Politics & the Nation
- Why does the EPFO shun equities?
- Take a look at this ET in the Classroom column that discusses the issue. Good one. Puts the issue in perspective.
- RBI goes for the kill to tame price devil
- RBI raised interest rates for the sixth time this year, probably the last in this cycle, to temper price increases that were threatening its credibility built assiduously in the last decade.
- Home loans would turn more expensive as banks are forced to end `teaser rates' and due to a cap on ratio of loan to value of homes, but that could slow the rate of price rises, helping buyers.
- But one unknown factor—the impact of yet another quantitative easing, or printing of more money, in the US to revive its economy—may throw all these forecasts to the winds if commodity prices surge and inflows make the macro economy unmanageable.
- RBI raised the repurchase rate, the rate at which it lends to banks, by 25 basis points to 6.25% and the reverse repurchase rate by a similar margin to 5.25%.
- An interesting Q&A session that enhances our understanding of the scenario:
- End of ‘Teaser Rate’ Home Loans?
- RBI has made it tougher for banks to extend such loans, where the interest rate is fixed at 7.75-9% for 2-3 years. It fears, like subprime loans, they are risky for banks, as borrowers may default when rates surge. Banks disagree. They call it ‘special home loan schemes’.
- Is it bad news for new borrowers?
- Yes, because many borrowers are opting for teaser loans. They will also get to borrow less as RBI has capped loans at 80% of property value, which is currently 85-90%. Besides, rates will rise for loans above 75 lakh
- What will RBI achieve by raising repo and reverse repo rates?
- Nothing dramatic, and banks will not raise rates immediately. But since inflation continues to be a concern, not raising the rates would have been a missed opportunity. RBI has, however, hinted that there may not be more rate hikes in the ‘immediate future’
- Will property prices correct in cities like Mumbai?
- Not because of RBI’s measures. While the RBI has expressed concern about high home prices for the first time, it will not force builders to lower prices. Till now, the regulator has been tightening rules on loans to commercial property market.
- Harley to assemble bikes in India
- Iconic American motorcycle maker Harley-Davidson will start assembling select models in India, making them about 20-25% cheaper, in a bid to crack the booming Indian premium bike market dominated by Japanese brands.
- The upcoming facility at Bawal in Haryana will be operational in the first half of 2011 with an initial capacity to assemble 200 bikes per year, the company said on Tuesday.
- Completely knocked-down (CKD) kits attract a lighter net duty and taxes of around 60% compared to the 110% tax being levied on imported bikes.
- The super bike market in India was estimated at around 1,000 units last year and is growing 20% a year. It’s dominated by Japanese companies Suzuki, Yamaha and Honda with Suzuki’s Hayabusa in the lead. Kawasaki (by Bajaj Auto) and Italian cult brand Ducati, besides Harley-Davidson, too are selling big performance, designer bikes with engine capacity of 800 cc and more in India, while German luxury carmaker BMW last week said it will start selling its Motorrad range of bikes in the country by the end of the year.
- Austerity back on government agenda
- Government departments and ministries may have to cut unproductive spending as the finance ministry puts in place measures to keep fiscal plan on track even in face of any expansion in expenditure.
- The total non-plan expenditure of the government is pegged at Rs. 7.35 lakh crore. Interest payments and pensions account for nearly Rs. 3 lakh crore of this expenditure.
- The government has budgeted a fiscal deficit of 5.5% of the GDP in the current year.
- The centre’s fiscal deficit stood at Rs. 1.33 lakh crore in the first half of the current fiscal, or 35% of the budgeted Rs. 3.81 lakh crore in 2010-11.
- Look at how the moneyed class gets more money at the expense of the smaller investors
- Take a look at this modus operandi through which money is first invested in liquid schemes, then switched to liquid plus schemes on the very same day, making a killing without taking any risk whatsoever. SEBI appears inclined to plug the practice. But let’s wait and see how things pan out.
- Why is Philippines emerging as the call centre capital of the world?
- Better affinity with the American culture, lack of competing industries for skilled workforce, higher tax incentives and an overall strategy to derisk from a pure India-based call centre model are among top reasons for this shift.
- Experts point out that Philippines can overtake India’s $12.4-billion BPO industry in five years. The $9.5-billion Philippines O&O (offshoring & outsourcing) industry grew at a compounded 27.6% in the last two years.
- Low attrition rates of 15-25% in contact centres in the Philippines is another advantage, given that the corresponding number in more mature destinations like India can be as high as 40-80% for voice-based processes.
- IT-BPO enterprises in the Philippines enjoy 100% tax exemption for up to 8 years. Even upon the expiry of the tax holiday, the nation only levies a 5% special tax on gross income while exempting BPO firms from all other taxes.
- The Philippines’ stronger cultural ties and understanding of American consumers is one of the top reasons. The US, which controls 65% of the world outsourcing market, had colonised the Philippines post the Treaty of Paris in 1898. The Philippines was ceded to the US from Spain for $20 million. Even after the archipelago gained independence in 1946, the US continued to have a military base there and the Philippines became a strong ally.
- The other factor is choice of an alternate cheap location, as costs are similar in both nations. Call centre is a critical work and no company wants to put its eggs in one basket. But the Philippines may not win from India in UK-bound work, where India has much more cultural affinity.
- However, UK customers have also started drifting to the Philippines now, primarily because of better call quality.
- UK races past US in govt offshoring
- They have been close allies for long, sharing similar outlooks on important issues. But, the UK has chosen to depart significantly from the US in its approach towards outsourcing and offshoring. While the US government is leaning towards protectionism, the UK government, which has outlined plans to cut spending to a mammoth £83 billion, could look to outsource and offshore more to deliver quality services at lower costs, say experts and industry veterans.
- After the US, the UK is the largest market for Indian IT and BPO vendors, accounting for 18% of the country’s outsourcing services exports.
- gnarly: Adjective
- Used of old persons or old trees; covered with knobs or knots
- grizzled: Adjective
- Having dark hairs mixed with grey or white
- Verb: grizzle = Be in a huff; be silent or sullen; Complain whiningly
- appellation: Noun
- Identifying word or words by which someone or something is called and classified or distinguished from others
- taloned: Adjective
- (of predatory animals) armed with claws or talons
- wangle: Verb
- Achieve something by means of trickery or devious methods; Tamper, with the purpose of deception
- eg: ...This helps them wangle admissions and scholarships for favoured wards, not just of family and friends, but also of influential civil servants and politicians.
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