Day to day SOF-TIPS (Simplifly Own Finance )

Supply and Demand Side Inflation

It is summer holidays and kids living in a posh building – “Inflationary Heights” are having great fun. Their parents have filled their pockets with money and the kids now have buying power. There is an ice cream parlor down the street. The parlor sells ice cream to all the children of the area. The man in charge of the parlor is glad for making all the children happy with his different ice cream flavors.

There is a nice balance between the joy of selling and buying ice cream. But this summer something happened which disturbed this balance.

The kids from Inflationary Heights full of notes in their pockets start consuming double the volume of ice cream that they normally do. The parlor man soon realizes that the children from Inflationary Heights have a lot of money with them and even if he were to increase prices, they would continue to buy. He increases prices and the demand continues unabated. While the parlor man gets richer by the day, the other children of the area see their smiles vanish. They no longer are able to afford the ice cream any longer.

They decide to meet the parents of the children of Inflationary Heights. During the meeting with the parents, they explain their problem. They request the parents to reduce the pocket money allowance of their children so that the price of ice cream drops. The parents are in a fix. They know that this will not be accepted by their children. While everyone celebrated when they had increased their allowance, the children may not be willing to accept a reduction.

The parents do understand that if they reduce the allowance, their kids would have less money and consequently the demand for ice cream would drop. Thus the inflation in ice cream at the parlor could be reduced by reducing the availability of money.

Just like the parents of the children of Inflationary Heights have the option to regulate the prices of the ice cream parlor by either increasing or decreasing the allowance money of their children, in the same way; RBI (Reserve Bank of India) has the option to regulate the flow of money into the economy and control prices. This is called demand side inflation that may get controlled by monetary policy measures.

So what is supply side inflation? Let’s get back to the story.

After the meeting, one of the parents, Mr. Idea Shankar, comes up with an idea that may not force them to reduce allowance and at the same time may provide that prices at the parlor would come down.

The next day, Mr. Idea Shankar calls on a few competitors of the Ice Cream Parlor and informs them of the huge business potential in their area. He informs the competitors about how the children of Inflationary Heights have got a lot of cash to spend due to their higher allowance. Idea Shankar’s idea works to perfection. Within two days, four new parlors spring up in the area. Seeing this and fearing that he would lose business to the competitors, the parlor man immediately brings down prices. Now there are enough parlors and enough customers. In this scenario, the higher allowance does not impact prices in the parlors because there is enough supply. In fact, some of the parlors who are new start offering discounts. All the children on the area are happy now because they can start enjoying their ice cream all over again. In fact, they can now eat more due to the discounts. Now they do not have any grievances against the children from Inflationary Heights. Some of them are even thankful to them because now they have more variety and at lower prices.

The manner in which prices were regulated was by increasing the supply of ice cream, in the same manner, the government may control inflation by making the necessary provisions for increasing the supply of products and services in the economy. This is the concept of supply side inflation. While it is easier to set up a few ice cream parlors, it is not as easy to set up many factories and services for the government as it would need land, labor and capital plus time to set up the supply.

However, controlling inflation from a supply perspective is more inclusive and sustainable. On the other hand, using monetary policy to stem inflation is short term in nature and not inclusive. Beyond a point, monetary policy ceases to be an effective tool for inflation control.

To some extent, the Indian economy stands at a cross road because the role of RBI to control inflation is diminishing and the need for creating additional supply is getting imperative. Policies need to be drafted that attract entrepreneurs to invest in the economy so that they can create supply and demand by way of creating jobs. This could try and bring balance back to the economy.

All this is ok sir, but m sure u know people do not tend to understand well when they are asked to pay more. V have the habit of fixing and being emotionally attached to things.

Still i heard people telling ki a yr back petrol was at this rate and that rate and crap. V just cant cope with things.

There is this good story. Let me try to recall it

Two good friends Ramesh and Suresh open up a grocery shop opp to each other. Customers come regularly to both the shops., but lately there were a step loss in customers at Suresh’s shop. But the same business was going good infact great for Ramesh
So finally Suresh goes to Ramesh and asks him y his shop is going in loss and urs in profit even though both are honest and never cheat. To this Ramesh replies

“Its simple dude, the trick that i use and u miss is the same. To a customer who needs 100grm sugar i first put 75gm on the weigh machine and then gradually add 25grm on it. Whereas u add 125grms and then remove 25grm from it. "

“This is y ur customers dont prefer coming to u.”

End of story…… Dont ask me for the moral of the story cos it took me all my power to remember this story in the first place.

sirji can you comment on derivatives

Wait the moral of the story is :

Never open a shop opp to ur friends shop.
So beware.

And another thing that u learn is :

Suresh and Ramesh are good only for eating Five Star and nothing else……

Sureshhhhhhh : Rameshhhhhhhh

sildenafil wrote:

sirji can you comment on derivatives

first 2 post were from TATAAMC, as i got mail from them.
you can regd./like that on facebook,, prof. simply simple.

Derivative is complex subject, first the basic should be covered.
Lets us wait from any simple explaining from some1.

The Libor scandal

Quest: Guilty bankers should clean toilets

The CNN

Richard Quest is CNN’s foremost international business correspondent and presenter of Quest Means Business. Here, he gives his views of the latest bank crisis.

The Libor scandal has confirmed what many of us have known for some time: There is something smelly in the London financial world and the stench is now overwhelming.

But It is only when I read the Financial Services Authority report — all 44 pages of it — that is became clear just how widespread, how blatant was the fixing of the benchmark interest rate Libor and Euribor by Barclays. Brazen is the only word for it.

The emails and phone calls reveal that on dozens of occasions those who stood to gain by the decisions asked for favours (and got them) from those who helped set the interest rates.

And all the time the world believed Libor was somehow a barometer of what banks were lending to each other. It wasn’t. It was the rate at which a bank was prepared to corrupt the money markets for its own narrow, venal gain.

It is the way the traders, the rate submitters — everyone involved in this cesspit — was running to do wrong which makes it so egregious. With one or two feeble exceptions, no-one ever seemed to stop and say “this is against the rules.” Or, heaven forbid, “this is wrong.”

I have no doubt that Barclays wasn’t the only one up to this. The FSA report makes it clear that other traders were putting pressure on their rate setters too.

Libor emails: ‘For you…anything’

It’s just a question of time before more fines are levied. After all, to believe that this was just Barclays is to ignore the obvious. I can imagine the frantic damage limitation now underway at other banks as they try to minimize their own damage, instead of coming clean.

All this wouldn’t matter so much if it wasn’t so serious — Libor and its cousin Euribor are the rates used to determine hundreds of trillions of dollars worth of highly specialized financial contracts called derivatives. Businesses and household loans are set by this benchmark. It is the backbone of the financial world and now it has been proven to be bent and crooked.

On the wider issue of how banks are governed, it is another example of why light-touch regulation and self-regulation are oxymorons.

We have seen it in investment banks where Chinese walls have been ignored and information freely passed about. We have seen it in accounting scandals where auditors were more concerned about contracts than credibility. We have seen it in transactions where the bank was more worried about its own well-being than its clients and now we are seeing it in a case were a bank attempts to rig the entire market.

Now it is time to get the drains up and start cleaning out the sewage. And it is about more than just firing the miscreants and fining the banks. It is truly about back to basics. Ethics. Integrity. Honesty. Old fashioned words which never go out of date but which have become buried under the weight of money that corrupts the financial world.

Somewhere along the moral compass of those involved became corrupted and they forgot dictum like “my word is my bond.” Business schools no doubt shoulder part of their blame. After all, they are the ones who should add a much healthier respect for rules and regulations. As one lawyer once said by all means go around, bend and twist the rules….but never break them.

For me — the best outcome here is a full, frank and detailed investigation into who was in charge, what did they do and why didn’t they stop it. Then the best punishment I can mete out is for them to go and spend several weeks cleaning out public toilets and sewers.

Having allowed so much crap to be heaped on the rest of us and wallowed in the dirt and sewage for so long it is about time those who are proved to be ethically bankrupt financiers actually did some real cleaning up.

21st-century banking

Free e-transactions would increase savings

Business Standard

The Reserve Bank of India has, according to reports, turned down the finance ministry’s suggestion that electronic funds transfers, or e-transactions in general, be made free for bank customers. The main reason cited for this is that no product or service should be offered free, as then it would not be commercially viable and so would not be scaled up. This needs to be contested. Banks’ major sources of revenue, other than net interest income, are fees for different services and investments. While income from investment can be quite volatile, fee-based income like remittance charges tends to be stable and, therefore, desirable. There is no reason to argue that all these three revenue sources should always stand on their own feet and there should be no cross-subsidisation. In a year of market volatility, income from buying and selling of securities can be low or negative, leading to cross-subsidisation from other activities. At the retail level, branch managers routinely ask customers looking for lockers to fork out a tidy sum as fixed deposits. Here interest income (from deposits that can be lent on) is sought to bolster the fee income from renting the locker. Similarly, a bank could use free remittance facilities as a marketing tool to get more deposits.

Systemic issues enter the picture when it is proposed that the banking regulator ask banks to move towards offering free electronic services, which is considered good for the system and the average bank customer. Under ideal free-market conditions, banks should be free to formulate their own marketing plans and incentives for attracting desirable businesses. But conditions in the banking sector are far from perfect competition. You need to get a licence to start a bank and accept deposits, which are then insured. This protects depositors from bank failure. So those owning bank licences do form a club whose interest will be to keep others out. What’s more, a major section of banking business in India is in the public sector, where incentives for senior officials can be quite different from what they would be if these banks were widely held.

On the other hand, the developmental role of the government is to raise the national savings rate by promoting the spread of banking by, among other things, offering easy and free electronic facilities. To be able to make an electronic transfer you need to make a deposit in the first place, and the mainstay of a large commercial bank is a large deposit base facilitated by affordable basic banking facilities. Once a core banking solution is in place, it does not cost a bank anything to handle additional remittance traffic. It is as irrational to charge for this as it is for telecom service providers to levy roaming charges. Yes, periodically you have to increase server capacity, but that is a capital cost like adding new branch premises. Moreover, after the global financial crisis, banks are being forced to rediscover their main business of lending to small and large enterprises to fuel economic activity, instead of relying overly on other income.

This is the 21st century, and technology advances swiftly; it should be used to increase the base of low-cost deposits, not ignored.

The Libor saga

Another blow to finance’s reputation

Business Standard

Barely a week after London-based Barclays Bank Plc was fined a record £290 million (Rs 250 crore), for allegedly participating in the fixing of the London Interbank Offered Rate, or Libor, by regulators in the US and the UK, its chairman Marcus Agius and outspoken CEO Robert Diamond have finally resigned, though Mr Agius will still run the bank at least till a new chief executive is chosen. Mr Diamond, who was at the helm of Barclays Capital at the time that the division’s employees were knowingly submitting incorrect information to the British Banking Authority, will still have to face enraged members of the British Parliament on Wednesday, as the inquiry into the fixing of Libor continues. This is another blow to the embattled City of London’s reputation as a financial centre, and to that of big banks themselves. For Barclays, the fine equals half its total dividend payout of last year, and so the impact on its shareholders is considerable.

Libor is central to how money-market rates, and thus interest rates for home and other loans, are set. It is supposed to reflect the degree of trust in the financial system. The British Banking Authority collects quotes for interbank lending rates on loans of varying tenures daily from a set of large, well-respected global banks – including Barclays, the Union Bank of Switzerland, Citigroup and the Royal Bank of Canada – discards the high and low figures, aggregates the rest, and releases the composite data at 11 a m GMT every day. A meticulous investigation into Libor rates between 2005 and 2009, led by the UK’s Financial Services Authority (FSA), discovered that Barclays employees regularly submitted quotes first too high and then too low during that period. They were responding to requests for assistance from colleagues playing the markets, and investigations are proceeding into whether instructions from higher up – and even tacit approval from some within the Bank of England – existed, too.

Barclays, in the end, might not even turn out to be the worst offender. The FSA’s investigation followed whistleblowing by the staffers from Barclays responsible for submitting the rates, who informed the bank’s vigilance division, which then bumped the problem up to the regulator. Barclays employees have claimed that they held out as long as possible when submissions from other banks were way off target — and eventually started cooking the rates when the financial crisis grew acute, and they worried that Barclays looked like it was paying a higher risk premium for capital than other banks. Of course, that isn’t the whole story — some submissions seem to have been made keeping in mind Barclays’ repayment and borrowing schedules. But observers can be genuinely concerned that the entire banking system is complicit in rigging Libor, and more large fines will follow.

The problem is that here, as elsewhere in the financial system, incentives were not properly aligned and self-regulation was substituted for active regulation. The lessons of the financial crisis have been underlined: an overly light regulatory touch is inappropriate for finance, and it is the largest and best respected of institutions that can do the most damage.

Dispense with Address Proof

The Economic Times

Janmejaya Sinha’s article, Please Give Me an Identity (ET, July 11), detailing his travails while trying to prove his address, struck a chord with many readers, all of whom have gone through similar trauma in pursuit of an identity. It is time to approach this question from first principles. Do we really need to worry about proof of address?

Is having a verified address any guarantee that someone will not commit a crime? Clearly not. Is it the case crimes are committed only by people without a verifiable address? Again, the answer is in the negative.

Having a verified address is not a sufficient condition to prevent the addressee from wrongdoing. Not having an address is not a necessary condition for a person to commit a crime. So, why insist on everyone having some verified address?

You could argue, it makes it easier to trace a criminal, in case you have his original address. Ask Dawood Ibrahim, anyone? Police records are full of people who have gone missing and are untraceable, in spite of having a bona fide address to begin with.

It makes sense to ask for an address if the addressee has some specific use from providing that address. Where the individual being asked for his address has no incentive to comply, such as when the transport department asks for it in order to track down the driver for violations, and provides an incorrect address at the time of registering the car, it should be possible for the traffic police to generate a database of offending cars, and haul up the drivers on the road. Of course, this would entail car numbers being scanned at traffic signals and run through the database by a computer. A smartphone app should suffice to enable this for any traffic policeman on the beat.

But in this case, the might of the state would be brought to bear on actual offenders, a tiny subset of the universe of citizens. This is preferable to treating all citizens as potential offenders and harassing them out of their minds.

Why do banks need proof as to where an account-holder lives, over and above the account-holder’s own claim? In all bona fide cases, the vast majority, the account-holder wants the bank to send him statements and cheque books to an address where he would receive them.

Consider the minority of criminals or would-be criminals who use a bank account after having started it with false addresses. Repeated deposits and withdrawals of only cash can and should trigger special investigations into such account-holders’ identity and the identity of their counterparties. Here again, it is possible to exempt the majority of bona fide account-holders from harassment while identifying and isolating an offending minority.

Considering that bribes can be paid as inter-corporate loans that are eventually written off, a bank account with verified address is no guarantee against banks being used as conduits for crime. Whether an electronic trade put through a bank account is an insider trade or not hardly depends on the quality of address proof supplied at the time of opening the account. In those minority cases where an account is being used to launder the proceeds of crime by those who only want to leave a false address, strengthening the current restrictions on depositing cash would be a better deterrent than the current practice of demanding impossibly tough proof of address.

A passport is proof of identity, citizenship and address (of course, the passport office itself does not accept the passport as proof of address, even if the holder claims no change of address at the time of renewal). Why should it ask for permanent address? In the new world of increasing urbanisation, migration within the country and abroad, what sense does a permanent address make? What about residents of Delhi, whose parents hail from some remote village in, say, Jharkhand, but have always lived in a rented accommodation in their adopted city? What is their permanent address? Do such people have no right to have a passport? Should they write down some ancestral place in Jharkhand whose current occupants are probably unaware of their existence? Should they claim a rented place as their permanent residence?

What about the three crore odd households who have no homes of their own anywhere on the planet? Don’t their 15 crore individuals have a right to be called Indians and be entitled to a passport, bank account and other citizen amenities and rights?

It is possible to abandon proof of address altogether and accept an applicant’s submission as authentic. Biometric tags and de-duplication software that works across multiple databases — driving licences, hospital records, school and college registers, insurance and bank accounts — would identify cases that call for further verification.

Sure, this means a lot of computerisation. So what?

Trust everyone’s claimed address, verify those that give cause for doubt. This is integral to inclusive growth.

@B@R_0_0_D wrote:@

The Libor scandal

Quest: Guilty bankers should clean toilets


The CNN

Richard Quest is CNN’s foremost international business correspondent and presenter of Quest Means Business. Here, he gives his views of the latest bank crisis.


The Libor scandal has confirmed what many of us have known for some time: There is something smelly in the London financial world and the stench is now overwhelming.


But It is only when I read the Financial Services Authority report — all 44 pages of it — that is became clear just how widespread, how blatant was the fixing of the benchmark interest rate Libor and Euribor by Barclays. Brazen is the only word for it.



The emails and phone calls reveal that on dozens of occasions those who stood to gain by the decisions asked for favours (and got them) from those who helped set the interest rates.


And all the time the world believed Libor was somehow a barometer of what banks were lending to each other. It wasn’t. It was the rate at which a bank was prepared to corrupt the money markets for its own narrow, venal gain.


It is the way the traders, the rate submitters — everyone involved in this cesspit — was running to do wrong which makes it so egregious. With one or two feeble exceptions, no-one ever seemed to stop and say “this is against the rules.” Or, heaven forbid, “this is wrong.”


I have no doubt that Barclays wasn’t the only one up to this. The FSA report makes it clear that other traders were putting pressure on their rate setters too.


Libor emails: ‘For you…anything’



It’s just a question of time before more fines are levied. After all, to believe that this was just Barclays is to ignore the obvious. I can imagine the frantic damage limitation now underway at other banks as they try to minimize their own damage, instead of coming clean.



All this wouldn’t matter so much if it wasn’t so serious — Libor and its cousin Euribor are the rates used to determine hundreds of trillions of dollars worth of highly specialized financial contracts called derivatives. Businesses and household loans are set by this benchmark. It is the backbone of the financial world and now it has been proven to be bent and crooked.



On the wider issue of how banks are governed, it is another example of why light-touch regulation and self-regulation are oxymorons.



We have seen it in investment banks where Chinese walls have been ignored and information freely passed about. We have seen it in accounting scandals where auditors were more concerned about contracts than credibility. We have seen it in transactions where the bank was more worried about its own well-being than its clients and now we are seeing it in a case were a bank attempts to rig the entire market.



Now it is time to get the drains up and start cleaning out the sewage. And it is about more than just firing the miscreants and fining the banks. It is truly about back to basics. Ethics. Integrity. Honesty. Old fashioned words which never go out of date but which have become buried under the weight of money that corrupts the financial world.



Somewhere along the moral compass of those involved became corrupted and they forgot dictum like “my word is my bond.” Business schools no doubt shoulder part of their blame. After all, they are the ones who should add a much healthier respect for rules and regulations. As one lawyer once said by all means go around, bend and twist the rules….but never break them.


For me — the best outcome here is a full, frank and detailed investigation into who was in charge, what did they do and why didn’t they stop it. Then the best punishment I can mete out is for them to go and spend several weeks cleaning out public toilets and sewers.


Having allowed so much crap to be heaped on the rest of us and wallowed in the dirt and sewage for so long it is about time those who are proved to be ethically bankrupt financiers actually did some real cleaning up.

anything will happen !
how many such banks in india !

Government bars 3 Iranian banks

he Home ministry has refused to allow three Iranian banks to open branches on Indian soil because of concerns about money-laundering and terror financing, a report said on Friday.

The move complicates New Delhi’s efforts to settle its oil trade bills with the Islamic Republic, the Indian Express daily reported, quoting an unnamed home ministry official for the report.

The ministry has denied security clearance to applications by Parsian Bank, Bank Kasargad and Eghtesad-e-Novin Bank because of its obligation to guard against money laundering and terrorist financing, the newspaper said.

There was no immediate comment from the home ministry.

Fuel-scarce India plans to import 15.5 million tonnes of crude oil from Iran this year.

It has faced difficulty in finding banks to transfer payments to Iran due to US-led financial sanctions against the Islamic republic that have dried up dollar payment routes.

To help circumvent this, India and Iran clinched a deal under which New Delhi would pay for close to half of its Iranian oil purchases in rupees.

Allowing branches of Iranian banks to set up in India would made it easier for Indian firms to boost rice, tea, yarn, fertiliser and textile exports to Iran as well as facilitate cooperation on engineering and other projects.

Iran will use the rupees it receives for oil to buy Indian goods. Large delegations from each country have already made visits to explore trade opportunities.

Transactions are now routed in euro payments through Turkiye Halk Bankasi and 45 percent of crude payments in rupees through India’s state-run UCO Bank.

India’s Department of Economic Affairs plans to ask the home ministry to reconsider its decision, citing “strategic compulsion” for the opening of the Iranian bank branches, the newspaper said.

Iran is also looking to India for transfer of technology to modernise its textile industry and investments in a railway corridor to connect Iran to Caspian Sea countries.

India, which imports four-fifths of its crude, says it shares the US anti-nuclear proliferation goals. But it also views Iran as an important source of oil to feed its economy’s fast-growing needs and sees Iran as a key ally in stabilising Afghanistan following the US planned troop exit.

The United States says Iran’s nuclear drive is aimed at making an atomic bomb but Iran insists it is for civilian energy.

OCI – Dual Citizenship (India) explanation

Please try this direct link:

http://nriinformation.com/articles2/dual_citiz….

Bring Back the Apprentice

_
Manish Sabharwal_

A strong apprentice system will
bridge the gap between education and employability

Our inability to predict where jobs will be created is a strong argument for fixing our dysfunctional apprenticeship regime. A story about Einstein has one of his students stand up 15 minutes into an exam saying, “The questions in this year’s exam are the same as last year’s exam.”

Einstein replied, “Don’t worry; the answers are different this year.”

Policymakers should ask, which sectors will create what kind of jobs in the next 20 years? The answer to this question is crucial because educators need to decide what kind of skills and education to impart to young people long before they hit labour markets. But most attempts at job forecasting make weather forecasting look easy. Even complex forecasting models fail at longterm prediction.

Flawed, complex models have dangerous consequences. The physics’ envy of finance led to huge losses because quantitative models used to evaluate value at risk or credit default swaps were precise but incomplete. A comprehensive and multi-decade review of attempts by many countries, including the US, UK, India and Japan, to forecast long-term jobs suggests that accuracy has been poor. To be fair, just like weather forecasting in the very near term (one or two days), these models know where job demand will be in the next one or two years. But this is not enough to craft long-term education policy. The future is unknowable but that does not mean we can’t prepare for it. Trying to predict is not as effective as creating an education, employment and employability ecosystem that is self-healing. This would have a strong school system with broad fundamental grounding rather than vocation training. It needs an effective qualification framework with seamless mobility between short-term certificates and longer diplomas and degrees, effective employment exchanges with low search costs for job-seekers and employers by effective matching and much else.

But the biggest short-term impact would come from rebooting our dysfunctional formal apprenticeship regime. India has only 3,00,000 formal apprentices because of the outdated provisions of the Apprenticeship Act of 1961. Smaller countries like Germany and Japan have six million and 10 million apprentices respectively.

Things were not always this bad; our history has many examples of how statecraft was learnt by a prince serving an apprenticeship. Our language is peppered with terms like ustaad, mureed, gurukul, shishya and so on that arise from a rich tradition of experiential learning. Apprenticeships may account for 70% of competence development in many countries. But the biggest upside of the ‘learning by doing’ and ‘learning while earning’ of apprentices is placing employers at the heart of education.

This reduces the importance of accurate forecasting because workplace exposure narrows the gap between labour supply and demand in real time. India needs a new apprenticeship regulatory regime that recognises, one, that apprenticeships are classrooms, not employment.

Two, that stipends are tuition subsidy and not salary.

Three, durations for different trades and candidates need to vary from three months to three years.

Four, the partition between jurisdictions in the ministry of labour and HRD is unnecessary because it creates policy orphans like non-engineering graduates and amplifies the apartheid between skills and higher education.

Five, we need employer-sponsored programmes that are allowed to outsource theoretical training.

Six, we also need educational institute-sponsored programmes that are allowed to outsource practical training.

Seven, the current stick of jail is not working and capacity will be higher if employers are volunteers. Eight, moving away from the current licence raj to nationwide permissions for national employers will increase capacity. Nine, removing the size ratios on apprenticeship programmes run by employers will accelerate capacity creation because apprenticeships have a lower expansion speed limit than physical classrooms. And ten, the most effective labour market subsidy is subsidising stipends.

These reforms should be designed to counter current opposition. One worry is that youth will be exploited with low stipends; many employers are willing to link stipends to a proportion of minimum wages. Another worry is permanent apprentices. To resolve that, employers could use biometric Aadhaar numbers to ensure maximum terms. A third worry is that older people will use these programmes. But entry could be restricted to candidates younger than 35 years.

A final worry is that expanding the stipend subsidies currently offered would be a waste of government money. But imagine if the all of the Rs.1,40,000 crore spent on National Rural Employment Guarantee Scheme had been available for formal apprenticeship stipends. The beneficiaries would have gained skills, workplace exposure and a higher probability of sustainable jobs.

Either way, reforms should give employers who don’t avail of stipend subsidies more structuring flexibility than those that do. Models that try to predict where jobs will be created in the next few decades have the efficacy of palm-reading or astrology: unreliable inputs for longterm decisions. We should try creating our education system to be self-healing in coping with changing employer needs. What better place to start than expanding our formal apprenticeships to 10 million youth?

Book ‘Weekend Entrepreneur’ tells you how to make extra money

It’s a question that is as simple to pose as it’s difficult to answer: do you want to supplement your income with a part-time venture? If yes, what are the things you need to know before you embark on such an entrepreneurial venture?

Your skills are likely to remain dormant unless such questions are answered. Weekend Entrepreneur by Michelle Anton and Jennifer Sander helps you do precisely this.

Over 234 pages, the authors not only tackle why and how you can launch a weekend start-up, but also the ways of cultivating your specific interests and converting them into profitable ventures, even as you carry on with your day job.

The premise of the book is that contrary to popular perception, it does not take a lot to start your own enterprise, at least on a small scale. In the first part of the book, the authors talk about why you should consider being a weekend entrepreneur.

The results can be staggering, say the authors. By taking up window cleaning, for instance, people in the US can make $2,600 a year. In India, you could substitute the activity with washing someone’s car.
Even if you clean two cars on a weekend and charge Rs 200 per car, you will be able to make about Rs 21,000 per year.

If you think cleaning cars is not your cup of tea, there are other options thrown up by the book, giving a fair idea about how much you can gain by utilising a few hours over the weekend.

To augment their argument, the authors use real-life examples, which make a reader believe that this need not be mere wishful thinking.

The second, and the lengthiest, part of the book delves into the possible options for part-time entrepreneurship. It lists 101 ideas across various categories, ranging from manual work to online ventures. The most common of ideas—knitting and tutoring—are interspersed with unfamiliar ones like ‘renting a husband’.

The job involves being a handyman—pounding a straight nail, replacing a broken windowpane or installing a new lock. While some of the job options, such as vintage clothing boutique, may seem alien to Indians, leafing through the various choices and real-life incidents makes for an inspiring read. What’s even more encouraging is that most of these entrepreneurs go on to quit their regular jobs and pursue their own ideas.

The third part, Success Strategies, talks about the next stage—ways to gain publicity. From creating a blog and including it in search engines to getting the right licences and patents for your new products, it focuses on getting noticed, not on advertisements.

The book shows how a mere mention in a newspaper or on a television channel can help boost your business.

From knowing the right mediaperson to approaching news stations, the chapter will be of help even to people who have already started their businesses and are looking to expand them.

Don’t give PAN numbers for Tatkal bookings

Indian Railways: Abuse of PAN No for Tatkal bookings, Do not quote

Do not quote PAN for Tatkal bookings. Indian Railways display PAN as identity proof for Tatkal bookings.

The Railways have collect PAN for Tatkal bookings and display the PAN + name, sex and age of passengers on reservation charts pasted on railway compartments.

This is a boon for benami transactions. It is mandatory for traders like jewellers to collect tax (TCS) from customers on purchase of jewellery worth Rs 5 lakh & bullion worth Rs 2 lakh. While complying with TCS rules for collection, payment and uploading of TCS information (e-filing of TDS returns) jewellers have to furnish PAN of customers. For certain customers it is not convenient to provide PAN. To accommodate high net worth customers, traders have a easy source of benami PAN numbers, name, sex and age from reserved railway compartments. A traveller recently noticed a chap copying PAN particulars along with name, age and sex pasted on reserved compartments, and when confronted with the help of railway police, he admitted that he gets Rs 10 per PAN particulars from jewellers. These persons are copying PAN information of senior citizens, women etc from sleeper class with the intention that passengers in sleeper class are not serious tax payers and generally salaried class.

This wrong usage of a PAN number is known only to the regular tax payers, who regularly check their tax credit on form 26 AS provided by the Income Tax department on their website. This form 26 AS is updated only on filing of e-TDS returns by the traders. There is almost 6-12 months time delay for the PAN holder to know that a transaction of above nature has taken place on his name and that too only if he goes through form 26 AS. On noticing the tax credit of above nature while reconciling form 26 AS for tax credits for filing the return during subsequent financial year i.e. July / September, the tax payer has an option to exclude the same and go ahead in filing the return. In that case the department will first initiate action from the tax payer’s side asking him to explain the sources of money for the above transaction done in his name and also to prove that he has not carried on the above transaction. The onus lies on the genuine tax payer for the fault committed by the traders. This dispute may even take more than 2 years to be settled.

In conclusion, the only way to protect yourself from these fraudulent transactions, is to avoid quoting PAN details for identity proof.

RBI launches website to explain

detection of fake currency

Seeking to spread awareness among public about fake notes, the Reserve Bank has launched a website explaining ways to detect counterfeit notes.

With a tagline ‘Pehchano Paise Ki Boli, Kyunki Paisa Bolta Hai’, the website — www.paisaboltahai.rbi….in – gives visual presentation with pointers on currency notes of 10, 20, 50, 100, 500 and 1,000 rupee denominations.

Consumers have the option to download posters of these currency notes, which can be used as reference to identify counterfeit notes. A documentary film on it can also be downloaded.

The link for this website is available on RBI’s main website as well.

The site also gives details of the number of fake currency notes detected.

RBI said considering there were 64,577 million pieces of banknotes in circulation as on March 31, 2011, the detection of forged notes during 2010-11 was to the tune of 6.74 pieces per million pieces of banknotes in circulation.

In the past as well, the Reserve Bank has come out with various notifications warning against circulation of counterfeit currency notes.

Referring to the fake currency notes in circulation, RBI Governor D Subbarao said that the government and police are taking several measures to deal with the menace.

He emphasised the need to educate people on ways to distinguish fake currency notes from the genuine ones.

Will exiting the euro be much worse than staying in it?

Most Europeans now openly admit, and some silently nod in agreement, that the creation of the European monetary union and the euro were bad ideas. The primary motive of this grandiose experiment was political, not economic.

By creating the eurozone, European countries, in particular Germany and France, wanted to increase their influence in world affairs. A single, unified European Union (EU) was expected to be mightier than, or at least as strong as, the US.

During the 1980s, when these ideas were being discussed, no one, of course, dreamt that in less than two decades, a giant dragon would emerge from the east to dwarf the economies of the EU.

Back in the days when the euro was being conceived, it was hoped that a single European currency will challenge the US dollar; join, and perhaps eventually replace, it as the international currency of trade and exchange.

Over the years, the euro has come to be accepted as the second-largest international currency. Until recently, that is. If market rumours are to be taken seriously, it seems that traders are aggressively bidding for the euro’s collapse. In response, investors are lowering their euro-denominated risk.

Imposing a single currency on a large number of countries was a bad idea because this forced these countries to surrender their monetary sovereignty. With that, the EU countries had to give up the two key instruments: fiscal and monetary policies that governments use to help their economies out of recession.

They could not print their currencies or adjust interest rates or increaseinvestments in government programmes to bring their economies out of the great recession.

As several EU countries found during the great recession, they had neither of these tools to redress the pain that the recession was inflicting.

The EU’s response to the great recession was to impose rigid austerity measures such as higher taxes and restrictions on government spending that further deepened the recession. The result: many European countries are facing large sovereign debts, weak banks, high unemployment rates and huge trade deficits.

It is true that until recently, countries were bending backwards to join the EU. They had willingly accepted the conditions of joining the EU and the structural and institutional changes it entailed.

Spain, Greece and Italy, like the UK, Denmark and Sweden, could have opted out of the European monetary union. As an aside, policymakers in Turkey are perhaps grateful to EU leaders for imposing endless hurdles in its admission to the EU.

Back in the 1980s, the defenders of the euro argued that by creating a large free trade area with easier labour mobility across national borders, European integration would increase economic productivity and growth.

And they were right. Free trade and unrestricted labour mobility increases productivity. But they were wrong in the belief that a single currency is essential to fully reap these benefits.

Indeed, there are many free trade zones between countries with separate currencies. The North American Free Trade Agreement (Nafta) between the US, Canada and Mexico is one.

For the residents of Greece and Spain, joining the euro has been a big mistake. Since 2007, both countries have suffered steep economic downfalls of a similar magnitude as the 1929 Great Depression.

The unemployment rate in Spain is close to 25% and in Greece about 22%. Youth unemployment is 40-50% in both countries. High unemployment among the youth has led to large-scale social unrest in both countries. Voters in both countries have revolted against the incumbents.

Both Greece and Spain could have avoided at least some of the pain if they did not have to suffer through the austerity forced on them. Given what they have suffered so far, it is fair to ask: for the residents of these countries, would leaving the euro be much worse than staying in it?

Exiting the euro would mean both countries would regain sovereignty over their monetary policies. Their currencies would devalue considerably relative to the euro and other world currencies. This would lower wages and improve the competitiveness of their exports, rejuvenate their economies and increase employment.

The initial impact of an exit would be further shrinking of their economies with the hope of revival in a few months. It would be risky. But it is not clear if staying in the euro would be any better.

Whereas the Maastricht treaty has an elaborate mechanism to prepare countries to join the euro, no similar mechanism exists to allow their exit from the euro.

To minimise damage, such an exit should be sudden to avoid speculation. If the market gets a hint that a country is considering exiting the euro, investors would start taking funds out of these economies that would further amplify the exit pain.

The leaders of the EU worry that if a country is allowed to exit the euro, will that open the door for other countries? How would this impact the euro? What would be its impact on the economies that remain in the EU? Should EU have a policy to expel a country or allow voluntary exit? What would be the best policy for the countries of the eurozone: more integration and less sovereignty? Or less integration and more country-level autonomy? If it is more integration and less sovereignty, what steps should it take to avoid situations like the current crisis?

*
Why India is on the rise*

HSBC Report

India’s growing economy has led to the rise of a new middle class and the return of many people who emigrated before the current boom began

India’s economy may have suffered from the global economic downturn, but according to a recent Reuters survey of economists, it is expected to grow, with domestic demand driving the rise.

The result of this growth is the rise of the new middle class who have money to spend on consumer items. Since 1991, when a raft of liberalising reforms were introduced, India’s economy has grown at an average rate of 6.4%. According to a report from McKinsey Global Institute, India’s middle class now numbers 50 million – and is set to rise dramatically, potentially reaching 600 million by 2025.

At the bottom end of this group are people who can afford to buy television sets, a scooter or maybe even a small car. At the top end there are a group of aspirational, brand-conscious individuals who buy foreign-made cars and can afford to go on holiday once a year.

Shopping malls, gyms, cinemas and other leisure facilities have been built to serve this growing middle class, and these have played a part in luring back Indians who had settled overseas. Many emigrated before the current boom. Today, the combination of better job opportunities and the presence of facilities they have grown used to in the West means many Indians are returning.

The Indian government doesn’t keep track of returnees, but labour market analysts say a conservative estimate would be around 60,000 in the last five years. Human resources agencies say this ‘brain gain’ intensified in the wake of the global financial downturn as a result of layoffs in the United States and Europe.

Most importantly for the Indian government, which has long fought the ‘brain drain’, graduates of the country’s most prestigious universities now see India as the best place in the world to base themselves. In one survey, when students from the Indian Institutes of Technology were asked to predict which country would “hold the most promise for success” in 10 years’ time, 72% named India, with only 17% citing the US and just 5% Europe.

Sheena Malhotra, 21, a law student at Delhi University, sums it up like this: “Sure, I might like to go abroad for one or two years to get more experience. But India is where things are going to be happening.”

AC20872

https://investments.hsbc.co.uk/article/303/whyi...

Hundreds of greeting cards are being sent online. But you better think before opening one of those e-greetings you receive.

Cyber crooks have recently been sending millions of fake online greeting cards, hoping that the receivers will click on these links and infect their computers with password-stealing viruses.

Fraudsters are now embedding (including) links in fake card messages. Anyone clicking on such a link is likely to have her/his PC whacked by an invasive keystroke-logging programme.

Such corrupted e-greetings have been tracked to tens of thousands of machines infected with the Storm Worm, this year’s most prolific and successful e-mail worm without a doubt. Storm and this rush of e-greetings are responsible for one of the biggest virus outbreaks in computer history.

While the chances of you becoming a virus victim may be slim with tighter online security nowadays, the threat still exists.

For, with consumers expected to spend over $160 billion (about Rs 6,40,000) on products and services online, the theft of bank account or personal credit information on e-commerce sites is very likely.

According to an e-commerce survey conducted jointly by the Internet and Mobile Association of India (IAMAI) and IMRB, the consumer internet market in India is estimated at Rs 9,210 crore (Rs 92.10 billion) by end 2007-08.

“This is a huge market for criminals to exploit. It is very easy to siphon off passwords and bank account details through phishing and keylogging,” said Vijay Mukhi, president of the Foundation for Information Security and Technology.

The stolen information is then sold on Internet Relay Chat channels such as flea markets, with people advertising and selling stolen personal information.

“The number of credit card numbers being exchanged is definitely on the rise, making theft of bank account data as one of the most common cyber crime activities today,” said Vishal Dhupar, managing director, Symantec (India).

Cyber criminals increasingly operate in an elaborate networked underworld of websites and chat rooms, where they sell another people’s stolen account numbers, tools for making credit cards, scanners to pick up card numbers and personal identification numbers (PINs) from ATMs and viruses and other malicious software.

Said a hacker, “The online trade in credit card and bank account numbers as well as other raw consumer information, is highly structured.”

No one is willing to hazard a guess on how many cards and account numbers actually make it to the internet auction block, but law enforcement agents consistently describe the market as huge. Mukhi said, “When a person robs a bank, he goes to jail, but when you do it virtually, there is no national cyber authority.”

Kalpesh (name changed), who was arrested by Mumbai’s Cyber Crime Investigation Cell for hacking, was all of 23 years old and had done computer courses such as CCNA and MCSE. He used readymade hacking tools to hack into a financial organisation’s website.

“It is easy to extract data from websites. Using various techniques for obtaining a password file, hackers can get into the administrator’s shoes and extract confidential data,” Mukhi pointed out.

Such thieves auction stolen identities for Rs 600-Rs 1,000 or even lend them out, security analysts said. In 2006, identity theft cost consumers and businesses $49.3 billion (or about Rs 2,00,000 crore), according to Javelin Strategy & Research.

According to the 2007 Consumer Reports State of the Net, wireless users face additional risks. The situation is worse for those who use their home computers with a wireless router and do not take basic precautions such as enabling encryption.

How scammers forge email addresses and how you can tell

http://www.howtogeek.com/121532/htg-explains-ho…

Aggressive Approach Needed for Cashless E-Payments

Amrish Rau

The story of Abhimanyu from the Mahabharata is one that is told with a lot of passion and emotion. This is a story of great vision and valour. The story of India and the Indian electronic payment industry is similar to that of Abhimanyu.

It is a huge opportunity and the prize is also very big. Over the past five years, many private and foreign players have invested in the electronic payments landscape without achieving commensurate returns. However, these companies need to move forward and cannot think of going back or worry about exiting. Interestingly, in the past one year, RBI has joined the battle against cash and in a way has decided to lead the charge.

While everyone knows about Abhimanyu’s valour, less is spoken about his extraordinary speed and ability to think ahead. In fact, the only reason he was killed in the battlefield was because he was slowed down by the breaking of his chariot wheel. The recent steps by RBI to cap the merchant fees for debit cards have the ability to provide the much needed fillip to the payment business. The hope is that e-payments will grow by 100% year-on-year and that payments can become all pervasive. However, good intent needs to be backed by speed and a clear vision of the end goal. Today, the Indian payment industry is lacking due to low investments and unclear business models for private and foreign operators.

ATM growth is a classic example of how private and foreign operators, along with support from RBI, have helped provide the much-needed service and access to cash to the common man. A similar aggressive approach needs to be taken for POS and E-commerce transactions.

Solely capping the merchant fees for debit cards will make the business model extremely difficult for the e-payment (merchant acquirers) operators. These providers are the most crucial link in deploying the infrastructure for the acceptance of non-cash payment modes and the need to have adequate financial incentives to continue investing. This needs to be supported by some clear steps like government incentives/ tax breaks for electronic payment transactions, an initiative that was mentioned in the recent Budget speech.

A similar regulation has been successfully implemented in Korea over the last 10 years. The other area of concern is around the cost involved for electronic payments transactions on the internet. Merchants and internet retailers find it extremely difficult to pay high fees for payment transactions as their business models have been built on wafer-thin margins. The recent Dodd-Frank law in the US and the steps taken by the Reserve Bank of Australia have been to curb such high fees.

Consumers and retailers are not the only industry stakeholders who benefit from electronic payments. National and local governments will gain from higher consumption and GDP, increased government efficiency and improved financial transparency. Electronic payments have provided a boost to financial intermediaries. Switching from cash to electronic transaction encourages people to put more of their money into the banking system.

Banks lend based on a proportion of their reserve deposits; so as deposits grow, more businesses and households receive loans. These loans, in turn, generate a ripple effect on initial and subsequent economic activity. In addition, electronic payments will also reduce the cost of handling cash. The storing and transportation of cash can be a huge burden on banks and retailers.

For example, the Dutch central bank has calculated that the cost of handling cash is 0.8% of GDP. One industry analyst in India estimates the cost of maintaining a cash-based payment system is as high as 5% of GDP.

Some of the above recommendations will help e-payment companies to continue investing in taking the payments through the length and breadth of India. However, without a clear end, state and medium-term financial path, a piecemeal approach could adversely impact an industry, which is yet to reach maturity. India, with its young consumer and ever growing merchant base has the opportunity to move fast and ensure the story of Abhimanyu starts with this battle and only RBI, government and the e-payment companies can lead the charge.

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