The Hindu Business Line : Middle class, the saving class

The new Indian middle class is relatively heterogeneous; it includes “highly educated academics as well as millions of people who earn their living in the informal sector of the Indian economy,” observes Dietmar Rothermund in India: The Rise of an Asian Giant ( www.landmarkonthenet.com ).

Analysts of the structure and the preferences of the new middle class usually stress their characteristics as a consuming class. But as far as the conditions of economic growth are concerned, this class should also be seen as a ‘saving class,’ the author argues.

He cites statistics on how the average savings rate in the household sector, which stood at 13 per cent of GDP from 1980 to 1984, rose to more than 22 per cent according to recent estimates.

Since the lower quintiles of the population cannot save very much, the savings must be attributed to a large extent to the middle class, Rothermund suggests.

“It will spend a considerable part of its savings on the education of its children.”

Educative perspective.

Financial intelligence

Where to look for financial intelligence?

The obvious first step is to keep a lookout for any published price or fee data, in articles or news reports, says Deborah C. Sawyer in Competitive Strategies for Service Businesses ( www.jaicobooks.com ). Such intelligence needs to be captured at first sighting; it can be difficult to track down later, she advises.

“The types of ads known as ‘tombstone ads,’ placed after merger or other business deals have closed, also can indicate the dollar size of the deal and provide a point of leverage for further deductions about fees in certain sectors of the management consulting business.”

A practical tip from the author is that casual remarks dropped in conversations at professional meetings can also lead to snippets of price or fee intelligence.

Ready takeaways.

Reporting fraud

When the auditor has obtained evidence that fraud exists or may exist, what should he do?

He must bring the matter to the attention of the appropriate level of management as soon as possible, says the Standard on Auditing (SA) 240 (Revised) titled The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements ( www.icai.org ).

“This is so even if the matter might be considered inconsequential (for example, a minor defalcation by an employee at a low level in the entity).” Ordinarily, the appropriate level of management is at least one level above the persons who appear to be involved with the suspected fraud, the Standard explains.

But what if the auditor has doubts about the integrity or honesty of management or those charged with governance?

In such exceptional circumstances, “the auditor may consider it appropriate to obtain legal advice to assist in determining the appropriate course of action.”

Essential inputs for the assurance professional.

Value of women’s life

Women are neglected when it comes to insurance, bemoans Kshitij Patukale in Insurance for Everyone ( www.macmillanindia.com). The husband takes a policy of Rs 20 lakh and the wife’s policy extends up to a maximum of Rs 50,000, he illustrates.

“Women are insured only for tax benefits.”

The author calls for defining ‘women life value’ and also an independent institution for women to ensure that they are adequately insured.

“It will help them create their own financially independent corpus, insurance protection, and financial backing… Women life value will make women more confident and efficient… It will destroy an invisible financial stress and strain.”

Good coverage.
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D. Murali

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