Silence of Centre

I am quiet surprised with unfolding of scams during this government rule . The people of the country provided a clear mandate to the Congress led the coalition. The party which is known for playing the aam aadmi card every election. I believe our prime minister has a very clean image but what is the benefit if he is not able to keep his government corruption free. It started with famous Raja 2G scandal followed by billion dollar CWG scam and now the Adarsh scam . The most disappointing fact this time the the image of army is being tarnished . It is a scam made possible by nexus between politicians , bureaucrats and army personnel. The army and the independent judiciary are two institutions of free India which we are proud of . Now with the name of top army brass coming in the scam , the credibility of army is in question.

Sonia Gandhi and PM appears to have a very corruption free image but the party and the government seems to bantering . Why the top leadership is silent on the issue ? When the government is going to clean its own house ? The land which was meant for Kargil Veterans is being given to bureaucrats , politicians and their relative at throw away prices.

People of this country want the answer - Who is going to take the responsibility ? Sonia Gandhi had formed a two minister panel to look after the scam ? I am thinking it is a scam of crores still there is no FIR registered -why? And the committee will come with its recommendation after Diwali. Mr Chavan has been given time to celebrate Diwali . It is an open loot of the government money and still no one is going to jail. Hope the PM will take a tough stand this time. Resignation is not the solution. Until those who are responsible are punished this disease will go on spreading . The day is not far when the bug is going to infect our judiciary and army if it is not checked at right time. The situation is becoming pathetic----today at AICC meeting Congress remained silent over the multi crore scam and instead declared terrorism and communalism is biggest threat to the country. When she is going to understand that corruption is the hidden cancer which weakening the roots of Indian democracy and making us more vulnerable to terrorist attack or a riot. Congress president seems reluctant to come forward and fight corruption. This is sending a wrong signal from the top.

These are criminal offenses and those who are culprit should be given proper sentence. Still the government is not able to pass lok-ayukta bill in parliament . Neither there is any progress on the police reforms . We are behind our neighbors like Sri Lanka on the transparency list . Today our country needs an independent investigation agency .

Financial Innovation - The darker side

The question about financial innovation is, however, somewhat different: it is whether most of the innovations that have been widely touted, such as credit default swaps, have in fact enhanced economic performance. What is evident is that they contributed to the current economic crises, and added greatly to the burden on taxpayers. The AIG bailout alone—linked directly to these innovations—cost taxpayers almost $180 billion, a sum that is hard to fathom. The present crisis even leaped the world into another depression. It took the life long savings form million people. It brought many families on the road. It created the panic . There is also ample evidence that they have been useful in accounting, regulatory and tax arbitrage, activities that may enhance the profits of the companies employing them, but not necessarily the efficiency of the economy. They have helped governments and firms hide their financial doings from taxpayers and investors. And those benefiting from such deception have been willing to pay amply for it, with large profits to the innovators, even if society as a whole loses. It has been found products such as packaging of toxic assets as AAA securities and selling to people is unethical . No one can disagree that this industry comprises of some of the most greedy people on this earth. From them their clients are every thing.
We should not be surprised that the so-called innovation did not yield the real growth benefits promised. The financial sector is rife with incentives (at both the organizational and individual levels) for excessive risk-taking and short-sighted behaviour. There are major misalignment between private rewards and social returns. There are pervasive externalities and agency problems. We have seen the consequences in the Great Recession which the financial sector brought upon the world's economy. But the consequences are also reflected in the nature of innovation, which, for the most part, was not directed at enhancing the ability of the financial sector to perform its social functions, even though the innovations may have enhanced the private rewards of finance executives. (Indeed, it is not even clear that shareholders and bondholders benefited; we do know that the rest of society—homeowners, taxpayers and workers—suffered.)
Some of the innovations, had they been appropriately used, might have enabled the better management of risk. But, as Warren Buffett has pointed out, the derivatives were financial weapons of mass destruction. They were easier to abuse than to use well. And there were incentives for abuse. They made it easier too to engage in non-transparent transactions; and lack of transparency never helps markets to function better. Some of the financial products increased the problems of information asymmetry, exacerbating problems of moral hazard. Indeed, much of the growth of some of these products can be attributed to these information problems, and perhaps to the deliberate exploitation of the uninformed: it is hard otherwise to explain the expansion of products that, it should have been clear, were so toxic.
Regulatory reform is important not just to ensure that the economy does not have another crisis. Better regulations, including regulations that help align private rewards and social returns, could and probably would direct the sector's creativity in ways that lead to more socially productive innovation.

Financial Industry contribution in World Development

Finance is powerful. Let us start with some positive aspects of financial world. Financial services provide vital services :allocate capital, monitor capital use , facilitate transactions and risk management. If financial systems provides these good services , the capital flow to most deserving and promising firms and it maximizes the utilization of capital and as a result enhance the world development. Secondly financial innovation and technological advancement are inextricably bounded together. As the economy expands the complexity of financial world increases. More sophisticated methods are required to access new enterprises and their novel risks. Without a commensurate modernization of financial system , the quality of financial services fall and economy growth slows . It is the fierce competition within the sector which keeps technology upgraded. Nor the traditional capital markets of London or New york have fuelled the technological innovations in information technology, tele communication and medicine that we have experienced over last 30 years.
Let us take example of Bio technology sector.The story of biotechnology in the 21st century provides a natural continuation of this virtuous cycle of financial innovation, technological change and economic growth. The venture capital model of corporate finance did not work well for biotechnology. Venture capitalists could not effectively evaluate biotech firms because of the scientific breadth of biotechnologies, which frequently require input from biologists, geneticists, chemists, engineers, bioroboticists and other scientists, enormous capital injections and expertise with the myriad of laws associated with bringing new medical products to market. It was unfeasible to house all of this expertise in banks or even venture capital firms.
So, financiers innovated. They formed new financial and contractual partnerships with the one kind of organisation that has the breadth of skills to screen bio-tech firms: large pharmaceutical companies. Through scientific know-how, legal expertise and connections with product distribution networks, pharmaceutical companies identified promising biotech firms, helped them create valuable products and attracted other investors. While financial modernisation is not the only cause of technological change, the adaptation of corporate financing techniques has greased the wheels of technological inventiveness underlying economic growth. Put differently, without financial innovation, improvements in diagnostic and surgical procedures, prosthetic devices, parasite-resistant crops, and an array of other life-saving and life-improving inventions would be occurring at a far slower pace.
Even the most conventional components of modern finance, such as debt contracts and liquid securities markets, were themselves once financial innovations that circumvented former barriers to investment and growth. So the financial innovation created by the giants of this sector - BOA, Citibank,Goldman,J P Morgan contributed a lot to the rapid development in past century.
Financial innovation is critical if we are to enjoy rapid rates of economic progress in the coming century, but innovation, change and growth can threaten stability. Improvements in financial regulation can reduce the risks of financial crises without curtailing sustained economic growth. In finance, as in medical research, encouraging the healthy application of human creativity requires some regulatory guideposts.

Coal INDIA IPO

Coal India, the only unlisted navaratna public sector company has issued its IPO. Coal India is the largest coal mining company in the world in terms of reserve-base and annual production.This is by far the largest IPO in India (Rs 15,100 crore). Coal India is selling more than 631.6 million shares in its IPO.After the initial public offering or IPO, the government’s stake would come down to 90%.Coal India is a holding company for 11 subsidiaries which are engaged in the development and operation of coal mines as well as exploration and design, making it an integrated coal mining company.
Coal India is a near monopoly with 82 per cent share of India's total coal production. Its fundamentals are strong, given the widening demand-supply gap for coal and the company's improving operating metrics. High return on equity (38 per cent for 2009-10), despite significant cash balances, too bolster prospects.
Morgan Stanley, Citigroup, Kotak Mahindra Capital, Enam Securities, Deutsche Bank and Bank of America-Merrill Lynch are managers on the offer.
The timing of IPO is perfect and it is bound to attract the foreign institutional investors, leading to more dollar inflow in the economy and hence strengthening the rupee further.
The stock is a good long-term bet with steady cash flows and limited risk to profitability. It may also turn out to be a high dividend paying stock, with huge cash reserves, minimal debt and limited cash requirement for its expansion plans for the next few years.

Future Prospect of Coal India
As global economy is recovering from the meltdown , the energy sector is going to boom in future. Presently according to coal ministry the gap between domestic demand and supply is around 67 million tonnes. So as far as demand side is considered ..it is win win situation for coal India. According to analyst demand is bound to grow at double digit rate keeping in mind government ambitious project like rural electrification and the increasing industrial demand.
Coal India is bound to go for expansion plans to fill the growing gap between demand and supply. Coal prices are also increasing as energy demand is growing.
The company has ambitious plans to go for acquisition of mines in foreign countries such as Mozambique, Australia and Indonesia.The proportion of expensive under-ground mines has fallen from 13.3 per cent in 2005-06 to 10 per cent as of March 2010.The impact of this on the cost structure is quite high as the current cost of mining per tonne from open-cast mines is at Rs 520 per tonne compared to Rs 2,145 per tonne in under-ground mines.Mechanised open cast mining trims employee costs for the company; the employee base is already down 3.7 per cent over the last three years and a net reduction of 11,000 employees is expected this year; from the current base of 4 lakh.CIL also plans to add 111 million tonnes of coal washeries which would improve the beneficiated coal output, which has higher calorific value.The average price realised for beneficiated coal (Rs 2134/tonne in FY-2010) is almost double the average price for the entire output, with only marginal addition to costs for washing. Currently the high grade coal is sold at import parity price unlike cost plus in case of low-grade coal.The proportion of coal sold through e-auctions is also expected to go up to 20 per cent from the current 13 per cent, owing to the demand-supply gap.While the existing fuel supply agreements (FSAs) with power projects stipulate that Coal India meet 90 per cent of its commitment or else pay a penalty to the clients, the commitment is lower at 60 per cent for non power sectors.New power FSAs too have a 50 per cent commitment. This allows room for Coal India to sell larger quantities through e-auction.
Risks associated :Investors have to bear in mind that the coal mining business is fraught with risks, apart from requiring long gestation periods. Execution delays may crop up owing to regulatory, legal and environmental hurdles, land acquisition delays, political risks and social disturbances. Geographical concentration of resources may impose logistical problems. ECL and BCCL, wholly owned subsidiaries, despite turning profitable recently have negative net worth of Rs 6015 crore and Rs 5400 crore respectively. These companies' contributed 36.4 per cent to the overall employee costs but only 13.4 per cent to the revenues of the parent.The new MMDR Bill may require Coal India to set aside 26 per cent of the profits for resettlement and rehabilitation activities of project affected persons. However, given the company's monopoly status and pricing power, the additional costs can be passed on to consumers.

Currecy Wars

World is yet to recover from the detrimental Financial crisis. The growth is too sluggish in US and European Union. Now as everyone believes worst had already passed. Still the shock waves of Financial Tsunami is haunting many governments. It has started a new war among nations over exchange policies. There are two kind of exchange rate policies - 1. Fixed exchange rate which is controlled directly by the government . 2. Market driven exchange rate. Still in the later policy the government and central bank plays vital role.

Signs of the crisis :
Japan coming forward to stop the appreciation of its currency . The emerging markets like Brazil taking monetary steps to control and restrict FDI's. Benchmark in Indonesia and Philippines had hit record levels.

What has triggered the currency wars ?
There are mainly to camps developed countries led by us and developing countries led by China , India and Brazil. Each camp is blaming other for he crisis. The view point of developing countries-Us treasury and Fed is pumping large volume of currency in the market to trigger the growth in US economy. But since the confidence in US domestic market is very low especially because of the high rates of unemployment in US and under performance of the economy . Where as the developing country like China having a 2 digit growth rate and closely followed by India and Brazil. All these is making the emerging economies very attractive for the foreign Investment. The FDI flows in emerging economies are at record level. The crisis of 1999 which made the Asian giants to bleed is still fresh in memory. Excessive flow of dollar in the economy will cause the domestic currency to appreciate and it will lead to fall in export and the large inflation rate. The stock market , real estate and asset price are government bonds are sky rocketing and can lead to another bubble in emerging markets. The Asian crisis of 1998 had exposed the dangers of large volatile FDI inflows already.

Asian crisis 1998 - It all started as ASian MIRACLE model with huge FDI inflows which dramatically increased the asset prices. The economy got bubbled by the hot FDI inflows.High asset price later on caused the investors and companies to default on their credit and later on this created panic among the investors. Foreign investors started to take out huge volume from the Asian markets. This increased the pressure on domestic currency. Banks and government tried to uphold the exchange rates but finally they had to give . It caused major depreciation in the exchange rate . It made the foreign currency dominated liabilities substantially high in term of their domestic currencies leading to further collapse and bankruptcy. Final IMF had to come to rescue of Asian tigers. But the terms and condition of IMF bailout was very harsh.
As a result even today emerging economies are very cautious about appreciation of their currencies.

The other camp led by US argue that it is China who is responsible for global currency imbalances. It is China which is upholding the rate of its currency and hence creating the crisis.
In my opinion both US and China are the epicenter of this earthquake which is detrimental to emerging economies. US is pumping more money and China is not absorbing its share of global shock waves.

Who is winning the war ?
Presently both US and China are in comfortable positions. Emerging markets are going to be the worst hit by the war. China is able to keep it currency at constant rate against dollar and it has depreciated against Euro. But in the long everyone is going to lose.

Whats the solution ?

There is no easy answer. But that, unfortunately, is a fact of life when the world has been living in such an unbalanced way for years. A rate hike in the United States might squash economic growth and leave the world facing another dip. A rapid China revaluation could price the country’s exporters out of the market and lead to widespread unemployment.A gradual but sustained revaluation of the yuan versus the dollar — combined with a halt to the dollar’s own depreciation — is the least bad way forward. Reforms in international institution like IMF,G-20 and World Bank is a huge step in right direction. These institutions need to represent the realities of present era. Greater voting right share and representation should be given to emerging economies . These institution can be the platform to find a middle amicable solution to such problem if and if the represent the realities of 21st Century.

Lets hope the next meeting of G_20 can bring some agreement on the exchange rates.

MOsque near GRound Zero

Lets first make it clear the mosque is not going to be build at ground zero . It is going to be build at two blocks behind the ground zero and it is part of 100 million $ Islamic center in New york. There is a lot of debate going on whether the mosque should be build or not. The opinion polls have showed majority of Americans are against the mosque . Even noble laureate Obama had changed his side . Democrats are going to have tough fight with republicans in coming elections in November . Especially when Obama is not able to bring the economy back on path and the governments sad response on Gulf oil spill . Obama is losing his popularity . So no one wonders why he changed his stand.
But leave this political aspect and lets give a unbiased look at this proposal of Mosque. America was the first nation to adopt the constitution based on equality for all. It is one of the oldest democracy of the world. This is same US which have invaded many countries with the aim of establishing a democratic country. One of the fundamental principle on which American constitution is laid is the right to religion. Everyone in US is free to follow their own religion. Everyone is free to open religious institutions and practice their tradition and culture . American society is one of the most liberal when it comes to religion. So how can anyone stop an organization from building a mosque on its owned piece of land ? The Islamist group have already acquired the land for building a religious center . No one should dare to stop the building of mosque in land which is the birth of democracy. So legally there should not be any problem with mosque.
Secondly some people say that it would hurt the sentiments of families of the victims . The reason is those who were involved were Muslims. Nothing can be more insane then this in my opinion. Terrorists have no religion . They know only one thing and that is to take innumerable human lives and create terror. The same terrorists are killing hundreds of muslims in Pakistan and Afghanistan. We have already seen the cruelty of Taliban to its own people especially woman. The american Muslims have the same love and respect for US as the christian, Jews Hindu or any other religion. It is fact that Muslims in America have faced many problems and agony due to their faith . It is not their fault that Taliban had planned one of the deadliest attacks in American history. By viewing Muslims as terrorists we are making huge mistake . And if a mosque is not built then it will be greatest insult to the oldest democracy in the world.

Now lets see its impact on the whole world . It is fact that Muslims living in other part of the world do not feel connected with Americans . The reason may be the Iraq war or huge civilian casualties in Afghanistan war or America's constant support for Israel. The same US president went to Egypt and said "I have come here to seek a new beginning between the United States and Muslims around the world; one based upon mutual interest and mutual respect; and one based upon the truth that America and Islam are not exclusive, and need not be in competition. Instead, they overlap, and share common principles – principles of justice and progress; tolerance and the dignity of all human beings". The relationship between the Islamic world and US is not so sweet especially due to Israel. Taliban had tried to take advantage of that bitterness in the relationship. The whole Islamic world will be watching Americas response to ground zero mosque. Untill and unless you take a step forward for peace and confidence building , Obama's dream cannot be fulfilled. So this issue is going to have impact especially in the Islamic world.

I believe that not allowing the construction for building the mosque will be against everything for which America stood for in the past . Islam did not plot the 9/11 terror attacks , though some of the extremist who committed this heinous crime were Muslims......they were not the representative of Islam. From the history we know there are more heinous crimes committed by Jews and christian (extremists). So federal government should pass a bill that no religious institutions will be constructed including those belonging to Christianity , Hinduism , Jew-ism in the vicinity of ground zero or else it should allow the construction of Mosque.
Today this issue is not a game of losing or gaining some popular votes , but it is issue whether Obama have guts to stand for the values for which US stood in the past.

Oil spill............ devastation of our Planet

The recent oil spill in the gulf of Mexico is the largest oil spill in the history of mankind . The spill started after deep horizon drilling rig explosion. As a result millions of gallons of had been spilt in the oceans. It has caused an extensive damage to fragile ecosystem of the gulf. Already there are many off shore drilling going on and many new projects are being launched.

If we give a look what we have done to our mother earth. Air, water and land we have left no part of our planet untouched from pollution and destruction. The greed of mankind is ever increasing . We are developing new ways to exploit our mother planet. The emissions are increasing each year.

Its not BP oil spill , our planet is being poisoned every day and this oil spill was a big dose . Countries haven't implemented the Kyoto protocol . United states which was supposed to be leader ......is a leader but in the destruction and poisoning of our planet. Its was oil spill in the US so it attracted so much attention , go to places like Nigeria delta .....where the total equivalent oil spilt during the year is even more. But it does not comes in the news headlines . And the big oil firms like Shell which are powerful even do not care to pay for clean up operations in the delta. The whole ecosystem has been destroyed. The big oil firms has become too powerful in this capitalist world. There ruthless quest for earning profit is damaging our existence . If you wouldn't believe ...go and watch the video "Who killed the electric car" . They even influence the public opinion by controlling the media. These oil companies have become too powerful and are influencing the policy of government. And may be these are controlling the small governments in poor regions like Africa. These multinational big guns care only for their profit and nothing else matter for them. Recent stories of involvement BP in release of Lockerbie bombers by Scotland is one of such incidents.

No one can disagree that in today's world money only matters . And these big firms have financial resources in plenty. Now they are forcing governments to start oil and gas exploration in remote areas of Arctic ocean. Five countries ...US, Canada, Norway, Iceland ,UK and Russia have their claims in the Arctic ocean. This is one of the rarest ecosystem of our planet which have not be damaged till now. But government have already started to take bidding for destroying these areas also. Before starting any exploration in the Arctic ocean ...all key countries should sit together and form tough laws for protesting the ecosystem......they should not bow under the pressure from multinational firms.

Time has come when nation should come above their interests to protect the mother earth . Stop thinking in terms of million dollars and MNCs......think of the future crisis. If we start it today ......................then may be we can save our planet for coming generations.