Monday, March 28, 2011

Web Press India

People!
This is it!!!

www.webpressindia.com

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INVICTUS


Out of the Night that covers me
Black as the Pit from pole to pole,
I thank whatever gods may be
For my unconquerable soul.


In the fell clutch of circumstance
I have not winced nor cried aloud.
Under the bludgeonings of chance
My head is bloody, but unbowed.


Beyond this place of wrath and tears
Looms but the Horror of the shade,
And yet the menace of the years
Finds, and shall find, me unafraid.


It matters not how strait the gate,
How charged with punishments the scroll.
I am the master of my fate:
I am the captain of my soul. 

- William Ernest Henley

Friday, March 18, 2011

Together We Will Live Forever

The Wind brings a new change, a new season.
And when the heart sings songs to the moon and prays at every Cross a Church holds, red in the black, I realise the innocence is still there. A heart that can melt at the thought of a romance, a soulmate and a soul that can tremble at the very thought of hurting someone and being hurt in return.
It's like an ancient tree which realises there's still some gum left in the bark.
It's a great joy to learn that after so much, and after so long, one is not immune to love, or seeming thoughts of love. It's a great joy to learn that something can still hurt. And you can still ache and be pained.
Vital signs.... of life. And that your soul is still breathing, still journeying. Still counting on the wisdom it has accumulated over the previous births... and even this one, still. Still banking on you to listen to your heart and take the right decision, stay true to yourself.
Amen.


For those who love, here's a haunting song, "a bath for your soul" by Clint Mansell: "Together We Will Live Forever"

Sunday, March 6, 2011

The Great Financial Crisis of Our Times since the Great Depression

'Inside Job' won the Oscar for Best Documentary Film at the Oscars last week. This is more than a movie review. The documentary is about the vulture culture at the Wall Street and how it has plunged the world into financial crisis. In a daring series of interviews, it answers how much were the Economists paid to ignore the impending collapse? And how it will happen again.

At the Oscars, Charles Ferguson, Director of 'Inside job', accepted his Oscar with a relatively lesser scintillating "Thank-you" speech. After thanking the Academy for 5 seconds, he said, "Not a single financial executive at the Wall Street was arrested following the world financial crisis. This is something to think about."

Finance and Politics are two topics that an average man shies from. The reason? Both the concepts and their effects are too "complicated" for anyone to figure out. It is also true that these two have the most profound impact on each one of our lives - more than we care to fathom or more than we will ever come to agree, realise or accept.

Artists shy away with the discussion of Finance and Politics mainly because it represents the ugly truth and it has something more to do with facts. An artist would rather linger in the creativity of imagination. But kudos to Ferguson who has made sense of a global recession that has plagued our recent times and considering unemployment still is a major challenge worldwide, we are still to emerge out of this mess.

Kalyanee Mam, Researcher, DOP, Executive Producer has done an impressive job. Matt Damon has taken an audacious step by agreeing to narrate it.

The film shows extensive interviews with Economists, Lobbyists, Deans of Harvard and Colombia business schools, politicians, authors, researchers, a prostitute and a psychologist who shed light on the reasons as to why millions worldwide lost their jobs, major companies announced bankruptcy and how a world plunged into darkness. The effects were felt worldwide: In India, we were expected to see a blockbuster of an IPO with Emaar-MGF in 2008. Considering the crash of the stock markets world wide, with stocks falling up to 777 points in a single day, the IPO was cancelled 2 days after its scheduled debut at the Bombay Stock Exchange (BSE). Singapore's exports collapsed by 30%. Iceland, a country of democracy and a very high standard of living, was facing riots. People walked off from their Lehman Brothers' offices worldwide on a single day of notice of bankruptcy. 

One of the best features of the documentary was how it showcased the actual proceedings (court-room snippets) of Lehman Brothers' case and AIG bankruptcy - to name a few. The judge actually remarked to Lehman Brothers' CEO that he was filing bankruptcy, but he actually owns around 5-6 private jets, two helicopters, celebrated and expensive paintings and art in France. The CEO had no reply. Ask his lawyer, "Isn't that too many planes for a single person?" Even he has nothing to say to that. 

To bail out AIG, the US Treasury Secretary Henry Paulson demanded a bailout of 700 crore rupees from the US Government. He said the alternative to this was unthinkable. The office building of AIG has a helipad. The website of the US Treasury states that the department is responsible for formulating and regulating economic, financial, tax, fiscal policies; serving as a fiscal agent for the US government. 

A prostitute, who operated from her high-rise apartment, located only a few blocks away from Wall Street, says that she had around  10,000 customers during the "bubble". She said that the executives would rent a Lamborghini only to take the prostitutes out for a night out. They would give the women a corporate letter head, and ask them to fill the price and mention it against expenses incurred for "Corporate Research".

Raghuram Rajan, former Chief Economist of IMF, had presented a Paper titled "Has Financial Development made the World Riskier?"(2003) which warned Financial Industry about the amount of compensation that the financial executives were given, stating that it would lead to a crisis. Former US Treasury Secretary and former Harvard President Lawrence Summers called the Paper "misguided". Greenspan and Summers had enacted two major laws under the Clinton and Bush administration that allowed deregulation, endorsing unaccountability of Financial Markets and Derivatives segment, incomes and incentives earned by Financial industry.

After the crisis, lobbyists and politicians met at a gathering hosted by Greenspan. Here, business lobbyists joked that the politicians should have regulated the Financial industry; they were too greedy and hence they needed someone to stop them at a certain juncture.

Research shows that the area of the brain that gets stimulated with making large chunks of money is the same area which gets stimulated after having cocaine. 

Economic and Business Studies' professors from Harvard and Colombia Business Schools end up making a lot of money on the side as consultants and on boards of companies like Goldman and Sachs, and Nomura. These professors are also paid by these companies to write a book on Financial Stability in the bankrupt economies like Iceland to fool people, painting a rosy picture. One of the professors was compensated around $50,000. He was asked as to how he could downright lie in a book about the economy, and he fumbles for an answer. In his CV, he has mentioned about co-authoring book, but the title corrected to Financial instability in Iceland. 

Most of the interviewees turned hostile asking the camera to be turned off, and a Columbia B-School professor even ignoring to answer a question saying, "You only have three minutes left. I should have never agreed for this foolish interview."

The film explains the complex financials of the Derivative segment, much beloved in our own country, the unregulated Over The Counter (OTC) trading and sub-prime lending. Apparently, the financial market giants not only sold CDOs (Collateralised Debt Obligation) but also made money through insurance of the same. Here's how it worked. 

Financial giants like Goldman and Sachs, Lehman Brothers incentivised their top management with astronomical bonuses for selling a great deal of CDOs to people. A most common form of CDO would be a commercial real estate property. Even if you didn't have the ways and means to actually afford a loan or the necessary documents, they'd  still get it for you. They needed incentives. And when the President of the US says that people could now afford a better home, you start taking the agent seriously. Loan documents are doctored, and the loan is passed. This was one way to make money. 

The other: the same executives, or a separate department in the same company would tell another client that a particular CDO was a "crappy investment". When the CDO's value would be driven down in the market, Lehman Brothers' would not lose anything because it was insured against the same by AIG. The CEOs of the companies that were declared bankrupt went home taking astronomical figures, stashed safely in their bank accounts, around 10-12 months before they saw the possibility of a global financial breakdown. 

When the judge asked an executive as to how he could sell a "crappy" CDO to another client, citing evidences through a tirade of emails, the executive replied, "It is.... (pause) very unfortunate.........(fumbling).... that..... the conversation was on email."

It is interesting to see that none of these high profile CEOs regret what happened. Or notice the nature and most importantly, the impact of their criminal acts all over the world. 

Before he was elected President, Barrack Obama mentioned in his speeches how the highly unaccountability culture of the Wall Street executives has resulted in the loss of jobs (also since lot of US jobs are being outsourced), recession, and deregulation of the Derivatives market (specifically asked for by Henry Paulson and Alan Greenspan). After he was elected, he has chosen the very same people who were in the Bush administration and directly responsible for the global economic meltdown.

According to Robert Gnaizda, former Director of the Greenlining Institute, a group that advocates housing rights, "It is a Wall Street Government.' Just how safe are we? It will all happen again. 

Tuesday, March 1, 2011

Union Budget 2011-12: Review and Sector Analysis, Major Highlights. What's in it for YOU

First the factual analysis of what is going to be dearer (expensive) and what is going to be cheap. Then we'll look into the effect of the Budget on the economy and the common man at large.


WHAT'S GOING TO COST YOU MORE:
1. Branded Clothes
10% excise duty imposed on ready-made and made-up garments. Consumers are expected to pay around 4-10% more on branded apparel. This is a cause of concern since rising cotton prices have forced the government to hike retail prices by 10% recently.


2. Branded Gold, Bling
Gold was expensive before, but it's become more so, post Budget 2011-12. One per cent excise duty on branded jewellery is back. This is a matter of concern as the prices of gold have increased from 21% (Feb 2010) to now. The prices of polished diamonds has increased over 50%.


3. Hotel Accomodation
Hotel accomodation over INR 1,000/- per day or more, will come under the service tax bracket, along with air conditioned restaurants that have the license to serve liquor. This puts India's travel and tourism industry over six times more expensive than that of Malaysia and Singapore. The industry already pays a luxury tax of over 10-20% in certain states, and with this latest tax burden, it will become the highest tax paying industry in the country.


4. Hospital and Medicare services
You'll have to fork out 5% service tax at air conditioned hospitals and diagnostic centres. 


5. Air travel
Domestic and International air travel will become more expensive w.e.f. April 2011. Service tax on domestic air travel increases to INR 150 - earlier it was INR 100 (economy class) and to INR 750 (business class) - earlier it was INR 500. 


6. Computers
Excise duty exemptions have been withdrawn on hardware items such as computer micro-processors, floppy disc drives, CD-ROM drives, DVD Writers, Flash Memory Drives. They will attract a concessional excise duty of about 5%. Computer manufacturers located outside excise-free zones, will not be impacted as they will avail CENVAT credit. But those located within the excise-free zones will pass the burden to the consumer as the cost of input will now increase.


WHAT WILL COST YOU LESS
1. Nuts - like Pistachios, Raisins, Cranberry
Import duty on pistachios has been cut down to 10% from the existing 30% . On sun-dried seedless raisins, it has been reduced from 100% to 30%. On cranberry products and its juice based products, it has been cut down from 30% to 10%. 
It is interesting to note that there is a bumper growth of pistachios in Paramount Farms, the California based company, and it needs a market like India to offload their surplus. Judging from the FM's generosity, it seems the Indo-US trade talks have definitely taken a headway.


IMPACT ON THE TAX PAYER
1. Taxation exemption limit increased to INR 1,80,000 from INR 1,60,000 
2. Salaried individuals with a taxable income of up to INR 5 lakh may be exempt from filing tax returns. Form 16 issued to salaried employees will be treated as income-tax return. This is a discretion at the hands of the Centre, and it may be notified w.e.f. June 2011.


SENIOR CITIZENS AND SUPER-SENIOR CITIZENS
1. A new category for those above 80 years of age has been introduced: super-senior citizens. For them, income up to INR 5 lakhs is exempt from tax.
2. The senior citizen age limit has been brought down from 65 to 60.


IMPACT ON INDUSTRY/ SECTORS
1. CEMENT
Cement prices may rise up to Rs. 10-12 per bag.  This will add to the cost of construction, and thereby the real estate prices may increase too. The industry currently is struggling with the falling demand and increase price of the input. The fuel cost has risen by about 30%, power tariff by 12-15%, and freight cost by 10-12%. The excise duty rates are slated to be replaced by composite rates having ad valorem and specific component. The customs duty on two most important raw materials of the industry - petcoke and gypsum- are proposed to be reduced to 2.5%.
The government had earlier levied ad valorem rates on the MRP; but now this stands on the sale price. The rate of specific duty over and above the ad valorem rates negates the earlier relief.


2. EXPORT SECTOR
There  have been no relief for the export sector. Experts feel that in the light of fierce competition in international markets, some pro-export policies and encouragement in terms of protection for home currency should have been made available. 


3. OIL AND PETROLEUM
The subsidy pay-out for public sector oil companies has been increased. The industry expected a reduction on duties in petroleum products and crude oil. This is good for the companies as it reduces the impact of global prices of oil, but with no reduction in duties, consumers will still have to pay the existing prices. Two years ago, a barrel cost $24, and now it's at $110. 


4. MSME
Micro and Small enterprises were granted an incremental lending of about INR 5,000 crore through SIDBI. Last year, the government had provided SIDBI INR 4,000 crore for the same purpose. The industry expected an outlay of INR 7,000 crore.


5. SEZ
Bad news for SEZ developers and units, as they now have to pay a Minimum  Alternate Tax (MAT) at 18.5% from their book profits from the next fiscal year. This development annuls all the exceptions specified under the ambitious SEZ Act. The fine print of the Budget however aims at developing a scheme where the SEZ units and developers can obtain tax-free receipts of services and get their refunds in a hassle-free manner.


6. Infrastructure
Undoubtedly, the single most budgetary provision for more access to foreign funds for making roads and highways, the government has allowed NHAI (National Highway Authority of India) to raise INR 10,000 crore through tax-free bonds. This higher FII limit is welcomed by highway developers. FIIs can now invest in domestic construction companies in unlisted bonds, with a  minimum lock-in period of 3 years. The MAT is increased from 18% to 18.5%. In all, INR 30,000 crore outlay is given to the Infrastructure sector. Bifurcations are as follows:
NHAI - INR 10,000 crore
IRFC - INR 10,000 crore
HUDCO - INR 5,000 crore
Ports - INR 5,000 crore


7. Iron & Steel
The Steel industry is content as stainless steel scraps are fully exempt from customs duty. The government has hiked the duty on all variants on iron-ore. Iron ore miners are burdened by 20% of export duty. Iron ore is a precious, fast-depleting natural resource. The government is fully exempting iron ore in a pelletised form so as to encourage the value addition process for fines. 


8. Shipping
The Government has provided for duty free import of spare parts for shipping companies. Earlier, only shipyards were allowed duty free import of spares. Small shipping companies will benefit from this move as they now no longer would have to depend on the shipyards for their requirements. Coastal shipping service operators also welcomed the abatement in the service tax. They are subject to 18.5 % of MAT, though. Out of the INR 30,000 crore outlay to the infrastructure sector, INR 5,000 crore is dedicated to the ports. 


Other Major Developments/ Concerns/ Attempted Policy Reforms of Budget 2011-12 


INFLATION
Excise duty is waived for food and agro-based industries, which involve a large range of equipments used in the sector. Storage facility, warehousing and logistic concerns are also addressed - the government plans to create modern facilities. Mega Food Parks are to be created: 15 during 2011-12 over an expense of INR 400 crore.


BLACK MONEY
The government has suggested the following superficial program to track down black-money:
1. Create an appropriate legislative framework
2. Set up institutions dealing with illicit funds
3. Develop systems and impart skills to manpower for effective action.


AIR INDIA gets a cash injection of INR 5749, out of whic INR 1200 crore through budgetary support, and the remaining is through resource mobilisation. AIR INDIA reported a loss of INR 3472 crore in 2009-10 and INR 5,672 crore in 2008-09.