POST 19

Bid Rigging

Bid rigging is a form of fraud in which a commercial contract is promised to one party even though for the sake of appearance several other parties also present a bid. This form of collusion is illegal in most countries.

 It is a form of price fixing and market allocation, often practiced where contracts are determined by a call for bids, for example in the case of government construction contracts. Bid rigging almost always results in economic harm to the agency which is seeking the bids, and to the public, who ultimately bear the costs as taxpayers or consumers.

Types of Bid Rigging

Here are some very common bid rigging practices:

• Subcontract bid rigging occurs where some of the conspirators agree not to submit bids, or to submit cover bids that are intended not to be successful, on the condition that some parts of the successful bidder's contract will be subcontracted to them. In this way, they "share the spoils" among themselves.
• Bid suppression occurs where some of the conspirators agree not to submit a bid so that another conspirator can win the contract.
• Complementary bidding, also known as cover bidding or courtesy bidding, occurs where some of the bidders bid an amount knowing that it is too high or contains conditions that they know to be unacceptable to the agency calling for the bids. Complementary bidding, however, is not always a corrupt practice. A contractor that is too busy to complete the work will often place a high bid simply to maintain a relationship with government agencies.
• Bid rotation occurs where the bidders take turns being the designated successful bidder, for example, each conspirator is designated to be the successful bidder on certain contracts, with conspirators designated to win other contracts. This is a form of market allocation, where the conspirators allocate or apportion markets, products, customers or geographic territories among themselves, so that each will get a "fair share" of the total business, without having to truly compete with the others for that business.

POST 18

What is Cartelization?

A cartel is a formal agreement among competing firms. It is a formal organization where there is a small number of sellers and usually involve homogeneous products. Cartel members may agree on such matters as price fixing, total industry output, market shares, allocation of customers, allocation of territories, bid rigging, establishment of common sales agencies, and the division of profits or combination of these. The aim of such collusion (also called the cartel agreement) is to increase individual members' profits by reducing competition.

 One can distinguish private cartels from public cartels. In the public cartel a government is involved to enforce the cartel agreement, and the government's sovereignty shields such cartels from legal actions. Inversely, private cartels are subject to legal liability under the antitrust laws now found in nearly every nation of the world. Furthermore, the purpose of private cartels is to benefit only those individuals who constitute it, public cartels, in theory, work to pass on benefits to the populace as a whole. 

Competition laws often forbid private cartels. Identifying and breaking up cartels is an important part of the competition policy in most countries, although proving the existence of a cartel is rarely easy, as firms are usually not so careless as to put collusion agreements on paper. 

Several economic studies and legal decisions of antitrust authorities have found that the median price increase achieved by cartels in the last 200 years is around 25%. Private international cartels (those with participants from two or more nations) had an average price increase of 28%, whereas domestic cartels averaged 18%. Fewer than 10% of all cartels in the sample failed to raise market prices.

POST 17

FDI in Aviation

10 Things You Should Know 

1. The Cabinet Committee on Economic Affairs, headed by the Prime Minister, will consider a proposal to allow foreign airlines to buy shareholdings in local carriers. 

2. Currently, India allows foreign investors, excluding airlines, to hold a cumulative 49 percent in an Indian carrier. If the proposal is approved, foreign airlines would be allowed to buy similar-sized shareholdings.

 3. A major opponent of the proposal is West Bengal Chief Minister Mamata Banerjee who has 16 Lok Sabha MPs and is the second-largest member of the ruling UPA coalition.

 4. Although a 49 per cent stake gives investors minority shareholder control, they will get the right to block a special resolution. 

5. The proposal to be considered today incorporates suggestions by the FDI proposal incorporates suggestions by Aviation and Home Ministry to ensure substantial ownership and control remains with Indian nationals. 

6. So the Chairman and two-thirds of the Directors on the airline's board will need to be Indians.
 7. All foreign citizens participating in the joint venture will need security clearance by the Home Ministry. Any equipment being imported for the airline will have to be vetted by the Aviation Ministry. 

8. Relaxing FDI rules will help bring a much-needed cash flow to India's bleeding private airlines. The total FDI inflow in the aviation industry, the new proposal says, stands at a mere $433.75 million (Rs. 2,405.36 crore). FDI inflow into the aviation industry is a meager 0.25 per cent of the total FDI inflow. 

9. Those in favour of more liberal guidelines say more sophisticated technology in ground handling and flight operations will follow. More competition is likely to result in more competitive fares and better product and services. Another potential benefit: better international connectivity. 

10. Airlines like Vijay Mallya's cash-strapped Kingfisher have been pushing for FDI to boost the sector, but the airline industry is divided on this. More successful players like Indigo and Jet have expressed reservations in the past that allowing global players in will lead to cartelization and takeovers of Indian carriers.

POST16


International Monetary Fund

The International Monetary Fund (IMF) is an international organization that was created on July 22, 1944 at the Bretton Woods Conference and came into existence on December 27, 1945 when 29 countries signed the Articles of Agreement. 

It originally had 45 members.

The IMF's stated goal was to stabilize exchange rates and assist the reconstruction of the world’s international payment system post-World War II. Countries contribute money to a pool through a quota system from which countries with payment imbalances can borrow funds temporarily. Through this activity and others such as surveillance of its members' economies and policies, the IMF works to improve the economies of its member countries. 

The IMF describes itself as “an organization of 188 countries (as of April 2012), working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.” The organization's stated objectives are to promote international economic cooperation, international trade, employment, and exchange rate stability, including by making financial resources available to member countries to meet balance of payments needs. Its headquarters are in Washington, D.C.

The members of the IMF are 188 members of the UN and the Republic of Kosovo. All members of the IMF are also International Bank for Reconstruction and Development (IBRD) members and vice versa

Any country may apply to be a part of the IMF. Post-IMF formation, in the early postwar period, rules for IMF membership were left relatively loose. Members needed to make periodic membership payments towards their quota, to refrain from currency restrictions unless granted IMF permission, to abide by the Code of Conduct in the IMF Articles of Agreement, and to provide national economic information. However, stricter rules were imposed on governments that applied to the IMF for funding

POST 15:

6 teachings of Warren Buffet That we all must follow

What Warren Buffet says about basic investing, spending, savings are so true. Most of us know it, however too many of us do not live it.

1. On Earning:

Do not depend on a single income. Invest and create a second/ third source of income:

This means when you are young your first task should be saving and investing. By creating a second source of income you are quickly reducing your dependence on your job. This could help you to set out on your own one day. The quicker you can do it, the better.

2. On Spending:

If you buy things that you do not need, you may soon have to sell things you need: 

It kind of summarizes Gen X’s reaction towards ‘luxuries’. As a part of Gen X we were perhaps criticised for some of our expenses, so it could be a generational thing even for WB. However, having goals and knowing where you are going, and not spending just to ‘show off’ are important lessons for all generations.

3. On Savings:

Do not spend what is left after spending, instead spend after you save/invest:

Also called ‘Pay Yourself First’. If you realise that investing in a pension plan or for your kid’s education is just helping you to save more later on. It is not a sacrifice, it is just postponing consumption. So understand, invest and then spend.

4. On taking Risk:

Never test the depth of the river with both your feet: 

If you are doing something, do small. If you are a first gen investor, do not be carried away by equity lovers like me and put all your money in equity. Do a SIP with a small amount, and test the waters. Do a SIP of Rs. X (which could be 10% of your take home pay) for 5 years and then step up. And for heavens sake understand risk of inflation, and the concept of real returns

5. On Investing: 

Do not put all eggs in one basket:

Immaterial of who you are and how much you understand, create a portfolio. A full range lunch plate is always better than just one item. So create a portfolio with bonds, bond funds, PPF, NSC, equity, mutual funds, and on the risk side medical and term insurance.

6. On Expectation:

Honesty is expensive, do not expect it from cheap people:

Not everybody is honest, nor does everybody want to be honest. Honest advisers are difficult to find especially in Health and Wealth, be careful.

POST 14:

From Maruti 800 to Alto 800: 8 ways how India and its consumers have changed over 30 years (Source: ET)

On Tuesday, Maruti unveils its newest small car, Alto 800. That's not just another car launch. It's a marker in the India story. ET take a look on the 8 ways the country and its consumers have changed in the long journey between two small cars.

Can a simple car tell the story of a country, its people, its economy? Well, if it is Maruti's entry-level car, the answer is a resounding yes. The journey from Maruti 800 to the soon-to-be launched Alto 800 is a narrative about how India's car market and how its economy and business have changed over 30 years. But even more important, this story is also a good marker of how India and Indians have evolved during this period. 

Today, Maruti 800 is an old-fashioned car with dated technology, poor driving comfort and pathetic interiors. It has few takers in India. 

 Three decades ago, it was a sensation.

"It felt like the world's most beautiful car," recalls Santosh Desai, CEO of Future Brands. He still remembers that 1985 autumn evening vividly. He was a student at IIM-Ahmedabad and he spent half an hour roaming the city just to get a glimpse of the Maruti car. After bulky Ambassadors and noisy Premier Padminis - which were costlier - this was a technological marvel. "It was a dream toy. Its smallness was its beauty. Its mileage a wonder. Its low price a big hook," says Desai. The car besotted an entire generation of Indians.



On Tuesday, Maruti Suzuki will launch a new entry-level car - Alto 800, replacing the old Alto. It will be the third entry-level car in three decades from the Maruti stable. Expectedly, it will be a very different car meant for a very different India. It promises better engine performance, best-in-class mileage and improved interiors and should beat its predecessor in every way. Also, its zippy look and sportier style targets young aspiring Indians. Expected to be priced at under Rs 2.5 lakh, it will remain the cheapest car on Indian roads (excluding the Nano)

Ahead of the Alto 800 launch, ET takes a look at the eight ways in which M 800 and the world it started its journey in, is different from the world in which Alto 800 is going to start its journey now.

Here YOU can have a look

http://economictimes.indiatimes.com/news/news-by-industry/auto/automobiles/from-maruti-800-to-alto-800-8-ways-how-india-and-its-consumers-have-changed-over-30-years/articleshow/16701571.cms

POST 13:

What is NIFTY? – Meaning and Definition of NIFTY

NIFTY is an Index computed from performance of top stocks from different sectors listed on NSE (National stock exchange). NIFTY consists of 50 companies from 24 different sectors. NIFTY stands for National Stock Exchange’s Fifty. The companies which form index of NIFTY may vary from time to time based on many factors considered by NSE. NIFTY is for NSE similarly SENSEX is for BSE 

 Some mutual funds use NIFTY index as a benchmark meaning the mutual funds’ performance is compared against the performance of NIFTY. On NSE there are futures and options available for trading with NIFTY as underlying index.

 India Index Services and Products Ltd. (IISL) owns NIFTY. IISL is a joint venture of NSE and CRISIL. CRISIL is a subsidiary of Standard and Poor (S&P). And so NIFTY is also called as S&P CNX NIFTY.

The S&P CNX Nifty covers 24 sectors of the Indian economy and offers investment managers exposure to the Indian market in one portfolio. The S&P CNX Nifty stocks represents about 65% of the free float market capitalization of the stocks listed at National Stock Exchange (NSE) as on March 30, 2012.

POST 12:

Insurance Regulatory and Development Authority
Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory body which regulates and develops the insurance industry in India. It was constituted by a Parliament of India act called Insurance Regulatory and Development Authority Act, 1999  and duly passed by the Government of India.

History

The IRDA Act, 1999 was passed as per the major recommendation of the Malhotra Committee report (1994) which recommended establishment of an independent regulatory authority for insurance sector in India. Later, It was incorporated as a statutory body in April, 2000. The IRDA Act, 1999 also allows private players to enter the insurance sector in India besides a maximum foreign equity of 26 per cent in a private insurance company having operations in India. It serves as an Authority to protect the interests of holders of insurance policies, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith.

Duties, powers and functions

The duties, powers and functions of IRDA are laid down in section 14 of IRDA Act, 1999 as 

1. Subject to the provisions of this Act and any other law for the time being in force, the Authority shall have the duty to regulate, promote and ensure orderly growth of the insurance business and re-insurance business.
2. Without prejudice to the generality of the provisions contained in sub-section (1), the powers and functions of the Authority shall include, -

1. issue to the applicant a certificate of registration, renew, modify, withdraw, suspend or cancel such registration;
2. protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
3. specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents
4. specifying the code of conduct for surveyors and loss assessors;
5. promoting efficiency in the conduct of insurance business;
6. promoting and regulating professional organizations connected with the insurance and re-insurance business;
7. levying fees and other charges for carrying out the purposes of this Act;
8. calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business;
9. control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee under section 64U of the Insurance Act, 1938 (4 of 1938);
10. specifying the form and manner in which books of account shall be maintained and statement of accounts shall be rendered by insurers and other insurance intermediaries;
11. regulating investment of funds by insurance companies;
12. regulating maintenance of margin of solvency;
13. adjudication of disputes between insurers and intermediaries or insurance intermediaries;
14. supervising the functioning of the Tariff Advisory Committee;
15. specifying the percentage of premium income of the insurer to finance schemes for promoting and regulating professional organisations referred to in clause (2.6);
16. specifying the percentage of life insurance business and general insurance business to be undertaken by the insurer in the rural or social sector; and
17. exercising such other powers as may be prescribed

POST 11:
Big-bang reforms continue: Cabinet allows 49% FDI in insurance, 26% in pension sector (Source:ECONOMIC TIMES)

NEW DELHI: Signaling the government's intent to continue with reforms to boost economic growth and investor sentiment, the Cabinet on Thursday cleared all amendments to the insurance bill. In a major move the cabinet approved allowing 49% Foreign Direct Investment (FDI) in insurance. The cabinet also cleared the Pensions Bill and allowed FDI in Pension Funds. Upto 26% FDI in the pension sector will now be permissible. The proposed changes to both the bills will now have to be cleared by both houses of the Parliament before they can come into effect. Commenting on the development, Bharti-AXA Insurance expressed hope that the changes to the insurance bill will be approved in the winter-session of the Parliament. Deepak Sood of Future Generali was of the opinion that post the announcement, all foreign insurers would want to hike their stake in he joint venture. However, Bibek Debroy of Centre for Policy Research told ET Now that he was not sure whether these bills would be passed in Parliament. Hitting out at the government, Saugata Roy of TMC said that most political parties will find it difficult to support these measures. Till now, 26 per cent foreign direct investment was allowed in the insurance sector while the pensions business was closed to foreign investment. The government had attempted to push the nine-year-old Pension Fund Regulatory and Development Authority Bill, which seeks to give statutory status to the pension regulator, in June as well, but put it on hold due to the impending presidential elections.


The decision on these bills had been deferred because of opposition from Mamata Banerjee's Trinamool Congress, which has since quit UPA after the government refused to roll back some of last month's decisions, notably the diesel price increase and FDI in multi-brand retail. The government is believed to be building on the momentum generated by last month's reforms burst and buttress a growing view that the policy paralysis, which defined much of Congress-led UPA's second term in office, is ending. The government wants to build on the positive sentiment created by its reforms burst while sending out a clear message that it is doing all it can to arrest the deceleration in growth that has been forecast by a stream of forecasters. On Wednesday, the Asian Development Bank cut its growth estimate for this year to 5.6 per cent from 7 per cent earlier. On Wednesday, the government won crucial support for its proposed plan from the insurance regulator, which said a higher FDI limit in the sector was needed urgently. "Unless we go for 49 per cent, we will not have the kind of capital required to underpin the growth of insurance industry," Insurance Regulatory and Development Authority ( Irda) Chairman J Hari Narayana said on the sidelines of a CII event in Delhi.

POST 10:MUTUAL FUNDS
PART 2

WHAT ARE STOCK FUNDS?

Stock funds invest primarily in stocks. A share of stock represents a unit of ownership in a company. If a company is successful, shareholders can profi t in two ways: the stock may increase in value, or the company can pass its profi ts to shareholders in the form of dividends. If a company fails, a shareholder can lose the entire value of his or her shares; however, a shareholder is not liable for the debts of the company. When you buy shares of a stock mutual fund, you essentially become a part owner of each of the securities in your fund’s portfolio. Stock investments have historically been a great source for increasing individual wealth, even though the stocks of the most successful companies may experience periodic declines in value. Over time, stocks historically have performed better than other investments in securities, such as bonds and money market instruments. Of course, there is no guarantee that this historical trend will be true in the future. That’s why stock funds are best used as long-term investments.

Stock Market Returns

The upswings and downturns of the stock market affect stock fund returns. Despite a history of outperforming other types of securities, stocks sometimes lose money (see chart below). Sometimes these losses can be substantial and last for long periods. The average annual return on stocks from 1926 to 2005 is about 10.4 percent

WHAT ARE BOND FUNDS?

Bond Funds Bond funds invest primarily in securities known as bonds. A bond is a type of security that resembles a loan. When a bond is purchased, money is lent to the company, municipality, or government agency that issued the bond. In exchange for the use of this money, the issuer promises to repay the amount loaned (the principal; also known as the face value of the bond) on a specific maturity date. In addition, the issuer typically promises to make periodic interest payments over the life of the loan. A bond fund share represents ownership in a pool of bonds and other securities comprising the fund’s portfolio. Although there have been past exceptions, bond funds tend to be less volatile than stock funds and often produce regular income. For these reasons, investors often use bond funds to diversify, provide a stream of income, or invest for intermediate-term goals. Like stock funds, bond funds have risks and can make or lose money.

POST 9: We talk on Mutual Funds For Coming Days.Your View Are Welcome.

PART 1 MUTUAL FUNDS.
Reference From Investment Company Institute (U.S) .So terms are mostly in their terms

What Is a Mutual Fund?
A mutual fund is a company that invests in a diversified portfolio of securities. People who buy shares of a mutual fund are its owners or shareholders. Their investments provide the money for a mutual fund to buy securities such as stocks and bonds. A mutual fund can make money from its securities in two ways: a security can pay dividends or interest to the fund, or a security can rise in value. A fund can also lose money and drop in value.

Different Funds, Different Features

There are three basic types of mutual funds—stock (also called equity), bond, and money market. Stock mutual funds invest primarily in shares of stock issued by U.S. or foreign companies. Bond mutual funds invest primarily in bonds. Money market mutual funds invest mainly in short-term securities issued by the U.S. government and its agencies, U.S. corporations, and state and local governments.

Why Invest in a Mutual Fund?
Mutual funds make saving and investing simple, accessible, and affordable. The advantages of mutual funds include professional management, diversifi cation, variety, liquidity, affordability, convenience, and ease of recordkeeping—as well as strict government regulation and full disclosure

Professional Management: Even under the best of market conditions, it takes an astute, experienced investor to choose investments correctly, and a further commitment of time to continually monitor those investments. With mutual funds, experienced professionals manage a portfolio of securities for you full-time, and decide which securities to buy and sell based on extensive research. A fund is usually managed by an individual or a team choosing investments that best match the fund’s objectives. As economic conditions change, the managers often adjust the mix of the fund’s investments to ensure it continues to meet the fund’s objectives

Diversification: Successful investors know that diversifying their investments can help reduce the adverse impact of a single investment. Mutual funds introduce diversification to your investment portfolio automatically by holding a wide variety of securities. Moreover, since you pool your assets with those of other investors, a mutual fund allows you to obtain a more diversified portfolio than you would probably be able to comfortably manage on your own—and at a fraction of the cost. In short, funds allow you the opportunity to invest in many markets and sectors. That’s the key benefit of diversification.

Variety: Within the broad categories of stock, bond, and money market funds, you can choose among a variety of investment approaches. Today, there are about 8,200 mutual funds available in the U.S., with goals and styles to fit most objectives and circumstances.

Low Costs: Mutual funds usually hold dozens or even hundreds of securities like stocks and bonds. The primary way you pay for this service is through a fee that is based on the total value of your account. Because the fund industry consists of hundreds of competing fi rms and thousands of funds, the actual level of fees can vary. But for most investors, mutual funds provide professional management and diversification at a fraction of the cost of making such investments independently.

Liquidity: Liquidity is the ability to readily access your money in an investment. Mutual fund shares are liquid investments that can be sold on any business day. Mutual funds are required by law to buy, or redeem, shares each business day. The price per share at which you can redeem shares is known as the fund’s net asset value (NAV). NAV is the current market value of all the fund’s assets, minus liabilities, divided by the total number of outstanding shares.

Convenience: You can purchase or sell fund shares directly from a fund or through a broker, fi nancial planner, bank or insurance agent, by mail, over the telephone, and increasingly by personal computer. You can also arrange for automatic reinvestment or periodic distribution of the dividends and capital gains paid by the fund. Funds may offer a wide variety of other services, including monthly or quarterly account statements, tax information, and 24-hour phone and computer access to fund and account information.

Protecting Investors: Not only are mutual funds subject to compliance with their self-imposed restrictions and limitations, they are also highly regulated by the federal government through the U.S. Securities and Exchange Commission (SEC). As part of this government regulation, all funds must meet certain operating standards, observe strict antifraud rules, and disclose complete information to current and potential investors. These laws are strictly enforced and designed to protect investors from fraud and abuse. But these laws obviously cannot help you pick the fund that is right for you or prevent a fund from losing money. You can still lose money by investing in a mutual fund. A mutual fund is not guaranteed or insured by the FDIC or SIPC, even if fund shares are purchased through a bank. For more information about how funds are regulated and supervised.

POST 8: 
EURO CRISIS

The entire global attention is currently focused towards the ongoing crisis in the Euro zone. The present article seeks to simplify and logically explain the crisis which has engulfed PIIGS.

Q1) What does the term PIIGS stand for?

Ans. PIIGS stands for Portugal, Ireland, Italy, Greece and Spain. The current Euro crisis started in Greece and has now finally spread to Italy. In fact, there is a worry that ultimately it will slowly engulf the entire Euro zone and that there will be sovereign defaults.

Q2) What is a sovereign default?

Ans. Sovereign default occurs when a country defaults on the loans it has taken and is unable to repay them as per the originally decided terms. Sovereign default is considered catastrophic as the lenders normally have to make huge sacrifices.

Q3) How did the crisis originate in Greece?

Ans. Greece had a very liberal social security program for its citizens. Govt aided healthcare, education, pensions etc. which were heavily subsidised as the Greek Govt was bearing the major part of the expenditure. The Greek Govt went on a borrowing spree to finance its expenditure leading to the current debt position which looks unsustainable. It is feared that there will soon be a contagion effect.

Q4) What is the contagion effect?

Ans. Contagion is derived from the word “contagious” which means to spread. The worry is that this alarming situation would spread to soon other Euro regions leading to many sovereign defaults. Already pain is being felt in Italy and Spain as of late their borrowing costs have substantially increased.

Q5) Why is any crisis by Italy and Spain particularly worrying?

Ans. Any crisis in Italy and Spain is expected to have serious global effects as they are comparatively bigger economies. Also any defaults by Italy & Spain would have disastrous effects as a large number of French, German, British banks & investors have lent money to them. There is worry that finally there would be defaults in the bigger economies. Actually the current predicament is due to the basic problem in the structure of the Euro zone.

Q6) What is the basic problem in the Euro zone structure?

Ans. The Euro zone has a single monetary policy by which the interest rates are same for the region. However each individual country decides their fiscal policy. In short the problem of the Euro zone is a common monetary policy but different fiscal policies. This fundamentally flawed structure worked during the good economic times. But this arrangement has now come under stress due to the response of the lenders in the current weak economic conditions.

Q 7) What is the response of lenders in weak global conditions?

Ans. It is said that funds becomes scarce when they are needed the most. Often lenders refuse to lend in times of crisis when the threat of default looms. In any case during such times the lenders always increase the interest rate charged on loans, due to the higher risk perceived. In the current case of Greece, Portugal and Ireland, their borrowing costs have increased substantially in the last seven months. Of late this worrying increasing trend is visible in case of the borrowing rates of Italy and Spain also. This increasingly alarming situation has led to many analysts fearing the worst.

Q8) What is the worst case scenario?

Ans. Currently one can identify three types of regions within the Euro zone. Germany has been least affected. Countries like Italy and France however are experiencing a slowdown i.e. they are growing but at a slower rate than normal. However countries such as Greece , Portugal etc are facing recessionary conditions i.e. negative economic growth. Thus the whole Euro zone is witnessing differential growth rates causing strain. In a worst case scenario, this severe strain would cause Euro in its current form to eventually break down. However there are high costs of this breakdown as it will have some serious economic ramifications globally and especially for the countries in the Euro zone. Many analysts hope that all Euro countries will make unitedly make serious efforts to retrieve the situation.

Q9) How can the situation be retrieved?

Ans. It is felt that the stronger countries in the Euro zone would completely bail out the weaker ones. The European Union has already come with a safety net where the stronger countries like Germany would contribute to bail out the weaker countries. Also these countries are expected to tap the lender of last resort, the International Monetary Fund (IMF). However though this arrangement looks good on paper it is easier said than done. The tax payer citizens of the stronger economies (particularly Germany) are not particularly happy to see their money being used to bail out the weaker economies. Unfortunately even the citizens of the weaker economies are also not currently comfortable with this arrangement.

Q10) Why are the citizens of the economically weaker countries not currently happy?

Ans. Often good economics often is bad politics. During bailouts several conditions are imposed on the borrowing countries. For example one of the conditions is that the weaker economies should adopt austerity measures in order to reduce their debt levels. Consequently taxes are increased and a number of social benefits reduced.  These stiff conditions attached to bail-out are leading to a lot of social unrest in weaker economic countries like Greece etc.

This crisis can have two outcomes, the extremes of which are as under. On a positive note this crisis can lead to better unification on fiscal terms, of the entire Euro zone. On a negative side, the Euro itself can collapse. This situation needs to be keenly watched as it would have serious global repercussions

 A single Cigarette has 0.63g of tobacco and is a composition of 4000 chemicals.
SOMKING KILS!!! 

POST 7:

What is a Fiscal Deficit?       

  And why you should care about it...

We've   all   heard  about  it  and  we've   all  read   articles  that worry about a large fiscal deficit, whether in India or in the United States. But the question is, what is the problem with a big fiscal deficit? Indeed, what is it to begin with? Every year, the Government puts out a plan for it's income and expenditure for the coming year. This is, of course, the annual   Union Budget.   A  budget  is   said  to  have   a   fiscal deficit   when   the   Government's   expenditure   exceeds   it's income.   When   this   happens,   the   Government   needs additional   funds.   Now   there   are   two   ways   for   the Government to arrange these funds. The first is, of course, to   borrow.   The   Government   can   borrow   either   from  the citizens themselves or from other countries or organisations like the World Bank or the IMF. The money borrowed by a nation's Government is called public debt. As on any other debt,   the   Government   promises   to   pay   a   certain   rate   of interest. To pay this interest in the future, the Government has three options:
 1. increase   the   amount   of   taxes   collected   by increasing the tax rates;
 2. help   stimulate   economic   growth   so   that   tax collection automatically increases with it; or 3. print new currency notes to  pay  back the debt – also called debt monetization. 
We can all agree that the first option is not desirable. That leaves   the   second   and   third   options.   While   the   second option sounds like the best one, it is easier said than done. We will see presently why the third option is dangerous and can act like an unfair and invisible tax on the people of a country. To do so, we will begin with a very simple model of a national economy.

Suppose that there is  only  one commodity that everyone needs to buy in order to live a good life – say wheat. Also, assume that our country produces ten thousand quintals of wheat every year. There are a total of twenty­five thousand people in the country who spend Rs. 400 each per year to buy wheat. Thus total amount of money spent to buy wheat is Rs. 1 crore. Since this Rs. 1 crore is spent to purchase ten thousand quintals of wheat, the cost of wheat is Rs. 1,000 per quintal.

Now   suppose   that   to   repay   some   of   it's   debt,   the Government decides to print some new currency notes. Say the Government prints new notes worth Rs. 10 lacs. This means the amount  of money available to  spend increases from Rs.  1  crore to Rs.  1.1 crores.  Since the amount  of wheat produced hasn't increased,&So  does that mean that  fiscal  deficits are evil? Well,  not necessarily. If the money that the Government had borrowed was used to increase the amount of wheat production, then the   inflation   could   have   been   avoided.   To   see   how,   we assume that the Government used the borrowed money to improve the irrigation facilities in the country. Also suppose that this programme led to an increase in wheat production from 10,000 quintals to 11,000 quintals. In that case, even with an increase of money to 1.1 crores, the cost of wheat would  remain  steady at Rs.  1,000  per  quintal. Thus we'd have economic growth and also avoid inflation. Everybody would be better off. Clearly then, it was a good thing that the   Government   borrowed   money   to   implement   this programme.nbsp;each tonne of wheat now costs Rs.  1,100, a  10% increase!  (1.1 crores  paid  for ten thousand quintals = Rs. 1,100 per quintal).  So we have just seen that the effect of debt monetization is inflation, which acts like an invisible tax on all the people of a country.

It is thus clear that a fiscal deficit is not necessarily a bad thing. However, a large and persistent fiscal deficit can be an indication of several worrying signs in the economy. It can   mean   that   the   Government   is   spending   money   on unproductive programmes which do not increase economic productivity.   It   can   also   mean   that   the   tax   collection machinery is not effective so that a significant proportion of people get away without paying their due taxes. In any case, a large fiscal deficit significantly increases the chances of inflation in the economy which is an invisible tax on every citizen.   In  extreme  conditions, inflation   can   give  way to hyper­inflation that   can   completely   destroy  a   country.  In milder forms, high inflation and a large fiscal deficit lead to a weaker national currency (imports become expensive) and reduce the credit­worthiness of the country.

As citizens, therefore, we must not only pay attention to the fiscal deficit, we must also try and understand the different areas   of   Government   spending.   Is   the   Government borrowing   money   to   spend   on   programmes   that   lead   to increased   economic   productivity   or   is   it   spending   on unproductive programmes. Remember, even directly giving money (or amenities) to sections of people, without creating conditions for them to be more economically productive is dangerous because of the reasons seen above. 

GOOD NIGHT.

POST 6:
WHAT IS FISCAL POLICY?

In economics and political science, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure. Changes in the level and composition of taxation and government spending can impact the following variables in the economy:

Aggregate demand and the level of economic activity

The pattern of resource allocation

The distribution of income.

Fiscal policy refers to the use of the government budget to influence economic activity.

Stances of fiscal policy

The three main stances of fiscal policy are:

1. Neutral fiscal policy is usually undertaken when an economy is in equilibrium. Government spending is fully funded by tax revenue and overall the budget outcome has a neutral effect on the level of economic activity.
2. Expansionary fiscal policy involves government spending exceeding tax revenue, and is usually undertaken during recessions.
3. Contractionary fiscal policy occurs when government spending is lower than tax revenue, and is usually undertaken to pay down government debt.

However, these definitions can be misleading because, even with no changes in spending or tax laws at all, cyclic fluctuations of the economy cause cyclic fluctuations of tax revenues and of some types of government spending, altering the deficit situation; these are not considered to be policy changes. Therefore, for purposes of the above definitions, "government spending" and "tax revenue" are normally replaced by "cyclically adjusted government spending" and "cyclically adjusted tax revenue". Thus, for example, a government budget that is balanced over the course of the business cycle is considered to represent a neutral fiscal policy stance.

Methods of funding

Governments spend money on a wide variety of things, from the military and police to services like education and healthcare, as well as transfer payments such as welfare benefits. This expenditure can be funded in a number of different ways:

• Taxation
• Seigniorage, the benefit from printing money
• Borrowing money from the population or from abroad
• Consumption of fiscal reserves
• Sale of fixed assets (e.g., land)

POST 5:
 SOME ABBREVATIONS:

ALM – Asset-Liability Management

APL – Above Poverty Line

BPL – Below Poverty Line

CBDT – Central Board of Direct Taxes

CENVAT – Central Value Added Tax

CIBIL – Credit Information Bureau (India) Ltd.

CRR – Cash Reserve Ratio

CST – Central Sales Tax

ECA – Essential Commodities Act

EFT – Electronic Funds Transfer

EXIM – Export-Import

FCI – Food Corporation of India

FDI – Foreign Direct Investment

GDP – Gross Domestic Produc

GDS – Gross Domestic Saving

GSDP – Gross State Domestic Product

IBA – Indian Banks Association


ICAI – Institute of Chartered Accountants of
India

IFCI – Industrial Finance Corporation of India

IMF – International Monetary Fund

IPO – Initial Public Offer


IRDA – Insurance Regulatory and 

Development Authority

SEBI – Securities and Exchange Board of 

India

TRAI – Telecom Regulatory Authority of India

VAT – Value Added Tax

POST 4:

Current Affairs:
1)A good article on FDI in Economic Times Website.
   The Link
http://economictimes.indiatimes.com/news/economy/policy/fdi-in-retail-why-30-local-rule-is-100-trouble-for-mncs/articleshow/16605481.cms
 

KNOW THE PERSONALITY:

1) VIJAY KELKAR:

 Vijay L. Kelkar (born 15 May 1942) is an Indian economist and academic, who is currently the Chairman of the Forum of Federations, Ottawa & India Development Foundation, New Delhi and Chairman of Janwani a social initiative of the Mahratta Chamber of Commerce,Industries and Agriculture (MCCIA ) in Pune. He was also the Chairman of the Finance Commission until January, 2010. He was earlier Advisor to the  Minister of Finance (2002–2004), and is known for his role in economic reforms in India. Prior to this, he remained Finance Secretary, Government of India 1998-1999, and in 1999 he has been nominated as Executive director of India, Bangladesh,Bhutan and Sri Lanka on the board of the International Monetary Fund (IMF).

 

POST3:

Current affairs as 29 sep 2012: (Source:TOI)

1)     Rupee may hit 50 per US dollar in a few months: Govt

The government on Friday said it expects the rupee to appreciate to around 50 against the dollar over the next three-four months on higher foreign inflows, a development that will help rein in subsidies and also check inflation

2)     Kingfisher Airlines shares tank 5%

Shares of Kingfisher Airlines today plunged 5% after the SBI-led consortium of lenders turned down the company's Rs 200 crore working loan request. 

After opening weak, shares of the company further lost 4.95% to touch the lower circuit limit of Rs 16.12 on the BSE. 

3)     Apple says sorry, suggests rivals’ maps

Apple chief executive Tim Cook apologized on Friday to customers frustrated with glaring errors in its new Maps service, and, in an unusual move for the consumer giant, directed them to rival services instead, such as Google Maps.

Users complained that the new Maps service — based on Dutch navigation equipment and digital map maker TomTom NV's data — contained geographical errors and gaps in information, and that it lacked features that made Google Maps so popular, including public transit directions, comprehensive traffic data or street view pictures.

POST 2
CURRENT AFFAIRS As on 28 sept 2012
1) Arvind Lifestyle Brands, a unit of Arvind, on Thursday said that it has acquired the India business operations of global fashion retailers Debenhams, Next and Nautica from Planet Retail
Arvind Mills BRANDS

• Arrow
• Lee
• Wrangler
• Gant U.S.A.
• Sansabelt
• Izod
• Cherokee
• Mossimo

2) AC TRAIN travel and freight to increase by 3.7 percent by OCT 1 2012.

3)Religare Enterprises is selling 49% stake in its wholly owned mutual fund business to New York Stock Exchange-listed Invesco for 1000 Cr.

September 28
Post1:

GDP

1) Gross domestic product (GDP) is the market value of all officially recognized final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living GDP per capita is not a measure of personal income (See Standard of living and GDP). Under economic theory, GDP per capita exactly equals the gross domestic income (GDI) per capita (See Gross domestic income).

GDP is related to national accounts, a subject in macroeconomics. GDP is not to be confused with Gross National Product (GNP) which allocates production based on ownership.

2) GDP was first developed by Simon Kuznets for a US Congress report in 1934^] who immediately said not to use it as a measure for welfare (see below under limitations). After the Bretton Woods conference in 1944, GDP became the main tool for measuring the country's economy.

3) GDP = private consumption + gross investment + government spending + (exports −imports)

                           OR

Date: 28 September 2012
Good Evening guys,
I am motivated to start writing blog's again. So i will update u with with current affairs.
Please give me suggestions on what u want to know and Point out mistakes if u find.
Regard's Prashant
Have great weekend