Monday, August 31, 2015

Case Study: Perfect Competition in Credit Card Industry !

In 1997, over $700 billion purchases were charged on credit cards, and this total is increasing at a rate of over 10 per cent a year. At first glance, the credit card market would seem to be a rather concentrated industry. Visa, MasterCard and American Express are the most familiar names, and over 60 per cent of all charges are made using one of these three cards. But on closer examination, the industry seems to exhibit most characteristics of perfect competition. Consider first the size and distribution of buyers and sellers. Although Visa, Mastercard and American Express are the choices of the majority of consumers, these cards do not originate from just three firms. In fact, there are over six thousand enterprises (primarily banks and credit unions) in the US that offer charge cards to over 90 million credit card holders. One person's Visa card may have been issued by his company's credit union in Los Angeles, while a next door neighbour may have acquired hers from a Miami Bank when she was living in Florida. Creditcards are a relatively homogenous product. Most Visa cards are similar in appearance, and they can all be used for the same purposes. When the charge is made, the merchant is unlikely to notice who it was that actually issued the card. Entry into and exit from the credit card market is easy as evidenced by the 6000 institutions that currently offer cards. Although a new firm might find it difficult to enter the market, a financially sound bank, even one of modest size, could obtain the right to offer a MasterCard or a Visa card from the present companies with little difficulty. If the bank wanted to leave the field, there would be a ready market to sell its accounts to other credit card suppliers. Thus, it would seem that the credit card industry meets most of the characteristics for a perfectly competitive market.

Questions

1. What are the characteristics of perfect competition that are exhibited by the credit card industry?

The characteristics of perfect competition that are exhibited by the credit card industry are:
1.  A large number of small firms,
2.  Identical products sold by all firms,
3.  Perfect resource mobility or the freedom of entry into and exit out of the industry, and
4.  Perfect knowledge of prices and technology.


2. Do you think the same competitive state is applicable to the Indian scenario?

Yes, the same competitive state is applicable to the Indian scenario. The main reason for the growth of credit cards as compared to debit cards is mainly due to provision of overdraft facility which facilitates the customers to make purchases and payment even without having enough money available in their account. The increase in the number of commercial activities and the growing malls in smaller cities have also contributed positively in the rise of credit card market.

Found at: 

Friday, August 28, 2015

Cost of Freedom



Politicians and pundits use the phrase “Cost of Freedom” a lot, usually in reference to something they are asking you to do that you probably prefer not to, such as pay higher taxes, wear a uniform, submit to intrusive surveillance, or simply keep quiet about any doubts you may have about the former.

Before going into the cost of freedom, however, perhaps we need to take a closer look at what we mean by freedom, exactly.

There is no pure, perfect freedom. We all agree that there are certain things we should not be free to do, such as to walk in and out of each others’ homes removing TV sets and jewelry, or shoot the neighbor who is hard of hearing and falls asleep each night in front of the too-loud TV set. We understand and agree to certain rules required to create a society in which specialized skills operate together in mutually beneficial commerce.

So, let us start out by defining a free society not as a society where people are free to do what they wish, but as one in which we freely choose to surrender certain behaviors in exchange for the benefits of living within that society. A covenant exists between the rulers and the ruled in which each freely agrees to follow a set of rules of behavior, in exchange for a certain set of rights. In the United States, that covenant is enshrined in the Constitution and the Bill of Rights, a contract which lays out what the government may, and more importantly may not do.

In a free society, the covenant must be enforced on both the rulers and the ruled equally. To enforce the covenant upon the people there is law enforcement, and when needed, prison. To enforce the covenant on the side of the government, the Founding Fathers created a government of three components, each charged with keeping an eye on the other two, and when needed, to legally restrain excess of authority.
 
Following the collapse of the USSR, the United States Government lost its most potent demon to wave at the masses. But it was quickly replaced with SARS, Aids, Swine Flu, Avian Flu, Ebola, Global Warming, Global Cooling, inflation, deflation, and most recently terrorists. Each and every demon was waved at us to trick us into surrendering more of our money, more of our children’s lives, more of our rights, and each and every demon had no more substance than the paper-mache’ heads used by the Wizard of Oz to trick Dorothy into making war on the Wicked Witch of the West. Fear gave politicians issues to run on, defense and medical corporations markets for their products, and media sensational content for their periodicals and broadcasts.

That it was all trickery and deception with the purpose of tricking us out of our rights was best illustrated by President George W. Bush’s plan to deal with Avian Flu, which not only enriched his good friend Donald Rumsfeld, but also included gun confiscation. It should be noted that firearms (and the second amendment) do not increase one’s susceptibility to infection by viruses. Clearly, the real agenda isn’t to save the populace from a flu virus (which as of this writing has actually killed few humans), but to grab the guns and remove the right to firearms recognized by the Founding Fathers.

The problem with a government that rules by fear is that once they have started to use fear on their own population they can never stop, never allow the fear to subside, never allow the population to calm down and think rationally. Because when the population stops being afraid, when they start to think, they will start asking why they cannot have all the rights, freedoms, and money back. This actually happened following the collapse of the USSR in 1990, when Americans, tired of the trillions in taxes collected and spent on the nuclear deterrent, demanded a drastic reduction in military spending. So, in 1991, the US tricked Saddam Hussein into invading Kuwait by promising they would not object, then invaded Iraq, thereby having a convenient war to keep the military budget inflated.

Today we are in two wars, both of which now appear to have been started with outright lies by the US Government. Americans are starting to say “no” to more wars and that is a good thing, for above all else freedom means the freedom to say “no” to the government,; to remind them that they too are bound by the covenant to restrict their actions to the letter of the Constitution and the laws.

The Cost of that Freedom isn’t paying more taxes or wearing a uniform; it is simply to decide one will not be afraid of the manufactured demons put forth in print and in TV that serve no purpose than to keep the people meek and under control. That is all it takes; the will to not be afraid.

Of course the government does not like people who refuse to live in fear, or who say no. Every time a citizen stands up and says “no” the tyrant fears. Every time a citizen refuses to be afraid the government will work extra hard to make that person afraid, and even today we see those who speak out, because they are no longer afraid, subjected to harassment and intimidation. Yet they remain unafraid, for they see the harassment and intimidation for what it is, a symptom of a government losing control of the people, and they choose to remain unafraid.

So, that’s really all there is to it. Refusing to be afraid. Refusing to be tricked out of your rights.

Freedom is the freedom to say “no”, and the freedom to live your life unafraid.

Article By: Michael Rivero 
Accessible at: http://whatreallyhappened.com/WRHARTICLES/costoffreedom.  

Tuesday, August 25, 2015

10 Reasons To Be Optimistic About Indian Economy (Puzzle!)

1. GDP growth estimated to grow at 8%

2. Increase in industrial output (growing at 3.8% presently)

3. Healthier Government finances - Improved tax collections, led by indirect tax growth of 37.6% during April-July. Lower subsidy bill due to falling oil prices; expected savings maybe around Rs. 1 Lakh crore

4. Inflation, both retail and wholesale under control - Retail inflation estimated at 3.8% in July; wholesale inflation at -4.1%. the ninth straight month of contraction

5. Better than expected monsoon rains - Deficit of around 11% but distribution has been encouraging

6. Lower trade deficit due to fall in import bill for crude, petroleum, gold etc.

7. Current account deficit appears more manageable - at 1.3% of GDP in 2013-14 compared to 1.7% in 2012-13

8. Forex reserves at a record $355 billion

9. Early signs of increase in investment

10. Healthy demand in consumer sectors, uptick in consumption

This is what Times of India dated 26th August  covered on the first page. If you are smart you would be able to make a critique of this news item. Can we find areas where the 'so called' optimism about the economy can be questioned? Try to locate those areas and comment. I am sure, we are no so gullible to just accept the good news which is actually missing or is misplaced.

Comment and get answers....Question and get enlightened on the 'breaking news' on the cover page of the national daily    

Monday, August 24, 2015

The A B C of Reservation in Gujarat

In India, the Other Backward Castes (OBC) status is an affirmative action which provides reserved quotas in education and government jobs. In Gujarat, 27% seats are reserved for OBC, 7% for Scheduled Castes and 14% for Scheduled Tribes totaling 48% of all seats.

In 1981, the Government of Gujarat headed by Indian National Congress (INC) chief minister Madhavsinh Solanki, introduced the reservation for socially and economically backward castes (SEBC) based on recommendations of Bakshi Commission. It resulted in anti-reservation agitation across the state which spilled over in riots resulting in more than hundred deaths. Solanki resigned in 1985 but later returned to power winning 149 out of 182 assembly seats. He was supported by Kshatriya, Harijan, Adivasi and Muslims; called collectively as KHAM theory. It resulted in other communities including Patidars losing the political influence which later alienated the INC. The SEBC (later OBC) list initially had 81 communities which expanded to 146 communities by 2014.

The agitation took inspiration from the agitation by Gujjar community in Rajasthan which ended in May 2015.

The youths of Patidar community, who are also identified with their surname Patel, started public demonstrations across Gujarat starting July 2015. They were supported by Sardar Patel Sevadal, an organisation for community service. The youth seek Other Backward Class status for community to get reservation in government jobs and education. The youth formed Patidar Anamat Andolan Samiti (PAAS) for the purpose headed by Hardik Patel. The organisation termed itself as an apolitical organisation. The other major community organisations which are participation in the agitation include Sardar Patel Group (SPG) headed by Lalji Patel, Sardar Patel Seva Dal, Patidar Sankalan Samiti and Patidar Arakshan Samiti. Four major Patidar organisation denied their involvement in agitation though later Khodaldham Trust offered to meditate between the youth and the government.

The public demonstration was held in Mansa on 22 July. The demonstration in Visnagar on 23 July 2015 turned violent when some agitators torched some vehicles and vandalised office of Bharatiya Janata Party MLA, Rishikesh Patel. The demonstrations were held in Vijapur on 28 July followed by in Mehsana. The police booked 152 persons for violating prohibitory orders for holding the demonstration. 

The next major demonstrations will be organised in Ahmedabad on 25 August at GMDC ground.

BJP MLA of Dhari, Nalin Kotdiya declared his support to the agitation. The social media helped to spread the protest quickly across the state.

The Politics & its Implications…(Live Mint Report)
With the powerful and dominant Patel community’s demand for reservation in government jobs becoming louder, the Bharatiya Janata Party (BJP) government in Gujarat led by chief minister Anandiben Patel, may have to tread a bit carefully before the local body elections slated for October.

Earlier this week, the Gujarat government issued a notification, making voting compulsory in the forthcoming municipal and panchayat polls becoming the first state in the country to do so. Local body polls for 253 municipalities, 208 taluka panchayats, 26 district panchayats and six municipal corporations will be held in October this year.

Out of about 120 BJP MLAs in Gujarat, 40 are from the Patel community, including Saurabh Patel, Nitin Patel, Purshottam Rupala and the chief minister herself.
The community, under a recently floated outfit called Patidar Anamat Andolan Samiti, has been vociferously demanding the status of other backward class (OBC) and benefits of reservation under it in government jobs.

However, a Supreme Court’s guideline states that there shouldn’t 
be more than 50% reservation in any state, said a senior BJP official, on conditions of anonymity. Gujarat has already reached that mark, he added.

The leader said that the government’s recruitment drive for permanent posts last year, in which several Patels felt left out, had led to the demand.

The group has held 15 rallies since June, and the agitation is likely to intensify with plans to hold 52 more such rallies in the next 10 days. “On 22 August, we will hold a massive rally on the Sabarmati riverfront in Ahmedabad wherein we expect about 20 lakh people to join our fight. Our children are left out during admission in colleges despite securing high marks due to reservation. We want to end this inequality for our community,” said Hardik Patel, member of the Patidar Samiti.

The outfit has so far enrolled about 14 lakh Patidar or Patel members. Hardik claims the outfit has no political affiliations.
However, last week, an agitating mob of Patels ransacked the office of Visnagar’s BJP MLA Rishikesh Patel’s office, considered to be very close to the chief minister.

Times of India report on 26 July said that Prime Minister Narendra Modi and BJP national president Amit Shah have sought a report from the state government on the Patidar community’s rallies, and on the violence that took place at the Visnagar rally.

According to the BJP leader quoted earlier, the Patel agitation could impact the party’s vote bank in some rural areas. However, he was confident that the movement will fizzle out soon.

Another BJP leader said that if the movement was apolitical, as it seems to be, then the government has to be cautious that it does not become another Navnirman Movement.

The Navnirman Movement was initiated in 1974-75 when college students protested against hike in their food mess bill. It snowballed into a state-wide movement, first against high prices and then against corruption, forcing then chief minister Chimanbhai Patel, who belonged to the Congress party, to resign.

“There is little basis for the Patel community’s sudden demand. They are prosperous, hold powerful positions both in the government and private sectors, have family members settled overseas and dominate the agriculture and co-operative sector. It is still not clear if BJP’s internal politics is at play. There is definitely something more than what meets the eye,” said Achyut Yagnik, a political observer.

Congress spokesperson Manish Doshi said the party was not supporting the Patel community’s demand. “Patels who are the backbone of the development model of Gujarat which the BJP is projecting are today asking for reservation. They held a dominant position in various industries be it pharma, diamond or textile. It means something is not right with BJP’s development model. For about 20 years BJP is ruling Gujarat and Patels form their major vote bank. It is for the BJP to come up with an explanation as to what went wrong,” he said.

Former Gujarat chief minister Madhavsinh Solanki swept the state assembly elections in 1985 with his Kshatriya Harijan Adivasi Muslim (KHAM) combination in 1985 side-lining the Patel community. Following this, the Patels became a strong base for the BJP.

While Patel leaders claim that they form about 25% of the voters in Gujarat, Yagnik says they constitute about 14%. The Patidar community comprises Lehuva, Kadva and Anjana Patels.
The Anjana Patels who form a very small part of the Patel community and reside mainly in north Gujarat fall in the reservation category, said Yagnik.

Another BJP member said that many in the party were not happy about the way senior Patel leaders were side-lined after Anandiben Patel was handed over the reins of Gujarat in 2014 by Modi.

In 2012, former chief minister Keshubhai Patel left BJP to form a new outfit called Gujarat Parivartan Party ahead of the assembly elections. He is credited with building the BJP’s Patel vote bank in Gujarat. However, the newly formed party managed to bag only three out of the 182 assembly seats. Later, he ironed out differences with BJP leaders and re-joined the party.


Live Mint Report

Saturday, August 22, 2015

The Day of the Exam: 15 Tips to Boost your Exam Performance

So you’ve come all the way…and tomorrow is finally the moment of truth, the day of the exam. At this stage you have studied almost all that you can study to be 100% ready for the big day. You have been planning, revising and studying and so there is little more you can do, right?

However hard you studied in the run up to exams, the most important work is yet to be done. Regardless of how much you have studied, it is possible that your exam performance may not reflect your hard work studying for hours on end. That is why I wish to give you a few tips to maximise your performance on the day of the exam.

15 Tips for Succeeding on the Day of the Exam:

Exam Tip #1
Wake up early so that you do not need to rush through having breakfast and getting ready.

Exam Tip #2
Check the venue and time of the exam to make sure that you have not confused the day/time/venue.

Exam Tip #3
Have a balanced breakfast and eat nothing risky (probably not the best day to have a super-hot curry!). Bananas are always a good option.

Exam Tip #4
Before leaving home, check that you have everything that you will need – ID, stationery, pen, pencil etc.

Exam Tip #5
Head to the exam with plenty of time. A lot of unexpected events can happen on your way there and you do not want to be late!

Exam Tip #6
If there are people around who are panicking, avoid them. They are not doing you any favour!

Exam Tip #7
Go to the toilet before the exam starts. Exams can be quite long and there is no time to waste.

Exam Tip #8
Remember to write your name on the exam paper. You would not believe how many people have forgotten to do it!

Exam Tip #9
Read all the questions carefully before starting and quickly plan how much time to allocate to each.

Exam Tip #10
Start answering the questions that you feel most confident about. There is no need to answer the questions in order.

Exam Tip #11
If your brain freezes, just start writing anything and you will soon start remembering more details.

Exam Tip #12
Don’t spend more time than you planned on a particular section/question or you might run out of time to answer other questions and gain those extra marks! Also,  leave any questions that you are unsure about for the end.

Exam Tip #13
Don’t be afraid to ask the examiner if you are not clear on a question.

Exam Tip #14
Use every minute of the exam and if you have time left, review your answers before handing back the paper.

Exam Tip #15
Stay calm, you have done your homework and have nothing to fear!


Available at Examtime.com

Friday, August 21, 2015

GST: How India Will Change For the Better with Tax Reforms

The GST framework could easily be one of the most important tax reforms to be tabled for discussion in the parliament. It does bring with it some problems, like division of taxation powers between the central government and states. Not surprisingly, the Finance ministry has already missed three of its deadlines to come out with an acceptable framework. In fact, most of the proposals aren't even in the beta stage yet. But, most administrators and more importantly, producers believe it would make the tax procedures more fair, transparent and efficient.

An ideal tax system collects taxes at various stages of production, supply and retail. It is based on the value that the producers, suppliers and retailers individually add to the product. However, the current tax regime is unfairly skewed against most producers. Let's outline and simplify the current system of taxes to see how it operates:

Assume there is a soap manufacturer that procures raw materials at 500 lakhs per batch. The manufacturer keeps his operating profits at 100 lakhs and encumbers a processing cost of 50 lakhs. The flow would look something like this:
 
If we calculate the total tax that the producer has to pay in this case, it would be 120 lakhs(50 lakhs on procurement and 70 lakhs on sales). Now if you have a GST framework in place, the total tax that the producer pays is 70 lakhs. How?

The producer had initially paid an input tax of 50 lakhs. Now when he goes on to sell his batch for 700 lakhs, he gets a tax credit of 50 lakhs. Thus, he pays 20 lakhs in the form of taxes for the final transaction. This adds up to just 70 lakhs for the producer. The GST hence, reduces the tax burden on producers. The biggest benefit of such a system is that it would contain various indirect taxes currently levied on various participants in the supply chain. Reducing such taxes would lower the overall production cost and  increase the output of the economy in the long run.

That sounds great, but, why GST when we already have VAT? Isn't the VAT framework similar to that of GST? VAT regulations and rates generally vary across states. There is a tendency, as has been observed, that states may resort to undercutting of rates to attract more investors. This generally leads to a loss of revenue to both the state and centre. GST would introduce uniform taxation laws across states and different sectors. The taxes would be divided between the state and centre, based on a formula that would be acceptable to both. Also, it would be easier to supply goods and services uniformly across the country, as no additional taxes would have to be paid across different states. Currently, no tax credits are provided for interstate transactions.

So do we as consumers get goods at a cheaper price? Probably not, and it is here that the GST has been attacked by the opposition. Since taxes are distributed across the chain, the consumer prices are likely to rise to maintain the current tax revenue levels. The government has justified this by saying it would provide tax cuts across various brackets. This isn't entirely satisfactory. First, the tax paying population isn't too significant a number to begin with and second, the tax payer is likely to get a meager tax cut for the GST he would pay for all the goods or services he purchases.

GST is clearly a long term strategy, it would lead to a higher output, more employment opportunities, and economic inclusion. Initially however, it is likely cause high inflation rates, administrative costs, and face stiff oppositions from states due to loss of autonomy.
The following are the salient features of the proposed pan-India Goods and Services Tax regime that was approved by the Lok Sabha by way of an amendment to the Constitution:

1. GST, or Goods and Services Tax, will subsume central indirect taxes like excise duty, countervailing duty and service tax, as also state levies like value added tax, octroi and entry tax, luxury tax.

2. The final consumer will bear only the GST charged by the last dealer in the supply chain, with set-off benefits at all the previous stages.

3. As a measure of support for the states, petroleum products, alcohol for human consumption and tobacco have been kept out of the purview of the GST.

4. It will have two components - Central GST levied by the Centre and State GST levied by the states.

5. However, only the Centre may levy and collect GST on supplies in the course of inter-state trade or commerce. The tax collected would be divided between the Centre and the states in a manner to be provided by parliament, on the recommendations of the GST Council.

7. The GST Council is to consist of the union finance minister as chairman, the union minister of state of finance and the finance minister of each state.

8. The bill proposes an additional tax not exceeding 1% on inter-state trade in goods, to be levied and collected by the Centre to compensate the states for two years, or as recommended by the GST Council, for losses resulting from implementing the GST.


-Article published in Business Standard