TECHNOLOGY & SUNLIGHT: SOLVING INDIA'S ENERGY, WATER, AND ENVIRONMENTAL CHALLENGES TO CREATE A GREEN, PROSPEROUS FUTURE

Quite a dated article, but definitely indicative of the macro numbers and the need for alternative energy in India.

by Ed Ring
March 17, 2007

India at night from outer space - already glowing with energy and light

To ensure India will have adequate energy and water supplies in the future...

The first step is to predict where India's population will level off. Assume India's population is going to peak at around 1.3 billion people. This may be somewhat underestimating reality, but everything that follows can be proportionately increased based on higher population projections.

Next, determine how many units of energy (expressed in millions of BTUs per year), and how many cubic meters of water per year, on average, are required to sustain the lifestyle for a citizen of a fully industrialized nation. Currently, on average, each Indian citizen consumes 25 million BTUs of energy per year and consumes not quite 500 cubic meters of water. In the European Union, which provides a useful comparison, the average energy consumption is well over 150 million BTUs per citizen per year, and just over 500 cubic meters of water.

It is safe to assume India will employ more energy efficient "leapfrog" technologies as she industrializes, meaning that it will not be necessary to achieve increases in per capita energy consumption all the way to the levels of the Europeans. This is also a safe assumption because much of Europe's energy consumption is required for heating during their much colder winters.

...assume that India's per capita energy production will need to get to at least 50% of that currently enjoyed by Europeans. Taking into account projected population increases, this means India's total national energy production per year will need to quadruple from 25 quadrillion BTUs per year to 100 quadrillion BTUs per year.

India's water production per person would not have to increase, but overall supply will still need to keep pace with population growth, meaning India will eventually need to divert 667 cubic kilometers of water per year, up from 500 cubic kilometers per year today. Bear in mind that abundant energy leads to abundant water, since a cubic meter of seawater can be desalinated for a mere two kilowatt-hours (ref. "Photovoltaic Desalinization").

DELIVERING ABUNDANT FRESH WATER
TO EVERY CORNER OF INDIA

With India's future water challenges, the problem isn't so much one of supply, it's more a problem of uneven distribution. The north and east of India enjoy abundant supplies of water, but the south and west of India are relatively arid. It is important to note that if the proposed aquaducts, reservoirs and pumping stations were built, India's major river interlinking projects, through a system of reservoirs and aquaducts, (ref. India's Water Future) could then move water in cubic kilometer volumes relatively cost effectively. Once the costs of the interlinking system are borne, the biggest ongoing cost is the energy required for the pumps. But to pump a cubic kilometer of water up a 250 meter lift, which is what it would take to get water from the Ganges basin to the Deccan Plateau, would only require 100 megawatt-years of power. To pump 50 cubic kilometers of water per year from the Ganges basin upwards 250 meters into aquaducts flowing south and west, which is more than the most ambitious of India's current interlinking projects, would only require about 5 gigawatt-years of electricity. This amount of electricity represents only about one-half of one percent of India's current total yearly energy production (all sources).

HOW MUCH ELECTRICITY WOULD BE REQUIRED TO PUMP WATER FROM THE GANGES TO THE KRISHNA BASIN?

As the table indicates, it would take 3.8 gigawatts of electricity (representing about 2.7% of India's estimated 2005 electrical generating capacity of about 140 gigawatts), running constantly, to pump water 250 meters uphill at a volume of 38 cubic kilometers per year. Put another way, a 250 meter lift will require about 100 megawatt-years for each cubic kilometer pumped.

Water supply in India, regardless of whether or not there are a few interlinking projects on a national scale, will be managed, overwhelmingly, using decentralized solutions. Both innovation and traditional methods can combine and evolve, proliferating via an information enlightenment nurtured by internet communications, to produce thousands of water management projects: cisterns in buildings, contour berms to collect and percolate runoff, refilling underground aquifers with runoff, and smaller but numerous new reservoirs (ref. "Harvesting Water"). It is important to emphasize that as India generates more energy, more uses for water will be required. India is challenged not only to redistribute water on a national scale, but also to use water much more efficiently.

...plant biofuel crops in the desert...

Strip mining the lands for biofuel is driving a new round of global deforestation - especially in the tropics - of catastrophic proportions.

When forests are regrown, more tigers and other wildlife may survive. Equally important however is the role forests play in increasing water supplies.

One often overlooked but decisive contribution to water supply and storage is through reforestation. India has lost about 90% of her forest cover. Watersheds need to be reforested everywhere, and when they are, the springs will flow again, and the water tables will rise. Forests moderate heat, they increase cloud formation and rainfall, they protect topsoil, and they nourish aquafirs. Do you want more fresh water? Then reforest India. (ref. "Profitable Reforesting," and "Reforesting Brings Rain").

Not only on the land, but just offshore, reforesting needs to be a priority for India. The best way to protect India's coast from tidal surges is to replant the mangrove forests (ref. "Mangroves Stop Tsunami"). Mangrove deforestation has occurred on a massive scale worldwide, and can be reversed simply by planting more mangroves.

Most projections of India's future energy supplies are almost completely reliant on increasing conventional energy production, and they are also far too low. An interesting side note is that India's most ambitious plans for nuclear power don't amount to more than about 3% of India's projected energy production (ref. "India's Nuclear Power"). India cannot plan to simply double energy production, they must quadruple it. To do this, conventional sources (including nuclear power) are not sufficient. A breakthrough is required, and that breakthrough is almost here.

SOLAR ELECTRICITY IS THE
MOST PROMISING RENEWABLE

There is only one source of renewable energy that can quickly get built and installed and can produce 50 quadrillion BTUs or more per year, and that is solar energy, photovoltaic energy in particular (ref. "Power the World With Photovoltaics," "Photovoltaic Powered Cars," and "The Photovoltaic Revolution). India needs a photovoltaic array on every rooftop. Today photovoltaic cells, in the whole world, produce at most 10 gigawatt-years of electric power per year, which at 3,416 BTUs per kilowatt-hour, equates to only .3 quadrillion BTUs. Given worldwide energy production is over 400 quadrillion BTUs, photovoltaic power today is a drop in the bucket. But that is about to change.

CHINA, INDIA, USA, EUROPE - KEY VARIABLES 2005

India's terribly inefficient energy intensity (BTU's per unit of GNP) is reason for hope - through more energy efficiency, quantum increases in energy output may not be necessary for India to achieve first world per capita economic status

Photovoltaic manufacturing relies on supplies of polysilicon, which have never been reliable. But there are new designs that require far less silicon, or no silicon at all. These next generation photovoltaic cells are called "thin skin," a catch-all term describing several technologies which all use a far thinner coating of photo-electric material. There are companies claiming to have this technology all over the world, including India. (ref. "Thin Film Photovoltaics," "Crystaline Photovoltaics," and "The Photovoltaic Boom). It is vital that photovoltaic technology be the top priority of India's alternative energy research and development community, as well as for investment in manufacturing. There is no other plausible way to produce, within a decade, a quantity of energy sufficient to lift the Indian economy to sustainable prosperity. Even if the thin film breakthroughs don't occur, India should invest in polysilicon manufacturing for the production of conventional crystaline photovoltaics. Even at current costs, conventional photovoltaics make long-term economic sense, and the greatest cost to their manufacture is energy, which can be produced by photovoltaics themselves. Conventional photovoltaics now have an energy payback of 20+ to one.

India can have a green and prosperous future

Other than photovoltaics, solar electricity via solar-thermal arrays is surprisingly cost-competitive and space-efficient (ref. "Solar Thermal Power," and "Saharan Solar Power") The space-efficiency of solar energy collection units (electric and thermal) enables decentralized energy development. Alternative technologies in general support the design of each home or building being adapted to collect and store solar, wind, or even geothermal energy. In a modern green structure, thermal energy from any source can be stored on-site and converted back into electricity, as well as used for space heating and water heating. Thermal energy can even by used as an energy source for refrigeration. Clearly the design of buildings to acquire and store energy is another area where technology, tradition, and innovation can significantly address India's future energy challenges.

Just as the potential for nuclear power to address India's energy needs may be overstated - as well as the risks therein, the potential for biofuel is overstated as well, and the risks of biofuel are decidedly understated (ref. "IPCC Report & Deforestation," and "Biofueled Global Warming"). Biofuel can provide an important supplemental fuel, but even at 2,500 barrels of oil per square kilometer per year - which would be an excellent yield - there is not enough land in India to begin to rely on biofuel to replace conventional fuels, let alone provide the fuel necessary to quadruple India's energy output. As it is, biofuel crops are beginning to crowd out food crops, pushing up the price of food. Biofuel crops also can provide the reason for further deforestation. Biofuel crops make sense as a supplemental fuel, not as a comprehensive energy solution. Biofuel crops make sense in arid regions where any crop is a welcome bulwark against desertification, and biofuel will eventually be extracted from virtually all municipal waste, but under no circumstances should a forest be cut down just to grow biofuel.

India's green and prosperous future will require education, infrastructure, innovation, pluralism, and enlightened, adaptable environmentalism.

Addressing India's energy and water needs requires servicing five interrelated industrial sectors; agriculture, manufacturing, transportation, buildings and shelter, and waste management (ref. "The Electric Car Revolution," "Clean the Ganges," "Organic Farming in India," and "India's Energy Future""). In all these areas, green technology and high technology, working together, can provide answers. Often solutions will embrace traditional practices as much as adopt scientific breakthroughs, and working synergistically within all these dimensions is necessary to quicken progress. It should be a source of inspiration that India can complete the process of industrialization today, meaning she can leapfrog obsolete legacy technologies that often hamper innovation in the west.

To produce so much more energy, to collect and distribute so much water, India's challenges are daunting but achievable. The key is to balance large scale projects that are often costly and difficult to manage ecologically, with smaller projects that can be adopted at the scale of individual homes or communities. And at both scales, the solutions will be easier if there is a faith and reliance on India's world-class intellectual and scientific community to provide assistance through high technology.

About the Author: Ed "Redwood" Ring is the Editor of EcoWorld, reporting on clean technology and the status of species and ecosystems. This story was originally published in the January-March 2007 issue of "TerraGreen" Magazine, published by the Energy and Resources Institute in New Delhi, India (www.teriin.org). In his spare time, Mr. Ring grows and gives away trees, especially his beloved Redwoods.

Making Mumbai an International Financial Centre??? - Long way to go

The Trader Monthly magazine has come up with a ranking of the top cities for traders and financial houses to live in. 50 locales were ranked based on a mix of work and lifestyle factors, exploring everything from the breadth of local financial-services infrastructure to time-zone considerations. Mumbai incidentally is 46th on the list and these were the specific comments:

"#46 Mumbai Lots of lows in the burgeoning financial powerhouse: the dearth of entertainment options and the utter lack of non-super-humid days, to name two. "

Incidentally, Dubai's made a major foray into the trading world.

"For the true-blue speculator, Dubai’s unique mix of boomtown adrenaline, gushers of money and seemingly boundless opportunity make it like no other place traders might want to be. "

Below is the top 10 ranking:
1) Chicago
2) London
3) New York
4) Dubai
5) Miami
6) Boston
7) Dublin
8) Los Angeles
9) Toronto
10) Sao Paulo

3G may turn it around for telecom

Rajesh S Kurup / Mumbai May 3, 2007
The outlook for the telecom sector is robust for the current financial year due to the huge capital expenditure plans announced by service providers, increase in telecom penetration and infrastructure sharing becoming more prevalent.

If the government keeps its promise of releasing more spectrum, we will witness the onset of third generation mobile telephony, which enables high-speed data transfer. If it becomes popular, the average revenue per user, which has been declining for most operators, may well go up significantly.

The largest private telecom company, Bharti Airtel, has announced a capital expenditure of $3.5 billion (about Rs 15,000 crore) this financial year, while the second largest, Reliance Communications, has announced Rs 10,000 crore. AV Birla group's Idea Cellular has announced a capital expenditure of about Rs 12,000 crore for the next two years.

Other players too have large plans. These include Hutchison Essar (Rs 7,200 crore), state-owned Bharat Sanchar Nigam Ltd (Rs 4,715 crore), Tata Teleservices (Rs 4,150 crore), Aircel (Rs 3,680 crore), MTNL (Rs 1,970 crore) and Spice Communications (Rs 1,285 crore).

According to an analyst, the majority of the capital would be used for the expansion of services in the country, resulting in faster rollout of services, especially in the rural and semi-urban areas, connecting the length and breadth of the country in the next 24 months. However, the results would emerge within the next two quarters, or latest by the end of this year.

Indian telecom companies are also looking at increasing the pace of erection of passive infrastructure or towers. Reliance is committed to setting up another 8,000 towers, in addition to its existing 12,000 BTSs, and Bharti Airtel has announced an addition of 30,000 BTSs to its existing 40,000 towers. GTL Infrastructure is looking at adding 400 towers a month to its existing 1,200 cell sites.

The emergence of tower sharing, after a recent Telecom Authority of India (Trai ) notification that a BTS can be shared among three players, would result in faster rollout of services. Analysts expect the Indian telecom sector to witness one of its fastest growths during this financial year, especially during the last two quarters of the year.

The industry is also expecting a fall in handset prices that would help in driving telecom penetration. The present telecom penetration stands at an abysmal 14.3 per cent, compared with other developing nations across the world. For example, the telecom penetration in Pakistan stands at around 27 per cent, more than double of India.

The prices of entry-level handsets have fallen to around Rs 1,000 from Rs 4,000 three years ago. Analysts and industry sources expect a further reduction in prices to around Rs 800-900 that would drive telephony growth in the country.

Macquarie Research has raised its wireless subscriber forecast to 425 million subscribers by March 2010, up from our earlier forecast of 400 million. This is based on higher wireless penetration expectations for each of the 23 wireless circles in India.

According to an analyst firm, this would drive revenues and EBITDA margins for the companies in the telecom space.

Another important factor is the country's strong economy that is expected to grow at around 9-10 per cent during the year. The rising income levels of Indian households would provide a "huge impetus" for the wireless sector growth in the country.

Industry expects a monthly net addition of around 7.5-7.7 million per month for the next two years, compared with the existing 6.6 million per month.

Moreover, the entry of Vodafone would also bring in more value-added services and features to the country, that would make other Indian companies launch newer customer-friendly services. If spectrum is released this quarter, as is expected by the industry, it would result in the rollout of 3G services in the country. For the sector, the current year and the next could well turn out to be the best years.

ONGC gets 38% premium reduction on risk cover

One of the big changes with the liberalization of the industry.

ONGC gets 38% premium reduction on risk cover
Falaknaaz Syed / Mumbai May 09, 2007

The Oil and Natural Gas Corporation (ONGC) has secured a 38 per cent reduction in premium on its insurance policy for 2007-08, in spite of consecutive losses in the last two years. The policy is due for renewal on May 11.

ONGC’s insurance policy is the country’s largest insurance policy. Insurance policies, where the sum insured is Rs 2,500 crore and above, are called large risk policies and are largely reinsurance driven i.e. the reinsurers decide the terms and conditions of the policy.

RS Sharma, CMD of ONGC, said, “We have received a confirmation from United India today that the risk has been placed overseas. We have paid the premium and the insurance policy will be issued to us before May 11.” When asked about the premium, he said, “This year the reduction in premium is 38 per cent.”

Speaking about the risk sharing, MK Garg, CMD of United India Insurance company, said, “The mandatory 15 per cent of the risk is reinsured with GIC. United India is the lead insurer and the remaining three insurers, New India Assurance, Oriental and National Insurance are sharing around 8 per cent. The remaining 77 per cent will be reinsured overseas.”

ONGC’s current assets in India exceed $20 billion. For the purpose of this insurance cover, the declared value is around $15 billion. This is an increase of 25 per cent over last year’s declared assets. Last year, the declared assets were approximately $13 billion and the premium was $47 million. United India was the insurer, with Ace and AIG being the reinsurers.

The premium amount changes every year, depending on the asset value and the reinsurance market capacity and costs. The premium is quoted at $29 million this year, though the company reported losses of

Rs 1,800 crore or $400 million in 2005. It also lost a vessel called Sagar Bhushan in 2006, where the claim amount could vary between $30 million and $70 million.

Companies must cosy up to new accounting standards

Asish K Bhattacharyya / New Delhi March 23, 2007


In accounting, an asset is said to be impaired if its recoverable value falls below the value at which it is carried in the balance sheet. How can this happen?

Initially, an enterprise acquires an asset only if it finds it economically viable to do so, that is, if the net present value (NPV) from acquiring the asset is zero or positive. Hence, on the acquisition date, the recoverable value of the asset would generally be higher than its acquisition cost.

However, subsequent events, such as increase in competition in the market or reduction in demand for the product or service, might adversely affect the service potential of the asset, causing its recoverable amount to fall below the carrying amount. This results in impairment of the asset and requires changes in the carrying amount to reflect the new reduced value of the asset.

Accounting standards require enterprises to test assets for impairment, whenever events that lead to a fall in their recoverable value occur. If the carrying amount of an asset is higher than its recoverable amount — defined as higher of its ‘value in use’ and ‘net selling price’ — the enterprise recognises an impairment loss and writes down the carrying amount to the recoverable amount.

Goodwill and intangible assets that are not put to use (for example, patent or licence not put to use), are tested for impairment at least annually. On reversal of events that caused recognition of impairment loss, subject to certain conditions, the enterprise writes back the impairment loss. For impairment loss on account of goodwill, these conditions are so stringent that impairment on account of goodwill is written back only rarely.

The ‘value in use’ component in the definition of recoverable amount requires us to attribute cash flows generated by a firm to specific assets. This is difficult to do if assets are defined too narrowly.

For example, a particular piece of equipment in a factory does not produce cash flows independently from other facilities in the factory; it is the factory as a whole which generates cash flows. To deal with this, the recoverable amount is computed for a group of assets, and impairment loss, if any, is then allocated to individual assets that constitute the group.

A group of assets tested collectively for impairment is known as a ‘cash generating unit’ (CGU). A CGU is the smallest identifiable group of assets generating cash inflows from continuing use that are largely independent of the cash inflows from other assets or groups of assets. Identification of CGUs involves judgement and there is the possibility of a difference of opinion arising between auditors and management. Deviations are possible on both sides.

The management may be tempted to group assets at a higher level than appropriate, in order to cover impairment loss of some assets by the healthy performance of other assets in the group. On the other hand, auditors, who are averse to risks and avoid situations that might attract criticism or litigations for negligence, may insist on grouping assets at a level lower than appropriate.

Once the CGUs have been correctly identified, ‘value in use’ of an asset (or a group of assets) is calculated as the present value of estimated future cash flows expected to arise from the continuing use of the asset in its present condition and from its disposal at the end of its useful life. The present value is determined by discounting pre-tax cash flows by an appropriate pre-tax discounting rate.

The other source of recoverable amount, ‘net selling price’, is the amount obtainable from the sale of an asset in an arm’s length transaction between knowledgeable and willing parties, less the costs of disposal.

The best evidence of an asset’s net selling price is a price in a binding sale agreement, in an arm’s-length transaction, reduced by costs of the disposal. If there is no binding sale agreement, the net selling price is the asset’s market price (current bid price) in an active market, reduced by costs of disposal.

In case current bid prices are unavailable, the net selling price is estimated with reference to the price of the most recent transaction. There might be situations where neither a binding sale agreement nor an active market for an asset is available.

In such a situation, the net selling price should be based on the best information available regarding the amount that the entity could obtain, at the balance sheet date, for the disposal of the asset. Outcome of recent transactions for similar assets within the same industry should be used as the basis for estimating the amount.

Some experts take a restrictive view of the concept of net selling price stipulated in the accounting standards by not accepting the appraisal method — which is an otherwise well-accepted method to determine the value of land, buildings and other assets — as an appropriate method to determine the net selling price. It is inappropriate to take such a restrictive view of net selling price. Let us consider a hypothetical case. Suppose, a company has three divisions, one of which is making losses.

The company has decided to continue running the loss-making division due to strategic reasons. Therefore, there is no binding contract for sale. Further, let’s assume that there is no active market for the purchase and sale of the same or similar businesses. There is no merger or acquisition in the industry.

The book value of the assets of the division (which is a CGU) is Rs 26 crore. Their value in use is Rs 12 crore. These assets include a large freehold plot of land, which is carried in the balance sheet at Rs 3 lakh (the historical cost), and buildings.

While the division itself has been running at a loss, its land and buildings have appreciated beyond their book value, with the appraisal method providing an estimated net sale value of Rs 41 crore. There is no way to take into account this significant economic fact if we reject the appraisal method, and the company will have to provide a misleading impairment loss of Rs. 14 crores.

On the other hand if we accept the net selling price determined through the appraisal method, no impairment loss is to be recognised. Here rejection of the net selling price determined through the appraisal method is inappropriate, more so since another accounting standard permits upward revaluation of fixed assets based on value determined through the appraisal method. In this situation, the management might want to use the appraisal method to estimate the net selling price, while auditors might argue against it based of a restrictive interpretation of the standards.

In most situations, it is the auditor’s view which ultimately prevails since managements and audit committees of the board of directors have traditionally been averse to adverse comments in audit reports. This mindset of managements and the audit committees should change. Implementation of new accounting standards and revised accounting standards involve judgment. Moreover, accounting practices for new accounting standards, such as accounting for impairment, are yet to evolve.

Therefore, managements should assert their position on interpretation of new accounting standards, provided they are confident that their interpretation of the accounting rule is based on sound accounting principles and the spirit of the accounting standards. This also increases the responsibility of audit committees. Instead of passively going with auditor’s view, they should provide an independent review of the accounting policy of the company.

The writer is professor of finance and control at IIm-C

Real estate prices in Mumbai

R Ravimohan / New Delhi March 16, 2007



Over the medium term of a few years, real estate prices in Mumbai should become competitive against other cities.

Real estate prices in Mumbai, and most cities around the country, have skyrocketed in the past one year. Since Mumbai still remains the price-setter for the rest of the country, let us understand the dynamics of real estate prices in this city. The market is rife with razor-sharp speculations on the expected direction of property prices, with almost an equal probability of prices staying at current levels, or going up even further, or coming down. Is there any methodical conclusion we can reach on the future direction of realty prices?

Several factors have combined to push prices up in Mumbai. For the past four years—backed by soft real estate prices, easy availability of finance, lower interest rates, liberalising construction rules, and better houses being constructed—there was a sustained buying trend that kept growing steadily. The wealth effect of rising income levels due to better wages, combined with the relentless growth of services (financial services, technology, BPO, retail, etc.), spawned a huge unmet demand for quality office space. Additionally, continued buoyancy in the stock markets diverted a lot of funds to the real estate markets. Private equity and venture funds also started taking strong positions on real estate, which infused large fresh funds into real estate. Then came the conjecture about the large-scale rollout plans by Indian and global retail Goliaths, which gripped the market in a frenzy of speculation. During all this time, the retail homeowner’s demand continued unabated, given the easy availability of home loans, and perhaps even spurred by the fear that if they did not buy they might miss the bus. The high prices are also a result of the failure of developers to bring new areas under development fast enough to counter this price hike.

The factors that can moderate prices are obviously the opposite of what have been identified as the drivers above. Most importantly, prices are completely out of whack with global trends, and have now reached a level where services are no longer competitive and have begun seeking alternative locations. Further, the high prices have attracted a new frenzy of construction, which on completion over the next few months will exert pressure on prices. The Bandra-Worli sea link, which is going full steam ahead, is expected to open up more areas on the Western corridor to access downtown Mumbai faster, thereby increasing supply. But the real benefit of this project is the encouraging prospects for the Trans-Harbour link, which will vastly increase the supply from the mainland to the hitherto land-locked paradigm of Mumbai. The provisions in the latest Budget proposals to withdraw Section 801b from March 2007, service tax of 12.5 per cent on lease rentals, and rising costs will dampen demand for residential property.

The floor space index (FSI) too impacts real estates prices. The higher the FSI, the larger the floor space that can be constructed per square foot of ground area, and therefore the lower the real estate prices. Currently the average FSI for Mumbai is less than 2. To put this in perspective, Hong Kong is now running well above 14! Admittedly Mumbai's infrastructure, as it stands now, does not give much scope for increase in the FSI. But large integrated developments, which have become the trend, are now able to achieve a considerably higher FSI. This gives rise to the hope that the pressure on the land area and, effectively, prices will ease progressively as the FSI gets liberated in tandem with improvements in road infrastructure.

Ultimately market forces will prevail. Sensible businesses will look for alternative locations. Any major ITeS or IT company now operates with big delivery centre operations somewhere else in the world other than in India. While India is still the fountainhead of talent, companies are not going to find homes and offices at viable prices in India at these levels. Unless prices moderate, the trend to set up delivery and off-shore centres in faraway locations such as South America and East Europe will gather momentum. Retail demand will sag if prices do not ease. Overseas markets such as Singapore and Dubai have become favoured destinations for Indian investors in real estate, because those are more attractively priced and the quality of those properties and the environment are also far superior. Interest rates on mortgages will move up significantly, choking off the smaller home buyers. Government policies on FDI on real estate are likely to be delayed, and probably be incremental, given the political sensitivities. Given the high prices, it will really be a brave foreign heart who will now bet billions on Indian realty! These are fundamental reasons why I believe prices will moderate.

However, I do expect continued buoyancy in the economic growth of both India and Mumbai. Thus, the salary push and attraction of foreigners to invest in India will continue. Indeed, buying continues till now unabated. Funds are still being generated in sumptuous measures in the overseas market, targeting real estate investments in India. Surely this inflow will keep the prices up, at least in the short term. I also believe that the developers and land ownership have a strong influence on the market, which is yet to get the full effect of the buyer’s power. We are far from the perfect market; so leaving the prices of real estate entirely to the market is not going to moderate the prices quickly. However, over the medium term of a few years, I expect real estate prices in Mumbai to become competitive against other cities, which are vying for businesses to shift to their cities. The prices in these cities are at considerable lower level than in Mumbai today. This slow moderation could be accelerated if the government decides to step in and step up city development plans, which is good, or if the money supply growth is sharply yanked, giving rise to deflationary expectations, which might be ill-advised, as it can potentially choke off the larger economy itself. The scope for any further sharp increase in real estate prices appears limited, with no further good news left for the market to rise up on.

The author is managing director and CEO, Crisil, a Standard and Poor’s company

Travel Guides for business

Business travel has witnessed a huge growth. With extensive expansion of multinationals in emerging markets, people are not just restricted to North America and Western Europe and are exploring new markets previously unknown to them. I have a habit of buying country travel guides whenever I visit a new country be it on leisure or business. But, what I have noticed is that there are no guides which exclusively cater to business travellers. I would definitely invest in any company which make such products. Moreso, the famous guides like Lonely Planet, Frommers, Frodders, GKT, all have their own shortcomings.

These are some of the topics that can be covered in the business travel guides:
1) History*
2) Places to stay and eat*
3) Detailed section on economy
4) Directory and description of prominent companies
5) Section on how to do business in the country
6) Section on politics

The House of Morgan: An American Banking Dynasty and the Rise of Modern Finance by Ron Chernow

I have been wanting to write a review on this book since a while. In this fascinating book, Chernow portrays the great influence that the Morgan banks had on the American economy and further since the late 18th century. It is a great book for individuals working in emerging markets and for others as well. It vividly describes how George Peabody started the banking house being a banker for the American states in London. Today, most emerging markets are in the same state (if not better) as America was earlier. Indeed, at that moment, the credit profiles of most of the American states didn't look good. This book describes how the British bankers harassed the states and how over time the financial centre changed from London to New York.

Chernow divides the 700 page book into several sections. The first section called the Baronial era in banking, is the most fascinating of the lot. After George Peabody establishes the bank, he died fairly young and brought in Junius Morgan from the US to be his successor. Junius Morgan scaled new heights, and then his son JP Morgan Sr. (Pierpont) took over. Pierpont is the name associated with the Morgan banks. He had a very powerful character which has been very colourfully described in the book (along with his comical physical traits). This was the infamous age of "Robber barons" where the banks, railroads, big steel and oil industry were very closely associated, if not owned by the same.

The second era is the "Diplomatic era", where Pierpont was succeeded by his son JP Morgan Jr (Jack). Jack was not as influential as his father and he was overshadowed by other bankers such as Dwight Morrow. This era is where the bank plays a very large international role rescuing the Bank of England and also helping finance the Nazis, Mussoline and Japanese nationalists. The other important event was the depression and how the bank was resilient inspite of it. This section was less vibrant compared to the first one and had very few fascinating characters.

The third era covered was called the "Casino era" and this was the birth of modern finance. With the Glass Steagle Act, the bank split into Morgan Guruantee and Morgan Stanley. This section describes a lot of the takeover battles that Morgan Stanley and Guarantee get involved in.

The book intertwines the history of the bank with the political and societal aspects very well. It also describes how the banking world was filled with groupism since the early days - the bank filled only white male protestants and both Jack and Pierpont hated jews. In fact, each bank had their own religious and social affiliations.

An excellent book! Must read.

Guru

Just watched the box office hit movie "Guru" by Mani Ratnam. The movie was very articulately made and depicted the life of the late Dhirubhai Ambani. The story of the lead character, Gurukant Desai (played by Abhished Bacchan) follows that of the business scion in every step. Scenes of his initial years in Yemen (shown as Turkey in the movie), where he sold cans of petrol and then returning back to his village to start his own venture trading in polyester. Overall, the movie was very entertaining and motivating to see the rags to riches story of the greatest Indian tycoon.

Inspite of being a book buff, I never happened to pick up a biography of Dhirubai (probably because they are not well written!). Here are a list of the books on Dhirubai and Reliance:

Dhirubhai Ambani: The man behind reliance by K Bhushan (Unknown Binding - Jan 1, 2002)

Dhirajlal Hirachand Ambani (Great personalities: life sketch series) (Paperback - Dec 1, 2005)

The Polyester Prince: The Rise of Dhirubhai Ambani by Hamish McDonald (Paperback - Sep 1999)

Guess many more are in line...