All you wanted to know about the Ease of Doing Business rankings

The last few days have seen a lot of media coverage and talk about the World Bank’s “Ease of Doing Business Rankings”. So yes, India has been ranked 100 out of 190 countries and that’s a gigantic leap of 30 places up from last year but what does this mean? Why is it important for a common man to know? How are these ranking derived? If you’ve been wondering this and more, then read on as the GK Nugget tries to simplify the Ease of Doing Business Rankings.

What are the Ease of Doing Business rankings?Every year the World Bank ranks 190 countries of the world on the basis of various parameters. These rankings are based on 10 indicators such as getting credit, paying taxes, enforcing contracts, resolving insolvency, etc. Higher the ranking; better is the environment to start and run a business in that country. The rankings are calculated for the period June to May of the previous year (i.e. June 2016 to May 2017 for the Doing Business Report 2018). Usually 1 city in each country is surveyed, but for large countries 2 cities are surveyed (Mumbai & Delhi were surveyed for India).

Why are the rankings important?
These rankings indicate how easy it is to run a business in that country, which in turn boosts employment and growth. It also attracts foreign investment. Most importantly, an improvement in the rankings indicates that the country is taking steps to implement reforms and is bringing about positive changes.

So how has India fared?
India was ranked 142 in 2015, 130 in 2016, 130 in 2017 and now it has been ranked 100 in 2018. India making a jump of 30 rankings is a big deal because it is a feat which is rarely achieved and also it is very difficult for a large economy to make such a drastic advance.  The report acknowledges India as a top improver with the highest jump in rank of any country.


Which areas showed improvement?
Out of the 10 indicators that are taken into account to get the Ease of Doing Business rankings, India has improved its rankings in 6 indicators compared to last year.
Construction permits – 181 (up from 185)
Getting credit – 29 (up from 44)
Protecting minority investors – 4 (up from 13)
Paying taxes – 119 (up from 172)
Enforcing contracts – 164 (up from 172)
Resolving insolvency – 103 (up from 136)


In which indicators did our performance deteriorate?Starting a business – 156 (down from 155)
Getting electricity – 29 (down from 26)
Registering property – 154 (down from 138)
Trading across borders- 146 (down from 143)


What led to this improvement in the rankings?Some of the reforms which were implemented by the government in the past year have helped boost the ranking. E. g.: Insolvency & Bankruptcy Code coming into force has made it easier to resolve insolvencies, rules & procedures cut for building permits, paying taxes has become easier owing to online means adopted, PAN & TAN applications merged & put online to make it easier to start a business, etc.

Uhh… you forgot to mention GST!!
That, my dear friend, is the icing on next year’s cake. The cut-off date for taking into account reforms implemented was 1^st June. Therefore the impact of GST will come into play in next year’s rankings. You can expect a substantial jump in rankings again, since the World Bank has already acknowledged the implementation of GST as a very important reform.


Sannu ki? Ki farak penda hain? (So what’s in it for the common man?)
Ah, now this is the tricky question. There is no direct benefit for the common man, but the reforms that are being put into place (which help improve our rankings) will also help boost employment, growth & development in the country which will in turn raise the living standards.


Hope that helped clear some of your confusion about the Ease of Doing Business rankings. That’s all on this edition.

How to Invest correctly - Tips from the 9 Days of Navratri

Chaiwallah of Dalal Street 

How to Invest correctly: - 

Tips from the 9 Days of Navratri 

Navratri (the nine auspicious days of the lunar calendar of Hinduism) begins on 21^st September this year & the festivities will be completed on 29^th September. Now we all know the significance of the nine days & also that each day is devoted to one avatar of Maa Durga. But did you know that the nine days of Navratri also hold a deeper connect & learnings on how to manage your financial portfolio? Read on to find out how:

Day 1: Avatar worshipped – Shailaputri

This avatar of the mother goddess is known as the daughter of the Himalaya (shail = mountain, putri = daughter).

Stay focused: Remember the mountain when reviewing your financial portfolio. Don’t lose sight of your goal with every storm. Stay strong in the face of bad weather (turmoil in markets) & remember that bright sunny days are around the corner.

Day 2: Avatar worshipped – Brahmacharini

This avatar practices devout austerity. She is filled with bliss, happiness, peace & prosperity & it is believed that she bestows the same on devotees.

Financial freedom: Isn’t happiness & peace what we all want in the end? Isn’t that why we work so hard to be financially secure?  Remember to invest correctly with the help of an efficient, experienced & learned financial advisor so that you can also attain happiness & prosperity for yourself & your family.

Day 3: Avatar worshipped – Chandraghanta

This avatar’s name is derived from the chandra (half moon) in her forehead in the shape of a ghanta (bell). Chandraghanta rides a lion, has ten hands (each holding a weapon) & is ever vigilant.

Diversification/Asset allocation: While we have only two hands, we can use asset allocation to ensure that our financial portfolio has the proverbial ten hands. Spread out your investments across different asset classes so that in the case of any problem in a particular asset class, the other ones will be ready to take care of your financial needs. To simplify, the major assets classes are stocks/equities, real estate, cash & commodities (Gold, silver, etc).

Day 4: Avatar worshipped – Kushmanda

Kushmanda is considered the creator of the universe.

Plan before building: While God is the creator of the world we live in, you are the creator of your financial universe which can only be created by efficient planning. Always set your goals – short term, mid-term & long term – based on which you should plan your investments. Like the universe is constantly changing, so will your goals. Sit with your financial advisor every few months & update your goals, if required.

Day 5: Avatar worshipped – Skanda Mata

She is the mother of Skanda, or Karthikeya, who was chosen by the gods as their commander-in-chief in the war against the demons. The Skanda Mata avatar of the Mother Goddess is accompanied by Skanda in his infant form who she protects.

Succession planning: You are building a financial portfolio so that you can provide the best of everything to your family. But you need to protect these finances as well. Make sure that you have adequate term insurance to cover the financial loss of an untimely demise. Also, as soon as you start earning or own any assets, be sure to make a will so that your assets are transferred to your successors smoothly after your passing.

Day 6: Avatar worshipped – Katyayani

In order to destroy Mahishasura, Maa Durga took the avatar of Katyayani. Born in a fit of divine rage & anger, she emits a radiant light from her body from which darkness & evil cannot hide. Despite her appearance, Hindus believe that she can bestow a sense of calm & inner peace upon all who worship her.

Demolish greed: We live in a day & age when we can get a loan faster than a pizza. Maintain your inner peace & calm & do not get swayed by the greed of easy money. Borrow money for a need (which builds an asset for you), not for a want (which becomes a liability).

Day 7: Avatar worshipped – Kaal Ratri

Kaal Ratri avatar is also known as Shubhamkari, which means "one who does good." She is a fearsome-looking deity, with a dark complexion, disheveled hair, four arms, & three eyes. Like Kali, the goddess who destroys evil, Kaal Ratri has black skin & is worshipped as a protector of Hindu faithful, one to be both honored & feared. In her left hand, she holds a vajra, or spiked club, & a dagger, both of which she uses to fight the forces of evil. Her right hands, meanwhile, beckon to the faithful, offering them protection from darkness & allaying all fears.

Technology: Yes, technology – On the one hand it can be used to destroy things but in this case I want you to focus on how technology can be used to make financial transactions, charges & information transparent & easily available for you as well as how it is used to protect all the digital transactions that run today’s global financial world. Use it to keep yourself informed & to manage your finances better.

Day 8: Avatar worshipped – Maha Gauri

Maha Gauri is believed to have done long austerities in the deep forests of the Himalayas. Hindus believe that by paying homage to Maha Gauri, all past, present, & future sins will be washed away, imparting a deep sense of inner peace.

Reach out to those who have attained knowledge over the years: You most likely are working in a job which is not connected to finance. So it would make sense to take the help of experts who have spent many years working in this field to help you invest your money in the best way, so that you are at peace.

There are two ways to go about this – Hire an experienced & learned financial advisor to help you with your portfolio. Yes – HIRE. Please discuss their fees with them & pay them. Would you go to a doctor who doesn’t charge you?  No right, then why don’t we apply the same logic for our financial health as well?

The second thing to do is to consider investing through mutual funds. Mutual funds have fund managers & large research teams who are constantly studying market trends & the reports of companies, to ensure that your money is invested in the most ideal form so as to provide you with the best possible returns.

Day 9: Avatar worshipped – Siddhidatri

The last day of Navratri is celebrated by worshiping the Siddhidatri avatar of Maa Durga. Her name means "giver of supernatural power," & Hindus believe she grants wisdom & insight to those who worship her.

Gain self knowledge: While taking the help of a competent financial advisor is highly recommended, do undertake a bit of self study as well so that you may gain some wisdom & insight as well. Take some time to read about financial planning & educate yourself about proper investment methods.

I hope you have enjoyed reading this article. Please do share your thoughts with me.

IMPORTANT: These are just some guidelines & should not be taken as any specific investment advice. Please always consult with your financial advisor before making any investments.

May Goddess Durga shower blessings of happiness, peace & prosperity on you, your family & your friends & I wish that in all avenues of your life may Good always prevail over Evil.

Investing in equities SIP by SIP

Chaiwallah of Dalal Street 

answers 5 questions about SIPs

Whenever a financial planner or a stock broker talks to an investor about putting in some money in the stock market, they generally end up saying "Sir, aap SIP kyun nahi kar lete?"

There is quite a lot of confusion about what this SIP is - is it beneficial and if I put my hard earned money in this, how should I go about it?

So here are 5 questions you wanted to ask about SIPs but didn't know who to ask?

What is SIP?

SIP is short for Systematic Investment Plan. To simplify it, you can consider it to be the opposite of an EMI; With an EMI you pay a certain amount of money every month to clear your loan, while with an SIP you pay a certain amount of money to buy some mutual fund units.

What is mutual fund then?

Remember as a kid when we used to play galli cricket, we'd all chip in some rupees and buy a few balls so that we could all play and not worry if 1-2 balls got lost.

Keep this in mind and tweak the idea slightly. 

Now, we all give some of our money to the  fund manager, who then buys the shares of the companies that he thinks will give the best return to us. So by paying smaller amounts, we have access to a large number of shares (just like by paying a few rupees we had access to a larger supply of balls).

So we can invest in SIPs to invest in Mutual Funds?

In a way yes, but that's not the correct way to say it. SIPs are a vehicle to invest in Mutual Funds. 

With things being so expensive nowadays it is difficult for most people to save or invest large sums of money every month. So what you can do is to fix a certain amount per month (starting from as low at Rs. 500) that you will invest in Mutual funds. When you give the order to your bank to release a fixed amount per month (just like EMI) towards a mutual fund, this is called a SIP. 

But I think stock market is just a gamble; it's very risky.

Hmm, ok, I can see why you would think that. But SIPs can be made for mutual funds that invest in debt instruments (like bonds and deposits) - which are much less volatile compared to equities. Also, there are Balanced Mutual Funds (which invest in equities and bonds/deposits) as well as Gold Mutual Funds. So you can use SIPs to invest in these funds as well.

Why is everyone promoting SIPs? Is it really that important to an investor's financial portfolio?

SIPs allow the investor to invest small amounts every month. This helps the investor be disciplined in his investing and also helps him reap the benefits of the same. 

The values of shares in the stock market are constantly changing. By regularly investing, the investor averages out the good & bad days on the stock market rather than investing and hoping/praying that the market goes up only. 

So yes, SIPs are very beneficial to an investor's portfolio.

SIPs can now be started online, so it is almost hassle free. Here's a link to an article about starting an SIP online.

Any more queries about SIP? Write to me in the comments section and I'll try and solve them to the best of my ability.

You can also visit this link for a very helpful investor education initiative called SIP Day undertaken by Kotak Mutual Fund & ET Now.

Most importantly:

We spend most of our day working hard to earn money - so please take a few hours a month to learn about how to best invest that money.

It might be tough and confusing in the beginning, but so was your first job, and look how far you've come in that.

So please read up about SIPs, Mutual Funds and investing and talk to your financial advisor before you invest your hard earned money.

 

Why do companies buy back their shares? - Simplifying the jargon

Chaiwallah of Dalal Street 

I'm starting a series of blog posts that will aim to simplify the stock market jargon. Basically convert the big heavy concepts into simpler sounding words for the layman investor - something that the chaiwallah at Dalal Street would be able to understand & explain to others.

Let's start with share buy backs:

While the stock markets are beating records all around, you might have noticed the recent offers by companies to buy back their shares from shareholders. 

Like you, I was also curious about why companies go in for a buy back of their shares. How does it benefit them? Does it benefit the shareholders as well? Many more questions were swimming around in my head. So I pulled out my trusty mobile phone and did a few Google searches and this is what I found out...

1) Just because a company is initiating a buy back of its shares doesn't mean its a good or a bad thing. You need to see the reasons & the prevailing situations behind it.

2) When a company buys backs its shares, it basically reduces the number of shares in the market. This leads to a rise in the Earnings Per Share (EPS). Quite simply put, if there are fewer shares, that means each share gets a larger portion of the company's profit. So this is a positive move for share holders.

3) Companies usually buy back their shares at a price which is higher that the current market price. So the shareholder selling his share back to the company makes more money. Again, a positive move for share holders.

4) Many a times the company's performance is below par and so buying shares back helps boost the performance on the stock markets, since shareholders can see that the company has confidence in itself and its future performance. At this time, a shareholder has to consider whether s/he believes in the long term prospects of the company and so can stay away from the buy back also hoping to reap better gains in the years to come. This is a neutral point; it'll be positive or negative depending on what the shareholder's view point is about the company.

5) Sometimes companies buy back shares because they have surplus cash which they cannot use anywhere else. It's a way in which companies reward their shareholders.

6) And finally, tax advantage, something that we all try to achieve in multiple ways. Companies in India have to pay a 15% dividend distribution tax. Plus, if the shareholder has an income of more than Rs.10 Lakhs from dividends, then s/he has to pay 10% extra tax. By going in for a buy back, the company is able to transfer benefits to the shareholder without any tax burden (since long term gains are tax free in India). Tax saving is always a positive in anyone's eyes.


So next time a company that you own shares of goes for a buy back, consider all the above points before you decide to be a part of the sale or not.
But remember, whether you're the chaiwallah of Dalal Street or the Big Bull, you need to do some of your own homework (research), weigh all the pros & cons and discuss with your financial planner before you finally decide whether to be a part of the buyback or not.
Because remember, there are never any free lunches!!


I hope this post was helpful. Do share your thoughts in the comments section. Thanks.

When I read "Scion Of Ikshvaku" By Amish Tripathi

If you've read & loved the Shiva Trilogy by Amish, then you've probably already read the Scion Of Ikshvaku, or at least already have a copy lying in your bag or next to your bed. So this review is not for you, my fellow fan of this new age indian mythology. I say "new age indian mythology" because over the last many years, Indian mythology of today has undergone a change and is different from the Sunday stories that our parents and grandparents grew up with. 

The Scion of Ikshvaku sticks to the age old tale of glory, duty, sacrifice, virtue and honesty - the Ramayana. It begins with Raavan kidnapping Sita from the jungle where Sita, Ram and Lakshman were spending 14 years, having been banished by King  Dashrath from Ayodhya and moves into flashback from a time just before Ram's birth.

But there are some twists in the tale, which the reader will not expect, and which hooks you onto the book. E.g. Dashrath battles with Raavan on the day that Ram is born and loses.

There are parts where the book gets too detailed and lumbers on and the reader is tempted to skip a few pages. E.g. Ram's discussion with a motley crew of people at different stages of the book on dharma, the law, etc.

All in all a decent book to read, but if you've read the Shiva Trilogy and expect the same level of story telling, you will be slightly disappointed.

Will I read the sequel? Maybe, maybe not.

When I read "The Hundred-Year-Old Man Who Climbed Out the Window and Disappeared" By Jonas Jonasson

Every once in a while a book comes along that is engrossing and un-put-downable but rarely does a book come along that has those 2 qualities and is also humourous. 

"The Hundred-Year-Old Man Who Climbed Out the Window and Disappeared" fits in the latter category. It tells the story of Alan Karlsson, who has just turned 100 years old but who is fed up of the life that he leads in the old age home and runs (figuratively) away. 

We follow Alan as he travels across Sweden making friends and experiencing adventures that you wouldn't associate with a centerenian. E.g. riding on a rail inspection trolley with a corpse while disguising it to look alive, travelling with a circus elephant, and not to forget an event that pretty much started the mad adventures - stealing 50 million kroner from a goon.

Along the journey, Jonas Jonasson takes us into Alan's past to discover that this demolition expert has been an involuntary part of some of modern history's pivotal moments and met the men and women that have scripted the world as we know it. From Mao to Truman, from Churchill to Lenin, DeGaulle to Reagan and many more in between.

Besides enjoying his outlandish life story, you take back much more than giggles and guffaws. Alan's a laid back kind of guy who believes in taking life as it comes. He makes no plans for the future and just deals with what life doles out to him; something that this generation of micro managing & over planning individuals would frown upon from behind their smart phones screens.

It's a must read for anyone looking for a laugh. The incredulous adventures of Alan Karlsson will have you smirking all through the book.

Highly recommended.

When I read " How to read a book - The classic guide to intelligent reading"

How to read a book - The classic guide to intelligent reading
By Mortimer J. Adler & Charles Van Doren.

'A living classic' - a phrase that stands out on the back cover of this book. Originally written in 1940 and revised and updated in 1972 this book talks about the importance of reading correctly and how that can be achieved.

The main aim behind writing this book was that as children we are taught how to read only till we've reached the 5th or 6th grade, post which the focus of our schooling shifts to other topics like geography, science, economics, etc.

The book divides reading into 4 types - elementary, inspectional, analytical and syntopical - in ascending order, being cumulative as they go along.
Elementary being basic reading, inspectional being skimming, analytical being understanding and syntopical being the ability to read multiple texts on the same subject simultaneously.

While the book starts off well, it tends to become too wordy and lengthy as you progress. Being a guide to improve your reading, the book ends with some practical exercises which entail reading small passages from the biographies of some classic authors, which if you are interested in history, will be quite captivating.

There are some interesting take home pointers, about the importance of scanning the table of contents, the publishers blurb, the authors introductory note before picking up a book to devote your precious reading time to.

Another good point made is that reading is of 2 types - for information and for understanding.
Reading for information is when you read something that you have some prior knowledge about, but it is when you read to understand that you stretch your limits by reading passages that require rereading and contemplation before you grasp the author's point of view.

At 426 pages, I have to be honest and say that I did not read each and every word on every page. But as the authors point out "Race through even the hardest book. You will then be prepared to read it well the second time."
Somehow, I don't think I will be giving this one a 2nd read.