Arbitrage Magazine - January 2022 - Finance & Investment Club | IIM Rohtak

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Presents

Our best read – The Explosion of FinTech Companies: Is the Future All Bright?

Special Mention – REIT:Bringing Private Real Estate Back to the Future

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INDEX S. No.

Article

Page No.

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The Explosion of FinTech Companies: Is the Future All Bright?

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2

“REIT – Bringing Private Real Estate Back to the Future”

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OPENING UP 2021’S PANDORA’s BOX

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Crypto-currency in developing nations: Boon or Bane?

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The Cabbage which has financial importance – Kimchi Premium

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The Giant Debt Bubble

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The Explosion of FinTech Companies: Is the Future All Bright?

By: Mahima Agarwal (NMIMS Mumbai) India is home to the world’s third largest Fintech ecosystem having the highest Fintech adoption rate globally of 87%. There are 2100+ FinTechs in India, 67% of these being set up in the past 5 years. In the same period, they raised about $10 Billion showcasing their huge growth spurt.

What fuels the growth of Fintech in India?

The annual GDP growth rate of India is estimated to be 6-8% for the next 10 years which will be the highest in the world, as per World Bank. However, the domestic credit to private sector (% of GDP) was only 50.04% in 2019, much below than that in China and US (both > 150%) creating a big opportunity.

2. The internet penetration has become almost double in the last 5 years (45% from 27%) and is projected to grow further.

3. Supporting Government Initiatives like Jan Dhan Yojana, Digital India, UPI, etc.

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Realizing a $100 Billion Opportunity The FinTech industry is anticipated to grow leaps and bounds in the upcoming decade supported by a well-functioning ecosystem. Experts estimate that the Indian FinTech will add an incremental value of $ 100 Billion to realize a total industry valuation of $150-160 Billion in the next 5 years.

As illustrated by the image below, the bottom rungs of the Fintech pyramid will experience a substantial amount of value creation since greater than 50 new FinTechs will enter the valuation club of $100 Million and more.

Indian FinTech 2020 vs 2025 In order to make this phenomenon future growth a reality, the industry needs an investment of $20-25 Billion over the next 5 years, $5-6 Billion of which to be invested in the early-stage funding. This represents an 80-100% rise as compared to the present investment. This massive investment is also required to be well spread-out across various sectors, with Insurtech, SaaS and WeathTech witness the maximum increment as shown in the graph below.

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Estimated investment required across various segments (2020-25) What are the key risks?

The Growing Number of Credit Defaults: Increasing NPAs (Non- Performing Assets) is a growing concern for the Fintech sector. Owing to the economic turmoil, a majority of the borrowers are facing difficulty in repaying their loans on time which is forcing many fintech lending startups to restructure their loans and show them as ‘standard assets’. The growth in credit supply has coincided with the growth in NPAs which has made it imperative for Fintechs to work closely towards managing their credit portfolio’s performance creating a need for a continued focus on robust credit risk. In order to effectively manage NPAs on books, considerable emphasis on robust collection management is required.

Fintech 90+ Deliquncy Trends (Source: Equifax)

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Procedural Bottlenecks: As per a report by the World Bank, Indian Fintech startups need to go through 2.5x more procedures as a result of which they take 4.5x the number of days and spend 7x the cost per capita on compliance as compared to those in the UK, a financial services industry leader.

Outdated cumbersome procedures for Fintech registration and verification like physical KYC mandate, submission of cancelled bank cheque, excessive paper-based documentation among others slows down Fintech startups in the Indian financial markets. Thus, policymakers need to urgently bring about digital reforms to aid the Fintech Ecosystem.

Frequent Frauds and Cyber Threats: Another prime issue for the Fintech industry is the risk of breach of cybersecurity such as phishing, data breaches, malware risks, third party security risks, cloud-based security threats, identity thefts and so on. They deal with sensitive data of customers which make them the prime target for cyber criminals. In 2020 alone, 52,006 cases of fraudulent use of debit/credit cards and internet banking frauds were registered in India amounting to transactions over Rs 2.24 billion. Indian Fintechs need to build robust data security programs and frameworks for detecting such ever-increasing frauds that will identify and prevent suspicious online activities.

Trust in Cash: There exists low financial literacy in the Indian community and it continues to be a cash-based economy even though technology is increasingly permeating our daily financial processes. A majority of Indians still prefer using physical cash to tech-driven alternatives like UPI transfers despite them being much more convenient to use. The preference for cash has multiplied in terms of currency held with the public accelerating from 11.3% in February, 2020 to 21.3% as of June, 2020, mainly triggered by the pandemic causing households to hoard cash. Thus, in its path of turning India into a cashless economy, this preference for cash amongst the general population stands as a big hurdle.

Heavy Reliance on Technology: Fintech companies have disrupted traditional financial services as a result of their innovative technology. However, their heavy reliance on technology also makes them very vulnerable.

Internet service providers in India are still struggling to provide faster speed and wider bandwidth to their customers owing to the vast population and diverse geography which makes it tough to penetrate every corner of the country. If the customers are unable to access Fintech services due to technological failures or in case the company is unable to maintain or improve its technological infrastructure, it’ll result in damaged reputation and income loss.

Conclusion Empowering those who are unserved or underserved by traditional banks in their entrepreneurial journey, Fintech lays the ground for various Government initiatives such as Make in India and Startups India. It can also aid the Government in accomplishing its vision of making India a $5 Trillion economy.

Fintechs can script the next global chapter in this success story through an efficient collaboration with Financial Institutions and the Government collectively.

They just need to effectively manage the various associated risks and then there’s no looking back for the emerging Fintech players!

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References: 1. https://www.investindia.gov.in/sector/bfsi-fintech-financial-services 2. https://www2.deloitte.com/in/en/pages/financial-services/articles/fintech-indiaready-for-breakout.html 3. https://www.bcg.com/en-in/india-fintech-a-usd-100-billion-opportunity 4. https://www.sidbi.in/files/announcements/Fintech-Pulse-Vol-II.pdf 5. https://www.sidbi.in/files/article/articlefiles/Fintech-Pulse-Vol-III.pdf

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“REIT – Bringing Private Real Estate Back to the Future” By: Saikrishna Sawale (IIM Tiruchirappalli)

A REIT - Real estate investment trust, is a corporation that owns, operates, or funds real estate and generates rental revenue while also providing an investment opportunity, similar to a mutual fund. REITs can only invest in rent-paying properties, with finished assets accounting for more than 80% of the total investment.

REITs are classified into two types: equity REITs and mortgage REITs. Equity REITs invest in and own buildings, and their income is mostly based on rent. Mortgage REITs invest in and hold property mortgages, and their revenue is primarily based on the interest they collect on the mortgage loans.

Currently more than 40 nations have created REIT regimes, with more countries on the way.

The worldwide adoption of the REIT strategy to real estate investment has also raised awareness and acceptability of investing in global real estate securities. The S&P Global REIT is a benchmark for publicly traded equity REITs in established and emerging economies. The weightage mechanism employed is float-adjusted market-cap weighted, and rebalancing occurs three times a year in March, June, and December.

In India, listed REITs generate a yearly distribution yield return of 6-7 percent. REITs are diverse, with assets scattered throughout key cities like as Mumbai, Pune, Bengaluru, Hyderabad and NCR.

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Source: NAREIT Above diagram shows us the growth of rental income over the years & city wise rental asset value share in India.

REITs have created a significant funding source for the real estate industry. They allow developers to focus more on project execution and provide them the opportunity to monetize their rent-paying asset and leave the property at its peak worth. REITs have also raised loans from the market at attractive interest rates, lowering the overall cost of capital. At least 90% of rental income from investment properties must be transferred to unitholders. In recent years, they have been able to lower their weighted average cost of debt to around 6.5-7 percent, down from over 9 percent when it was first issued. Other REITs are also looking to increase their debt. This will aid in the efficient reset of the debt portfolio and benefit unitholders. Over the last two years, REIT laws have become more investor-friendly. Many worldwide investors are also investing in office properties. They want to build a robust portfolio that will be REITready.

Performance of REITs in India since its inception:

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Source: NAREIT Since the debut of the Embassy REIT in April 2019, the Indian real estate investment trust (REIT) industry has matured significantly. REITs are becoming more accessible and relevant as the regulatory environment improves. Brookfield's third REIT, Embassy REIT’s follow-on offering, and big debt issuances by Embassy and Mindspace are just a few of the recent notable occurrences. REIT has now established itself as a formidable alternative financial platform for raising capital in the real estate market. It is altering the way commercial real estate is conducted.

The success of REIT’s has sparked the attention of global equity/sovereign/pension funds in investing in infrastructure assets, as an exit strategy is now in place. REIT's have shown to deliver a solid return even in unpredictable circumstances during the last two years.

Investors can earn income from rent collected from REIT-owned properties in the form of: a. dividend income, b. interest income, c. capital redemption and/or capital gains through the selling of REIT units in the secondary market.

STAGES OF REIT MATURITY REGIME

Source: Student Research The United States, as a mature market, has the biggest share in the Global REIT Index, followed

by Japan, Australia, and Singapore. REITs have a total market capitalization of around $1.70 trillion globally.

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Real estate investment trusts (REITs) are entirely reliant on rent-generating real estate assets.

Since the second wave of Coronavirus has veiled the possibility of a sluggish recovery of the office sector, the future of REITs will be coterminous with the proper management of the wave.

Year on year, net absorption in the Indian commercial real estate market fell by 47 percent in the first quarter of 2021.

According to an ICICI Securities analysis, the recovery of the REITs and commercial office space markets would be delayed. However, indicating a solid rebound, Indian REITs reported a good rental collection of more than 99 percent in Q1 FY22. The commercial office market's long-term durability may be predicted due to a restricted number of significant office space developers. India had about 488 million square feet of Grade A office stock as of March 2021, and numerous overseas investors are seeking to invest in REITs. According to JLL, with more REITs set to go public in 2021, the REIT industry will begin a period of sustained expansion.

In the long term, the number of sellers and purchasers will increase dramatically, improving market liquidity.

Impact of COVID and Future Outlook: The pandemic had a severe impact on real estate investment trusts (REITs) in the lodging/resorts, retail, and mortgage sectors. Commercial real estate in India has remained a quiet, low asset class, despite the country's status as a worldwide IT outsourcing engine.

With deposit rates falling in the 6-8 percent area and the rupee falling in value against the US dollar, NRI investments in real estate have increased. In FY2021, NRI investments totalled $13.3 billion. However, due to retail bankruptcy and store closures, no immediate stabilisation is predicted.

Benefits of REITs: 1. It enables indirect real estate investing more accessible. Participants can participate in a professionally managed real estate portfolio maintained in tax-efficient structures.

This aims to make real estate investing available to small investors who would not otherwise have had the chance.

2. It helps participants to diversify their exposure and widen their investment portfolio.

3. REITs can also help institutional investors, such as retirement funds and foreign entrepreneurs, avoid some of the tax and other complications that come with investing in real estate directly.

4. It facilitates the conversion of assets into cash, owing to the fact that they are exchanged on a stock exchange.

5. It has typically had little volatility. REITs are often stable, and as a result, they provide an appealing return to investors.

Benefit of Inflation: Inflationary pressures throughout the world have created an opportunity for REITs to outperform bonds and equities. Because leases are closely linked to inflation, rising prices result in rising real estate rentals. Inflation is likely to rise in the economic climate. High inflation rates represent greater rental earnings, which is favourable for REITs. REITs can act as a natural inflation hedge in the current context. They have historically outperformed other asset types, particularly in low-inflation scenarios. Over the last four decades, the REITs Index has outpaced the S&P 500 by 2%, whereas stocks have outperformed REITs in the last five years.

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Higher inflation, on the other hand, would allow REITs to make a significant comeback. Indian investors may now benefit greatly from global REITs in terms of geographic and currency diversity. It gives an investor's portfolio a fresh and appealing dimension.

Conclusion: Although REITs have been successful in many countries, their performance in India is totally dependent on SEBI laws and regulations, as well as the circumstances and acceptability of investors in India. SEBI recently cut the minimum investment amount in REITs from 50,000 to 10,000-15,000 in June 2021. It will also put REITs into line with other equity-traded products on the market. It will also boost liquidity owing to increased trade, which will result in market price discovery. Foreign portfolio investors are now permitted to participate in debt instruments issued by REITs, thanks to approval from the government. This is a positive step for REITs in India, since it will establish a significant funding source and a larger base of finance for the industry. This also allows REITs to raise more debt at a lower cost. REITs are a good alternative for those looking to diversify their portfolio.

Investors are particularly interested in real estate investing, which is why REITs are quite popular in international countries. To achieve such a situation in India, the company's consciousness should be increased as a first step, but before investing, any investor will conduct a comparative study on the various investment avenues. In such a situation, the REIT's yield should demonstrate that it is comparatively better than the real property investments, for which the government has liberalised the tax and return norms accordingly to attract more investors, but more measures are expected by investors. In such a circumstance, the REIT will be a profitable investment choice in India.

Thus, the post-lockdown, vaccinated economy is bound to make bigger comebacks and serve the REIT asset class further as markets stabilise and grow.

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OPENING UP 2021’S PANDORA’s BOX By: Diya Desai (PDEU) Back in Greek mythology, when Pandora, believingly the first woman on Earth, opened the box out of curiosity, it resulted in various evils creeping over mankind. Bringing you back to present reality, opening up pandora's box still seems to be problematic. Now, being aware of why one of the biggest global financial investigations involving millions of documents and terabytes of data is named after ‘Pandora’s Box’, it becomes pretty elementary to get to the core of ‘Pandora Paper Leak’.

What exactly is Pandora Papers Leak?

The Pandora Papers are 11.9 million files in the form of documents (53.78%), images (24.37%), emails (10.08%), spreadsheets (3.87%), and other formats (7.90%) published

by ICIJ starting on 3rd October 2021. These almost 12 million files are obtained from 14 sources comprising 2.4 terabytes of data. The papers highlight the shadow financial system fuelled by the most powerful and some of the richest of the world. The key highlights of the leak are hidden wealth and tax evasion in form of offshore companies and in some cases, money laundering too.

(QUICK FACT CHECK: The Pandora Papers involve names from nearly 100 countries across the globe.)

Who is ICIJ, responsible for publishing the data?

ICIJ represents the International Consortium of Investigative Journalists. It is a non-profit, unique organization based in the US. They are both, a newsroom with its reporting crew as well as a global network system of journalists and media outlets who collaborate to research, investigate and analyze the most crucial stories in the world. Their team encompasses 280 of the best investigative journalists from across 100 countries and territories across the globe.

The core team is small but aspiring and extensive. Through their investigations, they aim and work to encourage their readers to be aware of the important issues occurring around themselves and the world.

(QUICK FACT CHECK: ICIJ published the Panama Papers for which they won the Pulitzer Prize in 2017 for Explanatory Reporting along with McClatchy News and the Miami Herald.)

Who were the contributing sources to the Pandora Papers Leak?

A global team was a prerequisite for this investigation as the 14 offshore service providers that are the origins of the leaked documents are headquartered across the globe from Seychelles to UAE. The 150 news outlets that joined the investigative collaboration from around 117 countries include The Washington Post, the BBC’s Panorama, The Indian Express, Australian Broadcasting Corporation, Radio France, Le Soir, Zimbabwe’s The Standard, etc.

(QUICK FACT CHECK: As per The NY Times, about 600 journalists all over the world examined the documents and shreds of evidence for two years to come up to a concrete conclusion.)

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What do we mean by ‘offshore’?

Though ‘offshore’ has a metamorphic meaning in terms of finance, the literal meaning too conveys the concept. It simply means something is not performed in accordance to how it should ethically go. The Pandora Papers disclose the complex web of offshore companies established on paper mostly for tax evasion purposes. It ultimately leads to covert ownership of wealth and assets across borders.

A group of countries and territories have been infamously recognized as ‘tax havens’ or ‘secret jurisdictions. The peculiar features that help them label themselves as ‘offshore territories’ are: 1. The convenience of setting up the business, 2. The presence of laws that make it difficult to identify the business owners, and 3. The absence of or negligible taxation rates.

Bank accounts can be easily opened in name of such offshore companies and transactions can be conveniently carried out without revealing the real identity.

(QUICK FACT CHECK: Such offshore companies rarely have any physical existence that is they have neither operating staff, office location, organization building, etc. nor do they have any real board of directors.)

What is the monetary aspect of tax havens?

According to ICIJ, the value of hidden wealth can range from $5.6 trillion to approximately $32 trillion. The IMF mentions that the use of tax havens costs governments worldwide up to $600bn in lost taxes each year.

Observing from the ‘elite’ viewpoint who park their fortunes in such tax havens, setting up offshore companies costs them quite enough. Specialist firms are paid to establish and operate shell companies on the behalf of investors i.e., the elites. These firms provide addresses and identities of paid directors so that there lay no grounds to reach the reality.

(QUICK FACT CHECK: The values of hidden wealth mentioned are calculated estimates as the actual value is impossible to determine.)

How can the notion of ‘tax havens’ be considered legally?

Tax havens are not illegal but unethical. Finding a loophole in the system and benefitting from it to avoid tax is legal but to a certain ground level. The UK government states that tax avoidance "involves operating within the boundaries, but not the integrity of the law".

Making millions and billions of dollar profit, such people consume and exploit resources of home country and park/invest them in foreign lands. This would eventually lead to tax evasion which is a serious crime. Stating that it’s not illegal, making a complex web of secret companies to invest money and assets seems an apt way to hide transactions of criminality.

Hence, there have been repetitive reminders to formulate certain laws that make tax avoidance and tax evasion as hard as possible.

(QUICK FACT CHECK: Not everyone named in the Pandora Papers have ill intention. There are several legitimate reasons why people wish to park funds in different countries such as protection against criminal attacks, safeguarding wealth against unstable governments, etc.)

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Why would a country want to be a tax haven?

Tax revenue is the primary reason. Though taxation rates are nominal still they do exist.

Being a tax haven, it attracts foreign investments at a large scale, and hence, a notable rise in tax income is inevitable. Similarly, the respective government can demand various fees such as license fees, new registration fees, etc. for the smooth establishment process. Another aspect is the rise in employment opportunities. Some share of total foreign investments would go to homegrown corporate companies that would eventually give the rise to higher employment to local people.

(QUICK FACT CHECK: Tax Havens are often referred to as The Smoke Screens.)

How are common people affected?

It is a bit surprising to know that tax haven has a direct impact on the global economy as the phenomenon is quite larger than one could have imagined. As per IMF Report, governments lose between $500 billion to $600 billion of corporate revenues due to tax havens which takes a bigger jibe at the GDP of the developing or low-developed economies. Ultimately, more tax is imposed on the middle and poor class as a result of which the living standard of the middle-class collapses and the poor suffer the most and the worst.

Another aspect is the involvement of the law and policymakers in the tax haven schemes.

Powerful governments have huge stakes in tax havens located in advanced economies or territories functioning under them. If the ones from whom we expect the change are the ones getting the most benefit, then there seems a dim ray of hope. The Pandora Papers Leak, The Panama Papers Leak, and several others act as an alarm to the common people to wake them to reality and make rational decisions as to whom should the leadership positions go.

(QUICK FACT CHECK: Maximum investment in tax havens come from the world’s biggest democracies.)

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Crypto-currency in developing nations: Boon or Bane?

By: Anyatama Basak (Xavier Business School, Kolkata)

As the economies were being adaptable with the need of digital transaction system, the Covid 19 pandemic has made it clear that how much digital literacy is essential for touch- less transaction in post- pandemic world. In this scenario, the developing nations are following the path of first world countries by experiencing popularity in virtual currencies like Bitcoin, The Sandbox, Ethereum, Litecoin etc. The demand of this currency is governed by people with knowledge in financial nitty- gritty and computer science. A nation cannot control the cryptocurrency in the same way it controls its own legal currency. The Generally accepted accounting principles (GAAP) consider this intangible asset to be recorded at acquisition cost, impairment of the cost must be recorded on balance sheet to allow the reduction in value over time.

Let us say, the government of a country allows a specific type of crypto- currency for all legal transaction along with the existing currency system. Then the new currency will be used to buy and sell commodities, can be saved in banks, can be dealt in share market, purchase of properties – consumption of goods and services. Then the price of the currency will be fixed, let it be some more than the usual rate of the prior legal currency.

Now the market will have more liquid money to use for transaction purpose, though supply of commodities will not increase overnight along with this increase in liquidity. The production of primary and secondary sectors remains same in short run, though price will rise if more money is there for a constant volume of goods. According to a group of economists, this will have positive effect on the economy. People will purchase more having more money in hand, then sales will increase, employment will rise for need of higher production. The commodities which can be produced fast, their quantity will rise, so inflation will be less, in other cases the price will go up. Also, the investment in this form of currency will go up according to its high demand. Therefore, the economy will prosper.

The decline in rate of interest and increase in supply of money in market is the usual practice for any country to boost the situation of depression. Indian government also has followed this way out. If crypto- currency becomes the legal mode of transaction and over the time the existing currency becomes less trustworthy for the citizens or their use has fallen, then the process of increasing supply of money to help the economy will be weakened. The central bank of the nation will face changes in its power to control the fiscal system of it. Even if law comes in place to limit the supply of crypto- currency in the country, still, the power of regulation of monetary system will fall. The government has important responsibility of activities in social welfare, driving the economy in the right path, fiscal and monetary policy implication, where,

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increasing importance of a digital currency which lacks physical substance may mislead the monetary system of the country in time.

For a developing country, fixing the exchange rate between existing currency and cryptocurrency is not an easy task as the former one may not be globally accepted depending on its importance in the international market. The recent updates says that one of the world’s biggest crypto exchanges, Binance Holdings Ltd has restricted the personal accounts of 281 Nigerian users showing the reason of the platform’s security for other traders to maintain the anti- money laundering regulations. The latest news shows the fall in price of Bitcoin, Ethereum, Cardano, Polkadot whereas Tether price rises.

According to the fluctuation in supply of this intangible asset and its international demand, its price will change with respect to legal currency as per exchange rate norms. If people become fond of virtual currency, then currency like Indian Rupee will be in trouble. Restriction is needed to prevent the situation. Though, purchase of commodities, transaction of money over virtual platform helps to drive an economy faster. There is not yet much proof of increase in national income, employment, controlling inflation or any drastic positive change due to presence of virtual economy.

The supply of crypto- currency is self- regulated through specific mathematical algorithm. If in future, a certain group of bright minds can keep in control the maximum amount of this asset and also it becomes very popular mode of transaction, then the world monetary system will partially be dependent on it. But what is invisible is hard to control. Millions of businesses will take place using this currency where imposition of tax will be a matter of trouble for the central governments of the countries. If the tax rate is high, the capital will prefer to leave this asset and move to another currency as per the norms of business. So, this kind of E- commerce might boost the industries and their operations, but earning revenue out of this, as government depends on tax revenue mostly, and using that money for welfare of the country will be tough.

Inventions in science, finance, technology have helped the world to prosper repeatedly, so that their ill effects have been subdued sometimes. But, with progress of technology, the cyber security is facing difficulties as harmful influence of hackers is increasing day by day. The recent news says that a group of hackers have stolen$80 million worth of crypto- currency from a decentralized finance platform (DeFi) named Qubit Finance.

Also, the inhuman tendency of destroying something what is not liked by certain capitalists and rich people, establishing a remarkable protest and strengthening own place in the business world can bring curse in the overall economic system on the earth. To have this invention of finance as blessings for the existing monetary process of the developing nations, who do not have much capital base like the first world countries to fight against huge financial distress, the governments have to be more careful and focus on the research outcomes of economists, computer scientists, renowned finance experts.

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The Cabbage which has financial importance – Kimchi Premium By: Dubhiksha Parthiban (LTI) I never thought a process used for bonding between the women in the family will be used as a financial term, little did I know that planted during winter cooked during summer after heavy fermentation and getting converted into pickle would end up in a financial article. This pickle dish is native to Korea and Korean call it, Kimchi. Kimchi premiums are in vogue for any arbitrage trader. Kimchi Premium is a term involving Bitcoin.

What is it all about?

Bitcoin is priced higher on the South Korean Exchange and this is exploited by the arbitrage traders where they buy bitcoins from other nations and sell them at Korean Exchange and the difference is referred to as Kimchi Premium. For Example, if you buy one bitcoin for 10,000 dollars and the rate of one bitcoin is 16,000 dollars in the Korean exchange there you can get a direct 6,000 dollars profit which is known as Kimchi Premium.

The Story So far This kind of crypto arbitrage trading started with a 2.27 % difference in the year 2016. Later on, this difference has climbed up to 50 % during 2018. The formula used for calculating the Kimchi premium is as follows, Kimchi Premium = {KRWBTC (price in usd) / USDBTC (price)} – 1.

Here, KRWBTC is the Korean Won bitcoin price based on US dollars USD BTC is US Dollars Bitcoin price.

The bitcoin price in USD is the mean price of all the USD transactions on the Bitstamp exchange of the day. This high exchange rate is due to the country’s interest in technology and online gambling. This premium has increased the trades in foreign exchanges. The same principle governing the asset price movement also governs the exchange rate of these cryptos.

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Factors Determining Kimchi Premium South Koreans account for 15 percent of the trading taking place in cryptocurrencies.

Cryptocurrency drivers are classified into four different categories such as blockchain technology, cryptocurrency market, Economic variables, and at last the policies and regulations put forth by the government. The correlation diagram of these factors is given below.

Blockchain Technology Blockchain tech is the main factor that directly affects the price, the influential factors in the blockchain tech are the transaction tech, reward system, hard fork, etc. the time factors which are involved in the computation is hash rate, confrontation time, proof of work or proof of stake. The supply of cryptocurrencies is fixed such that they follow a deflator trajectory hence the demand has become more when the supply is decreased Crypto Market The Crypto market is driven by the speculation and interest among people, this is determined

by Google search filters, Twitter sentiments, Wikipedia queries, etc. From 2008 to 2022 crypto market has seen a boom and its popularity has scaled great heights.

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Econ Variables In this Econ variables category includes stock market price, gold prices, foreign exchanges, etc. The research shows that there exists an inverse relationship between the stock market and crypto, it was analyzed that when the S&P 500 falls there is an increase in the crypto exchange rate and vice versa.

Policies and Regulations The control laws are being imposed to prevent money flow and large movement of foreign money outflow from the nation by the Korean Government. The laws capped at 5,000 dollars for individual investors in a month and not more than 20,000 dollars over a year above these fixed amounts they need to follow arduous regulation procedures which stifle the arbitrage traders. The South Korean traders are also facing strict regulations under which if the person sells a large amount of won for foreign currency that would be capped and if money laundering act would be imposed if there were any suspicions raised.

The South Korean Trader benefitted more than 1,20,0000 dollars which had a huge impact on the economy, the sudden flow of money from the country created a huge loss in real estate holding and various other sectors.

On-Going Forward The future trend of Kimchi Premium cannot be predicted easily since the microstructure controls suffocating the arbitrageurs. As of now, the trend does not tend to subside, it has pulled various investors. The Kimchi market did fall in 2018 after the record of 50 %. this was created by speculators from China and Japan who sold off their bitcoins after the laws were implemented this made the exchange rate fall below fifty percent. I think Time will decide the fate of this premium. Until then let's not think BTS is the only famous part of South Korea.

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The Giant Debt Bubble By: Praful Mishra(BR Ambedkar University)

Image taken from IMF report Total worldwide debt has never been higher. And still, there is no hope of these coronavirus waves going away any time soon. Now with the coronavirus outbreak being declared a scourge, governments have announced many billions of dollars in stimulus packages which will send debt even higher. The Institute of International Finance estimates total worldwide debt, which is formed of borrowings from households, companies,s, and government, surged to a staggering $253 trillion at the top of September 2019, and straight away the worldwide debt has surged to 279 trillion dollars this can be the largest surge since the second warfare.

But the most important surge comes from debt that’s the cash that governments borrow their loans are now up to 99 of the world GDP the numbers are staggering why are governments borrowing most because they need no choice the pandemic has forced them to try and do these countries worldwide spent big to stay their economies afloat that they had to support their citizens with every kind of things free food treatment vaccines health infra infrastructure and every one of this needed money so governments haven't any option but to borrow and meet expenses the result's these leading economy are severely indebted.

The USA has very high level of state debt almost 20 trillion dollars that’s quite 100 of its GDP. The japan situation is alarming the country has borrowed quite 9 trillion that’s quite 230 percent of japan’s GDP. China has over five trillion dollars in debt over 50 percent of its GDP From the past, we've learned that when countries have accumulated the most debt it's always led to a financial crisis. for instance, from 1970 to 1989 many occupier countries accumulated huge amounts of debt at the tip of 1970 the region’s outstanding debt was 29 billion dollars within the years that followed occupier governments couldn't manage these loans by the 1980s debt levels during this region reached 327 billion dollars from 29 to 327 billion it’s a rise of over 11 times here is what happened next in 1982 Mexico defaulted on its sovereign debt

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Argentina and brazil had to weaken their currencies a worldwide financial crisis began a complete of 27 countries had to reschedule their debts 16 of those were from geographical region.

The story repeated itself in 2007 banks within u. s. gave out plenty of bad Mortgages it had been a systemic failure u.s household debt was allowed to achieve an overflow of 10 trillion dollars that were quite 40 percent of the GDP many of those loans failed major banks within u. s. collapsed in 2008 the result was these two trillion dollars were wiped far from the world market u.s and European banks lost over one trillion dollars they'd placed a game Mortgage based securities The World Bank says we are currently in the midst of the fourth wave of world debt. And to avoid history repeating itself all over again, governments must make debt management and transparency a top priority. This wave of world debt is believed to share many of the identical characteristics because the previous three, including prolonged periods of low interest rates and changing financial landscapes which encourage more borrowing. But the globe Bank has called this wave “the largest, fastest and most broad-based" of all of them.

Right now the governments everywhere in the globe is doing that they're just printing money and increasing debt , just dumping this problem on future generation to accommodate Economically, the debt situation are often solved easily, but politically, it's tougher. To begin, conform to decrease spending while also raising taxes by the identical amount. Although each move reduces the deficit within the same way, it's varied effects on economic development and job creation. Tax cuts don't help to make jobs. Cutting taxes doesn't have to end in an enormous debt.

Second, following a recession, the govt can postpone any adjustments for a minimum of a year. this might allow the economy to recover sufficiently to expand at the three to 4% needed to get employment, leading to the requisite increase in GDP to weather any tax hikes or expenditure cuts. As a result, the debt-to-GDP ratio are going to be reduced sufficiently to eliminate any debt crisis.

So we are able to say that whenever countries have accumulated massive levels of debt they found themselves in financial crisis if this debt isn't controlled now the globe are forced to handle another financial nightmare this giant pile of debt could trigger the following financial crisis.

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