Your early PF withdrawals will be taxed Apr 01, 2011


	April 01, 2011

Your early PF withdrawals will be taxed!!

Impact

Will this finally make understanding of mutual funds easy?

Impact

Sensex roars despite MENA crisis

Impact

In this issue

Your early PF withdrawals will be taxed!!
Will this finally make understanding of mutual funds easy?
Sensex roars despite MENA crisis
Interview
And Other News
Financial Terms. Simplified.

INTERVIEW

In an interview with the Mint, Mr. Eswar Prasad - Senior Professor of trade policy at Cornell University and Senior Fellow at the Brookings Institution shared his views on global economic recovery, inflation concerns in India, RBI’s monetary policy stance and India’s growth forecast.

Mr. Prasad believes that the global economic recovery is in a very fragile state. He says, "The advanced economies were not really up on their feet before these shocks started hitting and they are going to be really battered. The emerging markets (EMs), on the other hand, were getting to be quite strong. But the EMs now face this cumulative series of risk that is adding to the complication they already have with domestic inflation management... So, it's going to be a tough slog ahead."

On the inflation front, Mr. Prasad feels that food price inflation has been high and has already begun to feed in the overall inflation. He further explains that it is a supply-side problem in terms of the distribution of food and agricultural policies and as such monetary policies are forced to deal with it. On the whole he thinks that the EM central banks, including RBI have little choice at the moment as they are in a very difficult situation.

From the RBI’s monetary stance point of view, Mr. Prasad said, "India is in a very different position than other Asian markets because we do have a pretty large current account deficit of the order of 3-3.5% of GDP (Gross Domestic Product) for this year. It is likely to be even greater if oil prices stay persistently high. I think the constraints on India raising interest rates from the perspective of capital inflows are not as bad. But the problem is that if you raise interest rates, that impacts the industrial production and that is something the RBI has been rightly very reluctant to do, except as the last resort."

As far as India’s growth is concerned, Mr. Prasad affirms that the fundamentals of the Indian economy are still strong and has enough potential to deliver an 8.0% to 8.5% growth rate. But he cautions that the industrial production has slowed down a little. He believes that if oil prices stay above U.S. $100 a barrel for the next few months it will be very difficult for India to meet its growth target.

QUOTE OF THE WEEK

"People spend more time and effort to buy the right refrigerator than they do to buy the right funds"

- Peter Lynch

AND OTHER NEWS ...

The National Stock Exchange launched a new index series CNX Smallcap Index designed to reflect the behaviour and performance of the small capitalised segment of the financial market. The index is calculated using free float market capitalisation methodology, the total cost of buying all the shares in the open market, with a base date of January 1, 2004, indexed to a base value of 1,000.
As per the new guidelines issued to lenders by the Reserve Bank of India (RBI), customers will get email alerts for all transactions done through their debit or credit cards from June 30, 2011. The guidelines issued to the lenders by the RBI aims at checking fraudulent transactions and encouraging usage of cards by customers.
India’s largest firm by market capitalisation, Reliance Industries Ltd. (RIL), announced its entry into the financial services industry through a joint venture with the New York-based D.E. Shaw Group.

The joint venture will allow RIL to enter more conventional sectors such as private equity; mutual funds other security-linked offerings.
Citing high defaults in provident fund contributions by employers, the Employees Provident Fund Organisation (EPFO) has decided to give monthly updates of contributions instead of an annual statement.

As per EPFO, this will bring instances of defaults by employers to the notice of workers, who, in turn, will put pressure to demand their dues. The EPFO has been computerising its offices across the country and will be in a position to provide monthly information from the next fiscal.
The six core sectors crude oil, petroleum refinery products, coal, electricity, cement and finished steel registered a robust growth of 6.8% in February 2011 as against 4.2% in February 2010.

Also during the period April 2010 to February 2011, the six core industries registered a growth of 5.7%, as compared to an expansion of 5.4% reported during the same period last year.
SEBI along with financial regulators is planning to bring the wealth management business of large financial institutions under regulatory control. These large financial institutions provide advisory services to clients and also distribute multiple financial products across different asset classes cutting across different regulatory turfs.

The regulators are planning to separate this inter-regulatory piece and have some code of conduct for wealth managers by getting them to register. Thus now institutions who act as corporate agents selling multiple financial products may also have to document all their engagements with investors on why a certain product was sold to a customer. As a mandate they will also have to maintain an audit trail.

In our opinion if such an initiative really sees the light of the day, it would be in the interest of investors as transparency would be infused while transacting with large financial institutions, since they in turn would be more responsible and accountable.