2nd March

No room for adventurism

The article attempts to analyze the present economic situation India is facing and concludes that with respect to all the measures government has already taken, it leaves no space for any further adventurism since it will lead to serious consequences.

The third quarter GDP growth of 5.3% has compelled govt to revise its estimates for not only the yearly projection of 7.1% but also for the year 2009-10. The main reason for the slowdown has been 2.2% contraction in agriculture, forestry and fishery which is a serious concern since it reflects the rural consumption, a major driver of growth in downturn. A part of the reason his higher base for last year – 6.9% growth last fiscal. Besides that, except for rice, there has been a decrease in production of all kharif crops. Apart from govt consumption, impact of 6th pay commission and 6% DA to all govt employees, there is essentially no further booster to economy. What’s important here to learn that our illusion that during the boom years, we remained in the illusion that our 9% growth rate was domestic consumption driven which was actually foreign liquidity driven. Now, govt has to make sure that it doesn’t stretch itself too far in providing fiscal incentives since some of the steps might not be reversible when the good times return. 

Currently the fixed costs such as interest payments, revenue expenditure on defense, pensions and subsidies constitute 70% of our non-debt receipts. Thus there is hardly any room for further adventurism left for govt. 

A bold move

The article talks about the benefits of recent merger between RIL and RPL calling it a bold move although markets have rejected it (BSE down 3.2% while RIL 3.15% and RPL 1.38%).

The merger is set to create truly global-scale operations. The benefits would come from the synergies, tax savings and rev up the valuations. Besides that, currently, the integrated oil and gas majors command a higher value by reducing the earning volatility with operational presence across the value chain, both upstream and downstream. For shareholders of both the companies there are clear benefits. With each RIL shareholder getting the ratio of 1:16 shares of RPL, for RPL shareholders also the merger is beneficial since the weak demand for oil products makes RPL less profitable venture for the near future. Post-merger RIL would be among 50 most profitable corporations in the world, top 10 private refining majors and high in the list of independent upstream oil companies.

For future, what RIL needs to do is to set its marketing focus in the downstream oil products. Also research-intensive products in oil and petrochemicals would bring in good dividends. Solid revenue growth and high value creation should be the future of this merger.

Mutiny in Bangladesh

The article talks about the way Bangladesh has evolved so far and suspects a greater conspiracy to the recent mutiny which in a way was strange since BDR is one of the oldest and the most experienced paramilitary forces in the region.

The recent mutiny is no less then a political fiction thriller. Bangladesh has one of the most vibrant histories in the region. Liberated in 1971 from Pakistan, went through numerous assassinations, coups and mutinies, lost democracy on the way, regained it back last year and again it finds itself in crisis. The recent mutiny is even more tragic since BDR has been one of the oldest and most experienced force, which has participated in most of the wars in the region and still it invited mutiny for the reason beyond comprehension. 

Is it just the pay package and working under bossy army officers or some greater conspiracy to scuttle a secular, India friendly, probe-1971-collaborators line of thinking regime? But are these subjects so influential to lead these army men to mutiny? It’s becoming more and more interesting.