Posted by: jayanthv | February 6, 2008

CURRENT AFFAIRS 1

Hey guys these are some important events that took place in 2007

RAM SETU CONTROVERSY

            This controversy is regarding a bridge called the Ram Sethu also know as the Adams Bridge that links Rameswar in Tamil Nadu to the Mannar Islands of Sri Lanka. Its made up of limestone shoals.. According to the Hindu scriptures it is purported build by Rama and his followers to rescue Sita from Ravana.

            This link is not more than 5- 10 meters deep. And it thereby hinders navigation of ships which have to cross the entire Sri Lanka instead (which nearly increases the navigation time by 30 hours). In 2001 the Govt approved to create a shipping canal in this region. Now this move has stirred the hornets nest because for Hindus this bridge is sacred.

            The contention here is whether the bridge is manmade or natural.

Promoters of Hindutva like BJP, RSS etc, feel that by damaging the bridge in order to build a shipping canal will hurt the sentiments of the Hindus. While others feel by constructing a shipping canal can reduce the 30 hrs of extra shipping time. Moreover since ships now have to cross Sri Lanka there is always a potential threat from the LTTE.

However there are certain geologists who feel that the Adams Bridge could in someway prevent Tsunami and that the Bridge is manmade.

 

            The Madras High Court has said that the bridge is natural while certain geologists based on 2002 NASA footage content it’s the same bridge build by Rama’s followers.

 

 SENSEX STUFF
            In 2007 (sometime in Oct) the sensex touched 20k marks and all of a sudden in Jan 2008 it has drastically dipped to around 16k (as of today it is 18663). This sudden boom and the more sudden dip in the shook the nation’s economy considerably. This is (I think) pretty important as it greatly affected the nation and its policies.

But before going in depth it is really important to know what sensex and shares is all about.

 

Shares – Assume I want to start a company and the company requires Rs 200 (only an assumption!) as the investment but unfortunately I have only 100 bucks. So I ask the general public to offer me investment. So I made 200 certificates which is called shares of my company each costing Rs 1. I keep 100 for myself and sell the rest 100 at Rs 1 each. Now this move of giving the public the opportunity to invest in my company but issuing out shares is called initial public offering (IPO). So basically shares are nothing but investment wherein you are a part of the firm and u get dividends (profits) that are generated by the firm proportionate to your investment.

 

Mutual Funds – Basically these are professional organizations. These organizations have like really good analysts (Einstein brains) who are erudite when it comes to market and economic analysis. So these organizations take investment from you and they using their analysis invest in the stock market. And whatever profit that accrues from the investment they return it you subtracting a percentage of it as their commission.

BSE-SENSEX – this is essentially an index which indicates how well the companies are doing in the market (something like Celsius measuring temperature). Similarly there is the NSE another index (don’t get confused with all the index and stuff just for your understanding)

 

FII – Foreign Institutional Investment – This term refers to companies (investors and investment funds) that invest in Indian (or for that matter any HOME country) financial market.

 

FDI- Foreign Direct Investment – This term refers to investment by foreign companies in domestic companies so as to take control of the domestic companies.

 

            Now why SENSEX boomed in Oct 2007 can be explained using the above concepts. Basically India is a developing country so the labour is cheaper and tax imposition is not that high as compared to other developed nations ergo a lot of foreign companies sought to invest in India (ANOTHER MAJOR REASON IS DUE TO THE RISE IN THE VALUE OF RUPEE- this is pretty confusing so will deal in another post to make it more succinct). Since a lot of companies invested in our market this valued the Indian market, causing the SENSEX (the index) to rise.

             

            Why did it crash all of sudden? Ok supposedly there is some economic crisis in the USA (which is a major player in the Indian market). There is a lot of speculation that the US economy is going down. So what these companies did is that they are diverting their money invested in India into their market so as to prevent the down fall of their economy.

 

Phew! Okay this is one huge article. Donno if you have got the hang of it. Any doubts just let me know we can sort it out. And if any changes need to be made i.e. if I’ve gone wrong do inform. Thanks

Cheers

Jayanth

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Responses

  1. Thanks for the article
    The explanation is brilliant

  2. Iam a commerce student , still am confused . need a little more help[this article was a great help THANKS

  3. Interestingly you quote lower [corporate] taxes & cheap labour as the reasons for the October 2007 boom in the Sensex. While the latter may be true, you should be surprised to find out that corpoate income tax in India is one of the highest in the Asian-Pacific region as well as among the developed nations. The statutory rate of tax in India is 30% excluding 10% surcharge & 2% education cess, the effective tax rate thus being 33.66%. I quote 13th December, 2007 edition of The Economic Times:
    (http://economictimes.indiatimes.com/News/Economy/Policy/Govt_may_cut_corp_tax_rate_to_26_as_collections_rise/articleshow/msid-2618481,curpg-2.cms

    “The fiscal style in vogue now is to reduce the corporate tax rate, according to a 2007 survey carried out by KPMG among over 90 countries. According to the survey, the lowest tax rate is in the European Union countries, the average rate in EU being 24.2%. The average corporate tax rate in OECD countries is seen at 27.8%, while it is 30.1% in countries from the Asia-Pacific.

    During the last 14 years, the average corporate tax rate prevailing in major industrialised countries has declined from 38% to 27.1%, a drop of about 29%. The trend began in the 1980s in the UK, when the government of Magaret Thatcher lowered the corporate tax rate from 52% to 35% between 1982 and 1986, forcing other developed countries to follow suit. ”

    In the same breath, you mention the strengthening rupee as another reason for the boom (conveniently ignoring to give any explanation). So far no certain co-relation has been found between the two & any attempt to do so would at best be speculative.

    Also, terms like the Sensex have been expalined rudimentarily. Sensex is a list of top 30 shares (in terms of Market Capitalisation(M-Cap), i.e. the total value of the company in the market, supposing market price of each share of ONGC is Rs 1000 & ONGC has issued 1000 such shares, so its M-Cap will be 1000*1000=Rs 10,00,000). The Sensex is evaluated by the Bombay Stock Exchange(BSE) a complex formula depending on the price of the 30 shares. Now a valid query might be raised that since there are hundreds of scripts (or shares) listed on the BSE (i.e.stock market), how come the market index (i.e. Sensex) is calculated only on the basis of top 30?
    The answer is simple as its often seen that the trend followed by these 30 scripts is also the overall trend in the market.

    Finally the whole point in writing this comment is that oft forgotten archaic saying, little knowledge is a dangerous thing, something all of us should avoid.

    Bhusan Jatania
    1st yr.
    NLU, Jodhpur

  4. The economics related tems are very useful.

  5. hey Bhusan thanks for the stuff man…..i didnt want to go into excess detail cause i felt it’ll be a bit redundant…neverthless thanks for finding the loopholes will look into the article and try to refurbish it and do add on some stuff if possible…..cheers

  6. most welcome…

  7. great article!!! keep them coming. pleaaaseee…….

  8. ya.Bhushan bhai.. please post some more topics..

  9. Thanks a lot.

    But the pattern is now objective.

  10. nice article.. especially the ram sethu controversy..
    people say that the ships take more time to go all around sri lanka,agreed..Evn if they destroy the adams bridge (or ram sethu) the ships will approx take the same time bcoz the area is shallow n the ships will have to slow down at this point.. I saw someone say this on tv..And it is made into a political issue.. Was the person right in saying this? they will obviously destroy the natural beauty

  11. both jaynth and bhusan u may be very knowledgeable . i respect both of yours initiative but plz explain in such a way so that its easy for the aspirants to understand and morover publish to that extent which is required for us to know. at the entry level we are not supposed to get into such depths of the topic. in away it diverts young teen agers from their track of preparation
    anyways its gud to find u people taking initiative.
    plz bro dont mind !!!

  12. I would take up the reponsibility of quoting what
    PRAHLAD K. (NLSIU ENTRANCE 2006 TOPPER) had mentiomed in his interview with the bangalore times
    IT IS NOT WHAT YOU DO, IT IS HOW YOU DO
    WORK SMART NOT HARD

    hats off to this would be lawyer.

  13. would love to know how jayanth burnt the midnight oil and made it to nlsiu, the king of law schools.

  14. For all those who are intrested in current affairs
    list of important political events in 2007
    Mandate 2007:
    Elections to general Assemblies took place in as many as 7 states. Key states being Uttar Pradesh & Gujarat.Other states include Punjab,Manipur,Goa,uttarakhand and Himachal Pradesh.
    Mayawati led BSP came back to power with a clear majority.
    Narendra Modi led BJP successfully retained their power.This BJPs 4 th consecutive win in Gujarat.
    Return Prakash S Badal was seen in Punjab.
    BJPs Prem Kumar Dhumal became the CM of Himachal Pradesh and B C Khanduri became CM of Uttarakhand.
    Race to the Raisina Hills:
    Prathiba Devisingh Patil assumed office as 13 th and 1 st women president of Republic Of India.
    She is the successor of Peoples President A P J Abdul Kalam.
    prathiba patil backed by UPA-Left won against her opponent Former Vice-President of India B S Shekhawat by 306,810 votes.
    States scheduled for polls in 2008 are Karnataka, Rajasthan, Madhya Pradesh, NCT Region etc.,
    Hamid Ansari became Vice-President of india.

  15. gud work by bhusan i agree wid him

  16. Hi jayanth.
    I have gone through the new Information Brochure of CLAT. But i am little confused about the following:-

    a) Is 50% marks needed subject-wise?

    eg. 50% in english, 50% in maths…..etc

    b) Do all the core subjects include a language- subject other than english?

    eg.
    Phy + Che+ Bio + Hindi + Eng = 5 subjects

    Thank you.

  17. Hey, and one more thing u should note. The rise of the rupee. The rupee is rising due to increased foreign investments into india through FII(most of it). The increasing demand puts pressure on the rupee to appreciate. As a result, there are reduced earnings for exporters. That is why companies like Infy, Saty, Wipr,are being hit. Their earnings are being hit. Hence, their profitability is also being hit. Textile exporters are also abdly hit. This sector has witnessed a lay off of so many workers.


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