Thursday, May 28, 2015

Co-operative Farming: Making Funding Viable

India is an Agriculture based country, where 67% population is dependent on agriculture. But the share of agriculture in India's GDP is just 14%. A stark contradiction. This is true as many of these farmers do not own a farm land. There are almost 30% farmers who work as a laborer in the farm land and do not own a farm land. More over, agriculture in India is dependent on rain, many states do not have irrigation facility. Farmer suicide is a common problem. The reason for increasing suicide is more or less attributed to financing. Many states have come up with an option of opening the sector to private sector and many of the states such as Maharashtra, Gujarat, Karnataka, Rajasthan, Tamil Nadu have made changes in the policy to allow Corporate Farming.

Few large Corporate have also acquired land and were planning to start mass farming with other supporting infrastructural facilities. This is a good idea considering the fact that many farmers are only laborers and do not own farming land addition to this, corporate can provide agricultural infrastructure facility of warehouses, cold storage, transportation, silos etc.   Even financial institutions are willing to fund such large projects as there is a less possibility of a default. Banks and other financial institutions when lend funds, secures or at least require some assurance of their funding will be used effectively and will be returned back with interest. Financial institutions worries about return of their funding, and that is the reason why small farmers do not get funding from such financial institutions. Even micro finance institutions stay away from such uncertain sector where major dependence is on whether. The need of the hour suggests that there is need to create a structure under which finances can made available to these small farmers and also the interest of financial institutions needs to be maintained in the business.

Co-operative Farming is the solution. A group of farmers come together create a co-operative society, under which the assets of all member farmers will be collated and against which funding can be made available. Co-operative society's duty is to create required supporting agriculture infrastructure of storage, warehouses, transportation facility. Such infrastructure can be kept as a collateral with financial institutions. Financial institutions can keep a check on such facilities and other activities, time to time. Under this mechanism farmers can get funding for their farming needs and also for setting up supporting infrastructure. Peer pressure can force farmers to pay back the amount received from financial institution.

Co-operative farming is one step towards ensuring funding for small farmers as well as growth of agriculture in the country. With some modification and incentives, innovative farming can be encouraged in such farm lands. 

Sunday, March 15, 2015

(S)Crude Reality

Prices of oil is falling and once it reached one of its lowest in few years. Prices are still falling and expected to go further down beyond $40. Other side the market is also plummeting. Europe is facing its worse problems, China's growth is falling, Russia fuhhhh.... no need to explain. and interesting fact is the country whose economy is dependent on oil is not worried. What is it going on with oil? Is globalization playing a part in all this? The answer to this is YES, globalization is playing a very important role in these events.

Usually, oil companies make a future deal and the derivative market also plays a very important role in deciding prices of oil. This market is based on the demand and supply. But the twist here is, oil trader's  went into a forward contract with a view that the oil prices will remain range bound for some time, the situation arise out of geopolitical situation, the demand for oil has reduced. And a new alternative shell gas had been discovered (this was discovered few years back, but the announcements made the difference) and it was suggested that this will reduce the need for crude oil. The prices start plummeting.

There is another angle to this fall in crude prices is that its demand increased. US is the largest consumer of oil in the world. In fact the crude consumption in the US is double the crude oil consumption of China and India both together. Shell gas was discovered mainly in the US, still the US is accumulating oil more than the earlier. According to the market data provider company Genscape, the US is producing and importing 1 million more barrel of oil everyday and there is a possibility that the storage tanks at Cushing, Oklahoma could be full by mid April, further reducing the demand of oil and bringing down the oil prices.

Now there is a question how all this affects the Global economy. Reduction of oil prices, pinches the oil companies. After certain level, when companies have made purchases at one level, and prices fall further, MTM losses increases. Further, at low prices, refining cost could be more than the oil prices. Once prices fall further, even the transportation cost could not be cover. All these will lead to losses for oil companies and will also impact their other investments in other countries. Market crashes and spiraling the problem.

It is a reality that the Globalization has helped the world to prosper. but it is also true that the problem in one global commodity can impact the world economy badly. Globalization has its advantages as well as its problems. Crude has Screwed  many economies, countries and companies.

Tuesday, November 13, 2012

After a long time I am writing on my blog. This time on a Diwali day, market is gloom Mahurat session ended in red and Economy is in bad state, IIP nos. are disappointing, manufacturing growth is negative and in all this gloom I am again writing here to initiate a discussion to understand what is more important or rather what requires our attention Growth or Inflation.

Government has started taking steps towards the revival but the saying suggest "aag lahgne ke baad khadda nahi khoda jata". The best possible way to bring back the growth is bringing foreign investment in the country. FIIs are that capable of holding the growth but FDI is and will be the main source of the growth. Government has allowed allowed FDI in Multi Brand retail, increased the FDI limit in Single Brand retail and in aviation as well as in Insurance but still the sentiments have not changed. The reason behind this is implementation of these steps taken by the government, even after taking the decision to allow FDI, the RBI has not incorporated this change in their system.

RBI governor is in a dilemma what to prioritize, Growth or Inflation. RBI has given priority to the growth. Interest rates are still high though the RBI has provided liquidity in the system but that is not enough. When the country is facing a threat of credit degradation, they must take step for improving the economy and allow growth.

What is more important here is to provide a one window clearances for such investments in India. FDI limit is different in different sectors but it is important that we provide easy and fast clearances to such investments.

In my views RBI should lower the interest rate in their next review which will allow the industry to borrow and start looking for the growth.

Monday, December 20, 2010

3G Technology : A new price war?

3G Technology has been rolled out by 2 operators in India and there is a possibility of a new price war scenario in this space. Last years when DOCOMO reduced calling rates to 1p/sec a new low pricing war started. Even the established players like Airtel, Vodafone and Idea have slashed their calling rates.

With introduction of 3G the same price war scenario is expected. DOCOMO has rolled out 3G during Diwali and now Airtel is ready, but in all these cases the price war is very unlikely. There are 3 reasons for it.

First reason is 3G license were very costly and plus installation cost were huge. Which will actually restrict telecom operators from reducing their rates.

Second reason is that with the emergence of so many mobile handset companies the price of handsets are decreasing significantly and selling of mobile handsets are increasing but around 70% mobile handsets do not have 3G technology built in. so in a whole group of Mobile holders only 25%-30% are potential customers.

The third reason is that the Government has allocated 3G licenses to 2-3 operators per circle. and the operators who has received 3G licenses are established players in the market. DOCOMO has cash with them to function 3G effectively and they are experienced too. Vodafone though facing legal battle for tax, still can run 3G with foreign money. Airtel too has a good debt payment record and thus their will be less problem for them to raise money and repay it. Reliance is in some pain but the policy of Reliance group is that they do not do charity.

With all these reason I think There is NO possibility of Price war after 3G starts functioning fully.

Saturday, August 21, 2010

A Strange Problem : money saving

India, A country where elders always advise their sons & daughters to save money. And after the recent global meltdown it is quite obvious that its a good habit. Now, even Americans have started saving money but according to economists there it is a matter of concern as in this recovery phase if people won't spend, the recovery would be slow and which may depress many people and which may create another slowdown.

But how Saving can be a problem as it helps one to use his saving in need. Economists are right about the fact that people should spend which helps to rotate economic cycle and helps to create more jobs. But they are missing a point, If people start spending like before it may shorten the economy cycle. and may be again in few years we see another depression. If people save some money, the recovery would be little slow but it will help the economy build it self with greater strength.

I think government can address both this issues. Government should direct all the employers small or big, deposit salaries of all their employees in a bank account. Bank will create savings account for all the employees and they will deduct 10% of their salary and allow them to spend or take credit on remaining 90%. This process will serve 3 purposes, it will help government to track black money, help banks to track defaulters, and help the economy to sustain itself for a longer period.

This is just an opinion. have a thought.

Friday, March 19, 2010

First Hollywood, then Bollywood and now its Sportywood

This word 'wood' is something amazing with whoever it attaches gets famous or we can say it is attached to only those things which are famous and provides entertainment and remarkable. English film industry known as Hollywood, world’s largest movie making industry Indian film industry known as Bollywood, then came the famous Tiger woods who provided good entertainment to media and gave a chance to those alleged mistresses to appear on TV and news is that they all might take part in Fashion show, great. Provides opportunity to its stakeholders to be famous and get entertained.

3 years back when BCCI had started IPL we thought this will be another cricketing affair but today when we check IPL is more than cricket it is mixture of cricket and entertainment. DJs are played at all the match venues. Filmstars buying teams and those who could not afford associating themselves with one or the other team and even the cameraman focuses on filmstars time to time while match is going. This is something incredible.

Now it’s a trend in India that for every other sport event organizers call one or the other filmstars to entertain people. Recently at Commonwealth Boxing championship organizers has arranged music show to entertain viewers.
These systems open a new gate for the entertainers top associate themselves with sports and earn more limelight. Now, with the ongoing IPL we will see more such incidences. Good for viewers that for a ticket for one game they are getting entertained. JAI HO SPORTYWOOD……

Budget 2010: Mind numbers

You all must be surprised that after almost 20 days why am I analyzing and writing about the Union budget, but this budget is so interesting that I can’t resist myself from writing about it. Highlight of budget says that Income tax exemption limit has increased and the tax structure has changed these are positive news. But at the same time FM has increased export duty, hike in Petrol prices and increase in stamp duty on land registration and building construction.

In all if we see there are so many thing which can affect common man in his day to day life such as increase in petrol prices which will indirectly help to take the inflation higher or even excise duty hike will indirectly increase the burden on common man but, there is something positive about this budget and it is that it gives the indication that government is looking for growth. Government has not rolled back any stimulus which is really positive for the industries and one more important thing government has did is that they have increased tax slab. The change in the tax slab is not too high but even a small increase in one’s earning results in more spending and we will see this in near future.

When a person tends to earn X money he used to save X/4 money and when his salary increases and becomes X+5000 he try to spend those money and it helps the economy. Even 100 bucks from an individual helps the economy to pick up and here we are talking about nearly 20% Indians it’s huge.

These all are evident from the fact that Indian stock exchanges are showing positive signs. After these stock exchanges has became the face of the economy we try to convince ourselves that the economy is picking up after every high at stock exchanges and these further improves the sentiments and helps people to append more which results in pick up in economy. With this global condition is showing positive signs which further helped stock exchanges to move further.

In all I can say the Union Budget is not only about numbers but it is more than that. It gives the indication what government priorities are and what they going to do in future.