02.03.2008

• Chairman of CBDT (Central Board of Direct Taxes)
• Mr. R. Prasad
• The impact of the move to hike capital gains tax by 5 percentage points. Here are some views from experts:
• It will inculcate long-term investment habits, by forcing people shun short term trading in stocks.
• It will force a cut down of day trading to begin with; though eventually the volumes may pick up again in course of time.
• You have heard of Mr. Warren Buffet; didn’t you?
• Do you know how much turnover the investment company (Berkshire Hathaway Inc) he heads generates a year? How much profit does it generate?
• Its turnover for 2007 (calendar year) is $118.25 bn
• And its profit was $13.21 bn.
• And it is perhaps for the first time in recent years that its profit has dipped by 18%.
• How does our defence budget compare with US expenditure on defence?
• Recently the US has given a huge contract of $40 bn for procuring air refuelling tankers. The order went to Northrop/EADS combine. The contract is for supply of 179 new aircraft to be delivered at the rate of 15 per year. It is quite likely that the total value of the order can touch a cool $100 bn. Obviously Northrop CEO Ron Sugar is very happy with it.
• Our current allocation to defence in the latest budget -- of Rs. 1056 bn (Rs. One lakh five thousand six hundred crores) equals $26.4 bn. This is assuming a conversion rate of Rs. 40 per US dollar.
• Get a picture of the size of the US defence budget? A mere order for refuelling aircraft can be nearly double the size of our entire defence budget!!!
• By the way do you know that recently US President Bush submitted his budget? Their fiscal year starts on October 1^st of every year.
• Its size is $3.1 trillion. Let’s count it. A trillion is Rs. 40 lakh crores (assuming a conversion rate of Rs. 40 per dollar). This means the US budget size is Rs. 120 lakh crores.
• In comparison what is our budget size? It is Rs. 7,50,884 crores.
• Isn’t it 16 times the size of our budget?
• Their budget deficit is $407 bn. That is Rs. 16.28 lakh crores. It is more than double our budget size.
• Not that anybody will ask us to remember these figures. But it sure does give us some perspective.
• Bullet magnet
• It is the nickname given to Prince Harry while he was on military duty in Afghanistan recently.
• As the media got wind of his duties in Afghanistan, he was quickly recalled from his duty.
• Vaccine that ended smallpox destroyed
• The US government has announced that it has disposed of its 12 mn doses of Dryvax, the vaccine that was created in late 1800’s to combat smallpox.
• Some interesting concepts that I found worth noting from Open Space column of today’s TOI:
• Doomsday vault: The doomsday vault is a Noah’s Ark of sorts which would store samples of the world’s important seeds. It was inaugurated at Longyearbyen, Norway on Tuesday. The vault is a trident-shaped tunnel bored into the permafrost of the Arctic mountain range. It comprises three cold chambers and can hold 4.5 billion batches of seeds from the main crops. This is to ensure that plants obliterated by any manmade or natural disaster can be regrown.
• Time Preference Theory of Interest: The Time Preference Theory of Interest is also known as The Agio Theory of Interest. It was presented by Bohm Bawerk, who said that interest is an agio (reward) or (premium) for time preference.
• People prefer present income, present consumption and present satisfaction of wants, which means that people are impatient to spend. To induce them to postpone their consumption, they are to be compensated by paying interest. Irving Fisher said, “The rate of time preference measures the rate of interest.” The higher the time preference, the higher the impatience to spend.
• According to Fisher, people with low level of income, uncertain about their future and are spendthrifts will demand high rate of interest whereas their opposites will demand low amount of interest.