Economics at Indian Roads

• Watchmen: They are strictly not road side vendors, but still their work gets done mostly on the road side. Most houses employ old ex-army (or simply old) men as "Watchmen". They are not security guards nor are they healthy enough to catch a thief. They simply deter unwanted people from entering the premises.
• Tailors: Each road has at least 1 tailor plying his trade under the shade of a large tree. They are mostly quite cheap and deliver on time.
• Ragpickers: They are responsible for strewing the waste outside the garbage bin.
• Peanut Vendors: Either roasted or plain peanuts are sold in push carts.
• Old Newspaper Vendors: If you have old newspapers, they are the ones that collect them and pay YOU money after weighing the amount of old newspapers you have.
• Plastic Container Vendors: In India, water shortage is acute and there is a lot of demand for large plastic containers. Bringing one from a store is a lot of hassle (given that most Indians have two-wheelers rather than four-wheelers). These vendors carry huge plastic containers on their cycles (don’t ask me how they do it!) and barter it for old clothes.
• Cobbler: They shout out "Jod Repair" (where "Jod" is an antiquated word for "Footwear") as they walk by.
• Barbers: In Northern India, it is quite common to see road side barbers who also deliver a good hair massage.
• Flower Seller: They sell flowers that idol-worshipping Hindus put on the illustrations of Gods and Goddesses.
• Vegetable Vendors: They sell vegetables at slightly higher prices than usual as they push their cart from one house to the other.
• Banana Vendors: In South India, it is more common to see banana specific vendors who sell at least 3 varieties of banana.
• Fruit Sellers: They generally sell anything other than bananas (if bananas they sell some exotic variety of Bananas).
• Astrologers: I suspect they are a dying race.
• Coconut Vendors: They are mostly found in South Indian states where coconut water is a good thirst quencher and a good "cooling" solution for braving the heat. Not to mention, it is cheaper than any of the "cool" drinks.
• Chaat Vendor: "Chaat" is a specific variety of North Indian Snacks. Even in South India they usually sell some of these items on the road side.
• Tea Vendors: They usually ply their trade in cycles carrying big containers of hot tea and plastic cups to serve them in. They come around morning 9 a.m. and evening 3 p.m. Their usual customers are other roadside vendors like Watchmen, Tailors, Newspaper men, etc.
• Stuffed Toys Sellers: These guys are very smartly dressed and use parked cars to showcase the kind of stuffed toys they have. Most of the time, all of them sell the same kinds of toys from China which are usually stuffed big toy tigers or teddy bears.
• Ear Cleaners: Though not a part of the South Indian road market, these people are quite a force in North India.
• Temple Priests: In many roads of India, temples awkwardly jut out into the roads (they cant be demolished as they will cause an uproar in religious India). Priests either belonging to neighbouring temple or dedicated to that temple start early morning’s ablutions for the Gods. It is also common to see small temples for Virgin Mary.

Source : www.nimbupani.com/blog

The Impending Brand Bubble

Now, another bubble is hiding in our economy. This bubble represents $4 trillion dollars in S&P market capitalization alone. It’s twice the size of the subprime mortgage market. And it accounts for over one-third of all shareholder value. Credible evidence suggests that financial markets think brands are worth more than the consumers who buy them. The constantly rising valuation of major brands is creating a brand bubble, one that could erase large portions of intangible value in firms and send a shockwave through the global economy.
Figure 1.1 illustrates the typical value exchange between brands and consumers. In essence, the multiples that markets place on brand value overstate actual consumer sentiment, so the value creation that brands bring is greatly exaggerated. That is, Wall Street is long on brands; consumers are short on brands.
Fissures are forming in the pillars of brand equity. This conclusion is based on our research of fifteen years of brand and financial data from Y&R’s BrandAsset Valuator (BAV), the world’s largest study of consumer attitudes and perceptions on brands. Working with professors from several leading business schools, we’ve identified a growing divergence between brand valuation and brand speculation. Our data indicates that investors are irrationally overvaluing brands, and that if leading companies don’t take steps to change their approach, more than a few of them might soon experience dramatic declines in market value.
Of course, this is not to suggest that some stellar brands are not genuinely outperforming the market and setting new standards in customer loyalty and financial performance. But in most cases, these are precisely the brands that serve as examples of what other companies must do to inject value back into their own brands. These are the brands consumers swoon over, tell their friends about, and buy time and time again. These are the brands that drive a company’s stock beyond the estimates of financial experts. These are the brands that create surprise earnings quarter after quarter.
The problem is these stellar brands are becoming fewer in number. In today’s changing consumer climate, exceptional brands are just that — exceptions. Most of the brands lining our supermarket shelves, hanging from department store racks, or touting their superiority on television are experiencing a rapid diminution of perceived value. Consumers are simply falling out of love with a majority of brands they buy.
This warning about the prices of assets such as brands being in decline is, without doubt, contrary to what most people believe. Just as with equities and property in past bubbles, the market values of brands have been consistently rising for decades. Even in today’s recessionary climate, brand valuations reports continue to proclaim consistently rising brand values each year. How then is a brand value collapse possible? Thousands of brands have experienced large and long-term successes driving their corporate stock in a continuous upward pattern, enriching executives and investors alike. What exactly is the nature of this bubble? Are we talking about a simple market correction that will be forgotten in a few months or a year? And, if that is so, then why bother with it?
In reality, this is not a simple market correction. Our research foretells a significant loss of value for many brands that will jolt business and investors alike. Markets, being about expectations, have pushed brand values to unsustainable levels, where the earnings potential imputed to thousands of brands far outstrips their value to the consumer. These expected future cash flows that brands are expected to account for have grown to become a dominant force in driving total business value. But their future value is unsustainable when we uncover and analyze the true state of most brands today.
As CEOs search for future pathways to growth, their brands now account for a growing proportion of total enterprise value. This means their brands are making bigger promises of future earnings. Are those earnings going to be there in the future? Have most companies properly discounted the risk on their rising brand values?
When future earnings are in question, it’s more than a brand problem; it’s a business problem. Most of the discussion surrounding the tectonic shifts in the digital, consumer, and media landscape has been held at the marketing and brand level. By examining these phenomena through the lens of brand value, we can see how new consumer behaviors are causing widespread perceptual damage to the values of all but a handful of brands. Let’s begin by examining the origins of the brand bubble . . . .

Excerpt from " The Brand Bubble" by John Grezma and Ed Lebar

Future of Dollar as the Reserve Currency

Introduction
From the gneiss of the foreign trade and globalization, dollar has been the sacrosanct currency of exchange. The political , social and strategic clout of United states stems from the strength of US Dollars in the world economy. Till Date it is the largest foreign reserve currency followed by Euro , British Pound and Japanese Yen. Such is the impact of the dollar, that almost every country keeps major chunk of their foreign reserves in terms of dollars. The purchasing power parity of nations are calculated by IMF on the basis of dollars. As an currency of settlement , it is usually a medium of exchange between the countries not having a common currency.
With the tremors of recession in about last 2 years, there are clear indications of change in the world order. After the bursting of the housing bubble in united states , governments all over the world had tried to inject surplus liquidity in the financial systems to keep them up and running. US had led the surge with millions of dollars granted to various firms under Troubled Assets Relief Program (TARP). This has created a huge trade deficit on the part of the US Government. To finance this deficit , US Government need to issue treasury bills and needs countries to buy them. Here comes the role of China in the world Economy. For a long time China is the major exporter to United States. Authoritarian Government, cheap labour and large population has leveraged China to sell (or Dump) the products all over the world. The foreign reserve of China is hovering around $2 Trillion Mark. China in turn uses this currency to buy US treasury bills.
For the last two months, China's leadership has been complaining about the country's dangerous dependence on the dollar. Beijing holds $2 trillion in dollar assets, accumulated through years of exports to America and massive purchases of Treasuries by the Chinese government. If Washington can't rein in its mounting budget deficit, both Treasuries and the greenback could weaken considerably—and the Chinese could be big losers as a result.
The Chinese began generating attention on the issue in March, when Chinese Premier Wen Jiabao said he was worried that the country's dollar assets could slide. Ten days later Chinese central bank chief Zhou Xiaochuan suggested replacing the dollar as the international reserve currency. One idea, Zhou said, was to replace the dollar with a basket of currencies supervised by the International Monetary Fund.
So, the evidence is mounting that China is getting serious about loosening their ties to dollar and even replacing the yuan in place of dollar as the reserve currency. Already, China will trade with Argentina, Hong Kong, Indonesia, Malaysia, South Korea directly in Yuan thereby eliminating the use of Dollar as an intermediary currency. China denominated a bilateral trade agreement with Brazil not in dollars but in two countries’ currencies. This makes it clearly evident that China has intentions of making Yuan the next reserve currency. Some experts are still skeptical about the possibility of replacement of dollar as a reserve currency given the political and economic infrastructure in china and lets us say all over the world. But there are others also, who are predicting a major shift in the world order by 2020. Chinese have set a target of increasing percentage of Yuan in foreign exchange reserve to more than 3 percent by the year 2020.If this happens then Chinese Yuan would replace Japanese Yen as the fourth largest foreign currency reserve. There is every possibility of reaching the target keeping in mind the booming Chinese economy.
Roadblocks for Yuan
Skeptics said the Chinese were merely talking. The dollar is too entrenched as the international currency of choice, with the U.S. by far the world's largest economy, went the thinking. And in any case, the Chinese act so deliberately that, even if they did wish to elevate the yuan globally, they wouldn't do it in the short or medium term. Finally, if the Chinese were to bring the yuan into competition with the dollar as a medium of international trade, they would have to turn the yuan into a convertible currency whose value would be dictated by the market, with traders, investors, governments, and companies around the world freely buying and selling it. Such a loss of control, said many Western investors, would never be allowed by the authoritarian Chinese. It would mean lowering all kinds of financial trade barriers, allowing foreign access to Chinese securities markets and more.
Big hurdles remain for the Chinese. Making the yuan freely convertible is one: Major central banks would be loath to hold any large sums of any currency—the purest definition of a reserve currency—if they could not sell or trade it without limitation. Another is the absence of a large market for yuan-denominated bonds. One key sign of acceptance as a reserve currency would be if Western countries such as the U.S. purchased bonds denominated in yuan and sold at market rates. Until now, yuan-denominated bonds have been sold only by Chinese banks, along with multilateral banks such as the Asian Development Bank and International Finance Corporation, and the bonds have been sold only in China.

Future Ahead
Why have perceptions started to change? Last month, Beijing completed the last of a series of so-called currency swaps—providing yuan to other central banks for use in trade with China—with Argentina, Hong Kong, Indonesia, Malaysia, South Korea, and others. These arrangements theoretically removed any need for these trading partners to use the dollar as an intermediary currency in dealing with China. Last week, Beijing denominated a bilateral trade deal with Brazil in the two countries' currencies, rather than in dollars; the value of the agreement was not specified.
Still, what is more or less a consensus among Western experts on China seems to have formed that the Chinese are on an unmistakable path toward challenging the dollar. What remains lacking is a political decision to shift from acting on the margins to making a decisive move, many experts say. That resolve may be forming. A Chinese official said on May 20 that the yuan could be a serious reserve currency by 2020.

Consumer Price Index : An insight

Game Theory: Effect of Big Sporting Events on National Economics

Whenever there is money involved , the radars of economists start working. On this ground, games like olympic games and Commonwealth games are the areas which involve heavy investment and spending. Winning a bid for the game is a prestigious matter itself, barack obama will certainly testify that.

In order to flaunt their countries economic and social status, the spending on these games are gradually reaching astronomical figures. The Beijing Olympics spending Budget ,$40 Million, was more than the GDP of Srilanka (source: Bloomberg.com). The festive mood of the public and the government is the common feature of all the major games, but are they really economically viable. Is the level of spending justified for a nation? Lets have a look on it. I will judge it on the basis of 4 Parameters , that are considered the sacrosanct part of hosting Games

Infrastructre
Infrastructure is something on which countries start working long before they bid for games. They want to leverage on the infrastructure they have and the potential infrastructure which they can develop. But a cost-benefit analysis by Darren Mchugh ,a queensland unversity scholar, shows that generally the most expensive infrastructure projects are those projects which would not have been built in the first place if normal conditions prevail. In case of Delhi CWG , major of the infrastructure spending is done on Airports and Metro overhauling , which in anyways would have been sooner or later. But about Rs 700 crores are still been spent on the projects like over bridges and stadiums (source: www.livemint.com). According to me, these projects are over ambitious with little practical utility. In many of the places a little more planning and common sense ( which is highly uncommon!!) could have reduced spending considerably. The worst thing which we can afford are the white elephants standing after the games were over.

Tourism
Tourism and games go hand in hand. Indian tourism industry is looking towards CWG as a saviour in their efforts to recover from the dreaded recession. In anticipation of huge inflow of foreign tourists, the capacity is being added in form of extra hotels and other accomodation places. Approx 30,000 hotel rooms are added in delhi to cater the visitors ( Source: www.epaper.timesofindia.com) . Although the projections are supporting the work done, there is a catch in it. The seats in the airplanes coming to india are limited. So, the demand will definitely push the ticket price northwards during the games. History depicts that inflow of tourist are maximum shortly before games, reach peak during games, and drops sharply after games. The future of the extra capacity added , will be affected seriously. After the montreal winter olympics , every 3rd hotel which added capacity went bankrupt.

Markets
As some one quoted, "markets are the best snifer dogs". If there is an opportunity,market will definitely sense that. In this light, let us look at the markets reaction when indian won the bid for the commonwealth games. The 2010 CWG are awarded to new delhi on 13 November 2003, and the markets closed 1.68 % lower on 14th november 2003, on next day (Source: www.moneycontrol.com) . Even the construction and infrastructure scrips traded in red. So, it is clearly visible that even markets are not that optimistic of benefits of hosting an event as big as commonwealth games.

Revenue
Beijing olympics , with all its audacity managed to earn only $16 million as margin ( source: www.livemint.com) . Comparitively Los Angels had made $250 millions and Seoul $300 millions. So, the extravagant spending is not resulting in generation of high revenues. The figures of delhi are not yet out , but the projections are not very optimistic.

All said and done, hosting a game is undoubtedly a matter of national prestige and helps a country projecting its image all over the world. This is the best marketing even which a country can do. But in the increasing complexity of games, there should be an intelligent view to all the spending, The day is not far away, when we have special economists would be there knows as "Game Experts"