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

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?.

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

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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Everything evolves, so is ERP

Recently, I received a forward note from my friend about an article "The End of ERP", however could not agree with key point mentioned in the article and hence thought of sharing my view points.

Any high tech product, whether hardware or software evolves over period of time, one would normally end up getting a better product by features and easier in use over certain period of time. Now to the topic of discussion, ERP had evolved over period of time. It was started as MRP(Manufacturing industry) and mainly in a mainframe environment, in early 90's with advent of client / server technology it evolved into ERP with finance based modules introduced. Still remember the days, in late 90's when ERP did not have modules to support marketing or sale activity and generally it started, with the business flow from order processing.

With Internet boom starting from year 2000 onwards, saw ERP vendors venturing into 3 tier architecture of browser, middle tier and DB tier. Naturally, when field force like sales and service can access ERP system from anywhere the ERP module footprint got extended into sales, service, CRM etc. All this time, the server and  application had to be procured and owned. In the last few years, a new paradigm is getting evolved in the form of cloud or subscription based computing model, where the company need not procure IT asset. This concept is catching up slowly, but may not be without challenges particularly if data is related to financial / statutory requirement. Some countries, may not allow a company financial transaction data to be stored in a different country due to statutory requirement.

These days with even business intelligence part being integrated with ERP, the ERP module footprint getting wider across industries with standard industry specific modules built and put to use. Hence, one cannot compare features across modules of ERP with specific functionality of sales and further ERP module footprints and features will evolve over period of time.

The cloud computing or subscription based model is more to do with where and how data is stored and accessed or its about the ownership of IT infrastructure. Hence, I feel this yard stick cannot be used to compare the specific products or its features.

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Indian Cricket team - Strategic management needed #$#!!!

With Indian team loosing out against Australia without any fight, a weird thought came to my mind. Is it weird?!!!.. may not be,......... might be a strategic management, the need of the hour ... .. : ).

 

If corporates can has strategy to sell their products and so is the army having strategy  to win wars, then why not the Indian cricket board  have strategy. Here goes the strategic suggestion...

The cricket board should have two teams,

Team A : All stalwart players, these players will play only at home series and they would be in position to win all matches including ODI world cups, T20, 10's , test etc. Apart from home series matches with wins, they can concentrate on advertisement, sponsorship and earn for themself and board.

Team B : All the rookie players, these players would only play at abroad series. In this case, there is nothing to loose and even if they loose one can always says the team is without experienced player and if they win the series, the best performers can be graduated to A team.

Won't this be win - win strategy plan #%???!!. :)

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Good bye, 2011... Welcome 2012.

As 2011 come to a close and a new year begins, wishing you all a very happy and prosperous new year!

Looking back at 2011 from economic perspective, we have seen reports, that the world had not come out fully from recession and some even predicting a double dip recession. 'Gold' has out shined all other investments in the year. From about 1900 INR (22 carat) towards close of 2010, it had reached to about 2600 INR, a whopping 40% return on investment.

Had predicted and written in my blog in Sep 2010, that gold will continue to raise and the same happened. However, along with gold, the USD appreciated against INR towards close of 2010, the likely reason provided by experts is the slowing down of Indian economy in the last quarter of 2011. In spite of repeated raise in the interest rate by RBI, the inflation refused to come down, which can also be the possible cause of slowdown in the economy.

While developed countries real estate sector woes continued, I would say, India real estate market was able to sustain in 2011. However, I read an article about the challenges in Indian real estate sector and hence one need to see, which way it would go in 2012.

Indian automotive sector which had  been reporting increase in sales even during 2008-09 recession period had for the first time  reported a dip in the sales towards in last couple of months of 2011. So, would this be the indicator for Indian economy in 2012?.

Lastly, the Indian IT sector had been able to sustain its growth, though it did not have an exponential growth. The operating model might see a change in coming years. To me, the word onsite, offshore or near shore might disappear in few years time and the focus would be towards ' Cloud' computing.

Well, time is the answer..... For the moment lets be optimistic, welcome year 2012, which is my 4th year in blogging as well ....

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