Value Added Tax:
Value Added Tax (VAT), or goods and services tax (GST), is tax on
exchanges. It is levied on the added value that results from each
exchange. VAT is a consumption tax (CT) levied on any value that is
added to a product. In contrast to sales tax, VAT is neutral with respect to
the number of passages that there are between the producer and the final
consumer; where sales tax is levied on total value at each stage, the
result is a cascade. A VAT is an indirect tax, in that the tax is collected
from someone who does not bear the entire cost of the tax.
VAT was invented by a French economist in 1954 as taxe sur la valeur
ajoutee (TVA) in French. Maurice Laure, joint director of the French tax
authority, the Direction generale des impost, was first to introduce VAT
with effect from 10 April 1954 for large business, and it was extended
over time to all business sectors.
The standard way to implement a VAT is to say a business owes some
percentage on the price of the product minus all taxes previously paid on
the good. If VAT rates were 10%, an orange juice maker would pay 10%
of the Rs.50 per litre price (Rs. 5.0) minus taxes previously paid by the
orange farmer (maybe Rs. 2). In this example, the orange juice maker
would have a Rs. 3 tax liability. Each business has a strong incentive for
its suppliers to pay their taxes, allowing VAT rates to be higher with less
tax evasion than a retail sales tax.
Personal end-consumers of products and services cannot recover VAT on
purchases, but businesses are able to recover VAT on the materials and
services that they buy to make further supplies or services directly or
indirectly sold to end-users. In this way, the total tax levied at each stage
in the economic chain of supply is a constant fraction of the value added
by a business to its products, and most of the cost of collecting the tax is
borne by business, rather than by the state. VAT was invented because
very high sales taxes and tariffs encourage cheating and smuggling.
Critics point out that it disproportionately raises taxes on middle- and
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Wholesale Price Index
A Wholesale Price Index (WPI) is the price of a representative basket of
WPI was first published in 1902, and was one of the more economic
indicators available to policy makers until it was replaced in most
developed countries by the Consumer Price Index in the 1970s. In India,
a total of 435 commodities data on price level is tracked through WPI
which is an indicator of movement in prices of commodities in all trade
and transactions. It is also the price index which is available on a weekly
basis with the shortest possible time lag of only two weeks. The Indian
government has take WPI as an indicator of the rate of inflation in the
Calculation of Wholesale Price Index
The wholesale price index consists of over 2,400 commodities. The
indicator tracks the price movement of each commodity individually.
Based on this individual movement, the WPI is determined through the
Consumer Price Index
Consumer Price Index (CPI) is a statistical time-series measure of a
weighted average of prices of a specified set of goods and services
purchased by consumers. It is a price index that tracks the prices of a
specified basket of consumer goods and services, providing a measure of
It is one of several price indices calculated by most national statistical
agencies. The percent change in the CPI is a measure estimating inflation.
Two basic types of data are needed to construct the CPI: price data and
weighting data. The price data are collected for a sample of goods and
services from a sample of sales outlets in a sample of locations for a
sample of times. The weighting data are estimates of the shares of the
different types of expenditure as fractions of the total expenditure
covered by the index. These weights are usually based upon expenditure
data obtained for sampled decades from a sample of households.
Most countries use the CPI as a measure of inflation, as the actually
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measures the increase in price that a consumer will ultimately have to
pay for. It is the official barometer of inflation in many countries such as
the United States, the United Kingdom, Japan, France, Canada, Singapore
and China. In India, the WPI is published on a weekly basis and the CPI
on a monthly basis. The index is usually computed yearly, or quarterly in
some countries, as a weighted average of sub-indices for different
components of consumer expenditure, such as food, housing, clothing,
each of which is in turn a weighted average of sub-sub-indices
Gross Domestic Product:
The gross domestic product (GDP) of gross domestic income (GDI) is one
of the measures of national income and output for a given country's
economy. GDP is defined as the total market value of all final goods
and services produced within the country in a given period of
The international standard for measuring GDP is contained in the book
System of National Accounts (1993), which was prepared by
representative of the International Monetary Fund, European Union,
Organization for Economic Co-operation and Development, United Nations
and World Bank. The publication is normally referred to as SNA93 to
distinguish it from the previous edition published in 1968 (called SNA68).
Measuring GDP is complicated, but at its most basic, the calculation can
be done in one of two ways: either by adding up what everyone earned in
a year (income approach), or by adding up what everyone spent
(expenditure method). Logically, both measures should arrive at roughly
the same total.
The income approach, which is sometimes referred to as GDP(I), is
calculated by adding up total compensation to employees, gross profits
for incorporated and non incorporated firms, and taxes less any subsidies.
The expenditure method is the more common approach and is calculated
by adding total consumption, investment, government spending and net
It is a tariff or tax on the import of or export of goods. In England,
customs duties were traditionally part of the customary revenue of the
king, and therefore did not need parliamentary consent to be levied,
unlike excise duty, land tax, or other forms of taxes. Customs procedures
for arriving passengers at many international airports, and some road
crossings, are separated into Red and Green Channels.
Custom duty is a tax which a state collects on goods imported or
exported out of the boundaries of the country. It forms a significant
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source of revenue for all countries especially in developing countries like
India. In India, custom duties are levied on the goods and at the
rates specified in the schedules to the Custom Tariff Act, 1975.
Custom duty is levied on
Import of Goods: Import is bringing of goods to India from any other
country of the world. Territorial water extends up to 12 nautical miles into
the sea from the coast of India and so the liability to pay import duty
commences as soon as goods enter the territorial waters of India. No duty
is leviable on goods which are in transit in the same ship or if goods are in
transit from one ship to another.
Export of Goods: Export duty is levied on export of goods. The main
objective of this duty is to simply restrict exports of certain goods. At
present very few articles like skin and leather are subject to export duty.
The liability to pay export duty commences as soon as goods leave the
territorial waters of India.
To carry out the purpose of the act several rules are made by the Central
Government. The few among these rules are:
• Custom Valuation Rules, 1988 for valuation of imported goods that
calculates the custom duty payable.
• Customs and Central Excise Duties Drawback Rule, 1971 for
calculating rates of duties as drawbacks on exports.
The Central Board of Excise and Customs has been empowered to
make regulations to carry out the provisions of the act. In case of any
conflict regarding the rules and regulations the provisions of the rules
shall prevail. In order to maintain the rules of the Act several regulations
like Customs House Agents Licensing Regulations, 1984 have been
Emergency powers are granted to the Central government to increase
import or export duties if a need arise to do so. The increase in these
duties should be notified in the session of Parliament or should be placed
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within seven days before the next session of the Parliament. The
notification is not considered to be valid if it is not approved within a span
time of fifteen days.
Foreign direct investment (FDI): FDI is a measure of
foreign ownership of productive assets, such as factories,
mines and land. Increasing foreign investment can be used
as one measure of growing economic globalization. It has
long term impacts and creates a great job pool in the host
country. It reinforces the economy.
(In India the largest FDI inflows comes from Mauritius.)
Foreign Institutional Investor (FII): Also known as Portfolio
investment is a term used to denote an investor - mostly of the form of
an institution or entity, which invests money in the financial markets of a
country different from the one where in the institution or entity was
originally incorporated. FII investment is frequently referred to as hot
money for the reason that it can leave the country at the same speed at
which it comes in. Thus it is of short term.
International Monetary Fund (IMF): It is an international
organization that oversees the global financial system by following the
macroeconomic policies of its member countries; in particular those with
an impact on exchange rates and the balance of payments. It is an
organization formed with a stated objective of stabilizing international
exchange rates and facilitating development. It also offers highly
leveraged loans mainly to poorer countries.
Debt vs. Equity: To raise money companies can either borrow it
from somebody or raise it by selling part of the company, which is known
as issuing stock. A company can borrow by taking a loan from a bank or
by issuing bonds. Both methods fit under the umbrella of debt financing.
On the other hand, issuing stock is called equity financing. Issuing stock
is advantageous for the company because it does not require the
company to pay back the money or make interest payments along the
way. All that the shareholders get in return for their money is the hope
that the shares will someday be worth more than what they paid for
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When you buy a debt investment such as a bond, you are
guaranteed the return of your money (the principal) along with promised
interest payments. This isn't the case with an equity investment. By
becoming an owner, you assume the risk of the company not being
successful - just as a small business owner isn't guaranteed a return,
neither is a shareholder. As an owner, your claim on assets is less than
that of creditors. This means that if a company goes bankrupt and
liquidates, you, as a shareholder, don't get any money until the banks
and bondholders have been paid out. Shareholders earn a lot if a
company is successful, but they also stand to lose their entire investment
if the company isn't successful.
Common Stocks: Common shares represent ownership in a
company and a claim (dividends) on a portion of profits. Investors get one
vote per share to elect the board members, who oversee the major
decisions made by management. Over the long term, common stock, by
means of capital growth, yields higher returns than almost every other
investment. If a company goes bankrupt and liquidates, the common
shareholders will not receive money until the creditors, bondholders and
preferred shareholders are paid.
Preferred Stock: Preferred stock represents some degree of
ownership in a company but usually doesn't come with the same voting
rights. (This may vary depending on the company.) With preferred
shares, investors are usually guaranteed a fixed dividend forever. Another
advantage is that in the event of liquidation, preferred shareholders are
paid off before the common shareholder (but still after debt holders).
Preferred stock may also be callable, meaning that the company has the
option to purchase the shares from shareholders at anytime for any
reason (usually for a premium).
Hedge Funds: A hedge fund is an investment fund typically open
only to a limited range of professional or wealthy investors. As the name
implies, hedge funds often seek to hedge some of the risks inherent in
their investments using a variety of methods, most notably short selling
and derivatives. However, the term "hedge fund" has also come to be
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applied to certain funds that do not hedge their investments, and in
particular to funds using short selling and other "hedging" methods to
increase rather than reduce risk, with the expectation of increasing the
return on their investment. This provides them with an exemption in
many jurisdictions from regulations governing short selling, derivatives,
leverage, fee structures and the liquidity of interests in the fund.
Distressed securities: Distressed securities are securities of
companies or government entities that are either already in default, under
bankruptcy protection, or in distress and heading toward such a condition.
The most common distressed securities are bonds and bank debt. While
there is no precise definition, fixed income instruments with a yield to
maturity in excess of 1000 basis points over the risk-free rate of return
(e.g. Treasuries) are commonly thought of as being distressed.
Recession: In economics, a recession is a general slowdown in
economic activity over a long period of time, or a business cycle
contraction. It is actually a period of declining productivity. A recession is
defined simply as a period when GDP falls (negative real economic
growth) for at least two quarters. Some economists prefer a definition of
a 1.5% rise in unemployment within 12 months.
Global recession: A global recession is a period of global economic
slowdown. The International Monetary Fund (IMF) states that global
economic growth of 3 percent or less is "equivalent to a global recession".
Capability Maturity Model (CMM): The Capability Maturity Model
(CMM) is a service mark owned by Carnegie-Mellon University (CMU)
developed as a tool for objectively assessing the ability of government
contractors' processes to perform a contracted software project.
'Unfriend' (to remove someone as a "friend" on a social networking
site such as Facebook) is the Word of the Year 2009 by New World
Dictionary. (2008: 'Bailout', 2007: 'Sub prime')
Darren Morgan of Wales regained the Masters title with ease as
he outplayed defending champion Dene O'Kane 6-0 at the ONGC-IBSF
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World Snooker championship 2009.
Shot putter Om Prakash Singh won the only gold for India in the
recently concluded 18th Asian Athletics Championship in China.
In South Africa 'cruel' Zulu bull-killing ritual (also known as
Ukweshwama) is performed. In which "Dozens [of people] trampled the
bellowing, groaning bull, wrenched its head around by the horns to try to
break its neck, pulled its tongue out, stuffed sand in its mouth and even
tried to tie its penis in a knot. "Gleaming with sweat, they raised their
arms in triumph and sang when the bull finally succumbed". Now it is
being considered for vanishing.
The Company Arcelor was created by a merger of the former
companies Aceralia (Spain), Usinor (France) and Arbed (Luxembourg)
After a year in the doldrums, placements scale a new peak with an
eyeball-popping offer for a BA student that many a veteran would be
more than happy to land. The 20-year-old undergraduate Adit Mathur
of Shri Ram College of Commerce (SRCC) of Delhi University (DU)
gets an annual compensation package of Rs 32 lakh ($69,000)
offer from Deutsche Bank.
Google has now publicly announced that it is working on an
operating system called Chrome OS. Google's Chrome OS will
emphasize speed, simplicity, and security; it'll store everything in the
cloud and it'll come preinstalled on net books.
German car giants Mercedes-Benz confirmed on November 16,
2009 that they have successfully taken over Formula 1 team Brawn GP.
Mercedes have bought a 75.1% stake in the Brackley based team to
become majority share holders. The team will now be re branded as
Mercedes Grand Prix