Archive for the ‘Current Affairs’ Category

Why some energy firms going bust in UK?

2021/09/22

In 2021, some small energy firms went bust in UK. Why did it happen?

These firms were re-sellers meaning they didn’t produce any gas or electric of their own. They bought wholesale gas/electricity from large producers and sold it to customers.

When customers signed up with them, these firms promised a price say £x. They used to buy energy at wholesale rate of £w (where x – w = their profit).

Since wholesale energy price went up suddenly, these firms had to buy energy at a rate W which is more than x, i.e. what customers paying them.

They can’t simply ask customers to pay more because they had contract with customers where customer would pay fixed price £x as previously agreed.

So these energy firms can no longer afford to purchase energy at cost W and in return get only x from their customers. So their business is no longer sustainable and hence they went bust.

What if people like the new normal?

2020/07/03

There is now a push everywhere to end the lock down arguing “lets get back to normal“.

But nobody is asking the question whether old normal is the best normal.

So what is the “normal”? Was commuting in packed trains a normal thing? Or getting stuck in rush hour traffic is normal? Rushing to school every morning is the normal?

There is no denying the fact that overall creativity of the population has flourished. I observed this empirically based on how many in friends and family circle started writing poems, stories, paintings, drama and much more.

I myself wrote an app for the masses (download link in the right hand side) of this blog.

All these could have been very difficult, if not impossible, during “old normal” way of working. By no means people are working less productively. In fact, productivity of people have increased because people are wasting less time in office (well they can’t as they are not travelling to offices).

Not all work can be done from home. True but there are plenty of works which can be done remotely.

Those who are advocating loss of productivity when working remotely, are actually fearful of few things:

  • Office based politics – often the perception of hard work is more important than actual metrics of the output. In a physical office, it is much easier to show off your input. This gives an extra advantage for extroverts. Whereas in lock down, introverts are in slightly better position as they can flourish their creativity (both work and personal life) without interruptions.
  • Lack of team building / socialisation with colleagues – yes, this is missing while WFH. But why the assumption is most people actually enjoyed it? After work socialisation is often enjoyed by younger crowed in large towns (e.g. London). There are plenty of online socialisation meetings happening. Though I admit not everyone enjoys online socialization.

Now we must tackle the big issue – the loss of jobs. Corona virus pandemic has led to unprecedented job losses around the world and worst is yet to come.  Some industry segments (like hospitality, travel etc.) are affected more than others.

When a big change happens, there are usually 2 ways to counter it – either adapt or resist. Most people are in resist mode and argue everything should go back to old normal mode.  But the winners would be who are ready to adapt and embed new normal culture.

Plenty of businesses have adapted very well. Most desk based jobs are already happening remotely. Many schools have started teaching remotely. While the experience is slightly different, there is no proof that it is worse than old normal.

If in real life people work from home, why not make it mandatory for schools to also teach remote at least 1-2 days per week after life goes back to old normal?

Why people who started to like the new normal should be forced to go back to old normal?

One big issue of accepting new normal is the way we measure well beings. It is roughly on money also known as GDP. But GDP is detached from human wellbeings. One can earn a lot and still be miserable. Many of the high earners actually discovered how they enjoyed being out of rat-race.

I appreciate this is a sensitive and somewhat controversial issue but Darwin said it is not the most intelligent who survives but the most adaptable create survives on the cycle of evolution.

So let us be realistic and assume that life will not fully go back to old normal and better not to force people to go back to old normal. Let us focus on rebuilding our economies and well beings be embracing the new normal.

Everyone should be given a choice of whether they want to go back to old normal or enjoy new normal (or even best of both worlds by mixing old and new normal).

All the best to humanity.

 

 

 

Work From Home (WFH) – boon or bane?

2020/05/26

Following the pandemic, there has been lot of discussion on remote working. Some are predicting end of office working culture while others are arguing we shall be back to offices once lock down is over.

Let us examine this using an analytical perspective.

In most IT organizations, work from home (WFH) is already common. Many workers work at least 1 day/week from home already (pre-pandemic). So we can say 80-20 office:home culture was already there. Now the big question is, post lockdown whether it would be one of these:

[1] 80-20 i.e. pre-pandemic level commute
[2] 20-80 i.e. 4 day WFH + 1 day office
[3] 0-100 – WFH = current lock down model

There was a pre-lockdown perception that WFH model is not efficient for productive working. However, the forceful adoption of WFH has proven it wrong. More or less people’s productivity remained the same in 100% WFH model. Businesses have adopted very quickly to the new model. IT industry is no stranger to remote working, especially those with large offshore teams for last 20 years.

There is no research showing people work less productively when working remotely. In fact, not having to do a long commute (either driving or using crowded public transport) makes employees more charged up. The 8-hour work day was based on industrial age. In current service based economy, it is the outcome that matters – whether someone produces it in 4 hours or 8 hours is irrelevant.

In fact, WFH may increase productivity. While working in offices, employees often tend to show off work. A lot of time is wasted in schmoozing in kitchen area. People stay late to feign being busy. Hang on too long to submit output even when done, because they don’t want to show it delivering before deadline as next plannings would be based on current delivery timelines.

WFH is very different. Since no one is actively watching employees, if one can finish the work off in 6 hours, s/he would get 2 hours spare time to do his/her own work. As long as output is of professional and acceptable quality, employer has little to complain if workers are working less than 8 hours. This would drive employees to be more productive.

In many cases, one simply wait while waiting for feedback on previous delivery. While sitting at office desk, this time could be hardly used productively. While WFH, employees can do lot their own stuff and then get back to work once the feedback lands on their inbox.

Some employees prefer to work from office because they are better at climbing corporate ladder easier by just being there. Many employees want to be in the forefront of decision makers/higher management so that they are in the front line for promotions. In general, it is harder for remote workers to get appreciations. This is because decision makers tend to believe (not always a logical thing) those whom they can see are working harder. So in short term, this will cause some impact. However, once WFH embeds in culture this issue will diminish over time.

From employers’ point of view, an immediate cost saving is not having to maintain large offices at expensive cities like London. If WFH becomes mainstream, workers do not need to live near to offices as they would not commute during rush hours any more. This can help them moving to country side where they can afford larger homes with gardens – thus improving overall well-being of their families.

Some people might miss the after work hang-around-to-pub culture though – but that varies from person to person.

Covid19 – potential exit strategy

2020/04/24
Disclaimer:
Please note that things are changing very fast on Corona virus. Scientists are working hard to find a vaccine. Hence, the content of this blog could become out of date very soon. This blog is for information purpose only and does not constitute as medical advise. Always follow the advise from your doctor and relevant medical authority in your country.
How can lock down be lifted?
The key question for most part of the world is now how to end the lock down without a massive risk of life of citizens.

As of this writing, there is no known cure for Covid19.

If nothing is done, entire population will eventually catch the virus and around 1% of them will die.

If we could confirm who are immune to the virus then we can easily identify the vulnerable and ask everyone else to carry on with life as usual. However, the problem is, other than identifying aged people (e.g. those with 65 years and above) and those with existing health conditions (e.g. obesity, cardiac issues, diabetes etc.) there is no finer way to identify the risk group. Even them, some young and healthy people are randomly affected in a serious manner, even resulting to death!

Millions of people around the world have got infected with Covid19. Some have suffered no or mild symptoms only. However, due to very little testing carried out, majority of people who think they have got Covid19 and recovered, have no way to confirm that that is actually the case!

The crux of the problem here is how to identify people who got Covid19, then recovered and thus assumed immune to it. These people can then come out of lock down and start leading a pre-Covid19 life.

So how do you confirm this? This is where the difficulty lies.

Presence of the virus can be confirmed in 2 ways – swab test and antibody test.

The swab test shows if the virus is present at the point in time (when patient is tested).

WhatsApp Image 2020-04-24 at 12.08.57
The antibody test can detect patients who suffered and recovered but up to a certain period of time. The big unknowns are [1] how long antibody will remain in the body [2] whether the antibody is due to Covid19 only or for some other viruses.

Although there are cases for person being affected again after recovery, but in this writing we are assuming subsequent infection would not be fatal .

Now if we take a person A, who got infected by Covid19 but suffered only mild symptoms and recovered after 21 days, then the question remains how to prove it? He can be tested for antibody and if IgG antibody is found, a reasonable conclusion can be drawn that person A is immune from Covid19 going forward.

But this approach has a major hurdle. Firstly, antibody test is not yet available to everyone. Secondly, by the time antibody test is available to everyone, the concerned person may have lost the antibody from his blood stream. In this case, it is back to square one!

WhatsApp Image 2020-04-24 at 12.12.16
This person is now in same position like one who has never caught Covid19 before (say person B).

To the public, person A is having same risk of person B. But in reality person A is possibly immune and carry far less risk than person B. But there is no way to prove it.

For person B, there is a risk that he could suffer mild symptom or sever symptom and could even die.

If the immunity can be proved beyond doubt, then it is a valid exit strategy.

Without proper tests, we have to adopt any of following situations.

[1] Lives saved but economy damaged

Continue lock down indefinitely. If everyone remains isolated, no one will get infected, hence no one is contagious and no new person gets infected. But this will destroy the economy and livelihood of billions of people. This is not acceptable solution to public – even though this is actually best solution for saving maximum amount of lives. After sometime public may revolt and might just start their normal life anyway.

[2] Economy survives but high number of casualties

Allow people to carry on as usual and achieve so called herd immunity. This means allowing everyone to catch the virus and accept 1% death of overall population. Effectively a situation a very large number of random people will die. This scenario does not try to prevent infection, rather relies entirely on individual’s body immunity to tackle the virus.

What is the future then? Well, only time will tell.

Thanks to Dr Somnath Mukherjee and Dr Shyam Das for their inputs.

How life changes pre and post pandemic

2020/04/14

How the world is changing post Corona virus pandemic?

The table below and the attached PDF presentation explains the life before and after the Covid19 pandemic.

View this document on Scribd

Post Pandemic World

Parameter Pre pandemic Post pandemic
Way of working Work from office Work from home
Learning, teaching From school, university etc. Online learning
Meetings Face to face Online
Seeing medics Doctor examines patient physically Doctor examines patient over video conference for basic diagnosis and prescription
Shopping Physically in store (especially for grocery) Online grocery shopping
Commuting Car, public transport – more fuel use Not necessary due to home working – less fuel use
Social visits More Less
Events – concert, sports, movies Mostly physical visits Less physical visits or watch online only
Perception of prestigious professions Celebrities, politicians, high paid jobs Key workers e.g. medics, delivery drivers, supermarket workers etc.
Healthcare Less focus on national healthcare More focus on national healthcare
Healthcare – personal Gym Gym at home, walking, running, cycling
Political beliefs Predominantly capitalistic Shifting towards socialism
Personal freedom More Less – movements could be legally tracked

This blog was written during lock down period and reflected what happened during the lock down period, but some of the trends mentioned below likely to continue once lock down is lifted.

 

Post pandemic economic recovery

2020/03/26

1. The Problem – micro view

1.1. Theory

Let us explain very basic economic theory first. Below is Cost Volume Profit graph.

Pandemic1

Figure 1

Every business has cost, with 2 main components – fixed cost and variable cost. Fixed cost includes things like cost of machinery, premises, staff salary etc. Crucially, it also includes interest payment on loan – assuming all businesses have some debt which is loan taken from bank and/or investors to raise the capital. The variable cost is often proportional to revenue or sales.

Here we shall use the term sales and revenue interchangeably, to denote earning of the business.

If a business procures more number of product units, higher quantity raw material needs to be purchased – so this is how it linked with revenue. So this is the variable part of the cost.

The earning is shown by blue line. The expense is shown by red line the above graph.

We know the simple formula, Profit = Revenue – Cost

If profit is negative, then it becomes loss. This is same as saying, Savings = Income – Expense.

A business needs to pay tax on profit – so tax is also a cost. But for simplicity, we leave tax out of our discussion.

The point, where revenue becomes more than cost, is known as breakeven point. Until the business reaches this point, it is loss making. Once business is way past breakeven point on the right, it is profitable. In fact, all business tries to move as much right as possible for sustained growth and profit.

A business can borrow more (cost goes up as interest payment) to increase revenue (more sales), resulting in more profit. Now, how much a business needs to borrow in order to increase profit is a complex calculation which depends on type of industry, business strategy, market condition and many other factors.

At normal time, all businesses operate in an equilibrium. Business pays interest to bank, buys the raw materials from suppliers, manufacturers product in factory, pays salary to employees and sells products to customers who pay the price and so on. For a service based business, the theory is still the same. Here, instead of producing items in factory, the company sells intellectual expertise of their employees.

1.2. Recession

Let us see what happens in a recession. The pandemic has led to people being fearful and cities have been locked down to encourage social distancing. As a consequence, all sales have gone down (except very few like supermarket shopping where people are stockpiling for the Armageddon).

Due to very low (or nothing at all) sales, the revenue curve will flat out. However, the fixed cost component will remain mostly the same. This means, for a long time, the business will not make any profit.

Pandemic2

Figure 2

This is shown in above figure. Note that we are now showing time on horizontal axis.

While cost of the business also falls due to less sales, the revenue falls rapidly as people are scared away from purchasing. This will drive down the businesses into further loss.

How quickly a business comes to grinding halt, again depends on industry, geography, mitigation factors etc. For example, airline industry, which has a high fixed cost (as the cost of flying a plane with one passenger vs 300 passengers almost the same) are already near bankruptcy.

For a person, disaster does not strike as soon as he or she loses job (i.e. salary stops coming). This is because the person can still sail thru troubled times using own savings. Here savings is the money in bank saved during good time.

However, a person becomes bankrupt when his/her savings become zero and cannot pay for anything anymore.

Similarly, a business does not go bust just because it is making loss. A lot of businesses, especially those like start-ups, make losses during initial years. However, they carry on as long as investors pump out money to them. This is cash flow.

A business goes bust only when it runs out of cash.

In normal time, a business can increase their cash reserve by adding the profit to their cash reserve.  Every business has a finite amount of cash reserve. The amount again depends on industry, strategy, demand etc.

Also as the demand falls during recession, the supplies must also go down as more competitors now try to get a slice of same shrinking market. This further drives many businesses into downward spiral of lower sales thus more losses.

As businesses go into losses, they start laying off employees, which collectively reduces further demand on the market, leading to panic and mayhem.

2. The cause – macro view

2.1. Pre-pandemic

Here we shall take a step back and discuss how the world economy (mostly capitalism or market driven economic model) works.

Our economy is underpinned by the banks and the government. The depositors (i.e. common people) deposit money in the bank. Let us say a bank collected £1000 from depositors. The bank will pay a tiny interest to the savers. Bank will earn money by lending money to borrowers (for starting business, buying house etc.) at a higher interest. The different between interest earned and interest paid (from bank’s point of view) is the profit for the bank.

But the twist is fractional reserve. This is adopted almost universally worldwide. Under this model, if a bank has only £1000 deposit it can create more money out of thin air, while lending. So basically the banks are allowed to lend more than the actual money they have. In our example, a bank can lend £10000 to borrowers! This means, the bank has created 9 times more money (1000 + 9000) than the real deposit amount. This fictitious money is then lent to people and businesses. This fictitious money is the debt.

Our economy is debt driven economy.

In olden days, when gold was used as currency, fictitious money was not possible. Once the banks introduced fiat currency, by abandoning gold standard, banks got the freedom of create fictional money and debt.

The fiat currency is what our bank notes are. These have no intrinsic value (unlike gold etc.) but people use it as if it has purchasing power purely driven by trust as guaranteed by the government.

Creating this fictional money is not necessarily evil per se. Had the bank not created fictional money, it could have lent only £1000 (in our example) to people who wanted to buy houses or start businesses. However, by creating fictional money of £9000 more, bank is able to lend to more people, enabling more people to buy their dream houses or fund their own businesses. In theory, it actually elevates more people into better life. When we say better life, this is by more consumption of goods and services. With more transactions, nation’s GDP goes up.

As long as continuous growth is happening, everyone is happy in this model. This is why all politicians and big businesses love growth. It makes everyone feel good.

Thus, in a debt driven economy, more money is analogous to having better life.

2.2. Post pandemic

Things become dramatically different during and after pandemic!

As everyone borrows more and more, the debt burden increases. Remember, all debts are to be paid off someday! In normal time, people do not think much for paying of debt. The house price mostly goes up. So even if house owners default on mortgage, the bank can repossess the house and can sell at a higher value than outstanding mortgage amount. So even if individual business or people are bankrupt, the country level economy (known as macro economy) pulls thru as usual.

During pandemic time, the revenue of most businesses fall so low, that most business cannot make profit at all. The business will also default on their loan payments and soon become bankrupt. With millions of people becoming jobless it will be a national calamity.

The government, as in any recession, usually intervenes. This is done by financial stimulus like printing money (known as Quantitative Easing) and reduces interest rate to encourage business to borrow money and sail thru the cash flow issue.

The important part is, government will give further loans to businesses. These loans are meant to be paid back when situation improves.

This will lead to a situation depicted in the next graph.

Pandemic3Figure 3

The key message here is that with even more debt (on top of existing debt) most businesses will not be able to see profit for a very long time. So they are going to see cash flow problem again after some time, requiring another bail out. This will lead to even more debt – which will increase the fixed cost even more as interest payment will also go up and this cycle will continue for foreseeable future.

No business can run in loss forever (only exception is some nationalized public services). Unless the shareholders/investors see some return on their investment, they will not be interested in paying money to the business.

This is a deflationary economy, dreaded by all. Whereas deflation did happen in the past, this time, clubbed with the pandemic (i.e. loss of lives) the blow will be huge.

The philosophy of the capitalism is survival of the fittest. In capitalism, people with more money are considered better off. People with more money can have a better life. But a pandemic, affects rich and poor equally. Hence, if money does not improve people’s lives, people may not be willing to increase their earning more. Thus the fabrics of run after money philosophy fails!

Although, even during pandemic, the rich and powerful in somewhat privileged as they are able to get tested for COVID19 whereas normal people cannot unless they are serious ill and rich people can still buy essentials at an inflated price from black marketeers.

3. The solution

I admit that I do not know what the solution is. If I were that intelligent, I would have received Nobel prize by now. But still, we can make some attempt to find a solution that may work.

One option could be writing all the debt off for everyone. This means everyone can start with a clean slate. This will help majority of the people. But this will not go very well with the banks and the government. Why?

Because in debt driven economy, the control of economy in the hands of privileged few, namely the banks and the government. If debts are written off, their own flow of income will stop. They will also not be able to control the population saying work hard else you will die starving.

From historical times, society has mostly been unequal rather than equal. Even in Ancient Egypt, there were rich and almighty pharaohs and slaves who served the riches. As the folktales say, when Moses tried to free the slaves, the pharaoh refused. Among many other tricks, the God of slaves unleashed a plague which affected pharaohs’ family only and spared the slaves’ families.

The analogy here is illustrating that rich and powerful always controlled the masses – in olden days with fear of death and in modern days’ fear of (lack of) money!

Usually in recession the government often bails out (i.e. provide cash to big businesses as loan) but this seldom goes to employees. Big corporations claim these saves the jobs, but alternatively, government can help everyone by giving them money directly in the form of Universal Basic Income (also known as Unconditional Basic Income i.e. not means tested). The unconditional basic income is claimed to be easier to manage than means tested benefit system. If this scheme is adopted, the big corporations can simply fail if they cannot run their business efficiently.

The other path could be gift economy. It mode of exchange where valuables are not traded or sold, but rather given without an explicit agreement for immediate or future rewards. This is like catching fish to eat but not catching too much to make a big profit. This model already works in Open Source Software where people write software for others for free and users can donate if they wish. Couch Surfing as another such example where people stay in others’ homes during holidays without paying anything.

Designing an alternate economy model is extremely complex and beyond the scope of this article. My aim here is to drive the thought process of everyone so that collectively we may invent something more egalitarian than greed driven economy.

 

Why do smart phones freeze (or hang or lock up)?

2014/04/22

Old Nokia phones (also known as dumb phones or features) almost never froze! I had a Nokia phone which froze only once (worked fine after restart) in 7 years of use! That is pretty impressive.

However, most smart phones often freeze. Some freeze quite often while some other freeze only occasionally.

Let us understand why it happens.

All smart phones are mini computers inside. They have an Operating System (OS) which interacts with the phone hardware. Users interact with the phone via application layers.

The core of OS is known as “kernel”. This is low level assembly language core which translates users’ requests (via apps) so that hardware can process it. For example, when you dial a number (via dialler app) the request is sent to kernel which instructs the hardware to perform the phone dialing operation. Both Android and iOS runs on highly customized flavors of Unix OS inside them.

The old dumb phones also had similar concept but there was a big difference. Those phones were only allowed to perform few predefined tasks like dialing a number, receiving phone calls and sending texts (along with alarm, calendar etc.).

But modern smart phones are expected to do a lot of things! As a result, it is often very difficult to predict what each app will request to kernel. There are just millions of instructions possible. When many apps send some instruction to kernel, it may get overloaded (takes too long to process which manifests as phone slow to respond) or just get confused (manifests as phone freezing). The freezing often happens due to kernel going into an infinite loop (and does not know how to come out of that) or just bogged down by too much work.

When you use heavy weight apps in lower end (or budget) smart phones, due to slow CPU and small amount of RAM, the hardware gets overloaded. So, those phones often become slow over times. When you install newer versions of apps, they usually take up more space and thus strains hardware even more!

Different manufactures try to handle this problem in different ways. Apple implements a strict control of what its apps are allowed to do and what hardware goes inside the phone. That’s why iOS is more restrictive and iOS users see less frequent freezing. Internally, iOS apps work in a sandbox mode. Each app gets a space in phone storage and it can’t access anything outside of its own sandbox. Once you delete the app, all its traces are gone. This is also the reason why users can’t access iOS file system (unless you jailbreak). Apple also doesn’t allow usage of external memory card which is often responsible for corrupt file systems and thus causing problems.

Android system (even though derived from Unix) is more like good old desktop Windows OS in its behavior. Apps can often access an equivalent of Windows registry style things. Various apps dump garbage in cache, which fills up phone’s internal storage (like hard disk) and phone becomes slower over time. Even if you install an app in SD card, it still leaves traces in internal storage space due to OS design. Android also allows access to file system (just like desktop PCs) which means users can fiddle with its system and may accidentally delete system files!

Microsoft has taken iOS like “sandbox” approach in its Windows phone system. So, in theory, Windows Phones are supposed to crash less! However, these still allow external SD cards so such issues will remain to some extent. Also, as Windows phones have less market share at present, it is difficult to predict if they are indeed superior to Android or iOS.

From empirical evidence, it can be stated that:

  • Apple phones crash the least. However, internet browsing is often unpredictable and quite often iOS browser just crashes but this does not usually lead to entire phone freezing up.
  • Blackberries and Android phones crash often. Lower end Android models crash more if you fiddle with them too much for the reason described in this article.
  • Less matured OS crashes more. For example, Windows phones OS have good architecture but it is still maturing so it may crash unexpectedly.
  • Poorly designed OS will crash often. This is why Nokia’s Symbian based smart phones were notorious for freezing!

If you are an Android user, make sure you clear cache often, manage your applications so that it does not store too much data in phone’s internal memory and refrain from heavy browsing or playing hardware heavy games. This should lead to less crash, especially in budget hardware Android models.

If you are an iOS user (iPhone or iPad), there is not much you can do to prevent freezing (if that happens at all). Sometimes one or two rogue apps may cause problem. In that case, simply get rid of those apps. Some apps when updated, tend to make use of newer features of latest OS. If your OS is older version, you may see apps crashing (but not entire device freezing up).

Windows phones are still maturing so nothing can be advised at this moment.

Why rupee always falls against dollar, pound, euro?

2013/06/26
Historically, Indian Rupee always fell against strong currencies like Dollar, Pound or Euro.

 
During mid of 2013, rupee had almost a free fall. It now equals 1 $ = 60 Rs or 1 £ = 93 Rs.
 
So why suddenly rupee fell so low?
 
One reason is better economic outlook in USA. Large scale investors are now expecting better return on their investment from USA. Thus, their funds are going towards USA and less amount is coming to India. For many day to day products, India needs foreign currency (in the form of $, £, € etc.) so less foreign currency coming to India means more demand for $ £ € to buy goods/raw materials from outer world.
 
Incidentally, weakening of rupee should make export much more attractive as same $ will now buy more Rs. However, there is a catch. To produce many of those exportable goods, businesses need to import raw materials from outside India, which requires foreign currency! Since such import is getting more expensive, resulting goods (manufactured in India) is also becoming expensive – thus eroding the benefit of weakening rupee for export.
 
Weakening rupee also sometimes prompt foreign importers (who buy exported goods from India) demanding a re-negotiation on price (as they claim weakening rupee will benefit Indian exporters also we have just seen that may be the case always).
 
Non residents Indians (NRI) are happy because if they send foreign currency to India now they will get much better return (i.e. more Rs for every $ sent). However, such fun is only possible if they don’t want to take money out of India at a later date. If NRIs send money to India and invests in a scheme in India, when they convert money later from Rs to $/£/€, chances are – due to rupee weakening even more, they will get a very poor return.
 
So, in short, weakening rupee is not a good news for investors especially those who want to invest foreign currency in India and then want to convert that to their native foreign currency once their investment is matured. If rupee falls further between the time they invested and investment matured and considering rate of return and inflation, they may even get same/lower than what they originally invested in $/£/€ terms!
 
In theory, Reserve Bank of India (RBI) can intervene by imposing a temporary limit of foreign currency going out of India but that will irk lots of common public and goes against free market economy principle (which India has adopted since 1990s).

Why Apple is suing Samsung?

2012/09/04

Lately it has been a trend to big multinationals suing each other’s over patent infringement cases.  The Apple vs Samsung battle is the latest one. No doubt Apple got a favourable verdict in a court which is just few miles away from their Californian headquarters.

It is difficult to comment how reasonable Apple’s claim is because nowadays most phones look and behave in very similar way.

But what is the real reason for Apple’s move?

Samsung itself is a very big conglomerate and powerful rival to Apple. The executives in Apple are very well aware that Samsung (and other competitors) will come up with many innovations some of which will invariable be better than Apple’s own.

In today’s cut throat consumer market, first movers do not have advantage for long. Within months (if not weeks) competitors can bring out a better model of the gadget. So majority of profit needs to be reaped as soon as the product is released. At least, before a cheaper better clone is released by competitors.  By suing Samsung, Apple at least made sure their competitor will lose some market share (!) in short term.  In current consumer market popular gadgets sale in huge numbers and majority of other models just lag behind (like what Nokia’s Windows phones are doing now).  That means even a very short term but massive market lead can bring billions in profit.

Whether Apple’s strategy is counterproductive or not, only time will tell. The sentiments of posters in social networking sites and blogs indicate that most people are actually favoring Samsung on this case. So this might be a boomerang for Apple.

What is black money in India?

2012/08/13

Black money is a term used (predominantly in India) to indicate money which has not been declared for tax purpose.

Black money occurs in all economies but in few countries, the amount is massive.

Let us illustrate this with an example; if you pay cash to your plumber and he does not declare this in his income statement, the amount becomes a black money. In most countries, this happens in small scale transaction involving small traders. However, in many countries (especially India and surrounding countries) it happens at a mass scale.

For example, one builder sells a flat for Rupees 10 million. When a buyer is found, he offers it to sell for Rs 9 million on the condition that official transaction will be noted as Rs 7 million and then buyer will pay him Rs 2 million separately without keeping any footprint of the transaction. Thus, they will pay tax on Rs 7 million only. Buyer will accept it as he is getting a price reduction of Rs 1 million. Seller is saving on tax as he won’t declare Rs 2 million as income. So in a nutshell, the tax amount is shared between buyer and seller.

This activity flourishes because of two reasons:

1. People believe by dodging tax they are helping themselves

2. In many cases the practice is so rampant that normal citizens do not dare to buck the trend because they believe law will take side of rich people only (even though when these people are actually in fault)

Some analysts estimate that the amount of black money stored by Indians in Swiss bank is over Rs 1 trillion. Indian government did not show any real interest to tackle this problem because many head honchos in political parties are benefitting from this practice by paying little tax.