niravisms

Economic Indicator - IIP - Index of Industrial Production

2012-08-05T11:43:00.000+05:30

IIP - Index of Industrial Production is an Economic Indicator tracking the production activities on a monthly /quaterly/half yearly/annual basis in the country . Like every other indicator , IIP numbers are produced with a reference point in the past . In case of India , the revised benchmark is 1993-94 , for US its 2002 with level of 100 . The calculated data can be tabulated to form a time series in order to compare the output across various years .

The IIP numbers are calculated in 3 ways as described below :
(1)Use Based - The industry is categorized broadly as Consumer Goods, Durable and Non durable goods ,Basic and Intermediate goods .
(2) Sector wise - Industry is categorized sector wise like Electricity , Mining , Manufacturing etc
(3)Detailed Sector - Industry is categorized in to various detailed sectors, the link for which has been provided below .

Sectors Under Consideration for IIP Calculation : Click on the link here to get the complete list of sectors . Click here

Data Sources for calculation of IIP (for India) : .The data for the IIP estimate is supplied by 15 source agencies which include Department of Industrial Policy and Promotion, Indian Bureau of Mines, Central Statistical Organisation and Central Electricity Authority, among others.

How is IIP index calculated : IIP index is calcualted with the Laspeyre's formula . The calculation involves following steps .

(1) Identifying the weights of the various sectors on Product level , Product Group level and Industry level . These weights will be identified on the basis of the total output in sales or gross output value . The weights and the sectors are updated periodically to incorporate the changing market scenario and the economic dynamics . Weights on the product level can be updated annually while those of Industry level can be updated every 5 years .

(2) Once the weights are calculated the IIP number is calculated ,The index is a simple weighted arithmetic mean of production relatives calculated by using Laspeyre’s formula
I=Σ(Wi*Ri)/ΣWi,
Where I is the Index, Ri is the production relative of the i-th item for the month in
question and Wi is the weight allotted to it based on Gross Output.
The item-wise indices are vertically aggregated at 2-digit of industrial classification
based on weighted average, weights are proportionate to Gross Value Added.

Information Sources :

Economic Times, Wikipedia , UN Stats , http://des.delhigovt.nic.in/ASI/indindex05.pdf
http://www.delhi.gov.in

Mobile Vendor Industry - Infographic by Reuters

2012-05-03T14:36:00.000+05:30

A Simple Diagram of Relation between Repo Rate and Inflation

2012-04-03T17:50:00.001+05:30

Source : RiskBank

The Atlas of Economic Indicators: A Visual Guide to Market Forces, and the Federal Reserve

2012-04-03T17:48:00.001+05:30

The book is written in a very simple and lucid way . All the key statements/theories are duly supported by appropriate visuals along with real time examples. As the name suggests the book deals primarily with the key economic indicators used for assessing the health of the economy. Various Classifications and the Sub-categories are also presented in a very clinical way . What captured my attention is that the equations and the basic definitions are also presented in a pictorial manner which makes it easier to visualize and grasp the essence of the topic. The author has made a point that this book can be used across a varied class of users including those who are not from the financial background. . In a nutshell , I will recommend this book to all those who are looking for a book to read about the basics of the Economic Indicators.

Title : The Atlas of Economic Indicators: A Visual Guide to Market Forces, and the Federal Reserve

Author : W. Stansbury Carnes and Stephen D. Slifer

Reference link on Amazon : http://www.amazon.com/Atlas-Economic-Indicators-Federal-Reserve/dp/0887305377

NVS

Economic Indicators : Debt/GDP Ratio

2012-04-03T17:44:00.000+05:30

Ratio of Debt to GDP is one of the imp factors from economic point of view, used to gauge the economic health of the country. Usually countries strive to have this ratio as low as possible so as to avert such financial and unexpected circumstances.

To start with , lets understand the concept of GDP -In a simple way, it’s summing up what all the people earned OR spent over a definite period of time .Logically; both the measures should arrive at the same conclusion.

Alternative Definition is: Gross domestic product (GDP) refers to the market value of all final goods and services produced in a country in a given period.

There are multiple ways of calculating this GDP. For details on how to calculate, click here

Next, what is Government Debt?

Debt, as we know is the amount we borrow from someone to meet our needs. But why does Govt. need Debt? To answer this, let’s see the Expenditure and the sources of Income for a government.

Sources of Income (A): Income from all kinds of taxes collected by the Govt. at Local, State and Central level like Tax, Corporation, Excise duties , Wealth tax, Estate Duties so and so forth . Non Tax revenues include net contribution from the public sector undertakings like Railways, Posts and Telegraphs, Currency and Mint etc.

Sources of Expenditure (B): Government requires money for financing tis own projects like roadways, infrastructure, pension schemes, etc.

So the difference (B-A) is the amount Govt. needs to borrow, which can be described as debt. For that, Government borrows money through internal or external means, by issuing treasuries, bills, bonds. These in turn become liabilities for the government, since they have to pay interest and repay this amount as and when the loan period matures.

What I would like to highlight here is that things are much more complicated. It’s not like taking a home loan, and repay it with an EMI every month. Lots of planning and analysis is required in calculating how much funds are required, how to circulate these funds... because National debt goes into billions of dollars... in some case trillion dollars also. Usually such are planned keeping in mind, a horizon of about 5- 20 years.

But how does this Debt/GDP ratio help us in analyzing the economy?

The debt-to-GDP measure is simply a percentage number using total debt outstanding as the numerator and GDP as the denominator. GDP is used as a measure of the government’s ability to pay since a government’s income is taxes. As defined earlier, GDP measures the total value of the economy. A Govt. cannot collect tax of $1 Billion from an economy of $500 Million but surely from an economy of $10 trillion. The higher GDP is, the more it is assumed the government has an ability to collect taxes and pay the interest. Thus when the ratio is higher, it indicates that a lot of debt is outstanding and that implies (but only implies, not requires) a lot in interest payments. So, it is assumed by many that a higher debt-to-GDP ratio means interest payments are likely a greater burden and thus the chance of eventual default higher.

Using a debt-to-GDP ratio carries two major advantages over just using amounts of debt. First, it allows us to compare two different countries regardless of their size. For example, big economy like France having 83.5% as debt/GDP ratio while that of while Iceland has around 123%. In terms of absolute debt, Frances burden might be higher but so is its ability to pay back. Iceland's overall debt is very less than that of France but still very big compared to the size of its economy, it’s very high.When we are comparing 2 economies on the basis of this ratio , we do not take into account the repayment capability of the nations, their political stability , the efficiency f the economic and fiscal policies. So this ratio can be an indicator to compare 2 economies of diff size along with certain factors mentioned above.

Secondly, since the value of the currency under consideration keeps fluctuating is it Rupee, Dollar, Yen, to analyze the actual debt of an economy over a period of time does not give accurate results. In such cases, the Ratio can provide a clearer. Have a look at the following diagrams of US economy for the past 50 years.

From figure 1, we can see that the curve of the GDP and the total Outstanding Debt is almost similar. But no conclusions can be drawn from this diagram about the health of the economy.

While figure 2 represents the Debt/GDP ratio. We can see that during the time of Second World War, the Debt of the US has increased greatly compared to its economic growth. Also during the end of the last decade, 2008-2010, we see that the debt factor is rising due to the Financial Crisis of 2008.

Comparison of US Debt and GDP of last 50 years

What happens when we compare the Debt GDP Ratio with Per Capita Income ?

In the figure given below, I have mapped the Debt/GDP ratio of 128 countries to its Per Capita Income as of 2010. In the Graph, the Debt/GDP ratio is sorted in decreasing order and then the corresponding Incomes are plotted.

Per Capita Income : the gross domestic product at purchasing power parity(PPP) of countries per capita, i.e, the value of all final goods and services produced within a country in a given year divided by the average (or mid-year) population for the same year.

I have compared the Debt/GDP ratio with Per Capita Income rather than GDP because Per Capita provides a better picture of the economy. The size of the economy (GDP) may be big , but whether is it big enough to provide its population enough purchasing power can be understood by comparing the Per Capita Incomes at PPP so that amount of good and services are brought on the same scale.

1.) The Debt ratio is greater than 75: From the graph above and referring to the Table 1, we can see that the cluster with high Debt ratio contains high levels of Per Capita Income. Developed nations like Japan and USA can afford to take more loans from the market because of the backing of the strong economy and Political system. Countries like Japan, UK, Singapore, Iceland, Austria, Netherland fall in this cluster.In the graph above, there are 3 different zones highlighted.

2.) The Debt ratio is between 40 and 75: The average Per Capita Income of this cluster is almost equal to the overall average. Countries in this cluster are mostly the developing nations like India whose economy is growing but obviously is not as stable and strong as the developed nations. As a result, to extend their debt beyond this belt would require borrowing on higher interest rates, resulting in higher payments, eventually increasing the burden on the economy.

3.) The Debt ratio is below 40: The Average of this cluster is around 12% less than the overall average, hence representing the cluster of, mostly .and not all. Underdeveloped nations. Countries having economic in stability who are unable to have steady GDP growth find it difficult to have the debt burden since the chances of getting default in such cases are very high . As a result, they do not have very high debt ratios which again slow the growth since the Inflow of funds is less.

The inferences derived above from the graph represent the general trend with respect to the Debt/GDP ratio. We cannot conclude anything solely on the basis of the ratio alone .From the graph itself we can see the amount of uncertainties i.e. The entries which do not fall in the highlighted zones of their respective categories. We cannot conclude that any country with high Debt/GDP ratio is surely a developed nation or has high Income . For e.g.: Japan has 225.8% Debt/GDP ratio but its per capita income is $34,013 while that of Zimbabwe is 149% and $434 respectively. Other example is Qatar with 10.3% Ratio and $ 88559 Income while that of Uzbekistan is 9 % and $ 3039 respectively.

Hence, Debt/GDP ratio is an economic indicator used to indicate how much debt one owns relative to its capacity. . But this ratio combined with other economic indicator can give us clearer picture.

NVS

What Govt can do more through SSA- Sarva Shiksha Abhiyan and RET

2012-03-16T11:16:00.000+05:30

Importance of Education is something on which any man can talk about endlessly but only few have actually understood and acted in the way one should have to handle the Global Issue of Illiteracy ,especially for the needy ones The Govt. has 2 flagship programs for education : Sarva Shiksha Abhiyan (SSA) and Right to Education (RTE). Here are some of the alarming stats (Courtesy: Times of India ).

Mean years of schooling in India is 4.4 years ( China 7.5 years)
%GDP spent on Public education is down to 3.8% in 2008-09 compared to 4.3% in 2000-01 whereas Cuba has 18.7% which is highest.
Only 21000cr INR have been received by RTE for 2011 out of sanctioned 48000cr.
Of 7.5 lakh candidates who appeared for CBSE's all-India teacher recruitment test , only 93,000 passed
NGO Parham’s Annual Status of Education Report (Aser) shows that nearly 47% Class V students cannot read Class II texts, while over 63% of Class III students cannot subtract
India has a shortage of 1.5 million teachers.

: A Fellow at Teach For India

What will give a clearer picture about the need for education is to find out the literacy rate in India for those who are near to the BPL line. As per the MultiDimensional Poverty Index , 650 million people (53.7% of population) living in poverty in India, of which 340 million people (28.6% of the population) were living in severe poverty, and that a further 198 million people (16.4% of the population) were vulnerable to poverty . (Courtesy: Wikipedia) Now a survey of literacy rate in this section of ppl will reveal how successful we have been in RTE and SSA. The proportion of students in Private Schools has increased from 18.7 % to 25 % owing to the pathetic conditions of Govt counterpart.

Compared to this, here are some of the statistics showing the growth stories of Institutes like Teach for India who have taken up the initiative of free education. (Link) TFI has impacted 12000 students in 2011-2012 compared to 2800 in 2009-10. Such is the growth of these organizations. MAD (Make a Difference) also aims atimproving the retention ratio of children in school. Although, India has a literacy rate of 72-74 %, most of them drop out by the time they reach 10th Std. As a result, MAD has designed courses accordingly .Currently they work in 11 districts in India with over 800 volunteers, teaching 2500 children.

So what have such organizations done correctly which our Govt cannot achieve till date? Compared to them, Govt has more powers, more workforce at disposal, reach to a bigger mass of people and adequate funds at disposal, still such disheartening results.

The organizations work on the simple principles of providing education to all. They are not cash rich, instead they work hard and sustain from the funds of the sponsors - Be it Corporate or Pooling of Donations. At the core, they understand what they stand for; realize the importance of the responsibility on their shoulders. TFI has fellowship programs through which they invite the Next Gen to be a part of teaching community, and bring out innovative ways of teaching.

Why can’t the Govt run such programs with everything on their side? Why can’t they keep such programs free from the red tape and other bureaucratic nonsense? What is required is here not some rocket science invention. Have to follow the basic steps of Management. There are various surveys saying that Indian students are not on par with International students, that they are not taught that primary education also properly. We have taken the initiative to teach everyone, which is obvious, but not at the cost of quality of education. I mean why we wait for such surveys to tell us where we stand. Why can’t we have our own internal monitoring policy to see the effectiveness of our actions, to tell us how well we have fared and what kind of improvements are to be done? Form a committee who takes care on the quality and timely check that the things are just not in place but are being utilized efficiently. In today's highly competitive world, having education for the sake of it is not is as good as not having it. Also, undue attention has to give to the teachers and timely monitoring of the teaching practices and their abilities in delivering the required results.

Centralized tests can be conducted throughout to see where the students stand. It will serve 2 purposes. First it will tell the average score school wise, class wise so we can easily compare and find the loopholes. Also average scores of class can tell u about the teaching efficiency of the teachers as well.

SSA prepares and issues Joint Review Mission reports talking about implementation and the progress. What it does talk basically is about number of intakes, fund flows, infrastructure facilities and what it does not mention is the quality of the teachers and students. The reports have references for training for the teachers but not the results or efficiency of such training. Why so?

To read the full progress report, click the following link: Joint Review Mission dated: 13th Jan, 2011

Whenever we discuss about the development, the rise of the "superpower”, we compare only the GDP growth and not such basic parameters. When the basics of the country are in such appalling condition, how does u expect the country to sustain such high levels of growth? If the foundations itself are not strong enough, even minor setbacks can cause large scale damages.

NVS

Comparison of Sensex returns against Fixed Deposit Rates

2011-06-19T18:42:00.000+05:30

Following table compares the returns of investment in Fixed Deposits and Indian Stock Exchange .

Source : Economic Survey of India

Stock Exchanges, Investments and Derivatives

2011-05-10T17:54:00.000+05:30

The book “Stock Exchanges, Investments and Derivatives” written by V Raghunathan and Prabina Rajib deals with the common issues that any Investor faces , specifically those who do not have the technical background.

What’s the plot?

The book is a compilation of 250 most nagging questions an Investor has regarding the Stock market. The book deals with all the basics of the Stock Market. What the market is all about along with a brief history on Indian Markets. All the aspects of the stock market i.e. Equities, IPO, Mutual Funds, Bond Market, Derivatives, Share Pricing models, Introduction to Portfolio Management are introduced chapter wise.

What to expect?

The book is all about sharing the basics of the stock market in a question answer format. The highlight of the book is the simple language that has been used; the concepts are explained in a lucid manner without going into the technical details or using any financial jargons. All the theories and intricate material has been supported by appropriate examples, again which are simple to understand. The author has very tactfully touched all the topics of the market without going into details.

Verdict

I will recommend this book to all those who want to know the basics of the stock market. This is certainly book where I would like to begin. A word of Caution: This book is NOT about how to earn money in Stock Market or Trading Strategies. It’s a book for understanding the concepts.

Ref Link On Amazon : http://www.amazon.com/gp/product/0070077347/ref=cm_li_v_cr_self?tag=linkedin-20

Begging - Should it be Encouraged ?

2011-02-22T17:49:00.000+05:30

Begging - technically known as “panhandling” means is wherein the needy ask for material benefit, money, or even basic amenities like food and clothing .

But the question here is should this activity be encouraged ??

: Image Courtesy : http://www.pravoslavie.ru

It’s a human tendency that u feel like helping someone when they are in need – Good karma as we say it ..But is it really a good karma ?

They are many reasons that ppl keep begging . Some think they cannot do anything else , some don know whether they can do anything , then there are some who think that begging is better and easy money , sit in a place and keep pleading ppl to help them . Begging has become more of an art rather than an unwanted activity.

In countries like India . , it is considered holy and religious duty to help the needy and “sadhus” by providing them alms . In certain communities , there are sadhus who visit ppl of their caste residing in diff states , to get their self proclaimed “bhiksha” .

For example , some beggars demand for some food items , dragging u to a nearby store and asking u to get some based on the deal with the beggar and the shopkeeper.

At times , when I have given alms to small kids , they directly run to a shop and get some tobacco . When I asked , they say that’s the best thing they can have . Such is the condition of this community .

So why should we give them alms and what good will it do to them other than making them dependent on our generosity and making them live on the hope that we are there for donation , but only when we feel like.

Imagine your Boss ,if u r not one , tells u that yeah u will get salary but only when he is in the mood to give. Sounds weird.. right ? But then we are doing the same thing to them , Aren’t we ?

Encouraging begging means we are making them more dependent on us rather than themselves. When we are helpful enough , they are happy . When we are not , they device tactics like the one I mentioned above.

Once , these ppl are used to begging , than it becomes more like a profession rather than necessity . They start thinking that they can beg only now and so they do not try to improve their standard of living or make a move to something better . Ultimately , generations after generations are stuck to begging only. Small children born in such families are made to beg from small age – partly because of need and partly because ppl will be more sympathetic towards children.

On the other hand ,there have been some incidents wherein the beggars lure ppl to help them and ultimately they are robbed /kidnapped/raped – Giving a negative image to the whole community .

Frankly speaking , what makes more sense – Paying 10 Rs to someone suffering from polio or similar disability or to forward him to right NGO or nearby Govt. services. isn’t that the real good karma ??

They are various Social Welfare programs for Beggars initiated by the Central and State Govt. levels. But we as a citizen , are as usual not aware of such noteworthy laws and its implementations.

Delhi Government has started a service called Dial 1908 . So when u see a child beggar , u have a chance to rescue them and save their lives. All we need to do is call this authorities. A better act of generosity will be to support such Noble causes and encourage such institutions.

If I am not wrong , there are laws against begging .There is something called THE BOMBAY PREVENTION OF BEGGING ACT, But like any other laws , we are not aware or don’t care to follow.

Rather than paying them directly 10 Rs whenever u visit a temple , better collect them , save separately and donate it to NGO in our locality who are working for betterment of such people. Try helping with things like clothes and unwanted stuff in our houses which can actually help them .Encourage them to work on their own , at least to the ones who are capable .

These institutions and such laws need support from our side. If we cannot help them , least we can do is spread the word . Make ppl aware about the existence of such websites , NGO that are there in our area, city . Make use of Social Networking mediums to spread the awareness . Put notices on the School College and Office Boards. If u not helping or cant help , someone else can and will .That’s more than enough to start with . Such things don't require rocket science planning . Its just that we should know the ways in which we can extend out help .

Till we don stop giving money to them , they wont stop asking . Cut the supply and they will start looking for alternatives. I am not asking to avoid them or neglect this section of society. They are the ones who need most help . What I mean is that if we cant help them , then at least not to things which are not good for them in the long run .

A small collective effort by us can be very productive for them in the long run . Society , as a whole in general will materialize by this small small initiatives.

“ Give a man a fish , u feed him for a day . Teach him how to fish
 and you feed him for lifetime “ .
 
Img Courtesy -natyogachandra

NVS

The Dynamics of 2 & 3 - Group Behaviour

2010-11-22T16:32:00.000+05:30

We come across so many people in life. See a thousand faces every day, notice a hundred , talk to some and care for a few . The obvious fact is that our behavior varies from person to person depending upon the degree of our comfort, how well we are accustomed with him/ her, how trustworthy and important he/she is and some other ulterior motives, if any that is. From my observation, that is just one aspect that governs our behavior. We can treat the same person differently if we meet him in person and when we meet in a group. My article is just about that and my observations relating to the same.

For a group of 2 people, their dynamics are similar to that of a couple irrespective of their genders. Since they have one to one correspondence, they feel more obliged and responsible towards their counterparts. They start to share small details in the early stages of interaction. The behavior and dynamics depend more on this singular interaction and not positively correlated with their liking and preference for the person. As a result, you are cautious and more choosy consciously or sub consciously in selecting such a friend when you know that you have to interact on one to one basis .More often than not, people are shy from opening up in public, so in case of a duo, it is easy to share your personal details which you might not otherwise, had u met this person in public. Usually there is a case of dominant and submissive personality, one leading while the other following.

For a group of 3 people, case becomes little different. What happens is for each person there are two options to interact. Since there is no one to one correspondence, we are at some liberty regarding our contribution and how active we can be in the group. In such cases, we let our guard down in a way and interact with people who might not be our first choices. There can be multiple scenarios. You can choose to be the leader, a follower or the “indifferent” guy who does not have its preferences or is basically ok with everything. Plus you can be close to the group as a whole or to only to one person. You can be a part of the group yet you can be at a distance from others, maintaining your interaction to bare minimum. So if we put the 2 ppl in first scenario, chances are that they won’t behave and interact in the same way because there are more possible choices. However, there is always a possibility that these 2 people interact a lot and the 3^rd person is sidelined but the probability of that happening can be presumed to be less than the first. The presence of the third member weakens the chances of the 2 getting close and personal because they will be not be provided with enough space and opportunity to do so . Also since the third member is also part of the group, the remaining 2 cannot neglect him out rightly.

This is how I have witnessed the group behavior. Just the addition of one member changes a whole lot of things, the way we approach people, our attitude, behavior and lot more. All the views and observations present here are mine and mine only .