Interim Budget speech 2009

The Interim Budget speech as presented by Hon. Finance Minister Mr. Pranab Mukherjee.

Contributor: Mr. K.P. Nagashrith, BSIM-Bangalore


FM's Budget Speech

FDI: To be or not to be??

Times of India, Feb 12, 2009: With the Government decision to ease the entry modes of FDI into the country, a great leap is expected in the areas of the already hyped retail sector, telecom, insurance etc. Earlier when a company invested in a company in India, it had to enter into a joint venture with an Indian partner. Suppose the contribution of the Foreign partner in this JV (Joint Venture) was 49% and that of the India Partner was 51%, and this JV started its own subsidiary in India, this subsidiary was supposed to be constituted of 49% FDI.

Now, with the cabinet decision on wednesday, a subsidiary from the above example would be considered as a 100% Indian entity.

It seems India has started changing much of its tactics, keeping in mind the fact that most of the past stock trends have been affected due to FII's instability.

India now seems to be locking horns with China, which has less FDI restrictions, but has more restrictions over the equity market. As a result, FII's find it very hard to enter China.

FDI entry and exit is a very difficult affair. First of all, there are the limitations which a foreign company can't exceed. Exit is also difficult, as Industrial laws mention that diluting a company employing more than 100 companies needs prior Government approval.

Now that the entry has been made easy, Indian's can expect more increase in FOREX levels. But there are also problems associated with this. Remember my earlier blog on Mao's cookie crumbling (http://fingertipfinance.blogspot.com/2009/02/renminbi.html)? Well, India could loose its cookie too, as more FDI in makes the value of Indian Rupee appreciate against the US dollar. This happens because the supply starts exceeding the demand. Imagine a shopkeeper holding excess of a particular product which he has to sell before it reaches the expiry. What does he do?? He lowers the rate of the item. That's what will happen with the dollar. 1$ that I used to get at Rs. 50 will now be available say at Rs. 42. So an American can now only get Rs. 42 of work done out of me for his 1$. Now he has to look for cheaper substitutes. That's where India looses.

Also, Indian goods could loose out their competitive value. Interest rates start coming down.

So even I am puzzled....Should we or shouldnt we....the choice is yours.

Your comments on this article are invited. Do participate.

When business falls in love

The legend has it that a clergyman from ancient Rome, St. Valentine, was executed by the Emperor for marrying off runaway couples. To this day, February 14th is remembered with as much fervour and joy in memory of this kind-hearted Saint. And when it comes to business, Valentines day has much to offer. The following data could be useful to young entrepreneurs who have a lot of opportunities during the festival of love. The statistics are from the US. But I am showing this with the belief that Consumer behaviour should be the same everywhere.

Top Ways to Celebrate Valentine’s Day

Household participation rates

Greeting Cards	65%	Plush	21%
Date Night	44%	Other Gifts	17%
Candy	38%	Perfume/Cologne	12%
Flowers	32%	Jewelry	11%
Gift Cards	29%

Sources: Hallmark/Retail Industry Leaders Association/NRF

Valentine’s Cards
180 million
Number of Valentine’s Day cards exchanged annually, making Valentine’s Day the second-most popular greeting-card-giving occasion. (This total excludes packaged kids valentines for classroom exchanges.) (Source: Hallmark research)

Nearly 50 percent
Typically, the proportion of all Valentine’s Day cards purchased in the six days prior to the observance, making Valentine’s Day a procrastinator’s delight. (Source: Hallmark research)

About 40%
Proportion of all Valentine card purchases which parents account for. (Source: Hallmark research.)

Candy is Dandy

1,271
Number of locations producing chocolate and cocoa products in 2003. These establishments employed 43,379 people. California led the nation in the number of such establishments (with 146) followed by Pennsylvania (with 120). <http://www.census.gov/prod/www/abs/cbptotal.html>

519
Number of locations that produced nonchocolate confectionary products in 2003. These establishments employed 23,343 people. <http://www.census.gov/prod/www/abs/cbptotal.html>

$13.5 billion
Total value of shipments in 2003 for firms producing chocolate and cocoa products. Nonchocolate confectionery product manufacturing, meanwhile, was a $5.5 billion industry. <http://www.census.gov/prod/ec02/am0331gs1.pdf>

3,523
Number of confectionery and nut stores in the United States in 2003. Often referred to as candy stores, they are among the best sources of sweets for Valentine’s Day. <http://www.census.gov/prod/www/abs/cbptotal.html>

24.7 pounds
Per capita consumption of candy by Americans in 2004. Candy consumption has actually declined over the last few years; in 1997, each American gobbled or savored more than 27 pounds of candy a year. <http://www.census.gov/industry/1/ma311d04.pdf>

Flowers
$422 million
The combined wholesale value of domestically produced cut flowers in 2004 for all flower-producing businesses in 36 states with $100,000 or more in sales. Among states, California was the leading producer, alone accounting for nearly three-quarters of this amount ($304 million). <http://www.nass.usda.gov>

$43 million
The combined wholesale value of domestically produced cut roses in 2004 for all businesses in 36 states with $100,000 or more in sales. Among all types of cut flowers, roses were second in receipts to lilies ($78 million). <http://www.nass.usda.gov>

22,022
The number of florists nationwide in 2003. These businesses employed 113,270 people. <http://www.census.gov/prod/www/abs/cbptotal.html>

Jewelry
28,527
Number of jewelry stores in the United States in 2003. Jewelry stores offer engagement, wedding and other rings to lovers of all ages. In February 2005, these stores sold $2.4 billion worth of merchandise. (This figure has not been adjusted for seasonal variation, holiday or trading day differences or price changes.) <http://www.census.gov/prod/www/abs/cbptotal.html> <http://www.census.gov/mrts/www/mrts.html>

The merchandise at these locations could well have been produced at one of the nation’s 1,892 jewelry manufacturing establishments. The manufacture of jewelry was an $8.6 billion industry in 2003. <http://www.census.gov/prod/www/abs/cbptotal.html> <http://www.census.gov/prod/ec02/am0331gs1.pdf>

The New Curriculum

MBA aspirants joining this year & in the future may get to read a lot about the Satyam Scam & the fallen IT Czar Ramalinga Raju.

The question now being debated is whether fresh MBA grads ought to have their attention focussed on such a topic. There are some who feel that MBA's should know a thing or two about business ethics, and keeping that in mind is much more important than earning profits. Others say that such cases should be left to students doing CA courses and law firms as they are more involved directly in such cases.

According to me, a businessman needs to be aware of all his surroundings. People would think twice before they do something foolish or the other.

An MBA grad should know what has to be followed. There are many ways a company can earn its profits. Proper management happens when you take the right path of earning this profit. India is already dependent on FDI's & FII's on maintaining its stock market movement. Any similar mishap can make such investors loose their confidence in the Indian business environment, ultimately leading to more disaster.

Let us hope that there wont be another 'Enron' or 'Satyam' for us to study.

Eureka! That's Finance

Students like me from B.Sc background have had really hard times in and out of class coping with Finance subjects. Following are tips from a few lessons that I learnt-

1. Be in touch with your professor- Some are tough, I know, but they also know your weakness well. Ask them where you lack.

2. Get one good book & stick to it- Its true that in specializations, you have to read a lot, but often with so many books lying around, you might end up deciding which one to start. Understand it...then go for change.

3. The Job- Don't visualise yourself 2 years from now working on your PC doing some unknown research. Search the job postings available at different job sites like 'Naukri' & Monster.com. Find out what these jobs involve. Select your field of choice & work towards it. Believe me....you dont get to sit in the hot seat right away.

4. Everyday is a new day- So learn something new. There are analysis tools from excel. Dont wait for others to teeach you. The materials are available on net. And dont think you can get it done in a day.

5. Freelance- Get hold of a company of your choice. Dont just take the top ones. Take one that's faring very badly. Use your analytics that you learnt as Science Grads. Think what could have gone wrong. Do a short analysis and show it to your professors. This excercise would increase your confidence level and your proactiveness.

Do share any other tips or comments that you might have. Happy Calculating!!!