The latest CRR rate hike
The decision of the Reserve Bank of India (RBI) to increase cash reserve ratio (CRR) came as a surprise to many. The hike in CRR from 6.5% to 7% will compel banks to keep more cash with the RBI and thus will remove some portion of monetary liquidity from the market.
Theoretically, this may cause an upward movement in cost of funds (interest rates, which I and you pay on the loans taken from banks). This considers the demand-supply principal. Supply of money will shrink as banks are ordered to keep more money with the RBI leading to a drop in available funds for disbursement. As supply has gone down, cost to get it (the interest rates in the economy) would go up. Now, the question is will this happen?
Seems really difficult. Banks are as such facing trouble with parking the funds they have at the current interest rates. There are less takers of credit at these prevailing rates. Further, banks are saddled with the fixed deposit money (again, parked by you and me with various deposit schemes of banks) due to higher interest rates on these. Given this fix, it seems unlikely that banks would further hike interest rates on either side of their business (lending and borrowing).
The RBI has been showing a very high sensitivity to the inflation data. The latest decision to hike CRR stems from the need to curb inflation. The problem is authenticity of the mechanism to determine inflation. The RBI looks at the wholesale price index (WPI), which at the most gives an indication of inflation but not a clear picture. It does not cover many commodities, which are of importance to the industries and consumers.
Labels: Policies
Hello iPhone, goodbye iPod!!
On 29th June, it appeared that whole of the geeks in the US had just one great mission: to grab the new toy on offer from Steve uncle! All the Apple retail stores across the nation saw long queues of tech enthusiasts to touch, feel and perhaps buy iPhone, the latest offering in the mobile communications space from the legendary Silicon Valley company.
The launch of iPhone is a major milestone in Apple’s corporate journey. It demonstrates the agility of its think tanks to sense the technological shift much before it wipes out profitability of a technology driven company (for instance digital cameras cannibalizing market of not only the analog cameras but also the camera rolls) or any other non-technology business (Indian postal department facing stiff competition from e-mails and telecommunication; as a matter of fact, I’ve not written and posted a single letter in past seven years!).
Take a close look at the evolution of mobile technology and you will realize that it was quiet evident that iPod was going to be a dead technology sooner than later given the voracious appetite of latest mobile handsets for music and video. There is no logic in keeping two devices --- one for music (iPod) and other for communication (mobile handsets) when you can get just one gadget having both the capabilities.
With breakthrough mobile handsets from Sony and Nokia providing all the virtual stuff under one roof (games, music, video, camera, wireless communication, internet etc), days of iPod like gizmos were numbered. It is a great sense of maturity on Apple’s count to accept this stark reality. In early 2005, they announced plans to come out with a mobile phone. This seemed to be like late entry in already fiercely competitive mobile handset space. And, personally, I was wondering what kind of niche Apple can create in such a dynamic product space where one finds a few new handsets after every six months.
But, Apple didn’t disappoint. It is always the message Apple gives the observers, which says there still can be a lot of room to fit an altogether new approach to existing solutions. Thus, Apple didn’t invent technology of mobile communication. But, it did introduce a new ergonomics to the handsets. It has perhaps changed the way people use and handle the device --- swivel and shuffle, portrait to landscape and back etc.
This is the third time that Apple has taken advantage of something which was missing from the technological space for no valid reason. First, it was the iMac candy colour PCs, which made technology look beautiful and cuddly. Then, it was iPod, the digital walkman (Sony must be repenting for missing on this great opportunity). And now the iPhone, doing something that any other latest handset can do but with a brand new perspective.
One thing is sure, Apple has forced its new line of competition (the handset makers of the world) to give a radical thought to their designing strategies for moths to come!
Labels: Corporations
