The railway budget

The Laloo ministry did manage to bring out the railways from the red to Rs 25000 crore over the last 4 years. Laudable it may seem, but there are still opportunities for improvement.

I read this article on rediff, the author made quite a few interesting comments on the budget.

India has amongst the lowest rail fares in the world. An Indian consumer's fare is about 50 per cent of what his Chinese counterpart pays. Well, we belong to a poor country, and a democracy is not expected to raise prices, with general elections next year

In sharp contrast, Indian Railway's cargo fares are among the highest. Even after the 5 per cent reduction announced by Lalu, cargo fares in India are costlier than China's, by at least 25 per cent.

Further, only about 35 to 40 per cent of all cargo traffic in India goes through the Railways. Railways' share has been falling consistently over the years.

In general, it takes lesser time for cargo to be transported over the train (discounting the delay at the yard) than by road. In addition, the road infrastructure is not too adequate for high speed traffic (and we do not even have high speed trailers!). So a reduction in cargo fares coupled with smoother services would only make railways more amiable to businesses. It would reduce costs, lower pollution levels and increase railways revenue.

I haven’t traveled in a train for quite some time now, but I wonder what advantage will a 4% reduction in AC-II tier fares will provide. If my fare to Delhi is some Rs 2000, a 4% reduction will translate to only Rs 80. I don’t see any reason for someone opting for the AC II tier to gain the meager amount (much more is spent on the way to the railway station).

We have a state monopoly when it comes to railways. If railways were partially privatized or a permission were given for FDI, it would only improve the quality of services (both on and off the tracks).

Kya Aap Panchvi Pass Se Tez Hai

They say greed and fear are the drivers of the stock market. The two aspects of human psyche coupled with benevolent sentiments and pluralistic attitudes only lead to further liquidity, the m-commerce way.

The rediff article talks about Rs 18 crore being made from customers through the much hyped SRK featuring “kya aap panchvi pass se tez hain?” Entertainment aside, this sitcom will give viewers the opportunity to bid for places and try their luck. Somebody calls it gambling, but so what? We all take risks in so myriad ways.

The surge of mobile phones has allowed the entertainment media to make money. The so many reality shows that ask for your “votes”, which you can cast through sms to 5 digit numbers. Contestants fighting against each other result in people (and their sms’s) fighting for the top spot in this seemingly democratic set up.

And people don’t mind it. They treat it as a small price to pay for the entertainment. And irrespective of who wins the game (can range between ages 6 to 80), the telecom industry is having a good time with their value added services raking in the bulk of the revenue.

Fiscal favors

I came across this article in the Telegraph a couple of days back, and I was enlightened with some understanding of the economic forces in the present globalized world.

The Indian economy is no longer immune to the world economic changes. The recent fears of economic slowdown in the US has tumbled the stock markets, with foreign investors taking away their pie before its too late. And this has affected domestic growth rate as well.

India has moved on from a fixed exchange rate regime to a flexible rate, thereby allowing INR to fluctuate with the demand and supply in the forex market. In addition, the existence of capital account convertibility (which allows freer movement of capital in and out of the economy) gives India the capability to compete in the world.

The author opines that the existence of the above (capital account convertibility and flexible currency rate regime) renders the fiscal policy ineffective.

A chain of events occur due to the favorable (or unfavorable) fiscal policy. Higher revenue spending on growth will lead to greater outputs and higher incomes. This will translate to higher demand for commodities, and subsequently higher demand for loanable funds and resulting in higher commodity prices.

Rising prices imply higher inflation. Now this inflation hurts the poor and benefits the rich. This is because of higher incomes of the rich, or because the rich are the commodity suppliers. The poor, on the other hand cannot demand higher income, but are faced with inflationary pressures.

To keep inflation in check, the government raises the interest rates. In the presence of CAC, there is a higher capital inflow in the domestic economy, leading to accentuating stock markets. The demand for domestic currency also rises because of flexible currency. This makes foreign items cheaper for the domestic market and domestic commodities more expensive to foreigners. The demand for locally made products takes a hit, and so does exports.

The recent fall in the bellwether index is a fallout of expectations: FIIs expected a reduction in the interest rates in India after US economy reduced theirs. But the RBI governor has not shown any intention to reduce the rates. So, foreign investors are expected to be back soon.

But what does government intend to do? They will have to keep an eye on the forthcoming elections. The recent hike in fuel prices, thought long awaited has already seen sections railing against the government for the pragmatic move.

The author expects the larger populace to be pleased with “fiscal favors”, and issues like exchange rates and CAC will take a back seat.

The impact of the missing fowl

The importance of something is realized only in its absence. The chicken is a classic description of the food that has somehow gone out of our lives.

The bird flu with its sordid impact has wiped out the chicken from our tastebuds, dining tables, kitchens and even the markets. In spite of the advisory of cooking the meat for 70+ degrees (which every human being cooks at), the state government is chickened to allow consumption. And the result? I haven’t tasted it for over a month now.

Now to the economics behind the whole safeguard. The government ordered culling of fowl in all the infected districts, and allotted 700 crore for the initiative. As expected, poultry farmers did not get their share, and did their best to hamper the operations. With the bird flu reaching the adjoining districts of Kolkata, all Buddhadeb government could do was to make the sale of chicken and eggs illegal.

Before this rule came into effect, the prices had dropped from a high of Rs 80 or 90 to Rs 35, thanks to lowering demand. And after the ban on the sale, traders will have to make do with selling illegally (at a lower price) or by sharing among friends.

This has increased the demand on its substitutes: mutton and paneer. Prices of these items have risen 10-15% in the past 2 months. The marriage season also saw costs going up; since mutton is much more expensive. Restaurants are not serving chicken any more.

Over all, the bird flu has caused quite havoc in the food market.

What else can one do but to wait for this phase to get over? But once it does and the fowls reach the market, the prices will only be 50% higher than the pre virus stages. And the prices of its substitutes will fall immediately.

At least we will have something to look up to!!

Travel - Valentine day special

Rediff.com takes us to some of the romantic spots and call it the valentine day special.

No harm in me calling the same!

http://specials.rediff.com/getahead/2008/feb/08sld1.htm

Goel vs Patni

http://www.businessweek.com/magazine/content/08_06/b4070057782750.htm

This article shows the plight of the knowledge workers in the land of opportunities.

A couple of days back a friend forwarded me this link. I could then understand its relevance. I know a few of my friends who have been with Patni and at the client site at Bloomington, IL; but didn't have an idea how bad things were out there.

US is known to be a land of opportunities, though it is observed to be losing its sheen, thanks to the recent economic slow down. But it used to score way above India a few years ago, when emerging markets were struggling to keep up. In this circumstance, it gave the IT firm opportunities to exploit those looking for a successful career.

Why was this delay in bring the story out? And what is the plight of the IT junta at onsite? Only ones who have been or are at onsite can say.