Showing posts with label GDP. Show all posts
Showing posts with label GDP. Show all posts

Friday, February 08, 2013

UK, Germany lost due to auctions! And India?

3G in India is clearly too expensive on a rational and logical basis

The Indian 3G spectrum auction has finally ended after 34 days, 183 rounds and prices close to US$15 billion. The resulting US$ / MHz / Pop (the standard benchmark) for Mumbai, for example, makes the prices paid in the UK and German 3G auctions look relatively good value. If the prices were adjusted for relative differences in GDP per capita, Indian prices would be off the scale. The prices paid in Germany and the UK in the dying days of the dotcom boom are often said to reflect the “irrational exuberance” of the time but has that same exuberance driven prices in India to irrational levels?

Vodafone in the UK, for example, had been enjoying returns on capital employed (ROCE) of 27% (before tax) in the year preceding the auction. However, after bidding close to GB£6 million for its 3G spectrum the company’s capital employed had to grow from GB£2.7 billion to GB£9.6, an increase of 255% to finance the investment. The result was an overnight fall in the ROCE from an impressive value creating 27% to a below the cost of capital 8%. O2, Orange and T-Mobile all experienced a similar fate with the returns for O2 and Orange falling from 6% to 3% and 19% to 13% respectively. After many false dawns only now, 10 years on, are non-SMS data revenues beginning to have a material impact on the top line but for many operators the contribution is still below 10% of total sales. UK and Germany were clearly cases of irrational exuberance but what about India?


Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

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Friday, November 02, 2012

THE COMPLETE GLOBAL ECONOMY

WHEN OIL GREW, RUSSIA GREW; WHEN OIL FELL, RUSSIA ENSURED UKRAINE FELL. IF DUBAI IS A CASE IN QUESTION, THEN THE FACT IS THAT RUSSIA AND UKRAINE TOGETHER HAVE THE POTENTIAL TO DEBILITATE THE COMPLETE GLOBAL ECONOMY. SAYS GYANENDRA KASHYAP

Comparatively, Putin’s Russia – although not as bad as Ukraine – is the 7th ranked nation across the world on the cumulative default probability ranking (they have a default probability of 13.6%, better than Dubai). From 2005 to 2009, Russia’s fiscal balance has deteriorated phenomenally. While in 2005, there was a fiscal surplus of 8.2%, in 2009, there is now a fiscal deficit of 8% – a 180 degrees turnaround. Although Russia had managed to control its debt service ratio since 2005 (when it was 24.2) and brought it down to 11.3 in 2008, the same is expected to be 18 in 2009, an extremely worrisome rise. To Putin’s credit, FDI investment has increased from $12.8 billion in 2005 to $70.32 billion in 2008. But the forecasts for 2009 are close to half of this figure. External debt that was 33.6% of GDP in 2005 is now expected to increase to 47.1% in 2009. Add public debt of 5.4% of GDP, and you start realising that 52.5% of Russia’s national income of $1671 billion is pure and simple debt. In absolute figures, approximately $840 billion – compare this to Ukraine’s overall debt of $232.2 billion. Russia’s inflation worries continue, with 13.3% being the average inflation in 2008, although the same is expected to come down to 12% in 2009.

Fitch Ratings writes to us that Russia’s foreign currency and local currency long term IDRs have now been downgraded. Russia’s foreign exchange reserves saw an outward flight of almost $200 billion from July 2008 to February 2009. And with almost $137 billion of private sector debt coming up for repayment, these reserves might see a further fall very soon. At one point this year, the Russian rouble had fallen by a killing 37% when compared to the highest it had previously achieved against the dollar. Russia’s real GDP growth this year has been forecasted by Fitch Ratings to be -7%. In fact, World Bank has presented a worse picture, and has said that Russia’s GDP growth has been -9.8% in the first quarter, -10.9% in the second quarter, -9.4% forecasted in the third quarter and -10% in the fourth quarter. Interestingly, population is continuously falling by around 750,000 per year. The UN forecasts that Russia’s population, from 142 million now would go down to just 100 million by 2050. Still, in all fairness, Russia will make it through these times.


Source : IIPM Editorial, 2012. An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
 
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Tuesday, October 30, 2012

A new revenue model?

Is the Indian government missing out on billions?

One of the fastest growing nations, India faces a severe problem when it comes to effective and adequate revenue generation. For example, the government succeeded in generating only Rs.6,279.49 billion as gross tax collection while the proposed budget expenditure is Rs.9,532.31 billion in the budget year 2009-10. The country faces a budget deficit of Rs.2412.73 billion, which is 4.4% of GDP, a figure high for an emerging nation (in 2009, China’s budget deficit stood at yuan 111 billion, which is just 0.4% of the GDP). Since taxation is the major revenue source, the Indian government keeps attempting to look at increasing as well as ‘innovative’ ways generate more money. We looked around, and think we have one which will qualify in their standards. And that is to bring net based companies under an organised tax structure – beyond simply service and profits tax payments – on a narrow premise that we’re forwarding.

As a case study, search engine Google follows a unique revenue model with innovative products and services. It has AdWorks, which is a pay per click advertising program. This allows advertisers – on Google search and on other Google sites – to present their advertisements instantly to people who are looking for information similar to what the advertiser has to offer. And the advertiser pays Google for every click that surfers make on their links. Moreover, it has Ad-Sense, which allows Google to place clients’ advertisements on partner sites, wherein the partner sites earn part of the per-click payment. This unique double combo revenue model helped Google earn $21.79 billion in the FY2008, up from $16.59 billion in the last year. Even in the last quarter ending June 30, 2009, Google generated astounding revenues of $5.52 billion despite all talks of an economic slowdown. Yahoo is another internet service provider that generates a hefty chunk of money following a very similar revenue model. Yahoo Inc. generated $7.2 billion in the FY08 compare to $6.9 billion in the last year. In the last quarter ending 2009-06-03, Yahoo generated $1.57 billion.


Source : IIPM Editorial, 2012.

For More IIPM Info, Visit below mentioned IIPM articles.
 
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Tuesday, October 16, 2012

In pursuit of happiness…

Indian policymakers have miserably failed to arrest the growing financial mess, feels Manish K. Pandey

It isn’t an optimistic avowal for an economy sweating hard to pass up a financial mess. But then, it’s the bitter truth! What else would you say when you hear the Reserve Bank of India (RBI) Governor D. Subbarao proclaiming “FY 2009-10 to be more challenging than the current one” with a sigh? In fact, the wheeze seemed to have much more in it than what he actually confirmed – the burden of the muddled past!

No doubt, over the past few years India has been on a high growth trajectory. But then, it had more to do with the buoyant show put up by both manufacturing and services sectors (of course others too!) and less by our very own policymakers. The little help they could provide (don’t forget the government influence) was by being spoil sports. Hey, how can you forget ‘some’ of the aggressive moves like interest rate cuts, stimulus packages, et al and ‘more’ of populist measures that include a whopping Rs.716.80 billion debt relief for farmers and a Rs.300.62 billion pay hike for government employees? So what, if they have a devastating effect on the nation’s financial health! To what extent should India believe her policymakers then, at a time when she is in a fix in terms of the forthcoming economic scenario, is a query that seems to be doing the rounds in many minds. “For the growth momentum to be sustained, it’s necessary to return to the path of fiscal prudence by both the central and state governments,” agrees the RBI in its latest report on fianancial assesment.

The stimulus packages will inject the much-needed support into the economy; but then, what about the country’s already-massive public debt that is officially projected to hit its highest levels this fiscal since the 1991 economic crisis? RBI has already accepted that the combined federal and state budget deficit for FY 2008-09 will come close to 10% of GDP. Even S&P anticipates the government deficit, including off-budget measures such as oil and fertiliser bonds, to increase to 11.4% in FY 2008-09 (to be the highest in the world), from 5.7% in the last fiscal. Goldman Sachs, too, seems to be in agreement with this assessment and pegs India’s fiscal deficit at 10.3% of GDP in the current fiscal. Isn’t this a wake up call for the Indian policymakers, who have been pushing spending beyond the limits?


Source : IIPM Editorial, 2012.

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Friday, August 10, 2012

RAMESH POKHRIYAL, CM, UTTARAKHAND

“We have Vision 2020” 


7 months into his tenure as CM, Ramesh Pokhriyal unveils his plans for Uttarakhand to Anil Pandey 

What are your plansfor Uttarakhand?

We have prepared ‘Vision 2020’ to make Uttarakhand a prosperous, ideal and developed state by 2020. The plan focuses on the theme ‘Pahad Ka Pani, Pahad Ki Jawani’, or water and youth of the hills. We will harness the natural resources of the state in an optimal manner. We will also focus on increasing economic activities in the state that will lead to creation of more jobs and increase in GDP. We’ll take education, health facilities, roads, drinking water, power and other basic amenities to every nook and corner of the state. We have invited investors and the response has been very encouraging.

Please elaborate your ‘Water & Youth of the Hills’ scheme.

The state has a capacity to produce at least 40,000 MW of power from hydel projects. Therefore, we have planned to install several hydel power units in the state. The surplus power will be sold to other states. To rope in local talent and provide jobs, we have decided to employ local youths in mini hydel power projects.

But haven’t all these measures failed to check migration from the hills?

No, there is a significant dip in numbers. Expansion of industries and further industrialisation are the key factors for stopping brain drain.

Health is another area of concern. The lack of connectivity and the lack of facilities in small hamlets are the major areas of concern.

The state provides all BPL families free treatment. Keeping in view the specific problems of the hills, the state government has come up with Pandit Deen Dayal Upadhyay Free Healthcare Programme. At present, the programme is run through 90 centres in the entire state. Under this scheme, anybody can dial the prescribed number – 108 – and avail the facility of emergency ambulance service. These ambulances are sort of mobile hospitals. We have saved as many as 82,000 mothers and children .in the last one and a half years.

Read more.....

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Tuesday, July 24, 2012

This Time, The Entire US GDP will be Wiped off!

Question is, will The World see Tech-Bubble 2.0? The Incredible Valuations of New age Internet Startups do Indicate so. And what are we Risking? Amir Moin after an In-Depth analysis, Reveals The Answer – a Mighty lot!

C apitalists hate bubbles. Actually, they first love it. Dimes turn into hundreds of dollars, and before the investors wake up to reality, the stock markets crash. Valuations are reduced to ashes, and what is left of any industry hit by this dust storm is a sight of riches-to-rags investors, with the world looking on in helpless horror. The bursting of the dot com bubble of 2000, is an example. It is not every day that the world can withstand a blow of $6 trillion (the value that stock markets around the world lost between March 10, 2000 and December 31, 2002). And the current times – when US, Eurozone and many countries around the world are still digging themselves out of the slowdown disaster – is certainly not one.

But, the threat is growing by the day. The bubble, we mean. And once again, we find ourselves fearing the unholy apparition symbolising all that the world has suffered in the past, due to the cold savagery unleashed by a handful of financial engineers. And like it happened at the turn of the century, the accused this time again, will be the new age Internet startups. Only this time, the aftermath will be more unpleasant. This is how. Of the 308 companies that went public in 1999 (when the dot-com cycle was at its peak) the 24 largest of them, were valued by the bourses at $70.96 billion (the largest being Agilent Technologies, which was valued at $13.6 billion). As per Morgan Stanley, currently, the combined valuation of just the top five most sought-after unlisted Internet start-ups (which are forecasted to hit bourses anytime by mid-2012), totals a higher $71.3 billion (the largest of them being Facebook, at $50 billion)!

We are staring at a dangerous outcome. Events synonymous to those that led to the previous bubble are being seen in the present days. During the first half of 1999, New York was ablaze with venture capitalists funding any and every dot com start-up. IPO activity surrounding these companies was at an all-time high. According to Thomson Reuters, Wall Street made an estimated $1.3 billion in underwriting fees during that period. Investors in tech-stocks were the happiest of the lot. On March 10, 2000, the NASDAQ index peaked to an all time high of 5132.52, before closing at 5,048.62. That day, the total m-cap of companies listed on NASDAQ was $1.98 trillion. By December 31, 2002, the stock exchange had shed 73.55% of value – amounting to a loss of $1.46 trillion. If a similar mishap is repeated today, the NASDAQ alone will lose $3.01 trillion by December 2013 (as per March 31, 2011, valuation of domestic stock exchanges by World Federation of Exchanges ). Simulate the tumbling reaction on stock markets around the world, and you arrive at value lost of $14.77 trillion over the next 33 months – enough to wipe out the total GDP of US (which stood at $14.80 trillion for 2010, as per US Bureau of Economic Analysis) – sending a ‘stock’ shock wave 146.17% higher than the 2000-2002 Internet-apocalypse!



 
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Thursday, June 09, 2011

Morgan Stanley cuts FY'12 India growth to 7.7 per cent

The next three to six months may not be very good for the Indian equities market, but it makes a very good investment proposition with a 12-18 months view, and India would continue to be on a high-growth path posting 7.7 per cent in 2011-12, said Morgan Stanley analysts. "There is a 19 per cent upside for the BSE Sensex considering our target of 22,100 points. And the market provides a great environment for the stock pickers, as the macro influence on stock prices has already peaked," said Ridham Desai, MD and head of Indian equity research team of Morgan Stanley.

"Valuations are looking attractive, especially on an absolute basis, and for the broader market, the market is pricing in slower near-term growth," he added. Morgan Stanley has shifted its focus from global commodities to domestic consumer-driven sectors. "We remain overweight on industrials and are cognizant of the downside to capital expansion," Desai added. Industrials include engineering, capital goods and infrastructure sectors.

Other favourites include energy, telecom and utilities, while sectors that are underweight are consumer staples, healthcare, financials and materials (commodities). Technology is in the neutral. "Risk-return analysis is in favour of small- and mid-cap stocks, compared to frontline stocks," Desai said. Global risks apart, the market performance would depend on the policy initiatives of the government in the coming quarters. Desai listed expected policy decisions as fuel price hikes, fertiliser prices, FDI in retail and coal mining policy.
"Higher interest rates are likely to put pressure on corporate profitability, but are unlikely to affect them much," said Desai, reasoning that the current debt levels of Indian companies was much lower compared to its own past. On the global front, the impact of withdrawal of quantitative easing (QE-II) in the US on commodity prices was identified as a major surprise in store. Consequent to the US launching the QE-II in September 2010, commodity prices shot up as the US dollar slid.

Responding to a query on the attractiveness of the Indian market for foreign institutional investors (FIIs), Desai said, "Foreign investors are cautious at present and are waiting to invest. But typically foreign inflows follow performance and not the other way round."

Chetan Ahya, MD and Asia Pacific economist at Morgan Stanley, said the government spending will nosedive this fiscal to seven to eight per cent of GDP from 18-19 per cent of CAGR (compounded annual growth rate) in the last five years.

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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