Pay through Nose

A litre petrol in India would have cost us 25-30 Rupees, have been there no tax implications i.e. if we consider basic cost of petrol as 25 Indian rupees then 35 rupees approximately are the taxes and duties imposed on the poor fuel because of which it is available @ 60 Rupees a litre in retail market.


Even today the Base price of petrol is between 25-30 rupees added to which are taxes like Excise duty, Education Tax, Dealer commission, VAT, Crude Oil Custom duty, Petrol Custom duty etc, Which means we are paying effectively for 2 litres of petrol and getting 1 instead. You might have heard about buy 2 get 1 free but this one is strange and is one of its kind pay for 2 get only 1

With a recent hike of 3 rupees, the poor petrol is now costing @ 60 rupees in some of the metros; well it’s not shocking but was anticipated since the day government decided not to regulate the pricing, which implicitly gives authority to the oil marketing companies to decide upon the pricing at which the products can be made available in the market. Petrol got orphan letting marketing companies to drive it. Strange…!!! “Driving force getting driven”

Since last few weeks the entire machinery was struggling to tame the inflation to a single digit figure, Kudos!!! They achieved it recently….!!!. But the recent hike will definitely push it back to two figures. Petrol is not singled out from oil based products; instead oil marketing companies are eyeing to hike prices for Kerosene, diesel and LPG. Now as all these components have weightage in whole price index they will push the inflation.

Petrol has a weight of 0.88 per cent, while diesel has a weightage of over two per cent in the Wholesale Price Index, on the basis of which inflation is calculated and if the prices of petrol and diesel rises, inflation is bound to rise, LPG cylinder would add addition 0.2-0.3 per cent to the kitty, taking all together we can assume an increase of 1% approx in the inflation figures.

Protest, special comments and concern on the price hike has started pouring in and will gain some more momentum in a day or two once people start feeling the pinch of price hike.

I was wondering what will be the pricing of petrol once the crude oil touch the pre meltdown level i.e. 150 $ a barrel, definitely you can expect petrol costing @ 500 rupees a litre, Pray to God; it should not happen, that’s what we can do as individuals at this point of time

Image source: indianbuzzblog.blogspot.com

Ripple effect

In my earlier article (Way Out!)I have expressed that it will take some time for the realty sector to come out of the blues and with each passing day things will become tougher for everyone in the market be it developers or prospective buyers. Real estate companies and upcoming projects will be subject to stringent regulatory checks and controls. On the other end financial institutes has raised the bar for margin money to 20% from 15% earlier, which means the prospective buyers need to shell out additional 5% margin on their purchase.

Discovery of loan scam will have ripple effect and will trigger many events perpetually.

Prima-facie it is learnt that post discovery the real estate prices will decline which in turn will trigger margin calls for the developers who has placed that land banks as collateral. Developers, who have borrowed money by placing land/ project as collateral, will have to replenish margins that have fallen due to correction in overall property prices.

Real estate developers will be forced to borrow money at high cost or place more property as collateral to fill-up the lost margin. Developers will rope in money by inviting investment as a part of fixed maturity plan (FD’s) and might offer interest rates which will be obviously higher to other financial institutes. But possibility of raising funds through this route is also tougher as Real estate developers fixed maturity plan are finding few takers post meltdown and recent scam headlines have further dampened the already difficult fund raising efforts by them.

Apprehension, difficult to answer in a very immediate term, one has to wait and watch to see the market reacting, Developers will definitely explore Fixed maturity plans deposit route for funds raising by offering good interest rates. Investors who love to pursue risk can definitely explore the option as risk reward ratio will be lucrative but simultaneously should not forget to read the ratings given by rating agencies before investing.

Traffic Park

“I’m short tempered, impatient for the result” these are the known drawbacks which I’m trying to improve upon since years but the underlying fact is that one can’t change his/her nature rather improve it, and improvement is always a possibility.

It has been almost a month since my kid is requesting, to lend him my lapi; as he wanted to write down a story, but for no good reasons I was deferring. Yesterday he might have again developed zeal to write the story and decided to approach me. In normal case we adults instruct our children not to speak in between when some elderly person are talking, we also instruct them that if something is urgent they should interrupt the discussion in a polite way and seek permission to speak.

As generally kids are smart and obedient to follow parent’s instruction he interrupted the discussion politely and tried to whisper his interest in my ears.

I was annoyed; annoyed like anything. I couldn’t take whispering in right way.

I yelled at him.

I screamed....!!! tell me what’s that????, what do you want????

Broken in tears this young chap…!!! And was inconsolable.

He didn’t expected this rude response from his dad, He couldn’t speak, his face turned red and tears started rolling on his face, While weeping he couldn’t express what he intend to say and there was no connection between the words he uttered, but the only words which I could understand were “Story and computer”.

I realized my mistake that my behavior was not at all human; I apologized him, kissed him on his face and handed over the computer. He with his tiny fingers started typing his story, The last drop of his tears hanged outside his eyelids and dried away with the heat of excitement. His small palm was too short to cover the keypad, hopping from one button to another with his little two-three fingers, asking me to spell a lot of words, he narrated his story in an WordPad which goes as below.

Traffic park

“at my school in the morning we had gone for traffic park to learn some traffic sign .the sign where like this no entry, bumper, Turn. we enjoy were much one of my friend . got hart then we sit in the bus. go school back this is the wonderful day”

After reading his story and expression I realized his anxiety and curiosity was genuine and I should not have behaved like that. I appreciated his work, kissed him many times and tried to make him understand a new code of instruction “Do not whisper” Parents will be parents and they will always keep on instructing their wards

Image source: nevcoeducation.com

Way Out!

How the loan scam discovery will shape up the realty market in the future, will it be a win-win proposition in the market and how the common man should read in between the lines; these are some of the apprehension which can’t be answered in a very immediate term instead one has to wait and watch to see the market reacting.

The loan scam was busted with the allegation that few private institutes have benefited some real-estate players by compromising stringent procedure of funding and providing funding to real-estate players in return of monetary benefits. The day since this loan scam was busted the stocks of funding companies whose names was involved in the scam and the real estate player are bleeding. Stocks even breached there year low’s since the discovery came to the light.

Well there is mixed reaction from the market regarding property prices projections for days to come. With every passing day new names and new ways of misappropriation are getting exposed including writing off of bad debts and malpractices. I anticipate some new imposition from government in a very immediate term, to curb malpractices in future transactions. This will lead to tougher financing guidelines resulting liquidity crunch to real estate developers which in turn will slowdown there upcoming projects.

It is also learnt that Real estate developers are having an outstanding obligations tuning to 25,000 Crore rupees to honor, for which they can’t look back at market. Tough time for real estate companies doesn’t ends here, the Public offers which were in the pipeline to hit the market are taken a back as there is a subdued interest on investor in real estate stocks post scam, Investors are in a pause mode and it seems that real estate sector has suddenly lost its shine.

In this entire development the developers are bleeding and to honor there existing obligation they may take a decision of reducing the price for there completed and upcoming projects as well

On the same time projects with clean image will beg a premium for there upcoming and completed projects, scarcity of the new projects and premium from these developers will push the prices.

In nutshell how the market will react to this development is not very certain and if you are thinking for a dream house of yours I will suggest you to watch the situation and then take an informed decision.

Image source: princetonrealestatehomes.com

All in the name of education !!

It has been few months since the landmark discussion of “Education as a fundamental Right” came into force. Policy makers thought that Education and access to education should be for everyone and there is a necessity to declare as fundamental right. Policy makers thought that if children are nurtured and equipped with right education then, India’s future as a strong and prosperous country is secure and only education can change the face of India’s tomorrow.

Central and state Governments joined hands and left no stone unturned in launching and adhering to the new directive, initiatives were taken to ensure that no child is deprived of his fundamental right. Right from recruiting teachers (both on temporary and permanent basis), offering good pay structure as an incentive for getting posted in rural areas, Mid day meal for students and kids attending the school, freebies etc.

Apart from government schooling machinery, all private institutes were summoned for implementing the new directive. The new directives/ norms and standard stats that; All schools have to prescribe to norms and standards laid out in the Act within 3 years, failing to which they will not be allowed to function. Schools have to apply for recognition, failure to which will attract penalty of Rs 1 lakh and further functioning will be liable for 10,000 INR penalties per day.

It will be also mandatory for private schools to enroll children from weaker sections and disadvantaged communities to the extent of 25% of their enrolment. Selection of group of children will be based on simple random selection and no seats of this 25% quota can be left vacant. Children from weaker and disadvantaged communities have to be treated on par with all the other children in the school.

“Right to education” gives a sort of relief to all the patriotic souls, but on the same time raises eyebrows about the exorbitant fee charged by the private schooling institute. Private schools charge heavily under various heads be it admission fee, imprest money or caution money. I remember my good school and college days, my yearly college fees used to be less than today’s kinder garten monthly fees. I’m not telling a 50 years old story it’s hardly 10 years back proposition. Even though if I add inflationary parameters to it still it will be lower.

I wish and pray to government machinery to device some mechanism to put a upper ceiling in the fee structure. One amazing thing which I came across was a 40,000 INR deposit as caution money in the school. Didn’t get the logic....???? what assets does the school has worth 40,000 which they feel is endangered....???? against which they are looking for a collateral, Hope that this is getting heard and addressed by someone.

Image source: michaeljackson-art.com, exposenewspaper.com, willourworld.com

Inclusive growth

We as a nation boast on robust economic growth but isn’t’ our growth superficial and peripheral or have we achieved an all Inclusive growth

Economic Growth

Wealth of High net worth individuals soared drastically even though we have not fully recovered from the downturn. With economy knocking 8-10% growth rate rich yet got richer but contrary life has not changed much for a big chunk of peoples for whom the struggle for bread& butter is a never ending battle.

Unemployment

Villagers seeking better life; migrate to the cities, adding inorganic element to the growth of cities; in form of slums and load on the resources like potable water, energy, housing, sanitation and transportation. Unavailability of accommodation results in slums wherein many people share the resources, life in such slums is really harrowing and living condition extremely difficult.

Gender equality

Many of the unemployed migrated workers work on pity jobs like construction sites carrying all sorts of head load and with there children play around the site. Nursing mother taking out time in between to feed there babies and such breaks results in lower pay scale as compared to there counterparts males. Moreover women are seen as physically weaker then men and compromises on wages as compared to men.

Socio economic

Gap between rich and poor is widening, we boast on increased number of millionaires on y-o-y basis; implicitly we mean that in increase in number of poor on y-o-y basis. One side we have plush residential complexes with all the amenities and lavishness; also we have people who stay on pavement, huts on the other side, striving to meet there ends meet

Infrastructure

Overcrowded cities with denizens having higher disposable income putting a lot of load on infrastructure. Rapidly growing cities attracts lot number of people to participate in the growth story and be a part of growth as a result of which cities are running short of roads, portable water, power and hygiene, demand of power, water is constantly increasing and we are always in deficit to meet the demands.

Conclusions: Looking at this I think that the numbers can be indicators for the external world to show that we are not only alive but are growing; but these numbers do not justify growth in its entirety and are not all inclusive.

Image Source: economic-growth.info

Why food inflation!!

This being a vicious circle, difficult to find the start and end but as far as I think, IT Sector was the instrumental in rewriting the growth story of India Inc. It all started in late 80 with the growth saga of Information Technology sector; this sector started attracting the talent from the core industries, high profit margin/cash rich IT companies could leverage double, quadruple salary expectations for the experienced recruits. There were never like before demand of engineering graduates all across the country and existing machinery of colleges were not sufficient to meet the industry demand.

To meet the demand of engineering graduates, education sector started to grow as an industry in it and in the past decades ample number of engineering colleges mushroomed across the country. Now this industry is producing engineering graduates more than what they are required globally; this is my assumption.

High salary packages of IT industry apparently pressurized other sector to revise their base packages and to preserve brain drain, manufacturing and service sector followed the suite and offered good package and perquisites to their employees. The salary of the Entire private sector companies got revived and IT sector was an instrumental and trend setter for revival of the salaries for the entire India Inc. High salaries increased the leverages in terms of disposable income and people started spending on their wants.

Young graduates getting hefty packages started spending lavishly; there was spurt in demand for luxurious commodities, housing, food and clothing. As they were spending heavily and buying something or other, the related industries which were the net producers went for a head spin profits and thus the entire value chain started making money, money got mobilizing and started exchanging hands and in turn everyone getting a pie of the transaction.

Money and trend started mobilizing towards other cities and now this euphoria is all over the country; you find people with ample disposable income and lavish expenditure. Increased disposable income also pushed the demand of investment, the handful avenues everyone short listed being gold, housing and equity and the money started flowing. The soaring profits of these sector pulled many investor and money in turn; henceforth more money started flowing in the system.

Of all the favorite investment avenues, the Only demand which I believe will be hampering in long turn will be the bizarre demand of Housing, as equity and gold is something virtual and not much to do with a common man, but housing demand is something which is a basic need and “not a want” and unprecedented demand of housing will further push the prices of all commodities in the entire value chain.

To meet the unprecedented demand of housing sector agricultural land is getting sacrificed, agricultural land is rapidly winding up, though there are norms for not using agricultural land for housing purposes but hardly does it comply. In the past I have seen catchments of land which were used for agricultural purposes, lying vacant for few years and then emerging as residential colonies.

India is rapidly growing in population and so is the demand for housing, but if we keep on losing agricultural land in lieu of residential projects than the expected agricultural output will never be able to meet the demand of growing population and the commodities prices will be always inflated.

Now whom should we blame for the any of the inflation? Is it High Industry packages, aspirations or desire to fulfill the wants?

Images source : smartgrowth.bc.ca