US Banking System Collapse

The sub prime credit crisis in US is showing its effects in a very bad manner. It first started as the bankruptcy of Lehman brothers, followed by the failure of other famous institutions, like Merill Lynch, Wachovia etc.

The credit crisis has introduced a chain reaction - The sabotage of the US financial institutions - the slowdown in the US stock market - corresponding slowdown in the world market. India has been one of the worst affected due to the US slowdown.

The stock market has been on the negative for about a year and has not been able to recover majorly. The US slowdown has forced the FIIs to exit the Indian stock market, which was such a hot investment the same time last year.

Rupee continuously falling against the dollar, the stock market still yet to find its bottom, high inflation, all have become a daily nightmare for those who have invested in the market.

Singur Controversy - Not a "Nano" scale one

The first question that comes into my mind when I think of the Singur controversy is "Is it right to have chosen Singur?". This is an important question that needs to be answered so as to come to a decision on the controversy. Let us ponder this question from different views.

"Project Nano" is a very important one not only for the Tatas, but for the entire country. It aims at one of the important dreams of anyone - Owning a car. But it does not stop there. It aims to produce a car that is affordable, compact, and most importantly, fuel-economic. This project is a pride for the entire country. It showcases our country's capabilities in achieving the impossible target of producing a fully loaded car at a much cheaper price.

Thinking about the country's economic development, this project is a very big milestone. It is imperative for the country's development to occur evenly at all the places, and not just its urban locations. A place like Singur would not have been as popular as it is now. Choosing a site like Singur is one such step towards that direction.

But was the Tata group right in choosing the farm land for its infrastructure? Not going into too many details, with agriculture being our country's primary industry, choosing a fertile land for industry use is not to be encouraged. One, a trend of such kind to setup industries in fertile land is disastrous for the country. The country would face an uneven growth, with agriculture being sidelined. Two, the farmers' life would be at a stake, for they don't have any other occupation, and they would have to look for new employment opportunities. A monetary compensation might be just a relief, but not a permanent solution for them.

An ideal solution, from my viewpoint, would be one that in which the existing agriculture industry of the villages coexists with other industries. With the fertile lands intact for agriculture, using the infertile lands for other industries would help the villages grow and cater to the overall development of the country.

Helping your friend - Beware

"What's so dangerous about helping a friend?"You may ask. Yes, there is nothing so dangerous about it, but just a word of caution; A word of caution before you lend money to your friend.
Wherever money transaction comes, one has to beware of the so called "Taxman", the eternal spy in every taxpayer's life. So what is the hitch in lending money to your friend? Continue reading...

I was having an unusually detailed browsing over "The Hindu Business Line" yesterday, when my eyes fell on the article "Diluted check on the cash route". It discussed the various aspects in acceptance and repayment of loans/deposits.

The most important point mentioned was that accepting/repaying loans/deposits beyond Rs.20000 has to be through an account-payee crossed cheque or a bank draft. That means, accepting anything beyond Rs.20000 by cash attracts penalty.

There are various questions on this.
1. Is there any problem for the one who is lending?
2. The main objective of the governing I.T. section, 269SS, is to check the conversion of black money into white money. That is the reason, as discussed in the article, why an account-payee crossed cheque or a bank draft is required for transactions involving more than Rs.20000, which act as due records. Can other routes of transaction like internet banking be treated valid? Or can the rule be extended to them?

The other side of the coin - Monetary Inflation

In the past, we have discussed Price Inflation. That is what people generally perceive inflation as - the increase in price of goods. This is one side of the story, the effect of "something" as its cause.

The other side of the coin, that "something", is "Monetary Inflation". This refers to the increase in money supply, which we have already discussed as the purchasing power in our older post. With more money, the purchasing power of an individual increases, thereby increasing the demand for goods, and the inflation rate.

One cannot say that monetary inflation is the only cause for price inflation; it is one of the many important factors. The causes include factors from the social, economic and political systems and hence the analysis becomes complex.

Breaking its own record

The inflation figure has risen to 12.44% for this week. Already, rice is costing Rs.32 a Kg, as I heard. Projecting this for another year, with the same inflation rate, I see that it would have increased to Rs.36.

The worst part of calculating the future price of a commodity is that the interest is compounding. While the inflation rate is applied to Rs.32 for the next 1 year, it would be applied for Rs.36 for the following year and so forth. :-(

Truly, inflation is breaking its own record (our head too) each week!!!

Driving me crazy

Alto, Wagon R Duo, Santro, Omni, Maruti 800... The list goes on. Looking for a "fuel efficient" Alto, "ever performing" Santro, "dual fuel" duo, "take all" Omni, "bike priced" 800, i have gone an entire round.

Having not a penny to waste, thanks to the ever increasing inflation and petrol price, it has become so complex to choose a car. The cars are driving me crazy!!!

Price Inflation

When we talk about inflation, we usually refer to the increase in the price of commodities. This is called "Price Inflation". But what causes the price to increase?

Let us have an example. Suppose today, we have only 100 rupees in hand. We can spend only for 100 rupees maximum. But if we have 1000 rupees, we can spend that entire 1000 rupees. Hence our purchasing power has increased.

On the other hand, in case we don't have enough options to spend, i.e., if the consumables are less in quantity compared to our purchasing capacity, demand would start increasing for the consumables, for people would be ready to shell out more money for something that cost less in the past. This causes price inflation, wherein the price of the commodity would start increasing.

Inflated Balloon or the air inside it?

Is an inflated balloon and the air inside it are same? No. The air inside the balloon is just the cause, and the inflated balloon, its effect. Inflation is similar to that. Inflation is not price rise as many of us think. Inflation is a phenomenon whose effect is a rise in price of commodities.

Inflation - The killer

One of the hottest topics discussed these days, INFLATION, is at about 12%. It has been hovering above 11 for quite some time and seems not to cool down. How do I, as a common man, find it important in my day-today life?