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Beware Of Bad Debts.


wealthymattersAs per RBI figures, a debt of Rs. 5.65 lakh crore (a fifth of the total debt in India) was shared by 67 of the 441 top indebted companies in India at the end of the year 2014-2015. This theoretically makes these companies financially insolvent, which means that the company is no longer able to meet it’s financial obligations.

This number has increased from 49 in the previous year to 67 in 2014-2015.

The return on capital employed has hit 7.4%, barely a few basis points ahead of the average interest cost of 7.1%.This is the lowest value recorded in the decade; in 2004-05, the reported RoCE was about 18% while the interest cost was 6.9%. Read more of this post

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The Indian Rupee And The General Elections


 

wealthymattersHistory shows that after liberalization,the Rupee falls ahead of the general elections.For example,in 1996, the rupee depreciated by nearly 10% in the 12 months leading up to the elections. And in 2009, it fell by 18% in the run-up to the polls.

Economist’s explain this phenomenon by pointing out to the governments’ tendency to overspend to satisfy various vote banks as elections approach. This unproductive expenditure causes the Rupee to depreciate, which then forces the government to intervene and try to prop up the currency.

Lay people have a more interesting take on the matter:the money of the political class stashed abroad is brought back to fund elections. A weak rupee means politicians and others bringing back the money are able to get a greater bang for their buck, and it is in their interest that the Rupee remains weak during this period.   Read more of this post

The Buying Power Of The Rupee – Past And Present


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