Deeps d'Light

Iconic woman - Zaha Hadid

2010-05-11T23:09:00.000-07:00

Few days back I was reading Times magazine. The whole issue of last month was about top 100 most influential people of the world. All the great names were there but the person and the write up which gained most of my attention was about Zaha Hadid.

Neha, a close friend of mine who is also an Architect settled in Scottland could not stopped herself from parising, when I mentioned about Zaha. She conculded about her work in just one word by saying 'she is an Icon'!

Zaha's work evokes that passion. Her buildings are like a gust of wind — organic, forceful and utterly natural. Her oeuvre is diverse: she has done structures from the Vitra Fire Station in Weil am Rhein, Germany, to the Terminus Hoenheim-Nord in Strasbourg, France, to the Rosenthal Center for Contemporary Art in Cincinnati, Ohio. Then there are her products, interiors and furniture. I couldn't imagine opening my flagship Madison Avenue store without her signature pieces in it.

When I finally met Zaha, I found she personified the work. Strong. Sensual. Iconic. She commands the space around her — not in an imposing way but in a way that seduces you with excitement. She's got great personal style — her hair, her voice, her clothes, her luminosity. She is a woman of culture. Born and raised in Iraq, she bridges East and West with pure sophistication.

To me, Zaha's womanliness is what makes her designs so compelling. She brings a female sensibility and a goddess's touch. Her work is light and lyrical, like an Asian artisan's brushstroke captured forever in the environment.

Really she is great who deserve so much appreciation and such wonderful words from comtemporary people. Read the complete article here.

Globality

2008-11-04T07:33:00.000-08:00

What comes after Globalization?---- GLOBALITY....!!

Globality- Competing with everyone from everywhere for everything...!! Whether You Agree with Globality or Disagree, Don't Ignore It......!

Globalization has entered a new phase. The old model of globalization was about multinationals from Europe, the U.S. and Japan expanding into the developing countries, attracted primarily by low raw material and labor costs. In the new phase -- which the authors term "globality" -- firms from rapidly developing economies such as Brazil, India, China, and Russia are stepping out to challenge the incumbent multinational giants, often on their own turf. It is "a different kind of environment, in which business flows in every direction. Companies have no centers. The idea of foreignness is foreign...!"

In the age of globality, these challengers will compete with every other company for everything. "And by everything, we mean just that -- all the world's resources. Everybody will be trying to grab the same things that everybody else wants, especially the most precious and limited ones: raw materials, capital, knowledge, capabilities, and most important, people: leaders, managers, workers, partners, collaborators, suppliers. And, of course, customers."

Source: Book 'Globality' by-Hal Sirkin, Jim Hemerling, and Arindam Bhattacharya

Have We Made the Rewarding Choice?

2008-07-31T09:42:00.000-07:00

We only have one life but many possible careers. Challenging ourselves to find one that truly fits is one of the most rewarding choices we make as adults.

When I read those lines, I just thought it’s so apt…. not just for myself but for many in general… and the irony is with the passage of time our spark gets blur… I was talking to a person who is doing his PHD in applied mathematics from IIT R one among the most reputed college in India. After talking to this person I just felt that his spark has been subsided to an unbelievable extent. This is just one story…. Similar numerous we encounter whenever I talk to more people….

This person when completed his +2 was keen to get through IITs for graduation degree in Engineering, but couldn’t make his way through cut throat competition. Eventually landed up doing B.Sc Honors is Mathematics. Later his dream shifted to join IT industry. But this person landed up doing the MSc in applied Mathematics. Dream of joining IT industry got encapsulated in packaging of reluctance and lost its existence. And finally this person made his way for his PHD and got through IIT R. This phase can be considered as re-entering and re-affirming the belief in his dream, complete revival….! I know this guy since almost a year or two, always found his energy level high.

Recently I was talking to this person and he told me that he is about to finish his thesis. But there is a slack time between submission of thesis and getting the degree. This slack period is about six months…!! Consequences, which he narrated, were many organizations they don’t consider the doctorate-ship unless one produces the degree certificate…. Which I really doubt; as most of the organizations who visit campus and offer jobs when kids are still in final semester or much far off. Other is financial reason, mass of middle class face this constraint. These all things are acceptable to me…

What surprised me the most was he has an offer form Amity to teach engineering graduates….!!! I am sure he would have not aimed for that and to teach kids in second tier engineering school, one need not to earn a PHD to do that… I am not saying whether teaching is bad or second tier schools are bad. But to do something where you are under valuating your skills and potential is something which needs to be re-thought and addressed carefully. Putting the umbrella or reasoning and blaming don’t help. We made our choice very much by our self. One wrong choice leads not only to zero score but also the negative marking in accumulation. In any kind of favorable or unfavorable days one need to keep the spark alive and shiny. Once that gets dim and faded our eyes start loosing the dream of life worth living.

No factor which exists outside effect our spark it just we as an individual flicker it. If someone is mediocre, its not that everyone else around is genius. Rather that person has completely agreed and accepted the fact s/he is that… with limiting the immense growth horizons.

Go confidently in direction of your dreams…!!

The Top 20 Most Influential Business Thinkers

2008-07-29T08:47:00.000-07:00

Read the full story here

20 Breakthrough Ideas for 2008

2008-07-29T08:36:00.000-07:00

1-Here Comes the P2P Economy
2-Task, Not Time: Profile of a Gen Y Job
3- A Doctor’s Rx for CEO Decision Makers
4- Understanding Opposition
5- The Board Meeting of the Future
6- How Honest People Cheat
7- Lies, Damn Lies, and Lie Detectors
8- The Cybercrime Service Economy
9- Sick Transit Gloria
10- The Gamer Disposition
11- Making Alternate Reality the New Business Reality
12- The Metaverse: TV of the Future?
13- Giving Avatars Emote Control
14- Happy Metadata Trails
15- My BlackBerry Ate My Accountability
16- On the Back of a Turtle, I See a City
17- Socially Responsible Lobbying
18- China’s Untapped Second Cities
19- Islamic Finance: The New Global Player
20- Sustainable and Unsustainable Trends

Read the complete article here

IFRS- International Financial Reporting Standards

2008-07-25T03:40:00.000-07:00

International Financial Reporting Standards (IFRS) is gathering storm and most countries barring the US and a few others have either adopted IFRS or their national generally accepted accounting principles (GAAP) are converging to IFRS. Australia, New Zealand, China, Singapore, Japan, Middle East, Africa and the European Union have either adopted or are converging to IFRS. The eminent status to IFRS came about after the EU made it mandatory for all its listed companies starting 2005. Consequently, more than 8,000 EU-listed companies adopted IFRS in one go. US capital markets are losing their attractiveness as a result of what many view as excessive regulation. As a consequence, many believe that the predominance of US GAAP as a standard may be coming to an end. This could make large companies look at other capital markets, and in many of those capital markets IFRS are accepted. More than 1,100 Chinese companies have recently switched over to new accounting standards bringing their books in line with international norms. India follows Indian GAAP, which is inspired by International Accounting Standards (IAS). However, Indian GAAP has not kept pace with the changes that followed IAS’ metamorphosis to IFRS. The most important change in IFRS is the application of fair valuation principles. Key standards based on fair valuation principles that have not yet been rolled out under Indian GAAP relate to business combinations, financial instruments and investment properties. There are also several areas where there are critical differences between Indian GAAP and IFRS. The key questions for India are:
* Should Indian GAAP be converged with IFRS?
* What are the pros and cons?
* What are the hurdles and impediments in fully converging with IFRS?
* What are the precautions that need to be taken?
* Whether Indian GAAP should be converged with IFRS?
* Is there an option or alternative?
IOSCO requires all its constituents to converge to IFRS and therefore departing from IFRS is not a solution. Besides, India has globalised and if it has to invest abroad or attract inbound investments it must follow global standards. Seen from this perspective, the sooner we converge to IFRS the better. When most of the developed world follows IFRS, can we lag behind?
The accounting framework in India has been characterized by relatively less complex accounting guidance with a bias towards historical cost accounting and focus on the contractual form of the arrangement. Therefore, audit committee awareness of concepts around fair value recognition and measurement, reflecting the substance of the arrangement and applying relatively more complex accounting concepts and models is likely to be low. This would necessitate the need to create awareness among audit committee members on these concepts as it affects companies that they are involved with.
As compared to formal classroom-type training, a preferred approach in the Indian context would be for management to spend sufficient time in advance with audit committee members on key changes to accounting policies of the company and their implementation upon adoption of IFRS. This process should commence sufficiently in advance of the actual transition to enable audit committee members to familiarise themselves with IFRS accounting concepts and their implementation. Similarly, auditors would need to spend relatively more time with members of the audit committee educating them on IFRS interpretation and judgmental matters as they affect the company. A customised and company-specific approach is likely to be a good way to educate audit committees.
In the initial period, audit committees will likely rely more on both management and the external auditors to understand concepts and accounting models that are unique to IFRS and that represent a change from current accounting practice. During this initial period, audit committees will likely focus on sufficient debate between management and the external auditors on key judgement and interpretation issues and would focus on these areas as they evaluate the financial reporting process adopted by the company. Audit committees may question the manner in which such matters have been resolved, with a focus on whether the external auditor is satisfied in relation to the position adopted by management.
Fair value: In India, relatively few assets are traded on markets—primarily plain vanilla equities and bonds. How will the ‘fair value’ concept of IFRS be applied? Are there other challenges for audit committees in handling fair value?
Given the relatively less developed debt and asset markets in India, fair value determination will be a challenge for management, auditors and audit committees. There are no easy answers and management, auditors and audit committee members would need to work together closely to evaluate the process used by management for determining fair values.
Having said that, generally the assets and liabilities held/issued by Indian organizations are also relatively less complex and accordingly some of these valuation challenges may be addressed by extrapolating available information. It is likely that asset and financial markets in India will develop over time easing the process of fair value determination. In the initial period, management, auditors and audit committees may decide to place relatively more reliance on external independent valuation specialists.
Indian management and audit committees are also not familiar with managing the volatility that arises out of applying fair value concepts to financial instruments such as derivatives. The committees would need to devise and implement appropriate hedge accounting principles and policies to address such volatility or familiarize themselves with communicating such volatility to external stakeholders.
It not true that IFRS necessarily imposes any additional short-term, quarterly results-oriented views of corporate strategy. Indian corporations have been publishing quarterly results for quite some time now and adopting IFRS will not result in a change in financial reporting strategies. What will be needed is a will to change mindsets to get a better understanding of the financial results, along with a strategy to manage and communicate volatility that arises from applying the fair value principles.
The accounting framework in India is deeply affected by laws and regulation. In India we have multiple regulators of accounting standards. For example, if there is a listed bank, it has to follow the accounting norms prescribed by SEBI, RBI, ICAI, Companies Act and the Banking Regulation Act. Some of the accounting requirements may be inconsistent with each other and some are definitely inconsistent with IFRS.
The success of convergence to IFRS in India will depend on how well the regulators cooperate. At the moment, if the law conflicts with any requirement of an accounting standard, the law overrides the accounting standard. For instance, the presentation of financial statements as per the Companies Act, 1956 conflicts with the requirements of IFRS, and business combinations accounting is governed by the courts, which may conflict with IFRS. Besides the Companies Act, 1956, other regulators in India like SEBI, RBI and income-tax department will need to accept IFRS in lieu of their sets of rules of accounting. So, the Companies Act and related laws would need to be amended to ensure that the law does not conflict with the accounting framework that may be prescribed by the Institute of Chartered Accountants of India.
It’s a fait accompli, let us brace up for it
A recent notification from the Ministry of Corporate Affairs (MCA) confirms the International Financial Reporting Standards (IFRS) convergence/adoption agenda for India. The MCA states that it has adopted international norms established in IFRS’s issued by the International Accounting Standards Board to formulate Indian Accounting Standards after considering the requirements of Indian entities. This process would be continued by the Government with the intention of achieving convergence with IFRS by 2011.
While this is a welcome step, some questions remain unanswered. Considering that the MCA is looking at the harmonization process being implemented through notification of accounting standards, it seems the MCA believes that current accounting standards notified under Companies (Accounting Standards) Rules, 2006 are fairly consistent with IFRS. However, this is not the case as there are significant differences between India’s generally accepted accounting principles (GAAP) and IFRS. It is not clear how IFRS convergence would be achieved in India. Firstly, whether it would be convergence or adoption (adoption may result in nil or negligible departure from IFRS whereas convergence may result in significant departures from IFRS)? Secondly, whether appropriate amendments would be made to the Companies Act? Thirdly, whether exceptions to IFRS would be made so as to take care of India-specific issues in the rarest of rare circumstances? Fourthly, whether on adoption of IFRS, would IFRS standards continue to be notified under the Act? Lastly, what standards would apply to small- and medium-size enterprises and how would they be defined?
These and many other strategic issues in regards to IFRS adoption/convergence are not clear at this point in time. More importantly because law overrides accounting standards, full convergence with IFRS is not possible unless those laws are amended or an overriding section is enacted with regards to accounting standards. Some key examples are discussed below.
Companies Act, 1956 prescribes statutory depreciation rates. Companies are required to provide depreciation based on useful life of an asset or statutory rates, whichever is higher. In practice most companies apply statutory rates without regard to useful life. Under IFRS, depreciation is based only on the useful life of an asset. Accounting for amalgamation is done based on treatment prescribed by the High Court under an approved scheme, even though it may not be in accordance with accounting standards. Under IFRS, accounting for amalgamation is required to be done purely based on IFRS principles and hence may conflict with directions of the High Court.
Definition of subsidiary under Companies Act is not consistent with definition of subsidiary under IFRS. Further, section 78 of the Companies Act, 1956, permits writing off of preliminary expenses, underwriting commission paid or discount allowed on issue of debentures, premium payable on redemption of debentures etc. to be adjusted against securities premium account. Treatment of such expenses is different in IFRS and in many cases would result in a charge to the income statement.
Companies Act prohibits reopening of financial statements once accounts are approved in the AGM. This requirement will conflict with IFRS which requires comparatives to be restated to give effect to change in accounting policy and prior period items. Further, Schedule VI of the Companies Act prescribes specific disclosure requirement and format of balance sheet. These requirements are significantly inconsistent with the requirements of IFRS.
While the MCA notification clearly indicates that India will adopt IFRS, it does not lay down a comprehensive strategy for convergence or adoption. It would only be appropriate for the MCA to announce a strategy as soon as possible focusing on adoption rather than convergence, since if adopted Indian entities can claim that their accounts are prepared under IFRS which will give them a distinct advantage. If we converge and don’t adopt IFRS, Indian entities would not be able to claim that they are IFRS compliant, which will defeat the very purpose of embracing IFRS.
Apart from the MCA, tax authorities should consider IFRS implications on direct and indirect taxes and provide appropriate guidance from a tax perspective. The Institute of Chartered Accountants of India should make an all out effort to train and upgrade the profession in IFRS. These milestones need to be achieved at the earliest; else the whole convergence exercise could get trapped in a hopeless tangle causing immense waste of time, resources, capital and cause inconvenience for Indian entities. In any case, since IFRS in one form or the other is fait accompli, Indian entities should not take things lightly, and should prepare themselves for IFRS immediately.

(Source: Economic Times)

Inflation

2008-07-23T10:07:00.000-07:00

I like munching mixtures and snacks by Haldiram. I am consuming it since last 12-15 years. A decade back a pack of 100 grams was costing Rs.18. Same is now costing Rs.24. As inflation rises, every rupee will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a Re.1 pack of gum will cost Re1.02 in a year. Therefore over a period of 10 years (roughly) price has increased by Rs.6 or 600%. In other words we can say 60% annually…!!
Maggie my other favorite narrates the same story in different words. Instead of increasing price it is keeping the price constant and decreasing the quantity to factor in price inflation…!! If 100 grams of Maggie was costing Rs10 a decade ago considering the same factors as Halidarm, now we should be getting just 65 grams in Rs10. But one can notice that the 10 years (roughly) Maggie was 100 grams for Rs.10 and now it’s 85 Grams for Rs.10. meaning its annual rise is just 20% as compared to haldiram’s 60%...!! (Assumption: only inflation is considered as the factor for price increase keeping all other factor constant)

During World War II, you could buy a loaf of bread for $0.15, a new car for less than $1,000 and an average house for around $5,000. In the twenty-first century, bread, cars, houses and just about everything else cost more. A lot more. Clearly, we've experienced a significant amount of inflation over the last 60 years.

Definition of Inflation:

An increase in the price you pay or a decline in the purchasing power of money. In other words, Price Inflation is when prices get higher or it takes more money to buy the same item. Inflation is measured by the Bureau of Labor Statistics in the United States using the Consumer Price Index. People on fixed incomes, such as some annuities or income from fixed interest on long-term investments, suffer most when inflation is rising, unless their pensions or incomes are fully indexed to the inflation rate. In other words according to this definition inflation is things getting more expensive. But that is really the effect of inflation not inflation itself....caused by an increase in available currency and credit beyond the proportion of available goods and services.

What is Inflation?

What is being inflated? Obviously prices are being inflated. So this is actually "price inflation".
Price inflation is a result of "monetary inflation". Or "monetary inflation" is the cause of "price inflation". So what is "monetary inflation" and where does it come from? "Monetary inflation" is basically the government figuratively cranking up the printing presses and increasing the money supply. "Monetary inflation" is the "increase in the amount of currency in circulation".
But how do we define currency in circulation? Is it just the cash in our pockets? Or does it include the money in our checking accounts? How about our savings accounts? What about Money Market accounts, CD's, and time deposits? "The Federal Reserve tracks and publishes the money supply measured three different ways-- M1, M2, and M3. These three money supply measures track slightly different views of the money supply with M1 being the most liquid and M3 including giant deposits held by foreign banks. And M2 being somewhere in between i.e. basically Cash, Checking and Savings accounts.
But back to the question of the cause of inflation. Basically when the government increases the money supply faster than the quantity of goods increases we have inflation. Interestingly as the supply of goods increase the money supply has to increase or else prices actually go down. Many people mistakenly believe that prices rise because businesses are "greedy". This is not the case in a free enterprise system. Because of competition the businesses that succeed are those that provide the highest quality goods for the lowest price. So a business can't just arbitrarily raise its prices anytime it wants to. If it does, before long all of its customers will be buying from someone else. But if each dollar is worth less because the supply of dollars has increased, all business are forced to raise prices just to get the same value for their products.

Major types of inflation:

There are three major types of inflation, as part of what Robert J. Gordon calls the "triangle model"
Demand-pull inflation: inflation caused by increases in aggregate demand due to increased private and government spending, etc. Demand inflation is constructive to a faster rate of economic growth since the excess demand and favourable market conditions will stimulate investment and expansion.

Cost-push inflation: also called "supply shock inflation," caused by drops in aggregate supply due to increased prices of inputs, take for instance a sudden decrease in the supply of oil, which would increase oil prices. Producers for whom oil is a part of their costs could then pass this on to consumers in the form of increased prices. Likewise all items that increase costs that could be passed on to consumers in the form of increased prices add to cost-push inflation. All increased costs passed on to consumers are inflationary.
Built-in inflation: induced by adaptive expectations, often linked to the "price/wage spiral" because it involves workers trying to keep their wages up (gross wages have to increase above the CPI rate to net to CPI after-tax) with prices and then employers passing higher costs on to consumers as higher prices as part of a "vicious circle." Built-in inflation reflects events in the past, and so might be seen as hangover inflation.
A major demand-pull theory centers on the supply of money: inflation may be caused by an increase in the quantity of money in circulation relative to the ability of the economy to supply (its potential output). This is most obvious when governments finance spending in a crisis, such as a civil war, by printing money excessively; often leading to hyperinflation.

Measures of inflation:
Inflation is measured by calculating the percentage rate of change of a price index, which is called the inflation rate. This rate can be calculated for many different price indices, including:
1- Consumer price indices (CPIs) which measure the price of a selection of goods purchased by a "typical consumer."
2- Cost-of-living indices (COLI) are indices similar to the CPI which are often used to adjust fixed incomes and contractual incomes to maintain the real value of those incomes.
3- Producer price indices (PPIs) which measure the prices received by producers. This differs from the CPI in that price subsidization, profits, and taxes may cause the amount received by the producer to differ from what the consumer paid. There is also typically a delay between an increase in the PPI and any resulting increase in the CPI. Producer price inflation measures the pressure being put on producers by the costs of their raw materials. This could be "passed on" as consumer inflation, or it could be absorbed by profits, or offset by increasing productivity. In India and the United States, an earlier version of the PPI was called the Wholesale Price Index.
4- Commodity price indices, which measure the price of a selection of commodities. In the present commodity price indices are weighted by the relative importance of the components to the "all in" cost of an employee.
5- GDP Deflator is a measure of the price of all the goods and services included in Gross Domestic Product (GDP). The US Commerce Department publishes a deflator series for US GDP, defined as its nominal GDP measure divided by its real GDP measure.
6- Capital goods price Index, although so far no attempt at building such an index has been made, several economists have recently pointed out the necessity of measuring capital goods inflation (inflation in the price of stocks, real estate, and other assets) separately. Indeed a given increase in the supply of money can lead to a rise in inflation (consumption goods inflation) and or to a rise in capital goods price inflation. The growth in money supply has remained fairly constant through since the 1970s however consumption goods price inflation has been reduced because most of the inflation has happened in the capital goods prices.

Causes of inflation:
In the long run inflation is generally believed to be a monetary phenomenon while in the short and medium term it is influenced by the relative elasticity of wages, prices and interest rates. The question of whether the short-term effects last long enough to be important is the central topic of debate between monetarist and Keynesian schools. In monetarism prices and wages adjust quickly enough to make other factors merely marginal behavior on a general trend line. In the Keynesian view, prices and wages adjust at different rates, and these differences have enough effects on real output to be "long term" in the view of people in an economy. There are different schools of thought as to what causes inflation. Most can be divided into two broad areas:
1-The quality theory of inflation rests on the expectation of a seller accepting currency to be able to exchange that currency at a later time for goods that are desirable as a buyer.

2- The quantity theory of inflation rests on the equation of the money supply, its velocity, and exchanges. Adam Smith and David Hume proposed a quantity theory of inflation for money, and a quality theory of inflation for production.

For more info click here, here and here

Related economic concepts:
1- Deflation - a general falling in price level. It is often caused by a reduction in the supply of money or credit. Deflation can be caused also by a decrease in government, personal or investment spending. The opposite of inflation, deflation has the side effect of increased unemployment since there is a lower level of demand in the economy, which can lead to an economic depression. Declining prices, if they persist, generally create a vicious spiral of negatives such as falling profits, closing factories, shrinking employment and incomes, and increasing defaults on loans by companies and individuals. To counter deflation, the Federal Reserve (the Fed) can use monetary policy to increase the money supply and deliberately induce rising prices, causing inflation. Rising prices provide an essential lubricant for any sustained recovery because businesses increase profits and take some of the depressive pressures off wages and debtors of every kind.
2- Disinflation - a decrease in the rate of inflation. Typically, this occurs during a recession as sales drop and retailers are not able to pass on higher prices to customers. Disinflation is not to be confused with deflation, where prices actually drop.
3- Hyperinflation - an out-of-control inflationary spiral. Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is a situation where the price increases are so out of control that the concept of inflation is meaningless. When associated with depressions, hyperinflation often occurs when there is a large increase in the money supply not supported by gross domestic product (GDP) growth, resulting in an imbalance in the supply and demand for the money. Left unchecked this causes prices to increase, as the currency loses its value. When associated with wars, hyperinflation often occurs when there is a loss of confidence in a currency's ability to maintain its value in the aftermath. Because of this, sellers demand a risk premium to accept the currency, and they do this by raising their prices. One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion, doubling every 28 hours.
4- Stagflation - a combination of inflation and slow economic growth and rising unemployment A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation. Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects
5- Reflation - which is an attempt to raise prices to counteract deflationary pressures. An economic policy whereby a government uses fiscal or monetary stimulus in order to expand a country's output. Possibilities include reducing tax, changing the money supply, or even adjusting interest rates
6- Agflation -An increase in the price of food that occurs as a result of increased demand from human consumption and use as an alternative energy resource. While the competitive nature of retail supermarkets allows some of the effects of agflation to be absorbed, the price increases that agflation causes are largely passed on to the end consumer. The term is derived from a combination of the words "agriculture" and "inflation". Interest in alternative energies contributes to agflation. In order to produce biofuel (such as biodiesel and ethanol), manufacturers need to use food products such soybeans and corn. This creates more demand for these products, which causes their prices to increase. Unfortunately, these price increases spread to other non-fuel related grains (such as rice and wheat) as consumers switch to less expensive substitutes for consumption. Furthermore, agflation will also affect non-vegetative foods (eggs, meat and dairy) as the price increases for grain will make livestock feed more expensive as well.
7- Stagnation - A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. A good example of stagnation was the U.S. economy in the 1970s.

Top 10 Oil Producing Countries

2008-07-09T08:24:00.000-07:00

Hijacking Fuel Prices

2008-06-29T10:09:00.000-07:00

India’s political parties, especially those in the opposition, transport and taxi unions and nearly everyone else is extremely agitated about the recent fuel price hike but only few realize that the Rs3 (roughly 8.5%) increase in diesel prices would affect freight transport costs by only a marginal 0.12%, that is equivalent to 12 paise on every Rs100 that is spent on what one purchases. Murad Ali Baig, auto expert and columnistThe impact would be much more on bus and taxi fares but even here the impact should be 2.8% or less than Rs3 on every Rs100 spent. Transporters, industrialists, bus and taxi companies are however demanding huge fare increases to exploit the situation.Elementary arithmetic will however show that the cost of transport in the cost of most goods averages just 5% and the cost of fuel is usually about 35% of this cost. India’s four million trucks and one million buses have to additionally pay large finance costs, depreciation, staff salaries, tyres, repairs, taxes, bribes, etc. So if the cost of diesel is just 35% of 5%. it is barely 1.4% of the cost of most of the goods that one buys. Therefore, the recent 8.5% increase in the price of diesel should only have an impact of about 8.5% on this 1.4% or a miniscule 0.12%. It will vary a little and be even less on high value goods that are transported over long distances and a bit more on milk and vegetables that are transported over short distances.The impact of diesel costs will however affect passenger fares on taxis and buses more seriously, especially when fuel accounts for about 35% of transport costs. But an 8.5% price hike on this 35% should result in a small 2.8% increase in passenger fares. Bus and taxi fares should therefore be up by about 3% and not by the huge amounts that are being demanded.Road transportation is today estimated to account for over 55% of the country’s diesel consumption while another 6% is consumed by the railways that transport most of the food grains, sugar, petroleum products, steel, coal and cement, so subsidized diesel for the railways will ensure that the impact on inflation is further moderated. With this and the reports of a good Rabi crop, the anxieties regarding huge inflation seem misplaced. As for the farmer community, diesel consumption for tractors and irrigation pumps is estimated at about 23% of India’s total diesel consumption but the cost of diesel is less than 2% of the cost of agricultural products. The price increase should again have a marginal direct impact on food prices. Very few of the tractors and pump sets are owned by the poor farmer so where are the weaker sectors for the Government to protect? There is however an affluent segment that does not deserve any subsidy. It is roughly estimated that 10% of India’s diesel is consumed by private gensets. Few are aware that it is against the law to supply loose fuel to anyone except to farmers, so the widespread malpractice of loose fuel supplies, now so essential for the smooth running of offices, malls, condominiums and industries, will have to continue, although they can easily be made to pay a fair price. The dedicated tankers that supply them can also be made to charge much more.The issue of petrol prices for the roughly 200 million people who use 60 million petrol-engined 2-wheelers and 12 million cars on a daily basis needs to be addressed. They consume only 17% as much fuel as diesel. But they are a political constituency with many poor users and do not deserve to be punished in the name of the weaker sectors. The Rs5 or roughly 12% petrol price hike will hit their pockets directly.However, the automobilization process cannot be reversed and the average car owner will reluctantly raise his cars’ petrol bill from Rs3,000 a month to Rs3,400 and his bikes’ bill from Rs300 to Rs340. This may appear tough but is unavoidable. The main beneficiary of the continuing subsidy on diesel and even kerosene in relation to petrol are the not-so-weak sections of fuel adulterators.And although the Government has finally taken a partial plunge by hiking the prices of fuels, further upward revisions are likely in the months ahead because the old prices had been pegged to a time when crude cost $60 a barrel and should have more than doubled now that it has hit $138 a barrel. The situation is unlikely to improve in the months ahead with the shrinking fossil fuel reserves worldwide. There have been no major oil or gas discoveries for two decades and almost all the big reserves are seriously depleted. There are plans to extract liquid fuels from large tar sand beds in Canada, Venezuela and elsewhere and from the liquefaction of coal but these will take many years. Biofuels and hydrogen also look promising, but will need even more time before they can be tested and ready for use. With increasing prosperity, people in all developed and many developing countries are using much more energy for personal transport, entertainment, computers and for heating and cooling their homes and offices. Thus the costs of liquid fuels will have to go up further in the months ahead because no political party will be able to sustain the current, over Rs200,000 crore direct and indirect, annual fuel subsidies.

(Source:http://www.livemint.com/2008/06/13095457/Web-Exclusive--Hijacking-fuel.html)

Thoughts to Ponder upon

2008-05-31T09:47:00.000-07:00

1- Freedom how free it is?
What’s the limit of freedom.... Is there any... or it just beyond... That’s is why its freedom? How much it costs us, it sounds FREE for dumb (DOM) but so called knowledgeable pays for it as get caught up in knowledge (No + Edge) and never become free...!!

2- Trust, how fair it is?
How it feels when someone puts all his/her trust in you? Up to an extent more than oneself on its own..!! Does it give warmth of bondage of coldest scare?? It happens when a person becomes very significant for someone who has lost direction and searching the path with direction in tattered pieces of his days... suddenly founds a light and strength with your guidance... and instant liberation...! But how about being someone’s God, you loose your freedom as you are no longer free someone's trust is binding you which you need to take care... it you break it its not Trust...!!

3- How personal is personal life?
Personal life portrayal on public. What is personal? The fact which is confined to only one that’s you. What is public? The fact which get shared among more than one (off course micro view). Personal life meaning life within, to the micro level thoughts... Our thoughts are our very own but the moment we share those with others it no longer personal. Trust act as binding and accompanied with expectation hinders the ripples... If you tell your secret to wind don’t blame it when it reveals it to tress..!! Trust sounds discrete but it is backed but expectation isn't it..!!
When we reveal our thoughts to others, we are free to do so... Why isn't other person free to pass it on?? How personal is personal life up to an extent of invisibility, anonymity with the doubt of existence OR visible up to an extent of chain of freedom-of-expression to get mingle with public...!!

For You...

2008-05-31T09:44:00.000-07:00

Shiny eyes...
Careless smile...
From the deep of your heart,
As reflection of my presence,
On your face..
That’s all I will ever need,
For my true happiness...!!

A walk,
On a lonely road..
Greeted by tress...
Welcomed by drizzling..
Cool breeze adding symphony
Your hand in mine,
That’s all I ever need.
For my days to get refreshed..!!

Driving Forces Behind Crude Oil Prices

2008-05-29T08:57:00.000-07:00

Crude oil prices are roaring louder, which is nudging 150 USD per barrel… I always wonder how world decides this price?

How transparent and fair are the driving forces behind sky rocketing pace of oil price rise??

A significant percentage of physical oil transactions occur outside the regulated market and beyond the view of analysts and traders.
The day’s spot price denotes the price at which a few origins of crude are sold.
As the market rarely has real-time knowledge of production and stocks, traders have to place their faith on the figures put out by a few agencies such as Platts.
Crude futures do not move exclusively in response to physical supply and demand conditions. They are determined by many factors such as-

The positions taken by traders in many other assets (for example , bonds, equities, foreign exchange and other commodities)·
Declining dollar
Market speculation
Refinery bottlenecks and geopolitical concerns.

The price of a barrel of oil depends on –

1- Grade (which is determined by factors such as specific gravity and sulphur content)

2- Location.

3- The lighter, sweeter crudes (low sulphur) are easier to refine than heavier, sourer crudes.

With the increase in crude oil prices, even refining heavier, sourer crudes has now become more profitable. Oil prices have risen, particularly for better quality crude oils, to bring supply and demand into balance.

Benchmarks for oil pricing system-

I- Brent - Almost all oil traded outside America and the Far East is priced using Brent as a benchmark.

II- West Texas Intermediate - is the main benchmark for pricing oil imports into the USA.

III- Dubai-Oman -is used as a benchmark for Gulf crudes (Saudi Arabia, Iran, Iraq, the UAE, Qatar and Kuwait) sold in the Asia-Pacific market.

In crude oil, spot contracts mean delivery over the coming month, e.g., a contract signed in June for delivery in July. The market consists of refiners, traders, producers , and transporters. Spot markets allow buyers and sellers, e.g., refiners and marketers, to adjust their supplies to reflect near-term supply and demand conditions. Till the late Eighties, the spot price of reference crude varieties was the accepted price of the day. But when the total production of the benchmark crudes began to drop and the volumes traded daily correspondingly fell, it became difficult to determine the correct price. Price assessing agencies came up with a few solutions. To make up for the drop in Brent production, for instance, in July 2002, Platts broadened its definition of Brent to include Forties (UK North Sea) and Oseberg (Norway). The new benchmark was called BFO.

The more lasting solution was shift to a futures market. Crude futures have two main advantages : one, they are not easily distorted by low spot market volumes. Two, futures price is determined by actual transactions in the futures exchanges and not on the basis of some assessed prices by oil reporting agencies. At any time, a seller or a buyer can look at the prevailing price and use it in spot and term contracts. The volume of daily transactions and open positions also helps investors gauge the liquidity of the market. Since most traders cancel their positions, futures transactions rarely lead to actual delivery.

Though crude futures prices are more transparently fixed than spot prices, not all contracts are successful. A crude oil contract becomes trustworthy only when its production is not controlled by a few companies and it has reasonably large volumes. If a few companies or even one company controls production, then the likelihood of price manipulation rises. Even if the oil pipelines and infrastructure are owned by a few, it increases the likelihood of manipulation.

(Source: ET)

Three girls: Every Individual has a Story

2008-05-20T08:35:00.000-07:00

I was reading a book named Red Carpet by Lavanya Shankar… Apart from the content of the book which is very thoughtfully written, I liked the punch line of the book also. It says “Every family has a story!!” agreed rather I believe in its elaborated version, every individual has a story. Some are shared, some are told and many are even untold. I knew three people, who have something; which can be perceived as story but they are so innocently unaware of it!

Sarandha, she is very affectionate, caring, amiable and sweet girl. It hardly takes any time for her to mingle with people its like putting rose water drops in plain water which will get mixed so well that its difficult to see those two as separate entity. Parul, she is quite, clam, reserved girl. Will talk as much as needed and no cribs to others about anything whether it’s personal life or work. And Mrinal, who is person yet to explore world as good or as bad on her own. Innocence is still alive and think everybody around is good. Lot of preoccupied thoughts and sees the world as other people have shown her.

The biggest character of this whole play on this earth has put these three girls Sarandha, Parul and Mrinal together. They are set free to act in their very own way; they have got their own freedom of speech, expression, sharing, etc etc.. Sarandha initially felt that her space is getting breached, but very soon overcomes it and as per her very own instincts mingle with other two. They feel the warmth of their friendship. They share jokes and giggle together. They share low and weak moments and ready to give shoulder. Silently ignorant about the sweet poison called expectation which leads towards taken for granted concept. Slowly they are caught up, and seeing friendship which they were nurturing and cherishing is getting tattered. Bitterness infused into their relation as nature does to chili. All the heartily laugh and giggles got ruined. Rotten ill words blabbered in high temper; passes on to other with spices and misinterpreted works as perfect poison to the ears. Instead of checking for the driving cause behind it is sweetly acceptable. Every ill thought in their mind started attracting numerous similar ones. Distance which is literally negligible among them started appearing more than thousand of miles. Phone and internet become admiringly adorable to confirm the marked distance mended. The ecstasy of proving own point to be right gives a feel good factor. Nothing can be as melodious as hearing the criticism of person whom we envy. That works as soothing balm to unhealed wounds caused by our own bitterness.

Today Mrinal is leaving the city forever, there is wish in her heart to bid a good-bye with a warm hug to her mates who had stand for her in her thick and thins. They would accept the seasons of your heart just as you have always accepted that seasons pass over your fields and you would watch with serenity through the winters of your grief. Alas! One has to surrender itself to destiny which one carefully carves for itself….

“In the sweetness of friendship let there be laughter, and sharing of pleasures. For in the dew of little things the heart finds its morning and is refreshed”.

Look Within

2008-05-19T08:39:00.000-07:00

There is no fire like greed,

No crime like hatred,

No sorrow like separation,

No sickness like hunger of heart,

And no joy like the joy of freedom,

Health, contentment and trust

Are your greatest possessions

And the freedom your greatest joy

Look Within

Be still

Free from fear and attachment,

Know the sweet joy of living in the way.

(Pic Source: http://images.salon.com/books/review/2006/06/26/wade/story.jpg)

Oil Price Rise: Is OPEC really opaque??

2008-05-13T01:48:00.000-07:00

Recent sweltering news which is considered as one major factor among various other reasons behind bearish trend of US stock market as well as Indian too; the exceptional rise in Oil Price to record level. I was wondering what could be the possible reason….? "According to normal economic theory, and the history of oil, rising prices have two major effects: they reduce demand and they induce oil supplies," ....But not this time.....!!!
As-

OPEC-cartel has plenty of reserve as well as non-OPEC countries like Russia, Norway, Greenland, West Africa etc etc…
So it’s not the crisis at supply end due to resource… Demand is increasing at constant rate not exponentially….
Apart from US being the world’s largest consumer of oil, consumption in other developing nations (BRIC) is increasing.
Therefore demand is not going to reduce due to price rise.
“Some Factors” which are driving the OPEC, which is responsible for 75% of reserve to restrain the supply.
President of OPEC makes statement that oil prices to remain unstable.
Long-term oil futures, dated for 2013, now trade at $108 a barrel, a strong indication that investors see little cause for prices to drop in the next five years - partly because of low expectations about production growth. (In NY mercantile exchange)

Few basics information:

Price of 1 Barrel oil as of today (14-May-2008) = USD 124

Price of 1 Barrel oil in year 2000 = USD 24

1 barrel = 42 gallons

1 barrel = 117 liters (Approx)

In India we get oil at subsidized price.

One of the best texts which I came across to know the background of oil price history and analysis read here

All the above points carry their own significance but the fifth points had gained more attention from me. I gathered some information behind driving force which is leading to restraining of supply. Following is the list, out of which some factors responsible for less supply and subsequently price rise are interdependent:-

Monopoly of OPEC: This factor is well known as major pie of reserve is with them.
US economy downturn: that’s continuing since quite some time attributed to sub prime and bearish trend of market. Increasing worries that the US downturn will spread globally – with the slump in US employment confirming that the US downturn is likely to spread into consumer spending which in turn will have a big impact on Japanese, European and Asian exports. Ongoing problems in credit markets with the whole securitization process (whereby individual loans are packaged up into securities) that has underpinned a lot of credit growth in recent years now in disarray, and the banks unable to take up the slack.
Middle East peace process: Gen. Mansour al-Turki, spokesman for the Saudi Interior Ministry said, "They have recognized that the al-Qaida ideology is an ideology to inflame terrorism rather than trying to set up a new approach for Muslim societies". Apart from that tensions between Iran and the international community (in particular the U.S.)
Commodity trading: Due to US downturn in economy, commodity price have increased.. This is also reason for oil price increase… Oil has been traded globally for more than a century, and commodity pricing in the oil sector is well-established. Crude oil prices behave much as any other commodity with wide price swings in times of shortage or oversupply. The crude oil price cycle may extend over several years responding to changes in demand as well as OPEC and non-OPEC supply. There has been a significant increase in paper trading of crude oil on world markets over the last few years (2005 to 2008). While the effects of increased trading activity are hard to quantify, it appears that speculative trading has, at the very least, increased the level of volatility in crude oil prices.
Terrorism: This is something much rumored… Story goes like this; a significant portion of money earned through oil trade goes to terrorist organizations. And they keep some money aside for weapon and rest they pump in to stock market. As and when need arise to them they pull the money out from market and its huge sum of money which is sufficient to crash the market….!!
Inflation: This factor directly translates to reason for higher price… As soon as world oil prices move up, inflationary expectations take over… :)
Cost of production: geographical, political factor along with cost and availability of labor…
Government Policy: Most of the Non-OPEC countries they have astringent rules for FDI to set up refineries
Increasing consumption: Consumption is increasing, but not at exponential rate, though US blames developing countries for increasing demand…
Lack of alternative energy sources: “oil is non-renewable energy source” is well known fact but still no alternative option had been introduced on mass level….
USD Depreciation: Significant depreciation of the U.S. currency due in part to credit problems in the sub-prime mortgage market.
International politics: I was reading an article which co-related Butto’s assassination and increase in oil price. It says rise in oil prices after the assassination Bhutto is an evidence of the size of the security interdependence between the Gulf States and Pakistan, since the start of the global war on terrorism. The Hariri of Lebanon invested with Nawaz Sharif and later failed to mediate between Pervez Musharraf and Nawaz Sharif last Augustus. Harirri was embarrassed later by the Pakistani reaction saying: they do enjoy a strong relationship with Saudi Arabia, so they do not require mediation by a person exercising political activity in another country.(I am not very sure how much this factor attributes to oil price rise…)

Factors responsible for hindering to bolster production:

Higher petroleum taxes
Tougher contract rules
Scarce manpower
Swelling costs
Political wrangling and violence

Following related stories could be good read:
1- Bush urges Saudis to boost oil production
2- Bush Visits U.A.E., Continues Push for Mideast Peace
3- Oil prices to remain unstable
4- Behind record oil prices, troubling signs in production
5- Are high crude oil prices here to stay?

(Lots of thanks to Anureeta, Mr D’Souza, Bond, Niranjan, Aishwarya and pragya to give me valuable inputs …:))

The Crocodile and the Monkey

2008-05-10T23:50:00.000-07:00

I was reading a book called "Beastly tales from here & there" by Vikram Seth. Found his recreation of stroy in poetic way delightful. Here is one nice story of crocodile and monkey which I used to listen in childhood from my grandma in summer vaccations....

On the Ganga's greenest isle
Lived Kuroop the Crocodie:
Greeny-brown with gentle grin,
Stubby legs and scaly skin,
He would view with tepid eyes,
Prey below a certain size
But when substantial dish
Dolphin, turtle, fatter fish
Swam accross his field of view,
He would test the water too.
Out he'd glide, a floting log,
Silent as a polliwog
Nearer, nearer, till his prey
Swam single length away;
Then he'd lunge with smiling head,
Grab, and snap, and rip it dead
Then (prime pleasure of his life)
Drags the carcass to his wife,
Lay it humbly at her feet,
Eat a bit, and watch her eat.
All along the river-bank
Mango trees stood rank on rank,
And his monkey friend would throw
To him as he swam below
Mangoes gold and ripe and sweet
As a special summer treat
"Crocodile, your wife I know
Hungers after mangoes so
That she'dpine and weep swoon,
Mangoes-less in burning June."
The Kuroop the crocodile,
Gazing upwards wih smile,
Thus the addressed his monkey friend:
"Dearest monkey, in the end,
Not the fruit, but your sweet love,
Showered on us from above,
Constant through the changing years,
Slakes her griefs and dries her tears."
(This was only partly true
She liked love, and mangoes too.)
One day Mrs. Crocodile,
Gorged on mangoes, with smile
Sad, yet tender- turned and said:
"Scalykins, since we've been wed,
You've fulfilled my every wish
Dolphins, turtles, mangoes, fish
But I now desire to eat,
As an anniversary treat,
Something sweeter still than fruit,
Sugar-cane or sugar-root:
I must eat that monkey's heart."
"What?" "Well, darling, for a start,
He has been so kind to me;
Think how sweet his heart must be:
Then, the mango pulp he's eaten
Year on year must serve to sweeten
Further yet each pore and part,
Concentrating in his heart."
"Darling, he's my friend." I know;
And he trusts you. Therefore go-
Go at once and fetch him here
Oh, my breath grows faint, I fear..."
"Let me fan you- it's the heat"
"No- I long for something sweet.
Every fruit tastes bitter now.
I must eat his heart somehow.
Get him here, my love, or I,
Filled with bitterness, will die."
When the money saw Kuroop
He let out a joyful whoop,
Jumped from branch to branch with pleasure,
Flinging down the golden treasure:
"Eat, my friend, and take your wife
Nectar from the tree of life
Mangoes ripe and mangoes rare,
Mangoes, mangoes everywhere."
Then Kuroop the crocodile
Gazed up with gentle smile:
"Monkey, you are far too kind,
But today, if you don't mind,
Dine with both of us, and meet
Her whose life you've made so sweet.
when you meet her you will see
Why she mean so much to me.
When she takes you by paw
Something at your heart will gnaw.
When you gaze into her eyes
You will enter paradise
Let us show your gratitude:
Share our friendship and our food."
"Dear Kuroop, dear crocodile,
You can swim from isle to isle.
I can leap from limb to limb,
But, my friend, I cannot swim.
And your island's far away.
If I get a boat some day..."
"Nonsense; jump upon my back.
You're no heavier than my sack
Filled with mangoes to the crown."
So the monkey clambered down,
Bearing mangoes, and delighted
With such warmth to be invited.
They were just halfway across
When the crocodile said: "Toss
All the mangoes in the water."
"But these fruit are all I've brought her."
"You yourself are the gift enough,"
Said Kuroop in accents gruff.
"Ah, my friend, that's very gracious."
"Well, my wife's not so voracious-
And I'm certain that today
She won't eat fruit. By the way.
Tell me what your breast contains.
Mango nectar fills your veins.
Does it also fill your hear?"
Said the monkey with the start:
"What a very curious question."
"Well, she might get indigestion
If it's too rich, I suspect."
"What?" "Your heart." "My heart?" "Corect."
"Now," Kuroop said with a frown,
"Which would you prefer- todrown
In the Ganga or to be
Gutted by my wife and me?
I will let you choose your end.
After all, you are my friend."
Then he slowly started sinking.
"Wait" the monkey said, "I'm thinking.
Death by drowning, death by slaughter
Deat by land or death by water
I'd face either with smile
For your sake, O crocodile!
But your wife felicity
That's what means the most to me.
Noble lady! How she'll freeze,
Dumb with sorrow, when she sees,
Havig prised my ribs apart,
That my breast contains no heart.
If you had not rushed me so,
I'd have found the time to go
To the hollow where I keep
Heart and liver when I sleep,
Half my brain, and fingernail,
Cufflinks, chutney and spare tail.
I had scarcely woken up
When you asked me here to sup.
Why did you not speak before?
I'd have fetched them from the shore."
Now Kuroop the crocodile
Lost, then quickly found, his smile.
"How my sweetheart will upbraid me!
Monkey, monkey you must aid me."
"Well " the monkey placed his paw
Thoughtfully upon his jaw
"Well, although the day is hot
And I'd really rather not
We could go back, fetch my heart,
Check its sweetness, and depart."
So the crocodile once more
Swam the monkey back to shore,
And, with tears of thankfullness
Mingled with concern and stress,
Worried what his wife would say
With regard to his delay,
Begged his friend : "Come back at once."
"I'm not such a double-dunce,"
Yelled the monkey from the high;
"Tell your scaly wife to try
Eating her own wicked heart
If she has one for a start
Mine's been beating in my breast
Night and day without rest.
Tell her that and for you,
Here's my parting gift" He threw
Mangoes squishy, rotten, dead
Down upon the reptile's head,
Who, with a regretful smile,
Sat and eyed him for a while.

(Pic source:http://www.bolokids.com/archives/024.jpg)

Bangalore Airport

2008-05-10T03:04:00.000-07:00

Bangalore airport experiences have been part and parcel of my travel now……Every trip is a new venture towards experiencing something UNEXPECTED….If Bangalore airport is part of ones travel, one should not put thoughts for following:
1- Crowed and unsusual long queue for boarding pass and security check.
2- Any kind of discipline or punctuality
3- Clean rest-rooms
4- When your baggage shifts for one conveyor belt to another
5- If you have any connecting flight with less margin of time, please don’t worry you are in HELL right now.
Well list can’t be dragged to individual intricacies…. What happens when one runs out of choices? Obviously one become prone to crib about its own misery rather you would start laughing on others sailing in the same boat which you have already done..!
I can still recall when I have to go to Lucknow my home town and my flight was via Delhi, I was suppose to leave early morning around 10am and reaching my home around 5pm… those were my college days, semester break, was pretty excited about going home… that’s was one among initial few experience of hell, things were moving slowly… got boarding pass with delay of 45 mins in departure, seems ok as still have 2 hrs of waiting time in Delhi for connecting flight… finally got boarding call, standing in queue somewhere in between the crowd… started feeling irritated after standing for 15 mins in same place, and in another 5 mins got the announcement for further delay… now concern was how much delay, and due to what reason? How much that part is unanswerable… absolute uncertain…! First reason will come instantaneously ‘air traffic control"
Such a thing nobody can help, what you will do, max max shout on top of your voice…!! Do it… those guys are noise proof….!
When delay was almost 3 hrs which exceeded waiting time I lost the hope for connecting flight from Delhi and decided for cancellation and buying new ticket with refund money and some more money… After reaching to ticket counter discovered that no money I will be getting as refund happens at agent’s place who books it….!! Hehehe was nice to hear that (now I am laughing but that point of time my circuit was out) so all the friends and relatives become dearer to me… called up my uncle and ask him for arrangement for my ticket… as I had just thousand bucks or so in my pocket… at last reached Delhi at 8pm…!!! And there were no available flights for Lucknow for the same day…!! Hahhahaha that’s called the irony of fate…. Excitement completely drained out… when I saw my uncle at Delhi I was so happy that I would have ever been so to see him... :D
Sometime back I encountered the similar thing, this time I was not the honored guest in hell rather I was spectator… someone else was the privileged soul to step in… Delay was more on expected side… I had a book by my favorite author with me, but decided not to open it rather watch out the real melodrama… almost everyone will start asking what is the matter, why delay, how long will it take… etc etc.. Then most of them will be on phone telling this story…. After 15-20 mins of mayhem things will be settled... you will be served with some snack irrelevant with the time…some raw bread slices with raw veggies, buscuits etc etc... while muching this i saw a man with his family missed his connecting flight and was furious.. (obviously) and started shouting on ground force people who deals with customers on top of his voice… my fellow passenger whispered now we will have some entertainment..!! Alas, only one side of dialogs was audible other side was like calm sea…I just wondered on myself whether I am getting use to of hell or becoming saddist to have fun on others pitty...!
As per the latest news by media that existing domestic airport was suppose to be shifted almost 40 km away....I was thinking how would it be 2-3 hrs local Bangalore travel and 2-3 hrs actual travel for destination... :) :) And how about eve peak hours traffic?? ahhhh paradise...!!but one day I read it might not get shifted to the new vicinity, puts smile on my face.. what ever it be, I like this hell oops paradise....!!
"Fear for hell is hell itself, longing for paradise is paradise itself"....!!

Sense of Responsibility: Desh Ko Chalane Ki

2008-05-09T06:10:00.000-07:00

Every morning while traveling I listen to radio in cab. Its almost part of my daily travel now.Sometime some dialogs heard makes lot of sense to me… rather what is going in your mind and if you hear it with your ear makes more sense…!! Few lines which I can recall are-

“First person : Mai aap ka vote mangane aaya hun..

Second person : aaiye aaiye; aapki qualification kya hai

First person: aaaaa

Second person: accha bataiye aapka work ex kya hai

First person: 25 years…! (pacchis saal se hain iss field mein)

Second person: nahi sir, work ex matlab, aapka experience construction mae, ngineering mae …

First person: accha accha toh aap mera interview le rahe hain??

Second person: ab aap ne itni baddi jab ke liye jo apply kiya hai..

First person: Kaun si job???? HAHAHAHAHAHAHAHA…….!!

Second person: IS DESH KO CHALANE KA JOB…!"

Imagine someone is asking our favor, to show concern towards leading this nation (by voting him) and how less concern he is showing towards his accountability and responsibility towards the ‘JOB’??? Isn’t it simply thought provoking??? Should we give a thought before what we are going to do???

“We choose our joys and sorrows much before we experience it”

I had read this line, but never understood completely till the time I correlated it with the above mentioned dialogs….

Just be Yourself...!

2008-04-25T21:37:00.000-07:00

Do not believe in anything simply because you have heard it.

Do not believe in anything simply because it is spoken and rumored by many.

Do not believe in anything simply because it is found written in your religious books.

Do not believe in anything merely on the authority of your teachers and elders.

Do not believe in traditions because they have been handed down for many generations.

But after observation and analysis, when you find that anything agrees with reason and is conducive to the good and benefit of one and all, then accept it and live up to it.

image source:http://www.dailyexcelsior.com/magazine/07apr01/Self

Being Thoughtful

2008-04-25T21:32:00.000-07:00

The thought manifests as the word;

The word manifests as the deed;

The deed develops into habit;

And habit hardens into character;

So watch the thought and its ways with care,

And let it spring from loveBorn out of concern for all beings…

As the shadow follows the body,

As we think, so we become.

Guttama Buddha (563 BC - 483 BC)

Image source: http://www.filosofia.unimi.it/~bonomi/thoughtful.jpg

"LOVE ME FOR WHO I AM" Really..??

2008-03-11T09:48:00.000-07:00

I was reading TOI e-paper a catchy title “Love me for who I am” hold my attention… I thought this will be related to introspection skewed towards self realization and I started reading the article… After finishing the reading I couldn’t decide what to say and how to react…. I shared the article with one my friend and we were discussing…. Quite a lot points popped up, I was stunned when my friend said that she is feeling bad for that guy and she is alright with the stand this guy has taken... I asked myself if someday my son comes to me proclaims that he likes guys; I will be like lost cow...!!!For most of us its not easy to accept homosexual relationship…!! I believe our generation people started behaving NEUTRAL instead of +ve /-ve till the time it is concerned with some one ELSE. But, when it comes to some one who is our OWN reaction turns NEGATIVE. Imagine your father, boyfriend, husband, brother or son is Gay? How open are we to accept it, and what logic do we have to refute it?? If I can’t take it what reason do I have to give, I disapprove it because, “cause is blank….”??

Form the mentioned article few things are worth noticing-

1- Level of confidence and conviction is very strong

2- Age of the boy 21 and he started thinking he is gay at the age of 14

3- Educated by all the means of academics and access lot of information

4- Good Analytical power

5- Emotional and self centric thinking

Why I said those points are worth noticing is because each of these have relevance in the way this person is thinking and convinced about his thought are just RIGHT.

In the movie Kalyug, Amrita Singh is the owner of porn site and she is convinced with the fact that she is just running the business to cater the need, DEMAND and SUPPLY…!! But she becomes furious and unable to take the fact when her own daughter works for porn site which she herself is running….!!As far as the example of Khjuraho temple is concerned the concept is pretty scientific psychologically…! The sculptures on the outer walls of temple which are erotic and seductive, it is to manifest when a person is going to temple all the lusty desires should be dropped outside and enter inside with purity of mind to be with God. During our course of discussion we discussed about the book Kamasutra which was written in ancient time decades ago and affirms the concept of homosexuality, my stand on that is take the book as it is if you are capable to do so… and if there are books like KS there are numerous books on moral science… there is a certain age to read different kinds of book…. From childhood till teenage its time to built your personality and charecter, the various shades in charecter can be added or removed later on but addition or deletion of color itself in charecter is impossible later…. Nobody can teach qualities like self-respect, dignity, shame etc etc.. Nothing is absolutely right or wrong in this world, its just our perception which decides whether is right or wrong for us… Perception is something which nobody can teach someone or guide in it, rather its governed by ones moral and ethical thoughts…. Being God fearing, respecting and obeying parents since early age directs us to walk on path which is moral and ethical in lot many ways…. I remember an ad for “incredible India” campaign; there were few questions few I can still recall….. Who decides when party is over?Whether prostitution be legalized?Those were really incredible thoughts…. Some thing is called Custom which society by in large makes to be followed by culture and heritage together…. Sometime I really wonder what kind of parenthood I am going to lead..?? When I was a kid there were no comps, internet, mobiles around me, media exposure was also very less…. On the name of TV Channels only doordarshan was there with more of generic programs which doesn’t cater specific sects need unlike today… Being so much addicted to internet and seeing its penetration in all the vital domains of life is difficult to keep myself aloof from it… I don’t know whether parenting is lagging behind or kids are really becoming TRUE westerner by birth, as they are shedding all the walls of culture, tradition, morality…..I remember when I was kid, as usual like all the others I also use to demand lots of things to my parents… I believe they were pretty judgmental to put filter between the need which they are going to fulfill and the other not… and my mother to be on her best given reply “First deserve and then desire”.

Crux is don’t disappoint the child by refuting all the needs on the other hand don’t pamper also by fulfilling all the needs… a right balance is prime requisite, and to achieve that right balance one really requires right acumen…!

The NPA rule that kills banks, businesses, the economy itself

2008-03-11T09:46:00.000-07:00

'NPA'. The three letters strike terror in banking and business circles today. NPA is the short form of 'Non Performing Asset'.
The dreaded NPA rule says simply this: when interest or other due to a bank remains unpaid for more than 180 days, the entire bank loan automatically turns a 'non-performing asset'. This arithmetic has made automatic the classification of a loan as performing or non-performing. The recovery of loans has always been problem for banks and financial institutions. In the past after factoring different attributes of a loan --like who has borrowed, their record, whether the industry is cyclical-- they would classify their loans as good, doubtful or bad. How then did the paradigm shift from assessing a debt as doubtful or bad to automatic classification of debts into NPAs?
Before getting into details, let's look at the anatomy of the NPA issue in India. The first issue is when the Indian economy is not performing, can non-performing accounts in banks be avoided? Cannot be. Another point. Many western scholars are coming round to the view that the infamous Washington Consensus, which is the mother of the idea of globalised NPA norms, is a failure. They now say that domestic finance should be based on counter cyclical approach, that is, if the economy is under-performing there should be liberal financing to lift the economy. Today's NPA policy is precisely the other way round.
The second issue is the total amount of NPAs in the Indian financial system. This is estimated at Rs 120000 crores. Break this figure up. Just three categories of loans account for half this figure. Loans to petroleum sector [Rs 29000 crores], to steel sector [Rs 22000 crores], and to the infamous Enron power project [Rs 9000 crores]. Can the banks tell steel and petroleum industries to go to hell? Not if our economy has to survive. These portfolios have to be restructured. Once restructured, they will disappear from the NPA radar. However the money sunk in Enron is gone. Eventually, for all its sins, the government will have to offer this amount as a subvention or as subsidy. Deducting these loans, the resulting balance Rs 60000 crores [over $12 billions] is within 10% of the total commercial credit of banks and financial institutions. This is less than 4% of our GDP.
Look at Japan and China and other Asian nations in contrast. The total NPA in Japan is estimated at $1.26 trillions, equivalent to about 26% of Japan's GDP. In China it is $600 billions, that is, 45% of its GDP; in Malaysia 48% of its GDP; in Thailand 41% of its GDP; in Taiwan 27% of its GDP. Compare this with NPA at 4% of India's GDP. Where is the comparison? Yet despite all pressure Japan has steadfastly refused to accept the NPA norms universalised by the west. But surprisingly we have.
Universalised NPA rule is a western strategy to keep global banking and finances under its thumb. It is tailor made to suit equity-driven economies, that is, the Western ones. In the US where 55% of the households are linked to the stock market, equity constitutes most of business finance with debt playing only a limited role. In contrast in India less than 2% of household savings is invested in stocks. The result. India is debt-driven with more than 2/3 of the business funds being provided by debt. It is the other way round in the US driven by high equity and low debt. Where, with such low debt, interest or principal remains overdue for more than 180 days, the debt may be automatically regarded as non-performing. In contrast in India where debt in business is two times the equity, if the large debt is not serviced for 180 days, it cannot be automatically labelled as non-performing, without further appraisal.
Yet once a borrower is unable to pay interest for more than 180 days his account is to be regarded as non-performing and the new rule will deny him further credit, which he needs most then. With banks handling over 60% of national financial savings and the government handling the balance, where else will needy businessmen turn for funds? Thus, starved of funds, businesses, which are only weak, turn sick. Even though the banker knows the problem, he cannot fix it, thanks to the rule. Should any banker breach the rule to solve the problem of his client he is sure to end up in CBI custody. Will any banker risk his job and self if he has to deviate from the rules to save businesses? Never. What then does he do? He does not lend at all. That is why Indian banks are flush with funds and the businesses are starved of them. By the way, how can CBI authority over bank business and globalisation co-exist? Has any advocate of globalisation thought about it?
Not just on banks. The RBI has forced the NPA rule even on non-banking finance institutions. Ask non-banking finance companies about their experience. You will hear from them stories after stories as to how there is disconnect between the rule and their business. They will say how their clients like the Malabar lorry operators will tell them 'sir, for the next one year we will not pay any instalment; we will pay everything at the end of the year', and will do so promptly. But even though the finance companies would get their payments at the year end as the lorry operators had assured them, they would have to declare their accounts as NPAs meanwhile, leading to disastrous consequences to finance companies.
Indisputably, the NPA rule is unsuitable to banks and business; even harmful, killing both, why, our very economy, all at one stroke. Ask the bank heads in private, and see how critical they are about RBI for enforcing the global NPA standards as a fit-all-model. 'It will finish the banks and businesses' they whisper. So do the finance company promoters who are more efficient than some bankers. Of course all of them only whisper, not talk. Yet every one, including the media, swears by this suicidal rule as if it were an inerrant law. Why rules disconnected to India are framed? Simple. Those who frame them are disconnected from India.

(Author : S Gurumurthy)

Sub Prime

2008-03-11T09:45:00.001-07:00

Subprime lending, also called lending, is the practice of making loans to borrowers who do not qualify for the best market interest rates because of their deficient credit history. The term also refers to paper taken on property that cannot be sold on the primary market, including loans on certain types of investment properties and certain types of self-employed individuals. Subprime lending is risky for both lenders and borrowers due to the combination of high interest rates, poor credit history, and adverse financial situations usually associated with subprime applicants. A subprime loan is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. The term "subprime" refers to the credit status of the borrower (being less than ideal), not the interest rate on the loan itself. Subprime lending is highly controversial. Opponents have alleged that the subprime lending companies engage in predatory lending practices such as deliberately lending to borrowers who could never meet the terms of their loans, thus leading to default, seizure of collateral, and foreclosure. Proponents of the subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market.The controversy surrounding subprime lending has expanded as the result of an ongoing lending and credit crisis both in the subprime industry, and in the greater financial markets which began in the United States. This phenomenon has been described as a financial contagion which has led to a restriction on the availability of credit in world financial markets. Hundreds of thousands of borrowers have been forced to default and several major American subprime lenders have filed for bankruptcy.

Budget Glossary

2008-03-11T09:24:00.000-07:00

Annual Financial Statement:Article 112 of the Constitution requires the government to present to Parliament a statement of estimated receipts and expenditure in respect of every financial year — April 1 to March 31. This statement is the annual financial statement. The annual financial statement is usually a white 10-page document. It is divided into three parts, consolidated fund, contingency fund and public account. For each of these funds, the government has to present a statement of receipts and expenditure.

Consolidated Fund: This is the most important of all government funds. All revenues raised by the government, money borrowed and receipts from loans given by the government flow into the consolidated fund of India. All government expenditure is made from this fund, except for exceptional items met from the Contingency Fund or the Public Account. Importantly, no money can be withdrawn from this fund without the Parliament’s approval.

Contingency Fund: As the name suggests, any urgent or unforeseen expenditure is met from this fund. The Rs 500-crore fund is at the disposal of the President. Any expenditure incurred from this fund requires a subsequent approval from Parliament and the amount withdrawn is returned to the fund from the consolidated fund.

Public Account: This fund is to account for flows for those transactions where the government is merely acting as a banker. For instance, provident funds, small savings and so on. These funds do not belong to the government. They have to be paid back at some time to their rightful owners. Because of this nature of the fund, expenditure from it are not required to be approved by the Parliament. For each of these funds the government has to present a statement of receipts and expenditure. It is important to note that all money flowing into these funds is called receipts, the funds received, and not revenue. Revenue in budget context has a specific meaning. The Constitution requires that the budget has to distinguish between receipts and expenditure on revenue account from other expenditure. So all receipts in, say consolidated fund, are split into Revenue Budget (revenue account) and Capital Budget (capital account), which includes non-revenue receipts and expenditure. For understanding these budgets — Revenue and Capital — it is important to understand revenue receipts, revenue expenditure, capital receipts and capital expenditure.

Revenue receipt/Expenditure: All receipts and expenditure that in general do not entail sale or creation of assets are included under the revenue account. On the receipts side, taxes would be the most important revenue receipt. On the expenditure side, anything that does not result in creation of assets is treated as revenue expenditure. Salaries, subsidies and interest payments are good examples of revenue expenditure.

Capital receipt/Expenditure: All receipts and expenditure that liquidate or create an asset would in general be under capital account. For instance, if the government sells shares (disinvests) in public sector companies, like it did in the case of Maruti, it is in effect selling an asset. The receipts from the sale would go under capital account. On the other hand, if the government gives someone a loan from which it expects to receive interest, that expenditure would go under the capital account. In respect of all the funds the government has to prepare a revenue budget (detailing revenue receipts and revenue expenditure) and a capital budget (capital receipts and capital expenditure). Contingency fund is clearly not that important. Public account is important in that it gives a view of select savings and how they are being used, but not that relevant from a budget perspective. The consolidated fund is the key to the budget. We will take that up in the next part. As mentioned in the first part, the government has to present a revenue budget (revenue account) and capital budget (capital account) for all the three funds. The revenue account of the consolidated fund is split into two parts, receipts and disbursements — simply, income and expenditure. Receipts are broadly tax revenue, non-tax revenue and grants-in-aid and contributions. The important tax revenue items are listed below.

Corporation Tax:

Tax on profits of companies.

Taxes on Income other than corporation tax: Income tax paid by non-corporate assesses, individuals, for instance.

Fringe benefit tax (FBT): The taxation of perquisites — or fringe benefits — provided by an employer to his employees, in addition to the cash salary or wages paid, is fringe benefit tax. It was introduced in Budget 2005-06. The government felt many companies were disguising perquisites such as club facilities as ordinary business expenses, which escaped taxation altogether. Employers have to now pay FBT on a percentage of the expense incurred on such perquisites.

Securities transaction tax (STT): Sale of any asset (shares, property) results in loss or profit. Depending on the time the asset is held, such profits and losses are categorised as long-term or short-term capital gain/loss. In Budget 2004-05, the government abolished long-term capital gains tax on shares (tax on profits made on sale of shares held for more than a year) and replaced it with STT. It is a kind of turnover tax where the investor has to pay a small tax on the total consideration paid / received in a share transaction.

Banking cash transaction tax (BCTT): Introduced in Budget 2005-06, BCTT is a small tax on cash withdrawal from bank exceeding a particular amount in a single day. The basic idea is to curb the black economy and generate a record of big cash transactions.

Customs: Taxes imposed on imports. While revenue is an important consideration, Customs duties may also be levied to protect the domestic industry or sector (agriculture, for one), in retaliation against measures by other countries.

Union Excise Duty: Duties imposed on goods made in India.

Service Tax: It is a tax on services rendered. Telephone bill, for instance, attracts a service tax. While on taxes, let us take a look at an important classification: direct tax and indirect tax.

Direct Tax: Traditionally, these are taxes where the burden of tax falls on the person on whom it is levied. These are largely taxes on income or wealth. Income tax (on corporates and individuals), FBT, STT and BCTT are direct taxes.

Indirect Tax: In case of indirect taxes, the incidence of tax is usually not on the person who pays the tax. These are largely taxes on expenditure and include Customs, excise and service tax. Indirect taxes are considered regressive; the burden on the rich and the poor is alike. That is why governments strive to raise a higher proportion of taxes through direct taxes. Moving on, we come to the next important receipt item in the revenue account, non-tax revenue.

Non-tax revenue: The most important receipts under this head are interest payments (received on loans given by the government to states, railways and others) and dividends and profits received from public sector companies. Various services provided by the government — police and defence, social and community services such as medical services, and economic services such as power and railways — also yield revenue for the government. Though Railways are a separate department, all its receipts and expenditure are routed through the consolidated fund.

Grants-in-aid and contributions: The third receipt item in the revenue account is relatively small grants-in-aid and contributions. These are in the nature of pure transfers to the government without any repayment obligation. We now look at the disbursements section of the revenue account of the consolidated fund. It lists all the revenue expenditures of the government. These include expense incurred on organs of state such as Parliament, judiciary and elections. A substantial amount goes into administering fiscal services such as tax collection. The biggest item is interest payment on loans taken by the government. Defence and other services like police also get a sizeable share. Having looked at receipts and expenditure on revenue account we come to an important item, the difference between the two, the revenue deficit.

Revenue Deficit: The excess of disbursements over receipts on revenue account is called revenue deficit. This is an important control indicator. All expenditure on revenue account should ideally be met from receipts on revenue account; the revenue deficit should be zero. When revenue disbursement exceeds receipts, the government would have to borrow. Such borrowing is considered regressive as it is for consumption and not for creating assets. It results in a greater proportion of revenue receipts going towards interest payment and eventually, a debt trap. The FRBM Act, which we will take up later, requires the government to reduce fiscal deficit to zero by 2008-09. Receipts in the capital account of the consolidated fund are grouped under three broad heads — public debt, recoveries of loans and advances, and miscellaneous receipts.

Public debt: Public debt receipts and public debt disbursals are borrowings and repayments during the year, respectively. The difference is the net accretion to the public debt. Public debt can be split into internal (money borrowed within the country) and external (funds borrowed from non-Indian sources). Internal debt comprises treasury bills, market stabilisation schemes, ways and means advance, and securities against small savings.

Treasury bills (T-bills): These are bonds (debt securities) with maturity of less than a year. These are issued to meet short-term mismatches in receipts and expenditure. Bonds of longer maturity are called dated securities.

Market stabilization scheme: The scheme was launched in April 2004 to strengthen RBI’s ability to conduct exchange rate and monetary management. These securities are issued not to meet the government’s expenditure but to provide RBI with a stock of securities with which it can intervene in the market for managing liquidity.

Ways and means advance (WMA): One of RBI’s roles is to serve as banker to both central and state governments. In this capacity, RBI provides temporary support to tide over mismatches in their receipts and payments in the form of ways and means advances.

Securities against small savings: The government meets a small part of its loan requirement by appropriating small savings collection by issuing securities to the fund.

Miscellaneous receipts: These are receipts from disinvestment in public sector undertakings. Capital account receipts of the consolidated fund — public debt, recoveries of loans and advances, and miscellaneous receipts and revenue receipts are receipts of the consolidated fund. We now take up the disbursements on capital account from the consolidated fund. The first part deals with capital expenditure incurred on general, social and economic services. Some of the biggest expenditure items under these heads are defence services, investment in agricultural financial institutions and capital to railways. The second part takes up the public debt (repayments of loans) and various loans by the government. The consolidated fund has certain disbursements ‘charged’ to the fund. These are obligations that have to be met in any case and, therefore, do not have to be voted by the Lok Sabha. These include interest payments and certain expenditure such as emoluments of the President, salary and allowances of speaker, deputy chairman of the Rajya Sabha, and allowances and pensions of Supreme Court judges, Parliament and so on.

Budget at a glance: This is a snap shot of the budget for easy understanding. Nonetheless, it introduces some new concepts. While receipts are broken down into revenue and capital, unlike the consolidated fund, it shows the centre's net tax revenues. This is because a decent part of the gross tax revenue, as decided by the relevant Finance Commission, flows to the state governments. Budget at a glance also segments expenditure into plan and non-plan expenditure, instead of splitting into revenue and capital. Each of these is then split into revenue account and capital account. Before discussing plan and non-plan expenditure it is important to discuss the concept of the central plan.

Central plan: Central or annual plans are essentially Five Year Plans broken down into annual instalments. Through these plans, the government achieves the objectives of the Five Year Plans. The central plan’s funding is split almost evenly between government support (from the budget) and internal and extra budgetary resources of public enterprises. The government’s support to the central plan is called budget support. We will take up plan and non-plan expenditure in the next part.

Plan expenditure: This is essentially the budget support to the central plan and the central assistance to state and union territory plans. Like all budget heads, this is also split into revenue and capital components.

Non-plan expenditure: This is largely the revenue expenditure of the government. The biggest items of expenditure are interest payments, subsidies, salaries, defence and pension. The capital component of the non-plan expenditure is relatively small with the largest allocation going to defence. Defence expenditure is non-plan expenditure.

Fiscal Deficit: When the government’s non-borrowed receipts fall short of its entire expenditure, it has to borrow money from the public to meet the shortfall. The excess of total expenditure over total non-borrowed receipts is called the fiscal deficit.

Primary deficit: The revenue expenditure includes interest payments on government’s earlier borrowings. The primary deficit is the fiscal deficit less interest payments. A shrinking primary deficit indicates progress towards fiscal health. The Budget document also mentions deficit as a percentage of GDP. This is to facilitate comparison and also get a proper perspective. Prudent fiscal management requires that government does not borrow to consume in the normal course.

FRBM Act: Enacted in 2003, Fiscal Responsibility and Budget Management Act require the elimination of revenue deficit by 2008-09. Hence, from 2008-09, the government will have to meet all its revenue expenditure from its revenue receipts. Any borrowing would only be to meet capital expenditure. The Act mandates a 3% limit on the fiscal deficit after 2008-09.

Resources transferred to the states: A part of the Centre’s gross tax collection goes to state governments. In the Budget 2007-08, the states were to receive nearly 27% of the gross tax collections. The Centre also transfers funds to states by way of support to their plans. It also gives large grants to manage centrally-sponsored schemes. The government counts small savings transfers to state governments, which are in the nature of borrowings, as resources transferred to states. Before March 31, 1999, the Centre used to borrow net accretions to small savings and lend them to the states. From April 1, 1999, states started receiving 75% of net small savings directly; the balance was invested in special government securities during 1999-2000 to 2001-2002. The sums received in the NSS fund on redemption of special securities are being reinvested in special G-secs. From April 2002, the entire net collection under small saving schemes in each state and UT are advanced to the concerned state/UT government as investment in its special securities. The expenditure and receipts Budget take up the respective heads in greater detail.

Value-Added Tax (VAT) and GST: VAT helps avoid cascading of taxes as a product passes through different stages of production/value addition. The tax is based on the difference between the value of the output and inputs used to produce it. The aim is to tax a firm only for the value added by it to the inputs it is using for manufacturing its output and not the entire input cost. VAT brings in transparency to commodity taxation. In this concluding part we take a look at some of the important terms that figure in the Budget-

BHARAT NIRMAN: Bharat Nirman is the current UPA government’s ambitious programme for building infrastructure, especially in rural India. It has six components — irrigation, roads, water supply, housing, rural electrification and rural telecom connectivity. In each of these areas, the government has set targets that are to be achieved by the year 2009, within four years of its launch.

CESS: This is an additional levy on the basic tax liability. Governments resort to cess for meeting specific expenditure. For instance, both corporate and individual income is at present subject to an education cess of 2%. In the last Budget, the government had imposed another 1% cess — secondary and higher education cess on income tax — to finance secondary and higher education.

COUNTERVAILING DUTIES (CVD): Countervailing duty is a tax imposed on imports, over and above the basic import duty. CVD is at par with the excise duty paid by the domestic manufacturers of similar goods. This ensures a levelplaying field between imported goods and locally-produced ones. An exemption from CVD places the domestic industry at disadvantage and over long run discourages investments in affected sectors.

EXPORT DUTY: This is a tax levied on exports. In most instances, the object is not revenue , but to discourage exports of certain items. In the last Budget, for instance , the government imposed an export duty of Rs 300 per metric tonne on export of iron ores and concentrates and Rs 2,000 per metric tonne on export of chrome ores and concentrates.

FINANCE BILL: The proposals of government for levy of new taxes, modification of the existing tax structure or continuance of the existing tax structure beyond the period approved by Parliament are submitted to Parliament through this bill. It is the key document as far as taxes are concerned.

FINANCIAL INCLUSION: Financial inclusion is universalising access to basic financial services (to have a bank account, timely and adequate credit) at an affordable cost. Exclusion from financial services imposes costs on those excluded; these are typically the disadvantaged and low-income group. Exclusion forces them into informal arrangements such as borrowing from local money lenders at high rates. Financial inclusion remains a serious issue in India. The government has proposed a no-frills account to provide cheap banking.

MINIMUM ALTERNATE TAX (MAT): This tax on corporate profits was introduced in 1996-97 and has been modified since. If the tax payable by a company is less than 10% of its book profits, after availing of all eligible deductions , then 10% of book profits is the minimum tax payable. Book profits are profits calculated as per the Companies Act, while profits as per the Income-Tax Act could be significantly lower, thanks to various exemptions and depreciation.

PASS-THROUGH STATUS: A pass-through status helps avoid double taxation. Mutual funds, for instance , enjoy pass-through status. The income earned by the funds is tax free. Since mutual funds’ income is distributed to unitholders, who are in turn taxed on their income from such investments , any taxation of mutual funds would amount to double taxation. Essentially , it means the income is merely passing through the mutual funds and, therefore, should not be taxed. The government allows venture funds in some sectors pass-through status to encourage investments in start-ups .

SUBVENTION: The term subvention finds a mention in almost every Budget. It refers to a grant of money in aid or support, mostly by the government. In the Indian context, for instance, the government sometimes asks institutions to provide loans to farmers at below market rates. The loss is usually made good through subventions.

SURCHARGE: As the name suggests, this is an additional charge or tax. A surcharge of 10% on a tax rate of 30% effectively raises the combined tax burden to 33%. In the case of individuals earning a taxable salary of more than Rs 10 lakh a surcharge of 10% is levied on income in excess of Rs 10 lakh. Corporate income is levied a flat surcharge of 10% in the case of domestic companies and 2.5% for foreign companies. Companies with revenue less than Rs 1 crore do not have to pay this surcharge.

(Source: Economic Times)

Belief the essence

2008-01-27T07:03:00.000-08:00

The moment alas world seems to end…
All good thoughts start disappearing…
Heart felt its identity in million tiny pieces…
Soul wants to put a step away….
Thy will of His still being continued…??
Want ignorance for being ignorant…
Asking to be easy for difficulty…
Console the difficulty,
Console the ignorant,
They are fragile,
No thoughts for you…!
Hold the waves of ocean,
Stand as still as a clam lake,
Let the thousands volcano erupt together,
But be as cool as lotus floating on ponds surface….
How ignorant I am from the entire plan…
Senses are getting alive, to doubt grace….
Still somewhere some ray of hope is twinkling….
Aye to balm I or to put delusion...
The moment alas I know what is ocean….
The moment I felt what being eruption of thousand volcanoes…
Knowing all and understanding nothing…
How strange entire plan but still true….
Can a plan play with my belief?
Can waves of ocean wash of my belief?
Can thousand erupting volcanoes’ destroy my belief?
Nay, never, nor they should …
That’s the reason Calmness and stillness accompanying me…
The moment my belief and I are together…
Bedazzled but still smile on each other…!

(I had written this poem in Sep'2007)