Nations with highest per capita income

As I mentioned about GDP and GNP in my previous post, so I thought per capita income will be a good topic to post. So some recent facts & figures about per capita income from world bank (I will continue A to Z terminology in next posting)....

• India's per capita income is almost Rs 40,000 ($950) per year, according to the latest figures released by the World Bank.
• India's per capita income has more than doubled from $460 in 2000-01 to $950 in 2007 due to strong economic growth.
• Finance Minister P Chidambaram had recently stated that India's per capita income could double every 9 years. By 2016-17, the country's per capita would be at $2,000; and by 2025, per capita would be $4,000 if India grows at 9 per cent.
• At $950 per capita income per year, India ranks a poor 160th in the world.

• According to the World Bank categories: Nations with per capita income (PCI) less than $935 are 'low income;' nations with PCI from $936 to $3,705 are 'lower middle income;' those with PCI from $3,706 to $11,455 are 'upper middle income;' and those with PCI from $11,456 or more are 'high income.'

Now lets take a look at richest per capita income countries......

1. Liechtenstein

Liechtenstein, a small country bordering Switzerland and Austria. Liechtenstein's per capita income is about $80,000 per annum.

The principality has an industrialised economy, with banking and financial services being the mainstay. Tourism too is a major revenue earner for the nation.

The personal income tax rates in Liechtenstein too are exceedingly low: basic income tax rate is 1.2 per cent on income up to 200,000 Swiss Francs, and maximum is 5 per cent on income over 2 million Swiss Francs a year.

2. Bermuda

Bermuda is tourist's delight, located in the North Atlantic Ocean.

Bermuda's per capita income is almost 50 per cent more than that of the United States. The tiny island nation's per capita income stands at just above $78,000.

Bermuda is a major financial centre and is particularly attractive because of its low taxation rates. Financial services is the nation's largest industry, followed by tourism.

3. Norway

Norway's per capita income stands at $76,450, which is the third highest in the world.

Norway has a mixed economy consisting of state-owned businesses and a robust free market. It's a high developed and industrialized state. Fishing, petroleum, hydel power, minerals contribute heavily to the nation's GDP.

4. Luxembourg

Luxembourg's per capita income is at $75,880. That makes it the world's fourth highest PCI.

Luxembourg is located in Europe and is bordered by Belgium, France, and Germany.

The nation has highly developed industrial and financial sectors.

5. Qatar

The per capita income of Qataris is $60,000, the fifth highest in the world.

Qatar is an Arab emirate located in the Persian Gulf.

The nation's economy mainly depends on its huge oil and natural gas reserves. There is no income tax in Qatar.

6. Switzerland

The Swiss enjoy a financially comfortable life, with a per capita income of $59,880.

Switzerland, a truly capitalist economy, has many giant banks and multinational corporations. It also has highly developed industries in sectors like pharmaceuticals, chemicals, machine parts, electronics, precision instruments, banking, tourism, etc. Dairy farming too is an age old industry in Switzerland. It has very low tax rates.

7. Denmark

Denmark's per capita income is at $54,910.

Denmark has a highly industrialised economy, with robust agricultural and corporate sectors. Despite being one of the most competitive nations, the nation has a very weak financial regulatory system. Also, its labour laws are very lax and tilted heavily in favour of the employers.

8. Iceland

At $54,100, the per capita income of Iceland is the world's eighth highest.

Iceland has a very healthy power sector which helps it be a highly industrialised country. Apart from manufacturing, the nation is also taking big strides in the fields of software generation, biotechnology, tourism, and financial services.

Cayman Islands

The per capita income of Cayman Islands is more than $48,140 and less than $54,100, as per World Bank figures. It has the 11th highest PCI in the world. At number 9 is Channel Islands and in the 10th spot is Andorra.

The Cayman Islands are situated in the Caribbean Sea. It is a major financial centre and also one of the world's best known tax havens.

The nation's economic mainstays are tourism and financial services.

12. Ireland

The Irish have a per capita income of $48,140, ranking them twelfth in the world.

Ireland too has made rapid strides in the field of information technology. Construction, apart from agriculture, too is an important part of the Irish economy.

Sweden

Sweden's per capita income is $46,060, making its PCI 14th-highest in the world. San Marino, with a PCI of $45,130 is the 13th-highest.

United States of America

America's per capita income is $46,040. It's the 15th-highest in the world.

The United States is mostly a capitalist economy, with huge mineral and oil reserves, apart from fantastic infrastructure, skilled work force, and the highest number of the world's largest corporations.

The country has highly developed sectors, like banking, financial services, automobile, agriculture, manufacturing, energy, etc.

China

China's per capita income is $2,360. It ranks 132nd in the world.

China, the world's factory, has a highly developed manufacturing sector. It has a huge market which acts as a magnet for big multinationals who pour in billions of dollars into the economy to grab a chunk of the massive Chinese market.

The country also has a very well developed telecommunications market, apart from robust agricultural and industrial sectors.

Pakistan

Pakistan's per capita income is at $870. It ranks 163rd in the world.

For the past few years, India's neighbor has been growing at an impressive rate of about 7 per cent. Its economy mainly comprises agriculture, services, telecommunications, software, automotives, textiles, etc.

source....

rediff

Difference between GDP & GNP

Since difference between GDP & GNP table is not coming properly I am posting it again.....


GDP

GDP (Gross Domestic Product) is defined as the total market value of all final goods and services produced within the country’s geographic border in a given period of time (usually a calendar year).

GDP measures economic output based on location.

An American company with a plant in India will actually contribute to Indian GDP.

GNP

GNP (Gross National Product) measures the total amount of goods and services that a country's citizens produce regardless of where they produce them.

GNP measures economic output based on ownership

An American firm operates a plant in Indian, then the profits that the firm earns would contribute to U.S. GNP.

GDP & GNP related things

This is little bit information what I gathered for GDP & GNP related things, I hope it will be helpful for you guys..........

Difference between GDP & GNP

GDP	GNP
GDP (Gross Domestic Product) is defined as the total market value of all final goods and services produced within the country’s geographic border in a given period of time (usually a calendar year). GDP measures economic output based on location. An American company with a plant in India will actually contribute to Indian GDP.	GNP (Gross National Product) measures the total amount of goods and services that a country's citizens produce regardless of where they produce them. GNP measures economic output based on ownership An American firm operates a plant in Indian, then the profits that the firm earns would contribute to U.S. GNP.

Points to remember while calculating India GDP

• There are different sectors contributing to the GDP in India such as agriculture, textile, manufacturing, information technology, telecommunication, petroleum, etc.
• The different sectors contributing to the India GDP are classified into three segments, such as
• Primary or Agriculture sector,
• Secondary or Manufacturing sector and
• Tertiary or service sector.

The components used to calculate GDP include:

Personal Consumption
-- Durable goods (items expected to last more than three years)
-- Nondurable goods (food and clothing)
-- Services & etc

Government Expenditures
-- Defense
-- Roads
-- Schools & etc

Investment Spending
-- Nonresidential (spending on plants and equipment), Residential (single-family and multi-family homes)
-- Business inventories & etc

Net Exports
-- Exports are added to GDP
-- Imports are deducted from GDP

A common equation used to calculate GDP is as follows

GDP = Consumption + Government Expenditures + Investment +Exports – Imports

GDP GROWTH RATES

Quarterly GDP for Q3 of 2007-08 was expected Rs. 8, 24,075 crore, as against Rs. 7, 60,386 crore in Q3 of 2006-07, showing a growth rate of 8.4 per cent over the corresponding quarter of previous year.

Recent World Bank Figures for GDP…

The Indian economy is the 12th largest in the world. That is, India's gross domestic product stands at $1.171 trillion.

However, in terms of purchasing power parity, India is the world's fourth largest economy. Its GDP in purchasing power parity terms is at $3.092 trillion.

[Purchasing power parity (PPP) is an economic theory that estimates the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to each currency's purchasing power.]

1. United States

The American GDP is at $13.812 trillion, making it the world's largest economy. It accounts for more than 25 per cent of the entire world's GDP! In terms of purchasing power parity too, the United States is the world's leading economy.

2. Japan

Japan, with a GDP of $4.377 trillion, is the world's second largest economy. However, in terms of purchasing power parity, Japan is ranked third by the World Bank. It's GDP in PPP terms is $4.283 trillion.

3. Germany

Germany is the world's third largest, with its GDP at $3.297 trillion. But in PPP terms, Germany is the world's fifth largest economy. It's GDP in PPP terms is at $2.752 trillion.

4. China

China, the Asian giant, is the world's fourth largest economy with a GDP of $3.281 trillion; but in purchasing power parity terms it ranks second at $7.055 trillion.

5. United Kingdom

Its GDP is at $2.728 trillion. In purchasing power parity terms, the United Kingdom's GDP stands at $2.082 trillion making it the seventh largest in the world.

6. France

The French GDP is at $2.563 trillion, making it the world's sixth largest economy; but in terms of PPP, it is the world's 8th largest (GDP in PPP terms, $2.054 trillion).

7. Italy

Italy's GDP in absolute terms is at $2.107 trillion. However, in purchasing power parity terms its GDP is at $1.780 trillion and its rank is 10th.

8. Spain

Spain is the eighth largest economy with its GDP at $1.429 trillion. In purchasing power parity, however, it slips to the 11th spot ($1.373 trillion).

9. Canada

The Canadian GDP stands at $1.326 trillion, making it the world's ninth largest economy. In PPP terms, however, it stands 14th in the world. Its GDP in PPP terms is at $1.178 trillion.

10. Brazil

The Brazilian economy too has been growing at a scorching pace. It is the world's 10th largest economy with a GDP of $1.314 trillion. But in terms of purchasing power (GDP - $1.834 trillion), it is better placed at number 9.

11. Russian Federation

In absolute GDP terms, Russia -- at $1.291 trillion -- is the world's 11th largest economy, but it jumps to the 6th spot in terms of purchasing power parity ($2.088 trillion).

Good question Siva..
First let me tell you that RBI rate hikes are not at all expected, even if they are expected also but not by this amount. According to CNBC survey majority of the corporates expected only 25 basis points hike in repo rate. But Mr. Reddy's move was a shock. He increased repo rate by 50 basis points & CRR also by 25 basis points, this one move itself sucks out the 200 billion rupees from the banks. And after all Stock Market runs on sentiments not by logic all the time. Just one news is sufficient for crash. So yesterday's news was bad for the market, thats why Bank index and reality sector hit very seriously.. And also there is reduction in growth expectation from 8.5 to 8%. So one more bad news for market to sell off.

And about GDP & GNP I will try post in next post............

Keep reading & asking questions......

STOCK MARKET TERMINOLOGY A TO Z

So I am continuing with STOCK MARKET TERMINOLOGY A TO Z...................

Earnings Per Share (EPS)
It is the most important measure of how well (or otherwise) the board of directors are doing for the shareholders. This measure expresses how much the company is earning for every share held. The calculation is 'pre-tax profit dividend by the number of shares in issue'. Earnings per share is more
important than the overall reported profit figure ! The reason is that EPS provides a more pure measure of profitability.

Eurobond
A Eurobond is a medium or long-term interest-bearing bond created in the international capital markets. A Eurobond is denominated in a currency other than that of the place where it is being issued. Eurobonds are only issued by major borrowers, such as governments, other public bodies or large multinational companies.

ESOP
Employee Stock Option Plan is a trust established by a company to allot some of its paid-up equity capital to its employees over a period of time. They are used to reward employees.

Exercise price
The pre-determined price at which the underlying future or options contract may be bought or sold.

Exercising the option
The act of buying or selling the underlying asset via the option contract.

Efficient capital market :-
A market in which all the players have all the material information at their disposal at the same time.

Flotation
The first occasion on which a public company’s shares are offered widely to investors on the market. Flotations are often referred to as new issues although it is possible for companies already in the stockmarket to issue new shares

Futures
A contract for the purchase and sale of a commodity, financial instrument or index at a fixed price at a fixed date in the future. Futures contracts were originally invented to allow those who regularly buy and sell goods to protect themselves against future changes in the price of those goods. In other words, the futures markets evolved to allow producers or consumers to hedge their risk.

Forward trading
Forward trading refers to trading where contracts traded today are settled at some future date at prices decided today. Thus a contract to buy dollars at Rs.42 per dollar after 3 months is a forward contract. The price is fixed today but the settlement will be after 3 months.

Floating Stock

The fraction of the paid-up equity capital of a company which normally participates in day to day trading.

Foreign Institutional Investor (FII)
An overseas institutional investor permitted under Securities and Exchange Board of India (SEBI) guidelines to trade in Indian bourses.

Good Till Cancelled (GTC) orders
A Good Till Cancelled (GTC) order remains in the system until it is cancelled by the user. It will therefore be able to span trading days if it does not get matched. The Exchange may however set an upper limit to the number of working days an order can stay in the trading system. At the end of this period, GTC orders are cancelled automatically from the system.

Gap
When the market opens above or below the previous day's close the price on a bar chart will show a "gap". This may then be "closed" if the market trades at prices between the opening level and the previous day's close.

Gilts
Gilts, sometimes referred to as Government bonds are those used by the Government to raise money from large financial institutions like pension funds and from private investors. Money is needed by the Government because the Treasury so often finds that its expenses exceed its income. Gilts are sometimes referred to as 'gilt edged securities' or 'bonds' or 'fixed interest securities'. In any event, gilts are issued by the Treasury and in nearly all cases, the investor hands over his cash and then receives a fixed rate
of interest for the life of the gilt. When the gilt matures, its capital value is repaid at par value.
Gilts are bought at their par value or at face value.

Global Depositary Receipt (GDR)
These are negotiable certificates which prove ownership of a company's shares.They are marketed internationally, mainly to financial institutions. GDRs allow purchasers to gain exposure to companies which are listed on foreign markets without having to purchase the shares directly in the market
in which they are listed.

Grey market
Trading in shares outside a recognized market.This has come to mean trading in shares ahead of their issue on the stock market. This market plays very important role in the listing day's price of an IPO.

Growth Fund

A mutual funds which invests only in equity shares which offer chances of good capital growth, rather than current income.

Hedging

Offsetting or guarding against investment risk. A perfect hedge is a no-risk-no gain precaution.A conservative strategy for reduction of risk through futures, options or some other derivative, by opening an opposite position to that already held in the underlying market. Taking positions in securities so that each offsets the other.

Holding Period Return (HPR)

The rate of return for the period of holding of an investment.

Holder

The buyer of an option.

Initiator

The Initiator is the trading member who starts the auction. The Initiator can be a buyer or a seller.

Insider trading

Trading on information which is not really available to the general public. Trading in a Company's shares by a connected person having non-public, price sensitive information, such as expansion plans, financial results, takeover bids, etc., by virtue of his association with that Company, is called insider trading.

Illiquid

An investment is said to be illiquid if it cannot easily be turned back into cash quickly and at a low cost. Shares in smaller companies are more likely to be illiquid than those in larger companies; they will be less easy to sell and you are likely to find that the spread or difference between the buying and selling price is much wider.So, in other words blue chip shares are more liquid than unquoted companies.

Issued Share Capital
This is the total number of shares a company has made publicly available multiplied by the total nominal value of the shares.

Immediate or Cancel (IOC)

An Immediate or Cancel (IOC) order allows a user to buy or sell a security as soon as the order is released into the market, failing which the order is removed from the market. There could be a partial match for such an order resulting in one or more trades, in which case the balance order will be removed from the market.

Inactive Shares

Shares which are seldom bought and sold in the stock exchange, although they are listed. A share which is transacted less than four times a year may be called inactive or dead. It is quite difficult to find a buyer or a seller for such shares. The Spread between buying and selling prices can be large.

Guys I will continue with A to Z(Stock Market Terminology) in my next blog, now I am publishing more important than that. That is RBI is credit policy, because of which today market crashed 550+ points when RBI announced its policies. Here are highlights of that announcements......

Bank Rate kept unchanged.

Reverse Repo Rate under LAF kept unchanged.

Repo Rate increased by 50 basis points from 8.5 per cent to 9.00 per cent.

Cash Reserve Ratio to be increased by 25 basis points to 9.0 per cent with effect from the fortnight beginning August 30, 2008. This move suck up an estimated Rs 20,000 crore (Rs 200 billion).

GDP growth projection for 2008-09 revised from the range of 8.0-8.5 per cent to around 8.0 per cent, barring domestic or external shocks.

While the policy actions would aim to bring down the current intolerable level of inflation to a tolerable level of below 5.0 per cent as soon as possible and around 3.0 per cent over the medium-term, at this juncture a realistic policy endeavor would be to bring down inflation from the current level of about 11.0-12.0 per cent to a level close to 7.0 per cent by March 31, 2009.

Domestic Developments

Real GDP growth in 2007-08 was revised upwards to 9.0 per cent by the Central Statistical Organisation (CSO) in its end-May 2008 estimates from the advance estimates of 8.7 per cent released in February 2008.The price of the Indian basket of crude oil increased from US $ 99.4 per barrel in March 2008 to US $ 129.8 in June 2008 and further to US $ 141.5 on July 3, 2008 before declining to US $ 121.9 on July 25, 2008.

Inflation, measured by variations in the wholesale price index (WPI) on a year-on-year basis, increased to 11.89 per cent as on July 12, 2008 from 7.75 per cent as at end-March 2008 and 4.76 per cent a year ago.

Money supply (M3) increased by 20.5 per cent on a year-on-year basis on July 4, 2008, lower than 21.8 per cent a year ago.

The year-on-year growth in aggregate deposits of scheduled commercial banks (SCBs) at 21.7 per cent (Rs.5,89,646 crore) up to July 4, 2008 was lower than 24.6 per cent (Rs.5,36,617 crore) a year ago.

The equity markets witnessed a major downturn in both the primary and secondary segments during the current financial year so far, continuing the moderation that had set in by early January 2008.

External Developments

Information released by the DGCI&S indicates that exports increased by 21.7 per cent in US dollar terms during the first two months of the current financial year, as compared with 24.2 per cent in the corresponding period of the previous year. Imports rose by 31.8 per cent as compared with 37.9 per cent in the corresponding period of the previous year.

Foreign exchange reserves declined marginally by US $ 2.6 billion during the current financial year so far and stood at US $ 307.1 billion on July 18, 2008.

During the current financial year up to July 25, 2008 the rupee depreciated by 5.4 per cent against the US dollar, by 5.0 per cent against the euro, by 5.2 per cent against the pound sterling and by 1.3 per cent against the Japanese yen.

Global Developments

According to the update of World Economic Outlook (WEO) of the International Monetary Fund (IMF) released in July 2008, global real GDP growth on a purchasing power parity basis is expected to decelerate from 5.0 per cent in 2007 to 4.1 per cent in 2008 (3.7 per cent in WEO, April 2008) and further to 3.9 per cent in 2009 (3.8 per cent in WEO, April 2008).

Prices of crude oil, which have rebounded since July 2007, increased by 60.0 per cent up to July 25, 2008 from their level a year ago. World oil markets have been particularly tight during the first half of 2008, with year-on-year growth in world oil consumption outstripping growth in non-Organisation of the Petroleum Exporting Countries (OPEC) production by over 1 million barrels per day.

Some central banks that have tightened their policy rates in the recent months include the ECB; the Reserve Bank of Australia; Bank Indonesia; Bank of Thailand; the Banco Central de Chile; Banco Central do Brasil and Banco de Mexico.

Overall Assessment

The upsurge in inflation during the current financial year reflects a combination of forces at work: the pass-through of international crude prices to domestic administered prices effected on June 5, 2008; inflationary pressures in addition to crude oil prices; and movements in international prices of key commodities indicating elevated upside pressures for domestic prices of a number of commodities with implications for the evolving scenario.

The rates of money supply and deposit growth have started to moderate in consonance since June, edging towards the trajectory set for 2008-09.

The balancing of monetary and liquidity conditions has not, however, impacted the demand for bank credit which has accelerated on a year-on-year basis.

Downside risks to global economic prospects appear to have intensified since the Annual Policy Statement of April 2008 with slowdown of growth spreading from the US to several other advanced economies with housing and labour markets weakening sharply.

The deepening financial turbulence in major financial centres has worsened the macroeconomic outlook further by erosion of consumer and business sentiment and tightening of financing conditions with indications that a generalised credit squeeze may take hold.

Inflation has emerged as the biggest risk to the global outlook, having risen to very high levels across the world, levels that have not been generally seen for a couple of decades.

Developed and emerging economies alike are reporting multi-year highs in inflation, driven mainly by escalating commodity prices, particularly of energy, food and metals amidst growing concerns across economies that rising food and energy prices are triggering a more generalised inflation spiral through second-round effects.

In the overall assessment, several risks looming over the global economy at the time of the Annual Policy Statement of April 2008 have either materialised or intensified with implications for every national economy, including India, warranting heightened vigilance and stress testing of the preparedness to deal with these developments.

Stance of Monetary Policy for the Remaining Period of 2008-09

Taking into account aggregate demand management and supply prospects, the projection of real GDP growth of the Indian economy in 2008-09 in the range of 8.0 to 8.5 per cent as set out in the Annual Policy Statement of April 2008 may prove to be optimistic and hence for policy purposes, a projection of around 8.0 per cent appears a more realistic central scenario at this juncture, barring domestic or external shocks.

While the policy actions would aim to bring down the current intolerable level of inflation to a tolerable level of below 5.0 per cent as soon as possible and around 3.0 per cent over the medium-term, at this juncture a realistic policy endeavour would be to bring down inflation from the current level of about 11.0-12.0 per cent to a level close to 7.0 per cent by March 31, 2009.

Barring the emergence of any adverse and unexpected developments in various sectors of the economy, assuming that capital flows are effectively managed, and keeping in view the current assessment of the economy including the outlook for growth and inflation, the overall stance of monetary policy in 2008-09 will broadly continue to be:

To ensure a monetary and interest rate environment that accords high priority to price stability, well-anchored inflation expectations and orderly conditions in financial markets while being conducive to continuation of the growth momentum.

To respond swiftly on a continuing basis to the evolving constellation of adverse international developments and to the domestic situation impinging on inflation expectations, financial stability and growth momentum, with both conventional and unconventional measures, as appropriate.

To emphasise credit quality as well as credit delivery, in particular, for employment-intensive sectors, while pursuing financial inclusion.

STOCK MARKET TERMINOLOGY A TO Z

Even though published stock market basics in my earlier posts, I feel that is not sufficient, so I am posting this STOCK MARKET TERMINOLOGY A TO Z

Arbitrage
The business of taking advantage of difference in price of a security traded on two or more stock exchanges, by buying in one and selling in the other (or vice versa). Quite simply it means you try to buy something cheap in one place, to make a profit selling it somewhere else.Given the speed at which the financial markets now operate, in practice the simultaneous purchase of foreign exchange, securities, commodities or any other financial instrument in one market and the sale in another at a higher price.

American Depository Receipt (ADR)
A stock representing a specified number of shares in a foreign corporation. ADR's are bought and sold in the American markets just like regular stocks. An ADR is issued by a U.S. Bank, consisting of a bundle of shares of a foreign corporation that are being held in custody overseas. The foreign entity must provide financial information to the sponsor bank. ADR's are listed on either the NYSE, AMEX, or NASDAQ.

American Depository Share (ADS)
A share issued under deposit agreement that represents an underlying security in the issuer's home country. The term ADR and ADS are thought to be the same, they sort of are. ADS is the actual share trading while ADR represents a bundle of ADSs.

Averaging
The process of gradually buying more and more securities in a declining market (or selling in a rising market) in order to level out the purchase (or sale) price.

Bears
These stock market animals are pessimists, they expect share prices or any other type of investment to fall. In a 'bear market' the general sentiment is that prices are going to go lower and majority of dealers will sell as quickly as possible for fear of holding shares which diminish in value.Bears, like 'bulls' drive the market.

Basis Point (BP)
The smallest measure used in quoting yields on fixed income securities. One basis point is one percent of one percent, or 0.01%.

Bond
A debt security, issued by a company or government agency is called a bond. A bond investor lends money to the issuer and, in exchange, the issuer promises to repay the loan amount on a specified maturity date; the issuer usually pays the bondholder periodic interest payments over the period of the loan.

Blue Chips
Blue Chips are shares of large, well established and financially sound companies with an impressive records of earnings and dividends. Generally, Blue Chip shares provide low to moderate current yield and moderate to high capital gains yield. The price volatility of such shares is moderate.

Bonus
A free allotment of shares made in proportion to existing shares out of accumulated reserves. A bonus share does not constitute additional wealth to shareholders. It merely signifies recapitalization of reserves into equity capital. However, the expectation of bonus shares has a bullish impact on market sentiment and causes share prices to go up.

Book Closure
Dates between which a company keeps its register of members closed for updating prior to payment of dividends or issue of new shares or debentures.

Bull
A bull is one who expects a rise in price so that he can later sell at a higher price.

Base Price
This is the price of a security at the beginning of the trading day which is used to determine the Day Minimum/Maximum and the Operational ranges for that day.

Buyer
The trading member who has placed the order for the purchase of the securities

Bid and offer
Bid is the price at which the market maker buys from the investor and offer is the price at which he offers to sell the stock to the investor.

Basket Trading
Basket trading is a facility by which investors are in a position to buy/sell all 30 scrips of Sensex in the proportion of current weights in the Sensex, in one go.

Beta
It is a standard measure of risk for an individual stock. It is the sensitivity of the movement of the past share price of a stock to the movement of the market as a whole. The beta of the market is taken as 1. A benchmark index (the Sensex, for instance) is taken as the proxy for the market.

Stocks with betas greater than 1 tend to amplify the movement of the market. If a stock has a beta of 1.20, it means that if the market has moved by 1%, the stock price would have moved by an 1.2%.

Bid
This is the highest price at which an investor is willing to buy a stock . Practically speaking, this is the available price at which an investor can sell shares.

Buy limit order
An order of buying a security with a condition that order will not be executed above the specific mentioned price.

Buy on close
An order of buying a stock, but only at the end of the trading day. Security will be bought in the closing price range.

Breakout
When the price of a stock surpasses its initial high (resistance level) or falls below the initial low (support level), it is termed as break out in technical analysis.

Best ask
The lowest price at which a stock is quoted to be sold.

Best bid
The highest price quoted for a particular stock to be bought.

Bid/Ask spread
The difference between the ask price and bid price.

Correction
Temporary reversal of trend in share prices. This could be a reaction (a decrease following a consistent rise in prices) or a rally (an increase following a consistent fall in prices).

Carry forward trading
Trading where the settlement of trades is postponed on the stock exchange until a future settlement period involving payment of interest on the account. It refers to the trading in which the settlement is postponed to the next account period on payment of contango charges (known as ‘vyaj badla’) in which the buyer pays interest on borrowed funds or the backwardation charges (a.k.a ‘unda badla’) in which the short seller pays a charge for borrowing securities.

Call Option
This is the right, but not the obligation, to purchase shares at a specified price at a specified date in the future. For this privilege, the buyer pays a premium which would be a fraction of the price of the underlying security. You are gambling that the share price will rise above the option price. If this happens you can buy the shares and sell them immediately for a profit.If the share price does not rise above your option price, you do not exercise the option and it expires - all you have lost is the initial payment made to purchase the option.

Capitalization
The total value of the company in the stockmarket.This value is arrived at by multiplying the number of shares in issue by the company's share price. This market capitalization obviously fluctuates as the share price moves up and down.

Convertible
Any security is described as convertible when it carries the right or option for the holder to at some stage convert it in for another form of security at a fixed price. Convertibles are often bonds or loan stock (but sometimes preference shares) which carry the right to be converted into ordinary shares at some date in the future at a previously specified price.

Corporate Bonds
A corporate bond is by a public company. When you invest in a corporate bond, you are lending money to the company. In return you will receive interest at a fixed rate and the promise that your capital will be repaid at a certain date in the future. The guarantee that our capital will be returned is only as good as the company you are lending money to.

Correction
A correction is a term to describe a downward movement in share prices. In other words, a shake out or even a crash or mini-cash. Stockbrokers and fund managers like the term correction, perhaps because they believe if they use the term crash or 'heavy fall', it'll cause panic. Whatever you decide to call a downward jolt in share prices, if you lose money, it may be described as a correction, but you'll feel pretty sick all the same!

Cum-bonus

The share is described as cum-bonus when a potential purchaser is entitled to receive the current bonus.

Cum-rights

The share is described as cum-rights when a potential purchaser is entitled to receive the current rights.

Carry Over Margin
The amount to be paid by operators to the stock exchange to carry over their transactions from one settlement period to another.

Capital Asset Pricing Model (CAPM)
A model describing the relationship between risk and expected return, and serves as a model for the pricing of risky securities. CAPM says that the expected return of a security or a portfolio equals the rate on a risk-free security plus a risk premium. If this expected return does not meet or beat required return then the investment should not be undertaken.

Circuit breaker
When a stock price increases or decreases by a certain percentage in a single day it hits the circuit breaker. Once the stock hits the circuit breaker, trading in the stock above (or below) that price is not allowed for that particular day.

Custodial fees
The fees charged by the custodian for keeping the securities.

Cumulative preference share
Preference shares whose dividends will get accumulated, if the issuer does not make timely dividend payments.

Convertible preference shares
Preference shares that can be converted into equity shares at the option of the holder.

Commercial Paper (CP)
CPs are negotiable, short-term, unsecured, promissory notes with fixed maturities, issued by well rated companies generally sold on discount basis.

Dividend
This is the income you receive as a shareholder from a company. When you buy an ordinary share in a company, you become a shareholder (an owner of the business) and to that extent you will have certain entitlements including the right to receive dividend payments as set by the board of directors and approved by the shareholders (sometimes called members.)A dividend is a cut of the profits earned by the business for the year. This pay-out is not guaranteed and where it exists at all, the amount you'll receive will vary from company to company and year to year.

Day Trading
Day trading is the buying and selling of stocks during the trading day by individuals known as day traders on their own account. The aim is to make a profit on the day and have no open positions at the close of the trading session, the day.

Debenture
A loan raised by a company, paying a fixed rate of interest and which is secured on the assets of the company. Debentures are fixed interest securities in return for long-term loans, they tend to be dated for redemption between ten and forty years ahead of the date of issue. They may be secured by a floating charge on the company's assets or they may be tied to specific, named assets.Debenture interest has to be paid by a company whether it makes a profit or not - if the debenture holders do not get paid they can legally force the company into liquidation to realise their claims on the company's assets.

Derivatives
Instruments derived from securities or physical markets. The most common types of derivatives that ordinary investors are likely to come across are futures , options , warrants and convertible bonds.
Beyond this, the range of derivatives possible is only limited by the imagination of investment banks.

Delivery
A transaction may be for "spot delivery" (delivery and payment on the same or next day) "hand-delivery" (delivery and payment on the date stipulated by the exchange, normally within two weeks of the contract date), special delivery (delivery and payment beyond fourteen days limit subject to the exact date being specified at the time of contract and authorized by the exchange) or "clearing" (clearance and settlement through the clearing house).

Demat trading
Demat trading is trading of shares that are in the electronic form or dematerialized shares. Dematerialisation is the process by which shares in the physical form are canceled and credit in the form of electronic balances are maintained on highly secure systems at the depository.

Delivery price
The price fixed by the clearing house at which deliveries on futures are to take place. In practice, at this price contracts are settled by payment or receipt of the difference.

will continue........

Central bank misrules

The double barreled attack on inflation is more posturing than good economic policy. In the last four years preventing rupee appreciation and risking high inflation was a policy choice made by the government and RBI. Today's inflation is the natural consequence of this political choice. Fire fighting inflation with sharp hikes in interest rates will now do more harm than good. What is needed is long term reform. We have seen this movie before. In the mid 1990s, RBI fought a grim battle to prevent the rupee from appreciating in an attempt at subsidizing exporters. From March 1993 to September, the rupee was kept between Rs 31 to Rs 32 to a dollar. Over this period, RBI added USD 12.6 billion to reserves in the effort of preventing rupee appreciation. Dollars were purchased, rupees were injected into the domestic economy, and growth in the monetary base rose to 20 percent per annum. Not surprisingly, inflation took off. Interest rates were used to combat inflation. The 91-day rate went all the way up to 13 percent by November 1995 in this fight against inflation. RBI won this fight. But many people believe that this increase in interest rates led to souring of a remarkable phase of high GDP growth.

Now we have a second edition of the same story. Once again, currency pegging has fouled up domestic monetary policy, and ignited inflation. RBI fought a grim battle to prevent the rupee from appreciating in an attempt at subsidizing exporters. After 3 years of high liquidity growth, even after early 2007 when the first signs of inflation started appearing, RBI added USD 110 billion to reserves in its effort to prevent rupee appreciation. Dollars were purchased, rupees were injected into the domestic economy, and growth in the monetary base rose to 31 percent. With a huge stock of liquidity in the system, a shock in global commodity prices ignited high inflation in the domestic economy. RBI's monumental mistake was then to engineer a rupee depreciation that pushed up prices even further. It then stood by passively and watched as the rupee depreciated and prices spiraled.

The first and most obvious question to ask in this story is about RBI's focus on inflation: Why does RBI not learn from history? Why does RBI obsess with currency pegging, even though it has led to such costly distortions of monetary policy? Why is subsidizing exporters more important than delivering low and stable inflation? Why does RBI have a greater loyalty to exporters than it has to the local economy? Or, it it that since the RBI is not an independent central bank, was the 'prevent appreciation, risk inflation' loose monetary policy the policy choice of the government? Would RBI have focused on inflation if it was an independent central bank? To address this issue the Percy Mistry and Raghuram Rajan reports on financial sector reforms in India have recommended that RBI be made an independent central bank with a focus on inflation.

The second and more subtle question to ask is: Why do central banks in mature market economies manage to combat inflation by gently nudging rates up? When interest rates are used to combat inflation in India, why are savage hikes required?

This brings us to the `monetary policy transmission', the term used for the process through which an increase in the short-term interest rate by the central bank propagate into changes in interest rates all across the economy, thus pulling back demand and slowing inflation. In India, the monetary policy transmission is largely dysfunctional. Because monetary policy is enfeebled, if a certain reduction in inflation is required, very large changes in the policy rate are required. Central banks in mature market economies have a more powerful monetary policy transmission. Hence, they are able to control inflation through small changes in the interest rate.

Why is monetary policy enfeebled in this fashion? The answer lies in two parts. As Nachiket Mor and Paul Levine have independently pointed out, the large informal sector has been cutoff from formal finance. Changes in the policy rate do not impact upon this group. Over half of the economy, then, does not participate in the monetary policy transmission.

The second story is in the formal sector. In mature market economies, the `bond-currency-derivatives nexus' (BCD Nexus) is the complex system of markets through which a small change in the policy rate propagates across the economy into interest rates for corporate bonds, interest rates charged by banks, etc. This BCD Nexus is lacking in India. There is no corporate bond market to speak of. The large corporations are largely equity financed. Changes in interest rates by banks - for either borrowing or lending - do not quite track changes in the policy rate by RBI.

Through a combination of financial exclusion and the lack of the BCD Nexus, monetary policy in India has been weakened. As a consequence, if interest rates have to be used to combat inflation, savage increases in interest rates are required.

Why there is such financial exclusion and what can be done about it? The Raghuram Rajan report has eloquently diagnosed how after 50 years of preaching about carrying banking to the poor, the supposedly pro poor policies of the government are the cause of financial exclusion. Fundamental reforms are required on issues like priority sector credit and the regulation of micro finance institutions to overcome financial exclusion.

Why is the BCD Nexus absent and what can be done about it? The Mistry and Rajan reports have both diagnosed how RBI's policy framework has systematically prevented the rise of an efficient and liquid BCD Nexus. Fundamental reforms are required on issues like regulatory structure for the BCD Nexus, breaking down of entry barriers, removing capital controls, and reforming bankruptcy procedures, in order to achieve a well functioning BCD Nexus.

In other words, there are no short term solutions……………..

Source

Indian Express, 3 July 2008

Emerging economies can decouple from the US

The much-debated decoupling theory had propagated that emerging economies, in particular the BRIC nations, had grown to the point that they were no longer reliant on the US for their future growth. Furthermore, in the event of a slowdown or even a recession in the US, their growth would largely remain insulated or, in other words, they would have decoupled from the US.

The theory was, however, dealt a severe blow by the credit market crisis in the US. The housing slump and the ensuing credit crisis, believed to be a domestic phenomenon, sent shock waves, tumbling capital markets across the world. The bottom-line: Problems in US markets are felt instantly elsewhere. It is true, when the Dow rises, so do all Asian markets and, conversely, every time the Dow falls, so does all of Asia’s markets.

Let’s elucidate. The housing crisis, which was previously perceived to be a domestic predicament, was actually not so because of its manifestation in the financial markets. The sub-prime securities issued by Wall Street were traded by financial institutions across the world. So when defaults started escalating in the US, these financial institutions were forced to write-off losses. Tribulations in the US real economy had flown into its financial markets and then quickly engulfed markets the world over.

Risk-averse US investors, attempting to shore up their balance-sheets, withdrew their investments from the emerging economies causing their rapid meltdown. The ability of capital to move seamlessly across borders had ensured that financial linkages, that is, the capital and money markets, were much stronger than previously anticipated. Critics of the decoupling theory quickly pounced on this opportunity, hailing its demise.

This scenario poses certain interesting questions: First, do the US financial markets dictate real growth of emerging economies the world over? Second, if real growth in the US slumps after peace is restored in the financial markets, will emerging economies sustain their growth rates? Clearly, a distinction has to be made between the real economy and financial markets.

With the ability of capital to move seamlessly across borders, the decoupling theory falls flat on its face when applied to the financial markets. However, in the context of the real economy, a strong argument can be made for it. The three scenarios examined below, operating in tandem, are pre-requisites to the success of the theory.

Policy decoupling

While the US Fed has been actively slashing its benchmark rate to stem the credit crisis and, thereby, deviating from its primary objective of inflation control, central banks, the world over, have for the first time chosen not to follow suit. Central banks from Beijing to Budapest have been raising key rates to combat the inflation demon. Clearly, domestic considerations are over-shadowing the erstwhile dominance of the US monetary policy on the world. In addition, most emerging economies, with the exception of India, now boast of a current account surplus which, coupled with sizeable foreign exchange reserves, leaves plenty of room for a fiscal stimulus if the need arises.

Thus, for the first time, emerging economies can fully utilise their monetary and fiscal policy to cushion their economies which, in turn, diminishes the probability of their growth being determined by US policy. It is, thus, safe to assume that emerging markets will continue to grow respectably, particularly those with high forex reserves

Export profile

With the US experiencing a slowdown, exports to that country have naturally stumbled. But, surprisingly, those to other emerging economies have only surged. China’s exports to Brazil, India and Russia are up by more than 60 per cent and those to oil exporters by nearly 45 per cent. Roughly half of Chinese exports are directed to other emerging economies.

Four of the biggest emerging economies, which accounted for two-fifths of global GDP growth last year, are least dependent on the US. Exports to the US account for just 8 per cent of China’s GDP, 4 per cent of India’s, 3 per cent of Brazil’s and 1 per cent of Russia’s.

Furthermore, emerging markets as a group now export more to China than to the US, implying that while a US slowdown may affect the world, it may not have the catastrophic repercussions as previously conceived.

Over the past few years, trade surplus has allowed emerging economies to build up a $3.2 trillion foreign exchange war chest. This acts as a strong buffer against any credit market disruptions in the US. Asia, in particular, should profit from rising domestic demand, especially in China, which should continue sustaining growth in the region.

Interestingly, a substantial portion of exports to China is now being retained. As China continues to rely on imports to feed its growth, it has uniquely positioned itself at the epicentre of the decoupling process. If exports to the US weaken further, many Asian governments can stimulate demand by boosting public spending, thanks to more prudent budgeting than in the past.

In the event of a decline in export demand owing to a US slowdown, Europe and Japan will not be able to bridge the gap. The much-talked about domestic demand in the emerging economies, though at present cannot fill the void, has the potential to be a powerful substitute.

Domestic demand

The low level of wages in most of these countries ensures that in the long-term wage levels will rise, thereby raising their per capita disposable income creating the largest known source of global demand. Recent data has suggested that consumer spending in emerging economies rose almost three times more rapidly than in the developed world. In the absence of any major externality coupled with the strengthening of domestic structures in the emerging economies, it is safe to assume that their growth trajectory cannot be cut short and eventually their real economies will decouple from the US.

However, one particular problem threatening to derail the emerging market’s growth story is inflation. The phenomenal rise in commodity prices across-the-board has resulted in global inflation touching all-time highs. Most central banks have reacted by raising key rates in an effort to curb aggregate demand, thus negatively impacting growth.

By

Ishan Bakshi

Senior Manager, Kotak Mahindra Bank

Business line

Prime Minister’s Reply to the Debate on the Motion of Confidence in Lok(Must & Should Read, Atleast the bold lettered portion)

The Leader of Opposition, Shri L.K. Advani has chosen to use all manner of abusive objectives to describe my performance. He has described me as the weakest Prime Minister, a nikamma PM, and of having devalued the office of PM. To fulfill his ambitions, he has made at least three attempts to topple our government. But on each occasion his astrologers have misled him. This pattern, I am sure, will be repeated today. At his ripe old age, I do not expect Shri Advani to change his thinking. But for his sake and India’s sake, I urge him at least to change his astrologers so that he gets more accurate predictions of things to come.

As for Shri Advani’s various charges, I do not wish to waste the time of the House in rebutting them. All I can say is that before leveling charges of incompetence on others, Shri Advani should do some introspection. Can our nation forgive a Home Minister who slept when the terrorists were knocking at the doors of our Parliament? Can our nation forgive a person who single handedly provided the inspiration for the destruction of the Babri Masjid with all the terrible consequences that followed? To atone for his sins, he suddenly decided to visit Pakistan and there he discovered new virtues in Mr. Jinnah. Alas, his own party and his mentors in the RSS disowned him on this issue. Can our nation approve the conduct of a Home Minister who was sleeping while Gujarat was burning leading to the loss of thousands of innocent lives? Our friends in the Left Front should ponder over the company they are forced to keep because of miscalculations by their General Secretary.

As for my conduct, it is for this august House and the people of India to judge. All I can say is that in all these years that I have been in office, whether as Finance Minister or Prime Minister, I have felt it as a sacred obligation to use the levers of power as a societal trust to be used for transforming our economy and polity, so that we can get rid of poverty, ignorance and disease which still afflict millions of our people. This is a long and arduous journey. But every step taken in this direction can make a difference. And that is what we have sought to do in the last four years. How far we have succeeded is something I leave to the judgment of the people of India.

When I look at the composition of the opportunistic group opposed to us, it is clear to me that the clash today is between two alternative visions of India’s future. The one vision represented by the UPA and our allies seeks to project India as a self confident and united nation moving forward to gain its rightful place in the comity of nations, making full use of the opportunities offered by a globalised world, operating on the frontiers of modern science and technology and using modern science and technology as important instruments of national economic and social development. The opposite vision is of a motley crowd opposed to us who have come together to share the spoils of office to promote their sectional, sectarian and parochial interests. Our Left colleagues should tell us whether Shri L.K. Advani is acceptable to them as a Prime Ministerial candidate. Shri L.K. Advani should enlighten us if he will step aside as Prime Ministerial candidate of the opposition in favour of the choice of UNPA. They should take the country into confidence on this important issue.

I have already stated in my opening remarks that the House has been dragged into this debate unnecessarily. I wish our attention had not been diverted from some priority areas of national concern. These priorities are :

(i) Tackling the imported inflation caused by steep increase in oil prices. Our effort is to control inflation without hurting the rate of growth and employment.

(ii) To revitalize agriculture. We have decisively reversed the declining trend of investment and resource flow in agriculture. The Finance Minister has dealt with the measures we have taken in this regard. We have achieved a record foodgrain production of 231 million tones. But we need to redouble our efforts to improve agricultural productivity.

(iii) To improve the effectiveness of our flagship pro poor programmes such as National Rural Employment Programme, Sarva Shiksha Abhiyan, Nation-wide Mid day meal programme, Bharat Nirman to improve the quality of rural infrastructure of roads, electricity, safe drinking water, sanitation, irrigation, National Rural Health Mission and the Jawaharlal Nehru National Urban Renewal Mission. These programmes are yielding solid results. But a great deal more needs to be done to improve the quality of implementation.

(iv) We have initiated a major thrust in expanding higher education. The objective is to expand the gross enrolment ratio in higher education from 11.6 per cent to 15 per cent by the end of the 11th Plan and to 21% by the end of 12th Plan. To meet these goals, we have an ambitious programme which seeks to create 30 new universities, of which 14 will be world class, 8 new IITs, 7 new IIMs, 20 new IIITs, 5 new IISERs, 2 Schools of planning and Architecture, 10 NITs, 373 new degree colleges and 1000 new polytechnics. And these are not just plans. Three new IISERs are already operational and the remaining two will become operational from the 2008-09 academic session. Two SPAs will be starting this year. Six of the new IITs start their classes this year. The establishment of the new universities is at an advanced stage of planning.

(v) A nation wide Skill Development Programme and the enactment of the Right to Education Act,

(vi) Approval by Parliament of the new Rehabilitation and Resettlement policy and enactment of legislation to provide social security benefits to workers in the unorganized sector.

(vii) The new 15 Point Programme for Minorities, the effective implementation of empowerment programmes for the scheduled castes, scheduled tribes, paying particular emphasis on implementation of Land Rights for the tribals.

(viii) Equally important is the effective implementation of the Right to Information Act to impart utmost transparency to processes of governance. The Administrative Reforms Commission has made valuable suggestions to streamline the functioning of our public administration.

(ix) To deal firmly with terrorist elements, left wing extremism and communal elements that are attempting to undermine the security and stability of the country. We have been and will continue to vigorously pursue investigations in the major terrorist incidents that have taken place. Charge-sheets have been filed in almost all the cases. Our intelligence agencies and security forces are doing an excellent job in very difficult circumstances. They need our full support. We will take all possible steps to streamline their functioning and strengthen their effectiveness.

Considerable work has been done in all these areas but debates like the one we are having detract our attention from attending to these essential programmes and remaining items on our agenda. All the same, we will redouble our efforts to attend to these areas of priority concerns.

I say in all sincerity that this session and debate was unnecessary because I have said on several occasions that our nuclear agreement after being endorsed by the IAEA and the Nuclear Suppliers Group would be submitted to this august House for expressing its view. All I had asked our Left colleagues was : please allow us to go through the negotiating process and I will come to Parliament before operationalising the nuclear agreement. This simple courtesy which is essential for orderly functioning of any Government worth the name, particularly with regard to the conduct of foreign policy, they were not willing to grant me. They wanted a veto over every single step of negotiations which is not acceptable. They wanted me to behave as their bonded slave. The nuclear agreement may not have been mentioned in the Common Minimum Programme. However, there was an explicit mention of the need to develop closer relations with the USA but without sacrificing our independent foreign policy. The Congress Election Manifesto had explicitly referred to the need for strategic engagement with the USA and other great powers such as Russia.

In 1991, while presenting the Budget for 1991-92, as Finance Minister, I had stated : No power on earth can stop an idea whose time has come. I had then suggested to this august House that the emergence of India as a major global power was an idea whose time had come.

Carrying forward the process started by Shri Rajiv Gandhi of preparing India for the 21st century, I outlined a far reaching programme of economic reform whose fruits are now visible to every objective person. Both the Left and the BJP had then opposed the reform. Both had said we had mortgaged the economy to America and that we would bring back the East India Company. Subsequently both these parties have had a hand at running the Government. None of these parties have reversed the direction of economic policy laid down by the Congress Party in 1991. The moral of the story is that political parties should be judged not by what they say while in opposition but by what they do when entrusted with the responsibilities of power.

I am convinced that despite their opportunistic opposition to the nuclear agreement, history will compliment the UPA Government for having taken another giant step forward to lead India to become a major power centre of the evolving global economy. Jawaharlal Nehru’s vision of using atomic energy as a major instrument of development will become a living reality.

What is the nuclear agreement about? It is all about widening our development options, promoting energy security in a manner which will not hurt our precious environment and which will not contribute to pollution and global warming.

India needs to grow at the rate of at least ten per cent per annum to get rid of chronic poverty, ignorance and disease which still afflict millions of our people. A basic requirement for achieving this order of growth is the availability of energy, particularly electricity. We need increasing quantities of electricity to support our agriculture, industry and to give comfort to our householders. The generation of electricity has to grow at an annual rate of 8 to 10 per cent.

Now, hydro-carbons are one source of generating power and for meeting our energy requirements. But our production of hydro-carbons both of oil and gas is far short of our growing requirements. We are heavily dependent on imports. We all know the uncertainty of supplies and of prices of imported hydro-carbons.

We have to diversify our sources of energy supply.

We have large reserves of coal but even these are inadequate to meet all our needs by 2050. But more use of coal will have an adverse impact on pollution and climate. We can develop hydro-power and we must. But many of these projects hurt the environment and displace large number of people. We must develop renewable sources of energy particularly solar energy. But we must also make full use of atomic energy which is a clean environment friendly source of energy. All over the world, there is growing realization of the importance of atomic energy to meet the challenge of energy security and climate change.

India’s atomic scientists and technologists are world class. They have developed nuclear energy capacities despite heavy odds. But there are handicaps which have adversely affected our atomic energy programme. First of all, we have inadequate production of uranium. Second, the quality of our uranium resources is not comparable to those of other producers. Third, after the Pokharan nuclear test of 1974 and 1998 the outside world has imposed embargo on trade with India in nuclear materials, nuclear equipment and nuclear technology. As a result, our nuclear energy programme has suffered. Some twenty years ago, the Atomic Energy Commission had laid down a target of 10000 MW of electricity generation by the end of the twentieth century. Today, in 2008 our capacity is about 4000 MW and due to shortage of uranium many of these plants are operating at much below their capacity.

The nuclear agreement that we wish to negotiate will end India’s nuclear isolation, nuclear apartheid and enable us to take advantage of international trade in nuclear materials, technologies and equipment. It will open up new opportunities for trade in dual use high technologies opening up new pathways to accelerate industrialization of our country. Given the excellent quality of our nuclear scientists and technologists, I have reasons to believe that in a reasonably short period of time, India would emerge as an important exporter of nuclear technologies, and equipment for civilian purposes.

When I say this I am reminded of the visionary leadership of Shri Rajiv Gandhi who was a strong champion of computerization and use of information technologies for nation building. At that time, many people laughed at this idea. Today, information technology and software is a sun-rise industry with an annual turnover soon approaching 50 billion US dollars. I venture to think that our atomic energy industry will play a similar role in the transformation of India’s economy.

The essence of the matter is that the agreements that we negotiate with USA, Russia, France and other nuclear countries will enable us to enter into international trade for civilian use without any interference with our strategic nuclear programme. The strategic programme will continue to be developed at an autonomous pace determined solely by our own security perceptions. We have not and we will not accept any outside interference or monitoring or supervision of our strategic programme. Our strategic autonomy will never be compromised. We are willing to look at possible amendments to our Atomic Energy Act to reinforce our solemn commitment that our strategic autonomy will never be compromised.

I confirm that there is nothing in these agreements which prevents us from further nuclear tests if warranted by our national security concerns. All that we are committed to is a voluntary moratorium on further testing. Thus the nuclear agreements will not in any way affect our strategic autonomy. The cooperation that the international community is now willing to extend to us for trade in nuclear materials, technologies and equipment for civilian use will be available to us without signing the NPT or the CTBT.

This I believe is a measure of the respect that the world at large has for India, its people and their capabilities and our prospects to emerge as a major engine of growth for the world economy. I have often said that today there are no international constraints on India’s development. The world marvels at our ability to seek our social and economic salvation in the framework of a functioning democracy committed to the rule of law and respect for fundamental human freedoms. The world wants India to succeed. The obstacles we face are at home, particularly in our processes of domestic governance.

I wish to remind the House that in 1998 when the Pokharan II tests were undertaken, the Group of Eight leading developed countries had passed a harsh resolution condemning India and called upon India to sign the NPT and CTBT. Today, at the Hokkaido meeting of the G-8 held recently in Japan, the Chairman’s summary has welcomed cooperation in civilian nuclear energy between India and the international community. This is a measure of the sea change in the perceptions of the international community our trading with India for civilian nuclear energy purposes that has come about in less than ten years.

Our critics falsely accuse us, that in signing these agreements, we have surrendered the independence of foreign policy and made it subservient to US interests. In this context, I wish to point out that the cooperation in civil nuclear matters that we seek is not confined to the USA. Change in the NSG guidelines would be a passport to trade with 45 members of the Nuclear Supplier Group which includes Russia, France, and many other countries.

We appreciate the fact that the US has taken the lead in promoting cooperation with India for nuclear energy for civilian use. Without US initiative, India’s case for approval by the IAEA or the Nuclear Suppliers Group would not have moved forward.

But this does not mean that there is any explicit or implicit constraint on India to pursue an independent foreign policy determined by our own perceptions of our enlightened national interest. Some people are spreading the rumours that there are some secret or hidden agreements over and above the documents made public. I wish to state categorically that there are no secret or hidden documents other than the 123 agreement, the Separation Plan and the draft of the safeguard agreement with the IAEA. It has also been alleged that the Hyde Act will affect India’s ability to pursue an independent foreign policy. The Hyde Act does exist and it provides the US administration the authorization to enter into civil nuclear cooperation with India without insistence on full scope safeguards and without signing of the NPT. There are some prescriptive clauses but they cannot and they will not be allowed to affect in any way the conduct of our foreign policy. Our commitment is to what has been agreed in the 123 Agreement. There is nothing in this Agreement which will affect our strategic autonomy or our ability to pursue an independent foreign policy. I state categorically that our foreign policy, will at all times be determined by our own assessment of our national interest. This has been true in the past and will be true in future regarding our relations with big powers as well as with our neighbours in West Asia, notably Iran, Iraq, Palestine and the Gulf countries.

We have differed with the USA on their intervention in Iraq. I had explicitly stated at a press conference at the National Press Club in Washington DC in July 2005 that intervention in Iraq was a big mistake. With regard to Iran, our advice has been in favour of moderation and we would like that the issues relating to Iran’s nuclear programme which have emerged should be resolved through dialogue and discussions in the framework of the International Atomic Energy Agency.

I should also inform the House that our relations with the Arab world are very good. Two years ago, His Majesty, King Abdullah of Saudi Arabia was the Chief Guest at our Republic Day. More recently, we have played host to the President of Iran, President of Syria, the King of Jordan, the Emir of Qatar and the Emir of Kuwait. With all these countries we have historic civilisational and cultural links which we are keen to further develop to our mutual benefit. Today, we have strategic relationship with all major powers including USA, Russia, France, UK, Germany, Japan, China, Brazil, Nigeria and South Africa. We are Forging new partnerships with countries of East Asia, South East Asia and Africa.

CONCLUSION

The Management and governance of the world’s largest, most diverse and most vibrant democracy is the greatest challenge any person can be entrusted with, in this world. It has been my good fortune that I was entrusted with this challenge over four years ago. I thank with all sincerity the Chairperson of the UPA, the leaders of the Constituent Parties of the UPA and every member of my Party for the faith and trust they reposed in me. I once again recall with gratitude the guidance and support I have received from Shri Jyoti Basu and Sardar Harkishen Singh Surjeet.

I have often said that I am a politician by accident. I have held many diverse responsibilities. I have been a teacher, I have been an official of the Government of India, I have been a member of this greatest of Parliaments, but I have never forgotten my life as a young boy in a distant village.

Every day that I have been Prime Minister of India I have tried to remember that the first ten years of my life were spent in a village with no drinking water supply, no electricity, no hospital, no roads and nothing that we today associate with modern living. I had to walk miles to school, I had to study in the dim light of a kerosene oil lamp. This nation gave me the opportunity to ensure that such would not be the life of our children in the foreseeable future.

Sir, my conscience is clear that on every day that I have occupied this high office, I have tried to fulfill the dream of that young boy from that distant village.

The greatness of democracy is that we are all birds of passage! We are here today, gone tomorrow! But in the brief time that the people of India entrust us with this responsibility, it is our duty to be honest and sincere in the discharge of these responsibilities. As it is said in our sacred texts, we are responsible for our actions and we must act without coveting the rewards of such action. Whatever I have done in this high office I have done so with a clear conscience and the best interests of my country and our people at heart. I have no other claims to make.