Friday, November 28, 2008

Mumbai attacks India 26/11

125 dead, 327 injured in Mumbai attacks

New Delhi NSG commandos battled to flush out militants still resisting in three pockets in the country's financial capital on Friday, over 24 hours after heavily armed fighters killed at least 125 people in coordinated attacks.

Early on Friday morning, sporadic gunfire and explosions continued at a Jewish centre where at least 10 Israelis were trapped or being held hostage.


Police said militants were also still holed up at the Taj Mahal hotel and the nearby Oberoi-Trident hotel along with an unknown number of hostages.


Prime Minister Manmohan Singh pinned blame for the attacks on militant groups based in India's neighbours, usually an allusion to Pakistan, raising prospects of renewed tension between the nuclear-armed rivals.


He warned of "a cost" if these nations did not take action to stop their territory being used to launch such attacks.


An estimated 25 men armed with assault rifles and grenades -- at least some of whom arrived by sea -- fanned out across Mumbai on Wednesday night to attack sites popular with tourists and businessmen, including the city's top two luxury hotels.


Police said at least seven of the attackers were killed and nine suspects had been taken into custody. They said 12 policemen were killed, including Hemant Karkare, chief of the police anti-terrorist squad in Mumbai.


At least six foreigners, including one Australian, a Briton, an Italian and a Japanese national, were killed. Scores of others were trapped in the fighting or were being held hostage.


More than 300 people were wounded.


Commandos battled the militants through Thursday, often room to room in the hotels, to rescue people, police said. Flames billowed out of the buildings and loud explosions were heard during the fighting.


Mumbai, a city of nearly 18 million people that is the nerve-centre of India's growing economic prowess and home to the "Bollywood" film industry, was virtually shut down on Thursday as the battles raged.


But in a reflection of the poverty that sits cheek-by-jowl with the upmarket shops and restaurants in the city, hundreds of people were stretched out asleep on pavements and handcarts near the scenes of fighting.


The sea-facing Marine Drive in front of the Oberoi-Trident is a favoured spot for early morning walks, and some regulars came out for their constitutional despite the tension.


"I hear they (the security forces) have relaxed the rules a little so I came for my morning walk but I did not see any of the regulars," said Raja Ram Patil, 54, a local businessman.



British Prime Minister Gordon Brown said the attack would be met with a "vigorous response".


U.S. President-elect Barack Obama condemned the incident. Obama, who favours a regional solution to the war in Afghanistan and is encouraging Pakistan and India to make peace over Kashmir, was monitoring the situation closely, an aide said. [nLR502129]


The Times of India published a photograph of one of the attackers, dressed in a black T-shirt and holding an assault rifle with a backpack over his shoulder.


At least some of them had come ashore in what police said was a rubber dinghy. They commandeered a vehicle and sprayed passersby with bullets, and fired indiscriminately in a train station, hospitals and a popular tourist cafe.

visit www.expressindia.com

Wednesday, October 15, 2008

Kingfisher-Jet merger will impact fliers

Spandanangal:Kingfisher-Jet merger will impact fliers

Friday, June 20, 2008

LIC housing Project at Pattom

Life Insurance Corporation of India who boasts that everylife is insured with them has behaved in a manner that NOTHING IS INSURED when dealing with them.Regarding the above housing project of LIC they have now informed the allottees that they have terminated the project stating the reason the project not viable for LIC. The allottees are now fearing that there is a foul play and the failure from the part of LIC in performance of a contract entered with the public has triggered wide spread protest.
The LIC under the scheme invited applications from Indians including NRI's during October 2006 and the cost of application was Rs150/-The response was very high and LIC selected the alloottees througha Lucky Draw held on 22.04.2007.The cost of the flat was fixed at Rs20.46lac minimum and Rs25.73 lac maximum depending upon type of flat.LIC has accepted even the First instalment of sale price from the allottees whichranges from Rs4.70lakhs to Rs5.50lakhs.There were 52 allottees and from this one can understand the huge volume of money mobilised from the public and a Govt: institution finally shedding the project siting reason NOT VIABLE.There is a clear violation of the stipulated terms and conditions of the project.
A foundation stone was laid on December 18,2006 and now they have removed the same.So this is published to make aware the public that Nothing is Insured with LIC that tomorrow -- will they be saying that a particular insurance scheme is not viable and therefore we are returning the money to the policy holders?

Monday, June 16, 2008

PAPER BAG,COVER&SCREEN PRINTING sample project report

A SAMPLE PROJECT REPORT ON PAPER BAG, COVER MAKING AND SCREEN PRINTING
INTRODUCTION

Plastic, although considered as one of the greatest inventions by virtue of its use in carrying things has become a major element in polluting the environment. Kerala Government has imposed a ban on thin plastic carry bags and is likely to extend it to all the plastic carry bags, since they are bound to create health hazards. Eco-friendly paper carry bag is the only alternative and the Government has started encouraging the setting up of paper bag making units. Since there is lot of demand, paper bag making will certainly be a provider of self-employment.

With a view to have a better living by setting up a self-employment unit, we attended training at …………..for 15 days. By attending the above training, we acquired the knowledge and skill in paper bag making, cloth bag making and screen-printing. ………….. selected us for the training.

Entrepreneurship and Managerial inputs were also given to enable us to take up self-employment with confidence. Since the demand for the paper products are definitely going to increase, this proposal for setting up of a Paper bag Making and Screen Printing Unit is placed before you for sanction.
Promoter.

Details to be given

Market Analysis

The unit by name …… is proposed to be opened near……… There are no such units in the near vicinity. A market survey conducted as part of establishing the unit proved that here is ample scope for getting umpteen number of orders.

Land & Building
The unit will be established in rented premises. This is located on the roadside and proximity is an advantage for this activity.

Machinery & Equipments

The requirement of the machinery and equipments for the project is enclosed in the annexure.

Requirement of Raw Materials:

The required raw materials can be procured from the local market.

Paper, rope, eyelets, gum etc - Rs.20000

Man Power Requirement

The unit will provide direct employment to three to four persons. Part time assistance will also be there.
Sl.No. Particulars Nos. Wages/worker Total
1. Worker 2 1500 3000
2. Helper 2 500 1000
4000
Cost of project

Work shed - 15000
Racks - 8000
--------
23000

Machinery
Creasing Machine - 35000
Hole Punching Machine - 3000
Punch (Rs.100 x 5) - 500
Exposing Box - 6500
Screens - 2000
------------
Total - 47000
-------------
Furniture
Printing table - 6000
Mould - 4000
------------
10000
------------
Working Capital
Working capital requirement for procurement
of raw materials as above - 20000
Means of Finance
Contribution by the Promoter - 10000
Bank Loan - 90000
---------
Total - 100000
---------
Financial Viability
Covers - 25days x Rs.0.50 x 400 = 5000
Bag - 25 days x Rs.3.50 x 200 = 17500
Screen Printing - 15 days xRs.0.10 x 1000 = 1500
Visiting Cards - 10 days xRs.1.00 x 400 = 4000
Wedding Cards - 5 days xRs.2.00 x 300 = 3000
-----------
31000
----------
Expenditure
Variable cost
Materials - 15000
Wage - 4000
------------
19000
------------
Fixed Cost
Rent - 500
Electricity - 300
Depreciation - 500
Interest on Bank loan - 750
Insurance - 150
Repairs - 200
Admn. Exp - 300
Misc - 150
-------------
2850
-------------
Contribution = Sales - Variable cost
= 31000 - 19000
= 12000

Break Even point (BEP) = FC/Contribution
= 2850 /12000
= 23.75 %


Projected cost of Production & Profitability Statement

1st Year 2nd Year 3rd Year 4th Year 5th year
No. of Working days 320 320 320 320 320
Capacity utilization 100 100 100 100 100
A. Income 372000 390600 410100 430600 452100
B Expenditure
Raw Material 180000 180000 180000 180000 180000
Wage 48000 48000 48000 48000 48000
Electricity 3600 3600 3600 3600 3600
Rent 6000 6000 6000 6000 6000
Depreciation 6000 6000 6000 6000 6000



Interest on Bank Loan 9000 7700 5800 3600 1950
Insurance 1800 1800 1800 1800 1800
Repairs 2400 2400 2400 2400 2400
Admn Exp 3600 3600 3600 3600 3600
Misc 1800 1800 1800 1800 1800
Total (B) 262200 260900 259000 256800 255150
Profit 109800 129700 151100 173800 196950

Debt Service Coverage Ratio

1st Year 2nd Year 3rd Year 4th Year 5th year
Profit 109800 129700 151100 173800 196950
Depreciation 6000 6000 6000 6000 6000
Int. on loan 9000 7700 5800 3600 1950
124800 143400 162900 183400 204900
Payment of
Bank loan 18000 18000 18000 18000 18000
Int. on loan 9000 7700 5800 3600 1950
27000 25700 23800 21600 19950
Balance of Profit 97800 117700 139100 161800 184950
DSCR 4.62 : 1 5.58 : 1 6.84 : 1 8.49 : 1 10.27 : 1

Average DSCR = 7.16

The project is to break even at 23.75%. Average DSCR works out to 7.16, which takes care of the repayment obligation and the unit can generate income too. Since the group comprising of…. members does the masterwork the income generation is always bound to increase with further curbing down of expenditure.

Hence this proposal for setting up of a Paperbag, papercovers and screen printing unit is found to be technically feasible & financially viable.

Govt warns about ill-effects of mobile phone radiation

NEW DELHI: Warning people about harmful effects of radiation from mobile phones, the government has asked service providers and makers to avoid promotional advertisements showing vulnerable segments like children and pregnant women using cell phones. The electromagnetic waves emitted from mobile phones can seriously damage the tissues of the users' brain, according to recent guidelines issued by the Ministry of Telecommunication. The draft guidelines suggested measures like limited usage of mobile phones by children, pregnant women and people suffering from heart ailments. In India, the growth of mobile phones is very high and may cross 500 million by 2010-end, and a large chunk of the users are children. Many parents provide mobile phones to their children for safety reasons, and to keep connected with them all the time. The guidelines say that mobile phones/radio terminals radiate Radio Frequency energy that heats up the tissues which may be possibly harmful to human health. During use, mobile phones are usually kept closer to the ear which is very near to the brain giving rise to fears that continuous use of mobile phone for longer duration may damage some brain tissues. The report advises people to use hands-free, if longer use is unavoidable and recommends that children below 16 should be discouraged from using cell phones as the tissues of children are tender and are likely to be more affected.


Govt warns about ill-effects of mobile phone


EMail

NEW DELHI: Warning people about harmful effects of radiation from mobile phones, the government has asked service providers and makers to avoid promotional advertisements showing vulnerable segments like children and pregnant women using cell phones. The electromagnetic waves emitted from mobile phones can seriously damage the tissues of the users' brain, according to recent guidelines issued by the Ministry of Telecommunication. The draft guidelines suggested measures like limited usage of mobile phones by children, pregnant women and people suffering from heart ailments. In India, the growth of mobile phones is very high and may cross 500 million by 2010-end, and a large chunk of the users are children. Many parents provide mobile phones to their children for safety reasons, and to keep connected with them all the time. The guidelines say that mobile phones/radio terminals radiate Radio Frequency energy that heats up the tissues which may be possibly harmful to human health. During use, mobile phones are usually kept closer to the ear which is very near to the brain giving rise to fears that continuous use of mobile phone for longer duration may damage some brain tissues. The report advises people to use hands-free, if longer use is unavoidable and recommends that children below 16 should be discouraged from using cell phones as the tissues of children are tender and are likely to be more affected.

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Friday, March 28, 2008

6th Pay Commission Report -the fine print

6th Pay Commission Report the fineprint
For government employees, the suspense is over. For the past couple of days, we have been inundated with queries about the various scales and details of the 6th Pay Commission Panel report that was submitted to the government on Monday. Read on to find out what the Commission has in store for you.
• Implementation of the revised pay scales from January 1, 2006. Recommendations relating to allowances to be implemented prospectively. • To remove stagnation, introduction of running pay bands for all posts in the Government presently existing in scales below that of Rs 26,000 (fixed). • Four distinct running pay bands being recommended - one running band each for all categories of employees in groups 'B' and 'C' with 2 running pay bands for Group A posts. • The posts of Secretary to Government of India/equivalent and Cabinet Secretary/equivalent to be kept in distinct pay scales.
Is the hefty salary hike for government employees justified? Write in
• A separate running pay band, designated as -1S scale, is not to be counted for any purpose as no future recruitment is to be made in this grade and all the present Group D employees not possessing the prescribed qualifications are to be upgraded and placed in the Group 'C' running pay band PB-1 after they are suitably retrained. Group D employees possessing the minimum prescribed qualifications to be placed in PB-1 pay band straightaway. • Minimum salary at the entry level of PB-1 pay band to be Rs 6660 (Rs 4860 as pay in the pay band plus Rs 1800 as grade pay). Maximum salary at the level of Secretary/equivalent to be Rs 80000. The minimum: maximum ratio 1:12. • Every post, barring that of Secretary/equivalent and Cabinet Secretary/equivalent to have a distinct grade pay attached to it. Grade pay (being a fixed amount attached to each post in the hierarchy) to determine the status of a post with a senior post being given higher grade pay. • The total number of grades reduced to 20 spread across four distinct running pay bands; one Apex Scale and another grade for the post of Cabinet Secretary/equivalent as against 35 standard pay scales existing earlier. • At the time of promotion from one post to another, the grade pay attached to posts in different levels within the same running pay band to change. Additionally, increase in form of one increment to be given at the time of promotion. A person stagnating at the maximum of any pay band for more than one year continuously to be placed in the immediate next higher pay band without any change in the grade pay.
• Annual increments to be paid in form of two and half percent of the total of pay in the Pay Band and the corresponding grade pay. The date of annual increments, in all cases, to be first of July. Employees completing six months and above in the scale as on July 1 to be eligible.
• Another form of variable increments for Group A Pay Band PB-3, where annual increments in the band will vary depending upon the performance. Eighty percent or more employees in the grade to be allowed normal increment at the rate of 2.5% with the high performers (not exceeding 20 per cent) during the year being allowed increment at the higher rate of 3.5%. Government advised to extend the scheme of variable increments in running paybands PB1 and PB2.
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• The following scheme of revised pay bands is being recommended:
(In Rs)
Pre-Revised
Revised
Pay Scale
Pay Scale
Pay Band
Corresponding Pay Bands
Grade Pay
S-1*
2550-55-2660-60-3200
-1S
4440-7440
1300
S-2*
2610-60-3150-65-3540
-1S
4440-7440
1400
S-2A*
2610-60-2910-65-3300-70-4000
-1S
4440-7400
1600
S-3*
2650-65-3300-70-4000
-1S
4440-7440
1650
S-4
2750-70-3800-75-4400
PB-1
4860-20200
1800
S-5
3050-75-3950-80-4590
PB-1
4860-20200
1900
S-6
3200-85-4900
PB-1
4860-20200
2000
S-7
4000-100-6000
PB-1
4860-20200
2400
S-8
4500-125-7000
PB-1
4860-20200
2800
S-9
5000-150-8000
PB-2
8700-34800
4200
S-10
5500-175-9000
PB-2
8700-34800
4200
S-11
6500-200-6900
PB-2
8700-34800
4200
S-12
6500-200-10500
PB-2
8700-34800
4200
S-13
7450-225-11500
PB-2
8700-34800
4600
S-14
7500-250-1200
PB-2
8700-34800
4800
S-15
8000-275-13500
PB-2
8700-34800
5400
*Employees in these scales to be eventually placed in pay band PB-1
doweshowbellyad = 0;
Pre-Revised
Revised
Pay Scale
Pay Scale
Pay Band
Corresponding Pay Bands
Grade Pay
New Scale
8000-275-13500
(Group A Entry)
PB-3
15600-39100
5400
S-16
9000
PB-3
15600-39100
5400
S-17
9000-275-9550
PB-3
15600-39100
5400
S-18
10325-325-10975
PB-3
15600-39100
6100
S-19
10000-325-15200
PB-3
15600-39100
6100
S-20
10650-325-15850
PB-3
15600-39100
6500
S-21
12000-375-16500
PB-3
15600-39100
6600
S-22
12750-375-16500
PB-3
15600-39100
7500
S-23
12000-375-1800
PB-3
15600-39100
7600
S-24
14300-400-18300
PB-3
15600-39100
7600
S-25
15100-400-18300
PB-3
15600-39100
8300
S-26
16400-450-20000
PB-3
15600-39100
8400
S-27
16400-450-20900
PB-3
15600-39100
8400
S-28
14300-450-22400
PB-4
39200-67000
9000
S-29
18400-500-22400
PB-4
39200-67000
9000
S-30
22400-525-24500
PB-4
39200-67000
11000
S-31
22400-600-26000
PB-4
39200-67000
13000
S-32
24050-650�26000
PB-4
39200-67000
13000
S-33
26000 (fixed)
Apex Scale
80000 (fixed)
Nil
S-34
3000 (fixed)
Cab.Sec./Equ.
90000 (fixed)
Nil
Defence Forces: Smile Your Way to the Bank
• Defence Forces given running pay bands and grade pay on par with those recommended for civilians. • In addition, Military service Pay for all personnel of Defence Forces till the rank of Brigadier/equivalent @Rs 6000 pm for officers, Rs 4200 pm for Military Nursing Services officers and Rs 1000 pm for Personnel below Officers ranks. The Military Service Pay to count for all purposes excluding increments. • Director general (Armed Force Medical services) placed in the Apex grade of Rs 80,000 (fixed) • In Defence Forces, only two trade groups to be retained for Personnel Below Officer Ranks with the earlier trade groups Y and Z being merged. The personnel in trade group X to have an additional X Group Pay of Rs 1400 per month. • Certain posts in senior Administrative Grade (SAG) and Higher Administrative Grade (HAG) requiring technical or specialized expertise and not encadred in any of the services to be opened up for being filled bys it able officers within the Government as well as by outsiders on contact. Shift from carrier based to post based selection in the higher echelons of Government in order to get the best domain based expertise. • Creation of additional posts in senior administrative grade/equivalent/higher grades in future to be strictly on functional considerations with such posts invariably being created outside the cadre to be filled by method of open selection including contractual appointment from within or outside the government
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• Introduction of Performance Related Incentive Scheme (PRIS) in the government under which employees to be eligible for pecuniary remuneration over and above the pay. PRIS to replace ad hoc bonus scheme immediately and eventually replace Productivity Linked Bonus. PRIS to be budget neutral.
• System put in place for giving market driven compensation package to young scientists and posts requiring special expertise and professional skills. HR Fine Tuning
• Parity established between field and secretariat offices. • The secretariat and stenographers cadres to stand merged in future. All future recruitment in secretariat to be made as executive assistants with minimum qualifications of gradation and one-year diploma in computers. Executive assistants to discharge the functions presently being carried out by assistants as well as the private secretaries. • Scale of Rs 26,000 (fixed) corresponding to the revised pay scale of Rs 80,000 (fixed). • Base year of the Consumer Price Index (CPI) for computation of dearness allowance to be revised as frequently as feasible. Formulation of a separate CPI for government employees by National Statistical Commission for computation of dearness allowance suggested. • Existing rates of most of the allowances to be doubled both in case of Defence Forces as well as civilian employees. • Existing rate of HRA to be retained for A-1 cities. A, B-1, and B-2 cities to be given this allowance at the higher rate of 20%. C and Unclassified cities to be given the allowance at the higher rate of 10%. • CCA to be subsumed in Transport Allowance and the rates of this allowance to be increased by 4 times. • Travel entitlements to be paid on actuals. • Reimbursement of education allowance to be raised from existing Rs 50 to Rs 1,000 per child per month, subject to a maximum of two children. Hostel subsidy to be raised from existing Rs 300 per month to Rs 3,000 per month. • Risk allowance to be replaced by risk insurance. • All fixed allowances made inflation proof with provision of automatic revision whenever dearness allowance payable on revised pay bands goes up by 50%. Transport allowance to be increased every year on the basis of the increase in the dearness allowance. • Encashment of earned leave in case of defence forces personnel delinked from the number of years of service. All defence forces personnel to be eligible of leave encashment of up to 300 days at the time of retirement/discharge. • A new medical insurance scheme recommended for government employees. The scheme to be optional for existing central government employees and pensioners. New government employees and new pensioners to be compulsorily covered by the scheme. • Fitment formula recommended for serving employees to be extended in case of existing pensioners/family pensioners. • Rates of Constant Attendant Allowance for disabled pensioners to be increased by five times to Rs 3,000 per month.
• Pension to be paid at 50% of the average emoluments/last pay drawn (whichever is more beneficial) without linking it to 33 years of qualifying service for grant of full pension.
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Graceful Separation
• A liberal severance package for employees leaving service between 15 to 20 years of service. • Higher rates of pension for retirees and family pensioners on attaining the age of 80, 85, 90, 95 and 100 years. • Revision of the commutation table suggested for commutation of pension. • In case of government employees dying in harness, family pension to be paid at enhanced rates for a period of 10 years. • Framing of an appropriate insurance scheme suggested for meeting the OPD needs of pensioners in non-CGHS areas. • A new mechanism for grant of advances under which an employee will take the advance from an approved bank and the government will give an interest subsidy equal to two percentage points on the rate of interest being charged by the bank to the employee. Existing limits of various advances increased and provisions made for their automatic revision periodically. • Continuation of five-day week. Government offices to remain closed only on the three national holidays. All other gazetted holidays to be abolished and compensated by increasing the number of restricted holidays from two to eight days in a year. • Benefits like staggered working hours, special leave for child care, enhanced maternity leave of 180 days, better accommodation facilities in the form of working women's hostels, etc specifically for women employees. • Government employees with disabilities recommended various benefits like enhanced number of casual leave, special aids and appliances for facilitating office work, higher interest subsidy for automobile loans, liberal flexi hours, higher rate of transport allowance, better prosthetic aids and proper grievance redressal machinery. Extra allowance for disabled women employees to take care of young child till the time the child attains the age of two years. • Lateral movement of all Defence Forces personnel (both personnel below officer ranks and short service commission officers) at appropriate levels in Central Police Organisations/central Para military Forces as well as to the various posts of defence civilians in the ministry of defence. • Steps leading to improvement in the existing delivery mechanisms by more delegation, delaying and an emphasis on achieving quantifiable and concrete end results. Emphasis to be on outcomes rather than processes. • Greater emphasis on field offices/organizations at the cutting edge of delivery • Enhanced pay scales for nurses, teachers, constabulary and postmen with whom the common citizen has most frequent interaction. Forest guards also to get higher pay scale. • Better deal for training academies. • Normal replacement pay band, grade pay and allowances for the existing members of regulatory bodies. A revised method of selection with a higher pay package to those recruited through the revised process of selection in selected organisations. • All the recommendations to be treated as an organic whole as partial implementation will bring in several anomalies and inconsistencies.
• The recommendations contained in the report to cost Rs 12,561 crore in the year 2008-09. Savings of Rs 4,586 crore likely to accrue on account of various measures suggested in the report. The net financial implications of the recommendations contained in the report estimated to be Rs 7,975 crore for the year 2008-09. an additional, one-time burden of Rs 18,060 crore on payment of arrears. Courtesy: pib.nic.in

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Saturday, January 5, 2008

GUNS AT SCHOOL

GUNS AT SCHOOL
Robert Hawkins, 19, killed six employees and two customers of Von Maur department store on Wednesday before turning his AK-47 rifle on himself.
In India inside two months it has happened for the second time.Who is to be blamed? Why these things are happening?This has to be seriously debated in every forrum concerned.It's really scaring.

SUB PRIME CRISIS

Sub-prime and side effectsIf the US, which has a 25 per cent share of global GDP, slows down, it will definitely have an impact on the Indian economy. The next couple of months are definitely going to be crucial.Anil SinghviThe last couple of months, capital markets around the globe have been going through somewhat uncertain times on account of the sub-prime problems affecting the American banking industry. It now appears to be spreading to the UK as well. It’s a problem much bigger than it looks as it is more qualitative than quantitative.It is important to understand how the sub-prime problem is causing a great concern to the global financial markets and the recent decision of the US Federal Reserve to reduce the lending rates by 50 basis points had made it even more pronounced. Perhaps this was a rather surprise move, and Wall Street has taken this as a pointer towards a stock rally.Since last Tuesday, all stock markets worldwide have rallied on account of this announcement by the Fed. A similar situation is prevailing in India as well, where, in just four trading sessions, our benchmark index, the Sensex, has gone up about 1,000 points. One fails to understand this euphoria in global equity markets and, more importantly, how this is benefiting the Indian growth story for the stock market to rally the way it has.But, first, let us examine how the sub-prime crisis is likely to affect the confidence of global markets in the months to come. The last few years, global markets have been awash with excess liquidity — a classical problem of plenty that created hyper-valuations for all asset classes and, more significantly, for real-estate in the US. The declineAs interest rates started falling due to excess liquidity, house prices started rising rapidly, creating a pool of wealth in the hands of Americans, which they unlocked by contracting mortgage loans. It benefited them in two ways — they got huge liquidity at inflated housing prices and at interest rates that were practically lowest in the last 20 years. This became a virtuous cycle, resulting in a very high consumer spending and obviously fuelling global growth.As interest rates started rising in the US due to inflation concerns, this virtuous cycle came to a standstill and the demand for houses started tapering. This resulted in lower prices for houses and many were unable to cover the mortgage loans. It has now hit the entire banking industry in the US and the virtuous cycle is becoming a vicious cycle.The excess liquidity is slowly evaporating and premium on risk is reappearing. It has started causing problems for Americans in the form of job losses, less consumer spending and the fears of a slowdown, if not recession. A similar situation may develop in the UK, where housing prices during last five years have risen very rapidly, creating a wealth effect just as in the US. But prices there have now started correcting. This has a contagion effect and we may see a huge write-off by banks doing business in the US and the UK.Implications for IndiaWhat does all this mean for the Indian capital market? To my mind, this will reduce the flow of capital coming to the Indian stock market. India was always considered one of the robust emerging markets, but definitely with certain political and economic risks.These risks, in recent times, were not priced into equity valuations as the excess liquidity was chasing emerging market exposures and India became the investor’s darling, after China. Now, with the sub-prime crisis, excess liquidity will vanish and the market will correct for the price of risks. Now let’s look at domestic fundamentals. Indian markets will see a correction on account of high oil prices, high interest rates, slowing down of exports on account of the slowing down of the US economy and rupee appreciation. This will definitely have an impact on the GDP growth rate.The stock market has, in the recent past, rallied largely on account of global cues and has almost completely ignored the local issues. With liquidity drying up, the market will now focus on local issues, including political uncertainties and corporate earnings. It is natural to expect that, finally, fundamentals will rule over technicals, and the market will look at ground realities.We saw that the July 2007 IIP numbers were much lower than expected. And we are seeing a slowdown in the automobile sector, some slowing down is already being witnessed in the real-estate segment and, with exports coming down, it will not be too long before we see the same in textiles, jewellery and other areas as well.We are yet to hear the last word on the sub-prime issue. Uncertainty in the global markets on this issue is similar to the case of Enron. Everyone knew there was a problem but nobody knew where it was until Enron went belly-up.Perhaps a similar story will unfold in the next couple of months for these lenders who have lent big money into the sub-prime markets and one or more banks will fold, just like Enron did, resulting in a huge crisis of confidence.It would be naive to wish away this major problem inflicting global markets and to presume that the Indian market is decoupled. If the global super-tanker, the US, which has a 25 per cent share of global GDP, slows down, it will definitely have an impact on the Indian economy.The next couple of months are definitely going to be crucial and the best course of action in these uncertain times should be ‘wait and watch’.(The author is Managing Director, Ican Investments Advisers Ltd., Mumbai.)
For more www.hindubusinessline.com

Wednesday, January 2, 2008

CREDIT CARDs BEWARE

Consumers risk a beating if loan repayments late,

NEW DELHI: Most consumers risk being hit by hefty fees or a nasty spike in interest rates if loan or credit card repayments are late -- but in India there is also the danger of being pummelled with an iron bar. Consumer lending has taken off here, but few have credit histories that make it easy to weed out risky borrowers, so mainstream banks have resorted to other tools to keep defaulters on their toes. The tools are small, unregulated loan recovery agencies -- whose tactics can include public shaming, kidnapping, death threats and even beatings. Vinod Chaudhary, a 22-year-old student, happened to be in the car of a family friend who had fallen behind on repayments when he experienced loan recovery, Indian style. "They grabbed my collar and started beating me. Someone hit me from behind and I almost passed out," Chaudhary said of his close encounter with agents, who were armed with an iron bar in their operation to recover the vehicle. The car's owner and defaulter, Tapan Bose, sued ICICI, India's largest private bank. In November the bank was fined Rs 5.5 million (138,000 dollars). ICICI declined to comment on the case, which is still in appeal. In another case, the bank paid up Rs 1.5 million in damages after a father-of-three from the financial hub of Mumbai committed suicide, blaming threats from ICICI's recovery agents. But ICICI, which accounts for a third of all consumer loans in India, is far from alone in using the heavy-handed agents. A Mumbai branch manager for HDFC Bank, India's second-largest private bank, and two others were arrested by police in October for threatening to murder a customer who had defaulted on a 5,000 rupee loan. The Reserve Bank of India is now circulating a draft of new guidelines on using recovery agents, a job that sprung from the less than decade-old boom in consumer lending in a fast-growing economy. Until six or seven years ago, institutional consumer lending barely existed and Indians mostly borrowed from friends, family, or a neighbourhood money lender. The arrival of private banks in the last decade has changed all that, and personal loans currently account for a quarter of India's 500 billion dollars of bank lending. Last year the sector grew by 30 per cent. During the holiday season, banks hold "loan festivals" urging borrowers to apply for credit. That credit has been good for the economy, financing the purchases of cars, motorcycles and other goods. But more loans means more risk -- and debt lawyers say that even though the justice system can deal with cases of large debt, defaults on loans of a few hundred dollars are viewed as scarcely worth the trouble of going to court. That's where the collection agents come in. A New Delhi-based company, the DNL investigation agency, boasts on its website that 70 percent of cases it has dealt with are "resolved out of the court." "We apprise the defaulters that their escape routes would be quickly closed," the company says. The agency's founder, Subhash Dutt, declined to be interviewed on what exactly this entailed. Banks say they do their best to weed out risky customers but point to the lack of credit histories. "There's a gap in Indian law. We don't have any records of the borrower. We don't have any credit control system. We don't have any credit reporting system," said lawyer Kaviraj Singh, whose firm Trustman Associates specialises in debt collection on behalf of foreign clients. "In the US, if a lender enters your name in a database and you have a credit card, the bank will come to know if you are paying. Or if you are not paying." Action is being taken with the Indian government setting up a specialised credit agency -- but in a country of 1.1 billion people, the task of building up an effective database will be colossal. "Apart from the 50 million people who have credit, no one else has any record," commented a senior private bank official, who asked to be named. "India is going through the same stage that many developed countries went through 15 to 20 years ago. It's going to be a long haul."


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