Byapaar.com – The Indian Business Blog

Different people have different needs at various stages of life. So they have to plan accordingly and make some investments for financial security. For long, state owned insurance companies like Life Insurance Corporation of India (LICI) have been offering lots of investment options in India along with traditional saving agencies like banks and post offices. LICI has been the most dominant player in this field with almost monopoly status.

But the scenario has changed since Indian economy started liberalizing and opened up the sector to private and foreign players through IRDA bill in 1999 amidst protest from many quarters. Not surprisingly the who is who of global insurance majors rushed into Indian market and set up shops after tying up with local companies who have little or no experience in insurance business. Soon the market became hot as news players started to market their products more aggressively seldom seen in India. People got spoilt of choice as agents now came to homes or offices with insurance quotes their offered by their respective companies. My intention here is not to write about the history of insurance companies but it is absolutely necessary to know the background for the main topic.

So everything has been going smoothly for all with a booming stock market and fast growing economy. It has been like honeymoon for both investors and insurance companies. But nothing in a market environment is permanent and one fine day in the middle of September this year everything came tumbling down as world financial markets crashed. As most insurance companies invest funds they collect from clients, most of them suffered huge losses due to the global financial problem phenomenon.

To cite a personal example, one of my colleagues invested Rs. 50,000/- with an insurance product offering high returns (thus highly risky) and linked to stock market with life insurance as an added option, (continue reading…)

It has been six long years since India and South East Asian trade block known as ASEAN started negotiations on free trade in goods (TIG). Finally it has concluded in a meeting of economic ministers held in Singapore. The deal is up for final sign in a summit to be held in next December in Bangkok, Thailand.
Indian industry minister Kamal Nath has described the conclusion of the TIG deal as a “key regional milestone” that will create a European Union like open market for goods. It has even bigger prospect than the EU with booming markets and an estimated 1.5 billion people waiting to be conquered by consumerism.
Kamal Nath says,

“It took six years for India to understand the sensibilities of Asean, and for the Asean to understand the sensitivities of Indian.”

Actually, the deal was supposed to be concluded last year but due to differences on the list of products to be excluded, it took one more year. Now that it has been finalized, both parties will remove import duties on 71 percent of products by December, 2012 and additional nine percent by 2015. The ten percent which have been kept under sensitive list will also see duties brought down to five percent. The deal also has provisions for fast track reduction of import duties on five products which are so vital in trade relations. These goods are coffee, tea, crude and refined palm oil and pepper. Currently, trade volume between India and Asean is to the tune of $38 billion which is to go up to $50 billion by 2010. At present India holds seventh position in Asean’s overall trade and the group holds 9.8 percent of India’s global trade volume.
According to a joint press release, both parties also resolved to negotiation on similar agreements in services and investments sector.

“So the potential for enhanced economic engagement between Asean and India is profound.”

Mr Nath says. The question is can this new economic block create same impact as that of EU? It certainly has potentials with fast growing economies and an ever increasing group of middle class flush with disposable income. But my personal opinion is it still has long way to go. First, China must be included in the group so as to have a major global impact. Secondly, unlike the EU, the group does not have a single monetary system. Still, both the parties will benefit hugely with this pact and more so if they could do the same in other sectors too.

Finally the turbulence of politics is over with the UPA led by the Indian National Congress withstanding a tight no-confidence motion in the Lok Sabha on 22^nd July. The Left Front has been blocking almost all major reforms which are so badly needed to push the economy to the next level. It has been frustrating 4 years for both pro-reform Prime Minister Mr. Manmohan Singh and also the business community. Now that all is over, the UPA government is determined to push through reforms in many fields like insurance, telecom etc. despite the alarmingly high rate of inflation that stands @ 11.98% today!

High rate of inflation has also made the apex bank (Reserve bank of India) to raise interest and thereby make bank deposit attractive. On the other hand, the long bull run of the stock market also ended with the start of the turbulence of government instability and skyrocketing international fuel price.

So as an individual – where do I put my money? Most banks are offering an attractive 10% annual interest rate. But is it long lasting? Despite forecast of an economic slowdown, businesses remain upbeat on long-term economic prospect of the country.

So the ideal way to invest your money is to divide your funds and put them into both the markets. While it is not guaranteed that bank rates will always remain the same, one can not also say for sure when the equity/stock market is going to recover! (continue reading…)

The Union Budget for the financial year 2008-09 has brought few smiles on the faces of middle class people. It is clear that, the UPA government has an eye for early national pools -may be by end of this year and hence there is lots of cheers for the all powerful middle class.

The Finance Minister has not only raised the taxable income level from that of last year, but it has also offered some schemes to lessen tax liability. For example, if someone is earning a monthly income of Rs. 25,00/month, his current tax liability is around Rs. 3,347.50/month. In the new taxation syste, the liability for the same income will be Rs. 1,287.50/month and that too without claiming any tax benefit on offer.

So how to save this extra money?

The best way, according to analysts is to invest in real estate. Due to higher interest rates – the rela estate market has been going through a price adjustment or correctional phase over the last few months. So price is quite stable at the moment. The new budget is not offering any extra benefit under Sec. 80 C or Sec 80 D – but due to lower tax liability, the taxpayer can easily utilize the fund judiciously.

The Sec. 80 C has been facilitating tax benefits for certain saving instruments including repayment of home loans. But only Rs. 1,00,000/annum can be accounted for this purpose. One can also claim benefit for Rs.1,50,000/annum as repayment of interest for the housing loan. So thats a cool benefit for Rs. 2,50,000/annum.

Another attractive factor in this regard is that, some banks are already lowering interest rates for housing loans and it seems that, the home loan interest rate might come down further due to global meltdown trend.

Now, we may consider how one gains through investment in real estate properties. Studies have shown that value of Indian real estate properties has seen a compounded annual growth rate of around 15-18 percent. S, the value is always increasing.

Just one point to be cautious is that, the government is giving these sops for personal or live in properties only. If some one buys a property and sells it within next five years, then he/she will have to pay taxes for all these years.

If you have a house and are pondering at what to do – just go ahead, take home loans, buy a nice property and rent it out. The rent will help you pay the EMI (Easy Monthly Installment) and by the time you are ready to settle down, your home loan liability will be NIL. You can enjoy your superannuiation benefits for your recreations. Just remember one thing – the tax implications in this case will have to be worked out after deducting the rent you get. Still you are the winner.