government has, therefore, announced a $4 billion stimulus package to shore up the economy; analysts have few concerns about how this plan —which amounts to 2.8% of GDP — will be financed. 
    • And because Chile’s rating is not under a cloud, the government aims to sell foreign-currency bonds for the first time in five years. This will allow Chile to raise funds to spend in the local economy without “crowding out” the private sector from the domestic debt market. Compare this to our situation. 
    • Bond yields that are stubbornly high even after multiple rate cuts show a very real risk of state borrowings elbowing out the private sector. Logically, it makes sense for the Indian government to tap offshore debt markets with a sovereign debt issue. That will ease the pressure on local bond yields. But realistically speaking, the government can’t go out and raise money overseas — not when our credit standing is so precariously perched at BBB, the last rung of S&P’s investmentgrade totem pole. 
Technology
  • Some interesting stats and terminology related to telecom
    • What is backhaul?
      • It is the fibre optic cable used for communication between mobile towers and the nearest hub.
    • Telecom density disparities between rural and urban areas
      • Rural: 12.62 per 100
      • Urban: Over 80 per 100
    • It is in this context that the funds (Rs. 20,000 cr) lying unused in the USOF (Universal Service Obligation Fund) account draw attention.  If companies still show a disinclination to go rural in spite of the availability of part funding from this USOF, then the USOF administrator should go ahead and take up projects in its own and establish rural and countrywide optic fiber infrastructure.
Sport
  • Indian wins the 1st ODI with New Zealand; the second one at Wellington was abandoned due to rain.
    • India beat New Zealand by 53 runs on the basis of Duckworth-Lewis method in the rain-curtailed first cricket one-dayer to take a 1-0 lead in the five match series at Napier.
    • Brief Scores:
      • India 273 for 4 in 38 overs. 
      • New Zealand 162 for 9 in 28 overs.

1 Comment:

Shyam said...

Excellent summary as always.
Keep up the good work