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)

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. 

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.

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.

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. 

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

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. 

Middle Income Trap

It is a situation where a middle-income country is unable to become high income country as the situations for growth are slowing/ advantages which a country had is no longer present

Eg: A country has grown rapidly in industry due to cheap labour. As the country grew, the wages increased and hence the initial advantage of lower cheap labour diminished. Similarly, the manufacturing firms may shift to some country where the labour wages are lower than this country.

Hence, the GNP may get stagnated unless there is something the country does to overcome limitations. (commonly called reforms).

The reforms might be 1) Labour 2) Land 3) Capital/Investment etc

Challenges: If the administrative structure/information/expertise is lacking in recipient country, there may be unhealthy growth ( skewed distributing of income, cartelisation in businesses, plutocrats taking undue advantage)  .

Piketty Principle UPSC

Piketty Principle

Piketty in his book (capital in 21st centuary) explained the reasons for the widening difference in growth of economic disparity. He observed that “The rate of return on the investments the wealthy make will normally be greater than the rate of growth in a nation’s economy and total wealth.”.

This lead to increase in divergence of the earnings of the rich with respect to poor. He indicates increasing r-g gap(r – rate of asset return, g – real income growth) . The increasing r-g gap will lead to unrest and other social issues. The divergence is increasing with time. The  skill development, knowledge diffusion can lead to convergences – ie reduction in in-equality.

UPSC finance External Commercial Borrowing

External Commercial Borrowing

Finance upsc, finance basics

Capital is needed to achieve growth investment is needed. The capital needed for this can be from domestic (Indian) or foreign (external).

The type of deposits considered as ECB

• ·         Loans including bank loans;
• ·         Securitized instruments (e.g. floating rate notes and fixed rate bonds, non-convertible, optionally convertible or partially convertible preference shares / debentures);
• ·         Buyers’ credit;
• ·         Suppliers’ credit;
• ·         Foreign Currency Convertible Bonds (FCCBs);
• ·         Financial Lease; and
• ·         Foreign Currency Exchangeable Bonds (FCEBs)

Advantages:

The companies need capital for expansion, and the foreign route provides finance at lower interest rates.

The borrower gets finance cost advantage. The borrower can diversify his investments, plan new initiatives.

Disadvantages:

The multiplicity of legislations and constant changes in policy are often criticized.

The bigger firms are able to get capital at lower interest while a smaller company may be paying heavy interest in domestic lending. This means that higher finance cost is born by them.

The lower interest funds to firms may lead to heavy borrowing and debt burden.

How to study psychology for UPSC exam

Psychology can be tricky for the mains. The way to get into the groove for the psychology is a bit tricky. I am sharing a link of topper Mithali Sethi here

Drive (pdf) - Download

Source: www.insightsonindia.com (LINK)

A comprehensive strategy with lots of matierials are given. It is a very useful read for psychology mains.

Notes shared by the Mithali Sethi (LINK)

Note: This blog makes attempts to share links, articles written by toppers. 

Sensitivity Training Merits Context Methodology

Psychology Paper 2 Topic

Sensitivity training

It is a method of training that makes one aware about the dynamics of group and their roles. It makes them aware of their prejudices/bias and make them sensitive to others.

Eg: - Ctx is an IT company with professionals of all generations. Subbu 57 yr and Ragz 25 yr old work in a group that works in virtual group of 10. The 8 members  of virtual group are from China, US. There may be biasness, prejudices of each member with the other.

Subbu thinks “What is this guy Ragz doing in this group which has seniors like me. He doesn’t respect my seniority and don’t even stand up when I come. He has long hair with ponytail that doesn’t suit this office”

Ragz thinks “ Subbu is not updated on latest styles of IT world. He won’t know about new UI designs and trends. I wonder how I will communicate with this guy who never parties or even tells a ‘Hi’ to me.

Each team member would be harbouring a set of such impressions which may be adversely affecting the organizational set up. The sensitivity training will help them to discover each other, it will allow one to explore his/her thoughts. At the end, the thoughts held will get altered and a new cohesion/understanding is intended to be developed.

Raghav the trainer is brought in to  give a sensitivity training. He does it in following steps

1.       A unstructured meeting is conducted when all the members (10-15, in this example 10)meet at head quarters.  The old values held by the members are challenged and an face to face interaction happens within the group.

2.       The new values are developed.

3.       The new values are freezed. Subbu feels that Ragz though looking different is sincere in work and he is rather a problem solver. Ragz feels that gesture which he thought was rude from a China team mate was infact a friendly gesture in that culture.

A self awareness of one’s attitude and bias happens in a facilitated manner. An introspection of one’s behavior can be done. This is a group psychotherapy started by Kurt Lewin.

It is useful technique in organizational structure.

Which is the best Coaching institute in Delhi, Chennai, Hyderabad, India

A common inquiry that aspirants and their parents have is - which is the best coaching institute?. Which is the best one which will get him/her into the service?. Where to stay ?

 I may not be able to answer your question fully, but may be able to help you get a better view about coaching institutes.

Soon after the result of the civil services, a campaign trail is started by IAS coaching centres. The common ad style is something like

XYZ IAS Academy 

(A guy generally in suit - photo in inset near name of academy)

10 in top 20, 50 in 100

(photos of toppers)
And 300+ Selections.

The ads will be dotted with pictures of young civil servants who just entered in last upsc exam. Sometimes highlighting 1^st rank to 500+.

The address, the details, the updated course and how innovative we are generally is in the last line.

I understand that like in all business , marketing has to be high pitch. But as a customer( aspirant) has to put some thought to understand these ads. Why?

Simply because, in case you are joining the said flamboyant institute which churns out IAS officers, then you are paying for all the hungama created by the institute. The ad campaign by many institutes runs into crores. The institutes sometimes charges lakhs from a student, the accumulated lakhs go to feed these crores. That’s the way business runs and its perfectly fine if you are ready to pay and institute delivers.

Now to the winner’s part, you would see that toppers are claimed by all institutes. The topper who accidently left an inquiry email to the institute at puberty stage of preparation,  one who attended their outreach programme, to the original student who really studied at the institute – all will figure in the ad campaign.  If the ads were true, check the ads of prominent 10 institutes you would figure out that toppers photos will figure in all most all the coaching institute!!. I have met a topper whose name was falsely claimed by a Delhi institute, while only time he visited Delhi was for an upsc interview. He gently reminded the suit boot owner of the institute and his reply was “ Abhi toh chalne do, aapko kya bharak padtha hai”. So in case you are marching to an institute just because they have advertised 10 in 20 toppers studied there, then beware.

How do the institutes make so much toppers to be part of institute?

1.       Conduct “free” intro sessions – which entices to be part of the historic institute. A format with details of the attendees is signed from all participants. When the results come, the staff will dig these data, if you attended and signed then you are their “student”.

2.       Conduct free mock interview – this s catch late strata which many institutes use. The guy has passed mains and there is high chance he will get through. A good quality mock interview will ensure that he becomes the aspirant who studied here. This is reason why some institutes conduct mock interviews with good quality faculty as they can claim you as student without taking any pain to take you all the way through hectic mains exams.

3.       Just steal a pic and claim he was student!

4.       A highpitched ad driven institute in prime locality of Delhi has more probability of an aspirant joining and simply getting higher conversion. The person may have left the institute and studied on his own as the institute was not good. But since he spent money there, then naturally they now have a poster boy.

Lets now move on to total claims, 300+ selections. What is ‘+’ no one has any idea. Probably the institute is waiting to see ad of its main business rival and planning to increase. The multiple branches, multiple type of courses (online/offlie/correspondence) make it difficult to identify or clarify most claims. Even if the institute wrongly claims that a person passed because of their excellence, there is little way to verify it. An interaction with the newly cleared persons will give an idea of the state of the coaching institute. Many young civil servants have blogs where they clarify things.

What institutes won’t tell

1.       How many students attended and did not make it?

2.       Which good teachers the institute has?

3.       Why do they charge so high!

What matters in a coaching institute?

The Teacher

The only important factor in an institute is its teachers. Passing any exam depends on student and teacher, the way the teacher is able to connect to the students. Meeting the teacher, his attitude to students is key to your win. Is the institute which you join have the teacher who is best for you or is it just a ad based institute which don’t pay to teachers?. How many hours of class the best teacher gives you?.  It is a strategy of certain institutes to run multiple branches where good teacher is just an occasional visitor. This will be of limited use. Hence you should verify these facts.

The feedback

The question papers and its review should be able to evaluate you. The evaluator should be able to speak to you and explain the correct way. A one-to-one interaction and correct evaluation with support system (where to find the answer and how to present it) is needed for your continuous improvement of writing skills.

I hope these inquiries would be put forth by aspirants. This will help you weed out the high pitch ad based institutes and find the correct institution.

Note: There are very good coaching institutes everywhere, you just got to ask the right questions to find the good ones. Kindly cross check the credibility of the institute in multiple ways before you join. This blog makes an effort to identify and post blogs of toppers.

Dollar Currency Swap by RBI

RBI is central bank of India and it uses liquidity management tools like

a)      Repo

b)      OMO (Open market operations) etc.

Recently, RBI used another tool – Currency swap

Effects/Aim:

To infuse liquidity to overcome the current liquidity crunch.

The rupee appreciation may slow.

The dollar reserves of RBI increases.

How does it work?

RBI gives rupees for which banks gives dollars to RBI under certain terms and conditions. This contract is for a period of 3 years and the banks have to pay a forward premium. The banks (Tier 1) can participate in auction for the 5 billion dollar.  The banks will buy back dollars after 3 years at rates arrived through auction.

The content below can be ignored by aspirants. It is for causal readers of this blog.

What are risks of the currency swaps?

The swaps have default risk and exchange risk. In this case, since RBI is central bank, it can avoid default risk.

How is the swap agreement made?

As in most financial contracts, reasoned assumptions are made regarding the economy and then scenario analysis is done. The risk management analysis based on cash flows and assumptions in exchange rate, policies which may be followed by banks etc are done to arrive at a decision making.

How is liquidity created?

Banks which get rupee pass it on to its customers.

The customers could be

a)      Old customers –

1.       Those who repay

2.       Those who default due to business risk

3.       Those who lend not to pay but to pump in money for businesses at cost of bank or because of many other factors or for evergreening. (here after referred to N)

b)      New customers – which includes small, micro and medium industries  who need credit at lower rates for successfully running business. It also includes customers who will be able to generate cash when money is available at lower rates. (assuming the banks charge lower rate).

If the money gets routed to the Old customers who Sl.No 3 or N , then the whole exercise will go void. 

How to know whether banks are lending for Old Customers Sl. No 3 types or N ( intentionally careless or lending with intent of not paying )?

The current debt equity level and its variations can be analyzed to understand it. (provided company don’t collide with auditing and rating companies in rigging all the processes). If it gets to these customers, then the purpose gets defeated.

If you are further interested you may explore web on 

- Reverse mirror swap

-securitization of swap