Impact 
In its objective to track down black money in circulation in the country, the Government in power proposed to lay down measures in the 'White Paper' on black money tabled in the Parliament by the Finance Minister (FM) - Mr Pranab Mukherjee.
One of these measures was to reduce stamp duties and provisions for tax deduction at source (TDS) on payments made in the real estate transactions as formula to check generation of black money in the country. Interestingly, the government recently scrapped a proposal to levy a 1% tax deduction at source (TDS) on real estate transactions as mentioned in the Union Budget 2012-13 (announced on March 16, 2012).
Furthermore, to weed out black money from real estate transactions, the Government has now also suggested lowering of stamp duties across states and capping it at 5%.
We believe that lowering the stamp duty and scrapping of the levy of 1% tax deduction at source to a certain extent may help curb the use of unaccounted money in property transactions, as parties to the transaction may prefer to account the transaction. At present according to the estimates of the income-tax department most (40% to 60%) property deal values in metros go unaccounted, as it helps the parties to the transaction to evade tax.
We are of the view that, in order to preclude tax evasion in property deals, the Government should ensure that proper checks and balances are in place, and make disclosure mandatory for foreign assets.
| | This Week's Poll !!!
Will reduction in stamp duty in real estate encourage you to buy a property?
| Impact 
The Indian rupee (INR) is going through one of its worst phases, as despite Reserve Bank of India (RBI's) intervention, the INR has been slipping against the U.S. dollar. The INR has depreciated to almost Rs 56 / U.S. $ in May 2012 from Rs 44 / U.S. $ in July 2011. Although the depreciation in the INR can be attributed to the rising demand for greenback (U.S. $), there are other domestic factors which have also led to the fall in the INR against the U.S. $.
INR on a slippery path, while equity on a rollercoaster
Base: Rs 100
(Source: RBI website, ACE MF, PersonalFN Research)
India has been facing the Current Account Deficit (CAD) problems mainly due to import of crude oil and gold. Apart from this due to the inefficiency on the part of the Government, India's fiscal deficit too, is not in a good shape. Thus, taking cues from these domestic factors, the Foreign Institutional Investors (FII) capital flows have been reduced drastically, which in turn has also got the BSE Sensex to display a rollercoaster movement. Moreover, with uncertainty global economic environment, and policy paralysis in the intermediate, FIIs have been weary of investing in India.
We believe that the Indian economy needs policy reforms on an urgent basis to re-instil confidence of the investors. With widening CAD and fiscal deficit resulting in a weak currency, the Indian equity markets too have not been spared.
But there is silver lining in the dark clouds, as the Brent crude oil prices have dropped to $107 from $125 levels. This will help in reducing the import bill to a certain extent. Also, with the standard customs duty on gold bars hiked to 4% from 2%, to reduce import of gold, it may also have a positive impact on the CAD. Coupled with this, if the Government takes prudent policy measures and puts reforms on fast track we may see India back on high growth trajectory.
| Impact
We all know how important it is to have a health insurance or mediclaim, in today's times when healthcare costs are mounting. But merely holding a mediclaim policy is not enough. Apart from being chary about how much premium you need to pay, one should also check on:
- Whether cashless facility is available;
- Does the insurer have a higher number of network hospitals (more importantly the reputed ones);
- List of medical conditions that will not be covered by the policy;
- The waiting period for pre-existing diseases and whether there are sub-limits (i.e., the claim amount to be paid into smaller fractions wherein the Health Insurance Company bears some of the cost, while the insured bears the rest.)
But recently due to difference of opinion between the civic body and medical establishments, your genuine mediclaim may get rejected, despite you taking care of the above mentioned points. Let us find out how.
To know our views, please click here..
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| Impact
Black money or unaccounted money stashed outside (the size of the amount is unknown) our country results in a real loss to the Indian economy. India has been under the pressure of the black money menace since many years. Thus in order to bring back the money stashed abroad and to curb the black money menace, the Finance Minister - Mr Pranab Mukherjee tabled the much awaited 'White Paper' on black money.
The 'White Paper' suggests various ways to bring an end or to lower the volume of black money in the country. One of these suggested measures is to encourage the use of debit and credit cards along with electronic transfer of funds.
Let us see how the use of debit and credit cards would help curb the black money menace.
To know our views, please click here..
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In an interview with the Mint, Mr Jeff Chowdhry, Head of Emerging Equities at F&C Investments shared his views on capital flows into India, Indian equity markets, RBI managing inflation & growth and the depreciation in Indian Rupee.
Mr Chowdhry believes that as long as there is governance deficit, there's going to be very little fund flows or net fund flows into emerging markets and it's only when risk aversion dies down do we expect that these flows will pick up. "In the case specifically of India, I think the people are looking around the world and saying, "We don't want to really invest in areas where there is uncertainty," and I am afraid at the moment because of either policy paralysis or uncertainty regarding certain tax elements within the country, it is quite likely that FIIs (foreign institutional investors) are sitting on their hands," he added further.
About the Indian equity markets, Mr Chowdhry feels that the valuations are attractive but valuations per se are not a reason to buy the market. "I think you need to have either a catalyst in terms of the external environment improving, which I can't see happening in the next month or so, or you actually need some policy measure to say that actually, foreign investors you're welcome and second, we are doing something to tackle the fiscal deficit," he explained.
As far as the managing inflation & growth is concerned, Mr Chowdhry that RBI has got a very difficult job. He says, on one hand inflation continues to be very sticky, particularly the food inflation, and on the other hand the growth is slowing down. He said, "A growth of 7% or 6.5% in the next year is not a bad rate of growth, it's a pretty decent rate of growth, but obviously that is a big slowdown from this 9% that we have seen in the last couple of years. But Reserve Bank of India has got a very delicate balancing act and with inflation being where it is, I can't see the rates coming down very much for the foreseeable future."
On rupee depreciation, Mr Chowdhry thinks that there are two issues here. First of all, the risk aversion generally globally has risen as we have seen. What people are also looking in terms of Indian rupee is the fact that here is a country that also has macro-economic imbalances and one of the problems with that is that the currency does get affected. So, in his view two things need to happen, first of all we need the external environment to stabilize, and second, we need some measures to at least aim to tackle the fiscal deficit.
In our opinion unless the Government of India takes some serious measures on the policy front and economics is seen ahead of politics, the foreign capital flow in the country is bound to remain muted. This in turn will adversely affect the equity markets.
Moreover, inflation especially food inflation which is on a spiral can be contained if proper storage facilities are made available to store the surplus produce and artificial hoarding of goods is eliminated. A reduction in the headline inflation (WPI inflation for the month of April 2012 was at 7.23%, above the comfort zone of the RBI) is essential for the improvement in the overall economic growth in the country. Apart from this, RBI's intervention in preventing the rupee from further depreciating against the dollar may not help much unless there is improvement in India's long-term macro-economic fundamentals.
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- The Securities and Exchange Board of India (SEBI) has asked the Union Government to allow investments in mutual funds (MFs) to be made eligible for tax exemptions under the Rajiv Gandhi Equity Savings Scheme (RGESS), announced in the Budget 2012. The move to include MFs RGESS, if implemented in the desired manner, may end up pouring up to Rs 50,000 crore of retail inflows a year for long-term funds. This will exceed the funds brought in by foreign investors. The money would not only boost India's capital markets but also bring stability, as these funds will be available for a long term.
- Domestic rating agency ICRA has warned of increasing risks arising from double-leveraging by private sector entities in the infrastructure space, saying such multiple ways of fund-raising increase lenders' risks.
- In order to keep Greece in the Euro zone, a summit of the Group of Eight (G8) leading industrialised nations came down solidly in favour of a push to balance European austerity - an approach long driven by German Chancellor Angela Merkel - with a new dose of US-style stimulus seen as vital to healing ailing euro-zone economies.
The overarching message from the summit hosted by President Barack Obama reflected his own concerns that the euro-zone contagion, which threatens the future of Europe's 17-country single currency bloc, could hurt the fragile US recovery and his re-election chances in November.
- To safeguard the interests of the lenders in a corporate debt restructuring (CDR), bankers have proposed to change the rules to ensure promoters bring in more funds than they do now. According to bankers, a company may have to chip in with 25% of the haircut taken by the bank while restructuring of loan. At present, promoters contribute up to 10% - 15% of the haircut taken by the bank. Banks have to make a provision, that is, allocate higher capital to the extent of the diminution of the loan's net present value arising out of extending the loan tenure or lowering the interest rate.
- India, the world's biggest consumer, imported bullion worth a record $58 billion in 2011-12, contributing immensely to the $184.9 billion trade deficit. The current account comprises the balance of trade, net factor income, such as interest and dividends, and net transfer payments. Thus, in order to discourage trade in the precious metal, the Government may consider tweaking import duties on gold and jewellery.
- FirstRand Bank, the first bank from the African continent to open a retail branch in the country has announced to offer an interest rate of 7.25% on savings accounts with a minimum balance of Rs 1 lakh to compete with the banking peers adopting similar strategies to increase their CASA ratio.
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Double Leveraging: When a bank holding company conducts a debt offering to acquire a large equity stake in a subsidiary bank. Ideally, dividends earned on the subsidiary company's stock are used to finance the holding company's interest payments.
(Source: Investopedia)
| | QUOTE OF THE WEEK
"Those who start with too litte money are more likely to succeed than those who start with too much. Energy and imagination are the springboards to wealth creation."
- Brian Tracy
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