Indian Current Affairs: 12.05.2009

Politics & the Nation

Read this ET editorial on the low cost housing foray by the Tatas.
It is really heartening that Tatas are trying to do a Nano even in housing. They are reportedly looking at constructing houses costing between Rs. 3.9 lakh and Rs. 6.7 lakh. Remember Mr. CK Prahlad's bottom of the pyramid theory? This is what exactly they are trying to capture.
If done well, as they normally should, we are sure they will see great success here. Realty majors like DLF, Parsvanath, Unitech and Lanco have set their sights only on the high end segment. Consequently with the economic downturn they are now suffering for want of demand. But bottom of the pyramid segment is one which is not too severely impacted by the economic downturn. They always lead a hand to mouth kind of existence and hence demand from this segment will remain more or less the same -- downturn or no downturn.
Let's give a thumbs up to Tatas for their plans. It will do the country a lot good.

Yesterday we noted about the case filed by Satyam shareholders in National Consumer Disputes Redressal Commission. The Commission refused to entertain the petition citing lack of infrastructure to handle such cases. It further noted that the CBI and the CLB (Company Law Board) are already seized of the matter.

Finance & Economy

Yes, feels Niraj Kaushal, a Professor from Columbia University in his op-ed piece in ET today.
An interesting read. Do so here.

In a landmark judgment, the ITAT ruled that a recipient of an interest-free loan from a non-relative is not liable to pay tax.
Section 56 (2)(v) of the Income Tax Act provides for taxing any sum of money in excess of Rs 25,000 received without consideration by an individual or a Hindu Undivided Family (HUF) from any source other than a relative. Occasions where the recipient is exempted from tax are during a marriage, or in cases where the amount is received under a will, or by way of inheritance or in contemplation of death of the payer.
This section was introduced to fill the void created by the abolition of the Gift Tax Act in 1997. Under the Gift Tax Act, it was the giver of the gift who was subjected to tax. This section made the recipient taxable.
What this judgment recognizes is that loans can be there without interest component also. On this count, this judgment acquires significance.

We are referring to international trade here.
These are duties levied by the country to protect domestic industry from a surge in imports.
We need to know about this because the Directorate General of Safeguards has recommended a 25% safeguard duty on flat steel products such as hot-rolled steel. But the standing board on safeguards decided not to impose the duty saying there was not enough ground for immediate action.

It is interesting to know the results of a survey conducted amongst independent directors of various companies. The survey points out that they don't want to be hand picked by the companies' managements. Instead they prefer being selected by an independent body which can be formed by all the listed companies.
Further they have also voiced their opinion that the existing limit (15) on the number of companies on which an independent director can function is way too high and should be brought down.
These results carry lot of weight in the context of the Satyam scam.

The futures market helps farmers in taking correct/timely decisions in regard to the crops to be sown and sale of the crops.
The farmers can also bargain for more remunerative prices for their produce based on their knowledge of futures prices.
Another benefit of the futures market is that it allows farmers, other producers, processors, merchandisers, exporters and others to hedge the price risks at a small cost.
Futures markets enable a person who desires less risk (the hedger) to shift risk to another person (the speculator), who is willing to accept the risk in exchange for an expected profit.
Futures markets also enable hedgers with opposite positions in the market to trade with each other.
Similarly, speculators with opposing views regarding price movement in the future also trade with each other in the futures market.
By performing the functions of price discovery and price risk management in an efficient and orderly manner, futures markets contribute to the growth of the economy.

The reports of these committees have revived futures markets from a state of stagnation.

International

They are basically about ending tax incentives for US MNCs. If Obama’s proposals go through, it would mark an end to tax-deferrals. US firms with foreign subsidiaries will not be able to claim a deduction for their expenses when they do not pay taxes on their profits in the US. They will also find it tough to take credit against their US taxes for foreign taxes paid on overseas profits.
But many MNCs in the US have begun lobbying against Obama’s proposal to end their tax incentives. These firms hope to scuttle proposals on the sweeping changes in the US tax code, but their lawyers are advising them to gear up for any eventuality.

Language lessons

Indian Current Affairs