I was surprised to read that Pakistan is contemplating importing 1,000 MW of electricity from India as I wasn’t aware that this has been discussed once earlier in 2012 as well.

Pakistan faces shortage of electricity regularly, and needs some short term measures to bridge the gap between demand and supply, but the surprising part to me was that India is not a surplus electricity generator itself, so how can India export electricity to Pakistan or for that matter, any other country?

I started by seeing if India exports electricity to any other country, and it appears that India does export electricity to Nepal with plans to start electricity exports to Bangladesh as well.

I think these are the only two countries that India exports any electricity as I couldn’t find any information on exports to other countries.

Among its neighbors, India imports electricity from Bhutan and that’s because Bhutan has surplus electricity generation.

According to MOSPI data – India consumed 6,12,645 GWh of electricity in 2010 – 11 so the 1,000 MW electricity export is a rather tiny amount, and I think this is more of a diplomatic step aimed at improving relationships rather than a measure that will have any meaningful impact on India’s overall trade or electricity production and consumption.  In that sense this is probably similar to the 1000 metric tons of onion imports from Pakistan back in the early part of 2011, except that Pakistan didn’t have an onion shortage of its own.

India and China have a very skewed trade relationship in terms of relative importance of one to the other. China is by far India’s largest trading partner with a total trade of $75 billion between the two countries in 2012, but India doesn’t feature very high in China’s list.

I was curious to see how big a trading partner is for China, and I wasn’t able to get to 2012 numbers, but I did find China’s trading partners for 2011, and here is how that list stands:

Numbers in 100 Millions USD

This is how it looks like in a graph.

A lot of people have the misconception that since India and China have similar populations, the trade numbers are also the same, but this is simply not true. Like it or not, India is a lot more dependent on China for trade than China is on India. India also runs a massive trade deficit with China, and that’s the reason why India has been and needs to push China to allow import of more Indian goods and services to even out the trade balance between the two nations.

Justdial offers local search services where you can search for a service around you using your cellphone, SMS, or just the internet. In fiscal 2012 they addressed 254.3 million searches on their platform, and that shows that it is a fairly big platform. I don’t think there is another local search engine in India that has these kind of numbers.

Just in case you’re wondering, Google said sometime ago that it addresses more than 100 billion searches a month. 

Justdial makes its money by advertising, and the way that works is that they have sponsors that pay to be displayed along side the organic search results that Just Dial shows.

So if I search for pizza home delivery near Chembur – Just Dial shows me links from Pizza Hut, Dominos etc. and then towards the right they have links for Pizza Craft, Smoking Pizzas etc. which are their advertisers and have paid to be listed there. You can see an example in the screenshot below. 

Justdial is debt free, cash flow positive and profitable so obviously the local search business is doing well for them. The company made Rs. 2,770.2 million in fiscal 2012 with a net profit of Rs. 522.8 million. The cash from operations was Rs. 1,166.05 million last fiscal. The EPS last year was Rs. 6.54 and it was Rs. 7.19 in the nine month period this fiscal.

The price band for this IPO is Rs. 470 to Rs. 543, so if you were to just annualise the EPS last year – the P/E ratio at the lowest multiple is about 49. So, the IPO is richly valued, however, there is a safety net in the Just Dial IPO so retail investors are at least guaranteed that their principal is secure for six months.

This IPO is akin to PSU disinvestment in the sense that proceeds from the IPO will go to existing shareholders, and the company won’t get any of the money. When you look at how much cash the company has generated over the past, and the capital expenses, it does seem like there is no need for the company to raise additional cash so in that sense I feel that the company isn’t losing out on anything, and the current market conditions give the promoters a good opportunity to cash out a little.

Retail investors will also get a discount of Rs. 47 and I feel that anyone interested in IPOs or direct equity this might be a good option to dip your toes in. However, IPOs haven’t done so well in the past few years and the general optimism in the market along with the rich valuation of this particular IPO makes me feel that it isn’t that great a deal for investors.

This post is written by Shiv Kukreja, who is a Certified Financial Planner and runs a financial planning firm, Ojas Capital in Delhi/NCR. He can be reached at skukreja@investitude.co.in

Budget 2013 had “next to none” changes for the Indian taxpayers, investors or savers. As far as the investment options are concerned, some minor changes were made in the Rajiv Gandhi Equity Savings Scheme (RGESS) and a new kind of bonds got proposed to be introduced from June 2013.

Most of you must be aware about it by now, these are Inflation-indexed bonds (IIBs) or inflation-indexed national security certificates which will link their capital appreciation to inflation rates.

High inflation has left Indian investors earning negative real interest rates and that ways, it has reduced their purchasing power also. Investments by Indian households in financial instruments have also dipped to its record lows in the recent times. IIBs, by definition, are meant to provide protection against inflation to its investors.

The basic idea behind launching these bonds is to incentivise Indian household sector to invest in financial instruments rather than buy gold and thereby hedge the investors’ investments against high inflation and lower the gold demand here in India.

As per the Economic Survey of 2013: “Gold is considered as a hedge against inflation. Investors, especially in the middle-class, invest their savings in gold, which, in turn, has created a huge demand for the yellow metal. This necessitated imports, resulting in foreign exchange outgo, causing concerns for the RBI and the government. Like gold, the investment in IIBs would help hedge against inflation.”

India is the largest importer of gold in the world as people have a charm of owning it as jewellery and they also have a view that the gold prices always increase over a period of time, even if there is a small fall in its prices in the short term.

India imports a large percentage of its gold consumption and makes payments in foreign currency for the same. A rise in gold demand and its imports results in a rise in demand for dollars which is a big negative factor for our economy as it results in a fall in the value of Indian rupee and a higher current account deficit (higher imports – lower exports). Ultimately, it results in even higher inflation.

IIBs are not new to the financial markets. The RBI had introduced inflation-indexed bonds some years ago, which, however, did not take off due to poor response. It was then decided to re-design the instrument.

RBI has been advocating the re-introduction of IIBs for quite some time now and it also brought forward a technical paper on IIBs in October 2010.

IIBs – Good for the Govt.

IIBs benefit both the investors as well as the issuers. Research suggests that during inflationary periods, the government’s weighted average cost of market borrowings through IIBs would be cheaper in comparison to nominal dated securities and thus it would be able to raise its required borrowings in a cost effective manner. It also suggests that the nominal interest payouts would be in line with the revenues of the government, leaving minimum mismatches on account of inflation.

Also, if the government succeeds in its attempt to attract a portion of investors’ money invested in gold or gold-linked instruments towards these IIBs, then it would reduce our import bill to some extent.

Structure of Inflation-Indexed Bonds

First tranche of Series I IIBs will be issued by the RBI on June 4, 2013 and it will carry a fixed real coupon rate which will be announced by the RBI in due course. The principal on the IIBs will be indexed to inflation and the coupon will be calculated on the indexed principal. So, the investors will receive inflation-adjusted interest payments periodically on the indexed value of their initial investment.

At the time of maturity also, the investors will get inflation-adjusted principal repayments or their original principal investments, whichever is higher.

Unlike many other countries where the CPI is widely used, the RBI has decided to use the final inflation numbers based on the wholesale price index (WPI) for setting the coupon rate on IIBs. As per the RBI – “Unavailability of a single CPI representing the consumption basket of all sections of society in India renders it impractical to be used in indexation of IIBs”. In the past also, WPI was used for indexing the capital indexed bonds (CIB) wherein principal was indexed at the time of redemption.

RBI has also announced that the final WPI inflation numbers with four months lag will be used as the reference WPI inflation. This is because many a times final WPI deviates widely from the provisional WPI, with even directional changes.

At present, the Office of the Economic Adviser, Ministry of Commerce and Industry, GoI releases the ‘provisional’ inflation numbers based on WPI with a lag of two weeks and ‘final’ inflation numbers based on WPI with a lag of two and a half months. For instance, provisional inflation numbers for May 2013 and final inflation numbers for March 2013 would get released on June 14, 2013. So, for indexation purposes in IIBs, final WPI inflation of May 2013 and June 2013 will be used as the reference WPI inflation for 1st October, 2013 and 1st November 2013, respectively.

How exactly it works

For example, assume an IIB issued at a face value of Rs. 1000 with a real coupon rate of 3% paid annually. If the annual inflation comes out to be 5% at the time of coupon payment, the principal of the bond would be re-calculated as Rs. 1050 and the coupon payment would be Rs. 31.50 i.e. Rs. 1050 * 3%.

Inflation-Indexed Bonds (IIBs):

Face Value: Rs. 1,000

Real Coupon Rate (or Inflation-Adjusted Coupon Rate): 3% per annum

Inflation at the time of Coupon payment: 2% or 5% or 8% (Three Scenarios)

Coupon Payment (in Rs.): [1,000*(1+2%)]*3% = Rs. 30.60 (or 3.06% on Rs. 1,000)

Coupon Payment (in Rs.): [1,000*(1+5%)]*3% = Rs. 31.50 (or 3.15% on Rs. 1,000)

Coupon Payment (in Rs.): [1,000*(1+8%)]*3% = Rs. 32.40 (or 3.24% on Rs. 1,000)

On the contrary, if there is a deflation of 2%, the indexed principal would be Rs. 980 and the coupon payment would be Rs. 29.40 i.e. Rs. 980 * 3%. However, at the time of maturity, as the principal to be received back can’t be less than the original face value of Rs. 1000, so it would either be the face value of the bond i.e. Rs. 1000 or a higher market price.

Index ratio (IR): Index Ratio will be used for indexation of the principal amount and will be computed by dividing reference index for the settlement date by reference index for issue date (i.e., IR set date = Ref. Inflation Index Set Date / Ref. Inflation Index Issue Date).

Tenors of the IIBs: First tranche of Series I will be issued for a tenor of 10 years, which is considered as the benchmark period in most of the dated securities. It is expected to have different maturities later on.

Issue Size: RBI plans to issue IIBs of Rs. 12000-15000 crore this financial year in various tranches and each tranche will be for Rs. 1000-2000 crore.

Reserved portion for Retail Investors: 20% of the issue size in the first tranche has been reserved for the retail investors. Series II of IIBs is expected to be announced in October, which will encourage exclusive participation from the retail investors.

At this juncture, it makes sense for the govt. to issue IIBs and it would help investors also in diversifying their asset portfolios. Moreover, investors will be able to participate in more productive assets rather than gold, which has cut down the financial savings dramatically. But, it remains to be seen how these bonds would evoke response from the investors this time around

Also read Deepak Shenoy’s post on Inflation Indexed Bonds as that has some good thoughts as well.

I’ve often seen that when your parents first decide to vist you in the USA – a lot of time and energy goes into preparing for the visa, but once that is done, you don’t prepare as much for what they are going to do when they reach the country.

As a result, parents get terribly bored during their stay, and what should be a great holiday is reduced to weeks of boredom. There are several things that you can do to prepare for your parents who are visiting the US from India, and this is definitely a situation where a little planning can go a long way.

Flight

The first thing of course is the long flight. Non stop flights can be 15 hours, and other flights can make your journey extend up to a day or more. That alone is enough to discourage most people from flying. This is a long flight, and it’s not going to be comfortable for most people, but in reality it isn’t as much an ordeal as most people think it is either.

I’ve found that drinking a lot of water, having your own entertainment like loading a movie or two on your laptop, wearing comfortable slip on footwear and having ear muffs make the journey less arduous. It will never be a cakewalk, but these are simple things that you can do to make it a little easy to travel.

 Jet Lag

Jet lag can easily ruin the first week of your vacation, and you should try to beat the lag to whatever extent possible. The thing I’ve seen work for me best is to go to sleep only during the night no matter how tired you are when you reach your destination.

You can go out during the day and get some sunlight, meet people and do things that don’t strain you physically, and also keep you going throughout the day. Keep reminding yourself that you are trading a few tough sleepless hours for several jetlag free happy days. Here are some tips to beat jet lag.

Television

These days you have great options to get Indian TV channels in the US, and if your parents are visiting, then you should definitely have the TV set up so they can see the same shows they were seeing in India. Find out the channels that they are used to watching, and then get a package that has all these channels. You may not get everything, but you can cover a lot of channels by researching thoroughly.

Phone

Even if you think your parents won’t move about much without you, it is better to get them a cellphone or if they have a cellphone then you can get a prepaid SIM card so they can keep the phone with them when they go out without you. You don’t want them in a situation where they are outside and don’t have an easy way to contact you. Prepaid cards are really cheap and all major carriers offer them.

You also need an easy and cheap way for them to call India so they can spend time on the phone without worrying about the bill. Things like Vonage, Google Hangouts, Skype etc. work great for these, and  you can choose an option that is most convenient for them.

Health Insurance

Buying health insurance is quite necessary for parents because if they fall sick then the doctor bills in the US can be really substantial and you don’t want to go through that.

You can buy a plan very easily in the US and I feel that’s better than buying health insurance from India. It’s not that the health insurance bought in India doesn’t work or there is a lot more deductible but from the few examples I know, you will have to pay money up front, and then claim the insurance money later on. While an American insurance from something like Seven Corners gets cashless facility, which is preferable.

Transportation

The lack of public transport in most places in the US can become a big problem as parents can’t move about on their own, taxis are often too expensive to be used as a regular option, and that leaves very limited choices.

Some cities have van-pools or para-transits that can become a viable option, I think of these as a slightly better version of shared ricks.

How these work is they have a set area that they service, and you can call them up to come and pick you up from your house and then drop you at a certain location say the gym or the mall, and then call them back up and ask them to drop you back home. They are really cheap, and usually safe as well. You can read about one such service called the Pace Bus Paratransit service here to get a better idea of what I’m talking about. 

Weekend Getaways

It will most likely not be possible to spend a lot of time with your parents during the week when you have to go to work, but you can plan the weekends so you see something new every weekend. Most big cities have several places you can visit on a 3 hour drive, and that means a day trip or just staying a night, and returning next day. You don’t need a leave for such trips, and if you can find a handful of these then you will have the weekends to look up to.

Weekday Activities

If your parents did something regularly in India then try to find the equivalent in the US. The gym is an easy one, swimming is another one. If they were engaged in something that can also be done in the US then you should definitely explore it and see how practical it is to get them to do that in the US.

The other side of this is to try out new things which they never did in India, but are easily accessible in the US. You can look up golf lessons as one example, it isn’t very physically demanding, and not very expensive either. If you find three or four of these type of activities, that might be enough to fill up the day for the most part.

Visiting Friends and Relatives

I think social interaction is what parents miss the most when they are in the US, and if you have friends or relatives near your place that you can arrange lunch and dinners with that’s another good option to spend time pleasantly.

Conclusion

I always feel that you can make any situation better by being prepared and this is certainly one of them. Prepare well in advance, talk to your parents, talk to your friends, get ideas and don’t let a potentially great idea get ruined by boredom! You’re only there because of them, do all that you can to make them feel that way!

Finally some great ideas from IndusLadies on this topic.

Reader Pattu had developed a great retirement calculator and shared it for free here on OneMint about two years ago, and several people have downloaded and benefitted from that calculator.

Since then he has developed a few other calculators, and the latest is an Excel based RD calculator. You can download it here.

Comprehensive RD calculator

What I liked most about this calculator is that it calculates taxes also, and in that respect it is a lot more useful than most other online RD calculators.

Of course, being an Excel RD calculator also has the added advantage of not needing an internet connection, and then it is faster as well since you don’t have to click a button to recalculate amounts.

Taxes on Recurring Deposits

A quick word on taxes on RDs – RDs don’t attract TDS, however that doesn’t mean they are tax free. You are supposed to pay tax on RD interest just like you would pay tax on other interest.

To the best of my understanding, the proper way of doing this is to declare the interest that accrues to you every year, and then pay tax on it regardless of when your RD matures. For details read my  post on taxes and interest rates on recurring deposits.

Advantage and Disadvantage of Recurring Deposits

When I looked at RD rates some time ago I noticed that banks don’t give you their maximum interest rates as RD rates, so if a bank gives 9% on a 400 day deposit, and 8% on a 1 year deposit then you are likely to get 8% on a 12 month RD, so in that sense you never get the best rate on a RD.

However, RDs are great when you want to get in the habit of saving regularly, and in this case even small sums add up. Most of us talk about how compounding greatly enhances returns, and while that is true, I feel that we don’t realize enough how quickly time passes.

What seems like just Rs. 10,000 a month now, will amount to a little over Rs. 4 lakhs in 3 years at 8%, and 3 years will also pass in the blink of an eye.

And then you will thank yourself for putting the little money away every month. This I say with personal experience, and I think everyone should get in the habit of forcing themselves to save at least a little every month and with time all of this adds up.

This great Excel RD Calculator will help you in getting an exact number on how much you will get in a few years time, and is a very useful tool. Please download it and keep it with you as a ready reference.

Please post any feedback, or report any bugs that you may have in comments – it is greatly appreciated.

Finally, a big thank you to Pattu for letting me share this great tool and I certainly do appreciate the hard work and skills that have gone into making it and I am sure other readers do too!

One of the key things that insurance companies want to highlight in their child insurance plans is the premium waiver benefit, and Pankaj Parashar left a comment about this being the key feature of child insurances plans, and the need to look at it more closely.

When I was going through the plans, it did feel like premium waiver benefit is a great thing, but then I realized that it is not all that great if the insurance company is charging extra for it.

The premium waiver works in a very simple manner. If the child insurance plan covers the parent’s life and if something happens to the parents then you no longer have to pay the premium of the plan, and when the plan matures, your child will get the sum assured from the insurance company.

So in that sense the insurance policy does exactly what an insurance plan is meant to do, and there’s nothing remarkable about this feature. There is one benefit that I like though.

The benefit is that the child gets the money when their parent had originally planned for her to get the money, and I think this is a great benefit as far as the practical aspects of getting money from an insurance company, investing it on behalf of child, and also protecting the money from people who may take advantage of the situation is concerned.

I feel that this is indeed a useful feature to have, but as far as the financial angle is concerned, instead of paying money now, the insurance company is paying you later, and with inflation chipping away at the value of money, they are effectively paying less.

In this situation, I believe the child insurance plan should pay out more in the way of sum assured if they always pay a set amount after a certain point in time. If that’s not the case then you are still better off with a term plan that pays out immediately (at least financially).

In the coming days, I’m going to look at this feature closely on some of the insurance plans listed in my post yesterday, and if you had any other thoughts on what all I should be looking at, please leave a comment and I’ll try to address them as well.

One of the most common questions I get is about children insurance plans, and usually the comment is accompanied with the name of a plan and a request to review it. I am not too familiar with child insurance plans, and the problem with following this approach is that I don’t know if there are plans better than the ones I have looked at. I thought it would be good if there were one page with child insurance plans, and I was a bit surprised to see that no one has already done that.

So I started by creating my own list of child insurance plans.

There are several child insurance plans in India, and I have created this list of every child insurance plan that I came across.
I think you can divide them into the following different categories:

1. No different than a normal plan: There are a few plans that some insurers have labeled as child insurance plans but which are totally indistinguishable from any other policy they offer.

2. Child is the insured: In these type of plans, the insurance is on the child, and I can’t understand why companies are offering such plans. What is the point on offering insurance on children?

3. Health insurance for children: These plans provide health insurance for children, and though not many parents think about medical or health insurance for children, these can be useful at times. I used to have one of these plans in my own childhood and it was a good because it came handy when I got an appendix operation in my college.

4. Parent is the insured: These are like term plans and pay up on the demise of a parent. These are of two types – they either pay the whole amount at the time of the death, or wait till the child becomes a major and then pays them.

5. Money-back plans: These are the most common type of child insurance plans where you pay a premium for a number of years and then the insurance company pays you back at set time periods. In children plans you usually get this amount when the child is 18 years old or some other milestone like that.

I have tried to list all the child insurance plans that I could find and took their description from the website itself. The idea was to see the whole list at one place and then narrow down ones that you find interesting to review further in later posts.

If you know a plan that’s missing from this list please let me know and I will update the post. If you want some parameters added then you can leave a comment and I’ll try to see if I can get that added on this post itself.

Let’s start this week with a very interesting story that appeared in the NYT about a AComplaintFreeWorld.org. The idea is that you wear a bracelet and every time you complain, you take the bracelet from one hand and move it to another. This way you are conscious of when and how much you complain and as a result stop or at the very least reduce your whining.

I think I will try doing this, (not with the bracelet) and see if I can feel a positive difference in my life.

The WSJ had a fascinating story on how the physical makeup of the brain is different in criminals from the rest of us.

The BBC had a story on how people in Jamestown, the first permanent English settlement in the America were forced to Cannibalism in the winter of 1600s. I was eating while reading this story, and that is a very bad idea.

National Geographic has a great article on how Elephants communicate. Just amazing how complex and sophisticated their communication is.

Whether you drink or not, at some point, someone is going to ask you what a single malt is.

Harvard Business Review has an interesting article on people who add complexity to everything, and delay progress on all projects.

Finally, this car is in the Guinness book because it holds the world record for the highest recorded mileage on a car. Can you guess how much it has run?

Enjoy your weekend!

In the last few years, there have been vast improvements in the quality, pricing and availability of Indian TV channels in the US.

A lot of these have been made possible with the ability to stream Indian TV channels online, and I feel the online options are the best in terms of price and quality.

Here, I don’t mean the free pirated streams which in addition to being illegal are crappy feeds and ruin your whole experience but rather paid services that are legitimate and provide a good experience.

In this post I’m going to list down some options to watch Indian TV channels online, and discuss some pros and cons of them.      

1. Indian TV Channels from Comcast: A lot of people already have a Comcast cable connection, and if you want to temporary add a few Indian TV channels to that connection, you can get the Comcast South Asia package.

I think this may perhaps be the most unpopular way of watching Indian channels in the US because the options are really very limited, and they aren’t exactly cheap either.

2. YuppTV: YuppTV is a very popular option to watch Indian channels online and on your TV. It is fairly cheap, and some channels are even free to air as well. It has channels in 8 languages, and has a lot of options, but I don’t think it has any channel that shows IPL which is a big demand for a lot of Indian customers. Please correct me if I’m wrong on this, but as far as I can see, they don’t have any option to support that.

 The great thing about Yupp is that YuppTV is compatible with a lot of devices, and has apps on some of the major selling Smart TVs also, so if you have a Samsung Smart TV, you can just download the app on that and start using that without having to buy anything extra.

3.  Dish TV: Till sometime ago you had to get into a 2 year contract and get a dish installed if you needed access to Dish TV. All that has changed now with internet streaming and you neither need a dish nor do you need to get into a contract.

You can just download the Dish TV app on your phone, tablet or PC and start watching Indian channels without the need to buy a separate device.

You can connect your TV to your computer and watch the channels online on your TV as well, or you can buy a Roku device and install the Dish TV app on that.

I think Dish has the highest number of Indian channels of all operators and also has IPL streaming through its Willow cricket channel. The quality is good, and you don’t see any lag at all while connected to the TV using your Roku box, and there is certainly no lag while watching it on Mac or PC.

4. Jadoo TV: Jadoo TV is similar to the Roku device but is quite a bit more expensive than it. You can stream Indian channels on it but I really don’t see a lot of appeal in this option. If someone is using this option, please leave a comment on your experience.

These are some of the popular options that I’m aware of and in these, I feel that the Dish TV option is the best one if you don’t mind the monthly subscription, the next best is YuppTV which is priced much lower but has fewer Indian channels too.

If you know of any other ways to watch Indian channels in the US, please leave a comment and I will update the post. Please don’t leave   links to sites which are streaming content illegally, as I will remove those comments anyway.

Update: Mr. Rajagopalan sent in the following email on this post:

Dear sir,