The World This Week - 6th August to 8th August, 2012

Save Tax

The IT Act 1961 is loaded with big dollops of taxpaying/tax saving information. Ways to save tax have always been an interesting consideration for tax payers all across the world and the Indian tax payer is no exception.Since tax saved is money saved, we hold that to be completely justified. While some of the tax-saving avenues are well-treated by the tax payers in the nation, there are some roads to tax saving which are lesser known.

In India, you can enjoy a tax deduction if you have contributions to make to a political party. The IT Act says that any amount of money that is donated to an acknowledged political party can be lawfully claimed for deduction, under Section 80GGC (For corporate it is 80 GGB).This deduction was launched in April 2010, and the same applies to any contributions made to electoral trusts as well.

There is no set upper limit for the deduction amount, but it can exclusively be claimed only if the contribution goes into the party funds.

It is interesting to note here that deduction on donations does not come into play if you are donating money to an individual. It is only applicable if you are donating it to specific organizations.

Simply stated the Loan to Value (LTV) is the ratio of the amount that you wish to borrow for a home to the actual value of the home. The LTV can be calculated from the actual worth of the home, the mortgage being taken and the down payment that has been made prior to the loan.

For example - the value of a house is Rs 40,00,000/- and a down payment of Rs 400,000/- has been made a loan of the balance amount that is Rs 36,00,000 is being sought. In this case the LTV comes to be Rs 36,00,000/- of the actual value of Rs 40,00,000/- which works out to 90 per cent. Thus the LTV is 90 per cent.

On the issue of LTV the RBI has made the following statement on February 03, 2012 vide their circular "RBI/2011-12/383 DBOD.No.BP.BC. 78 /08.12.001/2011-12" -- "In this connection, it has been brought to our notice that banks adopt different practices for deciding the value of the house property while sanctioning housing loans.

Some banks include stamp duty, registration and other documentation charges in the cost of the house property. This overstates the realizable value of the property as stamp duty, registration and other documentation charges are not realizable and consequently the margin stipulated gets diluted.Accordingly, banks should not include these charges in the cost of the housing property they finance so that the effectiveness of LTV norms is not diluted."

For example, Section 80G of the IT Act says that if you are donating funds to a charitable organization, you are entitled to get a deduction of 50 per cent-100 per cent for that.

However, note that there exists a ceiling here -- the percentage of deduction is restricted to 10 per cent of the donor's (gross) total income. Also, only donations in cash are taken into consideration for the purpose and not donations in kind.

Needless to say that the amount of tax you can save is dependent on the amount that you contribute.You would require a proof to claim this deduction and that's a stamped receipt of the amount donated, from the party or the organization to which you have made the contribution.

The Indian taxman has a heart of gold and it is seen nowhere better than this. Section 80 U of the IT Act says that if a taxpayer happens to suffer from any of the listed disabilities (see below), he is entitled to a tax deduction of Rs 75,000.

If the tax payer has a disabled dependent (spouse/parents/children/siblings) to support, Sec 80DD allows him to claim the same.

Disability list includes low vision, blindness, hearing disability, leprosy, loco-motor impediment, mental illness and mental retardation.

This deduction is obtainable only if the disability is at least 40 per centFor severe impairments, 80 per cent or above, the deductible amount becomes more – 1 lakhThe disabled must be fully dependent for upkeep on the taxpayer and must not be claiming deduction for it independently under Sec 80 U

Proof required to claim this deduction will be a disability certificate from a CMO of a government aided hospital or a civil surgeon.

What the UPA govt can learn from B.E.S.T

"Ek bandra station," I told the conductor of the B.E.S.T (BrihanMumbai Electric Supply and Transport) bus number 83, handing over a ten rupee note. "Do rupiya aur," he replied. "12 rupiya ka ticket hai?" I asked him. "Ji sir," he replied.

I was travelling from Century Bazar in Worli to Bandra. The ticket till very recently used to cost eight rupees. It has now been increased to Rs 12, a rather steep 50 per cent increase.

The prices of tickets of lower denominations haven't been increased so much. A four rupee ticket is now five rupees. But at the same time a ten rupee ticket now costs fifteen rupees and a twelve rupee ticket costs eighteen rupees. This got me thinking. Why had the B.E.S.T increased prices? Well for the simple reason that they had to match their income with their expenditure, which is the most basic thing that needs to be done for successfully operating any institution.

The fact that it is not allowed to raise prices as often as it probably wants to has led to this very high increase. While the B.E.S.T believes in at least trying to ensure that its income meets its expenditure, the United Progressive Alliance (UPA) which runs the government of India, doesn't. And this is neither good for the UPA nor for you and me, the citizens of India.

In the year 2007-2008 (i.e. between April 1, 2007 and March 31,2008) the fiscal deficit of the government of India stood at Rs 1,26,912 crore (Rs 1,269.12 billion).

Fiscal deficit is the difference between what the government earns and what it spends. For the year 2011-2012 (i.e. between April 1, 2011 and March 31, 2012) the fiscal deficit is expected to be Rs 5,21,980 crore (Rs 5,219.80 billion). Hence the fiscal deficit has increased by a whopping 312 per cent between 2007 and 2012. During the same period the income earned by the government has gone up by only 36 per cent to Rs 796,740 crore (Rs 7,967.40 billion).

Things cannot be quite right when your expenditure is expanding nine times as fast as your income. As Franklin Roosevelt, who was the President of America for a record four times, between 1933 and 1945 famously said "Any government, like any family, can, for a year, spend a little more than it earns. But you know and I know that a continuation of that habit means the poorhouse."

So why is the UPA led Indian government headed to the poorhouse?  For that we have to dig a little deep and look into this document known as the annual financial statement of the government of India. In this document the government gives out numbers for the amount it had assumed initially as the oil subsidy for the year, and the final oil subsidy it gave.

The data for the last three years has been very interesting. The subsidy assumed at the time of the finance minister presenting the budget has always been much lower than the final subsidy bill. Take the case for the year 2009-2010 (i.e. between April 1, 2009 and March 31,2010) the oil subsidy assumed was Rs 3,109 crore (Rs 31.09 billion).

The final bill came to Rs 25,257 crore {(Rs 252.57 billion) direct subsidies + oil bonds issued to the oil companies}, around eight times more. The next year (i.e. between April 1, 2010 and March 31, 2011) the oil subsidy assumed was Rs 3,108 crore (Rs 31.08 billion).

The actual bill was nearly 20 times more at Rs 62,301 crore (Rs 623.01 billion). For the year 2011-2012(i.e. between April 1,2011 and March 31,2012) the subsidy assumed was Rs 23,640 crore (Rs 236.4 billion). The actual subsidy bill came to Rs 68,481 crore (Rs 684.81 billion).

So in each of the last three years the oil subsidy bill has come out to be greater than what was assumed. For the current financial year (i.e. April 1, 2012 to March 31,2013) the oil subsidy bill has been assumed to be at Rs 43,580 crore (Rs 435.80 billion). While this is greater than the assumption made over the last three years, it is highly likely that the oil subsidy bill will come to amount greater than this.

There are two reasons for the same. The first reason is that the rupee has been rapidly depreciating against the dollar and since oil is sold in dollars that means that the Indian companies are paying up more in rupees to buy the same volume of oil. Currently oil is priced at around $115 per barrel (around 159litres) of oil. This means that Indian companies pay around Rs 6,141 per barrel of oil.

If the rupee falls further and one dollar equals Rs 60 (as has been written about on this website), the Indian companies will be paying Rs 6,900 or 12.4 per cent more per barrel of oil.

In the normal scheme of things this cost would have been passed onto the customer and everybody would have lived happily ever after. But that is not the case. Various products coming out of oil like kerosene, diesel etc, are heavily subsidized in India. Hence even with higher prices of oil internationally the Indian oil companies will have to keep selling their products at lower prices and suffer losses. These companies are then compensated for the losses they face by the government of India.

The second reason is that the price of oil is unlikely to go down in dollar terms as well. As governments and central banks around the world run close to zero interest rates and print more and more money (and are likely to continue to do so) in order to revive economic growth in their respective countries, oil has become a favourite commodity to buy among the speculators.

While central banks and governments can print all the money they want, they can't dictate where it goes. As  Ruchir Sharma writes in Breakout Nations - In Pursuit of the Next Economic Miracles "When money is loose, investors borrow to buy hard assets, which is why the prices of oil, copper, and other commodities have become disconnected from actual demand."

This means that oil will either continue at its current price level or even go up for that matter. And with the rupee likely to depreciate further this means that India's oil import bill is likely go up even further.

It is highly unlikely that this increase in price will be passed onto the end customer. This means that the government will have to bear the losses incurred by the oil companies, pushing up the oil subsidy, which has been assumed to be at Rs 43,580 crore (Rs 435.80 billion). A higher oil subsidy bill means the government expenditure going up and this in turn means a higher fiscal deficit.

Typically, the government finances this deficit by borrowing money. With the government needing to borrow more money it would have to offer a higher rate of interest. At the same time a higher government borrowing will crowd out private borrowing, meaning that the private borrowers like banks and other finance companies will have to offer a higher rate of interest on their deposits because there would be lesser amount of money to borrow.

A higher rate of interest on deposits would obviously mean charging a higher rate of interest on loans. All this can be avoided if the government follows what B.E.S.T did recently i.e. allow oil companies to raise prices of its products.

Why can't a free market operate when it comes to oil products? If the price of oil products changes on a daily basis depending on its international price, like the price of vegetables, people will gradually get used to the idea of a changing price for products like diesel and kerosene. And of course chances are that with the government borrowing coming down, interest rates might also fall.

In 2007, when the government fiscal deficit was low, a 20 year home loan could be got at an interest rate of 8 per cent. A loan of Rs 25 lakh (Rs 2.5 million) would mean an EMI(equated monthly installment) of around Rs 25,093. Manybanks are now charging their existing consumers around 13 per cent on their home loans.

This means an EMI of around Rs 35,147 or almost 40 per cent more. The huge subsidy on oil prices has had a role to play in this increasing EMI. Bad economics does not always mean good politics. Its time UPA woke up to that.

Ford's India story: Successes and challenges

India's slowing growth rate has put a spanner in the works of the much sought after auto sector in India. Marred in sluggish sales and volatile demand, the country's top auto players are being forced to think out of the box and line up big launches to keep the auto buyer interested. The dream run is now being put to a test drive.

Ford's sales in India dropped in the latest data revealed for April even though exports doubled year on year.

The company continues to keep a parallel focus on exports which has put India on the global map for Ford making it the hub for the small car Figo.

Ford's Eco Sport is the most awaited car from its stable and has generated significant interest among auto enthusiasts and the public. On Tee Time With Shaili Chopra on ETNOW, Ford's Nigel Wark, executive director (marketing, sales and service), shares that the success of the Indian market so far has also come with its share of challenges - in particular the diversity in demand and a tough business environment over the last few years.

How do you plan to grow the business with new plants coming up and India gaining focus in the emerging market stable?

We expect 60-70 percent of our growth in the next ten years to come from its Asia Pacific and Africa where in India and China will be among the growth markets. Ford has tripled its sales volume in the last two years with the launch of the Figo and today has more than 1,50,000 owners of the Figo.

We have used India as a hub exporting  from the Figo to more than 34 markets. What makes the journey exciting is that eight new products are coming to India by middle of the decade. By 2014, when our new facilities will be ready Ford in India will be well poised to deliver a capacity of 610,000 engines and 440,000 vehicles.

How is the Indian market more challenging than others?

In India one has to deal with tremendous diversity and from a marketing stand point one approach to marketing does not fit all. Consumers wish to see something that is credible and believable.

Today they rely on word of mouth than anything else. At Ford, we always look at ways to stay connected with the consumer across regions and talk in their own language.We are delivering on experiential marketing opportunities to get people engaged with the brand at multiple touch points and in fact taking it step higher where real consumers are co-creating the content and involved with the brand.

And our recent marketing campaigns such a Swap Your Drive and Discover Smart Drive have allowed us to do the same. Your Figo is the big success story in India as you have managed to make the country your hub for over thirty countries. How does it scale up from here?

Ford India's entered into the small car segment, where 70 per cent of total car sales happen, and saw phenomenal success with the most awarded car-ever, the Ford Figo.

Today there are more than 150,000 proud owners of the Figo in India. Our Chennai-made Figo is not only winning over customers here but generating great international demand and is being exported to 34 international markets. It will eventually go to 50 international markets.

Bt what's the blow like given slower growth in the country in general and the impact of high interest rates in the economy?

As an industry, last year was definitely a year in which a slowing global economy, coupled with rise in interest rates, and fuel prices resulted in a decline in consumer confidence and car sales. However Q1 has been positive and we have to see how this trends as we progress through the year.

This is an industry that has to develop and invest in an eco-system and there are challenges where we have to work with suppliers and dealer partners for capacities, efficiencies and talent.

What are the key business challenges for a business like yours?

The automobile industry represents the pulse of the nation and reflects the true potential of the country. India today stands firm as one of the leading automobile markets in the world. India is expected to be No. 3 auto market by 2020 after China and the US. Not only is the world bullish on its outlook for the Indian automotive industry, it also is predicting investment worth $30 billion to $40 billion along with 300,000-500,000 new jobs in the time to come.

At Ford, we also expect the automobile industry in India to grow to five million vehicles by 2015, and nine million by 2020.

What has golf taught you about doing business and about people?

A.Importance of keeping your eye on the critical factors, in this case, the ball. Don't let the rest of the environment distract you. Your objective is to get the ball in the hole! And most importantly, you got to enjoy the journey.

About people too, it teaches you about staying calm under pressure, evaluating risks and personal achievements. The ability to have fun under pressure. The collapse of others as self-inflicted pressure takes it toll.

When did you start golfing and who introduced you do the game?

My father introduced me to Golf. I started when I was 8 years old.

To date, what is your proudest golf accomplishment?

Winning the Annual Grudge match amongst top competing friends who play golf.

How India's top 4 IT companies performed

The performance of India's top four IT services companies in the just-ended quarter and fiscal has made one thing quite clear - that growth, or a drop in growth, is now more a company-specific phenomenon, rather than something that captures the health of the entire industry. 


The performances of the top Indian IT players have also exposed the strengths and weaknesses of the strategies that each had adopted in the past few years, especially post the economic crisis of 2008. Amongst all the Indian IT services providers, TCS seems to have delivered the best all-round performance, ending the financial year on a similar positive note that it did when it announced its first quarter results in the beginning of FY12.

In the case of HCL Technologies, growth has come from its aggressive strategy to gain market share and gather critical mass by not worrying too much about profitability.


The company seems to have benefitted from restructured (re-negotiated) deals where wins typically happen when companies give good pricing discounts, but are also good at execution. The scorching pace at which TCS grew in FY12 can be gauged from the fact that the company added about Rs 11,569 crore (Rs 115.69 billion) in revenues during the past four quarters, to close the fiscal with revenues of Rs 48,894 crore (Rs 488.94 billion). 

On the other hand, Infosys added close to Rs 6,233 crore (Rs 62.33 billion) to its revenues of Rs 27,501 crore (Rs 275.01 billion) at the end of FY11 and Wipro added about Rs 4,946 crore (Rs 49.46 billion) to its IT services revenues of Rs 23,485 crore (Rs 234.85 billion). 

Infosys had a lacklustre quarter and year. It failed to meet the revenue guidance for both the fourth quarter as well as the full year - that too, despite revising its guidance downwards last quarter. 

Among the top four Indian IT services providers, despite being the largest revenue generator, TCS posted the highest growth in its revenues on a year-on-year basis in the quarter ended March 31, 2012 (30.5 per cent) versus 22.1 per cent for Infosys, 21 per cent for Wipro and 25 per cent for HCL Technologies.  TCS was the only player among the four to register a quarter-on-quarter increase in revenues, though marginal. 

TCS and HCL Technologies also reported a sequential increase in their net profits, whereas for Infosys it declined by 2.4 per cent and for Wipro by 0.63 per cent.

In terms of volume growth, TCS had been quite steady in the last four quarters with a volume growth of 3.3, 3.2, 6.3 and 7.4 per cent respectively whereas Infosys reported a 1.5 per cent drop in volume in the Q4 of FY12. In the Q4 of FY12, HCL Technologies was right behind TCS with a volume growth of 2.85 per cent and even Wipro showed a positive growth of close to one per cent.

Industry experts believe that Infosys and Wipro are clearly lagging TCS, HCL as well as US-headquartered Cognizant. In case of Infosys, the problem is a culmination of many things. 


There are a few issues which are quite specific to Infosys, and to a certain extent, to Wipro. F or example, with close to 30 per cent of its revenues coming from consulting and system integration works, the highest among all the Indian IT companies, Infosys' dependence on discretionary spending (spending by corporates which can be held back at discretion and generally done for long-term benefits) is much higher than the other companies. 


During troubled economic times, clients tend to tighten their discretionary spends first which took a toll on Infosys in Q4. "Many of the ramp-ups we were expecting did not happen in time, we saw ramp-downs in certain accounts and there were leadership changes by certain clients which affected the growth of those accounts," said S D Shibulal, CEO & MD of Infosys.

Besides, the company's positioning itself as a premier global consulting and system integration (SI) major, as a part of Infosys 3.0, was done at a time when the global economy had not completely come out of the slowdown.  Analysts feel that this might have backfired for the company to a certain extent. 

"The positioning of Infosys also went wrong from a timing perspective. When they restructured, they consolidated their verticals as well as consolidated their service lines, and positioned themselves as a high-end global consulting and SI organisation, and this happened immediately after their leadership change exercise. Then, when they tried executing the strategy, the economy went down again," said Arup Roy, principal research analyst, Gartner.  n case of Wipro, the company is showing a growth trajectory after having completed four quarters after the last organisational restructuring, including the one that, for the last time, supported the joint CEO model. 


While going in for a restructuring, Wipro had stated that the company will be back to its usual growth path within six quarters which means it still has two quarters to prove itself.  "The foundation has been laid and we have got the basics right. Now we have to figure out how we will differentiate ourselves," said T K Kurien, CEO of Wipro's IT business. Industry experts however feel there are certain mismatches between what Wipro is trying to position itself as, and what the customers perceive the company to be. "I   feel either there is something wrong in Wipro's base strategy or the way they are positing themselves is not reaching to the clients correctly. Clients don't perceive them as a transformational partner or a business solution partner as the company claims. They look at Wipro more as a technology-centric cost cutting vendor," said Sudin Apte, principal analyst and CEO of offshore advisory firm Offshore Insights. 


Given this, he says Infosys' problems are quite easy to fix compared to Wipro's. "Because, fundamentally there is nothing wrong in Infosys's strategy, in its ability to understand business domain and deliver solutions," adds Apte. 

"TCS' success seems to be driven by a combination of several factors, including its successful execution of its restructuring much earlier than the others when S Ramadorai retired from the company, leaving N Chandrasekaran at the helm. 

The leadership change did not cause much disruption in the company, unlike Infosys and Wipro, thus limiting the impact on client sentiments. 


The company's approach of integrated services - applications, infrastructure and BPO - is gaining good traction. Most importantly, according to industry experts, TCS is a very flexible company to enter into a contract with.

"If you look at TCS's fixed price components, it is at least 8 to 10 per cent higher than their peers. It is because they commit the total cost of ownership of their project to the clients which is very critical. When budgets are tight, clients want total cost predictability and TCS' ability to commit that is higher than the others," said Apte of Offshore Insights.

Added Amneet Singh, country head, Everest Group, "TCS has the reputation of being a flexible and trusted partner. I am sure they are much more open to clients' suggestions in the contracts. Infosys historically has been a very premium priced player. It is sometimes perceived to be not so flexible."

The world this week 30th April - 4th May, 2012

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Youngest Indian CEO in US shares his amazing story

When Sahil Lavingia, 19, a computer science student decided to drop off the University of Southern California to join Pinterest he went first with the news to his mother. "I felt like my life would be better if I left school and joined Pinterest, and that's what I told them," said Sahil, a designer, founder and CEO of Gumroad, a tool that democratizes the ability to sell stuff online.

"Gumroad's goal is to making selling as easy as sharing," Sahil told India Abroad. He added: "Over the last several years, sharing has become easier and easier but selling has remained just as hard as it was in 2001."

Gumroad sells things online that you've made and includes songs, albums, videos, photos, and other things. You can price a link for as little as $1, and as much as $1,000.

However, Gumroad has its cut in online selling. It takes five per cent + 25¢ of each transaction. For example: If you sell a digital video for $10, it gets $0.75 and $9.25 is deposited into your account.

There are no setup fees, monthly fees, bandwidth fees, or withdrawal fees. It directly connects you to your client.

Born to Indian parents in New York and raised in London, Hong Kong and Singapore the youngest entrepreneur among the Asian Indian community do not think living in various country was a gift in disguise but he loved living in so many different places in such a short period of time though he said, "It definitely helped me learn a lot about the world and about myself".

Talking about Gumroad he said: "We're trying to make it easy and accessible for everyone. We think anyone that creates content (anyone who writes, creates music, makes videos, takes photos) should have the ability to sell directly to the people that want their stuff. Those are the people that can benefit. We are just three for now, and growing quickly."

He said: "We have launched a bunch of new features, including the ability to remember your credit card so you can repeat-buy very frequently. We're working hard on making the product better, and building a team that will scale along with it."

Before venturing into Gumroad, he was with Pinterest, as a designer head and made Turntable.fm for iPhone. Not only this, by the age 16 he had already created dozen of apps (applications) though not all were successful. But some of his favourites have been applied in iPhone.

He says out of 20 products his favourites are: Dayta, that's a data tracking application for iPhone, and Rmmbr, a note-taking web app that doesn't require registration and Color Stream app, helps to create and store colour palettes for iPhone.

Crate, an app, that lets you share multiple files at once to anyone you want. Tweader,similar to twitter. Trnsfr an app that lets you send pages your're looking at from your browser to your phone. Rmmbr, wrote on his Rmmbr says "it's my one-hour app".It is an easy way to create notes on the go. All you have to do is visit a Rmmbr URL and it'll create one for you if it doesn't exist.

Caltrainer, an iPhone app that gives Caltrain timetable in the San Francisco Bay Area. Recently Gumroad turned one-year-old Sahil's invention of pencil has been a hit online.

So what is this pencil craze? On this Sahil said: "Yes, my pencil has been seen hundreds of thousands of times by now, which is crazy. He's selling that iconic pencil on Gumroad for $1 and has found buyers too. The iconic pencil came into being after four hour of long work on Friday a year ago. Like any startup, Sahil too have mentors, whom he calls his friends. "Nope, it's not tough for a teenager going to Venture Capitalist. VC's are just like me and you. I don't think age matters in a discussion like seed investment."

So any business venture in India, he said while in college he visited India last in 2009 for an internship for a software company in Bangalore.

Young, vibrant and confident Sahil at this young age works around 80 hours a week.

"But it never feels like work," stated the young entrepreneur, who has never been to TiE (The Indus Entrepreneurs) Silicon Valley, a non-profit global network of entrepreneurs and professional conference. He said: "I was invited to speak at the next one and I think I will go." So does the computer geek, CEO of Gumroad, have time for friends and family?

Sahil said: "I have friends that I hang out with everyday, because I get to work with them. I also hang out with other friends on the weekends if I'm not too tired. I try to read before I sleep but that rarely happens. Normally I think about how lucky I've been so far."

A look at India's top performing states

Ihe speed at which political statements of doubtful veracity acquire the aura of gospel truth is astonishing. One such "truth" is: coalition compulsions impede economic reforms. Even Chief Economic Advisor Kaushik Basu believes in it. He recently said, "Thanks to coalitional democracy, there is some slowdown in economic reforms and decision-making."

A few weeks earlier, Finance Minister Pranab Mukherjee had expressed similar views: "With a fractured mandate, yes, you can rule. But you have to carry other people with you."

That's right, but post-liberalisation, India has never seen a solid mandate for any party; it has been the era of coalitions. In fact, liberalisation itself was carried out by a coalition government. But the then Prime Minister P V Narasimha Rao was keen to open up the economy; the same cannot be said about the ruling United Progressive Alliance (UPA). 

Worse, the Congress-led regime has taken a number of steps that militate against the spirit of economic reforms. Consider the case of food security legislation. Commission for Agricultural Costs and Prices Chairman and prominent agricultural economist Ashok Gulati believes that the proposed Bill, cleared by the Cabinet in December last year, has the potential of taking the economy to the "crisis levels of 1991".

The Prime Minister's Economic Advisory Committee, headed by former Reserve Bank Governor C Rangarajan, had serious differences with the Sonia Gandhi-led National Advisory Council (NAC) over the scale of the entitlement project.

Agriculture Minister Sharad Pawar, too, was worried over financial implications. The food security legislation is also feared to drive out private companies. The moral hazard is no less frightening; for the law, if executed, would give a fillip to the process of transforming free citizens into serfs, always looking at askance at the giant feudal lord, the Indian state -- for relief, poverty alleviation, employment (the rural jobs scheme), and now even for food.

Government size and scope will increase. The raison d'etre of economic reforms was the reversal of this transformation that began during over four decades of socialism; downsizing government and its role was part and parcel of the attempted reversal.

But NAC bleeding hearts have had their way. And there is a possibility that the fiscally ruinous and morally hazardous project would be implemented. By the way, no Congress ally is forcing the government to go for the Bill. The strains on the public exchequer are showing because of mindless populism. The fiscal responsibility law is practically dead; the deficit is assuming alarming proportions; and a desperate finance ministry is taking recourse to desperate measures, as evident in the Vodafone case.

The taxmen lost the case against the telecom major in the Supreme Court. But the ministry is restless; it is trying all sorts of tricks; it wants to apply laws retrospectively and arm tax officials with discretionary powers. India Inc, the international business community, and even foreign governments are upset.

It needs to be mentioned that earlier, too, in 2005, the government had refused to respect the apex court's verdict in a Rs 800-crore (Rs 8-billion) tax case that had gone in favour of ITC; it had promulgated an ordinance and managed to extract Rs 350 crore (Rs 3.5 billion) from the company. A government cannot expect to disrespect the rule of law and (concomitantly) attract investors. The rule of law is the foundation of economic reforms. The government itself has shaken the foundation, and there is no coalition compulsion involved.

Nor is there any pressure from any allies to keep Air India (AI) running. One need not be an aviation expert or a financial wizard to say the national carrier is beyond redemption.

Yet, AI – which loses Rs 10 crore (Rs 100 million) every day, has debt worth Rs 43,000 crore (Rs 430 billion) and accumulated losses in the region of Rs 20,000 – recently got a Rs 30,000-crore (Rs 300 billion) revival package. The government sticks to the socialist dogma of "no privatisation," despite the UPA's dissociation with the Left.

Then there are green lobbyists who enjoy the patronage of the presiding deities of the ruling alliance. NAC members N C Saxena and Aruna Roy, for instance, are opposed to the $12-billion Posco project, the largest foreign direct investment in India.

And they have succeeded so far in frustrating the efforts of the Korean steel company, the Orissa government, and even of Prime Minister Manmohan Singh with whom Seoul has taken up the matter more than once. Worse, the greens' opposition to Posco is doctrinaire and not fact-based.

Electoral politics has also had its share of victims. Aiming to win over the local populace by demagoguery, Congress leader Rahul Gandhi torpedoed Vedanta's bid to mine bauxite in the Niyamgiri hills of Orissa. The grand old party may or may not gain in electoral terms, but the state and its people have certainly lost the benefits that might have come to them because of the project. 

Apart from ideological and electoral reasons, capricious and erratic governance has also harmed the cause of development. Years after work in Lavasa began, the government realised that the ambitious realty project was responsible for violations.

Yet another example of dirigiste mindset is the grant of first compulsory licence for a pharmaceutical product in March this year.

It needs to be mentioned that no Congress ally is involved in jeopardising industrialisation in the name of environment protection or affordable medication.

There are many more instances revealing the pro-Left leanings and anti-reforms biases of the UPA. Coalition compulsions have little to do with the big state imperative.

We are very POSITIVE on India: Piaggio chairman

The economic squeeze may be getting tighter in the euro zone -- and more so in Italy apart from Greece and Spain -- with every passing day. But that has in no way deterred group Chairman and CEO of Piaggio Roberto Colaninno or affected his investment plans for India.

Replying to a query from Rediff.com, Colaninno said that while 50 per cent of the company's total investment outlay is meant for Italy, the remaining 50 per cent will be invested in markets across Asia that includes India and China.

He, however, did not clarify the size of Piaggio's total investment outlay and more particularly the quantum of that share the Italian company will invest in India.

"During our internal discussions we have delved on what kind of strategy we should have (for India)," Colaninno said without divulging any more details.

He said, "We are very positive about our investments in India."

He further added that the company has already initiated steps to double the capacity at Piaggio, Baramati, from 150,000 units per year to 300,000 units per year by mid-2013.

"I am very optimistic about our growth prospects in India," he said, emphasising the company's plans to bring in at least 20 million euros this year as investments in the Piaggio's Baramati plant that will manufacture the Vespa LX 125.

According to a press release issued by the company, the Indian subsidiary of Piaggio has already invested Rs 10 billion (Rs 1,000 crore) in India as of December 2011.

"The investment in Baramati is part of our strategic plan, which sees India as a significant destination in our growth trajectory," said the press release issued by the company.

India's 16th Watch and Clock Fair

The sixteenth India International Watch and Clock Fair “Samaya Bharati 2012” will be held in Mumbai between February 2 and 5. The expo will exhibit latest watches, clocks, components, watch movements, watch straps /bracelets, packaging, accessories and lifestyle products, according to the Watch Trade Federation, one of the main sponsors of the event.

Twenty new international brands that plan to tap the Indian markets will display their offerings for the first time at the expo. It will also showcase latest products and innovations of about 150 leading brands from India, Switzerland, France, Belgium, the US, Japan, Korea, Middle East, Denmark, China, Hong Kong, Italy and Spain. Entry to the fair will be restricted to business visitors from 10 am to 3 pm and for others it will be open till 7 pm, free-of-cost. 




Source: www.thehindubusinessline.com
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Hallmarking of Gold made compulsory

To protect consumers from unscrupulous jewellers, the government on Wednesday approved a proposal making hallmarking of gold mandatory.The hallmarking of gold, which is voluntary in nature at present, is a purity certification of the precious metal.

The Bureau of Indian Standards, under the Consumer Affairs Ministry, is the administrative authority of hallmarking.

The Cabinet, headed by Prime Minister Manmohan Singh, cleared the proposal by approving amendments to the Bureau of Indian Standards Act, 1986, that aims to expand the ambit of mandatory hallmarking to include more products, including gold, sources said.

Source: www.rediff.com
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Exiting fixed income funds? Read on

Those getting into debt instruments like short-term funds, ultra short-term funds and income funds may need to extend their investment horizons or pay higher exit loads. The past couple of months have seen 16 such funds either raising their exit loads or increasing the scheme's lock-in period.

Some, like SBI Dynamic Bond Fund, Axis Short-Term Fund and Principal Income Long-Term Fund , have raised both the exit load and minimum period of investment.

ICICI Prudential Regular Savings Fund and Kotak Bond Short-Term Fund have increased their period of investment; IDFC All Seasons Bond Fund has raised the percentage of load.

Lock-in periods differ, depending on the fund. Typically, ultra short-term funds have a 15-day lock-in. Short term and income funds have a minimum six months of lock-in.

Exit load is levied on the net asset value as on the day of redemption. Assume you need to redeem your investment of Rs 50,000 purchased at an NAV of Rs 10. If the NAV is now Rs 11, you would have earned Rs 55,000 on your investment. With a one per cent exit load on the NAV, Rs 550 is deducted and you will get Rs 54,450.

"Currently, managers are taking longer-term duration calls and prefer having investors whose investment horizon matches their own portfolios to ensure the fund's stability," says Nandkumar Surti, CIO, J P Morgan Mutual Fund. The higher exit loads will act as a deterrent to investors, as the increase in exit load will lower the yield in the hand of investors.

In a rising interest rate scenario, fund managers take advantage of upward moving rates by investing in shorter term corporate bonds and government securities.

But with the interest rate cycle peaking, interest rates are expected to be stable over the next few months before they move downwards.

In such a scenario, medium to long investment options like short term and income funds are preferred, because they not only lock investments at a higher rate, but also for a longer duration.

"However, many investors may wait just long enough to take advantage of the accruals gained and the capital appreciation, as a result of the falling interest rates, and move out immediately. This impacts the fund's overall performance, with the remaining customers taking a hit," says Amar Ranu, senior manager, research & advisory, Motilal Oswal Securities.

One-year absolute returns from income funds have been 7.13 per cent, while that from the short-term funds category has been 8.57 per cent. In the same period, both diversified equity mutual funds and the Bombay Stock Exchange's Sensex gave negative returns of 21.39 per cent and 20.27 per cent, respectively. In such a scenario, fixed income products have been the investor's best bet.

The new exit load rates will apply only to new investors wanting to get into these funds. Financial planners say investors would do well to consider the costs of exit, especially if the investor is likely to need the funds ahead of the lock-in period.

These funds would be best suited for those with an investment horizon of a year or two. Else, even investors with surplus cash could look at these funds.

Income accruals within a year for those choosing the growth option will be considered short-term capital gains and one will have to pay according to one's tax slab.

Gains earned after a year will be considered as long-term capital gains (LTCGs) and one can claim 10 per cent without indexation or 20 per cent with indexation benefits on these. If one chooses funds with a dividend option, the fund has to pay a dividend distribution tax of 14.163 per cent.

Source: www.rediff.com

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5 most innovative gadgets

With technology moving at ever faster speed, the world is witnessing introduction of the most innovative of gadgets. It is interesting to see the evolution of this ever changing technological world. Here we present the 5 most innovative gadgets to hit the world.

Solid state drives

A solid-state drive is a data storage device that uses solid-state memory to store persistent data with the intention of providing access in the same manner of a traditional block i/o hard disk drive.

SSDs are distinguished from traditional magnetic disks such as hard disk drives or floppy disk, which are electromechanical devices containing spinning disks and movable read/write heads.

In contrast, SSDs use microchips which retain data in non-volatile memory chips and contain no moving parts.

Compared to electromechanical HDDs, SSDs are typically less susceptible to physical shock, are silent, have lower access time and latency, but are more expensive per gigabyte.

SSDs use the same interface as hard disk drives, thus easily replacing them in most applications.

Glasses-free 3D

Autostereoscopy is any method of displaying stereoscopic images (adding binocular perception of 3D depth) without the use of special headgear or glasses on the part of the viewer. Because headgear is not required, it is also called 'glasses-free 3D' or 'glasses-less 3D'.

The technology also includes two broad approaches used in some of them to accommodate motion parallax and wider viewing angles: those that use eye-tracking, and those that display multiple views so that the display does not need to sense where the viewers' eyes are located.

Smart TV

Smart TV, which is also sometimes referred to as 'Connected TV' or 'Hybrid TV', (not to be confused with Internet TV or Web TV), is the phrase used to describe the current trend of integration of the Internet and Web 2.0 features into modern television sets and set-top boxes, as well as the technological convergence between computers and these television sets/set-top boxes.

These new devices most often also have a much higher focus on online interactive media, Internet TV, over-the-top content, as well as on-demand streaming media, and less focus on traditional broadcast media like previous generations of television sets and set-top boxes always have had.

Kogeto Dot

The Kogeto Dot is a neat clip-on lens for your iPhone 4 or 4S that turns your device into a panoramic video recorder.

After filming, you upload the clip to the company's Flash-based player that lets you pull and drag the video so you can view it from all angles. You get a new experience every time you watch the video.

Long Term Evolution

Long Term Evolution, usually referred to as LTE, is a 4G standard for wireless communication of high-speed data for mobile phones and data terminals.

It is based on the GSM/EDGE and UMTS/HSPA network technologies, increasing the capacity and speed using new modulation techniques. The standard is developed by the 3GPP (3rd Generation Partnership Project).

The world's first publicly available LTE service was launched by TeliaSonera in the Scandinavian capitals Stockholm and Oslo on December 14, 2009. LTE is the natural upgrade path for carriers with GSM/UMTS networks, but even CDMA holdouts such as Verizon in North America and au by KDDI in Japan have announced that they will migrate to LTE in the future.

LTE is therefore anticipated to become the first truly global mobile phone standard.

These new age technologies are a boon to the techie fans though some of them might not be useful on daily basis but are certainly going to catch the eye of the innovators and early adopters.

Source: www.rediff.com

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Tough Norms for Insuring Art!

For instance, at a minimum sum assured value of Rs 1-2 crore (Rs 10-20 million).

The premium could be 1.5-2 per cent of this amount. However, a bank would "evaluate the overall net worth of the client, rather than the sum assured before granting an insurance cover".

The product offers an all-risk cover - loss reimbursement, repair and restoration, and preservation and storage assistance.

It would cover the assets against natural calamities, fire, theft and even employee infidelity (i.e. if an employee steals your assets).

Most important, the policy will cover the assets while in transit and if you lend the object to an exhibition, they would be covered there as well.

Insurers will evaluate the location used for storing your assets, as well as the security measures to protect them.

Past loss history will also be studied prior to fixing the premium payable.

But insurers said due to lack of knowledge, people do not get a sculpture or artefacts covered under the policies.

In the case of art insurance, valuation of the 'goods' insured is key.

According to a reputed bank personality, head - risk and reinsurance,this poses a challenge as they do not have sufficient expertise to value assets like notes and coins, as there are no clear benchmarks.

The valuation is not difficult in the case of art sold through premier art galleries.

However, in case of inheritances or assets bought without an intermediary, services of professional valuers are enlisted and the sum assured decided accordingly.

The valuations are revised annually. However, if there was a sudden spike in art prices and the value of your asset exceeds the sum assured, you can claim only up to the pre-decided sum assured and will lose out on the appreciation in the asset price.

To avoid this, you must get the valuation and the sum assured revised mid-term or whenever there is a significant increase in value.

For small collectors who cannot afford a Rs 1-2 crore (Rs 10-20 million) binge on a painting and own Rs 5,000, Rs 5,001-25,000, Rs 25,000-1,00,000, you can use home insurance products or householders' policies to get insurance cover.

"Typically, if the value of art holdings is lesser than the others contents being insured, it can be covered under home insurance as well," said the VP, retail - health and home, of a general insurance company.

The cover would cost you about Rs 300 per lakh of coverage amount, covering the contents against burglary and theft.

Source: http://www.rediff.com/business/slide-show

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The World This Week : Aug22 - Aug26'2011

The World This Week : Aug22 - Aug26'2011

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