Oh!..Not again... Petrol price increase May 2012.

Friday, May 25, 2012

My previous post was about depreciation of INR against USD and pointed out that petroleum product prices are bound to increase if depreciation continues,
While posting, my previous post, one of the factor, which I thought would be in our favour was that, crude oil price per barrel was still hovering around 100 USD and not at its worst. At one point of time in 2008, the crude oil per barrel was around 147 USD. Hence, I thought it may take some more time before any kind of increase.

  Hmm… however was shocked and surprised that only petrol price was increased by 7.50 INR per litre. Interestingly, petrol is environmental friendly when compared to diesel.

Made an attempt to compare & compute estimated prices, by considering the international prices of barrel of crude oil in year 2008 and 2012, the actual exchange rate and inflation.

Going by my calculation, it seems like we are being over charged by about 14 Rs.

It was said the government has decentralized and do not control oil company and its prices. Hence, are we being overcharged, with profit motive?.

There could be another debate, that Indian government is looking for ways to decrease or remove the subsidy over period of time and subsidy is being reduced further now. But, then how are our neighbors like Pakistan and Srilanka are in position to provide petroleum product price at better rate compared to India and still survive !!?!!. The point to note here, is that both Pakistan and Srilankan currency (Rupee) is weeker when converted to Indian Rupee.

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Depreciating INR… Gainers & Losers

Friday, May 18, 2012

With Indian rupee depreciating, it grim picture painted out on our economy. The instability is attributed to many factors including Euro crisis. Since 2006 economies around world is in turmoil, if one country attempts to come out, it impacts directly or indirectly the other country. It started of with US mortgage crisis in 2006/07, which was followed by Lehman brothers and other financial institution collapse in 2008, then came crash of stock markets, Euro crisis which was followed by appreciation of gold. The news coming out these days is quite conflicting, on one month one would see economic recovery being projected and the following month, one would see depressing news about economy.  
 What does rupee depreciation mean to Indian economy and who could be the probable Gainers or Losers?.

The Gainers: 

Exporters, particularly who are using the resource and raw materials by paying them in INR and getting return in USD. Companies earning in USD and reporting and exchanging to INR would stand to gain 

Indian Origin people sending foreign currency to India and converting into INR and making permanent investment in India. The reason being they would be getting more INR for lesser amount of USD. A 100 USD with exchange rate of 56.5 will fetch more INR compared to 100 USD with exchange rate of 40 INR.

 The Losers: 

Importers, more particularly India Government importing large volume of oil are bound to suffer. Normally such increase in Oil cost is passed on to the customer and naturally people of India would have to burn the money more. This would eventually continue spiraling of inflation, which is already high. 

Foreign equity investors who are looking for gains might lose, if attempt to pull out money. They now have to think or hold it for some time. The reason being, assume a foreign investor had invested in company ‘X’ in India when exchange rate was INR 45.00 (1 USD) and if he had invested USD 100, would exchanged to INR 4500 and invested the same. If there is a lock in period of 3 years and due to company profits the amount becomes INR 5700 in 3 years time, which is around 10% in ROI per year. However if the Foreign equity investor attempts to repatriate the investment back, due to prevailing exchange rate of 57 INR per dollar, the FI would get only 100 USD, in spite of money being invested for 3 years. 

In short term for India, it’s good that money does not flow out of India remain within India, however, in long run if INR is volatile and continue to depreciate the foreign investor would lose interest in Indian market.

Hence naturally, there is more to lose as for as India is concerned and lets hope INR bounces back in exchange rate.

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Why rent is better deal than mortgage?.

Saturday, May 12, 2012

Recently,read this article on "mortgage loan" and felt worth sharing.

 Though the article had been written with US market in mind, the points mentioned would very well be applicable for Indians as well. On top of this, Indian system is suppose to have additional drawbacks,

 Indian interest rate is almost twice when compared to US, which mean higher out go of cash towards interest component in earlier years. Another point is that, one who invest money in mortgage, would have invested all his earning and he has to keep paying the interest component for the first few years. After few years, if one is able to make saving or his income increases and decides to pay back or part pay the home loan, its going to only reduce the principal amount for which the interest component is already paid during earlier years of loan.

 Hence, the real benefit is for the mortgage company or financier.

Finally, the cost of real estate in India seems to much higher than developed economies. An article related to " India property bubble".

Is worth to think through and decide before investing. 

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Yours Spiritually

Sunday, May 6, 2012

Hinduism is one of the oldest religion in the world. Recently, started exploring  'Tirumantiram' by Tirumular written in Tamil. One of verse, I found  interesting at the start, which is very true as how any one get attracted to materialistic world,

    Marathai Maraithathu mamatha yanai
    marathin marainthathu mamatha yanai
    parathai maraithathu parmutharputham
    parathin marainthathu paramutharputhame.

A child looks at a toy elephant carved from wood. It sees only elephant and is not aware of the wood. A carpenter, on the other hand, looks at the quality of the wood and is not bothered about the carved creation. Like a child, we might be ignorant and aware only about outside attraction and materialistic needs and not aware of the lord who has manisfested the world. A saint or jnani on the other hand, sees only God in everything living or non living. He is not aware of the material world as we see it.

Hmmm... seems very true to me...

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