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| October 15, 2015 |
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| Weekly Facts | | | Close | Change | %Change | | S&P BSE Sensex* | 27,214.60 | 135.09 | 0.50% | | Re/US $ | 64.83 | 0.25 | 0.38% | | Gold Rs/10g | 26,965.00 | 690.00 | 2.63% | | Crude ($/barrel) | 47.83 | -3.39 | -6.62% | | F.D. Rates (1-Yr) | 6.25% - 8.00% | Weekly changes as on October 14, 2015
*S&P BSE Sensex value as on October 15, 2015 |
Impact 
When playing chess, you are always looking for checkmate opportunities. If you are playing with the white pieces, you get the 'first move' advantage, but you still need to play well to checkmate the opponent's king, blocking any escape. Without a sound strategy, apart from the first move, you have no advantage over your opponent, and the game will almost always run parallel until a stalemate or quit-time occurs.
In many countries, there are two systems that run parallel to each other; the legal one that is backed by the government and one that isn't. In India, the black economy has severely hampered the progress of the mainstream economy for years. The real world is a far bigger place than 64 squares on a chessboard. Setting up a ploy for the king is even more difficult in the real-world battle. By the way, do you know who the king of the black economy is? Cash...unaccounted cash to be more precise.
It's a never-ending battle; no side has won so far. The trouble started when black money made inroads in mainstream economy. Things might change now. The Indian Government is all set to launch a blitzkrieg on the black economy.
The plan of action that follows:
- The Government is considering making it mandatory to quote the PAN number each time you transact in cash over and above a particular limit. As of now, there is no clarification on what limit the Government believes would be effective to discourage people transacting in cash.
- Direct subsidy transfers and newly launched payment banks are expected to encourage the use of plastic money. The general notion is the lesser amount of cash used in day-to-day transactions, lesser black money will be generated and circulated.
And that's not all.
The Government has decided to employ a new high-end technological platform that consists of a new tracking tool, called Income Tax Business Application-Permanent Account Number (ITBA-PAN), available to the tax department by the end of October.
What is the tool capable of?
- Monitoring and analyzing the transaction history of PAN holders
- Helps identify fake or duplicate PAN
- Allows activation of PAN deleted or deactivated wrongly
- Helps with issuing new PAN Card within 48 hours which takes about 15 days at present
The intent is clear squash black money channels to a grinding halt.
Finance Minister, Mr Arun Jaitley, says in his facebook post dated October 03, 2015, "The monitoring regime of income tax has been strengthened and its capacity to access information and apply technology- driven analytical tools to expose evasion has been enhanced. Its ability to detect large cash withdrawals or transactions that enter the system is being strengthened. GST regime once introduced will also be a landmark step in this direction. Thus for commodities like gold where the initial purchase by the exporter is after the payment of custom duty, the subsequent transactions, which are mostly in cash, can be easily tracked. The Government's policy is the rationalization of tax structures, taxing at reasonable rates, placing more money in the hands of small earners, encouraging and promoting the use of plastic money by all sections of society, and creating deterrence against those who continue to use unaccounted money."
Read between lines, there's a message for you: - You can't make fortunes with black money; try the legitimate route.
- File income tax returns regularly.
- Don't create or encourage the creation of black money just to avoid tax liability
- Follow procedures; and remember
- The Government may be watching you every time you transact
What's next?
Imagine, the black-market king can now move only in black squares and the white-market government intends to block its progression. The encroachment of unaccounted money in a legitimate economy may retreat to a large extent. The question we might ask ourselves is, 'has technology played the role of a pawn who sacrifices its life to restore the position of a galloping knight?'
Beware black money holders! You may soon find yourself in a checkmate position.
Do you think with these efforts Government will achieve any substantial success in curbing black money? Share your views here.
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Impact
A lot can happen over coffee. Oh no! This isn't another date, just a mind-dulling experience of sitting with your investment advisor and discussing the plethora investment opportunities available. The blissful atmosphere of a coffee shop can really cheer your mood up and you may not mind listening to financial jargons while receiving the pedagogy of finance and investing. Enjoying your latte may be soothing but when you put yourself in the investor's shoes, reading the fine print may be tedious.
When a business goes public for the first time, it has to prepare a prospectus that acts as the comprehensive source of information for all investors. Recently, a chain of coffee house decided to tap the capital markets with equity offerings for the first time. Imagine the size of its prospectus. It ran into 610 pages. Gosh! Makes one wonder what details fill up the prospectus. It doesn't matter how important it is from the investor's perspective, but reading 600 pages is a big task, ain't it?
SEBI to your rescue:
Securities and Exchange Board of India (SEBI) has swung into action to make the process of investing in stocks more investor friendly. Being aware of practical difficulties in passing around important information through a prospectus in the current form; SEBI is pondering on the idea of an "abridged version" of the prospectus.
What will the abridged prospectus contain?
The abridged version will filter out information that may be legally important to document in a prospectus but gives little else for potential investors to make informed decisions. This won't be a substitute to the main prospectus but would serve as a 10-page simplified variant.
These little changes may significantly help lessen the tediousness associated with reading Offer Documents and the like. Now take the time to read the abridged version thoroughly. This effort is justified considering the importance of investing in our lives.
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Impact
Too much of a good thing may not always be a good thing. Just like the time you hope it rains to douse out the heat, until it rains so heavily that your family's plans of a weekend outing go for a toss. Similarly, we expect the price of stuff to go down, so that we can buy them more economically, however, if the market prices did start to fall across the board, it might not even benefit you. After all, your income depends on the product, service, etc. that your company sells. Yet, Beauty lies in moderation.
Over the last 5 years, India struggled with the escalating prices of life's essentials; captured by the movement of Consumer Price Index (CPI). The Reserve Bank of India (RBI) has done remarkably well to contain inflation below a target mutually set by the government and the central bank.
The original target the RBI set out to achieve by January 2016 was 6.0% with a margin of error of +/- 2%. In August 2015, inflation fell to 3.74%. In other words, it is undesired if inflation slides below 4% and if it continues to descend thereafter, that will hurt Industrial Growth. September saw the retail inflation rise up to 4.41%. So, is this good for you? Let's find out.
Since September 2015, the RBI had expected inflation to increase into the next quarter; so the jump we experienced in retail inflation doesn't come as a surprise. Speaking about growth in the fourth bi-monthly monetary policy statement, RBI said that, "monetary policy has to be accommodative to the extent possible, given its inflation goals, while recognizing that continuing policy implementation, structural reforms and corporate actions leading to higher productivity will be the primary impetus for sustainable growth."
Index of Industrial Production (IIP) is considered as an important indicator to gauge the level of manufacturing growth in India.
Rise in Inflation and Industrial Output
Data as on October 12, 2015
(Source: MOSPI, PersonalFN research)
When asked about inflation undershooting the targeted disinflation path at the conference call with researchers and analysts, the RBI Governor said, "we intend to be on the path and avoid over and/or undershooting. Some would argue that given the past history of failing to deliver on low inflation one should be more worried about having excessive inflation, an overshooting, and others would say, given the state of the world economy, given the state of the domestic economy, one should be worried about undershooting, that is too low inflation and some people are actually talking about deflation. So long as there are enough voices on both sides, we are pretty happy staying in the middle."
To know more about this and PersonalFN's views over it, please click here.
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Impact
India is ubiquitous for its vibrant culture, grand festivals and most Indians believe in buying assets such as gold, silver, vehicles, and houses on auspicious days. It is said that, beginning anything new on these days usher in prosperity and good fortune. This is why you may find scores of people buying gold, signing real estate deals or buying new cars, especially during the dussehra or diwali festival.
Banking on this predictable purchasing pattern, businessmen launch attractive festive season offers. With the emergence of e-Tailing in a big way, there is competition among sellers to offer the customer "the best deal", with well-known jewellery houses racing not far behind. There are specials offers for every occasion, sometimes offering you a whopping 50% discount on making charges or cut prices of diamond jewellery.
To read more about this news and our views, please click here.
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- Dal-Chaval or Dal-Roti is considered the common man's food but the uncommonly high prices of pulses are forcing the common man to look for a substitute to pulses. A kilo of Tur dal (Arhar or Pigeon Peas), which is one of the most widely used staples across India, now costs more than chicken. In September, the prices of pulses have gone up 1% every day as per the data on retail inflation for the month.
Acche din-for whom? The Government is prodded to answer this.
There is a tendency to play blame games when something fails. Sometimes it's the fickle monsoon or some other natural calamity, say hailstorms.
As per the report of Indian Meteorological Department (IMD) dated September 30, 2015, Central India, a key production area for Tur dal, received 16% lesser rainfall than the past average this season. This season, the sowing area for pulses has risen to 115.44 lakh hectares from 102.68 lakh hectares, as per the ministry of agriculture's report released on October 09, 2015. Although deficient monsoon affects the Kharif crop, can we continue to blame the weather for the catastrophic rise in the prices of pulses?
Let's see what agri-experts say...
In an interview given to Vivian Fernandes, consulting editor to www.smartindianagriculture.in, Mr Narendra Pratap Singh, Director, Indian Institute of Pulses Research, sheds light on something you must read.
"Pulses are kind on the environment. The amount of water used for one hectare of wheat can irrigate ten hectares of pulses. They also produce own nitrogen by absorbing it from air and storing it as nodules in the soil. Pulses add up to 40 kg of nitrogen per hectare," Singh says. "Pulses need potassium and potash, which are sold at market prices, while urea, which they do not need, is heavily subsidized."
Read more...
As per a research paper namely 'India's Pulses Scenario' published by National Council of Applied Economic Research, has more shockers. Here's what it says:
"Pulse production has recorded less than one percent annual growth during the past 40 years, which is less than half of the growth rate in Indian human population. Consequently per capita production and availability of pulses in the country has witnessed sharp decline."
After reading this, you may have concluded that the price escalation in pulses isn't a short-term problem and requires changes in policies. It needs our attention. You are probably right.
What has the NDA Government done so far to address this problem? - Government decided to import 10,000 tons of Tur and Urad earlier this season, but later placed additional import orders for 5,000 more tons of Tur.
- Recently the Government has decided to use price stabilisation fund to curb rapidly rising prices of pulses. A sort of subsidisation.
- As a long term measure, the Central Government has earmarked Rs 50,000 crores to Pradhan Mantri Krishi Sinchai Yojana (PMKSY), to be utilised over next 5 years.
All said and done, a hungry person first needs food on his plate rather than insipid explanations about the problem at hand. You shouldn't underestimate expenditure planning. After all, your expenses affect your savings, and your savings decide what lifestyle you may afford in years to come.
Now it remains to be seen how the Government responds to a problem that is on the verge of becoming a chronic one. That's another question waiting to be answered: 'Are commodity derivatives really playing a role in price discovery? Or are they havens for speculators?' |
Black Economy: The segment of a country's economic activity that is derived from sources that fall outside of the country's rules and regulations regarding commerce. The activities can be either legal or illegal depending on what goods and/or services are involved.
(Source: Investopedia)
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Quote : "Chains of habit are too light to be felt until they are too heavy to be broken." - Warren Buffett
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