Random Thoughts on Engineering Life, the Uncertainty Principle and what not to do at the engineering college!


It has been exactly two and a half months since I graduated. It counts for some task; four years of engineering (non-activity). Apart from all the technology that one learns, there are things which one unlearns as well. In the technical jargon this may be seen as ones’ own Open source Movement. You get to meet people from different diversities and nomenclatures. One meets geeks, nerds, the all-rounder’s, the extroverts and the aw-shucks, name it and there’s a character resembling one common entity called a wannabe engineer. Very similar to the elements in a periodic table which are so close to each other but have inherent qualities which make them behave differently! In the case of elements a change of electron in the outer layer can make all the difference, whereas in humans a strand of DNA! I have since then carried on my own research and found out that what maketh thy engineers different are thy mutated DNA’s.

Lot of random thoughts ahh.., getting back to the Open Source Movement, I believe getting into engineering tends to give a person a wider understanding of the scheme of things. Especially if one is staying in a hostel you have to manage yourself and also manage the different types of people who can get onto your nerves. More or less you participate in lot of talk (small and big) late nights with peers who can even get the most shy of species up and talking. I met some of the most interesting characters at college. Let us discuss them without raising too many eyebrows:

Party Politics: I had people from Bihar to Bengal to Tamil Nadu to Maharashtra to Uttar Pradesh to Punjab to Gujarat to Rajasthan to Assam and finally the Andhra Pradesh in my class. First things first, day one to day last the class was a polarized set. The guys from Andhra (40%) would sit in the left portion thus forming the Left Parties!  Then come in the guys from Bihar-UP-Jharkhand-Delhi (BJP, Samajwadi, BSP, Congress) they constitute the Centre or opposition and the government. Then come in the DMK and AIADMK, MDMK the guys from Tamil Nadu. (They are the king-makers, since my college was in TN they were also the entities who would have firsthand knowledge of the questions in the exam) So which party do I belong to? Good question some of my good friends and myself were above party politics. We were the so called independents and radical thinkers! Our opinion hardly mattered! We formed a collective group called the Back-bencher’s radical Party. We belonged to none and all! We had a healthy interaction with all other parties, whereas the other parties had close to none with each other. So that shows the real state of a multi-cultural classroom.

People are always so much interested in what the other chap is doing? Dude what is that you are reading? Why you are going to library now? Why do you study so much when exams are a month away (all one can say is get away jerk!)? Why are you going to class now? Worst of them all, how did your paper go? What was the answer to that previous question? And many others, I can’t be counted out because at times I was acting as a jerk myself questioning people! And at the receiving end other times. Though being a part of the independent radical party people generally were least interested in what we were cooking! J

A smart question- what do budding engineers do at engineering colleges? Well let us build upon it.

First few days of engineering life people develop a sense of dissatisfaction for the college itself due to multitude of factors. A fact can be self verified by each one, no doubt! The factors could range from bad faculty, too many restrictions, lesser recess time, a bad canteen, poor library and to some extent even absence of quality birds (rare species @ engg colleges) can be a deterrent for liking the college. Though in the case of my college the facilities were excellent, but I never understood most of us at college were dissatisfied with our college for some reason or the other, which we could figure out sometimes right and at other times wrong. Yes there are guys who would read up Five Point Someone and get dissatisfied with life too and start demanding things which can only be a part of a well written novel!  But nonetheless the bottom line is people come to engineering colleges with misconceptions which are cleared in the very first week!

I knew guys who would sabotage the hostel when the electricity went off, threw dust-bins and tube lights from third floors (and beyond) of the hostel into the open space between corridors unhindered of consequences and even swear and shout at the warden. One guy locked the warden’s room with a lock and stuck a Pamela Anderson picture on his door (counts for some guts!). Guys chasing the college principal Diwali night and beating him up, and on Holi coloring the guard at the level crossing gate separating the college and hostel campus subsequently breaking the signals bringing to complete halt the busy Chennai-Bangalore train route for two hours! These guys were the most daring among all; some got debarred, got screwed but were back to college and even finished the course with good grades and a placement. So who is the king?

Exam time, cramming up at the last moment; Most of the guys just regurgitate what they assimilate from the boring classroom lectures, a perfect start for wannabes! I would say I would never be woozy before exams instead I avoided studying itself!!! I think the best thing to do in engineering is to choose subjects of your own choice. For E.g. I was an Electronics and Communication guy but I enjoyed reading about operating systems, distributed computing etc (part of computer science engg.) which helped me to develop a wider understanding of technology. Spending time reading newspapers and magazines and subjects of my interest intrigued me more than listening to most of my lecturers teaching optical communication and Electromagnetic theory. I knew if ever I was going for a PhD in Electronics I’m going to avoid these fields (though one can’t decouple the basic subjects but a basic knowledge was more than sufficient I guess because these subjects can get creepy)

One thing one has got to understand, students world over have to face moronic lectures and there’s is no escaping. For me I was turned off from academics for a while and that showed in my grades, from being a onetime college scholarship holder to rank 52 in the department, counts for some slump! But that did not hinder me, while most of my classmates were mugging class notes and getting good grades and walking away with cool scholarship awards I had acquired the leverage to study and enjoy subjects which interested me! For e.g. most of my classmates if asked would not know what a monostable multivibrator was, but they would solve questions in the exam courtesy some simple formula application,  look up the circuit diagram and design it on bread-board but they would be totally nonplussed if asked what it was? Why are we going for it? Why use a Linear Integrated Circuit, why not a Microprocessor, are their other ways to do the same?  No they aren’t answering this one, because all they want is mug up, puke, get good grades, impress the teachers and then get even better grades! After all this is what our education system demands.

I forgot to mention the guys who really rock at engineering colleges. There are guys who possessed excellent oratory skills and they quickly gain fore-front organizing and narrating college events, and then there are multi-talented chaps like dancers and singers who are the famous people on the radar. It’s not just their talent but the sheer aura which makes them so famous. For E.g. I was part of a music band, a bassist (a lesser known member of a band by any regards, but surely the most important alongside drummer musically) but never quite was so well known because most of us surely lack that thing which these guys possess. I’m still in the process of understanding the economics of being well-known!

Smoke, liquor and joints are a favorite time-pass of the lesser known clan of engineers. These are the guys who spend a major time rolling leaves and searching some more for future. To be frank they are not the bad guys but just they belong to the same set of guys who dare beyond what people like us do! You can find them exploring innovative ways to fuck their neurons, by igniting it in chillums and pots and hookahs!! God give them some wisdom. It’s all up to the individual to realize what is right for them and what is wrong after all.

Finally I think I have more to say but just don’t have any more random thoughts right now; probably I’ll add some more Entropy when I’m back. I’m also not sure whether I really got my point across. Who emerges as the ultimate king after four years of non-activity is really a tough call, the nerds, the jerks, the wannabes or the dare beyond guys? hmm. It’s for everyone else to decide. All I can say is it is the best time of life where you can learn and explore and divert your energy into creative stuff and explore your hidden talents. It’s all there in engineering, a must have experience.

P.S: all comments and ideas are welcome!

Decoupling Theory – Truth or Myth? A Rogue Engineer turns Economist!


A few days back I was reading the book The World is Flat by Thomas L. Friedman, a bestseller by any regard. The book basically describes how Globalization 3.0 has emerged. This has not only brought countries and individuals close to each other; it proves how this has resulted in increased competition, the end result being a spur in innovation and increased cost advantage for companies and individuals. It also states the new fundamental tenet that globalization is the need of the hour and it’s good for everyone and not against particular individuals. It also states that in the present day global nations are very much interdependent on each other for economic growth and sustenance.

Decoupling Theory: The theory of decoupling suggests that emerging markets have broadened and deepened to the point that they no longer depend on the United States for growth, leaving them insulated from a U.S. recession.

The decoupling theory in no way shuns the globalization theory; all it says is that the major emerging markets primarily the BRIC (Brazil, Russia, India and China) countries have been showing increased economic activities and attracting foreign investments irrespective of the economic trends seen in the US. The theory took much flak off-late after the expose of the housing bubble in the US and subsequent Credit Crunch and Recession. The world markets saw a major downtrend, export driven sectors worldwide were hit by and large (E.g.: IT sector in India)

Demand for Commodities: Generally a recession results in a decreased economic activity, the demand for commodities is expected to fall and in some cases even spur cost-push inflation. The biggest critics of decoupling theory state that recession in the US will result in reduced demand for commodities and thereby hit the emerging economies because majority of their exports are commodity driven. But the supporters of this theory state that the recession is only going to affect the investments in the US and the general public would still be demanding the same level of commodities as before and that there will be no slowdown as such.

On the investment front, due to the declining dollar and interest rates cut by the Federal Bank resulted in diminished returns and hence investments started flowing to emerging economies where the returns were more lucrative (in India in terms of FII). So this resulted in increased economic activities in these economies for a while. However as the recession started finding its root in the export driven sectors in these economies, the companies started feeling the heat and subsequently they showed lower growth margins. Moreover as a result of rapid surge (due to increased foreign investments) these markets reached saturation and were sure to see the downfall. This was seen in the recent market downtrend in India where the stock markets have been falling ever since the start of the year. Now the decoupling theory supports it by stating that these stocks had already reached their peak (Technically say by the P/E) and the people thought that they were overvalued and their selling was imminent and bound to fall, the net sellers being FII. However the critics ridicule it stating that the market went into the bear mode due to increased risks pertaining to US recession and the liquidity crunch resulted in further keeping the investors from making huge commitments monetarily in these emerging economies.

Inflation, the critics of the theory state is an example of the developing nations to hold back the green buck (USD) and purposely devaluing their own currencies to make their exports competitive. This resulted in increased costs of imports for these countries. Now commodities like Crude oil went up. Now since it’s valued in dollars and these countries have devalued their currencies thereby passing on increased cost in their country triggering cost-pull inflation where the general input costs for production have gone up resulting in higher priced commodities, making it difficult for the common man. (For e.g. the RBI was accused of selling rupees and buying dollars to boost the export sector and curb inflation but did it work out? It only resulted in import getting costlier prices being passed on to the common man and thus increased inflation.) The supporters of Decoupling theory state that unlike general observation that due to the recession demand for commodities is going to go down, the opposite has happened and the increased economic activity and demand in emerging economies have pushed the prices up while the demand has reduced in the US supporting the theory further.

The increased per capita income in these emerging economies has resulted in improved standard of living and greater domestic demand for goods. Thus the local demand and supply has attained a greater share of GDP and greatly increasing the economic activity in the country. (for e.g. in India itself the rising standard of living has fuelled a great demand for electronic goods and connectivity leading to a boom in the telecom sector and subsequently in the semiconductor sector) The Economist a leading publication states the figure that the income level has seen a rise of 17% in emerging economies as compared to 1.5% in the developed ones.

Finally coming to Exports, figures state that emerging markets send half of their exports to the emerging markets itself. China’s total exports to US fell by 5% in the aftermath of housing bubble burst but exports to other Brazil, Russia and India was up by more than 60% and those to the oil producers by 45%. Moreover the export to US now contributes only 8% to Chinese, 4% to India, 3% to Brazil and 1% to Russia’s GDP. Thus the emerging economies surely have become more decoupled to the US than before. Moreover the domestic production and consumption has taken forefront.

Conclusion: The present US recession was initiated by the Sub-Prime mortgage crisis and the subsequent Credit crunch. This was followed by worldwide market downfall and at the same time the world witnessed the Food crisis (courtesy droughts, Floods, hoarding, Export bans, Bio-Diesel etc) and the Crude shock (courtesy OPEC’s bullying controlling the oil prices due to depreciating dollar and they trying to maintain their purchasing power, or because of the increased demands from China and India). The various reasons are yet to properly justified. Probably another recession in the US accompanied by a rapid economic activity in the emerging countries and devoid of basic commodity shocks is required to properly justify that the Decoupling theory stands or falls!

SEZ (Special Economic Zone) – An Overview, Challenges and Future


When the India’s ex- commerce Minister Mr. Murasoli Maran returned from a trip to China in late 90’s, he had witnessed something which would lead to revolutionary changes in the India’s EXIM (Export-Import) policy and then the SEZ’s were born.

What is an SEZ? It is a geographical region that has economic laws that are more liberal than a country’s typical economic laws. An SEZ is a trade capacity development tool, with the goal to promote rapid economic growth by using tax and business incentives to attract foreign investment and technology. Today, there are approximately 3,000 SEZs operating in 120 countries, which account for over US$ 600 billion in exports and about 50 million jobs. By offering privileged terms, SEZs attract investment and foreign exchange, spur employment and boost the development of improved technologies and infrastructure.

Moreover SEZ’s provide a medium wherein it not only attracts foreign companies looking for cheaper and efficient location to setup their offshore business, but it also allows the local industries to improve their export through a proper channel and with the help of the new foreign partners to the outside world at a very competitive price. SEZ’s offer relaxed tax and tariff policies which is different from the other economic areas in the country. Duty free import of raw materials for production is one example. Moreover the Free trade zones attract big players who want to setup business without any license hassles and the long process involved in it. Most of the allotment is done through a single window system and which is highly transparent system.  The bottom-line therefore is increased export and FDI (Foreign Direct Investments) enabling increased Public-private partnership and ultimately resulting in a development of world class infrastructure, boost economic growth, exports and employment.

Where SEZ’s have really flourished? The concept of SEZ’s was largely pioneered by China, wherein the SEZ’s contribute to 20 percent of the total FDI. Then the SEZ model was also successfully implemented in Poland and Philippines. In the former the SEZ’s contribute to almost 35 percent of the FDI inflows. Shenzhen in China has been at the helm of rapid economic development, after growing by a staggering 28 percent for the last 25 years.

Why SEZ’s are required? The SEZ’s are important in today’s context for the third world countries which have been in the race for rapid economic growth. There are many positives which emerge out of establishing an SEZ. Let us have a look on these factors.

For undertaking any kind of massive development program the government requires huge amount of funds. So it looks out for potential partners to help the government carry out the program. Now say for setting up an SEZ, the government may tie up with a private partner whose willing to invest in that area, thus a win-win situation for both. As in the government gets the capital needed to establish the required infrastructure and also the expertise. The private player on the other hand gets the right to market and use the SEZ’s with relaxed tax laws, thereby increasing its revenue generating capacity and also carrying out the economic growth of the company in a more efficient way with the better tax policies. Actually SEZ’s with relaxed import tariffs help the Import dependent and export driven industries to flourish by helping them develop manufactured goods at competitive prices.

 

SEZ’s create immense employment opportunities. The setting up of SEZ’s creates lot of indirect employment in terms of labour required. Then after the completion it enables employment in the relevant industries operating in the SEZ. Then there are lots of indirect employments generated wherein people start investing around SEZ. For example SEZ’s are townships of their own; thereby there are shopping malls, restaurants, amusement parks setup around to attract people, thus resulting in more economic development in that area.

 

Moreover SEZ’s improve the country’s foreign export. Because of the increased FDI and Private Equity presence, the local manufacturers get to tie up with these big names and export their products which now carry a better brand value, therefore helping in creating a greater demand for the goods of local manufacturers. Moreover the massive capital required for expansion is brought in form of FDI resulting in increased economic activity.

The increased exports from the country bring in more revenue for the country which improves the economic growth.

 

SEZ’s help in creating a balanced economic growth in a country if they are properly located and implemented leading to tapping of local talent and contributing to increased economic activity in the area.

 

 

Drawbacks:

The biggest challenges faced by SEZ’s in today’s scenario are the taking away of agricultural land from the farmers. The farmers are being paid disproportionate money which is not in lieu of the current land prices. The best example could be seen in the case of farmers from Kalinganagar in Orissa where the money given was disproportionate to as high as 1:10 with respect to the market rates. Moreover SEZ’s are leading to decrease in crop production (arable Land Grabbing!) thus slowing down of agricultural activity in the country. (Though it may help boost it in other ways by increased export of local goods, both processed and non-processed). More and more farmers are moving towards the lucrative manufacturing side in search of greater economic security. Moreover the greatest problem that seems to be emerging out is that arable land is being used for non agricultural purpose which could lead to food crisis and loss of self sustenance in future. For example: Nadigram district of West Bengal. But FDI could also help in providing our farmers to gain access to technological better farming methods.

 

SEZ’s in China were initially exempted from national Labor Laws (despite being a communist country!). This model sustained initially because the foreign investors were given the leverage to train the workers and even fire them if incompetent. This Hire or Fire policy initially helped in sustaining foreign investors’ confidence in the Chinese domestic labor competence, but in the long run such laws must be made more stringent once the confidence is reposed so as to hedge the workers from hostile company’ policies.

 

The SEZ’s if not properly located could lead to Supply Chain Management problems as well. Moreover improper planning could lead to unbalanced growth in the region giving an impression of pseudo-development. For example most of the SEZ’s in China are in proximity to the ports and also close to each other, while these have been at the helm of economic development most of the interior hinterland is vastly underdeveloped. SEZ’s could also lead to income disparities with divide between the rich and poor increasing if not properly planned.

 

SEZ’s mostly if setup for the manufacturing sector should be carefully planned to carry out proper pollution monitoring and control mechanism. Stringent measures may prove to be expensive but are also extremely important. Shenzhen in china has been the worst affected among SEZ’s in China where the sky is grey for most part of the day courtesy the polluting industries. The measures should be taken to make surroundings livable for multitude of people living in the SEZ’s. Moreover care should be taken to properly treat effluents from industries not to affect surrounding rivers. Also the SEZ’s should be carefully planned not to affect the natural habitat around (Gurgaon SEZ affecting the Bharatpur bird sanctuary)

 

India and SEZ:

Overview: The SEZ policy was first introduced in India in April 2000, as a part of the Export-Import (“EXIM”) policy of India. Considering the need to enhance foreign investment and promote exports from the country and realizing the need that level playing field must be made available to the domestic enterprises and manufacturers to be competitive globally, the Government of India in April 2000 announced the introduction of Special Economic Zones policy in the country deemed to be foreign territory for the purposes of trade operations, duties and tariffs. To provide an internationally competitive and hassle free environment for exports, units were allowed be set up in SEZ for manufacture of goods and rendering of services. All the import/export operations of the SEZ units are on self-certification basis. The units in the Zone are required to be a net foreign exchange earner but they would not be subjected to any pre-determined value addition or minimum export performance requirements. Sales in the Domestic Tariff Area by SEZ units are subject to payment of full Custom Duty and as per import policy in force. Further Offshore banking units are being allowed to be set up in the SEZs.

Are SEZ’s New to India? India is one of the first countries in Asia to recognize the effectiveness of the Export Processing Zone (EPZ) model in promoting exports. Asia’s first EPZ was set up in Kandla in 1965. With a view to create an environment for achieving rapid growth in exports, a Special Economic Zone policy was announced in the Export and Import (EXIM) Policy 2000. Under this policy, one of the main features is that the designated duty free enclave to be treated as foreign territory only for trade operations and duties and tariffs. No license required for import. The manufacturing, trading or service activities are allowed.  While EPZs are industrial estates, SEZs are virtually industrial townships that provide supportive infrastructure such as housing, roads, ports and telecommunication. The scope of activities that can be undertaken in the SEZs is much wider and their linkages with the domestic economy are stronger. Resultantly they have a diversified industrial base. Their role is not transient like the EPZs, as they are intended to be instruments of regional development as well as export promotion. As such, SEZs can have tremendous impact on exports, inflow of foreign investment and employment generation.

 

SEZ Act 2005: To provide a stable economic environment for the promotion of Export-import of goods in a quick, efficient and hassle-free manner, Government of India enacted the SEZ Act, which received the assent of the President of India on June 23, 2005. The SEZ Act and the SEZ Rules, 2006 (“SEZ Rules”) were notified on February 10, 2006. The SEZ Act is expected to give a big thrust to exports and consequently to the foreign direct investment (“FDI”) inflows into India, and is considered to be one of the finest pieces of legislation that may well represent the future of the industrial development strategy in India. The new law is aimed at encouraging public-private partnership to develop world-class infrastructure and attract private investment (domestic and foreign), boosting economic growth, exports and employment.

 

The SEZs Rules, inter-alia, provide for drastic simplification of procedures and for single window clearance on matters relating to central as well as state governments. Investment of the order of Rs.100,000 crores over the next 3 years with an employment potential of over 5 lakh is expected from the new SEZs apart from indirect employment during the construction period of the SEZs. Heavy investments are expected in sectors like IT, Pharma, Bio-technology, Textiles, Petro-chemicals, Auto-components, etc. The SEZ Rules provides the simplification of procedures for development, operation, and maintenance of the Special Economic Zones and for setting up and conducting business in SEZs. This includes simplified compliance procedures and documentation with an emphasis on self-certification; single window clearance for setting up of an SEZ, setting up a unit in SEZs and clearance on matters relating to Central as well as State Governments; no requirement for providing bank guarantees; contract manufacturing for foreign principals with option to obtain sub-contracting permission at the initial approval stage; and Import-Export of all items through personal baggage.

 

With a view to augmenting infrastructure facilities for export production it has been decided to permit the setting up of Special Economic Zones (SEZs) in the public, private, joint sector or by the State Governments. The minimum size of the Special Economic Zone shall not be less than 1000 hectares. Minimum area requirement shall, however, not be applicable to product specific and port/airport based SEZ. This measure is expected to promote self-contained areas supported by world-class infrastructure oriented towards export production. Any private/public/joint sector or State Government or its agencies can set up Special Economic Zone (SEZ).

 

ADMINISTRATIVE SET UP FOR SEZS: SEZs is governed by a three tier administrative set up

a) The Board of Approval is the apex body in the Department,

b) The Unit Approval Committee at the Zonal level dealing with approval of units in the SEZs and other related issues, and

c) Each Zone is headed by a Development Commissioner, who also heads the Unit Approval Committee.

APPROVAL MECHANISM OF SEZS: Any proposal for setting up of SEZ in the Private/Joint/State Sector is routed through the concerned State government who in turn forwards the same to the Department of Commerce with its recommendations for consideration of the Board of Approval. On the other hand, any proposals for setting up of units in the SEZ are approved at the Zonal level by the Approval Committee consisting of Development Commissioner, Customs Authorities and representatives of State Government.

 

How SEZ’s should be modelled to Benefit India:

Size Does Matter: I was reading an article and found out the following fact, China’s SEZs are huge. Shenzhen, the most important SEZ, covers 32,000 hectares. In India, there are just two or three privately developed SEZ, exceeding 1,000 hectares. Most of the others approved are less than 100 hectares.  But it is heartening to realize that the government has decided to up the ante and have made guidelines to have a minimum of 1000 hectares of area for approving an SEZ. It hardly needs reiteration that only a large sized zone can generate economic activity on some reasonable scale. In a small zone, the requisite infrastructure and services cannot be provided nor can multiple economic activities be promoted.

TAX Benefits:  The incentive package in India is quite liberal and may even be a shade better than that for Chinese SEZs. In fact, it is more or less on a par with the package for the existing EPZs. Duty free import of capital goods and raw materials, reimbursements of Central Sales Tax, tax holiday for specified period, 100 per cent repatriation of profits for subcontracting facilities are allowed. The Government has done well by extending incentives for the infrastructure sector to zone developers and the units as well. This can attract foreign direct investment for providing internationally competitive infrastructure.

Labor Laws:  We can learn from china where initially labor laws where relaxed so that the companies could adopt Hire and Fire policy, once the Private and foreign players gained confidence in the Chinese workers’ productivity, this was replaced by the Contract system. India should take cue from this and understand that the import-export business is highly dependent on uncertain international market conditions, rejection of consignments etc. hence a flexible labor policy is the need of hour in the SEZ’s.

Domestic Tariff Areas: We got to understand that the reason for the Foreign investors to invest in Industrial, Manufacturing sector in India is not only to cut down on their costs because of cheaper and competitive products but they also see the vast Indian consumer markets, which has seen great income rise and standard of living. So apart from exports itself, the domestic market itself provides immense opportunity for sale of products. The companies in SEZ being levied a full import duty on sale in domestic areas does not seem a bright idea. In this case SEZ’s will only promote export driven industries which are highly dependent on import of raw materials. To further make use of full potential of SEZ’s Industries which are capable of indigenous generation of raw materials should be provided with tax holidays in terms of benefits to facilitate competitive pricing in the domestic tariff areas.

Thinking about the Future and Possible Fallacies: As evidence over the years has shown, this single-minded pursuit of growth has lowered the efficiency and effectiveness of economic policies, besides incurring huge resource and environmental costs. The Chinese experience offers a valuable lesson for India. Neither the international nor the Indian experience with SEZs has been particularly happy. Globally, only a handful of SEZs, of the hundreds that exist, have generated substantial exports, along with significant domestic spin-offs in demand or technology upgradation. For each successful Shannon (Ireland) or Shenzhen (China), there are 10 failures – in the Philippines, Malaysia, Brazil, Mexico, Colombia, Sri Lanka, Bangladesh, why, even India. A 1998 report by the Comptroller and Auditor General (CAG) on export processing zones (EPZs) says: “Customs duty amounting to Rs. 7,500 crores was forgone for achieving net foreign exchange earnings of Rs.4,700 crores.

The Reserve Bank of India says that large tax incentives can be justified only if SEZ units establish strong “backward and forward linkages with the domestic economy” which is a doubtful proposition. Even the International Monetary Fund’s (IMF) Chief Economist Raghuram Rajan has warned: “Not only will [the SEZs] make the government forgo revenue it can ill afford to lose, they also offer firms an incentive to shift existing production to the new zones at substantial cost to society.”

As much as 75 per cent of the SEZ area can be used for non-core activities, including development of residential or commercial properties, shopping malls and hospitals. Developers will surely use this to make money via the real estate route rather through export promotion. This represents a potentially humongous urban property racket of incalculable dimensions. India will see a multiplication of “Gurgaon-style” development, under the aegis of big builders such as DLF, Marathon, Rahejas, Unitech, City Parks and Dewan.

 

Conclusion: The SEZ’s could drastically improve the economic activity in the country, make the country’s export competitive and globally noticeable, be net foreign exchange earner and provide immense employment opportunity. But this should not be done at the cost of bringing down the agricultural activities, Land grabbing and real estate mafia should be properly regulated so that the common man is not the net sufferer to get the net foreign exchange earner up and running. As compared to china where majority of the SEZ’s were setup by the government, similar should be adopted in India, if not fully it should be a public-private partnership and regulatory bodies should be properly managed to weed out fallacies. To be economically viable SEZ’s should be approved over a particular land area (greater than 1000 acres) for rapid economic growth in the area and for it to be profitable and self sustainable. Relaxed Tax norms, Labor laws and DTA regulations will surely attract foreign investment and major industries to setup industries in the SEZ’s making it profitable and meeting its desired results!

Childhood Summer Vacations


The best part of human life is undoubtedly the childhood. To be very precise say the 6-13 year age group is by far the best. I too enjoyed this time of my childhood doing all kind of stuff. One thing I loved about childhood was the summer vacations. It was that time of the year when exams were no tension and growing up quickly and trying to boss over people had been our utmost desire (though now I feel I’ve grown up too early!). But summer vacations were something special. For me it gave an opportunity to travel to our grandma’s place. I was brought up in the cities of Hyderabad and Delhi and going to Grandma’s place meant going back to the rustic roots of a place called Deoria in eastern Uttar Pradesh. The place is a small town, a district headquarter and pretty close to Kusinagar-the place revered by the Buddhist community. Okay now coming back to my grandma’s place, the funny thing was both my paternal and maternal relatives live in the same town. I am just guessing that majority of the young kids like staying at their maternal folks place than their paternal and I was no exception.

For me my maternal grandma’s place (nanis) held some special attractions courtesy:

First and the most important factor was the comic shop right in front of my nanis house. The guys name was Manoj. He had no issues with us taking any number of comics. Infact we used to get a dozen of them and finish them in a days’ time. While most of the people spent the good times of their lives reading Archies and DC comics, I was relishing some other homegrown masterpieces Nagaraj, Super Commando Dhruv etc. Actually in some of the comics these guys would team up with Spider-Man and Super-Man against evil forces and some cases even save them from the clutches of the Satans. (hehee that counts for some heroism). The graphics too were certainly no match to DC comics but nonetheless they were great! Apart from that I used to enjoy reading a lot of Chacha Chaudary, Saboo his friend who was from a planet I think Krypton ? That was Superman right? hmm. I forgot  😦   Then there were the detective duo of Ram-Rahim. There was also Pinky, Pluto etc which were on the lighter side and were pure fun. Back in hyderabad it was Tinkle, Gokulam, Jataka tales but none like Raj Comics On the whole reading these comics were a delight and I spent a good amount of my childhood summer vacations reading them, enjoying to the fullest.

Second there was a video game centre where you could play any console game for as cheap as Rs.1. So I used to spend major portion of the money and time playing games such as the Super Mario, Battle Tanks and Iceman. (Later my mom got it for me as a birthday gift so this attraction subsided gradually)

Third there were these large number of cousins, I actually cherished that the electricity was cut (power cut is a major problem in this UP) so that we could all gather on this huge terrace we had, water was sprinkled all over the place and cots and mattresses were put up, where we had fun time. Have dinner; talk etc. some my elder cousins (sisters) used to scare the younger ones (like me who had gathered from all parts of India to our nannies place) by reciting some scary stories. Anyways it was all pure quality fun. Childhood days were so good, i wish i could go back and have some more fun 🙂

Image: Raj comics characters

Information Technology (IT) in India- the challenges, Future Scope


The Indian information technology sector has been instrumental in driving the nation’s economy onto the rapid growth curve. According to the Nasscom-Deloitte study, the IT/ITES industry’s contribution to the country’s GDP has increased to a share of 5.2 per cent in 2007, as against 1.2 per cent in 1998.

Further, the IT and BPO industries are poised to clock revenues worth US$ 64 billion by the end of fiscal year 2008, registering a growth of 33 per cent with exports expected to cross US$ 40 billion and the domestic market estimated to clock over US$ 23 billion, according to a study. Simultaneously, the Indian IT services market is estimated to remain the fastest growing in the Asia Pacific region with a CAGR of 18.6 per cent.

India’s IT growth in the world is primarily dominated by IT software and services such as Custom Application Development and Maintenance (CADM), System Integration, IT Consulting, Application Management, Infrastructure Management Services, Software testing, Service-oriented architecture and Web services.

 

Challenges and Positives:

Can we stay Competitive? In the recent past we have seen that the Globalization 3.0 has resulted in Outsourcing and Off-shoring spreading to various other countries like China, Vietnam, Philippines and the Eastern European countries. In the wake of such competition can we still remain competitive? The answer is pretty much yes. We know that our assets are the talented pool of people who are not only competent technically but also linguistically better at English compared to the other competitors. Also the government support, labor pool, infrastructure, educational system, cost, political and economic environment, cultural compatibility, global and legal maturity, and data and intellectual property security and privacy give Indian IT companies and edge. But contradicting this is the Nasscom survey, which states that majority of the graduates coming out of the colleges today are unemployable. We need to introduce training programs in colleges to train the talent pool of students not only technically but also on soft skills. The training should also be imparted to the faculty to generate a better equipped talent force. These measures have already being taken by the IT companies, which also helps in reducing the training costs incurred by the IT companies after recruitment.

Dependency on the US: In the wake of the Sub-Prime crisis and subsequent economic recession in the US, the companies there started cutting down costs and one of them being IT expenditures. Because the majority of the IT companies in India have an export driven business model and majority of it is to the US, the companies have been facing a lot of heat. Some of the clients of these IT companies have gone bankrupt; some others have incurred heavy losses (Citigroup, Bear Sterns, and HSBC etc.) The IT companies should therefore explore options in Europe, the western Asia and Asia-Pacific and reduce direct dependency on the US.

Though it seems paradoxical but recession in the US is only going to make the Industries over there outsource more, primarily to reduce their costs by efficient application of IT, cheaper labor and cost effectiveness.

Indian IT firms outsourced and Off-shored! : It is observed that competitive markets have emerged in Latin America, Eastern Europe and South East Asia. Moreover there are emerging economies present in these areas like Brazil, Russia etc. The IT companies have already forayed in these countries for two primary reasons: First, it provides them to take advantages of cost-effectiveness in these areas due to new talent pool, Lower wages and greater advantage by making their exports cheaper and competitive. Second, places like Mexico have emerged as a major outsourcing and offshore development centre for the IT companies due to the proximity to their major business clientele in the USA. This not only provides cost-effectiveness, but also helping the client in round the clock service providing environment.

Rupee Appreciation and FII: In the wake of US crisis it was observed that the rupee appreciated due to the weakened US economy, Federal bank interest cuts and subsequent FII inflows in the country. Due to this IT companies in India incurred lower profit margins. On the flipside it surely gave them a wake-up call to effectively utilize the resources and bench strength. FII inflows and FDI in the IT sector surely helps in rolling out further expansion plans but excess FII also make the exports incompetent. So the govt. should take steps to manage excess FII inflows into the country and hedge the export driven sectors against the rupee appreciation.

IT SEZ’s: To further make the IT fraternity competitive, the govt. should take steps to develop IT Sez’s. This will reduce the excess tax burden on these IT companies. Moreover STPI (Software Technology Parks of India) have already enabled the IT companies and new startups to carry out the documentation and licensing and tax payment hassles through a single window system. Moreover the govt. should also relax norms for DTA (domestic Tariff Areas) to promote IT spending in the country itself at a lesser cost leading to development of the country.

Diversification In Verticals: In the wake of US crisis, one of the Indian IT company suffered major drop in profits because majority of its clientele in the BFSI (Banking Financial Sector and Insurance). This was the sector which took the brunt of the recession. And the company’ BFSI clients cut down on their IT spending leading to lower profits. Thus the companies should balance their presence in various verticals which will surely make them immune to unforeseen events.

Telecom and 3G: The roll out of 3G of mobile phones in India should be seen as a positive development for the IT companies. In the long run it is going to provide basic communication facilities in the rural areas of the country. Unlike the US where 3G brings luxury, In India it is going to provide basic communication and broadband access to the rural youth. This will result in dissemination of information and creating further talent pool for the country. We have already seen the IT industry moving to Tier-II and Tier-III cities to tap local talent and maintain cost-effectiveness. Moreover Growth in Telecom industry also demands greater IT application in terms of VAS (Value Added Services), Telecom Billing Solutions, IVRS etc.

Domestic Markets: Dalian in China has been growing as the major IT hub there. If actually compared China’s IT spending is five times that of India, most of it being domestically. This could be also seen in the organization of retail sector in China showcasing the presence of Retail majors like Wal-Mart there. Hence IT companies should also focus more on the domestic markets with major projects lining up inside the country as well for instance the Railways ERP project, the BSNL systems integration, networking projects, IT work from ministry of finance and private telecom companies, banks and others are offering multi-year contracts that are over US$ 100 million. Moreover multinationals have been lining up in India further strengthening the IT growth in India.

Capgemini, Europe’s largest consulting and computer services firm is gradually moving its internal support services to India.

After sourcing IT applications from some IT firms last year Wal-Mart will now expand its existing operations given India’s impressive IT capability to cover more firms and augment its work in the United States.

Intel-the globally renowned chip maker is looking to invest more than US$ 1 billion in India over the next three years in partnership with Indian and foreign hardware firms to prepare light weight personal computers.

Cisco posted over 100 per cent year-on-year growth in its SME business in India.

Oracle is expecting over 100 per cent growth in India for its CRM business on the back of increased technology awareness and need for cost-effective customer servicing.

Yahoo! Inc and Tata Sons subsidiary firm Computational Research Laboratories (CRL) have entered into a joint agreement to make available-EKA, a supercomputer (the fourth fastest) in the world for cloud computing research in India.

Dell India witnessed 80 per cent sales over last year with revenues to the tune of US$ 700 million.

World’s leading chip designer firm ARM is expanding its India design centre to make it the largest outside Britain.

IT biggies like Microsoft, IBM, Cisco, Oracle and a host of other IT entities are working overtime to tap the smaller and medium businesses.

Conclusion: Thus we observe that the Indian IT industry has been facing some challenges but if effective steps are taken then it will surely help it to remain competitive in the future as well.

 

Congress’ Political road map – Nonplussed or Nonchalant (A sequel to the New-Clear-Peace Deal article Posted on my blog)


Back to writing something, it’s been days I wrote anything worthwhile; the last one on FII’s required some research and understanding! Lot has changed meanwhile; the government may topple or just manage to escape through, the elections possibility for the month of November is not being ruled out. I have always been repugnant to writing on Politics; the very reason being it’s fuzzy for me. But surely it has it impact on Economics as well.

Now let us consider the situation where the govt. is toppled. What impact is it going to make on people of India and abroad?

                  First and foremost the nuclear deal will be put back into the box for a while? How long? No one knows. A lot will depend on who gains power in both the US and India. Mr. Obama (MS word spelling check recognizes Osama but not Obama, don’t worry sir you’ll soon make it if you do make it to the hot seat!) has been opposing all kinds of help to India courtesy Indians stealing all the jobs from the Americans and then he thinks India is getting too much in the nuclear deal and the US hardly anything. What about the Monetary support from the Indians for your election campaign sir? And if India TV (A Hindi news channel in India) is to be believed Mr. Obama is a great devotee of Lord Hanuman. So doesn’t it really make us think that all this is a publicity stunt by Mr. Obama? We have seen in the past and will surely see it in future. Political leaders everywhere will talk anything to appease the public for votes, but they ultimately end up doing things which will be in accordance of their own interest, or what the intelligence agencies want, or what the party demands for the good or bad! So Mr. Obama knows that outsourcing is not only good for the developing countries but a necessity for the developed nations. He also knows that nuclear deal will not only provide support in terms of technology and fuel but along with it comes economic and military co-operation. So no matter what; The deal is very dear to the US as well, irrespective of whether it’s Mr. Obama or Mr. McCain.

                      Second I can see why CPI is opposing (that’s what they can do), but why is that the BJP is opposing? Good question, is it because it’s compromising with our sovereignty. The answer is no, it is because they were trying to ink a similar deal but were turned down by the Bush administration. So they don’t want congress to sign this historic deal. The BJP wants to come to power and seal the deal.

                      Elections now what? While Congress has been crying foul that all the forces are trying to topple the govt.! Infact the strongest statement congress has made till date is that nuclear deal is more important for county’s security and they are willing to sacrifice the govt. for it. So now if the govt. topples then Congress will ride on the sympathy wave, showcasing its concern for the country. So if the govt. falls or if it stays then the congress is the one which is going to gain!

                         Won’t the high prices and oil crisis act as an anti-incumbent factor and work against congress coming to power again?  Yes, it will surely among the people in the metros? What about the rural India, the guys who make or break the government. Lot will depend on the Monsoon this year; if it’s good then it’s good news for congress. If it’s bad then congress can probably reserve its seat in the opposition for the next five years. But wait my rustic intelligence says won’t the people in the village ask the simple question of why the government toppled?  Yes, they will and probably they will think that it was unfair to congress and vote for congress in the elections. And did I just think that Mr.Chidambaran’s much criticized agriculture loan waiver was a plan for this time, they could see the govt. pushing for this deal, toppling and coming back to power after elections courtesy these sops! Probably yes. The inflation if not completely tamed will be atleast under control by that time. So no plans for guessing, it’s a well thought out move by the Congress. So the situation definitely seems more nonchalant for the congress!

A peek into the highest peak @ Vellore – And Before that!


It was January of 2006, barely weeks into the fourth semester of engineering. Classes and campus had already started seeming boring courtesy the moronic lecturers and lazy people around me. I had been planning a conquest of the highest peak @ Vellore (that’s where my college was VIT University) but could not find company. I didn’t understand guys around me were more interested in playing counter-strike on comp (where you give head-shots to your enemies, hopefully I could give some to these lecturers), some nerds into books, some others running after lecturers for marks, some were under the spell of dim witched girls (non male species @ college) who would drag the guys with money in their pocket to the food-court and order the best dessert (a chocolate Hot-fuzz nut!) or some others were simply lying in their rooms watching all kinda movies!

So I was bored and wanted company to go scale the highest peak @ Vellore. I am a kinda person who loves travelling, trekking or anything that involves moving! I had been to Calicut two months ago with one of my friends Anirudh for a technical paper presentation at NIT Calicut and enjoyed the place. It was so natural with serene calmness and greenery all around and with slight drizzle on. We won the second prize there, and yeah we also went to IIM Kozhikode, it was such a lovely campus, and it was located on hill top, so you actually had to trek all the way up to reach the hostel and the main campus. I was so excited after the trip that I wanted a quick trek some new place. And with little cash in my pocket the Vellore peak was the cheapest and best deal to satiate my craving for a trek. Luckily I had mentioned the above problem to one of my friends Anindya and so one night he turned up at my room in hostel and we decided to finally scale the peak the next morning sharp at 6.

Trek Begins: The next day we started by 6. I could only manage snickers and did not have trekking shoes so it was kinda dangerous because it was raining that day (Vellore receives the rainfall from the retreating or the North east monsoon), the rocks were all so wet and slippery especially with the snickers on. Okay the way to begin your ascent of the hill in Vellore is through the shacks in the foothills near Satuvachari. We took an auto till there from the hostel. We initially had to figure out the right place for the ascent cos there’s no defined way. Luckily we hit the right spot to start. It was a steep 70 degrees slope, and had tough time climbing the rocks amidst all the drizzle and slippery rocks! We somehow managed to reach the point where we could figure where we should be heading. Luckily we found a path which I guess became prominent courtesy people had earlier travelled on it. From there on we just followed the path, we had difficulty at times courtesy some steep climbing of 80 degrees as well, and then all those bushes, with ever looming danger of a King cobra showing up anytime. We somehow managed the trip upwards among all these perils. The hill has a kind of watch tower similar to the one they show in mythological and epic movies, say the LOTR where they light the fire and have bells to warn the city of potential dangers and attacks! It was constructed I guess during the time of King Krishnadevaraya a king who is believed to rule Vellore and surrounding areas. It was fun reaching the top. It was so soothing amidst the drizzle and the cool breeze. We could see the whole town of Vellore and even VIT and CMC. The two premier institutes in Vellore. We spent some great time there, tried shouting as loud as possible at times, trying to warn the Velloreans of the new age dangers! I guess trekking and travelling lets you experience new things and help you get energized and refreshed. After about half an hour we were headed back. It took us approximately 45 minutes climbing up and 20 back. It was a fun experience after all the hectic and boring college life that time!  and revitalizing!

Why Engineering? Which branch is good? – For me or for the world? A rogue engineer’ analysis of the hidden side to everything in engineering!


It’s that time of the year when thousands of souls are lining up on the crossroad trying to determine which road to take! I was too four years ago; when I was in a similar situation after my class XII. Ok atleast I knew I was going to do engineering. But I was confused what branch is apt for me? Do I choose the branch depending on the demand and worth of the branch or will that not matter and I can make my own choice depending on my own interest. What do I really want, everyone came up with their own advice, infact I wasn’t even listening to anyone, I had developed a misconception and was thinking only about it, which is may not be such a wrong thing to do at such a point of time. This is what I intend to explain through this post!  Read on \m/.

Why engineering?

Is it because you want to be the next Jack Kilby or Thomas Edison? Want to do a PhD in the subject?  These guys know it all what they exactly want. They do not require this manual! (More importantly these are the kinda guys we so badly want)

Is it because you think engineering is a good career option and you not very sure what after and want time to decide your future course of action but you want to learn a lot of things and do good. (My kinda guy)

Is it because you’ve heard B.Tech + MBA helps you secure your career totally and land you a job in the world’s best company ruling over these godforsaken engineers, getting them do all the work while you take away all the credit! (Both literally and monetarily)  (Most of the people take up engineering these days because of this factor which is not necessarily wrong)

I took up engineering now what?

1st year 1st day: Come in the dim witched lecturers and asks us for our intro and future plans! If only I had a future plan?  No points for guessing 70 percent of the class went for the third reason in the previous paragraph and so was the percentage in most classes. I was as usual for the second reason but I just said that I wanted to do an M.Tech just for the heck of answering a question whose answer I did not seriously know that point of time(though I do not want to do it now!)

What engineering branch do I choose? Which is the best?

If you are type 1 you know it all, you know the branches which interest you, go grab it! For example in our first year I had a classmate who would design robots (from scratch), in our Computer Aided Design Classes when we guys used to design simple figures with great difficulty, some geek gods used to design airplanes and submarines. (That counts for some geekiness, and it was more depressing than inspiring because even though you want to be you can’t be a geek like them, they are born that way. After all who designs robots and airplanes three months into engineering, we can only attempt its not difficult but still hats off to them)

If you type 3 you need to choose the branch which makes a good combination with an MBA degree. Mechanical is by far the evergreen branch serves the best with MBA. Then come in the Electrical branches ECE preferably, EEE sucks (did not find a better word) no explanation required here! Since your focus right from start is to do an MBA choose the branch you’re comfortable with it! I know a Sardar from my batch who can’t write a program for calculating the area of square in C language (the simplest program you will come across), but he wants to do an MBA and he took up ECE! So that counts for some bravery, sincere advice join a branch where you will be able to score a good percentage and show up the future employers that you rocked in engineering! For the good ones who can carry on the pressure and can definitely do well no qualms, you guys will definitely do well irrespective of the branch.

If you type 2, this Post is dedicated to you guys.

Electronics and Communication Engineering J what I am): By far the best. If you interested in designing computer chips, if u think you are fascinated by how a cell phone works, how the battery power lasts for so long for some devices and not for some (Nokia Vs Sony Ericsson), want to know what is this fuss about 3G, CDMA vs. GSM, want to design an Automobile safety system, a collision avoidance system, Program a chip and put it on a robot to make it work the way you want, Design protocols that decide how the data will be transmitted across the free space or through optical fiber, then ECE is for you.  Future scope: Immense, with companies setting off shore campuses for R&D in India there will be immense demand for EC engineers. Boom in the Telecom sector and then new Fab city (for silicon wafer fabrication and manufacturing chips for first time in India) ECE is here to stay. Moreover ECE guys are versatile can be fit anywhere.

Companies:

EDA: Cadence, Mentor Graphics,

Semiconductor Design and Fab: Nvidia, AMD, Intel, Infineon, Freescale, Bosch

Telecom: Huawei, Alcatel-lucent, Ericsson

Electrical and Electronics Engineering: If you in the IIT’s its ok. If other colleges this branch I don’t consider a very good option. Major part of your engineering life you are running a Motor or an Alternator first trying to understand how it works then its efficiency and then how do I transmit the power. That’s it your life stops there. You hardly learn things which are in demand today. Under the pretext of electronics all they learn is SCR and UJT (if that counts for a field as vast as electronics) Still I know a friend of mine who learnt a lot of things on his own like robotics, microcontrollers and embedded systems and is working on quality product stuff. There is always room for learning everywhere.

Civil and Mechanical Engineering: (We go hand in hand): My personal favorites, if you are the kind of guy who is inspired by the modern marvels on History channel. The unique design of the Hong-Kong airport, PETRONAS tower or the Bruj-AL-Arab hotel inspires you and you like watching extreme engineering on discovery channel. Or if you heard that Mahindra Scorpio was designed by an Indian engineer who was 23 year old! If you want to design the next gas guzzling Hummer for the US marines or the fuel efficient and the cheapest car on earth Nano! Or if you fascinated by Michael Schumacher and feel you should design a faster car for him so that he can remain competitive even @ the age of forty, or if you want to know that the site of the world trade centre is good enough for a building that giant size, then these branches provide you the opportunity to do so!

Biotechnology: If you think that you did not get a seat in a medical college and you can compensate it with a degree of B.Tech Biotechnology, this ain’t true. The b.tech biotech guys just study the applications and they hardly know the undercurrents. It is better go do a B.S in genetics or microbiology. What B.Tech biotech does provide you is a diverse understanding and application of biotechnology in diverse field ranging from protein engineering to Industrial processes of producing a better quality beer to a way to understand means to protect the ecology, or even design a drug but in a generalist aspect! So if u thought you will be working on stem cells and producing new dollies (the cloned sheep) you’re mistaken, this is one branch where a PhD is a must and requires immense hard work dedication and research unlike other branches. So if you can burn the midnight lamp and read those big fat books (which I’ll rather use as a pillow or a dumbbell) like doctors do, this is the one for you!

Chemical engineering: If you think you are good at organic chemistry, or want to design high pressure boiling chambers, or think that you have better ways to treat the chemicals coming out of the industries to save the environment, or you think you are fine with the smell of Hydrogen Sulphide this branch is for you.

Computer Science: The most sought after branch. This should not be necessarily seen as related to coding! Engineering. There is lot more to it. If you interested in operating systems, think windows sucks and Linux rocks and you think you have the creative genesis to design cool applications. Moreover there is web designing, Distributed Computing (getting a lot of computers together and make them solve a common large problem i.e. a cheap way of making your supercomputer), Networking and designing optimum algorithms for fast processing this is the branch you are looking for! Basically you got to have good logical skills and work on it.

In general there is more to engineering than only Studies. There is a lot of room for personality development, meeting people from different diversities (if you in a nationally reputed college) and taking part in different activities. Thus engineering rocks no matter how you see it!

P.S : if u have any queries please post a comment, i’ll get back to you.

Also do remember to check my new blog here..

https://www.facebook.com/firstpilgrim

and http://firstpilgrim.com

FII affecting Exchange Rates, Stock Markets, Inflation and Exports


Foreign Institutional investors: Mutual funds, insurance companies, pension funds, university funds, investment trusts, endowment funds and charitable trusts incorporated outside India but investing in equity and debt securities in the country are known as FIIs. They collect money from individuals and corporate (primarily from countries belonging to the European and American continents), and invest it in financial instruments worldwide, with India being one of the targeted markets. FII who want to invest in the Indian Markets have to register with the SEBI (Security and Exchange Bureau of India) and also from the RBI to maintain a foreign currency account to bring in and take out the funds and also a rupee bank account to make the transactions.

FII’s In Stock Markets: The FII’s profit from investing in emerging financial stock markets, say the Indian stock Exchange. If the cap on FII is high then they can bring in lot of funds in the countries stock markets and thus have great influence on the way the stock markets behaves, going up or down. The FII buying pushes the stocks up and their selling shows the stock market the downward path. So this is how influencing FII can be, as is seen in the present downtrend of the stock markets in India courtesy heavy FII selling.

FII affecting the Exchange Rates: As pointed out in the first paragraph, FII need to maintain an account with the RBI for all the transactions.

 To understand the implications of FII on the exchange rates we have to understand how the value of one currency goes up (appreciates) or goes down against the other currency. The simple way of understanding is through Demand and Supply. If say US imports from India it is creating a demand for Rupee thus the Indian rupee appreciates w.r.t the dollar. If India imports then the dollar appreciates w.r.t the Indian rupee.

Now considering FII’s for every dollar that they bring into the country, there is a demand for rupee created and the RBI has to print and release the money in the country. Since the FII’s are creating a demand for rupee, it appreciates w.r.t the dollar. Thus if for e.g. if prior to the demand the exchange rate was 1 USD = Rs 40, it could become 1 USD = Rs 39 after they invets. Similarly when FII withdraw the capital from the markets, they need to earn back the green buck (USD) so that leads to a demand for dollars the rupee depreciates. 1 USD goes back to Rs. 40. Thus FII inflows make the currency of the country invested in appreciate (e.g. FII investing in India may lead to Rupee appreciating w.r.t several other currencies) and their selling and disinvestment may lead to depreciation.

Depreciating currency not favorable to the FII’s: considering a simple hypothetical example. I invested 1 USD in India at an exchange rate of 1 USD = Rs. 40. If rupee appreciates the exchange rates become 1 USD = Rs. 20. Now if I disinvest I get 2 dollars, whereas I invested only 1 USD thereby a gain of 1 USD. (Though in real terms the purchasing power of my dollar might decrease as my import cost would increase, and cost of living back home may increase, but when I do consider practical examples there is always a gain for FII whenever the currency of the country invested in appreciates w.r.t the home currency)

Similarly when rupee depreciates w.r.t US Dollar and exchange rate becomes 1 USD = Rs. 80 I get only 0.5 Dollar and I lose 0.5 of the 1 USD invested.

Thus we observe that for the FII’s to gain investing in India the rupee should appreciate w.r.t the dollar.

*Recently the rupee has depreciated with respect to the dollar due to FII selling, and due to the selling it has been depreciating even further.

FII and Inflation: The huge amount of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created by the FII’s. This situation could lead to excess liquidity (amount of excess cash floating in the market) thereby leading to Inflation, where too much money chases too few goods (perfect example of demand-pull inflation). Thus there should be a limit to the FII inflow in the country.

FII and Local companies: FII bring lot of funds to the country’ markets leading to free availability of funds for the local companies in need of funds to carry on expansion in their production capacities or starting new ventures.

FII and Exports: However because the FII lead to appreciation of the currency, they lead to the exports industry becoming uncompetitive due to the appreciation of the rupee. For e.g. if 1 USD = Rs.40 and a soap costs 1 USD. Now when the rupee appreciates 1 USD = Rs. 20, I will have to sell the same soap to the US for 2 US Dollars in order to sustain the same income that I have been making i.e. Rs.40. Thus excess FII fund inflow in the country can also make a negative impact on the economy of the country.

Thus the FII bring in a lot of funds to the country which could be used by the companies to achieve rapid growth but there should also be a mechanism to keep them in check so that they do not affect the economy of the country negatively. FII are always compared with FDI (Foreign Direct Investment). It is believed that large FII inflows reflect the openness and Reliability of country’ markets. Thus it has to be seen which model perfectly suits a country’ growth

In Search of NEW-CLEAR-PEACE DHEEL- The real side of the nuclear Deal


Well it was a pretty dull week this one for me! Not exactly for the govt. while our beloved peaceful phlegmatic P.M was giving sleepless nights to the communists and as I search for some peace, Media has finally got its own piece of news for the week and left Aarushi to rest in peace. While Americans hiding behind the Bush! Are going to push India forward for peaceful nuclear power and give it a piece of the nuclear fuel, I have been searching for my own piece of luck (not peace).

Well the new-clear-peace that I’ve been searching for I’ve not found! I’m confused. Drop it! Let us focus on national issues, being true Indians we should always discuss, call meetings (and get people confused) arouse people’s sentiments (Amarnath Shrine Board Incident and Indore riots) after all we need to discuss (and not do anything, Communists in India, talk, brag, bully and more importantly do not join the government but just support from outside. Is that what the public voted for (na i did not vote i wasn’t 18 then), come on go make our policies, not just oppose them, owe responsibility for what’s going on!) India is on the development path and is soon going to overtake the US in terms of GDP. But will that be simple! No I guess if we just keep discussing and not act!

MAIN AREA OF CONCERN:  as we develop so will our energy demands grow sky high (well really? Yes). The major chunk of electricity that we produce is through our thermal plants, which consumes millions of tonnes of coal to convert steam energy into electricity and at the same time release that much amount of CO2 in the environment (not a great idea right). In future our energy demands are going to rise so much that we will not only exhaust our own coal but will have to import it (provided it’s left anywhere in the world) and imagine what threat to the world we will be guzzling out carbon to the atmosphere. Now why is nuclear energy so important? First coal is not a clean fuel; it is exhaustible in near future. Moreover there are ways to utilize non conventional sources like wind, ocean etc. but scope is limited and it’s difficult for it to directly sustain all the demands. So we turn to nuclear fuel particularly due to it being clean, limited but highly efficient, large scale power generation!

What seems “Left” is not Right? Well meet our communist friends; they have been pulling the poor Sardar’ leg ever since he went behind the Bush and gave an impression of being the new Mr. Tony Blair. According to the revered Economist (because of whom millions are working in the IT industry, People are going gaga over shopping branded stuff at the malls and enjoying the same status as the Americans in America) India is enjoying best ever relationship with Uncle Sam. And now it has become such a good friend that it is giving all this stuff for free (has to be a great friend indeed) Nuclear energy technology which Indians can use and take away all those jobs from Americans (Reason why OBAMA is against this deal!) How?  Look it will light up all the villages in India, then they will also get connected to broadband, then these IT companies will train the farmers in C, C++ and make them code for the Firangis in the west (look open source volunteers, farming in the morning, code in the night all voluntarily, that is how free software and open source community came along selling pizzas @ day and coding @ night giving Mr. Gates sleepless nights a.k.a NO PEACE @ all). Or some BPO fellows will setup a call centre, train our farmers in English and make them sell airline tickets for United Airlines! Everything is possible, Impossible is Nothing (courtesy: ADIDAS).

Coming back to our communist friends, they say that the govt. did not divulge all the details of the deal and there is a hidden agenda! Ah-ha! They feel that this deal is going to affect the sovereignty of the country and India may be headed the Pakistan way obliging the US. Moreover putting the atomic reactors under safeguards will put an end to future developments and advancements in nuclear technology. They also say that the sudden rise in the oil prices is due to US playing dirty games for getting countries like India to worry and fall into the nuclear trap! (courtesy Russia, Saudi and Iran, top three oil producers saying there is no fuel shortage and there will be no decrease in supply) point I guess!

Why they are not right?

1. India’s reactors running at half the capacity due to unavailability of fuel, uranium in this case.

2. India’s growing energy demand and future requirements indicate towards cleaner efficient fuel.

3. Only nuclear reactors which are used for civilian power generation under safeguards and not all, moreover the fuel will be tracked and monitored by IAEA only in these reactors and not all of them, so we can still manage to make bombs and scare off Pakistan! (Though not a bright idea again, India is a country that always preaches Peace, (PEACE again!) Pakis are our bro’s right).

Infact the 123 agreement and under the IAEA and NSG approval will allow India to use nuclear technology under dual use (Dual-use technologies earn their name because they can be used for both military and civilian purposes. Since India is under Nuclear Suppliers’ Group (NSG) sanctions, such technologies are denied to the country even for civilian use for fear they may be covertly used for military purposes.) Like:

Hidden gains

Sports gear: Lightweight and unbreakable tennis rackets, golf clubs and fishing poles.X-ray machines: Medical and dental imaging machines using radioactive cobalt-60.Space prog: Latest in telemetry, propulsion, guidance, speciality materials, nanotech.Defence sector: Components for developing a defence system against Pakistan’s rocket arsenal.

Image source: HINDUSTAN TIMES

 

 

 

 

The reason: the hi-tech fibres and filaments often used to make lightweight and unbreakable tennis rackets, golf clubs and fishing poles can also be used in the uranium-enrichment process. Also affected by the various sanctions are medical and dental imaging machines that use radioactive cobalt-60 and similar substances. Advanced technologies used to make ammonia and fertiliser can also be used to make heavy water.

Ultra low-speed photography equipment, pressure-measuring instruments and some types of communications switching equipment are also banned.

The famous supercomputer ban imposed by the US in the early 1990s was also a consequence of such sanctions. Sales of Sony’s Play Station 2 to India were under a cloud because the gaming device fell under Japanese dual-use export controls. NSG sanctions lie behind the recent arrest of Indian scientists trying to buy heat-resistant silicon chips in the US. All these and a host of other tech barriers will disappear if the nuclear deal is completed: a benefit of de facto nuclear club membership.

US commerce department and Indian industry representatives say the biggest problem with technology sanctions is the “uncertainty principle”. Technology evolves faster than the sanctions written to control their export. It isn’t uncommon for an Indian request for technology to be turned down because a US official, befuddled by an archaic rules book, decides not to take chances. The 123 Agreement would mean the official would give India the benefit of the doubt.

4. There’s nothing like compromising with security, it’s only about managing and understanding your needs, moreover there’s nothing wrong by sticking to a strong partner, I don’t understand how it is going to affect our sovereignty! As long as US is not asking for an airbase to attack China, or send Indian troops to Iran, India should be fine with it. Ok we blow another bomb for a Test and the deal is scrapped, come on we are looking at realistic situations here.  I was reading that we won’t be able to test nuclear bombs that can be sent on a missile to beijing, drop it. why? the next point answers

5. In this globalized world we are looking towards interdependence. China has it’s huge population to feed, it’s main strength is export and majority to the US. All of US’s IT work is done in INDIA. do you think it will see it’s two biggest suppliers of human resource, IT, manufactured goods, Hardware, food grains, soaps, Tooth Paste etc. bomb each other. what about the people in the US, they will struggle, their lives will be greatly affected! coming down to the worst scenario of a war, if ever a war is there between India and China then i don’t think there will be any force left to rule, cos the world wouldn’t be existing! so let us just forget that such a thing would happen and be realistic.

6. We are developing breeder reactors which will run on thorium but it will take time in R&D, so by that time we can fulfill our requirements through this new deal.( we have thorium in abundance, ever been to kerala!)

7. Moreover going ahead with this deal does not entitle India to buy fuel or technology only from  the US, there are 45 countries in the Nuclear supplier groups and India can approach any of them for any technology for civilian nuclear power, so why the fuss? France has already come out in support and so has Russia to supply the necessary technology.

With reference to the above points I really don’t see any reason why the communists are opposing it? Are they so averse to any foreign technology? Or to the capitalistic US? Or are they just non-committed towards the people of India? The larger picture has to be seen not in case of the political scenario but also the long term needs. And while I finish this it seems Aarushi has finally found peace (CBI seems to have figured out the culprit), but I’m still to find mine!

RUN TO THE HILLS FOR PEACE!

 P.S: The opinion is purely of the author’s and should be seen as just another way of expressing oneself in this democracy and means no offences to any party or ideology!