UK will be in deflation till 2012

The United Kingdom is likely to remain under deflation trap for at least another two-and-a-half years as Britain suffers an apparently intractable bout of debt deflation, the Telegraph has said.

The forecast, by a team at BNP Paribas, states that prices in Britain will keep falling for atleast another two-and-a-half-years, Telegraph said.

This prediction "comes only days before official figures confirm this on Tuesday that the Retail Price Index has dipped into negative territory for the first time in almost half a century," it said.

Debt deflation is the combination of falling prices and rising debt burdens that afflicted the US during the Great Depression.

The newspaper further said: "While many assume the combination of near-zero interest rates and a heavily-devalued pound will help prevent falling prices from becoming entrenched, and may stoke inflation, the BNP Paribas economists said they expected deflation to persist all the way until 2012."

The fall in prices is expected to be broad-based across the economy, pushing into the red not only the RPI but also the Consumer Price Index.

Wall St ends in red; Indian ADRs mixed

The Wall Street slipped on Wednesday as investors feared that the Federal Reserve plan to revive the economy could be very costly. The Dow Jones industrial average index advanced over 1% (91 points) to 7,487. The Nasdaq rallied 2% (29 points) to 1,491.

Indian ADRs, however, ended on a mixed note. Sterltie soared nearly 7% to $6.21. Infosys and Wipro gained 2% each at $26.75 and $6.79, respectively. Satyam and Patni Computers advanced over 1% each to $1.68 and $5.45, respectively.

On the other hand, Dr.Reddy's slumped 6.3% to $8.47. ICICI Banka nd Tata Motors tumbled around 4% each to $13.34 and $4.28, respectively. HDFC Bank shed 3% at $54.31

Financial planning

Financial planning is the process of meeting life goals through a proper planning and management of finances. Financial planning helps us to translate our dreams and aspirations in to reality.    

 

It also helps us to provide meaning and direction to our financial decisions.

Financial planning has to be done in a proper way, so that it can be implemented effectively.The important steps to be followed while planning our finances are,

-Analyse your dreams and aspirations

-Establish the goals

-Analyse your financial status

-Analyse your emotional status

-Develop a plan for achieving the goals

-Implementing the plan

-Monitoring the plan

Analyse your dreams and aspirations

All of us have got lot many things to do in life, Moreover we are all dreaming of doing the same at the earliest .But normally we do not realise the possibilities of these dreams. In India most of the people have not analysed these dreams and the ways of realising the same.

Establish the goals

Now you have to translate your dreams and aspirations in to money. Define the time frame within which you should be able to realize your dreams. The time frame may depend on your personal goals or family goals or both together. If you think, it is difficult to meet all your goals within the specified time frame, prioritize your goals based on urgency and importance. All goals need not necessarily relate to wealth accumulation only. There could be protection goals as well.

Analyze your financial status

Analyzing financial status includes,

- An inventory of assets and liabilities (including securities holding, debts, insurance, etc)

- A description of the present arrangement for distribution of assets at death

- Estimates of your income and expenditure

- Details of your insurance coverage

Once you analyze all these relevant information of your own, you will come to know where you do stand and what your needs are.

Analyze your emotional status

Emotional status is very important, while designing a financial plan for you. It will decide your strength to take risk or not. It will throws light on your hopes, fears, values, attitudes, preferences, biases and non-financial goals.

Develop a plan for achieving your goals

The plan, which you design, should take your present financial situation to the achievement of the objectives. A comprehensive financial plan should contain an analysis of all pertinent factors relating to your financial status.

Components of a good financial plan

- your personal data

- your goals and objectives

- identification of issues and problems

- assumptions

- your balance sheet/net worth for the financial year

- cash flow management

- income tax planning

- risk management/insurance planning

- investments planning

- estate planning

A well drawn plan must be tailored to you specific goals, situation and circumstances. If additional expertise is required, you should consult with a specialist in that field to help you design the overall plan. There is more than one more way for your financial goals to be achieved. If you want to try with other ways, you can first analyze the advantages and disadvantages of each strategy. The plan should be specific. It should list what you have to do? When and with what resources?

The plan format should be such that you can easily understand and evaluate. Only once you decide that the plan well suits to your needs, you can go to the next step.

Implementing the plan

Merely designing a plan, no matter how sound, does not constitute financial planning. A financial plan is useful to you only if it is put in to action. You have to ensure that the implementation is carried out in the manner and in accordance with the plan designed.

Monitoring the plan

Periodic reviews are the best form of monitoring. Of course, you should keep flexibility for a review if circumstances warrant. Following are three aspects to look at in a review:-

- the performance of what has been implemented,

- changes in the personal and financial situation and objectives,

- changes in the environment (regulations, financial, economic)

If you are on track to meet your financial goals nothing else needs to be done. If that is not the case, a revision is necessary. Revision process will involve the same above discussed steps but will take lesser time.

US curing crisis negatively: India

New Delhi: Criticising the US for resorting to protectionism in the wake of the global financial crisis, India warned such a ‘negative’ trend will have a cascading effect on major economies and undermine efforts to overcome the downturn in the shortest possible time.

"That the biggest economy in the world, the US, where this global financial tsunami originated, should be resorting to trade-restrictive practises is particularly disturbing," External Affairs Minister Pranab Mukherjee said at the India Today Conclave.

He said the US Government's stimulus package imposing restrictions on public procurement or discouraging US firms from outsourcing or restricting foreign workers is not in keeping with the spirit of global cooperation.

"It also runs counter to the current efforts to stem the sharp decline in the economic growth worldwide, especially in the US and other developed markets," he said.

Asserting that it would be shortsighted to go into protectionist mode, Mukherjee dubbed the US move as a ‘negative trend’ which is ‘likely to have a cascading effect in other major economies and thereby undermine the global efforts to overcome the current crisis in the shortest possible time-frame."

Mukherjee pointed out that the G-20 meeting in Washington last year had underscored the "critical importance of rejecting protectionism and not turning inward in times of financial uncertainty."

He stressed on the need to re-orient the growth paradigm to be followed by the international institutions and the donor countries.

"It is all the more critical because the developing countries still have positive growth rates and can provide the basis for global economic recovery," Mukherjee said.

"A well directed aid and trade effort can help in generating domestic economic demand and green growth," he said.

On February 26, US President Barack Obama in his maiden budget speech said his administration would do away with tax breaks for firms outsourcing jobs to overseas destinations, including India. At the same time, the US administration would be providing tax relief to 95 per cent of American working families.