RBIs Balancing act

Source: ET 21st June 2011

My thoughts on RBI's Balancing act:

Let us look into following scenarios to study the role of monetary tightening policy of RBI in increasing inflation :- ( Actually it is expected to reduce the inflation, as the liquidity gets absorbed by RBI)

1) Monetary tightening by RBI --> Banks are forced to increase interest rates on deposits to attract more deposits --> Banks profits under pressure--> Banks sooner or later increase the interest rates on borrowings by businesses --> Business profits under pressure --> If market allows pass the increased burden to market --> Prices increased --> Contributes to Inflation.

2) In some particular scenarios the increased interest rates may put some small scale businessmen out of business... which will make the market less competitive and in favor of the medium or big business... in addition the demand increases over time...this gives opportunity for the medium and big businesses to encash the opportunity by increasing the price of the service / commodity etc and the buyers have no option to go for it --> Increased prices and hence increase in "Inflation".

Indepth study of these measures of RBI from the ground zero level needs to be undertaken to see the real impacts of RBI policies on the Indian Economy.

Mr. Haresh Raulgaonkar
visit : http://yesiwill.in

Battle for Indian airline market

The Battle for India

ET 21st June 2011

It’s a market where foreign airlines control 70% and Emirates is the “national carrier”

“Emirates is now the national carrier of India,” declares a top executive of a private Indian carrier with big international ambitions. It’s a blunt assessment of the course the battle for India’s international air travel segment is taking. On the one hand, local carriers like Jet Airways, Kingfisher and Air India are unable to make much headway. On the other, European airlines like British Airways and Lufthansa are struggling to retain share. Leaving both sets behind in the market that is growing at 18% annually is the usual suspect: the Gulf carriers. “Emirates is slowly capturing the market at prices that are difficult to sustain,” the executive adds. “The government too is allowing them the number of flights they are asking for.” All three Gulf biggies are looking to add destinations in India and increase their frequency of flights. In contrast, Air India is losing its hold on international sectors. Private carriers like Jet are expanding, but with limitations. Kingfisher has international plans, but not enough cash. IndiGo is trying something with 25% lower fares on Gulf routes. Foreign carriers control 70% of this market. For many of them, India is the largest market outside the US. Emirates CEO Tim Clark believes Indian carriers are missing out even in attractive routes like Dubai, home to a million Indians. IndiGo, Kingfisher, Jet and Air India all fly to Dubai. “You have four Indian carriers against Emirates. Why is it that Indian carriers have not been able to fill up the quota to Dubai?” wonders Clark. “Maybe IndiGo will be able to fill this gap,” he says. That’s but a thin ray of hope.