Indian Agriculture Growth pegged at 3 percent

Planning Commission member Abhijit Sen today sounded more optimistic than the PM's Economic Advisory Council with his projection that the agriculture growth would not be less than three per cent this year.

The Prime Minister Economy Advisory Council (PMEAC) has projected a mere two per cent growth in the sector for the current year.

"Considering the first advance agriculture estimates of the current year along with the final estimates of last year, agriculture growth this year should not be less than three per cent," Sen said after releasing a report on food prices compiled by an international agency Oxfam India.

Earlier in August, PMEAC had projected the agriculture production to grow at a lower pace of two per cent in the current year as against 4.5 per cent in 2007-08. The reasons for the slackening projections were higher base and uneven spread of the South-West Monsoon in July.

Noting food production, Sen said as per the first estimates, rice and soybean output is expected to be more, while other cereals lower than last year.

"Overall, agriculture growth during the 11th Plan period would be fairly good at around four per cent," Sen, who is also an agriculture economist, said.

In the last three years, the average agriculture growth has stood at 4.2 per cent and "we will achieve more than the set target of four per cent by the end of the 11th Plan," he noted.

On huge hike in minimum support price (MSP) under UPA government, Sen said MSP was increased at a lower rate by Rs 10 to 20 per quintal by the last government because stocks were high. Whereas now, MSP is increased as stocks are very low.

Source - Agencies

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Govt may relax foreign investment norms in banking, telecom

Government is considering relaxing norms for foreign investment in sectors like banking and telecom by treating portfolio FII investment outside the sectoral cap.

At present, foreign direct investment (FDI) and foreign institutional investments (FII) are added to determine sectoral foreign investment cap in banking, credit information companies, broadcasting, commodity exchanges and telecom.

also read - How US economic recession occured

But, with RBI allowing FIIs to acquire shares in companies under the Portfolio Investment Scheme (PIS), the government is now likely to mandate that sectoral caps would henceforth be for FDI investment only, official sources said.

In sectors with caps, the balance equity would specifically be beneficially owned by/held with/in the hands of resident Indian citizens and Indian companies, owned and controlled by resident Indian citizens.

FIIs investing under PIS shall not seek a representation on the board of directors and they will have to give a self- declaration whenever they act in concert with any of the companies that they have invested in.

also read - Why Global economy is fluctuating

Sources said investments by registered FIIs under PIS are made under Schedule 2 of the Foreign Exchange Management Regulations and are distinct from FDIs which are made under Schedule 1. FIIs are also permitted to make investments under FDI Scheme under Schedule-1.

PIS cannot cross 24 per cent in any company. At present, banking and telecom have 74 per cent foreign investment cap (FDI plus FII), which would, after the policy is accepted by the Cabinet, be changed to 74 per cent FDI.

also read - Fall of US fnancial Institutions

Similarly, 20 per cent FDI plus FII limit in FM radio would now be 20 per cent FDI cap, while 49 per cent FDI plus FII in cable network, direct-to-home commodity exchange and CIC would be changed accordingly.

Indian Government to inject more money into market

Finance minister P Chitambaram said that government of india is ready to inject more money into tumbling share markets as indian stock markets took a blood bath during intraday trading. sensex closed 3.9% down after falling a whopping 9% in intraday trading.

Also read : The hidden story behind US recession

Panic gripped the stock and foreign exchange markets on Wednesday as a global financial turmoil intensified worries of a recession and sent stocks reeling worldwide. India's main BSE share index fell more than 8 percent at one stage to its lowest in two years, but recouped partly to be down 3.8 per cent by 0911 GMT.

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Foreign funds have pulled out a net $9.9 billion from Indian shares this year, after ploughing in a record $17.4 billion in 2007.

"I am hopeful investors will start coming to the market," Chidambaram said. On Monday, the Reserve Bank of India announced a surprise half a percentage point cut in the proportion of deposits that banks must keep with the central bank.

Also read : The hidden story behind US recession

The reduction, which is expected to release Rs 20000 crores ($4.1 billion) into the banking system, was intended to alleviate pressures on local markets due to the global financial crisis, RBI said. The government eased norms for foreign borrowings by companies, while the capital market regulator relaxed rules for indirect investments by foreign institutions in stocks.

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Indian and Gulf real estate market is best

According to a survey conducted all over world on real estate market the following results were taken:

The real estate markets in the Middle East will outperform all other regions in the world while India and China will be the key drivers of the sector in the Asia-Pacific region, according to a new survey.

The 'Investor Survey Sentiment', conducted by global real estate consultancy Jones Lang LaSalle in association Cityscape 2008, the real estate exhibition currently under way here, found that while the UAE will offer the best performing real estate market in the next couple of years, Saudi Arabia will be the next best performer.

The results of the survey were arrived at after taking the views of 350 developers, sovereign wealth funds and high net worth investors, Jones Lang LaSalle said in a statement.

Over 50 percent of the respondents believe the real estate markets in the Middle East will see the strongest performance of any region worldwide over the next two years.

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India and China, too, have a strong outlook with 20 percent of the respondents believing these two markets will make the Asia Pacific the best performing market.

"Sentiment is a critical component when considering the health of any market," Blair Hagkull, Jones Lang LaSalle's managing director for the Middle East and North Africa (MENA), said in the statement.

"It is an important barometer, a key assessment criteria for any investor and the ideal gauge for considering future prosperity," he added.

The survey, according to the consultancy, is the most up-to-date as it was conducted after in the aftermath of US investment bank Lehman Brothers' collapse.

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According to the survey, investors in the region are least positive towards west European real estate markets, with only 3 percent expecting this to be the strongest performing region.

Most Middle Eastern investors do not believe the US and European markets will witness a major improvement in performance in the short term.

The Middle East is expected to be one of the regions least affected by current global economic turmoil.

The survey found that though North America would be most affected by the crisis, it could also provide the most opportunities for value purchases over the next two years.

"There is a clear inverse relationship between strongest performing real estate markets and those economies expected to be most impacted by current global economic environment," the Jones Lang LaSalle statement said.

Investors also believe that, apart from MENA, emerging markets like Asia-Pacific and Eastern Europe will also be least affected by economic crisis.

With UAE expected to be the best performing market, investors remain particularly confident of growth in Abu Dhabi.

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Almost a quarter of the respondents said Saudi Arabia would offer the strongest performing real estate markets, driven by a large and rapidly urbanising population and new legislation, which is opening up of real estate market.

Apart from the UAE and Saudi Arabia, Qatar emerges as the best performing market in the Gulf Cooperation Council (GCC) with less investors expecting Bahrain, Kuwait or Oman markets to perform the most strongly.

"The Gulf region offers strong relative international value with active buyers in the region generally looking to transact at 8-8.5 percent yields for prime commercial operating assets and slightly higher for hospitality products," Ian Ohan, head of investment transactions in MENA at Jones Lang LaSalle said in the statement.

"Investors are looking for strong capital growth in Abu Dhabi, the kingdom of Saudi Arabia and Qatar, reflecting their robust economic potential and more nascent stages in the real estate cycle."

He, however, added that though this was consistent with recent market evidence, it was likely to bow to upward pressure as the cost of debt rose.

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According to Ohan, asset pricing in the region is increasingly being underpinned by cash flow valuation, reflecting a shift from development-led to capital-based real estate markets.

"We are anticipating greater transaction activity as sellers' value expectations begin to more closely resemble income valuations as debt markets tighten and speculative exit opportunities decline," he said.

India's Forex reserves in trouble - Goldman Sachs

Decline in capital inflows as a result of ongoing global financial turmoil may see India's foreign exchange reserves depleting by $ 39 billion during 2008-09, says a report by global banker Goldman Sachs.

also read : US recession - Why it happened

India's foreign exchange reserves, which were around $ 310 billion in March 2008, have been declining steadily and may go down to $ 271 by the close of current financial years, the report said.

The decline would mainly be on account of rising current account deficit, it said, adding "capital inflows fell to $ 13.2 billion (in Q1 2008-09) from $ 17.3 billion in Q1 of 2007-08 and $ 25.4 billion in the previous quarter (Jan-March)."

As per the latest RBI data, the country's foreign exchange reserves declined to $ 292 billion as on September 19, 2008, which can be attributed to higher trade deficit and declining portfolio investment.

Pointing out that the current account deficit will remain high during the year, the Goldman Sachs report said, "it would be a bigger concern with oil at $ 150 a barrel than at current prices."


also read : US recession - Why it happened

It further added, "with oil prices coming off substantially, one of the biggest threats to the current account deficit has been alleviated."

Even in the event of a sudden stop in capital flows, the report said, country's buffer of forex reserves would be sufficient to fund the current account and external debt payments.

At $ 271 billion in March 2009, the report said, the country would have sufficient reserves to meet 10.3 months of import bill, down from 15 months of imports in March 2008.


also read : US recession - Why it happened


.

US Recession and effect on India

American international Group popularly known as AIG is world's biggest Insurance provider but it ran into crises in mid september 2008 when it showed signs of cashlessness (having no cash reserve at all). Everyone was surprised when the news of AIG going for sell off came open and it spread like fire in a forest. soon the news reached fed reserve(Federal Bank) and it had no other option then investing in AIG by giving it loan of US$ 85 billion and purchase 80 % stake in world's largest insurance provider.

also read : Biggest US Bank failure ever


The Fall of AIG(American international Group) :

So what was the reason behind cashlessness of world's largest insurance company?? The decline of AIG started after the attack on World trade center's on 9/11 by terrorist groups. AIG used to provide insurance cover to world's biggest organizations and was running soundly until the credit crunch and mortagage crises began to start in US economy, various US investment banks like Lehman Brothers(158 years old institution), Merill Lynch, Morgan Stanley, Bear Sterns etc . provides loans in real estate. US public wanted expensive houses which were beyond their budget. US banks gave them loans thinking of gaining more profits from the interest rates which they will get on loan amount however they overlooked the most important condition which was "whether the customer is eligible for purchasing house which was out of the budget for him/her" still they gave the loan which eventually was never returned back to the lender bank.

Now small mortage banks which felt the pinch of credit crises earlier took loans from bigger banks in order to sail their bank to shore in these tough times when their was almost zero income for small mortage banks, now big investment banks like Lehman Brothers, Merill Lynch, Morgan Stanley, Bear Sterns gave loan to these much smaller banks which were facing credit crunch at that time thinking that they will get batter rewards for the investments made in mortagage banks.

To insure their loan to smaller banks they insured their investment with insurance company AIG in particular. Since AIG was dealing with much bigger banks the risks were even higher for insurance companies like American international Group(AIG). Now bigger investment banks never got their money back from smaller mortagage banks and their amount was dead. so the bigger banks could not pay the premiums to insurance companies and this was the time when insurance companies started helping them according to the terms and conditions of the insurance type done with the banks, during this time there was no source of income for insurance companies like AIG.



also read : Biggest US Bank failure ever


This was the time when the cash reserve of Insurance companies reached almost nil. Investment banks which had invested in Credit crunch facing mortage banks were already on verge of bankruptcy. US citizens lost their faith on Financial Institutions and began to sell their shares, the environment of investment bank stocks was discouraging. Share Markets all over the globe felt the heat and all the major indices including DJIA, Standard and Poor index, NASDAQ, BSE, NSE felt drastically.

Hence Federal Reserve bank had to act fast to control the situation and offered loan of US$85 billion to the AIG for improving it's financial conditions, due to this act Fed reserve acted as last hope for many other banks.

Looking at present uncertainity the US government has made an announcement for providing a US$700 billion package to the financial market so that the US $ remains the strongest US economy in future too. but their has been resentment in citizens of USA when they heard about the news that US government is pumping money earned from taxes into the Financial Market to control global uncertainities .



also read : Biggest US Bank failure ever


my fingers are crossed when it comes to question "will supremacy of US $ continue after worst economic depression after the depression of 1929". lets wait and see how things unfold in coming couple of months.

Recently markets tumbled most due to biggest US bank failure in history(Washington Mutual).
Read about Washington Mutual Failure now!
Other top stories

How cos like Lehman Brothers become bankrupt:-

How can a bank like Lehman go down so fast?

ans- Financial markets can be punishing and reversal of fortunes can be dramatic. More so, if an institution is overleveraged — when loan and investment books are much, much bigger than its capital.

What compounds problems are strange accounting practice and high-risk nature of the loans and investments.

There are also disclosure issues: Lehman, in its last conference call with investors, gave no clue that it was actually on the brink.

------------------------------------------------------


How did the crisis build up?

ans- An investment bank uses its proprietary book (own money) to lend others and invest. It started with the subprime crisis. Banks like Lehman, buy mortgage loans from other banks, and then package them to sell bonds against the loan pool. Often they add cash to make the loan pool more attractive, so that the bonds can be sold at a higher price.

Suppose mortgage was earning 6%, these bonds are sold at 4%. The difference is the spread which the investment bank earns. By selling these structured bonds, it raises money and frees capital. But when homebuyers started defaulting, these bonds lost their value. It all began like this, and then the virus spreads across markets.

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But don’t investment banks play advisory role?

ans- They do, but slowly over the years, their prop books have multiplied.

Investment banks also organise big loans for their clients for funding acquisitions.

At times, investment banks take positions, only to palm off the securities to other clients and banks.

In a crisis, they may not get the opportunity to down-sell such positions. This adds to the panic.

------------------------------

Can’t central banks step in to stem the crisis?

ans- Well, they can and they have, to an extent. It’s precisely to discourage banks and bond houses from selling securities to generate liquidity, Fed has relaxed the rules under which it lends to institutions against securities.

Moreover, if there’s a financial chaos of this magnitude, banks refrain from lending each other, fearing that the money would get stuck.

A liquidity window from the central bank thus comes handy.

-------------------------------

How does the domino effect play out?

ans- Suppose Lehman faces a redemption and has to repay another bank it has borrowed from.

If it sells the mortgage-backed bonds, whose prices have fallen, it will not raise as much as was earlier expected.

So, it sells some of the other good assets or bonds which may have nothing to do with mortgages.

But since the bank starts dumping these assets, prices of these bonds also dip.

This is when the crisis spreads from subprime to prime.

---------------------------------------

How does it impact the balance-sheet?

ans- Herein lies the strange accounting of bonds and derivatives like mortgage-backed securities. All banks are required to mark-to-market (MTM) their investments.

So, if the price of an instrument falls, the difference between the price at which it was bought and the current market price has to be provided — meaning, it has to be deducted from the earnings.

So, a drop in price leads to the MTM loss. But there’s a bigger problem which really has deepened the crisis.

An MTM loss can be provided only if there’s a ‘market’. How do you provide when there is no market?

--------------------------------------------

But aren’t these instruments traded? How can the market suddenly vanish?

ans- Remember, it’s very different from checking the price of a stock from a stock exchange website. Many of the instruments are over-the-counter derivatives, which are struck on a one-to-one basis between two parties.

Suppose, a derivative is linked to variables like the yen-dollar rate, and may be prices of other actively-traded assets, say gold price and US Treasury bill.

What the bank does is construct a model, feeds the available market price of these variables in the computer, to arrive at what the market price of the derivatives could or should be.

This is an artificial model-generated price. This is called the mark-to-model against mark-to-market.

-----------------------------------------

So, what’s wrong in that?

ans- The trouble is when the bank actually goes out to sell the derivatives, it discovers that there are no takers. And, even if there are buyers, they are willing to pay just a fraction.

In other words, there is a sea of difference between the price that is being offered in the market and the high artificially-generated price thrown up by the model.

So, when the bank ends up selling the instrument or unwinding derivatives, the loss suffered is far in excess of the mark-to-model loss.

Such extra losses on thousands of securities and multiple portfolios can wipe out the capital of the bank.

--------------------------------------

What is the nature of the instruments?

ans- There are collateralised debt obligation (CDOs), credit default swaps (CDSs) and all kinds of derivatives. CDOs are asset (or loan)-backed securities, while CDSs are like a guarantee.

Say Bank A lends to a corporate but is unwilling to take the full credit risk. So, Bank A enters into a CDS deal with Bank B; under this, Bank B promises to pay Bank A if the corporate defaults. The money that Bank B earns for this is the CDS premium, which is similar to an insurance premium.

Now, if markets turn choppy, risks go up and so does the CDS premium. So, Bank B, which is earning a lower premium has to promote a mark-to-market loss against the CDS position.
--------------------------------------

How does one minimise such turmoil?

ans- No easy answer to that.

Maybe, some of the accounting norms need to be changed, so that the definition of MTM gets narrowed down.

Besides, to stop banks from going overboard, capital requirement may have to be raised for derivatives position.

But all this may be easier said than done.

- economictimes.com

Rupee posts biggest fall in a decade v/s US $

The rupee posted its biggest fall in a decade on Tuesday, hit by risk aversion and banks arbitraging a weaker offshore rate, although suspected central bank intervention stopped the slide just short of 47 per dollar.

The partially convertible rupee ended at 46.89/90 per dollar, off a trough of 46.99 which was its lowest since July 24, 2006.

The rupee fell 1.8 percent from its close of 46.05/06 on Monday, its biggest fall since May 14, 1998, according to Reuters daya, when the currency fell 2 percent after sanctions were imposed on India for its nuclear testing. One-month offshore non-deliverable forward contracts were quoting at 47.15/25, weaker than the onshore rate, indicating a bearish near-term outlook for the rupee.

That also created an arbitrage opportunity, where the dollar is bought against the rupee in the onshore market and sold in the offshore NDF market to exploit the price differential. "There are no (dollar) sellers in the market apart from the central bank. There is lot of oil, equity and NDF-related dollar demand, and even importers are covering near-term imports," said Madhusudan Somani, associate director of financial markets at Yes Bank.

"The rupee may test 47.20-25 levels in the near term," he added. Dealers said the central bank was seen selling dollars to halt the rupee's sharp decline, but sales were offset by demand for the US currency. At its low on Tuesday, the rupee was down 6.5 percent in September and more than 16 percent in 2008. Dealers estimated the central bank had sold $1.5-$2 billion to put a floor under the rupee on Tuesday.

Indian shares pulled out from a nosedive to end almost level on Tuesday after they had opened down 3.5 percent. Capital outflows from the local shares so far in 2008 total a net $8.4 billion, including $1 billion in September, a sharp turnaround from a record net inflows of $17.4 billion in 2007.

Traders said broad strength in the dollar versus other currencies overseas was also hurting sentiment on the rupee. The dollar steadied near 4-month lows versus the yen on Tuesday, but held gains against high yielders as investors took refuge in safe-haven assets following the collapse of Lehman Brothers.

Real GDP growth in Q1 FY 09 at 7.9 pc-CMIE

The first quarter of this fiscal witnessed a real GDP growth of 7.9 per cent which is expected to accelerate further in the second half, an economic think-tank report said.

"Real GDP grew by 7.9 per cent in the first quarter of 2008-09. We expect the economy to accelerate in the second half of the fiscal," the Centre for Monitoring Indian Economy (CMIE) said in its September monthly review.

The broad composition of the growth in the first quarter was - agriculture - three per cent, industry - 6.9 per cent and services - 10 per cent, CMIE said.

However, each of these were lower than the corresponding levels of growth in the year-ago quarter with the slowdown severest in industry, CMIE said.

"Within industry, mining and construction sectors reported healthy acceleration in growth," the report said.
Mining growth accelerated from 1.7 per cent in the previous year to 4.8 per cent in this year while in the case of the construction industry, the acceleration was from 7.7 to 11.4 per cent.

The manufacturing and utilities sectors saw a serious slowdown. "Growth in manufacturing slowed to 5.6 per cent in the first quarter of 2008-09 from the 10.9 per cent growth registered in the first quarter of 2007-08," CMIE said.

-Economic Times

India behind Pak in doing business: Report

For the fifth year in a row, Eastern Europe and Central Asia led the world in business reforms. However, so far as India is concerned, it still lags behind its neighbours on the ease of doing business.

This is the finding of the 'Doing Business Report 2009’ prepared jointly by the International Finance Corporation and the World Bank. Since 2004, Doing Business has been tracking reforms aimed at simplifying business regulations, strengthening property rights, opening up access to credit and enforcing contracts by measuring their impact on 10 indicator sets.

September Share Market Reviews

Nearly 1,000 reforms with an impact on these indicators have been captured. Eastern Europe and Central Asia has accounted for a third of them. The region surpassed East Asia and Pacific in the average ease of doing business in 2007—and maintained its place this year. Four of its economies—Georgia, Estonia, Lithuania and Latvia—are among the top 30 in the overall Doing Business ranking.

India, however, slipped two notches to rank at 122nd, below its neighbours such as Nepal , Bangladesh and Pakistan which have been placed at 121st, 110th and 77th place, respectively, in the overall ranking. One interesting fact, however, being that even the neighbours have slipped this time from their previous rankings.



September Share Market Reviews

However, Singapore continues to rank at the top on the ease of doing business, followed by New Zealand, the United States and Hong Kong (China).

Five of the top 10 economies implemented reforms that had an impact on the Doing Business indicators in 2007/08. Singapore further simplified its online business start-up service. New Zealand introduced a single online procedure for business start-up, lowered the corporate income tax and implemented a new insolvency act. Hong Kong (China) streamlined construction permitting as part of a broader reform of its licensing regime. Denmark implemented tax reforms. And entrepreneurs in Toronto, Canada, can now start a business with just one procedure.


September Share Market Reviews


For many economies the reforms captured in Doing Business reflect a broader, sustained commitment to improving their competitiveness. Among these systematic reformers: Azerbaijan, Georgia and the former Yugoslav Republic of Macedonia in Eastern Europe and Central Asia. France and Portugal among the OECD high-income economies. Egypt and Saudi Arabia in the Middle East and North Africa. India in South Asia. China and Vietnam in East Asia. Colombia, Guatemala and Mexico in Latin America. And Burkina Faso, Ghana, Mauritius, Mozambique and Rwanda in Africa.

Crude price slides below $100 a barrel

Price of Crude oil has slipped more then 27% since june 11 when it touched the highest ever $ 147 mark / barrel.

The price of crude oil produced by the Organisation of the Petroleum Exporting Countries (OPEC) has plunged below $100 per barrel for the first time since late March, according to OPEC data released here on Wednesday.

On Tuesday, one barrel (159 litres) of OPEC-produced crude stood at $98.49, $2.59 less than the previous day's $101.08.

OPEC's latest price announcement came before its decision early Wednesday to cut overproduction.

OPEC calculates an average basket price based on 13 brands produced by cartel members.

A statement issued by the Organization of Petroleum Exporting Countries issued after oil ministers ended their meeting early Wednesday said the organization agreed to produce 28.8 million barrels a day. OPEC President Chakib Khelil said that quota in effect meant that member countries had agreed to cut back 520,000 barrels a day in production over the established quota.

OPEC's statement on Wednesday noted that "prices had dropped significantly in recent weeks driven by a weakening world economy ... with its concomitant lower oil demand growth, coupled with higher crude supply, a strengthening of the U.S. dollar and an easing of geopolitical tensions." And it warned of the possibility of further price erosion, forecasting a possible "shift in market sentiment, causing downside risks to the global oil market outlook."

Oil demand from China's and India's booming economies have helped fuel oil demand and drive up prices.

At the next OPEC meeting on December 17, in Oran, Algeria, the organization would "reassess the market situation.

Since crude surged to a record $147.27 a barrel on July 11, it has tumbled by over $40, or more than 27 percent. Still, prices remain close to 14 percent higher this year than in 2007, and a barrel of benchmark crude still fetches four times what it did five years ago.

- Economic times

Inflation down by 0.2%

Moderating global crude oil prices over the past few weeks worked behind 12.4 per cent inflation for the week ended August 16.Following dip in prices of vegetables, meat and cement, it is 0.2 per cent less than that in the previous week. Finmin considered inflation figure an early sign of moderation in prices.

It went on to reaffirm the fact that prices of most items in the WPI basket have either declined or remain unchanged and the annual rate of inflation in two of the three major commodity groups showed signs of moderation

Bse Closing rates

India may save $17 bn on oil fall

India is expected to save about USD 17 billion this fiscal on crude oil import bill due to fall in crude oil prices, currently hovering between USD 110-120 per barrel after nearly touching USD 150 per barrel mark, a study said. According to the industry body Assocham's Eco Pulse study on 'Crude Economics', the oil import bill for the current fiscal would have soared to USD 125 billion had crude oil prices remained at USD 145 per barrel level.

However, with the reversal in price movement, the import bill for crude oil would be restrained to USD 108 billion, it said.
Although, experts are still not sure whether the crude price decline would sustain in coming months, but so far it has shed almost 25 per cent after peaking to an all time high of USD 147.27 per barrel in July this year.

The study noted that oil prices have nosedived mainly on account of correction in demand, easing supply conditions and stronger US dollar.
The demand in the US, the biggest oil consumer has fallen sharply from 20.7 million barrels per day (mbpd) in 2007 to 19.88 mbpd in the first quarter of 2008, the chamber said.

In April-June this year, India's oil import bill stood at 25.5 billion dollars against 17 billion dollars during the corresponding period last year.
Fall in oil import bill will also help the government to bridge the trade deficit which rose to 30.4 billion dollars in the first three months of this fiscal.

The OECD-European countries have also registered a slowdown in demand from 15.28 mbpd in 2007 to 15.24 mbpd in the first quarter of this year.
Softening crude oil prices may come as a respite to the burgeoning current account deficit growing at an alarming rate mainly due to the rising crude oil bill.

Trade deficit for the first quarter of the fiscal (April-June 2008) widened 42 per cent on account of a 50.2 per cent rise in the oil imports. The oil import bill for Q1 08 stood at a whopping USD 25.5 billion on top of USD 17 billion in the same quarter last fiscal.

The economic forces at play in shrinking demand and improving supply facilities may cool down crude oil prices further which would lead to a narrower than estimated current account deficit, Assocham President Sajjan Jindal said.
Strengthening dollar has also played its role in cooling down the crude prices. The greenback has appreciated by as much as 6 per cent versus Euro in the last three months.

-economic times

Character of Left parties - Ridiculous -On Indo-US Deal

Left Parties (CPM and associates) are playing a spoilsport in Indo - US Nuclear Deal. Which will benefit India's Power crises and can bring an end to power crises for whole country.
but Left parties are against indian interests and so they withdrew their support to UPA government as they are against Indo- US deals.

Actually Left parties are funny parties who don't know how to work for interests of the country. by seeing past of all the Comminists parties it is clear that they are always against any deal with United States of America and India, whatso ever be the motive of the deal.

I mean to say if there is a deal to take place between Indian Government and USA then Left parties would always be against them. Instead if the same type of deal is taking place between India and any other country(China or UK especially)then Left parties would have never opposed that deal under any circumstance.

In previous general elections Left parties provided support to Congress government to stop BJP from making a government at center and in 2008 they withdrew support from UPA government to stop them to finalize the INDO - US Nuclear Deal, they have no moral values and are surely not thinking in the interest of indian Subcontinent. If they have understood each and every aspect of this deal then there is no reason to act against this deal which would end Power crises in india and would enter India's name along with likes of US, UK, Russia, China etc which are developed Countries. So here the question arises

Are Left parties against Development of India as a country????

Looking at present scenario of indian politics and biased opinion of left parties on Indo US Nuclear deal the answer to above question is YES.

Left Parties have some bias on deals with Russia or UK instead of USA so they are opposing the deal without thinking about the results and the hindrance which failure of the deal would provide in growth of India as superpower which is a dream of Sardar Manmohan Singh.

What is Wealth Tax - Explained

Everyone having interest in Indian economy is fascinated by 'Wealth Tax' what it actually is??
so this post will sort every Ambiguity on this topic of wealth tax??

What is wealth tax?

Wealth tax is a tax levied on individuals, Hindu Undivided Families (HUFs) and companies who possess net wealth in excess of INR 1.5 million on March 31st of every year. The Wealth tax law specifies a list of assets that will be considered to be part of the taxable wealth of the assessee. Broadly, house property, motor cars, jewellery, cash in hand subject to limits, urban land, yachts, boats and aircrafts are the assets that will be liable to wealth-tax in India. Principally, wealth tax is levied on non-productive assets of assesses, and thus the above assets, where used for commercial purposes, will be excluded from taxation. The current rate of wealth tax is 1 percent on the net wealth of the assessee, exceeding the threshold limit of INR 1.5 million.

The value of taxable assets for the purpose of wealth tax would be their value as on the last day of the respective financial year (FY). Further, such value of assets (except cash) will have to be determined in accordance with the valuation norms laid down in the Wealth Tax Act. In determining the value of the assets, debts owed by the assessee in respect of assets chargeable to tax are reduced from the taxable value of the assets. Thus, where you have purchased your brand new Mercedes on 'easy monthly installments', the outstanding value of the loan as at March 31 of the FY will go on to reduce the value of the motor-car in the wealth tax computation. Further, while the tax base for wealth tax is restricted to individuals, HUFs and companies; their interest in partnership firms/ association of persons (AOP) to the extent such firms/ AOPs possess specified assets is included in their net wealth and subjected to tax.

Exemptions and clubbing provisions:

In determining the wealth tax liability, one must be careful in examining whether an asset is liable to wealth-tax, as there are some exemptions that are available with respect to certain prescribed assets. For example, wealth-tax need not be paid in respect of one house of an individual/ HUF or on a plot of land which does not exceed 500 square metres. Neither does tax need be paid on any residential property that is let out for a minimum of 300 days in the relevant previous year, nor on any property which is held for business purposes. Motor cars that are held by an assessee for running them on hire or held as stock in trade are also not liable to wealth-tax. The same applies to jewellery that is held as stock in trade for the purpose of business. Other than the specified assets prescribed under the wealth tax law, no other assets such as investment in fixed deposits, shares or intangible property is subject to wealth tax in India.

It is also important to note that one cannot evade wealth tax by transferring ownership of taxable assets among family members with a view to disperse the value of such assets which could subsequently reduce the tax burden. When an asset is transferred to a spouse or a minor child of the individual, or to any other person for the benefit of his spouse or minor child, without adequate consideration, even if the ownership of that asset does not lie with the individual, he will be liable to pay wealth-tax with respect to those assets. Thus, the diamonds that you gift your wife on your anniversary, besides burning a hole in your pocket, will cause you to pay wealth tax, as the jewellery is deemed to be your wealth.

Filing of returns

The Indian wealth tax law requires every person subject to wealth tax in India to file a physical wealth tax return with the Income-tax authorities by July 31 (September 30 for companies) of the year following the FY. Another factor to consider is that while Indian residents are liable to pay wealth tax on their global wealth i.e. on those assets situated outside India too, but non residents including foreign companies are liable to pay tax only on assets situated in India.