Healthcare cost: How much is too much?

My uncle, after undergoing a successful removal of tumor a few years ago, was recently diagnosed with abnormal growth of cancerous cells. It was a case of metastasis i.e. spread of a cancer from one organ or part to another non-adjacent organ or part. Thankfully the disease was manageable due to timely detection and availability of a suitable drug. As we move ahead I must clarify that in this blog, I am not focusing on the disease or its treatment rather the focus would be the cost of availing such healthcare services. Before I decided to write this blog post, I had a lengthy and animated discussion with one of my friend who has been working in the pharmaceutical industry for quite a few years. 

Nepal: In turmoil or in transition?

During the early part of the last month, I happened to visit Kathmandu for one of my consulting assignments. Given that Kathmandu has been one of the major tourist destinations and there has been some mystery attached with the Himalayan Kingdom, I was excited about this trip. As it was more than a week long trip, my stay over there did help me experience different facets of Nepal.

Mr. Prime Minister, I will try my level best

A couple of hours ago, I happened to watch our Prime Minister, Dr. Manmohan Singh, address the nation. Given the spate of criticism faced by the government in the wake of corruptions and controversial reforms, the public at large felt an address to the nation was long due. Even his self-proclaimed “khamoshi” (silence) that was meant to save the “aabroo” (dignity) of the corruption laden nexus of corporates and politicians, wasn’t successful at all.

These are some of my observations from the PM’s address to the nation. Before you proceed, I would request you to either go through the text of the speech or the video so that we can have a more meaningful discussion.

Rupee Depreciation: There are lessons to be learnt

Rupee, our very own Indian currency, has witnessed a literal free fall especially in the past few weeks. The rupee slid 15.8% in 2011 and by 0.2% in the last week of 2011 to 53.065 per dollar in Mumbai, according to data compiled by Bloomberg. According to reports, this currency weakened the most in Asia this year. So, what has led to such weakening or should I say, depreciation of the rupee and what does it entail for the Indian economy? Let’s explore this interesting and crucial topic that has the potential to shape the future of Indian economy. After all, an appreciating currency makes a country's exports more expensive and imports cheaper in foreign markets whereas the reverse makes a country's exports cheaper i.e. more attractive and its imports more expensive in foreign markets. 

FDI in retail: "Modern" solutions to "old" problems?

The government of India is patting its back as by the passing of the much awaited "FDI in multi-brand retail", some experts believe that the reforms are back on track. In this blog, I don’t intend to discuss the criticality of the reform rather my focus will be on the efficacy of this reform. With the issue increasingly being politicized across the nation, let’s try to see whether this reform really aims at solving issues esp. inflation, which a common man faces. Will the benefits percolate to aam aadmi or will, once again, the crème-de-la-crème in the metros only share the spoils?

Interest rate hikes: Has the time to apply brakes arrived?

The RBI interest rate policies despite evincing lots of interest have become predictable off-late. Given the fact that the last 13 revisions have resulted in rate hikes, there is an understandable gloom associated with it. Our personal loans are getting costlier, buying your dream home isn’t easy, budding entrepreneurs have seen the cost of capital head north etc. Before we discuss further, let’s first try to understand the rationale behind these rate hikes by RBI. 

The policy being referred to is “Monetary policy” by which the monetary authority of a country like RBI, controls the supply of money by controlling interest rates; monetary base and reserve requirements. The policies are designed keeping in mind, the rate of economic growth, inflation, unemployment or exchange rate. The current RBI policy also referred to as contractionary policies, seeks to address the high inflation levels in India by suppressing demand. The rationale is that higher interest rates would lead to less borrowing thereby reduced investments and demand for capital goods. In addition, higher interest rates will also lead to people saving more thereby reducing consumption i.e. demand.  

Seems logical and sound, isn’t it? It is, but empirically it has been established that monetary policies are effective in targeting price stability, exchange stability and financial stability in short term or at best medium term. The Reserve Bank has so far, hiked its key policy rates 13 times, totaling 350 basis points since March 2010 i.e. the hike has been continuing for more than 18 months.  

Double Dip: The likely impacts on India

In one of my previous blogs I wrote about why double dip was a possibility in the US? Now after the S&P downgrade of the US debt, it seems that the sentiments have really turned for the worse though fundamentally things haven’t changed a great deal. But what if the double dip materializes and what lies in store for India if US is engulfed by the economic crisis? Let’s discuss them. 

The US Double Dip: It could well be a reality

Initially the experts predicted a V shaped recovery i.e. a fast recovery for the US but then shifted to the left in the alphabetical order i.e. U, a slower path to recovery, but the existing scenario might push them further to the right i.e. to W or double dip. A look at the common economic indicators like unemployment rate, growth rate, rate of inflation or interest rate etc. would tell us that the future is murky. Add to that the increasing clout of countries like China or should we say decreasing impact of US on the global setup is only worsening the cause. The inability of the US to force appreciation of Yuan is a case in point. The usual backers of US like UK, France, Japan are themselves deep into crisis so no help can be expected from that quarter. The world economy discussing “decoupling” shows that the perception is that the US is lonely as well as depleted in its battle with recession.

QE II and the recovery story: Is it time for austerity?

(The article was adjudged the best entry at Consilium – The Policy Design Competition at IIM Lucknow)

Quantitative Easing II better known as QE II has been globally the most  discussed phenomenon in the recent times. Through this mechanism the US Federal Reserve will buyback 600 bn US$ worth  of bonds, at about 75 bn US$ a month, and infuse newly created money in the system. The buyback follows the QE I that saw an infusion of 2 trn US$.

The step can lead to lowering of interest rates or yields in the US thus incentivizing investors to look for greener pastures abroad that provided greater returns. Considering the deflationary concerns in the US and the unusually high unemployment rate, “doing nothing” was not an option for the regulators. With Chinese not allowing Yuan to appreciate to the levels acceptable to the US, Fed through QE has taken it upon itself to undo the “trade imbalance”.  QE through lowering of interest rates aims at spurring demand as well as consumption. This will generate jobs as well as lead to appreciation of asset prices which have touched new lows thus leading to foreclosures and defaults. As far as global economy is concerned, even they can benefit through FII inflows.

Bihar: The road-map to prosperity

For the past few weeks, I have been going through various panel discussions, books, blogs & news articles, both national and international that had some relevance or relation to Bihar. Through this blog dedicated to Bihar, my focus will be on laying out a roadmap for a prosperous Bihar. I will include the findings from the above exercises as well as inputs from discussions that I had with my Bihari as well as non-Bihari friends. Let us now start our expedition.

The Decoupling Theory

One term that has been doing the round nowadays on the web, on biz news channels or newspapers is “Decoupling”. The decoupling theory holds that Emerging economies have broadened and deepened to the point that they no longer depend on the United States or Europe for growth. Emerging markets (EMs) are nations with social or business activity in the process of rapid growth and industrialization. So let’s start our exploration of the decoupling theory (DT) now.

Decoupling as we all know is separating or detaching. But what’s the reason that we hear so much about DT? The two likely reasons are shaky recovery of the developed economies with V shaped likely to make way for a U or even worse W shaped recovery and the robust performances of the emerging economies like China & India.  So what does DT entail for the world economy? One, it signifies the growing strength of the developing countries as well as weaning strength of the countries like US & UK. Add to that it also tells that emerging countries are gaining self sufficiency i.e. consuming what they are producing within themselves.

The Past, The Present & The Future of Asia.

We all love keenly contested battles. Isn’t it? Such contests can take place on the sports ground, in the academic setup, on the battlefield etc. The one such battle that I am going to talk about, is taking place on the global scale. It’s the battle to become the next economic superpower of Asia. In this blog I’ll discuss the three countries that look set to stake their claim for the Numero Uno tag. The great thing about this contest is that we could have three different leaders at three commonly classified points of time i.e. the Past, the Present & the future. So, let me break the suspense on the trinity (if there was ever one). They are Japan, China & India. Let’s us analyze their strengths, weaknesses and the possible road ahead.

Base Rate System : A change for the real ?

(My heartfelt thanks to Mr. G. C. Nath, Senior V.P., CCIL for his invaluable insights on this topic)

There hardly is an adult nowadays who hasn't felt the need or has gone ahead to avail a loan. You can blame it on the increasing consumerism or the inflationary forces. Anyways, I am not going to discuss the rate of inflation or conspicuous consumption rather I will focus on the rate of interest on these loans. These rates were affected by a major change that took place on the 1st of July, 2010. This happening was; "coming into effect of Base Rate System".This blog is on Base Rate System and its likely impacts. 

Family creates value

The idea of writing this blog came to my mind when I was in Ahmadabad for my summer internship.Apart from the Gujarati splendor what I witnessed was a quite different type of business lingo. The bosses and the sirs were replaced by bhaiyaa, bhai or even pappa. Even though the firm that I worked for happened to be a B-School but things were no different over there either. In fact this lingo was more common when the discussion was among the higher-ups in the firm.So what was so different about the businesses in Ahmadabad or rather the Gujarati style of functioning? It was the style or type of ownership. They were the Family owned businesses (FoB).

Rail Budget 2010

(This article was originally written for the CNN-IBN blog)

So, the first Railway Budget of the new decade is now out of the bag. It won’t be wrong to say that it is on expected lines considering the track record of the incumbent Railway Minister, Ms Mamta Banerjee i.e. High on populism.

The good news for the commuters is that the train fares have not been raised. Seven years without any increase in fare, must be some sort of a record in an inflation ridden world. The transportation of essential commodities like food grains, kerosene and fertilisers will attract lower freight rates. Commendable effort provided the benefits are passed onto the consumers.

Deregulation of Oil Prices in India

Raghu is a clerk by profession who lives with his wife and two daughters. He uses the city bus services to commute daily to his office. Though not highly educated, he loves going through the newspapers to keep him abreast of the latest happenings. He is especially fascinated by the news related to the ‘aam aadmi’ (a typical middle class person; the new rage amongst the TV channels and politicians). He was happy that the government was making special efforts to keep oil prices in check so that people like him could benefit. The efforts of the central government had helped him keep his household expense viz. LPG cylinder, bus tickets etc in check. 

But he was surprised how his neighbour Rajesh, a businessman, could afford the latest gas guzzling cars when the government was finding it so tough to keep the fuel prices in check. In order to satisfy this curiosity, he asked this question to Rajesh. Rajesh replied, “In the existing scenario when the international price of crude oil is constantly threatening the 100$ (per barrel) mark and in India you could still afford it for Rs 50 per litre, why not make the most of it?” After replying, Rajesh sped past him in his latest SUV. Raghu was puzzled. Was the government step really pro-aam aadmi or was it bad policy? For the past few days the news related to a panel headed by a gentleman named Kirit Parikh has caught his attention as it is related to “deregulation” of oil prices in India. He wonders what this topic is all about and how does it affect an average Indian? Let’s try to answer his question.

Is the Government ready to roll out the GST?

(This article was published in the 7th Dec, 2009 edition of the Financial Express. The Link for the same can be found here.)

Reaching a consensus between the Centre and states on the issue is the biggest stumbling block

The goods & services tax (GST) is part of the proposed tax reforms aimed at evolving an efficient and harmonised consumption tax system in the country. Presently, there are parallel systems of indirect taxation at the central and state levels. The world over, goods & services attract the tax. But what is the key to the introduction of GST? The first step is to progressively harmonise the service tax rate and the Cenvat rate. The central government plans to roll out GST by April 2010. Therefore, the question is, are we ready to do it?