21st August 2008

Happy Independence day!

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To all those who are free….and to all those are not yet free, but in a quest to unshackle

themselves. Freedom is indeed the most beautiful thing that could happen to you in life….Yes…that could happen…but has it happened yet to you…?...only you can answer…Or may be question to your conscience…
So question…do question yourself…. Dear! Are you free…?

Yes ! I am free…
Born and learnt believing something…enchanting mantras of …tradition…culture…ethos…and all that my forefathers have left for me as legacy… …discovering that my soil…my Ganges,Yamunas..Godawaries…would quench my thirsty soul……………Himalayas would guardian me…..

……………………………….I was told…when I could sense and conceive….I am born free……

Am I free now…..I doubt…..somewhere down these days….i feel…..day-by-day….i am actually losing my freedom…… When I had to do…What my conscience wouldn’t allow….. When I had to ditch my motherland….while I still being patriotic….. While I see myself enjoying every fun of life…while my nation….is actually in pain….

When I should have shouted at the top of my voice……I won’t let this bullshit to be done in my soil…to my nation…to my people…..But …..i couldn’t shout….couldn’t even murmur…. I wasn’t perhaps free, when they decided overnight….policies,lobbies,quotas….. …when they sold my part of nation…just overnight…..

I discovered …may be I am not free……
I woke up early in the morning….unfolded morning newspaper with sipping Coffee….

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just today…few Free people died in Ahmedabad,Bangalore,Ajmer,Jammu…..free..Yeah…I mean it…free like me…..Innocent….. Just today…..18 crore Kids…age…less than 12 years….are breaking their bones to earn daytime bread… ……and just today…my Government….my elected leaders….sold this great free nation in nation…..and still selling it in installments……to whoever pays the dirty price…. I believe….I am still free….because..i am not dead yet….because…the fire in

Kashmir…those Azaadi..Azaadi..screaming…have not torn my ears apart yet…
I am still free….because I can still manage my Ferrari,my I-Pod,my Tissot watch… I am still free….for I still spend my evening in Firangi-Paani or Barista…shopping in malls….enjoying PVRs… I am still free….coz..i don’t bother…that half of my nation has still not seen Thomas Alva Edision’s Electric Bulb….. Coz I don’t bother….that just few Kilometers away from my posh City-Metro…..Naxalites are eating away my territory of freedom…. I don’t bother….because…I am the proud citizen of World’s most corrupt free nation…. I don’t bother…if my Government could not give my fellow-countrymen basic amenities of Roti-Kapda-Makaan…..I have Pizzas---Westsides----my Leela Palaces…. ----------I don’t bother…I don’t bother…I don’t bother….just ..don’t…… My days are passing by…so smoothly……why should I bother……..I am

free…..free till Sun sets…Come the dark night…..I ask my self……Am I free…..Yeas….may be….may be not….Or I am NOT……

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Democracy is the most beautiful thing that has happened to human civilization….It has established the fact that all human beings are equal to all opportunities…to manifest themselves to their fuller potentials…..

Democracy however is also equally dangerous if come without sense of responsibility and discipline…. It could fatally destroy the nation, society and generation….. It is the same democracy…where everyone does not enjoy similar rights…..where opportunities are not equal….where you start doing something good…and you will find many many hands to stop you doing good….where people just do not wish something good, better that happen to them….they are just happy being what they are…wherever they are…. People are ready to die…ready to be crushed….but till we breathe..we do not have time to think….just no time to think….what is happening with us…to…us …to our children…we just don’t think…what kind of nation ,we are making…because we just don’t make this nation…we only live in it…unfortunately for many…and fortunately to few…. We remember….Democracy has rendered rights to us….we forget….it has bestowed few duties as well…. Day-by-day, minute-by-minute…we are destroying every good thing that was so far with us…polluting our rivers…sucking our groundwater, poisoning our air….chopping our Jungles..Killing our wildlife… ….forgetting our traditions…..fighting with each other….caste…Race…state…language…religion….killing each other…..corrupting ourselves…our system…bribing institutions…..vulgarizing our schools…..

I would not say you Happy Independence Day….
Just that…..this independence is attained after much sacrifices…it is still being protected by bloodstained soldiers at our borders…. Please….respect it……Our nation is very great….10, 000 years of burning mid-night candles……

Come together…for no time is left…just come close to each other…even air could not pass by….. Hold hands….together…. Lets join the caravan…lets make our nation stronger…..bring all those who are left behind…those dirty….half-naked….emptystomach…illiterate...stupid…beggars, laborers….left-behind ones….put all you intellect, strength…..appetite…together…… Feel Proud……You are an Indian…. Feel Responsible…..You have to make your India….its still in the making….

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Heroes and Hooligans
Bihar: On a fast track of growth machine: Clears 135 proposals worth Rs 71,290 crore
The Bihar government has cleared 135 proposals worth Rs 71,290 crore submitted by big entrepreneurs for setting up medium and large industries. All these proposals have been approved by the State Investment Promotion Board. The proposals approved include opening of 23 new sugar mills and the expansion of the 7 existing ones, apart from the production of ethanol in 2 sugar mills and 5 sugar cane juice production plants. The projects regarding 5 power plants, 12 food processing units and 15 steel processing and cement plants have also been cleared. As per the report, a sum of INR 603 crore had already been spent on various activities pertaining to the cleared projects, which are likely to create job opportunities for over 0.114 million people.

Amarnath Shrine issue: It’s more than just a few acres……
Kashmir is burning and so is Jammu….The issue is odd 180 Hectare of land that was about to be transferred to Amarnath Shrine board. The decision was initially taken by the then PDP Government in J&K. The issue was then taken up by fundamentalist and separatist, pro-Pakistan, pro-Taliban forces who purposefully wanted to vitiate the peaceful environment of valley.

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So far, it is not strange, Mr.Mirwaiz Umer Farooq,Mr Gilani,Hurriyat Conference,JKLF and their rank and file were always Pakistani interest on Indian soil, They were eagerly waiting for an opportunity to poison the environment and fuel separatist sentiments among common Kashmiries…And eventually they got chance. But there is a catch in the drama here. And there are people to be exposed…these are the people more dangerous than Pakistan or terrorist outfits like APHC and JKLF. And these are the people who swear by being Indian. The role of Ms. Mehbooba Mufti, Mr Farooq Abdullah and their political cousins need to be scruitinised. They are the real villains backstabbing Indian interest and fuelling common Kashmiries sentiments against Indian mainstream.

An era ends/begins in our neighborhood: Musharraf dethroned
General Pervez Musharraf, President of Islamic Republic of Pakistan has finally resigned from his premiership after a month old political tussle with the democratically elected government and its core forces.

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Departure of Mr. Musharraf from the political landscape of Pakistan has closed a great chapter, not just in the Pakistani History but in Global power circles, especially in the Indian context and much hyped US-Global war on terror. Mr. Musharraf has played a very crucial role in Terror-corridor, from Saudi-to –Iran –to – Afghanistan-Libya-Egypt and most of the Muslim dominated world. Here is the man who has sailed his country prudently in its most difficult time and transformed (or tried to transform, but failed) a fast-getting-Talibanised country to a country, which has visibly shown its determination in global war against terrorism. If you follow the statistics in last 10 years, you can easily understand that his was the time, when terrorism and infiltration dropped substantially and acrimonious gesture of Pakistan towards India moderated a bit. While looking little deeper in Pakistan, for recent years, one also can observe the positive changes, Mr. Musharraf had tried to bring in the mindset of Pakistan. Here was a dictator who, with all his human weaknesses, mistakes and ill-intentios, had something, substantial to contribute not just to his country, but to the global mainstream. What failed Mr. Musharraf? Musharraf seems to be more secular, pro-developmental and more modern than any other ruler, Pakistan ever had in its history. He was a great opportunity for Pakistan to come out of all those stupid medieval aged mindset and become a modern developed state of respect, repute and prosperity. Pakistan failed, but who is responsible? Onus lies with the man himself. Mr. Musharraf failed to deliver, what he promised for or rather what he had thought he would have achieved. He could not change the psyche of Pakistani intelligentsia. He lost it to Taliban. Pakistan of today is , sadly much more talibanised than ever before. It is well said…”You can kill an institution, millions of people, but you can never kill an idea, a thought. Taliban has resurrected

itself in common People of Middle East, London, USA and Islamic world. Taliban now is much much stronger that it ever was. Recent bomb blasts and terrorist activities in India are evidence that the so called democratic regime and forces in Pakistan are actually people and philosophy of Taliban and Al-Qaeda resurfacing with a legal face. Its as soon world realizes the fact that political power of Pakistan has actually in hands of Taliban and faces like Mr. Gilani, Asif Zardari and Nawaz Sharif are just puppets being played by very strong invisible hands who are very soon going to be surfaced.

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What are the takes from the saga of Pervez Musharraf? Number one is that it zeroes in to the Leadership ultimately. Mr. Musharraf failed to deliver what he promised for. Leaders, who do not hold on the promises they make are bound to be thrown into dust, no matter how strong legacy they assume. The second lesson is for the world and people in so called democratic society about the potential weaknesses of democracy as an institution.Democracy, per se, does not guarantee freedom and prosperity. Democracy must have elements of Discipline, Responsibility and sociological character, for, without them it is bound to fail and succumb to fundamentalist and destructive forces.

Third and the most important lesson are for India to learn….
We need to be over cautious and prepared about coming forces in Pakistan. People in power de-fecto represent Taliban and Al-Qaeda and their very survival depends on their acrimonious attitude towards us….. Watch on the newer stage for newer players to play with?

MAKETS FORTNIGHTLY
Amar Saboo
date
25-Jul 26-Jul 27-Jul 28-Jul 29-Jul 30-Jul 31-Jul

sensex
14274.94 14274.94 14274.94 14349.11 13791.54 14287.21 14355.75 14656.69 14656.69 14656.69 14577.87 14961.07 15073.54 15117.25 15167.82 15,223 15,212.13 15,093.12 14,724.18 14,645.66 14,543.73 14,678.23 14244

Sensex….too sensitive to cues
15500 15000 14500 14000 13500 13000 2-Aug 4-Aug 6-Aug 25-Jul 27-Jul 29-Jul 31-Jul 8-Aug 10-Aug 12-Aug 14-Aug 16-Aug 18-Aug 20-Aug Sensex….too sensitive to cues

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1-Aug 2-Aug 3-Aug 4-Aug 5-Aug 6-Aug 7-Aug 8-Aug 11-Aug 12-Aug 13-Aug 14-Aug 18-Aug 19-Aug 20-Aug 21-Aug

20th Aug: Firming trend in Asian region boosted the trading sentiment. Hong Kong stocks rose, with the benchmark index rebounding from a one-year low on speculation that China will introduce measures to support the economy. 19th Aug: The domestic market had shown smart recovery during final trading hours to came off from the day’s low but closed with marginal losses. Weak European markets also added to the negative sentiments. Along with this, fears of more losses from the US mortgage crisis globally mulled over the sentiment.

14th Aug: Domestic market ended the day with heavy losses as witnessed a sharp fall during the trading session on the back of sustained selling activity over the counters. The market extended losses for the third session in a row as a bounce back in crude oil prices stroked fears of increase in inflationary pressures. 13th Aug: on a subdued note as investors are waiting for the outcome of SEBI`s board meet regarding participatory notes. Weak global cues.

12th Aug: broke its winning trend to close the session with heavy losses on sustained selling pressures due to disappointing IIP numbers that were down at 5.4% YoY and negative cues from European and Asian markets. 11th Aug: The Sensex witnessed the awaited correction today, as meltdown in major global indices turned the domestic market upside down. After rallying for the past few sessions, the Sensex lost 292 points on sustained selling in heavyweights, metal and banking stocks. 8th Aug—25th July This fortnight the markets opened dull th on 28 July-08, Monday aftermath Bangalore and Ahmedabad bomb blast which had already knocked 500 points off the sensex on 25thjuly, Date
25-Jul

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Friday. Major focus was on RBI’s monetary policy on short term rates scheduled for release on 29thjuly, Tuesday. On Tuesday RBI hiked not only hiked CRR by 25 basis points as expected but it also hiked repo rate by ’50 basis points’ against the investor expectation. This again lead weakening of sensex by over 500 points closing at 13791.54. The market sentiments for the whole period was negative due to high inflation, rate hike by RBI, monsoon forecast etc. But all these news were out weighted by cues form US markets and falling crude prices. That’s why on 30th July, Wednesday, market gained 495 points due to fall in crude prices by $3/barrel amid hike in rates by RBI just the previous day. US indexes were up DJIA by 2.4% and NASDAQ by 2.5%. The crude oil prices dropped by $10 this fortnight. This has led to a rally in US markets. The Dow Jones which was at 11370.69 on 25th July climbed to 11734.32 ‘up by 3.19%’.

crude
125.93 125.93 125.93 125.05 124.71 125.19 122.03 125.19 125.19 125.19 122.07 117.42 117 118.2 115.11

crude
128 126 124 122 120 118 116 114 112 110 108

26-Jul 27-Jul
28-Jul 29-Jul 30-Jul 31-Jul 1-Aug 2-Aug 3-Aug 4-Aug 5-Aug 6-Aug 7-Aug 8-Aug

crude

The reactions of sensex to cues from US markets were notable. In fact sensex almost followed the same trends as the US markets. This trend is visible only in short run, in absence of any positive news and uncertainty. For most part sensex was similar to US markets except few days when local news was strong. Like on 1 st Aug, Friday the markets went up irrespective of weak global

cues because of expectation that IAEA will give green signal to Indo-US nuclear deal. Stocks of infrastructure companies- L&T, JP Associates; power companies-NTPC; power equipment supplier-BHEL, ABB, Siemens were up because of the positive news on nuclear deal. Rcom on the same day was badly hit trading 13% below at Rs.436.8 due to lower that expected Q1 results.

Table 1: comparison of sensex and DJIA date
25-Jul 28-Jul 29-Jul 30-Jul 31-Jul 1-Aug 4-Aug 5-Aug

DJIA
11370.69 11131.08 11379.56 11583.69 11378.02 11326.32 11284.15 11615.77 11656.07 11431.43 11734.32

%change in sensex and djia
4 2 0 -2

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6-Aug 7-Aug 8-Aug

-4
-6 %senxex %djia

Table 1 shows the movement of sensex in comparison to DJIA (Dow jones industrial average). X-axis is dates and Y axis is % change in indexes. Due to time difference the US markets lag behind our markets i.e. US markets on 1st Aug will act as cue for Indian markets on 2nd Aug(US markets open at 7.30pm IST). Now to sum up the overall story sensex this fortnight was a big gainer. On 25th July it was at 14274.94 but on 8th ague it was at 15167.82 up 892.88 points (6.25%)

compared to 25th July. The positive signs were only in the form of falling crude prices. Due to slowing down of US economy as evident from low GDP growth of 1.9% less demand for crude is expected. For India it may act as a signal of lowering of inflation and thus, no further hike in RBI rates. The most active sectors in this period were Banks (because of RBI policies, inflation and crude), Capital goods (because of Indo-US deal), Sugar (because of monsoon), oil and gas (because of falling crude).

Sector Watch
Real Estate: CB Richards Ellis views
Investment in country's real estate sector remained subdued in the second quarter this year amid global economic slowdown, which has also cast its shadow on the property markets across the world. Like most property markets around the world, Asian markets have been affected by slowing economic growth and unsettled capital markets. The cautious attitude was largely because many investors expect the ripple effect of the global credit crunch to continue unfolding in Asia. Investors have been exercising restraint in launching new developments and projects intended to support new emerging commercial hubs. Developer’s profitability was also impacted by rising construction costs, escalating interest rates and tighter lending measures. However, financially-sound institutional investors, including pension and sovereign wealth funds, remained active across major cities in Asia. Direct commercial property transactions in Asia were up moderately in the first half of 2008, as compared to the corresponding period last year.

Cement: prices to fall on surplus output
Cement makers feel their margins will remain under pressure for the next several quarters as excess capacity build up in the country is expected to keep prices from moving up. This is despite various infrastructure development projects which is keeping demand alive even as real estate development has witnessed a slowdown. The bullishness surrounding the cement sector has ended due to overcapacity. The economy’s performance is below expectation and will result in lower demand for cement. Overcapacity alone will not result in decline in prices. If input costs keep rising and cement makers still reduce prices, many of them will just go out of business. Therefore, it’d be difficult to say if prices will surely decline in a year. The cement industry has added around 20 million tonnes of capacity in the Q1 of calendar year 2008 taking the existing installed capacity to 203 million tonnes per annum. The industry is expected to increase its capacity to 254 million tonnes by the end of next calendar year, which may create a huge supply demand mismatch. Last year, the capacity utilization of the industry was over 90% with several plants working at over 100% capacity.

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Fertilizers: New Policy: A bullet fired so closed, yet missed
The new rules would promote joint ventures abroad, which in turn will help meet India's domestic demand through imports at competitive prices. According to the new investment policy, additional urea from the revamp of existing units will be recognized at 85 per cent import parity price with the floor and ceiling price of $250 and $425 per tonnes respectively. The urea from the expansion of existing units would be recognized at 90 per cent of import parity price with a floor price of $250 per tonnes. The new policy also provides that coal gasification-based urea projects will be treated at par with other new and existing plants, which will encourage use of local coal.

Iron ore prices likely to rise in near term
The domestic price of iron ore is once again rising, after experiencing a marginal slip last month. Prices are likely to shoot up even further, with steelmakers indicating a 5 percent hike in prices which they had kept in check till now. On the global front, iron ore prices have been declining, which has affected Indian iron ore exports adversely. In fact, miners in India are on the back-foot and have said that export of iron ore has slipped by as much as 20 percent in just the past month. Steel production in the country has been slow and is expected to pick up once the Olympics are over. Therefore, the current lower freight rate is nothing but a temporary phenomenon and stands to get corrected soon. According to a source, f.o.b price of 63.5 grade iron ore is currently ranging between $128 and $130. Change in prices is unlikely to occur before the first week of October.

Core Sector Research:
Indian production at 6 key sectors grew by 3.4% in June India's production at six key industries, which account for a quarter of the nation's industrial production, rose by 3.4% in June 2008. The Ministry of Commerce and Industry said in a release that the index for the six key industries rose to 232.5 in June from 224.8 a year earlier. Production in the three months ended June 30 rose by 3.5% as compared with a 6.4% a year earlier. The following is the percentage change in production Sector Electricity Coal Steel Crude oil Refined petroleum Cement Overall Jun'08 2.6 6.2 4.4 -4.7 5.6 3.8 3.4

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1st Quarter result Analysis: Devil lies in details:
Sales grew at a record pace (37%); profit growth was the slowest in the past 11 quarters. Fertilizer companies showed an unexpected 60 per cent jump in sales as the government increased the subsidy to compensate for the higher raw material prices. Food processing, pesticides, agrochemicals, industrial gas and explosives, computer education and cement firms, recorded a healthy 40 per cent growth due to higher income and increased industrial activity. The software sector, after growing at a scorching pace of more than 35 per cent for the past five years, grew at a moderated pace of 25 per cent in the period after a slowdown in the US. Power cables grew at a higher rate of 25 per cent helped by demand from telecommunication and power companies. Passenger cars, diversified companies, paints, pharmaceuticals and tyre manufacturers posted 20 per cent-plus revenue growth. Commercial vehicle sales grew by 18 per cent driven by tractors and LCVs. Motorcycle producers saw sales rising 12 per cent even after hardening of interest rate. Auto ancillary makers, which derive demand from automobile sector and original equipment manufacturer, posted a modest revenue growth of 15 per cent. Foods products (manufacturers of biscuit and dairy products), tea, personal care products, sugar, consumer durables, cigarettes, textiles and retailers, which faced price competition, expanded revenue by 10-15 per cent.

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Economy: Would the Elephant still be dancing…?
CAPEX increased to Rs 1,050,950 crore in 6 months
Despite global slowdown, the capacity expansion plans announced by Indian corporate surged to INR 10, 50,950 crore in the first 6th months of the current calendar year as against INR 5, 67,851 crore between August to December 2007.

Current Account deficit widening…

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India's current-account deficit, which includes trade and investment flows, widened to a record $17.4 billion in the financial year ended March 31, from $9.8 billion in the previous 12 months, partly because of increased spending to keep fuel prices below international levels. The deficit is the amount the government needs to borrow to bridge the difference between spending and receipts. A narrower budget gap may lead to lower government borrowing in Asia's third-largest economy, allowing reductions in interest rates.

Finance Minister undeterred….Inflation crosses 12%
India's Finance Minister P. Chidambaram believes that the central bank's tight monetary policy stance would help tame inflation in 3-6 months. India's annual inflation topped 12 % for the first time in 13 years in late July, and analysts said it was yet to peak and the central bank was not done with monetary tightening. The wholesale price index, India's most widely watched price measure, rose 12.01 pct in the 12 months to July 26, above the previous week's 11.98 % and the highest since the current series became available in 1995.

Expert Speaks: Double digit inflation to continue till December - Dun & Bradstreet
Inflation is projected to remain in double digits till the end of this year as the fiscal measures initiated by the government are expected to yield results only by December. Given the supply driven nature of the current inflation, the RBI's measures are likely to have limited impact towards controlling inflation in the short run." The fiscal measures initiated by the government to augment supply are expected to begin yielding results from December. As such, we expect inflation to continue to remain elevated and in double digits till December 2008." The report stated high input costs and rising interest rates have impacted industrial growth

with IIP growth slowing down to 5.23% in Q1 of FY 2009 against a growth of 10.28% in the same period last year. However, with inflation continuing to be in double digits and the money supply growing well above target, RBI further tightened its monetary stance, increasing the CRR and repo rates. Recent increase in policy rates could lead to upward movement in banks' lending rates, thereby increasing pressure on corporate margins. Also, high interest rates would further dampen the demand in interest sensitive sectors. We may witness deferment in investment decisions by companies. Industrial growth is therefore, expected to be subdued in the months to come and average at around 6.8% during FY 2009.

OPEC oil production up in July
OPEC pumped an average of 32.77 million barrels per day of crude oil in July an increase of 300,000 barrels per day on collective production. OPEC 12, excluding Iraq exceeded their 29.673 million barrels per day target by 637,000 barrels per day. An increase in the daily production of 390,000 barrels per day by Saudi Arabia, Iran, Nigeria and Kuwait was said to be offset by shortfalls in Libyan and Iraqi outputs. The biggest increase in OPEC production came from Saudi Arabia which increased output from 9.45 million barrels per day to 9.7 million barrels per day as it had pledged to do. Nigeria increased its crude oil output by 100,000 barrels per day in July to an average of 1.9 million barrels per day. Libyan output volume, which had declined in May and June because of repair work on Total’s al-Jurf field decreased further in July after maintenance work commenced on the Waha-Defa oil pipeline. Iraqi crude production was down by 30,000 barrels per day in July to 2.46 million barrels per day.

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…and the crude tumbled…..
Crude oil is on a falling streak for this fortnight mainly on signs that a U.S. economic slump will extend into 2009, paring fuel demand in the world's biggest oil consumer. Hedge funds and other speculators are increasing their net-short positions in futures contracts. Speculative short positions, or bets that prices will fall, have actually outnumbered long positions by 5,550 contracts on the New York Mercantile Exchange in the week ended Aug. 5, the Commodity Futures Trading Commission said in its Commitments of Traders report on Aug. 8. Net-short positions rose by 4,890 contracts, or 741 percent, from a week earlier. China's July crude-oil imports fell 7 % from a year earlier after global prices increased to a record, discouraging refiners from purchasing raw material to process into fuels. The country's 15 biggest oil refineries increased their operating rates to boost fuel supplies for the Beijing Summer Olympic Games that started on Aug. 8. Clashes between Russia and Georgia threatened alternative export routes from Azerbaijan, needed because of a pipeline fire. A fire on the Turkish stretch of the Baku-Tbilisi-Ceyhan

pipeline was extinguished following an explosion last week. Georgia is a key link in a U.S.backed southern energy corridor that connects the Caspian Sea region with world markets, bypassing Russia. The Baku-Tbilisi-Ceyhan pipeline ships Azeri Light crude.

Testimony of an optimist: Mr. L.N. Mittal

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The shock of credit crunch should moderate by early next year, with the crisis mainly affecting the financial and consumer sectors. I am sure that there will be some calmness in the whole turmoil in the next six to nine months. Large parts of manufacturing industry would not suffer the same problems as those parts of the world economy more closely linked to banking and finance such as housing and consumer goods. The world has to differentiate between the industrial and consumer parts of the global economy and recognize that they would behave differently as a result of today's difficult conditions, including tightness in credit markets and commodity and food inflation. The substantial parts of the broad industrial sector across the world would perform in a satisfactory way in the next one to two years. Much of this related to the demand for manufactured products in emerging economies such as China and India. They are continuing to grow and they need to grow. They are not stopping even if they have slowed down their progress.

NYSE Euronext 2009 CEO Report: ‘Managing During Economic Turbulence’,
The current US and global economic conditions will separate the best companies from great ones.[NYSE Euronext operates the world's leading exchange group with 4,000 listed companies representing a combined USD 28.5 trillion in total global market capitalization more than 4 times that of any other exchange group.] For the fourth consecutive year, the US is the most important region with 66%, followed by China with 9% and Western Europe with 9%. In fact, most CEOs view the US as crucial or important to their businesses. Nearly two thirds of CEOs view BRIC countries as opportunities. This is particularly true of CEOs from non US companies, of which nearly 8 in 10 see BRICs countries as an opportunity. Sensible acquisitions and expansions are targeted in BRICs countries with the majority saying they would maximize their opportunity by establishing or expanding local marketing and sales activity. Half of CEOs from NYSE Euronext listed companies plan to establish or expand local marketing and sales activities in BRIC countries through 2009. One quarter will seek or expand local partnerships. Also, a vast majority of CEOs believe that changes to the US legal and regulatory systems would have a positive impact in the competitive position of the US capital markets. US based CEOs are more optimistic about the impact these will have, compared to non US based CEOs. US based CEOs are less likely to believe a convergence of international accounting standards would have the same positive impact.

Global Stage:
Russia Georgia spat

Shiva Tankha

Georgia declared a "state of war" as Russia bombed the country and their armies battled for control of the separatist region of South Ossetia. Georgia is under a state of total military aggression by the Russian navy, air force, large-scale ground operations. The Georgian parliament approved the emergency decree, which will last for 15 days and is equivalent to declaring martial law. Within hours of the Russian bombing of the second separatist region, the Abkhazians announced they had begun a military operation against Georgian troops in their territory. THE BROADER IMPLICATIONS------Russian President Dmitry Medvedev ordered a halt to military operations in Georgia on Tuesday, saying Moscow had achieved its objectives by punishing Tbilisi , after five days of air and land attacks that sent Georgia's army into headlong retreat and left towns, military bases and homes in the U.S. ally smoldering. Georgia insisted that Russian forces were still bombing and shelling. Senators McCain and Obama are both trying to demonstrate their leadership capacities in their strong statements on the conflict between Russia and Georgia. Senators McCain and Obama are both trying to demonstrate their leadership capacities in their strong statements on the conflict between Russia and Georgia EFFECT ON CRUDE OIL ---------------------Oil fell to a three-month low today, dropping for the third day in a row, after the International Energy Agency (IEA) predicted supplies would be more adequate and Russia called a halt to the conflict in Georgia.US crude fell to a session low of $112.48.

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Energy Outlook: EIA perspective
World energy demand and carbon dioxide emissions will grow by about 50 percent over the next two decades despite soaring oil prices as developing countries outpace rich ones in consumption, the U.S. government predicts. World marketed energy consumption is projected to increase by 57 % from 2004 to 2030," the Energy Information Administration (EIA) says in its International Energy Outlook 2008 report.. During the same period, total energy demand in the non-OECD countries increases by 95 %, compared with an increase of 24 % in the OECD countries."

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The non-OECD countries' share of world energy consumption is seen rising from 47.9 % in 2005 to 58.8 % in 2030. Oil and coal -- both regarded as major culprits in global warming because of the carbon dioxide they spew into the atmosphere when burned -- will continue to dominate global energy supply, says the U.S. Energy Department's statistical wing. As a consequence, and assuming no new measures are enacted to curb climate change, the annual amount of heat-trapping carbon dioxide flowing from energy use will have ballooned by 51 % between 2005 and 2030. It sees demand for oil and other liquid fuels growing to nearly one-third more than today's consumption, topping 113 million barrels a day by 2030. Crude oil will retain its 40 percent market share throughout thanks to stepped up production by members of the Organisation of Petroleum Exporting Countries (OPEC) cartel.

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The EIA also expects alternative liquid fuels -- including environmentally controversial oil shale and biofuels such as ethanol, which has been assailed as contributing to runaway food prices -- to grow to supply nearly 10 percent of total liquid fuel consumption by 2030. The United States is expected to account for nearly half the growth in global biofuels production. This is expected to rise from 1.3 million barrels a day in 2010 to 2.7 million barrels a day in 2030, with U.S. production increasing from 500,000 barrels a day to 1.2 million

barrels a day in the same period. The EIA sees nuclear power leading growth in alternatives to fossil fuels. It anticipates that nuclear-generated electricity will grow by about one-third and that 124 new nuclear power plants will be built by 2030. Around 45 would be erected in China, with another 18 in Russia, 17 in India, and 15 in the United States, the agency predicts. "Electricity generation from nuclear power is projected to increase from about 2.6 trillion kilowatt-hours in 2005 to 3.8 trillion kilowatt-hours in 2030, as concerns about rising fossil fuel prices, energy security, and greenhouse gas emissions support the development of new nuclear generation," the report says. "Issues that could slow the expansion of nuclear power in the future include plant safety, radioactive waste disposal, and the proliferation of nuclear weapons, which continue to raise public concerns in many countries and may hinder the development of new nuclear power reactors," it says. "Moreover, high capital and maintenance costs may keep some nations from expanding their nuclear power programmes."

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Freedom

Electricity generated by renewable energy sources will rise by about 2.1 percent a year. Most of this growth will stem not from sources favoured by conservationists -- the sun, wind, or heat trapped under Earth's surface -- but from new mid- to large-sized dams in Asia and Latin America.

Our Debutants: Young Bloods
Mukesh Kr. Mangal

SHOULD INDIA GO FOR FULLER CAPITAL ACCOUNT CONVERTIBILITY ?

Fre edo m Freedom towards
PROBLEMS WITH CAC

When the Prime Minister asking the Finance ministry and the RBI to sketch the road map for Capital Account Convertibility (CAC), once again the expectation that the rupee is close to full convertibility has become a reality. Presently, current account convertibility is allowed to make and receive payments in foreign currency for exports, imports, education, travelling and trade

in services. Capital account convertibility is restricted and full capital account convertibility would allow free conversion of Indian assets into foreign currency assets and vice versa. While asking the RBI to prepare the roadmap, the Prime Minister said that India is more comfortable both externally and internally and that the time is ripe now for full capital account convertibility.

S.S.Tarapore
In 1997, a committee on CAC, headed by former RBI deputy governor S.S. Tarapore, had spelt out the conditions under which full convertibility could be ushered in. These are manageable fiscal deficit, moderate rate of inflation, strong financial sector and ample forex reserves. Government aimed at reducing the Gross Fiscal Deficit to GDP ratio from 4.5% in 1997 to 2.5% by 2009 and estimated revenue deficit at 1% by 2009. In 2007-08, Gross Fiscal Deficit to GDP ratio was 3.1% and revenue deficit was 1.4%. The average inflation for the period 1997-2000 was maintained between 3 to 5%. But presently, the inflation is hovering around 12% and also the Cash Reserve Ratio (CRR) is 9%, so these may hamper progress towards full capital account convertibility. The banking system has done well to bring NPAs down and now the Gross NPAs of all banks in India averaging close to 2% mark. India’s foreign exchange reserves are over $ 300 bn. So situations are favorable for India to introduce full CAC.

Several economists are of the view that the full Capital Account Convertibility has serious consequences on the wellbeing of the country, and this may even lead to extreme sufferings of the common masses. Some of the reasons are highlighted below.
During the good years of the economy, it might experience huge inflows of foreign capital, but during the bad times there will be an enormous outflow of capital. This has serious impact on the economy and can even lead to an economic crisis as in South-East Asia in 1997. There arises the possibility of misallocation of capital inflows. Such capital inflows may fund low-quality domestic investments, like investments in the stock markets or real estates, and desist from investing in building up industries and factories, which leads to more capacity creation and utilisation, and increased level of employment. This also reduces the potential of the country to increase exports and thus creates external imbalances.

International finance capital today is “highly volatile”, i.e. it shifts from country to country in search of higher speculative returns. In this process, it has led to economic crisis in numerous developing countries. Entry of foreign banks can create an unequal playing field, whereby foreign banks pick the most creditworthy borrowers and depositors. This aggravates the problem of the farmers and the small-scale industrialists, who are not considered to be creditworthy by these banks. In order to remain competitive, the domestic banks too refuse to lend to these sectors, or demand to raise interest rates to more “competitive” levels from the ‘subsidised’ rates usually followed. Under flexible exchange rates, capital inflows lead to an appreciation of the domestic currency directly. On the other hand, in a fixed exchange rate regime, increased capital inflows lead to monetary expansion and price inflation, which also causes a real appreciation. In both cases, capital inflows tend to cause a real appreciation and the possibility of current account deficits because of cheaper imports and uncompetitive exports which, if not controlled in time, will lead to loss of confidence and capital flight. A study conducted by Dani Rodrik (1998), finds little evidence of any significant impact of capital account convertibility on the growth rate of a country. A 1999 World Bank survey of 27 capital inflow surges between 1976 and 1996 in 21 emerging market economies found that in about two-thirds of the cases, there was a banking crisis, currency crisis or twin crises in the wake of the surge.

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BACKGROUND OF CAC IN INDIA By August 1994, India was forced to adopt full capital account convertibility under the obligations of IMF. The committee on Capital Account Convertibility, under Dr S S Tarapore’s chairmanship, submitted its report in May 1997 and observed that international experience showed that a more open capital account could impose tremendous pressures on the financial system. Hence, the committee recommended certain signposts or preconditions for Capital Account Convertibility in India. The RBI over a period of time has accepted the point that the South East Asian crisis was a bad example for Capital Account Convertibility and that India had been insulated from the crisis because it had not allowed Capital Account Convertibility. There are four benefits to India from CAC: (1) Rates of return on debt and equity in India are high by world standards. With convertibility, foreign money will come into India to reduce these rates of return: i.e., the cost of capital faced by the companies of India in equity and debt financing will drop. At a lower cost of capital, more investment projects would be viable, which would generate a faster pace of investment and growth in the economy. (2) With convertibility, Indians would be able to diversify their portfolios internationally. Instead of being constrained to only hold Indian real estate, equity and debt, we will reduce our risk by diversifying internationally. This means that in a bad year in India, when Indian financial assets generate a poor return, foreign assets owned by Indians would continue to generate good returns.

(3) CAC also has important ramifications for taxation. Convertibility opens up new avenues for a narrowing of the tax base, and hence upgrades the priority of a harmonization of taxation in India with international standards. (4) Finally, CAC puts new pressures upon macroeconomic management of the economy, in the sense that poor macroeconomic policies will swiftly generate large outflows of funds, and price volatility. Financial markets will constantly monitor economic policy; this will constrain the behavior of policymakers, and diminish the likelihood of irresponsible policy choices.

WHO BENEFITS FROM “CAC”? The class which benefits from the CAC primarily comprises the big business houses and the finance capitalists, who invest in the stock market for speculations. The policies like CAC are pursued mainly to gain the confidence of the speculators and punters in the Stock Markets, and do not have any beneficial effects on the real sector of the economy, like increasing the employment level, eliminating poverty and decreasing the inequality gap. However, the irony is that under a crisis, the burden is borne primarily by the common masses. This may come in the form of a sharper reduction in subsidies, less investment for social welfare projects by the government and an increase in the privatisation process.

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An interesting fact is, in the BRIC countries (Brazil, Russia, India and China), only India has a trade deficit. And if there are again spikes in crude prices, not only will the deficit widen, but inflation will raise more. If India goes ahead with its full CAC, then it would go down the history as a major step taken by the Indian government after the onset of the liberalization program in the early 1990s. It is seen that if the financial development of a country is not strong and that country goes in for full CAC, then it would experience volatility in economic growth. That is why the government has to be very much sure of India’s economic strength before going in for full CAC. The government should lower the import tariff and allow foreign competition and then the resistance of the economy should be evaluated. The government should also monitor the flow of short term foreign debt and see to it that there is no misallocation of the foreign funds into low grade investments. At the same time, inflation and fiscal deficit should be according to the targets set. Moving forward on this path the steps should be cautious and gradual so that when full convertibility happens there is no looking back and events like South East Asian crises do not occur. Because any such crash would hurt the economic sentiments, question the economic strength and throw the economy back at least by a couple of years. The government should link full CAC with the economic reform process, especially in the public debt area and also to the strength of the economic development.

Our Debutant: Young Bloods

RETAIL INDIA

INDUSTRY

IN

--Leena Agarwal

Industry Watch
luxury brands and other specialized retail chains.

“ ALL THE POWER IS WITHIN YOU, YOU CAN DO ANYTHING AND EVERTHING”
This positive atmosphere has been prevailing in India from quite a few time with all the big players like Reliance, Aditya Birla group, the Pantaloon retail of Future group, subhikha group, The Tata and shoppers stop, RPG, Vishal mega mart, Godrej etc entering and foraying into retail sector.

Retail today has changed from selling a product or a service to selling a hope, an aspiration and above all an experience that a consumer would like to repeat again and again. The industry has seen such a transformation over the past decade that its very definition has undergone a sea change. No longer can a manufacturer rely on sales to take place by ensuring mere availability of his product. The major investment areas in retail supply chains lie in the area of sourcing, distribution centers (warehouse, cold storage),transportation networks, inventory(both store level and warehouse), supply chain information systems such as warehouse management systems, planning, forecasting, inventory management, etc.

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The growing India’s GDP at 8%, increase in the disposable income of middle class in India, shift in consumer demand to foreign brands, flexible government policies, the spread of visual media making consumer more aware of advancements in the industry are a few factors driving these players towards the retail sector. The Indian retail market, which is the fifth largest retail destination globally, according to industry estimates is estimated to grow from the US$ 330 billion in 2007 to US$ 427 billion by 2010 and US$ 637 billion by 2015. Simultaneously, modern retail is likely to increase its share in the total retail market to 22 per cent by 2010. Apart from the domestic players the announcement of tie ups with the foreign giants like Wal-mart, Woolworth , etc has also brought out sea change in this sector. The Government allows 100 per cent foreign direct investment (FDI) in cash and carry through the automatic route and 51 per cent in single brand. Besides, the franchise route is available for big operators. To further attract global retailers, the economic survey 2007-08 has suggested a share for foreign equity in all retail trade and 100 per cent in respect of

Strategies in retailing
Retail chains can choose to own or outsource one or more areas in the back end starting from inbound transportation, distribution centers, or even further upstream, value adding operations. Currently, some of the retail chains like Subhiksha have outsourced most of their back end, while some, such as Reliance, are investing heavily in the supply chain network. Others are positioned in between owning part of the activities in the back end. Outsourcing is done mostly in inbound transportation to independent trucking companies, or to 3PLs, who may also provide other services as warehousing.

Retailing inherently is a difficult business. Forecasting is merely 65% accurate, up to 20% of the orders are filled imperfectly, 30% of the merchandise is sold on markdowns, 75% of the new products fail to meet expectations, net margins are low (2-3%) and inventory is high. However, even beyond that, the Indian retail scenario has a number of deficiencies. Supply chain and logistics costs currently in some cases go up to 10% of the organized retail sales, to the tune of INR 50 bn, while it is less than 5% in mature retail markets such as US. Thus, there is a current improvement opportunity of up to INR 25 bn. In the next 10 years, this gap of INR 25 bn could go up to INR 300 bn., and hence a lot more investment and effort would have to be put in to reduce this. On other measures of supply chain effectiveness also, Indian retailers lag behind that of mature markets. Indian retail chains turn their inventory much slower, and stock out levels are also higher. Even the more established retail chains are able to turn their inventory only half as fast as retail chains in US or Western Europe, and stock out levels are also twice or thrice as much. On the other hand, shrinkage levels are in tandem with international benchmarks. However, since many retailers have still not invested in the back end and the average length of the retail supply chains in India is comparatively smaller than their counterparts in other mature markets, this might not have been captured. IMPROVEMENT RETAILERS PROJECTS FOR

owned by either of the parties. In addition, parts of the value chain may be outsourced to a 3PL. Finally, to ensure proper planning and visibility, IT systems may need to be deployed at various points of the value chain, often connecting one entity to the other. A number of opportunities exist for Indian retailers today in terms of reducing cost and improving service levels in the existing supply chains. For most retail chains today, simply setting up the entire network is a big challenge at the moment, since decisions today will affect the performance of their stores (or any other mode of sales) in the coming years. Investment required will be huge and a number of challenges will have to be overcome, as described in the previous sections. Network design, DC design & engineering, Supply chain IT systems implementation, decisions to outsource part of the network are some of the typical projects Indian retailers are taking up at the moment, and would be taking up in the near future. However, going forward, there will be tremendous scope to further improve upon the supply chains and even more important, to use supply chain innovation for gaining competitive advantage. As mentioned before, Supply chain best practices in global retail have created giants like Walmart, Amazon, Target, Tesco, Metro, to name a few. Hence, a number of projects, including process improvement at the DC level or the store level, improving forecasting accuracy, reducing out of stock, increasing sourcing efficiency, increasing product movement visibility, reducing lead time (sourcing, distribution), optimizing transportation etc. should be on the radar of the Indian retailers for the short to medium term time horizon. On a long term basis, supply chains would need to be built flexible, in order to respond to changes, drastic or slow, in demand, supply and technology. Further, flexible supply chains would allow retailers to tackle any dramatic events like natural calamities, terrorism, etc.

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The retail firm boundaries may extend anywhere from the sales point (stores, typically for Indian retailers today) and backwards up-to the source, encompassing the distribution network, intermediaries and the final supplier. The linkages in between these entities (transportation network) may be

Aligning the supply chain strategy to the business strategy would be of paramount importance in order to make strategic decisions more effectively, like entering new markets, new product introductions, new mode of sales, etc. Anticipating the future, and building a supply chain around it, is another way of looking at what the customer behavior would be in the long term.

Prospects

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No doubt the retail sector is still going to be a major contributor to GDP of India. Now that the influence of the left parties have been reduced to a great extent from the UPA, hopefully we expect government to come up with more vibrant policies to boost the retail boom which would bring about changes in other sectors like realty, processed food industry, garments, gems and jewellery, education,etc and also lead the improvement in supply chain management services by more tie-ups with foreign players or hiring more of experienced executives predominant in this sector.

CONCLUSION
“Past is experience, Present is experiment and Future is expectation. Use your experience in your experiments for better expectations” In the same way the retailers keeping in their mind their past experiences, using them in their present experiments will surely come out with better expectations in future.

------------------------------Disclaimer: This magazine is
being published and circulated on behalf of Stockyard by Mr.Prem Kumar and Mr Chandra Prakash .All the liabilities and issues concern to named individuals.

--------------------------------------To reach the editors…. Prem_propulsion@yahoo.co.in chandra5911@gmail.com

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