New U.S. Visa Fees is the change only to be criticized or can we see anything more coming up soon?

The increased H1-B us visa fee would have had some eyebrows raised but the question to be thought and asked is if this was a major issue pertaining and needing some attention.

Every year thousands of Indians visit US(only with respect to US), for a normal visa the fee ranges till 10K INR and that’s for all one application which if rejected will need a reapplication, mostly if you are a tourist there are no chances of rejection but in most of the student visas which are for longer duration and the one which are for temporary work force ( staff sent by Indian countries to US for temporary period) there are many rejections. Every rejection earns the US government some more dollars.

However the H1-B visas have always been considered more important from the point of Indians who eyed them during the brain drain years and since then have always been eyed upon.

After the recent change in the visa fee due to Schumer border security bill in US one will have to shell away more approximately more of about US$2000 per visa ie about INR 92000.

What is to be looked upon is the direct and indirect impact of this bill on Indians, Indian firms and any kind of employment drawbacks.

• The majority of the individuals who apply for H1-B visa are students and those always have a choice of applying in student visas.

• Majority of the Indian firms who send there employees on a temporary period abroad are the ones who apply for H1-B visas however the percentage of these is incomparable to others. The reason why they send there people is simply based on the concept of high profit earnings (i.e. all IT companies charge there counter parts in US on a monthly basis for the service they provide on the other hand the Indian employee is normally paid on a daily fixed expense+ Indian salary or only on daily expenses abroad basis, the net difference is simple profit made in body shopping)        
•  As we are taking about big corporations whose reason to send an employee and earn over per  head   is  more than mere fee H1-B despite the fact it will add to the cost it will make no difference to the number of people sent by these firms abroad.

•  Employment Drawbacks: if and only if one would not have any prospects of future earnings they would drop a plan to avail H1-B and as there is no difference made in the number of visas allowed it makes no difference to the overall employment opportunity in US on part time or full time basis.

So after reading all of this the questions still remains same , why is a policy decision hyped so much when it makes no difference to the overall economic situation of a country except for the few thousand dollars surplus(which sound like peanuts in front of the overall reaction).

Or is this just the first step for the change and we can expect more change in the coming days. Looking at the present scenario the only option US seem to be having is generation of employment and creating more opportunity for employment and any changes made there could not only hurt US corporate profits but also Indian companies and overall employment scenario in India.

Common wealth. What is more uncommon about it, the expenses, the speculations or the reactions?

Any event which is so big in itself  could not only add to the existing grwoth of  a developing nation like India but helps in generating more employment and other benefits . The Common wealth games are contributing to the livelihood of almost 300000 people (WSJ) employed in infrastructure and  other 200000 involved in services.

We know that the people employed in infrastructure would no longer will be working after the completion of the jobs but they have been involved since 2003 so lets account there presence till Oct-2010 and look at the future events taking place.

The stadiums might not be reused, but the equipments hired would be paid for, the stadiums would have tickets contributing towards their fixed cost (contribution), the roads being used and hence value for the money, the visitors coming in the country would stay in hotels (spend )and involve in other shopping around the town.

The basic economics suggest that any input by government favors a multiplier effect on the over all economy hence pump the economy with jobs and money. In a country like India the government investments still do not produce crowding out effect(as in case of developed nations) as in India  the private players  would still have lot of scope to take part.

It’s been estimated that a government expense in India results in a multiplier effect of approximately 1.8(WSJ). We know that after the approx 10000 millions expenses so far and over all revenues and expenditures to touch 2 billion approximately, the net multiplier will be approximately 4billion.

There are always possibilities of leakages in a system and so is the case of common wealth games and despite the uncommon large leakages happened what could possibly be done is manage the large event coming up not only for pride but also for the growth of the economy.

India won the bid to conduct an even which is so large and after having spent so many crores and expecting more to be spent are we looking back to withdraw it? Debate over it? or find a solution?

Tightening Monetary Policy: Repo and Reverse Repo

It was impending and is not taken as a surprise…when on 27th July 2010, RBI Governor, D. Subbarao announced the increase in Repo and Reverse Repo rates by 25 and 50 basis points respectively, making it to 5.75% and 4.5%. The hike in policy rates is done keeping in mind the food and non food inflation which is still in double digit at glaring 10.4%.However it is expected that monsoon will moderate the food prices and will help the inflation rate to come down. As a part of monetary tightening policy, increase in the interest rates will make the credit dearer, reduce the spending, thereby tightening the liquidity in the market. Apart from this, there is also narrowing of LAF (Liquidity Adjustment Facility) corridor to 125 bps.

LAF can be simply defined as gap between the repo and reverse repo rate incorporated in 2000.The broad objectives of LAF are:

• To give RBI greater flexibility in determining both the quantum of adjustment as also the rates by responding to the system on a daily basis.
• To help RBI ensure that the injected funds are being used to fund day-to-day liquidity mismatches and not to finance more permanent assets.
• To help RBI set a corridor for short-term rates, which should ideally be governed by the reverse-repo (top band), and repo (lower band) rates. This would impart greater stability in the markets.

The exact quantum of liquidity to be absorbed or injected and the accompanying repo and reverse repo rates are determined after taking into consideration, the liquidity conditions in the market, the interest rate situation and the stance of monetary policy. The decisions are based on a numerous factors including net inflows and outflows on account of forex operations, current account balances of the banks against the CRR requirements, open market operations, redemption of loans and coupon payments, announcement of new issues by the government, un-drawn liquidity support on account of export refinance, collateralized lending facility to banks.
D. Subbarao, in the disclosure also talked about the LAF to be narrowed to 125 bps thereby reducing the volatility.

However, the change in the rates had empirically no impact on the growing sectors, i.e auto and real estate immediately. It may be because the hike was an expected event or it may be just a short phenomenon.
The question which becomes pertinent here is the impact of hikes in the long run on the growth sectors and on the inflation. It is also expected that deposit and lending rates are next on the list. What will be its impact?

Lending policies is there any safe way out? Liberalized or conservatism which view do you hold or is there any third way out?

The world seems to be astonished looking at India, a country which was popular for snake charmers and elephants in west is in news but for all the new reasons. From the terminology of “outsourced” synonymous to “Bangalored” in world, to financial shock observer India is leading the world for its policies and conservative approach.

Some day we blamed public sector banks for there hundreds of documentation procedures but today we look at them proudly and say” This is called banking”. When United States largest banks were in soup we had State Bank of India having its revenues exceeding its previous year. When People had serious doubts about banks like CITI Bank in India we even had private players like HDFC being not affected.

The Basel committee on banking supervision which consists of 27 countries seems to be following the same path of Indian Banking system with its new recommendations. The recommendations would be to thicken capital buffers, hold more liquid and cut down on leverage. This means improving on Cash Reserves (Like Indian CRR) and Capital adequacy ratio (CAR)will become mandatory for all the banks in the 27 nations at least.

The reason of the policy is simple, to avoid any other financial crisis in the future as was last time(mostly because of excessive liberal lending policies). Now when we are talking about capital account convertibility in India the world seems to be moving our way towards a more conservatism.

Liberalized policies or conservatism? One recession and we seem to neglect the growth created by the liberal lending policies, is the solution right or is there any other way around? Can we have a standard lending policies promoting growth?

United States standing on cross- roads of Inflation, Deflation, depression or recovery? Which of one them is closer?

World seem to be caught turbulences one after other but it seem to be tougher for United states than others 2008-2009 recession, massive unemployement, threat to global currency value and now a new question appearing for the world’s biggest economy.

Where it heading to?

United States is indebted to worlds largest economies the country is running on 11 % deficit and has gross debt of 83% its GDP. As of now the country is majorly running on subsidies and rebates, Sooner the government would like to repay these debts and also reduce the subsidies so what would happen then?

After the subsidies reduction the Fed would like the demand in economy to be maintained and to foster growth it would possibly pump more money in the system and maintain money supply by keeping lower interest rates.
However what can be the impact of lower interest rate be?

• Lower interest rates would lead to more money in system hence fear of inflation.
• It would lead to easy purchases and hence people would buy more than they can afford (Unemployment levels are still same and hence people do not have sources to repay the debt) hence eventually another bubble and another recession.

What if the FED is cautious and the lending and rules are made strict then they were before recession?

• The purchasing power of people will go down, the consumer price index will go down and the economy would move towards deflation.

Which one of them seems to be closer and what could be the right move towards recovery is something to ponder about.

The revaluation of Yuan, is it going to set the growth path ahead or will it be the reason for fall?

China is the world’s largest developing economy with highest saving rate(50% of GDP) and forex reserves up to $2 trillion it has been been challenging and growing as a major threat to worlds most developed economies.

It’s been a while from the post recession heated talks about a new currency which could replace dollar, the focus of discussion was always China.The reasons were many why China did not revalue its currency and when you would look back now they all seem more like strategic decisions rather than succumbing to the situations as it seemed before

Here is China back with a boom not only revaluing its own currency but also making the whole world wonder about the reasons and the outcomes.

China which appeared as the biggest lender and savior of the US in the past today seems to be in a role reversal of sorts and now with the picture looking totally upside down we have a lot to discuss and a lot to learn.

The Chinese currency revaluation brought a new news across the world, would it bring positives for most of the world including India it is expected to give a tough time to US economic policy maker to formulate an easy way out.

Across the world the news was taken in different magnitude but in India we know that the stock prices jumped high, the oil prices followed them and than there is no commodity I guess which did not rise after the big news.

So why are the signals being speculated positively in India, What could Yuan’s revaluation possibly lead to?

• Costlier imports for US largest importer of Chinese goods.
• Higher cost of debt which US have to repay china(In May 2010, the US amount owes $900.2 billion to China)
• Will give other nations of world a more competitive edge on their exports( India is one amongst them)
• Increasing revenues for China on exports and debt interest.
• Mitigation of the Euro falls as compared to it was before.
  
  But is their any other side of this picture? do we also have economies which have got tangled into a silk spool of china and going to fall?