Although India Is on Track to Becoming the Fastest Growing Economy, It Might Need Another 78 Years to Surpass China

New Visit Begins $22bn New Economic Era

First Published Date: May 21, 2015

China and India may have non-agreed issues from decades of mistrust, but economic cooperation is something these two Asian giants can agree upon. India’s PM Narendra Modi’s recent visit opened up a new economic bridge paved by $22bn to begin a new era of cooperation.

As China’s economic growth starts to slow down, India is expected to overtake China with its growth rate of more than 8 percent to become the world’s fastest growing economy. And China takes notes by not missing to become a partner of the growth opportunity in India.

China has expressed interest in investing in India’s $2tn before, but the progress has been slow due to various political issues on the Indian side. However, at the end of Mr. Modi’s visit to China, both countries signed $22bn deals to boost economic ties, starting with areas such as renewable energy, ports, financing and industrial parks, and so on.

Although India is on track to becoming the fastest growing economy, it has a long way to go to become the next China. China’s GDP is about five times that of India. As a recent Wall Street Journal post points out, India would require 78 years to surpass China at its current economic rate.

Although the new India-China economic cooperation begins a new era, their non-economic rivalries remain strong with no ending in sight. Decades-long border disputes and vying for regional influence to become the regional big brother are here to stay and have no indication of resolving anytime soon.

Boring is the new Sexy

Canada Will Emerge From Global Crisis First

First Published Date: April 25, 2009

For a long time now Canada has had to put up with jibes about being a boring country. This is something that Canadians have come to live with in a sense. Being called boring isn’t nice, exactly, but there comes a point where you cease to care what people think about you based on your nationality. Equally, ask an Irish person if it bothers them to be called “stupid”. This clichéd image of friendly, but drunken and unintelligent Irish, people was common currency for years. That Ireland had turned out Oscar Wilde, George Bernard Shaw and W.B. Yeats was ignored. Now Irish people are happy for someone to underestimate them – as it means the advantage is with them.

Equally, while Canada was carrying on being “boring”, other more “exciting” nations were mortgaging their futures on the wave of credit that never seemed to slow at all. While the banks were taking on customers in their millions, and those customers were buying expensive goods, houses and cars, there may well have been many people who looked at Canada from the outside and considered its financial caution to be boring and pedestrian. But looking at Canada’s financial position, which has attracted somewhat envious compliments from US President Barack Obama, who would swap places with the “exciting” countries now?

Yes, there is a recession in Canada, and it will not be here today, gone tomorrow. There are hurdles to clear, and right now it is a little more difficult to get a home loan than it was a few years ago. But with the government’s financial policies having stipulated caution while all around were deregulating and hiding behind credit – very shaky credit at that – the Canadian banks have not required bailouts like in the US, Britain, Germany and elsewhere. This means that while those countries are still recovering from the battering that their economies took, and looking at a tax burden that could persist for some time, Canada will emerge in a better position.

Finance Minister Jim Flaherty has recently expressed an opinion that will probably write a thousand headlines between now and the end of the global crisis. Speaking to a seminar in Chicago on financial literacy he gave the opinion that “boring is the new sexy”. There are very few countries in the world that would not love to be where Canada is right now, and fewer still who wouldn’t like to be where Canada is going. Having succumbed last to the crisis, Canada is due to escape it first – and then, the possibilities are intriguing.

Sure, nothing is guaranteed in this climate, and even if there are positive signs, it would not be a typically “Canadian” attitude to crow about the relative strength of our position. But if the current global situation shows us anything, it is that being “boring” while everyone else is counting on the goose to continue laying golden eggs can be a very wise decision. Just watch the other global economies once they are back on their feet. They’re likely to be a lot more “boring” than before. Especially now that they know how sexy it is.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Apr 25, 2009.

Canadian Banking – World’s Soundest Banking System

Canadian Banking System Gets A+

First Published Date: January 4, 2009

Good news if you do your banking in Canada – you are storing your money in what is accepted to be the safest banking system in the world, ahead, even of banking paradise Switzerland. This means that even in the current global financial crisis, there is no cause to worry about the safety of your banking deposits, and that putting your money into a Canadian bank is as close as you can get to a guarantee that it will be handled in the most efficient way imaginable. After the annual study by the World Economic Forum polled bankers worldwide, Canada came out on top – well ahead of near neighbours the United States, which came in 40th.

The World Economic Forum polls its members every year, asking them to award marks out of seven for the soundness of a countries banking system. Canada polled a remarkable 6.8 out of seven, ahead of the previous leader as well as other notables such as Sweden, Luxembourg and Denmark, all of which are known for unshakeable fiscal probity.

This is news worth shouting about, as banks in many other countries have had to rely on government bailouts while others have gone to the wall. Canadian Finance Minister Jim Flaherty is a man with plenty of reasons to smile. As his counterparts in supposedly more prestigious economies flounder against a seemingly unstoppable wave of financial doom, Flaherty is presiding over a competitive economy with a lessening level of debt. As other governments borrow to escape the meltdown, Canada’s surefootedness is likely to reassure banking customers.

Canada has a progressive banking system too. It is a lot less stressful to try and get hold of your money here, with more Automated Bank Telling Machines per capita than any country in the world. Anybody who has ever spent time in a city or town with a dearth of ABMs can tell you that it’s a frustrating experience trying to withdraw money that you know you have. Sometimes it’s like they don’t WANT you to spend your money.

Electronic banking plays its own part in this most efficient bank system. Canada has the highest penetration levels worldwide of debit cards (enabling you to make use of your account even if you can’t find one of the country’s many branches or cash points), Internet banking (so if your bank doesn’t have one of the many branches nearby you can still conduct any transaction you care to name) and telephone banking. It’s a quite impressive story overall, to be honest. Knowing that your money is safe and that you face the fewest restrictions imaginable should you wish to make use of it means Canada should be in a position to ride out the crisis and come out the other side ready to compete.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Jan 4, 2009.

Canadian Financial Blog And US Jobless Claims

US Jobless Claims Fall And Canadian Finance Blog

First Published Date: May 10, 2009

Yes, this is a Canadian personal finance blog, and yes, the headline is about unemployment in the US. So yes, there may appear to be a contradiction in writing about that issue in this blog. But as we have all become more aware than we ever needed to be, the influence that one country can have on another is all the more when it comes to financial issues. Therefore, even though the figures may be coming from south of the border, it should be cause for reassurance and satisfaction to hear that the US Labour department has reported that jobless benefit claims fell to their lowest point in three months this week.

The news is, as ever, not all good. The number of people living on unemployment benefit has reached its highest level yet, but the number of new claims falling is a sign that the wave of layoffs has possibly reached its peak. The motto of the last few months where money issues are concerned is again relevant – “This is an encouraging sign, but we’re not out of the woods yet”. But living as we do in an age where perception is almost as important as hard reality, it is important to look at encouraging news as a potential springboard to a sustained improvement. Figures will not improve the situation by themselves, but investors, employers and job hunters can all play a part by showing optimism and helping to drive the economy forward.

OK, so no doubt some will be saying “this is all very well and good for America, but how does it really affect Canada?”. It is a good question, but there is an answer to it. The fact is that the US and Canada are linked not only geographically, but in business terms too. From simple matters like Canadian and US citizens in border regions crossing over the border to commute to work – then spending their wages in their home country while paying taxes in the other – to things like trade tariffs, the two countries have a mutual interest in seeing that things run smoothly with their neighbours. The worst case scenario would be protectionism in times of financial stricture, where either country moves to shore up its own interests. The likelihood of this increases in parlous economies, and decreases when news improves.

Canada, as we have discussed previously, has a lot to be proud of where handling of the recent financial crises has been concerned. Panicking will help no-one, and Canada has certainly avoided panic. Taking great care to ensure that the way we move out of the crisis is not just the quickest, but the most secure, is the only way forward. The potential for things to go badly wrong is never far away, and an increase in serenity south of the border will mean that Canadian economists can continue to steer the best path forward without the worrying distraction of things getting worse down South. And that affects everything in Canada – housing, employment, lifestyle, it all adds up.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on May 10, 2009.

Canadians are among the most heavily taxed in the industrialized world

Canadian Tax Issues

First Published Date: Jan 31, 2009

To paraphrase Benjamin Franklin, nothing in life is certain except for death and taxes. It is a legal requirement that we must pay tax on earnings and purchases in addition to other more specific levies that pay for our public services. This is a necessity, but that does not make it any less galling when the time comes to give up a portion of the money we have earned. Taxes are indeed such a vexed issue that those of us who can afford to often employ a financial advisor or accountant whose knowledge of the system can spare us at least some of the unnecessary tax expenses that often go unnoticed due to the less than total comprehensibility of the system.

One way to defray at least some of your tax burden is to invest some of your money in bonds. When a bond matures it is seen as a capital gain, and only half of the proceeds of capital gains are taxable under Canadian law. There are jobs that pay a portion of their salary as bonds for this very reason, although this is obviously unpractical for those whose income falls below a certain threshold. However, as Canada’s taxation system is progressive, with a higher rate paid by those on larger incomes, some people argue that this legal tax avoidance measure is simply a way of redressing an unfair balance.

Sales taxes also account for a portion of each Canadian citizen’s tax burden. Depending on which province the sale takes place, the tax on a sale can rise as high as 13%. Certainly all provinces other than Alberta have a Sales Tax level of 10% or more, with Alberta clocking in at a comparatively tiny 5%. Therefore, if it is practical for you to do a large amount of your purchasing in Alberta, this is one way in which you can avoid being stung for more cash. Prince Edward Island is comparatively a high sales tax area, with a  taxation level of 15.5% of the cost of the sale. Thus, an individual who pays most of their Sales Tax within Prince Edward Island can, at least in theory, unburden themselves of more than two-thirds of their tax loss by doing their shopping in Alberta.

Unlike most of the Western world, the Canadian government does not impose Inheritance Tax on its subjects. Inheritance is seen as another form of capital gain and therefore subject simply to Capital Gains tax just like bonds or stocks. Though to benefit from this absence of Inheritance tax, someone needs to die – which takes us neatly back to the words of Benjamin Franklin all those years ago. One other thing – if you like a cigarette and a beer, and drive an air-conditioned vehicle, then you are paying four different kinds of Excise tax. It might be time to look at whether you can walk to the liquor store.

To streamline and minimize blog maintenance, I will be discontinuing maintaining the Canadapersonalfinancewebsite.com website (however, I will still hold the domain). I will gradually move all articles from this site to A Dawn Journal. This article originally published on the above website on Jan 31, 2009.