FII, Exchange Rates, Stock Markets, Inflation and Exports

Foreign Institutional investors: Mutual funds, insurance companies, pension funds, university funds, investment trusts, endowment funds and charitable trusts incorporated outside India but investing in equity and debt securities in the country are known as FIIs. They collect money from individuals and corporate (primarily from countries belonging to the European and American continents), and invest it in financial instruments worldwide, with India being one of the targeted markets. FII who want to invest in the Indian Markets have to register with the SEBI (Security and Exchange Bureau of India) and also from the RBI to maintain a foreign currency account to bring in and take out the funds and also a rupee bank account to make the transactions.

FII’s In Stock Markets: The FII’s profit from investing in emerging financial stock markets, say the Indian stock Exchange. If the cap on FII is high then they can bring in lot of funds in the countries stock markets and thus have great influence as well on the way the stock markets behaves, going up or down. The FII buying pushes the stocks and their selling shows the stock market the downward path. So this is how influencing FII can be, as is seen in the present downtrend of the stock markets in India courtesy heavy FII selling.

FII affecting the Exchange Rates: As pointed out in the first paragraph, FII need to maintain an account with the RBI for all the transactions.
To understand the implications of FII on the exchange rates we have to understand how the value of one currency goes up (appreciates) or goes down against the other currency. The simple way of understanding is through Demand and Supply. If say US imports from India it is creating a demand for Rupee thus the Indian rupee appreciates w.r.t the dollar. If India imports then the dollar appreciates w.r.t the Indian rupee.
Now considering FII’s for every dollar that they bring into the country, there is a demand for rupee created and the RBI has to print and release the money in the country. Since the FII are creating a demand for rupee, it appreciates w.r.t the dollar. Thus if for e.g. if prior to the demand the exchange rate was 1 USD = Rs 40, it could be 1 USD = Rs 39. Similarly when FII withdraw the capital from the markets, they need to earn back the green buck (USD) so that leads to a demand for dollars the rupee depreciates. 1 USD goes back to Rs. 40. Thus FII inflows make the currency of the country invested in appreciate (e.g. FII investing in India may lead to Rupee appreciating w.r.t several other currencies) and their selling and disinvestment may lead to depreciation.

Depreciating currency not favorable to the FII’s: considering a simple hypothetical example. I invested 1 USD in India at an exchange rate of 1 USD = Rs. 40. If rupee appreciates the exchange rates become 1 USD = Rs. 20. Now if I disinvest I get 2 dollars, whereas I invested only 1 USD thereby a gain of 1 USD. (Though in real terms the purchasing power of my dollar might decrease as my import cost would increase, and cost of living back home may increase, but when I do consider practical examples there is always a gain for FII whenever the currency of the country invested in appreciates w.r.t the home currency)

Similarly when rupee depreciates w.r.t US Dollar and exchange rate becomes 1 USD = Rs. 80 I get only 0.5 Dollar and I lose 0.5 of the 1 USD invested.

Thus we observe that for the FII’s to gain investing in India the rupee should appreciate w.r.t the dollar.

*Recently the rupee has depreciated with respect to the dollar due to FII selling, and due to the selling it has been depreciating even further.

FII and Inflation: The huge amount of FII fund inflow into the country creates a lot of demand for rupee, and the RBI pumps the amount of Rupee in the market as a result of demand created by the FII’s. This situation could lead to excess liquidity (amount of excess cash floating in the market) thereby leading to Inflation, where too much money chases too few goods (perfect example of demand-pull inflation). Thus there should be a limit to the FII inflow in the country.

FII and Local companies: FII bring lot of funds to the country’ markets leading to free availability of funds for the local companies in need of funds to carry on expansion in their production capacities or starting new ventures.

FII and Exports: However because the FII lead to appreciation of the currency, they lead to the exports industry becoming uncompetitive due to the appreciation of the rupee. For e.g. if 1 USD = Rs.40 and a soap costs 1 USD. Now when the rupee appreciates 1 USD = Rs. 20, I will have to sell the same soap to the US for 2 US Dollars in order to sustain the same income that I have been making i.e. Rs.40. Thus excess FII fund inflow in the country can also make a negative impact on the economy of the country.Thus the FII bring in a lot of funds to the country which could be used by the companies to achieve rapid growth but there should also be a mechanism to keep them in check so that they do not affect the economy of the country negatively. FII are always compared with FDI (Foreign Direct Investment). It is believes that large FII inflows reflect the openness and Reliability of country’ markets. Thus it has to be seen which model perfectly suits a country’ growth.

In Search of NEW-CLEAR-PEACE DHEEL- The real side of the nuclear Deal -

Hmm.. it was a pretty dull week this one for me! Not exactly for the govt. while our beloved phlegmatic P.M was giving sleepless nights to the communists and as I search for some peace, Media has finally got its own piece of news for the week and left Aarushi to rest in peace. While Americans hiding behind the Bush! Are going to push India forward for peaceful nuclear power and give it a piece of the nuclear fuel, I have been searching for my own piece of luck (not peace).

Well the new-clear-peace that I’ve been searching for I’ve not found! I’m confused. Drop it! Let us focus on national issues, being true Indians we should always discuss, call meetings (and get people confused) arouse people’s sentiments (Amarnath Shrine Board Incident and Indore riots) after all we need to discuss (and not do anything, Communists in India, talk, brag, bully and more importantly do not join the government but just support from outside. Is that what the public voted for, common go make our policies, not just oppose them, owe responsibility for what’s going on!) India is on the development path and is soon going to overtake the US in terms of GDP. But will that be simple! No I guess if we just keep discussing and not act!

MAIN AREA OF CONCERN: as we develop so will our energy demands grow sky high (well really? Yes). The major chunk of electricity that we produce is through our thermal plants, which consumes millions of tonnes of coal to convert steam energy into electricity and at the same time release that much amount of CO2 in the environment (not a great idea right). In future our energy demands are going to rise so much that we will not only exhaust our own coal but will have to import it (provided it’s left anywhere in the world) and imagine what threat to the world we will be guzzling out carbon to the atmosphere. Now why is nuclear energy so important? First coal is not a clean fuel; it is exhaustible in near future. Moreover there are ways to utilize non conventional sources like wind, ocean etc. but scope is limited and it’s difficult for it to directly sustain all the demands. So we turn to nuclear fuel particularly due to it being clean, limited but highly efficient, large scale power generation!

What seems “Left” is not Right? Well meet our communist friends; they have been pulling the poor Sardar’ leg ever since he went behind the Bush and gave an impression of being the new Mr. Tony Blair. According to the revered Economist (because of whom millions are working in the IT industry, People are going gaga over shopping branded stuff at the malls and enjoying the same status as the Americans in America) India is enjoying best ever relationship with Uncle Sam. And now it has become such a good friend that it is giving all this stuff for free (has to be a great friend indeed) Nuclear energy technology which Indians can use and take away all those jobs from Americans (Reason why OBAMA is against this deal!) How? Look it will light up all the villages in India, then they will also get connected to broadband, then these IT companies will train the farmers in C, C++ and make them code for the Firangis in the west (look open source volunteers, farming in the morning, code in the night all voluntarily, that is what open source community came along selling pizzas @ day and coding @ night giving Mr. Gates sleepless nights a.k.a NO PEACE). Or some BPO fellows will setup a call centre, train our farmers in English and make them sell airline tickets for United Airlines! Everything is possible, Impossible is Nothing (courtesy: ADIDAS).

Coming back to our communist friends, they say that the govt. did not divulge all the details of the deal and there is a hidden agenda! Ah-ha! They feel that this deal is going to affect the sovereignty of the country and India may be headed the Pakistan way obliging the US. Moreover putting the atomic reactors under safeguards will put an end to future developments and advancements in nuclear technology. They also say that the sudden rise in the oil prices is due to US playing dirty games for getting countries like India to worry and fall into the nuclear trap! (courtesy Russia, Saudi and Iran, top three oil producers saying there is no fuel shortage and there will be no decrease in supply) point I guess!

Why they are not right?
1. India’s reactors running at half the capacity due to unavailability of fuel, uranium in this case.
2. India’s growing energy demand and future requirements indicate towards cleaner efficient fuel.
3. Only nuclear reactors which are used for civilian power generation under safeguards and not all, moreover the fuel will be tracked and monitored by IAEA only in these reactors and not all of them, so we can still manage to make bombs and scare off Pakistan!
4. There’s nothing like compromising with security, it’s only about managing and understanding your needs, moreover there’s nothing wrong by sticking to a strong partner, I don’t understand how it is going to affect our sovereignty! As long as US is not asking for an airbase to attack China, or send Indian troops to Iran, India should be fine with it.
5. We are developing breeder reactors which will run on thorium but it will take time in R&D, so by that time we can fulfill our requirements through this new deal.
6. Moreover going ahead with this deal does not entitle India to buy fuel only with the US, there are 45 countries in the Nuclear supplier groups and India can approach any of them for any technology for civilian nuclear power, so why the fuss? France has already come out in support and so has Russia to supply the necessary technology.

With reference to the above points I really don’t see any reason why the communists are opposing it? Are they so averse to any foreign technology? Or to the capitalistic US? Or are they just non-committed towards the people of India? The larger picture has to be seen not in case of the political scenario but also the long term needs. And while I finish this it seems Aarushi has finally found peace (CBI seems to have figured out the culprit), but I’m still to find mine!

RUN TO THE HILLS FOR PEACE

P.S: The opinion is purely of the author’s and should be seen as just another way of expressing oneself in this democracy and means no offences to any party or ideology!

‘SUZLON’ – THE WIND-SIR MANOR

What started off as an initiative to meet his own demand for energy to run his textile plants has now resulted in the world’s fifth largest wind power equipment company with revenues of $ 3.2 billion and market share of 10.5%. So what led to this tectonic shift and resulted in one of the world’s best energy company? Let us have a look.

HISTORY: It was the early nineties and India was just opening up. A Gujarati businessman by name Mr. Tulsi Tanti was running his textile business. He had been facing a frequent problem, the infrequent supply of electricity for his textile plant. It was hitting his business hard, so he decided to setup two wind turbine generators at his site to cater to the energy demands. Many regarded this as a foolhardy step where the capital for setup was more than the textile business itself. But he had his sights on more than the immediate, having already seen the potential of wind power and the global opportunities in the field. Moving quickly, he set forth to acquire the basic technology and expertise to set up Suzlon Energy Limited - India’s first home-grown wind technology company. Suzlon began with a wind farm project in the Gujarat state of India in 1995 with a capacity of just 3 MW and has, at the end of 2007, supplied over 7,500 MW world over. Suzlon has grown more than 100% annually and registered a 108% growth, in the financial year ended 2007 – over twice the industry average - in a supply restricted environment. Today Suzlon is being ranked the 5th leading wind power equipment manufacturer with a global market share of 10.5%. The company seized market leadership in India over 8 years ago, and has consistently maintained over 50% market share, installing over 3,000 MW of wind turbine capacity in the country.

CORE COMPETENCY: So what is Suzlon’ core competency is not tough to guess, the question is how it’s focusing on it? Suzlon over the year (13 years to be precise, setup in 1995) has grown leaps and bounds, to become a complete end-to-end company. The company creates demands for its customers by providing comprehensive business solutions by infrastructure development and converting potential windy sites into profitable business measured in the net output kilo-watt hour.

Complete integration of backward supply chain, through this approach Suzlon has developed comprehensive manufacturing capabilities for all critical components in their wind turbines. This provides the company with quality control, assurance of supply and economic sales.
Research and Development: Suzlon’s R&D strategy lays key emphasis on a lower cost for every kilowatt-hour generated through technological competent products making technology the central objective. For this Suzlon has set foot outside India and has R&D centers in Netherlands and Germany. This brings expertise from the best all over the world.

Markets: Following a truly global approach Suzlon has moved from traditional markets to the new emerging markets. It is basically targeting the Asian and the American markets; it has expanded its business in Australia, Brazil, China, Italy, Portugal, Turkey and United States. To be looking at the figures, Suzlon is the fifth largest in the world right now, with a market share of 10.5%, Vestas the world’s largest player in the segment is 13.6%. Apart from this Suzlon has been creating a great market for itself in China and has already captured an 8% share there.

Wind Farms:
1. Suzlon is also developing the biggest wind field in Dhule district of Maharashtra, India. The current capacity is around 650 MW. With an additional capacity of 450 MW, net output wattage will be 1000 MW, making it the biggest in the world.
2. In addition to this, Suzlon’s wind farm located in Sanganeri in the state of Tamil Nadu in India, has planned for a capacity of over 500 MW and is home to over 250 wind turbines with a total of 350 MW of installed capacity presently.
3. Suzlon has made an entry into the state of Kerala, in southern India, as well.
4. Suzlon’s customers in USA currently include Edison Mission Group (EMG) in Irvine, California where EMG holds more than 1000 MW of wind turbine capacity. Another high profile customer John Deere Wind Energy (JDWE) has projects in Minnesota, Texas and recently in Missouri with a turbine portfolio from Suzlon that exceeds 530 MW in capacity.
5. Suzlon, under its contract with AGL (Australian Gas Light Company) for 95 megawatts of wind turbine capacity, is setting up a wind farm in rural South Australia. The facility is located in Hallett, 220 kilometers north of Adelaide.
6. Suzlon crossed a major milestone in Europe, the world’s largest and most competitive wind market, by completing the commissioning and mechanical erection of turbines installed at its Penamacor projects. The projects cover 39.9 MW of wind turbine capacity with TECNEIRA – Tecnologias Energéticas, SA for two wind farm projects in the Penamacor region of Portugal.

Suzlon’s Clients: Primary customers in India include companies that have manufacturing facilities with high power consumption. These companies have high profitability and seek investment opportunities with stable returns. In India, Suzlon caters to leading corporate houses like the MSPL Limited, Bajaj Auto Limited, Tata Group and Reliance, to name a few. Among others include the ones mentioned in the section under wind farms.

Manufacturing and R&D Sites: Suzlon emphasizes innovation at the core of all its activities, and nowhere is this more evident than the Research & Development effort. The company has developed a comprehensive range of wind turbine models ranging from 350 kW to 2.1 MW, with customized versions for deployment in a variety of climes ranging from hot, dry deserts to humid coasts, to near-freezing plains. Suzlon has driven a focused effort to make wind turbines more reliable, consistently delivering availability rates beating global standards, higher than 95% on an average. The Suzlon R&D effort is working towards lowering the end-cost of power from wind, in cost-per-kW/h terms – leading towards making wind an increasingly viable, competitive part of the global energy matrix. To drive this development effort, Suzlon has – again – chosen an innovative approach: leveraging the core strengths and experience of different places and people to build a global team dedicated to developing world leading technology. Suzlon has established dedicated centers for gearbox technology in Belgium, technology innovation in Denmark, process engineering in India, aerodynamic development in the Netherlands, and composite wind turbine technology in Germany. These centers of R&D, Innovation and Knowledge Management have been carefully located to leverage local expertise, such as the leadership of certain European countries in different aspects of wind power technology, alongside India’s expertise in IT systems and process engineering and innovative technology application. Suzlon has headquartered its R&D effort in its new Global Technology Center in Hamburg, Germany, enabling a centrally coordinated R&D effort, while allowing for technical collaboration with leading technical universities and institutions in Germany, and further afield.

SUZLON – A HUMAN FACE: Apart from serving the business community by setting up wind turbines for power generation which is cost effective. The company is also contributing to a greener world through initiatives in terms of setting up wind farms to generate energy through non conventional and clean sources. It has also taken initiatives on the human front by taking up multiple steps to promote local business, education and health system in India. Few are:
1. Suzlon Energy Limited (SEL), through its subsidiary Suzlon Wind farm Services, undertook a major new Corporate Social Responsibility (CSR) initiative, in the beginning of April ‘07, by launching a partnership with the Kutch Nav Nirman Abhiyan (KNNA). Suzlon has partnered with KNNA to gain support for an operational CSR framework for proactive development. The KNNA is a network of multi sectoral institutions with its expertise areas of community development and sustainable disaster mitigation / management. With its primary focus as Kutch as a model of district development, KNNA also demonstrates good practices of community empowerment and disaster management within the country and outside The first project, organized through ‘Khamir’ – a local NGO, will focus on creating employment in the rural area by leveraging locally available skills. This project named the ‘Dutch Kutch Design Exchange Program’, will be run in partnership with the Einhoven Institute of Design, Netherlands, and Dastkar, Delhi. The focus is on developing local crafts to enable the artisans to create marketable products and access better markets in India and abroad. The program will also assist in developing designs with a strong brand identity, specifically in sectors of weaving, block printing, leather, silver and bell metal. Suzlon will support this initiative with amount of INR 3 lakh, in the first year.
2. The second project organized by Bhojay Sarvodaya Trust, will focus on health and sanitation services in the villages of Abdasa and Mandvi. Approximately INR 4 lakhs will be contributed by Suzlon for the effort. Under this project, the Bhojay Sarvodaya Trust will organize eye, dental, general surgery, ENT and gynecology camps free of cost across the project villages. The project will coordinate doctors and surgeons for providing care at the village centers, distribute preventive medicines, and also run awareness campaigns in the region.
3. The third activity focuses on our Vision of powering a greener tomorrow at our forthcoming corporate facility at Hadapsar, Pune. There are several ways in which buildings can be made more energy efficient, environmentally friendly, pollution free and socially uplifting. Measures to achieve these objectives are including the usage of solar water heating, using other renewable energy sources, energy efficient lighting, maximum use of natural ventilation, building design to suit convenience of disabled persons, water recycling and moving from a typical office environment to an environment that encourages creativity and team work. These steps have been taken by Suzlon to make this vision a reality.

BLACKBERRY Vs INDIA! – The Impasse seems to end

On 2nd of July, in a complete turnaround of its previous stance, the Department of Telecom (DoT) said that there was no threat from blackberry services and the government had no objections if an operator wanted to offer these services. This comes after an impasse of almost over two months. So what was the reason for the impasse and what has finally emerged as a viable solution for both the sides? Let us have a look.

What is blackberry? Blackberry is broadly identified as a PDA (Personal Digital Assistant). It is designed and marketed by RIM (Research In Motion), a Canadian firm. It is a wireless hand-held device introduced in 1999 which supports push e-mail, mobile telephone, text messaging, Internet faxing, Web browsing and other wireless information services. Further features are: Large, high resolution screen to provide ample workspace; vibrant display supporting over 65,000 colors; available memory for application and data storage; Java development platform based on open standards; integrated attachment viewing; exceptional battery performance; tri-band hand-held, operates on 900/1800/1900 MHz GSM/GPRS wireless networks, allowing for international roaming between North America, Europe and Asia-Pacific.

Why the security agencies are concerned? The Indian security agencies have concerns that the data generated by the blackberry is not only difficult to monitor and intercept, it’s even tougher to decrypt the generated data sent over the network. The security agencies feel that this could be used by the terrorist organizations to their advantage in exchanging vital information pertaining to national security and could pose a serious threat.
Under India's Information Technology Act of 2000, the government has the right, under certain circumstances, to intercept electronic communications for security reasons and in the national interest. Security agencies say that terrorists are increasingly using the Internet and applications such as e-mail to communicate with one another.
The security agencies have some primary problems with the blackberry:

1. The BB uses a 256 bit encryption which is by far one of the toughest in the world to break through. The present operators providing such services offer 128 bit encryption. Moreover the security agencies have the only the capability to break through a 40-bit encryption in their armor.

2. Most of the data that is sent through the BB is routed through its server in USA and UK. The security agencies want that since it is difficult to access these data because of multiple reasons pertaining to sovereignty, diplomatic and security reasons, the proposal is that all data generated by the BB’s in India should stay within the country. And for this RIM has to setup dedicated servers in India itself.

3. RIM should provide means to the security agencies to monitor the data, by either providing the master key to the database, or let the security agencies monitor it by bringing down the encryption level.

What RIM says?
1. RIM says that providing a 256 bit encryption is the USP of its blackberry model. The very reason that it provides such robust security feature is the reason it is being used by the corporate in exchanging important confidential business mails. Bringing it down to the level demanded by the security agencies will hurt its basic business model.

2. Second, RIM says that setting up server in India will make other countries where it is operating (operates in 135 countries) demand the same. This will greatly hurt its business propositions and it is against any such demands.

3. Then RIM feels that snooping through the users BB by the way of sending a SMS and that will automatically install itself and either let know the encryption key being used would greatly reduce the QoS and the device may behave abnormally (performance) and the user may get to know that he/she is being snooped.

4. RIM also makes it clear that the decryption key for any data sent is not even known by it because the device which sends the data itself generates an encryption key and can be decrypted by the user to which the data is intended. And there is no such master key which the security agencies are demanding.

5. Most importantly RIM says that majority of its clients are corporate companies, and these are used by people in the higher hierarchy in these companies, so RIM has proposed that their monitoring was not of concern and the real problem in monitoring would require the individual clients. The RIM is therefore working out technological changes to help the security agencies in monitoring these individual clients.

So each side has put their point of view with the DoT, security agencies and RIM are working together to find out ways for monitoring the data and help it covert into understandable form. Hopefully this impasse seems to be breaking.

FIRST TIME ROCKING AT JIPMER – A Learning Curve

It was just the end of August in 2006 and it was my first ever tryst with the rock and roll scene in India. I was for the first time playing Bass (please pronounce it as base) guitar for a band in college, and my first ever gig was supposed to be at JIPMER, Pondicherry. One of the most revered Battle of Bands contest in southern India. The show was called Tinnitus (Western Music Competition). It was a gleaming night, with some of the best rock crowd I had come across. People seemed to understand here that rock was no screaming stuff but just another form of music they were so addicted to.

BATTLE OF BANDS STARTS: The battle for the supreme bands started around 8 p.m. after much delay due to rain which had added another dimension to the already energetic and rocking crowd. The bands came, they played and they conquered. Though we did not give a perfect show but we were surely on the learning curve seeing all these wonderful bands around! We played a mix of modern rock, some punk and a hard rock number. The songs we played were: Show me how to live (Audioslave), Virus (Iron Maiden), Flavor of the weak (American Hi-Fi) and Rocking in a free world (Neil Young, Pearl Jam cover). We got a mixed response; to be frank I was so involved in playing (I was a bit nervy as well) that I totally missed out on the crowd thing. Though we screwed up the third song (Flavor of the weak) the response from people after our show was that the second and the last song were pretty good. And for the last song we even got some head-banging, applauses and rock on screams! So that went down pretty well. Though after our performance we went back stage and we were trying to find out culprits as to who screwed up the third song! To be frank I did not say anything that time but it was our rhythm guitarist but no issues cause one can always goof up while playing. It’s only about realizing ones mistake and giving a good show the next time. Another thing with JIPMER’s battle of bands is that the sound system over here is awesome. Apart from that the lighting is so perfect that it adds to the joy of playing. The Light men flicker the lights depending upon the rhythm and the mood of the music being played by the bands. So it is worth appreciation.

Moreover it was my first experience of the rocker lifestyle. People around some engineers, some doctors (JIPMER is a medical college) and rest all jerks (engineers at the most respect doctors rest all guys are unknown clans) from colleges all around Chennai, Bangalore (India’s rock capital), Calicut, Trivandrum etc had gathered for the JIPMER event(it’s basically the cultural and sports meet organized on an yearly basis). There were many other things I got to see. There were smokers and dopers all around. Some frustrated doctors were high on alcohol (one even got on to the stage and did a ramp walk when the bands were playing), some were busy rolling Marijuana joints and the extreme jerks were even snorting cocaine. Well it’s such a shame that such guys bring to the Rocker community, because they set a bad example and the youngsters just blindly emulate them. Actually Pondicherry is the dopers’ paradise. Anyways it was a fun experiencing different cultures, morons and the lovely Pondicherry. It was fun rocking!

CARRIER SELECTION- what is it, what are the operators saying?

The latest buzz in the Indian Telecom industry already complaining against TRAI and DoT for the delay in rollout and licensing of 3G in India and has come under yet another regulatory order from the governing authority. The TRAI wants to introduce carrier selection in the India. So what is the fuss all about? Let us have a look.

Carrier Selection: This enables a telephone subscriber to decide which operator it wants its call to be routed through when he/she is making an ISD/STD call. So say I am a Vodafone customer staying in Hyderabad and want to make a call to someone in Delhi. Unlike now where I have to stick to my present service provider (this case Vodafone) and it (my present service provider) decides how my call is routed and charges a specific amount for the call. In the carrier selection process I get to choose my own operator. This can be done by prefixing the code of the operator which I want my call routed through and whose network I’ll be using before the number to be dialed. My choice will primarily depend on two factors:
1. Cost- operator providing cheaper call rates may be preferred
2. Quality of Service – operator providing better QoS like voice clarity, low echo, and low latency and jitter.
So once the customer decides upon his option he’s free to use the particular operator.
This however should not be mistaken for MNP (Mobile Number Portability) where the customer uses the same number but has shifted to another operator. In Carrier selection I’ll be still under my service provider for normal call and value added services but for long distance calls I can choose the operator for carrying the voice calls.

What’s TRAI’s Vision? TRAI, yes the Telecom Regulatory Authority of India which has been bullying the telecom players for quite some time now. TRAI feels that the adoption of American system of carrier selection in India is largely going to help the subscribers. It also sees a general increase in competition thus pushing the prices further down. It will also spur further innovation in terms of better long distance communication and facilities (QoS). Thus TRAI believes the end user will be greatly benefitted.

What the operators have to say? The operators believe that the present regulations being introduced by the TRAI is unfair for multiple reasons
1. The present long and short distance call rates in India are already cheaper than most markets in the world. The call rate is generally in the range of 80 paise to Rs. 1.60. Out of this around 65 paise goes for the carriage, 30 paise is the termination charge (fixed by the operator) and rest is what goes to the operator. Therefore service providers think that they are already operating on a thin margin and there is minimal space for further reduction in call rates.

2. Second, when the scheme of carrier selection was first introduced in early 2000 there were very few operators in the market. The scheme would have been feasible at that time encouraging competition and driving down call rates. Presently there are twelve Mobile Service providers operating in the market. Thus the service operators hold an opinion that they are already enough players to have good amount of competition and keep the prices as low as possible.

3. Third, the cost required for setting up the Intelligent Networks for Carrier selection is huge. Rather than bringing down the cost, setting up these infrastructure and extra capital flow may lead to increased call rates. Moreover already the Telecom billing system is still maturing; there is no fool-proof system for correct billing. Due to this Mobile Telcos lose out on some revenues. Moreover increased burden in terms of setting up extra IN (intelligent networks) may tax heavily on the service providers.

4. Finally, one more point to be taken note of is that most of the players which have a considerable customer base are already long distance players (barring Vodafone). And the competition has already driven the prices low.

The Mobile operating space is already very competitive courtesy a significant number of players in the market. Moreover they already are operating on thin cost margins. The Regulatory authority should therefore concentrate on 3G regulations and future innovations.

The 80-20 Principle – Pareto’s Principle

How it came along? It was first proposed by the Italian economist Vilfred Pareto in 1906. He created a mathematical formula to describe the unequal distribution of wealth in the country. He observed that 20% of the people owned 80% of the wealth. Much later in the late 1940’s Dr. Joseph M. Juran proposed the "vital few trivial many principle". This theory basically proposes that 20 percent of things are always responsible for 80% of the results. Moreover the principle came to be known as Pareto’s principle partly because the earlier work of Dr. Juran wasn’t clear and people thought he was applying Pareto’s Economic theory in a broader aspect and partly because Pareto’s principle sounded better than Juran’s principle.

What does it mean? It means that 80 percent of all the things you achieve are because of 20 percent of all the things you’ve been doing. Further many things can be taken out of it. 20 percent of your work may be consuming 80 percent of your time. Managers spend only 20% of their time to complete 80% of their work, and 80% of a company's business comes from 20% of its customers. 80 percent of your losses could be because of 20 percent of your business. 20 percent of your stocks may be taking 80 percent of your warehouse. 80 percent of your sales may be due to 20 percent of your products. 80 percent of business growth may be due to 20 percent of your employees. One can apply this principle in any aspect of work or life.

How to use it? First we have to write down what are the main factors that are directly related to the problem or in general the question that is involved. If more than one factor is due to the same thing then count it as one single generic factor. Let us learn from a simple example.
Consider the contribution to the monthly household expense by various payments that should be considered. The major payments can be taken as:
1. House Rent- 10000
2. Electricity Bill- 500
3. Car Petrol Bill- 1000
4. Telephone Bill- 500
5. Child’s School Fees- 1000

We then chart it out and observe the contribution made by each. In the example below we observe that out of the total expenditure of Rs.13000 house rent itself amounts to Rs.10000 which is almost 77% of the total expenditure. Moreover it is just one out of the 5 factors making 20 percent of the total factors. Thus we observe that in this case also 20 percent of the factor is contributing to 80 percent of the expense.

Thus we observe that 80-20 principle can in general be applied to any day-to-day problem and with proper analysis one can prioritize his course of action for better returns and efficient functioning.