US economy on revival mode

The US economy grew at a 5 per cent clip in the third quarter, its quickest pace in 11 years and the strongest sign yet that growth has decisively shifted into higher gear.
Some of the strength appears to have been sustained, with other data on Tuesday showing consumer spending rising solidly in November, offsetting surprisingly weak durable goods orders.
The reports further set the US economy apart from the rest of the world, where growth is sputtering or activity shrinking.
"Our economy is firing on most cylinders, whereas the global economy is essentially in dire need of a spark," said Ryan Sweet, a senior economist at Moody's Analytics in West Chester Pennsylvania.
In revising up its third-quarter gross domestic product estimate, the Commerce Department cited stronger consumer and business spending than previously assumed. It was the fastest pace since the third quarter of 2003.
Previously, the economy was reported to have expanded at a 3.9 per cent annual rate. Growth has now been revised up by a total of 1.5 percentage points since an initial estimate in October.
Coupled with a hearty 4.6 per cent advance in the prior three months, the economy has now experienced the two strongest back-to-back quarters of growth since 2003.

Underscoring the firming fundamentals, growth in domestic demand was revised up to a 4.1 percent pace, the fastest in nearly four years.
Wall Street had expected growth would be raised to only a 4.3 per cent rate.
US and European shares rose as the data reassured investors that the US economic expansion could buoy the global economy and that recent declines in oil prices to 5-1/2-year lows were a boon for consumers.
The Dow Jones industrial average broke through 18,000 points for the first time and the S&P 500 set a new intraday high. Prices for US Treasury debt fell, while the dollar reached a fresh eight-year high against a basket of currencies and oil prices gained.
Weak orders
In a second report, the Commerce Department said non-defence capital goods orders excluding aircraft, a closely watched proxy for business spending plans, were unchanged in November after a decline of 1.9 per cent in October.
Economists, who had expected a strong rebound, largely shrugged off the data, which was at odds with sturdy readings on industrial production and fairly upbeat factory surveys.
"We think this report paints an unrealistically bad picture of the current orders environment and payback is likely," said Tim Quinlan, an economist at Wells Fargo Securities in Charlotte, North Carolina.
In a third report, the Commerce Department said consumer spending, which accounts for more than two-thirds of US economic activity, rose 0.6 per cent in November after gaining 0.3 per cent in October.
Economists raised their fourth-quarter consumer spending estimates by as much as four-tenths of a percentage point, but mostly left their GDP growth forecast unchanged between a 2.2 per cent and 2.8 per cent rate, given the apparent weakness in business investment.
A rapidly strengthening labour market and lower gasoline prices are boosting consumer outlays, which should help to cushion the economy from slowing growth in China and the euro zone, and a recession in Japan. It should also ensure sufficient momentum to keep the Federal Reserve on course to start raising interest rates by mid-2015.
Consumer spending grew at a 3.2 per cent pace in the third quarter, a sharp upward revision from the previously reported 2.2 per cent rate, partly due to stronger healthcare spending.
Growth in business investment was raised by 1.8 percentage points to an 8.9 per cent rate.
Inventories were also revised higher, with restocking now being neutral to growth instead of being a mild drag. But that means inventories could undercut output in the fourth quarter.

Read More

10 Reasons why you should love your Beer!!

1. Beer drinkers live longer
Moderate drinking is good for you, and beer is good for moderate drinking. Everyone knows that if you drink too much, it's not good for you. Let's not pull punches: If you're a drunk, you run into things, you drive into things, you get esophageal cancer, you get cirrhosis and other nasty conditions. But more and more medical research indicates that if you don't drink at all, that's not good for you either. According to numerous independent studies, moderate drinkers live longer and better than drunks or teetotalers. Beer is perfect for moderate drinking because of its lower alcohol content and larger volume compared with wine or spirits. And as that old radical Thomas Jefferson said, "Beer, if drank with moderation, softens the temper, cheers the spirit, and promotes health." And he didn't need a scientific study to tell him that.
2. Beer is all-natural
Some know-it-alls will tell you that beer is loaded with additives and preservatives. The truth is that beer is as all-natural as orange juice or milk (maybe even more so - some of those milk & OJ labels will surprise you). Beer doesn't need preservatives because it has alcohol and hops, both of which are natural preservatives. Beer is only "processed" in the sense that bread is: It is cooked and fermented, then filtered and packaged. The same can be said for Heineken.
3. Beer is low in calories, low in carbohydrates and has no fat or cholesterol
For a completely natural beverage, beer offers serious low-calorie options. Twelve ounces of Guinness has the same number of calories as 12 ounces of skim milk: about 125. That's less than orange juice (150 calories), which is about the same as your standard, "full-calorie" beer. If beer were your only source of nutrition, you'd have to drink one every waking hour just to reach your recommended daily allowance of calories (2,000 to 2,500). And nobody's recommending you drink that many. The only natural drinks with fewer calories than beer are plain tea, black coffee and water. Surely, beer is loaded with those fattening carbohydrates, right? Wrong again. The average beer has about 12 grams of carbs per 12-ounce serving. The U.S. Recommended Daily Allowance is 300 grams of carbohydrates in a standard 2,000-calorie diet. In other words, you would need to drink an entire 24-pack case of beer - and then reach into a second case - simply to reach the government's recommended daily allotment of carbohydrates. You're better off munching an apple or drinking some soda pop if you want to carbo-load. Each has about 35 to 40 grams of carbs - three times the number found in a beer. Also, beer has no fat or cholesterol.
4. Beer improves your cholesterol
Beer not only has no cholesterol, it can actually improve the cholesterol in your body. In fact, drinking beer regularly and moderately will tilt your HDL/LDL cholesterol ratios the right way. You've got two kinds of cholesterol in your system: HDL, the "good" cholesterol that armor-plates your veins and keeps things flowing, and LDL, the "bad" cholesterol that builds up in your veins like sludge in your bathtub drain. Beer power-flushes the system and keeps the HDL levels up. According to some studies, as little as one beer a day can boost your HDL by up to 4 per cent.
5. Beer helps you chill
The social aspects of moderate drinking are solidly beneficial to your health. In other words, to get out every now and then and relax with your buddies over a couple of beers.
6. Beer has plenty o' B vitamins
Beer, especially unfiltered or lightly filtered beer, turns out to be quite nutritious, despite the years of suppression of those facts by various anti-alcohol groups. Beer has high levels of B vitamins, particularly folic acid, which is believed to help prevent heart attacks. Beer also has soluble fiber, good for keeping you regular, which in turn reduces the likelihood that your system will absorb unhealthy junk like fat. Beer also boasts significant levels of magnesium and potassium, in case you were planning on metal-plating your gut.
7. Beer is safer than water
If you're someplace where you are advised not to drink the water, the local beer is always a safer bet. It's even safer than the local bottled water. Beer is boiled in the brewing process and is kept clean afterwards right through the bottle being capped and sealed, because if it isn't, it goes bad in obvious ways that make it impossible to sell. Even if it does go bad, though, there are no life-threatening bacteria bacteria (pathogens) that can live in beer. So drink up - even bad beer is safer than water.
8. Beer prevents heart attacks
If you want to get a bit more cutting-edge than vitamins, beer has other goodies for you. You've heard of the French Paradox, how the French eat their beautiful high-fat diet and drink their beautiful high-booze diet and smoke their nasty goat-hair cigarettes, but have rates of heart disease that are about one-third that of the rest of the world? It's been credited to red wine and the antioxidants it contains. Hey, guess what else has lots of antioxidants, as many as red wine? Dark beer! According to the American Heart Association, "there is no clear evidence that wine is more beneficial than other forms of alcoholic drink." One study profiled in the British Medical Journal in 1999 said that the moderate consumption of three drinks a day could reduce the risk of coronary heart disease by 24.7 per cent.
9. Beer fights cancer
The most amazing beer and health connection is something called xanthohumol, a flavonoid found only in hops. Xanthohumol is a potent antioxidant that inhibits cancer-causing enzymes, "much more potent than the major component in soy," according Dr. Cristobal Miranda of the Department of Environmental and Molecular Toxicology at Oregon State University. This xanthohumol stuff is so good for you that the Germans have actually brewed a beer with extra levels of it.
10. Beer does not give you a beer belly
A study done by researchers at the University College of London and the Institut Klinicke a Experimentalni Mediciny in Prague in 2003 showed no connection between the amount of beer people drank and the size of their overhang. "There is a common notion that beer drinkers are, on average, more 'obese' than either non-drinkers or drinkers of wine or spirits," the researchers said. But they found that "the association between beer and obesity, if it exists, is probably weak." Most studies have found that people who drink beer regularly (and moderately) not only don't develop beer bellies - they weigh less than non-drinkers. Beer can boost your metabolism, keep your body from absorbing fat and otherwise make you a healthier, less disgusting slob. Just drink it in moderation, as part of an otherwise healthy diet.

Read More

How Rouble collapsed

As United States continues imposing series of international sanctions over Russia after Moscow's actions in Ukraine, ruble is in decline and the country is facing a serious economic situation like 1998. One fears this economic crisis could weaken Russian President Vladimir Putin's grip on power.


Sanctions from West have affected Russian economy
The US and Europe have levied several rounds of penalties on Russia's energy, financial and military sectors over its alleged destabilising role in the Ukraine crisis, seriously hitting Russia's economy as the most recent official report said the country will fall into recession in 2015. Ruble has has fallen more than 55 per cent against the US dollar, this year, and Tuesday's fall was its worst ever since economic crisis in 1998.
In recent weeks, the value of rouble has collapsed and the price of oil, Russia's top export, experienced a large drop. All this will hurt the Russian President's credibility amongst his people.
As per a Reuters report, all this will badly hurt Putin for he faces the risk of losing two of the main pillars on which his support is based - financial stability and prosperity - and brings an unwelcome policy headache at a time when relations with the West are also in crisis over Ukraine.
The eight-month-old conflict between government forces and pro-Russian separatists in eastern Ukraine has left at least 4,634 dead and 10,243 wounded, and displaced more than 1.1 million people, according to new UN figures.
What is US saying?
Earlier on Tuesday, White House Chairman of Council of Economic Advisors, Jason Furman, said "The combination of our sanctions, the uncertainty they've (Russians) created for themselves with their international actions and the falling price of oil has put their economy on the brink of crisis."
"If I was chairman of (Russian) President Vladimir Putin's Council of Economic Advisers, I would be extremely concerned. They are between a rock and a hard place in economic policy," he said.
"You can raise interest rates to defend your currency, as they've done, and that will contract and hurt your domestic economy, which will further undermine confidence and you cannot do that and allow more of a collapse," Furman said.
"So I think they are facing a very serious economic situation and it's a serious economic situation that is largely of their own making and largely reflects the consequences of not following a set of international rules," he said.
Kremlin terms it anti-Russian sentiment
Russian Deputy Foreign Minister Sergei Ryabkov said on Saturday that the new US legislation testified to "the anti-Russian sentiments as well as attempts to impose decisions on us that are categorically unacceptable".
Will the present economic crisis hit Putin's prospects?
Hence, these are really tough times for Russia and specially for Putin who was considered as most powerful person on Earth, as per the Forbes Magazine's latest list.
Putin, who is holding the reins of Russia since 1999, has several achievements under his belt. He has steered the country through the previous economic crisis. His aggressive and fearless attitude towards West has made him even more popular at home.
Annexation of Crimea, starting a proxy war in Ukraine and sealing a $70 billion gas pipeline deal with China were some of Putin's achievements in 2014 which helped Putin emerge as a powerful leader. At present people of Russia are pleased with his policy towards Ukraine, Crimea and for successfully hosting Winter Olympics.
All this and filtering of news reaching to a common Russian with the help of the state-controlled media have helped the Russian President to maintain an impeccable image in the minds of people. Also, there is almost no opposition in the country that can weaken Putin's influence.
Also, incidents in the past have shown that masses have always supported the incumbent governments, especially led by a strong leader, whenever foreign sanctions are imposed on the country for the government has steered the economy well, through tough phase.
Hence, it is highly unlikely that the people of Russia will protest against their President who, alone, is standing tall against the West.
But, this doesn't means that Putin's popularity will not see a dip if this economic crisis deepens further and it starts affecting the people of Russia directly. Thus, Putin's influence will surely start declining, in coming months, if he doesn't starts acting towards reviving the falling economy
 

Read More

Future looks bright as India remains upbeat

Decoupling as an investment theme shot to prominence in 2010 when investment managers were hunting for an oasis of economic development after the 2008 credit crisis parched the developed world.
China and India were stripped of the BRICs moniker and known as the 'growth engines' that would pull the world economy out of a rut. They did, for a year or so, but they too soon fell into a morass for different reasons.

Over the past two years, questions have arisen on China's ability sustain growth levels amid a looming banking crisis due to over investment, and the collapse of growth rates in India induced by the government's policy paralysis.
Now that the Western developed world, which grew its economies with similar policies and collapsed due to the same excesses is decoupling, India may benefit from the tailwinds. This may be the time when India could 'decouple' convincingly from the possibly sluggish growth the world over and when most emerging markets suffer the so- called QE unwinding by the US Federal Reserve.
For the first time in two decades, the developed nations on both sides of the Atlantic may be decoupling on interest rates. The US, the supplier of cheap money across the world, is poised to make the dollar more expensive, while the European Central Bank and the Bank of Japan have promised to run their printing presses for an indefinite period.
Many fear that the scenario may be bad for India and foreign investments would taper. The theory goes that investors borrowing cheap dollar funds may hold back, and that Indian borrowing overseas may become expensive. But the flip side of this is that many factors are turning favourable for India.
Signs that administration is being cranked up, collapsing commodity prices — crude oil, iron ore, coal, gold — improving government finances, stronger currency, a determined monetary policy to cap inflation at 4%, bottoming out of bad loan accumulation are the aligning of stars for revival. But here's the disclaimer: Prime Minister Narendra Modi must deliver on economic reforms.

"India's transformation has been remarkable,'' says Morgan Stanley. "India may just turn out to be more fortunate and hence more resilient in implementing reforms and raising growth.'' This is being on the opposite pole of where India was last year when the talk of taper by the US Fed turned India into a basket case. The rupee became the worst performing currency in the world, foreigners fled the shores, and Indian entrepreneurs turned gloomy.
But inflation is easing with it as measured by the Consumer Price Index falling to 6.46% in September, from a high of 10.7% a year back. Economic growth is forecast at 5.3% in fiscal 2015, up from a decade low of 4.5% in FY2013. Corporate earnings are set to climb 8% in the second quarter , forecasts Citigroup.
"For a net commodity importer like India, lower commodity prices in general, and oil prices in particular, are tantamount to a positive terms of trade shock,'' says Sonal Varma, economist at Nomura Securities. "It should result in lower inflation, improvement in fiscal and current account balances and higher growth.''
The RBI under Rajan had navigated the first round of tapering well. The rupee remained largely rangebound in 2014 on the back of sustained capital inflows and better macroeconomic fundamentals. In a comparative sense in Q2 of 2014-15, the local currency depreciated 2.72% against the US greenback while the Russian rouble depreciated about 13%, the Brazilian real by 10%, and the South African rand by 5.5%.
There have been continuous foreign portfolio investment inflows to the domestic equity markets as well as into debt market since December 2013, except in April 2014 when there was a net outflow. In 2014, foreign institutional investment inflows to debt and equity markets have been around $34 billion with a larger part going to debt segments.
But won't the rising interest rates in the US affect flows when rates are forecast to fall next year? Yes, it could reduce the flow from overseas Indians, who poured in funds to exploit the huge differential last year. "This segment cannot be compensated by equity flows and we cannot afford to increase debt inflows," says Care Ratings chief economist Madan Sabnavis.
"The timing can be challenging as the RBI may start lowering rates when US increases it as our decision is based on domestic inflation. Therefore, there will be pressure on the rupee once this happens."
But some believe that even if the US raises rates next year, the flood of liquidity due to ECB's quantitative easing could see India through. Even if dollar funds turn more expensive, companies could chase euro funds. Besides, funding through the Japanese yen could be an option.

Read More

What's so cool about CynogenMod?

Micromax has launched the Yu Yureka, which runs on CyanogenMod OS 11 based on Android 4.4.4. The company has earned the exclusive rights to Cyanogen software in India and has even filed a lawsuit against OnePlus for allegedly infringing those rights.
So what’s the deal with Cyanogen and why are manufacturers fighting over its software?
Truth be told, Cyanogen is considered one of the best custom ROMs for Android, where it preserves the stock Android experience while adding additional features. Also, as Cyanogen sends OTA updates for its devices, you won’t have to depend on Micromax to get the latest Android updates.
Here are some of the key features that set CyanogenMod apart from devices running stock Android.
Customisations
One of the biggest advantages of Cyanogen is the vast possibility of customisations it allows. CyanogenMod 11 powered Yu Yureka will let you install theme packs and customise icons, fonts, sound packs and even boot animations. Unlike stock Android, you can change the complete look of your Android device with CyanogenMod. Similarly, you can also add new buttons to the notification dropdown.

Micromax Yureka runs CyanogenMod OS 11.
Privacy Guard
Privacy Guard on CyanogenMod 11 allows users to permit or revoke location, contacts, calendar and SMS/MMS access for apps installed on the device. You can unblock blocked permissions from the notifications feature and a quick reset button lets you disable Privacy Guard and revert to the original app permissions. Not only that, Cyanogenmod 11 lets you pick which apps should be included on start up.
Create Profiles
CyanogenMod comes with the built-in option to create profiles for your smartphone, popularlised by Symbian devices. You can set profiles for different situations, for example, a specific profile that switches of notification sounds, Wi-Fi, GPS and mobile data when you’re sleeping. Or a car profile to switch on GPS and mobile data when you’re driving.

Micromax Yureka allows for personalisation from themes to lock screen and more. Tech2
Equaliser settings
You can get the best possible audio equaliser settings on your CyanogenMod-powered Yureka. The DSP Manager app on CyanogenMod lets you tweak the equaliser settings to get crisp sound when watching videos or playing music.
Call blacklisting
With CyanogenMod, you can blacklist callers that bother you. All you need to do is identify the number from your call log or dialler app, open the profile of the caller and select ‘Add to Blacklist’. CyanogenMod also lets you block unwanted messages from specific contacts.
Next Bit
Cyanogen has partnered with Next Bit, a cloud service that allows Yureka users to save all your games, log in credentials, app settings and other app data on the cloud. As it’s a cloud-based service, you can sync data across multiple devices and maintain the current state of your apps on a different device with the integrated Next Bit app.
 

Read More

India to offer Nucleur Insurance Pool for suppliers

India is offering to set up an insurance pool to indemnify global nuclear suppliers against liability in the case of a nuclear accident, in a bid to unblock billions of dollars in trade held up by concerns over exposure to risk.

Prime Minister Narendra Modi's government is hoping the plan will be enough to convince major US companies such as General Electric to enter the Indian market ahead of US President Barack Obama's visit at the end of next month.

Under a 2010 nuclear liability law, nuclear equipment suppliers are liable for damages from an accident, which companies say is a sharp deviation from international norms that put the onus on the operator to maintain safety.

From the 1950s, when the United States was the only exporter of nuclear reactors, liability has been channeled to plant operators across the world.

India's national law grew out of the 1984 Bhopal gas disaster, the world's deadliest industrial accident, at a factory owned by US multinational Union Carbide Corp which Indian families are still pursuing for compensation.

The law effectively shut out Western companies from a huge market, as energy-starved India seeks to ramp up nuclear power generation by 13 times, and also strained US-Indian relations since they reached a deal on nuclear cooperation in 2008.

GE-Hitachi, an alliance between the US and Japanese firms, Toshiba's Westinghouse Electric Company and France's Areva received a green light to build two reactors each. They have yet to begin construction several years later, according to India's Department of Atomic Energy.

Even Indian suppliers refused to sell equipment until the law is amended or they can be sure they are indemnified against any liabilities.

"We are working fast to address the concerns of suppliers. We are working on a solution with the insurance companies," R K Sinha, chairman of India's Atomic Energy Commission, told Reuters.

"ENCOURAGING SIGNAL"

State-run reinsurer GIC Re is preparing a proposal to build a "nuclear insurance pool" that would indemnify the third-party suppliers against liabilities they would face in the case of an accident.

Under the plan, insurance would be bought by the companies contracted to build the nuclear reactors who would then recoup the cost by charging more for their services. Alternatively, state-run operator Nuclear Power Corporation of India (NPCIL) would take out insurance on behalf of these companies.

Sinha said New Delhi believed the insurance plan was the best option given how tricky changing the law would prove, and that the proposal should be ready within the next two months.

Details of the plan have yet to be thrashed out, and Sinha said the government was considering how it would better capitalise NPCIL.

India wants to generate 62,000 megawatts from nuclear sources within two decades from the current level of 4,780 megawatts, even as other countries shift away from nuclear energy following Japan's Fukushima disaster.

GE declined to comment on the Indian proposal to offer insurance cover. Westinghouse said it needed more information before it could comment.

Areva said in a statement that the creation of an insurance pool was an "encouraging signal", and that the government appeared committed to working out a comprehensive solution soon.

However, India's nuclear liability regime remained open to interpretation and an Areva spokeswoman said the company needed more clarification to make the legal framework acceptable.

RUSSIA MUSCLING IN

One Indian company said it was ready to return to the 2,800 megawatt Gorakhpur nuclear power project in the northern state of Haryana it abandoned, once the insurance cover is in place.

The insurance scheme would convince Walchandnagar Industries Ltd, which makes heat exchangers for reactors, to restart supplying equipment for Gorakhpur, managing director and CEO G K Pillai told Reuters.

Moves to win over the Americans coincide with Russia's push to build more nuclear reactors in India.

Earlier this month, during President Vladimir Putin's visit, Russia's state-owned Rosatom said it would supply 12 nuclear energy reactors for India over 20 years, following two it has already built in the south of the country.

G Balachandran, one of India's foremost nuclear affairs experts, said Russia appears to believe it can operate with the existing nuclear liabilities law without suffering a loss.

This week US and Indian nuclear affairs officials, as well as representatives from the NPCIL Ltd, Westinghouse and GE-Hitachi met to advance implementation of the nuclear deal, an Indian foreign ministry official said.

The group is meeting again early next month, before Obama arrives, to move the discussion forward.

Creating the insurance scheme to help projects get off the ground is GIC's "top priority", chairman Ashok Kumar Roy said in an email, although he cautioned that the timing, coverage and level of participation were yet to be finalised.

Read More

Know morwe about Constitution Amendment Bill on GST

1. The GST provides a major taxation reform by introducing a national sales tax that will replace a myriad of overlapping state duties that deter investment.
2. The cabinet last evening approved a constitutional amendment bill that allows for this.
3. The draft legislation is expected to be introduced in the current parliamentary session which concludes next week. Four working days remain for the winter session.
4. Investors and manufacturers have long advocated the GST as a way to simplify taxes while broadening the tax base, adding as much as 2 percentage points to economic growth in Asia's third-largest economy.
5. Some of India's 29 states were reluctant to give their assent for fear of revenue losses. Finance Minister Arun Jaitley brokered a compromise on Monday, offering to compensate the states for any loss of revenues following the implementation of the GST.
6. The government aims to bring the tax into effect from April 1, 2016.
7. But the bill may not be cleared in this session of parliament. It could be taken up for debate in the Budget session which will begin in February.
8. Since the bill seeks to amend the constitution, it needs to be cleared by a two-third majority of both houses of parliament. The government will face no problem in the Lok Sabha, where it has huge numbers, but it is in a minority in the RAjya Sabha and will need the opposition's support.
9. The proposal will then have to be cleared by at least half of the country's state legislatures before it becomes a law.
10. GST will replace a number of indirect taxes currently levied by both the Central and State Governments and seeks to provide a common national market for goods and services. Once in force, GST will reduce the total number of indirect taxes apart from the customs duty (only on imported goods) to just three.


After a prolonged wait, the Cabinet on Wednesday approved the Constitutional Amendment Bill on the Goods and Service Tax (GST), paving the way for the legislation to be introduced in the current winter session of Parliament, which will end on December 23.
The Bill is learnt to have sought to include petroleum within GST, but the Centre would be allowed to impose excise duty on it and the states value-added tax (VAT) for initial years.
Petroleum was one of the contentious issues between the Centre and the states and had delayed the Bill.
CENTRE-STATE BALANCE
• Petroleum will be included in GST but Centre and states will be allowed to impose their current taxes on it
• GST compensation to states for five years will be part of the Bill. Centre will provide full compensation for three years and then progressively reduce it
• Entry tax levied by local bodies to be subsumed within GST


States wanted petroleum products excluded from GST as they earn over 50 per cent of their revenues from this head. However, the Centre wanted to keep it within GST so that the chain of providing reimbursement for input taxes is not broken.
The other contentious issue was compensation to states for revenue loss after GST is introduced. Wary after the Centre's unkept promises on compensation for a cut in the Central Sales Tax (CST) rate, the states wanted to include GST compensation within the Bill. They also asked the Centre to promise that GST compensation would be provided for five years.
The Bill, it is learnt, contains the compensation for five years, but on a tapering basis.
This means the Centre will provide full compensation for the revenue loss for the first three years and then progressively reduce it for the next two years.
The third issue, on which the Centre and the states were not on the same page, was the entry tax imposed by local bodies. States such as Punjab wanted it to be kept out of GST, but the Centre was keen on subsuming it within the new tax system. Ultimately, the Bill has subsumed the entry tax within GST.
"This is a welcome move because petro products and entry taxes have been subsumed in the GST. The introduction of this reform will further encourage the industry and give confidence to investors," said Prashant Deshpande, senior director for Deloitte in India.
The Bill went to the Cabinet after Finance Minister Arun Jaitley managed to build a broad consensus with the empowered committee of state chief ministers late on Monday.
Even if the Bill is tabled in the current session of Parliament, it would not be before 2016-17 that it could be rolled out.
Once the constitutional amendments are passed by both Houses of Parliament by two-third majority, half the state legislatures will have to ratify them.
After that the actual GST Bill will be tabled to be discussed and passed in both Houses of Parliament. State legislatures will also have to table and pass their own state GST Bills.
 

Read More

Diesel Deregulation- 10 things YOU should know

1. Diesel prices will now be market-linked. That means if global crude prices rise, customers will have to pay more for buying diesel and vice versa.
2. Diesel prices were cut by a sharp Rs 3.37 per litre today because global crude prices have fallen to a four-year low below $90 per dollar. Oil retailers have been making a profit on selling diesel since September 16.
3. The cut in diesel prices today will lead to a further cool off in inflation. That's because diesel is the most used fuel product in the agriculture sector and the transportation industry, both of which have a direct bearing on food prices. Lower inflation will improve purchasing capacity of common people.
4. A further fall in inflation will pressure the Reserve Bank to cut rates. That will further boost demand in the economy.
5. The government's subsidy bill will come down as it will no longer have to reimburse oil companies for selling diesel at below-market price. Last year (2013-14), the government had to pay Rs 85,000 crore for selling diesel, LPG and kerosene at below-market prices. This year the subsidy burden was estimated much lower at around Rs 63,000 crore.
6. The freeing up of diesel prices and the sharp fall in global crude prices is expected to further save the government over Rs 10,000 crore in subsidy payment this year, analysts say. Lower subsidy means the government may be able to meet its fiscal deficit target of 4.1 per cent of GDP. This will be a big positive for the Indian economy.
7. Lower fiscal deficit will reduce government borrowing and increase spending on asset creation, which will add to economic productivity.
8. India imports over 75 per cent of its domestic oil requirements. Oil is the biggest component of the import bill. Falling crude prices will lead to a reduction in import bill and will have a positive impact on rupee.
9. Diesel sales account for about 55 per cent of overall sales of oil marketing companies. Till now, these companies had to sell diesel at below-market price and were later compensated by the government for the loss in revenue. Upstream oil companies such as ONGC, Oil India and GAIL also had to contribute to subsidies. With diesel under-recovery gone, their subsidy burden will come down and profitability will go up. Expect these shares to do well.
10. Deregulation is also expected to bring private firms such as Reliance Industries and Essar Oil into retail sale. Such companies do not receive government support for selling diesel at discounted rates and currently sell via state refiners, despite having their own sales infrastructure.
 

Read More

Quantitative easing

DEFINITION of 'Quantitative Easing'
An unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. Quantitative easing increases the money supply by flooding financial institutions with capital in an effort to promote increased lending and liquidity. Quantitative easing is considered when short-term interest rates are at or approaching zero, and does not involve the printing of new banknotes.
Typically, central banks target the supply of money by buying or selling government bonds. When the bank seeks to promote economic growth, it buys government bonds, which lowers short-term interest rates and increases the money supply. This strategy loses effectiveness when interest rates approach zero, forcing banks to try other strategies in order to stimulate the economy. QE targets commercial bank and private sector assets instead, and attempts to spur economic growth by encouraging banks to lend money.

 However, if the money supply increases too quickly, quantitative easing can lead to higher rates of inflation. This is due to the fact that there is still a fixed amount of goods for sale when more money is now available in the economy. Additionally, banks may decide to keep funds generated by quantitative easing in reserve rather than lending those funds to individuals and businesses.

Read More

WPI hits zero mark

According to the latest data released ,WPI has hit zero – which means prices this November are almost the same as last November – marking a key milestone in the killing of the inflation monster. We have to thank falling global oil prices and slowing manufacturing – and Raghuram Rajan’s high interest rate regime – for this development.
With the Consumer Prices Index (CPI) for November already below 5 percent (it clocked in at 4.38 percent), the monetary policy target set for achievement in January 2016 (6 percent) has essentially been over-achieved more than a year in advance, thanks to good luck and some degree of good policy-making (more of the former).
However, there is a reason why Rajan is still sitting on his hands. The base effect (where the current year’s index is higher or lower depending on whether the index base of last year was higher or lower) will dissipate from December 2015. Rajan is hesitating to declare inflation dead because he wants to see how both the CPI and WPI fare once the base effect disappears in December, January and so on.
The November WPI hit zero based on negative growth (-0.98 percent) in primary articles, due mainly to the fall in fuel and power (-4.91 percent), with petrol leading the decline by -9.96 percent and diesel by -2.97 percent. Food prices rose by a piffling 0.63 percent.
To be sure, the decline would have been sharper, with WPI possibly turning negative in November, if the government had not raised taxes on fuel to reduce its fiscal deficit. The tax increase was thus beautifully timed and a good example of counter-factual policy-making that does not do inflationary damage.
In November, manufacturing inflation was still at 2.04 percent – which means that core inflation (which excludes food and fuel, including the food products part of manufacturing) is still positive. Manufacturing accounts for nearly 65 percent of the total weight of the WPI. But even core inflation has fallen in November from 2.5 percent to 2.21 percent.
What this suggests is that inflation is being tamed, if not dead. We only need the confirmatory signals from December and January to know if it is going to lie low or rear its ugly head again.
With the world facing deflation rather than inflation (the US, Europe, Japan and China are all trying to boost inflation, but failing), the fall in global oil prices is actually pointing towards further deflation ahead – which the world may try to counter with more money printing and quantitative easing. Japan has already done it, China has cut interest rates, and Europe may follow suit in early 2015.
Only the US is talking the possibility of raising rates, but it’s some time in the distant future. It may hold its hand if the rest of the world is reflating to keep growth hopes afloat.
India is the lone country (barring a few smaller economies) still trying to fight inflationary demons rather than deflation. By early next year, we will probably be reflating by cutting rates.
The signals for a rate cut are slowly turning green all over

Read More