Unconventional Economics,Unpredictable Growth

Indian Economic symphony

With the Rupee depreciating by over 20% against the US dollar over a period of 15 months, Indian Corporates who had gone for Foreign Currency Convertible Bonds, will opt for redemption rather than exercising the option of conversion, for which they have to raise funds thro’ External Commercial Borrowings. According to Cricil, Nifty companies suffered a nett loss of Rs 48 billion between July-September 2011, wiping out 8% of the profits (total of Rs 572 billion) before tax. One of the highest aggregate losses, due to 3 fold rise in foreign debt of these companies in the last 8 years. In the next quarter (Oct-Dec), these losses would be around Rs 35-40 billion. High level exposure to foreign currency debt, which is calculated on the closing exchange rate (around $ 1.5 trillion)(24% of their total outstanding debt of Nifty companies). The hedging of funds will enhance the foreign exchange losses, as the derivative instruments are market to market. With rupee shedding another 31 paisa, the Rupee was Rs 53.03 against the dollar on Dec 27, 2011.

With increased cost of Credit, 13 interest rate increases in the last 1 ½ years, the Industrial growth showing wide disparity even touching negative growth in recent months, dwindling exports, increased expenditure putting pressure on funds, do we need to be cautious as the cloud overhead is a couple of shades darker.

However, the silver lining in the dark clouds was the downward journey of food inflation to 1.8%, savings rate going up, and the core sector growth steadying at 6.8%(November 2011) with infrastructure showing positive growth coal products(4.9%), cement(16.6%), power production (14.1%), IIP turning positive with 4.6% growth against 5.6% (between April-November of current year and past year).

Government, taking into consideration the pathetic economic growth has forecast 7.5% growth in the GDP in 2011-12 against the earlier anticipated 9%.

Will the New Year continue with the economic slowdown or persist with economic recession. Will the fury of recessionary trend be “v’ shaped curve or would the curve be scary elongated “u” shaped and can India stay immune from the euro zone crisis? If so, how long?

But economic growth or conditions pertaining to economic growth, creating scare, etc we need to be cautious. The way TV channels are airing expert opinions which seems to be very many, or dozens worth of truck loads, seem to shake the confidence or lead astray your optimism, then the broadcasters could do a world of good by stopping their expert commentaries. If they were so expert, why do they not invest or follow their own suggestions and make themselves richer. These TV channels who claim they are the fourth pillar of the Constitution and mirror the view of the Society should remember not to stand depending upon where they sit!

KERALA's economic buffet

If the World economy sneezes, Kerala will catch pneumonia. Because, bulk of the States economy with 3.4 cr people depend upon the remittance of Kerala’s labourers who make their income with the sweat of their brow. The Free trade Agreement signed between India and ASEAN has made Kerala’s trade literarily free, as the state is vulnerable to the dumping indiscrimination of the products from ASEAN countries which are Kerala’s domestic products which made Kerala’s GDP growth touch 6.89% in 2008-9 against the country’s 6.7%. The import with its knitty gritty of tariff declared levies would leave the state products unsold as they would be priced higher than the imported stuff. Coconut Oil is no more consumed even by Keralities while indiscriminate Palm oil is reaching the state at cheap prices due to government’s subsidizing of the Product to low value edible oil. Coconuts are growing in prices which have made its place redundant as it would also be exposed to exodus import. Secondly, the Policy of Mr Obama, who has sleeved up his shirt which would indicate that the subsidies provided by the Federal Government would be withdrawn, with India’s largest bi-lateral partner suffering from economic crisis ceasing the imports. Also employment opportunities in the Heaven’s Gateway that is America would come down drastically. These new turn in the world crisis will hit Kerala like a tsunami, an economic tsunami. Once upon a time, Kerala’s per capita income stood at Rs 14,629 highest in South India (in 2007). Now crisis looms large on the economy of Kerala.

Kerala faces a cloudy economic forecast with State Domestic Product touching Rs 1, 57,144 Cr (2009-10). But 75% of the proceeds are accounted for paying interest, salaries and pensions, with only 24.17% available for spending by the state towards Schemes benefiting the People. Presently, state’s debt is put at Rs 78,329 Cr (2010-11).

When the state is reeling under such dire straits, Lord Padmanabha to whom the King of Travancore Marthanda Varma pledged his country is proving to be rich. That Raja after Raja surrendered their offering in valuables, made the Temple, one among the richest in the world. When an inventory of the various treasure groves were taken, it was found, after 80% of the search, the Lord had around Rs 60,000 Cr in gold, silver, other precious stones. A treasure trove of gold, diamonds and precious stones —was unearthed from an ante-chamber to one of the six vaults in Sree Padmanabhaswamy Temple.

More than 1200 ‘Sarappalli' golden chains (some sporting ‘navaratnas'), three golden crowns, numerous golden staffs, golden plates, a chain of golden coins of 1732 vintage, diamonds, including Belgium diamonds, and precious stones, including ‘cat's eye', rubies and emeralds, were among the articles found inside vault A located on the southern side of the ‘Nalambalam' inside the Chandanamandapam. One gold chain was found to weigh more than three kg. Hundreds of kilos of coins issued by the government of erstwhile Travancore (raasi) and those from the time of Napoleon and the British East India Company were among the articles that were found. The Travancore-era coins include more than 14 kg of half-sovereigns believed to have been offered during ‘thulabharams' made over the centuries. More than 70 kg of Venetian coins were also reportedly found along with many kilos of East India company coins minted at (then) Madras. Coins of Australian origin and those from Mysore were among the inventories.
A temple treasure grove, yielding more than Rs 60,000 Crores in precious jewels, coins, gold, silver, platinum, rare antiquary, show the sincerity and honesty of the Rulers of Travancore of pre-independent India. There are 2 other valuts to be opened. Today rulers, that too in a democracy who are accountable to the People behave as if they are accountablable to nobody. Scams, looting, plundering, of Public money in the name of democracy have made the People compare the pre-independent India with the Republican Rule through a Constitution, we have given to ourselves.

Dodgy debt and dozing Oil Company executives?

The Oil Companies are at their tricks once again. From today, the Petrol prices will increase by Rs 1.35 paise to offset the loss of Rs 1048 Cr due to selling Petrol below Cost. Only on the 15th May, these Oil Cos raised the price of Petrol by Rs 5/- per litre. The explanation from the Government: We have nothing to do. It is the oil Companies who have raised the price to bridge the shortfall in the price of crde and cost of refining. Oil Companies aver that high prices of crude and huge debt burden of oil companies makes it imperative to raise prices though they would like to shed a tear for the common man reeling from price rise especially the inflation factor. We, the am admi, must thank these Oil Cos for their consideration.

But let us just look at these statistics, which have been released as advertisements by the Oil Companies.

1. Indian Oil Corporation says that it has made a Profit of Rs 7445.48 Cr, and the actual growth in sales in the III & IV Quarter was 138.9%. Sale proceeds stood at Rs 3,28,744.27 Cr (the highest sale rate in its history). They have also declared Rs 9.50 per share which is considered to be a handsome dividend.

2. Bharat Petroleum is showing a net profit of Rs 1,63,496 lakhs (2010-11) against Rs 1,63,236 lakhs during 31-3-2010 . Total income was recorded as Rs 48,311,46 Cr against Rs 40,07,155 Cr ( 205% growth). The company is said to have spent for refining crude at US $ 4.47 per barrel (previous year $ 2.97 per barrel). In the previous year, dollar value was low, and Rupee value was high. This year also, the Rupee value maintained the same position. Hence when all the prices are shown in Rupees, Bharat Petroleum shows the refining prices in Dollars.

3. ONGC has placed a full page advertisement with the heading, "The way to bigger achievement lies in the path less travelled". Hurray! Income of ONGC stood at Rs 121,929,29 Cr (2010-11) against Rs 103,438.85 Cr (2009-10), with a net profit of Rs 22,455.93 Cr against Rs 19,403.53 Cr last year. Aditional shares have been allotted and a dividend equivalent to Rs 642 Cr and special interim dividend of Rs 6844 Cr paid on Dec 2010. The total dividend paid alone accounted for Rs 7486 Cr!!

4. Oil India Ltd records a profit of Rs 2883.73 Cr.2010-11 Government had provided a subsidy of Rs 40,912 Cr. 1 litre of petrol has a Central excise of Rs 8/- and Customs duty.

Oil Cos are pretending dodge debts and dozing returns? Does the level of economic output justify its spending and lifestyle of its employees (of Oil Companies?) The dividends are all transferred to GoI which never figure in the accounts. Government gets all. Plunder?