A Recession is a prolonged period of time when the nation’s economy is slowing or it is the reduction of the Gross Domestic Product(GDP) for at least six months. The producers and consumers are the two basic people upon whom the whole economy revolves. The value of goods and services is determined by supply and demand. In case the price is too high there will be less demand and the producer reduces the price to increase supply.

Increasing demand leads to an increase in the production thereby increased supply which in turn results in increased labour ,materials and overall increase in price.Now the general feeling is good. You want to make investments and consequently the stock markets go up.

Consequently this leads to overproduction and the supply exceeds consumption.Now the attitude of the people changes to saving mentality and this can lead to a contracting economy.People spotting a negative trend on one area fears the same to happen in other areas and suddenly RECESSION is on.

In a market economy the market is determined by demand and competition putting it beyond any control.A government has the fiscal and monetary policies in controlling the recession.While the former is on collecting and spending money and latter on manipulating the available money. Both can either improve the situation or worsen it.

According to the Halfway Rule past recessions lasted only for 13 months. So continuing with the trends the present recession is predicted to last till 2010.

A recession in US should worry India as it has major outsourcing deals.The strengthening rupee is another cause of concern.Oil prices coming down is at present keeping inflation down.The way out of the present crisis is only through a massive fiscal stimulus either by monetizing or by tax cuts.Indian Government is relying on private investments and resurrection in agriculture.

But the stress should be on public spending as advocated by Keynes who argued that the solution to recession is through reduced interest rates and increased public spending.

Image Credit: Azrainman

Popularity: 35%

Recently I was holidaying in US with my wife. I had the opportunity to visit various places of interest and to meet and interact with many enthusiastic Americans.

During my stay there, I observed that although a majority of the Americans were comparatively less educated than the Indians, they were very much focused; and they prioritized the national interest over the individual’s. Neither they suppress their income nor do they try to evade tax in any form. Almost every citizen there feels proud to contribute their share and strengthen the national exchequer. There could be very rare cases of corruption or malpractices.

Whereas here in India the scenario is totally different. Let us take the following cases:

• Individuals, other than those who are being subjected to TDS from salaries, whose income exceeds the taxable limit, do they file the IT Returns with their total income declared? Do we have systems where suppression of income can be detected by the authorities?
• What about the same in corporate segment?
• What about the huge amount of Service Tax being manipulated by companies and firms engaged in service industry?
• What about the huge amount of Sales Tax being manipulated by the traders?
• What about the officials with assets (both fixed and current) disproportionate to their income?
• What about the huge amount of black money being generated by politicians, business tycoons and goons?
• What about the officials awarding contracts to companies who do not have the required merits/credentials to execute such contractual works?
• What about the enormous hawala and benami transactions?

India has been classified into four segments in terms of corruption: a) alarmingly corrupt, b) very highly corrupt, c) highly corrupt and d) moderately corrupt.

Source: Ankwd.com

As a matter of fact, the evasion of various taxes by individuals, firms and companies could run into billions of rupees. In the very near future, the increase in these areas could be in geometrical progression! The sooner these issues are addressed, the better.

In simple definition, true patriots are citizens who love their nation more than anything else.

We, as patriots, should try to evolve systems to plug the loop holes in the required areas, earlier the better!

Jaago India! Jai Hind!

Popularity: 15%

On Sunday the Government released a statement saying, Public sector banks will shortly announce a package for borrowers for home loans in two categories — for loans of up to Rs 5 lakhs and Rs 5-20 lakhs  The housing sector has been in trouble in the last 6 months with very few takers for houses.

With this bailout package, the government is going to subsidize the banks providing housing finance.  I believe, instead of doing this, it should try to control the price set by the builders. 

Tell me in which Indian city will you get a flat for 5 to 10 lakhs?  It is not possible in Tier I and Tier II cities.  Or only those who have 15 to 20 lakhs cash in hand will benefit from this package.  If you take a look at the top cities in India, the real estate prices are ridiculous. In cities like Hyderabad, it is almost impossible to find a flat which is less than 30 lakhs.  If you want a flat in the city or near the city it will not cost you less than 50 lakhs.

No government employee will ever earn more than 50,000 rupees a month and 90 % of private sector employees earn less than 25,000 rupees a month.  These people would never be able to buy their dream houses if flats are available only at such astronomical prices.

Have you ever tried to calculate the cost of construction?  I know a couple of builders and I got these figures from them.  For a super deluxe flat, for a square foot, cost of construction (including the land price) will be between Rs 800 to Rs 1400.  This might vary a bit depending on the land cost.  So if an sft is costing Rs 1400, have you ever seen builders selling it for 1600 or 1800?  They will never sell it below Rs 2500. They almost make 100 % profit.

Also remember that the prices of steel and cement have come down but flat prices wouldn’t come down in the last 6 months.

If government really cares for middle class people, they should set a cap on the profits made by realtors.  Like cement and sugar, regulate the prices of houses.  Ask the builder to provide the cost of construction and allow him to make a maximum of 30% on construction cost.

Providing cheap loans to people for buying houses is a failed American policy. 

The government is encouraging realtors to keep their high margins and using the tax money to subsidize loans.  I urge the Government to increase the affordability of houses.  In all the metros there should be at least 30 to 40 % reduction in the prices of houses and apartments.

Right now the sentiment is low and reality sector is under correction.  Please allow the correction so that it can regain its health. A correction in these overhyped cities will eventually bring down the prices.  Don’t coerce it to gain artificial health by spending tons of people’s money.  If people don’t buy flats for another 6 months, and we can see the prices drop by 30 to 40%.

In the last few years, people panicked and purchased houses, as they thought the property prices might further increase.  But what people forgot or didn’t notice is that in any economy nothing can keep increasing for ever.  It took a big crisis (subprime) in a big economy (America) to prove it.  Not just the people but even banks missed this simple truth and got into trouble.

We the people of India should understand how the economy works and make wise decisions while a buying house. 

So whom is this policy going to benefit?  Definitely not the people in Metros and Tier I cities. It will benefit Tier II and Tier III cities.  Our infrastructure is not able to handle the current growth. Cities like Mumbai, Bangalore and Hyderabad have become costly. This will force builders, IT, manufacturing, and other investors to invest in tier II & III cities.  People in these cities will start investing in Houses. 

This is the only solution to offer a competitive price to the world for our product and services.

I hope one day we will have a world class infrastructure like US or Europe.

Image Credit: Kevindooley

Popularity: 17%

July 2006 – I will remember as a month in which my brother and I lost one of the most beloved friends of ours. He was vibrant, passionate and above all humane. Bright, charming and at the same time passionate about India. So much so that he let go of multiple opportunities to either study or work abroad. He did not believe in brain drain.

We used to call him as AK. AK passed away in a tragic traffic accident involving motorists. I was in London at that time and this is what I heard about the incident from my brother.

This incident happened in Hyderabad. AK was coming back from his work around midnight. He was riding a bike and was on his way to meet my brother at a common place. AK crossed one of the flyovers and was riding the bike in his usual average speed. There was another bike that was coming from the opposite direction and there was a car in front of the other bike. Without realizing there was someone in front, the bike from the opposite side tried to overtake the car and hit AK’s bike head on.

AK flew and fell onto the ground breaking many bones. The other bike had two riders. Both fell on the ground, as well with an even bigger impact. Traffic came to a halt. My brother was called in by a stranger and he arrived at the spot in 10 mins. What he saw next was a picture that would last a lifetime. My brother couldn’t believe his eyes

AK and two others were lying dead in a pool of blood.

Many days passed by. I still see that fear, anger, anguish in my brother’s eyes. I could not console him for the loss he suffered and I could not imagine the state of AK’s family and other friends. AK’s family was shattered. My brother was helpless. So were the others.

That was some two and a half years back.

The story is still the same across the country. AK was one of the many thousand victims who lost their lives because of poor infrastructure, bad governance and pathetic traffic management system.

What did the government do then ? – Nothing.

What did the government do since then ? – Nothing.

What is the government planning to do ? – Anybody’s guess.

With the recent Mumbai attacks, everyone all over the world seems to have shaken up and started some or the other campaign against terrorism.

Why can’t a similar shake up happen for our infrastructure management, our traffic management system etc which are the causes for such state of affairs ?

I would like to see a traffic system in place in India with at least the basics right. I have listed few of my wishlist here

1. Cross roads manned by Traffic Lights, Camera and Cops- Have you ever heard of a Traffic Challan being sent to your house ? I am looking at a system where traffic violators will be caught on camera and that very moment he will be sent a notice to his house with proof of the violation.
2. Separate roads for bikers and cyclists – How many bikes do you see on highways abroad and how many you see in India ? How many bike riders truly “gear up” themselves ?
3. Banning of heavy trucks into the city – Why should the industrial facilities be within the city ? Why can’t all of it move out ?
4. City roads with one-way traffic system, wherever possible within the city – In some cities I have seen dividers and in others not even that. Firstly the quality of material used in those dividers are not good. Secondly when you have the divider you have a one-lane traffic. What else do you expect ? A free way ?
5. Congestion Tax, Road Tax collected at the Point of Entry for cities – Those who want to have it easy should have to pay for it. We talk about climate change, global warming etc. Is it not easier to control it by purely reducing the traffic inflow by simply increasing the entry cost ? Look at London & New York – It costs nearly GBP 8 and USD 10 to enter the city. I am not even talking about the parking cost
6. Rigorous penalty for offenders including imprisonment, community service wherever applicable
7. Point system for serial offenders – Points?? What are they ? Our babus would have heard about it when they saw the latest Sania Mirza and Venus William match. Wont be surprised if they hired a McKinsey to understand what point system is all about. High time they bring in a system that brings in accountability
8. Driving Licence to be given after 3 months of Learners Licence – Currently it is given after 1 month. No wonder you have the extra adrenalin pumping when you touch those sensuous steering wheel. Got to stop this.
9. Learners to be accompanied by qualified adults at all time
10. Driving restrictions for certain timings
11. Compulsory reissue of Identity cards aligning to all other National Identification system
12. Strict testing procedures – both online and road test
13. Stop signals at the corner of every intersections
14. Point based insurance system for the driver and not the vehicle.
15. And of course unparalleled highways for outside-the-city traffic with multiple lanes and highway management system

The list is endless.

The point is we in India DO NOT tend to value the life of a fellow citizen. That is the root cause of all problems. If we start valuing the life of an Indian, everything else will fall in place.

Value the Life of An Indian – That is My Vision for India !

Image Credit: Ateabutnoe

Popularity: 10%

If you invest in tax saving schemes right now, you can get your money back early. For example: If you have planned to invest in Fixed Deposit which can’t be withdrawn for 5 years, if you deposit today you will get your money back in 2013 December and you can use this money for tax investment again. Where as if you save it in March, you will get it back only in 2014 March and you will have to again go in search of cash.

Most of us spend all the cash in hand all through the year and try to find some cash in March. If we don’t find cash in March then your tax plan will go wrong.

Some people are of the opinion that even if I save on 31st March it will still come under this financial year, but this is not clever thing if you are trying to invest in Tax Saving Equity linked funds (ELSS) or Public Provident Fund. You will stand to loose 4 months of interest free income.

Some of us will wait till the year end to submit the medical bills or bills of books purchased for research etc. There is a chance of bills getting lost. It’s better to submit these bills every month to the concerned department in your office.

What about the investments I have made in the financial year ?

Before making any tax saving investments, it is always better to review the investments you have already made in the current financial year. In case you have made investments through Systematic investment planning (SIP), or already contributed to PPF, add all the amounts and plan for the remaining amount.

Get your calculations right:

• For employees there is PPF and it will anyway come under Section 80C. Some employees also would have taken health insurance, life insurance, or group insurance policy. First calculate the amount you have already paid towards premium.
• For those who have taken home loan, calculate the EMI you have paid for all the months. See the interest and principal component in that. You can get the principal paid on the loan exempt under Section 80C. You can claim exemption on interest up to 1.5 Lakh per annum.
• Also take into consideration, the tuition fee you have paid for your kids (allowed only for 2 kids).
• Take into consideration all the above and then decide on the amount for which you have to do tax planning.

• After all your tax planning is done if you are falling under 10% tax bracket and tax payable is not less than two to three thousand, it’s better to pay the tax instead of making investments only for saving these two or three thousands.
• Accounts folks in your office would have already informed you the amount of tax payable. Once you have calculated the amount invested so far, return from the amount invested, and the amount to be invested, all that you need to decide is to where to invest.
• If you don’t have the appetite to take risk invest in National Savings Certificates and Bank Fixed Deposits and if you are planning to invest for long term, put your money in Public Provident Fund.
• If you have the ability to bear risk, invest in Tax Saving Funds or ULIPs.

Instead of investing your money at once, it’s better to choose SIP and invest in 5 equal installments.

Image Credit: Kevin

Popularity: 21%