The Stepping Stone

By Dhirendra Kumar | Jul 6, 2011

Last week, I wrote about how investors who are targeting a particular financial goal should allow for inflation when they make their future projections. Inflation and returns are two variables both of which have a compounding effect. Even small errors in the estimating either can leave you far from the target. However, getting your estimates right is just the beginning of the job that you need to do. The most important variable that decides whether you will meet your target or not is the nature of the actual investments. The first step in getting this right is to decide what kind of asset class you need to invest in. By asset class, I mean debt or equity. This is the primary decision that you will have to make.


Conventionally, the difference between debt and equity is that of their risk level. When I say debt, that encompasses bank deposits, government-backed deposits, other deposits as well as mutual funds that invest in debt paper. Equity means stocks as well as equity mutual funds. Everyone knows that debt is less risky than equity and that’s true. However, for the purpose of planning a targeted investment, it’s more useful to think of debt and equity in a different.

The important difference between the two is that the risk and return curve of the two varies in a very different way over different time-scales. Debt returns are predictable and there are many government-guaranteed deposits available to the Indian investor. However, debt returns are low, barely matching or only slightly exceeding the rate of inflation. Equity returns have the potential of being much higher but can be volatile. However, the volatility of equity is a relatively short-term phenomenon. For periods exceeding three to five years, equity investments are extremely likely to give strongly positive returns. This is especially true if you stick to a broad selection of the relatively larger-cap companies and if you invest gradually, as in an SIP.

Speaking in risk terms, this means that instead of saying that equity has higher risk, we should actually be saying that equity’s risk drops over time and at a long-enough time-scale, the returns-to-risk ratio becomes far more attractive than debt. And there’s the point about how all this fits into your targeted investment goals. The formula is simple—debt for the short-term and equity for the long-term. Of course, this formula is well known. However, there’s brings us to a most important factor, and one that is rarely appreciated. The ‘short’ and the ‘long’ that we are talking about here refer not to the total period over which you are investing for a target. Instead, it refers to the time remaining till the point when the money will be needed. You may have worked for a decade towards buying a house and thus treated it as a long-term investment. However, when you reach a stage when the realisation of the target is about two years away, then the risk profile should be that of a two-year investment. And that means a safe and sound fixed-income option. Otherwise, a bear phase in the stock market could easily wipe out a big chunk of the returns that your equity investments have accumulated over the previous eight years and leave you much further from your goals.

This necessity of treating a targeted investment according to the time remaining rather than the total time from the beginning means a major modification in the way you exit an investment. To facilitate a ‘soft-landing’, an investor should pull out money gradually from equity and redeploy it into a fixed income avenue as d-day for that investment comes closer, as a process that is the reverse of the SIP. This underscores the role of fixed-income investments in every portfolio. It’s all very well to say that you can bear the risk of equity, but as we’ve seen above, the debt’s role as a protector of returns already generated from equity is indispensable.

Move on climate panel for region

by PULLOCK DUTTA


Jorhat, July 7: A joint panel of the states of the Northeast to study the impact of climate change on agriculture in the region is in the offing with Dispur seeking cooperation from the seven northeastern states, including Sikkim.

Sources in the agriculture department said it was the need of the hour to have such a panel of experts from the Northeast since the climate of one state in the region is related to that of the other and the economy is agrarian in nature. The idea to form such a panel was mooted by the Assam Agricultural University to Dispur a few months back.

Sources said Dispur was in touch with the neighbouring states to suggest names of experts who could be included in the panel. The vice-chancellor of the university, K.M. Bujarbaruah, said as global warming and its subsequent effect on the climate is definitely having an impact on the agricultural sector of the region, it was necessary that the states get together and have a proper scientific study in this regard.

“Although such studies are being carried out at the national level, we need a special panel to study the impact of the climate change on the region’s agriculture. It is time that all the states got together now since no systematic study has been done in this regard using long-term weather data,” the AAU vice-chancellor said.

According to the data prepared by the National Action Plan on Climate Change, a trend of decreasing rainfall in the Northeast has been noticed. The region lost more than 200mm of annual average rainfall in the last 100 years. The minimum temperature on an average has risen at many places from 1 degree Celsius to 1.5 degrees Celsius during the same period.

“Warming trends, coupled with other disturbed weather parameters, will affect the cropping patterns in different areas of the region and necessitate growers to think of adaptive strategies. It may so happen that some crops may become unsuitable for some areas and give way to other crops,” another AAU scientist said.

The Dispur move to constitute a panel to study the impact of climate change on the region comes in the wake of chief minister Tarun Gogoi giving special emphasis to improve the agricultural sector.

The chief minister has recently held a meeting with senior scientists of AAU, including the vice-chancellor, and the director of North East Institute of Science and Technology in Jorhat recently.

Gogoi said in Guwahati yesterday that there would be better cooperation between the irrigation and the agriculture departments from now on to give a boost to the agriculture sector.

Agriculture minister Nilamoni Sen Deka has announced recently that Assam would soon have a separate policy for the agricultural sector to achieve self-sufficiency.

Boost for N-E spice traders

In Focus- ROOPAK GOSWAMI

Spices Board India has initiated a process for identifying the local cardamom traders of Arunachal Pradesh and Nagaland to bring them under the Cardamom (Licensing and Marketing) Rules, 1987 to give a fillip to the cardamom business in the region.

Senior officials of the ministry of commerce were informed about this at a consultation workshop for the forthcoming twelfth plan in Guwahati recently.

Cardamom, called the queen of spices, and is one of the most exotic and high-priced spices in the world. It is often named as the third most expensive spice in the world (after saffron and vanilla), and the high price reflects the high reputation of this pleasant smelling spice.

According to the Cardamom (Licensing and Marketing) Rules, 1987 all the producers of cardamom should sell their produce through a licensed auctioneer or dealer.

Speaking at the consultation, director (research) of the Spices Board, Kochi, J. Thomas said state governments should identify suitable farmers, NGOs, government agencies or individual entrepreneurs linked with farmers for starting large cardamom auctions in Arunachal Pradesh and Nagaland.

“The authorities should motivate leading traders and exporters from upcountry markets to participate in the auctions,” he said, adding that the agro climatic condition in the two states was suitable for cultivation of cardamom.

Figures made available by Spices Board revealed that in 2009-10, the contribution of the Northeast to the quantity of cardamom exported from India was 1,000 metric tonnes and in 2010, it was 775 metric tonnes. The value of export was Rs 1,789 lakh and Rs 4,463 lakh respectively.

In Sikkim, licensed dealers in assembly markets buy large cardamoms from growers directly. Farmers from Sikkim had received a good prices varying from Rs 845 to Rs 851 per kg, whereas the present prevailing market prices range between Rs 600 to Rs 700 per kg.

Traders from Arunachal Pradesh can also participate in the auctions in Sikkim, as large cardamom auction has been introduced and conducted in Sikkim from November 2010 to safeguard the interests of the growers.

The budgetary allocations for the spices sector of the region are also on the rise. While it was Rs 620 lakh in 2009-10 and Rs 850 lakh in 2010-11, the allocation for 2011-12 is Rs 1,000 lakh.

The Spices Board, which manages the spices sector in the country, is also supporting the cardamom growers by providing financial assistance for meeting plantation, maintenance, organic inputs purchase, organic certification and other expenditures.

Cho-Lhamu declared highest lake in India

PTI | 06:07 PM,Jul 08,2011

Gangtok, Jul 8 (PTI) Cho-Lhamu lake, located over 18,000 feet above sea level in North Sikkim, has been declared the highest lake in the country after a survey conducted by the central government. The Wetland Atlas, prepared by the Ministry of Environment and Forest, has stated that Cho-Lhamu is the highest lake in the country and the sixth highest lake in the world, state Tourism Minister Bhim Dhungel said here today. The Teesta river, stated to be the lifeline of Sikkim, has its origin in Cho-Lhamu lake, located near the Donkiala pass and only about five km from the Indo-China border. Dhungel said the recognition for Cho-Lhamu lake would boost the tourism industry of the state.

NEC sponsorship for 23 Northeast students


Shillong, July 2: These 23 students may hail from below poverty line families living in nondescript villages of the eight northeastern states. But they have cleared a competitive written examination and earned a seat in the picturesque Assam Rifles Public School, located at Laitkor, around 16 km from here.

Sponsored by the North Eastern Council to study in the school, these 23 students — three each from the Seven Sister states and two from Sikkim — have literally received a new lease of life.

The school will enrol 23 students every year for the next five years and the NEC will continue to support the sponsored students till they pass the Matric exam. Repeaters, however, will not be sponsored for the second year in the same class.

The total annual financial implication for the NEC is Rs 91,700 per child.

Assam Rifles selected the students through its centres at Kohima, Imphal, Gangtok, Agartala, Aizawl, Lekhapani, Silchar and Guwahati where written tests were conducted.

Following the written tests, 23 students were selected to study in the school for the academic year (2011-12).

“It was in 2009 that the then director-general of Assam Rifles, Lt Gen. K.S. Yadava, suggested that the NEC could sponsor less-privileged children to study in the school, as there was excess capacity,” NEC secretary U.K. Sangma said today at the Assam Rifles headquarters during a programme in which Union DONER minister B.K.

Handique formally inaugurated the sponsored education programme.

He said the council decided to embark on the pilot project from this academic year onwards following Yadava’s suggestion.

Admitting that advertisements for the sponsored programme was not up to the mark, he said the maximum number of applicants came from families in Manipur.

“If this pilot project proves to be successful, we will continue with it for the times to come,” he added.

The programme was taken up with the vision and hope that many deserving students, who otherwise could not afford it, could get access to world class education that would shape their future and enable them to give back to the community some of the benefits they acquire.

Handique hailed the pilot project, which would be of immense help to less privileged children, while stressing on the need to cater to victims of violence.

“Providing help to children who are victims of violence is a social challenge as they have to suffer the traumatic experience where dreams are nipped in the bud. We should pick up those children and send them to a school of this (Assam Rifles Public School) standard,” he said.

The Union minister, who is also the NEC chairman, said the nation would progress if help was provided to victims of violence, especially children.

Instituted in 1980, the Assam Rifles Public School, which follows the Central Board of School Education syllabus, has 650 students. Of these, 10 students are from Bangladesh.

By Akshay Mathur

In May this year, the Congress party won its third straight vic- tory at the hustings in Assam. By itself, the event is liable to be dismissed as another victory in a far-away state. But this win has a different complexion: It is for the first time in three decades, that the Congress is presiding over the fate of Assam that is at peace.
This is a historic opportunity for the country to launch a bold peace-time initiative in the North- East that will provide an economic, diplomatic and security boost not just to India's eastern flank, but to our global ambitions to be a rele- vant Asian player and a competi- tive regional alternative to the Chi- nese juggernaut.
What's needed is a robust re- gional economic strategy coupled with new international trade rela- tionships for the North-East that will provide a viable option to the limited trade and travel opportuni- ties through the expensive “Chick- en's Neck“ route to the rest of the country.
One such option could be a “Seven Sisters Corridor“ modelled on the `4 trillion Delhi-Mumbai Industrial Corridor (DMIC), which is already dramatically changing the landscape of India's western hinterland. In the North-East, a similar mega infrastructure project --requiring a basic investment of `11,000 crore (not including land and power)--will link the Seven Sister states of the region to each other and to multiple border points with contiguous neighbours such as Bangladesh, Myanmar and Bhu- tan. Like DMIC, an exemplary for- eign-policy initiative with Japan as a 50% partner with the Union gov- ernment, the corridor could part- ner with Thailand, a country with which India is in the process of signing a free trade agreement (FTA), and whose government has expressed interest to partner with India. Major Thai companies such as Italian-Thai Development PCL and the CP Group have the neces- sary expertise to develop infra- structure and small-scale indus- tries such as food processing. At $85 million, it is already one of the largest South-East Asian foreign di- rect investors in India, even top- ping China, and the potential is many times greater still.
The plan (see map) will provide high speed road, rail, and air con- nectivity, land for industrial re- gions and complementary housing needs, access to ports for trading goods, financing for start-up entre- preneurs, broadband and telecom access for businesses, and security to people.
To accomplish this, the North- East region must first be stabilized using the triumvirate of diplomacy, development and policing--a win- ning strategy that brought peace to Assam. While most of the insurgen- cies there are winding down, Ma- nipur is still troubled. Repealing the despised Armed Forces Special Powers Act where the corridor would run, will help.
India must then use the diplo- macy of mutual interest to draw its neighbours. There is already a base to build on. The Kaladan Multi- Modal Project connecting Sittwe Port (Myanmar) to Lawngtlai (Mi- zoram) is under way, and this has prompted Bangladesh to open its Chittagong, Ashuganj and Mongla ports to India. In India, integrated checkpoints are being developed at various border points, and the east-west highway from Porbander (Gujarat) to Silchar (Assam) is al- most complete.
The corridor's success will de- pend on thriving industrial activity developed around it--not just big private firms feeding off the re- gion's lucrative natural resource base, but small and medium value- added businesses. Food processing, for instance, remains un- tapped even though the region produces large quantities of rice, sugar, ginger, pineapple, potato, millet--products essential for food security. The corridor will enable building smaller food parks and processing units closer to tier II or III cities and to the farms--a boon to small entrepreneurs and mar- ginal farmers, creating a base of skilled labour and business entre- preneurs. It will also harness the talent of the region's literate, Eng- lish-speaking youth who are mi- grating to other parts of India in droves, manning the front desks of the hospitality business across the country.
The corridor is the ideal place to productively direct the vast subsi- dies allocated to the region by the Centre and the states, few of which are successful. The `70,000 crore committed to the North-East by the 11th Plan will certainly get a better return if blended into the Seven Sisters Corridor budget rather than expecting piecemeal efforts to add up to a grand economic strategy.
But banking on the government for AHMED RAZA KHAN/MINT financing is neither practical nor appropriate. The initiative needs stakeholders that can invest for the long term. This means private Indi- an business, and a reliable foreign country partner such as Thailand.
This is a good time for the Con- gress government to introduce this as its flagship initiative. A new cor- porate entity to manage the project must be created and the North- East Industrial Policy must be re- vised to support enterprises on the corridor. The Central Industrial Se- curity Force, which provides secu- rity to airports and oil refineries, can also cover the corridor. Finally, the ministry of external affairs must make the corridor an integral part of the Look East Policy and prioritize the completion of the FTA with Thailand.
The Assam elections showed that the North-East is not only a robust participant in India's democracy, but with imagination, it can play a role in leading an economic trans- formation from the east.
Source:Livemint

sourceLive mint

‘Northeastern capitals on rail map by 2017′




Agartala, July 2 (IANS) The Indian Railways will connect all the capitals of northeastern states with the rest of the country by 2017, a senior railway official said here Saturday.

‘Under the current mandate of ‘North East Vision 2020′ all the northeastern state capitals would be brought under railway connectivity by 2017 if the land acquisition takes place on time,’ Northeast Frontier Railways (NFR) General Manager (Construction), Vijaya Kanth told reporters.

The North East Vision 2020 was prepared by the North Eastern Council (NEC) for the development of the region. The eight northeastern states are Arunachal Pradesh, Assam, Meghalaya, Manipur, Mizoram, Nagaland, Tripura and Sikkim.

Several railway projects now under way in all the eight northeastern states are getting delayed. The main cause is a long period of monsoon which leaves a very short working period from October to March, she said.

‘Frequent shutdowns by various political and non-political parties have affected railway construction works and traffic as well as supply of essential goods between the northeastern states and the rest of India,’ the official said.

‘Due to mountainous locations and terrorism in some parts of the region, technical and security related challenges are also major obstacles for expansion of railway network in the region, bordering China, Bangladesh, Myanmar and Bhutan,’ said Vijaya Kanth.

The NFR is now laying railway tracks to extend its network up to Sabroom in southern Tripura, 135 km from Agartala, the NFR general manager said.

‘After the extension of railway line up to Indian border town Sabroom, it would be easier to access the Chittagong international sea port,’ Vijaya Kanth stated.

She said that northeast is NFR’s priority area and receives government’s full support.

‘Works are now in full swing to extend railway line from Agartala to border town Sabroom by 2014 and to connect south Tripura’s district town Udaipur by March 2012,’ said the official.

‘In the eastern border state of Arunachal Pradesh, capital Itanagar would be connected to Harmuti while the Himalayan state of Sikkim too would not lag behind. Tracks would be laid from Sevoke in neighbouring West Bengal to Rangpo in south Sikkim,’ she said.

Assam’s main city Guwahati and Tripura capital Agartala are now already connected by the railway network.

Agartala is the newest station of the railways and came up on the country’s rail map in October 2008.

Railway line first entered Assam in 1881 when the Assam Railway and trading companies began construction of a 65-km long metre gauge line from Dibrugargh to Makum collieries in Margherita in northeastern Assam for the sole purpose of transporting tea and coal.

In all, ten rail projects in the northeastern region have been declared as ‘national projects.’ Important projects include Bogibeel rail-cum-road bridge in Assam and gauge conversion between southern Assam and Tripura.

The NFR construction chief along with senior railway officials is now on a visit to Tripura to supervise the railway work there.

According to the official, in Nagaland tracks exist up to Dimapur. It would be further extended to capital Kohima. In Manipur, tracks will be extended from Jiribam to capital Imphal