'School expenses rise by 160% in 8 years'

While politicians battle it out over inflation and the prices of onions and brinjals, the probable blow for the Indian middle class with its obsession for a ’good’ education are the rising school expenses. According to an ASSOCHAM survey, the costs of sending a child to school have risen by 160% in the last 8 years. What’s more, this figure is exclusive of the tuition fees hiked every now and then.

The survey, done under the aegis of the Social Development Foundation of ASSOCHAM on ’Rising school expenses vis-a-vis dilemma of young parents’ says annual school expenses for a single child excluding tuition fees have risen from Rs 25,000 in 2000 to Rs 65,000 in 2008 while the average annual income of fairly well-off parents has not risen by more than 30% in the same period. The average tuition fees for a private school is Rs 35,000 per year, with Rs 30,000-35,000 per year as expense for a host of ’overheads’. An estimated 3 crore children in the country study in private schools, says the survey.

The 2,000 working parents across were surveyed across nine cities—Delhi, Mumbai, Lucknow, Dehradun, Pune, Bangalore, Kolkata, Chennai and Chandigarh—during April and May this year. One in 10 respondents said the cost of schooling did affect the choice of school. These were parents of young enough kids who had the option of changing schools. Sixty-five per cent respondents said more than half of their salary was spent on their children’s education while 50% conceded schooling was actually a ’strain’ on the family budget.

Nearly 60% of parents felt education had become a business and that the high tuition fees did not actually indicate the academic standards of a school. Rather, it indicated a demand-supply function so that school managements could effect erratic fee hikes every year—something parents can not protest. Even private preparatory schools charge Rs 25,000 a term, the survey says.

Said a parent with two children studying in a very reputed chain of schools, ’Every year there is a hike. Every few days there is something or the other in school for which I have to cough up more money.’

Transport has emerged as one of the most expensive components of a child’s schooling with an average annual cost of Rs 12,000 per child. Packed lunches cost Rs 9,600 per year per child and shoes cost Rs 4,000-5,000 per year per child.

Said Rakhi Sengupta, whose daughter studies in a reputed private school in south Delhi, ’It’s all a racket but we can do nothing about it.’ This ’brand consciousness" too finds a mention in the survey.

Sensex's returns to be less than 10%?

The Bombay Stock Exchange’s benchmark Sensex may have registered its biggest ever monthly fall in the last 16 years when it sank to a 15-month low of 13,405.54 points on Monday, but the worst is still not over if a survey of fund managers is to be believed.

The country’s key stock index could provide a return of less than 10 per cent over the next 12 months, brokerage firm CLSA said on Monday, citing a majority of fund managers in a poll. The Sensex has already dropped 33 per cent this calendar year, its worst six months since the benchmark was introduced in 1979.

In fact, according to 31 per cent of the participants in the poll, a further downside in the benchmark index can be expected as rising commodity prices and higher interest rates hurt growth in Asia’s third largest economy.

“India-dedicated funds and mid-sized funds are relatively bearish,” CLSA said, adding that 57 per cent of non-India dedicated funds were underweight on the Indian market.

NO END TO BAD NEWS...

The survey could not have come at a more inopportune time as investor sentiments had already been dampened by high inflation and a resurgence in global crude oil prices which again surged to over $142 in Asian trade.

Even during Monday’s trade session, fund houses and investors off-loaded holdings in refinery, bank and realty segments following projections of a fall in economic growth.

Germany-based Dresdner Bank said that the soaring inflation and high interest rates are expected to take a toll on the Indian economy, bringing down its GDP growth rate to 7.5 per cent this financial year as against the 9 per cent clocked in 2007-08 .

Dresdner Bank, the banking arm of global insurance major Allianz Group, also observed that the Indian economy had already lost momentum this year with production growth slowing substantially in the first four months of 2008.

This projection is much lower than the Finance Ministry’s expectations of 8-8 .5 per cent GDP growth, and is the second major one since research firm Standard and Poor’s slashed its forecast to 7.8 per cent last Thursday.

SENSEX DROPS BY 340 PTS

The downgrading of GDP growth forecasts, coupled with global oil rates heading northwards again, hit the BSE’s bellwether hard, pulling it down by another significant 340.62 points to register its biggest ever monthly fall in the last 16 years.The 30-share Sensex settled the day at 13,405.54, showing a loss of 2.47 per cent, from its previous close. Similarly, the NSE’s 50-share S&P CNX Nifty fell by 96.10 points, or 2.32 per cent, to close at 4,040.55.

Traders said that the ongoing political uncertainty at the Centre had a sentimental impact on markets too. The Left supporters of UPA Government had threatened to withdraw support if Prime Minister Manmohan Singh pushed ahead with the Indo-Us Nuclear Deal.

“The only segment that is showing some resilience is the services sector, which is still recording double-digit growth rates,” Allianz-Dresdner Economic Research said in its report on the economy and markets. AGENCIES

MANIC MONDAY

DOWN 340.62 PTS AT 13,405.54 CLOSING LEVEL IS A 15-MONTH LOW JUNE ’08 ENDS AS BIGGEST LOSING MONTH IN 16 YEARS

World's longest cable-stayed bridge opens in China

The world’s longest cable-stayed bridge has officially opened in eastern China, linking the two banks of the Yangtze river, state media reported Tuesday.

The Sutong bridge, which spans 1,088 metres (3,570 feet) over China’s longest waterway and links the cities of Suzhou and Nantong, officially opened with a ceremony Monday after a month-long trial, the Shanghai Daily reported.

The six-lane bridge is expected to boost economic growth in the region and cut the travel time between Shanghai and Nantong to one hour from the previous four hours, the report said.

Up to 30,000 vehicles a day crossed the bridge during the trial, the Xinhua news agency reported.

"With the bridge, it takes just seven minutes to drive across the Yangtze," the agency quoted Jiangsu province’s transportation director, You Qingzhong, as saying.

The 1.15-billion-dollar bridge, which overtakes Japan’s 890-metre (2,900-foot) Tatara Bridge as the longest of its kind, is a feat of modern Chinese engineering, the project’s chief engineer Wu Shouchang said.

"The bridge is a good demonstration of China’s scientific achievements in bridge construction over the past years," Xinhua quoted Wu as saying.

The bridge, 108 kilometers (67 miles) upstream from the mouth of the Yangtze River, joins the national highway network on both banks, Xinhua said.

The bridge is supported by soaring steel and concrete towers that stand 300 meters tall.

Mobile phones pose no health risk: German study

One in four Germans who worry that mobile phones and their transmission towers are health hazards can now relax following studies coordinated by the Berlin-based Federal Office for Radiation Protection (BfS).

German Environment Minister Sigmar Gabriel said more than 50 studies in the German Mobile Telecommunications Research Programme (DMF), conducted from 2002 to 2008, had found no evidence that mobile phones and transmission towers posed a health risk within the required limits for electromagnetic radiation.

The programme was funded with 17 million euros ($26 million), a small sum compared with the billions of euros that the German government collected when it auctioned licenses for slices of Germany’s UMTS airwave spectrum in 2000. Though the country’s four mobile network operators provided half of the research funds, the BfS told critics that DMF procedures had ensured the objectivity of the studies.

Research focused on the functioning mechanisms of high frequency electromagnetic fields in mobile telephony, the fields’ effect on humans and animals, and the amount of electromagnetic radiation to which the German public is exposed.

Several studies looked at possible effects on what is known as the blood-brain barrier, a kind of filter that prevents harmful substances in the blood from reaching neurons in the brain.

According to the BfS, the studies found no conclusive evidence that radiation from mobile telephony significantly weakened the blood-brain barrier.

Three studies dealt with the 1.5 percent of Germans who describe themselves as "electrosensitive" and blame various health problems on electromagnetic fields.

Since the ailments are typically things like headaches and sleep disorders, which could have many causes, establishing a link with electromagnetic radiation is very difficult.

The studies found that some people were quicker to sense electromagnetic fields than others, and that health complaints were not necessarily connected with radiation.

est persons were asked to speak up as soon as they felt exposure to electromagnetic fields. Those who considered themselves electrosensitive sounded the most false alarms.

The BfS concluded there was no proof that electromagnetic fields caused the health problems named by electrosensitive people.

The research programme also included a number of epidemiological studies aimed at determining whether mobile phone users contracted certain kinds of cancer more often than nonusers.

The BfS said there was no evidence of a link.

Despite the studies’ reassuring results, the "all clear" signal comes with a caveat: Mobile telephony is safe as far as we know, but we still do not know everything.

"What concerns me is that we know little about the effects on children and juveniles," remarked Rolf Buschmann, an environmental expert at the North Rhine-Westphalia Consumer Centre in Dusseldorf.

There are no suitable scientific models at present for studies involving children.

The effects of longterm mobile phone use - 10 years or more - have not been sufficiently studied either, which is not surprising considering that the technology is still young.

For Bernd Rainer Mueller, an engineer and measurement technology specialist for the Berlin-based environmental protection organisation BUND, this is reason enough to demand lower legal limits for the electromagnetic radiation caused by mobile telephony.

"I’m afraid that otherwise half the population will have health problems at some point," he said. Mueller’s fears are based in part on the justified assumption that mobile-phone use will increase in the years ahead.

For its part, the BfS also sees the need for more research on long-term mobile-phone use as well as on the effects on children and juveniles.

And it continues to advise consumers to use mobile phones as little as possible, to buy low-radiation models, and to make sure that conditions for reception are good.

Use your PC with tip of the tongue

A new device that uses a tiny magnet can help disabled people steer a wheelchair or operate a computer using only the tip of the tongue, US researchers reported on Monday.

The magnet, the size of a grain of rice, lets people direct the movement of a cursor across a computer screen or a powered wheelchair around a room. It is easily implanted under the tongue, the team at the Georgia Institute of Technology said.

"We chose the tongue to operate the system because unlike hands and feet, which are controlled by the brain through the spinal cord, the tongue is directly connected to the brain by a cranial nerve that generally escapes damage in severe spinal cord injuries or neuromuscular diseases," said Maysam Ghovanloo, an assistant professor who helped direct the work. "Tongue movements are also fast, accurate and do not require much thinking, concentration or effort."

A headset with magnetic field sensors detects the magnetic tracer on the tongue and transmits wireless signals to a portable computer, which can be carried on the user’s clothing or wheelchair.

"This device could revolutionize the field of assistive technologies by helping individuals with severe disabilities, such as those with high-level spinal cord injuries, return to rich, active, independent and productive lives," Ghovanloo said. The team reported on their device to a meeting of the Rehabilitation Engineering and Assistive Technology Society of North America in Washington.

The researchers said the computer could be programmed to recognize a unique set of specific tongue movements for each user. "An individual could potentially train our system to recognize touching each tooth as a different command," Ghovanloo said.

The researchers tested the Tongue Drive system on 12 able-bodied volunteers and now plan to test it on people with severe disabilities, Ghovanloo said.

Rise in interest rates to push up your EMIs

With the inflationary trend in the economy persisting, more and more lenders are raising interest rates. The country’s largest home loan lenders, HDFC Ltd and ICICI Bank, joined the bandwagon on Monday, increasing interest rates on home loans by 0.50 to 0.75 percentage points.

This means all fresh borrowers and those existing customers who borrowed under the floating-rate option will now have to shell out more. This applies not only to home loans, but to all kinds of consumer loans, including car financing. Public sector banks like SBI, UBI and PNB increased the rate by half to one percentage point last week.

The rise may also affect the borrowers because the longer the duration of the loan, the more the impact of the rise in interest rate on your EMI.

Since home loans are normally taken for 20 years, rise in EMI is substantial. For every percentage point rise in interest rate, EMI on a 20-year loan goes up by Rs 68 per lakh. Normally, the size of the home loan in the present scenario is in the range of Rs 30 lakh to Rs 50 lakh. EMI on a Rs 50 lakh loan for 20 years will go up by Rs 3,402 per month. This means an additional annual burden of Rs 40,830.

A senior banker pointed out that the cumulative effect of interest rate hikes over the last three years means that for those who borrowed in 2005, the new EMI would be almost 28% higher than it was when they started repaying the loan. That means, EMI on a Rs 50 lakh loan has gone up by Rs 11,500 to Rs 53,322 after the latest hikes, which means the borrower will now fork out Rs 1,38,000 more per year than he did three years ago.

This is a major cause of concern not only for customers, but also for banks as they are now beginning to fear that rising EMIs might increase the default rate. If it happens, it won’t just be the bank’s profitability that will take a hit. You can be sure they will hike rates even further to cover for the higher risk of default.

But apprehensions of default as EMIs rise mean that banks and finance companies will first resort to increasing the repayment period while keeping the EMI unchanged. However, this may not be possible for many old customers, who have already had their repayment periods extended at the time of earlier hikes.

If the interest rate goes up by one percentage point, the repayment period increases by eight years if EMI is to be maintained at current levels. As the rate has gone up by three percentage points since 2005, most customers of that vintage may have reached the maximum possible repayment period already. In such cases, the increase in interest rates will perforce lead to rising EMIs.

For new customers, however, banks will try as far as possible to increase the repayment period, keeping their EMI unchanged, so that it would not stretch their repayment capacity immediately. Of course, this won’t be possible if the extended repayment period goes beyond the borrower’s super-annuation date.

In any case, whether through higher monthly payouts or a longer period of repayment, borrowers will have to meet the extra burden.

For those who have bought houses on borrowed funds, it’s a double whammy. On the one hand, high inflation at 11.42% is adding to their monthly bills. On the other, the rise in interest rates will push their EMIs substantially upwards.

'Rupee to test 47-level vs USD, GDP growth 6% by year-end'

Continuing flight of foreign capital from Indian equity markets and the persisting global financial crisis, hit by surging crude oil prices, are likely to send the domestic currency crashing to 47-level against the US dollar in the coming months, the experts have warned.

Since the beginning of 2008, the rupee has depreciated by over 8 per cent against the US dollar in a downward rally, which started after a sharp appreciation of over 11 per cent in the Indian currency spanning over a year-long period.

During its last appreciation leg, the rupee rose from about 45-level to a high of close to 39 per dollar mark, while it is currently inching towards 43-level amid continuing pull- out of foreign capital from India and surge in oil price.

Global brokerage and equity research major CLSA’s analyst and a renowned portfolio manager Christopher Wood has said in the latest June edition of his famed "Greed and Fear" report that further rise in oil price would continue to be particularly bad news for India.

"This is both despite and because of the Reserve Bank of India’s increasingly pre-emptive monetary tightening stance. The RBI raised on Tuesday the repo rate and the cash reserve ratio (CRR) by 50 bps each to 8.5 per cent and 8.75 per cent, respectively.

"Certainly, a re-test of the 12,000 level on the Sensex cannot be ruled out in these circumstances. And that will be accompanied by a further weakening in the rupee," Wood wrote.

Separately, research and analytics firm Evalueserve’s Chairman Alok Aggarwal has written in a whitepaper that the rupee is expected to fall to 47 against the US dollar and GDP growth could slow down to six per cent by the fourth quarter of this fiscal.

"Should the present global financial crisis not subside, crude oil continue to trade upwards, FII outflow from India continues unabated, and the Indian government do more harm than good to the country’s fiscal health in an election year, we are revising down our earlier forecasts.

"We now believe that the Sensex could drop to 12,000 in the near term, the Rupee could depreciate by another five to six per cent against the US dollar, and the GDP growth could slow to approximately six per cent by the fourth quarter of this fiscal year," Aggarwal wrote.

He also pointed out that deterioration of external and internal factors have thrown obstacles in the country’s growth story.

"We also believe that the Indian government’s hands are tied in an election year and it is likely to be a net negative contributor," he said.

Noting that the Indian economy is in a tight spot in the short term, the whitepaper said a number of external and internal factors are likely to create pressure on economic growth, corporate earnings and the stock market.

Further, it added that as the country’s financial markets are relatively immature, small capital inflows and outflows tend to have an exaggerated impact.