Business Standard analyses one family's finances and suggests a way forward

Case study

Business Standard

Rakesh Jain, chief executive officer of Reliance General Insurance, answers your questionsI own an information technology firm. Should I take a cyber liability insurance policy, in addition to the regular fire and building policy?Cyber liability coverage for claims from third parties are on account of:n	Unauthorised access to or dissemination of private informationn	Infringement of copyright and trademarkn	Defamation and invasion of privacyn	System security failures that result in harm to third-party systemsn	System security failure resulting in the insured's systems being unavailable to its customersFirst-party cyber crime expense for:n	Privacy notificationn	Crisis managementn	Forensic and PR consultantsn	E-business interruption & E-vandalismIs there a cap on room rent in all health insurance plans?No, not all health policies come with a room rent capping. There are policies available without this but these could have a room-type capping, like a single AC private room. In such kin

Readers' Corner: General Insurance

Trade unions fighting yesterday's battles

An unnecessary strike

Loss of growth momentum in latest numbers

Revisit overdue reforms

Nowhere is the battle for Bihar more evident than in the posters and billboards dotting the state. One poster reads: "Nitish ke netritya mein, Lalu ke saath, Congress ka haath (With Nitish as our leader along with Lalu, stands the Congress)." In a way, it marks the striking changes in the state's political contours since the last Assembly elections in 2010. Then, Chief Minister Nitish Kumar's Janata Dal (United) [JD(U)], Lalu Prasad's Rashtriya Janata Dal (RJD) and the Congress were all opposed to each other. JD(U) was in a coalition with the Bharatiya Janata Party,  now a sworn opponent. At a busy crossing in Patna, one can see a huge poster of the JD(U) with the slogan: "Bihar mein bahaar hon, Nitish Kumar hon (Let Bihar be prosperous, let it have Nitish Kumar)." Right below is a BJP poster trolling it: "Kal taak ke jaani dushman aaj satta ke yaar hain/Haan bhaiya, Bihar mein bahaar hain (Sworn enemies of yesterday are now friends for power/Yes, Bihar is prosperous)."

All-out poster war in Bihar

The past few days have been good for Indian Administrative Service officers of the Rajasthan cadre. The Appointments Committee of the Cabinet named Finance Secretary Rajiv Mehrishi as the new home secretary for a fixed tenure of two years on Monday. Mehrishi, a Rajasthan cadre officer of the 1978 batch, was due to retire on August 31. Two more Rajasthan cadre officers were given key positions. Last week, Sunil Arora (1980 batch) was appointed the information and broadcasting ministry secretary, while Deputy Chief Election Commissioner Vinod Zutshi, a 1982 batch officer, was appointed secretary, Ministry of Tourism.

The good batch

On Monday, Prime Minister Narendra Modi launched the digital version of Ramcharitmanas, which chronicles the deeds of Ram of Ayodhya. He said it was an interesting quirk of fate that the venue for the event was Panchavati at 7, Race Course Road, the official residence and principal workplace of the prime minister. As outlined in the epic Ramayana, Panchavati was the place in the forest of Dandakaranya, where Ram lived with his wife Sita and brother Lakshman during their exile. Karan Singh, a Congress Rajya Sabha Member of Parliament, was one of the guests at the event. The PM lauded his presence to bless the project and said Singh had never let the ideological predisposition of the government of the day be an obstacle in encouraging projects such as the digital Ramcharitmanas.

A happy coincidence

In recent months, at various intervals, Indian media has provided misleading coverage of the risks posed by India's hard currency debt owed to foreign creditors, saying these are minimal. On the contrary, risks stemming from current levels of short-term hard currency debt are significant.On August 23 and 29, Business Standard carried reports on India's external debt, which mention that the short-term component by original maturity was 27.7 per cent of the foreign exchange (FX) reserves as of September 2014 and the volume of FX debt was about $85 billion as of March 2015.Analysis of elementary risk management suggests that India's hard currency debt should be divided into residual (not original) maturity buckets. That is, we should focus on how much FX debt would mature in the next 12 months, then between 12-24 months and so on. By this metric, FX debt which is due for repayment in the next 12 months, is about 54 per cent ($192 billion) of India's FX reserves of $356 billion.It would be

Letters: Specify debt situation

With reference to the report, "Hardik in Delhi, to hold talks with quota-stir leaders" (August 30), the agitation in Gujarat is the backlash of an erroneous reservation policy that has now degenerated into a political tool, deviating from its objective of uplifting backward communities.Post Independence, reservation was an urgent need.  But there is no use of having quota in employment, education or elections if the people belonging to the backward classes cannot be uplifted after decades. Reservation on the grounds of merit is leading to substandard services, especially in government jobs. Only economic status, irrespective of caste, creed, colour and sex, should be considered the yardstick of the reservation policy. No political party will, perhaps, dare to revise the reservation policy on the basis of economic status. But if that is not done there is every possibility of the upsurge in Gujarat taking on an epidemic form.Buddhadev Nandi  BishnupurLetters can be mailed, faxed or e-mai

Letters: Revise quota policy

Apropos the report, "PSU bank reforms fall short of expectations" (August 25), the three areas to focus on are extending absolute functional autonomy to public sector banks (PSB); raising enough capital to ensure regulatory commitments and tackling non-performing assets (NPA).The key challenges in raising capital are low equity valuations, an overcrowded market and regulatory curbs. Similarly, more NPAs mean more provisions, more risk weight on capital and shrinking profit.Expected capital support from the government in relation to actual requirements in the run-up to Basel III compliance in 2019 is meagre and given the fiscal situation, it is almost certain that this will not meet the needs of PSBs entirely. The problems confronted by PSBs are more serious than what they appear to be. Nevertheless, there is a realisation now that the health of PSBs is indeed bad and the measures initiated indicate the level of seriousness. It is a daunting task, yet not impossible, given that India In

Letters: Daunting, not impossible

India Aspiration Fund to boost prospects of MSME start-ups

CRISIL has analysed 1,050 start-up micro, small, and medium enterprises (MSMEs) that were rated on the basis of their 2013-14 (financial year April 1 to March 31) financials. For arriving at start-ups, CRISIL has considered MSMEs that started business operations after 2010. The MSMEs featured in the sample are primarily non-e-commerce enterprises that are in the manufacturing and services space.The analysis reveals that seven sectors -  engineering; construction; agri products; textile; printing & packaging; transport & logistics; and outsourcing & support services - account for 68 per cent of these, and 41 per cent are operational in the  engineering, construction, and agri products sectors. Several of these sectors form part of the government's 25 sectors under the 'Make in India' programme.Additionally, the Government of India has recently announced a Rs 10,000-crore India Aspiration Fund to provide equity capital for MSMEs-based start-ups. The average net worth of the C

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Troubles spread across world markets after the Chinese devalued their currency sharply, after a long period in which it had gently appreciated or stayed flat, as Table 1 shows. Table 2 shows the Shanghai market crashed. The Sensex also lost value. But other world markets, after initial jitters, recovered - and some, like New York and Frankfurt, actually gained by close of day on Friday. A similar pattern is seen with some currencies, in Table 3. It is worth noting that, while Shanghai is down sharply over the past week and month, Table 4 reveals it is still up massively when looked at from a yearlong or two-year perspective. As Table 5 explains, much of Shanghai's recent ramp-up and decline can be explained by the rise and fall of margin debt.The Shanghai crash, some argue, is a symptom of China's underlying economic problems. Growth is not as high as official indicators, they argue. Tables 6 and 7 show China's electricity production and its car sales, respectively. Both appear highly

StatsGuru: Taking stock of the numbers behind the Chinese slowdown

Cong should not feel defensive or apologetic about the 1991 reforms: Jairam Ramesh

Jairam Ramesh

Former minister in the United Progressive Alliance government Jairam Ramesh believes the reforms of 1991 were possible because of a strong team in place and the role of jugalbandis . On the occasion of the release of his book on the reforms initiatives of 1991 (To The Brink And Back: India's 1991 Story), Ramesh spoke to Business Standard and said it was unfortunate that P V Narasimha Rao as prime minister has not got due credit for his contribution to reforms of 1991. Edited excerpts:How different is your assessment of what happened in 1991?I have written this book as we are approaching the 25th  anniversary of a watershed development in 1991. It is different because it is written not from an economist's point of view. I have tried to capture the development of those 90 days, when I happened to be part of the government, in a popular and chatty way. My attempt is to Chetan Bhagatise the developments of 1991 - what actually happened, how they happened and why? I was a close observer of

Shanghai-based online meal delivery start-up Ele.me has received $630 million in a Series-F funding, led by CITIC

CITIC backs Ele.me

Lasting solutions to chronic price spikes exist

Tears over onions, again

Investors will pay premium for comparable financials: Dipak Bohra

Dipak Bohra

It helps when accountants speak a common accounting language, facilitating cross-border economic activity. Also, global investors are willing to pay premium valuations for comparable financials.I do not see any major challenge faced by large IT companies in India, as they are already publishing their statements in IFRS/US GAAP. Indian IT companies will face a challenge, in terms of additional disclosure requirements in revenue contracts, as they will have to reorient/reconfigure their IT systems to report such data. However, companies currently on the Indian GAAP platform will have to undergo changes in their reporting, disclosures and build their back-end system/process to support the enhanced reporting requirements. We are hardly left with seven months to achieve this.Dipak BohraSenior vice-president (global controller), Wipro

Indian revenue authorities are averse to fair value accounting: Indrajit Pathak

Indrajit Pathak

Though about seven months are left for mandatory implementation for select companies, the fact that five months have already passed for preparation of comparative financial statements for the previous year, not only under existing accounting standards but also under Ind AS (which will have to pass through auditors), makes the situation somewhat worrying. A major change is reporting, predominantly under fair value, as opposed to historical costs, being followed for ages.The areas corporate India is still grappling with include:nThe format for presentation of balance sheet and statement of profit & loss (schedule III of the new companies Act) is not strictly aligned with requirements of Ind-AS. More, confusion prevails on whether disclosure requirements in the schedule for items such as CIF (cost insurance and freight)/FOB (free on board) value of imports/exports, consumption of raw materials and stores segregated into imported and indigenous, etc, will remain valid for consolidated

Unlearn, learn, re-learn to be Ind-AS ready: V S Parthasarathy

V S Parthasarathy

Despite its long-term benefits, there are a lot of short-term challenges. The challenges are both technical and non-technical such as readiness of people, processes and technology. To be prepared for Ind-AS, we all have to unlearn, learn and re-learn. We are providing intensive training to our employees to sharpen their saws.We had created a 'Corporate Center of Excellence' to prepare for IFRS initially, but when it was delayed we still continued with the team and momentum for a smooth transition to Ind-AS across the group. We have partnered with the 'Big four' consultants to help us align our systems and processes. A dedicated IT team is also helping with building technology platforms to align the systems to make the transition successful.To focus on a few of the technical challenges, under the new definition of 'control', we have to re-examine which of the entities to consolidate, specifically focusing on substantive participative rights. For business combinations, all identifiable a

Minimise chances of changes post implementation: Nilanjan Roy

Nilanjan Roy

The phased implementation road map for Indian Accounting Standards, aligned to the International Financial Reporting Standards (IFRS), is a major step forward for India's integration with the global economy. However, there are some challenges that need to be addressed while implementing these.Globally, the application of the new standards on revenue has been deferred until January 2018, owing to the need for clarity on various technical accounting aspects and system implementation/software changes. The new standards are yet to be implemented anywhere in the world. India would be the first to do so. From the perspective of the Indian telecom sector, a rapidly-evolving industry operating across a broad revenue spectrum - voice calls, high-speed data, satellite communications, etc - there could be implications on matters such as multiple arrangements, transaction price and variability thereto, goodwill, indefeasible rights of use and capacity arrangements, fair valuation of deposits and a

Intangibles will pose a challenge: M P Vijay Kumar

M P Vijay Kumar

Typically, the challenges faced by technology companies are on account of the variety of assets they hold and the intangibles they create out of the business. In terms of measurement of tangible assets, the proposed Indian accounting standards aren't far from existing ones. Therefore, this might not prove to be an arduous journey. It is the intangible part that will pose the challenge.Also, on the fair value measurements of financial instruments and business combinations, there is no detailed prescription in the existing standards. As such, both measurement and disclosure of these in terms of data they need to maintain and also to fulfil the disclosure criteria, could be another challenge. There will be a consequential amendment to the accounting systems and data capturing methods. But considering the expertise and guidance available at the global level, companies might not face an uphill task here.On the revenue measurement and recognition front, the draft standard on revenue measurem

RBI warns incrementalism won't help fix banks

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