Markets Struggle with Brexit Hangover, Pound Sinks

Asian Stocks Dropped/British Pound Plunged – Brexit

Asian stocks dropped and British pound plunged over 2% on Monday while markets wriggled to shake off the uncertainty which had ignited due to Britain’s choice of leaving the European Union. Emotion seemed weak even though the most horrible of the uproar envisaged on Friday when the global stock markets had suffered one of their largest declines in almost five years, had improved. Senior foreign bond strategist at Mizuho Securities, Hiroko Iwaki, had stated that “things are so uncertain that investors still do not have a clear idea how much risk assets they need to sell. But it is safe to assume investors are not yet done with all the selling they need to do. I would not be surprised to see another 10% fall in share prices”. From the several questions regarding the British exit, or Brexit, which have generated are `just how much UK and European economies will slow, how they would negotiate their new relationship and how European leaders would try to improve the collapsing EU’. The world’s most traded stock futures; US S& P dropped 0.4% to 2,011.50, soaring close to the three and a half month low of 1,999 of Friday.

Brexit – First Surprise in Re-Calibration

The widest index of Asia Pacific shares MSCI, beyond Japan, shrank losses to 0.6% since the companies especially with UK exposure were under pressure.Equity strategist at Bank of America Merrill Lynch in Hong Kong, Ajay Singh Kapur had written in a note that they think Brexit could be the first surprise in a re-calibration of the world away from globalisation towards more inward-looking policy making’.He further added that `Brexit has now possibly opened up more uncertainty about the European Union project and that the already crashed down Asian and emerging equity market could receive asset allocation flows from Europe. Nikkei of Japan extended gains to 1.9% which was a fractional rebound after the hefty 7.9% of Friday’s fall. Stocks of Japan had been supported by stronger warnings from the officials of Japan that they would interfere in currency markets in stabilising the yen. However, the dollar still fell 0.3% against the secured yen, trading around 101.81 yen.

Sell-Off in Euro – Exit Referenda Builds

Shares of China also increased with the CSI 300 index as well as the Shanghai Composite both increased around 0.8%. British pound dropped 2% to $1.34, yet some distance from the 31 year low of $1.3228moved during wild trade of Friday. Moreover, euro had also come under additional pressure, falling against the dollar by 0.8% as the investors fret that Brexit would strengthen the anti-establishment mood in Europe and also communicated about breakdown of the union. The chairman of New Sparta Asset Management in London, Jerome Booth, had commented that “there will be sell-off in the euro as talk of other exit referenda builds. This sell-off will be more profound and long lasting and will be not just against the dollar and yen but also against the pound. It would also raise fears of significant loss of values for holders of Eurozone government bonds”. Since December 2010 on Monday, Euro’s weakness aided in pushing the Chinese Yuan to its weakest level against the dollar and dropped to 6.6396 per dollar on opening at 6.6360 a dollar, in comparison with the five and a half year low midpoint level of 6.6375 agreed by the central bank, reaching an intraday low of 6.6469.

UK Inflation Rate Stays at 0.3%

UK Inflations Unchanged at 0.3%

According to the Office for National Statistics – ONS, UK inflation, measured by the Consumer Prices Index remained unchanged at 0.3% in February. There was a big rise in vegetables though the transport cost had dropped as per ONS. The annual inflation was below the target of 2% of Bank of England for two years and last year it had been zero. Last month the Bank had stated that it predicted inflation to remain below 1% this year.

Other figures of ONS published at the same time showed that Chancellor George Osborne had been close to missing his target in cutting the budget deficit of the country in 2015-16 financial years. According to ONS, borrowing of the government dropped than anticipated in February which brought the overall deficit so far to £70 for the 11 months of the year, as against the chancellor’s full-year target of £72.2bn.

The borrowing figures could mean that the government could borrow on additional £1.5bn this month if it intends to avoid exceeding the forecast set by the Office for Budget Responsibility during the last week’s Budget. Recent ONS’s release revised January’s borrowing by 2.6bn and even though next month’s figure exceeds the forecast, there is a possibility of waiting longer for confirmation.

Difficulties in Implementing Some of the Planned Budget Cuts

Chief economist at the British Chambers of Commerce, David Kern, stated that while there is a gradual progress in reducing the deficit, the timetables outlined in the Budget last week tends to be ambitious and the return to surplus could take a bit longer than the chancellor hopes.

He further added that `the difficulties in implementing some of the planned budget cuts would increase the problem’. Under the single Retail Prices Index – RPI measure including housing cost, inflation was 1.3% in February, which also remained unchanged from the previous month. According to the ONS, the biggest downward pressure on the inflation rate was from the transport segment with the changes in prices for items like road passenger transport, second hand cars and bicycles.

There was a drop in prices for toothpaste together with other personal care products, though higher prices for vegetables, milk, eggs and cheese compensated for those declines.

Britain’s vote on European Union Membership – Hit UK Economic Growth

An increase was also seen in hotel accommodation and restaurant bills along with the price of furniture as well as household equipment. Lower oil prices kept a cover on inflation leaving the central bank in no haste to increase the rates beyond 0.5% which remained there for almost seven years. The unmoved level of inflation of February comes after three months of increased consumer prices.

 Clothing prices had been up by 0.4% when compared to last year while gas prices had dropped by 6% over the same period after energy giant E. ON’s decision to reduce the cost of gas by 5.1% for two million customers last month. The inflation announcement was made after the Bank of England had voted to maintain the rates on hold once more this month and cautioned that Britain’s vote on its European Union membership could hit UK economic growth.

IMF Says World at Risk of 'Economic Derailment’

Global Economy Faces Rising Risk of Economic Derailment - IMF

The International Monetary Fund – IMF has advised that the global economy tends to face a rising risk of economic derailment. David Lipton, Deputy Director has called for urgent steps to increase global demand. He had mentioned in his speech to the National Association for Business Economics in Washingtonrecently, that they are clearly at a delicate juncture. He warned that the IMF’s latest reading of the global economy indicates once again a weakening baseline.

His comments have come up after weaker than expected trade figures from China portrayed that the exports had plunged by a quarter from a year ago, in February. With the second largest economy of the world often stated as `the engine of global growth’, weaker global demand for its goods seems to be read as an indicator of the general global economic climate. IMF have already mentioned that it would be likely to downgrade the present forecast of 3.4% for global growth when it tend to release in April, the economic predictions. International lender had warned last month, that the world economy seemed to be highly susceptible and had called for new efforts to spur growth.

Downside Risks Clearly Pronounced

Ahead of last month’s Shanghai G20 meeting, in a report, the IMF had mentioned that the group need to plan a co-ordinated stimulus programme since the world growth had reduced and could be derailed by market turbulence, the oil price crash as well as geopolitical conflicts. In his speech in Washington, Mr Lipton had stated that the burden to lift growth falls more squarely on advanced economics which tend to have fiscal room to move.

He added that the `downside risks are clearly much more pronounced than earlier and the case for more forceful and concerted policy action has become more compelling. Moreover risks seemed to have increased further with volatile financial markets and low commodity prices creating fresh concern about the health of the global economy’. A swing of weak economic data had lately been added to these apprehensions and the US ratings agency Moody’s had downgraded its outlook for China from `stable’ to `negative’.

Time to Support Economic Activity

The rising unemployment is also another worry as Beijing tends to slowly shift its economy from over dependence on manufacturing and industry to more services and consumer spending. The economy of China seems to be growing at the slowest rate in 25 years which has resulted in considerable uncertainty in the financial markets all over the world leading to sharp falls in commodity prices.

Lipton has commented that `together with bank repair wherever needed and with adequate targeting on infrastructure, this approach could create jobs and probably reduce public debt-to-GDP ratios in the medium term by motivating nominal GDP as well as support credit and financial stability. On strengthening the global outlook, this coordinated action could hurry healing in the banking sector and prevent continent liabilities for the government which appear in case of inaction.

 Moreover it would also have considerable positive spill-overs to susceptible emerging economics comprising of commodity exporters which would be unable to participate in the fiscal expansion, directly. He added that at the recent G20 meetings in China, he thinks that `there was broad recognition of these risks and priorities and now is the time to support economic activity and put the global economy on a sounder footing’.

After the sell off, stocks may actually be cheap

Sell Off Wall Street - A Silver Lining

Wall Street is finally breathing a sigh of relief after the S&P 500 Index managed to hold on to its first weekly gain of the year. One prominent market watchers had commented that inspite of signs of strength; stocks are still in store for a thundering reset. The ruthless sell off Wall Street had faced during the last few weeks could have a silver lining.

 According to FactSet, the S&P 500 Index is presently trading at around 15 times the earnings; analysts tend to expect constituents companies to post over the next year. This reading is known as `forward P/E on the popular measure of valuation which is compared to a 15 year average forward P/E ratio of 15.7. The conclusion collected from historical comparison is based on the timeframe taken into account.

 It is worth observing, in this case that the current valuation level tends to represent the premium to the average of 14.3 observed over the past five and ten years periods. Since the firm in the meantime is probably using various earnings estimates, IQ of S&P Capital current forward valuation number is 15.7 though they also observed that was under the 15 year average.

Broad Market Trading in Abyss

David Stockman who was the former OMB Director under President Ronal Reagan, is of the opinion that the broad market has been trading in the abyss after breaking beyond 1,870 in 2014, since then with a meagre one percent return. He had commented that they had been there for 700 days and had something like 35 attempts at rallies where all have failed for the `four no’s’. For him the four no’s comprise of a combination of no escape velocity, no earnings growth, no dry powder from the central bank and no reflation.Accompanied together, it leads him to the belief that the U.S. economy seems to be on the point of a full blown recession.

He further adds that they are getting to a point where the chickens are coming home to roost and there is no help from the central banks and that is why these rallies seem to get weaker as well as shorter. He is of the belief that the overflow of easy money from central banks all across the world has shaped a credit crisis which is so severe that it could probable take years to come out of what it has created.

High Powered Money – Enormous Expansion of Credit

Market watchers have pointed out a stunning $21 trillion collective balance sheet built up all around the globe, up from 2.1 trillion only 20 years back. He has said that this is high powered money which has resulted in an enormous expansion of credit as well as financial valuation bubble.

Stockman has observed that the speedy increase of credit has caused debt all over the world of over $225 trillion and has mentioned that they `are at peak debt’. Stockman, at this point considers that the hands of the Fed could be tied up after being on zero interest rates for almost a decade. There is nowhere to go but negative and it is time to get out of the market completely.

The S&P 500 has been progressively in correction territory in 2016and the large-cap index closed the week at around 11% from its 52 week high. However Stockman is of the opinion that it could plunge another 30% from its present trading which takes it back to levels not envisaged since 2012.

What markets are really worried about

Dull Start for Global Stock Market

It has been a dull start for the global stock market this year and the first week has been described as the worst start ever, for Wall Street. During the first week of 2016, Frankfurt and Tokyo had dropped by double digit percentages while in New York the drop was 9% and in London 8%. However, China was the eye of the storm where the key index in Shanghai had lost 19% of its value during the same period.

The prices of commodity had also stumbled where crude oil prices for the first time in almost 12 years, had slipped to below $30 per barrel. Share prices, at times had followed oil downwards which is likely for shares of the companies in oil business. However, for the others it tends to reduce costs leaving consumers with more to spend on their products.

There seems to be a slowdown in emerging growth of the economies and China is an exceptional example though certainly not the only one. The instability had begun in the Chinese market, spreading all around the world.The Chinese stock market in itself does not seem to be the ultimate international issue.

Currency under Pressure

Though it is a serious issue for Chinese investors who had purchased shares while the prices were high, they have lost a good amount of money. However there are few of them to have a possible impact on consumer spending in China.

 There are also few foreign investors in Chinese market withthe possibility of serious losses inflicted beyond the country as direct significance. Besides the stock market, the currency, Yuan has also been under pressure and has lost its ground this year though not on the stock market scale. In the first week, the onshore, official rate dropped down by almost 2%. Some had indicated that there could be a possibility of the decline in the Yuan revolving into a full blown loss of confidence.

The financial market pressures on China are in portion at least an indication of the extensive and much discussed economic slowdown. Since the Chinese economy seemed to lose some space there has been some uncertainty on how well the authorities would handle the process. China would certainly need to slow to an added sustainable pace, but would the path tend to be a rocky one with an abrupt slowdown?

Significant But Catastrophic Slowdown in Growth

The official figures so far indicate a significant though not catastrophic slowdown in growth. According to official figures published, after three decades of 10% average growth, China seemed to slow down to 6.9% last year.The new assessment of the economic outlook of IMF tends to predict a further easing of the pace to about 6.3% this year and in 2017 around 6.0%. It records that China has experienced a faster than presumed slowdown in exports and imports, partially reflecting weaker investments as well as manufacturing activity. The apprehensions regarding economic outlook are not only over China. The new forecast of IMF, downgrades the outlook for the emerging as well as the developing countries and the ones which tend to stand out are Brazil and Russia. This is partly regarding the low prices of oil together with the other commodities as well as the political issues, external for Russia and domestic for Brazil. Besides, this there is also a substantial downgrade in the forecast for South Africa.

Yellen: December interest-rate hike a ‘live possibility’

Federal Reserve (the Fed) Chairman Janet Yellen said last Wednesday that an interest-rate hike in December is a “live possibility” if the economy stays on track. Yellen described the US economy as “performing well” right now, with solid growth in domestic spending. At their meeting last week, policymakers believed that the threat of global headwinds had ebbed, Yellen said.

At its December 15 and 16 meeting, the Fed will consider raising a key interest rate from a record low near zero if the economy continues to grow at a strong enough pace to keep adding jobs and push annual inflation toward the Fed’s 2-percent target, Yellen said. Yellen stressed that no decision has been made yet, and a move in December will depend on how the economy fares between now and then. She reiterated that when the Fed does start raising rates, it will do so gradually.

She said she understood that “there is a great deal of focus” on the timing of the Fed’s first rate hike in nearly a decade. But she said the more important focus should be on the pace of rate hikes after the Fed decides to move.

“The committee’s expectation is that it will be a very gradual path and…will depend very much on the actual performance of the economy,” she said. Yellen’s comments came in response to questions during an appearance before the House Financial Services Committee on Wednesday. William Dudley, president of the Fed’s New York regional bank, said at a separate appearance later in the day that he was in full agreement that December was a “live possibility and we will see what the data shows.”

The main topic of the committee hearing was banking supervision and regulation. On that subject, Yellen said that the country’s largest financial institutions are still falling short of managing the types of risks that led to the 2008 financial crisis.

While Yellen acknowledged progress in making the financial system more resilient to shocks, she expressed concerns about the “substantial compliance and risk-management issues” at the institutions.

“Compliance breakdowns in recent years have undermined confidence in the [banks’] risk management and controls and could have implications for financial stability, given the firms’ size, complexity and interconnectedness,” Yellen said.

The group includes the eight largest banks in the US, a number of major foreign banks operating in the US and several large institutions that have been judged systemically important. Republicans on the House committee have been critical of many of the regulatory changes the Fed is undertaking to implement the 2010 Dodd-Frank Act.

Committee Chairman Jeb Hensarling, Republican-Texas, criticized the Fed for failing to provide enough details about the annual stress tests it conducts on the biggest banks to ensure they can withstand a severe financial downturn.

He told Yellen he had great concern about “how opaque and nontransparent” the stress tests are.

Yellen said that the Fed tries to provide banks detailed information about the methodologies it is using to structure the tests each year.

The Fed’s overriding goal is to make sure that it has sufficiently addressed the kind of problems that lead to the 2008 crisis, the worst financial crisis in the US in seven decades, Yellen said.

“We have made changes in our supervision that now allow us to supervise large financial institutions on a more coordinated, forward-looking basis,” Yellen added­.

-- Associated Press

Interest Rates Could Stay 'Glued' to the Floor, Admits Bank's Chief Economist

Photo: CHRISTOPHER PLEDGER

Interest Rates Remain Glued to the Floor – Andy Haldane-Chief Economist

Reports have come in from the Bank of England’s chief economist, that the interest rates would remain glued to the floor for the instant future. It has been stated by Andy Haldane who sits on the Bank’s committee of interest rate setter that inspite of strong attempts in dislodging them; rates tend to remain stuck at unprecedentedly low levels across major economies.Presently the financial markets are speculating that the UK rates would rise from their lows of 0.5pc to around 2,5pc ten years from now which according to Mr Haldane implies an extraordinarily slow pace of monetary tightening at least by historical standards.

He suggested that policymakers, in trying too hard to raise rates would make the situation even worse, but on the contrary with in due course, they could come free of their own accord. He further stated that it is one reason why the glue holding interest rates to their floor has stayed so strong and feels no immediate need to loosen that glue.Mr Haldane has earlier considered himself as one of the Bank’s most dovish interest rate setters, indicated that he would prefer rates to be lower, instead of being higher. He comments that the Bank should be prepared to cut interest rates if it looks like low inflation and tends to become entrenched in the UK.

Interpreted Downward Drift as Evidence of Secular Stagnation

He has said that the glue holding rates low is remarkably resilient and could have been aggravated by deficient western investment together with additional savings in the east. While in conversation with Milton Keynes, Haldane has stated that `some have interpreted their downward drift as evidence of secular stagnation’, which is a concept that economies tend will grow slowly than in the past and this fear is an echo of concerns raised after the Great Depression. Consumers and businesses now are concerned that what is a reasonable recovery may not be permanent. Consumers are pleased that their glass is now less than half empty but they are no more willing to drink it and this cautious behaviour is to a degree, mirrored also among companies’.

Wage Growth Causing Fluttering 

Inspite of encouraging signs of wage growth during the year right up to April, together with rise in pay with its fastest pace from the time of the crisis, Mr Haldane had cautioned using the phrase `one swallow does not a summer make’. Analysts had informed that the pay growth could be even stronger after accounting changes in the UK’s workforce like the changing mix of employee ages, occupation and job tenures.

However, Mr Haldane has criticized the idea stating that `the wage growth is causing some fluttering though not in this dovecote’. It is now a matter of time to wait and watch for the outcome of the prevailing scenario on the interest rates in the near future.

Complication and Implication of Virtual Water- II

Fresh Water – Concern on Global Food Security

For several parts of the world, fresh water has become a scarcity and over exploited natural resource has now given rise to concern on global food security as well as damage to fresh water ecosystems. Situation seems to increase with the FAO making its estimate that the food production should be double by 2050 and hence food chains should be more efficient with regards to the usage of consumptive water. For geographically and small well defined Australian mango industry, with an average annual production of 44,692 ton of marketable fresh fruit, was 2298.1 kg−1 of average virtual water content, which is a sum of green, blue as well as grey water, at the orchard gate.

Due to wastage however, in the distribution as well as the consumption level of product life cycle, the virtual water average content of 1 kg of Australian grown fresh mango used by Australian household was 52181. This figure compared to an Australian equivalent water footprint of 2171 k−1is the volume of the usage of water in Australia with equivalent capabilities in contributing to water scarcity. Nationally, the distribution and consumption waste in food chain of Australian grown fresh mango to the consumers, indicate an annual waste of 26.7 Gl of green water with 16.6. Gl of blue water

Intervention in Reducing Food Chain Waste – Great Impact on Fresh Water 

These discoveries indicate that the intervention in reducing food chain waste would probably have a great or even a greater impact on freshwater resource available like other water use efficiency measures in food production and agriculture. Analyses of evolution and the structure of trade in virtual water had shown that a number of trade connections together with volume of virtual water trade had doubled for the past few decades. Developed countries have been drawing on the rest of the world to ease the pressure on domestic water resources.

Three studies have been done though it fills three important gaps in the research on global virtual water trade, the first being that in previous studies, virtual water volumes were put together from countries which were envisaging various degrees of water scarcity which was incorporated into assessments of virtual water flows. Secondly some previous studies assessing virtual water networks in terms of immediate water was used for food production though refrained from indirect virtual water used in the supply chains underlying all traded goods.

Global Virtual Water Network Structure

In the analysis, the use of input-output analysis included indirect virtual water, noting the existing conflicting views on whether trade in virtual water could lead to overall savings in global water resources. A re-visit to the Hechscher-Ohlin Theorem was done in the context of direct and indirect virtual water, to determine if international trade could be seen as feasible demand management tool in reducing the water scarcity. It was found that the global virtual water network structure changes significantly on adjusting for the purpose of scarcity.

Besides, the Heckscher-Ohlin Theorem can be validated when indirect virtual water is appraised. Water once seen as an infinite resource is in fact, a finite resource. Moreover, fresh water is an important resource to plants, animals, human and all living things on the planet Earth. Geographic zone of abundance and scarcity is due to unequal global distribution of fresh water and global climatic changes tend to redistribute precipitation away from geographic locations which has sufficient or excess supply to cope up with the population.

Complication and Implication of Virtual Water- I

Water – Huge Number of Characteristics – Important Economic Good

Image credit:ourworld.unu.edu

Water, though not a normal economic good has a huge number of characteristics which distinguishes it from the other goods and these characteristic individually may not be important but its combination makes water an important economic good.`Virtual water’ term was first used in the context of water scarce in Middle Eastern and Northern African countries that imported huge quantity of their food and thereby reduced substantially the demand of water in domestic food production as well as compensated for lack of water.

Importing food was virtually equal to trading water for these countries. Allan (1966) termed water - embodied in food import as virtual water. The terminology as well as the scope of virtual water over the years is extended beyond the original purpose. Presently the definition accepted on virtual water is the water requirement for production of commodities and since food production in several countries is by the largest water user, topics on virtual water problems have been targeted primarily on food commodities.

Virtual water is politically silent and economically invisible (Allan 2003a) and in the past, this has made it possible for water scarce countries to manage with water deficit through food import without a policy discourse of national water scarcity.

Debates – Usefulness of Concept/Feasibility to Import Virtual Water

The term virtual water came into focus in mid 1990s and since then has drawn growing awareness among policy makers, general public and scientific communities. It has become a topic which is discussed recurrently at several international conferences as well as meetings, especially the World Water Forum organized by the World Water Council as well as the Stockholm World Water Week which is an annual event and convened by the Stockholm International Water Institute.

Relevant issues publications have been rapidly on the rise in the international journals. There have been intense debates on the usefulness of the concept as well as the feasibility to import virtual water to reduce local scarcity of water. More than a decade of efforts have been made in virtual water studies and it is time now for a critical review to be done on relevance of virtual water concept in heightening our understanding of real water resources management.

Water – Limiting Factor/Significant Impact

Water is now becoming an increasing limiting factor for sustainable growth and development of economy in many countries, its allocation having a significant impact on the whole economic efficiency especially the mounting physical scarcity in some regions. Need for huge water supply tends to increase the vulnerability in the affected areas.

Moreover, water has also become a strategic resource which involves disputes among those who tend to be affected differently by various policies. Some papers tend to analyse various policy interventions focused at improving water allocation decisions with a novel approach which could incorporate macro as well as micro level options in a unified analytical guidelines which could facilitate assessment of different linkages with other policies as well as their impacts in individual sectors and the wide economy.

Policy impacts comparison indicates the usefulness of the guidelines in information, which the policy makers could use to rank policy intervention as per the emphasis given on various policy objectives.

Virtual Water

Virtual Water Trade – Embedded/Embodied Water 

Virtual water is defined as the total volume water which is needed in order to produce and process. Virtual water trade also known as trade in embodied or embedded water is related to hidden flow of water in case other commodities or food tend to get traded in different places.

On an average it takes around1,600 cubic meters of water to produce ` metric tonne of wheat and the accurate volume could depend on more or less on the climate as well as agricultural conditions. According to Hoekstra and Chapagain they have defined virtual content of product – a commodity, service or good, as `volume of freshwater which is utilised to create a product, measured at the place it was actually produced’ and relates to the sum on the utilisation of the water in the various stages of the production chain.

According to John Anthony Allan, Professor from King’s College London and the School of Oriental and African Studies had introduced the concept of virtual water in order to support his views that countries in the Middle East could save their scarce supply of water by relying on import of food.

He received an award of the 2008 Stockholm Water Prize, for his contribution. He states that `the water is considered to be virtual due to the fact that once the wheat is grown, the real water used to grow it is no longer actually contained in the wheat and the concept of virtual water helps in realizing how much water could be needed to produce different goods and services’.

Some Deficiencies in Concept of Virtual Water

He further states that in `arid and semi-arid locations, the value of the virtual water of good or service could be useful in determining the best use of the available scarce water.’ However there are some deficiencies in the concept of virtual water which means that there is a significant danger on depending on these measures in order to guide policy conclusions.

As per Australia’s National Water Commission it is considered that the measurement of virtual water has less practical value in the making of decision with regards to the best allocation of scarce water resources.

Recently the concept of virtual water trade has been gaining weightage in the scientific and the political arguments with the notion of its concept being ambiguous and changes have been moving between a descriptive, analytical concept and a political induced strategy.

From the point of view of an analytical concept, virtual water trade relates to an instrument which enables the identification as well as the assessment of policy choice not only in the scientific but also in the political discourse.

Concept Analytically helps Global/Local/Regional Level

From the point of politically induced strategy, the query is whether virtual water trade could be used in a sustainable way, or whether implementation could be managed in an economic, social or in an ecological manner and which countries would have a meaningful option of the concept offered.

In the framework of latest developments from supply oriented to demand oriented management of water resources, new field of governance has opened up which facilitates a differentiation as well as balancing of different perspective, interest and basic condition.

The concept analytically helps in distinguishing between global, local and regional level, together with their linkages. Which means that water resource problem needs to be solved.