Is it a good time to invest in equities?

'Every time someone buys in a market, there is someone else on the other end who sells it. And the beauty is both think they make are making the right move in the market' - This is a famous ironic saying about the stock markets. 'Timing' in the market is something you would have to perfect and that comes with experience. So, when do you 'Buy' or 'Sell' in a stock market? There are people who have burnt their fingers pouring there entire savings into stock markets, pretty much like pouring the plastic currency into a full blown well. And everyone knows what would be the fate of your plastic currency.

We will look at a few examples to time the market.

1.If someone had invested in market in the early 2007, might have laughed all the way to bank with a 55% return on his investment in mid-2008. That is, his 100 rupee investment would have been all the way upto Rs.160.

2. If the same guy had invested the same amount in early 2008, he might have had a negative return on his investment of 40%. That is his 100 rupee investment would have come down to 60 rupees by the end of 2008.

So, its all about timimg the market, knowing the complete view of the stock you are about to buy and its perceived value in certain time frame and not to forget your own target towards your investment. Markets were just pummelled right from the start of 2011 and there is a general state of gloom in the market. Sensex and Nifty is down 13% for the YTD and many believe its a fair value now. But if its fair value, then the probability of 15 to 20% return this year is a tricky one.

Also, think about your equity(stocks and Mutual funds) exposure wi.h relation to your age. There is a belief that your equity exposure in your portfolio should be 100 - current age. So, if you are aged 40, your equity investments should be 60% in your investment portfolio.

On a macro-ecomonomic scale, India's fiscal deficit could be one of the biggest problem going forward this year. You just cannot run the government with debt and then hope for growth too. The reason is fiscal deficit is the percentage of the GDP which reflects government debt obligations. So, the government finances its needs with loans from the central bank. so, what happens is the private sector 'Crowding out' happens. That is, private sector capital needs for expansion will be possible only at a higher interests., as logically government would be preferred creditor to any banks, reason being their money is safe and repaying capacity is bright with the government.

So, unless the fiscal deficit is down, the private sector growth is always limited and this impacts the overall economic growth. So, economic growth being less, the company revenues is less and this in turn reflects in low profits for the companies. Obviously, low profits will conclude towards low share price in the markets. This is how fiscal deficit impacts growth.

Another side to it is the inflation. Higher inflation, leads margin pressures due to higer input costs and so the profits become lesser. So, bothe inflation and fiscal deficit greatly influences the market price. India's fiscal deficit this year could be arounf 4.5% and as you all know we have a sky-rocketing inflation (although early signs of tempering is on the anvil). So, that is the reason for the recent butchering in the dalal street in the last couple of months.

So, now that the stock markets have greatly corrected , this could be a best time to buy in the market. Sensex is expected to cross and close the year at around 21,500 and that translates to a double digit return from the market. And if you are not highely knowledgable in the market, you can take the Mutual fund root with Systematic Investment Plans.

So, invest in companies whose fundamentals are good and you the performance of the particular company. Otherwise the safe root is mutual funds. So, hapy investing in 2011 and this just could be right time to do it in 2011. And remember, you must have the final say in your investment and just nobody else, not even any third-party broker, as its your money that is being invested.

Indian IT companies - Time for a change in operating models

Indian IT services companies have been the darling of the masses for about a decade now. The clean and transparent administrative models that they brought to the table was quiet refreshing in the early 90's albeit much was from the corridors of the elite American industry. The large talent potential in India was attracted by the huge salaries that were been offered by the industry if you were a techie. Yet, rigorous entry criterion and high merit-based selection interviews models were used by the top management to hire employees.



The unique and highly profitable offshore-onsite was a win-win situation for both the Indian IT vendors and the clients. Since 95% of the revenues came from exports, the industry was able to achieve 25-30% as Profit After Tax(PAT). The geographical spread was as such that USA contibuted 65% of the revenues and Europe around 30%.This meant that the currency fluctuations was never a headwind. So, IT companies never really bothered about hedging practices. The traditional ADM model(Application Development and Maintanence) was bread and butter for most IT vendors. The companies kept bringing out customer specific outputs and never really focussed on R&D for customized services and tools which needed domain experts.



The economic crisis was a watershed moment for Indian IT industry. World economics have seen a sea change and the share of developing countries in the world economic growth is rising and will have an exponential growth in the years to come. The world is slowly changing and so should the Indian IT pack to sustain their growth. Its no longer the US and Europe markets. New markets like China, India, South Africa, Brazil and Russia should be the focus in the years to come. New markets mean new and diversified customer whose needs could be vastly different from say a client in US or Britain. So, careful study of these markets is critical for gaining a foothold in these geographies.



India is a growing economy. With growth, the choice for employment will also increase for the local skilled workforce. Already, many sectors like Infrastructure,tourism and financial services are seeing robust growth in India. So, young Indian graduate will become more choosy about his dream job with the attractive offers from many sectors. This in turn will only push the salaries demanded by the skilled workforce. So, margins of the IT companies could be hit due to higher salaries. Dont forget, one of the main reasons overseas clients flock towards India is due to their low salaried workforce. Higher salaries mean lesser profits for the company. This could be the major problem for the Indian companies going forward.So, carefully caliberated approach is needed on this account. Otherwise, the profit margins as in pre-2008 levels will become history and will never be achieved again.



The next big challenge is the ramp-ups that needs to be done in the R&D platform. Right now, Indian IT companies spend on an average 1% of their revenues towards R&D. More customized IT products should be delivered to catch up with the likes of the Microsofts and the Googles of today.New and emerging markets like Infrastructure, high-end defence and government sectors should be fostered apart from the known culprits like BFSI and retail.



So, change in approach should be the main focus for these doyens of the Indian industry to stay afloat and capture many more deals in a more competitive world with other rivals

Sachin Tendulkar's new bat

Sachin Tendulkar and his MRF bat have been synonymous for the past 13 years. It was a big hit among young kids and parents literally bought MRF bats, so that there kids will also become a Sachin Tendulkar. But now, after 13 years of association with MRF, Sachin Tendulkar will sport a new bat. Adidas will sponsor that bat and Sachin's bat will bear its name on it.

Sachin Tendulkar is playing active cricket after a long well deserved rest. He played his last cricket match in South Africa in IPL 2 for Mumbai Indians. He said during the function that ODI's should be more innovative if it wants to survive the T20 assault. He also said that he hasn't thought about retirement yet.

Apparel major Adidas today announced its foray into cricket equipment business in the country and said it plans to become a leader in the over Rs 100-crore organised cricket gears market in the next five years. The company's long-standing brand ambassador Sachin Tendulkar was the main design advisor for the new range. During the first two years, Adidas is aiming to capture at least a double-digit share of the organised cricket equipment.
The marketing campaign for the new range will be spearheaded by Sachin Tendulkar.

Now talk for hours for just Re.1: Tata's innovative plan

Innovation once again from Tatas.Close on the heels of Tata Docomo’s ‘pay-per-second’ offer, dual-technology telecom service provider Tata Teleservices (TTSL) today unveiled a ‘pay per call’ plan under its CDMA brand Tata Indicom.The new plan marks a dramatic shift in airtime pricing, in effect offering unlimited talk time. Telecom operator Tata Teleservices' new tariff plan allows CDMA subscribers unlimited hours on local calls for just Re 1.

Tata Teleservices pre-paid CDMA subscribers will be charged Re 1 for all local calls and Rs 3 for long distance calls, regardless of the duration.The plan also offers subsidised rate for SMSes or short message service at 50 paisa for both local and national SMS.The pay per call plan is initially being introduced on the pre-paid platform, and all subscribers who opt for it will be charged a daily fee of Re 1 to avail of the tariff option. The company expects volumes to make up for the loss of average revenue per user in this plan. TTSL's CDMA service is pan-India and has a subscriber base of under 40 million.Rival dual-technology telco Reliance Communications, which, in early years gained market share competing on price, is almost certain to come up with an equivalent plan

IL&FS to be the new promoters of Maytas Infra

IL&FS(Infrastructure Leasing and Financial Services) Ltd. will take over the management control of Maytas Infra Ltd. The board of Maytas Infra Ltd, linked to scam-hit outsourcer Satyam Computer, has received a proposal to replace the existing founders of the company from IL&FS limited. IL&FS is the single largest shareholder of Maytas and will control 37% of equity in the company as some other large shareholders will pledge their shares with it.IL&FS currently holds a 14.5% stake in Maytas. The existing promoter shareholders will step down.
Maytas was founded by the family of Ramalinga Raju, the former chairman of Satyam Computer Services Ltd., who confessed in January to an accounting fraud at Satyam.
IL&FS Financial Services will spend about Rs.1.5 billion to buy 22.51 percent of equity in Maytas Infra Ltd.

Economy grows by 6.1% in Q1

Indian economy grew an impressive 6.1% in Q1 of FY2010. The YOY growth was at about 7.8% while last quarter(Q4 FY2009) was at about 5.8%. So, QoQ the economy has grwon by around 300 basis points. As government stimulus measures helped spur demand, although a poor monsoon threatens to crimp growth later in the year even as it drives inflation. The economists feel the full impact of drought in certain areas of the country will be seen only in the coming quarters, especially in the Q2 and Q3 of this year.

The segment grouping financing, insurance, real estate and business services led growth in gross domestic product, gaining 8.1% on year. Services sector was pleasant surprise which grew by 7.8%, while as expected Agriculture was worst performing with 2.4% vs 3% last year. The drought situation will only decrease the growth in agriculture in the coming months. Manufacturing and mining grew by 3.4% and 7.9% in June quarter compared with 5.5% and 4.6% respectively in the year-ago quarter.

The whole year GDP guidance is at about 6.1-6.4% taking into consideration the agricultural slowdown and also some counter balance from manufacturing,services and mining sectors. This is below the promised growth of 7% by the Finance Minister in his budgetary speech. Weak rains will hurt purchasing power of consumers in rural areas and drag down industrial output. Drought situation may impact around 400-700 basis points of the total GDP growth.

3G spectrum auction in 3 months; reserve price at Rs.3500 crore

The deadlock over the reserve price for third-generation radio frequency auction, vital for services such as video-calling and high-speed internet access on mobile phones, was finally resolved.The empowered Group of Ministers (e-GoM) finalised the reserve price for auction of at Rs. 3,500 crore. The auction will be completed within three months, and the winners will take another 3-5 months to roll out the services.

The EGoM also decided that a total of five players will be allowed to offer 3G services in every circle, of which one slot will be reserved for state-owned telcos BSNL & MTNL. BSNL and MTNL already own and operate 3G services. They will have to match the highest auction price in each circle.The 3G spectrum auction will provide mobile users a host of facilities like video streaming, richer internet connections—basically use of data on phones not possible in the current 2G spectrum and also put behind irritants like call drops and connectivity problems. The group of ministers (GoM), headed by finance minister Pranab Mukherjee, also fixed a reserve price of Rs 1,750 crore for the auction of wireless broadband (WiMax) spectrum.The e-GoM decided to auction only three slots of spectrum for WiMAX services.

The government will earn at least Rs 35,000 crore from the auction. The more aggressive the bids are, the richer will the government be. This will provide some succour to the government which is struggling with its finances with a fiscal deficit already estimated at a high of 6.8 per cent of the GDP. The Prime Minister’s Office and the finance ministry expect 3G services to attract foreign players and generate high revenues.

What is W,V and U-shaped recession ?

U,V,W or something else.... What shape will it be eventually ? Everyone wants to know about it. No, am not talking about something pertaining to English literature. Its about the painstaking graph that this economic recession will take through up until its end and for the world economy to come back to its normal growth progression. Well read and well-informed researchers and economists have all tried to through their hat in to decide the course-graph that this recession could eventually take.
The first case is the shape of 'V' that this recession could take. This essentially means that economy will have a steep decline in its growth, but its rebound will also be quiet sharp. This kind of recession and its recovery will resemble closely to the alphabet 'V'. This has always been the case in superficial recessions like the ones in 1983 and in 2001. These are typically those recessions that comes in a cyclical fashion after every economic bubble. They are shallow recessions which doesn't affect the job market in a significant manner. But this 'V' shaped rebound have been ruled out when it comes to this particular recession. The main reason being that this recession is an outcome of a virulent housing market bubble going bust. Soaring housing market and typically low interest rates have long fuelled a huge booming housing market in the US. People started using their homes like some kind of ATM machines, mortgaging them and withdrawing money and getting huge profits due to a booming housing market.
The sub-prime crisis and huge dip in housing market were instrumental in bringing the housing prices to record low levels. Unable to cope with rising interest rates and lowering home rates citizens felt it was impossible to either sell their homes or pay their mortgage loans. This led a huge amount of loan defaulters and many foreclosures followed. The banks unable to flush out these bad debts went bankrupt overnight. This was manily due to bad and directionless management of mortgage and bad debt accumulation by these banks.
This triggered a huge stock market crash which started immediately followed by the Chapter 11 bankruptcy filing by Lehmann Brothers. Many banks like AIG and Morgan Stanley faced unprecedented drain of assets and cash equivalents. Many Americans lost jobs as many industries like the automobile industry in particular, were closing down their many manufacturing plants.
This was the start of long and painful recession which many believe will chart out a 'U' shaped recovery in the coming year.Most economists, including Federal Reserve Chairman Ben Bernanke, predict a slow and gradual upturn. To be sure, the telltale recovery signals have been flashing green lately. Factory output and new orders grew last month at the fastest pace in two years. These are what many state as "Green Shoots" in the recovery path of the economy.And with inventories of stores and manufacturers depleted, factories must soon ratchet up production just to restock. So, this is the way economists bet,the economy will grow to get out of recession, the 'U' shaped recovery, slow and painful recovery.
Now to the theory of a 'W' shaped recovery,the occurance of it,many believe is remote .The recovery will be muted, largely because consumers are in no mood to open their wallets. They have lost $13 trillion of wealth in the recession's housing and stock market crashes and appear determined to sock away any extra cash they have.The savings rate jumped to 5.2% in the second quarter from a low of 1% before the crisis. Consumer spending in the US accounts for 70% of the economy. So, any dip in consumer spending will greatly affect a dynamic, consumer centralized economy like the United States.
A small group of experts believes the economy will endure an unusual W-shaped, or "double-dip," recovery in which the economy falls back into recession before growing again.The massive liquidity, plus rising commodity prices, will increase inflation. Meanwhile, many believe the Fed reserve will be loath to raise interest rates to stave off inflation in 2010, because doing so could tamp down what will be a weak recovery in next year.So, these are the three major theories that is doing rounds in terms of recovery in global economy.

Whatever be the recovery path the economy takes, one thing that everyone comes to a consensus is that unless and until the US citizen starts spending again, the economical growth will not possible in a major way. There maybe green shoots or slight decrease in unemployment rate, but consumer confidence and higher spending are the ones which could lead a robust economical growth in the coming years.

Now, withdraw cash from debit cards at retail shops, petrol stations

Every store that accepts debit cards could soon become an ATM. The next time you run out of cash, you needn’t go scouting for an ATM. All you need to do is take your debit card to the nearest shop, swipe it and withdraw cash.As a further step towards enhancing the customer convenience ,the Reserve Bank of India (RBI) has decided to permit cash withdrawals at point-of-sale (POS) terminals.

You can withdraw up to Rs 1,000 in a day. Also, you don’t need to purchase anything from the shop to avail this facility.In case the facility is being availed along with the purchase of a product, the receipt generated shall separately indicate the amount of cash withdrawn. For this, the swipe machines, or point-of-sale (PoS) terminals, will have to be upgraded and it may take around a month for the service to go on stream. The move will particularly benefit customer in smaller towns and rural areas, which have few ATM machines.

At present the cash withdrawal facility using plastic cards is available only at automated teller machines (ATMs). This will help crowd out people at the ATM's and also make use of many retail shops, petrol stations, hotels and restraunts and big budget shops who have this wipe sysytem installed in their shops.However, customers (i.e) general public may have to pay a fee of 2-3%.The processing fee will be split between the bank and the shop owner.

Can India effectively leverage its Demographic dividend ?

The buzz word these days in chambers across the knowledge-hungry societies is the so called "Demographic Dividend" which will favour India in the near and medium term. The term "Demographic Dividend" essentially means that the percentage of working class people is high among the total population such that it favours an accelerated economic growth. This perhaps is seen to be a new dimension to India's oldest resource namely the "Human Resource". Population density and its growth was perceived to be India's biggest bane until a few years ago. Thanks to huge boom in services sector and economy as a whole in the last decade or so, people began to talk about the huge potential in India's large population. Add to this, today India is one of the youngest nations in the world.

This is an unique and favourable transitive stage in a country's demographic make-up which comes once in many decades, maybe once in a century. This essentially means less dependants(read "retired senior citizens and children below 15 years) and more people in the working age between 20-45. This is due to falling fertility rates(the average number of children born to a woman) in India from about 4.8-5.3 in the 70's to about 2.3 today.

So, people spend less on child care as there are less number of children and simultaneously the average wages and savings becomes higher. This leads to higher spending for a safer lifestyle and the growth of children in healthy environment.Parents are under less strain to provide for many children.The government can then concentrate purely on economic growth rather than wasting money in subsidies and low quality education. Eventually, the population growth rate also stabilises and signs of those happening in India could be seen as early as 2030.

The other side of this story could actually act as counter to economic growth. If, the government doesnot fuel growth now and create jobs for many young people who come out from their education every year, then we cannot effectively take advantage of this demographic dividend. The second point is as economy grows, healthy lifestyle will also grow and so the average life-expectancy(average number of years a man could live) will also increase. This leads to an increase in retired dependants who may not have a role to play in economic growth of a country.Another dreaded scenario is that the educated umemployed youth turning to evil ways like terrorism and domestic violence.

So, if we donot take stock of the situation and strive for producing enough oppurtunities for producing skilled youth labour and jobs for them, the old evil of high population will come back to haunt us once again. At a time when many countries like America, UK and Europe are going through a downturn and has a huge dependant population in their ranks, this is probably the best oppurtunity for India to spread its wings and fly high. The next decade will be very crucial and determine how well India has leveraged its demographic dividend. This will go a long way in shaping India's quest for becoming a worthy super power and sustain itself in the world's economic map.

TCS beats Q1 FY10 estimates; variable pay to be paid in full

Country's largest software exporter TCS reported nearly 19 per cent growth in consolidated net profit for the first quarter of the current fiscal at Rs 1,533.94 crore.Its revenue for the same period stood at Rs 7,207 crore -- up 12 per cent YoY.In terms of verticals, the quarter under review saw some stability in the core BFSI segment with the US leading the trend, while the UK and Europe are expected to stabilise in subsequent quarters, notes the management. In manufacturing, the speed of demand recovery will depend on overall economic recovery. The media and retail verticals continue to grow from new deals as well as ramp-ups of large deals closed in FY09.

On the hiring front, utilisation in Q1 FY09 was 79.2 per cent (excluding trainees) and 71.3 per cent (including trainees). There was a gross addition of 2,828. The attrition rate in Q1 was 11.5 per cent. At the end of Q1, the total employee strength of the company was 1,41,642. Foreign nationals formed 8.3 per cent of the total employee base and 30 per cent were women.The variable component of employees in Indian payroll will paid in full along with july salary.

TCS also added 26 new clients(lowest in 6 years), and net addition were down by 2000 odd employees though gross addition was 2312 associates. EPS growth was up 15% to RS.7.83 from Rs.6.81 last quarter. The board approved a dividend of Rs.2 per share.

Balloning Fiscal deficit: Will it affect you ?

Pranab Mukherjee, finance minister of India presented what many believed to be a lousy budget with no definitive approach towards important issues like disinvestment, financial sector reforms and even deregulation of petrol and diesel prices. The argument in favour of FM was that budget is not neccesarily the place to chalk out plans for reforms or disinvestment strategy. These market-centered announcements may even come later through the course of the Congress's regime. Point well taken.

But, the most dreaded and the one which could come back to haunt the FM and the people is the fiscal deficit. The projected fiscal deficit for this financial year is 6.8% and when you add the state fiscal deficit which is 3.8% and some revised expenditure through the year, it ballons out to nearly12.5-13% and more worrisome is the revenue deficit at 3%. Revenue deficit is the deficit caused by higher cost of running government, its debt and things like pay commision hikes. According to FRBM act(Fiscal Responsibility and Budget Management), the union government has financial obligation to keep the fiscal deficit below the accepted levels of 3-4%. But these are tough and unprecedented times. A deeper economic recession and the resultant negative growth of the private sector has left the central government with little headroom for spuring economic growth or atleast maintain it at present levels. That is precisely why the government has announced three stimulus packages. Stimulus packages are essentially more spending by the government in job-oriented infrastruture projects, farm loan waivers, tax cuts, interest rate deduction and giving more subsidies. The idea is to put more money in the common man's pocket and encouraging him to spend more. This in turn will spur growth due to domestic demand. At a time, when export market is hit by a deep recession in developed countries(US and Europe in particular), fiscal stimulus are the only way the government can arrest the economic growth from nose diving.

But, everything comes at a cost. These stimulus packages need greater government spending and so the government borrows money from the central banks(like the RBI) and many foreign financial instituitions.Also, at a time of recession, due to less industrial growth, the tax collections from both the corporate and individuals citizens are comparitively lesser. So, this is the cause of balloning fiscal deficit and what does it have to do with ordinary citizen like you and me?

As fiscal deficit increases and the government borrowing from RBI hits new high, interest rates increases which will crowd out the private sector from large scale investment. Cascading effect is more job losses, less spending and low growth. Also, high fiscal deficit will force international credit rating agencies like S&P, IMF to downgrade India credit rating. This only adds to more pain as these are the main criterion with which foreign financial institution plan investment and lend credit to Indian MNC's.

So, its very vital to contain the Fiscal deficit and get the country back to normal growth. Many other countries like America and UK have high fiscal deficit in tune to about 15% and 9% respectively. But they have far deeper crisis than what we do. We have to be careful so that we don't fall into a painstaking downturn like the developed countries. This is perhaps why, the markets nosedived nearly 10% last week, the fact that there was no proper roadmap to contain and bring back the fiscal deficit to acceptable levels(maybe 3-4%).The FM did say that the fiscal deficit will come down to 4% by FY 2012. But there was no mention of any plan how he will bring them down.

This is such a risky and tough period which may well decide whether we get back to sub-8% growth rates or languish to a paltry sub-4% levels which will disastrous for the whole nation, you and me included. Hope Finance Minister's listening.....

Infosys Q1 2010 results: Beats expectation;revenues down by 5%

Infosys declared its first quarter results showing that there has been a five per cent fall over fourth quarter results of 2008-09.Infosys counts on Goldman Sachs, Philips Electronics, BT Group Plc and Australia's top phone company Telstra Corp among its clients. The Group has posted consolidated net profit after tax & minority interest of Rs 1527 crores for the quarter ended June 30, 2009 as compared to Rs 1302 crores for the quarter ended June 30, 2008.

Profit after tax is the net profit earned by a company after deducting expenses like interest, depreciation and tax.

Infosys rupee EPS guidance has been downgraded to Rs.94.59 to Rs.96 from the previous guidance of Rs.96 to Rs.101. Revenues for the whole year is estimated at Rs.21,452 crores to Rs.22,343 crores.The revenue from the top client BT is down from 5.3% to 4.6%.New client addition for the quarter is 27. All the revenue and EPS guidance are at the presumpotion that dollar stays between Rs.47.91-Rs.50.72 in the exchange rate.The utilisation is at 67% including trainees and at 70.4% ecluding trainees. Company has actually offloaded 945 employees and thus the net additions is in the negative.

Budget 2009: Cheers from aam admi;bloodbath at markets

Finance minister Pranab Mukherjee on Monday raised the income tax exemption limits in his Union Budget 2009-2010 speech. He proposed to increase the income tax exemption limit for senior citizens by Rs 15,000, for women and others by Rs10,000 each, while keeping the corporate tax rate unchanged. The exemption limit will now be Rs 240,000 for senior citizens, Rs190,000 for women and Rs 160,000 for others.The good news is that 10% surcharge on income above Rs 10,00,000 has been removed.

The most welcome change is the complete removal of the Fringe Benefit Tax (FBT). As the FBT provisions were felt to be too onerous and generated a huge administrative burden on corporates, there was a pressure to abolish the same.However, Minimum Allocation Tax (MAT) on book profits has been increased from 10 percent to 15 percent.Finance Minister Pranab Mukherjee asked state governments to remove hurdles to speed-up infrastructure implementation and tried to bring liquidity back to the cash-strapped builders.
He also set a goal to increase the investment in infrastructure to more than 9 percent of GDP by 2014.Market tanked almost 950 points in sensex and 280 points in Nifty.

The government is committed to provide Rs 100 a day as wages under National Rural Employment Guarantee Scheme.The National Rural Employment Guarantee Act (NREGA) Allocations have been hiked by 144% to Rs.39,100 crore in the proposed Union Budget.The Finance Minister also said allocation for Bharat Nirman programme is being hiked by 45 per cent. The project covers six schemes, including rural roads, drinking water and sanitation in villages.

The finance minister said the government would soon publicise a draft food security (guarantee) bill and seek comments from everybody before finalising the bill. In its election manifesto earlier this year, the Congress had promised 25 kg of rice or wheat a month at Rs.3 per kg to families below the poverty line.

Nandan Nilekani quits Infosys

Infosys Co- Chairman Nandan Nilekani has been appointed by the government to head the National ID Card Project and will step down from the company’s board. Nilekani would be given status of a Cabinet Minister.The UIDAI, an entity under the Planning Commission, has been constituted to provide national identity cards to Indian citizens.Nilakeni said the government was still to work out the costing of the project, adding the plan was to roll out UIDs within 12 -18 months.The big issue of this project is that we need to have one central data base which ultimately will have details of a billion residents of India and that apart from their information about their names, address, date of birth and so forth, will also have to store bio-metric information about them, maybe finger prints, or facial picture etc. because the bio-metric is what is going to ensure that we don’t have duplication of people in the database.

Under the UIDAI programme, unique identification cards would be provided to citizens by 2011. In the beginning, the cards will be assigned to all voters by building on current electoral roll data. The other big challenge is the inter-operability is whether the Citizen card is issued which are co-branded with MNIC or Pan card, as far as the identity part of it goes, it should get authenticated in the same way all over the country so there is a lot of co-ordination that is required both across central government as well as local governments, so the complexity is mainly of co-ordination and inter-operability which we have to encourage.

As co-founder of the $4.6-billion global software major, Nilekani served as a director since the company's inception in 1981. He was the chief executive and managing director from March 2002 to June 2007 and was re-designated as the co-chairman of the company's board.

Will middle income syndrome affect India ?

Recently, India was elevated from being a low income country to a lower-middle income country joining the likes of China,Philipines and Turkey by the World bank. This was mainly due to strong economic performance in the last half decade. What is the significance of this elevation in the first place ? Lower-middle income countries are those countries in which the average income of an individual is anywhere between 956$-3705$. Generally, countries grouped in this category said to have attained financial credibility which they lacked previously. This in turn, makes them eligible to borrow more loans and aids from financial instituitions like World Bank and IMF for improving their internal infrastructure, spending in social sector schemes and internal security.
But, many countries like Brazil and Philippines which had tremendous growth in the early 90's and their subsequent stagnation in growth should be properly analysed. India's main growth story is fuelled by the services sector like IT and financial services. Now, why is outsourcing and other services being awarded to India by foreign countries like America and the EU? One reason is the high technical expertise of Indian engineers and the second and a major factor is due to "Low wages" prevailing in India.
But, as we grow and so is the income of many skilled people in India. This could affect the wage-advantage that we have against our Chinese,Korean and Japanese counterparts. This will affect our services sector. IT and ITES contracts may go to many less-income countries like Vietnam and Philippines which are of late, growing very well in services sector.This was echoed even by Wipro chairman Azim Premji recently in a conference. He said "The BPO business in the Philippines was hardly anything some five years ago, but now the country is in a position to get equal with India or displace its leadership in BPO". IT companies may not post 25-30% CAGR that they are posting before the recession. This means creation of less jobs in this industry and more difficult times ahead.
Thus, India has look beyond the successful growth story of services sector and start investing in sectors like manufacturing,infrastrucure,education,textiles and telecom. Proper planning forward with proactive rather than reactive measures should be the need of the hour. Also,improving educational expertise in different sectors and skilled labour in other sectors should be encouraged. India has to diversify its core sectoral growth and bring in major face-lift to many sectoral portfolios, if it wants to become a major superpower by 2020.
As far as the software industry is concerned, they will have to keep thinking and innovating in different avenues and be competitive always,like they have been for many years.Major thrust to R&D and Intellutual Property Rights(IPR) should be given by Indian companies. If these can be managed, Indian IT industry can become a 80 billion dollar sector by 2011, double than what they are today!!! It has to seen whether India can stay clear of this middle income syndrome like China and motor forward, diversifying in all sectors or get stagnated like Brazil with a small percentage of growth.

Budget 2009- what is the road ahead for our economy ?

Everyone seems to buoyed by the outcome of elections 2009 in India. India will have a far more stable and energetic government in the form of the Congress-led UPA government.Hopefully, we will see lot more governance than politics in the next five years led by PM Manmohan Singh.One of the main and immediate challenge facing the government is the economic slowdown. Although, India seems to have been faring far better than many countries around the world, it cannot be complacent. The two main reasons for this is- one, India has a vibrant domestic demand fuelled by a huge population and second is that India is just a developing country with industries and exports just on the brink of huge expansions. Also, there is lot of restrictions and caps on foreign investments in India.Therefore, well developed export sectors like IT and trextiles are the main ones which are worst-hit by the recession in the developed world.Even though we had the popular liberalisation budget of 1991 by the then FM Manmohan Singh, we still need to do lot more in terms of reforms especially in sectors like power,insurance and banking.

Many ask why its just an economic slowdown in India, while many western countries are going through a rough recession period ?It is the above mentioned reasons why there is just a slowdown in India. On the contrary, Japan is going through a deep recession even though it is not the cause of it, primarily because it is an export-dependent country.

With the left out of the way, Congress has a golden oppurtunity in setting the record straight in the economic front. The budget on July 6th will signal the direction in which this government will travel. That is why, this budget will be very important for the government as well as the industry leaders.

Here are some of the main decisions that the industry believe should be taken in this budget:

Agriculture and Food: India, even while it talks of globalisation and industrialization, should not forget that 70% of Indian population depend on agriculture. The most important policy is the Food security act, which essentially will guarantee food, three times a day for the poor. Also, more R&D intiatives and investments is the need of the hour in this sector such that new techniques and ways to cultivate fertile land and produce hybrid seeds can be achieved.

Exports sector: This sector is worst affected by the global recession and needs a fillip immediately. Tax breaks and duty cuts for this sector is a mere given. Also, textile sector should be given some stimulus package so as to revive their business and compete with global players. Also, for the IT sector abolition of FBT(Fringe Benefit Tax) and STPI tax exemption extension for another 3 years should be taken up.

Telecom: The first and foremost is the completion of 3G auction which will enable fast data transfer and more clear voice signal.Also, a proper broadband policy for India should be commisioned in line with major economies. Broadband and internet should help in e-governance and education at all levels. Atleast 8 Mbps broadband speed should be introduced in wired communication.

Insurance and Finance: Labour reforms, Insurance and banking reforms should be the priority. Banks must be adviced to lend to for many industrial projects, most of all the infrastructure projects.

Roads, railways and infrastructure: This perhaps is the most important sector. Huge potential in improving our infrastructure will produce more jobs and stimulate the demand market and improve our economic growth vastly. The main issue here is the execution of all the projects. We have all the project work and the money. But, we have to execute the projects well which is where we lack. Power generation, roads, ports expansion will hugely transform our economy. Proper execution mechanism and regulatory mechanism should be taken up by the FM in this budget for this sector.

Education: Primary education should be the main focus.Schools with properly attended teachers and students should be ensured. Innovative methods for teaching with the help of internet and computers should be used.More money should be allocated for this sector in mid-day meal schemes and should also ensure continuation of children in classes into secondary education and colleges.

Other important schemes like Bharat Nirman,NREGA(National Rural Employment Guarantee Act) with daily wages incrreased from RS.80 to RS.100 a day should be ensured. It must extend to throughout India. Similar scheme for the rural poor should be researched and executed.

Thus, these are the main and immediate steps that should be taken in this Budget. This will help the Indian economy to move back to our growth story of 2007-08. A GDP growth of 9% should be the goal which is very much achievable in the next 2-3 years.

"The Great American Dream" - Will that be possible again?

For students in emerging markets i.e India and China, America was the dream destination for pursing their higher studies and a wonderful career. It was all a matter of few applications to US universities and choosing the right ones once you get the admits, ofcourse you need a better under-graduate score and acceptable scores in some qualifying exams. Two years of hard work and then landing in a good job there will help you take off in your career.
But now, is it all turning into a nightmare very soon ? The economic recession and its aftermath, have pulled the US economy considerably down. The housing bubble has led to huge financial crisis. Many big companies have gone bankrupt and huge layoffs have occured in many sectors across the board in America.
Many Indians have flown back home to India planning to apply for jobs in India, as they think that their jobs are not secure. US government has pumped in money through many financial and stimulus packages, cut interest rates to encourage spending by its citizens.This inturn has put a huge fiscal deficit burden on the American government, which many believe will balloon out to uncontrollable levels by FY10. Besides this, the American treasury bonds bought by many countries as a source of investment is becoming more of a liability. The Chinese who has the highest amount of treasury bonds are very worried about their return on investment.
Americans who are the main source of consumption for the global market are beginning to save more for the future fearing a bleak future. So, this has put enormous pressure on other countries who export goods to America and Europe.
Many believe this gap in global consumption can be filled only when emerging markets like India and China grow and create a domestic demand in their respective countries as they have a huge growing population.Experts believe even if America and Europe get out of this recession, they may not grow like they massively did pre-recession era. So, more protectionist measures and stringent immigrant laws will follow so as to keep American jobs to themselves. This may make it improbable for Indian students and their Chinese counterparts to study and get a dream job in US.
But the blessing in disguise could be a growing India and more jobs being created in India with well paid openings. This could take a few years, if not a decade or so before India and China emerge as dynamic economies providing sufficient jobs to its citizens. Till then, a slow growing or sluggish global economy will be the order of the day,hopefully just 2 to 3 years of pain.Indian companies should now look to Africa and "Emerging markets" for pouring their investment rather than United States and Europe and diversify their investment.
So, maybe, demise of the "American Dream" would be the starting point of an "Indian or a Chinese dream".

GM files for bankruptcy

General Motors Corp filed for bankruptcy on Monday, forcing the 100-year-old automaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.
The bankruptcy filing is the third-largest in U.S. history and the largest ever in U.S. manufacturing.The widely expected move comes after GM had seen its losses widen following a steep fall in sales in recent years. The move into bankruptcy protection has been backed by the US government, which is now expected to take a 60% stake in the company.
GM had already received $20bn of state aid since the end of last year. US Chapter 11 bankruptcy protection gives an American company time to restructure its finances while being protected from its creditors. The restructuring is likely to drastically change GM, with some 20,000 US workers thought likely to lose their jobs.

Inflation inches to 0.26%;food prices increase

Dearer food items and textile products pushed inflation for the week ended April 11 away from the brink of negative inflation.RBI in its monetary policy review announced earlier this week pointed out that with inflationary concerns abating WPI inflation is expected to enter negative for a short patch though it will move up to 4.0% by end of current fiscal.

During the week, prices of raw food rose by 0.5% as tea prices increase by 5%, Bajara by 3%, fruit and vegetables by 2%, and mutton and maize by one per cent each. Even though annual Inflation no longer remains a concern increase in prices of vegetables (2.6%),fruits (0.8%) and cereals (0.3%) is emerging as a major work for policy makers. Prices of vegetables had moved up by almost 25% in the week before, and the spike in prices of essential commodities is expected to play spoilsport for ruling coalition during elections. Prices of manufactured items has also been moving up for the last one and a half months. Textile products like synthetic yarn and sacking bags, chemicals and basic metals became costlier over the week.