Challenges in front of Indian Infrastructure Sector

India infrastructure: big ambitions, big potential, big money, little happening. This is what I feel, sums up, what's happening in the Indian infrastructure sector. Government's extended enthusiasm about the sector hasn't been able to get the big infrastructure projects moving. There are lot of PPP projects coming up but what's going wrong? Many Infrastructure and Power shares are seeing constant ups and downs in the market. What is keeping the big money away? Surely the private investor is upbeat on the sector and so is Indian mutual fund. But the big money from western FIIs and Pension funds doesn't seem to have embraced the sector gladly.

I believe that there are few sore issues which needs to be taken care of so that the Indian infrastructure sector can be put on fast track asap.

Mobile Marketing: Potential or Pain?

Mobile advertising has off late gathered lot of intellectual discussion. Some see it as a great potential and others treat it as a pain in the a***. Mobile advertising today, as I know, mainly comes in the form of SMS (Text Message/Multimedia Message). I am keeping the advts. which a user sees while browsing internet through his mobile phone separate from this.  A quick look at Wikipedia suggests that worldwide, over 90% of mobile marketing is done through SMS.

I personally feel that mobile advertising has one of the biggest nuisance value as compared to other conventional mode of advertising. I would request readers to pour in their views and correct my opinion.

Well, in case of TV advt. I switch on my TV to watch my favourite show and attached with it comes few advt. which I see during the breaks. Thus, I don't switch on my TV to watch Advertisements!

I pick up my favourite news paper to read the latest news/articles/opinions and while browsing through the pages I get to see some advertisements. Again, I didn't pick the newspapers to check the advertisements!

Let's take the case of web advertising as well, and there also I go to my favourite website to browse it and I see few ads while browsing through my favourite website. Thus, the ads come with my favourite website which has some helpful content for me. I didn't go on internet to see ads.

You can apply a similar logic for hoardings, banners, etc which you see on your way. You usually don't go somewhere to check the hoardings or banners.

Role of Fiscal and Monetary policy: American context (Part 2)

Welcome to part 2. (Click here to read the first part) I will begin this part with the modern panacea for recession. Loosen monetary policy, let your currency depreciate boost your export and plough back out of recession.

This looks efficient as well as effective in most cases. Although the sanity of increasing liquidity in the market was not suggested to the Asian tigers or the Argentinean government during the crisis, still it is now a well established fact to do so in order to fight recession. However, it might not give its usual results when we look at America.

The USA is a net importer with huge trade deficit and USD is the global trade currency. Many other countries are dependent hugely on trade with the USA and also dependent on the value of USD. This has propelled most of the developing countries to maintain the value of their domestic currency against dollar to keep them competitive in the export market and also to prevent losing the value of their forex reserves. These nations which include the likes of China, Russia and India, have chosen domestic inflation over stronger local currency (Click here to better understand this phenomenon). Another factor which plays a role in keeping the dollar strong against other currency is that US lies in the centre of today’s mono polar world. Thus no major economy across the world stays untouched from US recessions. You can see on the graph how Euro area follows US GDP growth rate.

Role of Fiscal and Monetary policy: American context (Part 1)

Hi friends,

I started off with the aim of exploring recessionary economics. I wanted to find out the different ways in which a recession is triggered and steps which can lead a nation out of it. But as I spent more time on it, the length and complexity of the scenarios to be considered kept increasing. I wanted to present a simple model which can explain different kinds of recession and give a clear picture of the phenomena which everybody can understand. But as I said earlier it’s now taking too much time. Let’s see when I complete it, if I complete it at all.

Right now I will give a quick over view of the role of fiscal and monetary policy and understand them in today’s context. I will also try to explore how they work in the American economic system.

We typically have two kinds of tools to bring changes in the economic condition of a country: fiscal policy and monetary policy. We use an expansionary fiscal/monetary policy to plough out of recession. Here is how they work and the basic difference between them.

Fiscal policy focuses on controlling the government spending in order to accelerate or retard economic growth. During recession, an expansionary fiscal policy is used which aims at increasing government spending to directly increase investment, employment and thus domestic demand. Expansionary fiscal policy is either financed through borrowing or tax increase.

Monetary policy aims at controlling the liquidity in the market to spur up or slow down the economy. It is implemented primarily through interest rate control (though there are other ways as well). Usually the central bank is responsible for fixing the interest rate. During recession, an expansionary monetary policy is implemented (easy money) which aims to bring down interest rate or make money cheaper. It is then expected that with cheaper money, the private sector will increase production, which will increase employment and then demand.

The effectiveness of the above tools depends a lot upon the source which triggered the recession, severity of the recession, objectives which the government/central bank is looking to achieve (like exchange rate stability, price stability, et al), financing options, how soon the results are desired, etc. Both got a validation and initial acceptance after the great depression. However, while recovery from the depression of 1933 saw the use of fiscal stimulus, the world today is seeing more of monetary policy being used to fight slumps in economy. There are various reasons for this

Stocks, Gold or Treasuries?

Hey frns... I see this question popping up quite a bit more frequently now as compared to couple of months back. Perhpas the liquidity boost given by central banks have started to reach the pockets of individuals.

Well I believe that the excess liquidity in the market will surely ensure low returns from treasuries.

How about gold and stocks... excess liquidty can chase either of the two...

Below is my take on the situation...

We are still not out of the recession... at this unpredictable juncture, a greater affinity to gold is more likely. Gold has always been a safer bet, a reliable bet and should attract the liquidity when the confidence in the market is still far from upbeat. Also, greater investment in gold will act as a hedge against inflation and thus would be a desirable outcome for central banks as well. Thus, during our journey up the economic curve as we move out of recession, gold should get higher proportion of investment. However, as the haze clears up and the economy looks upbeat, stocks would lead the race. As the confidence in the business returns, stocks will start outperforming gold.

I am sorry for this unstructured and badly written post but I hope you would be able to make some sense out of it.

Just to summarise:

1. I won't put my money on treasuries for now.

2. Gold will outperform stocks now. It will remain the same for approx 5-6 months in Western markets. In India, the period should be shorter to about 3-4 months.

3. Stocks take the lead perhaps arnd 6-8 months down the line in Western market. Indian market would start seeing better returns on stock compared to gold slightly earlier.

For people trading in Gold, it would be a good idea to invest in stocks in order to hedge against the fall in gold prices which shoud come as we start seeing a steady rise in stock prices. This, I believe is the clue. Yes, "steady" is a very vague term and evrybody will have a different definition for it. However, keeping this fact in mind can help you to minimize any loss or build upon your profits as the investment shifts from a safer gold to a higher return stocks...

Hey pls do leave a comment if you think that my posts are not structured, not worded properly or you think that they don't properly explain the issues. I will try to improve them. I usually write them in a hurry and I end up with a not very smooth and lucid writeup.

American recession fuelling domestic inflation?

American economy is influencing the world economy as never before and particularly the Asian developing nations which are increasingly becoming dependent on GDP growth fuelled by $ based trading. The present American recession pushed the US interest rate down to almost zero. However, the crisis didn't require similar cut back in interest rates for other economies. Though we saw strong measures to increase liquidity in developing nations. Why were the interest rates cut down so much and increased liquidity was ensured through various means. Why did it all happen and why in this large proportion? Was it only to fight liquidity crunch in the domestic market of developing nations? No, the reasons are not so simple. There was another very important factor playing a role. "Developing nations dependence on Dollar based world trade".

As lowering interest rates in US devalued the dollar, developing countries like India had to follow suite. Developing nations had to make a choice between stable exchange rate and domestic inflation. Most of the nations chose to maintain their currency against dollar rather than to maintain a stable domestic inflation rate. In doing so, almost every developing nation increased the flow of domestic currency in the local market, but this was done not only to fight credit crunch but to match the falling dollar as well. The extra bit of effort made to maintain the value of dollar cost the countries a recent surge in inflation.

Well, free market economy is all about choices. The developing economies chose to defend dollar to maintain their cost advantage but in the process stoked inflation which will anyways hurt export. The question is which would have hurt more? A weaker dollar or domestic inflation?

Please write in your views.

What to blame for the present economic crisis?

It's an interesting question, specially because everybdy wants an answer and has an answer as well to this query. I would not put the blame on Financial innovation or American politics or Greed or Real estate crisis, etc etc... What we receive is often a result of what we choose, and we have chosen to follow a "similar to" free market economy model. Not a wrong choice but surely it comes with an inherent characteristic named *swing* which is responsible for 'almost cyclical' booms and bursts in the economy. Free market economy, though gives space to greed, profit motives, financial innovation, political adventurism, etc etc, still manages to provide an economic model which is good enough to be followed by the majority of the world. For me, the only downturn is the *swing* which needs to be controlled through appropriate policies. The swing needs to be attenuated through regulatory measures.

With the choice we have made, everything else which we have blamed so far is inevitable. Political adventurism, greed, booms, bursts, et al, have happened in past and will keep happening without control. The only controllable part is regulation which we failed to provide and thus should bear the blame for the crisis.

Check out these Economist ads!

Inquisitive?

Reasons have nothing to do with age!

Management trainee, aged 42 :)

It's a connected world and we feel it...

:D

My dad didn't n I have nothing of them all :(

What do you think are the top 6 issues concerning India?

This is what I view as the top 6 issues concerning our nation(India) today. I want to base my opinion on some of the basic tenete on which i believe a healthy and progressive nation is based. These fundamental blocks for me are (in no particular order)

1. Free and Liberated minds

2. Healthy citizens

3. Leadership and vision to lead the nation

4. Justice to all

5. Peace and Harmony

6. Robust economy governed by fair and inclusive system

Keeping the above in mind, I would suggest the following issues which needs to tackled with urgency.

1. Education.

1.1 Need for bigger, better and more number of par excellence institutes of higher learning for science, commerce as well as arts.

1.2 Need Quality primary education for all

2. Health. Need Better health and sanitation facilities. Interestingly over 30% of doctors in the USA are Indians while we all know the plight of health in India!

3. Leadership. There is big void of strong leadership and a visionary in the political arena. In fact I wonder who in the long history of indian civilization could have played the role of such a leader. What's your opinion on this? Vallabh Bhai Patel? Ashoka? What kinda leader do you want to have for your country? Opinons welcome...

4. Courts. We need higher number of courts with a stronger machinery to monitor court proceedings. We have nearly 30 million cases pending in our courts! Justice is absolutely fundamental for the well being of citizens and nation.

5. Terrorism. Well I don't know how to deal with core fanatics who irrespctive of being educated or not, having a family or not, having a job or not, et al... behave in certain unacceptable ways. But many of their followers (who make d majority of the number) are not like them. But still they have enough "time" to get into other people's business rather than minding their own. Perhaps inclusive growth is one small step to styme the growth of such followers at least.

6. Tax System. Tax system is just one among many systems which plays a major role in the way our economy works. Our tax system is still incapabale of bringing tax evading companies/people to books. We lose billions of rupees every year because of it, thus creating a handicapped gov. with a burden of consistent budget deficit. Fixing the tax system can be the key to many other lingering issues which the gov. can't handle due to lack of resources. Overhaul and reforms in this field has to be a part of bigger effort to enlist citizens, companies (listed, unlisted, SME, etc, etc)... We need to bring every person (social security no.) , every transaction, every biz, to books at which we r way behind. Even small SMEs save crores of rupees every year by evading taxes! This is an aspect which has never been given enough importance. But we need to, sooner than later.

Your thoughts welcome... Pls write what in your opinion r the top issues being faced by India...

Future of 80/20 thumb rule?

Check this thought provoking write up on the ever so famous 80/20 rule...

http://www.siliconindia.com/startupcity/index.php?arId=29&cat=1&pgid=1