February 2016

Union Budget 2016 Highlights !!!!

Union Budget 2016 Highlights, Indian Economy, Budget 2016,

Union Budget 2016 Highlights !!!!

1. Rs. 35984 crores allotted for agriculture sector.2. Rs. 17000 crores for irrigation projects.
3. Two new Organic farming scheme for 5 lakh acres.
4. Rs. 19000 crores for Gram Sadak Yojana
5. Rs. 9 Lakh Crores Agriculture Credit Target.
6. Rs. 38500 crores for MANREGA, highest ever.
7. Rs. 2.87 Lakh crores to be spent on Villages in total.
8. Rs. 9000 crores for Swach Bharat Mission.
9. Rs. 97000 Crores for Roads.
10. Total Outlay on Roads and railway Rs. 2.18 Lk Crores.
11. Rs. 2.21 Lakh Crores on Infra Projects.
12. NHAI to raise Rs. 15000 crores via NHAI Bonds.
13. More benches for SEBI Appellate tribunal.
14. Registration of Company in One Day for Start-ups.
15. Rs. 25000 crores for Banks rehabilitation.
16. 100% FDI for food processing.
17. Non planned expenditure of Rs. 14.28 Lk Crores.
18. Planned expenditure increased by 15.3% .
19. Relief Section 87A Rs. 2000 to Rs. 5000
20. Relief Sec 80GG Rs. 24000 to Rs. 60000
21. Section 44AD limits Rs. 1 crores to Rs. 2 crores. Rs. 50 Lakh for professional
22. Accelerated depreciation limited to 40%
23. New manufacturing companies will pay tax @ 25%.
24. LTCG on unlisted securities limited to 2 years.
25. 100% tax deduction for companies building houses upto 30 sq. mtrs.
26. Additional interest deduction for first house.
27. No service tax for building houses upto 60 sq mtrs.
28. 10% dividend tax for recipient over Rs. 10 lakh per annum.
29. TCS on purchase of asset over Rs. 2 Lakh in case and luxury cars.
30. VDS Scheme @ 30% + surcharge, Ist June to 30th September 2016.
31. Dispute resolution for appeal pending before Commissioner(Appeals).
32. Penalty for concealment of Income from 100-300% to 50-200%.
33. Rationalisation of TDS provisions.
34. 11 new benches for Income Tax Appellate tribunal.
35. No face to face scrutiny…..

July 2013

Why RBI has hiked the Base Rate on Jul 15 & Implications

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Reserve Bank Of India (RBI) announced several measures day before yesterday late evening to tighten liquidity in the system and arrest depreciation of rupee.  Why RBI wants to tighten liquidity and why the urgency.

RBI had tightened liquidity to support rupee during Asian crisis:

Historically, During the Asian crises of 1997-98, the RBI raised its benchmark interest rate by three percentage points in one go to 8%, in order to attract capital from foreign investors. The RBI had raised the bank rate and cash reserve ratio of banks too. This had sucked out liquidity, and interest rates had skyrocketed. This checked the run on the rupee.

The reason for this move and its impact:

Liquidity had eased considerably in June and that had brought the overnight rates (also CP, CD) rates below the Repo rate. With these measures, RBI will be able to raise the effective short term interest rate considerably without hiking the policy rate. (more…)

December 2012

Key Figures ~ Indian Economy ~ Week Ending Dec 07 2012

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Here are some key figures of the Indian Economy as of Dec 07 2012

Key Current Rate – Indian Economy
  Policy Rate
Bank Rate 9.00%
Repo Rate 8.00%
Reverse Repo Rate 7.00%
  Reverse Ratio
CRR Rate 4.25%
SLR Rate 23.0%
  RBI Reference Rate / Exchange Rate
INR / 1 USD  54.44
INR / 1 Euro  70.37
INR / 100 Jap.YEN  66.02
INR / 1 Pound Sterling   87.31
  Lending & Despite Rate
PLR 9.75%-10.50%
Saving Bank Rate 4.00%
Deposite Rate 8.50% – 9.00%
  Market Trends
  Government Securities Market
8.13% GOVT.STOCK 2022  8.0907%-8.0907%
91 day T – Bill  8.19  % *
182 day T – Bill  8.14  % *
364 day T – Bill  8.11  % *
* Cut of at the last auction
  Money Market
Call Rate  7.00%-8.15%
  Capital Market
BSE Sensex  19424.10  -62.70  -0.32%
NSE Nifty  5907.40  -23.50  -0.40%

~ Data Source : Ace Equity

Who Pays for your coffee ~ Bargaining Power ~ Ricardian Model ~ Economics

Ricardian Model , Undercover Economist, Who pays for your coffee, Economics & Value Investing, Bargaining Power, Scarcity, Premiums, Marketing , Branding

I was reading the article  Who Pays for Your Coffee? the other day, an interesting take on the concepts of scarcity and bargaining power.

We learn the reasons behind why people pay premium price for the coffee in the morning trip (American Morning’s …that is…)… Interesting .. Ricardian Model of rents, scarcity, bargaining power and pricing… Read on..

A resource (which could be land, brand , car..or for that matter stocks etc..)  which is in demand and which is also scarce will have the bargaining power and get a high premium.

The author uses the example of coffee bars located at stations having huge volume of commuters to drive home the point of the power and the strength of scarcity of resources and the bargaining power of the resource owners.

The exclusive coffee bar at the station is scarce. And so is the station location. The coffee bar has bargaining power over customers for high coffee prices. The station owners have bargaining power over coffee bars for high rent. 

However, the Bargaining Power does not come by just owning the resource. It comes because of scarcity. This viewpoint forms the crux of the article. If the scarcity shifts so does the bargaining power.

Businesses which hold the bargaining power today due to a combination of owning resources, demand and scarcity may go out of favor in future if there is a shift in scarcity which could be because of changing economic environments, changing customer tastes, rapid technological shifts or competition. An important factor to consider in investing, is to not only keep an eye on the past performance of a business / sector but to have vision to sense the future direction as well.

However, in real life the shifts in bargaining power and relative scarcity are often very slow. These shifts also have profound impact on lives of people. And most of the analysts miss this completely.

 In economics, Basic principles and patterns that operate behind seemingly complex subjects can be used as models. These models have been used to explain other complex phenomena in real life.

The article goes on the explain Ricardo’s model of meadowland which expounds on the concepts of scarcity of resource, bargaining power and shifts in bargaining power. It also explains the concept of relative value pricing and marginal land.

For example, although common sense says that the high rent causes the high prices coffee, the application of Ricardo’s model reveals that It is actually the willingness of customers to pay high prices for coffee which sets up the high rent and not the other way round.

The economists try to focus on underlying process, understand the patterns of scarcity in order to unearth developing shifts of bargaining power.

Would be interesting to look at investing in stocks from this angle as well

November 2012

The Illusion of prediction ~ Hindsight Bias

The Illusion of prediction , Hindsight Bias, Financial Pundits, Predicting the stock markets, Stock trends

Everything makes sense in hindsight, a fact that financial pundits exploit every evening as they offer convincing accounts of the day’s events.  

And this Illusion that we understand the past fosters overconfidence in our ability to  predict the future. The idea that the future is unpredictable is undermined every day by the ease with which the past is explained. This is especially true in the financial markets.

Value Investing

September 2012

Herd Mentality ~ Charles Mackay ~ Quotes

Extraordinary Popular Delusions, Madness of crowds, Charles Mackay Quotes, Herd Mentality, Stock Investing

Men, it has been well said, think in herds; it will be seen that they go mad in herds, while they only recover their senses slowly, and one by one ~ Charles Mackay

Extraordinary Popular Delusions and the Madness of Crowds is a history of popular folly by Scottish journalist Charles Mackay, first published in 1841.

Among the bubbles or financial manias described by Mackay are the South Sea Company bubble of 1711–1720, the Mississippi Company bubble of 1719–1720, and the Dutch tulip mania of the early seventeenth century. (some tulip bulb varieties briefly became the most expensive objects in the world during 1637)

A great book …. worth a read…

<<Finance, Management, Investments for the rest of us>> 

January 2012

Getting Interested in Economics : Free Rider Problem & Law of Unintended Consequences

Economics, Free Rider, Management, Leadership, GDP, Wisdom, Investments

Free- rider is a person or group of persons who knowingly or unknowingly shares the benefits acquired from a collective effort, but contributes little or nothing to the effort. It is considered to be a problem when it leads to non-production or under-production.

An example of the free-rider problem : This can happen in a cricket matches series. We have often seen that when a team wins the series, then each player belonging to the winning side, irrespective of whether he has performed or not, enjoys the reward. This happened recently in WC T-20 when India won the series and few players enjoyed the benefits of winning the world cup by not playing a single match or having under performed. The rewards were substantial to the tune of millions of dollars.

Here the players who have not contributed or have contributed little are known as free-rider. The free-rider problem will arise when few players start taking their position for granted in the team, and assume that they will get rewarded without contributing. And this could lead the down fall of overall team.

 

Unintended Consequences , Economics, Basics, Concepts, Fundamentals, GDP, ManagementUnintended consequences  are outcomes that are not the ones intended by a purposeful action. During the cold war between US and USSR – the Americans had the

following strategy. They supported the Afghan rebels against fighting the Russians in Afghanistan. This went on for almost a decade leading to increase in arms and trained mercenaries amongst the Afghan rebels.

The cold war lasted until 1990’s when the USSR collapsed. After this event and the cold war the Americans withdrew supporting the rebels and left them on their own state.

The unintended consequences of this series of events happened when the Afghan rebels turned against America culminating in a terrorist attack on 9/11 in 2001 on the WTC.

Why deflation can be equally if not more harmful than inflation?

Money, Deflation, Inflation, Economy, GDP, Crisis, Current Account Deficit, Money Supply , Interest Rates

Deflation happens when there is a decrease in the general prices. The prices can be of goods and services. This is exactly the opposite of what happens in inflation. In case of inflation there is a general increase in the prices. The value of money reduces in inflation and the value of money increases in case of deflation. This means that with the same amount of money, you can buy more goods and services at later period of time due to decrease in the prices.

Deflation can happen when there is reduction in spending either by government, personal spending or investment spending. It can happen when either of the following happens :

  1. Decrease in Money Supply
  2. Increase in supply of Goods or services
  3. Decrease in demand for goods or services
  4. Increase in demand for money

On the surface it appears that increase in value of money is a good thing. In fact it is good for those who are holding cash or for those who are creditors.

(more…)