- Many people shy away from the stock market thinking it is a lot likegambling and some even think it is gambling. The vagaries of the stockmarket in the form of sudden spurts and dizzying falls only add fuelto this thought.
- Adding fuel to the aversion is the past pain from few experiments --many in their 40s are still not entering the market because they werehurt by the Harshad Mehta scandal!
- Short-term trading versus Investing- The goals for any investor in the stock market change very dramatically based on whether he is a short-term player or a long-termone. In the short term, the market has to be perform the role of an income generator for the trader/investor. In the long term, it has to give capital appreciation for the investor.
The first thing to remember is that when we buy a stock (a share in any company), we get a part ownership in the company. We have a right to a part of the assets and a part of the profits that the company generates.
The price of the share will be reflected by the current and future profits of the company and also by the various forces that affect thebusiness of the company. There are several macro-level factors such asthe political, social, and international environment too that affectthe business and hence the share prices.
Shares are best for the long-term investor
To generate income out of shares is possible in two ways:
-Wait for the dividend. This income is going to be quite low compared to the market price of the share. Typical Indian dividend yield(dividend per share/market price of share) is in the range of 1% to2%. Not quite attractive.
-The other way is to generate trading gains. This is highly risk ladenas inherently share prices follow randomness. The Random Walk Theory says that the events in the past do not affect the price of the shares in the future. Hence, it is not possible to predict the future price of shares. This means that to generate income by trading one has to 'speculate'. That is gambling.
-In the long run (three years and above), however, the scenario is different. There is sufficient control for the management of the company to steer it to success or failure. And this will be reflected in the stock market as rise or fall in the share prices.
As an investor in the company, we too get signs on whether to hold onto the share or to let it go. In the short run companies can fool its investors by changing some numbers and by making good presentations but in the long run to compete and to grow, they have to delivervalue.
Returns in the long run
The stock market remains the undisputed and consistent leader forreturns in the long run. In spite of the economy slowing down in India and going into a depression in many parts of the world, the historical Sensex returns are still very attractive.
The Sensex was formed as an index to reflect the stock marketmovements in the year 1979. The value at that time started at 100. OnAugust 14, 2009 this figure stood at 15,400. This translates to acompounded annual growth rate of an amazing but true 18.28%.
We cannot see any other asset class giving such returns over the long term. Is there a reason why stocks perform so well in the long run?Yes, there are.
-As business people, the promoters of the companies have an inherent reason for working towards the growth of their companies. Also businesses need time to grow and flourish.
As businesses compete with each other during their growth, they comeout with creative, efficient and effective solutions to our needs andproblems. This creates value for us as consumers and as investors. The country itself grows because of this.
Case in proof
A case in proof is a Bangalore family that was surprised by the valueof shares that their late father had accumulated. He had bought sharesof Hindustan Level Limited (HLL [ Get Quote ] -- now HindustanUnilever Ltd) consistently for over 20 years from whatever savings hecould scrap from his earnings as an executive in a private company.
At one point in time HLL was the largest company in India and he lovedthe company. Post his retirement he continued to hold the shares inthe material form itself. After he passed away, the family found thathe had over Rs 1 crore (Rs 10 million) worth of HLL shares!
Stock market is not a gambling arena - The stock market is a tool for investing and wealth-creation. As discussed above it is a way to create wealth in the long term. Itshould not be mixed with gambling nor should it be used for that purpose.
Like gambling, it might be thrilling in the short term but too much indulgence in thrill at the expense of strong fundamentals could lead to major losses.
Ironically, the media and the people around us always highlight the extremities rather than focus on the fundamentals. For example, a person losing Rs 500,000 in one day is given more importance than someone earning the same amount in three years. This has been themajor cause of creating a negative picture of the stock markets. - We need to come out this imagery and look at the broader and long-termpicture. Long-term investors can never lose money in the stock market if the fundamentals are right!
Tuesday, August 25, 2009
Is the stock market a gambling arena?
Learnings from Rakesh Jhunjhunwala investment style
Rakesh Jhunjhunwala made a fortune by investing in the stock market. From an initial amount of Rs 5,000, as it is rumoured, he has made Rs 5,000 crore injust over two decades!
There is a lot we can learnt from his investing quotes:
1. Invest in a business and not a company.
Jhunjhunwala identified and invested in Pantaloons much before themarket discovered it. Today, he is gaining from that investment.That's because he invested in the potential of the underlying business(of organized retail in this case) and it's first mover advantage.
2.Maximise profits and minimise losses.
Cut losses and move on with life. At the same time, hold on to winningstocks till their business has achieved its full potential.
3.Always have an independent opinion.
Observe and read relevant information with an open mind.Jhunjhunwala believes in doing his own research before investing. A good example: he was lapping up the ignored Indian Public Sector (PSU)stocks when the herd was after the IT stocks during the late nineties.He made a fortune investing in PSU stocks, while many lost their shirts during the dot com led market crash in 2000.
4.Be opportunistic but wait for the right moment.
Don't jump to buy all at once. The market always gives a chance to buymore at a lesser price if you wait for the right moment.
5.Be happy with your gains but learn to accept losses with a smile.
Jhunjhunwala has had his share of dud investments. A good example is Mid-day Multimedia. But that did not deter him.
4.Study the markets thoroughly.
Refer to history.There have been many a bull and bear markets but in the long-term, themarket is always trending upwards
5.Do something you love.
Jhunjhunwala went on to pursue his passion for investing right after he completed his Chartered Accountacy. He also had the option to go abroad but he chose to do what he loved.
6.Patience may be tested but your conviction will be rewarded.
Many of his holdings like Praj Industries, Hindustan Oil Exploration,Pantaloon, did not move for quite some time. However, he had the conviction in their business models and their potential to becomemultibaggers, which they eventually did.
7. Market is always right.
Markets cannot be taught, they have to be learnt.According to him there are no kings or kingdoms in the stock market. Mr Market is the only prime force.
8.Be an optimist!
His genuine optimism rubs across the businesses he backs and they achieve success faster. For example: Bilcare, a clinical suppliesmanagement services, has suddenly become a hot story out of nowhere.
8.Aspire, but never envy.
Jhunjhunwala believes in sharing his investment ideology and thoughtprocess in this highly secretive industry.
9.Begin whatever you dream.
Boldness has genius, power and magic in it.No wonder he has backed many a first generation entrepreneurs likeC.J. George (Geojit Financial), Mohan Bhandari ( Bilcare), PramodChaudhari (Praj Industries) etc.
And some more...-- Build a fighting spirit; take the bad with the good.-- Balance Fear and Greed-- Invest for the long term-- Be paranoid of success; never take it for granted. Realise successcan be temporary and transient
Recently, while addressing an audience in Hyderabad, he predicted that the bull market is intact and the current phase is just a significant time-wise and price-wise correction.
Let's hope he is right this time around too and we see the resurgenceof the India bull market soon.
Why should you control your anger?
An interesting story........
There once was a little boy who had a bad temper.
His Father gave him a bag of nails and told him that every time he lost histemper, he must hammer a nail into the back of the fence.
The first day the boy had driven 37 nails into the fence. Over the next fewweeks, as he learned to control his anger, the number of nails hammereddaily gradually dwindled down. He discovered it was easier to hold histemper than to drive those nails into the fence.
Finally the day came when the boy didn't lose his temper at all. He told hisfather about it and the father suggested that the boy now pull out one nailfor each day that he was able to hold his temper. The days passed and theyoung boy was finally able to tell his father that all the nails were gone.The father took his son by the hand and led him to the fence He said, "You have done well, my son, but look at the holes in the fence. The fence willnever be the same. When you say things in anger, they leave a scar just like this one. You can put a knife in a man and draw it out.
It won't matter how many times you say "*I'm sorry*", the wound is stillthere. A verbal wound is as bad as a physical one.
Hence, we need to learn this aspect and implement in our lives.. be it personal or professional!
There once was a little boy who had a bad temper.
His Father gave him a bag of nails and told him that every time he lost histemper, he must hammer a nail into the back of the fence.
The first day the boy had driven 37 nails into the fence. Over the next fewweeks, as he learned to control his anger, the number of nails hammereddaily gradually dwindled down. He discovered it was easier to hold histemper than to drive those nails into the fence.
Finally the day came when the boy didn't lose his temper at all. He told hisfather about it and the father suggested that the boy now pull out one nailfor each day that he was able to hold his temper. The days passed and theyoung boy was finally able to tell his father that all the nails were gone.The father took his son by the hand and led him to the fence He said, "You have done well, my son, but look at the holes in the fence. The fence willnever be the same. When you say things in anger, they leave a scar just like this one. You can put a knife in a man and draw it out.
It won't matter how many times you say "*I'm sorry*", the wound is stillthere. A verbal wound is as bad as a physical one.
Hence, we need to learn this aspect and implement in our lives.. be it personal or professional!
Tuesday, August 18, 2009
Bank information must be effective
Have you ever compared the service charges of your bank with that of others to see how competitive the rates are?Banks impose charges for basic services such as collection of outstation cheques, and carrying out standing instructions and levey penalties for not maintaining minimum balances or for excess debit entries in your savings account. You also lose money if you close an account within 12 months of opening. Some banks offer a 50 per cent cut in service charges for senior citizens..If you click on the icon ‘Useful Information’ on the Reserve Bank website dedicated to “Common Persons” you will see a link that> connects you to the websites of over 40 banks on ‘service charges’.The list of banks include public sector, private sector and foreign> banks. The link gives valuable insights. Some banks for example,calculate the minimum balance required in an account on a quarterly basis, some on a monthly and yet others on an average daily basis.You can also get a good look at the service charges imposed by your bank — and I am sure you will be quite surprised at some of the levies! The idea of providing such information to consumers is good, but if it is to serve any useful purpose, the information should be more structured and provided in a way that facilitates price comparison. With most banks, the links take you straight to the ‘service charges’> page, but with some, they do not and you have to search for the ‘service charges’ icon. And each bank has its own way of providing the information, making comparisons difficult. Some sites have outdated information. The Reserve Bank has to come up with a specific format for the> information and insist on banks updating the information regularly in a consumer-friendly manner.Banks also should provide information on their customer charters and> their implementation
Thursday, August 13, 2009
We are faced with a negative demand shock
*During the oil shocks in the second half of the 1970s, governments believedthat the solution was to boost demand, whereas the problem was negative-supply shocks. So the expansionary (monetary and fiscal) policies implemented at the time simply led to an upsurge in inflation. We are currently faced with a negative demand shock, due to the halt inindebtedness and the decline in global trade.It must therefore be dealt with as a demand shock and not as a supply shock
*counter-cyclical monetary and fiscal policies are justified up to thepoint where perverse demand-dampening effects appear;
*• *cutting wages is counterproductive, except if it can boost employmentmore than proportionally; governments should therefore as far as possiblecurb companies’ attempts to renegotiate wages downwards;
*• *having low inflation is favourable whether this is thanks to commodityprices or increased competition, as it stimulates real incomes; likewise,the fact that employment only partially adjusts to the drop in activity isstabilising, even though it entails a fall in profitability.*
*counter-cyclical monetary and fiscal policies are justified up to thepoint where perverse demand-dampening effects appear;
*• *cutting wages is counterproductive, except if it can boost employmentmore than proportionally; governments should therefore as far as possiblecurb companies’ attempts to renegotiate wages downwards;
*• *having low inflation is favourable whether this is thanks to commodityprices or increased competition, as it stimulates real incomes; likewise,the fact that employment only partially adjusts to the drop in activity isstabilising, even though it entails a fall in profitability.*
Tuesday, July 14, 2009
CEOs and competitive Arousal !
Few days back, The Economic Times had an interesting story on the front page on the Bharti-MTN deal. The writer’s point was how Bharti’s Sunil Mittal was back pursuing a deal he had to give up last year. The most interesting thing about the story was a Mittal quote that came lower down in the fourth paragraph. In that, a quote recounted by the CEO friend it was made to, Mittal says how winning MTN had become “a question of my ego”.
If you look at it, these are just five words. But what a window it offers to the mind of one of India’s most successful entrepreneurs. A 100 million subscribers on, Mittal is still in, what you could call, a state of ‘competitive arousal’.
It’s actually the subject of an article that Deepak Malhotra, Gillian Ku, and J. Keith Murnighan wrote for the Harvard Business Review last year. Their contention is simple. When a CEO is in a state of competitive arousal, he’s more prone to make the sort of (rash) decisions he would not otherwise.
But what leads to this state of competitive arousal? According to Malhotra et al, there are primarily three reasons.
1. the CEO is going head-to-head with one or two rivals and feels compelled to beat them to the target.
2.when there’s a stiff deadline, self-imposed or otherwise, that the CEO is trying to meet. In that situation, he’s unlikely to weigh all the pros and cons.
3. presence of an audience. When people (especially the ones with pens and cameras) are watching, an M&A can spiral into a gladiator sport. The CEO is under tremendous pressure to win at any cost.
In the case of Bharti-MTN, where Anil Ambani’s Reliance Communications was a rival contender last year, Dalal Street’s initial reaction was to beat the stock down. But some considered opinion now seems to suggest that the deal, if it goes through, may not dilute Bharti’s earnings per share to any great extent. That said, it’s also likely that Mittal is forced to sweeten the deal for MTN shareholders; quite a few of them are grumbling about what they are getting. At what point Mittal says ‘no more’ to them is a question that’ll get answered only closer to the July 31st deadline.
Mittal, of course, isn’t the only CEO who’s getting tested this way. Ratan Tata ended up paying $12 billion for Corus—34 per cent more than the initial offer price. A fortnight after Tata sewed up corporate India’s biggest cross-border deal, Kumar Mangalam Birla announced he was buying Novelis for $6 billion. In hindsight, both these deals look way too expensive, but it’s only Tata who has admitted that the Corus buy (not to mention Jaguar Land Rover) happened at “an inopportune time”.
In the long term, each of these CEOs may be proved right, but there’s no doubt that their companies will face some pain till that time. In India so far, we haven’t had a deal that’s been a complete dud (Dr Reddy’s Betapharm buy, though, comes painfully close). But as more and more CEOs seek to expand their business empires beyond India, an ill-conceived AOL-Time Warner kind of merger may well happen.
Malhotra et al suggest three ways in which CEOs can avoid getting into the competitive arousal trap. One, bring not your heart but head to the deal. That means keeping away from negotiations the CEO who thinks he must win at all costs. Two, do away with any unreasonable timelines. And, three, let not the deal become one man’s glory game; instead, deflect media attention to a team. That way, the deal doesn’t become a matter of prestige for the CEO.
That said, one cannot be ordinary and hope to achieve extraordinary results. Sunil Mittal is what he is today because he pursued big dreams and took the sort of risks a more ordinary CEO would have shied away from. The secret to success, then, is in knowing how much risk is too much. Unfortunately, there’s only one way to find that out. And that’s to do the deal.
If you look at it, these are just five words. But what a window it offers to the mind of one of India’s most successful entrepreneurs. A 100 million subscribers on, Mittal is still in, what you could call, a state of ‘competitive arousal’.
It’s actually the subject of an article that Deepak Malhotra, Gillian Ku, and J. Keith Murnighan wrote for the Harvard Business Review last year. Their contention is simple. When a CEO is in a state of competitive arousal, he’s more prone to make the sort of (rash) decisions he would not otherwise.
But what leads to this state of competitive arousal? According to Malhotra et al, there are primarily three reasons.
1. the CEO is going head-to-head with one or two rivals and feels compelled to beat them to the target.
2.when there’s a stiff deadline, self-imposed or otherwise, that the CEO is trying to meet. In that situation, he’s unlikely to weigh all the pros and cons.
3. presence of an audience. When people (especially the ones with pens and cameras) are watching, an M&A can spiral into a gladiator sport. The CEO is under tremendous pressure to win at any cost.
In the case of Bharti-MTN, where Anil Ambani’s Reliance Communications was a rival contender last year, Dalal Street’s initial reaction was to beat the stock down. But some considered opinion now seems to suggest that the deal, if it goes through, may not dilute Bharti’s earnings per share to any great extent. That said, it’s also likely that Mittal is forced to sweeten the deal for MTN shareholders; quite a few of them are grumbling about what they are getting. At what point Mittal says ‘no more’ to them is a question that’ll get answered only closer to the July 31st deadline.
Mittal, of course, isn’t the only CEO who’s getting tested this way. Ratan Tata ended up paying $12 billion for Corus—34 per cent more than the initial offer price. A fortnight after Tata sewed up corporate India’s biggest cross-border deal, Kumar Mangalam Birla announced he was buying Novelis for $6 billion. In hindsight, both these deals look way too expensive, but it’s only Tata who has admitted that the Corus buy (not to mention Jaguar Land Rover) happened at “an inopportune time”.
In the long term, each of these CEOs may be proved right, but there’s no doubt that their companies will face some pain till that time. In India so far, we haven’t had a deal that’s been a complete dud (Dr Reddy’s Betapharm buy, though, comes painfully close). But as more and more CEOs seek to expand their business empires beyond India, an ill-conceived AOL-Time Warner kind of merger may well happen.
Malhotra et al suggest three ways in which CEOs can avoid getting into the competitive arousal trap. One, bring not your heart but head to the deal. That means keeping away from negotiations the CEO who thinks he must win at all costs. Two, do away with any unreasonable timelines. And, three, let not the deal become one man’s glory game; instead, deflect media attention to a team. That way, the deal doesn’t become a matter of prestige for the CEO.
That said, one cannot be ordinary and hope to achieve extraordinary results. Sunil Mittal is what he is today because he pursued big dreams and took the sort of risks a more ordinary CEO would have shied away from. The secret to success, then, is in knowing how much risk is too much. Unfortunately, there’s only one way to find that out. And that’s to do the deal.
Head wise budget snapshot!!
BUDGET
Taxes
· Surcharge of 10% on personal income tax removed
· No change in Corporate taxes
· Increase exemption on personal income tax by Rs 15,000 to Rs 2,40,000 for
senior citizens
· Increase exemption on personal income tax by Rs 10,000 to Rs 1,90,000 for
women
· Increase in exemption on personal income tax by Rs 10,000 to Rs 1,60,000
for all others
· Surcharge of 10% on personal income tax removed
· Propose to phase out surcharge on Direct Taxes
· To remove Fringe Benefit Tax
· To remove Fringe Benefit Tax
· States agree on basic structure of Goods and Services Tax
· To raise Minimum Alternate Tax(MAT) TO 15 % of book profit
· MAT hiked from 10% to 15%
· Commodity Transaction Tax scrapped
· Carry Forward Tax credit on MAT to 10 year
· To exempt Pension trust from Securities Transaction Tax
· To create Alternate Tax disputes resolution mechanism for foreign
companies
· Software Technology Parks of India (STPI) extended by a year
· GST to be a dual regime with Central and state terms
· No Securities Transaction Tax (STT) on sale/purchase of shares by NPT
Reforms, Tax reforms
· To work on Saral 2 form to make income tax procedure simple
· Tax reform system to be completed in 4 years
· Balanced approach to financial de-regulation in justified
· Review and aims of the budget
· It a mandate we accept with humility and will do all we can for the
welfare of the nation
· Strong mandate for growth
· Sensitive to the challenges of a young India
· The govt has to sustain a growth of 9% create 12 mn jobs per year
· Reduce poverty levels by half by 2014 infrastructure investment to more
than 9% by 2014
· Focus to sustaining momentum in exports
· Strengthen primary healthcare delivery
· Plan to strengthen primary health care
· Broaden inclusive growth agenda
· Our target of agricultural growth at 4%
· Signs of revival of domestic industry
· Fiscal deficit has widened from 2.7 % to 6.2% of GDP
· Institutional reforms to bring the fiscal deficit under control
Challenges
· To get the GDP growth to 9% at the earliest
· To deepen the process of inclusive development
· To reenergise govt, govt must provide service with accountability
· Growth driver in the last 5 yrs has been private investment
· Structure of Indian economy has changes in last 10 yrs
· Now services constitutes more than 50% of GDP
· Increase investment in infrastructure to 9% by 2014
· To focus on infrastructure development
· Growth co-operative effort of Centre and States
· Job growth rate hit by dip in GDP
· Integration of Indian economy with the world has opened up new
opportunities and new challenges
· Aim to return to FRBM target at the earliest
For revival
· Govt provided three stimulus package
· RBI took monetary measures to meet the needs of productive sector
· This led to fiscal deficit to rise to 6.2% in 08-09
· We achieved a growth of 6.7% of GDP last fiscal
· Signal of recovery visible in the last few months
· Uncertainty about revival of global economy remains
Infrastructure
· We had set up IFFCL to provide financial assistance to infra companies
· IIFCL will be given greater flexibility
· IIFCL will refinance 60% of bank loans in critical sectors
· IIFCL will evolve a take-out financing schemes for incremental funding in
infra
· Fiscal stimulus at 3.5% of GDP helped economy revive
· Sensitive to the needs of young India
· Endeavour to make Budget participatory and ensure continuity
· Significant increase in capital inflows needs
· PPP to be encouraged especially in infrastructure
· Need to improve and strengthen regulatory framework
· To speed up Golden Quadrilateral Project
· Total investment of 100000 CFR in infrastructure
· Need to remove bottlenecks for speedy implementation of infra projects
· Highways allocated 23% more than 08-09
· Rs 15800cr for Railways
· JNURM allocation increased by 80% to Rs 12887 cr
· Basic amenities for urban poor to get more than 3000 cr to make country
slum free in 5 yrs
· Provision for housing urban poor at Rs 3973 cr
· Allocation to NHAI increased to 23& Y-O-Y
· Fiscal deficit has widened to 6.7% of GDP
· Target agriculture credit inflows ay Rs 3.25 lakh cr
· · Focus of NCC, Gammon for highway development
· JNNURM to get more than Rs 12000 cr up 87%
· Basic amenities for urban poor to get more than 3000 cr to make country
slum free in 5 yrs.
· Provision for housing urban poor at Rs 3973 cr
· Allocation to NHAI increased to 23& Y-O-Y
· Fiscal deficit has widened to 6.7% of GDP
· Target agri credit inflows ay Rs 3.25 lakh cr
· Focus of NCC, Gammon for highway development
· Rural electrification allocation up 27%
Agriculture
· Interest subvention scheme for agriculture loans to continue
· 60% population depended on agri
· Sustained increased in plan allocation
· Target credit flow Rs 325000 cr
· Loans upto 3 lakh at 7% per annum
· Those who pay their loans in time will get loans at 6%
· Task force set up to look into farmer suicides in Maharashtra
· Rajiv Gandhi Krishi Vikas Yojana allocation up by 30%
· Fertilizer subsidy to go to farmers directly
· To move towards Nutrient based subsidy regime
· Additional allocation of Rs 1,000 crore for accelerated irrigation
project
· Central assistance for storm-water drainage project increased to Rs 500
crore from Rs 200 crore in the interim Budget
Exports
· Market development assistance schemes allocation up by 180% to 124 cr
· Interest subvention extended to march 2010 for employment extensive
export sector
· Special fund for small industries development bank of Rs 400 cr
· Focus to sustain momentum in exports
· 2% Interest subvention for exporters
· Extension of interest subvention scheme extended upto March 2010 to cover
sectors like handicrafts and handlooms
· Allocation for market development assistance scheme enhanced by 148 per
cent
· To set up handloom mega clusters in Rajasthan, West Bengal and Tamil Nadu
· Export Credit Guarantee scheme extended till March 2010
Oil and gas
· Domestic oil prices should be in sync with global crude
· National gas grid to be set up
· Outlay for Assam Gas Project increased
· Effective interest rate is 8% for farmers with foreclosures
· Expert group to be set up petro product pricing
· Domestic oil prices should be in syncy with global crude
· To develop National Gas Grid
PSUs, banks and Insurance
· To hike promoter shareholding in PSUs
· Encourage people participation in disinvestment
· Banks and insurance will remain in public sector and will get all support
· Banking network to be expanded
· One banking centre in every block planned
· 160% hike in ADPRP
· Capital in fusion in PSU banks to keep them competitive
Inclusive development
· Creating entitlements backed by legal authority to provide basic facility
to the aam aadmi
· NREGA gave employment to 4.4 cr household
· Reserve wage of RS 100 per day as an entitlement under NREGA
· Rs 39100 cr for 09-10 for NREGA an increase of 140%
· NREGA allocation increase at 144%
· New scheme PMAGY for integrated development of under developed villages
Pilot project this year
· Poverty eradication goal by 2014-15
· Interest subsidy to poor families for loans upto Rs 1 lakhs
Pension
· Substantially improve pension for armymen
· Pension benefit extended to war wounded being liberalised
· One Rank One Pension committee recommendations accepted
National Food Security
· BPL entitled by law for Rs 25 kg of rice/wheat at Rs 3 kilo
· Bharat Niraman allocation up 45%
· PM Gram Sadak Yojana allocation up to Rs 12000 cr
· Indira Gandhi Awas Yojana allocation up by 63%
Women and child development
· Focus on women self help groups
· 22 lakhs such groups of women active today, aim to link such self help
groups to banks
· Corpus for such schemes to be raised to Rs 500 cr in this fiscal
· Aim to reduce female literacy by half in 3 years
· New scheme to give interest subsidy to poor students pursue any
recognised course
Climate change
· Rs 562 cr for national river and lakes conservation
To build accountable institutions:
· RTI act an important step in ushering in accountability
· Unique ID project is major step in this regard: it also marks a beginning
of the private involvement in projects of national importance
Police and security
· Rs 430 cr for police modernisation
· 1 lakh housing units for central paramilitary forces
· Borders: 2284 cr for strengthening of borders
Education
· Rs 50 crore for Chandigarh University
· Interest subsidy on loans for higher education
· Rs 2130 crore to set upto more IITs and IIMs
· Spending on higher education raised to Rs 2010 crore
Minorities
· Allocation hiked from Rs 1000 cr to 1700 cr in 09-10
· Scholarships for minorities
· AMU to get Rs 25 cr for each of its new campuses
· Rs 1740 crore outlay for minorities
Budget estimates
· Rs 1020838 cr total budget allocation for 09-10
· Out this more than Rs 6000 cr is planned expenditure while the rest is
non-plan
· Increase in non-plan expenditure was due to pay commission and food
subsidy
· Interest payment consists of 36% of non-plan expenditure
· Defence outlay up from Rs 105600 cr in 08-09 to 104703 cr in 09-10
· Total tax receipts expected at Rs 641079 cr
· Revenue deficit is estimated at 4.8% and 4.6 as per provisional account
for 09-10
· Revenue deficit as percentage of GDP is pegged at 6.8%
· To spend Rs 10.20 lakh crore as total expenditure in 2009-10, crossing
the Rs 10 lakh mark for the first time in history
· Increase in plan expenditure 34 %, non-plan at 37 %
· Revenue deficit projected at 4.8% in FY 10
· Fiscal deficit projected at 6.8 % in FY 10
Others
· DEPB scheme for print media extended
· Stimulus package for print media extended to Dec 31
· Hike in allocation for management of Mumbai Floods
· New project for modernisation of employment exchange
· A national web portal for the same
· New programme for rehabilitation of those effected by cylone Alia
Taxes
· Surcharge of 10% on personal income tax removed
· No change in Corporate taxes
· Increase exemption on personal income tax by Rs 15,000 to Rs 2,40,000 for
senior citizens
· Increase exemption on personal income tax by Rs 10,000 to Rs 1,90,000 for
women
· Increase in exemption on personal income tax by Rs 10,000 to Rs 1,60,000
for all others
· Surcharge of 10% on personal income tax removed
· Propose to phase out surcharge on Direct Taxes
· To remove Fringe Benefit Tax
· To remove Fringe Benefit Tax
· States agree on basic structure of Goods and Services Tax
· To raise Minimum Alternate Tax(MAT) TO 15 % of book profit
· MAT hiked from 10% to 15%
· Commodity Transaction Tax scrapped
· Carry Forward Tax credit on MAT to 10 year
· To exempt Pension trust from Securities Transaction Tax
· To create Alternate Tax disputes resolution mechanism for foreign
companies
· Software Technology Parks of India (STPI) extended by a year
· GST to be a dual regime with Central and state terms
· No Securities Transaction Tax (STT) on sale/purchase of shares by NPT
Reforms, Tax reforms
· To work on Saral 2 form to make income tax procedure simple
· Tax reform system to be completed in 4 years
· Balanced approach to financial de-regulation in justified
· Review and aims of the budget
· It a mandate we accept with humility and will do all we can for the
welfare of the nation
· Strong mandate for growth
· Sensitive to the challenges of a young India
· The govt has to sustain a growth of 9% create 12 mn jobs per year
· Reduce poverty levels by half by 2014 infrastructure investment to more
than 9% by 2014
· Focus to sustaining momentum in exports
· Strengthen primary healthcare delivery
· Plan to strengthen primary health care
· Broaden inclusive growth agenda
· Our target of agricultural growth at 4%
· Signs of revival of domestic industry
· Fiscal deficit has widened from 2.7 % to 6.2% of GDP
· Institutional reforms to bring the fiscal deficit under control
Challenges
· To get the GDP growth to 9% at the earliest
· To deepen the process of inclusive development
· To reenergise govt, govt must provide service with accountability
· Growth driver in the last 5 yrs has been private investment
· Structure of Indian economy has changes in last 10 yrs
· Now services constitutes more than 50% of GDP
· Increase investment in infrastructure to 9% by 2014
· To focus on infrastructure development
· Growth co-operative effort of Centre and States
· Job growth rate hit by dip in GDP
· Integration of Indian economy with the world has opened up new
opportunities and new challenges
· Aim to return to FRBM target at the earliest
For revival
· Govt provided three stimulus package
· RBI took monetary measures to meet the needs of productive sector
· This led to fiscal deficit to rise to 6.2% in 08-09
· We achieved a growth of 6.7% of GDP last fiscal
· Signal of recovery visible in the last few months
· Uncertainty about revival of global economy remains
Infrastructure
· We had set up IFFCL to provide financial assistance to infra companies
· IIFCL will be given greater flexibility
· IIFCL will refinance 60% of bank loans in critical sectors
· IIFCL will evolve a take-out financing schemes for incremental funding in
infra
· Fiscal stimulus at 3.5% of GDP helped economy revive
· Sensitive to the needs of young India
· Endeavour to make Budget participatory and ensure continuity
· Significant increase in capital inflows needs
· PPP to be encouraged especially in infrastructure
· Need to improve and strengthen regulatory framework
· To speed up Golden Quadrilateral Project
· Total investment of 100000 CFR in infrastructure
· Need to remove bottlenecks for speedy implementation of infra projects
· Highways allocated 23% more than 08-09
· Rs 15800cr for Railways
· JNURM allocation increased by 80% to Rs 12887 cr
· Basic amenities for urban poor to get more than 3000 cr to make country
slum free in 5 yrs
· Provision for housing urban poor at Rs 3973 cr
· Allocation to NHAI increased to 23& Y-O-Y
· Fiscal deficit has widened to 6.7% of GDP
· Target agriculture credit inflows ay Rs 3.25 lakh cr
· · Focus of NCC, Gammon for highway development
· JNNURM to get more than Rs 12000 cr up 87%
· Basic amenities for urban poor to get more than 3000 cr to make country
slum free in 5 yrs.
· Provision for housing urban poor at Rs 3973 cr
· Allocation to NHAI increased to 23& Y-O-Y
· Fiscal deficit has widened to 6.7% of GDP
· Target agri credit inflows ay Rs 3.25 lakh cr
· Focus of NCC, Gammon for highway development
· Rural electrification allocation up 27%
Agriculture
· Interest subvention scheme for agriculture loans to continue
· 60% population depended on agri
· Sustained increased in plan allocation
· Target credit flow Rs 325000 cr
· Loans upto 3 lakh at 7% per annum
· Those who pay their loans in time will get loans at 6%
· Task force set up to look into farmer suicides in Maharashtra
· Rajiv Gandhi Krishi Vikas Yojana allocation up by 30%
· Fertilizer subsidy to go to farmers directly
· To move towards Nutrient based subsidy regime
· Additional allocation of Rs 1,000 crore for accelerated irrigation
project
· Central assistance for storm-water drainage project increased to Rs 500
crore from Rs 200 crore in the interim Budget
Exports
· Market development assistance schemes allocation up by 180% to 124 cr
· Interest subvention extended to march 2010 for employment extensive
export sector
· Special fund for small industries development bank of Rs 400 cr
· Focus to sustain momentum in exports
· 2% Interest subvention for exporters
· Extension of interest subvention scheme extended upto March 2010 to cover
sectors like handicrafts and handlooms
· Allocation for market development assistance scheme enhanced by 148 per
cent
· To set up handloom mega clusters in Rajasthan, West Bengal and Tamil Nadu
· Export Credit Guarantee scheme extended till March 2010
Oil and gas
· Domestic oil prices should be in sync with global crude
· National gas grid to be set up
· Outlay for Assam Gas Project increased
· Effective interest rate is 8% for farmers with foreclosures
· Expert group to be set up petro product pricing
· Domestic oil prices should be in syncy with global crude
· To develop National Gas Grid
PSUs, banks and Insurance
· To hike promoter shareholding in PSUs
· Encourage people participation in disinvestment
· Banks and insurance will remain in public sector and will get all support
· Banking network to be expanded
· One banking centre in every block planned
· 160% hike in ADPRP
· Capital in fusion in PSU banks to keep them competitive
Inclusive development
· Creating entitlements backed by legal authority to provide basic facility
to the aam aadmi
· NREGA gave employment to 4.4 cr household
· Reserve wage of RS 100 per day as an entitlement under NREGA
· Rs 39100 cr for 09-10 for NREGA an increase of 140%
· NREGA allocation increase at 144%
· New scheme PMAGY for integrated development of under developed villages
Pilot project this year
· Poverty eradication goal by 2014-15
· Interest subsidy to poor families for loans upto Rs 1 lakhs
Pension
· Substantially improve pension for armymen
· Pension benefit extended to war wounded being liberalised
· One Rank One Pension committee recommendations accepted
National Food Security
· BPL entitled by law for Rs 25 kg of rice/wheat at Rs 3 kilo
· Bharat Niraman allocation up 45%
· PM Gram Sadak Yojana allocation up to Rs 12000 cr
· Indira Gandhi Awas Yojana allocation up by 63%
Women and child development
· Focus on women self help groups
· 22 lakhs such groups of women active today, aim to link such self help
groups to banks
· Corpus for such schemes to be raised to Rs 500 cr in this fiscal
· Aim to reduce female literacy by half in 3 years
· New scheme to give interest subsidy to poor students pursue any
recognised course
Climate change
· Rs 562 cr for national river and lakes conservation
To build accountable institutions:
· RTI act an important step in ushering in accountability
· Unique ID project is major step in this regard: it also marks a beginning
of the private involvement in projects of national importance
Police and security
· Rs 430 cr for police modernisation
· 1 lakh housing units for central paramilitary forces
· Borders: 2284 cr for strengthening of borders
Education
· Rs 50 crore for Chandigarh University
· Interest subsidy on loans for higher education
· Rs 2130 crore to set upto more IITs and IIMs
· Spending on higher education raised to Rs 2010 crore
Minorities
· Allocation hiked from Rs 1000 cr to 1700 cr in 09-10
· Scholarships for minorities
· AMU to get Rs 25 cr for each of its new campuses
· Rs 1740 crore outlay for minorities
Budget estimates
· Rs 1020838 cr total budget allocation for 09-10
· Out this more than Rs 6000 cr is planned expenditure while the rest is
non-plan
· Increase in non-plan expenditure was due to pay commission and food
subsidy
· Interest payment consists of 36% of non-plan expenditure
· Defence outlay up from Rs 105600 cr in 08-09 to 104703 cr in 09-10
· Total tax receipts expected at Rs 641079 cr
· Revenue deficit is estimated at 4.8% and 4.6 as per provisional account
for 09-10
· Revenue deficit as percentage of GDP is pegged at 6.8%
· To spend Rs 10.20 lakh crore as total expenditure in 2009-10, crossing
the Rs 10 lakh mark for the first time in history
· Increase in plan expenditure 34 %, non-plan at 37 %
· Revenue deficit projected at 4.8% in FY 10
· Fiscal deficit projected at 6.8 % in FY 10
Others
· DEPB scheme for print media extended
· Stimulus package for print media extended to Dec 31
· Hike in allocation for management of Mumbai Floods
· New project for modernisation of employment exchange
· A national web portal for the same
· New programme for rehabilitation of those effected by cylone Alia
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