Arbitrage Magazine - May 2022 - Finance & Investment Club | IIM Rohtak by Finance and Investment Club, IIM Rohtak

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Presents

May 2022 Vol 5 Issue 9

Our Best Read: ‘India’s Power Crisis is becoming a Payment Crisis’ Special Mention – ‘How can India cope with inflation as a result of the Russia-Ukraine war?’

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INDEX

S. No.

Article

Page No.

India’s Power Crisis is becoming a Payment Crisis

How can India cope with inflation as a result of the Russia-Ukraine war?

Ramifications of Russia-Ukraine war on the financial markets and international trade #Unlocked: Harnessing the power of Finance for a better future

Teething Problems of Algo Trading in India

Biggest Scandal in the History of Accounting: ENRON

Are sanctions working?: The Rising Rubel

Indian Startups - From Valuation to Value Creation

Q-Commerce 101

The Great Resignation and its Economic Impact

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India’s Power Crisis is becoming a Payment Crisis By: Ruchi Garg (IIM Rohtak) Introduction Despite increasing temperatures, economic boom, and critically low coal reserves, resolving payment conflicts among India's power sector's multiple players might be the key to meeting electricity demand. The act of giving something in exchange for money is known as selling. In order for a corporation to exist, this transaction must occur within an acceptable time limit. On the other hand, India's electrical business has a unique story to tell. Throughout the chain, entities are selling without being paid on time. It also shows up in the number of outstanding invoices. Despite the fact that Coal India is owed approximately Rs 12,300 crore by power generating companies, the country's largest coal supplier continues to provide coal to its customers. Power generators, in turn, owe power distribution companies (discoms) roughly Rs 1.1 lakh crore, yet they continue to supply them with electricity. Discoms have losses of more than Rs 5 lakh crore and regulatory assets of Rs 1.25 lakh crore, indicating expenses that will be recovered through rate changes in the future. Despite this, they continue to provide clients with electricity, although with intermittent power disruptions. Tariff increases are being fought by the discoms, and "free electricity" is still being used as a political tool. In the middle of it all, India's energy usage peaked at over 201 gigawatts (GW) on April 26, just as summer arrived early this year. According to the government, demand is predicted to hit 215220 GW in May-June.

Demand Growth "Increasing power usage reflects the country's economic success," the electrical ministry stated in a statement. Due to increasing industrial activity and significant demand from farmers and households as temperatures climbed, energy consumption jumped by as much as 8.9% in March. The power ministry declared, "The government and all parties are coordinating to preserve an uninterrupted electrical supply." "On all fronts, efforts are being made, and steps are being taken to better use various resources." The electrical sector, on the other hand, is plagued by payment delays across the value chain. Whoever is to blame for the disaster, shortages that have forced governments to enforce power cuts, all parties agree that the payment system must be remedied as quickly as feasible.

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According to industry insiders, discoms' refusal to pay dues has damaged electricity production enterprises, which have been dragged to insolvency court due to nonpayment owing to no fault of their own.

Source – Moneycontrol.com "A government body is not paying the generators, forcing another government entity, the banks, to declare the same generator bankrupt," observed Harry Dhaul, director-general of the Independent Power Producers Association of India. Cash Shortage due to Limited Supply Payment Ratification and Analysis in Power Procurement for Bringing Transparency in Generator Invoicing, or PRAAPTI, a government portal, estimated that discoms owed generating businesses Rs 1.1 lakh crore. This has harmed their financial flow and capacity to purchase coal.

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While Coal India's dues from the electricity sector have decreased to around Rs 12,300 crore from Rs 21,600 crore at the start of FY22, company executives told Moneycontrol that they remain high. "We have been providing independent power producers on a cash-and-carry basis," a senior Coal India official said, "but we have not controlled shipments to central and state generation corporations due to unpaid dues." Coal stocks are quickly dwindling at power plants, with some units reporting critically low average stock levels. According to the Central Electricity Authority, 86 of the 150 domestic coal-fired power plants had dangerously low average stock as of April 25, indicating they were operating at less than 25% of normal capacity. The primary reasons cited were a scarcity of waggons on the railways for transporting coal from pitheads to power plants, as well as a lack of supply from Coal India and its subsidiaries. A number of power plants were receiving coal on a payment basis. According to reports, Coal India increased exports to Maharashtra by roughly 30%. The state of Maharashtra owes the company Rs 2,000 crore While Coal India officials denied that the business was turning off supplies to specific power plants due to non-payment or payment delays, company data showed that several units were no longer designated as "critical/super critical" due to outstanding dues. A full probe into Coal India has yet to receive a response.

Source – IndiaToday.com Coal deliveries to several gencos have been halted due to past-due or delayed payments. As a result, discoms and state governments will be forced to either shoulder the financial burden by increasing imported coal-based generation and passing the cost on to consumers through tariff

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increases, or they will be forced to offtake electricity, resulting in load shedding, as has been seen in a few states recently. According to Kadam, improved cashflow positions for state discoms will be dependent on the ability to ensure healthy cash collections from consumers, timely and adequate subsidy release by the respective states, and a focus on reducing distribution losses and cost overheads, all of which must be achieved in accordance with regulatory targets. The peak in power usage in India for this year is yet to occur, and fixing payment difficulties would need months of structural improvements. Power companies, distribution companies, and Coal India will have to sell their output for "uninterrupted electricity" till then.

Way Forward India vowed at COP26 to expand its renewable energy generating share to 50% by 2030 and achieve net-zero emissions by 2070. The whole 500GW is required, as proposed by the government. This, in particular, needs to be backed with appropriate storage to assure solar power delivery around the clock. Existing storage alternatives are mostly based on lead-acid batteries, which are heavy, expensive, have a limited lifespan, and are inefficient. Wind energy needs to be increased as well. While these issues will be resolved in time, it does not appear to be a good plan to phase out coal and switch to renewables entirely without a backup, since we would be exposing a lot of manufacturing to environmental dangers. Another option is to build waste-to-energy treatment plants, which use liquid waste to generate steam, which may then be used to generate power. India produces more than 1,50,000 tonnes of solid trash every day, making it the world's third-largest producer. Only 70% of this garbage is

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collected, with only 20% being treated. The remainder is disposed of in landfills or burnt, resulting in pollution of the air. The Amberpet factory in Hyderabad converts faecal waste into biogas, which is then used to generate power. The sludge that remains is composted and sold to farmers. References Power crisis in India: These states facing electricity problems; full list - BusinessToday India to face more power cuts due to coal shortage, soaring demand | Reuters Power sector crisis could become a drag on India's economic growth | Business Standard Editorials (business-standard.com)

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HOW CAN INDIA COPE WITH INFLATION AS A RESULT OF THE RUSSIAUKRAINE WAR? By: Aishwarya Saxena (Lucknow University)

It has been more than a month since Russia, under Vladimir Putin, launched a full-scale military invasion of Ukraine to escalate the tensions brewing between the two nations since 2014. As a result of the unfortunate turn of events, Ukraine is witnessing its biggest refugee crisis since World War 2, and more than 2.8 million people have fled Ukraine. However, the wrath of the war is not limited to both nations but is being faced across the world. Ukraine is a significant exporter of agricultural products, so its supply has been adversely impacted. In addition, investors are limiting their investment to their home countries, which has declined the global capital flows, coupled with sanctions on financial flows, which have worsened the impact on the financial market and private investments. The investment climate has become unfavorable, and the capital inflows have declined, and so have the stock markets. The Balance of Payments may experience a deficit. The private sector would not be incapable of boosting itself. The public sector would have to play a significant role. Moreover, the world is experiencing deglobalization, which may adversely impact export earnings. Global vaccine inequity will grow under the pretext of the national requirement. When the world is yet to win, the war against Covid is genuinely devastating.

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TIMELINE Russia and Ukraine have had hostile relations since the 2014 ‘Revolution of Dignity. In November 2013, Ukrainian President Yanukovych decided not to sign a political association and free trade agreement with the EU. He was met with violent protests and eventually ousted from power. In 2014, Russia invaded and annexed Crimea. Rebels backed by Russia seized Donetsk and Luhansk, collectively called the Donbas region. Minsk peace accord was signed by both the nations later to halt the violence in east Ukraine, including Donbas. The agreement has been criticized for containing extremely vague terms that provide ample scope for the benefit of the doubt. Lately, Ukraine's bid to become a NATO member has been the prominent bone of contention. In January 2021, Ukrainian President Zelensky urged US President Joe Biden to make the nation a part of NATO, angering Russia. It began sending troops near the Ukraine border. The US warned of grave consequences. Russia demanded a legal guarantee that NATO would not conduct military activity in East Europe. On 24 February 2022, under Vladimir Putin, Russia launched a full-scale military invasion of Ukraine to escalate the tensions brewing between the two nations since 2014. Most of the NATO members are EU members and thus have joined the USA in imposing sanctions against Russia.

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INFLATION India is amongst one of the worst affected emerging economies. Moreover, it has been exceptionally challenging to decide on the stance given the intricate trade relations that India has shared with Russia for a long time. In the efforts to revive growth, India's fiscal deficit widened to 9.3% in March 2021. The ratio of GDP surged to more than 90%, one of the worst among India's likes. India imports 85% of its total need for crude oil. The widening of the Fiscal deficit may be one of the consequences of the rise in oil price. A 10-dollar increase in the average cost of oil widens the Current Account Deficit (CAD) by $1415 billion. The average oil price was $ 75 a barrel at the beginning of April 2021. On 7 March, the prices stood at $ 140 a barrel, decade-high fees. The Government of India had estimated that if the oil price touched $ 100 a barrel, it would pull down the expected growth rate from 8-8.5% (as expected earlier) to below 8% (even as the global demand is not yet recovered from the pandemic) as the excise duties would be cut down to cushion inflation. The deficit could widen by 2.3-2.4% of GDP. According to HDFC bank, the current account deficit would be 2.3% for FY23. CAD was 1.3% of GDP in the September quarter, and the Current Account Surplus (CAS) was 0.9% in the consequent year.

Retail fuel prices could shoot up by 10%. Since November, the fuel price has been sticky owing to the poll season, which is now over. Unless the Government takes immediate measures, consumers could be burdened by a sharp rise in prices. The Government must reduce fuel tax for the consumers and absorb the losses of the oil financiers. It has the cushion created by not giving the benefit of moderate oil prices prevailing since 2014 by charging high tax rates.

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Every rupee cut in fuel reduces the government revenue by 130 billion rupees/year. According to the economists, the Government may lose 900 million rupees while lowering the fuel price. The Government is mulling over some alternative sources of importing crude oil. 11% of India's edible oils and fertilizer, 90% of sunflower oil, and 30% of project goods are imported from Russia, Ukraine, and Belarus. With the aggravated supply disruptions, inflation could be pushed up by 50-70 points. The impact on raw material supply may hamper industrial growth and performance. Monetary policy wouldn’t be helpful in this situation as the economy is already witnessing weak demand. Raising the interest would only cause further damage. Instead, the Government should actively leverage the Fiscal Policy measures to tackle the crisis. Demand for gold is expected to rise, and hence the import bills will increase. WHAT IS INDIA’S STAND ON THE WAR? India has opted for a neutral stand, i.e., neither expressing support for Russia nor condemning it. Russia is India's largest arms supplier and the only nation to share key military technologies with us. Its share dropped from 70% to 49% due to India's indigenized defense manufacturing. Russian missile S-400 gives India crucial strategic deterrence against China and Pakistan. Moscow has even vetoed the UNSC resolution over the Kashmir dispute to help India. Also, India has to evacuate some 20000 citizens, mostly students, from Ukraine. At the UNSC vote on a draft for a UN resolution to condemn the invasion, India abstained. India talked about the importance of "the UN Charter, international law, and respect for states' sovereignty and territorial integrity," adding that "all member states need to honor these principles in finding a constructive way forward."

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WHAT CAN INDIA DO? 1. Ukraine and Russia account for 30% of the total wheat exports of the world. India, which produces 13.53% of the global wheat, can benefit by ramping up exports, helping India generate revenue to meet the higher cost. 2. India needs to diversify its portfolio to import goods from several diversified countries and not become dependent on just one country. 3. Monetary policy wouldn’t be helpful in this situation as the economy is already witnessing weak demand. Raising the interest would only cause further damage. Instead, the Government should actively leverage the Fiscal Policy measures to tackle the crisis. 4. The private sector would be incapable of boosting itself. The public sector would have to play a significant role. 5. The Government must reduce fuel tax for the consumers and absorb the losses of the oil financiers. It has the cushion created by not giving the benefit of moderate oil prices prevailing since 2014 by charging high tax rates. Efforts should be directed to sustain the already weak consumer demand so that they don't have to face the grunt of the power struggle between the two warring nations. CONCLUSION The war has much more significance than just a bilateral impact. Today stands before India a crisis that imposes a significant threat if not handled meticulously. It has adversely impacted the global economy as well. Expenditure on R&D will rise at the cost of welfare expenditure. As a result, the standard of living worldwide would dip, and the number of people below the poverty line would increase. The war would generate employment. Countries would try to reduce their dependence on Russia, attempting to stop energy imports for the nation. They would offer China a similar treatment to amplify their stand. As China is the largest trading partner for several major economies, supply bottlenecks may be created. As for India, we need to prioritize strengthening the economy and leveraging domestic production to become self-reliant. While this is a process of decades, we need to diversify the portfolio to import goods from several diversified countries. The Fiscal Policy measures should be actively leveraged to tackle the crisis. The Government must remember that tough times require harsh measures.

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RAMIFICATIONS OF RUSSIA-UKRAINE WAR ON THE FINANCIAL MARKETS AND INTERNATIONAL TRADE By: P A Neeraja Nair (CHRIST University, Delhi) On 24th February, 2022 Russia invaded Ukraine marking the gruesome beginning of a catastrophe that led to social, financial and economical disruptions around the world including the displacement of more than 6.7 million Ukrainian citizens from the country leading to Europe’s fastest growing refugee crisis since world war II, increment in food and energy prices pushing as additional 40 million people across the world under the poverty line, reduction in the volume of international trade, interruption in the 10 year bull market, disrupted supply chains across and increased unemployment on top of the infamous covid 19 pandemic. As the war approaches its third month, the world is still feeling its shockwaves and facing its ramifications which even threatens global growth and development. With the Global Financial Markets still facing the pressure of war, investors are rattled by the rampant inflationary rates and increased uncertainty. International Institutions such as World Trade Organisation and International Monetary Fund predicts that the Euro Zone inflation rates will cross 5.3% and 7.7% in the US which are tempting investors to sell off bonds and push for higher yields. Additionally, its speculated that the central bank will increase its interest rates to control price rise, which again would prompt increased market sell-offs. On the day of invasion, the stock market prices across the world except for a few countries fell drastically and since then it hasn’t been the same. Russia and Ukraine together hold a significant share of international trade for commodities, mainly 29% of the global wheat exports, 53% of global trade in sunflower oil and a rather significant role in the trade of crude oil. Additionally, Russia was also responsible for 10% of the global Nickel export which all together crashed since the war. Their export audience mainly constituted vulnerable and developing nations, who now are suffering terribly due to soaring food prices which in turn are pressurising poorest households. Hence, the shockwaves so emitted from war are disrupting the financial market and international trade by a great margin along with heavy surge in commodity prices. The prices for Wheat, Aluminium and Nickel rallied up to a highest point in 50 years signifying the intensity of the ramifications caused. Additionally, the currency markets have also not escaped the steep losses and fluctuations resulted from the war as various currencies plummeted down since the inception of the war including US Dollars, Euro, Egyptian pound, Indian Rupee, Russian Rubble, British Pound and so on. However, economists and experts predict that the depreciation will not sustain for much long and the currencies will revive its previous values in time. International trade relations are another sphere that was deeply impacted by this strenuous war. The world in itself divided into 2, against Russia and those countries which abstained on the vote. Additionally, in terms of trade and development, a world bank report forecasts that the world will see a decline in the global GDP under 1% and world trade by 1%. However, the war has impacted the world trade in different angles when considering countries on an individual level. Manufacturing exporters such as Mexico, Vietnam and Thailand experienced a sharp decline whereas the net exports of crops especially Turkey, India, Brazil and Fossil Fuel exports such as countries in the Middle East and Nigeria experienced a surge in their exports attenuating the negative trade impact of war. Since, Russia and Ukraine are now at a state of emergency, few countries have taken advantage of the trade opportunities that have been created and thereby

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developing themselves wider opportunities. However, the war has also resulted in the blockage of key transport links further disrupting and constraining the trade between the rest of the world, specifically, Ukraine’s Black Sea ports have been blockaded, Rail transits through Russia has slowed down tremendously due to military checks, Russia’s connection to European ports have been interrupted leaving only a few routes for countries to utilise the transport channels present. In addition to that, even though Russia and Ukraine aren’t crucial participants in the world’s FDI networks, the war has impacted countries like Armenia, Moldova and Kyrgyz Republic who are heavily dependent on Russian Investment. Moreover, few European countries including Germany, Norway and Finland have also been impacted due to their heavy involvement in Russia’s energy sector. On a similar note, developing countries like Georgia and Montenegro are also suffering as their tourism sector is heavily dependent on the citizens of Russia and Ukraine. Economists, governments and advisors fear that the fear, uncertainty and disruptive waves emitted might result in the corrosion of globalisation which acted as the fuel for growth and development in the modern era. The geopolitical alignments have turned, trade relations have been reestablished, policies have been formulated aiming at fragmentation of the trade systems and investment trends have experienced the emergence of a new pattern. However, given the current situations and degree of uncertainty, the stabilisation process is likely to be gradual and time consuming rather than an overnight redemption. Whatever, the situations might be, however terrible and confusing it might seem, the world has always risen back to its full strength and regained its financial, economic and societal stability.

CHARTS AND GRAPHS SUPPORTING THE ARTICLE

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Figure: International wheat prices and trade policy measures

Figure: Change in exports relative to reference year as a share of real GDP

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REFERENCES 

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How the war in Ukraine is reshaping World Trade and Investment. World Bank Blogs. (n.d.). Retrieved May 28, 2022, from https://blogs.worldbank.org/developmenttalk/howwar-ukraine-reshaping-world-trade-andinvestment#:~:text=A%20new%20World%20Bank%20report,especially%20in%20energ y%20intensive%20sectors. Person, & Patrick Werr, N. A. (2022, March 21). Egypt devalues currency 14% after Ukraine War prompts Dollar Flight. Reuters. Retrieved May 28, 2022, from https://www.reuters.com/world/africa/egyptian-pound-drops-10-after-ukraine-warprompts-dollar-flight-2022-03-21/ Ukraine war's impact on trade and development. UNCTAD. (2022, March 16). Retrieved May 28, 2022, from https://unctad.org/news/ukraine-wars-impact-trade-anddevelopment Russia-ukraine war: 6 charts to know what's happening in financial markets. The Economic Times. (n.d.). Retrieved May 28, 2022, from https://economictimes.indiatimes.com/markets/stocks/news/russia-ukraine-war-6-chartsto-know-whats-happening-in-financial-markets/articleshow/90026372.cms Written by Victoria Masterson, S. W. (n.d.). These 3 charts show the impact of war in Ukraine on global trade. World Economic Forum. Retrieved May 28, 2022, from https://www.weforum.org/agenda/2022/04/ukraine-war-global-traderisk/#:~:text=War%20in%20Ukraine%20is%20causing,Ukraine%20conflict%2C%20the %20WTO%20says. Yousaf, I., Patel, R., & Yarovaya, L. (2022). The reaction of G20+ stock markets to the Russia-Ukraine conflict. Available at SSRN. Ahmad, S. (2022). Russia Ukraine Conflict-How War Affects the Stock Market. Available at SSRN 4058001. Hoffmann, M., & Neuenkirch, M. (2017). The pro-Russian conflict and its impact on stock returns in Russia and the Ukraine. International Economics and Economic Policy, 14(1), 61-73. Umar, Z., Polat, O., Choi, S. Y., & Teplova, T. (2022). The impact of the Russia-Ukraine conflict on the connectedness of financial markets. Finance Research Letters, 102976. Mardones, C. (2022). Economic effects of isolating Russia from international trade due to its ‘special military operation’in Ukraine. European Planning Studies, 1-16. Ruta, M. (2022). The Impact of the War in Ukraine on Global Trade and Investment.

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#Unlocked: Harnessing the power of Finance for a better future By: Pallak Kainthla (SIMS Pune)

Ten years back, when our feet ached while standing under the scorching heat in long queues outside the bank, didn't we long for a service that could mitigate our pain? Luckily, technology came to our rescue. Every day, disruptive technology is revolutionizing the way our world has ever worked before. Banking and the financial world are no exception to it. Especially post-demonetization, money transaction methods have considerably shifted towards online mode than it was before. The rise of apps, websites, and other platforms have reformed the financial world. These far-reaching platforms are the gateway for accessible payment solutions and banking automation solutions. This made FinTech touch not only the lives of millionaires but, more importantly, of millennials. On the one hand, the consumer experience has been enhanced as the banking processes have become more streamlined due to innovative payment solutions like ATM and CRM, Cash Management services, Transaction switching services, Digital payment services, POS Machines, Agency banking, and prepaid cards. Whereas on the other hand, greater efficiency has been attained owing to currency technology products, self-service terminals, and automated banking systems. Thus, we can say that FinTech has brought ease to people's working ecosystems and personal lives.

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How 'FinTech' Fintech is often misinterpreted as a newbie, but this confluence of finance and technology has a long-intertwined history spanning more than 150 years. It all started with laying the first transatlantic cable in 1866, which provided the fundamental infrastructure necessary for the digital revolution of financial services. The mainstream emergence of the internet greatly affected financial services. Wells Fargo became the first bank to offer an online checking account in 1995. By the end of this time period, a majority of banks' internal processes, interactions with outsiders, and an ever-increasing number of their interactions with retail customers became fully digitized. However, the shock of the great recession, coupled with the emergence of new-age technologies like Machine Learning, Big Data, and Artificial Intelligence (AI), sowed the seeds of a financial services disruption.

Unlike other industries, the fintech industry witnessed skyrocketing growth in the pandemic. The industry reported a steep rise in digital asset exchanges, payments, savings, and wealth management volumes with increments as high as 13 percent and 11 percent. In global parlance, developing countries reported a more significant rise in digital financial transactions than their developed counterparts, signaling necessity paving the way for mass adoption. Surprising data in digital transactions growth came from member states in the Middle East and North Africa with 40 percent growth and Sub-Saharan Africa and North America, both up by a staggering 21 percent.

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The Growth-Tech According to Harvard Business Review, since 2008, global investment in the fintech industry has tripled from $928 million to $2.97 billion, and it is forecasted to reach up to $8 billion. In the present scenario, concepts such as the Internet of Things (IoT)–enabled contactless payments, connecting various needs with one card, thus promoting ease and convenience. As per Deloitte and CII's vision 2020 report, India is fast becoming a digital economy with over a billion mobile phones, 330 million internet users, and 240 million smartphones.

genuine differentiators and readiness of services in the digital market in the infrastructure, cashless payments, and Robo-advisory space. They reaped on big data and data analytics to improve the customer experience with more personalized offerings. They offered data-driven decisions around risk management for robust customer loyalty. An assemblage of various technologies like AI, Cryptocurrency, and Blockchain contributed to this futuristic transformation. AI-enabled chatbots guided their clients on improving transactions and several other forms of trading and commerce. They also enabled profiling their customers along with categorizing them. The Blockchain system dealing in cryptocurrency is another futuristic trend opening multiple avenues to take the FinTech industry by a boom. Thus, humankind is using the power of technology to transform the way it transacts with businesses or manages its assets efficiently.

Present view As per a report titled, 'India FinTech: A USD 100 Billion Opportunity', by Boston Consulting Group and FICCI, India is swiftly moving towards a massive FinTech industry valuation of USD 150-160 billion by 2025. This opportunity amounts to USD 100 billion in new value creation potential. The current innovation model in the finance industry is designed to generate the highest possible short-term returns. But investors and entrepreneurs in financial services will need to rethink those timelines if they want to be successful in the future.

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The only way forward for financial services businesses is to take a long-term view — planning for a viable business in the next decade, rather than the most profitable one in the next quarter. The industry involves such scale, regulatory intricacy, and organizational inertia that making a substantive change will take time. CEOs will need to shift their mindset now if they want to avoid their own "Kodak moment." Embracing innovation requires unconventional capital allocations that won't always yield shortterm profit, but that can lead to exponential growth in the long run.

The Dark Web FinTech also has some roadblocks in its way. The most pressing issue is cyber-attacks. Fending off cyber-attacks is one of the greatest challenges faced by businesses across the world, and given the sensitive nature of the client data they hold, this vulnerability is a severe concern for FinTech firms.

To this end, it may be time to consider deploying dynamic security solutions such as a ‘Moving Target Defence’ (MTD). As per a Deloitte report, 40 percent of companies surveyed pointed out that they have either introduced or are in the process of introducing enhanced fraud or security measures as a response to business conditions under the pandemic. Another critical area in which FinTech services can fall behind the traditional approach is the absence of ‘human touch’. Their operating models often leave clients to feel like they are dealing with some faceless entity. Being able to pick up the phone and speak to a real person is an essential selling point for some consumers, So FinTech firms should be prepared to cater to this.

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Leading Avenues Fintech has overarchingly come to the rescue to meet the needs of those who were underserved by the banking system. The welcoming hands of Fintech are supporting even those who are still unbanked. The rise in smartphones using population and government incentives has bolstered the integration of multiple services in a one-stop platform for all financial needs. FinTech is inevitably bringing small but significant changes.

“FINTECH IS NOT ONLY AN ENABLER BUT THE DRIVING ENGINE” -PIERRE GRAMEGNA

References:   

https://digital.hbs.edu/platform-digit/submission/goldman-sachs-a-technology-company https://findexable.com/news-and-insights/post-pandemic-banking-6-drivers-shaping-thefuture-of-finance-after-covid/ https://thefutureofthings.com/10827-fintech-will-shape-future-banking/

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Teething Problems of Algo Trading in India By: Gitika Singh (IIM, Indore)

Ever repented over missing an alert on your mobile trading app and losing a few bucks that you could have potentially earned? Or does the regular speed of trading terminals not match with your dreams of making fortunes at the stock market? What if an algorithm automatically executed all your orders on fulfillment of certain pre-defined market conditions? And all of this at a speed that no human can ever attain? If this sounds unreal, then the term algo trading is probably new to you. No worries. A simple example of algo trading could be something like an algorithm placing a buy order for say 100 HDFC Bank shares, whenever Nifty goes up by 5%. Now based on some good research, one can come up with thousand such conditional commands and devise a solid strategy for making money at the stock markets in milli seconds. What if I give you the contact of someone selling such automated strategies? Wouldn’t you be lured by it? Of course, yes. But hold on. Things aren’t so rosy. Algorithmic trading can definitely execute trades in as less as 10 milliseconds (to help gain a perspective, know that we take 300-400 milliseconds to blink), eliminate human errors and thus help you capture every arbitrage opportunity. But what if someone uses such algorithms to manipulate the market? Given the immense power that these algorithms come with, the extent to which they can wreck a havoc is also huge. Retail investors can be badly hit and given that today’s markets are so interlinked, the entire system can suffer. Now you might say that a simple solution might be to allow the use of only those algorithms which get approved by the concerned authorities. And that is what had been happening till now. In-house algorithms made by different stock brokers in India have to go through the approval procedure of the stock exchanges. But in last few years brokers such as Zerodha, AngelOne, Kotak Securities and many others have started offering Application Programming Interface access (API) to their customers. APIs allow customers to get real time pricing data and place orders. It also allows them to connect with certain third parties who sell algorithmic strategies. Customers can take such strategies from these third parties and place orders through the API. Now what the brokers receive at their end are just the orders and not the algo. There is no way for them to verify whether the order received was through an algo or not. And thus, such algorithmic strategies can easily sidestep the scrutiny of exchanges. Such third parties offering algorithmic strategies and claiming that money at stock markets is now easy, have been burgeoning in the country in last two years. And their market is completely irregulated at this point of time. Their ‘unapproved and unregulated’ algorithms are entering our stock exchanges through these APIs, thus putting it at great risk. This is what worried the SEBI and in December 2021 it proposed a framework to check the rise of these APIs allowing automation of trades for retail investors. According to SEBI’s proposition, all the orders coming through the API have to be labelled as algo orders and it would be the responsibility of the brokers to ensure that all these algos are approved by the exchanges. So, every time a customer uses a third-party algorithm to place an order or creates one himself/herself, it would be the onus of the broker to get it approved by the

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exchange. Whenever there is any change in the strategy depending on the market conditions, those changes will have to be checked by the exchanges. The SEBI has also said that the brokers will also have to come up with proper grievance redressal systems for anything related to these algo trades. The brokers offering API access in the country have been critical of this move. They say that given their current systems, there is no way for them to figure out if an order coming through API was algo generated or not. So, they cannot fulfill the requirement of getting these algos approved by the exchanges. It is equivalent of SEBI telling the brokers that until you figure out a way to distinguish algo orders from non-algo orders, stop offering API services. But APIs are the future of fintech space. Moreover, they are employed for several other uses apart from placing algo orders. And this proposition of the SEBI can curtail their growth putting us back in the race of technology. Thus, while SEBI’s proposition is well intended, it can hamper the growth of our securities market on the front of technological advancement. But the point to be noted is that algo trades already make up to 80% of the market volume in advanced countries like US and UK. And the onus of keeping a check on algo trades in these countries lies with the brokers only. So, taking a cue from them, we can definitely figure out a way of executing algo trades in a safer manner. What SEBI will probably have to do now is to first regulate the market of third party algo strategy providers and then chalk out a plan for algo trading in India considering the opinions of all players. But given that algo trading is at nascent stage in the country, it might take some time for all of this to actualize.

REFERENCES      

https://indianexpress.com/article/explained/algo-trading-sebi-market-7676061/ https://www.financialexpress.com/opinion/trade-talk-the-future-of-algo-trading/2386057/ https://upstox.com/knowledge-base/algorithmic-trading-india/ https://rainfundai.medium.com/the-evolution-of-algorithmic-trading-in-india3f287ee4f2aa https://www.icicidirect.com/knowledge-center/article/basics-of-algorithmic-trading-howto-start-algo-trading https://www.moneycontrol.com/news/business/stocks/zerodhas-nikhil-kamath-explainswhy-inflation-in-the-us-is-a-great-concern-for-india-8563221.html

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Biggest Scandal in the History of Accounting: ENRON By: Kshitija Kulkarni (GIPE) The tale of Enron Corporation illustrates the biggest scam in the history of accounting, which was filled with fraud, lies, and political manipulation and shocked Wall Street to the core. The fallout from this scam was the monumental loss of jobs, pension funds, suicide, and the unveiling of a very public display of corporate greed.

Origin: The merger between Houston Natural Gas Company and InterNorth Inc. formed the entity Enron in 1985. The then CEO of Houston, Kenneth Lay continued as the CEO of Enron. It eventually moved on to trading making energy deals in power from an energy supply company. Then later into broadband and even trading the weather. In 1990, Ken Lay hired Jeffery Skilling who was one of the most youthful compliance and also partners at Mckinsey & Co, a consulting firm advising Enron.

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In 1992, Jeffery Skilings introduced a new accounting technique called Mark -to- Market(MTM) which was approved by the SEC. He transitioned to the historical cost method where the unrealized gains of the future were booked from contracts or trading which were perceived as revenue and profits. The effect of using the mark to market technique was incredible for revenue and the stock performance in general. The stock went from 1999 to 2000 from around $10 per share to around $90 per share and collapsed to less than $12 by 2001.

Fall of the company: The Valhalla scandal was the first red flag that something was wrong in the company. It involved two oil traders transferring money to fake accounts and gambling on the company's behalf. They warned Lay about the manipulated earnings and gamabing on trade beyond capacity. For Enron’s situation, for example a power plant as an asset, the company booked the future profits projected regardless of the fact whether the deal materialized. If the profits from the power plant were less than the estimated value, the loss was never booked and it transferred the asset to an off-the-books corporation and the losses were never reported. Thus, this technique resulted in them concealing unprofitable businesses without any harm to their parent company. In reality the company was worth more on paper than it actually earned but it allowed them to gamble billions of dollars.

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But the performance of the business never matched the revenue being booked in accordance with the cash flow coming in. Regardless, the investors including retail and institutional investors the stock was a no-brainer to invest in. The MTM accounting practice that Enron did, led to an incredible revenue growth. The Debt to Equity ratio of the Enron stock was commendable which inflated earnings. The stock price thus increased as the debt to equity ratio was alluring. Andrew Fustow was hired as CFO in 1998, misled the board of directors and audit committee on financial issues using his intellectual skills by making debts disappear by moving them to ‘show companies’ so that it was profitable in order to mount liabilities. With a vision that broadband would have around $20 returns on market capitalization on every $1 invested, Enron signed a deal with Blockbuster. But the deal failed blockbuster was blamed and they concealed all their malpractices using unethical accounting methods. This inflated the revenue by a humongous margin and marked the beginning of the end for Enron. How did it hide debt? Fastow and others devised a plan to hide their debts by transferring them into Special Purpose Vehicle (SPV), entities formed for certain special businesses. They began discarding poorperforming assets to SPVs hiding significant losses to create the illusion of stable growing profits. They began transferring rising stock in exchange for cash, and in turn, utilized them to support the recorded resources. The assets transferred into SPVs were accounted for as sales to the SPV in lieu of the assets and the revenue was shown on Enron’s balance sheet. The SPV’s were not unlawful even though they concealed the bookkeeping factors. Although their relationship with standard obligation securitization was unique and appalling, SPVs were promoted with Enron stock which compromised the capacity, assuming Enron’s fall of portion costs. As a result, the stocks declined.

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Enron, which was once the 7th largest corporation in America, who revolutionized the energy market and trading, which could never lose any stock and it kept growing year on year, became bankrupt. Arthur Anderson, The management and auditors, became out of business because of this fiasco and the bubble of trust was eroded. The dissolution of Arthur Anderson led to a big exodus of the staff and partners. The government passed the Sarbane-Oxley Act with the objective that every company should have a framework of internal controls in order to ensure the integrity of the financial statements.

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Source: Chart: Enron Corp.'S Share Price. (1997, February 9). Bloomberg.com. Retrieved May 24, 2022, from https://www.bloomberg.com/news/articles/1997-02-10/chart-enron-corp-dot-s-shareprice Segal, T. (n.d.). Enron Scandal: The Fall of a Wall Street Darling. Investopedia. Retrieved May 24, 2022, from https://www.investopedia.com/updates/enron-scandal-summary/ References:   

 



 

Cabral, C. (2020, August 4). Enron Broadband: Here's Why it Failed. Shortform. Retrieved May 24, 2022, from https://www.shortform.com/blog/enron-broadband/ Enron Scandal - Summary, Causes, Timeline of Downfall. (n.d.). WallStreetMojo. Rzetrieved May 24, 2022, from https://www.wallstreetmojo.com/enron-scandal/ Enron paper Auditing .docx - Steven Ma Auditing 9/10/18 Professor ... (2018, September 10). Course Hero. Retrieved May 24, 2022, from https://www.coursehero.com/file/35841807/Enron-paper-Auditing-docx/ "Oil for Enron" - The Hugh Hewitt Show. (2005, August 18). Hugh Hewitt. Retrieved May 24, 2022, from https://hughhewitt.com/oil-for-enron/ Constable, S. (2021, December 2). How the Enron Scandal Changed American Business Forever. TIME. Retrieved May 24, 2022, from https://time.com/6125253/enron-scandalchanged-american-business-forever/ The Enron affair was a sequence of events that culminated in the bankruptcy of Enron Corporation.doc - The Enron affair was a sequence of events that. (n.d.). Course Hero. Retrieved May 24, 2022, from https://www.coursehero.com/file/108700072/The-Enronaffair-was-a-sequence-of-events-that-culminated-in-the-bankruptcy-of-EnronCorporationdoc/ Bondarenko, P. (n.d.). Enron scandal | Summary, Explained, History, & Facts. Encyclopedia Britannica. Retrieved May 24, 2022, from https://www.britannica.com/event/Enron-scandal Bhatt, A. (n.d.). Enron Scam: The biggest scam in the history of America. The Company Ninja. Retrieved May 24, 2022, from https://thecompany.ninja/enron-scam-america/ (n.d.). Cambridge Dictionary | English Dictionary, Translations & Thesaurus. Retrieved May 24, 2022, from https://www.coursehero.com/file/108700072/The-Enron-affair-wasa-sequence-of-events-that-culminated-in-the-bankruptcy-of-Enron-Corporationdoc/

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Are sanctions working?: The Rising Rubel By: Konark (Sgtb Khalsa) We all have watched several unexpected aspects of what could happen. This year has been many ups and downs, from giving threats to striking the country. But no one has ever anticipated the Russian ruble to turn into the world's best-performing currency, as its onshore rate is up more than 11% against the U.S. dollar so far in 2022. From where the situation was not sustainable to ruble and barely a month later after drastically downward, all the sanctions imposed when the war began are still in place. In some cases, they're even more robust. So how have the Russians managed to restore their currency?

1. Artificial Manipulation With Western authorities yet examining further sanctions, the ruble to strengthen its stance against both euro and the U.S. dollar. The ruble was below 40%, at 139 rubles to the dollar, in the wake of Russia's invasion of Ukraine. Generally, in a flexible exchange rate, currencies rely upon forces of demand and supply in determining their rate. It is frequently seen that surging currency prices reveal a general strengthening of a country's economic outlook. But in Russia's case, government efforts hampered trading and forced buying pushed it higher, so high in fact that it has started to reflect upon the economy. Restricting the number of dollars residents can withdraw from foreign-currency bank accounts and blocking banks from selling foreign currencies to customers for the next six months. Russian brokerages also aren't permitted to allow foreign clients to sell securities. By prohibiting those exchanges, the government is shoring up both the stock and bond markets and conserving money inside the country, which assists the rubble from tumbling. These regulations have made it more challenging to sell the ruble, thereby limiting its losses.

2. High Energy Prices The sanctions were formulated to hinder Russia's ability to obtain foreign currency, dollars and euros. But several European nations resume buying Russian gas because they have become so dependent on it and because there are not enough alternative suppliers to meet demand. Making dollars and euros flow into the country. Russia instructed those exporters to sell 80% of their foreign currency revenues and buy rubles, enabling the currency to appreciate. This is because it would reverse the current flow of money, making sanctioning countries support Russia's currency and assuring that all funds from energy sales support its value. Looking at demand and supply value, creating artificial scarcity in demand will increase supply.

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Other factors The Central Bank of Russia raised interest rates to 20%. This means any Russian attracted to selling their rubles and buying dollars or euros now has a big reason to save that money instead. The less the burden on the currency, the limited rubles that go up for sale. As gold is exchanged in U.S. dollars, this enables the Central Bank of Russia to connect the ruble to gold and establish the floor price for the ruble in dollar terms. Further ruble rises could inflate the rate of gold, and Russia has been acquiring precious metals rapidly since 2014. Therefore, this move gives additional safety to the Russian economy against liquidity restrictions arising from further sanctions and the decline of the country's foreign currency reserves. Will the same work in the long term? Everything arrives with a price, on the other hand. Though Russia occurs to have turned back, approaching economic collapse, the longer-term prospect is less optimistic, as the knock-on effects from relief regulations and the risk of further sanctions continue to play. Russian borrowers can't maintain paying interest rates of more than 20% for long if they can even conceive of borrowing at that rate. Russia is the world's massive exporter of natural gas. However, it's not the only source out there, and buyers of Russian gas could pivot to new suppliers. Can we say Sanctions are of no use? One of the trembling questions is roaming after the ruble performed so well. At the same time, at war, primarily other countries that imposed capital restraints in the recent past have not achieved the same results. Ruble performing well in the short term doesn't mean the sanctions imposed aren't working. There are other things which Russia is going through, like Russian inflation came in at a twodecade high of 17.8% year-on-year in April, up from 16.7% in March, but price rises are beginning to show signs of slowing. Consumer price growth slowed sharply from 7.6% in March to 1.6% in April, and non-food goods prices increased by just 0.5% compared to 11.3% in March. Trouble importing goods will make the circumstance for business operations worse. When the business operation suffers, they have to suspend further operations forcefully. Judging through currency performance for a particular duration won't be the right way to measure the working of the sanctions. But the West will consider this event and try to put more sanctions.

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Indian Startups - From Valuation to Value Creation By: Arghadeep Chanda, Nishanth DK (IMI, New Delhi)

India is at a strategic advantage with a sizable domestic market, increased labor productivity, and ground for digital interventions, making it the fastest-growing major economy. According to a recent WEF projection, India will become the third-largest consumer market in ten years, with consumer spending of six trillion dollars, up from the current 1.5 trillion dollars. Many investments have been made in Indian startups at record valuations to capitalize on this favorable climate and conducive regulatory environment. The third-largest startup ecosystem got its 100th unicorn this May, which was a moment of pride and celebration. These unicorns have been cumulatively valued at $333 billion with a total of 90 billion funds raised and ten startups having progressed to launch their IPOs. Although it is laudable that startups are torchbearers of innovation and have been game-changers by creating an impressive 3.8 lakh jobs, there are possibilities for further improvement.

Source: Economic Survey and Economic Times

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Winter In Burning Summer

The startups are primarily chasing valuations and shifting their primary focus from profit generation. An overwhelming majority of startups do not have a profitable business model and are solely dependent on large Private Equity partners or Venture Capitalists for funding and running the business. The majority of the startups are gaining customers in the first few years of their inception by giving huge discounts and cashback to their customers. The startups have not created adequate value but have burnt enormous cash on marketing, received through multiple rounds of funding, to maximize revenue. This may be a good idea to start with, but subsequently, a profitable business model should be made so as to survive in the long run. However, once their funds dried up due to the FED interest rate hike as a response to inflation, investors cut the value of these enterprises. The widespread joy and enthusiasm were quickly dampened by the reality that thousands of employees in once-promising firms were on the verge of losing their jobs.

Source: Tracxn and Economic Times Unless these firms reduce the cost of goods sold or minimize their expenses, they will find it difficult to generate profits despite them being in the growth phase. The startup ecosystem should look at value creation for the massive Indian population. The core focus of a business should be on generating a profit and thereby keeping all the stakeholders happy. Price Over Value Most of the startups had launched their Initial Public Offers over 2020 and 2021 due to huge liquidity surplus in the market. Their valuation metrics were quite questionable, which is why they have ended up eroding investor wealth of over Rs 2 Lakh Crores. It's a bubble that began with a sharp increase in the value of US technology businesses as a result of a surge in public investment in these companies by everyone from taxi drivers to venture capitalists, amounting to billions of dollars. When it became clear that these businesses would not make money in the future, the bubble burst as investors rushed to get out. It occurred as a result of market overconfidence, an oversupply

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of capital, a disregard for business fundamentals, and unexpected technical developments which gave enterprises an optimism about market disruptions with new technologies. The retail investors who put faith in these startups by investing in their IPOs were the ones who lost the most because they do not know the fundamentals of their business or their ability to generate profits in the future. These people were just betting on India's growth story and were bullish on them just by seeing their popularity in the media and cities/ towns they are operating in. The angel investors on the other hand exit the business immediately after listing by selling off their equity and making a healthy return on their investment. Way Forward The funds across the globe and US, in particular, flew to India when the central banks pumped trillions of dollars to recover from the pandemic. The valuation of startups is often difficult and subjective. Many startups even with zero revenue were stratospherically valued due to the change in the valuation metrics. The traditional fundamental valuation methods like share price to earnings or forward revenue multiples were no longer used. The present valuation is almost entirely based on their ability to raise fresh funds. The founders are thereby enticed to hunt growth at the cost of profitability. Investment in a startup was driven by sentiments like fear of missing out, the urgency to make a quick buck with investments, and exit options available to investors following “The Greater Fool Theory”-A rift is created between the intrinsic value and value perceived by the investors due to the belief that there would always be a buyer who will pay the higher price. There is a lot more scope to improve even at the corporate governance level for these new-age entities. As Chief Investment Officer at a leading investment company opines companies should create an ambiance of convergence of Interest rather than a conflict of interest. Periodic reviews by investors, management, and audit committees can further help to improve corporate governance. The new-age companies should adapt to the changing consumer behavior to make their business model more viable. They can use creative methods to conserve cash and augment their revenue stream which has the potential to scale and turn them profitable. The startups with the lessons learned from introspection can course correct to see a boom not only in valuation but a boom in both valuation and value creation as well.

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Q-Commerce 101 By: Aishwarya Srivastava (Arka Jain University) It is rightly said that destruction lays forth the path for new creations. The Covid-19 pandemic disrupted supply chains, resulting in the birth of q-commerce, a unique e-commerce business model based on on-demand delivery of goods and services within 10 to 30 minutes of ordering. The quick commerce business model offers the functionality of both e-commerce (doing business over the internet) with traditional shopping (doing business in minutes) to produce a new business model that meets the growing demand for speed while shopping online.

It focuses on micro to comparatively small-quantity goods, such as groceries and stationery, as well as over-the-counter pharmaceuticals. The sellers have switched their concentration away from typical warehouses on the outskirts and towards micro-warehouses near the expected delivery location. The concerned ventures state that stocks will be limited to under 2,000 high-demand items. According to management consulting firm RedSeer, the rapid commerce sector in India is expected to reach $5.5 billion by 2025, rising 15 times its current size and surpassing other economies, including China, in terms of user acceptance." The stakes are high—a $45 billion total addressable market offers plenty of space for growth." said Abhishek Gupta, engagement manager at RedSeer, who further stated that "This industry is rapidly growing as a result of the growing popularity of online shopping among the general public." In consonance with Economic Times report, the Q-commerce platforms will grow exponentially i.e., 20-25 percent faster in not only volume but also in turnover. Quick commerce doesn't quite aspire to be another BigBazaar or Walmart unit, rather it wants to be the largest grocery and delicatessen store in an urban colony.

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So, now that we are well versed with the definition and basic functionality of the business model of q-commerce, let's dive deeper into the topic, and explore the stated venture further.

The following characteristics distinguish the q-commerce business model from other business models:  Faster Delivery: Q-principal commerce's goal is to provide faster delivery, making shopping on this platform a convenient and time-saving experience.  Convenience: The most crucial advantage of q-commerce is that it allows users to shop whenever and wherever they want by simply tapping their cellphones. Customers are not restricted to specific business hours.  Reliability: Customers may expect prompt delivery and high quality because they are wellknown brands.  Lower Pricing: Q-commerce companies frequently buy in quantity, lowering the average cost of each good and allowing them to offer attractive discounts.  Order tracking: Another characteristic of q-commerce is order tracking, which helps customers to follow their orders.  'One-stop shop': Quick commerce companies create their own apps that allow consumers to order many things from a single location.  Product availability is guaranteed: Thanks to investments in artificial intelligence and technologies that monitor demand and alter inventories in real-time, items are more likely to be accessible.  24-hour operation: Stores affiliated with q-commerce can operate 24 hours a day, 365 days a year.  Instead of holding an inventory of all types of products, q-commerce firms only list the most popular items on their apps, which saves money on warehousing and storage costs and allows the company to rent smaller locations.  Micro-warehouse: Q-commerce businesses adopt the "micro-warehouse approach," in which they rent, lease, or own micro-warehouses, which they refer to as "cloud stores" or "dark stores," in popular neighborhoods in cities with a strong online presence.  Deliveries that are strategically planned: Q-commerce companies engage or cooperate with delivery persons based on specified routes, such as 'Morning' or 'Evening.' They categorize zones within a city and guarantee that enough last-mile delivery partners are assigned to each zone based on the number of residents.

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Top-Notch Customer Experience: Q-commerce focuses on delivery speeds, customer experience, and delivery efficiency, which improves the consumer experience by allowing customers to have everything delivered straight to their doorstep in minutes. Opportunity For Delivery Partners: Large numbers of individuals working in last-mile delivery are employed by q-commerce enterprises. A substantial number of people who were previously unemployed and without a stable source of income now have job opportunities.

Every coin has two sides, and that stays true for Q-Commerce as well. Even with such an effective model, efficient delivery system, and strategized formulae for the venture, there are a few stakes that keep Q-Commerce at a disadvantage i.e., high “Startup Operational Costs”. Q-commerce delivery must construct the infrastructure and facilities required for last-mile delivery, their operations have a high starting cost. This includes establishing a logistic where they may retain their commodities, hiring and training delivery partners, and equipping them with the equipment they ought to deliver goods. Another factor that denies edge to the model is the risks to the “Existing Local Economy” The q-commerce delivery model enables enterprises to minimize or limit the need for local markets, which could affect, in fact, hurt existing local businesses because individuals may find it more convenient to obtain their basic commodities online rather than going to the local market. Furthermore, a dip in foot traffic at these local markets might have had repercussions on the whole economy of that particular area. Additionally, during the pandemic, the gradual shift in patron shopping comportment and tendency toward online, on-demand, and increased convenience has opened up new commercial frontiers for enterprises to explore. Such distribution's efficiency can be enhanced over time for increased efficiency and cost-effectiveness while also expanding the reach of these businesses to more clients all throughout the globe. The potential of this device makes it one of the finest. Q-commerce is already becoming extremely prevalent, and interest in this service is anticipated to grow, although it may take a while for industries to become lucrative and feasibly viable. According to a survey conducted in 2021, ventures emphasizing near-instant delivery would need to treble the volume and the value of daily purchases to break even. Even with the supply chain disruption caused by the coronavirus allowing these businesses to thrive, it also posed obstacles and hurdles in terms of management and distribution. The largest ones include growing needs for speedier delivery and increasing backorders, as well as staff shortages. Riders confront numerous risks at such a speed. The survey claimed that time pressure could force delivery people to exceed the speed limit, or go as far as to jump red lights. This move could herald the commencement of stricter regulations for q-commerce companies all over the world, particularly in India.

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References: 1. https://www.feedough.com/q-commerce-quick-commerce-business-model/ 2. https://www.business-standard.com/about/what-is-quick-commerce 3. https://economictimes.indiatimes.com/?back=1 4. https://www.statista.com/topics/8932/quick-commerce/#dossierKeyfigures 5. https://www.livemint.com/ Picture Credit: 1. Jagran Josh - https://www.jagranjosh.com/general-knowledge/what-is-quick-commerce1639483191-1 2. Newswire.CA https://www.newswire.ca/news-releases/quick-commerce-funding-rounds-and-industryconvergence-enabling-rapid-growth-of-last-mile-food-and-grocery-delivery-market831768838.html

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The Great Resignation and its Economic Impact By: Harsh Goyal (MDI Murshidabad)

Introduction People across the world are resigning from their employment. Stating some facts, 41% of the world's working population plans to change employment this year, and 95% of Americans are considering quitting their current jobs this year, with many already having done so. Dr. Anthony C Klotz coined the word, calling the trend a Pandemic Epiphany, and we'll try to understand why individuals are quitting their jobs, where they're going, and, most importantly, whether you should consider resigning as well. According to a survey performed by Microsoft, 41% of employees globally want to leave their jobs this year in the United States. In August of 2021, 4.3 million people, or 2.9 percent of the working population in the United States, departed their jobs. Since April 2021, 20,000,000 Americans have lost their jobs. In Germany, currently, one-third of organisations are short on skilled people, with at least 400,000 job openings. According to OECD (Organisation for Economic Co-operation and Development) data, at least 20,000,000 workers have not returned to work in 38 member countries since the Wuhan virus struck India. In Vietnam, many low-paid government workers have not returned to factories, and in the Caribbean, one out of every six workers aged 18 to 29 has quit the job. In China, there is a scarcity of workers in the Tech industry, so welcome to the “Great Resignation”. Causes Unemployment benefits, low pay, caregiving, relocation, and a lack of in-person engagement are some of the causes. The causes of the Great Resignation are complex and emerge in a variety of ways. According to an August 2021 study, more than half of workers surveyed want to hunt for a new job in the coming year. Flexible working hours and remote work are a priority for 56 percent of respondents, and some people have quit the industry entirely. Job security and better income are among top issues for employees. In August 2021, about 4.3 million Americans resigned from their jobs, a 20-year high. People are asked why they put their jobs on hold in a survey. Burnout was noted by 40% of respondents. 20% mentioned a lack of flexibility. 16% stated that their former employer did not care about their well-being. The ability to work remotely according to personal preference was cited by 40% of respondents. According to statistics, 1.4 million start-ups have been established in the US since the pandemic hit. Those who did not have the funds or skill set to hunt for new occupations chose to stay in their towns. For example, garment factory workers traded poor living conditions and human rights violations in the factories for a life of struggle at home, where at least they have family. It's no surprise that the Great Resignation is also known as a Worker’s Revolution; it's a legacy of the

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pandemic that gave people a newfound respect for themselves and their lives, they want their jobs to fit into their preferred lifestyle. Statistics

Industry

Percentage of Quits

Cumulative Quits (April’21Oct’21) In thousands

Arts, Entertainment, and Recreation Transportation, Warehousing, and Utilities

0.94

523

2.03

1130

Information

0.65

362

Professional and Business Services

8.85

4918

Health Care and Social Assistance

6.58

3657

Retail Trade

8.35

4643

Total Private

48.69

27070

Leisure and Hospitality

10.56

5869

Accommodation and Food Services

9.62

5347

Manufacturing

3.74

2078

Total

100

55597

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We discovered that the whole private sector had the largest percentage of quits, followed by leisure and hospitality, from April 2021 to October 2021. In-person jobs in generally lower-paying industries have particularly high quit rates. In April 2021, there was a considerable increase in the number of unfilled job vacancies, which continued significant over the next few months as the country attempted to equalize the impact of the pandemic.

Furthermore, the rapid drop in insured unemployment claims revealed a stunned growth in the diminishing rate, as people preferred to receive unemployment insurance for next few months until the government revised the benefit scheme's provisions.

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The Phillips curve is an economic concept that states that inflation and unemployment are inextricably linked. According to the hypothesis, economic expansion leads to inflation, which leads to more jobs and lower unemployment. When both inflation and unemployment are disturbingly high, the Phillips curve fails to support stagflation.

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Conclusion and Message Although great resignation does not have a large impact on the economy because it is only for a short period of time, it can slow down the rate of economic growth and, if continued for a long period of time, can negatively impact aggregate demand in the economy, resulting in slower economic growth. People desired a safety net following the Great Recession, so they returned to their old occupations. Then followed the pandemic, which served as a stark reminder that those who survived the virus, place far too much value on their lives to risk them. People want flexibility in terms of being able to work from home if they want to and not being penalised for it. We need to improve the hybrid model for the better and diversify it. The pandemic has given people more power over their job paths and forced them to reconsider their priorities, their lives, and occupations. Several people who worked remotely at the outbreak of the epidemic were unwilling to give up their autonomy, which is the outcome of the profound thought that people undertook during the pandemic. Employees who work from home feel freer than those who work in an office. We believe this is a wonderful opportunity for businesses to truly adapt and think about their employee relationships, and technology will play a big part in that. With the era of communication and collaboration tools, post-pandemic workers may now work anywhere, at any time. This is a huge opportunity for firms and employees to move forward into the future together.

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Individual Industry Analysis

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Data reference: https://fred.stlouisfed.org/ https://fred.stlouisfed.org/series/PEUCCCNY

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