Effective Tax Rate

According to this week’s Economist, the tax rate in India is the second highest in the world.

All this when we know that there is no Social Security system in India:
1. Government schools are a mess
2. Not even the poor want to go to the government hospitals
3. Lets not talk about the public transport system
etc etc
India has the world’s second highest saving’s rate (after China), and yet government’s borrowing is out stripping the supply.
When I couple these news with the fact that Fiscal Deficit is now a 2 digit figure (in terms of percentage of GDP), I wonder where is all the money going.


total return index nifty

The returns from holding a stock could come through various ways.
1. Capital Appreciation (the stock price going up)
2. Splits, bonus, and rights at a discounted rates
3. Dividends
4. Shareholder promotional schemes. (Reliance stock holders get discount at Raymonds, Apollo hospital shareholders get rebates for medical treatment etc)
Almost all indexes (Sensex, S&P CNX Nifty etc) take care of the first 2 return. It is hard to put a monetary figure to the fourth because many of these schemes are never exercised or are little more than advertizing channels.
However Dividends are not taken into account when Index is computed and yet they are not insignificant. During the bear market period, the Nifty dividend yield was about 2% (as per NSE website ) it is 1.09% on 28th Aug. In evaluating a long term portfolio, ignoring this value could be serious.
Interestingly all mutual funds while advertizing their performance would assume that dividends from the mf are reinvested, yet Nifty/Sensex benchmarks are not adjusted. This introduces a bias of 1-2% in returns.

NIFTY Total Return Index does adjusts for dividends, but unfortunately one has to pay to access it.


Diet Chocolate

Most commercial chocolates available in India have coco butter, milk/hydrogenated vegetable oil and sugar. So this sugar and fat loaded bar is not the best friend for a calorie conscious girl who is hooked on to it. It should be possible to replace sugar with artificial sweeteners and coco butter with coco power (which has 10-12% fat). Are there any brands that use this formula and make something that tastes almost as good as the regular bar?


Loan against credit card

Recently I came across this very interesting personal loan scheme. The merchant would swipe your credit card and max out your credit limit (say 30,000/-) and make a spot payment of 28950/- (he charges a 3.5% commission for these activities).
This thousand fifty of processing fees for the loan might look exorbitant, but actually it works out a lot less.

1. Most credit cards company would offer you a loyalty gift/cashback worth 1% or 300/- for this transaction
2. If you could match the billing cycle, then you can have a 45-50 day loan at 3.5% interest or 33.5% compounded annually. After accounting for the 300/-loyalty points, it comes to only 1.7% monthly which is lower than any other commercial loan of the similar duration. If you have multiple credit cards, then probably you could roll over this credit to longer periods at favorable terms.
3. Cash limit from credit cards is usually lower than the spending limit also when one accounts for the ATM usage charge and the fact that the interest cost starts kicking the second you make the withdrawal, traditional loan against credit card looks less attractive.
4. Most personal loan come for a minimum of 6 months period and has a substantial processing fees and early payment fine. This makes it very expensive for ultra short term loans.
5. Bank overdraft facility is the cheapest option, but unfortunately very few individuals have it.
6. Almost all other credit option require half-one day of processing time, while this is instant.
7. Earlier there used to be a local Marwari/Reddy who would double up as a pawn broker and issue loans. However lately many of them have started shutting shops and rest have become notorious of using physical violence. Hence most customers don’t want to deal with them.
8. Go for the crowdFunding and P2P loans. But most of them take a long time to close and there is always an uncertainty.

This post is written not to encourage individuals to accumulate huge personal debt but to show how ingenious unorganized sector has become. Also care must be taken to note that this activity is not legal in India. Yet these individuals advertize in newspapers and banks has not yet objected.


Parents Permission

A couple of friends cite parental objection as the reson for breakup. A friend of mine even attached parental permission as one of the covenant to their relationship. All this makes me wonder whether parental pressure is for real of is it just a charade?

I beleive that a lot of relationship have their basis in the desire to have some human contact, to hang out and do time-pass till someone better comes along. There is also a lot of peer pressure which forces people to scout for someone special to talk to, to share with. Over the years, many such relationships mature to love. However quite a few of them just continue to linger around. Hence no of years is no measure of how strong the commitment is.

I have known guys who wouldn’t allow their parents to select a dress for them, because they don’t think that their tastes match. Yet when it comes to relationship, I am surprised so many people cite parental objection as the reason for the breakup.

According to Julian Rotter, Locus of control (LoC) is a very important measure of culture. In cultures like India, people don’t like to own their failures and always are looking for an external reason/event to blame. Hence parents could be an scapegoat for the kid who actually does not want to marry. Also as TRR had pointed, if due to some miracle the horoscope do not match then its a bonanza. If aruged well, it provides with such concrete reason which your partner can never even think of challenging.

Unlike the previous generation, today the youth can afford to disobey their parents. Most of the educated middle class are qualified enough to earn their living independently. Hence the traditional threat that “If you marry her, then I would disown you” does not mean economic ruin for the newly weds. They are still attached emotionally to their family and relatives. However realistically speaking, sooner or later the parents have to come to terms and accept the new bride.

Only in movies you see that the guy brings a girl home and say “Maa, she is your daughter in law”. Most boys ensure that the parents have met the girl atleast once. He might not tell them implicitly at that time, but he surely seeks their approval and value their views. Also parents might not be sure of the son’s intentions at that time, but they feel duty bound to nip the bud, esp. if they find her unworthy and that their son is going astray.

Hence no matter what parents say, the news is rarely a bolt from the blue. All the pressure tactics/emotional blackmail etc is only to test his commitment level and make him aware of that fact. All parents want to see their kids to live happily ever after, hence they don’t want to be an agent of sorrow and interference.

PS: A few years ago, I had listed out few of the reasons that my dear friend gave when she broke off her relationship for an arranged marriage.



This tactic is supposed to be used only when you have an upper hand. If a weak party calls for an action then it is likely that the reserve price is not reached and you will be screwed/have to call for an re-auction.
You call in multiple buyers/seller together, then explain them clearly your proposal and pitch then what are the likely benefit etc . And them ask them to outbid each other.
Normally people are competitive and in the heat of the moment loose tract of the difference between object and desire. In such a scenario there is a high likelihood that the sight of loosing onto this coveted object makes the party to enter into a pyrrhic war. (quote a price which is way beyond what the party can afford)
This tendency is often more seen in case of a Dutch Auction. Where the buyer has to pay not the price he/she quotes but the next best offer. Hence there is an incentive to quote higher price. No wonder RBI these days does all its auctions via this mode.


Life is too short

Got this advice from Karthi

and also this gift from him.


Contingency Contracts

It is always good when you sign a contract, to have an in-build profit sharing model.
1. It builds trust. The other party realizes that you are willing to put in your money where your mouth is
2. It shows you are honest and not only trying to make a convincing sales pitch
3. Since you share the loss in case your product and services does not yield the desired effect, you in effect share the risk with your buyer.
4. There is an incentive for performance. Hence it is always seen that the products and services delivered under profit sharing model are superior.
5. You can also help manage the decision making bias: i.e. the seller always thinks more highly of his product than the buyer. Hence even though you think your product will result in a 100/- of profit (and want to charge accordingly) the buyer rarely would perceive the value to be 60/- and would like to pay you accordingly.
6. Since a revenue/risk sharing contract has higher element of trust, it is very effective when you are planning to pitch an innovative and new design/idea/concept, something whose results and effects are hard to measure beforehand.


Air India Express

Most of us when check the rates at makemytrip, yaatra and othertravel websites and book the lowest possible fare. However these websites often do not do an exhaustive search of the various airline options available esp PSU airline like Air India express.

A friend of mine could book a delhi to lucknow flight at 1195/- at Air India Express. Whats more that it is a fully refundable ticket because the airline has a policy of fully refunding taxes and surcharge. Also the flight takes off at international terminal. So he can stop by at the duty free shop and buy some discounted liquor 🙂
All this because he used a lesser known search engine easytrip

A comparable flight at jet light (next best option) would have a charge of 100/- as passenger ticket and 1700 as taxes and surcharge. = 18000 (almost 50% more expensive)

If you guys know of any other airline or search engine that could help me cut down my travel cost, please let me know.


Why consultants are hired

From my interactions with industry and a couple of consultants, here is the list of reasons I could list out why consultants are hired:

1. Because it is fashionable to do so: Till about a decade or 2 ago, forming a committee was the managements way of assuring the rest of the world that the problem at hand is being dealt seriously by professionals. Today this role of committees and action groups is being replaced by Consultants and scores of PSU and govt bodies are hiring them.

2. There are a lot of tasks which are important, but are do mundane and distasteful that management is unable to find anyone in the organization willing to undertake it.
Eg: downsizing.

3. Reassurance and rally support: The promoter or the CEO wants a certain course of action. However he wants to look professional. Hence the consultants are hired and they need to find 101 reasons why that brainwave is good.

4. Cover Your Ass (CYA): It is easier to blame an external body for any ill advice in case the project fails rather than shoulder the blame yourself. Hence consultants double up as the fall guy

5. Resolve a Dilemma: Imagine a scenario: CEO with is 20-25 years of experience is clueless, the Board of directors are perplexed and the functional heads of the departments are unable to make up their mind about how to resolve a problem at hand. Here comes a bunch of blue eyed generalists who have no idea of what you do or what you want, yet they solve your problem.