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Economy of India
For most of its post-independence history, India adhered to a quasi-socialist approach with strict government control over private sector participation, foreign trade, and foreign direct investment. However, since 1991, India has gradually opened up its markets through economic reforms and reduced government controls on foreign trade and investment. Foreign exchange reserves have risen from US$5.8 billion in March 1991 to US$247 billion in September 2007, while federal and state budget deficits have decreased. Privatization of publicly-owned companies and the opening of certain sectors to private and foreign participation has continued amid political debate. With a GDP growth rate of 9.4% in 2006-07, the Indian economy is among the fastest growing in the world. India's GDP in terms of USD exchange-rate is US$1.103 trillion, which makes it the twelfth largest economy in the world. When measured in terms of purchasing power parity (PPP), India has the world's fourth largest GDP at US$4.156 trillion. India's per capita income (nominal) is $820, ranked 128th in the world, while its per capita (PPP) of US$3,700 is ranked 118th.
The Indian economy has grown steadily over the last two decades; however, its growth has been uneven when comparing different social groups, economic groups, geographic regions, and rural and urban areas. Although income inequality in India is relatively small (Gini coefficient: 32.5 in year 1999- 2000) it has been increasing of late. Despite significant economic progress, a quarter of the nation's population earns less than the government-specified poverty threshold of $0.40/day. In addition, India has a higher rate of malnutrition among children under the age of three (46% in year 2007) than any other country in the world.
India has a labour force of 509.3 million, 60% of which is employed in agriculture and related industries; 28% in services and related industries; and 12% in industry. Major agricultural crops include rice, wheat, oilseed, cotton, jute, tea, sugarcane, and potatoes. The agricultural sector accounts for 28% of GDP; the service and industrial sectors make up 54% and 18% respectively. Major industries include automobiles, cement, chemicals, consumer electronics, food processing, machinery, mining, petroleum, pharmaceuticals, steel, transportation equipment, and textiles.
In 2006, estimated exports stood at US$112 billion and imports were around US$187.9 billion. Textiles, jewellery, engineering goods and software are major export commodities. Crude oil, machineries, fertilizers, and chemicals are major imports. India's most important trading partners are the United States, the European Union, China, and the United Arab Emirates. More recently, India has capitalised on its large pool of educated, English-speaking people, and trained professionals to become an important outsourcing destination for multinational corporations and a popular destination for medical tourism. India has also become a major exporter of software as well as financial, research, and technological services. Its natural resources include arable land, bauxite, chromite, coal, diamonds, iron ore, limestone, manganese, mica, natural gas, petroleum, and titanium ore.
Financial Planning
Financial planning can help you a great deal
These tips will help you to make financial planning one of your main goals.
Tip 1: Budget - Make budgeting part of your financial planning and you will realize saving is not so hard.
Tip 2: Spend Less than You Earn - Discipline yourself to spend within what you earn. Make savings an important part of your financial planning.
Tip 3: Invest - Financial planning means you are saving for the future in many cases. So invest for a better future.
Tip 4: Pay off Debt - Debt, especially credit card debt, is one of the biggest obstacles
against financial planning.
Taxation
- Taxes in India are of two types, Direct Tax and Indirect Tax.
- Direct Tax, like income tax, wealth tax, etc. is those whose burden falls directly on the taxpayer.
- The burden of indirect taxes, like service tax, VAT, etc. can be passed on to a third party.
Direct Tax - Income Tax
Income Tax is all income other than agricultural income levied and collected by the central government and shared with the states.
According to Income Tax Act 1961, every person, who is an assessee and whose total income exceeds the maximum exemption limit, shall be chargeable to the income tax at the rate or rates prescribed in the finance act. Such income tax shall be paid on the total income of the previous year in the relevant assessment year.
The total income of an individual is determined on the basis of his residential status in India.
Indirect Tax - Service Tax
What is it
It is tax on the transaction of providing a service for a consideration. Presently, it is collected on 100 services.
Who pays it
Normally it is to be paid by the service provider. However, in certain cases the responsibility is on the service receiver,
e.g., service provided by a goods transport agency for transport of goods by road; sponsorship receiver providing service to sponsor; or where the service provider is located outside India.
Banking
Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
Nomination simplifies the procedure for claiming a depositor's money. In the event of an unfortunate death, the Nomination Facility ensures that your savings are handed over to the person of your choice. So ensure that you always nominate your loved ones, invariably.
Loans
One of the reasons for boom in Indian economy is that now a days loans are easily available and the rate of interests at which they are available are very reasonable. Banks are giving loan for and loan against any and every thing. Government too is encouraging people to take loans for certain purposes. For example, government is encouraging people to take housing loans by giving tax concessions.
Loan available for all kinds of needs like marriage, holiday, travel, medicare, etc.
Bank Cards
Banks offer a variety of cards to suit your different transactional needs. The range includes Credit Cards, Debit Cards and Prepaid cards. These cards offer you convenience for your financial transactions like cash withdrawal, shopping and travel. These cards are widely accepted both in India and abroad.
Credit Cards give you the facility of cash, convenience and a range of benefits, anywhere in the world. These benefits range from life time free cards, Insurance benefits, global emergency assistance service, discounts, utility payments, travel discounts and much more.
Credit Cards are extremely convenient and safe while travelling. When used smartly, they offer many benefits like interest-free purchases, cash back, protection to purchases and more. However, continuously paying late can put you in bad-debt situation.
Debit Card is a revolutionary form of cash that allows customers to access their bank account around the clock, around the world. The Bank Debit Card can be used for shopping at more than 3.5 lakh merchants in India and 24 million merchants worldwide.
Travel Card is the hassle free way to travel the world. Travelling with US Dollar, Euro, Pound Sterling or Swiss Francs; Looking for security and convenience; take Bank Travel Card. Issued in duplicate. Offers the Pin based security. Has the convenience of usage of Credit or Debit card.
Banks also bring to you a complete bouquet of pre-paid cards providing payment solutions at your fingertips. Pre-paid cards are a safe and convenient way for associate payments, disbursements, gifting and small ticket transactions. Pre-paid cards are available on a VISA platform thus providing accessibility to over 3.5 lakh merchant establishments and cash withdrawal from all VISA ATMs in India.
Equities
Equity, commonly known as shares, is an investment vehicle. It’s the fractional ownership of a listed company. And returns are related with the performance of that company. Promoters need money to expand business, and if they lack sufficient fund of their own they sell off part of their ownership to public to accumulate invest able fund. Those who buy the part ownership become share holders of the company. If company profits, share holders receive part of that profit as dividend.
Derivatives
Derivative is financially engineered instruments which derive its value from price any specific asset. Value of Equity Derivatives is derived from share price of any company or share index. In India trading of two types of derivatives are permitted - Futures and Options.
Any futures contract signify leveraged buy or sell position of any asset while option contract provides right to buy or sell any specific asset at any future date to its holders.
Derivatives insure against price risk of any share or portfolio of shares. Other than that, anybody wants to participate in the market with specific knowledge about price trend can use these instruments for speculative purpose.
Mutual Funds
Mutual Fund is a pool of money contributed by the investors and managed by the fund managers who invests in the stocks, bonds and other money market instruments. These funds offer the investors an advantage of less risk diversified money management program and they earn through the different investments made by the fund.
The performance of the fund is denoted by the Net Asset Value, which is measured as: the market value of securities of a scheme / the total number of units held by the scheme.
NAV of a scheme varies on day-to-day basis. Mutual Funds are an attractive means of saving taxes and diversifying your investment portfolio.
Commodities
Commodity futures are derivative designed with commodity as underlying asset. Underlying varies from precious metal like gold, silver and Base metal like, copper, zinc to agro-products like, rice, wheat, cotton etc. Such futures are the contracts with properly standardized size and expiry. These futures are used mainly to hedge and speculate over fluctuation in commodity prices. Major global exchanges for commodity futures trading are NYMEX, CBOT, LME, MCX.
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Insurance
The word 'Insurance' provides a sense of security. Insurance policies are a safeguard against the uncertainties of life.
Insurance is system by which the losses suffered by a few are spread over many, exposed to similar risks. Insurance is a protection against financial loss arising on the happening of an unexpected event. Insurance policy helps in not only mitigating risks but also provides a financial cushion against adverse financial burdens suffered.
Insurance policies cover the risk of life as well as other assets and valuables such as home, automobiles, jewellery et al. On the basis of the risk they cover, insurance policies can be classified into two categories:
- Life Insurance Policies
- General Insurance Policies
Life Insurance
Life is very fragile and death is a certainty. We cannot control the uncertainties of life. But, we can cover the risks surrounding us. Life insurance, simply put, is the cover for the risks that we run during our lives. It protects us from the contingencies that could affect us.
Life insurance is not for the person who passes away, it is for those who survive. It is the responsibility of every bread earner to guard against the events that could affect the family in the unfortunate circumstance of his / her demise. Thus, having a life insurance policy is very vital. Before going for a life insurance policy it is imperative that you know about various types of life insurance policies. Major among them are:
- Endowment Policy
- Whole Life Policy
- Term Life Policy
- Money-back Policy
- Joint Life Policy
- Group Insurance Policy
- Loan Cover Term Assurance Policy
- Pension Plan or Annuities
- Unit Linked Insurance Plan
General Insurance
General Insurance provides much-needed protection against unforeseen events such as accidents, illness, fire, burglary et al. Unlike Life Insurance, General Insurance is not meant to offer returns but is a protection against contingencies. Almost everything that has a financial value in life and has a probability of getting lost, stolen or damaged can be covered through General Insurance policy.
Property (both movable and immovable), vehicle, cash, household goods, health, dishonesty and also one's liability towards others can be covered under general insurance policy. Under certain Acts of Parliament, some types of insurance like Motor Insurance and Public Liability Insurance have been made compulsory.
Major insurance policies that are covered under General Insurance are:
- Home Insurance
- Health Insurance
- Motor Insurance
- Travel Insurance
Investing in Real Estate
We give you a detailed analysis of the Indian real estate market and invest ability. The Indian government is now allowing foreign investment in townships, housing, built-up infrastructure.
Real Estate in India is a major contributor to the national GDP. In the absence of any specific measure, due to its complexity and linkages to other sectors, it is estimated to contribute about 14% to the national GDP. However, it is estimated that every rupee invested in Real Estate contributes around 78 paise to the total national GDP. Total GDP turnover is estimated at USD 12 billion, with residential real estate contributing about USD 10 billion, the rest attributed to commercial and retail real estate.
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