Samsung forecasts 25% profit drop; Why India must shrink Subsidy Raj; Carrefour to exit India; Why FB’s emotions experiment is alarming

1 Samsung forecasts 25% profit drop (BBC) Samsung Electronics has forecast a 25% drop in profit for the second quarter due to a slowdown in the smartphone market and a strong Korean currency. It expects to make an operating profit of 7.2 trillion won ($7.1bn) in the April-to-June period, down from 9.5 trillion won a year ago. Its operating profit has now fallen for three straight quarters.

Samsung is the world’s biggest maker of mobile phones and the handset division accounts for the bulk of its profits. Samsung’s growth in recent years has been powered mainly by its mobile phone division. The success of its Galaxy range of smartphones, coupled with a growing global demand for such gadgets, saw it displace Nokia as the world’s biggest mobile phone maker in 2012.

However, the pace of growth of the smartphone market has been slowing down and the competition in the sector has also increased, forcing manufacturers to cut costs of their devices in an attempt to attract consumers. “The golden era of high-end smartphones is clearly over. Those were the handsets that helped firms such as Samsung make healthy profit margins,” Ajay Sunder, a vice president specialising in the telecoms sector with consulting firm Frost & Sullivan, said.

2 Why India has to shrink Subsidy Raj (Raymond Zhong in The Wall Street Journal) Taxes and subsidies are part of every government’s toolkit for tinkering with prices and economic activity. But India tinkers more—and more expensively—than most. A reined-in subsidy bill is on many economists’ wish-lists for the new Indian government’s inaugural budget, which will be unveiled on Thursday.

The previous administration, led by the Congress party, budgeted nearly 2.5 trillion rupees, or $41 billion, on fuel, food and fertilizer subsidies for the current fiscal year, which ends in March 2015. That’s nearly 15% of total spending for the year, or almost 2.5% of India’s gross domestic product.

Here’s an overview of how the major subsidies work, and why economists say rolling them back isn’t only about saving the government money—it’s also about helping some of India’s most important industries grow and invest. Fuel: The worst-kept secret about India’s fuel subsidies is that oil retailers are reimbursed for their losses erratically and with a lag, which means repayments can be postponed until the following year’s budget in order to burnish this year’s deficit numbers.

Food: This is the big one: $19 billion in the previous government’s interim budget, or nearly half of all subsidy spending, went toward meeting the difference between the cost of staple foods—rice, wheat and lentils, predominantly—and the artificially low, government-set prices at which they’re sold to poor households at government-run shops. With food prices a perennially sensitive issue in India and a rainy season that is looking drier than usual, this week’s budget isn’t likely to contain dramatic cuts to these subsidies.

More investment in agricultural infrastructure could, in the longer run, help lessen subsidies’ importance in the fight against food inflation. Delhi spends a fraction on irrigation projects—just $185 million in the interim budget—what it spends on farm subsidies.

Fertilizer: India’s government caps the price of urea, a nitrogen-based fertilizer, and compensates chemical companies for their losses. But here, too, reimbursement is unpredictable. In all three cases, the basic tradeoffs are simple: Subsidies keep these staple goods affordable to all. But they cost the government dearly, and, by keeping sellers persistently in the red, they make it hard for producers of these goods to attract investment and modernize.

3 Carrefour to exit India (Straits Times) French retail giant Carrefour will shut down its Indian operations and close its wholesale stores in the country, as it exits underperforming markets to focus on reviving its French business. The world’s No.2 retailer by sales, which has been operating in India since 2010, will shut its five Indian wholesale stores by the end of September, it said.

Carrefour has been in talks with Indian retail companies and strategic investors about its Indian assets in recent months, after flagging in March that it was considering the future of the business.

4 Why FB’s emotions experiment is alarming (David Einstein in San Francisco Chronicle) By skewing the news feeds of nearly 700,000 users to test the psychological effects of viewing mostly positive or mostly negative posts, Facebook validated the concept of “emotional contagion.” In other words, good news makes people happy and bad news is depressing.

This wasn’t exactly an Earth-shaking discovery. The emotional power of information has been the foundation of public relations and advertising for decades – and it has played out on bigger stages than a Facebook page. Facebook’s ill-advised – and ultimately meaningless – psychological experiment is alarming because it suggests that the Internet, in the wrong hands, can be a powerful weapon to subtly manipulate public opinion and promote a political agenda.

Much of the discussion has centered on whether Facebook’s terms of service gave it the right to act as it did, but that misses the point: Using unsuspecting members as human guinea pigs is repugnant. And when the biggest social network on the planet does it, can its leaders be trusted with their own technology?


About joesnewspicks

This blog captures interesting news items from around the world for those strained by information overload and yet need to stay updated on global events of significance. The news items displayed are not in order of merit. (The blog takes a weekly off — normally on Sundays — and does not appear when I am on vacation or busy.) I am a journalist for nearly three decades.
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