A home is a risk-free asset. But, it is a liability as long as you are servicing a home loan. While most want to get rid of the debt at the earliest, they don't take the trouble of calculating how much they can save by pre-paying the loan &mdash; partly or fully. Even financial institutions encourage pre-payment and have done away with the penalty on it for all floating-rate loans.

How much do you save by pre-paying home loan? 

Business Standard

In his column White Knight, Bhupesh Bhandari attributes the perceived improvement in product quality and after-sale service to the entry of multinational companies (&ldquo;Swadeshi, circa 2012,&rdquo; August 31). But the real villain was the Licence Raj. India would have seen a similar amelioration in product quality and service had we done away with licensing and encouraged domestic competition. The gradual lowering of the protectionist customs duty would have provided an added impetus.

Letters: Licence Raj: The real villain

The Prime Minister&rsquo;s Economic Advisory Council (PMEAC) has rightly stressed in its recent Economic Outlook report the need for agricultural reforms and cutting down subsidies on power and water. Because reforms have not been introduced, agricultural growth in India has lagged that of other fast-developing countries. It is noteworthy that China began its journey towards economic transformation with institutional reforms in agriculture, by altering its land tenure system and freeing the prices and marketing of most farm commodities. In contrast, India has focused on industrial, financial and trade sector reforms, leaving agriculture virtually untouched. Even subsequent bids to reform the farm sector have been half-hearted and misguided. Unsurprisingly, the long-term trend rate in the growth of foodgrain production continues to be under three per cent, which compares poorly with that in India&rsquo;s neighbouring countries.

Stagnating agriculture 

Recently, senior Bharatiya Janata Party leader Rajnath Singh told ministers in the BJP-ruled Chhattisgarh that party members would quit office if any allegations of corruption were levelled against them. They would follow the example, he said, of Lal Krishna Advani, who threatened to quit the Lok Sabha with a vow to return only after his honesty was proven. This thundering speech has left ministers in the Raman Singh Cabinet in shock. They are convinced that their political opponents will use this pronouncement to grill them on corruption that will oust them from the state Cabinet.

Knock-on effect

The edit &ldquo;Don&rsquo;t delay GAAR&rdquo; (September 4) rightly cautions the government that is obsessed with foreign direct investment (FDI) for short-term gains. The General Anti-Avoidance Regulation (GAAR), retro tax laws, the excise duty on gold imports and the tax on jewellery were proposed in this year&rsquo;s Budget to increase the government&rsquo;s revenue. It is surprising that measures that were deemed good for the economy a couple of months ago are now being seen as impediments to growth. The deferment of GAAR will only benefit foreign institutional investors who mainly speculate in the Indian stock exchanges and deserve to be taxed. The need of the hour is to attract FDI in the infrastructure sector that will generate more jobs and speed up industrialisation.

Letters: Focus on infra, not FIIs...

Like Indian business, Indian politics is a hereditary business in which politicians literally inherit a parliamentary seat once occupied by a relative (usually a father). But inheritance often does not mean continuity. As a senior officer from the department of programme implementation said, inheritor MPs are often unwilling to continue projects started by their fathers under the MPLAD (Member of Parliament Local Area Development) scheme. Instead, they want to establish their own legacy. This is particularly true in the case of a prominent politician from Haryana, who has repeatedly approached the department, which is responsible for monitoring MPLAD schemes, to scrap projects his father started and introduce fresh schemes. As the official explained, the rules do not permit such mid-course changes so the fate of those projects in Haryana hang perilously in the balance.

MPLAD & family plots

The recommendations by the Shome Committee on the General Anti-Avoidance Regulation (GAAR), if accepted, are bound to clear the doubts that impede foreign investment in India. The government also needs to address other important issues that are a hindrance in the path of foreign investors. The Minimum Alternate Tax (MAT) on special economic zones (SEZs) introduced in the 2011 Budget has put off potential investors. MAT, effectively, nullifies all tax benefits and concessions that were earlier promised to foreign investors for investing in SEZs. This puts their projects based on the earlier tax benefits and exemptions in jeopardy and also deters them from investing in India. Globally, it projects India as a not-so-dependable investment destination with an unstable tax regime.

Letters: What about the MAT snag?

I am 30 and will be getting married next year. I have my own business and earn Rs 70,000-80,000 a month. How should I start saving for the future? I have sufficient life insurance. I make a fixed deposit of Rs 20,000 a month.

Financial Planning: Malhar Majumder

This refers to the front-page report &ldquo;5.5% economic growth beats market forecast&rdquo; (September 1). It seems like everything may finally be falling in place for Indian Inc. However, two of the major concerns of industry, high inflation and fiscal deficit, remain a problem. Inflation is still beyond the Reserve Bank of India&rsquo;s comfort zone of five per cent and there are no signs of the central bank softening its stance on the interest rate front. On the fiscal deficit issue, the government needs to hasten decisions with respect to deregulation of diesel to achieve the budgeted target. We hope for some breakthrough on these fronts.

Letters: All is well?

The edit on the Shome Committee&rsquo;s report was exemplary. You have rightly asserted that giving excessive discretion to the tax department is not suitable in a country like India where it has been accused of harassing taxpayers. And, the government should withdraw retrospective amendment in tax laws. We trust the finance minister to bring a progressive tax system that reduces corruption and black money, brings more revenue and benefits the common man so he can be comfortable and save more.

Letters: And on the taxpayers too

The government&rsquo;s coal mining policy is now widely acknowledged as problematic and clearly needs reform. Changes are required both in the short and medium term &ndash; as correctives for the errors in procedure highlighted by the report of the Comptroller and Auditor General (CAG) &ndash; and in the long term, to ensure such problems do not recur. Attention has been focused on whether or not the coal block allocations highlighted by the CAG will be cancelled.

Coal's way forward 

Last week&rsquo;s Supreme Court order asking Sahara Group to repay Rs 27,000 crore to investors from whom it raised money through a hybrid financial instrument has caused a flutter in Mumbai&rsquo;s Page 3 circles. Not because they were large investors in the scheme, but because Subrata Roy, the group&rsquo;s promoter who quirkily calls himself &ldquo;managing employee&rdquo;, was a regular fixture in these circles. Despite this, they know as little as pretty much anybody else about this secretive group. So much so that everybody is wondering who will be Sahara&rsquo;s sahara (protector) in its current predicament.

Sahara's sahara 

Maharashtra Navnirman Sena (MNS) Chief Raj Thackeray&rsquo;s outburst against Bihari residents has provoked Bihar Chief Minister Nitish Kumar to protest. Not reported is his sarcastic rejoinder drawing on an IT industry analogy. The Prithviraj Chavan-led government in the state, he said, had &ldquo;outsourced&rdquo; governance in the state and was shying away from its responsibilities.

'Outsourced' to MNS

Every year, industry chamber Ficci partners with the Indian Banks&rsquo; Association to organise a banking summit in Mumbai. The original programme for this year&rsquo;s summit, due on September 4, 5 and 6, included a special dinner address by foreign delegates between 6.30 p m and 7.15 p m on the first two days. A revised programme now omits these items and instead schedules dinner between 5.45 p m and 6.30 p m. True, this may be standard dining time in the West but it is way too early for Indians, who tend to be late diners and presumably make up the majority of the people participating in the summit.

Dinner diplomacy?

The front-page report &ldquo;Defer GAAR by 3 yrs, says Shome panel&rdquo; (September 2) makes for sad reading. Every recommendation of this draft report seems to insist that investors should be allowed to make windfall gains by twisting every real and imagined technicality in their favour &mdash; instead of making money by providing value to their customers through supply of goods and services, getting paid and paying normal taxes on the proceeds.

Letters: In the name of investors

Apropos the edit &ldquo;Centre&rsquo;s only choice&rdquo; (September 3), it would be premature to assume that the economy has bottomed out and the worst is over. The possibility of a return to the good old days of nine per cent growth without carrying out radical economic reforms that should include subsidy reforms looks remote.

Letters: Too soon to cheer

There is no question that the proposed General Anti-Avoidance Rules, or GAAR, need to be reviewed. To the extent that they give excessive discretion to the tax assessment authorities, they are clearly unsuitable for a country like India where the tax department has often been accused of harassing its taxpayers. Compliance with tax requirements is difficult enough currently; allowing more levers for potential harassment to income tax officers is a dangerous step.

Don't delay GAAR

This refers to the Q&amp;A with Reserve Bank of India (RBI) Deputy Governor K C Chakravarty (&ldquo;It is not our job to help banks achieve targets,&rdquo; September 3). His assertion that it is not the central bank&rsquo;s job to help banks achieve targets ignores some fundamental issues. Who lays down the targets in the first place? Who sets limits on various activities of banks? Moreover, who owns these banks? The limits of credit provisioning to specified sectors of the economy and inter-sectoral allocations are devised by the Centre and RBI. Having laid down these parameters, it is improper to say no help needs to be extended to banks to reach these targets. Banks are severely handicapped by umpteen regulatory requirements. They do not enjoy the independence to do business on purely commercial considerations, prudential norms notwithstanding.

Letters: RBI can't abdicate its role

I am servicing a car and a home loan. I have a part-time job. I lost one job. Now, I am finding it difficult to service both the loans as by the month-end I am left with nothing. My children will go for higher studies in six-seven years, hence I have to save.

Debt Counselling: Sanjay Agarwal

State Bank of India (SBI) Chairman Pratip Chaudhuri has publicly joined issue with the banking regulator, the Reserve Bank of India (RBI). Mr Chaudhuri questioned the central bank&rsquo;s practice of levying a cash reserve ratio, or CRR, by which a portion of bank deposits is impounded by the central bank, thus making credit both dearer and more scarce. This is akin to a schoolboy arguing with the headmaster. While bank chiefs routinely fall in line with what comes out of the RBI, the fact that the SBI chief is akin to the school head boy explains why perhaps only he could dare to go public. Banks, particularly the public sector ones, are looking for every bit of regulatory leeway they can get to make their performance look better. Mr Chaudhuri has said his aim is to raise a debate on an issue over which other bank chiefs hold similar views.

Business Standard

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