All views / opinions are solely that of the author and no other individual, group of individuals or organization (including my employer) has any stake whatsoever in the same. While every possibile care is taken with respect to the correctness of the facts and figures given in the blog, some inadvertant errors may have crept in and are regretted. The author accepts absolutely no responsibility for any action taken [and any consequence thereof] by anyone on reading these posts.

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Sunday, April 29, 2007

Moments when a smile flits across...

A dear friend of mine wants me to come with a list similar to hers. I was initially horrified!!! This was something I never thought of and had never expected her / anyone else to ask me!! She persisted and I have to give in.....good friends have to yield to such pressures....
Yes, there are some things which result in a smile flitting across my face and what follows is a list of that. This is not exhaustive in any way, just a sample...
  • Getting up early in the morning and seeing darkness slowly giving way to light
  • Praying
  • Whenever I understand a new concept, whether or not related to my field of study
  • Being alone and sitting with eyes closed......love it if there is the pitter-patter of rain and any soft song of ARR in the background..
  • Watching and getting wet in the rain
  • Reading good stories / novels / non-fictions
  • Writing a good essay, with some effort put in, in collecting the data; the happiness multiplies if I post it on my blog
  • Whenever I'm praised for a good work done, by people whom I respect / hold dear to my heart
  • Long duration telephone calls / face-to-face real chat with people whom I consider special
  • Being near any water body - any pond, backwater, river, sea

  • Long distance traveling
  • Traveling along the Alappuzha-Changanassery road in late afternoons without rain
  • My M Com, B Com Final Year and 10th classes - even a mere mention of those well-spent years will do
  • Seeing a good song while casually surfing TV channels, only to know later that it's by ARR. (This used to happen before I had access to the Net; not any longer, as I get to know of any releases of ARR or any news related to him much before others including mainstream media do, through ARR Fans Group)
  • Watching / reading anything related to ARR - interviews, concerts, award functions
  • Catching tunes of ARR being used in other TV programmes / films or songs copied / inspired from ARR's
  • Flipping through the pages of my previous years' diaries
  • Whenever yet another politician is caught red-handed in his / her act

Guess this is enough!!! Also got to add that included in the above are things which occur far and between...that's gives them a special charm!!!

Saturday, April 28, 2007

Reflections on the Rising Rupee

The Indian Rupee (INR) has appreciated vis-a-vis the US Dollar considerably in the recent period. It has gained almost 13 per cent since July-Aug last year. Even as recently as a month ago, it was moving in the range of Rs 44-45 per Dollar; now it is between Rs 40-41. Who all are happy and who all are worried?
The government is obviously happy, for two reasons. One, politically speaking, it gets some bragging brownie points. Though Finance Minister P Chidambaram said, "The government has no view on exchange rates", the ruling class can afford to say that the stronger INR is all due to their 'efforts', especially when elections are on in the all-too-crucial UP. May be, just may be, the guilt of mismanaging the economy in the late 80s and early 90s and having had to devalue INR is still there in the minds of Congress people (Oh, yeah?! You sure?!!!) and the gains made by INR may help assuage such feelings! Second, the government has been able to tame inflation at least a bit: WPI based headline inflation has come down to 6.09% from 6.72%, but is still far too above RBI's comfort levels.
Besides all these, a Credit Suisse report released recently has said that the rally in INR has made India a Trillion Dollar GDP economy. India's GDP has been put at Rs 41,00,000 Crore, which at Rs 40.72/$ translates to a little over $1 trillion. With this, India becomes the 12th member of the Trillion Dollar Club, the others being the US, Japan, Germany, China, the UK, France, Italy, Spain, Canada, Brazil and Russia. According to the same report, the Indian stock market capitalization too is closing fast on the trillion dollar level. Music to stock brokers' ears!
Another set of people who are rejoicing are the importers, in general and oil companies, in particular. Rising Rupee will help improve their margins. It remains to be seen whether they will pass on the benefits to the consumers.
In this context, the role of the RBI is surely worthy of a mention. Though our exchange rate mechanism is said to be market-determined, it was an open secret that RBI discreetly controlled it. All along, RBI used to buy up all dollars coming into the economy and this used to get added to our forex reserves, which recently crossed the $2 billion mark; the Rupee that were issued instead were mopped up by what was called 'sterilization' using government bonds under the Market Stabilization Scheme (MSS). However, many questioned this intervention of RBI and the effectiveness of its sterilization operations. The recent bout of high inflation was at least partly due to this, it was alleged. What has happened now? Though the RBI maintains that there has not been any change in its external sector management policy, the RBI has been conspicuous by its absence from the market in recent times. Is it because it has not enough MSS bonds or is there an ace up its sleeve? No one knows. Also, the RBI has concerns about the quality of the money coming into the country. It is now acknowledged that at least part of the dollar inflows is speculative in nature, called by different names like 'carry trade', 'private equity', 'hedge funds', etc. In a recent interview, the RBI Governor Dr YV Reddy hinted at RBI's helplessness in controlling such inflows which arise from policy flaws.
Rising Rupee has implications for India's Balance of Trade (BoT) position too. Unlike most other Emerging Market Economies (EMEs), India has a significant deficit in its Current Account. Coupled with a surplus in the Capital Account, a substantial portion of which is a mere mouse click away from flying out, it presents a tricky situation. The need for export competitiveness cannot be overemphasized. Appreciating INR will make it difficult to achieve the export target of $160 billion laid down in the recently released Annual Supplement to Foreign Trade Policy. Naturally, the exporters are a worried lot. If INR gains, it will eat into their wafer-thin margins and many will be forced to down their shutters. Then again, the sunrise IT sector feels threatened as most of their clients are US-based. Bigger firms which have the professional competence and access to hedging tools are better off, but it is the smaller firms that will be hit hard the most. In this context, the RBI's move to allow companies categorized as SMEs to book forward contracts without any past records of forex trade or any underlying exposure, is commendable. The RBI has also taken measures to ease Rupee outflows. All these have to be supplemented with activities to educate the small and medium exporting units on using hedging tools effectively.
Finally, amidst all this is a report (by JP Morgan? I'm not sure) that the INR is overvalued by about 11 per cent at current levels. This complicates the situation. Is the appreciation temporary? Will the Rupee plunge below the 50/$ mark? Only time will tell. Another aspect that calls for immediate attention is the need for cost reduction in all sectors of the economy. Though cost control and cost reduction are essential ingredients for the success of any organization, its significance becomes manifold for export-oriented enterprises, especially in the context of a rising Rupee. It is both an opportunity and a challenge for Cost and Management Accounting professionals. There is this dire need to instill cost consciousness in our economy and the rising rupee is the perfect excuse to initiate a cost reduction drive in all industries and sectors. Cost reductions and innovations are necessary to stave off the challenge posed by other low cost destinations like Philippines.

Thursday, April 26, 2007

Misinterpreting Indian Constitution

'Yours truly' is not an expert in the complexities of Indian Constitution. However, that should not prevent him or anyone for that matter from airing one's views on the same. On the basis of this belief, the following is a take on the tendency on the part of some of the stakeholders of Indian polity to interpret the constitution to suit their vested interests.
First is about the controversial topic of reservation. The Constitution, of course, provides for reservations for the disadvantaged and backward sections. Take a closer look: does the word 'caste' appear anywhere in the Constitution? No! It speaks of only 'class'. Then who is the 'erudite a*****e' who decided that reservations should be based on caste? Some people say that 'Class = Caste' if caste excludes the well-off within. However, that is a mistaken notion. If the objective is to keep out the well-off, then why is not reservation given on the basis of economic status alone? Even after some 57 years of independence, the quota system appears nowhere close to being phased out. It is to be remembered that even the SC/ST reservations were supposed to last for just 10 years. It was intended that this practice will be reviewed and measures taken to set it in tune with the changing times. Every ten years, the Parliament decides that SC/ST reservations be continued for another decade. When will this stop? True, caste-based atrocities are reported even today from different parts of the country. But that signals the existence of a malaise entrenched far deeper in the psyche of some people. Does reservation remove it? Again, no.
It is time we scrapped caste-based reservations and came out with an objective mechanism that takes cognizance of one's social, economic and physical weaknesses to help them realize their true potential. A targeted 'Help & Nurture System' for such people should be put in place. To make use of an analogy, in a 100 m race, the weak people need not be given the option to run just 70 m; they have to be given extra training to run the full distance. More than anything else, it will do wonders to their own sense of self-respect.
Second issue is another hot potato, 'minority rights'. The term 'minority right' itself is wrong; it is 'minority protection'. The controversy over this issue has two aspects. First is the lack of a precise definition of the term 'minority'. It is generally agreed that minority-ism is of two types: linguistic and religious. However, the problem is with the level at which we are to assess it - at the state level or at the national level? A minority in a state may be a majority in another. Therefore, logic states that minority status should be assessed at the state level. Another aspect of the controversy stems from Article 30 of our Constitution which provides that minorities will be free to run and promote their own educational institutions, etc. This provision is made to ensure that minorities do not suffer any discrimination in running such institutions and are thus able to protect and promote their unique culture, practices and customs. It is to be remembered that this provision does not give them any special privilege which is not available to others, the majority; in other words, the intention behind the provision is to have the minorities treated at par - not above or below others. However, this Article has now been sought to be interpreted as giving some special rights to the minorities, as if they are free from all rules and regulations. This hots up as a big issue especially when the minorities are perceived to be economically and politically strong, as is happening in Kerala.
The bottom-line is that all special provisions made in the Constitution to benefit any group of individuals are ultimately aimed at their economic and social upliftment and preventing / ending discriminations against them. Once this objective is achieved, these are to be scrapped. Again, if the mechanisms to ensure this have not produced the desired results or are proving to be the divisive forces in the country, it is time we revisited them and made them work the way they are expected to. Unfortunately the courage / willingness to do so is terribly lacking in India's political class.