MCX buzz

The headline Food Inflation has become so very obvious to us that we, the people, of this nation has accepted it as a new year gift from the UPA government. But the contingents depicting a supply-side crunch, necessarily says that the Mukhrjees, Subbaraos and Basus of the nation can't do much about it. Of course, it was not impossible to control  but the focus should have been given at the right time. It seems the priority was to settle the scam accounts first and then accentuate Inflation. So, when the custodians of the economy were puzzled by the opposition and public voice (which is supposedly the media), they have to vent their clanger on someone, and who better than MCX could be an option.
Intellects of this nation acknowledged the exchange by blaming it for price rises in commodities because of heavy trading and hoarding happening there.
What a dismaying and Coward excuse to shed the load!!!!!!!!!
   Why MCX???
Well, the only answer to this question is that we could not find anyone better.
Because, if you ask my views then, i find the exchange innocent. Most of the food commodities don't trade there. Some of which that are traded, they actually stabilised in this situation.
For example, lets see the movement of price in pulses.
Chana dal, production of which fluctuates between 4-7 million tonnes, is currently priced @ Rs.27.25 per kg (Indore,Bhopal and Vidisha being the major trading centre and M.P is the highest producer).
On the other hand, Toor and Urad, which accounts for 60% of the total production of pulses of India, is priced @ Rs. 62 /kg. ( The total pulse production in India is 15.23 mn tonnes).

Now, the point to be noted here is that Chana dal is traded in MCX and the other two are not.
How this is possible if MCX could rig prices???
MCX actually makes the system transparent. The supply-side bottle necks is not only because of unpleasant rainfall but also due to inadequate logistics, infrastructure migraine and intermediary's character. Our traditional distribution system in incapable of meeting these challenges but surprisingly nothing is done about it.
MCX, because of the e-trading and exchange mediation, could cut down Intermediary hoardings and price play. The trading in MCX has attracted investors who are ready to manage logistics as they have to honor the contracts. This is one of the biggest reason why price contradiction happened in the pulses.

I agree to the fact that MCX can be destructively used but to stop this there are many other instruments.
Mr. YK ALGAH(Chairman, IRMA), talks about intervention through an intelligent Parastatal (agency) which can sense price engineering happening through any source. The agency can involve markets and private sector players along with the exchange and the government to fix the price, it can monitor the the price fluctuations, it can warn before such crisis and also can help the exchequer to take policy decisions.
This is a very constructive approach and the government should really look for such options.
But it seems the government is more interested in talking about Fiscal consolidation in the FSDC meet and RBI is interested in hiking rates in this Scheduled policy meet (JAN 25).
Fiscal consolidation (which means deducting gov. expenditures to cut the fiscal deficit to controllable limits), is a toxic topic to tease at this point when there is a burning need of government's expenditure in the irrigation department(current infrastructure can support only 37% farm lands of the nation). Of course government can't help it because even deficit can't be neglected. This is a macro-economic trap and it has entwined and jinxed in this because of the lack of pre-emptive efforts. So, again focus comes into play, about which i have talked at the very beginning of the discussion.
So, it has no right to whine and blame. Only option it has is to accept the gaffe and embrace the parastatal proposal and act continuously on it as there can't be any sayonara in this concern.

The spicy business

When in the lonely roads, i pass by some strange faces, stumbling, fumbling in my mind,jerked by some nostalgic thoughts, suddenly something catches my attention, i close my eyes in deep retention, i feel the aroma of a known doorstep,only smelt but unheard,unwritten, oh god is this an Indian kitchen!!!!!!!!!!!
India is the home of spice, which adds aroma to our food, the profundity of which talks our culture, and the purity of which is something we cherish. It is the illustrate of the Indian kitchen and pride of the Indian mothers.

Spices from ages has a nostalgic connection with us but how many of us know that this emotional colossal has a business gargantuan to it. This fiscal, amidst all the speculations about a bad result for the third quarter,ever-rising food inflation, unseasonal monsoon, rate hike by the central bank, FII erosion and the jittery sensex, there is a comrade of the economy where the nation has embarked all its export load and the soldier has shouldered it responsively and responsibly.
Of course i am talking about the international spice trading happening through India.
The statute authority for spice trading in the nation has increased the export budget this year from $4700 mn to $5000mn because of the good production and more importantly the heavy global demand.
Spices account for around 39% of total export by volume and 22% by value in this country.(source: spice-trade.com) and is the only support system for the nation when the country's export drastically is coming down because of the food-grain crisis resulting in unfathomable current a/c crisis. Spices are the only commodity which is exported and generating dollars for the country and strengthening our currency which is already vulnerable.
The break up or the contribution of different variants and types of spices to export are as follows:
Seed spices: 22%
Turmeric :    14%
Oleoresins:  7%
Peeper    :    7%
Cadimum: 1.1%
Ginger   :   2.7%
Tamarind : 1%
and many others. An interesting point to note here is that chili which accounts for around 33% of the total exports have not been pictured in the list this year but still chillies are exported in heavy amount in the form of chili powder but green chillies could not be exported much because of supply side constraints.
So, an obvious question that raises is why supply side constraints cannot or did not happen for other spice crops. The nature has blessed our nation as optimal climatic conditions for spice cultivation. The major spice producing states are Kerela, Tamil Nadu, and Karnataka. All these states are surrounded by the western ghats  which logs water in necessary conditions and also provide suitable soil for its production.
On the other hand, green chillies  are extensively produced in Guntur A.P and are exposed to seasonal variations.
Last year, India alone fulfilled 65% of the global demand by focusing only upon the Latin -American market only. A very big pie that we are leaving is that of Canadian market.
Till 2009, there were more tham 1,000,000 Indo-Canadians spread over Toronto, Vancouver to Calgary to Edmonton. All of them love and miss the Indian cuisines but find it expensive and most of the time unavailable there.The extreme cold weather there can pivot the medicinal property of these spices too. But for these to be robust, a proper communication strategy needs to be established for the epitomization of Caveat emptor.

This is a huge revenue generating model to leverage upon but only few things that has to be done is to give more attention to this sector in terms of distribution, prices paid to farmers and shipping only( Note: not much is needed to be spend on storage as these crops have innate properties that preserves itself for a very long period. Also, not much spending is needed on irrigation).

so, we saw the acme of this old but strong comrade and its capacity to materialize. Only the time ahead can utter that the discussion held will be limited to Bizonomics or will it fizz out to the policy makers who should have considered it seriously long ago....

Country of origin effects

Often when we talk about branding, there is an innate concept that surfaces which is called the Country-of-origin(COO) effect. This simply means that the buyer's decision making process is biased based on the country of origin of the offering.  There may be many factors responsible for such associations of buyer s with a particular country some of which can be i) The ancient business of the nation (The watches in Switzerland)  ii) The Technological revolutions happened in the country(Japan and Germany). iii) The economy iv) The government
v) The wealth index(most important one).
This concept can be associated with many examples like the swiss watch or the scotch from Scotland or the French wines and list can go on and marketers implements this concept extensively to position their brands.

I am here to quote one such example where in COO effect could be seen operating as a success mantra for the offering.
It is still fresh in our hindsight, the 22nd feb,2009 when in the rampart of the 81st academy awards, the trumphets of Jai ho was blown and the son of BHARAT BHOOMI was awarded the oscar for the first time in musical category. Yes!!!!!! i am talking about the Slumdog millionaire, the movie that stole many awards in many events in that year and was one of the most successful movies ever made.
 But before getting carried away with the ecstacy, answer a question. How many of you have heard about a movie called Traffic signal. If we start digging from our memory, a wavy picture starts coming to our mind that we have heard about this movie somewhere. Let me reinforce your memory a bit. This was a movie by Madhur bhandarkar, released in the year March 2007. A movie that couldn't do wonders in the box-office but was made on the same lines as Slumdog exactly a year ago but we cannot say that theme was the same as we cannot challenge a hollywood movie's authenticity.
If you ask my point of view, i found Traffic signal a far better movie compared to slumdog but that's a different story.
However, the success of slumdog was surely due to one factor acting in several ways over the same movie:
- Poverty and India are siblings (atleast, the world perceives so) and the developed babus of the globe want to see our nation subdued, miserable, and poor despite the fact, that we are one of the fastest growing nations of the world. So, when we say that we are showing slums from India, the automatic thirst and passion operates over the world's most of the corners to see how subdued these dogs are & pamper themselves imagining their superiority. The poverty from India makes the global buyer's biased towards the offering as mentioned in the earlier part of the discussion. So did happen for slumdog. How convinced we Indians are with the fact that anytime we are shown subdued and caught in the spiral of social inequality, we are awarded oscars. It happened for Bandit queen and so happened for slumdog. However, when a movie like Lagaan, which shows Indians defeating the west, is not awarded anything even though it is best in the category.
Here, off course the Wealth effect accounts for the COO effect and it is a evident fact that our PPP says our poverty story.
Off course, Indians have gifted the world with many other gems apart from poverty but no one discusses about it that often.
Some of them are Ayurveda, Yog, Surgery(Father of surgery is susruta), kohinoor,Investment in gold (now called bullion) etc. But while availing these, does the buyers have a bias in their decision because of COO????
I have serious doubts. Forget about COO, Americans have even tried to infringe into our heritageous products like Basmati, Tulsi, Neem, & Turmeric and tried associating their country's name with it.
There are many unsung stories like this from India which is not associated with India anyways, but when it comes to poverty come what may, we stand to become the burning example of it.



So, i conclude the discussion saying that historic marketing concepts has evolved and the world uses it extensively also but what is dangerous is that the consumer tends to become more and more prejudiced in their decision making process as acceptability is something that the world need to learn to survive.

surplus-deficit paradox

1 A.D was an era where the INDIA epitomized the world's economy being the only country where culture and richness were two different diaspora flourished together. Sooner, there came a time where only cultural richness could remain and materialistic richness fossilized. This was the era from where started this paradox. The country is blessed with surplus (at least in theory) somewhere but deficit emanates and engulfs the surplus. The resultant is nullified.
The country in the Apr-Nov quarter of 2010 show a record increase of 27.4% in the gross tax collection as compared to budgeted 18% growth rate by the Finance ministry. The tax collected is Rs.418051 cr this period as compared to Rs.329606cr last quarter. But the fun here is that this surplus is not enough to sustain the deficit which the government wants to settle somewhere around 5.5%. The Fertilizer, Crude oil, Food ministries have already claimed subsidies which are 35%, 102%,450%, more than what was budgeted respectively. With such demanding spheres around and hike in global commodity prices the fiscal deficit seems to widen, let alone stabilization.

Consider the other side of the coin now. With the onion and chilly along with other commodities are getting dearer and dearer, aftermath is that the supposedly poor population is not considering them in their menu anymore. But what poor are we talking about. Is that the urban poor or the rural poor????
Because if it is the urban poor then, they anyways paid a premium because of the intermediaries who charged them extra in the name of logistics and transport from the point of origin to market (which is actually a hoarding premium). Now at least, they are paying for the correct reason. And if it is the rural poor then, its not  bad for them either as, they are getting a premium price for a supply squeeze with is better than surplus production wherein they were not paid the remunerative price even by the same intermediaries.
Thus, the the net off poor is not in that misery for this.
Here again, the deficit is earning surplus for some.

Now consider few other facts.

• India's Balance of payment is always positive but there is a huge current account deficit despite of it. The deficit is so huge that our currency grew only 3.4% against dollar where Ringgit grew 11.8% and Rupiah grew 4.2%. 
• India has a dwindling resource of uranium which is hampering its nuclear energy projects but, this is just an excuse for not investing in infrastructure. Not many of us know that the country has 25% of the world's Thorium reserves which is a potential nuclear fuel and is not used efficiently.
• Despite the fact that we had $25bn of FII inflows last year, yesterday it traded record low @ 45.33 against dollar as dollar still have a heavy demand in the nation (Thanx to the $224bn of external debt we have)
• India is the world's second largest producer of fruit amounting to around 10.9% of the world's total production but then also 37% of the people of the nation have just heard about these fruits.
• The country is third world nation but still super powers has to come for sales pitch and employment from us.

• Above all, we have Ambanis, Tatas, Birlas, and all those richies contributing to the revenue of swiss bank but then also more than 42% of the nation earn less than Rs. 40 per day.( Gini index: 36.8 %).

This paradox and sink of surplus and deficit is in consonance with us and is a part of our life. This probably could be a reason why we Indians can find miseries in riches and riches in misery.

investment in universities

There is a recent drift in the foreign university bill which off course saw an early turbulence from opposition. The HRD ministry can allow 100% FDI in the education sector, indicating some major changes in this sector.

The rules of the game is simple, upgrade or perish. There are major drivers vehemently favoring this change like:

1) 20-25% rise in middle class income(taking the last decade as the base year)

2) avg. indian family is ready to invest 9% of income in education and it may increase in future.

3) demand of skilled labors in the global market. etc.

Amidst all these, could be seen a brusque but deep investment opportunity. 

Lets take it this way. Many of our oldest universities like BHU, Osmania, DU,etc. have immense real-estate holding. Only BHU has more than 4000 acres land(including both the campuses), and Osmania has  1600 acres of land under it, a handsome part of which is not optimally used. Government is also in a spree to allocate lands to the private universities in the interior parts of the nation or the exterior skirts of the major cities. This is applicable to foreign universities as well. If seen collectively, the valuation of these institutions could run into millions of dollars considering the methodology used by any private equity firm. The valuation may also vary with the Brand. Brand equity allows us to monetize the brand value and add it to the total valuation of the company. this means black horse institutes not only can charge premium but also can be valued premium.

The establishment of the bill will ensure proper competition required and the accountability sought from this sector.This along with the growth drivers should ensure positive returns in this sector(off course government subsidies are included as earnings for public universities).

The major challenge ahead is to convince these institutes to come up with IPOs and  listing and also lobby government to dilute the policy norms applicable to this sector. So, the game commands marketing to play a bigger than expected role to play as spreading awareness and setting the pitch are the most intense variables on which the success relies upon. 

To conclude, there can't be anything better than investing in a sector wherein we can hope that our money will help us to grow as a knowledge driven society and also will earn handsome return for us.

 So lets welcome this.......... 

Pre-year resolutions

An end of a pervasive year in terms of resolution. The indian business saw dynamism in terms of brand building and macro-economics conditions. A year where the nation's private equity firms have finally woke up after hibernation with lot of activities in the QIP,IPO and FPO genre. The Immortal PSUs finally moved for disinvestment in a hope that the exchequer can offload some of its deficit burden some of which is done successfully. CWG was jittery but not bittery at the end but CAG reports has unearthed bittery scams and frauds from ministry to corporate to even employee level not forgetting the aakhri salaam by the city bank employee.

Rainfall was too good to handle so even though inflation dropped to 7.67%, onion and chilli became dearer to net off urban poor though making the future market shine.

But overall, the economy and the stock market both could overcome the slowdown and could see a rally in the third quarter (offcourse there was correction too) and not only remained creators but also purveyors of job for contry's like USA.

With jerks and jumps, the year has passed hoping for a better new year in terms of business variables of the nation and its macro and socio economics.