Volume 2, Issue 2

December 2017 Issue, Volume II, Issue No. 2

As the year 2017 comes to an end, we look back and realize that this year has witnessed some very important events which had the potential to transform many economies around the world.

This issue of TAPMI Journal of Economics and Finance (TJEF) focuses on some of the prominent topics in the field of Finance and Economics. The journal contains papers on below topics:

  • SHOULD YOU RIDE THE BITCOIN WAVE? – By Vidhi Jain & Vignesh V
  • BASEL III NORMS: JOURNEY SO FAR & THE ROAD AHEAD – By Mohit Jain & Barnava Chatterjee
  • BANK RECAPITALISATION:  NECESSITY AND IMPACT – By Anandhan P.T. & Lakshmi Ramakrishnan Nair

We hope that the readers of the journal benefit from the insights of the papers published.

Managing Editor,

Isha Varma

Please read the PDF version of the Journal on – TJEF Volume 2 Issue 2

#Fincabulary 29 – Guerrilla Trading

Meaning –  A very short-term trading technique that aims to generate small profits while taking on very little risk per trade and repeating this multiple times in a trading session. Guerrilla trades typically have a shorter duration than scalping or day trades and seldom last for more than a few minutes, at the most. Because of its high trading volume and limited return nature, low commissions and tight trading spreads are prerequisites for successful guerrilla trading.

While guerrilla trading can be applied to any financial market, it is particularly well suited for trading foreign exchange. This is because the major currency pairs typically have very tight trading spreads because of their plentiful liquidity that is virtually available around the clock.

But these elevated levels of leverage – which may be as much as 50 times the trader’s capital – represent a high-risk, high-reward scenario that can wipe out an inexperienced guerrilla trader in a few trading sessions.

 

Recently, Apple reported third consecutive quarterly decline. What do you think could be the reason for the same?

Financial Spending on Healthcare and its impact on the economy

– By Phani Kumar

“One of the factors a country’s economy depends on is human capital. If you don’t provide citizens with adequate access to healthcare, education and employment, you lose at least half of your potential. So, gender equality, empowerment and healthcare bring huge economic benefits.” – Michelle Bachelet

Healthcare plays crucial role in every country’s economy. Developed countries like America and France lay high emphasis on healthcare spending. Global average of financial spending on healthcare is 6% of GDP, whereas government spending in Indian healthcare sector is 1.3% of GDP. China’s expenditure on healthcare is 3.1% and the United States spends 8.3% of GDP. This shows the importance needed to be given for healthcare by emerging economies.

Holistically, healthcare means hospitals, pharmaceutical, diagnostics, medical equipment & supplies, medical insurance and telemedicine. At present, India has 0.7 doctors and 1.1 beds for every 1000 citizens. It implies that there is a lot of under-development in the Indian hospitals. Recent incidents in Uttar Pradesh government hospital portray the alarming situation of government hospitals. This shows that there is an urgent need for increase in financial spending on healthcare.

Average hospitalization costs increased 11% CAGR in last ten years but mortality rate remains high. It shows the increasing difference in quality of treatment of patients between private and public hospitals. Thus, there is an immediate necessity for the government to increase spending on hospitals and healthcare. It must increase the budget allocation from $4.5 billion to $10 billion in the coming years keeping in view the population growth of the country.

Pharmaceuticals in India are facing headwinds because of strict US FDA norms. There should be stricter government regulations to deal with issues of generic products. It boosts exports and improves country’s GDP. Proper regulations on generic products improve quality and will help in achieving the target of $50 billion exports by 2020.

Recent IPOs from diagnostic and insurance companies will provide necessary capital for their capex plans. This would help them expand into tier 3 cities and towns. SEBI support is necessary for further listing of companies from these segments.

Telemedicine is the next big thing in healthcare sector. At present, telemedicine has a $15 million market. It is expected to grow at a CAGR of 20% during FY 16-20. Proper support from government in PPPs can help the sector reach $32 million market by 2020.

100% FDI, National Health Policy 2017, incentives in the medical travel industry, tax incentives and encouraging investments in rural areas are future growth drivers in Indian health care industry.

Implementation of social insurance policies for people below poverty line and increase in allocation of government budget will improve health conditions of citizens in emerging nations. This, in turn will improve productivity of the people and increase their contribution to the economy.

Proper attention by government (of countries like India) on Telemedicine and Pharma sector will increase their contribution to export % of the country’s GDP.

POTENTIAL USE CASES FOR BLOCKCHAIN IN BANKING AND FINANCIAL MARKETS

 – By Vrishali Pawaskar – T. A. PAI MANAGEMENT INSTITUTE, MANIPAL

Introduction

The global financial services sector is an epitome of transformation for the other industrial segments to follow suit. Automation and digitalization have caused a paradigm shift in the way in which banks and financial institutions operate. In the words of Barclays’ former CEO Anthony Jenkins, “Banking is headed for an Uber moment”. The latest to join the bandwagon of disruption in the financial sector is the blockchain technology. Originally developed as a DLT (distributed ledger technology) supporting bitcoin transactions, financial institutions are now exploring several use cases apart from payments for application of this technology. They have been developing proof of concepts thus trying to assess the technical, legal and compliance aspects of implementing this technology. The fundamental motivation for most of the potential applications of blockchain technology in the financial services segment is to achieve cost savings and security, increase availability, speed up processes by eliminating the need for intermediaries, middlemen thus reducing effort duplication, easing reconciliation and improving the efficiency of services. This research paper strives to enlist and elaborate upon potential blockchain use cases in the banking and financial markets ecosystem, some of which have already been experimented with and others which are still at the idea level.

Application of Blockchain Technology

The following figure illustrates how most of the blockchain use cases aim to modify the modus operandi of banks and financial institutions.

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Source: A joint report by Infosys Consulting and HHL Leipzig Graduate School of Management, titled “Blockchain Technology and the Financial Services Market”, November 2016

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