Archive for July 1st, 2015

Understanding the central bank balance sheet – A handbook..

July 1, 2015

Garreth Rule of BoE has a nice detailed article on this.

The central bank’s balance sheet plays a critical role in the functioning of the economy. The main liabilities of the central bank (banknotes and commercial bank reserves) form the ultimate means of settlement for all transactions in the economy. Despite this critical role the central bank’s balance sheet remains an arcane concept to many observers. This handbook provides a useful framework for understanding the necessary details.

The handbook has excellent graphs and pictures to explain how central banks make changes in balance sheets.

This is another unfortunate development in eco teaching. There should be far more focus on reading balance sheets than just reading papers. Mon policy teaching barely covers balance sheets whereas they are central to understanding central banks. By looking at the balance sheet, one can figure out most of central bank operations without getting into complex math.

Really useful stuff..

How about outsourcing Indian eco policy to Moody’s (and likes)?

July 1, 2015

One is fed up with this kind of continuous eco(non)-sense dished in media. Just a month ago, as media celebrated one year of Indian government, they went over the top saying how much the govt has done. And now within a month they say we are disappointed with the pace of reforms.


This October, Get Ready to Welcome 175 Kms of Railway Tracks Free of Human Waste

July 1, 2015

It is recommended that one subscribes to daily news from this site – They point to some good positive news from things that matter and not the artificial news we get from other sources.

Today’s edition has this news on cleanliness in train tracks and a stench free journey:

This October, it will be a year since the Swachh Bharat Abhiyaan was first launched by Prime Minister Narendra Modi. And as an anniversary gift, Indian Railways has come in with some great news.On the mission’s first anniversary, railway tracks, over a stretch of 175 km, will finally be free of human waste. This will be made possible with the installation of bio toilets on all trains running on two routes.

Thus, from October 2nd 2015, these two routes will become “zero toilet discharge” routes:

1. The 141 km Kanalus – Dwarka-Okha section
2. The 34 km Porbunder – Wansjalya section

This is a part of an endeavour undertaken by Indian Railways to make 375 kilometres of rail track free of all human waste discharge from train toilets, in the current fiscal year.

By March 2015, the railway department had already installed more than 17,000 bio toilets in trains, and is targeting more before the end of this year. This will mean that each one of about 40 trains which currently ply on the 375 km route will have bio toilets in their coaches. With the help of these toilets, waste is directly digested by specially developed bacteria which then leads to only a small amount of non-corrosive neutral water being discharged on the tracks in the end. The installation cost for four such toilets comes to around 3 lakh rupees and about 6,000 coaches are all equipped with these.

The current discharge of waste directly on the tracks leads to corrosion which in turn leads to crores being spent on replacement. With the requirements of our trains in focus, these green toilets have been designed by Railways along with the Defence Research and Development Organisation (DRDO).

Thus, we can expect the impossible-to-stand stench and the filth to be gone from at least a stretch of the 65,000 km-long tracks across the country. An important next step will be a responsible and mature utilisation of these toilets. When a cleaner toilet option in trains is finally being provided, it’s best if we grab it in a way that the process can be sustained for long.

Swachch Bharat or Clean India is easily the most important program launched by the new govt. Even for slogan sake, it has atleast led to some awareness and push for cleaning India. A clean India will kill many birds with a single stone. But then it has to move beyond slogan and generate some serious action on this front.

Now, this train program did not come in one day. It was already implemented in some select trains on an experimental basis. These things happen overtime in a continuous fashion. So it will be wrong to give credit just to this govt but to railways for trying given the various constraints it has. Now, this has to be implemented across the train routes.


Bombay HC allows Nestle to export Maggi noodles, India ban continues!!

July 1, 2015

This is an ironical news. India allows Nestle to export Maggi noodles, but ban on India remains.

In some relief to the Indian subsidiary of Nestlé, the world’s largest food maker, the high court here has allowed it to export Maggi noodles, even as a ban on selling the item within the country continues. A Bench comprising judges V M Ranade and B P Colabawalla said the company was free to export the noodles, subject to compliance with rules and health and food safety standards. The court will take up the matter again on July 14.

The relief for Nestlé India comes after the country’s apex food regulator, the Food Safety and Standards Authority of India (FSSAI), said it had no objection to the company selling the product abroad, though it stood by its decision to ban nine variants of the instant noodles in India, an order it had passed on June 5. The order had also sought Nestlé withdraw all variants of Maggi from the marketplace. This led to the largest product recall in India.

So are we made to believe that food quality standards are more stringent in India than other countries! This is obviously not true.  As Raamdeo Agarawal of Motilal Oswal says that Nestle’s reputation is 100 times more than India:

In an interview with ET Now, Raamdeo Agrawal, Joint MD, MoFSL, shares his views on Nestle. Excerpts:

ET Now: You mentioned Nestle in your book as well as one of those stocks you have studied. Do you have the courage to buy Maggi now, considering the kind of trouble it is in the country? Is this the time to be patient with the stock and say I believe in the valuations?

Raamdeo Agrawal: Patience and aggression to buy more.
ET Now: Really? Buy more Nestle at this point?
Raamdeo Agrawal: Yes. At the right price I will buy double.
ET Now: So you are not worried at all?
Raamdeo Agrawal: Not at all. Nestle’s reputation, worldwide, is at least 100 times more than government of India itself. Nestle bonds in Europe trade at negative yield. Government of India bonds trade at 7-8% yield. This is the kind of reputational gap. Today, Nestle is in trouble but it is still making about Rs 1,000 crore. Last year, they made Rs 1,000 crore profit. 10 years on, will it make 5000 crore or 500 crore profit? This is the question to be answered. If the answer to your question is that it will make 500 crore profit after 10 years; obviously, this is not the stock to be in. If they are going to make 5,000 crore profit in 10 years, then you should welcome the downturn in the stock to load up enough.

Hmm.. Am sure that if the Nestle crisis had erupted in US/Europe, Nestle yields would have risen sharply and India Govt would have higher reputation. The crisis in India has barely affected Nestle’s position worldwide. Another reason for low Nestle yield is monetary policy which has pushed yields to zero/negative levels. So much so for India;s emergence as a world economic power..

I don’t know but somehow I have still not got the Maggi crisis right. It perhaps came at a right time as India was increasingly tilting towards processed/artificial foods whereas other countries were looking at ways to rid of such foods. So, we in India needed to be warned against unhealthy practices. But for the crisis to take this dimension is quite amazing really given how lax our food standards are in India..

Lessons from the Indian currency defence of 2013…

July 1, 2015

Prof. Ajay Shah reviews the various measures taken in India’s currency defence of 2013. He looks at the impact of these measures on various markets and says it only led to more volatility.


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