@Leisure - Vol-22 | srei

@Leisure - Vol-22

Newsletter
 

Christmas Price Index

Up north! That is the usual direction prices seem to take.  Trends in prices are captured by a simple mathematical method known as Price Index. A price index tracks the movement in prices of a hypothetical basket of goods over time.

A festive season particularly witnesses prices matching the surge in our spirits. Wouldn’t it be interesting to gauge how most sought-after festive goodies have become dearer over a season? This prompted chief economist of the US bank, PNC Wealth Management, 30 years ago to compose a new price barometer - the Christmas Price Index (CPI). The bank was then known as Provident Bank and the CPI was designed to engage its clients in an amusing way.

The CPI tracks the current cost (dubbed “True Cost of Christmas”) of one set of gifts mentioned in the classical carol “The Twelve Days of Christmas”.  This carol lists items like a partridge in a pear tree, two turtle doves, three French hens, four calling birds, five golden rings, six geese, seven swans, eight maids, nine dancing ladies, ten leaping lords, eleven pipers, and twelve drummers. These items constitute the market basket of CPI, similar to a serious economist’s market basket of goods consumed by the average American for a regular Price Index.

The fun concept behind the CPI does not prevent meaningful interpretations one can make out of it. For one thing, the index captures the service sector economy and indicates growing inflation in wage rates for skilled (dancing ladies and leaping lords) as well as unskilled labour (the maids). For another, it reflects prices of items like swans and partridges which have not risen as much.

Reflecting the growing interest in online shopping, the index is currently computed by including internet-savvy shoppers as well as the traditional buyer who prefers off-line transactions.

The index is not known for its precision and has attracted wrath of the critics for including prices only partially. For example, in the price of “maids milking a cow”, the price of the cow is not considered. Critics also point out that in this index, the price data is usually sourced from a single vendor and by the same person each year. This might lead to obvious biases.

Nonetheless, the index has gained wide popularity and is another delight in the festive season. For many a reveller, the “True Cost of Christmas” is a curiosity and for many a school kid, it serves as an educational tool for learning basic concepts of economics in a fun and easy way.

The Christmas Price Index, which started as fun and whimsy 28 years ago, has become a much-awaited economic report today. Among some interesting insights it offers is that Christmas was most economical in 1995 whereas the year 2003 witnessed the sharpest price rise in the history of the index. Do not forget to check it out this year and compare the price tag of festivities with the previous year.

 

Srei drives ahead in the
transportation sector

Intro: Srei, an experienced hand at the infrastructure sector, has over two decades of operational expertise in this sector. Today, Srei is an infrastructure solutions provider but our journey started as an infrastructure equipment financier. We have come a long way and transformed ourselves into a company that understands what infrastructure in India is all about. Srei provides support to a wide range of infrastructure activities and we have a presence in crucial infrastructure areas such as roads, bridges and highways.

Srei and infrastructure equipment

We support a range of activities and a wide variety of users of infrastructure equipment. Srei finances first-time users of infrastructure equipment and also works alongside large construction houses and project developers. We finance dozers, heavy dumpers, compressors, cranes, surface miners, compacters and many other such vital vehicles and tools.

Srei and comprehensive services

We provide holistic financial solutions for the infrastructure sector, which spans equity, debt and mezzanine capital. Our advisory solutions include debt syndication, private equity as well as mergers and acquisitions advisory. Srei extends financial assistance to power, renewable energy, roads, bridges, highways, airports and ports and a myriad of other vital infrastructure.

Our project background

Srei has a robust portfolio and execution experience spread across 14 Road Projects on BOT/Annuity with over 5,400 lane kms of Road Projects across India. National Highways Development Programme, National Highway Authority of India and others have awarded projects to us. We are expanding our infrastructure portfolio from roads to seaports, airports and railway development as well as mining, power transmission and waste recycling infrastructure projects in the PPP space. Some of the projects that Srei is associated with are 2/4 Laning of RimuliRoxy-Rajamunda, Section of NH 215, 4 Laning of Solapur Maharashtra/ Karnataka Border Section of NH-9, 2 Laning of Potin Pangin Section of NH-229.

Scope for the future

The Indian construction equipment industry is expected to grow by USD 5 billion by 2019-2020; this is all thanks to a revival in infrastructure projects. The government is committed to developing India’s road and highway sector as well as other infrastructure. The Union Minister for Road transport, highways and shipping has announced that national highways will be increased in length to 1,50,000 Km from their present 96,000 Km. Several new infrastructure projects like the Delhi-Mumbai Industrial Corridor, Amritsar-Kolkata corridor as well as Bangalore-Chennai corridor would require massive building of public infrastructure.

Conclusion: Srei is going to benefit as the country builds more to get moving. Our expertise in working with major stakeholders in the transportation sector puts us in a unique place and our comprehensive solutions from equipment finance to financing entire projects gives us a ringside seat as the Indian infrastructure story unfolds.

 
 

Bonds versus post office schemes - a comparison

When it comes to investing money, you may have many questions regarding the various options available. Post office schemes are familiar to many investors and so are bonds. Let’s see how they compare:

  1. Post office schemes
    1. MIS: Monthly Income Scheme is a 5-year scheme which pays out monthly interest at the specified rate which is 8.40% per annum. The maximum amount that a person can invest is Rs.4.50 lakh, either individually or as one of the joint holders.
    2. NSC: National Savings Certificates come with tenures of 5 years (Issue VIII) or 10 years (Issue IX) with interest rates of 8.50% and 8.80% respectively. There is no maximum limit for investment. The principal and interest accrual qualify for tax breaks under section 80C
    3. Time deposit: These operate similar to bank deposits and offer tenures of 1, 2, 3 or 5 years with interest payable annually but compounded quarterly. The minimum amount of deposit is Rs.200 with no maximum limit.
    4. PPF: Public Provident Fund (PPF) is a very popular scheme that provides tax breaks. The minimum tenure of the scheme is 15 years and the maximum limit of investment per year is Rs.1.50 lakh per person per annum. The current interest rate is 8.70% compounded annually.
  2. Bonds
    1. GOI and corporate bonds: These represent borrowings by the government or corporates which are issued for a specified period of time and interest rate (called coupon). These papers are usually traded in the securities market for liquidity.
    2. NCDs: Non-convertible Debentures are similar to bonds in that they are issued for a fixed tenure and a specified coupon. They are also traded in the securities market. NCDs may be secured against the assets of the issuing company.
  3. Advantages and disadvantages:
    1. Post office schemes: The major attractions of these schemes are the fixed rate of return and the sovereign guarantee of the government. The major drawbacks are the poor tax efficiency and poor inflation protection. The interest income (except PPF and NSC) is fully taxable and the post-tax return would struggle to beat inflation which may adversely affect your wealth in the long run.
    2. Bonds / NCDs: In addition to the return provided by coupon payments, these offer potential for capital gains in case market interest rates slide after these papers are issued. Another advantage is the better tax efficiency. While some bonds pay out tax-free dividends, capital gains on all bonds are subject to lower tax rates if they are held for at least a year. The disadvantages are the risk of default in case of private companies and the fluctuations in interest rates

Conclusion: Post office schemes are easy to access and offer security in terms of sovereign guarantee. However, bonds also have their own unique advantages like potential for capital gains and favourable taxation. You may choose your investment as per your preferences and circumstances.

 
 

Buddy Jokes

JOKES

1. One place, where you can always find money? - In the dictionary.

2. Teacher: “Whoever answers my next question, can go home."
Jay, throws his bag out the window.
Teacher (angrily): “Who just threw the bag out?”
Boy: “Me and I’m going home now.”

3. A family man says: Now, I know why I used to love Christmas as a child. I did not have to pay for the gifts!

 

Buddy Quiz

Fill in the blanks:

1. Trends in prices are captured by a simple mathematical method known as _______.

2. The Christmas Price Index, which started as fun and whimsy 28 years ago, has become a much-awaited ____________ today.

3. The Indian construction equipment industry is expected to grow by USD 5 billion by ___________.

4. ______________ is a very popular scheme that provides tax breaks.

5. NCDs may be _____________ against the assets of the issuing company.

Answer: 1. Price Index; 2. Economic Report; 3. 2019-2020; 4. Public Provident Fund (PPF); 5. Secured.