Category: Your Money

The truth behind FDI in retail

An example of street markets accepting credit ...

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Will UP really go bankrupt if FDI in retail were allowed? Why is TN and WB opposing foreign investment? In the meantime, why is the farmer’s association in favor of it? The funny thing is that we already have FDI in retail except that it is for cash-and-carry “wholesale” only. But whatever the original intent was, it has been diluted to mean a minimum of Rs.1000 ($20) per purchase, that can be paid using a credit-card and can include anything from liquor, food and soap! So what is the whole ruckus in the parliament really about?

The problem, apparently, is that if you give a choice between getting ripped off at the corner store and buying stuff in a clean, organized environment, the aam aadmi will chose the latter. So what are the traders in the kirana stores to do if everybody chooses to shop wisely? Its like saying, lets not build a bridge across the river because that would drive the ferry out of business. Building the bridge is a common good. It cuts down on travel time, it makes it cheaper and safer. And hence, the cost to society of the ferry going out of business is outweighed by the benefits.

Lets apply that logic to multi-brand retail. Its no secret that there’s tremendous waste and corruption not only in food-processing but in every step of our supply-chain. The government or the domestic industry, on its own, neither has the will, money or the expertise to setup a system that can fix those problems. After spending an inordinate amount of time in decision-making limbo and almost a year with inflation in double digits, the government finally mustered up the courage to put this in play. And now the peanut gallery has erupted in self-righteous rage.

So what are the nay sayers protesting against anyways? Are they against brining down inflation? Are they against reducing waste in our supply-chain? Are they against more choices for the aam aadmi? Are they against getting farmers paid market rates for their work? They are protesting against something that is for the common good; supported by trade organizations that represent the kirana stores. In the end, the aam aadmi can only vote but the traders can pay.

Support FDI in retail! It is the right thing to do.

Sunder’s List

Market action summed up:

If investors believe the IMF, European Central Bank or other authorities are willing to backstop sovereign debt — in much the same way the U.S. Treasury did for banks during the financial crisis — then stocks go up, bond yields fall and the tumult subsides.

But on signs that Germany, in particular, is not willing to bail out its weaker neighbors, panic prevails, sending stocks lower and bond yields soaring.

Is it time to ditch the the Euro? (TheStreet)

Time is running out for the Euro (FT)

NIFTY chart not looking too good. Pays to stay in the sidelines till the smoke clears…

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German Logo of the ECB.

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It appears that the EU is fast approaching the end-game. The Germans will not allow the ECB to print money and buy bonds. And neither will they allow PIIGS to default and quit. The only thing left on the table is tighter integration where austerity coupled with a transfer union will stabilize the Euro. The Germans seem to be hell bent on a treaty change and a move towards a fiscal union with tighter budget controls, even if that means removing democratically elected governments and replacing them with ‘technocrats’ favorable to Germany.

With Italy in dire straits, it appears that IMF has chalked up a $800 billion loan in case its debt crisis worsens. The funny thing is the largest contributor to the IMF is the US (18%). Wonder how that would go down with the Congress. But rumors of the IMF loan to Italy has sent stocks soaring, for now.

Since the US is going to be on the hook anyways, why not allow Uncle Ben to buy up all Euro debt? Maybe the only response to the current existential threat to Europe would be for the Fed to print dollars and buy up, say, €2 trillion of bonds? If it is presented as a choice between printing and fascism, Bernanke might just get away with it.

The fact remains that the world desperately needs the West to reflate.

Sunder’s List : The Economist Special

Eurozone_interest_rates, source of data: http:...

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A lot of good articles in The Economist:

At some point a listing ship topples over, and Germany would plunge into the sea with everybody else.

Government bonds have turned from offering a risk-free return into becoming a return-free risk: Gloom descends

The rupee is a “drama queen”. No: Euro-zone banks supply about half of India’s foreign loans.

If you make it too hard to fire employees, companies will stop hiring and automate the shit out.

Sad, but true: Both as entrepreneurs and as employees, women still seem to be at a disadvantage.

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Fiat India–Nice cars ruined by Tata Motors

Fiat 1100-103, 1954

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Note to self: no matter what, do not outsource customer service.

Fiat has a decent lineup of cars in India. However, they have been extremely unlucky in choosing an Indian partner. Fiat cars were one of two models that were available during the dark days of the license-permit raj. Their earlier models (more than 30 years old) are still used as taxis in Mumbai. Why is it that given a choice, most people would not buy a Fiat now? I guess the answer is fairly simple: poor customer service.

Back in the 90’s Fiat partnered with Premier motors to introduce the Uno. I remember my dad “booking” a vehicle and waiting for over six months to actually take delivery. It was a complete disaster in terms of service levels. Parts were unavailable, mechanics did not know how to service the vehicle and there just weren’t many service centers accessible. Fast forward to 2011 and they are still where they were 20 years ago, except that they now have Tata Motors screwing things up for them.

How do you expect a partner to do a good job servicing your product when the same partner has equivalent models competing under his own brand name? No wonder Fiat gets a step-brotherly treatment. Ask me, its two weeks and counting to get parts for my Linea. Pathetic.