The demographics of today’s generation are racing at a speed as that of a rocket into the space.  The amount of shopping than an average person does is more than his needs and requirements. The reasons for this being the wide variety of choices, higher pay among people and higher standard of living. With such advent the frequency of people visiting stores has increased (though the race for online shopping is quickly taking a pace ahead)

Shopping in the olden days used to be limited to the need s and requirements or carried on only during festivals and occasions. People used to carry their own bags so that they need not depend on the shopkeepers to provide them with their carriers. With times changing people believed that carrying cloth bags or rather jute bags in their hands while shopping would make them feel low or decrease their levels of attitude.

The recent law introduced wherein the shopkeepers charge for plastic bags from public (as seen in stores and malls) in most of the cities is followed thoroughly. It was an action to curb people from excessive use of plastic bags and clogging the environment. However ever wondered how much is the amount that is charged for such plastic bags. In comparison to the amount of shopping paying 5 or 10 rupees for each of the bag it really does not burn a hole in the pocket.

The stores and shop owners should instead support the environment in other ways. By charging for the plastic bags the storekeepers do not really think of well being of the environment. Rather they should provide jute and cloth bags for the purchases made by the customers. Paying a little higher for such bags may not seem feasible all the time for the customers. This will make customers’ realize that they need to carry their own bags (preferably cotton/jute) and also the stores will build a stronger and eco friendly environment.

If such interests are considered well by everyone even with a small initiative it will create a bigger impact on the society. It goes well by saying-

Carrying a plastic in hand will make no human great

An eco friendly gesture will positively change your fate.

Contributed by Anju Bafna (Batch 2010, IBS Bangalore)

Posted in Uncategorized | 1 Reply

Bad monsoon- How it will hit key sectors of the economy

Published in the business section of on 26th July, 2012

Agriculture in India is majorly rain fed. Hence, monsoons and the rain god attain significance beyond proportions for the Indian farmers. From offering prayers in order to please the rain god to silly things like watching the tail of the cows (they say if the cow lifts its tail upwards, it signals bumper rains), they do it all! And why not? 55% of the Indian population is dependent on agriculture for their livelihoods.

Not just agriculture, monsoons are important for the hydro-electric power generation too, which in turn reduces the consumption of diesel and other forms of fuel. In addition, it also impacts industries like fertilizers, Fast Moving Consumer Goods (FMCG), Electronics etc.

The Indian Meteorological Department (IMD) downgraded its monsoon forecast from 99% of the long period average (LPA) in April to 92%, this week. While this is clearly not in the normal range, the IMD is  still cautious about not using the word ‘drought’. But clubbed with the disclaimer of errors that come with such forecasts using statistical modeling, gives enough reasons to be worried.

Given that India is currently struggling with below par GDP growth rate, low industrial production, high inflation, high fiscal deficit and weak rupee, the role of monsoons has never been as crucial as in this year. What will be the impact on each of these factors, if the monsoon is any less than normal?

GDP Growth rate: Agriculture contributes to about 15% and the rural economy contributes to about 40% of the GDP in India. Failed crops or lower yields will bring down the GDP further. When the country is still shaken with the fourth quarter GDP growth rate for the year 2011-2012, of 5.3%, a weak monsoon can push it below five. An analysis of the last seventeen years rainfall and GDP data, shows that the effect of rainfall on GDP is generally seen with a lag. For example, in the year 2000-2001, when the rainfall was 12% below normal, the GDP growth rate went down from 5.22% in 2000-2001 to 3.77% in 2001-2002. While there may be other factors as well for the decline in GDP, on an average, a below normal monsoon has resulted in a decline in the GDP in the next year.

Industrial production: Lower crop yield results in lower income for the farmers. This directly translates into low disposable income and hence lower rural demand for FMCG products and white goods.

Inflation: India has been grappling with high inflation since the last two years. Food and fuel comprise of 22% of the Wholesale Price Index. Pulses and Oil seeds are mostly rain fed and will become more expensive, adding to the inflation woes. In general, the price of all food grains, vegetables and fruits would go up too, as the yield would be lower.

Fiscal Deficit: For the financial year 2011-2012, the fiscal deficit of the government of India stood at 5.9% of GDP.  Out of which, 2.34% (that is 40% of the total deficit) is accounted for by food, fertilizers and fuel subsidies. The fuel subsidy may go up as the generation of hydro electric power will go down. Also, more diesel will be used for irrigation using ground water.

The food and the fertilizer subsidy may not go up. The food subsidy in India comprises of the Government of India buying excess yield from the farmers at a Minimum Support Price (MSP), providing food at highly reduced prices to people below the poverty line and providing subsidy to the Food Corporation of India (FCI) to cover its costs.

The cost of food distributed at subsidized prices will not go up as the government will use food stored in their warehouses. However, more number of people may avail of this facility and distribution cost may go up marginally. Similarly, the costs of FCI may not go up due to a poor monsoon. But, if the yield is low, there may not be too much excess crop for the Government to buy. This will result in significant decline in the fiscal deficit.

In the case of fertilizers, after the de-control of fertilizers in the year 2010 (except Urea), the demand for fertilizers has been coming down due to 30 to 50% hike in prices of fertilizers. If the monsoons are bad, farmers will become more risk averse to deploying more capital into the farms and will avoid  expensive fertilizers. This would hit the fertilizer industry. But the government may not get hit with more farmers seeking subsidies on Urea

Rupee: India is a large importer of pulses and edible oil seeds. A weak monsoon will add further pressure on the Rupee as import of edible oil and pulses will increase to meet the domestic demand for them.

A large scale farmer on the outskirts of Hyderabad quips “If IMD has predicted that the monsoon is going to be weak, then I am not worried! Then it will definitely rain. IMD has a dubious reputation for forecasting!”

IMD uses a statistical model, which takes in account the historical rainfall patterns along with factors like the surface temperatures, warm water volume and sea level pressures, etc. This year, IMD has also experimented with a dynamic model, which are recognized as better weather forecasting tool across the world now. In the dynamic model only the current environmental factors are considered for prediction.

Let’s keep our fingers crossed and hope for a good monsoon, for a growing, prosperous India!

My Story

“Life is a cakewalk inside those closed walls of a classroom. Once you pass out with the degree in your hand, you witness the real battle. Suddenly you see all the eyes just staring towards you with expectation and anticipation. People become rationale, relations become demanding and life becomes a struggle without any further assurance of success. The competition gets intense and you just become paranoid with the thought of failure. And just in case if you fail, be ready to see turned backs, broken trust, aloofness along with the blessing of god.”

I passed out of IBS-Gurgaon in 2010 with a good job offer in ING Vysya Bank. Going for meetings, persuading clients, meeting targets and designing portfolios really seemed interesting in the first instance but with the passage of time, it pointed towards the harsh realities of the corporate world. I gained the needed experience from banking industry and joined my dad to head the business of auto security components.

Life seemed great until I suffered some setbacks personally and realized the contrary shades of life. People and environment both are changing at a rapid pace these days which sometimes leaves us perplexed longing for various unanswered questions. Trying to seek answers from my inner-self, I started to write. The writing helped me to relieve out my emotions and I started to preserve them in my diary without sharing it further. Soon, I witnessed some more friends around me going through a similar turmoil not knowing how to stay afloat. I made an attempt to help them with my writings and was luckily blessed with success. And since that point of time, there has just not been any turning back. I got an aim to work for which not only would fulfill my passion but would benefit each and every reader understanding those deep words.

Every poem I have written till date clearly has a story and a message intended to help the people undergoing through the same situation. Words have the power which no weapon can match and my collection of poems is a simple attempt to ease out the pain all around.  The ease and dedication with which every poem has been written would surely connect with the readers and would leave them motivated and inspired in life. Being famous has always attracted me from childhood but the fame has to come only after creating a difference in the society so that the world is a better place to live in for everyone.

Currently I am on the finishing stage of my poetry book which has already received some great publication offers. I am also working on my untitled fiction novel which I feel would be loved by each and every person having a heart.  My poem “The Waiting Heart” has been published in June 2012 Edition of “The Taj Mahal Review” which is Cyberwit’s International Journal devoted to Arts, Literature, Poetry and Culture. My poems on worldwide problems like “Global Warming” and “World Peace” have received appreciation from poetic groups and received invitation for entry in different contests. I am also an active member of poetic groups like “Delhi Poetree” and “Caferati”. We at Delhi Poetree are also organizing the “Thousand Poets Reading” starting October 28, 2012 which would feature writings of some great poets from all over India.

For any suggestions and insights you can email me at

You can also get in touch with me at Facebook-

Contributed by Angad Singh Saluja ( Class of 2010, IBS Gurgaon)

It need not be Taxing

This article was originally published in Postnoon on June 20th, 2012

It is that time of the year again when we scramble to put together our salary slips, investments, collect form 16 and 16A’s, run after Chartered Accountants, all in order to meet the deadline for filing our Income Tax returns. Most of us handle pretty complicated decision making scenarios with ease, in our respective work domains. However, this entire process of filing the tax returns seems unfathomable to most of us. The tax rate slabs, the deductions, the exemptions and the sections! This article lays down the basics of Income Tax returns filing for the Assessment Year 2012-13 (that is, financial year 2011-12).

Tax Slabs and Standard Deduction

The tax calculations for an individual depend upon the gender and the age of the person, apart from the income levels. There is a minimum standard deduction of Rs1,80,000 for a male individual below the age of 60. If we are doing the calculation for a woman, the standard deduction will increase by Rs10,000 to Rs1,90,000. Similarly, if the individual is a senior citizen above the age of 60 but below 80 years of age, the standard deduction is Rs2,50,000. For people above 80 years of age, the standard deduction is Rs5,00,000/-.

The Tax rates are 0, 10, 20 and 30%, depending on the level of the income. An illustration of how the tax rates are applicable depending on the income, is presented in Table 1.

For the current Assessment year, the tax slabs and calculations for a male individual or an HUF will be as follows:


Various sub-sections of Section 80 specify deductions which can be deducted from the Income, to reduce your tax liability and to encourage people to save in the specified instruments. Once again, this is not an exhaustive list, but covers most of the popular deductions:

The section 80c, 80ccc and 80ccd cover premium paid for Life Insurance policies for self, spouse or child(ren); contributions to Employee or Recognized Provident Funds; Post Office Savings Schemes; Subscriptions to Unit Link Plans of LIC, Annuity Plans or Mutual Fund Plans; Admission Fees for upto two children (this is not an exhaustive list). The upper limit for deductions available under section 80c, 80ccc and 80ccd together is Rs1,00,000/-.

Section 80ccf allows for a deduction of up to Rs20,000 invested in long term infrastructure bonds issued by approved institutions. The investment has to be for a minimum period of 10 years, with a lock in of 5 years. Section 80d is the deduction for premium paid for mediclaim or medical insurance. It is Rs20,000 for senior citizens and Rs15,000 for everyone else. One may also claim for premiums paid for parents who are senior citizens, over and above their own premiums.

Section 80E allows for deduction of interest on loan taken for Higher education, while section 80G allows for deduction of donations paid to approved trusts and NGOs. Section 80 GG allows for deduction of house rent paid (HRA). The amount to be deducted for HRA is the lowest of the:

 the HRA received, or

 50% of salary for people residing in the four Metro cities and 40 % of salary for any other city, or

 rent paid in excess of 10 % of salary

Online Tax Filing

Taxes can be filed through a Chartered Accountant or a Taxation lawyer or one can do it online. If your income is below Rs5,00,000 lakhs, you are not required to file your tax returns if you are a salaried person and receive a Form 16 from your company. On the other hand, according to a notification by the Central Board of Direct Taxes (CBDT), if an individual or a Hindu Undivided Family (HUF) earns more than Rs10 lakhs, it is now mandatory to file the returns online.

You may directly file your returns through the official website of the Income Tax Department: or you may file your returns through other sites which may charge you a nominal fees of around Rs200.

It is a good practice to recheck your tax return with the Form 26AS. Form 26AS is a statement of all taxes deducted or collected at source and paid to the Income Tax Department on your behalf, against your PAN number.

Insure Yourself to Skip Worries

This article was originally published in Postnoon on July 13th, 2012

Having realized the importance of Insurance, Mr. Mukherjee had bought a Life Insurance policy last month. However, he was still a worried man. He caught up with Prof. Nicky near the joggers park in their gated community.

Prof. Nicky: Hello Mr. Mukherjee. Good to see you. What brings you here? I thought you were not the jogging types.

Mukherjee: You are right. I never jog. I came looking for you. I bought a Life Insurance policy last month which will protect my family in the event of my untimely death. But what if something bad happens when I am still alive? What if there is a theft or a fire in my house? What if I meet with an accident and need a lot of money for the hospital? How will my family and me handle such an eventuality financially?

Prof. Nicky: What you need is insurance against these eventualities, for peace of mind.

Mukherjee: Exactly.

Prof. Nicky: There are insurance policies for fire, theft, accident, health, etc. These are together known as General Insurance and are sold by ‘Non-Life’ Insurance companies. In fact some of these policies are now a day’s made mandatory by the Government. For example, the third party liability insurance if you own a vehicle. Many companies provide medical insurance to their employees as part of the compensation. Banks insist on an insurance on property if you are taking a loan against property.

Mukherjee: But what about me? I am a businessman. And I have not taken a loan against my property. Its ancestral!

Prof. Nicky: Then you buy it on your own. You must insure your property against loss or damages. Most of the General Insurance companies determine the premium based on the value of the property and the sum assured. When determining the sum for which you want assurance, you should keep in mind things like anticipated damage in the event of a fire or explosion. How much will it cost to renovate? What all do you want covered-Only the property or the fittings and fixtures as well?

Mukherjee: So you mean that the Insurance company pays for the furniture and fittings as well?

Prof. Nicky: Absolutely. Just your premium will go up. Not only this, they will cover injuries to you as well if you want, under a ‘house holders policy’.

Mukherjee: Amazing. How about accident and medical plans?

Prof. Nicky: There are many different types of Medical and Health Insurance Policies. Depending on the terms of the policy, they can cover you expenses from hospitalization to diagnostic tests, to medicines, ambulance and other related expenses. Under accident covers, you may buy policies that cover you and your family for permanent or temporary, total or partial, disability. You may also seek cover for funeral expenses if you wish!

Mukherjee (gets angry): Professor, please don’t joke.

Prof. Nicky: Mr. Mukherjee, I am not joking. It’s true. I am just trying to tell you that you can buy a policy for anything now a days. It’s you who has to decide what is important for you to secure and insure. For example, film stars ensure their body parts, because their fame and success depends on those attributes.

Mukherjee: You finance people are genius! You make a product out of everything!

My condolences to the Ladies


A city formerly known as the “City of eastern light” and commonly referred to as the “Gateway” to the north east region of India has been in the spotlight recently due to an infamous incident. I don’t want to dwell on the details of this incident and the video which went viral, simply because enough has been spoken about it, and enough opinions have been formed already.

However I do want to dwell on a slightly sensitive topic which has been racing in my mind for quite some time now, even before the Guwahati-molestation case became a subject of national concern.

I want to talk about the conflict between two very distinct, yet heavily supported, points of view regarding the subject of a woman’s modesty being outraged. The opposing points of view being that “Women should know better i.e. they should dress carefully and be mindful of their surroundings” Vs “Rapists are the ones to be blamed”.

  1. “Women should know better”

Well, this does seem like an archaic line of thinking and I can sense the blood of feminists across the board boiling with dissent. However I intend to provide a rationale for this line of thinking, only because it does exist. The rationale being that; we know there are men out there, who are capable of such dastardly acts, committing this crime day in and day out without signs of stopping anytime soon. The only course of action left for women to take, is to be scared and careful. It’s a sorry state of affairs to be in, but wouldn’t everyone rather be careful and avoid such incidents from happening to them? This thought first came across my mind a few years back, when one of my female friends voiced her concern about molestations and how it can be dealt with. The adage ‘Prevention is better than cure’ seemed befitting and that’s what I told her. I don’t want to entertain thoughts of equality of sexes and how even men can be victims, frankly because I do not hear or read of many men being molested or raped in India, and not liking it.

2. “Rapists are the ones to be blamed”

This line of thinking does not need much elaboration or discussion but I will give it the due attention. Simply speaking the blame lies only on the offender and it should in no way be shifted to the victim. Let her be dressed provocatively or highly inebriated, it does not give any person the right to abuse her or take advantage of her. When men can walk around anywhere anytime of the day, dressed however they please, why should women be singled out for their choice of clothes or the places where they choose to be? However such double-standards don’t just exist in our country, but are prevalent to an extent that we can’t imagine. All these double standards have come into existence only because women are subject to more sexual offences than men. Period.

I do not intend to compare and say that one of the above approaches is better than the other, or that one is right and another is wrong. Good or bad are words of subjectivity and i’ll let them stay that way. I only intend to lay down the consequences, because they are concrete. The 1st approach, no matter how narrow-minded it may seem, will lead to a future where women are constantly judged for their outlook as well as behavior. The 2nd approach does aim to free the victim of any responsibility for the crime, but does it cleanse the trauma faced by her?

Truth be told, sexual deviants are criminals just like thieves and arsonists. The degree of their crime varies from groping to rape and assault. What amazes me is that when such an incident unfolds in full public view, how does the culprit manage to escape? Would the same happen if someone tried robbing someone in broad daylight? Wait a minute, yes it probably would!

As a society we are a group which just loves to look and ogle. Starting from drunken brawls, to petty thievery, people choose to distance themselves from an incident unfolding in public. We pass the buck, and we do it with panache. “The police are responsible for safety, why should I run behind a thief or molester?” Of course there are a few who would act in such a situation, but these few include the offenders in such incidents as well. So that makes for a really small group of people who would, without any self interest, act and help someone who is in trouble.

If being idle in such situations is not enough, we have another way to deal with such issues. We talk. We talk and talk and talk about what we think is right and how things should be done. Dissonance is a funny thing to have. The only way to rid oneself of it is by giving suitable explanations and achieving some sort of closure. We do this by talking. What we ideally do, is discuss a topic to such an extent that all the possible arguments are exhausted and after gaining that closure we move on. Carry on with our daily lives, hoping we would never be subjected to such torment.

Though this seems like a rather bleak outlook, it is the truth.

As a group of individuals, we do not act, instead we watch and we talk. (Check if you don’t believe me)

I would love to be proved wrong.

I’d love to read about how a crime, on an innocent girl was stopped by a group of onlookers. I doubt that would happen anytime soon though.

On behalf of our society, I offer my condolences to the ladies.

Indian Tourism: Bagging Losses

Ever wondered when asked about the destinations you dream to travel, destinations in India do not come up as the priority options. A country which is undisputed winner when it comes to diversified beauty may it be forests, wildlife, mountains, beaches, architecture, pilgrimage; captivating India can surely outclass the world when it comes to beauty and diversity. With such a big bag of variations, ever wondered why we can’t still hold mere 2% of international tourists and countries like Thailand, Bangkok, Singapore are ahead. Talks about the quality Indian tourism destinations have in offering you have a lot to discuss; the beauty of Himalayas is wilder than the Alps, the beaches of Goa are the undisputed New Year celebration destinations, Scenic beauty of eastern India can by far outclass major tourist destinations across the world.

Dating back to the 17th century when India was considered as an economic powerhouse, the country was the richest economy of the globe handling almost a quarter of the complete international trade. No doubts India is still an economic warhorse, but the country is ranked as 48th as of date on the list of international arrivals. What went wrong that countries like Thailand, Bangkok miniature of our size had 11 million visitors in the year 2010?

Give it a thought, what would you choose a sun bath on the beaches of Goa or a sun bath on the beach of Miami? A walk through the corridors of Himalayas,or a walk through the corridors of Alps?

Every 2nd of the 5th tourist who travels to India says there’s sheer lack of infrastructure in the country. The country is lacking basics from the word go. May it be sanitation, housing, hotels or the transport industry; major pitfalls in these basic amenities have turned India into a big NO in terms of travel preference. The major tourist destinations in India which house immense treasure in them are majorly accessible via rail routes. With inefficient railway system and over-crowded trains the journey houses tough competitions for the travellers. With rising disposable incomes and boom in the travel industry the hotel industry needs to catch up fast with the pace. Major travel destinations across the country go unexplored due to lack of hospitality. Due to high hotel to person ratio, travelers avoid travelling to these destinations, making the country loose several dollars.

Sorry pictures of the heritage across the country may it be the Taj Mahal of Agra or the forts of Rajasthan have become a reason of disgust for almost all the visitors. With all the care and handling given to the rodent and the spider department a desolate image is on its cards and speeding up. Majority of the tourist guides are mystery story tellers, a local tourist guide could even guide you the red fort saying its Humayun tomb. Leaving aside the odour one contends with across the country due to freedom of littering and poor sanitation, a visit to majority tourist sites across the country is accompanied with a luxury of beggars, touchers, feelers and the road side vendors.

Derogatory colloquial language is becoming an integral part of the foreign tourist visits to our country. The words like “firangi” and “habshi” are a common sight whenever an overseas individual passes by local residents. Several cases of economic and sexual exploitation against foreign individuals have lead to countries issuing travel advisories to India. The government’s Incredible India campaign and “Atithi -devo-bhavah” seemed to have lost their charm in the exploitation mystery. The management has forgotten the concept of mass tourism across the country. Unless you can shed hefty dollars, dig deep to buy luxury and have a trustable tourist guide, India is a tough job on your own.

With recent advancements in the hospitality sector and the government showing high interest on the security of tourists the tourism sector is showing growth. Services like Metros, improvement of facilities in railways, heavy competition in the airline sector are signs of rising tourism. The country is making efforts but it needs heavy fueling. In the modern era where marketing is becoming a trump card, India should play its aces properly. With vast variety and diversity available all across the country, India should carefully present its brand image to the world. With word of mouth being a great source of marketing the strategy needs to be developed with accuracy and perfection. The country has a major demand-supply setback and is losing heavenly on realizable potential.

The Impact of Online Graduate Programs

Today’s post by Linda Zabriske touches on an issue important to IBS and all other learning institutions providing advanced degrees—online graduate programs . Her article will discuss the potential drawbacks of these programs and what still needs to be done to bring them up to par with traditional learning environments. Zabriske currently collaborates on a site for people interested in learning about graduate degree programs.

As online education rises worldwide and more students get additional certifications and complete doctorate programs remotely, many economists speculate the massive influx of e-learners will have a continuous impact on the global market, though not necessarily in a positive way. In theory, web-based learning should provide much-needed opportunities for students. But many employers posit that traditional college is still the most effective channel by which to receive education – and they note the rise of online programs is merely over-saturating the job market with under-qualified applicants.

Yet, online college education is now a worldwide phenomenon.

Some countries have seen massive growth in online college education in recent years. The 2011 Sloan Consortium reported that more than 6 million American students – or roughly one-third — were enrolled in at least one online class. Over the past decade, the United Kingdom also recorded a 28% increase in the overall number of undergraduate and graduate students – and the advent of online learning is partially credited. While enrollment numbers in India are still low, the nation recently launched the National Knowledge Network, a one billion dollar project that virtually connects more than 1,500 colleges and universities across the nation. And though only 384,000 Canadian students, or 11%, enrolled in at least one online class last year, the nation’s largest web-based academic provider, Canadian Virtual University, has reported a steady rise over the past decade.

But to many, the online college spike is not a good thing. Compared to ‘traditional’ college, web-based higher education presents a number of challenges that are problematic to graduates-turned-job applicants. Some critics have posited that online university courses are overall inferior to campus-based courses, citing inexperienced faculty and insufficient course materials. Others argue that online curricula vary nation-to-nation, and this subjectivity goes against the universality that is crucial to global economic progress. Currently, many online programs are only practical if the graduate plans to work in his or her home country. Finally, critics have also voiced concern about the lack of standardized material, a deficiency that hinders development on a global scale.

Many groups and organizations are hard at work to mitigate these challenges. For instance, in November 2011, panelists for the World Innovation Summit for Education agreed that online education should be subjected to universal standards in order to benefit the global economy. Significant aspects of this system would include a standardized curriculum, faculty orientation and training and a strong system of student and peer support that students can utilize throughout their online program. The panel also identified contextual challenges that might hinder a universal system, such as cultural/language misunderstandings, varied learning styles/academic standards and public perceptions of e-learning as a viable educational outlet.

Despite these efforts, public perception of online learning programs remains speculative. “Presently, the job market is more willing to hire an entry-level online graduate in accounting than a high-level marketing executive with an online graduate degree,” wrote Global Economic Intersection contributor Brooke Folliot. She noted the overall economic impact of these programs would be significant – and ostensibly quite positive – if online academics were held in the same high regard as traditional college. But most online graduates are currently unable to find work, and the increased number of unemployed and underemployed individuals – many of whom are forced to default on their student loans — has merely hurt the economy.

The rising number of online students heralds a new, digital age of global education. However, the transition will not be complete until web-based programs are in equal standing with campus-based academics. In order for online education to benefit the global economy, employers must begin to consider graduates of these programs for positions that might otherwise be awarded to traditional degree-holders.

Authored by Linda Zabriske.

Rain, Rain Pour Again

This article was originally published in Postnoon on July 6th, 2012

Professor Nicky left for her native village in the Karimnagar district last week. She needed a break from Srikanth and his questions on Derivatives. Nicky loved the smell of the countryside and secretly harbored the desire to retire and live on the farms one day. It is the rainy season and the best time of the year to visit her ancestral farms. The soil is moist and the seeds are sown, the saplings are just sprouting from the soil at this time.

Nicky had heard that the Indian Meteorological Depart­ment (IMD) had predicted average monsoons this year, though slightly lower than their earlier prediction. For the sake of the country, she was praying for normal monsoons. The economy is as it is showing signs of a slowdown. A weak monsoon will push it further into lower growth path.

The Indian farmers are majorly dependent on the rainfall. They go to any extent to please Indra, the Rain God. In a village, they tie two frogs to a pole and get them married. They say that it brings good rainfall! On her farm, Nicky got into a conversation with Bhasker, the supervisor. Bhasker is more knowledgeable and well read than one would expect a rural farmer to be. Whenever professor visits the farm, he does not miss the opportunity to have a dialogue with her on the economy.

Bhasker: Professor, we farmers are worried about the monsoon. That is understandable. Why is everybody else worried about it? People come on the television and say that if it doesn’t rain, it’s going to be very bad for the economy. Why and how is that?

Nicky: Bhasker, the contribution of agriculture constitutes about 15 per cent of our GDP. In the last quarter of the year 2011-12, our GDP growth rate was only 5.3 per cent. If the monsoons are weak, the contribution of agriculture to GDP will go down further. And other industries like electronics and fast moving consumer goods will also experience a slow down since the rural demand for their products will go down if the farmers don’t make money.

Bhasker: Oh… so the impact is much deeper than what I though.

Nicky: That’s not just it. It’s in fact much more than that. Food inflation would also go up if the monsoon is weak. Lower yield will result in lower supply and hence higher prices. A few necessary food articles might need to be imported as well, driving up the demand for dollars, causing the rupee to weaken further. As it is in the last year, rupee has depreciated close to 25 per cent.

Bhasker: Hmmm…no wonder everyone in India so eagerly tracks the monsoon!

Nicky: Yes. It has a huge impact on the key economic figures like fiscal deficit, growth rate and inflation.

Bhasker: You just explained about growth rate and inflation to me. But what about fiscal deficit?

Nicky: The government has budg­e­ted Rs 43,580 crore as fuel subsidy for the year 2012-13. In the event of monsoon being weak, the gene­ration of hydro-electric power will go down and the use of diesel to pu­mp water into the fields will increase. Both of these will result in an increase in the import of fuel, causing the fuel subsidies to go up. This in turn will increase the fiscal deficit.

Bhasker: Professor I must run and tell my grandmother to tie two more frogs to the pole and get them married!

Understanding Options

This article was originally published in Postnoon on June 29th, 2012

Srikanth: Hi Professor! Hope you have some time because I have a ton of questions!

Srikanth: How would buying an option differ from buying a stock?

Prof Nikki: when you buy a call option, you own the right to buy the stock. But you do not own the stock and therefore have no right over dividends. Also, the extent to which the price movement of the option imitates the price movement of the stock depends on the strike price and the stock price.

Also, you own a stock till you sell it, but an option expires. It is an instrument with limited life.

Srikanth: What do you mean by the strike price?

Prof Nikki: Strike price is the price at which you will buy or sell the underlying asset. The current market price, on the other hand, is known as the spot price.

Srikanth: So when would you suggest I buy options?

Prof Nikki: There are several scenarios when buying options would be a good idea. The first case I can think of is when the prices of a stock you own are falling rapidly.

This is a situation that no one likes. And to protect yourself from potentially large losses, you can buy a put option to sell the stock at a certain acceptable price.

Srikanth: A quick question here Prof, can I buy options in such a way that I can make a profit by exercising it right away?

Prof Nikki: Hypothetically, by buying an in the money call, that is, a call with strike price less than market price, you should be able to make instant profit. But in reality, the options are priced to take into account the time value of money. Which means, factors like interest rates, time to expiration, volatility of the stock etc. are taken into account by the market, making it very difficult to make money by exercising the option right away.

Srikanth: Hmmm… so what are the other situation where buying an option would be good for me?

Prof Nikki: Like I said earlier, there are several situations. Before I tell you more, I really need you to understand that options are instruments that offer immense leverage because you are paying only a fraction of the money in the form of the premium. You actually pay for the stock or the commodity when you exercise the option. While this seems like a good strategy, you should always be careful and manage risk.

Srikanth: I understand Professor… Do you think it would be a good idea to buy call options on a stock that I am optimistic about?

Prof Nikki: You are learning fast indeed! It is a good idea. But please remember that if you plan to actually exercise the option, you will need to have enough capital to buy it at the strike price.

As a matter of fact Srikanth, there are several strategies that one can use with different combinations of options. But the more complex strategies need to be managed regularly. It is advisable to take help of a portfolio manager if you are serious about investing in futures and options.

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