Next Marking Management Education

4th October, 2017

In this issue...

1. Investing is simple, dont make it complex!

2. Ind AS a transitional Journey.

3. Act smart, Bank smarter, Insure in the smartest way

4. GST- A Starters Edition

5. FinTech Yay or Nay?

6. What lies ahead for cryptic cash in India?

7. 2019 Recession: Not Traumatic, yet a painful one

 From Editors Desk

By Neha Sardar & Akhil Jacob

The SIPs and Finals are here and we are all preparing for the painfully difficult
and overly unpredictable selection processes of the companies in campus this
edition of Sofia times aspires to make this task a wee bit easier for you guys.

This Edition has a variety of articles that can help you sail through the group
discussions and personal interviews.

We have GST decoded and simplified for you guys since this is a hot topic for
GDs these days its a breeze through the mammoth concept of GST.

Bitcoins are the new medium of exchange today, gone are the days of our good
old currency. Bitcoins are fast taking over the transactions in the west and India
is not far behind its interesting to know the level of penetration of bitcoins in
our nation.

The new wave in finance Fintech is extensively explored by Sofia times for
you.

For the finance enthusiast out there, we have our investors special and a deep
insight to the Indian Accounting standards.

We hope that you will find this edition useful and please let us know of there
are any specific areas you want us to cover in the future.

Happy Reading!!!!
 Investing is simple, dont make it complex!

By Angad Katdare

F
inancial literacy isn't a skill - it's a lifestyle. You should never lose your
sleep over investments. Once you start investing, dont look at the returns
from day 1. Focus on building the corpus fund i.e. your total funds.

Don't worry if you are not financially literate. Effective managers outsource their
work. Use that skill and outsource the financial headache to a professional i.e.
invest in a mutual fund and transfer the headache to the Mutual fund manager. It
will be his headache to generate returns for you.

First of all, you should change your mind-set about investing. Investments
(savings) is not Income - Expense but Expense = Income - Investments. I mean
dont spend the money and then invest the remaining amount but first invest and
then spend the remaining amount. Get this equation hardwired in your mind.
When you get your salary, first
allocate your money to savings and
then use the remaining amount as
Money begets money, the earlier expenses. Try to increase the
the better. You will make far more investing amount by 5-10% every
money by investing early and year.
reinvesting the dividends, interest
and gains than you will by earning
Investing in equities is important in
a paycheck unless you are a
movie star, pro athlete or heir to a todays time because it is the only
major fortune. asset class which beats the inflation
rate. Inflation is a silent tax which no
one can avoid and its an extremely efficient destroyer of value.

If you ask me how to do it, the just Start a SIP (Systematic Investment Planning)
in mutual funds. Invest every month in those mutual funds. Pick one balanced
fund, one large-cap fund and one mid-cap fund (Not a golden rule!). Program the
SIP in such a way that every month the equal amount will be automatically
invested in these funds a day after you get your salary. After all the expenses over
the month, if some salary is remaining, invest it in these funds. Follow this cycle
every month.

Warren Buffett once said, Chains of habit are too light to be felt until they are
too heavy to be broken.

Make investing via SIP every month a habit. Overtime youll be amazed by the
results. My take is dont look at the returns for the first 5 years. Let the corpus
build for itself. After 5 years, review the returns on the funds and if you feel the
returns are not satisfactory, then reinvest them somewhere else. Over the 5 years,
youll develop some knowledge about investing and you will be comfortable with
it and youll have a good corpus too.

To reiterate my point: In the

compound interest formula, people As of January 2013, there are 16
people left in the world who were
focus on the r i.e. rate of returns
born in the 1800s, according to the
rather than t i.e. tenure or the Gerontology Research Group. With
amount of years. Warren Buffett dividends reinvested, U.S. stocks
earned 99% of his current wealth have increased 28,000-fold during
after the age of 60 (He has been their lifetimes.
investing since the age of 26). Thats
surprising but true. He remained invested for a long time on his existing income
which compounded over time and gave him huge returns. Focus on the time factor
rather than return factor.

There are perks to invest in equities too. You earn a higher return than inflation.
You dont have to pay taxes for any gains over and above one year holding period.

Bottom line: Focus on investing as a secondary source of income and as a

protection of capital and try to become rich from your existing profession by
investing a large amount.
 Ind AS a transitional Journey.
By Akash Dammani

2
016 has been a transitional year for the Indian Companies into a new era of
Ind AS- A new framework which has been introduced under the
supervision and control of Accounting Standard Board, a committee under
Institute of Chartered Accountants of India. The Ministry of Corporate affairs
have mandated its applicability in a phased manner based on listing status and the
net worth of the company. From 1st April, 2016 all the companies (listed as well
as unlisted) having a net worth of INR 500 crore must mandatorily follow Ind
AS. The second phase of transformation (beginning from FY 2017-18) applies to
all the remaining listed companies and to other entities with a net worth of INR
250 crore or more (along with their holding, subsidiaries, and associates).

There have been over 1000 companies that have been transitioning to Ind AS in
phase 1. The existing Indian GAAP is significantly different from the Ind AS.
The major differences lie in the areas of financial instruments, share-based
payments, revenue recognition, business combination, consolidation of accounts
and presentation and disclosure. Hence it was a challenging affair for the
companies for going through this transition. MCA has also brought in changes in
the standards after due notification (Ind AS 115 Revenue from Contracts with
Customers was omitted and Ind AS 18 Revenue and Ind AS 11 Construction
Contracts were made applicable) also compounded a lot of problems for the
companies. MCA has notified the Companies (Indian Accounting Standards)
(Amendment) Rules, 2017, making amendments in Ind AS 102 on Share-based
Payment and Ind AS 7 on Statement of Cash Flows applicable w.e.f. 1 April,
2017.SEBI preempted the situation and were compelled to extend the timelines
of submission of financial results.

EY did a review of the financial results of 60 companies in BSEs top 100 list
that were covered in Phase I implementation and the remaining covered in the
subsequent phase, had a different year-end date or had not published their
financial results as of 20th August 2016 (the cutoff day for their review). They
had observed that the impact of Ind AS on companies reflect a mixed trend. 28%
of the companies experienced more than 10% impact on their net profits. They
themselves believe that the impact may not appear to be substantial but this
impression may not seem to be substantially correct. The sole reason being that
the impacts are being neutralized by the exemptions availed by the company.
While on the other hand in some cases, the net profit may not be significant but
the impact on the individual caption may be significant. A classic example of this
will be netting off the sales incentives with the revenue that may have no impact
on the net profit but will have significant impact on the revenue. Along with this
the major impacts were seen in the accounting of the Financial Instruments (this
had an impact on majority of the company), Share Based Payments, lease and
operating segments, employee benefits.

Some facts from the survey done by Mazars and ASSOCHAM survey:

86% of the respondents confirm that the phase-wise implementation of Ind

AS has provided enough time to the companies for a smooth transition.
However, 8% believed that more time should be provided and 7% was
unsure.
51% of the respondents believe that the MCA will be able to pace up with
the further amendments to IFRS from time to time in future. However, 36%
could not confirm their positive views and 12% believe that MCA will not
be able to pace up with the same and there will always be the time lag
between the amendments issued by IASB (International Accounting
Standard Board) and MCA.
46% of the respondents trust that adequate carve-outs* will be provided
under Ind AS to suit the Indian environment,32 % of people are still unsure
and 22% of the respondents feel that carve outs may not be adequate.
74% of the respondents feel that different corporate, banks and NBFCs etc
with different timelines is a fair strategy of MCA. 11% believe that it would
be better if the standardize roadmaps with same timelines were issued. And
16% of the respondents are unsure whether the same is a fair strategy or
not.
5o % of the respondents had given an affirmative response to the fact that
they have got adequate support from all the departments during the
transition period. However, 21% believed that all the departments of their
company are not in a sync and few 17% expressed their inability to opine
with conformity on the same.
After the completion of Phase, I transition, 48% of the respondents were
indecisive whether the phase II companies would be ready for Ind AS
 transition. 9% believed that companies will require more of time and the
remaining 43% were affirmative that they will be ready.
There was an equal weightage of opinion i.e. 35% each for the fact that
whether it will be difficult to explain the stake holders about the impacts
of Ind AS convergence on key financial measures. The remaining 30%
replied without a definitive opinion.
77% of the respondents believe that Ind As reporting will improve the
quality of financial reporting.19% also express the hope in this direction
and negligent 4% were pessimistic about this initiative.
44% of the respondents believed that revenue will the area where the
corporate will see maximum impact of Ind AS. Next 26 % feels the net
worth will be the key impacted area.19% voted for the net profit and the
balance 11% for taxes.
Lastly 50% of the respondents agreed that the financial instruments would
get affected the most due to the Ind AS convergence process. The rest were
equally distributed between Plant Property and Equipment (PP &E) and
Business combination aggregating around 24 % each. A minority 5%
believed that leases would get affected the most.
We have already seen a drastic impact in the 1st stage of implementation, and the
second stage is ongoing. The facts and figures gives a clear indication that the
Implementation of Ind AS is greatly welcomed by the corporates and they have
been given enough transition time and the process planned by the ministry was
effective. How far is it smoothing it is for the Phase II companies is still an
interesting area of analysis.

* Carve outs are the differences between the IFRS adoption and IFRS
convergence.

IFRS adoption: A country adopting IFRS is implementing IFRS into its

legislation in exact form as issued by IASB. Most of the countries adopted IFRS,
rather than converged.
IFRS convergence: A country converging to IFRS cooperates with IASB to
mutually develop compatible accounting and financial reporting standards (so, no
100% mere adoption occurs). A typical example of IFRS convergence is India
itself. In India we have the converged IFRS in the form of Ind AS as issued by
ICAI.
 Act smart, Bank smarter, Insure in the smartest way

By Anushree Bhargava

I
nsurance is a game man plays after his life. Someone very rightly said
this. You take birth, live a life and never understand the importance a
life insurance holds. Once you cease to exist, life insurance bequeaths
you the real sustenance. As per the Financial
Express, approximately 20% of the insurable
population is covered under any insurance
scheme. Pondering over this statistic really
makes me think what thought process does
an Indian holding in terms of availing any
life insurance for himself. The moment we
hear the footsteps of an insurance agent is
when we frown and crib that I have heard
this infinite number of times. You
manipulate reasons to ignore these agents or
rather consider yourself too young to be the
owner of a life insurance policy.

Each day lived is a day less in your life. While

you may thank the Almighty for not experiencing any unfortunate event, you
never know when the need for a PLAN B may arise. By PLAN B, I mean having
a life insurance policy to act as a catalyst in fulfilment in all investment required
deals. With the ongoing lifestyle a 1990s kid is living around an environment of
illness, low mortality and a lower life expectancy. And that is when the whole
concept of life insurance policy comes in to picture. It is not only about having a
death benefit or leaving behind resources for your loved one. Instead it displays
the correct financial planning one does throughout his life. It brings out the fact
that financial resources are invested in an efficient manner and that locking in
premium is valued significantly by the insured. So very quickly, I shall present to
you five reasons as to why you shall buy a life insurance in your twenties and
how will it change your life ahead.
1) Buying a life insurance at 25 is way easier than buying it at 45
My mommy already suffers from blood pressure problem and last week
the insurance agent claimed that it could be a little difficult for her to enter
into the contract of insurance. That is when my family realised that I shall
get insured at the age of 22. Currently I am fit and hale and hearty. All
these health ailments like diabetes, blood pressure take place in your body
after the age of 30 and
hence buying an insurance
policy now will prove to
be economical as less
premium will have to be
paid. The later you buy an
insurance, the more you
are jacked.

2) The cost of wait will be

costly
Consider a student of 22,
pursuing the degree of
MBA and excellent in
health. If she takes a life
insurance of 30 years, she
would have to pay x
amount of premium and
her policy expires at the age of 52. If she takes it at the age of 42 for 10
years, she would have to pay a premium of 3x and her policy would
expire at the age of 52 again. Both the policies have the same maturity
date. But at the age of 42, the person is 20 years older than before and
hence the probability of his death is higher than before. Thus, the premium
paid will be greater.

3) Efficient allocation of funds

Never put all your eggs in one basket is what the saying goes as.
Similarly, never invest all your available monetary resources at an early
age in investments that offer attractive returns. They might be fruitful for
 a short term but investing in life insurance will attract a long-term gain in
terms of security and larger returns.

4) Great supplement to heredity ailment

The life insurance policy is like a guarantee to the future unfortunate
events that might happen. Procuring this policy at an early age states that
if in the near future any ailment is passed on from the older generation like
diabetes or cataract, then the persons premium will be based on the terms
at which he had initially purchased the insurance. Furthermore, few newer
insurance policies are designed in such a way that the premium paid is
fixed at the rate that was agreed to at the initial time the policy was taken.
This is extremely useful for infirmities that pass on generation to
generation.

5) Premium isnt that of a

burden
At the age of 25, the liabilities one
owes is not much of a big deal. The
miscellaneous expenses of childrens
education or marriage, or greater
income taxes or family living
expenses is negligible. The person
can allocate a sufficient amount as
premium and not take it as a burden
on himself.
So, I have given you reasonable pointers to right away purchase a life insurance
policy. Were educated and it is time we better behave as one. Learning the
benefits of life insurance and still acting ignorant just brings out the disability of
financial sense. Its a competitive world. Get up and act as soon as possible.
 GST- A Starters Edition
By Neha Sardar

W
hat is GST?

Goods & Services Tax

Law in India is a
comprehensive, multi-
stage, destination-based
tax that will be levied on
every value addition.
Simply put GST is an
indirect tax levied on the
supply of goods and
services. GST Law has
replaced many indirect tax laws that previously existed in India.

Multi-stage: There are multiple change-of-hands an item goes through

along its supply chain i.e. from manufacture to final sale to consumer
Value Addition: Let us take an example, a manufacturer who makes clothes
buys yarn. The value of the cloth gets increased when its made into a dress.
The manufacturer then sells the dress to the warehousing agent who
attaches labels and tags to each dress. That is another addition of value after
which the warehouse sells it to the retailer. The retailer packages each dress
separately and invests in the marketing of the dress thus increasing its
value.
Therefore, GST will be levied on these value additions i.e. the monetary
worth added at each stage to achieve the final sale to the end customer
Destination Based: Consider goods manufactured in Mumbai and are sold
to the final consumer in Karnataka. Since Goods & Service Tax (GST) is
levied at the point of consumption, in this case Karnataka, the entire tax
revenue will go to Karnataka
Advantages of GST

Removing cascading tax effect

Higher threshold for registration
Composition scheme for small businesses
Online simpler producer under GST
Lesser compliance
Defined treatment for e-commerce
Increased efficiencies in logistics
Regulating the unorganised sector

Components of GST

There are 3 applicable taxes under GST: CGST, SGST & IGST.
CGST: Collected by the Central Government on an intra-state sale (Eg:
Within Mumbai)
SGST: Collected by the State Government on an intra-state sale (Eg:
Within Mumbai)
IGST: Collected by the Central Government for inter-state sale (Eg:
Mumbai to Tamil Nadu
That is if there is a sale within a state CGST+SGCT will be levied
If there is a sale to another state IGST will be levied
Taxes not Subsumed
GST may not subsume the following taxes within its ambit:
Basic Customs Duty: These are protective duties levied at the time of
Import of goods into India.
Exports Duty: This duty is imposed at the time of export of certain goods
which are not available in India in abundance.
Road & Passenger Tax: These are in the nature of fees and not in the nature
of taxes on goods and services.
Toll Tax: These are in the nature of user fees and not in the nature of taxes
on goods and services.
Property Tax
Stamp Duty
Electricity Duty
 Taxes to be Subsumed

Central Taxes to be Subsumed in GST

Following Central Taxes should be, to begin with, subsumed under the Goods
and Services Tax:
Central Excise Duty (CENVAT)
Additional Excise Duties
The Excise Duty levied under the Medicinal and Toiletries Preparations (Excise
Duties) Act 1955
Service Tax
Additional Customs Duty, commonly known as Countervailing Duty (CVD)
State Taxes to be subsumed in GST
Following State taxes and levies would be, to begin with, subsumed under GST:
VAT / Sales tax Entertainment tax (unless it is levied by the local bodies)
Luxury tax Taxes on lottery, betting and gambling State Cesses and
Surcharges in so far as they relate to supply of goods and services
Octroi and Entry Tax
Purchase Tax
Goods kept outside GST

Alcoholic beverages
Petroleum products
Electricity

GST V/s Older Tax System

Conditions Current Tax System GST System

Under separate laws, tax is levied There is no separate tax levied for
by Central Govt. and State Govt. goods and services. GST is a
on goods and services. common tax applicable to both.
Structure In the Current taxation system In the GST System till the goods or
import of goods into India is services reaches the consumer this
subject to a levy of customs duty GST tax would allow smooth and
and the person importing the continuous tax credit at all levels.
goods is liable to pay customs
duty at the applicable rates
Place of Taxation Origin based taxation Destination based taxation
Central Excise-1.5 Crores CGST & SGST Rs.10 Lakhs to 20
Threshold Limit VAT-Varies from Rs.5to 20 Lakhs as recommended by GST
Lakhs from state to state Council
Service Tax- Rs.10 Lakhs
Broad Scheme Separate laws for charging One law for various taxes
separate taxes
Tax Rates Different tax rates for differentThere will be one CGST rate and a
taxes uniform SGST Rate across all states
Tax burden is high for the Tax burden is low because of single
Tax Burden individual to pay so many taxes tax so the work splits between the
manufacturing and service sector
Under this the tax is levied on It is levied only at the final
Transparent tax two stages: destination of consumption
administration When the product moves
out of the factory
At retail outlet
Compliance Tax compliance is complex due Tax compliance is easier because of
to multiplicity of tax one law
Concurrent At present, there is no such power Both Centre and State are vested
Power to both Centre and State on same with the power to make law on GST
subject tax matter by virtue of proposed Article 246A
of the Constitution
A quick guide to India GST rates

Indian GST has 6 rates of CGST+SGST combined or IGST: 0%, 5%, 12%, 18%,
28% and 28% + Cess.
Cess: Special levy for 5 years to compensate states for revenue loss on moving to
GST. Levied only on goods like tobacco, paan masala, etc. All are goods liable
for cess taxed at 28% GST
Also, special rate on gold at 3%.
0% Goods
No tax will be imposed on items like Jute, fresh meat, fish chicken, eggs,
milk, butter milk, curd, natural honey, fresh fruits and vegetables, flour,
besan, bread, prasad, salt,
Services
Hotels and lodges with tariff below Rs. 1,000, Grandfathering service has
been exempted under GST. Rough precious and semi-precious stones will
attract GST rate of 0.25 per cent.
5% Goods
Items such as fish fillet, Apparel below Rs. 1000, packaged food items,
footwear below Rs 500, cream, skimmed milk powder, branded paneer,
frozen vegetables, coffee, tea, spices.
Services
Transport services (Railways, air transport), small restraurants will be
under the 5% category because their main input is petroleum, which is
outside GST ambit. Textile job work will be taxed at 5%.
12% Goods
Apparel above Rs. 1000, frozen meat products, butter, cheese, ghee, dry
fruits in packaged form, animal fat, sausage, fruit juices, Bhutia, namkeen,
Ayurvedic medicines, tooth powder, agarbatti, colouring books, picture
books, umbrella, sewing machine, cell-phones.
Services
18% Goods
Most items are under this tax slab which include footwear costing more
than Rs. 500, Trademarks, goodwill, software, Bidi Patta, Biscuits (All
categories), flavoured refined sugar.
Services
 AC hotels that serve liquor, telecom services, IT services, branded
garments and financial services will attract 18 per cent tax under GST,
Room tariffs between Rs. 2,500 and Rs. 7,500, Restaurants inside five-star
hotels.
28% Goods
Bidis, chewing gum, molasses, chocolate not containing cocoa, waffles and
wafers coated with chocolate, pan masala, aerated water, paint, deodorants,
shaving creams, after shave, hair shampoo, dye.
Services
Private-run lotteries authorised by the states, hotels with room tariffs above
Rs 7,500, 5-star hotels, race club betting, cinema will attract tax 28 per cent
tax slab under GST

Change is never easy. Other countries which have implemented GST before India
have faced inflation and price hike during the transition period. However, there
are anti-profiteering measures in the GST bills which will keep price hikes in
check and stop the economy from blowing over. Once GST is implemented, most
of the challenges of the current indirect tax regime will be a story of the past.
India will become a single market where goods can move freely across state
borders, compliance will be easier, and costs of daily goods will reduce.
 FinTech Yay or Nay?
By Sarvesh Nigayle

F
in-Tech is not just Buzzword but hot topic of todays start-up. It
comes from words financial technology. It aims at providing
financial services using latest technologies. Thus, intense pressure to
increase efficiency and reduce costs has led to disruption of traditional financial
services value chain. Fintech Revolution is here. Isnt it?
The crisis of 2008 defined a new era for finance. Tech founders began to imagine
how to disrupt the financial services, traditional banks provide. This was the birth
of fintech companies came into existence. They all have one thing in common, a
niche strategy that is eating finance. From being a banker to that of a mutual fund
advisor, from transferring money to big investments, it has entered every field of
finance.
Let us look at some of sectors of Fintech:
Digital Banking: New start-ups have tried to integrate both customer and
banks needs via a common channel that provides dynamic user experience to
customers. This have challenged traditional banking systems by providing
core banking service via mobile and internet banking portal.
Alternative finance: This majorly includes crowdfunding, peer-to-peer
consumer and business lending, Third party payments systems. In these digital
payments, innovative methods have proven to be threat to existing customer
relationship that exist with banks.
Bitcoin and Block Chain: It is a single, shared, immutable write only ledger
of transactions, which updates when multiple, decentralised, actors achieve a
consensus on the validity of a participants new entries. Bitcoin is a type of
unregulated digital currency where transactions are stored and transferred
using a distributed ledger on a peer-to-peer network that is open, public and
anonymous. It is first application of block chain, which maintains the Bitcoin
transaction ledger.
Let look at some of examples of FinTech companies in various areas:

Personal Finance and current account: mobile revolution started with all-in-
one money management tools like Mint ,Level and Intuit which help
individuals to take control of their personal finance as well provide advice and
assistance to manage their money. Cleartax helps consumers complete their
income tax returns, and has received $15.4M in five rounds of funding.
Payments system: PayPal and digital wallets like Apple (AAPL) and Google's
(GOOG) have revolutionized whole payment and money transfer to next level
wherein even the international payments are one with great ease and less cost.
With the governments support in creating the Unified Payments Interface
(UPI) and India Stack developer tools, this category has seen a fundamental
shift toward mobile payments using wallets like Paytm.
Loans and Credit: peer-to-peer lending sites like Prosper and Lending Club.
One of the best competitive advantages of these new peer-to-peer lenders is
that they do not bear the same balance-sheet risk than traditional lenders do.
Finomena provides EMI financings for purchases that range from mobile
phones to refrigerators.
Investment: mobile-only stock trading app Robinhood charges no fees for
trades, financial advisory and robo-advisor sites like LearnVest and
Betterment. Individuals get a user-friendly platform as well more involvement
in the investment process helping them to understand of what is going on.
PolicyBazaar has raised $70M in total funding to provide a personal insurance
product comparison platform.
Venture capital: two kinds of FinTech start-ups that compete with the venture
capital industry: crowdfunding platforms like Indiegogo and crowdfunding
equity marketplaces like Crowdcube. Both try to put aside the power of
venture capital and allow individuals to inform the very use of new
technologies like invest in people and their stories
B2B Financial Services: way financial institutions have managed assets; risks
and information have changed drastically following the trend of using new
technologies, like machine learning, predictive behavioural analytics and data-
driven marketing. Sirion Labs manages outsourced contracts and invoices for
enterprises and raised $12M in Series B funding with participation
from Sequoia Capital India.
 What lies ahead for cryptic cash in India?
By Mahalakshmi Subramanain

J P Morgan chief Jamie Dimon recently made headlines with his critical
comment against Bitcoin, a digital currency whose decentralized nature is
garnering quick and wide appeal. CEO of the US-based multinational
financial services firm, Dimon expressed his skepticism about currencies
operating without state supervision and painted a grim picture for Bitcoin and its
counterparts.

Mr Dimon, who has always been bearish as regards digital currency, expects
government crackdown on such systems and asserted that cryptocurrency will not
unseat traditional money.
His assertions assume significance back home, especially as top officials in the
Reserve Bank of India echo similar concerns over rising use of Bitcoin in India.

Bitcoin in Vogue

Bitcoin has seen increased

acceptance in India as both an
investment as well as payment
system. As per latest data, over No single entity or
five lakh Android users in the government has control over
country have installed Bitcoin the Bitcoin currency.
wallets to carry out transactions
and the number is rising with an
addition of 2500 new users every
day. Despite the RBI's warning
signals, the open source, peer-to-peer money, has been a hit in India, especially
post demonetization, when Rs. 500 and Rs. 1000 ceased to be legal tender.
Bitcoin and other cryptocurrencies enabled the cash strapped nation to transact.

A few days after demonetization, over 1.3 lakh people used Bitcoin and this
propelled a surge in its value - from Rs 51,000 to Rs 69,500. E-commerce sites
enabled customers to settle payments for purchases through Bitcoin, further
providing fillip to its usage. As an investment option too, Bitcoin has helped
individuals amass wealth unlike any other financial instrument.

To put things into perspective, lets consider the case of Mr Chintamani, who
invested in 100 Bitcoins in 2010, when the cryptocurrency was (approximately)
valued at 3.64. Today, Mr Chintamani would be gob smacked with returns to
the tune of 2,58,00,300.(at the time of writing; could vary according to volatility
in Bitcoin value) Obviously, he would not have to worry about money for the
near future!

Shaky ground

However, such handsome returns may cost you dearly for Bitcoin is a non-fiat
currency i.e. it lacks institutional regulation and a monetary value-base. These
sore spots make it less appealing in the eyes of governments and apex financial
institutions. Legitimizing such concerns, Chinas central bank ordered the closure
of BTCChina (a major Bitcoin exchange in China) in September to prevent a
financial breakdown.

Further, volatility of the non-fiat currency is evident from recent price

fluctuations due to global events detailed above. In India, its value plunged
around 35% to Rs.2,25,121 after the first fortnight of September, but climbed
back 24% to be valued at Rs.2,79,262
per bitcoin on September 18.

There is a finite number Yet another issue experts have

of bitcoins, 21,000,000. highlighted is that the incomes
1% of the Bitcoin
realized made through transactions via
cryptocurrency wallets cannot be
community controls 99%
taxable they are free of regulatory
of the worlds wealth. compliance. Authorities fear that
multiple bitcoins can be created to
mask the source and destination of transactions, which makes it easy for people
to conduct anonymous transactions and launder money

The way forward in India

Different countries may have varied approaches of dealing with the rise in use of
cryptocurrencies. Indias financial machinery, which has erred on the side of
caution, is making a slow and steady headway in this regard. While the RBI has
advised against use of Bitcoin and other non-fiat cryptocurrencies, it recognizes
that newer forms of digital payments are necessary to spur Indias move towards
a cashless economy.

Accordingly, the central bank is mulling the introduction of its own fiat
cryptocurrency as a digital alternative to the Indian Rupee. In addition, the
committee on financial and regulatory technologies (CFRT), which is instituted
by the Securities and Exchange Board of India (Sebi) is working towards a
framework to regulate bitcoin transactions and ensure that cryptocurrencies as an
asset class are not used to fund illegal activities.

While there is no doubt that institutionalizing cryptocurrencies will augur well

for the Indian economy, it remains to be seen how it would affect those
championing its supremacy.
 2019 Recession: Not Traumatic, yet a painful
one
By Yamini Sharma

A
s the US economy slowly recovers after the 2008 depression,
economists worry about when the economy will crash again. Since
1800s, major world economies experience 14 years of expansion and 4
years of recession. According to 18-year economic cycle theory of the US, the
next recession will hit in 2019. However, the next major downturn will be in
2026.
As the trend follows, in this cycle too, the economies have low inflation and low
interest rates in the 14 years period. This provides ample credit and opportunity
for economic activities which in return elevates the asset prices. Gradually,
central banks tighten monetary policy as the economy reaches its optimum
capacity and Consumer Price Index (CPI) shows inflation. The longer an
economy booms, the longer is the recovery period after recession. Currently, the
US economy has expanded for 94 months. In the next 2 years, it will be the
longest expansion stretch since 1850.
World economy will continue to expand till mid-2018. There are several
reasons for good days ahead: consumers are in good shape, the world is
relatively calm, employment is rising, banks are lending, retail sales are rising,
non-residential construction is improving, and deficit spending continues. Since,
the recession is more directed towards consumers, 2019 will be nothing like
2008-2009. It wouldnt hit the world as a shock but will slowly and painfully be
felt.

The current scenario in various sectors:

Ripple effect in the automobile production will create business.

Chemical production is outperforming the economy
Electronic component production will continue to grow
Health sector supplies requires increased efficiency to decrease costs.
Lessons for India:

Sticking to fiscal consolidation targets since recession causes high fiscal deficits
Lower investments in metal and chemical industry. Such commodities have
high fixed cost and lower marginal costs which will be difficult to cover during
recession period.
Make in India must focus on very selective products since countries like China
would dump chemicals and metal commodities in India.
Economist Alan Beauliea warns nations about consumers-led recession coming.
Countries need to be careful about over-expanding. However, it is our choice to
stop expanding and bury our heads in the sand which automatically puts us in
recession.
References

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30. Retrieved 16 September 2017, from https://www.moneyunder30.com/buying-life-
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Should You Buy Life Insurance at an Early Age? - Good Financial Cents. (2017). Good
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total-insurable-population-of-india-is-covered/178576/

References:
Aiyar, S. A. (2016, January 22). India must prepare for a
recessio n. Retrieved Se ptember 2 1, 2017, from
http://economict imes.indiatimes.com/news/economy/indicators/in
dia-must -p repare -for-a-recession/articleshow/50649598. cms
D u y , T . ( 2 0 1 7 , J u n e 0 5 ) . A n x i o u s A b o u t t h e E c o n o m y? I t ' l l S t i l l
Se t a Re cord. Retrie ve d Se ptem be r 21, 201 7, f rom
https://www.bl oombe rg.com/view/articles/2017-06-05/anxious-
about-the-economy-it-ll-still-se t-a-record
Hand, A. (20 16, June 0 3). Prepare Now for a 2019 Recess ion.
Retrie ved Septembe r 21, 20 17, from
https://www.automationworld.com/article/topic s/industry-
news/prepare-now-2019-recession
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