Car sales post slowest growth in 27 months in June

Higher interest rates, rise in fuel prices and the 13-day strike at Maruti's Manesar plant affected consumers' decision to buy vehicles," SIAM president Pawan Goenka noted

New Delhi: Domestic passenger car sales saw its slowest growth in 27 months in June this year at 1.62%, mainly due to hikes in lending rates and production loss due to the 13-day strike at Maruti Suzuki's Manesar unit, reports PTI.

Car sales in the country stood at 1,43,370 units in June this year against 1,41,086 units in the same month last year, according to figures released by the Society of Indian Automobile Manufacturers (SIAM) today.

"This is the slowest growth rate since March 2009, when the increase was just 1.16%," SIAM senior director Sugato Sen told reporters here.

The auto industry has started slowing down in this fiscal with the passenger car segment growing by only 7% in May. Before that, that car sales grew by just single digit was in June 2009 at 8.23%.

"All segments grew moderately. Interest rates hike and rising fuel prices have affected the consumers' decision to buy vehicles," SIAM president Pawan Goenka said.

The passenger vehicle segment's lower than expected performance was also because of the 13-day long strike at the market leader Maruti Suzuki's plant in June that had resulted in production loss of about 12,600 units.

"Maruti is the market leader in the car segment. The production loss due to the major strike at its plant affected the entire segment's performance. Another major car maker Tata Motors' sales were also down," Mr Goenka said.

During the month, Maruti Suzuki India posted a 6.39% decline in domestic car sales at 57,653 units. Rival Hyundai Motor India's sales grew by 10.73% at 30,302. Tata Motors saw a decline of 23.49% in sales to 18,522 units during the month.

According to SIAM, the total two-wheeler sales increased by 14.59% last month to 10,71,425 units from 9,34,975 units in June 2010.

Motorcycle sales grew by 14.97% during the month to 8,25,323 units from 7,17,859 units in the corresponding month last year.

Hero Honda continued its impressive performance with a 19.55% increase in sales to 4,68,310 units. Rival Bajaj Auto also posted a 12.06% increase to 2,08,883 units during the month, while Honda Motorcycle and Scooter India (HMSI) saw its bike sales grow by 4.31% to 61,435 units.

Chennai-based TVS Motor Co saw its motorcycle sales falling marginally to 50,835 units during the month.

The scooters segment witnessed a growth of 10.99% in sales during June this year to 1,82,653 units from 1,64,567 units in the same month last year.

HMSI's scooter sales during the month were down 2.87% to 76,310 units, while that of TVS Motor Co grew by 12.46% at 41,012 units. Hero Honda's scooter sales during the month grew by 35.10% to 33,253 units.

Three-wheeler sales during June grew by 4.33% to 40,550 units as against 38,868 in the same month last year.

Sales of commercial vehicles jumped by 17.83% to 62,009 units from 52,627 units in the year-ago period.

Light commercial vehicles sales grew by 29.35% to 34,393 units from 26,590 units last year. Medium and heavy commercial vehicle sales stood at 27,616 units as against 26,037 units in June last year, up 6.06%, SIAM said.

Total sales of vehicles across categories registered a growth of 12.84% to 13,62,984 units in June compared to 12,07,934 units in the same month last year, it added.

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A train called hope: Almost all of India is on this track

After taking a round-trip across the country, here is the key take-away: A number of our citizens are surviving on hope. Urban citizens should stop thinking that they decide things—ending this sequence of scams is the least we can do

A fortnight tramping across India by train, half the time sleeping overnight in a 2nd class sleeper, brings matters into perspective—more than what a year of seminars and conferences in Delhi can ever hope to do. In fact, this journey is highly recommended as a surefire way of getting your feet back on the ground, and preferably by the second ranking or lower trains on any route, the ones that you can be sure the VIPs don't use.

It also helps if you use the tier-II (polite word for decrepit, if you ask me) terminals like Delhi's Sarai Rohilla, Yasvantpur/Bengaluru or Mumbai's LTT (Lokmanya Tilak Terminus)/Kurla, where Indian Railways seem to have just given up with many of the basic facilities we expect even on so-called semi-urban 'halts'.

So, I travelled from Hazarat Nizamuddin/New Delhi to Yasvantpur/Bengaluru by the Sampark Kranti Express—across the decay and rot surrounding Delhi (known as heartland India), through rapidly-rejuvenating Bundelkhand and the greens of Chambal. Then my trip took me past jungles which seem to have stood still since the British forced the railway lines through, deeper past Maoist, as well as Telengana hotspots, before a brief sojourn through the late Sai Baba's wonderland.

Next, a very fast overnighter from Yasvantpur/Bengaluru to Kottayam (central Kerala) by the Garib Rath with a look-in at Thrissur—a kind of wealthy area which is a welcome change-this is an exposure to the reality of mountain Kerala, which 20 visits in the past to coastal Kerala could not even come close to. Back again, Eranakulum Junction/Kochi South to Bengaluru City by the overnight express, where Tamil Nadu enters the equation.

And finally, in a concession to luxury, I was pelting from Yasvantpur/Bengaluru to the fist in solar plexus that is Delhi's Sarai Rohilla Railway Station by Didi's wonder non-stop train, the Duronto—the poor man's alternative, faster than the Rajdhani experience with bad food.

There are going to be separate reports about different aspects which I set out to learn more about, but here are some of the more important observations—and no surprises, for a middle class on the move, many of these tend to fit in with the issues that Moneylife writes about. They pertain to the fiscal aspects of new middle class India. Often self-employed, often also holding a job in addition, and not a single 'sad-luck brought me down' kind of story—if anything, the trip was full of meeting up with people who had either done well and pulled themselves up or were trying to do so again despite failures.

Yes, regardless of what is in the news, the one outstanding feature of this cross-country run was that I met a lot of positive people, and came back more positive myself.

I also had a relapse of what appears to be chikungunya in mosquito-central, open-drain, tony south Delhi.

Of course, there was the mandatory "freedom fighter" pass holder, with an "attendant", he looked younger than me.

Here's a brief first report.

1) There was not a single day or journey on the trains when people were not approached by somebody trying to enrol more people for fiscal products—like the Speak Asia scheme. Armed with laptops and Internet, as well as fairly well-designed folders and charts, they tramped the train relentlessly, looking for more "panelists". These peddlers of dreams were polite to a fault, and not at all aggressive, but determined all the same.
 
The pitch was like this: Hand out Rs11,000 ( in cash), less some discount, and you get two postdated cheques of Rs4,000 right away in exchange, as well as some discount coupons of the sort you get in magazines and time-share meetings, along with some mumbo-jumbo about personalised Web-pages, Internet accounts and a great future like the pie in the sky. Notably, they moved off very fast if people started asking too many questions.
 
In a way, they were as much a part of the scenery as the other regular sales-persons and mendicants that make railway journeys so exciting—as long as you keep an eye on your baggage. Eunuchs, tribal and other holy men of all persuasions and denominations, songsters, travelling merchants, wayside produce sellers, ear-cleaners and more—add to them these evolutionary upgrades of the chit fund and 'kuri' purveyors.
 
If you were not interested, there were always more 'normal' financial products available, and hey—no need to give money now. Just provide your name and address and a date in the future, and somebody in your town would meet you at your home at your convenience-or you could go to their office. National coverage assured.
 
This was not some 'one-off sell while travel' kind of opportunism. This was absolutely and obviously a well-designed and executed system moving to a plan. Time-tables by heart, territories marked out, ensuring no interference by others, complicit with the assortment of "authorities" on the train, every train except the Duronto had these sellers of financial schemes of all sorts on board.{break}
2) I must have spoken to over 100 people of all sorts. Agreed, this is not a very large representative sample, but it is not anecdotal either, and there were many others listening—the vibes one got was that they did not disagree. And this is what they said—not one of them had not been through some episode or the other involving some element of dis-satisfaction with the ATM experiences they'd had so far.

Whether it was mutilated or counterfeit notes, incorrect entries, plain old-fashioned scams at ATMs, lack of coverage in cases where cards were lost, or similar issues—everybody had some grouse or the other. Typically, for a figure of up to Rs1,500-Rs2,000, beyond a phone call to a trained parrot at a call centre or an email exchange with a trained chimpanzee, and not much further. If the problem was resolved, it was because of luck, or because some friend/relative knew somebody at a bank… or similar.

One big reason for this sort of experience is that the bankers know that sufficient customer centric options are not available—especially as you move away from urban centres. The bank manager in a small town is still pretty much the boss of all he surveys, and the social as well as economic grips he has on matters precludes many forms of redressal that a customer may hope to utilise, even if she knew about them.

There was one case I heard of an ex-armed forces official, who had been tricked out of Rs40,000 in ATMs in a Western UP town, where eventually the bank manager finally told him that he could do his worst—nothing would happen. Nothing did. And this was an educated person, retired, living peacefully in Bengaluru, nothing to fear—who just gave up after 4 months of trying.

3) There were other observations, which may not sound like news to most, but all the same, they bear reportage.

# Joining salaries for fresh "engineers" at many MNCs (multinational companies) and other IT companies in the Bengaluru area are now in the Rs13,000-Rs17,000 a month range. There are no more hefty joining bonuses or free air tickets—it is "land up in Bengaluru and report to the office at a particular date, time or place". There are now "agents" who "assist" in placements for a fee.

Basically, from pre-school nursery through college and now first job, there are agents for a fee at every step.

# Thrissur is still the hotspot for all sorts of chit funds and quick-money schemes. A separate report on that amazing town, after some more research, which will include another trip. In brief, you choose the interest you want to earn, and then you get a scheme to fit. Once interest goes past the 3% per month range, then getting the principal amount back becomes extremely risky.

# Everybody in the Bengaluru-Kerala belt always knew that the DMK families were into making big money. That's not news. The real news is that apparently everybody in politics in Tamil Nadu has been into making money, literally, for decades. At one time this money was made in Singapore and Malaysia, till they became strict on counterfeit currencies, now this money is "made in India"—in the forests between Bangalore and Kerala.

# Nobody believes that satisfaction surveys or anonymous research are really true or anonymous. If nothing else, the presence of the digital camera at every breath makes people wary about saying anything if there is a form with a pen, or a microphone with camera—they tend to say what they think they are expected to say. This is with the educated middle class, which has a stake in staying in the clear, away from all controversy, and not the others whom we see on television all the time.

# Eunuchs are not a new phenomenon, but their sheer presence and aggression on trains, especially in the non-air-conditioned classes, leaves one gasping in amazement. We do not experience their tender mercies in our air-conditioned cocoons, and the worst of it is endured by those in the "general" coaches—the ones that are unreserved. It is absolutely apparent that here, again, some amount of connivance is probably a part of matters, and on this one single head alone the Indian Railways needs to pull up its socks.
 
Over and above everything else, if there was one sentiment that this correspondent caught a whiff of in the multiple scents that floated across on trips like these, then it was that some amount of rational thinking is kicking in after the first flush of spend—like there was no tomorrow has blown away. Not just with the older lot, but also with the younger people. There were many episodes, but just one:

Late at night on the Kochi-Bengaluru leg, while the rest of the train was asleep, I found myself talking to this group of youngsters, fresh out of new generation engineering colleges. Returning from what was described as a 2-week "trial plus training plus selection" incubation by one of the info-tech majors, those lucky enough to be selected would start at about Rs16,000 a month, and literally sign away all their rights for the next 3 years.

Their parents had paid between Rs6 lakh and Rs12 lakh for 4 years in what they described as "time-pass" engineering colleges, these sons of small shopkeepers and farmers looking for better lives. UPSC exams were considered to be unachievable, the Forces were not an option due to a variety of reasons—including lack of decent marks at the CBSE/12th level, and an H1-b visa to the US was not an automatic assumption.

Do the math. Once selected—and that would be the luckier ones-they would end up with close to no disposable incomes—even if they spend carefully. Those not selected-would get "entry level" jobs if lucky, in the manufacturing sector, for between Rs6,000-Rs8,000 a month.

But hey, each one of these youngsters was gung-ho that with some work experience, and a little bit of capital, they would do something on their own. Soon.

And that was the take-away from this train round-trip - there is a country of people out there who have a lot of hope. And those of us sitting in the cities who think we decide things—we better not let them down with our never-ending collection of scams and loots. Because if we do, all they have to do is take a train and come to the city.

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COMMENTS

Sandeep

5 years ago

India is full of scam so its better to think twice or thrice before coming into any conclusion

RNandakumar

5 years ago

Congratulations Mr.Veeresh for undertaking a 'Rail-Yatra' to feel the pulse of the middle-class. Perhaps southern region would have allowed you to travel without the disturbance of season-ticket travellers in your sleeper -class travel. My experience of the other regions was that day time sleep in the reserved sleepers was almost impossible with TTEs allowing extra travellers to their choice. I had to shift to A/C travel mode purely on comfort basis though it does bite my purse.

REPLY

malq

In Reply to RNandakumar 5 years ago

nandakumar ji, valid points, to get to the Southern region (where also ample number of seasons ticket holders board trains during the day . . .) one passes through North and Central India. My next trip, however, is through UP and Bihar for exactly this reason, by the 2nd and 3rd tier trains. Thank you for writing in.

nagesh kini

5 years ago

T thoroughly enjoyed the cross country journey with Veeresh. It took be back to the 1980s when I did New Delhi-Madras-Bangalore as they were known before name change. I want him to report on the Konkan Railway all along the West Coast running along the sea coast - no not by AC but the Gandhi class enjoying the sea breeze and smells and sounds cutting through the lush green Western Ghats in monsoon in the Ganapati season.
India with its diversity is great to travel to see more.
Looking forward to read more of your travelogues Veeresh.

REPLY

malini ganesh

In Reply to nagesh kini 5 years ago

YOU ARE LIVING IN A FOOLS PARADISE IF YOU THINK THAT ADVERTISING REVENUE INCREASES BECAUSE A FEW OF YOU SPEAKASIANS READ ANY WEBSITE. I AM FROM A SEO-DIGITAL MARKETING COMPANY AND CAN SAY WITH CONFIDENCE THAT MONEYLIFE WOULD HAVE EARNED NEGLIGIBLE INCREASE IN REVENUES.
IT IS UNINFORMED PEOPLE LIKE YOU WHO BELIEVE THAT SPEAKASIA HAS ANY KIND OF SUSTAINABLE BUSINESS MODEL. WHY DONT YOU STOP HOUNDING THE FEW PUBLICATIONS THAT ACTUALLY TRY AND KEEP PEOPLE FROM LOSING MONEY?

ALSO THIS MAGAZINE HAS BEEN WRITING ABOUT SCAMS LIKE SPEAK ASIA FOR ALL THE PAST 6 YEARS - I READ ABOUT GOLD QUEST HERE - NOBODY WAS WRITING ABOUT IT. I ALSO READ ANOTHER COVER STORY WHICH I CANT REMEMBER, SOMEWHERE IN THE NORTH EAST - BIHAR OR ORISSA OR SOMETHING. SO STOP THIS TIRESOME POSTING AND DO SOMETHING ELSE. WE ARE REGULAR READERS WHO DONT WANT YOU HERE.

Sudhakar

5 years ago

In speakasia is not there, then i would have not found your money life foundation which was running from 2006.

I understand that your ad revenue was increased because of speakasia article and i hope you want to maintain it.

I know you wont approve it, if you think you are really have good enough to publish your site without any ads inserted. Then we will agree with your comments on speakasia.

Go out and search for scams. punishing 1 good is equal to death. So prove only what you could . Because speakasia is already proved to 24 lakh indians already.

REPLY

aware

In Reply to Sudhakar 5 years ago

Sudhakar:- YOU ARE LIVING IN A FOOLS PARADISE IF YOU THINK THAT ADVERTISING REVENUE INCREASES BECAUSE A FEW OF YOU SPEAKASIANS READ ANY WEBSITE. I AM FROM A SEO-DIGITAL MARKETING COMPANY AND CAN SAY WITH CONFIDENCE THAT MONEYLIFE WOULD HAVE EARNED NEGLIGIBLE INCREASE IN REVENUES.
IT IS UNINFORMED PEOPLE LIKE YOU WHO BELIEVE THAT SPEAKASIA HAS ANY KIND OF SUSTAINABLE BUSINESS MODEL. WHY DONT YOU STOP HOUNDING THE FEW PUBLICATIONS THAT ACTUALLY TRY AND KEEP PEOPLE FROM LOSING MONEY?

ALSO THIS MAGAZINE HAS BEEN WRITING ABOUT SCAMS LIKE SPEAK ASIA FOR ALL THE PAST 6 YEARS - I READ ABOUT GOLD QUEST HERE - NOBODY WAS WRITING ABOUT IT. I ALSO READ ANOTHER COVER STORY WHICH I CANT REMEMBER, SOMEWHERE IN THE NORTH EAST - BIHAR OR ORISSA OR SOMETHING. SO STOP THIS TIRESOME POSTING AND DO SOMETHING ELSE. WE ARE REGULAR READERS WHO DONT WANT YOU HERE.

+++

ASHISH PANDIT

In Reply to aware 5 years ago

Aware and Malini Ganesh same? Just few minutes back she claimed she is from some blah blah industry.....i would like her to get the traffic reports before 11th may and after that for 60 days pls do this.

Sudhakar

In Reply to ASHISH PANDIT 5 years ago

you are on the point Ashih pandit. Could you show there analytics and adsense report of the last 100 days.

Also to others , still gold guest is running perfectly. But not only in your state bcoz of politicians.

SpeakAsia is proven in terms of payment, so whom these guys and gals were saying as saving. And who has lost it so far from SpeakAsia , not even 1 people from 24 lakh subscribers have lost their money, then what is there to shave or save. :)

KIDHORSINH

5 years ago

NICE ARTICLE TO READ

RajeevD

5 years ago

Every country has tons of scams, not only India. What I find interesting is that Apple just released an iPhone app a few days ago, called Scam Detector, which exposes in detail over 350 of the most notorious scams in the world. It is worth checking it out, if you have an iPhone. There is their info: http://www.scam-detector.com. It’s kinda cool, actually.

Prashant

5 years ago

Moneylife is reluctant to write against speakasia directly because they have been slapped with a legal notice from speakasia recently as mentioned by sucheta dalal in her tweets . . . . moneylife is dead!

REPLY

malq

In Reply to Prashant 5 years ago

Hello Prashant - thank you for writing in.

As far as a legal notice is concerned, please refrain from trying to influence the legal system or commenting on it.

rgds/

Prashant

In Reply to malq 5 years ago

Thanks for not refraining me this time . . . . by the way I am nowhere in a position to influence the legal system . . .Media has power to do that.

Regards

san tuk

In Reply to Prashant 5 years ago

little surprised at this prashant guy. was searching speakasia because i havent got my money. i come here for updates. where else do you get sober updated stuff on speakasia?
also , if moneylife is dead why is he here to comment? Frankly Prashant, if you are from SpeakAsia, do me a favour. Please tell me what is happening to our payments?

vivek

5 years ago

i am shocked to learn you were not aware of such a realty...

. since i come from rural background and depsite staying in metros for more than a decade now, i can say that, except for cheap mobile telephony, things have turned worse now in terms of education, development, healthcare, govt service etc.

In 1990s, comman man (which you observed) complained against wrong services and had belief that it will be solved. Corruption was there but it was firm belief that some 10% to 20% jobs/work will be done on merit basis. Now whenever i revisit my places, everyfolk believes that 100% jobs/works done by corruption. Policiticians have led commonfolks to belive that giving money to get work done is ok. Now people talk about excessive money asked/corrpution and in a way that reasonable money asked/corruption is ok.

In education, we spent a few thousnads in entitre four years of my engg from a reputed college whereas now a 'D" grade clolege charges lakhs with no faculty and infrastructure. Passes students,who do not get any job, become faculty. Uneducated/unaware parents are not aware of standards but spend money on children in that "hope" which you mentioned. Children are not aware how to decide and so do engg /med as commonfolks still think that engg /med is better than humanities and social sciences.

As a result corporate world engages them for 4k to 6k per month in clerical jobs. I can show you engr/MBAs selling credit cards, water purifiers, insurance policies, cars, loans, homes... with some sales related commission their salaries increase 10k+ and corporates give them designation of Manager to help them boost so called social status.So private sector so well served supply of low cost profesionally qualified youth. Some % are taken by the cos you mentioed in your report.

The end result is that hardly 10% ( my guesss) of youth are able to make a mark in India and abroad. Rest 90% are not able to a mark due to lack of merit, qualification and opportunities. This lot is incentivised intermittently to look for shorthcutrs of success/jobs/admissions/earning money and there are agents who help in such deals. So these rest 90% of India's part , (with varying degree of commitment) become followers of the message of partialty/ favoristism/ corruption. First they pay to Policticians/SadhuBabas to get favor and once these 90% get a position and they do it themselves as a return on investment.

Not only middle class folks, their graduate children also do not know how to use RTI. Accepting any injustice as a matter of fate is well taught by so called Politicians/SadhuBabas and the more people face corrpution and injustice , the more followers these Politicians/SadhuBabas have.

Any way it is good if those who intend to influence opinions are keen to check ground realties.

REPLY

malq

In Reply to vivek 5 years ago

Thank you for writing in, Vivek ji, and your observations are quite correct. Except one thing - and that people appear to have reconciled themselves. I would like to think that there appears to be some sort of difference in my observations - more often than not, I have also met youngsters who fit the pattern you mentioned, but are now at the same time aware that somehow they can improve matters. Maybe what they lack is direction as well as guidance - but the spirit is there. Certainly, many will fall for the Sadhu / Baba / Politician combines, but there are those who are able to look beyond too.

Once again, thank you for writing in.

ASHISH PANDIT

5 years ago

The intention of writing ....Brief Report...point 1)....
There is not Point 2)...
The exact purpose of including name SpeakAsia?
Whats the essence of wirte up? Indian Railways?
Why you are in bandwagon of those journalists from where only paid out or sold out opinions comes? This country already had lost hopes on journalism and looking at judiciary the last hope. I have been following all articles coming out from you so called Moneylife foundation about SpeakAsia but trust me nothing you could prove absolutely nothing. Moreover what you have shown is how uneducated you are about indian laws. When I tried to argue with your madam through this medium my opinions are blocked. only those are allowed which are singing her tunes of anti speak asia crusade.
Be greatful to speakasia that your website got good hits and advertisements revenue there of.
If your write up would have been mentioning only about indian railway I would have extended my kudos to you, but suddenly the name popped up speak asia? why? I hope your madam allows you to publish my comments.
You and your organization knows many more schemes which have blessings of big wigs but you just cant do anything against them. Just cant do anything.
If you really have intention to do something related to money circulation only, kindly do some research on CIRCULATION fake currencies in this country and come out with facts. Just do it. Dare it. YOU JUST CANT DO IT SIR.

REPLY

malq

In Reply to ASHISH PANDIT 5 years ago

Ashish ji, thank you for writing in.

1) On fake currencies, please read the following, and also await a follow-up article:-
http://www.moneylife.in/article/78/7202....
http://www.moneylife.in/article/78/7245....
http://www.moneylife.in/article/78/7308....

We are aware of the subject, and believe me, we are working on some aspects. Can't be alone, your support is solicited.

2) On SPEAKASIA, it just so happens that their people appear to be everywhere, this morning while going for a walk one newspaper selling young man also tried to make me a member. So be it.

3) On proof, what can we say, till today those who sell tobacco products say "no proof", the mobile phone suppliers they say "no proof", the manufacturers of soft drinks say "no proof" - even our Government says "no proof" for so many scams.

Our job to observe and report back, we are like mirrors to society, and if some people do not like what they see - then they are better advised to improve themselves, no?

Humbly submitted.

ASHISH PANDIT

In Reply to malq 5 years ago

Dear malqji,
1) All three very generic reports, involving nobody as responsible.
I dont want to trust that you didnt know following while writing these three parts of fake currency
http://www.youtube.com/watch?v=LhU7MZgf2...

http://www.youtube.com/watch?v=LhU7MZgf2...

Please comment on potency of your write up on fake currency.

Include name of Dela Rue and make fourth part of your seriese on fake currency. Get the proof and send it to all courts of India including supreme court and all media houses.

2) I am happy you see speak asians every where, this you didnt notice when kar lo duniya mutthi me fone service was launched in India?

3) On proofs I want to say that you journalists get the proof but you trade it. You dont use those proofs for the benefit of society. You create the sesation holding that proof and then trade it with responsibles. You people never go to judiciary and hand over those proofs.

This is also the observation of society of whose mirror you are.

Regards.

malq

In Reply to ASHISH PANDIT 5 years ago

Ashish ji, thank you for your leads, and yes, De La Rue does deserve more publicity as well as exposure and shall be done.

The reports are the best I could do. Your help appreciated.

ASHISH PANDIT

5 years ago

What Non sense is this write up?

REPLY

malq

In Reply to ASHISH PANDIT 5 years ago

Dear Ashish - many thanks for your indepth comment and query.

May I request you to please elucidate and articulate specifically which parts you did not understand? Humbly submitted.

malq

5 years ago

Very soon after I submitted this came news of the terrible Kalka Mail accident just East of Kanpur at Malwan. For a prestigious train now down on bad times, once known as 1Up/2Down, this was personal - I have used this train a lot in the pre-Rajdhani days. Early grapevine hints at sabotage or worse, given the political "situation" in the Western UP area, but one simple question arises - for a train with a maximum rated speed of 110kmph, to be running at close to maximum at 108kmph, in an overloaded scenario, raises uncomfortable questions. The engine being used was a WAP-7, normally set aside for much higher speeds (capable of 160 kmph), and pairing it with a train that required multiple stop/go schedules, was asking for trouble.

More will emerge, certainly, but till then - safety on rails needs to also do away with this fascination for relentless increase in top speeds required from our express trains.

Credit ratings agencies: The truth does not belong to any one

Ratings agencies are an important source of information for investors. However, it is difficult to judge the accuracy of the information because while ratings agencies may have the capacity to run simulations on a given set of assumptions, they cannot be certain about the information given to them

There is a common expression in English, 'There are three types of lies: lies, damn lies and statistics.' There have been many attempts to attribute the expression to a person without success. The closest and earliest seems to be in a different area, the law. In a reference dated to 1885, the quote goes "A well-known lawyer, now a judge, once grouped witnesses into three classes: simple liars, damned liars, and experts." For investors there can be nothing more important than statistics and experts. One of the most difficult things for markets to do is to judge the accuracy of information. But to make money this analysis is perhaps the most important of all.

One excellent way to determine the quality of information is to see who is attacking it. One appalling example came recently from the president of the European Commission Josée Barroso. This week Moody's downgraded Portugal's bonds four notches to junk. President Barroso responded by accusing Moody's of "mistakes and exaggerations". He felt that the experts at Moody's were incompetent to make the determination of Portugal's financial health. Instead he proclaimed that "our institutions know Portugal a little bit better". Perhaps, but as everyone is well aware, President Barroso's institutions have a bit of a bias.

The bias was echoed by Wolfgang Schäuble, the German finance minister, who said "We can't understand the basis of this announcement," and then threatened "to break the oligopoly of the ratings agencies." Both statements basically confirmed what the markets knew anyway, that Portugal's bonds were junk and that Moody's recognition was a rather late confirmation.
 
It was not just the Europeans who were annoyed with the ratings agencies that had given them bad marks. The American government was annoyed as well. When S&P cut its outlook for US bonds in the midst of budget negotiations between the White House and congressional Republicans, senior US Treasury officials questioned the timing and accused S&P of being misinformed about the budget talks.
 
It is not that the ratings agencies have never been wrong before. They are still recovering from their horrendous calls. Four weeks after Moody's rated Enron's debt as investment-grade, the company declared bankruptcy and defaulted on its bonds. But what really caused the credit agencies downfall was their work rating structured finance/subprime.

Structured finance was a method developed in the 1980s to turn many disparate mortgage loans into standardised, regimented and easy-to-assess bonds. The process could be manipulated to provide different degrees of risk. Exactly how the deal was structured depended upon what rating it was trying to get. So the ratings agencies were brought on board early, rather than after the products were created. This totally changed the ratings agency's bias. They were no longer an independent expert witness, but were providing a service for clients. In the case of structured finance, it meant that they were working for the creators of the products, the investment banks, and not investors. The rest, as they say, is history.

Because the ratings agencies have a particular bias that governments don't like, the governments decided that since they are free from bias, that they should create their own taxpayer funded ratings agencies. A plan by the European Union (EU) fortunately received a poor reception from the European Central Bank because it would need "extensive data, models and experienced staff" and could take years for it to become fully effective."

Although start-up problems prevented the formation of a ratings agency owned by the EU, they did not bother China. China has three credit ratings agencies, Chengxin International Rating Co, which is 49% owned by Moody's, and China Lianhe Credit Rating Co, 49% owned by Fitch Ratings Inc. The third and most interesting is Dagong. We don't really know exactly who owns Dagong. It is not revealed on their web site. We do know that it works closely with the Chinese government and at times can be particularly protective of what it considers its 'national sovereignty'.

It was denied an application by the US securities watchdog, the Securities and Exchange Commission (SEC), to become a "nationally recognised statistical rating organization", or NRSRO, a designation that allows a firm's ratings to be used as benchmarks in US laws and regulations, because "it was not possible at this time for Dagong to comply with the record keeping, production and examination requirements of the federal securities laws". Dagong refused to comply because it said it would have to remove 'state secrets' from documents requested by the SEC.

So which expert is right? Well, none of them. Moody's ratings software has the ability to run over a million simulations on a given set of assumptions, but part of their problem were errors in the code to say nothing of the information given to them. So investors like jurors at a trial must weigh the word of an expert against their bias and remember that the truth does not belong to any one.

(The writer is president of Emerging Market Strategies and can be contacted at [email protected]  or [email protected].)

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