Friday, 16 August 2019

What’s eat right India?


What’s eat right India initiative?

It is a government initiative to enable citizens to eat healthy and eat safe. The supply and demand side stakeholders are brought together to make sure India consumes healthy food. It is part of the “Swasth Bharat” initiative.

Why?

Prompt citizens to look beyond Ads

In the supply driven market run through smart marketing campaigns, the consumer is at receiving end where un-healthy food is pushed to him through glitzy ads and marketing campaigns.

Eg: Many sportspersons (people associate sports with health) feature in drinks advertisements whereas the drink may be just sugar+color+soda+secret recipes! The young generation would be enticed to use these products (assuming it is healthy through the pictures and depictions in ads). These myths are broken by the eat right India initiative.

Making person understand his health needs

The nutritional needs are explained, quizzes programs done for health awareness of the citizens. Videos of eat health champions are popularized to encourage healthy diet. The National institute of nutrition learnings are transmitted to people for taking healthy decisions.

Eat right awards

To brands and companies that produce healthy products.

Eat right India (Internal link - old article)

Monday, 12 August 2019

Monetory Vs Fiscal Policy of Government

The Government can regulate the economy through monetary and fiscal policies. 

Monetary Policy

The supply of money is controlled by Government through monetary policy. The monetary policies are generally done by the central banks ( RBI in India). The interest rates and circulation of money is controlled by the central banks through monetary policy. 

The central banks according to the macro economic situation take stance needed for the nation. At times, the priority may be inflation control and at times, the priority may be growth. 

eg: The higher interest rate will reduce the money in circulation and bring down inflation. At the same time, the growth may reduce. 





Fiscal Policy 

The composition of spending and amount of spending showcases areas where the government wants to spend money. The fiscal policies is the way govt spends money according to its priorities. 

The taxes government imposes and the incentives given for various sectors highlight the way government wants to spend money. If there is slowing of economy, the government may decide to spend more to stimulate economy. Eg: - Heavy investments in infrastructure will improve employment, push more money to core sectors, which in-turn may stimulate growth. 


Thursday, 8 August 2019

Real vs Nominal Interest rate


Real vs Nominal Interest rate

Real interest rate is the interest rate which takes inflation into consideration. To get the real interest you would need inflation rate and nominal interest rate.


Eg:
A person borrows Rs 1,00,000 as loan for building house from SBI with one year as loan period. Assume rate of interest is 10% (which is the nominal interest rate). If the inflation during the period is 6 percentage. Then, the real interest rate is 4 percentage.

The concept of real vs nominal is very basic to understanding the way money works with time. You may be seeing offers where NCDs offer 10 percentage or above interest on the deposits. What really matters would be real interest (real growth) which would be arrived after deducting tax, inflation , processing fees etc.

Thursday, 18 July 2019

What is purchasing power parity?

Purchasing power parity

The PPP or purchasing power parity is a macro-economic metric that can be used to measure a country’s GDP. The PPP uses a basket of goods approach ie: a set of goods which is bought by these currencies.

The currencies are first converted into dollar value. Then, the amount of dollar value which can buy the same basket of goods in two countries can be calculated.

Eg:
Lets take country A where i-phone is 100$ and another country B where i-phone is 200$, here the purchasing power of country A is double that of the country B with respect to i-phone.
The i-phone is a single product, to have meaningful calculation we add many goods and services eg:- electricity, milk, etc. Now this is called “basket of goods”.
For calculation, the currency of the nations A and B has been converted to common currency ie: dollar. The PPP can show the size of the country’s economy.

What are the criticisms of PPP model?

Let us assume that price of milk was compared between two countries

Country A  1litre = 2 dollar
Country B  I litre = 1 dollar
Milk is good quality, always preserved well, quality and safety tests done
Quality is poor, fluctuating with no quality tests, adulteration high.

Here though, you can buy double quantity of milk in country B, the quality defeats the quantity.

Similarly, Lets imagine B is a big country where a machinery is available at 500$ in city which is added in basket of goods. Now, a far-off villager buy this product from city and take it. The transport cost is high ( no good public transport, no great roads, high local area tax for new machinery etc) then the product costs villagers 700$ (500$ + 200$ transportation). These costs are not included in the PPP calculation.

There may be trade barriers, taxations etc. making goods/services unavailable/costly.

Thus, in-depth analysis are needed for accurate calculations.

Monday, 8 July 2019

Balance of Trade


Balance of Trade

The balance of trade is difference between the value of exports and imports of a country.
ie: A country which imports more goods and services than exports will have deficit of balance of trade.


Why balance of trade is talked about?

When the imports surge without increase in the exports, then it usually is discussed. There is a feeling that it should be balanced and balance of trade should be reduced. 

The govt identifies areas of higher growth, create policies which will drive exports, create right incentives to stimulate that growth.

The balance of trade can be classified as 1) of goods and 2) of services.

View of economists of Balance of trade

Several economists have opined that a growing country will have increase in the deficit. Hence, there is no need to focus on the trade deficit alone.
If the imports are used productively, then the exports will also rise and there will be employment

*Eg:

Company A imported 5 machines at 100 cr which would increase exports of the firm by 5 cr a year. And the machines work for average 30 years with minimal repairs. The machines are employing 3000 employees.

Company B bought imported TVs for all its workers worth 10 Cr and all are seeing TV. The TV decreased the working hours, decreased output of the workers. The exports of country fell by 1 cr in the year.

Imagine that there are 100 A type companies and very 5 B type companies. If the imports are tilted to expenditures more of Company A type functions (the function could be performed by govt, private etc), then employment, exports etc will be improved and nation will prosper. The trade deficit might be more when there are many A type companies but similarly the employment and productivity would be higher. There will be around 3 lakh jobs generated and exports increase per year of 500 cr. 

Imagine, another scenario where there are 100 B type companies and 5 A type companies. The deficit might be lower, but the jobs created and exports generated are lower. 

*Above is a gross simplistic example to focus on the productive use of funds raised.

Hence, I am avoiding the usual coaching centre material which usually classifies balance of trade into favourable, balanced and unfavourable. 

Monday, 1 July 2019

Artic and India - Strategic, Academic, Commercial




Artic and India


Why India is interested in Artic?

Artics have lowest temperatures and are seen to be very important from the climate studies especially with change in global temperatures. The warm artics are associated with change in world wind systems and change in precipitation. This means that the study of artics can give us data for monsoon predictions.

The improved technologies and the ice melt are making it possible to create sea routes from Asia to Europe. This would be a game changer in the economy of the area. Also, there would be minerals, hydrocarbons and other resources there in the artics.
source: www.thermodata.us

India has academic, environmental, scientific, commercial, strategic  interests in the region.

Who does the research there?

 National Centre for Antarctic and Ocean Research (NCAOR), Goa now renamed to National Centre for Polar and Ocean Research (NCPOR), Goa

The NCPOR has a very informative website and the annual reports give a glimpse of the budget spend and outcomes of studies. The professionally run and motivated group of researchers goes to Himadri, Bharathi  (Indian research station in the International station) every year. 

The news and information of the expeditions/missions help Indian know more about the huge importance of  research at poles in day to day life.

Link: http://www.ncaor.gov.in/upload/annualreports/Enghlish.PDF


Sunday, 23 June 2019

Government securities T-bills G-Sec




Government Bonds


Government raises money for its activities through various means. The bonds (debt instruments) are one way by which governments can finance its deficits. As in any investment, if the govt employs the capital in productive measures then the capital grows and if the spending is not done correctly the money raised is lost (value/ratings/yield etc of govt bonds reduces).
Government bonds are secure as the value is assured by the government. The rate of interest that government pays is determined by auction process. The rate of interest as in all cases is based on the credit risk.


What is credit rating of Indian govt bonds?


The credit rating companies (fitch, s&P etc) rate it based on various factors. The fitch rating is BBB- (2018 – 12 yrs it has been same).
The rating is based on many things like banking sector developments, shadow banking, deficit etc.
When the rating gets better, the credit will be available at lower rate of interest. More funds will flow ( higher risk = higher interest).

Content below may be read by people with interest in the subject, wont be asked in exams.

Who buys/takes/is bound to own/ Govt bonds?
The govt bonds are used to finance the govt activities and its deficits. It may be noted that banking, insurance sectors keep funds mandatory in Govt securities. This means when funds of citizens are parked in banks or when things (now a days everything is insured) get insured, the funds reach government. The pension funds too park money in govt securities.

Now, the govt bonds can be bought online through NSE and Zerodha buy individuals.

RBI through OMO (open market operations) purchases govt securities.

Why is it important?
The change in the international, national circumstances can lead to change in the government bond yields. The increase in deficit can lead to lower rating for the government bonds which means the credit becomes available for government at higher rate. When govt projects (huge ones) get locked without results then the capital doesn’t function effectively for its citizens and nation gets affected. Eg: Land acquisition litigations may delay a big road project causing huge cost escalations)
 
source: rbi reports
What are states doing?
The states too are increasingly borrowing to finance activities. There is significant growth over the years of SDL (govt securities sold by states) to raise funds.
The 2026-27 will be crucial looking at the maturity profile of SDLs ( state development loans). Also the way GST, discom debts , UDAY etc span out and is handled will be interesting for economic observers.
source: rbi reports

What to watch ?

Will the investors prefer buying the SDLs and moving them to Held to Maturity ?
click to enlarge, Source:ccil

Note: Persons who want to know more may read RBI reports on state finances. I have put up a very simplified gist of the subject. 

What’s eat right India?

What’s eat right India initiative? It is a government initiative to enable citizens to eat healthy and eat safe. The supply and deman...

Recently read

Search This Blog