Market indices explained!!

Why market indices are important? We all know that market index is some sort of average of its constituents and it reflects the overall market movement. And they are generally used to gauge the direction of economy, overall economic activity, they are also used to measure the performance of various mutual fund schemes as the benchmark performance. These market indices may be classified into price weighted, value/market weighted and equal weighted indices. The following video link explains how they are constructed? how the return on such indices are calculated? and what happens when there is change in the magnitude of the constituents? [LINK]

Readers who undergone the 'Investments' course, may use this talk as refreshing......otherwise it is very educating!! 

Interesting Links-20 (04/02/2011)

Markets:
New SEBI initiatives:
a) Planning to introduce call auctions in the proposed SME Bourse.[Link] The idea of setting up of separate bourse for the SME (less than Rs 25 crore) has been coined by SEBI in the mid of 2009. It will soon be implemented. As we all know, that these SME stocks trade very infrequently on the bourses. To correct it and encourage more trade to happen SEBI is mulling over to implement continuous call auctions (each running for 15 minutes) all along the trading hours. 
b) 'Ring Fence' to prevent flash crashes [Link]. It is still in our memory, during the last may (2010) Dow dropped by 700 points without any major news purely due to some technical snag at the HFT desk of a prominent investment bank. At that time, (not on same day) some miss trading caused the plunge in RIL scrip on Indian bourses. These flash crashes generally occurs when the large market order interacts with a thin order book. These large market order influence the price, the effect of which will be multi-fold as it feeds into automated trading systems (HFT).

Macro Economy
An interesting piece on the impact of monetary policy in Business line. [Link]

Interesting Links-19 (03/02/2011)

Corporate Finance:
Corporate governance mechanism's objectives are being redefined. As per the Anglo Saxon method of corporations, the shareholders are the key stakeholders and the managers who look after the firm should work for the maximization of shareholders' wealth. And managers contracts and their incentive mechanisms are designed such that their welfare is aligned with that of the shareholders. The benefits of other stakeholders are limited to the transactions they are involved in. The recent crisis brought in the government in particular and society in general on to the board as the prominent stakeholder in corporations. Now the definition of corporate governance is undergoing rapid changes in terms of its objectives.......... time has come it has to look beyond the welfare of shareholders. Here is a nice write up. [Link]

World economy:

Jonathan Parker, Kellog school of Management reports the initial reactions on the report of global financial crisis. (U might remember, i posted a link to it under the title of Official book on finance crisis) [Link]

Yield curve shape as the macro economic indicator!!

What do we know about the yield curve? what does it shape mean to the investors and to general economy. Here is a nice post from a finance professor. [Link]

Can the Yield curve predict the future economic scenario? Does the economy tank following the inverted yield curve? What is that evidence speaking? This post is very interesting. [Link]

Fifteen Facts about 'India'!!

25% of the world new workforce will be Indians (by 2014) and average Indian age seems to be 20 years less than that of Japanese (26 Vs 25) (sadly i am already older than average Indian :( :( ). These stats seems to be good facts, but the worst is that 42% of the world poor lives in India!! Click on this link for the remaining facts!! [Link]

Market over reaction or under reaction!!

It is widely reported and seems to be true that the positive news benefit 'worst' stocks (with low PE and reported earnings below the expectations) significantly far better than 'best' stocks!! Forbes India carries a nice illustration [Link]

Interesting Links-18 (02/02/2011)

Focus on grass roots:
Take of practitioners on Malegam Committee report on Microfinance Sector reforms in India, and a response from one of its member. [Link]. ET also carries another report on the recommendations of MC. [Link]. Kshama Fernandes (IFMR Capital) has a piece on the similar issue in Business line. [Link]


Corporate finance:
Stock Buyback: Implications to different classes of investors.......... what is it for dividend players, cash players and growth players. Prof. Damodaran has nice illustration [Link]. This has straight implications to the investors participating in Indian markets. The steep fall in the prices based on global cues and dried up volumes due to choppy market situations.......... triggering many firms to go for buybacks........there is a mad rush among India Inc. ET has a ready example for the same. [Link]

An Official Book on Financial Crisis!!

This is an exhaustive report with the illustration of various events at FED and US treasury desks in mid of crisis. It carries the testimonies of various officials who bailed out Freddie Mae, Fenne Mac, Goldman Sachs, AIG and How Lehman went under..................incident and closed door discussions with various authorities.........including the FED Chief Ben Bernanke. Happy reading! [Link]

Interesting Links-17 (01/02/2011)

Green World:
1. 'People develop, develop, develop and nobody thinks of what it is going to be like at the end of the this century. Thinking ahead and planning is the responsibility of governments, corporations and communities' - George Schaller (a biologist, environmental politician)... An interesting and thought provoking conversation.
Courtesy: Today's Business Line. [Link]

Fund management:
2. Why does market so obsessed with macro economic dynamics? Why do investors need to track the macro economic indicators?  Today's ET carries and interesting (rather exhaustive) piece. [Link]
Opinions:
3. Increase innovation causes the increase in economic growth thereby median level of income. Its vice versa is currently in operation. The slow down in innovations causing the decline in economic growth and resultant decline in median level of income.............the great stagnation..............an interesting review and comment of a book. [Link]

An Interesting debate on Facebook on 'Foreign Banks/Universities/Investments

Krishna Reddy Chittedi

Foreign banks, foreign University's, foreign investments....foreign..............everything foreign....? what will be future implications of this so called "FOREIGN" in India

Gareth James Wall: they'll be bought by tata and become 'indian' :-p
  
Surender Komera : 

Foreign banks or universities (anyway controlled by Indian regulators/authorities)..brings in competition to the existing players and add international flavor to the services.......consumer/students have more options and will get benefits!!... Foreign investments..if so controlled and channeled into right direction..... boosts the economy and more jobs!!................... Lets not give any (so called) colonial meaning to the word 'foreign' and cultivate hatred......... after all no one can make us anymore as their colony.................Lets think global!!  

 Anver Sadath one is the influence of CDS and other one is the influence of IFMR 

Surender Komera You may call it the influence.. It is more practical view, what do u say?

Krishna Reddy Chittedi

‎@Surender anna

Of course that is postive side...but without any sustainable development in the domestic economy...when you open our economy to world.......In india majority of the population may mis the benfits from this kind of policy's....... ya..stil you may not agree with me..but We need to have more focus on the gross roots...i have not seen big changes in the villages...

Brajabandhu Swain Anything excess is bad, samething will happen

John Hyderabadi Do we have Indian culture alive ? Is panjab a punjab? Is hyderabad a hyderabad? we don't have a single city which represents our culture any were so better adopt changes ... 

Srihari Naidu

why should there be worry, as long as the so called "foreign" banks or universities are properly regulated, so, the question in not "Foreign" but "Domestic"......v do have amazing policy makers but unfortunately, v do not have "....."people... to implement those policies.........

any how, on foreign banks issue, to put it in economic terms, there should not be any restrictions on capital, if so, then in the long run there will be growth equivalence in all the countries.

on Universities issue........i completely agree with Srender, the competition will bring radical changes to Indian education system......and max the consumer(students) welfare........

Krishna Reddy Chittedi

‎@ Sri hari
Till now in India common man cannot access the bank and credit facilities …for whom this capital? Is it to improve the more inequalities? As you know, In India many sections of the people not able to enjoy the benefits from the d...omestic services (social welfare)…do you think many “foreign” …….will bring more welfare to the India?

What you think about fee structure about these universities? Do you think common man can afford to get into these universities? Many of them not aware of Education loans….first get into the institutions… ..he/she need to have minimum financial support…

Krishna Reddy Chittedi

I will give example…to get into IIMs in India…its not easy task…if I want clear the test also I need some financial support...will your banks or anybody will sponsor for my trail (preparation cost) to get into IIMs?
I too agree overall it m...ay improve the efficiency …but to improve the efficiency…not necessary to have so called “Foreign”…

Surender Komera

There are many examples in practice.....'competition improves the efficiency'...... it may be from any source.. why not from an institution which adhere to the laws of land and brings in global expertise? ....... most of us came from a stat......e run regional universities and lower middle class families.........let me not cite the examples how the resources are wasted in domestic universities......am not saying it is happening all the institutions/universities.............. but wherever it happens......should be eliminated.......i believe ....as we study.... competition allocates the resources better and improves the efficiency.... i agree there are market failures......... (eg. our Reddy's case of not able to enter into IIMs)....lets look for the options to fix them....... may be lobby for the govt sponsored coaching centers.......... again u may raise the question of effective execution (as srihari suggested)........hope competition awakes the people to lobby for fixing the systemic failures!!.............After all we don't dislike competition and more choices!!

 
 Krishna Reddy Chittedi

If “Foreign” entries (competition) improve the efficiency , absolutely i do not have any issue. But my concern Here is the competition should not be with two extreme cases ....one firm is more efficient ( Say Foreign) and another firm inef...ficient (say domestic), Even you also mentioned the condition of our regional Universities)....before going to Foregin..., we should have basic needs for majority of the people to face this competition... In India lack of awareness, Information asymmetry and proper regulation r implementation is the major issues. First we need to solve the domestic issues and strength our self..then we can think about “Foreignn........” But am not completly ruling out of the role of “foreign” in the economy.

Rajesh Acharya

First of all I don't understand Reddygaru's concern. Why are you so concerned about quality difference between domestic and foreign. Do you mean that our existing system is egalitarian. Forget about foreign and private institutions, What ab...out quality difference even in public funded premier institutions and regional institutions.
How many years you need to go global. I don't think our regional institutions will come to global standards if they are kept in captivity. Let every one know where they stand in terms of quality. Let us have one IIT, IIM, CU and may be even a foreign university in every state. But still I don't simply believe that bringing some elite institutions will solve the problem we have. It may well end up in creating a situation of academic apartheid.
Our main problem is not with higher education but with basic primary education. If you have a government primary school, convent, an international school in a region, we decide who goes to a regional university, elite institution and may be for a foreign university in their first few years of schooling.... First we need to look at our primary eduction otherwise making some ideological clashes on foreign or desi,,, or something like that,,,,, is just futile.

Anver Sadath if all r equals, then that would be 'kaliyugam'

 

((Note: Krishna reddy, is a Ph.D. student at CDS, Trivandrum;

Srihari Naidu, is a Ph.D. student at HCU, Hyderabad.

Anwar Sadath is faculty at Kasargod central University and a doctorate from HCU,

Brajabandu Sahu, a Doctorate from CDS
Rajest Acharya is a Doctorate from HCU))

 

 

 

Interesting Links-16 (31/01/2011)

Corporate Finance:
1. On working capital funding....... it can be fund based or non-fund based. Business line carries a nice piece. [Link]
2. On Corporate hedging ....... seems to be interesting one. [Link]

Fund management:
3.On the importance of liquidity and volume for the exchange business by T.S. Narayanasami, CEO of United Stock Exchange. [Link]

Emerging Markets:
4. On the state of Indian corporate bankruptcy policies [Link]. You may find interesting to read my posts on the same issue [Link], [Link]

Interesting Links-15 (30/01/2011)

 Corporate Finance:
1. A limited liability corporation owes the societ a duty of care, it is not a device for individual profit- Indra Nooyi, CEO, Pepsico. [Link]
Fund management:
2. Building portfolio with the stocks of the firms you consume from and hope to consume!! [Link]
3. What Isaac Newton has to say about markets?? [Link]

World Economy:
4. Post-crisis, third world economies emerged as strong bets, but feeling over heat and possibly asset bubbles; European economies are struggling with sovereign debt crises and US with job losses. Here is a opinion piece from World bank chief. [Link]


Emerging markets:

5. Personal profile of New SEBI chief. [Link]

(today i so far dwelt with Hindu Businessline............ will be updating with others as the day progresses)

Interesting Links-14 (29/01/2011)

Corporate Finance:
1. As we all know Prof. Damodaran maintains his own webpage on which he provides the effective tax rates for each section for the US economy. His recent updates of the same received wide publicity from practitioners as well as policy makers. Here is his response to it. [Link]

 World Economy:
2. Ajay Shah on 'Globalization as half empty glass' [Link]

Interesting Links-13 (28/01/2011)

India Focus:
1. George Soros on prospects of investments in India. Today ET carries this piece. [Link]

Markets:

2. A nice illustration of 3 investment backs that dominated at various phases during last three decades... by Prof. Verma. [Link]
3. Retail investors seems to be playing smart game!! [Link]
4. How does inequality matters? by various bloggers/writers [Link]
5. What burger prices have to say about the reliability of inflation figures?? [Link] (sorry, information on India is missing as we use the WPI to estimate inflation rate.)
Note: Soon i will be starting special section on 'Emerging economies' which covers the news from India, China and other emerging economies. It means you may not find the 'India Focus' hereafter.

Interesting Links-12 (27/01/2011)

India Focus:
1. OPTIONS ON NIFTY WILL BE TRADED SOON ON SGX!! As most of us know, Nifty futures are traded on Singapore exchange (SGX). We also do know SGX-Nifty account for 25 to 30% of the total open interest on any day. It reached more than 50% when India regulator (SEBI) imposed restriction on participatory notes. On the whole SGX-Nifty is effectively banking on the regulatory arbitrage. [Link]
2. An interesting piece on exchange competition and implications to Bimal Jalan committee recommendations. [Link]
3. Some useful stats on Indian Economy. Presentations by Ajay Shah [Link], Prof. Rajan [Link] and Shankar Acharya [Link]

World Economy:
 4. Viral Acharya, Stern school of business on regulating wall street. [Link]

Interesting Links-11 (26/01/2011)

 World Economy: Opinion
1. 'Increased inequality in American society motivated the government (Bush government) to encourage mainly the state owned banks (Fannie Mae and Freddie Mac) to lend to the poor, which has been the root cause for the current financial crisis' - Fault Lines, by Raghuram Rajan. Few economists' responded to such controversial hypothesis. [Link], Rajan also responded to their criticism.[Link]

Corporate Finance: Stock buyback
2. Prof. Damodaran discusses the issue with nice illustrations. He discussed the present state of stock buyback as a corporate action. [Link]. He also discussed the effect of stock buyback on the wealth of stock holders, he discussed it by relating to two hypothetical worlds such as most pessimistic/lazy market and other most rational world. He argues that stock buyback doesn't have any  effect on the all equity financed firm. He also discussed the issue in various contexts. [Link]

India Focus:

3. Ajay Shah on the inflation forecasts. Video [Link]. He also discusses the credibility of IIP numbers and most other official numbers and he also cites the alternatives such as the data from Automobile association for data related to automobile output figures.

Note: Today i will not be updating this post further during the post-lunch as i will be out to watch No One Killed Jessica and Dhobi Ghat (two hindi movies) in a row at Escape Cinema!!  Happy Republic day! :)

Interesting Links-10 (25/01/2011)

1. Paul Krugman's 1988 paper at Princeton University argues that the woes of Europe may effectively solved by making the Greece to buyback their devalued bonds. [Link] But the question is that will this trick work and has any practical implications. There seems to be mixed opinion. [Link], [Link]
2. Investments in income funds: A nice write up from ET. [Link]
3. Need for Plan B to save the Euro zone [Link] 
4. 'Don't drink and drive'!! Oil and wine are found to be indistinguishable! and wine is no more adding any diversification benefits!! [Link]
Class room:
Econometrics classes from Mark Thoma. [Link]
Lecture notes on Introduction to Economic Growth from Department of Economic, U.C., Berkeley [Link]

Interesting Links-9 (24/01/2011)

1. The market and Inequality. [Link]
2. Shielding the portfolio from the wild swings during recession. [Link]
3. YH. Malegam on the state of MFIs. [Link]
4. RBI governor on corporate bond market. [Link]
5. Ways to tap the PE funds. [Link]

Interesting Links-8 (23/01/2011)

(Fund) Management:
 1. An insightful piece from BS: Debt can be as risky as equity. [Link]
 2. ESOPs (Employee Stock Options) could be much higher than the cash component of employee's (Managerial) compensation.Here are some insights into the ESOPs such as dynamics of their exercise, tax implications and the potential returns they offer. [Link], [Link]
3. IFMR B-school's visiting  faculty (they are usually called as 'scooter faculty')on 'Market timing versus asset allocation'. [Link]
4. Indians don't seem to be better money managers though they score better in financial literacy...... may be attributed to their inherent irrational conservative nature. [Link]
5. 'Economic liberalization' doesn't seem to achieve complete 'Globalization', still some gaps are well evident in terms of cultural exchange and artistic interactions. Probably world may need to learn from Vivekananda's philosophy and from his famous speech in 1893. [Link]
6. Nice piece from ET: Corruption impacts governance. [Link] Probably time has come to recognize the fact that corruption is not a bad word and it is universal. There are innumerable benefits by legally accepting this fact. I guess we have reached to that point where information on donations to political parties to kept in public domain and their accounts are independently audited and published annually. Industrial lobbyist to be recognized and regulated.

(Today i dwelt mostly on general issues, of course (as u r) i am also in a holiday mood!!).
Have a nice weekend!!

Interesting Links-7 (22/01/2011)

 Economics and Finance (Practitioners as well as Academicians) :
1. Richard Koo, The Chief Economist, Nomura Research Institute, the research arm of Nomura Securities; on the Balance Sheet recession. VIDEO [Link]. Mark Thoma on the same. [Link]
2. Joseph Stiglitz on the agenda for reforming economic theory. VIDEO [Link]
3. Prof. Verma (IIMA) on Influence of expansionary monetary policy on bubbles in commodity market. [Link]
4. Andrew Haldane, Head, Financial Stability at Bank of England.. fears on another crisis. [Link]
Focus India:
5. State of Microfinance: Where are we heading?? New law brought about by State Government of Andhra Pradesh increased the processing time for loan sanctioning to more than two months from a mere week. The new law stipulates the MFI to get the clearance from district officials before sanctioning loans to its borrowers. [Link]
6. Sijut Sirear, CFO IGATE on 'Tax law as M&A facilitator'. [Link]

Interesting Links-6 (21/01/2011)

It has been a busy day, not much time to browse. Today, I have made a presentation at SRM University, Chennai., on our recent work 'Does NFO Matter?' which received nice response.
1. Robert Shiller on the paradox of boom in popular economics: 'The boom in popular economics comes at a time when the general public seems to have lost faith in professional economists'. [Link]
2. On the Life after Capitalism.......... socialism is no more an alternative to capitalism but an heir. [Link]

India Focus:
3. Beans of 'insider trading' are finding every where. Vadafone accuses Essaar.[Link]

Interesting Links-5 (20/01/2011)

Corporate Finance:
Optimal cash holdings: A case of Apple Inc.: Currently Apple Inc.'s balance sheet reports that it has the cash balance of $50 billion and is expecting addition of another $20 billion by the end of the year, taking the cash balance to $70 billion. This cash amount is virtually not generating any interest income (merely 0.5%) when compared to the cost of capital of Apple Inc. This situation raises many eye brows. Though Apple being a growth firm, does it require such a huge cash balance?

1. Take of few portfolio managers who are holding considerable worth of Apple's stock. [Link]
2. Prof. Damodaran's views on the same. [Link]

India Focus:

3. Why do the people (Indians) behave the way they behave? RIM suspended the talks with Indian Government. [Link]
4. Confusing environmental policies of Indian Government. [Link]
5. In October, 2010, RBI set up a committee under the chairmanship of Mr. Y.H. Malegam to look into the practice of MFIs, charging of (high) interest rates, (coercive) recovery procedures; and recommend the potential policy changes. The committee submitted its report, you may check its recommendations here. [Link], [Link]

Interesting Links-4 (19/01/2011)

 1. The audios and relavent PPTs for the course Intermediate Macroeconomics by J. Bradford DELONG (University of California)  are being uploaded. The course started on 18th January 2011. [Link]
2. US's fear of China. [Link]
  India
3. Growing PE investments [Link]
4. Is our CAD sustainable? [Link]
5. 'The Banker who never goes on holiday is suspect': The country's largest bank (SBI) opts for the policy of compulsory leave for its officers to check their potential fraudulent activities. [Link]

Statement of the objective!!

It has been 28 years, i never felt the sense of responsibility towards anyone (neither to the family, friends, the subject i study, the institute i represent, the people around me nor to myself). Some unimaginable fashion drove me to this higher education. I guess now time has come i need to commit myself to certain short term objectives if not the long term goals. (Some may call them as resolutions). I hereby state two objectives for the coming year (during my 29th year).

1. I need to complete at least two publishable research papers and attend a couple of reputed research conferences.

2. I strongly feel that blogging disciplines the thinking process and provides the clarity. I need to post at least four links under the head of 'Interesting Links' everyday and blog on one issue every week. (for last three days on an average there have been 20 hits on my blog, this i have to increase to on an average 50 hits per day).

I am posting these personal objectives in the public domain, purely to commit myself. I will introspect how far i achieved these objectives at the turn of the year.

Btw today is my Birth day and i completed the journey of 28 years!!

Interesting Links-3 (18/01/2011)

1. New cooperative model for poor farmers by IIM-B Dean. [Link]
2. An insightful response to Prof. Yunus take on the present state [Link] of microfinance, [Link]
3. A note on China's raising household savings rate. [Link]

Interesting Links-2 (17/01/2011)

1. A brief summary: How the US (Bush's) government housing policy (Possessing a home is an every 'American Dream') and Fed monetary policy caused the housing bubble. [Link]
2. Prof. Yunus (founder of Grameen Bank, Bangladesh) on present state of Microfinance Industry. [Link]

Interesting Items-1 (17/01/2011)

1. Prof. Damodaran on 'Herd behavior', implications to finance and markets [link]
2. Insights into hedge fund operations [link]
3. News reading machines: Implications to High Frequency Trading [link]
4. Econometrics Lectures on You tube by Prof. Mark Thoma. You may find first four lectures in this winter [link]

Does NFO Matter?

It has been an open question whether it is advantageous to invest in New Fund Offers (NFOs). At least theoretically, it is expected to be advantageous if the NFO focuses on hitherto neglected investment avenues, otherwise similar existing schemes should be preferred. Using a comprehensive database of Indian mutual funds, we empirically examined 295 new funds launched by various Asset Management Companies during the period 2003 to 2008. The analysis using various benchmarks reveals that debt oriented new funds provide significantly higher returns in the short run as well as in the long run, where as balanced and equity oriented funds found to be offering better returns only in the case of long investment horizon. 


Note: You May download the full text of the paper here [Link] 


(This paper is at very preliminary stage, we welcome your critical comments for the improvement of the same)

ASSET REDEPLOYABILITY (LIQUIDITY) AND LEVERAGE: POTENTIAL IMPLICATIONS

Surenderrao Komera

20^th May 2010

Conventional wisdom attributes the positive association to tangibility of assets and leverage; it is because of the belief that the resale value of the tangible assets is considerable in the case of financial distress. From the general equilibrium analysis, asset tangibility doesn’t seem to be a sufficient condition for the high leverage. The sufficient condition would be their redeployability or liquidity.  If assets are redeployable for alternative uses, the resale value will be (very close to) their fundamental value, hence the liquid assets are best candidates for the collateral. Here redeployability of assets means, the inherent opportunity of assets to be used for alternative purposes which attribute close to their fundamental value. Thus, the asset liquidity is positively associated with the leverage.

There are three potential buyers for the assets of the distressed firm: a) the other firms in the same industry, b) outsiders who may venture into the industry c) prospective investors who may convert the assets and put them for alternative uses. Here question comes, whether assets are liquid/redeployable? If assets are liquid/redeployable easily at the value close to their fundamental value, the resulting competition for them will drive their liquidation value close to their fundamental value. But most of the assets are not efficiently [1] redeployable and have to be put in for the same use e.g. oil rigs, aircrafts etc. The value of such non-redeployable assets to the internal firms (from the same industry) will be close to their fundamental value and will be relatively higher than the same to the outsiders who incur some agency costs [2].  If the shock is idiosyncratic, the other firms in the industry will out-compete the outsiders and the price for the assets of the distressed firm will be equal to their fundamental value. Hence, creditors will need not to consider the idiosyncratic shocks (mismanagement etc) specific to the particular firm in the industry. If the shock is industry wide, almost all the firms in the industry do face debt-overhang problem and can’t be able to secure finance to buy the assets of the distressed firm. This results in the fire sale of assets to the outsiders who has far lesser value to the assets, causing the private costs to the seller as well as social costs (assets will not be deployed efficiently for their best use).

Implications: While appraising the (secured) loans, the creditors need to consider the following:

• The potential redeployability of pledging assets rather than their tangibility.
• Assigning the more weight to industry wide shocks rather than idiosyncratic shocks.

[1] Efficient redeployment means putting the assets for the alternative uses whose value will be close to their fundamental value.

[2] Agency costs for the outsiders are due to asymmetric information about the nature of assets, industry and so on

(Constructive comments are welcome)

Comment on "The False Fear of GM Foods"

I have a comment (critical) on one of the opinion post of Livemint.com. I recommend the reader, please go thought the post on livemint before going ahead with reading my comment on it. Click here for the link on livemint.

The concern of the green brigade is about the potentially irreversible and disastrous effects of the inadequate scientific experiments. ‘We should encourage the scientific experiments, but we should be very cautious in commercially exploiting them’ which is the lesson, we got to learn from the recent experience of ‘Mad-cow disease’ in Europe. I totally agree with the authors cost calculations, but I would like to remind the author with the Andhra farmers experience with BT-Cotton (Their cost of production has not come down significantly due to the increasing effect of the secondary pest.).

As a student of Economics, I do understand that the solution for the high food prices (caused by supply side factors) obviously lies in the reduction of cost of production and increase in output. I also like to remind the author that the high food prices (current issue) resulted from the delayed monsoons and increased emphasis of the farmers on commercial crops. Again I do agree with the author’s intention to encourage the technological progress, but one should not adapt the solution that may potentially cause some other problems which are seemed to be irreversible.

Given the well accepted corrupt practices of the Indian Bureaucracy, I strongly disagree with the author’s claim on the approval of Ministry of Environment on BT-Brinjal. Approval from any ministry of GOI, doesn’t require scientific proof, but the financial clout, which is being effectively used by the vested interests for their commercial benefits. Given the above mentioned facts, I strongly demand for the independent and adequate experiments before commercially exploiting the Genetically Modified products.

I encourage comments on my take on the post.