Something Is Fishy About Bt Brinjal

The GEAC (Genetic Engineering Approval Committee) has lived up to its name and approved India's first genetically-adulterated food crop. Now the question that arises is that "was this approval unanimously passed?"

I sense a "conflict of interest" in this issue. The panel of experts of GEAC who have approved Bt Brinjal has "at least" three members who were actively involved in developing and testing of Bt Brinjal. And who owns Bt Brinjal? Monsanto-Mahyco.

Monsanto India Limited is a subsidiary of the well known multinational in agricultural science products, especially chemicals and pesticides. Monsanto’s work in India began over 50 years ago, soon after independence. Monsanto India has been providing plantation growers with good weed control solutions and new generation herbicides, especially for farmers growing wheat, rice, and soya.

In the run for "commercialization" are we heading for a devastation? Isn't there a better way out to stop the contamination of our nation's fragile food supply? Can we truly discount the possibility of a business house influencing the decisions of a government authority to suit their benefits in this case?

“The World According to Monsanto”, the documentary film has already nailed such lies by pointing out that India’s cotton seed market has been taken over by Monsanto to produce a virtual monopoly. There are also several anecdotes to show that farmers committed suicide in the areas where the company overran traditional agriculture.

FIIs in Indian Capital Market - How Predictable Are They?

I just presented a paper on "Impact of FIIs and DIIs in Dynamism of Indian Capital Market" - co-authored with one of my senior colleague Dr. Rekha - at the 5th National Conference on "Indian Capital Markets - Retrospect and Prospects" held at GJIMT, Mohali.

Dr. Prem Kumar, Director, Ludhiana Stock Exchange and an eminent industry practitioner had asked me "what is my thinking about FIIs' investment flow in Indian capital market in future". While answering his query one thing that kept coming to my mind is that the FIIs, though being a major source of liquidity in the Indian capital market, are basically speculators. Otherwise why would they repatriate their money from an economy which is fundamentally sound - a $1 trillion economy with a steady-state growth of 6.5% (when others were striving hard to show a positive figure).

It is understood that there was a severe liquidity crunch at their home, the Indian stocks were highly over-valued, and we also cannot eliminate the possibility of a subtle pressure from their governments to bring back the money home. But, the investment behaviour of the FIIs in the Indian capital market - especially the equity segment - is crazy. The bull-run in the market post elections results in May 2009 seemed to me a handi-work of the foreigners. Out of the 14 trading days, during which the Sensex shot from12000 pt to 15000 pt, they were net buyers on 10 occasions. But, they immediately offloaded some investments in the months of June and July. What is the justification for this behaviour? Isn't it queer?

Also, the Sensex is too narrow an index to reflect the actual impact. Dr. Prem Kumar suggested broadbasing of the Sensex which is highly solicited. Also, the regulatory framework should ensure that the FIIs stay invested for long-term. The FIIs comprise only about 20% of the total combined turnover of NSE and BSE, yet they are powerful enough to influence the retail investors and dance them to their tunes.

Another Sign of Recovery

The direct tax collection figures can indicate whether an economy is doing well or not. If the economy is passing through a slowdown and there is a contraction in industrial production and corporate earnings then the direct tax collected thereof would also be low. Also, in the event of a economic slowdown (if not recession) even if the direct tax collections, at least, matches with that of the figures prevailing in the good times then it is indeed a sign of recovery.

There were concerns among the policy makers of a lower mop up of direct taxes due to reduced corporate earnings. But, the all India figures for direct tax collection till September 5, totalling Rs. 90,039.7 crore, is actually higher than what it was for the corresponding period last year.

The finance ministry's projection for direct tax collection in the current fiscal year is about Rs. 400,000 crore. The last year's collection was targeted at Rs. 345,000 crore while the actual collection was lower by Rs. 6,000 crore. (Source: ET)

The Saga of Illiquid Stocks in BSE

Ideally a stock is termed as illiquid if its is not actively traded in the market or has been lying dormant for a long time. In the current scenario in Indian stock market, on one hand when we see a marked improvement in investor interest in shares, on the other hand there is a spike in the number of illiquid stocks in the BSE.

The number of listed stocks on BSE is around 7750 while its counterpart NSE has close to 1200 listed stocks. The number of illiquid stocks have risen from 1600 in September 2008 to 1800 in August 2009. On NSE, this number has gone down to 235 from 327 in the same period.

This sudden spurt in the number of illiquid stocks vis-a-vis listed shares does not send a good message about the exchange's business health. It also points out that the difference in listing requirements across exchanges. Is SEBI doing something in this direction to improve turnover and volume? After all a stock if not actively traded for a long time is as good as a privately held company.

SBI Beats Recession

The global financial crisis has done collateral damage to many except few and, State Bank of India (SBI) is one among those few exceptional banking institutions. SBI is India's largest lender and has recorded a growth of 1.5% in its share of deposits (in FY09) from that in the previous fiscal.

The total deposits raised by all commercial banks in India by end March 2009 is worth US$ 818.57 bn out of which the SBI group raised US$ 197.67 bn. In a year when growth was unimaginable SBI group has emerged victorious, despite of the gruelling slowdown.

It's another way to exhibit that the Indian banking system is standing tall among the ruins - not just because of inaction!!

'The Man In The Mirror' Vanished So Unceremoniously

In my schooldays (1983 - 1997) I grew up listening to Western music of a few selected rock n' roll bands and pop singers. Without a grain of doubt I can recall that the first name that flash across my mind when I think of one pop-star is none else but Michael Jackson.

A celebrity's life is not at its pinnacle if it doesn't have enough scandals which give critics their food for thought. Michael Jackson as a celebrity had enough of them. But, to me since my childhood, he has been an angel. His 'Heal The World' was like a hymn to us in school and the most frequently sung opening chorus on our Annual Day. It is the same song which we belted out to win the 2nd prize in an Inter University National Youth Festival.

I never had an inkling of an idea that the 'Man In The Mirror' would vanish away so soon!!

Two Major Moves By LIC And India Post

I am excited about two major moves going to be taken by two different financial services institutions in India. The first move is by Life Insurance Corporation of India (LIC) and the second one is by the Indian Postal Services Department aka India Post.

LIC will be implementing a project called Enterprise Document Management System (EDMS), which they plan to complete by 2011. It will enable LIC to extend 'Anywhere Anytime' service. They have already launched the project in 2007 partnered with Hewlett Packard (HP). It will enable the policy holders or their nominees to pay LIC premium or claim their settlement payment from any location in India. This would indeed make lives of 230 million policy holders across the country much hassle free. Also, the digitization of record of these policy holders will ensure archival of physical records in electronic form and will eliminate risks of loss or damage to physical records due to natural and other disasters.

The second move that I was referring to, by India Post is that they are going to provide on-site ATMs for their customers. To note India Post has 155,000 locations across the country. This would be a massive value-added service to the post-office savings bank account holders. The hours of waiting in long queues at post-offices for withdrawing or depositing money can be cut down substantially. India Post had 228.9 million savings bank accounts with an aggregate outstanding amount in these accounts of US$ 457.89 million (as on March-end 2009).

Is Indian Economy Resilient To A Poor Monsoon?

Delayed monsoon and rising El Niño risks gives me a hint ... “are we going to see once again the market selloff during the drought of 2002?” The water reservoir levels are already low, and this factor coupled with poor monsoon may have adverse effects on farm income, and raise fiscal burdens. We are already halfway through in July and there has been no significant sign of onset of monsoon. My apprehension may turn out to be true depending on the progress in this month.

The year 2009 season has started on a bad note. The overall rainfall for the season until Jun 17 has been 45% below normal, with 28/36 meteorological divisions receiving rainfall below the long-term average. The water levels in reservoirs are at 10% of capacity (vs. norm of 14% for Jun). This is indeed an alarming situation. According to Australia’s Bureau of Meteorology, the signs of a developing El Niño, which usually lead to drought in Asia, have strengthened during the past fortnight. And if their predictions materialize in reality then we are definitely heading towards a crisis situation.

Indian agriculture is no more heavily dependent on monsoon. There has been much progress in the irrigation facility, and also the share of agriculture in GDP has declined. The share of the monsoon-dependent kharif crop has declined. Since 1987, agri output fell in only 5/8 years when monsoon rainfall was +5% below average. Also, the area under irrigation (now 43%) has been rising steadily, albeit gradually. This is a positive indication.

With agriculture now accounting for only 18% of GDP (versus 33% even in the early 1990s), the Indian economy is far more resilient to a poor monsoon season. However, a poor crop will deflate the current buoyancy in farm incomes. At a time of +10% fiscal deficits, there is little room for further fiscal support.

Investor Hostility and the Communist Governed States in India

In one of my earlier posts “Brand Bengal: It’s High Time to Rethink”, dated September 06, 2008 I had discussed the current state of investor hostility in the Communist regime in West Bengal. After the Dubai based Smart City decided to quit its ventures to set up self-sustained townships for information technology and knowledge-based industries near Kochi, Kerala I am compelled to think ‘is investor hostility plaguing communist governed states?’

The proposed Smart City was likely to generate direct employment for 80,000 people and provide indirect employment to another 20,000 people. This is only the employment generation aspect, besides this there are other aspects like revenue generation for the state in the form of taxes, and economic growth of the state which gets adversely affected. Added to this will be a domino effect wherein other investors restrain themselves from investing in projects in Kerala.

When the Tatas pulled out of its Nano project from Singur, West Bengal the immediate loss was over Rs. 5,000 crore and the potential loss was a whopping Rs. 80,000 crores. Smart City, Dubai had urged the Kerala state government to commit at least 12% free land out of the total 346 acres of land. The Kerala government still does not have a clear-cut answer to this issue and have dilly-dallied things.

Kerala and West Bengal are two states where the communists have ruled for long tenures and had once built a strong political base. In West Bengal the current public choice is against the red-brigade, they have been badly beaten in the Panchayat (local self-governments) elections followed by the Parliament elections. The story in Kerala is also similar, and if the investor hostility continues then the communist governments in these two states would have to pack their bags soon.

Slumdogs Are No Underdogs

The laurels that A. R. Rehman, Gulzar & Resul Pookutty brought to India at the centrestage of the Academy Awards function have enthralled every conscious Indian. We may have had loads of criticism against the portrayal of India's poverty and wretched condition of life of its slum-dwellers in this movie, but we cannot detach ourselves from dousing in the celebration for the victors who are very much Indian.

This is not the end of the story; India have once again proven her worth in another field - banking. Our very own State Bank of India (fondly known as SBI) have superseded Citigroup's market capitalisation to be among the largest banks in the world. The market capitalisation of SBI on Friday closed at Rs. 66,285 crore. This is around 25% more than the closing market capitalisation of Citigroup on the NYSE on Friday. The market capitalisation of Citigroup was Rs. 52,931 crore.

Though Citigroup's revenue in the last four quarters is almost eleven times more than the revenue earned by SBI, its profits are nowhere near the figures earned by SBI. While Citigroup has suffered losses of Rs. 83,474 crore in the last four quarters, SBI has booked profits of Rs. 8,262 crore. Martin Hutchinson, an economic commentator, recently put out a list on the status of the 12 largest banks in the US. He categorised Citi as a zombie bank. “Citi has been a serial flirter with bankruptcy over the past 30 years and remains a basket case,” he wrote.

Amazing Facts About The Big 4

The Big 5 (Sorry 4) accounting firms have been on the top of every finance professional's mind for some reason or the other. There are a couple of true but amazing facts about them, not known to many. Known as the Big 4 accounting firms they are:

(Arthur Anderson which made it the Big 5 is now in archives).

Of course they set the global standards for transparency in business. But who is their owner? Shhhhh ... It is a well-guarded secret. Even though present in over 120 countries, for obvious reasons each one of them is headquartered in a tax haven. If you enquire any details about these firms in a tax haven like Panama, you may end up spending the next 2 years in jail. Understand how secret the ownership is!

They have paid billions of dollars as fines in the U.S alone to the SEC. In U.K they are being subject to investigations under the Fair Trade Practices Act. They are the subject of cartoons in the western press and lampooned by the media.

They have been found innovative in:

• Booking bogus sales
• Capitalizing revenue expenses
• Insider trading & related unethical practices
• Not accounting sales returns
• Inadequate disclosure of off-balance sheet items
• Assisting the management in asset stripping
• Failing to record liabilities or suppress liabilities

Well the list on their accounting "innovation" could go on ... That is if you do not reckon shredding of documents as an expert service. It is these 'credible' professional outfits that are in India, advising the Government of India on:

• Speed and directions of reforms
• Advisor to the planning commission
• Providing expertise to the disinvestment process
• Privatization and Globalization
• Policies for inviting FDI

So if you want to innovate your accounts hire these "experts", they would do a good job for you and of course make a fortune in the bargain. If you are corporate manager, you may have personally felt bombarded, sullied, trampled over, bullied and even decried at your own office by representatives of the Big 4. Simply because they are from the Big 4. Remember, they charge you and you pay even for the time spent on abusing you!

If you are a decision maker you might have noticed subtle hints to influence your decisions. Hiring the kith and kin of the decision makers is one of their tried and trusted methods. They are experts in the art of making friends and influencing people. They are too good at Dollar Diplomacy!

Their ownership is unknown, their competency is suspect and their advice bogus. Then, why do the financial institutions, banks and the corporates in India keep them as auditors, advisors or consultants? Why are they allowed to operate in India, and hired and respected by the Government of India? WHY?

Simply because we are not aware of these firms and therefore we are silent. The need of the hour is to create public awareness.

Silver Tsunami

On February 12, 2008, America's first baby boomer, Kathleen Casey-Kirschling, received her first Social Security payment. That was just the beginning. Over the next 20 years, 80 million boomers (those born between 1946 and 1964) will begin collecting Social Security. That's an average of more than 10,000 per day. The wave of retiring boomers has been dubbed the "silver tsunami".

When World War II ended, there were 44 people paying into Social Security for every retiree. Now only three people pay in, for each person taking out, and it could be bankrupt by the year 2043. So, if Social Security doesn't benefit from boomers retiring, who does?

Courtesy: Will Ashworth

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