Sunday, January 3, 2010

COP15: Did we make much of headway anyways?

There has been much ado about the recently concluded Copenhagen Climate Accord. Through this biggest gathering of world leaders in the history of United Nations it was being hoped that the world will move from the non-binding statements of Kyoto towards perhaps, a more meaningful and committed dialogue for creating a blueprint for change. However, what has resulted instead is a political maneuver for a deferred action. What is strikingly strange though is to see that in spite of the awareness towards the greatest threat that humanity faces and the associated costs of not acting soon, the Accord couldn’t overcome the bi-polarization that we find ourselves in, between the developed and the developing world (the new economic powerhouse, BASIC: Brazil, South Africa, India and China).

Discord in the BASIC Targets
Individual voluntary targets were announced by the BASIC nations for reducing the energy intensities of their economic growth. While China announced a target of 40-45 percent reduction in the emission intensity compared to 2005 levels by 2020, India went ahead with a target of 20-25 percent. However, setting of such individual targets has not really been taken in as sacrosanct and instead has formed a mere basis for a template for future negotiations.

Highlights of the Deal
The deal, however, has been able to reach to some consensus on the following points:
A global goal to reduce worldwide emissions by 50 percent by mid-century
v Developed countries to set their emission targets by February 2010 and developing countries to list their actions
v Adherence to targets by developed countries would be subject to international monitoring
v Actions of developing countries supported by external assistance would be subject to external monitoring and verification
v Actions of developing countries supported locally shall be monitored and verified locally in accordance with international consultations and analysis without impinging on the sovereignty of nations
v Long term funding to the tune of $100 million per year by 2020 and making available $10 million per year for short-term funding from 2010 to the poorest and the most vulnerable to climate change and
v A review of the overall agreement in 2006

So, while the US has undoubtedly been able to maneuver its way out unscathed with no targets being imposed on it from outside, it has also been able to put BASIC in line with the developed countries by accepting a climate discipline. However, the Accord also finds the BASIC as a contended lot as they have been able to retain the “differentiated responsibility” without much damage to their long-term energy plans and independence from outside agencies observant of their self-regulated actions.
The Developed nations, who have been historically responsible for the climate change and the world that we find ourselves in today, have offered the Developing nations a financial assistance of up to $100 billion annually by 2020, with priority to the vulnerable nations. However, there’s no guarantee that the Copenhagen Accord will even be implemented as it has not been formally adopted by the Conference of Parties (COP).
While China has been painted as the biggest hurdle to a comprehensive agreement, it cannot be overlooked that despite the fact that the US is the biggest polluter per capita in the world, it has to date only offered emission cuts of a paltry 3 percent based on 1990 levels. China, like India and Brazil still emits a relatively small proportion and millions of its citizens continue to live in poverty.
Thus, just as Greenpeace makes a point, living standards need not be compromised. Small steps like increased focus on energy efficiency, better use of renewable resources of energy, trimming of the hefty $250 billion annual subsidies to the fossil fuel industry, innovations in design etc. can perhaps go a long way in making renewable energy cheaper than the conventional energy and thus reduce our carbon footprint.
We might have a Plan B for everything but just as the demonstrators on the streets of Copenhagen had upheld, there is no Planet B. The planet cannot be overlooked on the pretext of advancing out national aspirations and commercial interests. So while the Copenhagen Accord may have been useful for taking notes for future parleys, it hasn’t yet been significant, as it was touted to be, in enforcing a legally binding mechanism upon the nations for preventing climate change and the apocalypse that faces humanity. It is therefore imperative and crucial that the developed countries pledge deep emission cuts within a month and sign a legally binding pact at the climate change talks in Bonn.

Wednesday, November 18, 2009

Download the ppt on "Is world economy on path of recovery"

It was an interesting session on " "Is world economy on path of recovery " with wonderful speakers giving all insights on the recovery and the vibrant audience.
I thank you all for making the 1st session of Discussion forum a success. :)Thanks Mihir,Purnima and Raghunandan and offcourse the smart batch of 2011.

You can download the Power point presentation by copying and pasting the given link in address bar.

Link- World Recovered from Recession-1.ppt

You can post your comments and queries in this thread.
Enjoyy Discussing!!

Wednesday, November 4, 2009

RBI buys Gold from IMF

The central bank of India,RBI has bought 200 metric tonnes of gold from IMF in $ 6.7 bn $.India is now the 10th largest holder of Gold Reserves.
The big question is the reason behind such a move.Is it a move to diversify its reserves (Yes!! the rising deficit of US and declining Dollar) or to have more say in IMF or ....?Lets uncover the reasons of this move by RBI and its effect on market of gold,BOP outlook of India,financial market...

Sunday, September 27, 2009

Bharti-MTN Deal

The $ 24 billion Bharti- MTN merger deal has become an issue of international finance ,as South African Govt wants the dual listing of the merged company . The positive signals by the UPA Government like the support of Pranab Mukherjee and initiative of PM Manmohan Singh in G 20 summit can be inferred as the start of major leap in the direction of capital account convertibility. If deal goes through, MTN will hold 36 % in Bharti Airtel and Bharti will acquire 49 % in MTN.
The dual listing of the merged identity in both Bombay Stock Exchange and Johannesburg Stock Exchange requires full capital account convertibility of Rupee. This implies that the equity share of Bharti Ltd can be bought and traded in South African Rand. Till now the cross listing of companies was allowed which implied partial convertibility. The equity shares were issued to the custodians outside India, which were issued in the form of GDRs/ADRs to foreign investors. The ADR/GDRs can be converted to equity shares on the request of investors but once converted; they cannot be changed to ADR/GDRs.
What does the dual listing have implications for India Inc? Is it feasible for India to take such a major step at this stage (when the conditions laid by Tarapore Committee are far beyond realization)?

Tuesday, September 22, 2009

G 20 Pittsburgh Summit

The G20 club of rich and developing economies will hold a two-day leaders summit in Pittsburgh on 24-25th September’09.
G 20,the group of developed and emerging markets ,comprising of US, India , Argentina, Australia, Brazil, Canada, China, France, Germany, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, Britain and the EU. The group of countries accounts for 90 percent of the global output and 80 percent of world trade.
The proposed key issues to be discussed are the Doha round, management and regulation of World bodies like IMF, rebalancing of power within nations.
US meet to discuss the plan to build a more balanced developed economy, a framework to boost the savings in US and reduce the export surplus of Countries like China.
The developing countries will seek more say in world bodies like IMF, World Bank International Fin Corp. India has committed to invest up to $10 billion in the IMF to enhance its say in IMF.
Important and diverse issues are on cards. The result of the summit can hold solution to key problems looming over the world trade and growth.
And as the world leaders meet, the world watches..

Friday, September 11, 2009

India: An emerging source for FDI?

Outbound Foreign direct investment from India has increased at annual growth rate of 64 per cent in the last five years. India's FDI to the US was USD 4.5 billion in 2008 and USD 2.8 billion in 2009.Inbound FDI showed a 56 percent increase to USD 3.51 billion from USD 2.25 billion in the year-ago month.
Increasing outbound FDI establishes India as a key global player. It can be for increasing focus on geographical expansion, transfer of technology, access to raw materials and moving up the value chain. But it definitely points towards as start of reversal of power relations between countries.

Thursday, September 10, 2009


Will the most common word spoken, dreamt, dreaded, discussed, analysed, lived-“recession” will be out of people’s dictionary or stay for a long period before we could see some change in the economy and hear the most awaited word ”recovery”?

Recession is defined as “two consecutive quarters of negative growth”. The world economy entered into deep recession in the last quarter of 2008. The global trade and the industrial production saw its sharpest decline in the post world war era. Officially, recession was declared in US in December 2008 while UK announced in January 2009. What followed was a mere guess – declining production, rising unemployment, falling household consumption and declining investments.
So with the world economy showing some positive signs(green shoots), the question taking rounds is whether it will be L,U,V or W recession.

Now let me explain the meaning of alphabets in present context? V shaped recovery means economy will bounce back from recovery with a bang and recovery will be strong. In U shaped recession, trough is not well defined like V shape. W shaped recovery means sharp decline, followed by a sharp rise back to the previous peak, followed again by a sharp decline and ending with another sharp rise of output. L shape means that output does not return to its pre recession level and grow at permanently lower path.

What are the indicators? Stocks Index, Commodity prices, Industrial production, employment, growth etc.
According to Ranjeet, the magnanimous stimulus and fiscal measures that has created deep hole in government’s pocket all over the world has started showing positive signals. The industrial production in US grew by 0.5% in July 2009, the first increase in nine months. The UK economy contracted by only 0.8% in the second quarter this year much lower 2.4% contraction of the first quarter of 2.4% contraction. The French and German economies both grew by 0.3% between April-June while Hong Kong emerged out of recession posting 3.1% growth during the same period. China's economy grew at an annual rate of 7.9% in the second quarter this year up from 6.1% in the first quarter. So can we say it’s a U-shaped recession? A U-shaped recession illustrates a rather long and deep bottom with recovery being seen in about 2 years.

But Neha Bhatt rules out V shaped recession as it’s already over one and a half year since the onset of the one of the biggest recession. A V-shaped recession illustrates a steep decline, a relatively short stay at a bottom and a rapid recovery in a period of 8-10 months as was the case with the 2001 recession.
Further, Ranjeet observes that many economists reports that the signs of revival are temporal and a true revival is still far away. The households are still cautious and in savings mode delaying their consumption. The weak recovery in demand is still stopping the producers from huge capital investments. Large fiscal deficits and its debt financing leading to rise in bond rates and capital flight is causing crowding out of private investments. Given all these, it seems the recent signs of recovery are just an oasis with the true recovery still far away. The fear of a double-dip recession can thus be not ruled out in the current situation. A double-dip recession refers to a recession followed by a short-lived recovery, followed by another recession also known as W-shaped recession.

Only time will decide whether it’s a L, U, V or W-shaped recession.
What according to you will be the shape of recovery? and why?
Different indicators indicate towards different directions. According to you, which indicator gives better insight about the recovery?