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Rupee outlook not positive, may weaken further: CII
Biz
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RCom to hive off realty assets into separate listed firm
Online PF transfer facility
RIL to get benefit of gas price hike from 2017
SEBI okays Tamil Nadu's proposal to buy stake in NLC
personal finance
Self-managed investment option in life insurance
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Rupee outlook not positive, may weaken further: CII
New Delhi, July 7 The survey demonstrated a subdued outlook of the rupee with most respondents (around 56 per cent) expecting the rupee to trade above Rs 59 to a dollar by end-September. Another 15 per cent of the respondents expect the currency to remain in the vicinity of Rs 58-59 to a dollar as weak sentiments would continue to drive down the rupee. Commenting on the survey, Chandrajit Banerjee, Director-General, CII said, “The large current account deficit and our growing vulnerabilities on the external front have largely contributed towards the secular decline and the current volatility of the rupee”. CII said there is a need to move fast on the next round of reforms by addressing constraints such as land acquisition and environment which delay investments in industry and infrastructure, encourage foreign direct investment by easing investment caps, continue rollback of fuel and fertiliser subsidies, strengthen energy security and reduce transaction costs of exports. A majority of the respondents have cited high current account deficit and burgeoning gold imports as the top most reason for recent downslide of the rupee followed by expectations of tapering of QE (Quantitative Easing) by the US Federal Reserve. Other reasons such as weak domestic sentiments, rising demand for dollars by importers, among others also matter. The survey was unanimous about the adverse impact of the rupee decline on the economy. A majority of the respondents reported that the weak rupee would contribute towards imported inflation in the country due to a rise in the oil import bill and its consequent impact on inflation. This may discourage the central bank from cutting the policy rates in the next monetary policy review. Another significant impact, according to the respondents, would be the rise in under-recoveries of the oil marketing companies which in turn would raise the subsidy bill of the government and consequently push up the fiscal deficit going forward. The impact of rupee depreciation would also be felt on the import-oriented sectors as well on external borrowings but these were rated to be less important consequences of the rupee fall. The opinion of the respondents was divided about the intervention of the RBI to stem the slide of the rupee. All the respondents, however, agreed that the recent measures taken by the government were not sufficient to stem the fall of the rupee. The large current account deficit and our growing vulnerabilities on the external front have largely contributed towards the secular decline and the current volatility of the rupee
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Biz
Talk
India’s $25 billion electrical equipment industry is going through its worst phase in a decade due to weak demand and rising Chinese imports. JG Kulkarni, president, Indian Electrical and Electronics Manufacturers Association (IEEMA), and executive vice-president, Crompton Greaves, talks to Sanjeev Sharma how imports are taking on dangerous proportions affecting employment and the absence of level-playing field which is making Indian industry non-competitive in its own country. Q:What has been IEEMA’s performance in the last fiscal? A: Data released by the IEEMA shows that the Rs 1.20 lakh crore Indian electrical equipment industry registered a negative growth of 8% in FY13, first time in 10 years. The worst hit were the cable industry, which registered a de-growth of 26% in FY13 after a 25% slump in FY12, and capacitor industry where the negative growth rose to a massive 24% from 1.8% in FY12. Q: What are the reasons for negative growth? A: Sluggish demand due to the slowdown in the power sector and continuous rise in imports of electrical equipment, especially from China and South Korea, on account of the absence of a level-playing field in the domestic market has resulted in the Indian electrical equipment industry witnessing a de-growth for the first time in 10 years. Imported electrical equipment has now captured almost 40% of the domestic market. The transmission and distribution equipment industry is working at less than 70% of its production capacity. Q: What are the problems on project execution delays? A: There are multiple reasons for the delay in execution of power projects in India over the past couple of years. Firstly, lack of fuel linkages, especially coal availability, in the domestic market. Problems in obtaining environmental and other statutory clearances and also problems in land acquisition have added to the problem. Further, the financial distress of the power distribution companies have led to the demand for electrical equipment being much less than Q: How are imports hurting the industry? A: During the past seven years, 2005-06 to 2012-13, India’s imports of electrical equipment have increased at a compound annual growth rate (CAGR) of 24.67% in rupee terms and were at Rs 64,674 crore in 2012-13. China’s share in Indian imports of electrical equipment has dramatically increased in the past few years and now it stands at 44.92% (2012-13) of the total from 15.26% in 2005-06. Imports from China have grown at a CAGR of 45.46% in the past seven years and were Rs 29,054 crore in 2012-13. Imports of electrical equipment in the country have assumed threatening proportions, whereas there is a significant under-utilisation of installed domestic capacity, resulting in loss of employment to qualified engineers, technicians, workers. Q: What are the issues on level-playing field? A:Domestic electrical equipment manufacturing industry suffers a cost disadvantage of about 14% vis-à-vis imports due to sales tax/VAT, entry tax/ octroi; higher financing cost; lack of quality infrastructure; dependence on foreign sources for critical raw material and components, etc. In addition, Chinese manufacturers of electrical equipment are given by their government export subsidies as high as 17% of the export value, social security subsidies, lower income tax rate (15%) and access to financing at low rates of interest, which gives Chinese companies over 24% unfair pricing advantage and allows them to price their products competitively. Further, China is also offering credit to foreign buyers on soft terms to finance their imports. As a result, imports from China are escalating every year. All this makes Indian industry non-competitive in its own country. Q: What is the impact of slowdown in electrical equipment on the economy? A: For an efficient and developed power sector in a country of India’s size, a strong domestic electrical equipment manufacturing base is essential. The domestic electrical equipment industry contributed 1.4% to the nation’s GDP in 2011-12 and 10% to the manufacturing GDP, and with the existing slowdown the contribution to GDP and manufacturing GDP could be skewed down. Also, the industry provides direct employment to about 5 lakh persons and indirectly to about 10 lakh. The entire value chain would account for a total employment of over 50 lakh. The ongoing slowdown could hurt the overall employment scenario if concerted efforts are not taken by the government. Q: What are the solutions for the slowdown? A: To stimulate demand for the domestic electrical equipment industry, the government should expeditiously address the challenges confronting the country’s power sector, including the problems in fuel linkages, land acquisition, environmental and other clearances, precarious financial health of utilities, etc. The government needs to encourage indigenous manufacturing and technology in the domestic electrical equipment industry, as done by several countries, including China. There is a dire need for providing a level-playing field to Indian manufacturers of electrical equipment to compete with imported electrical equipment. Necessary safeguards have to be provided to the domestic industry that is facing non-market competition on account of below-cost entry level prices offered by foreign manufacturers. Imports of electrical equipment have assumed threatening proportions, whereas there is a significant under-utilisation of installed domestic capacity, resulting in loss of employment for qualified engineers, technicians and workers
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No rebate on amount deposited in PPF a/c of major son
by SC Vasudeva
Q. I am a retired senior citizen. Please advise whether premium paid by me in the PPF account of my major son qualifies for rebate u/s 80C. A. You would not be entitled to claim any deduction under Section 80C of the of the Income Tax Act 1961 (The Act) in respect of amount deposited by you in the PPF account of your major son. The major son can claim a deduction in respect of deposit made by him in his own account. Q. I have been serving as a lecturer in Govt. Senior Secondary School, Khuian Saredar, district Fazilka. I have been getting a fixed medical allowance of Rs 500, fixed mobile allowance Rs 500, B.H.R.A. (Border area allowance (5% of basic pay) in lieu of free accommodation and rural allowance 6% of basic pay. Please clarify whether these allowances are taxable or not. A. (a) Fixed medical allowance would not be exempted from tax. However, in case you can prove that the amount spent by you for medical expenses incurred for self and family is more than Rs 15,000 per year, it may be possible for you to claim that the amount being in the nature of medical reimbursement and being less than Rs 15,000 per year should be exempted from tax. (b) Fixed mobile allowance would be taxable. (c) Border area allowance would also be taxable as you are not living in the areas which are specifically covered for the purposes of grant of exemption as specified in Rule 2BB(1) of the Income Tax Rule 1962 (The Rule). (d) Rural allowance would also be taxable as no exemption is provided in the Act in respect of such an allowance. Q.(a) What is the maximum limit of contribution to the PPF account as an individual taxpayer and along with a minor child. (b) When the minor child attains majority and gets a PAN, how much contribution (maximum) can be done in both the accounts. (c) What will be the rebate in income tax (in both cases)? A. (a) The maximum limit of contribution to Public Provident Fund account is Rs 1,00,000. You can open a PPF account on your own behalf or on behalf of a minor. You can thus open only one PPF account. The applicable limit is Rs 1 lakh only for either of the accounts. The limit of Rs 1 lakh is applicable to any one of the accounts so opened. (b) The minor on attaining majority will be operating his own account. The limit applicable in his (c) The amount deductible under Section 80C of the Income Tax Act 1961 (The Act) in respect of the deposit made in a PPF account is Rs 1 lakh, being the maximum limit prescribed under Section 80C of the Act. Q. I have come to know that a ‘trust’ can be made for minor children. Please clarify if income is not clubbed with parents, whether such a trust is supported by courts of India, including Supreme Court or not. A. A person can form an irrevocable trust for the benefit of minor children. In such case, no clubbing would arise in respect of income of the trust. The trust so formed can be taxed at the maximum marginal rate in case the shares of beneficiaries are indeterminate or unknown. In case the shares of beneficiaries are determinable and total income of any beneficiary (excluding his share from such trust) exceeds the maximum amount which is not chargeable to tax under the Finance Act of the relevant year, tax shall be charged on the total income of the trust at maximum marginal rate.
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Gold imports likely to dip by 24% in June
Mumbai, July 7 The country imported about 50 tonnes of gold in June 2012, according to official data. CAD (current account deficit), which is the difference between the outflow and inflow of foreign currency, is estimated to be around 5 per cent of the GDP in 2012-13 fiscal. CAD had touched a record high of 6.7 per cent during October-December quarter. The central bank had said the trade deficit has widened during April-May due to surge in festival related or seasonal gold imports. To curb demand, the government hiked the import duty on gold three times in a year and raised it by 2 per cent to 8 per cent. Besides, RBI too has put restrictions on banks on importing gold. Meanwhile, All India Gems & Jewellery Trade Federation (GJF) has taken steps to help curb gold imports by issuing a circular to its members requesting them to stop selling bars and coins. "We have requested our members and affiliated members to help the government to reduce gold import by not selling bars and coins. We are getting positive response from our members and this step will help bringing down the imports to some extent," GJF chairman Haresh Soni said. GJF has also submitted a representation to the Finance Ministry, which suggests at way in which imports can be curbed without jeopardising the jewellery industry, he said. "We have listed number of ways that will help the government to curb imports. Our representation includes gold deposit scheme that will encourage people to deposit idle gold lying with them with the government in lieu of some interest for a few years. This gold then can be used for jewellery purpose by the industry and can later be given back to the source," Soni added. He said there are about 25,000 tonne gold laying idle in the country and if 5-10 per cent of it used the issue will be resolved. "The government has asked us to structure this gold deposit scheme. We are working on it and will present it this week," he added. — PTI
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RCom to hive off realty assets into separate listed firm
New Delhi, July 7 Besides unlocking the value of its real estate, RCom shareholders will free shares in Reliance Properties in the ratio 1:1. Indicative value of Reliance Properties shares is Rs 60 per share and market price of RCom share is Rs 130. This translates into almost 50 per cent enhancement/addition in shareholders value of RCom. "Board of Directors has in-principle decided on a demerger of the real estate held by RCom into a separate unit, Reliance Properties Ltd. The preliminary and indicative monetisable value of RCom's real estate on development is estimated by independent valuers at over Rs 12,000 crore ($2 billion), which is equal to Rs 60 ($1) per RCom share," the company said. — PTI
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Online PF transfer facility
New Delhi, July 7 "Employees' Provident Fund Organisation (EPFO) will make functional the online settlement of transfer claims on changing jobs by August-end," a source said. EPFO is expecting 1.2 crore claims in 2013-14, including around 13 lakh PF transfer claims. The body has planned to settle online around 10 lakh transfer claims of tech-savy applicants from industries like IT and other sectors this fiscal. The reason for their optimism is that the employers in sectors like IT generally have a registered digital signature, which is prerequisite for online claim settlement, the source said. Taking the first step towards launch of online PF transfer claim facilities, EPFO had unveiled the revised transfer claim form for the purpose on Thursday. The revised 'Transfer Claim Form' can be presented after verification, either through the present employer or the previous employer. Earlier, the form could be submitted after verification only through the present employer. EPFO has set up a central clearance house to enable subscribers to apply online for PF withdrawal and transfer claim settlements. The body also has plans to launch a facility for online settlement of withdrawal of PF subsequently. It has already digitalised the records of 122 offices and processed all its present claims on computer. EPFO has already computerised the processing of claims. It envisages settlement of all types of claims in three days period. At present, EPFO is expected to settle all claims within 30 days as per its citizens charter. — PTI EPFO is expecting 1.2 crore claims in 2013-14, including around 13 lakh PF transfer claims. It has planned to settle online around 10 lakh transfer claims of tech-savy applicants from industries like IT and other sectors this fiscal.
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RIL to get benefit of gas price hike from 2017
RIL, whose fields currently make up for just 12-13 per cent of total domestic production of about 85 million standard cubic meters per day, does not yet have all approvals in place to bring 16 discoveries in the KG-D6 block and another 6 in NEC-25 block off Orissa to production, sources said. The finds in KG-D6 can add a minimum 30 mmscmd of output to about 14 mmsmcd production from currently producing D1&D3 fields in the KG basin block. — PTI
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SEBI okays Tamil Nadu's proposal to buy stake in NLC
New Delhi, July 7 "SEBI is of the view that the proposal could get covered within the guidelines on IPP. However, the exact details need to be worked out that require discussions with the officials of the Government of Tamil Nadu, Ministry of Coal and Department of Disinvestment," an official statement said. The Department of Disinvestment (DoD) had sought SEBI’s views on Tamil Nadu Government's proposal to buy 5 per cent of Centre's stake in NLC disinvestment. SEBI has written back to disinvestment department last week saying that the 5 per cent stake sale should be done to the state PSUs through the Institutional Placement Programme (IPP) route. Also, the acquirer has to be registered with SEBI as a Qualified Institutional Buyer (QIB). "In the offer document for IPP, the seller can propose the criteria on the basis of which allocation could be made. This can be used to give preference to any set of Qualified Institutional Buyers, including state undertakings of Tamil Nadu," the statement added. — PTI
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Relax compensation norms for missing persons
As per Section 108 of the Indian Evidence Act, 1872, “A person is presumed to be dead who is unheard of for more than seven years by those who would naturally have heard of him/her if he/she had been alive”. Pankaaj Maalde
It is also true that hundreds of bodies are lying there and need to be identified and, if possible, handed over to the relatives of the deceased. The major challenge before the government is to identify the deceased persons. Looking at the present conditions, in many cases either it will not be possible to identify the person or still there will be hundreds of bodies which will not be traceable. In the eyes of law, a person will not be declared dead until his/her body is recovered. What will happen to their finances in the absence of a valid death certificate is also a major concern for the family members. They will neither be allowed to claim the money lying in their bank accounts nor will insurance company or mutual fund house will pay them unless they provide a copy of the death certificate. The life of legal heirs is also likely to be affected financially if the problem is not addressed immediately. Legal heirs might also have to struggle for day-to-day expenses even though they have sufficient money and investment in the name of the missing person. If the body is not found then what to do to claim the money and investment of missing person requires immediate attention and people should know the provisions of the law in this regard. Those who are dead are unlikely to come back but we should seriously think about the problems which living family members have to face for their survival. As per Section 108 of the Indian Evidence Act, 1872, “A person is presumed to be dead who is unheard of for more than seven years by those who would naturally have heard of him/her if he/she had been alive”. It means in the absence of a valid death certificate, family members will not be able to even touch the money and investment for another minimum seven years. The procedure is also long. Firstly, family members have to file a missing person complaint with the local police and after completion of seven years, they have to approach an appropriate court for the necessary order stating that the missing person is presumed to be dead. What time the court will take is also not clear. It means a delay of another six months to one year to claim the money. The government has to seriously think about this real life problem and review the provisions and reduce the time required for declaring a missing person dead, particularly in case of natural calamities. Section 10 of the Registration of Births and Deaths Act, 1969, gives power to the state government to appoint any person on their behalf to notify birth or death or both which occurred in such areas as may be prescribed. A positive step by the Uttarakhand Government can solve many problems and give hope to many families who have lost their bread earner. If the death of a missing person is notified by the state government, then on the basis of that it is possible to apply for and get the death certificate. We should plan for our finances so that in case of an unfortunate event, our loved ones don’t have to struggle financially in their life. It is important to open a bank account in joint name with either and survivor basis and also advisable to invest jointly with either and survivor basis. We have also to nominate one or two of the family members in all investments wherever such facility is available. It is also important to execute a Will in favour of loved ones so that there is no confusion thereafter. One should also note that till you get the death certificate, pay the life insurance premium to continue the policy as non-payment of premium in time will lapse the policy. It is also possible to claim the money, if the amount is small, on the basis of an indemnity bond filed with the authority concerned, if they agree do so. I also request all the three regulators — RBI, IRDA and SEBI — to do the needful in this regard so that legal heirs can easily get the money back and move forward in their life. The author is Head, Financial Planning, Apnapaisa. The views expressed in this article are his own
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Self-managed investment option in life insurance
The choice of allocating one’s savings will depend on the policyholders’ financial goals, knowledge and risk appetite. The riskier an asset class, the higher is the expected return. Policyholders who opt for the self-managed option need to ask themselves two key questions (i) which asset should they own and (ii) how much of each asset must they own. Different asset classes
To build a well diversified portfolio, it is important that an investor has an exposure to all asset classes — equity, debt and cash. To achieve one’s long-term financial goals with least turbulence, asset diversification is necessary. How much of each asset one must own is of course a much more difficult question. Each asset has a varying risk return characteristics – equity having the highest risk and also the highest returns and cash having the lowest risk and the lowest return over the long term. On the other hand, investment in debt gives your portfolio the certainty of returns and lessens the risks of erosion of the principal invested. Important tips
Fund option
Under ULIP products, policyholders have a wide choice of funds to choose from that cater to all their asset allocation needs. For those investors who have the ability to stomach higher risk but expect a higher return from their investments, equity funds are a good option. For policyholders who prefer to have only a part of their investments in equity there are a whole host of balanced funds with varying proportions of debt and equity. ULIP policyholders also have the option of opting for funds that offer capital protection, guaranteed return or funds where there is the possibility of earning additional return through an equity exposure. For risk-averse policy holders there are the cash and debt funds. Long-term plans
Life is not just about living for today or even the next 5 years. Our lives are worth a lot more to look out for. This change implies that there is a need for longer term plans and remain invested for the full tenure. Insurance equity funds are a natural investment option for policyholders with a long-term horizon. These funds are not under pressure to choose “momentum” at the cost of “long-term fundamentals” as they can afford to take a long-term view while investing. Insurance equity funds are well positioned to play the long-term “India story” and lock into businesses that are strong value plays. In uncertain times, return guaranteed funds enable policyholders to hedge their risks. They are suitable for policyholders who don’t have the risk tolerance to lose their principal. Insurance companies offer fund options to policyholders that allow them to participate in the upside of the equity market while ensuring payment of the maximum NAV at the end of the term. For investors who want to de-risk their portfolios, debt and cash funds are an appropriate fund option. Debt funds invest in debt instruments like government bonds, corporate bonds and fixed deposits. These funds have the option to invest in different instruments with different credit rating and different maturities, and these choices will determine the risk-return characteristic of the fund. Patience is the key
The benefit of using life insurance in a personal financial plan is therefore multi-fold. It is an indispensable tool for risk management, provides a route for wealth creation, allows for asset allocation flexibility and has tailor-made products for every life stage. Policyholders can make appropriate investment choices through the self-managed investment option in all these areas. The author is CEO & Managing Director, Birla Sun Life Insurance. The views expressed in this article are his own |
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New Delhi, July 7
The Kedarnath tragedy has killed thousands of persons and death toll is likely to go up as thousands of people are still missing. The relatives of the missing persons are praying for their near and dear ones to return but it is not clear for how many days this operation will continue.
Most Unit-Linked Insurance Plans (ULIPs) allow policyholders to opt for a self-managed investment option. The self-managed option gives customers a complete access to invest their premiums in a well-established suite of investment funds offered by the insurance company. These funds could have varying asset allocation patterns ranging from 100% debt to 100% equity. The policyholders also have the freedom to switch from one investment fund to another, as per their requirements and outlook.
One golden rule that policyholders opting for the self-managed option must remember is that they need to be patient and stay invested for the long haul. This is especially true if the policyholders invest in equity funds as the significant benefits from equity investing accrue only to long-term investors. Further, over the long term, the effect of compounding will ensure that your money grows exponentially. Life insurance products are specifically tailored to the various life stages of an individual. At the life stage when one is interested in asset creation, life insurance products offer wealth creation products. At the stage when one is interested in wealth creation and protection, life insurance products offer wealth creation and protection plans that cover mortgages, education, health etc. For the retirement stage, life insurance products offer retirement and pension plans. Different asset allocation strategies need to be used in the different life stages. At the accumulation phase, policyholders can opt for a larger proportion of equity funds which can lead to greater wealth creation. The policyholder needs to move to a more defensive asset allocation by shifting a greater part of his money to debt and cash funds, as he moves into the retirement phase. 
