tag:blogger.com,1999:blog-19649274.post2772399061449621017..comments2024-03-18T08:59:55.045+05:30Comments on The Leap Blog: The middle muddleAjay Shahhttp://www.blogger.com/profile/03835842741008200034noreply@blogger.comBlogger14125tag:blogger.com,1999:blog-19649274.post-45121062651581568882009-01-29T20:43:00.000+05:302009-01-29T20:43:00.000+05:30i agreee with ur comment that mindless people need...i agreee with ur comment that mindless people need not run india.do u think it is necessary to have rbi as an intervening hand in our market or let market decide everything.i think these babus r serving more of their interests.i m working on this concept nd would like to see ur comments.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-91060334539486208212007-10-25T11:28:00.000+05:302007-10-25T11:28:00.000+05:30AjayRefer to Ila Patnaik article .....RBI seems to...Ajay<BR/><BR/>Refer to Ila Patnaik article .....RBI seems to be buying much more dollars than the FII flows...what are the other channels from which foreign money is coming into the country.....the local debt window is capped and ECB are restricted.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-85283004868154744862007-10-19T08:38:00.000+05:302007-10-19T08:38:00.000+05:30> WRT monetary policy reforms, I> scanned the mone...> WRT monetary policy reforms, I<BR/>> scanned the monetary policy blog<BR/>> pages. Most of the pages<BR/>> centered out the solution<BR/>> towards fiscal consolidation.<BR/><BR/>Did you look in the right place? I just looked and on a massive web page with 41 posts, the word "fiscal" occurs all of 7 times.Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-9516148120756789292007-10-18T15:57:00.000+05:302007-10-18T15:57:00.000+05:30Hi Ajay,WRT monetary policy reforms, I scanned the...Hi Ajay,<BR/><BR/>WRT monetary policy reforms, I scanned the monetary policy blog pages. Most of the pages centered out the solution towards fiscal consolidation. <BR/><BR/>Does it include reducing public spending or reducing govt expenditures? Won't it affect various development projects which in India have started at last ?<BR/><BR/>What do you say ?<BR/><BR/>Anyway Please Please recommend me some new book on open economy issues (and obviously what's the right way to tackle them) wrt developing mkts (like India).<BR/><BR/>Best Rgds,<BR/>gaurav.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-50912015936573573552007-10-18T14:57:00.000+05:302007-10-18T14:57:00.000+05:30Anonymous,> How does one define these Offshore > D...Anonymous,<BR/><BR/>> How does one define these Offshore > Derivative Instruments ? I think it > has very interesting implications. > Technically, even shares / units<BR/>> issued by foreign mutual funds<BR/>> (which are registered as FIIs /<BR/>> Sub-accounts) can also be defined<BR/>> as such...and consequently would<BR/>> have to comply with the 40% / 0%<BR/>> limit respectively.<BR/><BR/>As I <A HREF="http://www.mayin.org/ajayshah/MEDIA/2007/making_sense_of_pns.html" REL="nofollow">say here</A>: <I>once we have the FII framework, and foreign financial firms are able to obtain exposures on NSE and BSE for the spot market and for the exchange-traded derivatives, they then use this `raw material' to construct all kinds of innovative products - ranging from emerging market funds to Nifty put options. This is feasible, desirable and inevitable.</I>Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-1971312286493016052007-10-18T14:47:00.000+05:302007-10-18T14:47:00.000+05:30hi AjayI read yr article in the Bus Std yesterday....hi Ajay<BR/><BR/>I read yr article in the Bus Std yesterday... I wish to defer on few points mentioned (of course, I am not as well versed with economics to give an opinion on wether the article as it stands is okay)<BR/><BR/>1. About the dollar depreciation, yes, the weakening of the dollar has a big role in rupee appr'tn. But we cant ignore the fact that the rupee has actually strengthened vis a vis every currency around.. viz the yen, euro and the pound! <BR/><BR/>2. The Govt has to have the exchange rate within a recognisable range. And therefore it has to take measures. It did take the step of imposing limits on ECBs some time ago. Now, i remember reading an article the same day in the same paper which stated that India's total ECBs last year was equal to about half of the total Negative balance of payments. Dont you think then, that it is prima facie, an effective way of controlling th exchange rate? <BR/>I dont understand macroeconomics as much as id like to. stuff like how you increase th bank rate, and the WPI falls within 2 weeks (i think its just coincidences, and economists parading it), and how a change in ECB limit will have an effect in 1 month. <BR/><BR/>now back to the issue of PNs, we all know that the current rally, was caused purely by foreign inflows, and th domestic traders wer jus enjoying somebody else's party. And it was, to say the least, frightening, from the point of view of a stock broker. <BR/>Now does that matter? maybe it doesnt matter who buys, but it is neccessary t have an idea of who exactly is buying for two reasons. one, if they are hidden as a sub account, the whole purpose of trasparency will be beaten. and secondly, they could really pull the rug from under our feet anytime, and I dont think that worry is exaggerated. It has happened before, and will again! <BR/><BR/><BR/>pls dont see this as a personal criticism, because well, its an unwritten rule at blogger! :) and secondly, I still am not economically educated enough to comment on the article. but I feel the facts could materially change the strain of it. <BR/><BR/>and finally, i personally dont think it is right for people to just bullshit the people in power just like that.. i mean, PC and th RBI and SEBI are people with brains too, are they not? dont they also see the facts for themselves.. I strongly disagree with the way Udayan Mukherjee cribs on TV<BR/><BR/><BR/>And ya, not to mention, but I want a reply!Abhttps://www.blogger.com/profile/03590586267621304681noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-32821667419401111222007-10-18T14:20:00.000+05:302007-10-18T14:20:00.000+05:30How does one define these Offshore Derivative Inst...How does one define these Offshore Derivative Instruments ? I think it has very interesting implications. Technically, even shares / units issued by foreign mutual funds (which are registered as FIIs / Sub-accounts) can also be defined as such...and consequently would have to comply with the 40% / 0% limit respectively.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-18001396802248929292007-10-18T11:20:00.000+05:302007-10-18T11:20:00.000+05:30If as Ajay Prakash argues (rather persuasively) th...If as Ajay Prakash argues (rather persuasively) that capital flows will be severely curtailed then the authorities would have met their objective.<BR/><BR/>That is really the game in town.<BR/><BR/>That ECBs didn't work is no reason why this won't work. (Actually in a way it it not that ECBs worked or didn't work but that flows from another avenue -portfolio investments - overshadowed, or rather overwhelmed the authorities - very likely a scenario they had not envisaged). The PN dynamics are different. In any case, the authorities are unlikely to rest unless they have their way. If changes to PN issuance doesn't work they will think of something else. Mr. Tarapore has even mentioned "unremunerated reserve requirements" on all capital inflows.<BR/><BR/>In such an environment expecting to away with FII registrations and having direct investments by foreigners is hardly going to be entertained. And while SEBI is making the right noises it can easily sit on fresh FII registration and delay the process long enough to suit themselves.<BR/><BR/>It may well be that what the authorities are doing will impose costs on the economy and several agents in the country and outside and may be undesirable, but that is hardly the point.<BR/><BR/>I think we still need an answer to the question Will the measures work? Are there enough holes elsewhere to neutralize the impact of portfolio flows? Will something else - unanticipated now - perhaps emerge?Ecothinkerhttps://www.blogger.com/profile/04381798336447733288noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-63589158598890348742007-10-17T22:14:00.000+05:302007-10-17T22:14:00.000+05:30Your parting comment on CNBC was pretty harsh, ouc...Your parting comment on CNBC was pretty harsh, ouch :)<BR/><BR/>It was good to focus on the big picture. Keep at it.Chandrahttps://www.blogger.com/profile/04763671243428875888noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-15784347354804475682007-10-17T16:39:00.000+05:302007-10-17T16:39:00.000+05:30well written article as usual... :)well written article as usual... :)Ankur (THE consultant)https://www.blogger.com/profile/12116610700551596475noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-61831765927397991922007-10-17T15:03:00.000+05:302007-10-17T15:03:00.000+05:30Gaurav, click on the label `monetary policy' on my...Gaurav, click on <A HREF="http://ajayshahblog.blogspot.com/search/label/monetary%20policy" REL="nofollow">the label `monetary policy' on my blog</A>. Right now, there are 41 posts there.Ajay Shahhttps://www.blogger.com/profile/03835842741008200034noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-87344509264031066462007-10-17T13:44:00.000+05:302007-10-17T13:44:00.000+05:30Hi Ajay,What all measures should RBI adopt to star...Hi Ajay,<BR/><BR/>What all measures should RBI adopt to start effective monetary reforms. Can you please enlighten us ? <BR/><BR/>I know you earlier mentioned this sometime back. But I am not able to capture the link. <BR/><BR/>gaurav.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-19649274.post-17674809803735058622007-10-17T11:31:00.000+05:302007-10-17T11:31:00.000+05:30very well said on cnbc ... do u think the Left has...very well said on cnbc ... do u think the Left has hand in this also ?Yogeshhttps://www.blogger.com/profile/03765493015971511898noreply@blogger.comtag:blogger.com,1999:blog-19649274.post-18697523871683245432007-10-17T09:21:00.000+05:302007-10-17T09:21:00.000+05:30This seems so much like a typical Indian tamasha. ...This seems so much like a typical Indian tamasha. While SEBI says the intention is not to restrict inflows but to regulate and know holders of PNs, several commentators are going on about how there is a bubble in the Indian stock market and it is being manipulated. This measure, they think, will cause a welcome correction. Of course, many (most?) see it for what it may really may be - attempt to restrict forex inflows.<BR/><BR/>Will it work? At the moment only PNs are restricted/withdrawn/banned. There is money coming in from registered FIIs - they are not affected. Many investors may decide to register. And the ingenious world of finance professionals may find alternatives. Since derivatives are cash settled what prevents a derivatives market to grow and thrive elsewhere (offshore) - at the moment it is largely absent and it may not have the liquidity that comes along with a cash market but things could change. It would also be interesting to see if PN holders and others rush to sell (as some are predicting) or could there be some aggressive buying (to beat the proposed rules) in the 7-10 days that it may take for the rules to be notified.<BR/><BR/>If one looks at ECB in the last year a few large borrowers accounted for the majority of the money raised (20 firms for 50 % of the borrowings). And they have capex expenditures in forex to easily comply with the new rules. It will be the smaller entities who will be shut out - so much for the stated intention of helping SMEs.<BR/><BR/>I think we are missing a trick or two as far as inflation control is concerned. Commodity prices are at all time highs, economic growth in India is high, corporates are running at capacity and making record profits, and the fiscal situation is comfortable (not ideal but neither is it dire). However, our import duties remain stubbornly high and the spread between input and output rates is unacceptably high. Certain low value added sectors - oil refining is a prime example - enjoy high effective rates of protection (ERPs). Instead of wasting time and energy on negotiating trade agreements with all and sundry and tinkering with a few rates in every budget, the government could use this fantastic opportunity to 1) lower rates and 2) decrease, no abolish the differential between input and output rates. Ideally, one single rate for all industrial products but in any case no more than 2-3 (to take care of some exceptionals). That would be inflation-busting, promote efficiency and may not seriously affect custom revenues.<BR/><BR/>Much is made of what the rising rupee may do to the margins of Indian companies. (While the reduction in prices of one's output is highlighted, that of inputs one uses is conveniently forgotten). But should we shed a tear for India Inc? They enjoy margins which are unheard of in industrialized countries. A few stray examples - IT (25-30 % vs 12-18%). autos (12-15% vs 5-7%), construction (7-9% vs 3-5 %). One can go on and on. Linked to margins, and perhaps, more important, is the return on equity for Indian corporates (as they proudly claim - it is frequently in excess of 20%). Even utilities and fertilizer companies (which are "low" risk) can earn 12 -14 % post-tax which translates into 18 -20 % pre-tax and even higher for the most efficient units. In an environment where the US 10-year bond yields less than 5 %, Indian 10-year is about 8%, add some equity premium and it is difficult to see and justify the levels what we enjoy (admittedly this is a crude calculation and the figures presented are approximate). The point is that a move towards lower margins and return ratios seems inevitable given free movement of goods and capital.<BR/><BR/>As you point out we need to come to grips with and live with the change. Either we should not have traveled on this road, but once we have, putting roadblocks, speed-breakers and leaving potholes unattended is not the way to go (though this is what we do - both literally and metaphorically).Ecothinkerhttps://www.blogger.com/profile/04381798336447733288noreply@blogger.com