Fuel price and interest rate hikes a Political Math....

On the one hand RBI is increasing the interest rates to make money costly which will tame demand and hence reduce inflation. And once the inflation tames Govt increases fuel prices.

The result of the two actions is as below

Interest Rate Hike By RBI to tame inflation	Fuel Price Hike by Govt in the name of deregulation
Results in increase in interest rates which leads to increased cost of borrowing, increased Home loan EMIs.	Results in shooting up of transportation costs making travelling by private vehicles dearer and increase in Rickshaw and Taxi fares as many of them still run on Petrol.
Result – 1.Reduced inflation, reduced cost of food and other daily necessities. 2. More outflow of salary per month to pay loans. Reduced food prices, but increased EMI amt.	Result – Costly Private and Public transport again draws a big hole in Common Man’s pocket, who even if does not have a private vehicle, has to suffer from increase in fuel rates due to increase in fares.

If the price of petrol stands at Rs 58.90, the break up of cost as calculated by the Indian Government is as follows - (Current break up is not available)

Basic Price: Rs 28.93

Education Tax: Rs 0.43

Dealer commission: Rs 1.05

Excise duty: Rs 14.35

VAT: Rs 5.5

Petrol Custom: Rs 1.54

Crude Oil Custom duty: Rs 1.1

Transportation Charge: Rs 6.00

Total price: Rs 58.90

Suggestion to government – I think govt should stop looting its citizens in the name of taming inflation. Instead of increasing the fuel and interest rates, govt can save a lot of money just by reducing electricity theft by 50% and reducing corruption by only 10% if possible and it is a simple logic which can be understood by a common man and we do not need any ECONOMIST to understand it!

- By Chintan Dedhia

Disclaimer - It is just a personal thought and the expression of the same by a mere analysis on the economic events It is not intended to hurt any person or institution .Any body having any queries please mail me at chintan.no1@gmail.com

Top 10 Most admired companies in India

Top 10 Most admired companies in India

1.     Infosys Technologies (Annual Sales of over $4 billion)

2.     Tata Consultancy Services  (largest Indian Outsourcer by Sales)

3.     Bharti Airtel 

4.     Larsen & Toubro (in deal to build nuclear reactors)

5.     Wipro (Global workforce of close to 100k)

6.     Tata Steel (Manufacturing units in 27 countries)

7.     Hindustan Lever (has more than 400 brands)

8.     HDFC Bank (Incorporated in 1994)

9.     State Bank of India (planning to add 1000 branches) 

10.  ITC (Wide-range Conglomerate)

Infosys Technologies is adjudged as the most admired company in India followed by TCS and Bharti Airtel in 2 and 3rd position respectively.

The ranking has broadly taken 5 different aspects into consideration.

§  Financial Reputation

§  Corporate Reputation

§  Quality

§  Innovation

§  Vision

Following are the individual ranking of various parameters:

Financial Reputation

With the biggest reserves and deposits than any other bank in India, SBI takes the numero Uno position when it comes to Financial Reputation. Reliance Industries, followed by HDFC bank complete the top 3 positions.

Corporate Reputation

Infosys Technologies known for its exemplary Governance and transparency in corporate dealing comes at top followed by 2 Tata companies, TCS and Tata Steel

Quality

Again with excellent quality of Software deliveries, Infosys takes the top position, followed by L&T and Bharti Airtel.

Innovation

Now this is a big surprise to me, TCS takes in the top position in Innovation. I always related TCS as a Volume player without much innovation, but I seem to be completely wrong here.

Infact, TCS is the most admired company for innovation, followed by Bharti Airtel and Infosys Technologies

Vision

With visionaries like Narayan Murthy and Nandan Nilekani at the helm, Infosys Technologies had to take the top position when it comes to vision. Tata Steel surprisingly  comes at 2nd followed by Reliance Industries.

UNCLE SAM HIT THE SUMO !!!!

Due to my academic schedules and my SEM III exams of MBA I could not write the blog. Please find below the continuation of the previous Blog( UNCLE SAM's CHINESE PROBLEM)

During the 1980s due to heavy Japanese exports especially that of automobiles flooded the US markets which led to the outflow of the USDs to Japan leading to surpluses with Japan and deficits with the US, thus US blamed JAPAN’s undervalued Yen for the US deficits.

The long running dispute between the United States and Japan throughout the 1980’s and early 1990’s over the value of the yen ended only when Japan’s economy entered its “lost decades,” which has made the Chinese determined not to repeat the experience.

But, based on Japan’s experience, the Chinese do seem to have good reasons to be wary of US pressure to revalue the renminbi. Indeed, the economists Ronald McKinnon and Kenichi Ohno have singled out US pressure for yen appreciation as a key source of the Japanese economy’s long-term deflation and stagnation – the so-called “lost decade” of economic malaise that is now well into its second.

Chinese officials agonize over the US pressure. If they yield to it, the Chinese economy, they argue, may fall into the same deflationary trap that ensnared Japan after the yen’s appreciation in the 1980’s – under US pressure – inflated a catastrophic asset-price bubble. But if they continue to resist, China may face hot trade disputes with the US, which could be even messier.

Like Japan in the 1980’s, China must defend itself from US claims that the renminbi’s weakness is the source of the imbalances between the two countries. Currency appreciation, Japan argued then and China argues now, is unlikely to result in a significant current-account adjustment, which requires addressing not only China’s high savings rate, but also low savings in the US.

What is the Lost Decade?

The economic miracle ended abruptly at the very start of the 1990s. In the late 1980s, abnormalities within the Japanese economic system had fuelled a massive wave of speculation by Japanese companies, banks and securities companies. Briefly, a combination of incredibly high land values and incredibly low interest rates led to a position in which credit was both easily available and extremely cheap. This led to massive borrowing, the proceeds of which were invested mostly in domestic and foreign stocks and securities.

Recognizing that this bubble was unsustainable (resting, as it did, on unrealizable land values - the loans were ultimately secured on land holdings), the Finance Ministry sharply raised interest rates. This popped the bubble in spectacular fashion, leading to a massive crash in the stock market. It also led to a debt crisis; a large proportion of the huge debts that had been run up turned bad, which in turn led to a crisis in the banking sector, with many banks having to be bailed out by the government.

Eventually, many become unsustainable, and a wave of consolidation took place (there are now only four national banks in Japan). Critically for the long-term economic situation, it meant many Japanese firms were lumbered with massive debts, affecting their ability for capital investment. It also meant credit became very difficult to obtain, due to the beleaguered situation of the banks; even now the official interest rate is at 0% and have been for several years, and despite this credit is still difficult to obtain.

Overall, this has led to the phenomenon known as the "lost decade"; economic expansion came to a total halt in Japan during the 1990s. The impact on everyday life has been rather muted, however. Unemployment runs reasonably high, but not at crisis levels (the official figure is a little under 5%, but this is a considerable underestimate - the real level is probably around twice that). This has combined with the traditional Japanese emphasis on frugality and saving (saving money is a cultural habit in Japan) to produce a quite limited impact on the average Japanese family, which continues much as it did in the period of the miracle.

UNCLE SAM’S CHINESE PROBLEM ! ! !

Today after the Subprime Crisis America is blaming CHINA for the high unemployment rate in the whole US.

US is forcing China to appreciate the YUAN as its depreciated value is leading to cheapest exports from China to 

US leading to huge deficits in the US economy as claimed by US

But do you think the depreciated value is the sole reason for the deficits in the US?

The answer is NO because the deficits in the US are structural deficits. The savings rate of US is hardly 1 % which is a major contributor to the deficit because, if the citizens don’t save the money in the domestic banks then it is spent on purchasing goods and services(Chinese) which leads to the outflow.

The cycle goes this way in the following manner

• US employees are highly paid – The basic Wages paid are anywhere between $ 4-8.
• Thus wages are a huge cost to the manufacturers and service providers, which leads to higher prices of Goods and Services.
• But on the macroeconomic level employees of any economy are the consumers also so in the end goods and services in the US become costly for their citizens itself.
• And then the citizens have no other option than to buy Chinese Goods and services which are available at Cheaper rates which leads to the outflow of the currency($) leading to deficits.
• And also the poor sales of the American firms then leads to layoffs which results in Unions putting pressure on politicians which in turn leads to put pressure on China to appreciate YUAN.

So do you think US should pressurize China to appreciate YUAN??? Or is there any other country on which US had put pressure to in the past to appreciate its currency???  

Find out in my next blog

- By Chintan Dedhia

What Is Freemium?

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Freemium is a business model that works by offering basic Web services, or a basic downloadable digital product, for free, while charging a premium for advanced or special features. The word "freemium" is created by combining the two aspects of the business model: "free" and "premium". The business model has gained popularity with Web 2.0companies.

The freemium business model was articulated by venture capitalist Fred Wilson on 23 March 2006.

"Give your service away for free, possibly ad supported but maybe not, acquire a lot of customers very efficiently through word of mouth, referral networks, organic search marketing, etc., then offer premium priced value added services or an enhanced version of your service to your customer base."

An early example of the freemium model working on the internet was Musicmatch Jukebox, an all-in-one music management tool that was first marketed with a freemium model in 1999. Most users could use the Basic/Free version, but a $19.99 upgrade provided extra features such as supertagging and faster ripping and burning. 

According to the New York Times, freemium is becoming the "most popular business model among Web start-ups." Some of the most popular services, such as Pandora, Flickr, LinkedIn, Spotify and Skype use the freemium model.

§  Feature limited

§  Time Limited

§  Capacity limited

§  Seat limited

§  Customer Class Limited

What is Dodd-Frank Act?

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President Barack Obama's policy architects say they will begin enforcement of a sweeping new set of financial regulations intended to govern risk-taking on Wall Street and offer greater protection to consumers. The goal is to help the U.S. economy return to prosperity even as troubling signs of a global downturn remain.

According to Wharton experts, the Dodd-Frank Wall Street Reform and Consumer Protection Act is a good start toward future financial stability, but they warn that significant concerns remain unaddressed, and stress that the details of implementation must be handled carefully to avoid creating new problems.

 HIGHLIGHTS OF DODD-FRANK ACT

1.    Consumer Protections with Authority and Independence: Creates a new independent watchdog, housed at the Federal Reserve, with the authority to ensure American consumers get the clear, accurate information they need to shop for mortgages, credit cards, and other financial products, and protect them from hidden fees, abusive terms, and deceptive practices.

2.    Ends Too Big to Fail Bailouts: Ends the possibility that taxpayers will be asked to write a check to bail out financial firms that threaten the economy by: creating a safe way to liquidate failed financial firms; imposing tough new capital and leverage requirements that make it undesirable to get too big; updating the Fed’s authority to allow system-wide support but no longer prop up individual firms; and establishing rigorous standards and supervision to protect the economy and American consumers, investors and businesses.

3.    Advance Warning System: Creates a council to identify and address systemic risks posed by large, complex companies, products, and activities before they threaten the stability of the economy.

4.    Transparency & Accountability for Exotic Instruments: Eliminates loopholes that allow risky and abusive practices to go on unnoticed and unregulated -- including loopholes for over-the-counter derivatives, asset-backed securities, hedge funds, mortgage brokers and payday lenders.

5.    Executive Compensation and Corporate Governance: Provides shareholders with a say on pay and corporate affairs with a non-binding vote on executive compensation and golden parachutes.

6.    Protects Investors: Provides tough new rules for transparency and accountability for credit rating agencies to protect investors and businesses.

7.    Enforces Regulations on the Books: Strengthens oversight and empowers regulators to aggressively pursue financial fraud, conflicts of interest and manipulation of the system that benefits special interests at the expense of American families and businesses.

What Is ATL and BTL?

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Above the line (ATL), below the line (BTL), and through the Line (TTL), are advertising techniques.

In a nutshell, while ATL promotions are tailored for a mass audience, BTL promotions are targeted at individuals according to their needs or preferences. While ATL promotions can establish brand identity, BTL can actually lead to a sale. ATL promotions are also difficult to measure well, while BTL promotions are highly measurable, giving marketer’s valuable insights into their return-on-investment.

Promotional activities carried out through mass media, such as television, radio and newspaper, are classed as "above the line" promotion. "Below the line" promotion refers to forms of non-media communication or advertising, and has become increasingly important in the communications mix of many companies, not only those involved in fast moving consumer goods, but also for industrial goods.

"Through the line" refers to an advertising strategy involving both above and below the line communications in which one form of advertising points the target to another form of advertising thereby crossing the "line".

Above the line sales promotion

ATL is a type of advertising through media such as television, cinema, radio, print, web banners and web search engines to promote brands. This type of communication is conventional in nature and is considered impersonal to customers. It differs from BTL advertising, which uses unconventional brand-building strategies, such as direct mail and printed media (and usually involves no motion graphics). It is much more effective when the target group is very large and difficult to define.

Below the line sales promotion

BTL sales promotion is an immediate or delayed incentive to purchase, expressed in cash or in kind, and having short duration. It is efficient and cost-effective for targeting a limited and specific group. It uses less conventional methods than the usual ATL channels of advertising, typically focusing on direct means of communication, most commonly direct mail and e-mail, often using highly targeted lists of names to maximize response rates. BTL services may include those for which a fee is agreed upon and charged up front.

BTL is a common technique used for "touch and feel" products (consumer items where the customer will rely on immediate information rather than previously researched items). BTL techniques ensure recall of the brand while at the same time highlighting the features of the product.

Another BTL technique involves sales personnel deployed at retail stores near targeted products. This technique may be used to generate trials of newly launched products.