Abstract: This paper attempts to study the factors driving the Rupee exchange rate and reasons for its sustained
depreciation over the period since 1993. A statistical analysis is carried out to identify significant factors and
regression models are developed to validate the assumptions. Solutions that can mitigate the depreciation of the
Rupee are presented
Business Analysis and Research Lab SICSR
Showing posts with label energy. Show all posts
Showing posts with label energy. Show all posts
Monday, March 21, 2016
Rupee Exchange Rate Dynamics from 1993 to 2011: A Study of Factors Driving the Exchange Rate
Saturday, December 12, 2015
The Paris Agreement of COP 21
The Paris Agreement of the COP21 has the following salient features:
1. Urging all parties to ratify and implement the Doha Amendment to the Kyoto Protocol.
Present ratification status of the Doha Amendment can be seen here: Link
The Doha Amendment to Kyoto Protocol: At a glance (This is roughly 20% emission reductions over the 1990 levels.)
2. Setup a fund by 2020 that provides 100 billion USD annually for mitigation and adoption.
3. Notes that 55 Gigatonnes of emissions reductions are necessary by 2030 to keep the temperature rise less than 2 degrees celsius in the worst case. The intended nationally determined contributions aggregated over all countries should fall in this range.
Link to the full document:
Present ratification status of the Doha Amendment can be seen here: Link
The Doha Amendment to Kyoto Protocol: At a glance (This is roughly 20% emission reductions over the 1990 levels.)
2. Setup a fund by 2020 that provides 100 billion USD annually for mitigation and adoption.
3. Notes that 55 Gigatonnes of emissions reductions are necessary by 2030 to keep the temperature rise less than 2 degrees celsius in the worst case. The intended nationally determined contributions aggregated over all countries should fall in this range.
Link to the full document:
Sunday, November 29, 2015
Climate Change Summit Paris 2015
The 2015 United Nations Climate Change Summit is underway in Paris now. At the previous summit in Copenhagen in 2009, it was agreed to control carbon emissions to the point that the temperature rise is below 2 degrees celsius. There were no legally binding agreements signed by the participating nations. A carbon trading system was proposed and global carbon trading market was stated as one of the goals of the COP15 summit.
Controlling global warming by reducing carbon emissions is important to sustain life on this planet. High levels of pollution have made cities in China inhabitable and people have to wear face masks on their daily commute to work. The rate at which plant and animal species become extinct has increased post the advent of the industrial age. Studies are showing that human productivity is decreasing in nations having heavy increases in temperature.
In the run up to the Climate Summit 2015, America has pledged that by 2025 it will cut its greenhouse-gas emissions by 26-28% below 2005 levels. South Korea says that by 2030 its emissions will be 37% below where they would be if the recent upward trend in emissions were projected forward.
What makes it difficult to get countries to a consensus on emissions reduction is the fact that the cost at face value of sustainable environmentally friendly business practices is more than that of more polluting practices. However, the recent advances in technology have made this argument turn on its head. As we had noted earlier on this blog, rising cost of coal imports and inflation in India have increased the costs of coal based thermal power plants to a point where wind energy is competitive without subsidies and solar power has come very close to break-even. The indirect benefits of a cleaner power source are also many, primary one being the healthier life of the citizens of the country.
Apart from this, carbon trading to offset the emissions is also gaining ground around the world. The revenue from taxing the emissions is used to fund environmentally friendly energy sources. I think it would be advisable to target areas where eco friendly technologies have reached free market pricing and have agreements on the use of these technologies. For example, electric cars, high speed rail, nuclear and wind power are some of the technologies that are at market potential and there should be agreements on the use of these technologies and their increased adoption. Instead of focusing on how much to reduce the emissions, the discussions have to now move to how to reduce emissions since several environmentally friendly alternatives are available which are competitive on the free market.
A global market for trading carbon offsets could be a good idea and carbon credits could potentially become an international currency. The price of a carbon credit would be low in a country which pollutes less and high in a country which pollutes more. Industries could purchase carbon credits from such countries that pollute less and get a license to pollute to that extent. The money earned by selling a carbon credit would be invested in developing eco friendly technologies and solutions. The carbon credit system could be internationally regulated and have a single controller such as the United Nations. The UN could then set quantitative targets on how much emissions are permissible over a given span of time and enforce it with a fine (carbon tax) on industries that don't have the required carbon credits. An Agreement on such a carbon cap and trading system should be the aim of the 2015 Climate Summit in Paris.
In the run up to the Climate Summit 2015, America has pledged that by 2025 it will cut its greenhouse-gas emissions by 26-28% below 2005 levels. South Korea says that by 2030 its emissions will be 37% below where they would be if the recent upward trend in emissions were projected forward.
What makes it difficult to get countries to a consensus on emissions reduction is the fact that the cost at face value of sustainable environmentally friendly business practices is more than that of more polluting practices. However, the recent advances in technology have made this argument turn on its head. As we had noted earlier on this blog, rising cost of coal imports and inflation in India have increased the costs of coal based thermal power plants to a point where wind energy is competitive without subsidies and solar power has come very close to break-even. The indirect benefits of a cleaner power source are also many, primary one being the healthier life of the citizens of the country.
Apart from this, carbon trading to offset the emissions is also gaining ground around the world. The revenue from taxing the emissions is used to fund environmentally friendly energy sources. I think it would be advisable to target areas where eco friendly technologies have reached free market pricing and have agreements on the use of these technologies. For example, electric cars, high speed rail, nuclear and wind power are some of the technologies that are at market potential and there should be agreements on the use of these technologies and their increased adoption. Instead of focusing on how much to reduce the emissions, the discussions have to now move to how to reduce emissions since several environmentally friendly alternatives are available which are competitive on the free market.
A global market for trading carbon offsets could be a good idea and carbon credits could potentially become an international currency. The price of a carbon credit would be low in a country which pollutes less and high in a country which pollutes more. Industries could purchase carbon credits from such countries that pollute less and get a license to pollute to that extent. The money earned by selling a carbon credit would be invested in developing eco friendly technologies and solutions. The carbon credit system could be internationally regulated and have a single controller such as the United Nations. The UN could then set quantitative targets on how much emissions are permissible over a given span of time and enforce it with a fine (carbon tax) on industries that don't have the required carbon credits. An Agreement on such a carbon cap and trading system should be the aim of the 2015 Climate Summit in Paris.
Wednesday, October 21, 2015
Impact Of Rupee Exchange Rate On Business Opportunities In India
We published a research paper titled "Impact Of Rupee Exchange Rate On Business Opportunities In India" in the IOSR Journal of Economics and Finance and the paper can be accessed here: Link to the journal
In this paper, we have presented the impact of Rupee exchange rate on business opportunities in India from a macro economic perspective considering the indicators such as Consumer Price Inflation, Gross Domestic Product and Index Of Industrial Production.
Abstract: In this paper, we present an analysis of the macro economy in India with respect to the exchange rate
of the Rupee and de regulation of oil prices. These 2 factors have been critical in deciding the business
competitiveness of the economy and their individual effects are studied. Various business competencies arising
from strong and weak Rupee as well as de-regulated prices of oil are discussed.
In continuation with the analysis expressed in this paper, we would like to share the following analysis:
The Rupee exchange rate in India is linked to the trade deficit (imports - exports). Higher trade deficits lead to a weaker Rupee. Considering an economy which has certain total imports x and certain total exports y, if the exports start dropping and imports (of consumer goods) start increasing, it might be a cause of concern (on the competitiveness of the economy). A currency depreciation might boost the exports in the short run, by making them cheaper.
But consider the case of India. Here the primary imports are all in energy: oil, natural gas and coal. When the imports increase, we are importing more energy, and that is because the economy is doing well and we are producing and selling more (domestically and internationally). In this case, should the Rupee depreciate with increased imports? Think about it.
(Petroleum accounts for 34% of India's imports. Data source at tradingeconomics.com)
(Petroleum accounts for 34% of India's imports. Data source at tradingeconomics.com)
On another note, Japan manages to import energy (oil) to meet 42% of its energy needs, but does not see any inflation even if the Yen depreciates from 75 to a US Dollar to 100 to a US Dollar. This is not the case with India. As is evident from the above research paper, a depreciation of the Rupee vs US Dollar will lead to higher inflation in the country (data from 2010 to 2014).
The below graph shows the energy imports in India as a percent of total (Data from: tradingeconomics.com)
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