How to Plan Financial Life

What is Financial Planning?

Financial planning is the roadmap to realise and achieve financial goals in life. Everyone has financial goals in life. These goals may include:
• Planning for children’s education
• Planning for children’s marriage
• Buying a house or buying a second larger house
• Buying a car
• Enjoying a vacation with family every year
• Living a comfortable retirement life without any compromises
• Leaving behind an estate for children
Through proper financial planning a person can accomplish all the above goals. Given this it is so scary to know how less people know about money. As they say “Being wealthy is not about how much you earn or what you do. It is just a matter of proper Financial Planning”. Financial planning can help a person identify his / her goals, invest towards achieving those goals and regularly review the investments every year to make sure they are on track to meet the desired goals. In short financial planning is a journey and not a destination.

Financial Planning Stepping Stones 
The process of financial planning is divided into seven steps. Let us try to understand the process of financial planning with the help of an example. 

Ajay is an MBA working for a MNC and is reasonably well placed. Ajay is married, has a 7 year old son Karan. Ajay stays with his parents. Ajay’s parents are retired and are dependent on Ajay. Ajay now wants to buy a new home and start saving money for his child’s education and marriage and his own retirement. He would also like to go on a short vacation once every year. 

Let us see how financial planning can help Ajay realize his goals with a high degree of certainty. The first step to financial planning is to assess the strengths and the risks involved.

Strengths:
Ajay is (30 years of age). That means a 30 year investment horizon till retirement.
Ajay has regular income @ 8 Lakhs per annum
Ajay is debt free and has no financial liabilities. 

Risks Involved: 
Ajay is sole bread earner of the family. 
Ajay’s parents are old and hence more susceptible to health issues. 
Now keeping Ajay’s example in mind let us see how the process of financial planning works.

1. Emergency / Reserve Fund
This is the first step of financial planning. Ajay should have a reserve fund equivalent to meet his 3 to 6 months expenses. A reverse fund is needed for the purpose of covering unforeseeable expenses like medical emergencies or temporary job loss etc. With an adequate reserve fund Ajay will not be required to dip into his investments in times of crisis.

2. Insurance
Life is full of uncertainties and so it is imperative that one has adequate insurance cover to help mitigate the risks that might arise due these uncertainties. A term insurance plan for Ajay would ensure that the family’s survival is not at stake in Ajay’s absence. Ajay’s insurance cover should be equivalent to the present value of his future earnings till his retirement. Also Ajay should buy a good health insurance policy for the entire family to take care of any expenses that might arise due to medical emergencies. Ajay’s parents are dependent on Ajay. If his parents get hospitalised due to some critical illness the huge hospital bill can burn a big hole in Ajay’s pocket. 

3. Child Education Fund
Ajay wants his son Karan to become a doctor. Ajay wants to start saving for his son’s education from now onwards. If the cost of the course as on today is Rs. 10 lakhs then the same course will cost Rs. 41,77,248 (Rs. 42 lakhs approximately) 15 years down the line if the cost of education increases by 10% (inflation) every year. If Ajay wants to reach this target of Rs. 42 lakhs 15 years down the line then he will have to start investing Rs. 9300 per month (Rs. 1,12,000 per annum) if his investments earn him a return of 12% per annum. 

4. Child Marriage Fund
Ajay wants to start saving for his son’s marriage from now onwards. The marriage is planned 18 years from now. If the cost of an normal wedding as on today is Rs. 6,00,000 then the same marriage will cost Rs. 33,36,000 (33.36 lakhs) 18 years down the line if marriage expenses increase by 10% (inflation) every year. If Ajay wants to reach this target of Rs. 33.36 lakhs 18 years from now then he will have to start investing Rs. 5000 per month (Rs. 60,000 per annum) if his investments earn him a return of 12% per annum. 

5. Buying a House
Ajay wants to buy a house worth 25 lakhs 3 years from now. For this he will have to make a down payment of Rs. 5 lakhs (20% margin money). He will have to start setting aside Rs. 13,000 every month in a recurring deposit account. 

6. Annual Vacation
Ajay wants to go for an annual vacation every year. This will cost him anywhere in the range of Rs. 25,000 to Rs. 40,000. Ajay can make provision for this from his monthly cash flows. He can set aside Rs. 3,500 from his monthly salary in a recurring deposit account and withdraw the money at the end of the year and go for a vacation at the end of the year. 

7. Retirement Planning
With advancement in medicine and technology the life expectancy of individuals is on the rise, this means more number of years of retirement. Therefore in order to reduce dependency on others; individuals must start working early on building their retirement corpus. Ajay wants to live a comfortable retirement life. So he wants to start investing for it from today itself. Based on his current monthly expenses Ajay can calculate his retirement expenses assuming an average inflation rate of 5%. And accordingly Ajay can start investing from today onwards to build his retirement nest. 

8. Asset Allocation
Ajay needs to invest for various goals like Karan’s education and marriage, his own retirement. Ajay can invest in a mix of asset classes like equity mutual funds, fixed income securities, commodities etc. to meet these goals. Initially Ajay can have a higher exposure to equity mutual funds. As his age goes on increasing he can change his asset allocation and go on gradually reducing the equity exposure and go on gradually increasing the fixed income securities exposure. 

9. Tax Planning
Ajay should make sure that while choosing his investment instruments he gets maximum income tax benefits. Under various Sections of the Income Tax Act (like Section 80C, 80D, 80E, Section 24) an individual can avail deduction from taxable income. 

Conclusion
In this way with Ajay’s example we have seen how proper financial planning can help a person plan for all his financial goals and start investing towards achieving these goals. Also financial planning is not a one time process. It is an ongoing activity wherein the investments need to be reviewed year after year till the targets are not achieved. Also above we have mentioned the Financial Planning is a journey and not a destination. 

Disclaimer: The above information is collected from various sources. Readers are requested to investigate themselves & take legal & professional advice before entering any tie-ups.

Jatkauli- A Village with special Attention

On 27^th of January, Central Bank of India In collaboration with Red Cross society have selected my village “Jatkauli” as one of 100 villages across the country for the social development in healthcare and education along with financial inclusion. It has been done to mark Bank’s 100 year of operation this year. Under the program, the selected villages will be having a special attention by the bank for its social development that includes health care services, Education loans, Agricultural activity loans and other initiatives to enhance the standard of living of the village.

Jatkauli, A village with around 850 household and roughly a population of 5000 people is situated near Vaishali, a famous pilgrim place of Buddha. On the occasion, in the supervision of its Muzaffarpur zonal office, 2 people have been allotted the Auto loan, 29 people have been selected for self-group for financial help and also 400 school children got the gift of their bank account. Along with that with the help of Red cross society, 400 people got free health check-up.

My association with Central bank has been for last 4 years as I had applied for my education loan for my MBA Program. It was surprising to see that my loan application was the first case of an education loan of amount higher than 4 lakhs in its 30 years of history. It shows the kind of education and social backwardness of the nearby area. Having said that, in last 5 years or so I have notices many families has sent their children for the higher education to make their life better and convenient. I feel proud to be one of them.

With the initiative by Central Bank and Red Cross will surely help the people of my village to improve their lives and will add immense value as far as education and healthcare is concerned. A village which is still waiting for its first high school, first bank, first hospital…. The list is endless, would be looking forward to this initiative. I hope in future many more such organizations should come forward to help the people to uplift their lifestyle. A well thought step by the Bank and I am truly truly thankful to them for this noble cause.

Thanks a lot for your contribution

On this republic day, on a different note, I tried to recall people who has made me able to reach me wherever I am today. It’s a small token of love from my side for all the blessings and love they have shown for me.

1.        Raghuwansh Pd. Singh & Uma Shankar Singh, ABVM School, Bidupur

This was the time when I was just 7 and was put into hostel. These two people made me realize that there is place called Boarding school as good as home and for the betterment of my life my dad has put me there. I still recall the period when I grew up with love and affection of these two people during my boarding days.

2.        Pramod Ranjan & Mrs. Kumkum Rani, DAV High School, Hajipur

I shifted to DAV High school in 1996 for my further schooling. I completed my 10^th (called matriculation) in year 1999. The contribution of these two people has been immense. Even today, I go to them take their blessings whenever I get a chance. It was not their teaching that helped me but moreover the kind of inputs these people inculcated in me that has shaped my character for my entire life. All credit goes to these two for all the good things I have since long.

3.        Kameshwar Singh

Although I completed my 1oth from a private boarding school but the syllabus was based on the Bihar Education Board, that has English as one of the subject, rest of the subjects were in Hindi medium. Here is man, a 24 year old person who impressed me like anything. I went to him and devoted my next 3 months for English. I was upgraded to his 3^rd batch on the basis of my learning and hard work. And that day I realized that If I have to go ahead in life, this is the language that will help me reach there. Just to mention, If this was the beginning, during my stay at Patna, Dr. Asif Anwer was the person who helped me to polish my English. I was awarded the best speaker of the batch and headed towards Delhi with lots of hope and aspirations in life.

4.        Vimal Bansal & Neeraj Nagpal, During my graduation

There are few people in life who comes like a little surprise and gives you so much that you cherish it for a long long time. These two people fall in that category. The contribution has been so immense that I am not able to put it down BUT I am pretty happy that the blessing of these two is still with me like always.

5.        Sugandha Tuli

Well, If I could get an idea of doing MBA, it was this lady who shown me the door. Believe me  before meeting her in May 2005, I did not know even what is CAT is all about?? She was the one who guided me and today I am here crossing all the hurdles and working with one of the best companies in India to work with.

6.        Ankur Jain & DhruvaJyoti Banik, TIME New Delhi

Once decided that I will be preparing for MBA entrance Exams, These were two people who shaped my preparation in their own way. Dhruva is the one person who polished me for DI and also GD/PI. My score of 92+ percentile at both of my CAT attempts is dedicated to him only. Ankur sir has his own “pedagogy” that he had used for himself and almost everyone had written off his this idea. I took it as a chalange and believe me it was a real task to come to his expectations. Today No one can even say that I have done all my schooling in Hindi medium and I can say after looking at the sentence whether this is sounding correct or incorrect. This is something that He has given me.

7.        V Shekhar, Vivek Bhatia, A. Gopalakrishnan, Dr. K P Chinda- ICFAI BUSINESS SCHOOL

The 2 years of MBA was something that I will cherish for my entire lifetime. There were many people with whom I interacted and there were so much to imbibe from each of them. Still there were few with whom I shared a special bonding and this is still today. These three people went out of their way and guided and helped me to make me a better individual and better professional.

Apart from there have been many people whom names I would not have been able to include here but their contribution is equally important towards the goal that I achieved so far.  I am humbled and my gratitude is towards everyone who has been a part of my life throughout. A special thanks to my school/college mates Aditya, Abhishek, Rajeev (Dadhi), Bhupesh, Chotu, Chandan, Prabhash, Mamta, Deepu, Suman, Mayank, Kanika, Fida…… and the list goes on for being there whenever I need them.

Regards-

Nandlal

IPL4 - The show has just began

The much awaited auctions for the players for the coming 3 editions of IPL took place this weekend. Live coverage on MAX shows its popularity and with Ad rates going up to three times to the normal add fees for the event has proved its critics wrong who thought that this would not be a mega event. Max has made crores of rupees to begin with.

More than 300 players including 48 Indian cricketers were on sale and at the end of the day We had many Carorpaties in their twenties without playing “Kaun Banega Carorepati”.  At the same time, there were some great names who were not considered fit or efficient enough to even at their base price. The game was played by 10 IPL team franchisees and with a $90 million in their kitty, They played it at their best. Different team owners had different approach towards the auctions. Defending champions Chennai Super Kings (CSK) wanted to retained as many as players they can from their last composition and they were able to retain 9 out their 11 playing 11 that won last edition of IPL for them. They must be disappointed to lose out Murlidharan to team Kochi at a staggering 1.2million dollars BUT Murli must be having a last laugh with 5 crores in the kitty. On the other side teams like Kolkata Knight Riders (KKR) and Royal Challengers Bangalore (RCB) were in the complete overhaul of their teams and the way they picked up the players it showed it. There were many who got confused about their approach and landed into a 50-50 situation. Team Kochi, Kings XI Punjab and Delhi Daredevils were in this category. Rajasthan Royals were the most unfortunate to have just 7 million dollars in their kitty and it impacted their selection of players.

Overall, Gautam Gambhir became the highest bid player with a auction price of 2.2 million dollars followed by Yusuf Pathan, Robin Uthappa and Rohit Sharma who also got couple of million dollars. The most surprising was Irfan Pathan who got 1.9 Million dollars, time will say if it was a wise decision. From the overseas players Sri Lankan stalwarts Muridharan, Jayawardhnae, Dilshan and Sangakara were among the top paid individuals. In the celebration of all the big money getters we must not forget that there were big names like Saurav Ganguly, Gale, Lara, Bouchar, Gibbs and Swann who were unsold. It shows that no matter how good you were at some point of your career, If you do not fit in the current scheme of things of these teams, You will not be considered.

If I look at the current team standings, CSK and Mumbai Indians are looking most formidable as they had retained all their 4 major players before the auctions. Team Pune has shown a lot of promise in picking up the players and they have a very good unit. RCB and KKR is also looking very good shape after the overhaul. Rest 5 have to make things happen and may be work harder than ever to make a presence felt in the coming season starting in Apr.

At last, No matter what happens to teams’ owners and their revenues and top and bottom lines, these players have become richer by leaps and bounds in last couple of days. I am sure even Umesh yadav (sold to DD for 950,000 dollars) would not have dreamt of having this money for himself, but this is what a auction can provide you. The calculations suggests that it will take another 3-4 years for most of team to reach the break-even and god forbid in case the event fails in between, there will be millions of dollars at stake. I hope and pray this would not happen in coming future. Looking forward to another extravaganza in Apr where we will have 10 teams fighting for the title of 4^th edition of IPL. 

IPL4 - The show has just began

Bihar Elections 2010: A view from sideline

A history has been created with a massive win by the NDA Alliance in Bihar in the current state assembly Elections 2010. Getting a more than Three-Fourth majority was not an easy task though everyone was expecting NDA to come to the power for the second term, BUT with this scale, probably even Its party leaders too would not have estimated. It has witnessed a second largest landslide victory in the history of Indian democracy after 1984 National Elections where Rajeev Gandhi had a remarkable win due to absence of any formidable opposition. The results in itself shows the maturity of the Bihar Voters who has come out of caste-creed politics which was prevailed for almost 3 decades in Bihar. The people of Bihar has voted for development and with this win their expectations has gone much much higher than It was 5 years ago when Nitish Kumar Came to the power for the first time.

There were certain fascinating statistics as far as this election is concerned. For the first time in Bihar election history, Women had come out in large numbers to cast their votes in this election. Not only that they (52%) have left men (50%) behind in percentage term for the number of votes casted. It is a very good sign for the future of Bihar where women are getting their voice. It will help towards women empowerment and self development in the state in coming time. There has been many scheme and initiatives for women on the ground and It has replicated into votes in the favor of Nitish Kumar. Not only state has witnessed a second best growth rate of over 11% after Gujrat in last 5 years of Nitish period but also it has also witnessed the highest number of girls child enrollment in the history of Bihar at schools. Be It Free school dress to all the children getting the enrollment, Mid-day meal or free bicycle for all the boys and girls enrolling in class 8^th onwards. It has also added a huge number of classrooms and schools for better education and living for the children of Bihar. All these have motivated people in general to send their kids to school. All this has provided the people of Bihar a hope that this progress and good work can be retained and given a second change even this can be made better.

Lets recall about some of the facts on which the Nitish and company has fought this election. There was a issue of Caste vs Development before the elections but I am afraid how can you fight an election on this basis where these two should not be even compared. RJD & LJP alliance fell in trap of brand “Nitish” and his development work done during last 5 years. Do not forget, Bihar had witnessed a lawlessness state of situation for 15 years and things were never easy for Nitish Kumar. Having said that the commitment shown by the chief Minister is of immense appreciation. In last 5 years, Bihar has seen as many as 1500 bridges along with hundreds of kilometers of roads being build (literally build as there were hardly any road left in most part of the state). Also we must not forget the efforts and initiatives to bring law and order in place. This is something Bihar will cherish for a long time.

With this kind of mandate, the path ahead will not be easy either. The expectation and hope from the people of state is immense and It will require ever greater effort and commitment to come to the terms in next 5 years. We have witnessed the development in certain areas but still there is a lot left to do in the state. Three major challenges that Nitish Government has to tackle is corruption, Power and Investment in different sectors including industry, education and healthcare. But with the kind of commitment and track record, It may seem extreme difficult but It will not leave any stone unturned to reach there. What he has done was like an impossible task when he resumed office in 2005 so we hope that Bihar again will have a bright future with the brand Nitish Kumar.

Importance of NITISH Kumar

The above title of this blog is inspired by the editorial by Sanjay Baru in Business Standard dated 15^th Nov 2010. I have been a great fan of his writing since I have read his debut book “Strategic Consequences of India's Economic Performance” last year. He is very clinical in the article that he has written in the newspaper. I am going to put my views on the same topic.

As I have mentioned in my previous blog that It is highly likely that Nitish Kumar should return to power with 2^nd term on 24^th of this month. If it happens so, It will be just the 3^rd occasion that Bihar people will be electing any Government for the second term after Sri Krishna singh in 1952 and Sri Laloo Prasad Yadav in 1995.However, We must underline the fact that times has been different at all these three era of politics. Probably the factors working in favor of Laloo at some point of time has been completely evaporated and his caste-creed politics has taken a back sheet in the current Assembly Elections. However, on the basis of this, you can not simply write-off Mr. Laloo until the evening of 24^th when we have the results out.

Taking about the progress Bihar has made in last 5 years, One must acknowledge that It was never easy to even start with. Not only Mr. Kumar has achieved a phenomenal growth rate of more than 11%, only 2^nd to Gujrat during the same period but also the law an order along with the governance has taken a positive move. There has been huge infrastructure work during the last 5 years with a total of 60,000 Crores being spent on many programs by the state government. To put some numbers, there was addition of few hundreds of kilometers of road and as many as 1500 bridges during last 5 years. In addition to this, Bihar has got many flyovers in different town that was a distant dream till few years back. So, Bihar is making a progress BUT the question is whether the rate is adequate? The second term for Nitish Kumar will provide another opportunity to clean up rest of the issues and improve upon many of the things that is still to be resolved including, public transport, bureaucracy, health care and most importantly higher education and industry as a whole.

There are 9 million people in Bihar, that is almost 9% of total population of the country. If Mr. Kumar is able to lift the state of living of these many people, It will also help the country as a whole. Do not forget, the determination with which he has completed his last 5 years, and He must be ready to take up the challenges ahead so that He can make Bihar a better place and a better name on the Indian map. Last few months since the elections has been kicked off, I have noticed that media too is taking these elections very closely, covering many minute details of the elections and having special programs dedicated to Bihar elections. Indeed, This would be trendsetter elections for the coming years where the people of Bihar will decide which is more important to them, Development or caste? This has been a vital question for everyone in the recent past.

As the time for 24^th of Nov is inching closer, anxiety is getting build up regarding the results but having said that, I must underline the fact that whosoever comes to the power (I still strongly believe that Nitish Kumar should get a second term for sure), It will be a different kind of governance and political outlook in Bihar going forward. Looking forward towards the final verdict with a lot of hope and optimism in heart and mind form the next government. Its never too late to start a fresh for new Bihar so Lets begin one again from stretch.

Regards-

Nandlal

Bihar State Elections 2010

Yesterday, 21 Oct 2010, Bihar went for the first phase of election for its 47 seats out of 243 assembly seats. This will be an important election not only for Bihar but for the whole country in general. For the fact that this is the first state election after the Ayodhya verdict. 16.5% of the total voters are Muslims and it would be interesting to see how these people vote in this election. As far as trend suggests, No one can predict what will happen in the final outcome of the polls but definitely current JD(U)-BJP alliance has an upper hand. One of the polls has even suggested that It would be a landslide victory for the ruling coalition. No doubt, the kind of development programs that has been initiated during its 5 year regime, It was never a case for Bihar. I have witness the whole lot of corruption and lawlessness during Rabri and Lalu regime and state was in such a dismal stage till the time Nitish Kumar took over. It was never an easy task for him to bring the state on track.

Having said that, elections were never fought on the basis of development as it was never a case in the past. It was more or less caste and community that has dominated the Bihar election almost every time in the past. Here is a state where RJD won an election because he dared to arrest Adwani during his Rath Yatra. Remember, 16.5% Muslim voters. So I hope this time, the whole state would be in a different frame of mind while going for vote. They voted for change 5 years back and I think that change has taken place that too on the positive side. It would be interesting to see whether that change has been up to expectation of the people of the state or not?

Coming to the recent campaign during the elections, both the national parties Congress and BJP is trying to put their senior leaders for the rallies but what is interesting is the gathering in leaders like Nitish and Lalu is much more than of these stalwarts. May be that’s a sign of of the coming result on 24^th Nov. Bihar in the list few states where the presence of national parties have been very limited. If you look at the 2005 state election, Congress and BJP combined had around 60 seats out of 243. It shows how desperate these two parties would be to improve its position in the state and If this does happen then I am afraid, the future of Lalu will be finished. Lalu is banking on its all time allies Muslim voters and if they do not vote for him then It will be the end of the road for him at state level too as he has already lost the plot during the last Loksabha elections in 2009 with mare 4 seats in Bihar.

Being someone from the same state, I am witness the difference during this 5 year regime of Nitish Kumar and this man is working like a CEO for the state. Even though there is a section of people who does not like the way he works but they simply can’t question him because He has become a bigger name than the party in the state. The kind of works he has done on every front has showcased the state in a better shape and I hope given a second term will help him to strengthen the faith to continue the good work. I hope Bihar voters are intelligent enough to vote and they will decide what they want on this coming 24^th of November when the counting will begin. From me, I should be a landslide victory for Nitish and maybe he might be in a situation where he may not need BJP support anymore. If this happens that that will be the best outcome for me. Fingers crossed, waiting for 24^th Nov. 

Challenges and its overcome

Last few weeks have been very challenging for me on both personal and professional front. The moment I realized that things have been in control and it’s a time to ease up a bit, something happens and you ponder, what’s wrong with it. But that’s the beauty of life and this aspect gives you enough energy and motivation to keep you up. However, In the mean time, You must not forget that show must go on.

In the professional life, I was witnessing a situation where my manager was not happy or rather convinced that I am adding value to the process and team. Though knew that I am putting my best foot forward but somehow It was not getting properly communicated to my manager. To come over this, I made a plan of action for next 6 months to my manager and took his advise. I asked him to see to it and would he be happy If I complete these in next six months. He said, He would be more than happy. So the process got started 2 months back and I am reporting every fortnight about my progress with the review of last fortnight. This is acting like a back up of the stuffs that I have taken care of during the period to make the process improved and to showcase that indeed I am adding value to the team and the process.

Also, Its give an opportunity to better myself every fortnight. This has also helped to be better organized in other works too, whether it be personal or professional. There was a time, when used to be a bit carefree and that resulted into some short of troubles and these things have given me enough learning to make sure that I am not repeating it in future.

There are always some family issues with everyone, so do I have. At times, the best way to tackle a situation is just don’t talk about the issues and may be with time it automatically goes. This exactly happened in my case this time. Finally happy that everything is fine… But again this “fine” may lead to some complications. That’s why I am always n my toes, as you never know from which side which problem will come and create a mess of it.

I have always believed that in professional life, you have to take everyday as a new learning and at the end of the day, you have to look back and see, what new things you have learnt for the day. This value addition will lead you up in the future. Don’t forget, your value addition is always a value addition to the organization, some way or the other. So try to better yourself on the daily basis and you will reach to the destination some day.

All the best and I do hope that my day will also come. Coz I am not happy for what I am today and I have to improve on day to day basis.

Regards-

Nandlal 

SIP Power: It works like wonder in long term

Hello Friends,
I was trying something new on my blog page. This time, I have created an excel sheet and tried to attach it on my page. I have done it through google Documents. Follow the link and you will be directed to the excel sheet.
This sheet is about the power of SIP (Systematic Investment Plan) in Mutual Fund. On the excel sheet, Put the value for the fields highlighted in Yellow (Initial Investment, SIP Amount and Number of Funds You want to invest it) It will Populate the table with different expected rate of returns. (In this case 12-20%).
Try it and do let me know your feedback If it works for you.
The link for the document-
https://spreadsheets0.google.com/ccc?key=tajZOzoI8GXt6RAGtsbQDeQ&hl=en#gid=0

Regards-
Nandlal

Commonwealth Games Expenses with No Common Sense

Recently, the central government disclosed that its total spend on the Delhi Commonwealth Games is likely to be Rs 11,494 crore. This number is disconcerting for two reasons.

Ø  One, because it is an order-of-magnitude away from its original estimate of Rs 655 crore.

Ø  Two, because the real cost of the games will be much higher if we were to include: 

Rs 16,560 crore additionally spent by Delhi government on upgrading the capital’s infrastructure — a new airport terminal, wider roads, new flyovers, Metro rail extensions, and so on; Real cost of labour - labourers got sub-minimum wages, worked in unsafe conditions, and were housed in sub-human tenements; The human cost of driving the poor out of streets and out of sight. 

The term ‘commonwealth’ originally meant public welfare, things that are for the greater good of society. Do the Commonwealth Games pass this commonwealth test? Is this Rs 28,000-crore drain on public funds for the greater common good?  

Before I respond to the question, let me clarify my position on the Games themselves. The desire to celebrate runs deep in our collective psyche. The teachings of a spiritual master, the creation of a nation, the birth of a child, celebrating each of them is important because they are our cultural compass; they remind us of things we value most.  

There are few things as uplifting as watching a sportsperson push physical and mental limits to achieve the incredible. The Commonwealth Games, like the Olympics, are a celebration of the human spirit of excellence. Therefore, in itself, the Games are a worthy endeavour.  

However, given the thousands of crores being spent on the Delhi Commonwealth Games, we need to ask if this is money spent wisely. As a country, we are constantly forced to compromise on funds. For instance, India needs more schools, and the existing schools need better infrastructure and more teachers. This will require us to spend 6% of our GDP on education, but we manage just over half that figure.  

Similarly, the country has very little sports infrastructure on the ground. To encourage sports, our first step has to be to ensure children get access to playgrounds, good equipment and quality coaching. To not have this, and to instead spend on a grand sporting spectacle sounds like we have got our priorities wrong.  

Despite the wonderful economic strides of the past two decades, the reality is that India is a poor country. A recent study by the University of Oxford measured levels of education, health and living standard in the world’s poorest countries. This study shows that India continues to be predominantly poor. In fact, there are more poor people in eight Indian states than in the 26 poorest African countries combined.  

Delhi has amongst the lowest occurrences of poverty in India, while at the other extreme, 81% of Bihar’s population is poor. No surprise then that many of the 100,000 laborers who worked for unfair wages to prepare Delhi for the Commonwealth Games were from Bihar.
The capital already boasts of some of India’s best infrastructure. Instead of spending crores to widen Delhi’s roads, should we not prioritize building roads and schools in Bihar where none exist in the first place? If we have Rs 500 crore to spare, should we use it to build basic sports facilities in thousands of government schools, or should we spend it all on renovating one stadium? 

In real terms, such choices are not all that easy to make. For instance, it is important for our cities to have great infrastructure, and money spent on a metropolis like Delhi will in turn catalyse our national economy. Our leaders have to constantly juggle and prioritize among many equally deserving needs, and it is not as if they are uninformed or wrongly intentioned. Over the last decade, the Indian government has taken important strides in social welfare and inclusive development. The National Rural Employment Guarantee Act and Sarva Shiksha Abhiyan are but two examples.  

However, it is not enough to have specific schemes such as the NREGA. Rather, equity and inclusion considerations must underlie each and every policy decision. Let me suggest that all public policy must recognize that GDP growth is meaningless if it does not uplift the most underprivileged of our country.  

How can we forget that for Rs 28,000 crore we could have established primary schools and health centres in tens of thousands of villages? Can we ignore this splurge the next time a malnourished child looks us in the eye?  

At times like these, it will serve our leaders well to recall Gandhiji’s talisman: “Recall the face of the poorest and the weakest man whom you may have seen, and ask yourself if the step you contemplate is going to be of any use to him. Will he gain anything by it? Will it restore him to a control over his own life and destiny? In other words, will it lead to Swaraj for the hungry and spiritually starving millions?”


By: Azim Premji, Chairman of Wipro

Connect the Dots: A book in a hurry

I still recall many of the stories about the people form “Stay Hungry Stay Foolish”, the debut book by Rashmi Bansal. It was a collection of the stories of 25 People who made their life successful and provided the world a better place to be in, in their own sense. It was undoubtedly a must read for anyone who wanted to be like any one of them and make their life big and successful.

However, In her second book “Connect the Dot”, Rashmi has failed to create that kind of aura in her writing. It seemed that the success of first book has propelled Rashmi to finish the book in hurry and this has lead to a not so good book on the stands.

This is a book about the stories of 25 non-MBA people who dared to dream and made it big. It has been segmented into 3 parts- “Jugaad”, “Junoon” and “Zubaan”. The first part is more or less interesting where we have few intresting stories but as we ahead with the book, one looses its interest. It is mainly because of the fact that going forward the book has not been able to connect to the reader in some way or the other. Some of the stories are too long resulting into a boredom. I don’t remember when was the last time, I left any book unfinished (atleast almost 100 that I have read) but Sorry to Miss Bansal, I could not make myself motivated to read it all. May be after Stay hungry…… My expectation from this one was too high or something else….

At the end, I would say, It was a nice read but just few stories that inspired me and motivated me. I hope next time You will have a better offer for your readers like me who has so big expectation after Saty Hungry…… All the very best.

Regards-

Nandy

World economy is recovering so is India- Here is the fact!!!

Statsguru--2010

Manufacturing growth in the US has surged to a 4-year high, the UK saw the highest rise since 1994 and JPMorgan Global PMI Output saw the strongest quarter since Q3 2007. With China and India doing well, the IMF has raised global output forecasts again, reduced the likely bank writedowns from $2.8 tn in October 2009 to $2.3 tn now, and overall levels of risks are steadily falling.

With Greece leading the way, however, country spreads remain elevated and there is a danger this could see commercial spreads rising. Banks have $5 tn of debt coming up for rollover in the next 36 months, and governments have large borrowing needs also — 6% of GDP for the Euro Area, 8% for the US and 14% for the UK, and numbers that are 1-2 percentage points lower in 2011. Consequently, the IMF estimates a credit gap of 2% of GDP in the Euro Area and the US this year and 10 per cent in the UK. A cross-sectional regression of 24 countries finds fiscal problems and likely banking writeoffs are the biggest explanator for higher sovereign spreads, followed by high current account deficits. In other words, while overall risk levels are lower, including those on finance, they are high enough to raise caution over global growth.

India is in a better situation with both business confidence and industrial production up to an all-time high. Industrial production is also more broad-based. While private consumption share in GDP growth has fallen, this is expected to recover — the share of the government is down and investment levels are rising. Foreign inflows are up and while that is good for the markets and companies that are raising funds, this is a problem for the rupee, and hence exporters. Inflation is a serious concern and while RBI has tried to ensure interest rates don’t rise, more aggressive action may be needed. With oil prices rising, oil marketing firm losses are all set to rise and the fiscal deficit is in trouble since oil subsidies have been seriously underestimated. Exceptionally high 3G bids could prove to be the saving grace.

Source: Business Standard

IPL4: New Auctions- Hard Facts

In my recent Twitter post I showed my apprehension regarding the 2 new teams getting sold for more than 3200M US Dollars. And After doing a bit of maths I have come to know that How correct I was. The total money raised by the 2 new teams are equal to the amount raised by all 8 teams combined 2 years back. On roughly estimates, The valuations of teams have gone 4 times in 2 years, at least the number suggests. As we don’t have a proper valuation method to calculate the value of each franchise, taking the value of two new teams we have come to a conclusion that the existing ones too have grown accordingly in last 2 years. And may be this is the fact that even the PE Players (Private Equity Players, fund houses those put their money in high growth business model) are very much interested in putting their money in this model.

Coming to the new buys of Pune and Kochi Teams, Its owner has paid staggering 370M US Dollar and 333M US Dollars respectively. The amount would be payable to IPL in equal installments for next 10 years. They will be in the action from next year onwards. One always wonder, after putting this much money just for getting the franchise, How would these owners would make money out of it? Well.. Stop thinking, It’s a simple arithmetic that will help us to understand How these owners will get money back and by what time they will reach their break-even point.
Let’s take the example of Team Pune that has been bough by Sahara-
Total Outflow For the First Year-
Heads Amount (US Million Dollars)
1. Franchise Fee ---  37 (370M dollars will be paid in 10 years)
2. Players Cost  ---   05 (Taking out the average amount being paid by rest of the franchises towards the players buyouts)
3. Stadium Cost ---- 01 (For 9 matches that will each franchise will own in its home town)
4. Travel and Boarding  ----0.5 (Again the average as per existing teams)
5. Coach, Support Staffs  ---- 0.5 (Estimated)
Total Outlay for the First Year----  44M USD


Now let’s talk about the inflow during the first year-
Major Source of Revenue Amount (in US Million Dollars)
1. TV/Media --- 7.2 ( Total divided now between 10 teams from 2011)
2. Central Sponsorship ---- 3 (60% of Share pool; Rest 40% to IPL)
3. Local Sponsorship ----- 2.75 (estimated average of past two IPL editions)
4. Gate Money ------ 1.8 (assuming 30000 paid tickets sold for Rs 300/- over nine matches @ an USD/INR exchange rate of 45/-)
5. In Stadium Ads ----- 1 (these are usually sold as package to local sponsors)
6. Merchandise ----- 0.25 (liberal Projection)
Total Inflow during the 1st Year----- 16


Total Loss 28M USD (For the First year after investing 44 M USD)


Even if we consider the number of matches getting to 94 in place of 60 in the current format nad we appreciate the inflow accordingly , It will give a loss of 19M USD. With the roughly calculations That I have, the new 2 teams will take a minimum of 7-8 years to break-even (that too being very optimistic). There are just few low priced franchises that is about to break-even (like KKR and Rajasthan Royals) but that also It will go to red once the revenue will be distributed among 10 teams in place of 9.
I think owners of the existing 8 teams would be feeling lucky with the kind of valuation they have. And I would not be surprised if they sell certain percentage of their stake to third party such as PE players or NHIs to improve negative cash flow. The IPL business model ensures that even after they break-even (after 5 years) they are unlikely to experience a significant growth in net profits as city-based teams have a limited market size of penetration.
With franchisees getting a declining share from the 6th year onwards, they will face financial pressures forcing sell-outs, either partial or fully unless their local sales are high, which is extremely unlikely. Part equity sale and new owners taking small stakes will happen for infusion of cash. Teams that continue to be laggards on the championship table will face huge financial crunch as they will not attract big advertisers.
There are those who argue that at the end of the 10th year the franchisee will be profitable as he will have no more financial obligations to IPL but by that time IPL will probably corner the central pool of revenues as well. So is the gestation period a 10 year wait for real profitability? How many owners are willing to fund a loss-making operation for just two months of ego-trip and Page 3 razzmatazz?
Perhaps the biggest risk that IPL, BCCI and Lalit Modi are taking is their arrogant belief that cricket can be sold and sold till the cash-counting machine collapses in India. It will. But by then there may not be enough to count.


Regards-
Nandlal

The Highlights of the Budget 2010-

-	Minimum Alternate Tax up from 15% to 18% on book profits
-	Fiscal deficit pegged at 5.5% of GDP
-	I-T dept to notify simple two-page Saral 2 form for individuals for current year
-	Personal income tax: Nil for income up to Rs 1.6 lakh, 10% for income bet Rs 1.6 -5 lakh
-	Personal income tax: Income between 5-8 lakh: Tax at 20%
-	Personal income tax: Above Rs 8 lakh, tax at 30%
-	Professionals with Rs 15 lakh income need account audit
-	Partial rollback of excise duty relief on large cars
-	To provide subsidy in cash instead of bonds for fertiliser, oil
-	Customs duty on gold, platinum imports raised to Rs 300 from Rs 200
-	Service tax to GDP ratio is 1%
-	Net revenue gain of Rs 43,500 cr from customs, excise proposal
-	Direct tax proposals result in Rs 26,000 cr loss; indirect tax yield Rs 45,000 cr gain
-	News agencies exempt from service tax
-	Some services hitherto not taxed would be brought under the purview of new Service Tax
-	Service Tax rates unchanged at 10%
-	No import duty on some equipment in road projects
-	Cut in duty for photovoltaic units
-	External commercial borrowing will be available for food storage industries
-	Clean energy cess on domestic, imported coal
-	Peak customs duty remains unchanged at 10%
-	Central excise on LED lights halved to 4%
-	Agricultural seeds exempt from service tax
-	Full excise cut on electric cars
-	For solar mission, solar power generating units rates are to be reduced by 5%
-	Cut on personal tax rates means saving of Rs 50,000 for income up to Rs 8 lakh
-	Partial rollback of excise duty relief on large cars
-	Peak excise duty hiked from 8% to 10%
-	Market borrowing were up to 3,45,000 cr. Enough to meet credit need of private sector
-	Duties on smoking and non-smoking tobacco products up
-	Excise duty on large cars, SUVs, multi utility vehicles hiked
-	Petroleum products: basic excise duty of 5% crude, 7.5% on diesel & petrol; 10% on other products
-	Structural changes in excise duties of tobacco, propose to extend excise duty
-	Revenue loss of Rs 26,000 cr on a/c of direct tax proposals
-	Surcharge for companies reduced to 7.5%
-	Due to direct taxes, result in a revenue loss of Rs 26,000 cr
-	Threshold limit for TDS applicability to be rationalised
-	Extended scope of presumptive taxes up to Rs 40 lac
-	Real estate sector now gets 5 years for completion instead of 4 years before
-	To boost tourism investment, offers investment linked tax deductions
-	Addl Rs20,000 deduction available for investment in infra bonds
-	Reduces current surcharge of 10% on domestic comp to 7.5%
-	Automation of excise, service tax already rolled out
-	FY11 market borrowing pegged at Rs 3.45 lakh cr
-	Govt to set up apex level Financial Stability and Development Council
-	FY13 fiscal deficit seen at 4.1%
-	Fiscal deficit seen at 4.8% in FY12
-	Allocates Rs 1,900 cr for UID project
-	Planned expenditure up 15% over 2009-10
-	Increase in non-planned exp up only 6%
-	Total exp proposed up 8.7% over 2009-10, to Rs 11 lakh cr
-	Taskforce to counter problems in Maoist affected areas. Adequate funds will be allocated
-	Allocation to Defence over Rs 147,000 crore
-	Technology advisory group to be set up under Nandan Nilekani
-	Smart card extended to NREGA
-	RBI to dole out more banking licences: Pranab
-	Sign language training centre for hearing impaired
-	Rs 4,500 cr for program of social justice, sr citizens, backward classes, handicapped
-	Rs 100 cr allocated for women farmers
-	Exclusive skill dev prog in textile and garment sector
-	Rs 48,000 cr for Bharat Nirman plan
-	Asks state govt to contribute for social security to workers in unorganised sector
-	Infra stocks spurt on higher allocation
-	To allocate Rs 22,300 cr to Health Ministry
-	Allocates Rs 100 cr for new pension scheme, to benefit 100,000 low income citizens
-	Khadi institutes get Rs 400 cr
-	GOI sign $150 mn deal with ADB for implementing Khadi programme
-	Rajiv Awas Yojana now ready' gets Rs 1,270 cr for FY11
-	Rs 7300cr in 2011 for backward sections
-	GST, Direct Taxes Code from April 2011
-	Housing loan: 1% interest subvention scheme extended, allocation Rs 700 cr
-	Urban dev allocation up more than 75% to Rs 5400 cr
-	Allocates Rs 1,200 cr for drought mitigation
-	Indira Awas Yojana: allocation up by Rs 10,000 cr
-	NMDC, SVJN stake sale to fetch Rs 25,000 cr in FY10
-	NREGS gets Rs 40,100 cr in FY11
-	Rs66,1000 cr allocateds for rural development in FY11
-	IIFCL disbursements at Rs 9000 cr by March 2010
-	School education outlay for FY11 at Rs 31,000 cr
-	States to get Rs 3,675 cr for primary education at rural level
-	To set up coal regulatory authority
-	Spending on social sector at Rs 137,000 cr
-	Rs 25,000 cr allocated to develop rural infrastructure
-	Growth to exceed 7.2% in this fiscal
-	Final FY10 GDP figure maybe higher than estimate of 7.2%
-	To set up National clean energy fund
-	Plan outlay for Renewable energy ministry up 61%
-	Power allocation doubles to Rs 5,100 cr
-	To set up 5 more mega food park projects
-	Allocation for road tansport Rs 19,894 cr
-	Farm loan repayment extended by 6 months
-	ECB to be available for cold storage
-	To provide Rs 400 cr to boost farm output in eastern India
-	Timely repayment of crop loans: subvention raised from 1% to 2%
-	Govt is committed to growth of SEZ to promote exports
-	Proposes allocation of Rs 200 cr for climate-resilient agricultural program
-	Extend 2% interest subvention for exports for another year
-	FY11 capital for PSU banks at Rs 16,500 cr
-	Extends interest subvention of 2% for handloom, handicrafts for 1 more yr
-	Propose new bill to address problems in corpoate sectors
-	Will augment assistance to RRBs to strengthen rural sector
-	RBI may give license to some more private sector players and NBFCs
-	Rs 1,900 cr addl capital in four PSU banks
-	Ownership and control clearly defined in FDI policy
-	To discuss Kirit Parikh report in due course
-	Subsidy for fertiliser sector to increase farm productivity
-	Govt to raise Rs 25,000 cr this year to meet cap expenditure requirements
-	GST and DTC can be introduced in April 2011
-	Steps to reduce public debt, paper to be presented in 6 months
-	Signs of food inflation going to non-food items
-	Need to review stimulus, move to fiscal consolidation
-	Double digit food inflation in 2009
-	Export figures encouraging; pvt investments can be expected
-	Concerned over emergence of double digit food inflation
-	18.9% growth rate in manufacturing sector in 2009
-	Final figure may be higher if earnings in last quarters are strong
-	Need to make recovery
-	Growth slows down to 6% in Q3 vs 7.9% in Q2 this fiscal
-	Focus shifts to non-governmental actors
-	3rd challenge: relates to problems in government system
-	2nd challnge: harden economic growth to make dev more inclusive
-	1st challenge: quickly revert to higher GDP growth path of 9%, cross double digit growth
-	Economy is in a better position than a year ago, however, challenges remain
-	Uncertainity was there on account of delay in monsoon, concerns about production and food prices
-	Pranab Mukherjee starts announcing Union Budget
-	Bond yields steady ahead of Budget