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Monday, 10 June 2013

Ideas about the budget and a few suggestions to boost the economy -- As written on 4th Feb 2013

I am having a diesel car for my own use but I do not mind if you increase the price of diesel to the extent that the companies who produce diesel at least do not make a loss. But besides a rise in inflation that would influence the decision to raise diesel prices, the decision should not burden a class of society that depend on it, raising interference from your allies. Alternatively, I can suggest that you increase the excise duty on diesel cars to compensate for the one lakh crore subsidy presently being paid by the government on diesel. Although lobby of diesel car manufacturing companies would not leave any stone unturned to stop you.

 My wife is very happy that the LPG cylinder that she uses is in fact 70% cheaper than its actual cost. I don’t mind if you tax her by raising LPG prices to the extent that LPG producing companies make a reasonable profit. I am certainly in favor of making LPG available to below middle class at a cheaper rate. You have to find out a solution for this. Just like you have put a cap of 6 cylinders per year per family, similarly LPG can be made available through ration shops at a cheaper rate.

 For the last 5 years Gold across the globe has been mis-marketed as a hedge against currency or country. I don’t know the real statistics behind it. But I know it has become the major culprit in economical growth of my country. As per Mr. C. Rangrajan  current account deficit has risen to 4.6 % in first half of current fiscal due to massive imports of Gold. It is a non productive investment. Thus you must raise import duty on Gold as huge budgetary deficit has become a major hindrance in growth.

 I got to know that out of our total population of 125 crore people there are only 3.25 crore tax payers. Out of this only 12 lakh people fall in the category of Rs.10 to 20 lakhs Income per year and just 3.5 lakh people in the bracket of the above Rs.20 lakhs Income per year category. These numbers of tax payers are less than 27.33 lakhs population of your very posh neighbourhood South Delhi alone. In 2000-2001, 2.5 crore people paid taxes. This number exceed nominally to just 3.24 crore tax payers in 2010/2011. Also our per capita GDP grew to USD 2000 last year compared to USD 450 in 2001. Therefore, widening your tax net would be a wise move. 45% of USA citizens pay taxes as opposed to only 3% in India.

 I am as fearful as you are citing the chances of our ratings being downgraded to Junk status by International Rating Agency. But I, probably like you, am masking a brave face but praying that it does not happen.  Therefore you need to kick start the investment cycle once again and do its fiscal consolidation soon.

External Debt has skyrocketed. Our foreign exchange reserves cover 80 % of our debt presently as against 110% just three years ago. You need to encourage exports by leaps and bounds.Faster implementation DTC AND GST would be a boon to the country. It is understood that Implementation of GST alone will add 1 % to GDP.

Since you do not provide any social security to retired people thus you should raise deduction under 80cc to 3 lakhs against 1 lakh now.Capital gain tax in shares has been a bone of contention between assessing officer and assesse. You should clarify short and long term capital gain tax. It will stop undue litigation and corruption.

 As written on 4th Feb 2013



Thursday, 30 May 2013

Three Wheelers VS Four Wheelers (Small commercial and passenger Vehicles)




3W’s
4W’s
Price
1.25 lacs – 1.50 lacs
2 lacs – 4 lacs
Average
35 Km/Lit
28-20 Km/Lit
Cost
20 Ps/Km
2 Rs/Km

Three Wheelers way ahead:

·        3W’s have a much better access than 4W’s in India. The roads in the small towns, small cities, rural and semi rural areas very narrow but the 3W’s can roam easily without any problems.


·     Three Wheelers are even better for their service. Good technology is used in the 3W’s which is so simple that the driver can service it himself. The driver can become a half engineer on the spot thus saving his time and earning some more livelihood. Whereas 4W’s have to be taken to the service centers. The drivers have to pay for their maintenance, fees and also their time. The maintenance cost in 3W’s is negligible compared to the maintenance of a 4W. Hence more losses are incurred with 4W’s.


·         The Re-sale value of the 3W’s is considerably better than the 4W’s.


·    The dealer margin in 3W’s is also more than that of 4W’s. The small 4W’s are dependent mostly on the spare part sales and servicing.


PS: Written on 23rd April 2013

Wednesday, 29 May 2013

Index will reach 50,000 in the year 2017- Written on 4th Feb 2013

Stock market touched an all time high of 22,000 index in the year 2008. But, just after that in 2009, it collapsed to 7,500 approximately. In no time it dramatically recovered after 9 months and crossed 15,000. After the low in the stock market that was observed in 2009, today index is range bound and market is revolving between 15,000 and 18,000 since three years.

It seems the turning point of the Indian economy was in 1990. Somehow it is observed that the year 2012 has also faced similar situations but at a more developed level as there was a tremendous growth in the Indian economy from the year 1990 to 2012.

It was observed that in the past five months, index reached 20,000 and it is stabilizing at the same point. It seems to be the kissing distance from its all time high in 2008. There is no doubt that the economy has grown above 6 per cent year on year continuously from 2009.  It has made a range in the higher level of the index. 22,000 and 7,500, both were extreme points even though index has made an edge above 15,000 for more than three years.

It is estimated that at this point market will consolidate at an index point between 18,000 to 22,000 for next 12-18 months. After that it is likely to break free violently and make a substantial high of more than 22,000 approximately. I feel that by the year 2017, index will touch 50,000.


From a different point of view, violent equity bull run has started all over the world from 2003 followed by crude, real estate, bullion and currency.  Each of these saw a period of rise and then finally busted. It is estimated that from here the investments will be diverted back to equity considering currencies as the last bull market. Again a new cycle will start in the bull market. I feel that it has already started which should not last less than the tenure of five years of last bull market from the year 2003 to 2008. 

PS: Written on 4th Feb 2013