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India’s growth: The problems aren’t in Greece but at home
Oil firms dismiss ‘false impression’ of huge profits
Aviation
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Tax Advice
‘Not all gloom and doom for economy’
FIIs’ equity sellout continues in May; withdraw Rs 347 crore
In India, some farmers take banks for a ride
Financial planning
Bourses may continue to slide on global cues
Market pointers
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India’s growth: The problems aren’t in Greece but at home
The one statement he had prepared for the media that night, however, concerned allegations of corruption levelled against him and his cabinet ministers — not the economy. Quizzed on the Indian currency's precipitous slide to record lows, Singh blamed the global economic slowdown and the euro zone's emergency, and he voiced hope that the G20 would sort these troubles out at a summit in Mexico later this month. Two days later, when GDP data showed India's growth rate had plunged to its lowest level in nine years, Singh's finance minister likewise pointed a finger at "weak global sentiments", as well as the Reserve bank of India for its tight monetary policy. But as warning lights flash on India's economic dashboard — with manufacturing output and consumer demand now fading as well as corporate investment, fiscal and trade deficits ballooning and inflation stubbornly high — few buy the line that it's somehow not the government's fault. "There’s so much denial, but almost all of the problems in India are self-inflicted," said Rajeev Malik, senior economist at CLSA Singapore. "The Indian situation is ... an outcome of policy incoherence, a government that's asleep." Economists say New Delhi's policy inertia and the absence of significant reforms to sustain growth have now turned India's slowdown from a cyclical one to something that is structural or systemic. The country is now stuck with lower growth than its potential: not the "Hindu rate of growth" of about 3.5% that dogged the state-stifled economy before big-bang reforms two decades ago, but a 21st-century version of that, which Malik calls "growth with a government-incompetence discount".
THE PROBLEMS ARE NOT IN GREECE: To be fair, the external environment does partly explain the faltering growth. However, all of Asia's emerging markets have been buffeted by chill winds from the United States and Europe, and yet India has fared worse than others, losing its ranking as the region's second-fastest growing economy. Last week's news that GDP grew by 5.3 percent in the first three months of this year, a stunning tumble from 9.2 percent in the same quarter of 2011, put India fourth among Asian emerging-market economies behind China, the Philippines and Indonesia. For JP Morgan Chase's India chief economist, Jahangir Aziz, what the government needs to do is "begin by admitting that the problem lies not in Greece, but at home". That doesn't look likely anytime soon: one day after the GDP data, the cabinet met to agree on removing restrictions on the export of skimmed milk powder and broke up without discussing the country's economic predicament. Western nations might look with envy at a growth rate of more than 5 percent, but not at India's inflation rate of over 7 percent, a current account gap now at its widest since 1980 and a fiscal deficit that has been allowed to swell to 5.9 percent of GDP thanks to a raft of crippling subsidies. The rash of macroeconomic imbalances has raised the spectre of India's balance of payments crisis in 1991, when the central bank was forced to airlift tons of gold to Europe as collateral for a loan to avert a sovereign default. Singh, then finance minister, rammed through deep-seated reforms that pulled India back from the brink and set it on the road for a streak of growth that came close to double digits before the global financial meltdown of 2008. A repeat of the full-blown crisis 21 years ago would be hard to imagine now, not least because India's stock of foreign reserves is comfortable. But confidence is evaporating fast. SETTLING FOR SUB-PAR GROWTH: The trouble is that since it won a second term in 2009 the government led by Singh's Congress party has taken no major policy initiatives to further the liberalization he pioneered. Instead, an outcry over corruption and peevish coalition allies that block unpopular reform have frozen the government into inaction. All this at a time when it needs to be slashing subsidies for fuel, fertilizer and food to fix the country's fiscal credibility and tackling regulatory uncertainty and the high cost of doing business to halt a slowdown in investment. — Reuters
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Oil firms dismiss ‘false impression’ of huge profits
New Delhi, June 3 The rebuttal was clearly targeted at charges made by Overseas Indian Affairs Minister Vayalar Ravi in a letter to the petroleum minister that the companies were making big profits and also indulging in wasteful expenditure. Oil companies retorted that they have been incurring huge losses due to sale of three products, diesel, cooking gas and kerosene at highly subsidized prices. They pointed out that it is only after the assistance of Rs 83,500 crore from the government and Rs 55,000 crore from the upstream oil companies (ONGC, OIL and GAIL), totaling Rs 1.38 lakh crore, the oil companies could declare nominal profits. “Had this assistance not been given, the three OMCs would have reported a combined loss of Rs 1.32 lakh crore”, they said. On a combined turnover of Rs 8.33 lakh crore during 2011-12, they have declared a combined profit of mere Rs 6177 core, which is only 0.7 per cent of their turnover. They said that this level of profit is not adequate for OMCs to enable them to incur huge expenditure on continuous modernization, making available environmentally compliant fuels, laying of pipelines, enhancing storage, and development of other infrastructure. “It’s important to note that the OMCs are enabled to announce at least nominal profits for maintaining their blue chip status and credit ratings at the global level”, the statement said. Due to highly subsidized sale of regulated products, the OMCs are under huge financial strain. Their combined borrowings have gone up from Rs 97,000 crore in March 2011 to a whopping amount of Rs.1.26 lakh crore in March 2012 . Similarly, their interest burden has gone up from Rs. 4,700 crore in 2010-11 to Rs. 9,500 crore in 2011-12. If the government and upstream assistance was not made available to the OMCs, to make good their losses, they would not have been in a position to raise necessary finance to purchase crude from the international market and maintain uninterrupted supply of petroleum products in the country. The fuel retailers have also said the cost of crude oil and products imported from other companies constitutes about 91-93% of the total cost incurred by the OMCs. “Therefore, the propaganda that the OMCs are incurring high administrative expenses is unfounded”, they said. |
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Air India pilots hurting their own cause
By K.R. Wadhwaney AIR India pilots have lost a lot in their ill-conceived strike. They will lose more, maybe, all that they have collected thus far. They are hurting their own cause. They are playing in the hands of a union leader, who is essentially a petty politician and he is serving the cause of a senior politician who is working hand in glove with private operators. In the closure or bankruptcy of the national carrier is the gain of this politician .and also long-time gain of the private operators. What minister of state for civil aviation Ajit Singh and the government have decided to implement is merely logical and fair. They are following the Dharmadhikari panel report in 45 days' time. This is a fair decision as it was announced by the then civil aviation minister Praful Patel in 2007 while forcing a merger on the two state-owned airlines. The amalgamation came about on the basis that two airlines, Indian Airlines and Air India, were two equal arms of the national aviation company and therefore government's decision to treat employees of two airlines on parity is a step in right direction. The Air India employees, particularly pilots, were/are not more equal than Indian Airlines workers and, therefore, they should be men enough to accept the terms and conditions offered to them instead of becoming stumbling block in the already messy affair of two carriers. Indeed, the merger was not only ill-conceived but was a crude ploy by a politician. It has failed and the present minister has accepted its failure. Now the government had woken up and has announced that there will be parity in all spheres for the employees of the two carriers. The investigations reveal that a "demerger" of the airlines after five years of a "failed marriage" is not possible because of several technical reasons. This being the case, it is only reasonable for the Air India pilots and the Indian Pilots Guild to emerge out of their exaggerated notions of ego and superiority to make the best of what is being offered to them. The National Aviation Co is said to have prepared a new business plan to cut down losses and regain operations on profitable routes domestically and internationally to bring about a turnaround of the ill-fated company. The National Aviation Co's success will be possible only if its unions, like the National Pilots Guild, are controlled upon persons other than hardcore politicians, who care for their own importance instead of working for the welfare of the employees of the company.
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Premature withdrawal from PPF account not taxable
By S.C. Vasudeva Q: Is the amount withdrawn prematurely from one's Public Provident Fund account taxable? — Sohan Lal A: Any premature withdrawal from a Public Provident Fund (PPF) account is not taxable in case the withdrawal has been made in accordance with the provisions of the Public Provident Fund scheme instituted in 1968. Q: Ours is partnership firm and I want to transfer my 6 per cent share in the entity to my son. Will I have to pay any gift tax and, if so, whether a separate gift deed is required to be made out? — Hridyesh Aggarwal A: It would be advisable to admit your son as a partner in your firm instead of transferring your share to him. He should make an appropriate capital contribution. The partnership deed in its preamble should clearly state that on account of your advancing age your son is being inducted so as to provide a necessary support to the firm by a younger person. This should enable you to get the partnership approved by the tax authorities. Q: If my “Hindu undivided family” (HUF) invests Rs one lakh in the name of my 34-year-old son under Section 80CCD of the Income Tax Act in National Pension Scheme, will my HUF get rebate under Sections 80C or 80CCD? Also, what is rate of interest in the case of the National Pension Scheme, and is income from the scheme taxable? — Ramesh Marwah A: Deduction under section 80CCD of the Income Tax Act is available to an individual assessee. However, An assessee from a “Hindu undivided family” would not be entitled to claim such a tax deduction. The rate of interest in the case of the National Pension Scheme has not been notified by the government so far. Such pension is not exempt under Section 10 of the Income Tax Act.
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‘Not all gloom and doom for economy’
A majority of respondents covered by the Bizcon Survey said the situation would change for better after few months. The apex industry chamber said it has surveyed over 300 CEOs of companies mainly operating in manufacturing and services. The study said the first signal of improvement would be seen immediately after completion of the monsoon. The Met has predicted a normal monsoon which would significantly improve the prospects of agriculture. "The share of agriculture in India’s GDP is less than 20%, but there is a multiplier effect as about 65-70% of India's population is still dependent on the agrarian economy," Assocham president Rajkumar Dhoot said. — PTI
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FIIs’ equity sellout continues in May; withdraw Rs 347 crore
New Delhi, June 3 Foreign institutional investors made gross purchase of equities worth Rs 42,443.30 crore and sold shares valued at Rs 42,790.70 crore, translating into a net outflow of Rs 347.40 crore, according to the data available with the market regulator SEBI. FIIs had pulled out Rs 1,109 crore from the stock market in April amid S&P lowering India's credit outlook to negative from stable. Market experts attributed the outflow to a slew of reasons such as depreciating rupee, high fiscal and current account deficit as well as lack of reform momentum. "Foreign investors are staying away from the Indian equity market, despite an attractive valuation, mainly on account of weakness in rupee, which is hovering around the 56-level against US dollar," a broker said. Foreign investors, however, seemed to be bullish on the debt market. — PTI
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In India, some farmers take banks for a ride
Supali, Maharastra, June 3 He is one of an increasing number of 'wilful' defaulters in Asia's third-largest economy, where banks are under government pressure to lend to farmers. Two-thirds of the population depend on agriculture for their livelihood and, to boost productivity — annual agricultural growth is just 3% — India has this year raised the farm lending target for banks by a fifth to more than $100 billion. "My brother was the village head so it had to be a big wedding. That's where the money went," said Yelmar, 39, speaking in Marathi. “Paying off the bank loan is not really my priority," he added. Banks and government officials do not have data on just how many subprime farmers are abusing the cheap loan system, but they are giving banks a multibillion-dollar headache. — Reuters
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Financial planning
Financial planning can solve many problems if we take it seriously and start working on it. Generally it is seen that when the time comes for any social function or occasion people redeem their money from the investment that was planned for some other purpose. Actually we become helpless when some emergency comes and take some instant decision that can definitely spoil our financial freedom. Today it is the need of the hour that one should make his/her financial plans as household, education and other personal expenses are going up and we don't know the impact of inflation in the longer run. Secondly, loans and credit cards have become a part of life as they are easily available. We never calculate the impact of interest which takes away major part of our income. In other words, our resources are limited but our wants are much more. Financial planning brings discipline in our savings and expenses. It helps us to set realistic goals and also prioritizes the goals. We can easily reach our destination safely and timely if we set some basic rules for investment and act accordingly. Most of us are not aware of priorities in our life. We all invest but without understanding our financial goals, risk involved and time horizon. The lack of proper financial planning will add to problems rather than solving them. Retirement planning
Life insurance, health insurance and disability insurance are the basics of financial planning. At present less than 10 per cent of Indians are insured and even those who are insured are mostly underinsured. Living short is always a major problem for the family but nowadays living long is also becoming more and more problematic. The average life of an Indian is 67 years at present and is increasing because of the advancement of science and technology. Retirement planning and estate planning will also form part of our financial planning. Less than one per cent of the country's population prepares their will and this leads to litigations for years. We have to think very seriously for all this aspects in our life if we want to live happily. There is other side of every investment which a common man does not understand like, economic growth, inflation, tax implications etc. Today we are surrounded by many agents and advisors who come to sell a particular product such as life insurance, mutual funds, PPF, NSC, postal schemes, bank fixed deposits and direct trading account. The most of the sells happens without understanding the future needs of the client. We all buy one or other product which may or may not fulfill our desired financial goals. No product is good or bad, but more important is the fact that it should match our financial expectations. Certified financial planners
Financial planning is the process where a product comes after the need analysis. This is the recent trend in India, wherein a financial planner charges fees for making the financial plan and does not push the product to earn the higher commission. Financial planners offer unbiased fee based advice which really can help to achieve financial goals. A certified financial planner is an individual who is qualified, certified and licensed to give unbiased financial planning advice, free of conflict of interest. They take care of all finance related matters just the way a doctor takes care of all health related matters. They look at all realistic financial goals, reviews current insurance and investments and then provide a roadmap to achieve financial goals. They make written financial plan with future recommendations in the best interest of client. They educate their clients and update them with recent changes in the tax and other investment laws. They follow a set ground rules of ethical standards and are governed by a neutral body - the Financial Planning Standards Boards of India (FPSB India). It is also a mandatory requirement to have "continuous education" and to be updated with the changes of the finance industry throughout the lifetime of practice as a certified financial planner. Financial planning not only helps you in achieving your dreams but also gives you peace of mind. The author is head of financial planning at Apna Paisa. The views expressed are his own |
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Bourses may continue to slide on global cues
The week began on a strong note on expected lines. The markets were up a good 320 points on the Bombay Stock Exchange Sensex and 100 points on the National Stock Exchange Nifty. However, the gains were wiped out in the next two days and there was a weak expiry on Thursday. Friday was marked by a selloff on global cues and all the day's losses were the weekly losses as by the previous day markets had become flat for the week. The Sensex lost 252.66 points or 1.56%. The Nifty lost 78.80 points or 1.6%. The broader indices like the BSE 500, BSE 200 and BSE100 lost 1.53%, 1.55% and 1.62%, respectively. The BSE MidCap was down 1.1.34% while the BSE SmallCap lost 1.96%. The sectoral indices hardly had gainers with the BSE IT gaining 0.53% and the BSE FMCG closing almost flat at 0.02%. On the losing side the BSE Auto lost 6.05%, the BSE Capital 3.49% and the BSE Bankex lost 1.97%. In individual stocks the top gainers were Hindalco (up 4.11%) and Coal India (up 2.57%). The top losers were Tata Motors which lost 16.65%, Sterlite (down 5.79%), ONGC (down 4.20%) and ICICI Bank (down 4.17%). Friday saw the Delhi High Court pass its order in the case between Indraprastha Gas and the regulator, PNGRB. The court ruled in favour of the company and said that the regulator had no power to fix any component of network tariff or compression charges for any entity having its own distribution network. This order saw the shares of IGL, Gujarat Gas and GSPL gain sharply in an otherwise bad day at the markets. It appears that the above counters are still oversold and could see some more gains in the coming days. The state-owned fuel marketing companies have finally reduced petrol prices by Rs 2 per litre. The cut has come two days later than expected. The delay was a political decision as it would have otherwise looked as the government succumbed to pressure from the "Bharat Bandh" (nationwide strike) called on May 31. Foreign institutional investors continued to be sellers with net sales of Rs 697 crore while domestic institutions too turned sellers of Rs 275 crore. The Indian rupee continued to be under pressure and after making new lows closed weaker at Rs 55.59. The week ahead would see the markets under pressure as on Friday the US markets lost a lot of ground on account of weak employment data. The markets could recover some lost ground as we move into midweek. The markets need to hold the 15,800 level on the Sensex and 4,790 levels on the Nifty to remain afloat. The breaking down of these levels would assume a further fall of 2-3% is imminent or certain. The net gain for the year as of date is 3.3% on the Sensex and 4.6% on the Nifty. In the coming week, the BSE Sensex has support at 15,857, then at 15,750, then at 15,564 and finally at 15,406 points. It has resistance at 16,149, then at 16,361, then at 16,484 and finally at 16,671 points. The NSE Nifty has support at 4,807 points, then at 4,775, then at 4,713 and finally at 4,655 points. It has resistance at 4,900, then at 4,962, then at 4,993 and finally at 5,045 points. It's a tough week ahead - trade cautiously. The author is founder of KRIS, an investment advisory firm. The views expressed are his own
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Market pointers
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Overseas investors, for the second straight month, in May pulled out funds of Rs 347 crore from the equity markets amid concerns over domestic economic growth and depreciating rupee.
Foreign institutional investors made gross purchase of equities worth Rs 42,443.30 crore and sold shares valued at Rs 42,790.70
crore, translating into a net outflow of Rs 347.40 crore, according to the data available with the market regulator
SEBI. FIIs had pulled out Rs 1,109 crore from the stock market in April amid S&P lowering India's credit outlook to negative from stable.
Financial planning plays a very important and crucial role in our life. It can be described as the "long term process of wisely managing your finances so that you can achieve your financial goals and dreams". We all see many dreams for our children's higher education, marriage and future prospects and also set many goals for us, like buying a dream home, a new car and a vacation abroad. Retirement planning is also important as we are moving from joint family to nuclear family. We surely know our goals and dreams but never make any serious attempt to fulfill the same. In reality all our goals and dreams remain on paper only.
New Delhi, June 3
New Delhi, June 3
Financial planning plays a very important and crucial role in our life. It can be described as the "long term process of wisely managing your finances so that you can achieve your financial goals and dreams". We all see many dreams for our children's higher education, marriage and future prospects and also set many goals for us, like buying a dream home, a new car and a vacation abroad. Retirement planning is also important as we are moving from joint family to nuclear family. We surely know our goals and dreams but never make any serious attempt to fulfill the same. In reality all our goals and dreams remain on paper only.