[LalooPrasad]

@5ter

Ignorence is bliss : never use " Forgive my Ignorence " again.

Rather I must appreciate ur proactive step of seeking clarification on this particular editorial as most of the people would have read it just for the sake of reading it and not to gain the knowledge...they love to remain in dark rather than saying that they don know ???

Regards
LP

[destroyer1982]

Hi Guys
Lets discuss today's ET editorial. This editorial appeared in today's ET. Can any one summarise it in a simpler language. If you can explain the economic terms used herein, that will be great, too.

The government’s willingness to look afresh at the ceiling on investment in debt instruments by foreign institutional investors (FIIs) has not come a moment too soon. It is entirely in keeping with new ground realities, particularly the robust performance of our external sector.

With forex reserves of about $213 billion, external debt of $155 billion, strong export performance and continued strong capital inflows, there is far less reason for caution on allowing FIIs to enter the debt market. The present limit of $3.2 billion in government securities and another $1.5 billion in corporate debt is far too conservative.

And though the ceiling has been progressively relaxed over the years, the pace of change has been far too slow and can be speeded up. Two expert committees, the Deepak Parekh committee on infrastructure and the high powered committee on making Mumbai an international financial centre, had urged a more liberal ceiling on overseas investment in debt.

Given our critical need for infrastructure finance, on paper the logic for allowing overseas investors more access to our debt markets is hard to beat. Though given the poor state of development of our debt markets, especially in comparison with our equity market, there is no guarantee that a hike in the ceiling will automatically lead to a rush of overseas investors wanting to buy more debt.

However, since the rate of interest on rupee-denominated debt is much higher than in many other countries of the world, there is the risk that we could become a victim of carry trade (where investors borrow in low interest currencies like yen to invest in high interest elsewhere).

And that will compound the problems posed by huge dollar inflows especially when it comes to formulating monetary policy: should it be hands off, bringing in its wake a rising exchange rate of the rupee vis-à-vis the dollar, or should the Reserve Bank of India intervene and if so, to what extent?

These are tough questions for which there are no easy answers. But we cannot cling to the past system of forex controls forever. We need to move towards capital account convertibility and raising (and ultimately doing away with) the cap is part of that process. It’s time we got on with it.

[dragonfly]

hey guys,,

will someone pls explain the concept behind the following terms for me. i know wht the words stand for,,courtesy wikipedia:satisfie:

equity market
debt market
micro finance
hedge funds

TIA

[Tame CAT]

I suggest you look to wikipedia. It is there in some introductory part.

[jhaji]

Originally Posted by dragonfly

hey guys,,

will someone pls explain the concept behind the following terms for me. i know wht the words stand for,,courtesy wikipedia:satisfie:


debt market

TIA

ok...
debt market : Debt market as the name suggests is where debt instruments or bonds are traded. The most distinguishing feature of these instruments is that the return is fixed i.e. they are as close to being risk free as possible, if not totally risk free. The fixed return on the bond is known as the interest rate or the coupon rate. Thus, the buyer of a bond gives the seller a loan at a fixed rate, which is equal to the coupon rate.

for more information visit this url....
sure it will help you Equitymaster.com : Debt markets: The other alternative

[raj_chopada2001]

Hi

today's Editorial

Trai’s suggestion that auction was the best way to allocate frequency spectrum is fundamentally sound. We support an open auction for allocating spectrum for 3G services in which both existing and new operators (telcos such as Verizon and AT&T are currently not in India) should be allowed to bid.

3G services will be the first opportunity for large-scale greenfield telecom investment, after FDI was raised to 74%. Also, it is likely to fetch billions of dollars, thus denting the fiscal deficit. In the case of 3G, because there is no historical baggage, spectrum should be auctioned to arrive at a price that reflects its scarcity value.

However, using auction to allocate spectrum for the up and running 2G services will be more difficult. Spectrum for 2G services is bundled with the licence and extra spectrum is allotted on the basis of subscriber numbers. In hindsight this was flawed and there is a case for delinking spectrum from the licence.

However, a mid-course correction and a switch to auctions for allocating spectrum for 2G services could throw up a situation in which an existing player is unable to secure spectrum for expansion. That would be iniquitous because the investment was made under the assumption that spectrum would not be a constraint when required.

Essentially, what is needed is a better fix on the spectrum availability and the number of maximum players it can support. If, as argued by some aspirants, there is adequate spectrum available to support more players then there is no reason why we should continue with a flawed policy.

Instead of arbitrarily issuing licences, the government should identify new entrants to 2G services through spectrum auction. The existing players could then be charged the same price for the spectrum already allotted and the extra that they would require in the future.

Indeed, some of the existing players have suggested that the government charge a price for even the 2G spectrum. And if there is a genuine 2G-spectrum scarcity, then let us not issue more licences particularly when there is adequate competition in the market.

In such a situation a discount to auction-identified 3G-spectrum price could be the basis for pricing spectrum for 2G services. The point is that even while we need to ensure existing 2G players are not denied spectrum, it is imperative that through market pricing of spectrum they are encouraged towards more efficient spectrum usage.

[manju23]

Hey which magazines are u looking for improving your english comprehension...

[manju23]

can u plz mention some useful online links for good reading material...

[anandca04]

i didn't get the % terms , r u sayin tat our country is creating 9 million new jobs every year ,if it so it comes to abt 2.5 % and u r also talkin abt unemployment ,tat means 2.4 % ppl r losin their jobs

Originally Posted by vyomb

thanks @LalooPrasad ...for showing meticulousness...and corrrecting me....

[anandca04]

hey got one doubt
1) rite now ruppe is appreciatin compare to $ ,so as an investor can i borrow eg: 100$ by payin interest rate of US banks and convert tat 100$ = 4000 ruppee and deposit in india banks for gettin more interest rate ,is tat v called carry trade.