Union Budget 2010-11

Finally this non-event has brought me to ad nauseam boredom & I decided not to follow it so rigorously anymore. Just one bit of good news for the working class is the new tax structure proposed

Income	Tax %
0-160000	0%
160001-500000	10%
500001-800000	20%
800001-above	30%

One angle to look at this is if you earned more, it’s more beneficial to you. Just look at table below. You tell me qui bono?

Income Rs.	Previous tax	New Tax	You save
350000	24000	19000	5000
500000	54000	34000	20000
750000	129000	104000	25000
1100000	234000	114000	120000

And this came at a time when the consumer is pissed off with the level on food item inflation. This is 4^th year I have been crying out loud that the government is playing plain dumb. We have so called “some of the best economists” sitting at the top viz. Manmohan Singh, P. Chidambaram, Montek Singh Ahaluwalia. And yet the government is not able to understand a simple problem for years, that we are not making any moves to tackle the supply side problems. That’s the main reason of the inflation. If you studied economics even for a year in your curriculum, you’d understand what I’m taking about. And these people have been in the field of economic for years & yet they do not seem to heed for this.

This whole façade is simply ridiculous & there seems no sense in making a hue & cry about it. So I better shut up & leave the country for the able leaders to ruin. I better spend my time in getting self-exiled like our dear old artist M. F. Hussain.

Union Budget 2009-10

Congress & UPA may have changed the Finance Minister but they haven’t changed the policy of the budget being a ‘non-event’ (a word personified by previous FM P Chidambaram) & the only concern the budget carries is ‘Inclusive Growth’ (Something the market has got fed up of since the Nehruvian Socialist India – the concept that still hasn’t quite worked; to UPA’s credit NREGA has got some favourable results including winning the election with clear mandate for Congress & UPA, without a pejorative external support of the Leftist, Communist parties). So in all, the budget had all the ingredients to make a rotten stew & that is what it made. Here’s the list of the ingredients & a small procedure of how to spoil the party.

The basic plan of this government is keep the wheels of growth spinning fast enough so that the wobble created by global financial turmoil does not derail the engine of growth. So the basic target is to maintain the GDP growth above 9% for the whole term, which includes maintaining the Agricultural growth above 4%. There has been lot of ruckus between the state & Central government regarding the collection & utilization of taxes since the introduction of VAT. So the FM has proposed the annual dialogue between the State Finance Ministers & the central government for resolving this issue & to ensure that the state government do no fall short of necessary funds.

Some significant points in expenditure for this year are as follows,

• The budget estimate for expenditure is set to cross the RS. 10 lakh crore for the first time. Total BE is Rs.10,21,000 crore out if which Rs.3,75,000 crore is planned expenditure.
• There is a proposal to set IIFCL as SPV for infrastructure growth.
• The Central Government to refinance 60% infra projects in critical infra sectors, amount estimated for the same is Rs.1,00,000 crore
• Funds allocated for JNNURM to be increased by 87% over last year.
• Also there is 23% increase in funds allocated for NHDP/NHAI.
• There is proposal of providing the farmers with loans up to Rs. 3,00,000 with special low interest of 7%. & further 1% reduction in interest rate to 6% for farmers who repay their loans on time.
• There is emphasis on irrigation with 75% increase in funds allocated.
• Micro, Small & Medium Enterprises are given a boost of 4000 crore for refinancing loans given by banks to these industries.
• A great positive as expected by market for the Petroleum Producing & Marketing industries is that the new mechanism to be introduced for Petroleum pricing policy which will try to decontrol the petroleum prices & put more in line with global crude prices to minimise losses of these industries & also it is bound to reduce the deficit burden on the government.
• To extend the Public involvement in the growth story of India Inc. there is proposal to expand Non promoter shareholding, as currently many of the listed companies have 10 – 15% general public (retail) holding only.
• An amount of Rs.39,100 crore for NREGA in this budget which is astounding 144% higher than last year due to the success witnessed in last year.
• Allocation for Bharat Nirman is up 45% from last year.
• Indira Awas Yojana is given 63% more funds than last year.
• Allocation of Rs.7000 crore for rural electrification.
• FM also proposed a plan of bringing the Employment exchange online to facilitate the jobseekers get into the right jobs & also to create a pool of talent for the India Inc. to choose from.
• There is boost for ex servicemen by increasing the Pension paid to them.
• The all centre of attention UID scheme which is now lead by Nandan Nilekani will be allotted Rs.120 crore & expected to be completed within 12 – 18 months.

Now something about the receipts

• The total Revenue Deficit for this year is set to be 4.8% of GDP.
• The Fiscal Deficit is revised to 6.8% of GDP but FM promised to bring it back within FRBM range at the earliest possible.
• The total Tax receipt for the year are budgeted to be Rs.6,42,000 crore
• Tax to GDP ratio is 11.5%.
• The only positive surprise in the budget that no one expected is that the GST is set to be introduced on previous target of April 1, 2010 without any delays.
• FM proposed to make the returns filing process simple yet again so the Saral 2 forms will be introduced soon.
• There will be New direct tax code prepared within 45 days
• Biggest negative that spooked market was that there was no change in Corporate tax. India Inc. was hoping for some reduction on that front.
• The individual tax exemption limits are changed to

• Senior citizen Rs.2,40,000
• Women Rs.1,90,000
• All others Rs.1,60,000

• Exemption under section 80DD Rs.100000
• Surcharge eliminated.
• Exemption under sections 10A 10B will be extended till FY09-10 end.
• One boost for the working class & a little to Corporates is the FBT is abolished as expected.
• Disappointment on individual level is the maximum deduction allowed under section 24(b) for the interest on borrowed capital for the purpose of purchase of home should have been increased to Rs.2,00,000 or even more sensible Rs.2,50,000, which was left unchanged to Rs.1,50,000.
• Another expected change is the STPI tax holidays are extended by 1 year.
• Tax holiday for exporters extended till FY10-11 end.
• All capital expenditure for the Corporates is allowed for deduction.
• Commodities Transaction Tax is abolished.
• MAT is raised to 15% from 10 %. This is supposed to cover up for the Surcharge & FBT abolition. In return to that the period to carry the loss for MAT is increased to 10 years from current 7 years.
• STT is tweaked to boost retail involvement.
• Exemption under section 80G will be 100% from current 50%.
• Exemption under 80E will be extended to all fields of education including vocational courses.
• Exemption under Section 80IB extended to natural gas
• Section 2(15) extended to organizations that work on improving environment.

Indirect taxes were left largely untouched. Few of the significant changes are as follows.

• Electronic sector customs duty benefits
• Set top box will attract duty of 5%.
• Duty on Wind mill magnets is cut to 5% from 7.5%.

I don’t need to say it differently than the overall market that this budget was disgusting & again a lost opportunity just to keep the promise of letting it be a ‘non-event’. I have been saying it for last 3 years now, since I started blogging this non-event that the Congress & UPA government have just not got the fundamentals of Economics right. This is astonishing & more disgusting because the best economist in the country is the PM. The reason I am saying it because for last 3 years there has been nearly no attention to the supply side of the economy, same is the case this year. All the efforts are targeted towards reviving & pushing the demand side up & thereby driving the growth. Should I remind you that similar thing was attempted by the great Alan Greenspan when he was heading Federal Bank & we all know where it ended. I fear we are just walking down the same path blindly & not ready to learn from the mistakes of predecessors. This is the same reason we witnessed the sky high inflation to the tune of 12.7% & my bet is it will be back again until the supply side is addressed on priority. The biggest thumb down was given to this budget because there was no roadmap for the all talked about & rather necessary reforms for the economy viz. disinvestment, financial reforms, view on FDI & FII. The uncertainty was maintained on it & market hates uncertainty. See where Nifty & Sensex are going, I need not say anything more.

MJ

MJ – two letters are enough to bring the whole picture of the legend in one’s head. The ‘King of pop’ will not perform again in this world. He was scheduled to perform ‘50 comeback concerts’ in London O2 Arena from July 13, 2009 till March 6, 2010. It would have been single highest earning & most popular event in the music would, which now will never take place.

He was no doubt one of the most popular persons of all times. To some he was known for his heart thumping music, to some he was known for the all the controversy came under the title of child molestation, but the one reason he should be known & remembered forever is the message he tried to convey to the whole world for more than half of his 50 year life – Peace. He dedicated very large part of his work & a lot of time for the one noble cause – to make this world a better place for the next generation.

Yes, I do like the most popular singles of his viz. Thriller, Bad, Dangerous; but the ones I really venerate the legend for are The Earth Song, We are the world, Heal the world, Have you seen my childhood, Gone too soon – just to name a few. If you ever had any doubt about the greatness of the legendary artist or his message, I’d suggest you listen to the songs, even better just watch the videos. If you don’t have tears in your eyes after watching each one of these then you can doubt your humanity.

I really think it was curtains on the one of few angels of peace too soon. His work here was not done. He’s ‘Gone too soon’. Of course the Legend that was MJ will live on eternally through his singles but I still wonder, will he rise back from his tomb to complete his work like in ‘Thriller’ or will this day reverse to take us to the glorious past like ‘The Earth song’. For most of the world the news has still not sunk in to make the effect. Many of them are wishing for his soul to Rest In Peace. But there is one thing we really need to do so that he could really RIP – each one of us has to vow that we would do all it takes the to do what he preached for, to make the world a better place for the generations to come – ‘Heal the World’

May we always remember the eternal Legend of ‘King of pop’ for all the right reasons & may he keep doing his ‘Moonwalks’ in the heavens as he’d be doing in the hearts of his fans – amen!

Disgusted by Investment Bankers

I am finance professional with aspiration to become a significant investment banker in the global market. So with the same motive I do keep a close watch on capital markets & respected Investment Bankers of India & world. Rakesh Jhunjhunwala is considered to be Indian version of Warren Buffet & a highly respectable Investment Banker, or so I used to think before today.

The reason the title of the article reads the way it is is that I watched his interview on CNBC TV18 today. Refer this link to get a brief of what he said. I should make a disclosure before I say anything further, I Really used to adore him till today. But in this interview all he was doing is to show that he knows how to count & he knows the technical levels of Nifty. He uttered all possible numbers in the span of 10 minutes or so. Thank god he stopped short of saying that Nifty could see a level of 1500 or may be say 8000 this year.

He said one of the scenarios could be that Nifty hits 6100 or higher then comes back to 3300-3500 & consolidates for 3-4 years at that level. Again in another question to him, he said he is really sure about the GDP growth in India & we could see a double digit GDP growth number in coming years. So now can anyone tell me if he is so sure about economy, then how on earth the scenario he mentioned is possible? To hit double digit GDP growth numbers the Nifty constituents have to grow at least by 20% y-o-y, which justifies a P/E ratio for Nifty of about 20-22 at least. Nifty current earnings are about Rs. 210 for the FY08-09. There is no negative growth in earning of Nifty as a whole. So assume 5% growth on Nifty which is the most pessimistic figure I can come to as of now. This still gives earnings for Nifty of about Rs. 221 for FY09-10 & range for Nifty would be 4400-4800 going by the history. Remember this is my most pessimistic target! So how could you justify a double digit growth for GDP from now on & still reaching levels of 3300-3500 & consolidate there for 3-4 years. There is only one sane explanation for the prediction; India would need to go through one of the worst recessions since 1991. Then may the god help us!

The only conclusion I could reach after watching the interview is that either Rakesh Jhunjhunwala has no clue where the markets would be heading (which I think is highly unlikely) or he is just trying to fool the viewers in the bright sunshine. In both cases I sincerely feel he should not be appearing on TV & expressing his opinions. Because the all the Investment bankers on Wall Street have earned very bad name for themselves in the downfall of Investment Banking as we used to know, & he should not add to the bad reputation. This is really detrimental for the people like yours truly, who aspire to be an Investment Banker & I sincerely do no wish to stand in the line of a breed that becomes most despicable after the politicians of course. So my earnest requests to Rakesh Jhunjhunwala is either guide people to right direction or just say, “I have no clue where market is heading.” or “I would not like to tell you & lose my opportunity to make money from it.”

The end result is I have lost one of my most venerable deities to cheapest level of lying & obfuscating hapless investors who are already floundering in darkness.

Changing money habits

These are tumultuous times, where no one is sure about which way the global economy or the capital markets are going. In such scenario there could be many changes in the way the countries try to tackle the slowdown & recession. So it makes doubly important to keep track of the changes in the policies & adjust your money position accordingly. Here are few changes that took place which could make you change your positions.

The biggest indicator that could signal a bull-run is falling bond yields, which clearly explains the current upsurge in the capital markets. So if you are holding positions in cash or debt, a little portion (@ 10% of your holdings) at this point can be transferred to equity with a long to very long term view. Especially if any of your Fixed Deposits in banks are maturing at this point, you can see that you are not getting as high interest rates on them as you might last year. All the Central banks are pushing the interest rates downwards in order to boost the economy according to Keynesian theory. The sectors that you can look at are Banking & Capital goods, which have been battered badly in the current fall & seem to have considerable upside once the bull-run gathers momentum. Equity diversified Mutual Funds can also be a good option.

There is a clear disincentive in pledging new money to Bank FDs. The Rates offered by banks on deposits may go even more south because of new directive given by RBI on the interest calculations on the savings accounts. Currently the interest on savings accounts is offered on the lowest balance of the account between 10^th & 30^th of the month. This system will be abolished beginning from April 2010 & the banks have to offer interest on everyday closing balance. This changes the Asset Liability Management of banks a lot. The interest outgo to savings accounts will be lot more than current year, so to reduce total outgo they will have to pull down the interest offered on Deposits right from this year to maintain their interest margins consistent. Given the benefit of liquidity Savings accounts could be a better bet to Fixed Deposits. This also works well with current inflation level.

If you are planning to buy your first home & you are well assured of your jobs, you can go in for current Real Estate & Home Loans rates. Do verify the fall in prices in the area you are interested in, if there has not been much correction in prices, you might want to wait for some time as on an average the real estate rates have corrected by at least 30% throughout the country. My suggestion is to go for fixed rate with reset clause after tenure of 60 months (@9.25%) instead of floating as there could be good amount of volatility in the interest rates in coming 5 years & upside risk is high on floating rates.

In all these changes do not forget the basics of liquidity. You need to have fair amount of cash to manage your day to day needs & EMIs, in case unforeseen circumstances force you into joblessness.

Crossroad of life

I'm standing stranded on the clueless isle

Shortest distance to life a cent & one mile

 

My compass asking me for next direction

Searching for even a mirage of destination

 

Sleepless for nights, eyes begin to sore

Wordless hum of wind; can stand no more

 

Walking over amorphous stones in the mist

Wondering if I stumble upon my alchemist

 

In dearth of love, in search of the destiny

Such mundane life trying to make harmony

Raison d’être

I always have been pronouncing myself as a true ‘Agnostic’ person, but to do so without taking opinions of the believers & the atheists equally would just be a prejudice. I always wanted to get the perspective of our great religious manuscripts ‘Bhagwadgeeta’, ‘Koran’ & ‘Bible’ equally. Being a proud Hindu I eventually started with ‘Bhagwadgeeta’ to know what really drives the people to believe in God so blindly. The reason I am a proud Hindu is that I believe that Hinduism is not a religion but a lifestyle in itself & the most important value it preaches is Tolerance. That is one quality the world needs today in abundance.

Let me first explain the true meaning of the word ‘Agnostic’ before I go ahead. Agnostic is a person who believes that you cannot know the whole & complete truth by any means, neither by science & nor by religion. After reading the “Bhagwadgeeta’ I have become even a stronger Agnostic than ever before. There is one biggest reason why I say science cannot help you know everything - the Birth & Death. Science till now has not been able to explain the phenomenon of beginning & end of life as we know it. What exactly happens when you are born or when you die? Today’s science has reached to a stage where you can replace each & every organ of the human being but there is no way to put the life back in a dead body, at least not that I know of. So the science cannot give you the complete knowledge.

But again neither can the religious books; at least I did not get any such enlightenment from ‘Bhagwadgeeta’. I never said I’m an Atheist either. I believe in Lord Ganesha for umpteen reasons. But there are many references in ‘Bhagwadgeeta’ where Lord Krishna says to Arjuna that he is the true origin of everything & you should only pray to him & not to other deities. This is so much against the Tolerance that I believe in. How one God cannot tolerate praying to other God, I cannot know. There have been umpteen references of the ‘Karma’ in ‘Bhagwadgeeta’ but most of them were pejorative. Lord Krishna says that ‘Karma’ binds your spirit in your body & prevents you from getting Moksha (The ultimate liberation of spirit). There have been references where it says that caring too much about your family your mother, father, wife, children is an obstacle in achieving Moksha. It also says that you suffer excruciating pain in your mother’s womb & that’s how the suffering of life starts & you should try to get rid of these cycles of life & death. & there is only one way to achieve it, Yoga (In the version I read the translator interprets it as Praying to Lord Krishna, which I beg to differ to).

All these views are so much against the beauty of life. There are so many beautiful things you can do in your life, such as love, to your mother & father, to your wife & children & to the whole concept of life. If you live life just thinking about the death (& Moksha thereafter) then where & how do you fulfil your Karma? If you cannot truly & fully devote your love to the people who love you & care for you, then how can the God offer you Moksha for doing such heartless deed? There is absolutely no mentioning of the concept of love in ‘Bhagwadgeeta’, if there is anything close to it, it’s again derogatory. Also there has been no emphasis on the females in the ‘Bhagwadgeeta’; not even Goddesses. There has been no mentioning of right & wrong or sins & good deeds as we know them. I can surely say these things thanks to 3 years in my High school when I learned Sanskrit, so with little explanation of tougher words I can understand ‘Bhagwadgeeta’ myself & I’m not completely dependent on the translator’s view for that. (I knew it would come into use some time in life & I’m thankful to the fact that I learned it devotedly at that time!) I must say that these are my personal views & If they hurt anyone’s feelings, then that is not my intention at all!

So in conclusion, this reading of ‘Bhagwadgeeta’ has made me think deeply on a spiritual level. Yes, I do have lot of earthly ambitions that I have to achieve & I am like a million miles away from it, but then again the satisfaction in life does not come from money (& other earthly things) alone. & the sooner you understand this the better for life, as there would be fewer things to repent about later on. I seriously am trying to understand my Karma here, but that surely is not only praying for Lord Krishna alone & may HE forgive me for that.