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presents
MAY 2021 Vol 5 Issue 1
Our best read - The Greece Debt Crisis
Special Mention: Conscious Consumerism
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INDEX S.No.
Article
Page No.
1
The Greece Debt Crisis
3
2
Conscious Consumerism
8
3
The frantic race for IPOs. What lies ahead?
12
4
Microfinance
16
5
Investing Lessons from Peter Lynch
19
6
Tesla’s reversal: The Bitcoin Saga Continues
23
7
NFT- The Dawn of Digital-Art Revolution
29
8
Dogecoin
35
9
EV: A promising upgrade for India
39
10
RBI AND COVID-19 IN INDIA: An insight to the journey of combat
43
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The Greece Debt Crisis -By, Saujanya Roy Indian Maritime University, Kolkata A financial crisis is characterized as a situation in which the prices of all the significant assets experience a huge decline in their financial value. Many crises have occurred throughout history. One of the most notable is the Greece Debt Crisis which the Greeks have been experiencing as an aftermath of the 2007-09 financial crisis. Greece seems to have suffered the longest duration of stagnation in recent history due to the crisis. Greece, like many other European countries, had experienced the 19thcentury debt crisis. However, Greece had emerged as one of the fastest GDP growth rates in the world during the twentieth century. Greece joined the European Economic Community (now the European Union) in 1981, with an impressive debt-to-GDP ratio of just 19.8% on average. (www.britanica .com)
In October of 1981, the Panhellenic Socialist Movement (PASOK) came into power, ending a brutal seven-year long military Junta. Since then, the power has always shifted between the PASOK and the New Democracy Party (ND). In order to win over the voters, both the parties lavished several policies over the years which resulted in soaring inflation rates, slow growth rates and creating an inefficient, bloated economy.
One of the most infamous Policy was to annually increase the salary of all the workers in the public sector irrespective of their performance or their productivity. The workers also received an
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additional pay (also known as 13 month or 14 month pay) in order to cover for their expenses while they were on vacations or during Easter. th
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These unplanned policies resulted in low production, slow growth and diminished competitiveness, which broke the government. During this financial crisis, on January 2001 Greece joined the European Monetary Union (EMU) giving them some glimpse of hope. With the introduction of Euro in 2001, trading cost between the Eurozone countries have greatly reduced and there was a significant increase in the overall trading volume. With Banks investing their money and usage of only Euros throughout the Europe, it significantly lowered the interest rates the Greek government needed to pay (around $172 Billion then). This allowed the Greek government to borrow at a much cheaper rate of interest than before 2001. The annual GDP growth between 2001 and 2008 was increased to an impressive 3.9% and were second fastest behind Ireland in the Eurozone.
(www.investopedia.com)
However, the membership soon became a very controversial one. Greece’s Debt-to-GDP ratio was found to be 103%, far above the permitted level of 60% set by the Eurozone. Furthermore, Greece’s fiscal defect was 3.7% of the GDP which is also above the allowed limit of Eurozone of by 0.7%. This was soon revealed during the global financial crisis of 2007-09. Greece’s already meagre tax revenues were getting eroded due to the recession weeks and hence worsening the deficit. In 2009, Greek debt was downgraded after many statistical discrepancies were found including underreporting of public debt was also exposed. Greece was suddenly barred from borrowing in the capital market. In 2010, U.S financial rating agencies assigned a “junk” rating to Greek bonds. Greece faced liquidity crisis as capital got dried up. To avoid a crisis, the IMF, the European Commission Bank and the European Commission, collectively known as the troika, agreed to provide Greece with emergency funding and Greece was essentially bailed out. This bailout marked the beginning of what has now become one of the longest crises in modern history.
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(www.npr.org)
The bailouts from the International Monetary fund and from other European creditors were contingent on Greece’s implementing fiscal reforms, specifically increased cuts and increased tax returns. These austerity measures triggered a series of recessionary cycle, with unemployment reaching an all-time high of 25.4%. Tax revenues fell, worsening Greece’s fiscal situation. The Austerity measures exacerbated the humanitarian crisis, increase in homelessness, suicide cases reached an all- time high, and a significant decline in public health and lifestyle
(www.britanica.com)
The measures implemented in the midst of the worst financial crisis in the world since the Great Depression of 1930, proved to be a major contributor to Greece’s economic implosion. In the wake of the financial crisis, the debt-to-GDP ratio skyrocketed as Greece’s economy shrank reaching an astonishing figure of 180%. The final nail in the coffin came in 2009, when the new government took over the office and announced that the fiscal deficit was 12.7% which is double than the previously disclosed figure, further accelerating their debt crisis.
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Instead of assisting Greece’s economy in regaining its stability, bailouts only ensured that Greece’s creditors get repaid while the government struggled to put together the meagre tax revenues. While Greece was facing structural problems, such as tax evasions, membership in the Eurozone allowed the country to hide from these issues for a time, but it eventually generated huge economic problems and an unresolved debt crisis.
Several methods have been suggested by economist around the globe, but the government failed to acknowledge most of these methods. Raising the tax revenues is one of the most important solution. The Greek government’s current income is about 42% of the GDP. This is a low to middle figure for the Eurozone where the IMF expects Belgium, France Finland will all exceed 50% by this year. Raising the tax rates and improving tax collections will help the government’s revenue to catch- up with its previous expenditures and gradually balance the budget. The government has been facing enormous pressure from IMF and EU to cut spending. Currently the budget deficit is around 7% of the GDP, and is expected to remain around 5% in the long run. However, cut spending could stymie the Greek economy’s recovery by reducing government employment and salaries and spending in other sectors.
(www.npr.org)
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Greece’s return to economic stability is getting hampered by the Euro currency. The government can use inflation to reduce the value of its debts with their own currency. Further, the Greek government cannot issue euros anymore, only the European Central Bank is able to do so. Returning to Drachma would restore Greek authority over their monetary policy. The government would initially struggle to come up with enough drachmas to cover their debt, but gradually the country would be well prepared for their future growths.
(www.britanica.com)
The Greek debt crisis had stemmed from previous governments’ fiscal mismanagement, indicating that, like individuals, nations cannot afford to live beyond their means. As a result, Greeks may have to endure years, if not decades of harsh austerity measures.
REFERENCES
1. 2. 3. 4.
www.britanica.com www.toptal.com www.investopedia.com www.npr.org
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Conscious Consumerism By: Shikha Makhija (K J Somaiya Institute of Management)
Let’s go back to thinking about your trips to the grocery store. When you glance through aisles of endless drinks, food, and many other products, do you actually consider the impact of every product while making a purchase? Do you actually sit and understand the after effects of using the products on the environment? Most of us focus on the price of the product, often by the necessity. But, sometimes, we may also consider where has this egg come from? In what condition was the chicken breeding and living? What kind of impact did this have on the environment? Yes, some of us think about a product’s social impact while making purchases. It is important to think about what kind of questions do you ask yourself while going shopping.
Introduction Let quickly have a look at the definition of Conscious Consumerism: When buying practices are driven by a resolution to making decisions that have a positive economic, social and environmental impact is what Conscious consumerism is. In simpler terms it is a step taken by the consumers to buy ethical products, avoiding ethical companies and sometimes not making any purchases at all. In this way, a consumer who is conscious about the environmental and social impacts, would think twice before making any purchase and would avoid the unnecessary buying. This also impacts the companies who produce these products and hence it drives them into the direction of going green and caring about the environment. Conscious consumerism has been a trendsetter in many countries and is growing day by day. As per reports in GWI (Global Web Index), 62% of eco-conscious consumers in the UK and U.S. agree to it that eco-friendly products are better for their health. As per statistics, there is a high percentage of population who have agreed that they would pay more for eco-friendly products. The diagram below shows that Millennials (age 22-35) are leading as they are more aware about the dynamics of the economy and they are the future. They are the population that drive our country and are quite experimental with changing environments.
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Reference : https://blog.gwi.com/chart-of-the-week/green-consumerism/
As per the graph show below, while taking into consideration the “greenness” of different product categories, major impact of mindset is seen in case of cleaning and personal care products. Through this it could be assumed that people believe that eco-friendly products are more natural and better for their health, which is also likely to be why food is highly researched.
Reference : https://blog.gwi.com/chart-of-the-week/green-consumerism/
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Benefits of Conscious Consumerism When individuals consume consciously, industry responds to meet consumer demands. This leads to increase in accessibility. As access to information increases, there is an expansion of products leading to more product choices for the consumer which in turn allows more people to focus on ethics and standards of daily consumption. Well, as consumer is the center of attention for every company, the shift in mindset of consumer leads to various companies taking a stand and working towards satisfying the needs of their consumers. If consumers have a stance of wanting to engage with companies that prioritize social and environmental wellbeing, then companies will be left with no choice but to drive their production activities and logistics towards a green move. Back in 2013, only 20% of S&P companies used to disclose their social, governance and environmental information. By the time world reached 2019, 90% of S&P started publishing their reports. This shows that the brands are definitely paying attention. Still not convinced? Here are some insights from Big Market Giants as they move towards sustainability: • IKEA - Furniture and home brand, IKEA has shifted its entire business model to sustainability. “People & Planet Positive” is its green strategy where they aim at sourcing materials for their supply chain from the most sustainable providers. • Unilever - Unilever has made sustainability an integral part of its organizational culture. Unilever announced its sustainable living plan in 2010 that aims at doubling the company’s profits thereby reducing its environment impact to half (or 50%) by 2020. The company managed to reduce its landfills by 75% in almost 5 years of times. With such a growth the company has the potential of achieving its true goals • Panasonic – Panasonic has managed to keep it low key unlike its competitors but has constantly tried hard and has been awarded for all its efforts. Panasonic has also introduced an ecofriendly plan that aims at making its day-to-day operations go green. To begin with, Panasonic moved its North American headquarters to another location in a move to reduce the carbon footprints and commute distance of its employees. Moreover, under its product to product scheme, Panasonic started reusing the left over plastics from its existing electronic products to make new appliances. The company has managed to plant more than 3 billion trees since the year 2007. • Nike - Nike initially was not inclined towards sustainability, however, when it started to introduce more green practices the brand empathy started increasing in the masses and then Nike never stopped. Nike changed its entire business practices in order to attain sustainability. It redesigned boxes with reduced packaging and also created a section on their also that gave more awareness to masses regarding the impact of different fabrics on environment.
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Future Today, with change in consumer’s consumption, the industry continues to move further towards a better practices for near future. Regenerative practices in field of agriculture are aimed at improving the health of the planet something that was never imagined decades ago is now reality. This is also leading to reverse climate change. World is moving towards more organic produce which will lead to improving the quality of life of individuals, lack of diseases, a more satisfied planet earth and much more. The benefits are countless. The impact of consumer is leading to world—and market-changing effects. It has been proven and seen that choosing renewable energy is more than just a fashionable trend. As people change their mindset and move towards a more sustainable environment, soon we will have an increased awareness and provisions for using and consuming more and more renewable sources of energy thereby making earth a better place to live in!
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The frantic race for IPOs. What lies ahead ? By: Rashi Rastogi (KJ SIMSR) The IPO market is by all accounts most sought after in a recent couple of years when contrasted with the earlier years. Despite the pandemic crushing the first and second quarters of FY 2021 and the whole portfolio of IPOs being required to be postponed, the public sector has had the option to effectively raise more than ₹ 25,000 crores. As many as over 80 organizations have strolled through SEBI's doors trying to obtain regulatory approvals for a public listing, thereby creating more money for the investors. For investors, this means opportunities to get in early, get in fast and, aim at earning big. The listing gains have been more than colossal in most cases. This year, each organization that opened up to the world has been oversubscribed in almost every category of financial and retail investors, especially. The following graph shows the verifiable pattern of the number of IPOs in India in each year between 2000 and 2021 YTD.
No. of IPOs annually 120
108
100 80
66
60 40
39
40
38
22 13
20
21 5
27
25 16
16
17
7
0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 * Source: Chittorgarh.com
Why the mad rush? Initial public offerings of different industries of the economy have opened up to the world, from payment systems to defence to pharmaceuticals, and many are currently hitting the market soon. With the sharp turnaround in auxiliary business sectors, IPO markets have likewise bounced back rapidly since their lows. Market awash with liquidity, low-interest fees and, absence of substitutes has created this keen interest for IPOs. Most of the IPOs made solid debuts helping short-term financial backers make significant additions. The first half of FY 2021 has been remarkable, however, the subsequent half is required to be much more remunerating for financial investors and organizations.
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However, why are organizations hoping to go public amidst one of the most prolonged downturns the Indian economy is going through? Some analysts attribute this to benchmark indices seeing an increase in recent months on the back of the COVID vaccination program and the reopening of the economy. Additionally, consumption has been quite meek since March 2020, leading to pent-up demand. Listed companies raising capital through alternate mechanisms for moving through the uncertain times are raising confidence. Moreover, the people's interest in the IPO's has increased, as can be seen from them being oversubscribed. This is the case because the grey-market premium is high and retail investors have expectations that the issue will bring about listing gains. A couple of elements adding to the surge in the IPO issues are excess liquidity because of cuts in the interest rates and printing of currency by the US Fed, adding to the restoration of the Indian businesses from their lows. However, word of caution that investing money in IPO doesn't consistently bring about gains in the short run, regardless of valuations. Kalyan Jewellers, Suryodaya Small Finance Bank, India Railway Finance Corporation are some of the recent IPOs that led to negative listing gains.
IPOs with negative listing gains 350
305
300
0.00% 276.2
275 269.96
250
-10.00%
200
-15.00%
150 100
-5.00%
87
-20.00%
75.3 26
50
-25.00%
24.85
0
-30.00% Kalyan Jewellers India Ltd Suryodaya Small Finance Indian Railway Finance Bank Corporation Issue Price
Listing Price
Brookfield India Real Estate Trust
Profit/Loss %
Source: Chittorgarh.com
Reforms by SEBI Moreover, the Securities and Exchange Board of India (SEBI) carried out a couple of measures to facilitate the whole process to promote capital raises. These gave way to many temporary relaxations and measures, including extending the legitimacy of perceptions on an organizations' draft order records, reducing the minimum subscription amount in rights issues, and increasing admissible size variation from 20% to 50%. Global Scenario Overall, the positive global economic scenario was driven by continued government programs, post-pandemic confidence fueled by vaccine rollouts and improved macroeconomic indicators. Globally, there were 727 IPOs in Q1 2021, raising a sum of $202.9 bn. Global macroeconomic indicators gave positive momentum to equity
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capital markets with a strong monetary recovery. March PMI data across the US, Europe and Mainland China all showed huge improvement contrasted with earlier months, demonstrating a surge of business activity in all regions.
Source: Global IPO Watch: PwC - https://www.pwc.com/gx/en/services/audit-assurance/ipo-centre/global-ipo-watch.html
What’s next? We should view a few of the top IPOs that are getting financial investors energized and idealistic. Flipkart, the e-commerce industry goliath is all set to enter the IPO markets. With a valuation of around 25 billion dollars according to its last round of funding, Flipkart would be the first-ever Indian original country to be traded on the US market. Ed-tech major BYJU presently holds a valuation of 10.8 billion dollars. The lockdown and resulting closure of schools and educational institutions are said to have boosted traffic on the website by 300%. Bajaj Energy, based out of Uttar Pradesh, intends to launch its IPO in FY 2021. Delhivery is another online delivery service that has been shot into the spotlight during the COVID-19 pandemic. The e- logistics organization claims more than 20% of the market share and has to date raised USD 780 million through its different funding rounds. A few upcoming IPOs in FY 2021 are listed below:
Source: Groww.in - https://groww.in/blog/upcoming-ipos-in-india/
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Most market keen millennials follow veteran financial investors and value their opinion. Youthful financial investors rushing into the market makes the scene significantly more intriguing for IPOs. The second half of FY 2021 is required to be a big draw for organizations and investors. Initial public offerings may keep on enticing financial investors in the market after ongoing fruitful subscriptions. Going forward, companies with stringent governance, robust business model, and good financial position may find it easier to proceed for listing.
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MICROFINANCE By: Vandita Tiwari (Great Lakes Institute of Management, Gurgaon) Microfinance, in truth, is a service which provides finance to low-income individuals or group of individuals who lack access to traditional or non-traditional financial services. The concept of microfinance has dual objectives of combating poverty and at the same time to help in the development of financial system of the country. It is a method of creating “economic and social development from below” by providing small loans to poor households who don’t have ability to provide collateral to banks and financial institutions for loans in the normal course. Micro finance or microcredit includes both formal and informal money lenders such as commercial banks, loan sharks, credit cooperatives etc. Though microfinance or microcredit are often used interchangeably, there is a distinction between the two. Microcredit is the act of providing small loans whereas microfinance encompasses other financial services such as banking facilities, insurance etc. Microfinance institutions sometimes provide social services such as educational facilities, clinical care and more.
Source: Journal of Global Health Reports
According to a GlobalNewswire report, global market for microfinance is predicted to reach US$ 313 billion by 2025. Driven by the widening gap in the distribution of wealth in the economy, microfinance initiatives are used to provide finance to those stricken by extreme poverty. It opens new opportunities for people to pull themselves out of the vicious cycle of poverty by providing access to business or education. It also aids the poor in managing their finances and can be used to leverage economic opportunities which brings about stability for their families. Over time microcredit and microfinance have assisted in supporting small and medium enterprises (SME’s) and overall sustainable development through inclusive financial innovation. The MFI institutions have made extreme headway in helping poor to get out of their poverty, especially in the countries along “the Silk Road Economic Belt” and “Maritime Silk Road”. “Self-sufficiency” is the main indicator used internationally to measure sustainable development of MFI’s. This indicator has further two levels- (1) Operating selfsufficiency (OSS) and (2) Financial self-sufficiency (FSS).
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The OSS rate determines the ability of an institution to earn sufficient revenue to cover its total costs in a given period of time. The FSS rate, on the other hand, reflects the ability of the institutions to provide sustainable services without accepting additional donations. In the fast-growing markets of the world, in the recent past, have been facing repayment crises that the industry has faced are indicative of the splits that are appearing in the fabric of microfinance. The most common causes for these crises are violation of lending disciplines, too many MFI’s operating in the same area, borrowers taking more loans than they can reasonably repay etc. The debt induced distress caused has led to debates on the relationship between microfinance and over-indebtedness. In 2008, all the 12 largest MFI’s experienced increase in Portfolio-at-Risk reaching approximately 7% but at the time microfinance participation was not considered as a possible driver of the crises. The United Nations (UN) recognised the success of MFI’s by declaring the year 2005 as the “International Year of Microcredit”. In the Indian market, there is a high concentration of microfinance industries and low competition, though it is one the leading markets in the world. The sector has undergone major changes in the structure of ownership, control and management of MFI’s and expanded immensely in the past two decades. The three most popular forms of organisations in the Indian microfinance sector are Non-Banking Finance Companies (NBFC’s), Banks and Co-operatives. Source: Microfinance in South India (https://repository.upenn.edu/)
Microfinance is highly cultural and context specific and India, a country with a significant poor population, is an extremely profitable region for MFI’s. The UN has declared two main approaches for MFI’s: the “formal financial institutions approach” and the “community-based institutions approach”. The first approach builds on stable and strong financial institutions wanting to broadening their horizons to aiding the underserved. The second focuses on developing informal community financial institutions and connecting them to the financial sector directly or indirectly via creation of federations. Example- Self-help group (SHG) model that links to banks. In India, the SHG model is dominant in the microfinance industry. In 2010, this industry went through a severe crisis when approximately 100 suicides in Andhra Pradesh were linked directly to aggressive microcredit salesman and loan collectors from private sector MFIs of the state. The state politicians responded by requesting the borrowers to not repay their debts causing repayment rates to plummet from 98 to 5 percent. The RBI stepped in to regulate the sector and passed margin caps to prevent overcharging over 10 to 12 percent off the operating margin of the loans. But, in the first half of FY 2011, MFIs in Andhra Pradesh issued Rs.5000 crore to borrowers while in the second half of the same financial year they could only disburse Rs. 8.5 crore reducing the number of clients being served by microfinance globally by over 10 million. This sparked debates on the ethicality of profiteering off the poor. When MFI’s focus more on commercial interests, they deviate from the objective of serving the poor. It is imperative that regulators take necessary steps to maintain a stern vigil on this industry as the enormous socio-economic and financial benefits from
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it can turn into the worst kind of exploitation. Still, microfinance programs provide aid to millions of households across the world and continues to drive toward a poverty free world.
REFERENCES Sunil Puliyakot (2020). “Does Microfinance Participation Lead to Over-Indebtedness? Evidence from India”, The Journal of Accounting Research and Audit Practices, Vol 19, No.3, pp 22-48. Bhaskar, Arjun. (2015). Microfinance in South India: A Case Study. Retrieved May 2021, from http://repository.upenn.edu/ Yaning Li, Yi Yang, Gaoshuai Li & Xing Zhao (2020). “Study on Sustainable Development of Microfinance Institutions from the Perspective of Inclusive Finance—Based on MFI Data in Countries along the Belt and Road”, Emerging Markets Finance and Trade, 56:13, 3205-3216, DOI: 10.1080/1540496X.2019.1684893 Navin, Nitin & Sinha, Pankaj. (2019). “Market Structure and Competition in the Indian Microfinance Sector”. Vikalpa: The Journal for Decision Makers. 44. 167-181. 10.1177/0256090919896641. Sengupta, Rajdeep & Aubuchon, Craig. (2008). “The Microfinance Revolution: An Overview”. Review. 90. 9-30. 10.20955/r.90.9-30.
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Investing Lessons from Peter Lynch By: Aaditya Shah (Nirma University)
When it comes to Investing, Peter Lynch is known as one of the best fund managers in the history of US Stock Markets. Lynch managed the Magellan Fund, where he generated an average return of 29.2% for 13 years, which is considered one of the best performances by a mutual fund ever. The Magellan Fund’s AUM grew from $18 million to $14 billion under the tenure of Peter Lynch. Lynch started his investment career by investing in an air-freight company called Flying Tiger, which helped him pay for graduate school. Peter Lynch is the author of some of the best-selling books on investing, such as One Up on the Wall Street and Beating the Street, and is credited with inventing many popular stock valuation methods. Picking stocks is a difficult task where not everyone can be successful. Peter Lynch laid out some foundations that he followed as his investment mantra, allowing him to earn huge returns. By following these lessons, you can improve your chances of wealth creation, and who knows, you may be the next Peter Lynch!
Source: https://fintrovert.com/blogs/top-15-peter-lynchquotes/
•
Invest in what you know
It is important to be familiar with the company and the industry you are investing in, as this provides you an edge over the average investor. Do you have intimate knowledge of the industry? Can you connect the dots? Consider the following example: You are in the business of selling cars. You have a good amount of knowledge of the internal specifications of cars and know what type of cars are selling like hot cakes in the market. A company launches a new car, and by understanding its features, you are convinced it will be a huge success.
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That’s the edge you have over others. Don’t know about a particular industry or company? You can easily research the industry and understand how it works to understand its future growth story better. •
Ten-Bagger Approach
The term tenbagger was coined by Peter Lynch in his book One Up on the Wall Street. It refers to an investment that can grow by 10 times and has exceptional future growth prospects. Lynch generally goes for stocks in this category with a PE Ratio below the industry average and whose 5-year EPS growth rate is generally high but lower than 50%. Identifying stocks in this category is very difficult, and the other tricky part is to stay invested in them for a long time. According to Lynch, Walmart is the best example of a tenbagger that investors had plenty of time to buy. Even if a person invested in Walmart after 10 years it went public, he still would have multiplied his wealth by 30 times. •
Patience
Patience is the most important virtue emphasised time and time again by big-time investors such as Warren Buffet, Charlie Munger, and our very own Peter Lynch. According to Peter Lynch, “the stock market's been the best place to be over the last 10 years, 30 years, 100 years.” Being invested for the long term offers investors the advantage of compounding, which helps multiply wealth faster. Also, it is easier to grow wealth in the long term while facing a lower amount of volatility. •
Research matters most
Research is the most critical factor that differentiates a great investor from a good one. It is very important to know about the industry and company in which you are investing. Investing randomly without any research is gambling. Lynch invented the Price to Earnings Growth (PEG) Ratio, which helps determine the worth of a stock given its growth potential and many other valuation methods prevalent today. •
Discipline to handle volatility
According to Peter Lynch, the stomach is the most important organ in the stock market. There will always be downfalls in the market. The question is: Can you survive them? In his tenure at Magellan Funds, the market went down 10% or more by 9 times. But this did not worry Lynch and he remained invested as he believed in the companies in which he invested. In the words of Sylvester Stallone (Rocky), “Life’s not about how hard of a hit you can give…it’s about how many you can take, and still keep moving forward.”
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•
Timing the Markets
An attempt to time the markets is unproductive and leads to lost time and opportunities. People have lost more money waiting for corrections and predicting them rather than what they would have lost in the actual corrections. If you spot a good opportunity and believe in its future growth prospects, then invest in it rather than waiting for the price to fall. •
Question the rise and fall
It is done matter if your stock grows from $50 to $100. The million-dollar question lies in knowing the reason behind the rise of the stock. The same applies to a fall in the stock price. Knowing the reason will enable you to be well informed and become better at spotting opportunities in the future. •
Exit when there’s no room to grow
When you buy a stock, you believe in a certain growth story, which you expect the company to reach. Once the company has realised its potential and there is no further room to grow, one should sell their investment. You should exit when the company has reached its maturity or cannot meet your expectations.
Source: https://graciousquotes.com/peter-lynch/
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The bottom line Investing is not easy, and only a few great investors have consistently beaten the markets. The advice given by Peter Lynch on various aspects such as patience, research, and timing the markets are great words of wisdom to the common investor. Research in-depth before investing and always have the stomach to remain invested in the markets for the long run.
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TESLA’S REVERSAL: The Bitcoin Saga Continues By: Anoushka Paliwal & Sushri Padhi (Shri Ram College of Commerce)
Illustration-EliasStein
Volatile yet lucrative, Bitcoin, the world’s most popular cryptocurrency has been a source of heartache to cryptocurrency speculators for some time now. Indisputably the CEO of Tesla, Elon Musk, has been quite a catalyst in the crypto world. To say the very least, his relationship with cryptocurrencies has been a complicated one… as he first seemed to love them, then he endorsed them, and now he thinks it's terrible for the environment! It all started in February2021, when Tesla announced that it has purchased around $1.5 billion worth of bitcoin and informing that it intends to accept Bitcoins as a mode of payment from people looking to buy its vehicles. Some people were quick to point out that the payment option felt like a PR stunt because if bitcoin is a ‘reserve asset’, a hedge against fiat debasement, then why would
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customers want to use it as a payment token. Nonetheless, the electric-car maker is known for its bucking convention, and with Tesla diving into the deep end of the pool on bitcoin, it gave people enough confidence to embrace cryptocurrency, causing prices to shot through the roof.
Source:Investopedia
However, as some predicted, a pullback was bound to happen as it was believed that Bitcoin was overbought. The month of May saw a lot of upheaval in the world of cryptocurrencies– from China reinforcing its stance against cryptocurrencies to Tesla selling 10% of its Bitcoin holdings and Musk tweeting that Tesla will no longer accept Bitcoin as a mode of payment due to climate concerns. This all triggered a huge sell-off in the crypto market and a snap fall in Bitcoin prices, plunging from around US$55,000 to the mid-US$45,000s. But didn't Tesla already know about Bitcoin’s effect on the climate, and that it is at odds with Tesla’s eco-friendly ethos? To understand why Tesla did what it did, first, we need to understand why a bitcoin requires so much energy. Unlike the paper currency, Bitcoin is decentralized, so new bitcoins come into circulation through a process called Bitcoin Mining. It is an important part of the blockchain ledger's upkeep and
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development, and serves as a barrier to ensure that no one fraudulently alters the global record of transactions. The model aka “proof of work” is carried out with the assistance of highly advanced computers that solve incredibly difficult computational math problems, in an energy-intensive process that often relies on fossil fuels, particularly coal. As previously stated, users known as miners, attempt to solve a mathematical puzzle on the bitcoin network. The puzzle is solved by changing a nonce until it gives a hash value that is less than a target, which is a pre-set criterion. When other users confirm and verify a transaction, a miner confirms it by solving the problem and adding the block to the blockchain. Currently, 12.5 bitcoins are awarded to those miners who complete a puzzle. And thanks to its decentralized nature, any user with mining hardware and Internet access can join the mining community. Hence, the subsequent environmental conundrum is that its colossal amount of energy use and the subsequent carbon footprint only spiral outwards. According to Cambridge University academics, cryptocurrency uses roughly 121.36 TWh each year and is unlikely to decrease unless the value of the currency falls. This equates to roughly 0.55 percent of global electricity production. To put that into perspective, this magic internet money consumes more energy per year than countries such as the Netherlands, Argentina, Malaysia, and Sweden.
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Still, the question remains why Tesla suddenly changed its mind? After all, the environmental concerns of using Bitcoins have always been there. One theory is that this reversal appeared to reflect an acceptance that bitcoin was not suitable for payments due to the huge price swings of the cryptocurrency as well as its finite supply. In fact, the number of Tesla buyers paying with bitcoins was anyway going to be small since, for the majority of the target audience, straightforward bank transfers or shiny credit cards seem more likely. However, there has been another popular theory floating around on Twitter that Elon was not reacting to the information about Bitcoin, instead, the reaction was to the changes in the Renewable Energy market in the US. Since 2005, the US has had a plan in place to reduce energy emissions by making it mandatory for oil refiners to blend a certain amount of biofuels into their fuel mix. If they didn’t meet the quota, then they were expected to buy tradeable credits, called Renewable Identification Numbers (RIN) from those who did. The market (dominated by Ethanol producers) generated around 18 billion credits in 2020 and Tesla's pending application would likely be tied to the production of electricity associated with biogas in case EPA approves. The Biden administration will review the EPA applications and will decide if EVs (electric vehicles) could qualify for RINs under the Renewable Fuel Standard as the company already produces electricity from biogas. This could attract investment for a muchneeded infrastructure network, including charging stations, for electric vehicles if Tesla and other EV makers do enter. Since Tesla is after the US Renewable energy market and Environmental regulators don't typically love Bitcoin, that is why Tesla might have made a very public call regarding the suspension of car purchases through Bitcoins and selling 10% of the holdings. Moreover, Tesla is already at risk of losing crucial earnings, since Stellantis (Tesla's customer for REC/Renewable Energy Credit) plans to meet the carbon emission rules this year. As traditional automakers are catching up by meeting the clean energy quota on their own, Tesla's REC Empire will get affected.
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To understand this model, we need to know that Tesla produces nothing but EVs. Since the company racks up way more credits than it needs to meet the Zero Emission Vehicle regulation, so it turns around and sells these excess credits to other automakers, so that they can avoid punishments from State Regulators. This works out well for all the stakeholders involved as traditional automakers can avoid penalties and since Tesla receives these credits for free, hence the credits are sold at more or less 100% profit. So with everything going on with the traditional automakers catching up and a potential opportunity in the market, maybe the negative look on the ESG front for using crypto was not worth the risk. Again this is all speculation and nothing is known for sure. Even if the real reason is only the harmful effect of Bitcoin on the Environment, many Bitcoiners might argue that the banking and gold mining sectors are way more taxing on the Environment than Bitcoin mining. For instance, the traditional banking system is far from green, from core-data centre costs to brick-and-mortar branches, ATMs, and everything in between that must be connected to power 24/7, 365 days a year. Physical cash, whether paper or metal, is harmful to the environment and leads to unsustainable consequences.
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https://distributedledgerinc.com/crypto-networks-and-proof-of-stake-vs-proof-of-work-part-2/
But then everything does come down to the volatility argument. After this rollercoaster ride over the last year, with the value of this prodigal cryptocurrency fluctuating between $5000 to $40000, the million-dollar question is how much is Bitcoin actually worth it? Its genuine worth is akin to a dialectic debate about angels on a pin. Is it possible to get it to sixseven figures? Is the environmental price justified? Or is it worthless? The mystery only adds to the charm. Bibliography •
https://economictimes.indiatimes.com/markets/cryptocurrency/extent-of-elon-musks-
influence-on-cryptocurrency-where-is-it-headed/articleshow/83037268.cms •
https://mobile.twitter.com/Elisabeth_Steyn/status/1392799067986554880?s=20
•
https://www.reuters.com/business/sustainable-business/exclusive-tesla-seeks-entry-into-
us-renewable-fuel-credit-market-sources-2021-05-12/ •
https://www.google.com/amp/s/amp.smh.com.au/environment/climate-change/bitcoin-s-
dirty-little-secret-it-s-not-easy-being-green-20210506-p57pki.html •
https://finshots.in/archive/why-musk-denounced-bitcoin/
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NFT- The Dawn of Digital-Art Revolution By Mukund Khemka (St. Xavier's College, Kolkata) The world was only comprehending the cryptocurrency universe when a new cryptographic asset class piqued everyone’s curiosity. This class is known as Non-fungible Tokens (NFTs) which is recognized to open gates for validating and gratifying the world of digital art. NFTs seek to provide artists with a decentralized platform where they can create and generate their ownership of any art and further sell or buy them respectively across the community. This concept uses cryptocurrency as a mode of transaction with a blockchain working at its core. This is undeniably an inception of a revolution in the world of art and creativity and only time will notify it to be either the most significant thing to happen in “modern technology” or will it be the inception of an impending nosedive. Keywords: Cryptocurrency, Non-fungible Tokens, blockchain, technology, digital art. A startling upswing in the value of Bitcoin has brought cryptocurrency and an unprecedented revolutionary world of crypto-economy in cynosure but the entire globe has gone berserk in the recent past over a concept that seems to be hotter than a volcanic eruption. This new class of cryptocurrency is notably known as NFTs or Non-fungible Tokens. The world was only getting to discern what cryptocurrency is all about? How is it different from the traditional forms of currency we use in our modus operandi? How is this currency traded? What is its future and the interrogations were infinite but the introduction of NFTs has left us all into a pool of unanswered questions. This article aims to bring forward the world of NFTs to the uninitiated and elucidate what it is all about that makes Gary Vaynerchuk remark NFTs as a “revolution” that will go down in history to mark one of the most remarkable things to happen in “modern technology and culture” at large. Decoding Blockchain To decipher the mechanism behind NFTs, we need to have an idea about blockchain. In the simplest sense, a blockchain is a generalized digital ledger of transactions where each block contains a plethora of entries, and every time a new transaction occurs on the system, respective
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records are added to a participant’s ledger. Blockchain works on a decentralized Distributed Ledger Technology (DLT) where each block is interconnected (forming a chain). This means that to corrupt the system, a hacker would have to deal with every block in the chain, across all of its distributed versions which makes it almost infeasible to hack the system. All of the cryptocurrencies, such as Bitcoin and Ethereum have blockchain as their foundation. The following characteristics make Distributed Ledger Technology distinctive: •
Each blockchain is a ‘Smart Contract’ that is programmable.
•
All the transactions are individually encrypted and secured.
•
The identity of participants is either anonymous or pseudonymous.
•
The network participants unanimously agree to the validity of each of the records.
•
A copy of the ledger is distributed to each network participant for complete transparency.
•
Every single transaction is irreversible, immutable and cannot be changed.
•
The time-stamp is recorded for each transaction on the system.
Transaction Process through a Blockchain. (Source- Investopedia)
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Explicating NFTs NFTs put in an uncomplicated way, are unique digital assets that exist in multifarious industries ranging from virtual real estate and digital arts to gaming, collectibles and many such things. One can consider any form of media- memes, gifs, tweets, articles and anything across the board as an NFT. NFTs are non-fungible tokens. Fungibility essentially means interchangeable. For example, a Rs. 2000 note is a fungible currency where two separate Rs. 2000 notes will have the same value. On the other hand, let’s think about two different paintings. Both of them are different and holds a sui generis characteristic. This idea makes NFTs futile as a currency, but a great sense for other things such as digital arts and creativity. NFTs bring with them the following attributes: •
Authenticity - Blockchain technology will ensure a certificate of legitimacy to each item
on the marketplace. •
Scarcity - NFTs get their value through scarcity. The artists often try to limit their
distributions to augment rarity. •
Non-Divisible - Tokens tied to one’s identity are indivisible, meaning that an NFT can be
transacted as a whole without any fractionalized ownership.
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How do NFTs play their part? The entire process, in and around NFT, begins with a piece of content. The content is turned into an NFT, i.e. “minted” on the Ethereum
blockchain
which
houses maximum NFTs as it stores extra information, thereby supporting them. This NFT now stays in a digital wallet at an NFT marketplace
and
the
entire
transaction lives on Ethereum as a form of currency.
Credit: Beeple/Christies
Now, there may be chances that someone might replicate an NFT and take away all the credit. The probability of such an event taking place is impossible because the blockchain validates and proves one’s ownership of the bona fide NFT by recording it in its system. This makes them a ‘one-of-akind asset.’ Next, one can choose to place an NFT for sale at the marketplace where potential buyers portray their interest either by placing bids or purchasing the NFT at a listed price and artists will be entitled to royalties every time their work goes for a resale. Otherwise, one can also wish to buy and collect NFTs that entails perceivable value. NFT, A Big Deal? One might end up thinking why NFTs are gaining the spotlight. The reason why people end up buying one is the same when they shop for clothes with designer logos or drive luxury cars. The psychology behind creating utility and exclusivity adds a perceived value to their social identity and this is the rationale behind people extending this digitally.
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The first virtual NFT artwork, “Everydays: The First 5000 Days,” was sold at a staggering $69.3 million at Christie’s auction house thereby positioning Mike Winkelmann (otherwise known as Beeple) among the top three most valuable living artists to date. This sale evoked a digital art boom
and
opened
gates
to
what
is
known
as
the
‘Internet
of
Assets.’
Credit: Jack Dorsey, Twitter
According to many artists, NFTs help them provide a democratized art market through which they can sell their arts straightaway to the buyers hassle-free. For quite many years, artists from all over the world have been using software and hardware mechanisms to create and distribute artworks on the internet without having any system to collect and own them. But as Beeple states, “With NFTs that has now changed.” Beeple’s success and some magnificent bids, including the likes of Jack Dorsey’s first-ever tweet sold for over $2.9 million, bears testimony that every work has a hidden value and this will undoubtedly bring stimulating possibilities for this incipient marketplace whose market capitalization displayed a raging development, thriving approximately ten-fold between 2018 and 2020.
Market Capitalization of global transactions involving an NFT from 2018 to 2020. (Source- Statista)
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NFTs hold tremendous potential in the art industry as it has brought with it a dawn of major cultural change. This industry will provide avenues to people with imaginative inclinations and will open a healthy career path to many professions and businesses alike. The only important factor that draws notice is the adverse environmental impact it generates. NFTs use Ethereum as its cryptocurrency and cryptocurrencies work on a system that demands incredible energy. It is reasonably striking to notice that Ethereum consumes as much electricity as the entire country of Libya. Will NFT repeat the events of the dot-com bubble or will bring an advent of the revolutionized marketplace? This question is debatable because, on a micro-level, the payoffs are huge, but when viewed through a larger lens, a revolution is impending. Non-fungible Tokens are sure to change the way art is perceived and it will be enthralling to witness how and where this nascent concept will take human behavior and creativity References
https://www.garyvaynerchuk.com/what-is-nft-non-fungible-token-guide/ https://www.theverge.com/22310188/nft-explainer-what-is-blockchain-crypto-art-faq https://economictimes.indiatimes.com/tech/trendspotting/what-is-nft-and-why-it-mattersin-the-crypto-world/articleshow/81410583.cms https://economictimes.indiatimes.com/markets/stocks/news/moving-beyond-bitcoin-tothe-next-crypto-revolution-in-2021/articleshow/81773999.cms?from=mdr https://www.nasdaq.com/articles/what-are-nft-stocks-your-guide-to-non-fungible-tokens2021-03-27 https://edition.cnn.com/2021/03/17/business/what-is-nft-meaning-fe-series/index.html https://edition.cnn.com/style/article/beeple-first-nft-artwork-at-auction-saleresult/index.html https://www.bbc.com/news/technology56371912#:~:text=NFT%20stands%20for%20non%2Dfungible,be%20readily%20interc hanged%20%2D%20like%20money.&text=NFTs%20are%20%22one%2Dof%2D,tangib le%20form%20of%20their%20own. https://www.euromoney.com/learning/blockchain-explained/what-isblockchain#:~:text=Blockchain%20is%20a%20system%20of,computer%20systems%20 on%20the%20blockchain https://appliedblockchain.com/growing-ecosystem-non-fungible-tokens https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/ https://www.investopedia.com/terms/b/blockchain.asp https://www.statista.com/statistics/1221742/nft-market-capitalization-worldwide/ https://blockchainhub.net/blog/blog/nfts-fungible-tokens-vs-non-fungible-tokens/
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Dogecoin By Renuka Chintalapati (Infozion Technologies) Cryptocurrency is a type of electronic money that is produced and stored in the blockchain, with encryption techniques used to monitor the production of monetary units and verify the transfer of funds. It doesn't have a physical form or intrinsic value. Cryptocurrency has developed to become a multibillion-dollar industry. Now it's up to banks and other financial companies to figure out how they'll deal with consumers, investors, and internal voices calling for more institutional investment in blockchain assets. One of the most trending topics in 2021 is Dogecoin. Dogecoin, the Shiba Inu dog-themed cryptocurrency that began as a joke in 2013, has developed into a serious competitor to the cryptocurrency giant Bitcoin.
What exactly is a Dogecoin? Dogecoin is a digital coin used for e-transactions that is similar to Bitcoin. The picture of Shiba Inu is depicted on Doge, which is a reference to the ‘doge' meme. It's a cryptocurrency, or digital currency, that, similar to the famous bitcoin, that allows for peer-to-peer transactions over a decentralized network. Dogecoin's recent rise has been boosted by a social media mania on Reddit involving GameStop, as well as a series of tweets from Tesla CEO Elon Musk and other celebrities. Since its inception, Doge has been used to donate money to charities. The 2014 Jamaican Bobsled team, which couldn't afford to attend the Sochi Winter Olympics, a Nascar driver named Josh Wise, and a Kenyan clean water initiative called Doge4Water are just a few examples.
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The Australian marketer, Palmer joked in 2013 that combined two of the most talked-about subjects on the internet: cryptocurrency and Doge. He bought the domain Dogecoin.com and put a picture of a Shibe on a coin. Dogecoin will reach $1 by the end of 2021, but with the recent drive, it will be interesting to see how far it can go. Elon Musk pledged on April 1 to send the Dogecoin to the Moon on a SpaceX rocket, and he is rumoured to be planning a bigger impact by establishing a Dogecoin foundation to finance growth. The CEO is often seen tweeting about Dogecoin. Now let us compare Bitcoin and Dogecoin-> The beginning of Dogecoin and Bitcoin: Satoshi Nakamoto invented Bitcoin in 2009. Then came the publication of a white paper outlining how Bitcoin could be used to create a modern financial system that would eliminate the need for financial institutions, lowering transaction costs. Dogecoin started as a joke. "Investing in Dogecoin, pretty sure it's the next big thing," Adobe employee Jackson Palmer tweeted in 2013. Dogecoin didn't exist at the time, and his remark mocked the growing hysteria surrounding Bitcoin. Ascend and the descend of these two cryptocurrencies: According to news, Bitcoin and Dogecoin have both been hot investments in the last 12 months, with recent prices that soared by 650 percent and 18,600 percent, respectively. A proposed capital gains tax hike from US President Joe Biden sparked a surge of sale of Bitcoin and other digital currencies a few days ago. Dogecoin, a digital currency, has also recently plummeted, with its value collapsing by more than 30%. The drop began a day after crypto enthusiasts celebrated April 20 as Doge Day by using hashtags on social media sites to boost the cryptocurrency's price. The price of these cryptocurrencies at the moment: The current price of Bitcoin is about $ 53,877.50, with 18.7 million Bitcoins in circulation and a market capitalization of $ 1.1 trillion. The current price of Dogecoin is about $0.3153, and there are nearly 130 billion Dogecoin tokens in circulation, with a market capitalization of $40 billion. Almost every technocrat, including Jack Dorsey, Mark Cuban, and Elon Musk, is currently promoting Bitcoin. Mike Tyson, a prominent former boxer and social media star, saw the future in Bitcoin much earlier than other celebrities and has been a supporter since 2015. In November 2020, Game of Thrones actress Maisie Williams joined the Bitcoin trend. Elon Musk and the Dogecoin Social Media craze: Dogecoin has recently received a lot of support from the Reddit community and Tesla CEO Elon Musk. Other celebrities have now joined this group. Among others who have tweeted about Dogecoin many times are YouTube star and prank influencer Ben Phillips and rapper Lil' Yachty.
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Now, what is the future of Dogecoin?
In a recent interview, Elon Musk, Tesla CEO, SpaceX CEO, and Dogecoin supporter claimed that this cryptocurrency might be the future. “There is a strong possibility that crypto is the future currency of the world,” he says in the interview. Then there's the issue of which might emerge out victorious. "It may be several things," he stated. He also said that it would be unwise to invest lifetime savings in cryptocurrency.
The "parody currency" often attracts investors, according to Michael Kamerman, CEO of broker Skilling, due to its popularity on social media and its craze among celebrities.
He said that the resurgence in interest in Dogecoin, which was originally launched as a parody currency, may appear appealing to investors due to its volatility. He also added that people need to heed to scalability and security issues of the currency. This would ensure the intrinsic value of Dogecoin. It is mainly influenced by headlines, tweets, celebrity, or corporate endorsements, and while “traditional” investors can dismiss this, it is what attracts the masses to cryptocurrencies. The general public understands news, tweets, and endorsements, and as crypto enthusiasts, they would undoubtedly grow to appreciate the movement's more technological details. Jeff Bezos is rumoured to be joining the cast as a secondary lead after Elon Musk. Dogecoin could reach $1 in under 24 hours if it is adopted by someone like Jeff Bezos. A petition asking Amazon to consider Dogecoin as a payment method has received over 140,000 signatures.
References:
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1. Dogecoin Could Be the Future of Cryptocurrency, Says Elon Musk, But Has a Warningwww.news18.com 2. Elon Musk Made a 'Typo' and Twitter Wants You to 'Hodl' Cryptocurrency Dictionary to Decode itwww.news18.com 3.
www.pwc.com
4. Jeff Bezos’ Dogecoin backing 'can set' crypto value to $1 ‘in less than 24 hours’ | City & Business | Finance | Express.co.ukwww.express.co.uk 5. How high will dogecoin go? Experts pinpoint future for digital coin performance | City & Business | Finance | Express.co.ukwww.express.co.uk 6. Elon Musk’s meme cryptocurrency Dogecoin is on a rise, can be next Bitcoin - Technology Newswww.indiatoday.in 7.
DogeCoin almost hit 70 cents: What's behind the latest surge - CNETwww.cnet.com
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EV: A PROMISING UPGRADE FOR INDIA - KHUSHBOO VERMA & MUSKAN GARG (SRCC) Whenever the fuel prices in our country rise, the average Indian household is left with no choice but to fret over their monthly budget. With this pattern continuing year after year, owning a car and then using it becomes a dreadful chore. The consecutive hikes in petrol and diesel prices are picking the pockets of the common man in India. What offers a sigh of relief during such times is the promise of a new wave of electric and automated vehicles. With technological upgrades being an incessant and constant part of our lives, an upgrade in the automobile industry was much needed. Thus, the time is right for the entry of Electric Vehicles in India; the time is critical.
Electric Vehicles are seen as a possible replacement for the conventional automobiles for addressing the issue of rising population, rising carbon footprint, depleting natural resources etc. Governments around the world have stepped up their efforts to make the shift with India not being too far behind in the race and has started investing more in implementing carbon neutral technology such as electric vehicles and renewable energy in order to fulfill the terms of the Paris Agreement of 2015. However, the very first decision to incentivize electric vehicles was taken in 2010 and by 2013, the National Electric Mobility Mission Plan (MPMMP) 2020 was adopted to make a shift from conventional to electric vehicles and to address the issues of national energy security, air pollution and accelerate the growth of domestic manufacturing capabilities. What followed were a few years of turbulence and ambiguity with plans relating to EVs were changing, being made and getting scraped off. The year 2019 finally offered a ray of hope with the Union clearing a budget of ₹10,000 crores for the faster adoption and manufacturing of electric vehicles. Numerous incentives were offered on purchase of electric vehicles and necessary charging infrastructure was also established. By the year 2030, the government aims to have increase electric vehicle sales by 30% for private cars, 70% for commercial cars, 40% for buses, and 80% for two and three wheelers by offering various incentives. It is planning to set up
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a minimum of one e-charging port at petrol pumps across the country. According to the Mordor Intelligence Report, the Indian electric vehicle market was valued at USD 5 billion in 2020 and is expected to go up-to USD 47 billion by 2026 registering a CAGR of above 44% during the forecast period (2021-26). Moreover, it is expected to grow at a much faster rate during the forecast period due to the various government initiatives and policies. The automobile industry is also recognizing the fact that the future belongs to EVs and thus many industry experts like Maruti Suzuki, MG Motors, Great Wall Motors etc, created and showcased their best electrical models for their arsenal in AutoExpo 2020. Many new entrants also emerged with promising models and technologies which makes electric vehicles a milestone for the future of the indigenous market. The year 2021 in particular saw major developments with the ingress of global giant Tesla-one of the most advanced EV manufacturing companies, in the Indian economy. The developments are colossal and rapid with the country in a seemingly catch-up mode, at-least in some areas. Karnataka has emerged as a favorite among the EV investors with the state government receiving proposals for investments worth more than thousands of crores. It was the first state in the country to introduce an EV policy and even appointed a consulting firm to help the state develop the necessary pillars that drive the EV market. What Karnataka is doing right is that it is making efforts to understand the issues at the base-level instead of just relying on subsidies. Karnataka along with Uttar Pradesh and Bihar was among the top 3 states in terms of EV sales in the financial year 21. Uttar Pradesh also emerged as a winner; contributing almost 23% (31,584 EVs) towards the EV sales of the country.
As India offers a lucrative market to the world especially in the electric two-wheeler segment and as 100% FDI is allowed in this sector, an upsurge has been witnessed in two-wheeler segment of EVs in India. With transportation still being a challenge in India a lot of people have been gearing up for electric-two-wheeler vehicles in India. Presently also, two-wheelers are the most soughtafter when it comes to electric vehicles. In the FY20, the sales of electric vehicles increased by 21% from 1,26,00 in FY19 to 1,52,00 in FY20.This is significantly more than the sales of electric cars and buses. The jump from Bharat Stage V(BSV) TO BSVI emission standards as a result of national government’s stringent policy is expected to benefit the electric two-wheeler industry segment by raising the prices of petrol driven two-wheelers by 7-15%. Okinawa AutoTech Private Limited invested ₹200 crores for it’s second manufacturing plant to be developed for electric twowheeler vehicles in Rajasthan with an annual output of 10 lakh units forecasted by 2021.
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EVs offer the perfect solutions for some of the biggest problems faced by Indians. First of all, they will create millions of domestic, environmentally-friendly and proficient jobs. According to the Ministry of Skill Development and Entrepreneurship’s estimate, the EV industry is bound to create 1 crore jobs by 2030. If we account for the indirect jobs which will be created in relation to the direct jobs, the number will rise up to a whopping 5 crores. Electric vehicles as a product and EV as an industry represent a paradigm shift in job structure with new job fields and roles under scientific research, design and development, manufacturing, maintenance and infrastructure. Moreover, day-by-day the lifestyles of people are getting busier. The effort that is required for maintaining conventional vehicles is not only heavy on the pockets of Indians, but also become a big chore. In comparison, EVs are significantly easier to maintain with no-oil to change, no engine to manage and fewer parts which will wear down.
They offer quite smooth operations with stronger acceleration. Also, the biggest advantage that EVs offer is the fact that they are environmentfriendly. With rising pollution levels and increasing global warming, the need to take action is urgent and much-needed. With the COVID- 19 pandemic, a respiratory disease continues to spread. A study by Harvard University found that the primary causes of the fine particulate matter pollution (PM2.5 ) is combustion from gasoline and diesel car engines. As compared to diesel and gasoline, electricity generation produces fewer life cycle emissions and thus, EVs cause much less pollution. They not only help in reducing air pollution but also reduce noise pollution as they are much more energy efficient. India is an active participant of the e-mobility revolution and while it may not be leading the race in promoting and building an ecosystem in electric vehicles, the progress is promising and if things are done right, in the next few years India will be a global change maker. The EV market in our
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country is consolidated due to presence of Indian as well as foreign entrants such as Tata Motors Ltd., MG Motor India, Olectra GreenTech Ltd. Etc. in the market owing to cheap and readily available man-power. Given all the benefits offered by it, the future belongs to EV. The government and other stakeholder’s best bet right now would be to tap into the potential offered by this new and emerging industry and use it their advantage.
REFERENCES 1. https://assets.kpmg/content/dam/kpmg/in/pdf/2020/10/electric-vehiclemobility-ev-adoption.pdf 2. https://www.mordorintelligence.com/industry-reports/india-electric-vehiclemarket 3. https://www.airveda.com/blog/Will-electric-vehicles-pave-the-way-to-cleanair 4. https://www.kia.com/dm/discover-kia/ask/are-electric-cars-cheaper-tomaintain.html 5. https://blog.ipleaders.in/future-of-electric-vehicles-in-india/ 6. https://timesofindia.indiatimes.com/auto/news/these-three-states-seehighest-ev-sales-in-india/articleshow/82068471.cms 7. https://economictimes.indiatimes.com/news/economy/infrastructure/drivinginto-2021-govt-sets-eyes-on-expanding-road-infrastructure-more-electricvehicles/articleshow/79937599.cms?utm_source=contentofinterest&utm_me dium=text&utm_campaign=cppst 8. https://www.smart-energy.com/industry-sectors/electric-vehicles/evs-themost-discussed-topic-on-twitter-report/ 9. https://scroll.in/article/984798/mahindra-ather-and-now-tesla-karnataka-isahead-of-other-indian-states-in-the-ev-race 10. Pictures – 1) google images 2)KPMG document on EV adoption 3)Scroll.in article on states performance of EV 4)Statista 5)World Bank report on EV
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RBI AND COVID-19 IN INDIA: An insight to the journey of combat - Vanshika Arora (University of Delhi) In January 2020, the economy of India has marked the surfacing of an unprecedented recessionary phase. Throwing a light on the financial sector in particular; the same has witnessed an invariable labefaction in majority of the areas that it is inclusive of. Thus, the central government has undertaken numerous fiscal measures to which the monetary policies executed by the Reserve Bank of India acted as a supplement for accomplishing a common objective: Revival of the nation. MONETARY POLICIES UNDERTAKEN AMID THE PANDEMIC Post the advent of COVID-19 in India, the role of RBI in response to the same is comprehensive of various efficacious policy measures formulated and executed: 1) POLICY RATES The Repo rate (or repurchase rate) referring to the rate at which the RBI lends to commercial banks involving submission of a security by the latter, was reduced to 4% on 22 May 2020 from 4.40% which stood on 27 March 2020. Since then it has been invariable. 4.40%
4%
The reverse repo rate being the lending rate of commercial banks to RBI was reduced from 3.75% to 3.35% on 17 April 2020 and has maintained the status quo since then. 3.75%
3.35%
The Bank rate (or discount rate), which is the borrowing rate of commercial banks from RBI without necessarily offering a collateral, was reduced on 22 May 2020 from 4.65% to 4.25%.The latter stands as the present rate. 4.65%
4.25%
The Marginal Standing Facility (MSF) rate that refers to the penal overnight lending rate of RBI specifically to the scheduled banks during their liquidity crisis decreased from 4.65% to 4.25% on 22 May 2020 and has been a constant figure since the mentioned date of change. 4.65%
4.25%
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2) RESERVE RATIOS The Cash Reserve Ratio (CRR), referring to the minimum percentage of Net Demand and Time Liabilities (NDTL) that commercial banks must deposit with RBI was dropped down to 3% on 27th March 2020 from the preceding rate of 4%. The same stood unvarying for almost a year until RBI decided to restore the same in a two phase manner: CRR increased twice by 0.5%; on 27 March 2021 and further on 22 May 2021, making the current rate prevailing at 4%.
4
3%
3.5%
4%
The Statutory Liquidity Ratio (SLR), which refers to the minimum percentage of Net Demand and Time Liabilities (NDTL) that the commercial banks need to keep with themselves in the form of liquid assets at every point of time, decreased from 18.25% to 18% on 27 March 2020 and has been stable since the same. 18.25%
18%
3) LOAN MORATORIUM: A RELAXATION TO DEBTORS AND HOUSEHOLDS On 27 March 2020, RBI had permitted all the commercial banks, co-operative banks, All India Financial Institutions and Non Banking Financial Companies (NBFCs) for allowing a moratorium for a period of 3 months on all kinds of term loans that were due as on 1 march 2020. The same was further extended on 22 May 2020 up till 31 August 2020, hence exempting the borrowers from paying the Equated Monthly Instalments (EMIs), bullet repayment amounts, principal amounts, interest, and credit card dues. The same facility could only be availed by the holders of a standard accounts, referring to the ones that are not classified as Non Performing Assets (NPAs) as on 31 March 2020. Moreover, the facility can be availed by the entities who/which had witnessed a negative effect on their income due to the recession in the economy. 4) MSME SECTOR: RESTRUCTURING OF LOANS On 6th August 2020, the RBI issued a facility of ‘restructuring’ of loans exclusively for the MSMEs that are registered under the MSME act 2006 and are not exempted from paying GST. The same allows the loan(s) borrowed upto Rs. 25 crores to be restructured in consensus with the respective lender(s) i.e. granting of moratorium, change in EMIs and/or interest rate, rescheduling of the period of payment and such related terms of loan(s). The same is only applicable to those MSME borrowers who were past their due date of payments but had a standard account on 1 March 2020.
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5) RESOLUTION FRAMEWORK-1.0: FOR ENTITIES EXCLUDING MSMEs On 6th August, RBI announced its first resolution policy framework -2020, keeping in mind the sole purpose of boosting the financial sector of the economy. All the COVID 19 financially stressed individual and non-individual borrowers (excluding MSMEs) who are having a standard account as on 31 March 2020 and are past their due date of payments of loan(s) taken on or before 1st March 2020 are eligible to avail the facilities announced under the same. a) FOR INDIVIDUAL BORROWERS: A loan restructuring facility is provided, which is inclusive of granting moratorium that can be applied for up to 6 months starting from the date of agreement with the respective lender(s) regarding the same. Alternatively, the other terms of the loan(s) can be restructured and in case the remaining tenure of payment is to be extended; it can be for a maximum period of 2 years. b) FOR NON-INDIVIDUAL BORROWERS: In addition to the facilities that can be availed by individual borrowers, non-individual entities such as corporate etc. can exclusively avail the following with the consent of their respective creditor(s) Conversion of their debt into equity Seeking additional credit facilities from the existing lenders.
6) RESOLUTION FRAMEWORK 2.0 The second Resolution framework dated 5 May 2021 is inclusive of all the facilities of restructuring of loans for the debtors having a standard account on 31 March 2021. The distinguishing factor between the ResFra 1.0 and the ResFra 2.0 is that the latter solely applies to those Individuals who borrowed finance for business purposes (and not personal purposes which was permitted under ResFra 1.0), small business not registered as MSMEs and the MSMEs exempted from GST, hence excluding entities such as corporates, NBFCs etc.
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IMPACT AND CONCLUSION Source: RBI
Due to the expansionary measures taken by RBI with the help of its policy rates and reserve ratios, the credit flow in the economy has Source: Ceicdata significantly increased given the fact that the overall lending capacity of the financial sector amplified. Moreover, the saving and term deposit rates have pushed up to 3% and 5.5 % from their previous rates of 2.7% and 4.9% respectively, as banks and financial institutions came out of their liquidity crisis. Moreover, the liquidity injection in the economy by September 2020 has been approximately 5.9% of the nominal GDP of 2019-20.Further, the overall money supply (M3) has increased by approximately 11% in the FY20-21.
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Due to the Resolution policy framework 1.0 and 2.0, the economy witnessed a reduction in the NPAs in the 3rd quarter of 2020. The same occurred due to the grants of moratorium etc and as there was no downgrade classification (Standard to NPA) of the assets. The financial stability report of RBI released in January 2021 stated that there is an expected rise of 13.5% in the NPAs in the first half of 2021 due to the continuous recession in the economy. Source: Newindianexpress
“In India, we are now better prepared to meet the challenges posed by this resurgence in infections. Fiscal and monetary authorities stand ready to act in a coordinated manner to limit its spill-overs to the economy at large and contain its fallout on the ongoing recovery. We must accept finite disappointment, but never lose infinite hope”
-Mr. Shaktikanta Das Hon’ble Governor Reserve Bank of India
References: https://www.rbi.org.in/ https://www.imf.org/en/Topics/imf-and-covid19 https://economictimes.indiatimes.com/
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