2G Spectrum scam- I'am Not worried about Money we have lost, but the faith we are loosing in the Indian Democratic System

While pursuing my graduation I have decided that I will contribute some portion {small though very precious] of my income for the welfare of my country. I have started doing it, but after looking at all this scams- CWG, Adarsh scam and 2G spectrum scam I am dropping off my faith on Indian democratic system. And not only me, there are millions of Indians who have same state of mind. Now my heart is not ready to pay even income tax. It asks me- why are you contributing your precious & hard-earned money for the welfare of any individual {politicians}?

And friends,

This state of mind is very dangerous because out of total population of our country, 70% are below 30 years age {youth or so called “Demographic Dividend”}. And once they have made up any idea in their mind it very difficult to change. I am not worried about money which we have lost in -2G Scam-176,379 crores rupees or USD 39 billion, CWG- 35000 crores but the faith we are losing in Indian political and governance system.

Through this article I am just putting light on 2G spectrum scam and involvement of many big shot people including Businessmen, politicians and many media icons.

2G spectrum scam-

The 2G spectrum scam involved officials in the government of India illegally undercharging mobile telephony companies for frequency allocation licenses, which they would use to create 2G subscriptions for cell phones. The shortfall between the money collected and the money which the law mandated to be collected is 176379 crores rupees or USD 39 billion. The issuing of licenses occurred in 2008, but the scam came to public notice when the Indian Income Tax Department was investigating political lobbyist Nira Radia.

*Parties involved

The selling of the licenses brought attention to three groups of entities - politicians who had the authority to sell licenses, corporations who were buying the licenses and media professionals who mediated between the politicians and the corporations.

A} Politicians involved

A. Raja, the Ex-Minister of Communications and Information Technology who sold the license

Kanimozhi, Rajya Sabha Member of Parliament

N.K. Singh, Rajya Sabha Member of Parliament

Annu Tandon, Lok Sabha Member of Parliament

Poongothai Aladi Aruna Tamil Nadu Minister for Information Technology, DMK

B} Corporations involved

· Unitech Group a real estate company entering the telecom industry with its 2G bid; sold 60% of its company stake at huge profit to Telenor after buying licensing (Including land values properties for towers)

· Swan Telecom sold 45% of its company stake at huge profit to Emirates Telecommunications Corporation (Etisalat) after buying licensing[2]

· Loop Mobile

· Videocon Telecommunications Limited

· S Tel

· Reliance Communications

· Tata Communications

C} Media persons involved

· Nira Radia, a corporate lobbyist whose conversations with politicians and corporate entities was recorded by the government and leaked creating the Nira Radia tapes controversy

· Barkha Dutt, an NDTV journalist alleged to have lobbied for A. Raja's appointment as minister

· Vir Sanghvi, a Hindustan Times editor alleged to have edited articles to reduce blame in the Nira Radia tapes

Shortfall of money

A. Raja arranged the sale of the 2G spectrum licenses below their market value. Swan Telecom, a new company with few assets, bought a license for Rs. 1537 crore. Shortly thereafter, the board sold 45% of the company to Etisalat for Rs. 4200 crore. Similarly, a company formerly invested in real estate and not telecom, the Unitech Group, purchased a license for Rs. 1661 crore and the company board soon after sold a 60% stake in their wireless division for Rs. 6200 crore to Telenor.The nature of the selling of the licenses was that licenses were to be sold at market value, and the fact that the licenses were quickly resold at a huge profit indicates that the selling agents issued the licenses below market value.Nine companies purchased licenses and collectively they paid the Ministry of Communications and Information Technology's telecommunications division Rs. 10,772 crore. The amount of money expected for this licensing by the Comptroller and Auditor General of India was 1,76,700 crore.

Conclusion-: So at the end of this article I just want to say it is our responsibility to change this scenario of our country. And if we can’t do this we can’t call ourselves “Demographic Dividend” and these so called demographic dividends will convert into national debt in the future.

Regards

Garvit Dave

"Greed is Good".....We need Amendments in Financial regulations

The “grexed is goodh” mentalityy is a regularf feature of financialz crises. But were the traders and bankers of the sub-primeg saga more greedy, arrogant and immoral than that of the 1980s? Not really, because greed and amorality in finankcial markets have been common throughout the ages. Teaching morality and values in business schools will not tame such behaviour, but changing the incentives that reward short-term profits and lead bankers and traders to take excessive risks will. The bankers and traders of the latest crisis responded rationally to compensation and bonus schemes that allowed them to assume a lot of leverage and ensured large bonuses, but that were almost guaranteed to bankrupt a large number of financial institutions in the end.

To avoid such excesses, it is not enough to rely on better regulation and supervision, for three reasons:

lSmgart and greedy bankers and traders will always find ways to circumvent new rules

lCEOs and boards of directors of financial firms—let alone regulators and supervisors—cannot effectively monitor the risks and behaviours of thousands of separate profit and loss (P&L) centres in a firm, as each trader and banker is a separate P&L with its own capital at risk

lCEOs and boards are themselves subject to major conflicts of interest, because they don’t represent the true interest of their firms’ ultimate shareholders

As a result, any reform of regulation and supervision will fail to control bubbles and excesses unless several other fundamental aspects of the financial system are changed.

First, compensation schemes must be radically altered through regulation, as banks will not do it themselves for fear of losing talented people to competitors. In particular, bonuses based on medium-term results of risky trades and investments must supplant bonuses based on short-term outcomes.

Second, repeal of the Glass-Steagall Act, which separated commercial and investment banking, was a mistake. The old model of private partnerships—in which partners had an incentive to monitor each other to avoid reckless investments—gave way to one of public companies aggressively competing with each other and with commercial banks to achieve ever rising profitability, which was achievable only with reckless levels of leverage.

Similarly, the move from a lending model of “originate and hold” to one of “originate and distribute” based on securitization led to a massive transfer of risk. No player but the last in the securitization chain was exposed to the ultimate credit risk; the rest simply raked in high fees and commissions.

Third, financial markets and financial firms have become a nexus of conflicts of interest that must be unwound. These conflicts are inbuilt, because firms that engage in commercial banking, investment banking, proprietary trading, market making and dealing, insurance, asset management, private equity, hedge-fund activities and other services are on every side of every deal (the recent case of Goldman Sachs was just the tip of the iceberg).

There are also massive agency problems in the financial system, because principals (such as shareholders) cannot properly monitor the actions of agents (CEOs, managers, traders, bankers) who pursue their own interest. Moreover, the problem is not just that long-term shareholders are shafted by greedy short-term agents; even the shareholders have agency problems. If financial institutions do not have enough capital, and shareholders don’t have enough of their own skin in the game, they will push CEOs and bankers to take on too much leverage and risks, because their own net worth is not at stake.

At the same time, there is a double agency problem, as the ultimate shareholders—individual shareholders—don’t directly control boards and CEOs. These shareholders are represented by institutional investors (pension funds, etc.) whose interests, agendas and cosy relationships often align them more closely with firms’ CEOs and managers. Thus, repeated financial crises are also the result of a failed system of corporate governance.

Fourth, greed cannot be controlled by any appeal to morality and values. Greed has to be controlled by fear of loss, which derives from knowledge that the reckless institutions and agents will not be bailed out. The systematic bailouts of the latest crisis—however necessary to avoid a global meltdown—worsened this moral hazard problem. Not only were “too-big-to-fail” financial institutions bailed out, but the distortion has become worse as these institutions have become—through financial sector consolidation—even bigger. If an institution is too big to fail, it is too big and should be broken up.

By-: Garvit Dave

Crisis of Credit.. Visualize presentation

Hi everyone,

Here I am going to share a video which will elaborate you everything about financial crisis and Collateralised Mortgage Obligations {CMO }

so njoy it!!

Check out these links

financial crisis -part 1

http://www.youtube.com/watch?v=Q0zEXdDO5JU

financial crisis- part 2

http://www.youtube.com/watch?v=iYhDkZjKBEw&feature=channel

Regards

Garvit D Dave

Various Avenues of Investment

The money you earn is partly spent and the rest saved for meeting future expenses. Instead of keeping the savings idle you may like to use savings in order to get return on it in the future. This is called Investment.

One needs to invest to and earn return on your idle resources and generate a specified sum of money for a specific goal in life and make a provision for an uncertain future One of the important reasons why one needs to invest wisely is to meet the cost of Inflation. Inflation is the rate at which the cost of living increases.

The cost of living is simply what it costs to buy the goods and services you need to live. Inflation causes money to lose value because it will not buy the same amount of a good or service in the future as it does now or did in the past. The sooner one starts investing the better. By investing early you allow your investments more time to grow, whereby the concept of compounding increases your income, by accumulating the principal and the interest or dividend earned on it, year after year. The three golden rules for all investors are:

Invest early

Invest regularly

· Invest for long term and not short term

Virtually everyone makes investment in one or other instruments like insurance, pension fund etc if not in risky equity. But each of these avenues has common characteristics such as potential returns and associated risk.

CATEGORY	INSTRUMENTS	FEATURES	BENEFITS
A} FIXED RETURN INSTRUMENTS	BANK FIXED DEPOSIT	Fixed tenure, Fixed interest rate, Interest generally compounded quarterly basis,	Less Risky, Fixed Deposit more than 5yrs is eligible for deduction u/s 80c Simple and Bare
	NATIONAL SAVING CERTIFICATE/POS	For Adult individuals, Tenure-6yrs No premature withdrawals are allowed,	Safe instrument, Principal and Interest reinvested are eligible for deduction u/s 80c
	Govt. BONDS/DEBENTURE	Fixed tenure, yield to maturity, coupon rate	Safe instrument, Less risky
B} HIGH RETURN INSTRUMENTS	EQUITY INVESTMENT	Volatile market condition, Unpredictable market, F&O	High return {avg 15%}
	COMMODITY MARKET INVESTMENT	Price depends on underlying commodity	Higher returns
	MUTUAL FUNDS/SIPS	Flexible investment, investment according to risk profile,	Handsome returns, Tax exemptions {u/s10(23D)}, guaranteed return
C} PROTECTION SCHEMES
	LIFE INSURANCE	Term, Endowment, ULIP, Money Back Policy	Life insurance cover+ investment +savings+ tax benefits u/s 80c
	MEDICAL INSURANCE	Medical expenses coverage, Critical Illness cover	Support during unexpected higher medical expenses, tax benefits u/s 80D
	PUBLIC PROVIDENT FUND	savings cum tax saving instrument, Retirement planning tool	Deposits in PPF are eligible for rebate under section 80-C, Interest is totally tax free, Deposits are exempt from wealth tax
	GENERAL INSURANCE	Cover assets accidental risk	Cover uncertain expenditure on movable assets
D} LONG TERM INSTRUMENTS	REAL ESTATE, ANTIQUES	Long term investment	Capital gains, durability

Written By

Garvit D Dave

What could trigger the next financial crisis?

What could trigger the next financial crisis?
There are many areas which we talk about regarding financial awareness, however there are things which a retail investor is never aware about and that’s "International finance". It’s equally important to understand what is happening at national and international level which can hugely impact a common man. With financial markets becoming increasingly complacent about the recurrence of a crisis, we believe it is relevant to explain a couple of areas of concern which could trigger the next round of the crisis.
Greece – Europe’s Achilles Heel

What’s Going on in International markets
In the last few weeks, Greece has taken the centre stage in the financial markets. Within the next two months, Greece has to pay back the maturing bonds [to investors across the world] and finance its budget deficit. The country needs to borrow around $40 billion from the international market. With 10 year Greek Government bond interest rates of around 7% (more than 3% to 4% higher than 10 year U.S. Treasury or German Government Bonds), this has led to fresh worries over a potential default by the Greek government. What has added to the problem over the last two days is a rapid withdrawal of deposits from Greek banks by individuals in the country. Unless, Greece agrees to the terms set forth in the rescue package put together by European Union and IMF [to reduce government spending and increase taxes], it is difficult to get the support of this consortium to raise the $ 40 billion to stave off the crises. As you can see from the graph, Greece’s debt is over 111% of GDP. We believe the situation in Greece is getting grimmer day by day and could be a trigger for a crisis in other European nations – Portugal, Italy, Spain.
The China Bubble
The fiscal stimulus initiated by China last year through bank lending to the tune of $ 1.2 trillion has led to potentially unstable conditions in their economy. According to well-known investor James Chanos with 60 percent of the country’s GDP relying on construction ‘China is on a treadmill to hell’. Marc Faber a long time optimist on China and well-known economist Kenneth Rogoff have also spoken of a China Bubble recently. With the Chinese government trying to enable a slowdown in real estate speculation via a recent tax on sale of homes when they have been owned for less than five years, one cannot rule a rapid decline in prices which would have a negative impact on economic growth.

Regards
Garvit D Dave