In this week's wrapup, we talk about how banks are being nudged into reducing interest rates, the government's plan to revive the economy, Basmati wars, why the rich keep getting richer, and whether the new Motor Regulation Act actually worked.
The Changing face of Insurance industry
Life insurance products have been synonymous with LIC since time immemorial. But ever since the government opened up the industry to private players, a lot of companies have been making considerable headway. And perhaps one of the leading players in the recent past has been HDFC Life — a company that’s focused on selling long-term life insurance products. So in this week's edition, we thought we’ll look at how the industry is shaping up and HDFC Life’s place in the ecosystem. Link here.
Cheaper Home Loans Incoming?
On Monday, we talked about the the new announcements regarding home loans.
Here's the thing, banks need to set aside money every time they extend a loan. The idea is to make sure they have enough protection in the event some of their borrowers default on their obligations. It’s not a lot of money however slowly but surely, the costs add up. On the flip side, if some of this capital were made available to these banks, they’d use these funds to extend new loans and make more money. But since it’s incumbent on the regulator (aka the RBI) to prescribe these norms, banks can’t do much on this front.
So how does this stipulation work for home loans? And how is RBI trying to switch things up now? Find out here.
The Great Government Gift
On Tuesday, we talked about how to revive the economy.
First off. It’s a complicated question especially considering the pessimism surrounding Covid-19. People aren’t spending like they used to. Businesses aren’t investing like they used to. And there is a very real risk that India might slip into a recession and stay there for a while. So its incumbent on the government to do something. They have to instil confidence in people and businesses and they have to do it now.
But what with large-scale unemployment, a higher tendency to save, and a slump in consumption demand, the government doesn't have a lot of options. One thing they can do is put money in people's hands and force them to spend even if they didn't want to. And that’s precisely what they're trying to do. Find out how here.
The Basmati Wars — India vs Pakistan
On Wednesday, we talked about rice, intellectual property and the fight for Basmati. In 1997, an American company, RiceTec obtained a patent for a strain of rice never historically grown in America — “Basmati”. They had crossbred India's native plant with a US long rice variety and then claimed exclusive rights over any basmati hybrid grown in the western hemisphere. Naturally, Indians were outraged. How could a corporation claim rights over a native plant that fed billions, and then prevent Indian suppliers from exporting Basmati rice to the US?
So the Indian government challenged this claim. But the thing is, India was fighting an American company over intellectual property infringement, at a time when the country did not have robust domestic IP laws in place. But then we found support from an unlikely source — Pakistan. Learn all about this short-lived alliance here.
Why the rich keep getting richer?
On Thursday, we talked about Thomas Piketty and the inequality conundrum. Inequality is rife in India. According to Oxfam, the top 10% of the Indian population holds 77% of the total national wealth. 73% of the wealth generated in 2017 went to the richest 1%, while 67 million Indians who comprise the poorest half of the population saw only a 1% increase in their wealth.
This disparity is staggering. And research indicates its likely to grow in the coming years. So although we are growing (economically) as a country, the rising inequality negates the positive effect of this development. And it’s imperative to understand what’s driving this phenomenon. And one of the most comprehensive analysis on the subject comes from a French Economist Thomas Piketty. And we tell you all about it here.
To wear a helmet or not
On Friday, we talked about traffic violations. When you set out on your scooter and head to the nearest Kirana store, you are faced with a momentous decision — To wear the helmet or not. And your answer depends on the expected payout if and when you get caught.
So if you’re simply riding through the corner street facing your apartment block, you probably won’t wear it. After all, who’s going to catch you there? However, in the off chance that you are forced to take a right turn outside the 4-way intersection, your expected payout changes. What if there’s a traffic cop lurking in the area? What if he catches you and fines you? In either case, the two fundamental things driving your decision here is the number of traffic cops patrolling the streets and the total quantum of the fine.
And since the government couldn’t increase the number of traffic cops patrolling the streets overnight, they decided to hike the fines in a bid to make traffic violations extremely expensive. This was back in September 2019. But did it work? Find out here.
Well, that's it from us. You have a great weekend!:)