A Tribute to the Heroes of the Mumbai Terror Attack!!

I severely condemn the death of 3 of our valiant Police Officers( Anti Clockwise)- Ashok Kamte, Hemant Karkare, Vijay Salskar and the death of hundreds of civilians, Army officers and commandos of NSG who laid down their lives for the Nation.

The 3 police officers in particular were known for their Counter Terrorist and Counter Insurgency Operations. Vijay Salskar and Hemant Karkare were Encounter Specialists while Ashok Kamte was Known for his Rough n Tough handling of terrorists and goons, he was also in news for taking on Ravikant Patil- MLA.

When most of the Youth through out the world are busy shaking their asses to the beats of the music in Discos and Pubs, People like Sandeep Unnikrishnan and many more who joined army at the age of 19-24 have sacrificed their lives for the nation.

"HAIL THE SOULS OF THE DEPARTED"

Pros and Cons of Capital Account Convertibility

Capital Account and Current Account are two essential components of Balance of Payments which is the difference between the aggregate inflows and outflows of a country's services, goods, expenditure abroad by Indians, expenditure in India by foreign nationals, Investments abroad, Investments in India by Non Indians, Transfer payments, Interest paid and received etc.

Current Account mainly deals with the trade related aspects which are known as the visible items and the services which are known as the invisible items. It also includes the transfer payments, expenditure of foreigners in India and vice versa.

Capital Account on the other hand refers to the Investments made by Foreign Nationals and Foreign institutions in India, along with the Inter country grants received by India. The Investments made in India and grants received constitute the credits and the Investments made abroad by India and grants by India to other countries constitute the debits.

Current account or capital account convertibility refers to the conversion of local financial assets into foreign currency or the conversion of foreign financial assets into the local currency at the prevailing market exchange rate.

Capital account convertibility is a much important matter of concern as capital account convertibility in particular refers to the withdrawal of Investments by foreign Bodies.

How does it affect?

As capital account mainly deals with the Investments by foreign nationals in mamoth projects like Construction of Dams, ports, infrastructure development, Power projects, Energy Projects , Realty,Green Field Investments which generally require huge amounts.

From the Foreign Investor Point of view- a cent percent convertibility or Full convertibility of capital account will confer him the right to withdraw his investments completely whenever he feels like, which in turn may cripple the progress of the domestic economy due to the stagnation of work owing to paucity of funds. Many developing countries generally resort to partial convertibility where in the Foreign Investor can only partially with draw his investments when a need arises, thus mitigating the risk to a great extent. As the cumulative figures of Capital Investments by foreigners amount to billions of rupees,Developing nations opt for a partial convertibility .

For example- Indian Stock Market which was at 21K in mid Jan this Year shed around 65% of its wealth owing to Inflationary and Recessionary pressures. A fuller capital account convertibility could have resulted in further more damage to it along with further withdrawal of FII and FDI activity.

Prospects of Full Convertibility-

It will result in a substantial increase in Inflows of Foreign Investments into India, thus infusing more funds and providing ample scope of an accelerated progress but at the same time it leaves a huge risk of foreign investors backing out incase of any untoward events or incidents.

India always adopts a conservative approach( just like the attitude of its people) by allowing partial capital account convertibility, Tarapore Committee made a thorough analysis of capital account convertibility and suggested that India should allow fuller capital account convertibility.
On the other hand USA whcih has gone through a recession nine times and recovered, since 1930's follows a full capital account convertibility leaving it more proned to risk.

But always remember - "It is better Safe than sorry".

For a Crystal clear understanding of Capital account Composition check out the following link.

http://in.youtube.com/watch?v=QE6819vVrCA

OPEC-13

OPEC- Organisation of Petroleum Exporting Countries is a cartel of 13 countries, mainly dealing in the export of crudes. These countries play a pivotal role in determining the supply of Crude.

Following are the list of Its members along with their Brand name of their Crude Oil.

Country Brand name

1. Algeria - Saharan Blend.

2.Angola - Girassol

3.Ecuador - Oriente

4. Indonesia - Minas

5.Iran - Iran Heavy

6.Iraq- Basra Lite

7.Kuwait - Kuwait Export

8.Libya - Es Sider

9.Nigeria- Bonny Light

10.Qatar- Qatar Marine

11. Saudi Arabia- Arab Light

12.U.A.E- Murban

13Venezuela - BCF 17.

An Insight into the Monetary policy of India.

The Monetary Policy of India mainly aims at promoting economic growth by maintaining price stability.

The R.B.I meets regularly to decide what, if anything, to do with interest rates or Cash Reserve Ratios. Cash Reserve Ratio is defined as the percentage of cash which the commercial banks have to maintain with the Reserve Bank or Central bank of the country .

Stock traders almost always rejoice when the RBI cuts interest rates, but does a rate cut equal good news for everyone?

The interest rates, CRR are very important as many other rates, domestic and international, are linked directly to it or move closely with it, along with them the investment prospects and the quantum of loan disbursement also depends to a great extent .

Why Does It Change?

The interest rates, CRR, SLR ( Statutory Liquidity Ratio- The percentage of liquid assets which the bank has to maintain with itself) , PLR(Prime lending rate- Rates at which banks lend loans to the consumers) are monetary policy tools used to achieve the R.B.I's goals of price stability (low inflation or to overcome recessionary pressures) and sustaining economic growth. Changing the rates influences the money supply, beginning with banks and eventually affect consumers.

The R.B.I lowers interest rates in order to stimulate economic growth. Lower financing costs can encourage borrowing and investing. However, when rates are too low they can spur excessive growth and perhaps inflation. Inflation results in decrease of purchasing power and could undermine the sustainability of the desired economic expansion. On the other hand, when there is too much growth the R.B.I raises interest rates. Rate increases are used to slow inflation and return growth to more sustainable levels. Rates cannot get too high, because more expensive financing could lead the economy into a period of sluggishness. A rate cut could help consumers save money by reducing interest payments on certain types of financing that are linked to prime or other rates which tend to move in tandem with the RBI's rates.

A rate cut can prove beneficial for home financing, but the impact depends on what type of mortgage the borrower has, fixed or floating, and which rate the mortgage is linked to.For fixed-rate mortgages, a rate cut will have no impact on the amount of the monthly payment. Low rates can be good for potential homebuyers, but fixed-rate mortgages do not move directly with the RBI's rate changes. A rate cut changes the short-term lending rate, but fixed-rate mortgages are based on long-term rates, which do not fluctuate as much as short-term rates. When the RBI resorts to a rate cut, floating-rate payments will decrease. The amount by which a mortgage payment changes will depend on the rate the mortgage uses when it resets.

This is how the monetary policy affects the working capital requirements of companies, investment prospects of induviduals throught out the country, disposable incomes of people, Mobilisation of savings and eventually result in the growth of the nation.

Rupee Depreciation v/s Dollar appreciation.

The recent uptrend in the value of dollar with respect to rupee and other currencies can be attributed to few factors.

1- G-7 mechanisms.

2- Crude and Dollar relationship.

3- Gold and Dollar relationship.

4- Indian Context.

G-7 mechanisms- The G-7 nations own huge assets and have large exposures in dollar holdings, so a fall in the value of dollar results in the decline of their wealth and a rise in the value of the assets will result in boosting their dollar holdings wealth. The current uptrend is not purely bases on the Market mechanisms but based on the G-7 Mechanisms.

2- Crude and Dollar relationship- Crude and Dollar enjoy an inverse elationship which means that a consistent rise in price of crude will result in decline in the value and demand for dollars and vice versa. This is due to the fact that Crude is pegged to dollars, Crude can be traded only in dollars, before purchasing crude nation need to pep up their dollar reserves to make crude transactions. when the price of crude tends to be very high , Nations try to resort to using crude very conservatively and purchase less of crude , in this scenario the demand for dollars decrease and on the other hand when the crude tumbles nations try to accumulate their dollar reserves to purchase more of crude, this results in the surge in the value of Dollar.

3- Gold and Dollar- Financial crisis has resulted in the shifting the focus from the capital markets to the commodities market, Among the commodities gold iss the safest bet, Gold too is traded in dollars, People try to accumulate the gold reserves for which they buy or demand lot of dollars which actually results in a surge in the value of dollar.

4- Indian Context- It is a fact that whenever RBI purchases dollar against rupee the value of dollar rises against the rupee and when RBI tries to sell the Dollars against Rupee the Dollar declines against the Rupee. RBI in the recent years had always accumulated Dollar reserves but never sold its dollar reserve holdings. The Forex reserves of India as on 7th Nov-08 stands at $244,059 Million.

The Conservative stands of RBI has resulted in its not disposing of the dollar reserves. If the Rupee continues to get the beating gainst the dollars, RBI might end up resorting to some stringent measures to curb the Dollar Domination against the Rupee.

So Let's wait for the moves of the RBI.

Along comes another crisis!!

Just when the whole world is deep in fears of recession creeping in, Prominent automakers General Motors and Ford Motors jolted the already gloomy sentiments of the investors by announcing a loss of 4.2 Billion $(GM) and ford too ended up depleting its asset base by 7.7 Billion $ following which ford has announced to resort to Job cuts and layoffs.The US Auto Industry is reportedly seeking billions of dollars as financial aid from the Federal. Ford on the other hand is looking for a bridge loan.

After the financial crisis the next potential threat was deemed to be the Credit card crisis but looks like the autocrisis is likely to hit earlier than it.

History of sorts!

Barack Obama created history of all sorts by becoming the first Black President of the U.S. Having won at a time when the nation was amidst economic crisis, the whole world awaits the moves of the 44 th President of the U.S. as his moves will play a pivotal role in determing the fate of the country.

Apart from the history of being the first black person to represent U.S., The U.S.stock markets created another history of sorts by stumbling down to a level, which was never witnessed on the day when the Presidential election results were out.

Barack Obama will be sworn in in January, so hope the whole world awaits a dynamic leader to rein supreme and lead the nation to glory no matter how the circumstances wary.

"Barack Obama - heal the world from the ongoing trauma".

Japan Follows the footsteps of its Asian Counterparts.

Bank of Japan cut down the interest rates for the first time in 7 years in order to protect its economy from the onslaught of the financial crisis which has been deepening day by day. It has followed the footsteps of its counterparts- India and China. US too had gone for a rate cut.

Apart from the interest rate cut the nation awaits more measures from the Japanese central bank to infuse liquidity in to the market. Moreover the economic growth estimates of Japan have dwindled to a new low due to the global fears of recession creeping in.Financial crisis had its toll on japan too.

Its now wait n watch for the measures to be initiated by its central bank.