Investment Valuation in India

The Reserve Bank of India has announced that starting it will withdraw all notes that were printed before 2005. Starting 1 st April 2014, the all banks will exchange old notes with new ones. One has to present all old notes to banks and they will be provided with new ones. Starting July 2014, anyone exchanging more than 10 notes of Rs 500 or Rs 1000 will have to present their ID proof. How to identify which notes were printed before 2005? All notes printed before 2005 did not have the year of printing on them. Starting 2005, all notes have the year printed on the back side at the bottom. The move is aimed at reducing fake notes from circulation. However, it was clarified by RBI Governor R Rajan that the pre-2005 notes will continue to be legal tender. This has created further confusion among people as to whether they should actually replace the notes or not. Impact of Currency Recall The currency recall announcement has a huge impact as this would cap...

Chief Economic Advisor Raghuram Rajan tabled his first ever Economic Survey. Key features of the Survey are: GDP growth for 2012-13 is expected at 5% GDP growth for 2013-14 is expected at 6.1% to 6.7% The Average WPI Inflation has come down from 8.9% in 2011-12 to 7.6% in 2012-13 The Average CPI Inflation has increased from 8.4% in 2011-12 to 10.0% in 2012-13 Gross Fiscal Deficit has come down from 5.7% of GDP to 5.1% of GDP Revenue Deficit has come down from 4.3% of GDP to 3.5% of GDP The trade deficit increased to US$ 189.8 billion (10.2 per cent of GDP) in 2011-12 as compared to US$ 127.3 billion (7.4 per cent of GDP) during 2010-11. Current account deficit seen at 4.6% for 2013-14 Overall global economic environment remains fragile Gold imports is key contributor to inflation, imports need to be curbed LPG and Diesel prices need to be increased in line with global rates, oil subsidy is a key risk

The announcement of poverty line for India pegged at Rs 32 per day in urban areas and Rs 26 for rural areas based on June 2011’s price index had gathered much attention and criticism itself. The planning commission has taken another bold step to revise it further downward to Rs 29 for urban areas and Rs 22 for rural areas on March 19.  The Planning Commission has cited that there is a decline in poverty level from 37.2 percent in 2004-05 to 29.8 percent in 2009-10. Even the absolute number of poor in the country has fallen. While the critics see this as an excuse from the government – already struggling to meet its expenditures - to avoid serving the poor by providing subsidies. But there is an economic sense in what the planning commission or the government seems to be doing. Let’s assume that the entire daily income of the country is Rs 100 and is earned by 5 people as follows: A: Rs 50 B: Rs 20 C: Rs 15 D: Rs 10 E: Rs 5 The government has limi...

Key Features of Budget 2012-2013 APPROACH TO THE BUDGET  For Indian economy, recovery was interrupted this year due to intensification of debt crises in Euro zone, political turmoil in Middle East, rise in crude oil price and earthquake in Japan.  GDP is estimated to grow by 6.9 per cent in 2011-12, after having grown at 8.4 per cent in preceding two years.  India however remains front runner in economic growth in any cross-country comparison.  Monetary and fiscal policy response for better part of past 2 years aimed at taming domestic inflationary pressure.  Growth moderated and fiscal balance deteriorated due to tight monetary policy and expanded outlays.  Indicators suggest that economy is turning around as core sectors and manufacturing show signs of recovery.  At this juncture, it is necessary to take hard decision to improve macroeconomic environment and strengthen domestic growth drivers.  Twelfth Five Year Plan to be launched with the aim of “fa...