Look Beyond Fuel Prices

Over last few weeks we have see lot of hue and cry by ‘vested’ interests over rising Petrol Prices and Diesel Prices. The fact is that, the fuel prices may be on the higher side, but the expenses in the common man’s kitchen have been considerably under control.

Our Chief Financial Advisor Mr. Vivek Karwa, keeps mentioning this: ‘Good Economics is Bad Politics and Good Politics means Bad Economics’ Thankfully the government is adopting Good Economics instead of falsely pleasing people.

Read from the below table with an ‘Open Mind’

Budget Documents

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Budget 2017 Highlights

Highlights of Budget 2017, source: HCC

On demonetisation

1. Demonetisation is expected to have a transient impact on economy.

2. We will have a great impact on the economy and lives of our people . The effects of Dem. are not expected to spill over next year.

3. Demonetisation a bold and decisive measure and will lead to higher GDP growth.

4. The effects of demonetisation will not spillover to the next fiscal.


1. Sowing farmers should feel secure against natural calamities.

2. Rs. 10 lakh crore as credit to farmers with 60 days interest waiver says FM

3. NABARD fund to be increased to Rs. 40,000 crore

4. Govt will set up mini lab in Krishi Vigyan Kendras for soiling:

5. A dedicated micro irrigation fund will be set up for NABARD with Rs 5,000 cr initial corpus

6. Irrigation corpus increased from Rs 20,000 crores to Rs 40,000

7. Dairy processing infrastructure fund with be created initially with a corpus of Rs. 2000 cr

8. Issuance of Soil cards has gained momentum

9. A model law on contract farming will be prepared and shared with States

Rural sector

1. Government targets to bring 1 crore households out of poverty by 2019

2. During 2017-18, 5 lakh farm ponds to be taken up under MGNREGA

3. Over Rs 3 lakh cr spend for rural India. MGNREGA to double farmers income

4. Participation of women in mgnrega up to 55%

5. During 2017-18, 5 lakh farm ponds to be taken up under MGNREGA

6. Using space tech in a big way to plan MGNREGA works

7. We propose to complete 1 crore houses for those without homes

8. Allocating Rs. 19,000 cr for Pradhan Mantri Gram Sadak Yojana in 2017-18

9. We are well on our way of achieving 100% rural electrification by March 2018.

10. Swachh Bharat mission has made tremendous progress, sanitation coverage has gone up from 42% in Oct 13 to 60% now.

11. Sanitation coverage in rural areas gone up from 42% in Oct 2014 to 60% now.

For youth

1. Introduction of a system of measuring annual learning outcomes, innovation fund for secondary education.

2. There will be a focus on 3,479 educationally-backward blocks

3. Colleges will be identified based on accreditation

4. Skill India mission was launched to maximise potential.  100 India International centres across country.

5. Courses on foreign languages to be introduced.

6. Skill India Mission was launched in 2015 to maximise the potential of our youth. 100 India International Skill centres will be established across the country.

7. Steps to create 5000 PG seats per annum

For the poor; health care

1. Mahila Shakthi Kendras – Rs. 500 cr allocated.

2. Nationwide scheme for pregnant women – Rs. 6000 each will be transferred.

3. For women and Kids – Rs. 1,84,632  cr. allocation investment

4. Affordable housing to be given infrastructure status.

5. Surplus liquidity – banks have already started reducing lending rates for housing

6. Elimination of tuberculosis by 2025 targeted.

7. 1.5 lakh health sub centres to be transformed into health wellness centre.

8. Two new AIIMS in Jharkhand and Gujarat.

9. Structural transformation of regulator framework for medical education in India

10. Allocation for Scheduled Caste  – Rs. 52,393  crore

11. Aadhaar-based smartcards for senior citizens to monitor health.

Infrastructure; railways

1. A total allocation of Rs. 39,61,354 crore

2. Total allocation for Railways — Rs. 1,31,000 crore

3. No Service charge while booked tickets with IRCTC

4. Raksha coach with a corpus of Rs. 1 lakh cr fore five years (for passenger safety)

5. Unmanned level crossings eliminated by 2020

6. 3,500 km of railway lines to be commissioned this year up from 2,800 km last year.

7. SMS based clean my coach service started

8. Coach mitra facility – to register all coach related complaints

9. 2019 – bio toilets for all trains

10. 500 stations to be made differently-abled friendly

11. Railways to partner with logistics players for front end and back end solutions for select commodities.

12. Railways will offer competitive ticket booking facility

13. 2,000 km for coastal connectivity of roads –

14. Rs. 64,000 crore allocation for highways.

15. Allocation of high speed Internet 1,50,000 gram panchayats

Energy sector

1. A strategic policy for crude reserves will be set up

2. Rs. 1.26,000 cr for energy production-based investments received

3. Trade infra export scheme will be launched 2017-18

Financial sector

1. FDI policy reforms – more than 90% of FDI inflows are now automated.

2. Shares of Railway PSE like IRCTC would be listed on stock exchanges.

3. Bill on resolution of financial firms to be introduced in this session of parliament.

4. Decided to abolish FIPB in 2017-18.

5. Foreign Investment Promotion Board to be abolished.

6. Revised mechanism to ensure time bound listing of CPSEs

7. Computer emergency response team for financial sector to be formed.

8. Pradhan Mantri Mudra Yojana lending target at Rs 2.44 lakh crore for 2017-18

9. Digital India – Bhim app will unleash mobile phone revolution – two new schemes to promote the app.

10. Govt to introduce two new schemes to promote BHIM App – referral bonus for users and cash back for traders: FM.

11. Negotiable Instruments Act might be amended.

12. DBT to LPG consumers , Chandigarh is kerosene free, 84 govt schemes are on the DBT platform.

13. Head post office as the central office for rendering passport services

14. Easy online booking system for Army, defence personnel

15. For big-time offences – including economic offenders fleeing India, the govt. will introduce a legislative change or new law to confiscate the assets of these people within the country

Fiscal situation

1. Total expenditure – Rs. 21, 47,000 crore

2. Abolition on plan, non-plan expenditure, focus on capital expenditure ( Capital expenditure will be 25.4 per cent)

3. Rs. 3,000 crore under Dept of Economic Affairs for implementing Budget announcements.

4. Defence expenditure, excluding pension, at Rs 2,74,114  crore

5. Expenditure in science and technology —  Rs. 37,435 crore

6. Total resources transferred to States and UTs is Rs 4.11 lakh crore

7. Recommended 3% fiscal deficit for three years with deviation of 0.5% of GDP.

8. Revenue deficit – 1.9 %

9. Pegged fiscal deficit of 2017-18 at 3.2% of GDP and remain committed to achieving 3% in the next year.

On funding of political parties

1. Maximum amount of cash donation for political parties will be Rs 2,000 from any one source from Rs 20,000

2. Political parties will be entitled to receive donations by cheque or digital mode from donors.

3. Amendment is being proposed to RBI Act to enable issuance of electoral bonds that government will scheme. Donor can purchase these bonds from banks or post office via cheque or digital transactions. They can be redeemed only by registered political parties.

Tax proposals

1. India’s tax to GDP ratio is not favourable.

2. Out of 13.14 lakh registered companies, only 5.97 lakh companies have filed returns for 2016-17.

3. Proportion of direct tax to indirect tax is not optimal.

4. 1.95 crore individuals showed income between Rs 2.5 lakh to Rs 5 lakh.

5. Out of 76 lakh individual assessees declaring income more than Rs 5 lakh, 56 lakh are salaried.

6. Only 1.72 lakh people showed income of more than Rs 50 lakh a year.

7. Between Nov 8 to Dec 30: Deposits between Rs 2 lakh and Rs 80 lakh was made in 1.09 crore accounts.

8. Net tax revenue of 2013-14 was Rs 11.38 lakh crore.

9. Out of 76 lakh individual assessees declaring income more than Rs 5 lakh, 56 lakh are salaried.

10. 1.95 crore individuals showed income between Rs 2.5 lakh to Rs 5 lakh.

11. Rate of growth of advance tax in Personal I-T is 34.8% in last three quarters of this financial year.

12. Holding period for long term capital gain lowered to 2 years

13. Propose to have carry-forward of MAT for 15 years.

14. Capital gains tax to be exempted for persons holding land from which land was pooled for creation of state capital of Telangana.

15. Corporate tax: In order to make MSME companies more viable, propose to reduce tax for small companies of turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in this category. 96% of companies to get this benefit.

16. Propose to reduce basic customs duty for LNG to 2.5% from 5%

17. SIT on black money suggested no cash transactions of more than Rs 3 lakh. Govt has accepted this proposal.

18. Income Tax Act to be amended.  No transaction above Rs 3 lakh to be permitted in cash.

19. Limit of cash donation by charitable trust reduced to Rs 2,000 from Rs 10,000.

20. Net revenue loss in direct tax could be Rs. 20,000 crore.

Personal Income Tax

1. Existing rate of tax for individuals between Rs.  2.5- Rs 5 lakh reduced to 5% from 10%

2. All other categories of tax payers in subsequent brackets will get benefit of Rs 12,500.

3. Simple one page return for people with annual income of Rs. 5 lakh other than business income.

Report Card of Central Govt

Below are few numbers compiled by Wall Street Journal to show case the hits and misses of Narendra Modi led government.

MeraDeshBadalRaha, TransformingIndia, Modi Government Two Years Performance, Narendra Modi

New land bill will win, not lose votes for Modi

Swaminathan, Times of India 26/4/15

source: http://blogs.timesofindia.indiatimes.com/Swaminomics/new-land-bill-will-win-not-lose-votes-for-modi/

Rahul Gandhi wants to escalate the suicide of a farmer at a Delhi AAP rally into a national election issue, painting Modi as pro-industrialist and anti-farmer. Mamata Banerjee leveraged resentment against land acquisition in Singur and Nandigram to unseat the Marxist government in West Bengal. Can Rahul do something similar?

Some BJP stalwarts want to dilute the new land acquisition bill to win over enough opposition parties to ensure success in the Rajya Sabha. But hardliners call this submitting to blackmail on an issue that can, with proper communication, place the BJP on the moral high ground. They would rather risk defeat in the Rajya Sabha, and then clear the bill in a joint session of Parliament, where the NDA has a majority.

The hardliners are right. The analogy with Singur is false. The new bill will gain votes, not lose them in the 2019 election. The 2013 land acquisition act of the Congress had so many onerous clauses that acquisition (and related projects) came to a virtual halt across India. Economic growth and job creation crashed, so voters turned against Congress with a vengeance. Its supposedly pro-farmer measure boomeranged.

Modi has raised high job hopes. He cannot get re-elected without fast economic growth that creates jobs and business opportunities galore. For this, he must change the 2013 law to ensure smooth, speedy acquisition for government infrastructure and industrial corridors. Without that, the economy will not accelerate, and voter resentment at slow growth will far exceed any anger over cases of faulty acquisition.

Besides, faulty acquisition typically hits the electoral fortunes of chief ministers, not New Delhi. Maybe 90% of rural Indians have never met a central government official. Those they know — the police, revenue and administrative staff, canal and electricity staff — are all state officials. Even New Delhi’s programmes are implemented by state officials. So, if implementation is good, voters applaud the chief minister, not New Delhi. Similarly, bad implementation sinks the CM, not the PM.

The Congress claimed that its farm loan waiver and MGNREGA (its rural job scheme) won it the 2009 election. Really? Congress won only nine of 72 seats in three very poor states where these schemes should have helped most — Bihar, Chhattisgarh and Odisha. Seminal research by Poonam Gupta and Arvind Panagariya shows that voter behaviour in 2009 was explained overwhelmingly by the acceleration or deceleration of economic performance in a state, not doles or write-offs.

State GDP growth shot up between 2000-04 and 2004-09 from 4.5% per year to 12.4 % in Bihar, from 4.8% to 10.2% in Odisha, and from 6.1% to 9.7% in Chhattisgarh. Despite big overall Congress gains, voters in each of these non-Congress states voted overwhelmingly for their CM’s party. By contrast, the Congress gained 42 seats in opposition-ruled states where economic growth had not accelerated — UP, MP, Rajasthan and Punjab.

Examining state GDP growth between 2004-05 and 2008-09, Gupta and Panagariya divided the major states into three growth categories — high, medium and low (relative to national growth). In high-growth states, a whopping 85% of candidates of the incumbent state party won in 2009.

The winning rate dropped to 50% in medium-growth states and 30% in low-growth states. Clearly, fast growth mattered most of all, though other factors (alliances, caste, regional pride, inflation) remained relevant. Rahul Gandhi can pretend that fast growth benefits only a few rich industrialists, but India’s high-growth era lifted a record 138 million out of poverty between 2004-05 and 2011-12. Fast growth reflected good governance — less thuggery, corruption and leakages — and hence more satisfied voters.

In 2014, Rahul hoped to win mass votes through the food security act, promising wheat and rice at Rs 2-3/kilo for two-thirds of the population. This failed, mainly because implementation depended on state governments. Besides, many state governments already provided food at Rs 1-2/kilo, so Rahul’s reduction of the central price merely subsidized the state governments, not consumers.

Some elections are won by a popular wave, as in 1984 and 2014. Gupta and Panagariya’s fast-growth thesis does not apply to such elections. But nobody expects a fresh Modi wave, or Rahul wave, in 2019. So, the performance of chief ministers will once again be critical.

What does this imply for the land acquisition bill? All land acquisition is done by state governments. Farmers whose land is acquired will be happy or angry depending on the honesty and sensitivity of acquiring state government officials. Congress-ruled states can add the extra onerous conditions Rahul swears by — this will stall projects and ensure Congress’ defeat in these states at the next election. Modi has nothing to fear, and much to gain.


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Is Rajasthan the next Gujarat?

Rajasthan CM Vasundhara Raje is trying to transform her state into an economic powerhouse with a raft of reforms. A chronicle of the change that’s underway.

Anil Padmanabhan, 30/7/14 Mint

source: http://www.livemint.com/Politics/lP38BmsQE4btyhhHFkSv1K/Is-Rajasthan-the-next-Gujarat.html

A day after India celebrates its 68th Independence Day, Vasundhara Raje , chief minister of Rajasthan, and the rest of her cabinet will head out to the Udaipur division of the state—not on a junket, nor for an offsite, but for hard work at the grassroots level. Over the following fortnight, the cabinet will work out of Udaipur, and, between them, its members will cover 1,600 panchayats, or local administrative bodies, in the Udaipur division, reviewing infrastructure in the rural areas. “This is the third such trip we are undertaking since our government was re-elected. The idea is to review the state of the rural infrastructure, beginning with the panchayat bhawan (building), school buildings, teacher-student ratio and so on,” explained Raje, who led the Bharatiya Janata Party (BJP) to a landslide win in Rajasthan in December.

For the two-time chief minister, the rather unique initiative of taking the government to the people is part of a strategy to radically overhaul the existing administration to ensure that governance doesn’t suffer from last-mile problems. The rural outreach is a logical sequel to the Suraj Sankalp (promise of good governance) programme Raje launched in the run-up to the assembly election last December to drum up political support for herself and the BJP. In the six months ahead of the election, Raje travelled to every constituency in the state to interact with the electorate firsthand. It was an experience, she says, that changed her world view. What she heard led her to conclude that grievance redressal was a key demand at the grassroots; and she realized it could not be delivered without shaking up the local administration.

The upcoming review of the rural infrastructure, like the previous two, will be used to identify the problems and the agencies that can deliver the solutions without the usual red tape. “What we will do is create a database of officials dealing with specific issues. And this will be put online so individuals can directly approach these officials and thereby ease the pressure on members of the legislative assembly (MLAs) who are then freed (up) to devote their time for larger causes,” Raje said. Alongside, the state government is moving to digitize land records and birth data. E-kiosks, to be set up in the next six months in panchayats, will facilitate delivery of such data on a real-time basis—doing away with the intermediation and delay that often took place when the transaction was routed through the local officer, called patwari. Clearly, Raje is looking to create a compact of trust with the people who so overwhelmingly voted for the BJP, not just in the assembly election but also in the 16th general election—the party swept all 25 seats, which was critical in the BJP getting to a record 282 seats in the Lok Sabha, winning a majority on its own.

Armed with this social capital, Raje wants to push ahead on bolder reforms. Some, like the radical overhaul of decades-old labour laws that plague Indian industry, have already been initiated. Together, these could dramatically transform the province once identified as part of the Bimaru states. The term Bimaru—Bihar (BI), Madhya Pradesh (MA), Rajasthan (R) and Uttar Pradesh (U)—was coined by Ashish Bose, the demographer, in the context of the similarity in their demographic statistics. However, over the past three decades, they have come to signify the sad narrative of social and economic stagnation, and not only because of the phonetics (bimar is the Hindi word for illness). The new Gujarat At the turn of the millennium, Narendra Modi took charge as the chief minister of Gujarat with a similarly ambitious agenda. Luckily for him, the state’s administration had, under the aegis of a structural adjustment programme sponsored by the Asian Development Bank, already gone through a major overhaul.

The tailwind of India’s growth revival, again led by a global economic surge, created an even better context for Modi to exploit. The rest, as we all know, is history—something that propelled Modi to the national stage as India’s 14th prime minister. Raje seems to be inheriting a similar constellation of circumstances in Gujarat’s northern neighbour. Not only is the Indian economy beginning to look like it is ready for a second life, people across India (including Rajasthan) are now driven by their aspirations—as opposed to being happy with entitlements or handouts—leaving them better placed to appreciate the underlying ideology of reform initiatives: no gain without pain. This change in attitude, and the number of young people in the country (almost 52% of the Indian population is below the age of 35), are among the factors credited with the political resurgence of the BJP. Like Modi before her, albeit in a different state, Raje too is seeking the mantle of being a politician with a difference.

The proximity to Delhi will no doubt be a factor. The Delhi-Mumbai Industrial Corridor and more than a third of the 1,483km-long dedicated western rail freight corridor between Dadri in Uttar Pradesh and Jawaharlal Nehru Port Trust in Navi Mumbai, will pass through the state. Both are game-changing projects that will bring development directly to the state’s doorstep. The traffic between Jaipur and Delhi is dominated by commercial vehicles—as opposed to the trend, say, even five years ago. It is a harbinger of things to come. The question is whether Raje will exhibit the same political will that Modi demonstrated during his three terms at the helm in Gujarat. Raje’s first eight months seem to suggest that she is on course. She first came to power in 2003, lost the re-election narrowly in 2008, and came back from the political wilderness in 2013 to choreograph a spectacular win, giving her a second shot as chief minister.

Raje brings along tremendous passion to alter the status quo and is driven by the desire to propel her state to the top tier among the country’s states. As she herself admits, her first stint, where her desire for accelerated reforms created politically undesirable disruptions, has prepared her for the second stint—to hit the right pace, not too fast, but not too slow either. Radical reforms Raje grabbed national attention after her government announced labour law reforms in early June; this was followed up with another round of reforms a month later. It has since moved legislation to amend four key national labour laws: the Industrial Disputes Act, the Factories Act, the Contract Labour Act and the Apprentices Act.

While Indian industry welcomed the move to amend the laws that allow firms to hire and fire—a long-standing demand—according to their needs, the chief minister herself is very circumspect of the objectives. To her, the labour law reforms were part of a package to create better opportunities for employment. “I believe if you look at reforms in this (labour) sector, it doesn’t go towards hurting labour; it goes towards improving the habitat for employment and that I think this is very, very important,” she said. The state’s budget for 2014-15—presented by Raje, who has retained the finance minister’s portfolio—seems to vindicate her claim. Presented in July, the budget accelerates the reforms process, touching upon a range of issues designed to lift the state’s economy, streamline administration, facilitate a greater role for the private sector by putting the public sector on notice, and also initiate rationalization of user tariffs of politically sensitive items like water. It has initiated “de-nationalization” of the roads network, breaking up the monopoly of the state transport undertaking. (In most Indian states, the state-owned transport corporation has the monopoly to ply on inter-state routes).

Raje argues that competition is the key to improving service delivery, which will then justify the move to charge to user tariffs that reflect underlying economic costs. “The most important thing is to be able to create quality delivery. Why would you want to pay for electricity when you don’t get the quality that you should be getting? You get five hours of power cut and you are still to pay electricity bills! Naturally you will protest,” Raje explained. In an aspirational society, Raje’s logic stands a better chance of gaining traction and provide political cover against critics. Like finance minister Arun Jaitley enunciated in the Lok Sabha during the debate on the Union budget, the Rajasthan unit of the BJP, too, is arguing that you can be pro-poor and pro-business—at the same time. Inclusion While the Congress owned the message of inclusion, pioneering the entitlement regime, the BJP, either by coincidence or design, seems to have married this with the philosophy of growth. And it is doing this by empowering people—as Manish Sabharwal, chairman of staffing company TeamLease Services Pvt. Ltd, put it, taking people to the jobs through a massive dose of urbanization and infrastructure creation.

Accordingly, Raje has come up with two solutions to deliver on her election promise of empowering the people of Rajasthan. One is a very ambitious financial inclusion programme, the Bhamashah scheme; the other is a restructured skill development programme that will be conducted in coordination with the top companies in the country and will not only train but also generate employment for those taken into the programme. The Bhamashah scheme seeks to leverage information technology and the Aadhaar programme (the previous government’s unique ID project) to create a database to deliver individual and family-based benefits, including cash transfers under various public welfare schemes, to the beneficiaries directly and transparently.

Meanwhile, Raje is working on making people, especially the young, realize that there are better opportunities than a government job. “I explain to the youth that there are only 800,000 government jobs. What I can do, and I am doing, is to create an opportunity, especially through skill development,” Raje said. To prove her point, in mid-July Raje inked a deal with several companies to train people. “In the next one year,” Raje explained, “say, by around next March, 1.34 lakh people will be employed with good salaries. My target for the next five years is employment for 1.5 million people; some of the jobs will come from government, but a large number is coming from outside.” Clearly, Raje has a strategy to propel Rajasthan onto the national stage. Since it relies on a strategy of making people stakeholders in the transformation, it holds out the promise of being the smart thing to do politically as well. It is now for her to walk the talk.


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Dim job creation prospects

Weakening economy dims job creation prospects for rest of 2013

Prashant K. Nanda, Mint 27/8/2013

source: http://www.livemint.com/Companies/FrrjXLwitRvlyveAhlqJcM/Weakening-economy-dims-job-creation-prospects-for-rest-of-20.html

Sectors like banking and automobile that already face a slowdown will see the maximum job loss, says a report

Fewer recruiters see more jobs being created in the second half of 2013, anticipating job cuts across sectors because of the worsening economy.

Some 54% of the recruiters surveyed in a new study by jobs website Naukri.com predicted more jobs will be created in the second half of 2013.

But that’s lower than the 68% optimistic replies at the beginning of the year about job additions during the first six months, and the 62% positive replies in July 2012 for the second half of that year.

About 15% of the respondents in the new study, released Tuesday, have anticipated both hiring freeze and job cuts. Most sectors barring information technology (IT) and construction are expected to see a sharp decline in the creation of new jobs, according to the study.

Sectors like banking and automobile that already face a slowdown will see the maximum job loss, it said.

“The employment scenario in the country is not very upbeat and is closely following cues from the weakening economy, inflationary pressures and falling rupee. Recruiters across sectors have echoed a cautious hiring sentiment,” said the Naukri job outlook survey conducted among 1,100 companies across sectors.

“The economy is certainly not in the best of shape; the macro-economic indicators are running weak, the rupee has stumbled to an all time low and inflationary pressures are strong. The hiring confidence can’t overlook these parameters and hence reflects the slowdown,” said Ambarish Raghuvanshi, chief financial officer, Info Edge (India) Ltd, the holding company of Naukri.com.

The automobile and IT-enabled services sectors saw the maximum drop in expectations, with only 43% and 64% of the respondents, respectively, forecasting job creation in the second half of the year. This number in January 2013 was 65% and 78%, respectively.

The sentiment is similar in the banking and pharma sectors, where only 49% and 44% of the recruiters, respectively, foresee new job creation in the second half, said the survey.

However, “replacement hiring would be considerable in the coming six months. Going forward, improvement in the economy will be factored in gradually by employers,” said Raghuvanshi.

About 53% of the recruiters projected replacement hiring, compared with 45% in January and 48% in July 2012.

The survey estimated that salary increments in 2013 were muted. About 39% of the recruiters said the increments were in the range of 10% to 15%, while 33% said the increments given were less than 10%.

Lowest increments were given in the auto and pharma sectors wherein a majority of the employers said salary hikes in their organization were below 10%.

Some business schools, however, are expecting a better placement season this time. Debashis Sanyal, dean of the Narsee Monjee Institute of Management Studies, a leading private B-school in Mumbai, said the institute’s students had already got 48 pre-placement offers at the beginning of the season. He expects the offers to surpass last year’s number of 90 by the end of the season.


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