Wednesday, July 9, 2008
AS-30 ? A premature birth
In an environment where usage of complex and hybrid financial instruments is increasingly becoming common; where innocuous sale, purchase and rental transactions might conceal hidden derivatives; where sophisticated instruments have been made available to Indian Corporates; India could not afford to exist without Accounting Standards which prescribe measurement, accounting, presentation and disclosure norms for these instruments.
Accountability of independent directors
Accountability of independent directors
The ongoing global financial crisis has had its effect on a wide variety of persons and events. With losses mounting to more than $400 billion, financial companies have given pink slips to more than 83,000 employees while top bosses at global financial brands such as Citi, Merrill Lynch and UBS have also packed their corner offices and left.
While there can be no doubt that these top bosses own responsibility for the misadventures of the entities they run, a debate is raging abroad about the role that independent directors play in this scenario and whether the top boss is solely responsible.
The debate also criticises the Sarbanes Oxley Act (SOX) of neutralising directors’ efficiency by increasing the burden of financial and regulatory compliance and neglecting the bread-and-butter role of monitoring company strategy.
Surveys of the composition of the boards of eight prominent financial institutions revealed that two-thirds of these boards had no significant experience in banking business and less than half had financial industry service. Stithapragna
Independent directors are defined by their name — independent. They are supposed to function like Stithapragna — the concept mooted in the Mahabharata — whose job role can be defined to be one who is sleeping when others are awake and awake when others are sleeping. He is duty-bound to raise the red flag when he spots an inherent issue which the others could not do merely because they possess a non-independent status.
While this is a tall order, if one visualises a situation in which out of a board of eight, seven agree for vetting a not-so-foolproof risk management policy and all eyes point to the independent director for his nod, chances of his raising a storm are limited as he would opt for a go-with-the-masses policy.
The International Accounting Standards Board (IASB) and other bodies such as the Income-Tax Appellate Tribunal (ITAT) have a solution for this by encouraging the dissenter to document his dissent. While a hare-brained proposal could be dissented, it is the day-to-day decisions taken by the board with no clue as to the implications in the future which could defy normality.
A recent notification from the Institute of Chartered Accountants of India (ICAI) urging companies to mark-to-market derivative losses led to litigation between banks that sold exotic derivatives and the entities that bought them with eyes blindfolded.
Examples in Wall Street have shown that a vast majority of the directors could not fathom the intricacies of a derivative transaction. Indian Situation
The revised Clause 49 of the Listing Agreement in India mandates that if the chairman of the board is a non-executive director, at least one-third of the company’s board should comprise independent directors. If the chairman is an executive director, at least one-half (or 50 per cent) should be independent directors.
The eligibility criteria are laid down in the revised Clause 49 of the Listing Agreement. While the crème-de-la-crème of independent directors have enough directorships of eminent companies, it is the mid-rung and lower mid-rung companies that seek truly independent directors.
All events — whether a crisis or a scam — occur the biggest in the US as its exposure to the complicated world of finance is extreme.
However, financial institutions and banks in India are feeling a minor tremor from the global situation which could act as a warning signal for the future.
A robust and transparent risk-management policy — validated at frequent intervals, being transparent with significant issues amongst all stakeholders in the company and constant communication — seems to be absolutely critical now.
The ongoing global financial crisis has had its effect on a wide variety of persons and events. With losses mounting to more than $400 billion, financial companies have given pink slips to more than 83,000 employees while top bosses at global financial brands such as Citi, Merrill Lynch and UBS have also packed their corner offices and left.
While there can be no doubt that these top bosses own responsibility for the misadventures of the entities they run, a debate is raging abroad about the role that independent directors play in this scenario and whether the top boss is solely responsible.
The debate also criticises the Sarbanes Oxley Act (SOX) of neutralising directors’ efficiency by increasing the burden of financial and regulatory compliance and neglecting the bread-and-butter role of monitoring company strategy.
Surveys of the composition of the boards of eight prominent financial institutions revealed that two-thirds of these boards had no significant experience in banking business and less than half had financial industry service. Stithapragna
Independent directors are defined by their name — independent. They are supposed to function like Stithapragna — the concept mooted in the Mahabharata — whose job role can be defined to be one who is sleeping when others are awake and awake when others are sleeping. He is duty-bound to raise the red flag when he spots an inherent issue which the others could not do merely because they possess a non-independent status.
While this is a tall order, if one visualises a situation in which out of a board of eight, seven agree for vetting a not-so-foolproof risk management policy and all eyes point to the independent director for his nod, chances of his raising a storm are limited as he would opt for a go-with-the-masses policy.
The International Accounting Standards Board (IASB) and other bodies such as the Income-Tax Appellate Tribunal (ITAT) have a solution for this by encouraging the dissenter to document his dissent. While a hare-brained proposal could be dissented, it is the day-to-day decisions taken by the board with no clue as to the implications in the future which could defy normality.
A recent notification from the Institute of Chartered Accountants of India (ICAI) urging companies to mark-to-market derivative losses led to litigation between banks that sold exotic derivatives and the entities that bought them with eyes blindfolded.
Examples in Wall Street have shown that a vast majority of the directors could not fathom the intricacies of a derivative transaction. Indian Situation
The revised Clause 49 of the Listing Agreement in India mandates that if the chairman of the board is a non-executive director, at least one-third of the company’s board should comprise independent directors. If the chairman is an executive director, at least one-half (or 50 per cent) should be independent directors.
The eligibility criteria are laid down in the revised Clause 49 of the Listing Agreement. While the crème-de-la-crème of independent directors have enough directorships of eminent companies, it is the mid-rung and lower mid-rung companies that seek truly independent directors.
All events — whether a crisis or a scam — occur the biggest in the US as its exposure to the complicated world of finance is extreme.
However, financial institutions and banks in India are feeling a minor tremor from the global situation which could act as a warning signal for the future.
A robust and transparent risk-management policy — validated at frequent intervals, being transparent with significant issues amongst all stakeholders in the company and constant communication — seems to be absolutely critical now.
Govt Will adopt Accrual System of Accounting
Accrual-based accounting system on cards
Our Bureau NEW DELHI INWHAT could be a step towards ensuring a transparent accounting system that would reflect the true position of the country’s financial health, the government has accepted, in principle, a gradual move from cash-based to accrual-based accounting. Acknowledging the essential benefits of the accrual-based accounting pattern, under which revenues and expenditure are shown in the books even when they are realised later, controller general of accounts V N Kaila on Thursday said that the government was positive towards changing the old accounting method. “There are definite benefits of accrual accounting that cannot be ignored. The decision makers can know the full cost of services they are providing, and this would result in better resource allocation, better management of assets and liabilities,” said Mr Kaila, speaking at the diamond jubilee function of accounting body ICAI. Speaking on issues involved in transitioning to the accrual system of accounting, Mr Kaila said that there are various factors that have created a demand for a transition to accrual system of accounting, such as the changing information needs of the decision makers, the implications of the Fiscal Responsibility and Budget Management Act and outcome-oriented budgeting. Cash-based accounting is a method of book keeping that records financial events based on cash flows and cash position. Revenue is shown in the books when cash is received and expense is recognised when cash is paid. On the other hand, under accrual accounting, revenue is shown in the balance sheet when it is earned and realised, regardless of when actual payment is received. Overall, accrual-based accounting would create a desirable measure of the complete financial health of the government, he added.
Publication:Economic Times Delhi;
Date:Jul 4, 2008;
Section:Economy & Corporate;
Page Number:22
Our Bureau NEW DELHI INWHAT could be a step towards ensuring a transparent accounting system that would reflect the true position of the country’s financial health, the government has accepted, in principle, a gradual move from cash-based to accrual-based accounting. Acknowledging the essential benefits of the accrual-based accounting pattern, under which revenues and expenditure are shown in the books even when they are realised later, controller general of accounts V N Kaila on Thursday said that the government was positive towards changing the old accounting method. “There are definite benefits of accrual accounting that cannot be ignored. The decision makers can know the full cost of services they are providing, and this would result in better resource allocation, better management of assets and liabilities,” said Mr Kaila, speaking at the diamond jubilee function of accounting body ICAI. Speaking on issues involved in transitioning to the accrual system of accounting, Mr Kaila said that there are various factors that have created a demand for a transition to accrual system of accounting, such as the changing information needs of the decision makers, the implications of the Fiscal Responsibility and Budget Management Act and outcome-oriented budgeting. Cash-based accounting is a method of book keeping that records financial events based on cash flows and cash position. Revenue is shown in the books when cash is received and expense is recognised when cash is paid. On the other hand, under accrual accounting, revenue is shown in the balance sheet when it is earned and realised, regardless of when actual payment is received. Overall, accrual-based accounting would create a desirable measure of the complete financial health of the government, he added.
Publication:Economic Times Delhi;
Date:Jul 4, 2008;
Section:Economy & Corporate;
Page Number:22
US under pressure to agree to 2050 emission target
US under pressure to agree to 2050 emission target
The European Union and green groups piled pressure on the United States on Monday to agree to a target to halve global greenhouse gas emissions by mid-century and back the need for rich countries to set 2020 goals as well.
The European Union and green groups piled pressure on the United States on Monday to agree to a target to halve global greenhouse gas emissions by mid-century and back the need for rich countries to set 2020 goals as well.
Cut wasteful spend & manpower cost, improve supply chain
Cut wasteful spend & manpower cost, improve supply chain
India Inc is looking to generate more bang from the available resources to tide over a high inflation regime. The corporate sector, which is facing a cost-push inflation largely stoked by global factors, has realised that inflation is here to stay. The overwhelming consensus during the ET CEO Roundtable on inflation was that Indian companies would need to focus on productivity to stay afloat
India Inc is looking to generate more bang from the available resources to tide over a high inflation regime. The corporate sector, which is facing a cost-push inflation largely stoked by global factors, has realised that inflation is here to stay. The overwhelming consensus during the ET CEO Roundtable on inflation was that Indian companies would need to focus on productivity to stay afloat
Competition in public-pvt projects: Finance Ministry mulls two options
Competition in public-pvt projects: Finance Ministry mulls two options
One option is to adopt the threshold qualification parameters and the other is to increase the number of players in bidding for a project.
One option is to adopt the threshold qualification parameters and the other is to increase the number of players in bidding for a project.
Govt makes overseas call for Hutch-Voda details
Govt makes overseas call for Hutch-Voda details
Sources close to the development said that the Indian government had sought the ‘sale and purchase’ agreement that Vodafone International Holdings had entered into with Hong Kong’s Hutchison. This comes even as the tax authorities and the company battle out their dispute on payment of capital gains tax in the Bombay High Court.
Sources close to the development said that the Indian government had sought the ‘sale and purchase’ agreement that Vodafone International Holdings had entered into with Hong Kong’s Hutchison. This comes even as the tax authorities and the company battle out their dispute on payment of capital gains tax in the Bombay High Court.
Volatile markets leave future IPOs in limbo
Volatile markets leave future IPOs in limbo
Volatile markets are giving the heebie-jeebies to promoters looking to raise funds through initial public offerings (IPOs). The fate of several proposed public issues looking to collectively raise Rs 10,000 crore is in limbo. Among large companies, UTI MF is reported to have deferred its plans to go public.
Volatile markets are giving the heebie-jeebies to promoters looking to raise funds through initial public offerings (IPOs). The fate of several proposed public issues looking to collectively raise Rs 10,000 crore is in limbo. Among large companies, UTI MF is reported to have deferred its plans to go public.
Kingfisher may buy SpiceJet in all cash deal
Kingfisher may buy SpiceJet in all cash deal
Another round of consolidation in the domestic skies seems imminent with UB Group chairman Vijay Mallya engaging in talks with two major shareholders of SpiceJet to buy the budget carrier in an all-cash deal
Another round of consolidation in the domestic skies seems imminent with UB Group chairman Vijay Mallya engaging in talks with two major shareholders of SpiceJet to buy the budget carrier in an all-cash deal
Google wants logins cut from YouTube data
Google Inc., the owner of YouTube, said it's seeking to remove users' login information from a database of all videos viewed on YouTube that it must turn over to Viacom Inc.
A federal judge in New York presiding over Viacom's copyright infringement lawsuit against Google told the search-engine company this week to give Viacom its "logging database" containing records of every video viewed, the login name of the person who watched it, and the Internet address of the viewer's computer.
Viacom, owner of Comedy Central and MTV Networks, wants the information to find out if YouTube viewers watch more copyrighted shows such as "South Park" and "The Colbert Report" than other videos in an effort to strengthen its $1 billion lawsuit against Google.
"We are disappointed the court granted Viacom's overreaching demand for viewing history," Catherine Lacavera, Google's senior litigation counsel, said yesterday. "We will ask Viacom to respect users' privacy and allow us to anonymize the logs before producing them under the court's order."
A Viacom spokesman didn't return a call seeking comment after business hours.
Viacom sued YouTube last year, claiming it allows users to post clips from its copyrighted shows without permission.
Google, based in Mountain View, Calif., has denied Viacom's claims in the lawsuit, saying YouTube follows the law by removing copyrighted material when it becomes aware of it.
US District Judge Louis L. Stanton authorized full access to the YouTube logs after Viacom and other copyright holders argued that they needed the data to show whether their copyright-protected videos are more heavily watched than amateur clips.
The data would be disclosed only to the plaintiffs
A federal judge in New York presiding over Viacom's copyright infringement lawsuit against Google told the search-engine company this week to give Viacom its "logging database" containing records of every video viewed, the login name of the person who watched it, and the Internet address of the viewer's computer.
Viacom, owner of Comedy Central and MTV Networks, wants the information to find out if YouTube viewers watch more copyrighted shows such as "South Park" and "The Colbert Report" than other videos in an effort to strengthen its $1 billion lawsuit against Google.
"We are disappointed the court granted Viacom's overreaching demand for viewing history," Catherine Lacavera, Google's senior litigation counsel, said yesterday. "We will ask Viacom to respect users' privacy and allow us to anonymize the logs before producing them under the court's order."
A Viacom spokesman didn't return a call seeking comment after business hours.
Viacom sued YouTube last year, claiming it allows users to post clips from its copyrighted shows without permission.
Google, based in Mountain View, Calif., has denied Viacom's claims in the lawsuit, saying YouTube follows the law by removing copyrighted material when it becomes aware of it.
US District Judge Louis L. Stanton authorized full access to the YouTube logs after Viacom and other copyright holders argued that they needed the data to show whether their copyright-protected videos are more heavily watched than amateur clips.
The data would be disclosed only to the plaintiffs
SBI to raise processing fee on loans
SBI to raise processing fee on loans
As part of its strategy to enhance the non-interest income, State Bank of India plans to increase the processing fee on loans, both for corporate and retail.
While the bank may still offer some concessions on a case-to-case basis, it will increase the card rates, said Mr Ashok Mukand, Deputy Managing Director, State Bank of India.
With the cost of funds going up, any additional income will enable the bank to maintain its bottomline. Other public sector banks may also take a cue from SBI to increase their non-interest income. As fees from sale of bank drafts are seeing a slowdown due to increasing online transactions, the processing fees on loans are an important source of revenue, said some bankers.
For 2007-08, SBI saw its fee income increase by 23 per cent. The fee income for large corporates grew by 61 per cent growth and for mid corporates by 43 per cent.
According to SBI’s Web Site, the current processing fee, for home loans, is 0.25 per cent of the loan amount, with a cap of Rs 5,000, which includes the service tax.
Its biggest competitor, ICICI Bank, charges 0.5 per cent of the loan amount as administrative fee or Rs 2,000, whichever is higher, on home loans, according to its Web Site. Lower charges
Mr Mukand said, “Our processing fees are rather low now. We are looking to raise processing fees on corporate loans and retail loans, though there could be some concessions, on a case-to-case basis. As our prime lending rate and home loan rates are the lowest in the market, our charges will be lower than that of other banks, despite the increase in processing fees.”
The rise in interest rates is unlikely to affect margins, Mr Mukand said.
“We have raised the interest rates on deposits only in certain bands, but in the case of loans, the increase will be across the board. So, profits should improve because of better returns on loans and margins should also improve,” he said.
As part of its strategy to enhance the non-interest income, State Bank of India plans to increase the processing fee on loans, both for corporate and retail.
While the bank may still offer some concessions on a case-to-case basis, it will increase the card rates, said Mr Ashok Mukand, Deputy Managing Director, State Bank of India.
With the cost of funds going up, any additional income will enable the bank to maintain its bottomline. Other public sector banks may also take a cue from SBI to increase their non-interest income. As fees from sale of bank drafts are seeing a slowdown due to increasing online transactions, the processing fees on loans are an important source of revenue, said some bankers.
For 2007-08, SBI saw its fee income increase by 23 per cent. The fee income for large corporates grew by 61 per cent growth and for mid corporates by 43 per cent.
According to SBI’s Web Site, the current processing fee, for home loans, is 0.25 per cent of the loan amount, with a cap of Rs 5,000, which includes the service tax.
Its biggest competitor, ICICI Bank, charges 0.5 per cent of the loan amount as administrative fee or Rs 2,000, whichever is higher, on home loans, according to its Web Site. Lower charges
Mr Mukand said, “Our processing fees are rather low now. We are looking to raise processing fees on corporate loans and retail loans, though there could be some concessions, on a case-to-case basis. As our prime lending rate and home loan rates are the lowest in the market, our charges will be lower than that of other banks, despite the increase in processing fees.”
The rise in interest rates is unlikely to affect margins, Mr Mukand said.
“We have raised the interest rates on deposits only in certain bands, but in the case of loans, the increase will be across the board. So, profits should improve because of better returns on loans and margins should also improve,” he said.
SAARC countries may open doors for CAs
SAARC countries may open doors for CAs
Indian chartered accountants may be seen practising in Pakistan as well as other SAARC countries and vice-versa in two to three years. A proposal to give mutual recognition to CAs in one another's nation was mooted by South Asian Federation of Accountants (SAFA), a body of SAARC.
The SAARC body has already developed a common course for the purpose called minimum common sallybus, President SAFA Syed Shabbar Zaidi said.
"At the moment, there is no exchange of CAs between the SAARC countries. But we are developing a common course for it. We have already developed a minimum common sallybus and by 2011-12 we hope that the exchange would materialise," Zaidi said.
He added that all the SAARC countries, which include Sri Lanka, Pakistan, Bangladesh, Nepal, Bhutan, Maldives and India, would then be asked to adopt the minimum common syllabus. The basic framework of the course will be same and the countries can then shape it as per their regional need, he said.
"This is what we foresee today. We are trying hard to achieve mutual exchange and within 3-4 years we are hopeful to enter into Mutual Recognition Agreement (MRA)," Zaidi said. At present, no country recognises chartered accountants of other countries.
When contacted, ICAI Secretary Ashok Haldia said, "With the growing cross-border trade, the demand for chartered accountants has increased. With SAARC countries having same culture and ethos, it would help CAs to grow professionally."
Indian chartered accountants may be seen practising in Pakistan as well as other SAARC countries and vice-versa in two to three years. A proposal to give mutual recognition to CAs in one another's nation was mooted by South Asian Federation of Accountants (SAFA), a body of SAARC.
The SAARC body has already developed a common course for the purpose called minimum common sallybus, President SAFA Syed Shabbar Zaidi said.
"At the moment, there is no exchange of CAs between the SAARC countries. But we are developing a common course for it. We have already developed a minimum common sallybus and by 2011-12 we hope that the exchange would materialise," Zaidi said.
He added that all the SAARC countries, which include Sri Lanka, Pakistan, Bangladesh, Nepal, Bhutan, Maldives and India, would then be asked to adopt the minimum common syllabus. The basic framework of the course will be same and the countries can then shape it as per their regional need, he said.
"This is what we foresee today. We are trying hard to achieve mutual exchange and within 3-4 years we are hopeful to enter into Mutual Recognition Agreement (MRA)," Zaidi said. At present, no country recognises chartered accountants of other countries.
When contacted, ICAI Secretary Ashok Haldia said, "With the growing cross-border trade, the demand for chartered accountants has increased. With SAARC countries having same culture and ethos, it would help CAs to grow professionally."
Auditing firms face EU heat
Auditing firms face EU heat
Auditing firms in the country could soon run out of business if they do not get themselves verified according to the guidelines mentioned in the Eighth Directive issued by the European Union (EU). EU will recognise balance-sheets of companies audited by firms that fit their specified standards.
Auditing firms in the country could soon run out of business if they do not get themselves verified according to the guidelines mentioned in the Eighth Directive issued by the European Union (EU). EU will recognise balance-sheets of companies audited by firms that fit their specified standards.
Mergers & Acquisitions become Simpler
Mergers & Acquisitions become Simpler
The move gives corporates the flexibility to go ahead with mergers without facing legal hurdles, if they do not fall under the commission’s criteria.
The move gives corporates the flexibility to go ahead with mergers without facing legal hurdles, if they do not fall under the commission’s criteria.
Flunked in CA exam? Don’t lose heart
Flunked in CA exam? Don’t lose heart
THE Institute of Chartered Accountants of India (ICAI) has opened new career option for unsuccessful candidates aspiring to become chartered accountants. At least a lakh candidates who have cleared the CA inter examination can now become accounting technicians without attending the mandatory one-year course
THE Institute of Chartered Accountants of India (ICAI) has opened new career option for unsuccessful candidates aspiring to become chartered accountants. At least a lakh candidates who have cleared the CA inter examination can now become accounting technicians without attending the mandatory one-year course
Capital gains — planning beyond investments
Capital gains — planning beyond investments
Often, the direct expenses incurred in connection with transfer of an asset can be substantial and have to be properly documented and captured to reduce the incidence of capital gains.
Often, the direct expenses incurred in connection with transfer of an asset can be substantial and have to be properly documented and captured to reduce the incidence of capital gains.
Possession, execution and registration
Possession, execution and registration
Capital gains will have to be assessed on the basis of the date of the agreement under which possession was handed over.
Capital gains will have to be assessed on the basis of the date of the agreement under which possession was handed over.
Possession, execution and registration
Possession, execution and registration
Capital gains will have to be assessed on the basis of the date of the agreement under which possession was handed over.
Capital gains will have to be assessed on the basis of the date of the agreement under which possession was handed over.
INDIAN ECONOMY
INDIAN ECONOMY
Indian economy is growing day by day.It is clearly reflected by data of GDP which is consistently revolving between 8- 9% which is healthy sign for Indian economy.India is just close to China whose GDP is around 11 to 12 %.But GDP alone is not an indicator of Development as there r many countries in world that have GDP around 20% even they lacks behind other countries, because they don’t have enough who can work or lack demand because for any economy to grow industrial growth in that country must be rapid and for industrial growth to take place there must be element of demand in that country. So India also has this advantage as huge amount of population leads to increased demand which also favours India. Development of Indian economy is also reflected by the fact that from last year increasing foreign currency flows are coming to India because of development potential of Indian industries.
But the main problems confronting Indian economy today are Inflation and rising crude oil prices. Inflation for week ended June 14 has touched 11.45% and crude on Friday has touched $143 per barrel from $136 a barrel in last week showing a uptrend of 4-5 % in last week which is a worrisome indicators for global as well as Indian economies.
Inflation & rising crude oil prices
When economy will grow that’s sure inflation will also increase but inflation above 6 % is cause of concern for our economy. But the main increase in inflation if we can analyze is mainly due to crude oil prices which have increased from $97 per barrel in October,2007 to $143 a barrel in June 2008 due to which 44% increase in crude oil has affected inflation to extent of 95% approx. as it has increased from 4% to 8.10%. 11.45% is weekly data annual inflation is around 8.10%. S o what I want to say that it is a short term phenomenon as in maid term crude will go to around $110 a barrel n also RBI has taken various steps such as it has increased CRR ratio as well as Repo rates by 0.5%. So the effect of all will tame down inflation and by September it will be around 6 %.
Saudi Arabia stated that it is ready to increase production by 200,000 barrels per day to give support to the international prices. This is provided there is an appropriate increase in investment both upstream and downstream necessary to ensure adequate and timely supplies. Also, the transparency and regulation of financial markets should be improved, it said. So in long run crude oil prices will also come down
Hoarding is also a factor which has resulted in increase of crude prices. Government has also taken measures to control it as follows
In response to record oil and gasoline prices, however, the US House of Representatives has approved legislation directing the Commodity Futures Trading Commission to use its authority, including emergency powers, to “curb immediately” excessive speculation in energy futures markets, which have been affected by massive inflows of money and zooming prices and also to control speculation and hoarding.
I am a BULL who has very optimistic view towards Indian economy and according to me in coming 2 to 3 years Indian markets will see an equity boom tht has never occurred place n in my point of view our stocks from where they are today will triple from current price sin coming two years. Its my own view
By Bhuvan
Indian economy is growing day by day.It is clearly reflected by data of GDP which is consistently revolving between 8- 9% which is healthy sign for Indian economy.India is just close to China whose GDP is around 11 to 12 %.But GDP alone is not an indicator of Development as there r many countries in world that have GDP around 20% even they lacks behind other countries, because they don’t have enough who can work or lack demand because for any economy to grow industrial growth in that country must be rapid and for industrial growth to take place there must be element of demand in that country. So India also has this advantage as huge amount of population leads to increased demand which also favours India. Development of Indian economy is also reflected by the fact that from last year increasing foreign currency flows are coming to India because of development potential of Indian industries.
But the main problems confronting Indian economy today are Inflation and rising crude oil prices. Inflation for week ended June 14 has touched 11.45% and crude on Friday has touched $143 per barrel from $136 a barrel in last week showing a uptrend of 4-5 % in last week which is a worrisome indicators for global as well as Indian economies.
Inflation & rising crude oil prices
When economy will grow that’s sure inflation will also increase but inflation above 6 % is cause of concern for our economy. But the main increase in inflation if we can analyze is mainly due to crude oil prices which have increased from $97 per barrel in October,2007 to $143 a barrel in June 2008 due to which 44% increase in crude oil has affected inflation to extent of 95% approx. as it has increased from 4% to 8.10%. 11.45% is weekly data annual inflation is around 8.10%. S o what I want to say that it is a short term phenomenon as in maid term crude will go to around $110 a barrel n also RBI has taken various steps such as it has increased CRR ratio as well as Repo rates by 0.5%. So the effect of all will tame down inflation and by September it will be around 6 %.
Saudi Arabia stated that it is ready to increase production by 200,000 barrels per day to give support to the international prices. This is provided there is an appropriate increase in investment both upstream and downstream necessary to ensure adequate and timely supplies. Also, the transparency and regulation of financial markets should be improved, it said. So in long run crude oil prices will also come down
Hoarding is also a factor which has resulted in increase of crude prices. Government has also taken measures to control it as follows
In response to record oil and gasoline prices, however, the US House of Representatives has approved legislation directing the Commodity Futures Trading Commission to use its authority, including emergency powers, to “curb immediately” excessive speculation in energy futures markets, which have been affected by massive inflows of money and zooming prices and also to control speculation and hoarding.
I am a BULL who has very optimistic view towards Indian economy and according to me in coming 2 to 3 years Indian markets will see an equity boom tht has never occurred place n in my point of view our stocks from where they are today will triple from current price sin coming two years. Its my own view
By Bhuvan
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ALL OF YOU ARE REQUESTED TO BE THE MEMBER OF THAT COMMUNITY ALSO
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