OIL SUBSIDY IN ASIAN COUNTRIES

Today world economy is depend upon electricity and transportation, these are two major source of development of any country. If we look behind the scene of these two important sources one thing is common that’s oil.

If look at the graph of oil prices in last 15 years its shoot up from $ 15/barrel (1994) to $ 100/barrel (jan, 2008), nearly 700% surge in oil prices, it’s really a very dreadful sign for any country because each dollar increase hugely affected the whole economic cycle of any country.

Contrary to this trudge in oil prices there are some Asian countries which are providing oil to their countrymen at highly subsidized rate. There are stats which showed that governments are bearing huge cost for providing oil to their countrymen.

Look at the figures given below of some Asian countries.

If we compare the statistics of both graph and data given above international oil prices shoots by 700% while in these asian countries maximum hiked by 167% for petrol & 193% for diesel in Vietnam, here we can see that the government of these developing countries are bearing huge burden on itself to move their country’s economy.

BRAND TATA=BRAND INDIA!

BRAND TATA=BRAND INDIA!

In 1999, the salt-to-software group started the Indian invasion of global brands with the acquisition of the UK’s Tetley. Since then, it has followed it up with many big and small deals, including the $13.7 billion buy of Corus Steel. But the conglomerate is increasingly facing resistance overseas while trying to acquire brands which are higher up the luxury scale — like the opulent Orient Express chain of hotels and iconic auto brands Jaguar and Land Rover.
What ails the brand perception of the group abroad, creating an impression that it is unworthy of handling luxury brands? Trust is almost synonymous to Tata in India. Trust is created through years of knowledge. Trouble for Tata abroad could be one of ignorance.
Ranjan Kapoor, country manager, India, WPP, says the problem is not Tata- specific but country-specific. “We are an emerging economy and foreigners see us based on that.” Every country goes through an evolution; initially as an exporter of low-cost products and later to one exporting high-quality goods. India is currently going through that transition and Tata is the flag bearer of Indian business to the world. That could be why they are facing the brunt. The comments from the top management at Orient Express or Jaguar’s US dealers are brand-racist comments. In a larger context the problem is certainly one towards India. US had the same attitude to the Japanese when they first went to that country. Look where they are now, be it in auto or the electronic space. Consumers do not see brands as a brown brand, white brand, black brand.
Tata Group offers everything from luxurious and niche products to cheap and ubiquitous ones. Is that contributing to diluting the brand image? Is the good will and premium image of a Tata Consultancy Services (TCS) and the Taj Hotels undone by mass market forays? The same company can cater to two extremes. It can be mass at one end and niche at the other. Nokia, which has phones both at the mass level and at a high end, is an example. Infact Tata has been named the world’s third most accountable and transparent company by Britain’s One World Trust, ahead of names like Coca-Cola, Petrobras, HSBC Holdings, PriceWaterCooopers and Google.
Making acquisitions at the top-end should, over time, make the Tata brand substantially more valuable. Rather than spend money on creating a brand image through other activity, it (acquisitions) is a much better route.
In its bid to gain trust, it can even try highlighting its intentions through hiring people who have experience in managing historic brands to lead the pitch when they go for an Orient Express or a Land Rover. What is to be noted is that a dilution in the brand perception can happen only if the Tatas decide to dilute it.
So is there anything that the Tatas can do to change perceptions?

BANK LOANS & ETHICS

ARTICLE FROM:
VIJETA KUMAR (ICICI BANK)
ICFAI Hyd.

There was a time not so long ago when the average middle-class Indian had to toil hard for a good number of years to acquire basic amenities like the refrigerator, a television, and a tape recorder. Owning an air-conditioner, a music system, a washing machine and a microwave oven would be a neighbor’s envy owner’s pride kind of situation. While buying a house was a lifetime dream for almost all of the middle-class fraternity, buying the goodies on loan was a taboo for most Indians. Fast forward to the 21st century, welcome to the Generation-next India… growing up in the thick of the information revolution, the connectivity boom, coalition politics, IT enabled everything, the rise of the service economy and where living off debt is a well-accepted norm of life. The conservative debt-averse middle-class Indian who lived a life-style within his frugal means, never to spread his feet beyond his sheet, seems to have given way to a new middle-class that is free from all inhibitions regarding conspicuous consumption. Unlike his earlier predecessor, the middle-class has donned a new outlook; he attaches no social-stigma in borrowing for his spending. How did this paradigm shift happen? Several factors are responsible but all of them can be traced back to one word or rather two – Economic Liberalization. If one were to examine the factors one by one- The soft interest rate regime and low inflation have delivered a double booster dose to consumer spending, they increased the cost of saving and reduced the cost of buying. There is a stated policy that the Government wants interest rates to be lowered and inflation to be kept in check.

The second key factor is the manner in which media has evolved in this country. Satellite TV and the Internet have brought the East and West much closer and today a consumer in India is quite aware of the latest trends in global markets and aspires to a similar lifestyle. All major MNC consumer goods brands now have a presence in India and some of them are even using India as a manufacturing hub for the Asian markets. Superior products, lower prices thanks to the competition, better services and most importantly backed by deep pockets to spend on advertising and sales promotion was enough to spark off consumer interest. Banks and Non-Bank Finance Companies made a beeline to capture this opportunity by enabling easy access to credit finance to customers across the socio-economic and geographical spectrum. The National Council of Applied Economic Research reckons that the impact of consumer finance first began to be felt in 1999-00. In that year cheaper finance added to the growth in the demand for white goods demand for financed white goods rose 23.9 per cent while the overall market grew just 18.9 per cent. In the rural markets the availability of cheap finance was an even bigger factor in growth. While rural demand for white goods grew 22.4 per cent in 1999-00, the growth of financed white goods rose a phenomenal 39.6 per cent. The arrival of cheaper finance has completely changed buying patterns.

At one level, Indians can now pay in installments for everything from automobiles to microwaves. Incomes may still be low by international standards but the availability of cheaper consumer finance has turned large swathes of India into consumers. While just 4.6 per cent of consumers bought what NCAER calls Category III goods like cars and color TVs in 1985-86, by 1998-99, this rose to 10.1 per cent. Similarly, in the automobile sector, for instance, sales in the entry-level Category A class (the Maruti 800) were overtaken in 1999-00 by those in the more expensive Category B which includes slightly bigger cars like the Zen and the Santro. And last year, the fastest growth segment, albeit on a lower base, was the D segment which includes cars like the Skoda Octavia and the Toyota Corolla — sales in this category rose from 990 in 2001 to 5,600 in 2002. There is a definite urge to splurge in the new emerging middle class. The 350- 400 odd million Indians’ in the age group of 22 – 40 approach to life is very different from the 100 odd million Indian’s in the age group of over 40 – 45 age group. One reason is because consumer financing means there may not be a big difference in the monthly installments. For instance, an entry level conventional fridge costs Rs 8,000 while a frost-free costs around Rs 14,500. However the monthly installments on the cheaper model are around Rs 600. That’s compared to Rs 900 for the more expensive fridge.

Article to be continued...

INFLATION:PROBLEM FOR ASIAN COUNTRIES

Few days back I was visited on Chinese NBS website and find an interesting fact which is very similar to our country problem that’s inflation and money inflow. Money inflow is not a problem but sometimes it creates very worse situation, same thing is arises in India and china i.e. INFLATION.

According to China's National Bureau of Statistics (N.B.S.) released financial data for the third quarter. The data showed China's economy was growing slightly faster than expected, but that persistent inflation may curtail future growth. Because Beijing has limited options for reversing this trend, inflation may require some important political changes.

A Growing Problem

According to the china's N.B.S., the third quarter ended with an inflation rate of 6.2 percent, just below the ten-year high set earlier this year. This level of inflation is high enough to cause concern. Moreover, it is unlikely that the official rate is the real rate. The Chinese government maintains a system of price controls for many goods, including gasoline. The price of oil on the international market jumped from US$65 to $85 per barrel during the third quarter, while the price of gas at China's pumps has remained relatively constant. Mainly china’s monetary policy and other strategic policies are secrets and unkown to other countries.

Factors responsible for Inflation growth:

Growth in the price of agricultural commodities. As global oil prices have surged, more and more farmers have dedicated their crop of wheat, sugar, and corn to the production of ethanol. As an increasing percentage of the crop is used for ethanol, less is available for consumption, resulting in price growth.

Only a few years ago, the average Chinese citizen drank five liters of milk per year. The figure now stands at 25 liters per year. As China demands more milk, both dairy and cattle prices will naturally rise.

Tactics to minimize the exchange rate: Chinese citizens are not allowed to hold foreign currency. When a Chinese manufacturer exports his products to the United States, he is generally paid in dollars. Yet, he is not allowed to keep the foreign currency. He must hand it over to the government in exchange for yuan. This allows the government to retire dollars from circulation. As dollars on the international market become scarcer, their price goes up. This allows the government to keep the yuan weak relative to the dollar, which benefits the export sector.

An inevitable consequence of this policy is that growth in the supply of yuan in the domestic market is tied to growth in the export sector. As exports grow, the money supply grows; as the money supply grows, there are more and more yuan chasing the same goods; inflation cannot help but follow. Exports grew by 27.1 percent in the first three quarters of the year, 0.6 percent higher than the same period last year. China's foreign exchange reserves have swelled on strong exports to roughly $1.5 trillion, and are growing at roughly $1 billion per day. At this staggering rate, it is clear why inflation is spiraling upward.

Additionally, the National Development and Reform Commission (N.D.R.C.) has expressed great unease with the current levels of inflation. According to Xinhua, "Zhu Zhixin, deputy director of the N.D.R.C., warned that the risks of an overheated economy remained, and preventing excessive rises in consumer prices should be a major macro-economic control priority." Officials in the Ministry of Finance share this view, and have been trying desperately all year to curtail inflation.

Attempted Solutions

The four policy levers at their disposal are: raising the interest rates, raising reserve requirements, issuing government bonds, and easing restrictions on investing abroad. In principle, raising interest rates and reserve requirements will decrease investments, while issuing bonds will soak up excess liquidity and easing restrictions on outbound investing may send the excess liquidity abroad.

The government has already raised interest rates five times this year and has raised reserve requirements eight times. Nonetheless, investment in the first three quarters of the year grew 25.7 percent as banks funded 170,123 new investment projects, 18,151 more than the number of projects that were funded all of last year.

Can Do

The Chinese government can get a handle on inflation in two ways: either by changing the market conditions or by changing the political culture. Unfortunately, due to the current ineffectiveness of monetary policy tools and the irrational exuberance of Chinese investors that are fueling the bubble, there are not many options for a market oriented approach to reining in the bubble. This seems to indicate that the government can either wait for the bubble to burst, or they can precipitate a change in the political culture.

In this situation, I believe that our expectation or vision 2020 would be achieved because comparatively our government, RBI and other institutions are really working hard to streamline the system with the growth rate of market and for curbing inflation. In this quarter inflation in our country was 4% comparatively very lower than china.

sources:

WWW.PINR.COM

CHINESE NBS (National Bureau of Statistics ) Report

SPECTRUM Vs GOVERNMENT IGNORANCE

Today, in most of the countries telecom companies are working on 3G technology, which requires huge spectrum.

3-G technology have various advantages, have a look at these:

• It support great number of voice and data customers than 2G tech.

• Low incremental cost in implementation

• Reduces the high congestion in metros i.e. Mumbai, delhi where subscriber base is increasing leap and bound way.

• Increase in Transmission rate to 384kb/sec for mobile systems and 2 Mb/s for stationary systems.

In our country we are using two different wireless technologies, GSM (Global system for mobile) & CDMA (code division multiple access). There is big internal fight of spectrum demand among GSM as well as CDMA technology telecom service providers.

According to Indian current telecom policy:

GSM operators have been allocated spectrum in the ranges of 890-902.5 MHz paired with 935-947.5 MHz and 902.5-915 MHz paired with 947.5-960 MHz. This gives the GSM operators total of 25+25MHz. CDMA operators have been allocated 824-844 MHz/869-889 MHz 20MHz+20MHz. DOT reasoning was that CDMA operators were more efficient in using the same and hence slightly lesser. Operator who adds more number of subscribers can get more spectrum.

Recently in spectrum war time Indian government provided state-owned Bharat Sanchar Nigam Limited additional spectrum of up to 10 MHz for GSM technology services in over 16 circles even as private competitors have been waiting to be allotted spectrum by the Department of Telecommunications since December 2006. This government move really made private players impatient. Till today, 30 new companies had applied for licenses. God knows when these companies will get license and will join the telecom industry.

Then government's stand and biasness with private telecom operators is like step son.

As per Indian defense sources, they want some time to release the spectrum for DoT due some security reason while here in telecom industry, new subscribers are increasing with 20% which affects the services of these operators..

DoT, TRAI, Operators, Indian government & defense all are disguise and dont know the day when we will be able to 3G technology, no call muffling, no call drops, smooth voice etc.

I have a doubt in this deal too like our well documented and highly ambitious NUKE deal....

Lets see how Telecom companies will handle such situation?????

It's Ringing in Rural India!

On march 16th finally Vodafone and Essar shook hands. £29,350 billion Vodafone, the largest company in terms of revenue in the mobile space, is planning to move in a big way in rural areas of emerging markets such as India. In the new entity Vodafone will have 52% stake, while Essar continues to hold 33%. There were some issues like Vodafone signing a memorandum of understanding (MoU) with rival Bharti-Airtel on sharing infrastructure that was not favored by the Essars which was finally sorted out. Vodafone's India-born CEO Arun Sarin was quoted saying:"Our target is to achieve 20-25 percent market share in the coming years from the current 16-18 percent."

Emphasising Vodafone's focus in rolling networks in rural India, Sarin said: "We are likely to invest several billion dollars in networks in India. There's an unmet need in rural India (for mobile telephony)."

So do you think Vodafone will be successful in its rural foray? To read the whole story click here

Is Indian retail geared up to go full throttle?

First came the supermarkets, then the malls, and the next big thing : emergence of Biyani. So where's Indian retail headed? Do you need some new flavors? Bored of your vanilla? Lets see what are the options. Walmart with Bharati? Tesco with Tata? Burger King with Pantaloon? These were the combos how about some plain flavors. Want Friuli? Puma? Starbucks? Louis Vuitton? Hmmm…. Didn't it satiate your sweet tooth? So what do these mammoth retailers look for before venturing into a new market? Here are some insights:

• Window of opportunity - that is simply the big bang entry at the right time. Indian retail is still in the nascent stage, so opportunities of growth are high. Companies can use this time frame to plan their future strategies. This window is pretty wide in India for retailer to form JVs, M&As and expansion strategies for existing retailers.

References : Business Standard dated 31st July 2007 and A.T. Kearney GRDI 2007 report

To read the full post click here