TORONTO: Minister for Roads and Transport Kamal Nath said here that the next decade will be the "decade of infrastructure" in India and invited
Canadian investors to participate in it. Speaking at a dinner gala by the Canada-India Business Council here Tuesday night, Kamal Nath said infrastructure was the buzzword globally and India offers great opportunities for investors. "Whether you look at East Asia, the US or Africa, the stress is on reinvestment in infrastructure - that is what will generate economic activity.'' Kamal Nath said, "If the last decade was the decade of IT in India, the new decade will be the decade of infrastructure. India faces the biggest deficit in infrastructure, with national highways accounting for just two percent of our total road network.'' Highlighting the government's plans to construct 20 km of roads every day, the minister said India has "embarked on the biggest infrastructure'' project which would need $500 billion in investment. "It is a huge challenge, but we have embarked on it. We have to transform the country.'' Massive investments in rural roads are needed as 70 percent of its people live in rural areas, he said. "That is where (rural areas) India's future growth will come from.'' "We cannot maintain eight percent growth rate unless we bridge the infrastructure gap. As India moves within confines of democracy, we face challenges of growth...how to make this growth touch all Indians. One is virtual India (that you see on the internet) and then there is a real India where 300 million people live on just one dollar a day. Reaching out to this real India is our biggest challenge,'' Kamal Nath said. Referring to India's high growth rate despite the global downturn, Kamal Nath said, "There was no collapse of the system in India unlike other countries...our banks have given money to the government while governments in other countries gave money to banks (to tide over the crisis).'' Calling upon Canada to become partner in India's infrastructure development, Kamal Nath said economic cooperation will benefit people in both the countries. He said the two countries were working on an economic partnership agreement to boost their trade beyond $5 billion annually. Summing up his mission here, he said, "In 2007, when I talked about the India story here, Canadians never looked beyond NAFTA (free trade agreement among Canada, the US and Mexico). But after the global crisis, Canadians are now asking questions about India. Last time, I told my story. But this time, I sold my story (to Canadians)." Earlier, welcoming Kamal Nath to Canada, Stanley Hartt, chairman of the Macquarie Group which has created an India Infrastructure Fund to raise $2 billion for investment in India, said his group will invest in roads, airports, ports, power generation, power transmission and distribution, telecom towers, rail, and other infrastructure-related sectors in India.
Wednesday, March 24, 2010
Tuesday, March 23, 2010
Inflation: The silent Killer
There is a constant battle going on between inflation and return on your investments. You must learn how it affects you and how to hedge against inflation in order to emerge victorious.
Introduction
Did you know that in some countries like Zimbabwe when you step out to buy some milk, it is more expensive by the time you reach the shop to buy it, and that their inflation is actually an insane figure like 98% daily?
What is inflation
Very simply, inflation is the corroding of the purchasing power of money with time, whereby Rs.100 today is worth Rs.94 at the end of one year if the rate of inflation in 6%. So in other words, where you could buy a kg of apples for Rs.100 today, the same would cost Rs.106 after a year.
Inflation is a normal side effect of a growing and sound economy as long as the annual percentage remains under control. The lack of inflation or the opposite i.e. deflations may be an indication that the economy is weakening. As you can see, it's not so easy to label inflation as either good or bad - it depends on the overall economy as well as your personal situation. A high inflation as well as a low or negative inflation could be bad.
What causes inflation
Different schools of thought provide different views on what actually causes inflation. However, there is a consensus amongst economists that economic inflation may be caused by either an increase in the money supply or a decrease in the quantity of goods being supplied. If demand is growing faster than supply, prices will increase. This usually occurs in growing economies with too much money chasing too few goods and services. Yet another common cause for inflation is a rise in production costs. When companies' costs go up, they need to increase prices to maintain their profit margins. Increased costs can include things such as wages, taxes, or increased costs of imports. As workers demand wage increases, companies usually choose to pass on those costs to their customers. Further wages while going up do not keep up with the growth in prices and hence inflation.
How it affects you
A high rate of inflation is an economic risk since it brings in monetary instability, stunts real economic growth and pushes interest rates higher. It also causes misallocation of resources in the economy.
To us as investors, inflation distorts the income and returns that we earn. While the nominal return maybe X, the real return or income i.e. inflation adjusted return is actually a value of X-. Inflation is the reason why money in the savings account is actually worth less than its nominal value. While a thousand rupees in a savings account at 3.5% p.a. is equal to Rs.1,035 in a year, taking into account an inflation of 6% p.a. it is actually equal to lesser than the Rs.1,000 originally invested. So in effect there’s a loss!
Hedging against inflation
In this context you would have heard of ‘hedging against inflation’. This is nothing but investing in a manner or in a product that is not affected by inflation or protects you from inflation.
Usually gold is referred to as a good hedge against inflation. The inverse relationship with the US Dollar that gold usually enjoys is a major positive in its favor.
Another asset class which can help you beat inflation is equity, whether in its purest form of shares or by investing in equity diversified mutual funds or unit linked insurance policies. Despite the volatility that is an inherent characteristic of equity, it is still an asset class which can give you an average return of 15% + in the long run. This is more than sufficient to beat not only inflation but also taxation.
Utilize indexation benefits
Indexation allows you to pay capital gains taxes only on the actual profits made. Investors are given a choice either to pay a flat 10% Long term capital gains tax or at 20% along with indexation benefits. High inflation periods are good to go with the 2nd option.
Now let us see how it works.
The govt has a Cost of Inflation Index with a fixed value of 100 for the base value year 1981-82. Post this, it is being declared for every financial year
Profit earned for taxation purpose = selling price of the asset – (purchase price of asset * (inflation index when the sale occurs/inflation index of the purchase year))
Illustration
Suppose you bought an asset for Rs 100 is year 2000 when the index was at 150 and sold it for Rs 300 in year 2009 when the index was at 300 The profit would be 300 – (100*300/150) = RS 100
As you can see, the taxable profit will decrease as the inflation rises. Moreover if your investment gains are not too good and indexation is offsetting it, then you may not even have to pay any LTCG tax. This also means that the longer you stay invested the better it will be since the indexed costs will be higher with each year the asset is being held for.
Conclusion
On the whole a well diversified portfolio relevant to your goals, with asset classes having negative correlation with each other would be a good hedge against inflation.
Further, start looking at investments from an inflation adjusted cost and return perspective and then make your investment decision. Likewise also look at your goals taking into account inflation and then make a plan to allocate funds for this. Otherwise you will end up being grossly short of the amount required to accomplish your goals. A special mention needs to be made for Retirement Planning here, since individuals often find that the retirement corpus they have accumulated is not sufficient and they have to compromise by making lifestyle changes in their retirement as they had not anticipated inflation, the silent killer.
China’s Booming Internet Giants May Be Stuck There
SHANGHAI — Even before Google began threatening to shut down its search service in China, it was not fitting in.
At an Internet cafe like this one in Beijing, Web users under age 30 are commonly found.
Google and other major American Internet companies like Yahoo and eBay failed to gain significant traction in the Chinese market. And Facebook, Twitter and YouTube are blocked by the government.
Instead, the hottest companies in the world’s biggest Internet market have names like Baidu, Tencent and Alibaba — fast-growing local firms that are making huge profits. Post-Google, China’s Internet market could increasingly resemble a lucrative, walled-off bazaar, experts say. Those homegrown successes, however, could have trouble becoming global brands.
“If the Chinese government continues to favor domestic companies, those companies that reach critical mass could become phenomenally profitable,” said Gary Rieschel, founder of Qiming Ventures, an American venture capital firm with investments in China. “But it may be hard for those companies to become world class without outside competition.”
Still, the success of Chinese companies here can be measured by the numbers.
Revenue at Tencent, a kind of Internet conglomerate, jumped over 70 percent last year, to about $1.8 billion.
Baidu, a Google look-alike, has largely clobbered Google in China, despite giving up some ground in recent years. And Taobao.com, China’s huge e-commerce site, handled nearly $30 billion in transactions last year.
The story behind the success of these companies is a simple one, some analysts say. The young people who dominate Web use in China are not just searching for information; they’re searching for a lifestyle. They are passionate about downloading music, playing online games and engaging in social networking.
“Sixty percent of the Internet users here are under the age of 30,” said Richard Ji, an Internet analyst at Morgan Stanley. “In the U.S., it’s the other way around. And in the U.S. it’s about information. But in China, the No. 1 priority is entertainment.”
Experts say American companies have largely failed here because they don’t have local expertise, are too slow to adapt and don’t know how to deal with the Chinese government.
“Internet companies in China have to work so closely with the government,” said Xiao Qiang, of the China Internet project at the University of California, Berkeley. “And that means the government’s political agenda can become the company’s business agenda.”
The need to censor Web sites, for example, can overwhelm smaller companies, Mr. Xiao said. “This becomes a growing business cost. So often, small companies don’t develop.”
At this stage, analysts say the Web in China is less about innovation than about quickly delivering on the latest online trend.
“People here are quick to see trends, and to clone and innovate,” said William Bao Bean, a former Internet analyst who is now a partner at Softbank China & India Holdings. “If one company is doing well, other companies will quickly clone it and roll it out.”
No company is better at that than Tencent, which is based in the southern city of Shenzhen.
The company’s biggest weapon is a popular instant messaging service called QQ. Its 500 million active users give the company an advantage when it introduces new products and offerings, like online games.
Tencent was founded in 1998 by a group of friends that included Ma Huateng, also known as Pony, who is now its 38-year-old billionaire chief executive. With Tencent commanding a stock market value of $37.2 billion, the only global Internet companies that are worth more are Google ($173.7 billion) and Amazon ($57.2 billion).
But there are other Chinese powerhouses. Baidu, which dominates the market for search advertising in China, is expected to benefit from Google’s departure, even though its own search engine is heavily censored. (Microsoft’s search engine, Bing, which remains censored, could also gain users.)
Investors are clearly betting on Baidu’s future. Since January, when Google first announced that it might exit China, shares of Baidu have leapt 50 percent, adding $7 billion to the company’s market value.
One advantage local companies have is government protectionism. Because the Communist Party wants to maintain tight control over communication and the media, foreign Internet companies come under suspicion.
For instance, YouTube has been blocked inside the country for over a year, ever since a user uploaded a video that was said to show human rights violations in Tibet.
YouTube, which is owned by Google, had a large following here. But now online video in China is being championed by companies like Youku.com and Tudou.com. They may have dominated anyway, analysts say, but it certainly helps to have few big competitors.
And without competition here from Facebook, which has not yet tried to develop a site for the Chinese market, a social networking site called Kaixin001.com has managed to register over 70 million users.
But some experts say Google’s departure will leave Internet users here with fewer options, making the country’s Internet market less competitive and less open.
“The biggest loser is Netizens,” says Fang Xingdong, chief executive of Chinalabs.com, a research firm. “Google is a multilinguistic search engine, but Baidu is a Chinese-language one. Chinese information only occupies a small fraction of the Internet.”
Google was troubled by censors. And it’s clear that censors make some of the material on Baidu’s search engine look like the bulletin board of propaganda, with some links directed to People’s Daily, the Communist Party mouthpiece.
But Chinese Internet companies go along, despite some misgivings, sensing that the real money is in online fun and games. These seem to flourish despite repeated government crackdowns and warnings about Internet-addicted youth and illegal music downloads.
One question, though, is whether Google’s departure will prevent Chinese companies from developing alongside the world’s technology powerhouses.
“When the Chinese companies go outside of China, they will find that they fail to understand their competitors as well as they did when they were competing in China,” said Mr. Rieschel, founder of Qiming Ventures.
Of course, Chinese companies may just be happy staying home. With 400 million Internet users and growing, their own market is a substantial prize.
Why They Fight and Can They Stop?
How can the Israelis and the Palestinians come to a fair and peaceful settlement? One is reminded of the old joke: however they get there, they shouldn't start from here.
Since the creation of the Israeli state in 1948, the question has taken the form: what is to be done with the Palestinians? Nobody has ever come up with a satisfactory answer. Bernard Wasserstein, a professor of history at Glasgow University, quotes the Zionist leader Leonard Stein, writing in 1937 about the the British Royal Commission's proposal to 'transfer' Palestinian Arabs into Transjordan.
'If it is not carried out rapidly and on a large scale, it will leave the Jewish State with a minority problem of the most formidable dimensions. If it is…, the odium attaching to the swift and wholesale evacuation of Arab peasants from their homes will fall mainly on the Jews, with results which will be embarrassing not only to the Jewish State itself, but to Jews in other parts of the world.'
In the event, Israel has faced both problems throughout its existence. Now more than ever, Israel is regarded with odium by much of the world. The Sharon administration's brutal repression of the Palestinians has made Zionism a dirty word. Interestingly though, Wasserstein shows that the doctrine has not been particularly important to the history of Israel. It is a rationalisation after the event, justifying the peculiar form of the Jewish State, rather than the mere presence of the Jews.
Historically, most Jews arrived in Israel, whether from Europe in the thirties or the former Soviet Union in the nineties, because they had nowhere else to go. And the bulk of Jewish settlement even in the occupied territories is not so much ideologically-motivated colonisation as commercially-driven suburban sprawl. Meanwhile, great swathes of Israel proper are underpopulated.
Accordingly, the interests of Israeli Jews are far from identical with those of Zionism or the Israeli state. Indeed, the simplest way for Jews to live wherever they want would be to abandon the Jewishness of the state. Wasserstein shows that the demography is inescapable. Inasmuch as it is committed to retaining a Jewish majority, Israel not only cannot expand. It must retreat.
The Israeli occupation of the West Bank and the Gaza Strip offers an easy territorial compromise. There is a substantial consensus, outside Israel-Palestine at least, that the basis of any solution should be Israeli withdrawal to its 1967 borders. Of course if Israel also occupied Jordan, as revisionist Zionists have sometimes demanded, such a 'compromise' might give Israel all of the currently occupied territories. Given the uneven nature of the relationship between Israel and the Palestinians, a territorial compromise is no compromise at all.
Nonetheless, some sort of two-state solution is currently envisaged. Wasserstein asks what form this might take, and what barriers exist. Most crucially, Israel's dependence on Palestinian labour means that the physical separation of Israel from a Palestinian state by means of a fortified wall, which has been proposed by some Israelis, is not workable. Instead there would have to be a 'porous' border, allowing for economic interaction, but leaving the question of sovereignty hopelessly fudged.
One aspect of the conflict Wasserstein does not treat at length is its increasingly international quality. The role of the US in sustaining Israel is well known. More recently, even those who claim to oppose Western imperialism in Iraq (especially European anti-Americans) nonetheless insist that the 'international community' sort out Sharon. It is hard to think of anything less likely to bring lasting peace to the region than yet another round of well-intentioned foreign interference.
India Inc raises Rs 46,778 cr via public offerings in 2009-10
NEW DELHI: India Inc raised Rs 46,778 crore through the public equity offerings in the current financial year, 23 times higher than Rs 2,034 crore
mopped up in the last fiscal, a study says. According to an analysis by Prime Database, which tracks primary capital market, companies raised a whopping Rs 46,778 crore in 2009-10 through the public offerings dominated by the state-run firms, which raised Rs 30,942 crore or 66 per cent of the total amount. The mobilisation in the year could have been higher but due to the continuing volatility in the secondary market and poor post-IPO performance of some companies in the early part of the fiscal, fund raising plan failed to breach the record level of Rs 52,219 crore raised in 2007-08. Nevertheless, the financial year 2009-10 amount stands as the second-highest ever and is almost double of each of the preceding years of 2004-05, 2005-06 and 2006-07, as per Prime. Interestingly, after several years, the mobilisation was almost equally shared by initial public offers (IPOs) and the follow-on public offers (FPOs), the study added. Fund raised by public sector undertakings was the highest ever amount mobilised by them. The last time when the PSUs had raised the biggest amount was in the 2003-04 at Rs 16,563 crore, Prime Database CMD Prithvi Haldea said in a statement. Of the Rs 30,942 crore raised in current financial year, Rs 21,162 crore was through divestments and Rs 9,780 crore through fresh capital. A total of six PSU companies entered the market in FY'10, led by NMDC (Rs 9,791 crore) followed by NTPC (Rs 8,480 crore), NHPC (Rs 6,039 crore), REC (Rs 3,530 crore), Oil India (Rs 2,777 crore) and United Bank of India (Rs 325 crore).
Are India's rich charitable? Not very, study shows
MUMBAI: The number of wealthy Indians has been rising fast over the last decade, but they're not ready yet to let go of their hard-earned cash, even
for charity, according to a study by business consultancy Bain & Co. The number of so-called "high net worth individuals" in India has grown at about 11 percent every year since 2000, possibly the fastest pace in the world, to more than 115,000 now. Two industrialists, Reliance Industries' Mukesh Ambani and Lakshmi Mittal, are among the five wealthiest individuals in the world, according to Forbes magazine. But when it comes to giving away money, India's rich are not very keen on loosening their purse-strings. Charitable giving in India probably totalled about $7.5 billion in 2009, according to the study by Bain & Co, equivalent to about 0.6 percent of the country's GDP. That percentage is higher than Brazil's 0.3 percent and rival China's 0.1 percent, but it falls way short of the 2.2 percent in the United States, and 1.3 percent in Britain, the report said. Most Indians have no qualms about giving cash to family, friends, household staff and religious institutions, but given the scale of poverty -- an estimated 40 percent of India's 1.1-billion population lives on less than $1.25 a day -- Indians need to become way more generous, said Bain partner Arpan Sheth. "Should individuals, particularly the well-off, be giving more? Can they afford to make larger donations? The answer to both these questions is absolutely yes," Sheth said at the first Indian Philanthropy Forum in Mumbai, the country's financial hub. There are an estimated 2.5 million non-profit organisations in India, and about half of all donations in the country go to religious, sports and cultural organisations, the Bain study showed. A huge 65 percent of donations comes from the central and state governments, with a focus on disaster relief. A large amount also comes from foreign organisations. Only 10 percent comes from individuals and corporates, in sharp contrast to the United States, where 75 percent of charitable giving is from individuals and corporates, Sheth said. And in India, its not about who has more money: in fact, the wealthiest social class has the lowest level of giving, just 1.6 percent of household income, which palls when compared to billionaire investor Warren Buffett, who has given away some 82 percent of his net worth. Bain & Co's Sheth said Indians' reluctance to part with their cash stemmed from a variety of reasons including no tax breaks for charitable donations and a deep-seated suspicion of what charitable organisations really do with the money. "Accumulation of wealth is a fairly recent phenomenon in India -- it really began only with the opening of the markets, and we do have a history of scarcity," Sheth added. "So it may be harder for people to let go of their newly-earned wealth." But change is coming: software czar Azim Premji and telecom tycoon Sunil Mittal have set up charitable foundations, and Vineet Nayyar, head of software firm Tech Mahindra recently gifted a third of his shares to another charity. "Such high-profile donations, private foundations, greater organisation in the NGO landscape and mass events that encourage fund raising, will encourage a greater culture of philanthropy in India," Sheth said. "What's also needed are conducive tax laws," he added.
Sunday, March 21, 2010
Chinese Actions Impact on World
It is no doubt that China is growing at a galloping pace and below figures will speak for itself, however same is at the cost of suppressing the humanity and same can be seen while we observe the words which are banned on internet in China. As a human we are definitely pained when their society is being served second rate information by virtue of China internet censorship and same is a slur on the name of society. Now have a look at below facts and decide for yourself that whether one wants this in their country by suppressing the humanity.
1.) By 2025, China will build TEN New York-sized cities.
2.) By 2030, China will add more new city-dwellers than the entire U.S. population.3.) China already consumes twice as much steel as the US, Europe and Japan combined. 4.) If the Chinese, one day, use as much oil per person as Americans, then the world will need seven more Saudi Arabia’s to meet their demand.5.) There are already more Christians in China than Italy, and China is on track to become the largest center of Christianity in the world. 6.) Chinese are far more likely to believe in evolution than Americans.7.) Chinese internet users are five times as likely to have blogs as Americans.8.) China has 150% more soldiers than America does, plus a high tech ‘Kill Weapon’ the U.S. can’t deal with. 9.) China still hasn’t rid itself of Europe’s medieval plague.10.) 40% of Chinese small businesses went bust or almost went bust during the world financial crisis.11.) China executes three times as many people as the rest of the world COMBINED… and uses mobile execution vans for efficiency. 12.) China averages 274 protests PER DAY.13.) When you buy Chinese stocks, you are basically financing the Chinese government. Eight of Shanghai’s top ten stocks are state-controlled arms of the government. 14.) 50% of counterfeit goods come from China.15.) The majority of Chinese drink polluted water. The above facts do not hold much cognizance to us as the same is scuttling the right to information of the people. China is preparing a strategy where it want to hold a major stake in dollar so that US remains in its grip in form of the debt and it is able to any kind of action at Chinese stock market or its commodities market. Definitely we want to let China free the info availability to people and probably that is the reason Google is pulling out of China. If Google does that it will be a great respect to humanity as till now Google was seeing its business sense by filtering the data to keep Chinese moguls happy. China please use your energy in fruitful aspects and get away from the scoundrel mentality of China INTERNET hacking as some day the same can backfire against you itself.
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