Monetary Policy in India; Review on July 31

RBI will have a review on it's monetary policy on 31st July. I have been grappling with concept related questions and issues on interest rates, exchange rates, capital account convertibility. I guess that the monetary policy review due on 31st July will have some answers.

What are the questions that baffle me? They are:
* Will we have a soft interest regime now when we have controlled inflation?
* Is the appreciating Rupee good for the consumer? I hear that it is bad for the export oriented industry, especially the IT industry.
* Does the appreciating Rupee make India more competetive? Or is it that that now when India is becoming more competetive, the Rupee will appreciate regardless of whatever the RBI or the Government does?
* In other words, should the RBI intervene or let the market forces control exchange rates?

India Knowledge Wharton has a very nice article on the issue. Am keenly watching Ajay Shah's Blog for more insights.

Impact of Financial Literacy on Indian Economy

I am trying to understand the impact of financial literacy levels on the Indian Economy. Let me elaborate by giving some examples of financial illiteracy:

- There are only 5-6 million Mutual Funds subscribers compared to
approx 150 million Insurance subscribers
- Insurance in India is looked as an instrument of tax arbitrage and
an investment product rather than an insurance product.
- Susan Thomas mentions, " In 2004, there was a flow of Rs.60,000
crore of premium income going into the insurance industry. Of this, as
much
as Rs.6,000 crore, or roughly 10%,went back to sales agents. ".
- Equities give the best returns and you are putting your money in a
professionally managed corporate organisation. Compare this with your
insurance products which give much lesser returns and your money is
invested
in the Government which is inefficient with your money, to say the least.
- The total AUM under Mutual Funds is about Rs 3.5 lakh crores while
LIC alone manages funds worth more than Rs 6 lakh crore

My point is that a more literate populace would buy better financial
products leading to better utilisation of the money. Things like better
saving, improved efficiency of the money in turn might have some effect on
the Economy.

How do we do it? Internet is a powerful medium and I saw these sites by the Australian & USA Governments which are very useful.

How the Financial Sector was Reformed in India

Ajay Shah has uploaded this article by Susan Thomas on how the financial sector was reformed. Insightful and very useful.

While talking about some problems in the Insurance industry, Susan Thomas mentions, " In 2004, there was a flow of Rs.60,000 crore of premium income going into the insurance industry. Of this, as much as Rs.6,000 crore, or roughly 10%,went back to sales agents. "

This makes a case for gigantic efforts on improving the financial literacy levels. What is the way of doing it?

What is your Human Life Value

Heard of this yaksha question: What is the greatest mystery on earth? Yudhisthir answers, "Every one has to die. But no one thinks that for himself. This is the greatest mystery."

That, I feel, is the paradox that makes people avoid life insurance!

That also makes agents take the wrong line of selling Insurance as a tax saving and/or Investment product (ULIP).

So what should we do?

Start with calculating your Human Life Value (HLV). A very simple way of looking at it is as follows. Imagine a monthly income of Rs 10000 and the net income provided to the family is Rs 8000 after deducting Rs 2000 for personal expenses. Thus the annual income provided to yr family is Rs 96000. The amount of money which will earn Rs 96000 pa at 8% interest rate is Rs 12,00,000. This is only a representation of the value of HLV. It is not the exact way of calculating yr HLV.

The future income growth, yr income generating assets, liabilities, spouse income, children's education, etc are also to be factored in.

Right now u can
go to this Page to calculate yr HLV from Bajaj Allianz. Another link is from Metlife Insurance

Also click on Insurance Industry to see a ppt on Insurance as an emerging industry.

Indian consumers have bought life insurance for reasons of tax saving rather than the core need of providing for one's family in case of death of breadwinner.

Challenges in Scaling & Globalization of a Web Application

Amit Ranjan , Cofounder & COO, Slideshare shares his experiences in the following slides.