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Showing posts from October, 2018

Are the Prices of Petrol and Diesel Determined by the Market Forces In India?

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The Indian government has supposedly deregulated the determination of prices of petroleum products like petrol and diesel in India. Every time prices of these two products go up , the government plays this card of deregulation to answer the critiques e.g., recently the Modi government reduced the excise duty on petrol and diesel by 1.5 rupees to lower the daily rising prices of these two products in the shadow of coming 2019 assembly election, and when the share prices of oil companies started declining in the aftermath of this move, the ministers are now reassuring the market participants that the government would not go back to regulating fuel prices . How much truth is there in this claim of successive governments that the prices of petrol and diesel are deregulated in India and that they are determined by the market forces of demand and supply? To understand this we need to understand how market determines prices of various economic goods. A market is an organ...

Rafale Deal and Corruption

The Modi government is embroiled in an alleged corruption case of  Rafale Jet deal with the French government. Opposition parties are now gunning for the resignation of prime minster Narendra Modi. They have accused him of personally influencing and altering the deal, which was originally put in place by the former UPA government, to benefit his crony Anil Ambani. The former French president Francois Hollande has now confirmed that it was the Indian government who didn’t give him any choice to choose their Indian partner, and only suggested Anil Ambani’s Reliance company name. We can’t and don’t want to investigate this alleged scam here. May be Modi did influence the deal, but that is not our concern here where we want to discuss the nature and cause of corruption. Nature of Corruption WordWeb online dictionary defines corruption as Lack of integrity or honesty (especially susceptibility to bribery); use of a position of trust for dishonest gain . One major...

The IL&FS Insolvency: A Canary in the Coal Mine

IL&FS insolvency is rocking the Indian stock markets right now. The situation is so grim that the Modi government has now “ nationalized ” the company! They have bailed out a private limited company by using public money. The news is coming out that, as usual, LIC and state bank of India (SBI) are being coerced by the Modi government to bailout this beleaguered company. The government has bailed out IL&FS, but it is just a ‘canary in the coal mine’. This is the domino whose fall will start the domino effect. There are many such companies whose books are leveraged beyond limits. As the bubble bursts, all the mass insolvencies will come to surface one after another. The whole Indian economy is like a giant castle standing on a quicksand of artificial growth generated by these companies. Artificial because such growth can’t be sustained for long. These activities have to be unwind one day. Modi government has bailed out IL&FS, but how many more such companies...