The Ecobizz Newsletter
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IBS HYDERABAD
THE TEAM
FROM THE EDITOR
Published by Club Ecobizz, IBS Hyderabad Editor In Chief Mr. Abhishek Sharma E-mail: abhishek.sharma0404@gmail.com
Chief Advisor Mr. Siddharth Padhiary Vice President, Club Ecobizz Designed and conceived by Mr. Siddharth Padhiary E-mail: sidpadhiary@gmail.com
Editors Message
Proof Read by Team Ecobizz
Editorial team Mr. Abhishek Sharma Ms. Nikita Singh Ms. Sakshi Bhalla Mr. Ramakrishna Iyer
Contributions Team Ecobizz Batch of 2016 Batch of 2017
Amidst the eventful schedules and vibrant happenings of IBS Hyderabad, Club Ecobizz is proud to come up with the June 2015 issue of its ever old, yet still young magazine, ‘THE FOCUS’. Read on to find out the cover story on “Missed call Economy”. The story how the growth of Telecommunication Sector in India and how it is supporting the Indian Economy by boosting jobs and changing the lifestyle of Indian citizens. As always, we are open for feedback and suggestions. We also take the opportunity to thank our readers and cherish their continued association with ‘FOCUS’ . Here’s hoping that you have an augmented reading. Warm Regards The Editorial Team
Copyright Regulation This material has been reproduced and communicated to you by or on behalf of Club Ecobizz, IBS Hyderabad pursuant to part VA of the Copyrights Act 1968 (The Act). The material in this communication may be subject to copyright under the Act. Any further copying or communication of this material by you may be subject of copyright or performer’s protection under the Act.
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CONTENT
WHERE ECONOMY MEETS BUSINESS
04 A walk down the memory lane - Activities done by Club Ecobizz
10 Decrease in oil price - Boon or Bane - Gokul Parthibhan
16 Frontier Markets - Nikita Singh
22 Octal Boost - Agri & Infra - Abhishek Sharma
28 Progressive Budget 2015 - Sakshi Bhalla
COVER STORY
32 “Missed Call” Economy -Rumit Saluja 38 Facets of Turkish Economy - Shivang Dattani
44 A Chit to the Future - Anupama Kumarswami
50 Events, GLs and Workshops - Growth of Digital India & EB Pathshala
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Logic will get you from A to B, but imagination will take you everywhere. 4
June 2015
INTRODUCTION EB FAMILY
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June 2015
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IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T
THE EB FAMILY A WALK DOWN THE MEMORY LANE Club EcoBizz, the Official Economics, Business and Public policy Club of IBS Hyderabad is a place to learn and a place to grow. A formal club which imparts values that of a corporate and yet a place to relax and develop the inner fire and thirst of knowledge. The club address all academics as well as non academic issues of its members with real zeal and imparts a style of symbiotic learning within itself. Ranging from activities to academics the club binds itself to achieve the zenith and to differentiate among the rest. The most applauded event presented by EcoBizz was the “EBweek”, a five day workshop where different guests lectured on various issue. Of them was “Business Making:
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Is that the way forward?” By Dr. Ashok Agarwal and “Economics of Investments & Market Scenario” by Mr. H.Krishnan who was the former GM (R&D, Finance) in BHEL. The FOCUS, the monthly publication continues to cover current and historic topics, which help in shaping the world economy. The latest topic discussed in Focus was “Feminism in African Economy” which showed that feminism is the cure to the African civil crisis. Our flagship event “X-Tasy 3.0” drew a huge crowd and was considered as a successful event. Amidst these activities that were aimed at positioning the club as a performer instead of being just an on the paper club, the club also has set a benchmark for the quality of June 2015
The desire to create is one of the deepest yearnings of the human soul.
extra-curricular activity in the campus with its active marketing and innovative events. Club ECOBIZZ not only involves in academics but also involves in sports too. The club has its own team named “Bizzy Jacks” which represents us in IBS IPL tournament organised by team V.A.P.S. For fun and frolic, club Ecobizz organised a couple of fun events. On 8th of December it organised “Bol-BollyBol, an interactive game based on the theme of bollywood and on 11th December again an event was organised name “Karobaar”. These events gave a breather from the hectic schedule of the college. On 24th October 2014 Ms. Bhamini Lakshminarayan and Ms. Lavanya L, the representatives of NCFW The Ecobizz Newsletter
conducted a workshop to discuss the ongoing burning topics like Rape, Sexual Harassment and Gender Policing. Major ideologies like the difference between “Gender and Sex”, “Definition of True Men” were discussed. On January 3rd and 4th “The E3 summit” was conducted in IBS Hyderabad by club Ecobizz. Here concepts like Economy, Energy and Employment were a hot bed for discussion by eminent personalities like Mr. Sanjay Gadhalaya, Ms. Padma Gunde and Mr. Ali Abbas. And then the mega event of IBS Hyderabad, Trishna 2015 was conducted which had a theme of the past, present and the future of India. Club Ecobizz participated in it by organising a major event named “BizzTryst”
which was conducted in three days. It had three rounds Rediscover India, Doomsday and Vanguard. It took into consideration all the aspects of Indian Economy by giving a platform of understanding the nuances of Nation Building, negotiation, tender passing as well as a blend of the different national scams, Crisis and terrorist attacks that took place over the years. Participants from various colleges all over India attended this event and appreciated the event for its innovative approach. Hence join the journey of IBS with Club Ecobizz and explore the magic in you.
Ranging from activities to academics the club binds itself to achieve the zenith and to differentiate among the rest.”
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Extraction of Crude Oil is not only an expensive task but also results in depletion of Non-renewable resource, causing imbalance in nature
June 2015
OIL ECONOMY
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IBSIBS HYDERABAD HYDERABAD
US has the highest amount of deposit of shale gas.
As there were sanctions from world countries towards Russia, imports of crude oil was banned so in order of selling its major export (crude oil) contacted India to become customer of Russia.
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OIL ECONOMY IN FORMATIO N, NE WS AN D S U P P OR T When looked at the background one of the major oil importer United States has started exporting its shale gas.
DECREASE IN OIL PRICE BOON OR A BANE
In context of oil price depriciation
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rude oil: It’s a naturally available product which composes of hydrocarbon deposit within. It is also called “Black Gold” because of its color. The color may vary with varying in regions of extractions also. There are different types of crude oil and they are classified depending upon Sulphur content and degree gravity (- it say about the densitywill vary from 20-40) Brent crude oil: It is typically used in Vehicles as gasoline after extraction. Its sulphur content 0.37% and 38 degree in gravity. West Texas Intermediate: It contains 0.2% sulfur and 39 degree of gravity. It contains both light and sweet crude oil. Dubai crude: As name implies it is extracted from Dubai. It is the lightest crude oil with sulphur content 2% and 31 degree gravity. Russian crude oil: It is the crude oil which has high amount of sulphur normally called sour crude oil.
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Major Producer’s of crude oil: When it comes to producers of crude oil they have a separate body who governs all the policies, prices and more. They call it as OPEC (Organization of Petroleum Exporting Countries). It was formed in the year 1960 at Baghdad; now headquarter at Vienna-Austria. It consists of twelve members each one representing each country.( Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria,Qatar, Saudi Arabia, the United Arab Emirates and Venezuela). As per the recent data the major producers of crude oil are United States (shale gas), Saudi Arabia, Russia, China, Canada, UAE, Iran, Iraq, Mexico, and Kuwait. Why Decrease in crude oil price: Last year we might have seen in the month of October there was a sudden drop in oil price (from $120-$45 low- a steady drop). When looked at the background one of the major oil importer United States has started exporting its shale gas.
Gokul Parthibhan Batch of 2016
There are different types of crude oil and they are classified depending upon Sulphur contentand degree of gravity”
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1 barrel of crude oil= 159 liters (only crude oil for others it may vary)
(Shale gas is a gas which has rich resources of petroleum and natural gas). US has the highest amount of deposit of shale gas. Even our country billionaire Anil Ambani though running the world’s largest oil refinery situated in Gujarat has partnered with oil companies in US in extracting shale gas. It’s a costly affair extracting shale gas compared to crude oil. Inspite of this Ambani’s investment proves it’s worth more than crude oil. Coming back as US started exporting shale gas at a lower price in concern of not allowing the US to capture the market share OPEC has even decided to lower prices. The price war starts here as a result in the month of January 2015 crude oil touched the bottom line of $45 a barrels( 1 barrel of crude oil= 159 liters- only crude oil for others it may vary ). The Second view of mine comes here. On overlooking the world economy other than India and US no other country was performing well
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especially Europe and china. There was a demand supply mismatch which was another reason of oil price drop. Demand was constant or more or less decreasing and the supply was more. Libya a member of OPEC ramped up its production to 8 lakhs barrel per day. All these were some of my observations to fall in price of crude oil. Implications on India economy: India was a major importer of crude oil. 70% of our necessity of crude oil is being served only through import. Once these prices were down it was like an unexpected treasure for our newly formed Modi government. India’s CAD (Current account deficit) dropped to $ 7.5 billion. In addition our trade deficit was also narrowed to a larger extent. Our BOP (Balance of Payment) was drastically reduced. As there were sanctions from world countries towards Russia imports of crude oil was banned so in order of selling its major export (crude
oil) contacted India to become customer of Russia. Through which many MOU’s signed between two countries A deal made by Government of India with Iran that it would pay in Rupee rather than in dollar benefited heavily. All these made piles of Foreign currencies stay within Indian economy so our Forex reserve started building up which touched all time high of $ 340billion. Having seen all the above things what happened within the country was Inflation which was a major worrying factor for RBI for the past five years started reducing. Prices of petrol, gas, and diesel were also reduced. Moreover interest rate was reduced. For every $10 drop in crude oil our CAD decreased by 0.5% of GDP and fiscal deficit 0.1% of GDP. Following all the above current events GDP started showing sign of improvement.
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OIL ECONOMY How it affected other economies: Russia- It currency got depreciated a lot as many companies banned selling products to people of Russia. Venezuela- It is the country which has highest amount of oil reserve was in the blink of recession at that time. Moreover it started asking help for OPEC to becoming country bankrupt. United States- It’s one country which stated showing growth and currency stared growing in comparison with other countries. Saudi, UAE- Will be facing huge budget allocation problems in the mere future. As a result the common problem would be budget allocation to all oil exporting countries and a source
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major revenue from oil. Future Trend: Until 2016 oil price may not exceed $100/barrel and by end 2015 it would be within $75/ barrel. Since OPEC countries have not reduced the output the breakeven for shale is becoming worse compared to other oil countries as a result a few companies in US closed the extraction of shale gas. This however may be beneficial for OPEC countries in future. For India the major effect would be seen on this fiscal for a huge fall in oil price in last fiscal.
The price war starts as a result in the month of January 2015 the crude oil touched the bottom line.�
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INVESTMENT ARENAS
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An economist is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today. The Ecobizz Newsletter
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IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T
2015 A NEW INDIA FRONTIER MARKETS NEW PLACE TO INVEST
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Nikita Singh Batch of 2016
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rontier markets are countries with investable stock markets which are less established than the emerging markets .They are also known as “pre-emerging markets�. These equity markets attract investors who are seeking potentially high returns and are able to take high risks which these markets are exposed to. Some of the risks which investors face in these markets are such as political instability, inadequate regulation, poor liquidity, substandard financial reporting and large currency fluctuations. In addition, many of these markets are overly dependent on volatile commodities.
Frontier market investments can have a low correlation to developed markets and therefore can provide additional diversification to an equity portfolio. They provide high growth potential. The very nature of these frontier markets is that they are inefficient, offering capable managers large set of opportunities to generate higher excess returns. Countries like Kuwait, Nigeria, and Pakistan are at early stage of development relative to the emerging market countries. Many frontier market countries are entering a period of mid-to high-single-digit growth .This is because of low economic base, favorable demographics, growth in
June 2015
You are determining the future you every day. Will the decisions you make today lead you closer to the person you want to be tomorrow?
infrastructure spending by government, and in some cases, abundant natural resources. Also certain frontier countries will benefit from the rapid adoption and dissemination of “new economy� services such as mobile banking and mobile payments, which should contribute to the growth in the medium term. Index providers MSCI and FTSE differentiate frontier markets from the emerging markets on the basis of their market size, liquidity and accessibility thresholds on foreign ownership. In other words invest ability is the prime criteria with aggregate and per capita serving as secondary role to classify countries in frontier market space. Market-cap-weighted
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frontier markets benchmarks from these index providers include stocks which are listed in the Middle East, Africa , former Soviet Republics (also known as Commonwealth of Independent States or CIS), and less developed Asian nations such as Pakistan, Vietnam and Bangladesh. The frontier markets of African and Asian countries have very low per capita GDP growth rate, while the oil producing states in the Middle East (also known as the Gulf Corporation Council, or GCC nations) are comparatively wealthy. These resource-rich nations are considered in the category of frontier markets because they have restrictive foreign ownership which limits their exchange-listed
companies.
Opportunities Frontier markets
in
The Frontier markets are identified as potential markets due to the following reasons:
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Young, Growing Populations Frontier markets encompass a population base of 1.2 billion people, and these populations are characterized by being much younger and faster growing than in developed or even mainstream emerging markets. By way of illustration, across frontier markets the median age of the population is only 30.2 years, which is compared with 40.5 years of that developed markets.
Many frontier market countries are entering a period of mid to high high-single-digit growth.�
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IBS HYDERABAD IN F ORMAT I ON , N E WS A N D S UPPOR T
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Rising Middle Classes
The economic growth of recent decades has lifted millions of people out of poverty and created a new and inspirational group of consumers. Although much of the workforce in frontier markets is still employed in producing goods for International consumers, future economic growth will likely be fuelled by these domestic consumers. Goldman Sachs calculates that around two billion people globally will join the middle class by 2030, and Many of these will be in the frontier markets.
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Infrastructure opportunities
Build
out
Many frontier markets are still in the process of development and improving their infrastructure, to support their growing populations, and this creates many opportunities for domestic and foreign investment, which vary greatly from one market to another.
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Risk in Frontier Market
Since frontier markets involve high returns they are accompanied with high returns. The risks involved are due to the immature of the asset class, and also represent, opportunities for the long term investors. These risks can be minimized by creating a well diversified portfolio. The various kinds of risks involved while investing in frontier markets are as follows:
stages of development. Some of the economies also possess a greater risk because of overdependence of economies on natural resources.
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Currency Risk
The currency of frontier markets are undervalued on purchasing power parity basis and are therefore expected to appreciate in the long run, which could provide a potential additional source of return. In order to benefit from this potential appreciation in the long run, investors may have to ride out potential volatility in the short to medium term.
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Inflation Risk
Given the occasionally fragile nature of these frontier market economies, governments may not have necessary monetary or fiscal tools required to curb inflation.
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Structural Risk
It involves that returns can be more volatile and price movements more extreme. Markets of frontier economies can have different levels of accessibility; ex some operate with more stringent controls on entry and exit or on foreign ownership. The cost of investing is high and transparency is low
Index providers MSCI and FTSE differentiate frontier markets from the emerging markets on the basis of their market size, liquidity and accessibility thresholds on foreign ownership.�
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Sovereign/Geopolitical Risk
Since these frontier economies are pre-emerging there are cases where political systems are not stable or fully developed. There are also the chances of potential risk in rising protectionism and capital control. Financial and banking systems are often in the early
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The Frontier markets are identified as potential markets in the growing era.
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GREEN INFRASTRUCTURE
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The Yadgiri-warangal section of NH-163 was under taken by the National Highways Development Project or the NHDP Phase-IV.
important decision taken by the cabinet to develop the Indian infrastructure was its approval for the development of the four-lane .National Highway-163 in Telangana.
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OIL ECONOMY IN FORMATIO N, NE WS AN D S U P P OR T It has mandated the banks to obtain from the sugar mills, the list of farmers the bank account details to extent the cane dues.
OCTAL-BOOST AGRI AND INFRA In context of Sugarcane and Highways develpmentgs
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he NDA government is in facing a huge expectation from the fellow Indian citizen and it is responding by taking some very strong steps to revive the agriculture and the infrastructure sector in. Issues like farmer suicide, unavailability of irrigational water, irregular supply of fertilizers, poor highway connections are some of the issues that haunted the Indian government for a long time. NDA led government had to find out ways to solve these burning issues so as to win the confidence of the Indian masses. The government took steps ranging from checking the rising price of pulses to ensuring smooth supply of urea in southern states of India, the government on 10th June 2015 approved selfengineered octal-measures to boost international highways, agriculture and a besieged sugar industry. The Cabinet did not take much time to approve the import of lentils in large quantities so as to boost supply and also asked states to take stern action against hoarders. The inflation in the prices of pulses rose up to 64 per cent in the last one year as the domestic production went down by
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nearly two million tonnes in 2014-15 crop year due to unfavourable and unpredictable weather conditions. The concern over rising pulse prices could not keep the cabinet mum as the Cabinet decided to import pulses in whatever quantity is required to meet the market demands, directing state government to take strict action against hoarders. A smooth supply of urea was ensured in the southern states of India. In order to do so the Centre approved continuation of its production of urea from three plants that use naphtha as its raw material till availability of gas through pipelines or any other means are built. This decision was necessary to ensure a smooth and uninterrupted supply of fertiliser in the southern states of the country. A total requirement of Karnataka, Tamil Nadu and Kerala is 23 lakh tonne (LT), and the annual production of these three units is 15 LT per annum. On June 15th the Cabinet approved the signing of the Bangladesh, Bhutan, India and Nepal (BBIN) Motor Vehicle Agreement for the Regulation of Passenger, Cargo and
Abhishek Sharma Batch of 2016
There are different types of crude oil and they are classified depending upon Sulphur contentand degree of gravity�
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A proposal to provide soft loan of Rs 6,000 crore to the sugarcane industry was approved by the Cabinet to help clear the long standing Cane dues arrears.
Personal Vehicular Traffic among BBIN. The BBIN transport ministers’ meeting in Thimpu, Bhutan made efforts to improve trade relations with the countries. Signing of the BBIN agreement promotes safe, economical efficient and environmentally sound road transport in the sub-region and will further help each country in creating an institutional mechanism for regional integration. This trade integration will boost the trade and commerce in the region and hence will help in developing each other’s economy. The Ratification of the International Labour Organisation (ILO) Convention on the Seafarers Identity Document was also approved by the cabinet. It was a smart decision taken by the cabinet which secured the trade from any unsuspected incidents of terrorism. Here system to ward off the potential risk of breach of security and possible terrorist attacks is developed by introducing
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a biometric based seafarer’s identity document, mainly, to ensure a foolproof security. India’s ratification of this Convention will benefit Indian seafarers. Otherwise they might find a threat to their job opportunities, in the near future, in the global maritime sector if India doesn’t ratify the Convention. A proposal to provide soft loan of Rs 6,000 crore to the sugarcane industry was approved by the Cabinet to help clear the long standing Cane dues arrears. A one year moratorium on this soft loan is also provided by CCEA and it will also bear the interest subvention cost to the extent of Rs 600 crore for the said period. The centre also has taken steps to ensure that the farmers are paid their dues expeditiously. It has mandated the banks to obtain from the sugar mills, the list of farmers the bank account details to extent the cane dues. These dues are then directly paid into the farmer’s bank account on
behalf of the sugar mill. Subsequent balance if any will then be credited into the mill account. For the development of Infrastructure the Centre approved the development of four-laning of the National Highway-3 of the GunaBiaora and Biaora-Dewas section with an estimated cost of Rs 2815.69 crore. This work will be under the supervision of National Highways Development Project or the NHDP Phase-IV. The green flag is in Design, Build, Finance, Operate and Transfer (DBFOT) basis in BOT (Toll) mode. Including the cost of land acquision, resettlement and rehabilitation and other pre-constructive activities the estimated cost for Guna-Biaora is estimated to be Rs 1.081.9 Crore. The total length of the road will be approximately 94 kms. The shipping ministry’s proposal was also approved by the Cabinet
June 2015
OIL ECONOMY which vouched for India’s accession to the International Convention on Civil Liability for Bunker Oil Pollution Damage, 2001 (Bunker Convention) of the International Maritime Organization [IMO] as well as to amend the Merchant Shipping Act, 1958 to give effect to the Bunker Convention, Nairobi Convention and Salvage Convention. According to the Bunker Convention adequate, prompt, and effective compensation for damage caused by spills of oil, when carried as fuel in ships’ bunkers and made. The territorial jurisdiction for damage compensation extends to territorial sea and exclusive economic zones. Indian vessel, wherever it is situated, and a foreign flag vessel while it is within Indian jurisdiction are subjected to the Bunker Convention.
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One more important decision taken by the cabinet to develop the Indian infrastructure was its approval for the development of the four-lane National Highway-163 in Telangana. The Yadgiri-warangal section of NH163 was under taken by the National Highways Development Project or the NHDP Phase-IV. The Engineering, Procurement and Construction (EPC) are the basis for approval. A total of Rs 1905.23 crore was estimated to be the project cost. These are the major eight decisions taken by the Centre on June 15th 2015 to boost the agriculture and the infrastructure of India. We can just say that these efforts are only the tip of an iceberg and there is more such a bold decision to come up by the Central Government.
The price war starts as a result in the month of January 2015 the crude oil touched the bottom line.”
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PROGRESSIVE BUDGET
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Government is the great fiction, through whichevrybody endeavours to live at the expense of everybody else. The Ecobizz Newsletter
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Abolition of the Wealth Tax is considered to be a wise move from the Government’s end due to the fact that filing it was considered as a highly tedious task
A PROGRESSIVE BUDGET
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he first full time budget after they came to power in 2014 was presented by the NDA government Finance Minister, Mr. Arun Jaitley on 28th February 2015 for the following year. It holds a lot of significance in the way opportunities will unfold for the economy for its growth in the years to come. There were a lot of expectations from this budget both from the common man and the industrialists waiting for the sign of “Achche Din” that may follow. With the investor’s sentiments favorable and huge sums of money pouring in, in the form of Foreign Direct Investments and Foreign Institutional Investments, it was the duty of the government to fulfill the expectations which they were found to be successful in some areas and not in others. Mr. Arun Jaitley tried to touch upon all the areas of the economy not leaving any sector feeling deprived of the effects this budget would have on them. Whether it is positive or negative, that can only be analyzed after the new set of policies is implemented and we start getting results. The major highlights of this year’s budget from the Taxation perspective
were:1. Reduction of the Corporate Tax from 30% to 25%. 2. Increment in the Service Tax Liability from 12.6% to 14%. 3. Abolition of the Wealth Tax. Focused on the growth of the economy, Mr. Arun Jaitley combined NAMO’s “Make in India” and the gradual decrease over the years in Corporate Tax Rate is likely to act as a catalyst for industry and manufacturing sector. Although this move gathered a lot of criticism from the opposition leaders who named it as a ‘DHAN VAPASI’ scheme of the government in power, but looking at the positive effect of it, this saved money can be reinvested in the fruitful ventures generating employment opportunities and increasing GDP as a goal. But it has also been announced that all the deductions and exemptions will be removed. The only deduction available will be the one announced with regard to donation made to Swachh Bharat Abhiyaan and Clean Ganga Campaign under Corporate Social Responsibility which is 100%. All the measures undertaken up by the Finance Minister have indicated
June 2015
that all the tax policies have been streamlined in such a way that the common man who is not equipped with the technicalities of tax filing does not have to suffer because of the same. Abolition of the Wealth Tax is considered to be a wise move from the Government’s end due to the fact that filing it was considered as a highly tedious task. People used to hire professionals to help them and do the needful which costs them additionally huge sums of money which is generally more than the actual taxable amount. So neither the government, nor the common man benefitted from the tax. In place of the Wealth Tax, the surcharge on individuals, HUF, associations of persons having income equal to or more than one crore was raised from 10% to 12%. Regarding the Corporate Tax Rate decrease, the government has nothing to lose because of the fact that currently the net government’s revenue is still calculated after it provides all the deductions and exemptions to the corporates. The amendments put forward in corporate tax structure only aims at eliminating all the deductions and exemptions ,thus, bringing the taxable amount down to the same level as before the amendment which will definitely benefit the companies. As far as the personal tax is concerned, although there has been no change in the individual tax slabs, that Finance Minister has incorporated some concessions for the middle class. With a increase in the limit of deduction in the Health Insurance premium, Pension Fund and the New Pension Scheme, he is certainly trying to encourage rate of savings among people which will be a major contributor to the boost in the money flow and hence, in the economy. With respect to the Service Tax rate which increased from 12.36% to 14% with the Educational Cess subsumed in the new tax rate, is definitely going to cost the service providers
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their business. As services become dearer, dining, entertainment, mobile services etc. surely are going to affect consumers. This time services which were not included earlier, will be also be added such as amusement parks, water parks, bowling alleys, etc. A provision is being made to impose a Swachh Bharat Cess on all or certain number of taxable services at the rate of 2% which will effective from a date notified in the future. There will be a benefit for senior citizens, a Service Tax exemption under Varishta Bima Yojna. Keeping all these amendments in place and if implemented in an effective manner will surely fetch all benefits intended.Clearly outlined map for growth and change in the years to come. It is no doubt a progressive budget.
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FEATURES
The first full time budget of the NDA governmentwas presetnted on 28th Feburary 2015 by funance minister Mr Arun Jaitley and it holded a lot of significance in the way oppurtunities will unfold for the Indian economy.
2 With an increase in the limit of deduction in the Health Insurance Premium, Pension Fund and the New Pension Scheme, Mr Jaitely is certainly trying to encourage rate of savings among the people which will be a major contribution to the boost in the money flow and hence, in the economy.”
With the investor’s sentiments favorable and huge sums of money pouring in, in the form of Foreign Direct Investments and Foreign Institutional Investments, it was the duty of the government to fulfill the expectations which they were found to be successful in some areas and not in others.
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Almost all the areas of economy was touched not leaving any sector deprived of the effects this bugdet would have on them.
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Reduction of the Corporate Tax from 30% to 25%, Increament in the Service Tax Liability from 12.6% to 14% and Abolition of the Wealth Tax were the major highlights from the taxation perspective.
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Focused on the growth of the economy, Mr. Arun Jaitley combined NAMO’s “Make in India” and the gradual decrease over the years in Corporate Tax Rate is likely to act as a catalyst for industry and manufacturing sector.
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“MISSED CALL” 33 ECONOMY
IBS HYDERABAD
THE “MISSED CALL” ECONOMY
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ntroduction
Rumit Saluja Batch of 2017
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Small businesses send a missed call to vendors to indicate they need deliveries, local shops send a missed call to customers to let them know goods are ready; fishermen use a missed call to inform buyers they are on the way back to the shore. It is even being incorporated into mobile applications and services as a standard type of messaging. Far from indicating a dysfunctional economy, this behaviour, which has been called the ‘missed call’ economy, is an indication of the spirit of practical innovation and untapped strength that underpins India. A decade ago, less than 37 million people had a phone of any kind. Today, every second Indian in a population of 1.2 billion has a mobile.
Telecom industry is just coming out of the lag phase of last three years. In that sense 2014 has been nondescript. In recent quarters operators have been showing a better EBITA due strong growth in data services. Hence we can say 2014 served as a foundation for a new growth oriented phase in the coming years. In 2015, the 3G spectrum bid took place in March 2015. India’s 2015 spectrum auction concluded on March 25, after 19 days and 115 rounds of bidding. Bharti Airtel says that now it will be able to offer pan India 4G services using a combination of FD-LTE technology in the June 2015
Vodafone India plans to expand its 3G service over its own network from 9 circles to 16 circles.
The telecom sector has been growing aggressive at an average for 35 percent a year for close to two decades .” 1800 MHz band and TD-LTE roll out in the 2300 MHz band. It will also be able to offer 3G across all markets with the exception of Kerala using a combination of 900 MHz and 2100 MHz Vodafone India plans to expand its 3G service over its own network from 9 circles to 16 circles. Vodafone spended a total Rs 25,810 crore in this auction Idea Cellular has retained 900 MHz spectrum in the 9 circles coming up for renewal in 2015-16. These 9 circles, the company says, account for 73% of its overall revenues and about 70% of its subscriber base. Idea has acquired a total of 79.4 MHz spectrum during this auction for Rs 30,100 crore Reliance Communications retained spectrum in the 900 MHz & 1800 MHz bands in 4 of the 7 circles coming up for renewal in 2015-16. The company mentions that it currently holds The Ecobizz Newsletter
3G and CDMA spectrum in these 7 circles, and will transition existing 2G customers in the remaining 3 circles to 3G before December 2015
Current scenario Driven by strong adoption of data consumption on handheld devices, the total mobile services market revenue in India reached US$ 29.8 billion in 2014 and is expected to touch US$ 37 billion in 2017, registering a compound annual growth rate (CAGR) of 5.2 per cent, India has 213 million mobile internet users by June 2015, a 23 per cent rise over a six month period India saw the fastest growth in new mobile-phone connections with 18 million net additions in the third quarter of 2014, followed by China with 12 million new additions, according to a report by Swedish mobile network equipment maker Ericsson.
The Indian telecom sector is expected to create four million direct and indirect jobs over the next 5 years on the back of the government’s efforts to increase penetration in rural areas along with the growth in the Smartphone numbers and internet usage, according to estimates by Randstad India. “The telecom sector has been growing aggressive at an average for 35 per cent a year for close to two decades,” said Mr K Uppaluri, CEO, Randstad India.
Government role The department of telecommunications (DoT) has agreed to the defence ministry’s demands for a defence band and a so called defence interest zone (DIZ). This move will free up 3G telecom spectrum for atleast three new carriers. The government of India has asked telecom firms to implement full mobile number portability by
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Illustration by IBM depicting the areas of work conditioning of a cellular network.
We feel that 4G is set to revolutionize the Indian telecom scenario. The inclusion of fibre optic connectivity will tremendously increase the reach and bandwidth.
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INF ORMAT I ON , N E WS A N D S U P POR T June 2015 a move that will enable subscribers to retain their numbers when they shift to others states or licensed service areas.
Chairman’s Desk Telecommunication has emerged as a key driver of economic and social development in an increasingly knowledge intensive global scenario. Sustained adoption of technology offers viable options in overcoming developmental challenges in education, health, employment generation, financial inclusion and much else. Today, India is one of the fastest growing telecom markets in the world. The unprecedented increase in teledensity and sharp decline in tariffs in the Indian telecom sector have contributed significantly to the country’s economic growth. Besides contributing to about 3% to India’s GDP, Telecommunications, along with Information Technology, has greatly accelerated the growth of the economic and social sectors. The policy has set ambitious targets of 100% rural teledensity and 600 million broadband connections by 2020. NTP2012 outlines various measures envisaged to develop a conducive ecosystem to achieve these lofty aspirations. To spur this phase of growth of the sector, Government has already launched a national optical fibre network project called NOFN. NOFN will connect over 250,000 gram panchayats through high speed, high capacity optical fibre medium. The socio-economic impact that this growth has had on the country, points to both the opportunities and challenges confronting the sector in the years to come. Recognising these new opportunities and the imperatives arising from the challenges in terms of consumer needs, technology and structure of the industry, Government has adopted the National Telecom Policy 2012, to drive the next revolution in growth of telecom services and provide a stable policy regime for the years to come. - Chairman TC & Secretary (T) The Ecobizz Newsletter
As part of the Government’s initiatives to boost domestic manufacturing, it had in February 2012 announced a preference policy in which 30% of the orders of government departments would be reserved for local telecom equipment makers, which would have to undertake a minimum value addition of 25%. The policy extended the quota to the private sector, too, asking it to source sensitive equipment from local manufacturers.
What future holds? According to TEMA estimates, the demand for telecom equipment in India was about Rs 76,940 crore in the fiscal year 2013 and companies are expected to invest about Rs 5,21,940 crore by 2020. In the fiscal year 2016, requirement of 3G equipment is expected to be worth Rs 10,130 crore while demand for 4G equipment would be 12,660 crore. In my opinion telecom in India will witness major changes in the coming years. Telecom Industry in India has great hopes on 2015 that the government will take a relook at the National Telecom Policy. There is a trend to enhance the basic telephony rate and that will add to profitability. There will be investment to enhance the infrastructure. The
industry is awaiting a firm decision regarding the telecom policy. We expect increase in pricing for telecom offerings in the coming year.
Conclusion The single most significant trend that has caught the attention of the industry is growth in data users in value and volume. As per the industry estimate by the end of 2015 we will have about 300 million data users. Majorly this is happening due to the reduction in prices of smart phones and data pack availability at a lower price point. We feel that 4G is set to revolutionize the Indian telecom scenario. The inclusion of fibre optic connectivity will tremendously increase the reach and bandwidth. 3G will also gain substantial momentum while 2G will continue to be the most preferred. The quality of services is set to improve with companies taking a step forward to invest in infrastructure. Cloud will be a gamechanger for telecom as well, with more and more companies looking forward to saving costs, cloud deployments will be a preferred mode to acquire cost advantage. Analytics and data will drive the industry forward in the coming year.
The DoT has agreed to the defence ministry’s demands for a defence band and a so called defence interest zone (DIZ).
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Your time is limited, so don’t waste it living someone else’s life. Dont be trapped by dogma- which is living with the results of other people’s thinking. June 2015
TURKISH ECONOMY
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FACETS OF
TURKISH ECONOMY The Ottoman Empire
C Shivang Dattani Batch of 2017
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onstantinople (present day Istanbul) was the trade hub of for the trade between Europe and Asia, it was ruled by the Eastern Roman Empire which had one of the most powerful economies till the time Arabs came. The economy of the city was brought back to its best by the 12th century when it was ruled by the Byzantines, was one of the wealthiest city of the time. The city felt the blow in 1453 Ottomans conquered and renamed as Istanbul. The Ottoman Empire (present day Turkey) flourished under the leadership of Ottoman sultans. The geographic location of Turkey from the beginning helped its economy to flourish, but due to the same reason it was always in the eyes of the emperors and so never had political stability. The Ottoman Empire entered into world
war I from Germany’s side. The situation of Ottoman became pathetic that it was stripped of its Arab position. Also ,the Anatolian heartland was in danger, but was saved by Mustafa Kemal (Kendal Ataturk). He gave Turkey the economic stability so it that could compete with Europe. In 1923 when the Republic of Turkey was formed wherein people practised subsistence agriculture but after World War 1, agriculture and new industries grew tremendously. This went on until 1930 wherein Turkey market were destroyed by Great depression. Turkey was ruled by Ataturk’s party during World War 2 and remains untouched. Ataturk’s party was a secular party .After World War 2 he opened the elections for parties having his ideologies and banned June 2015
Turkey was ruled by Ataturk’s party during World War 2 and remains untouched.
the Islamic parties. But the economy had never been stable since then , majorly because Turkey had a new government every 9 months. Those parties were run by rich elite class but they were afraid because they lead a weak coalition government. This was because this secular government had no base among the vast Muslim population. Turkey suffered definitive crisis in 2000 when the secular coalition replaced Erbakan. The party was highly unstable and trying to keep the dying prime minister in the office. This lead to a speculative attack on Turkish Lira ,inflation reached 70% and interest rates hiked The Ecobizz Newsletter
to 6200% and Lira lost half of its value almost overnight. The country was bailed out by IMF that totalled to $20 billion. Then came the time of Recep Tayyip Erdgon which lead the counter revolution , a movement to restore order and tranquillity after the period of upheaval. For 8 long years the country that had 99% Muslim population was not allowed to be itself, Erdgon gave Turkey the chance to be comfortable in its own skin. It started deregulating Islam itself, Turkey resumed its position that it had in 13th century as the bridge between Europe and Asia.
Subconsciously turkey was imitating China . Erdgon in its first term was pushing for minority rights,religious freedom and in lines with Eu demand.In the second term it came out more confidently and restructured some bold economic reforms. Due to these reforms even though its economy was hit by 2008 crisis it was one of the fastest recoveries. By 2011 its economy was growing at 11% the fastest in the world. Turkey’s savings were very low. Rich population accounted to only 20% of the population. Usually the countries grow with help of their savings but this wasn’t the case with Turkey, they grew with
Usually the contries grow with the help of their savings but this wasn’t the case with Turkey, they grew with the help of short term borrowed funds. ”
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Constantinople (present day Istanbul) was the trade hub of for the trade Juneand 2015 between Europe Asia;
IN F ORMATIO N, NE WS AN D S U P P OR T
FEATURES the help of short term borrowed funds .The other severe problem Turkey was the share of export in GDP. Top 5 companies barely accounted for just 8% from export. Erdgon did free up the trade but it did not help much as Turkey highly dependent on imports ,it imported everything from copper to oil. This highly affected the current account deficit. A drastic change took place when after winning 2014 election when Eardgon stepped down as the Prime Minister and became the President. Eardgon will keep pursuing his aspirations as the new President.The country has constantly grown at an average 5% growth rate, which is above that of European countries. With the optimistic hope Apk is back in power and no other party apart from APK
knows the country better.
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Looking at the history it is pretty clear that no country apart from Turkey has a better ability to revive its economy in a better way. There is something in the land that gives it the strength to wake up and fight back. Turkey with its ability to revive its economy when in trouble has the best prospects to become the breakout nation in the 10000-11000 bracket of per capita income.
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The ottoman empire’s economy crashed and then Mustafa Kemal (Kendal Ataturk) gave Turkey or the Ottoman Empire the economic stability so that it could compete with Europe.
Turkey suffered dentive crisis in 2000 when the secular coaliation replaced Erbakan. The party was highly unstable and trying to keep the dying prime minister in the office.
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Inflation reached 70% and interest rates hiked to 6200% and Lira lost half of its value almost overnight.
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The country was bailed out by IMF that totalled to $20 billion.
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Turkey was pushing for minority rights, religious freedom and in lines with EU demand. it came out more confidently and restructured some bold economic reforms.
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A drastic change took place when after winning 2014 election when Eardgon stepped down as the Prime Minister and became the President. Eardgon will keep pursuing his aspirations as the new President.
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CHIT FUND DILEMMA 44
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The Saradha chit fund scam amounted to Rs.200300 billion.
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A CHIT TO THE FUTURE “High risk yields high returns”
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isk is the biggest parameter in determining the value of an investment. More the risk, higher is the return that it would yield. With higher risks, the investor may eventually end up with nothing in hand, not even the funds invested. One such high risk investment is “chit funds”, popularly known as ‘cheat’ funds in our country. Widely spread across the nation and often misunderstood as a segment of unorganized sector, the chit fund industry is among the booming industries in our economy ever since regulations and acts regarding its functioning have been implemented. A chit fund business involves savings schemes which not only manages but also conducts and supervises the chit funds. According to Section 2(b) of the Chit Fund Act, 1982: “Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or The Ecobizz Newsletter
by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount”. The chit business can be conducted either through organized financial institutions as well as through unorganized system with the help of family and friends. The basic component of conducting the business is a group of people in need of financial support come together called subscribers to form a chitty by collecting money and carrying out auctions. The chitty starts on an announced date, every subscriber come together for the auction/lot. When there is more than one person willing to take the minimum sum, lot are conducted and the ‘Lucky subscriber’ gets the prize money for the month. If there is no person willing to take the minimum sum, then a reverse auction is conducted where subscribers open-bid for lower amounts. The person bidding lowest sum get bid amount. Chit funds usually operate in different ways, so there are many fraudulent strategies which are practiced by the private firms. Recently, a chit fund firm in Orissa collected around Rs.4600 crores by defrauding
Anupama Kumarswami Batch of 2017
Chit funds usually operate in different ways, so there are many fraudulent strategies which are practiced by the private firms.” 47
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OVERVIEW
Chit means a transaction whether called chit, chit fund, chitty, kuree or by any other name by or under which a person enters into an agreement with a specified number of persons that every one of them shall subscribe a certain sum of money (or a certain quantity of grain instead) by way of periodical installments over a definite period and that each such subscriber shall, in his turn, as determined by lot or by auction or by tender or in such other manner as may be specified in the chit agreement, be entitled to the prize amount.
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Widely spread across the nation and often misunderstood as a segment of unorganized sector, the chit fund industry is among the booming industries in our economy ever since regulations and acts regarding its functioning have been implemented.
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The chit fund industry is an important source of finance for small businesses and low income households.
millions of people. The Saradha chit fund scam amounted to Rs.200-300 billion. These scams not only redefine the meaning of microfinance but also reduce the customer base for the prospective business expansion. The Chit fund act, 1982 regulates the functioning of the whole organized chit fund business in India. Not only has the central government implemented the policy, but also states like Karnataka, Tamil Nadu, Andhra Pradesh, Maharashtra and New Delhi has enacted rules and acts relating to the business. With a country so varied in income distribution, the poor and lower income households being the highest, the importance of chit funds as savings and borrowings tool have increased. The Chit Fund Registrars of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Delhi have presented the information that the total amount of capital lent per year through registered chit funds is between 10 per cent and 50 per cent of all priority-sector lending which is extended by regular banks in these same States. The chit fund industry is an important source of finance for small businesses and low income households. This has increased the market for low value chit fund schemes from the registered chit
fund industry. The main reason being the registered chit funds find the service provided for poor very less attractive due to high operational costs imposed by the regulators. Thus, many registered chit funds are moving into offering large schemes which has lead to the poor approaching other institutional savings options. The Chit funds are officially governed by various state laws and SEBI and RBI regulations. While in practice, the chit fund operators write and follow their own rules. Neither RBI nor SEBI has the machinery, manpower and capability to deal with such operators. Thus, both RBI and SEBI have failed to control this unorganized sector of cit fund business. With such high demand and availability of chit fund schemes, not only RBI and SEBI but also the market is about to go through a massive transformation in the economy due to changes in the awareness and technology available. With a big amount of share in the economy it is not only important to organize the whole industry but also to legalize it as it would then positively affect stakeholders within the industry.
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Neither RBI nor SEBI has the machinery, manpower and capability to deal with chit fund operators. Thus, both RBI and SEBI have failed to control this unorganized sector of cit fund business.
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The Chit Fund Registrars of Andhra Pradesh, Tamil Nadu, Karnataka, Kerala and Delhi have presented the information that the total amount of capital lent per year through registered chit funds is between 10 per cent and 50 per cent of all prioritysector lending which is extended by regular banks in these same States.
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The main reason being the registered chit funds find the service provided for poor very less attractive due to high operational costs imposed by the regulators.
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EVENTS,GL’S & WORKSHOPS
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Creativity is allowing yourself to make mistakes. Art is knowing whihc ones to keep. The Ecobizz Newsletter
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The guest shared insights about the skills an MBA should acquire for a sound digital marketing.
Building a successful brand isn’t just about ROI, it’s also about building authentic relationships with people.
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IN F ORMAT IO N, NE WS AN D S U P P OR T
GROWTH OF DIGITAL INDIA
“The Role of a MBA in the Digitalization age”
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s said by the great John Andrew Holmes “At times the soul should be opening up like a rose, not closing up like a cabbage” by this quote a new dawn sets in for Club Ecobizz and also the inauguration of the club activity starting with a Guest Lecture by our guest Chiranjeevi Maddala. He who comes under the top 50 digital marketers in Best Digital Marketing Professionals at the Mobile and Digital Marketing Summit 2014. After working in the services business for 11 years as a digital business analyst, he started SWEET Digital, a digital marketing agency in 2011.He has also founded a digital skill development platform, Digital Ready. The guest lecture started with a warm speech by the president of Club Ecobizz Mr. Amandeep who threw light on the domain of Club Ecobizz and what is it all about. Following the speech by the club’s president, the club’s vice-president Mr. Siddharth Padhiary took over the dais to enlighten the audience about Club Ecobizz. A video was shown on Ecobizz showing what the club is all about and its previous year performances. A new wing “KHOJ-A Research Initiative” was introduced in this The Ecobizz Newsletter
session where students will be researching on various issues of their choice and will get an opportunity to publish their findings on a university level across the country. The guest of honour was offered the dais. The guest of honour Mr. Chiranjeevi Maddala started with what an MBA can contribute how he/she can change the entire conventional business module into an IT integrated Smart Business Solutions. The guest in honour also talked about Idea Generation, how the world is moving toward SMAC (Social Mobility Analytics and Cloud) and also talked about Big Data and its usefulness to predict the consumer behaviour and consumer pattern. He shared about the skills an MBA should acquire for a sound digital marketing. He included Digital Business Strategy, Digital Marketing and Digital Analytics as the basic ingredient for any digital marketer. The guest humbly taught us the tricks of modern trade and made us believe that the times have changed and companies have adopting a more calculated marketing strategies instead of conventional forms of marketing.
Chiranjeevi Maddala Founder and Director Sweet Digital, Digital Ready
He was awarded the top 50 digital marketers in Best Digital Marketing Professionals at the Mobile and Digital Marketing Summit 2014: recognized and unveiled by the CMO Council & World Marketing Congress.” 53
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INF OR MAT I ON , N E WS A N D S U P POR T
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OVERVIEW
EB - Pathshala was aimed to educate the students of IBS Hyderabad about the current hot topic “Global Credit Crisis”. How when and what happened during the crisis and what strategies these mega-economies are following to recover themselves from the crisis.
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It also imparted knowledge of the basic subjects like Financial Management-1, Economics, Quantitative Management-1and Accounts for managers which forms the building blocks of any MBA curriculum.
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The sessions were made interactive so as to wane out the boredom and to make people open their minds and clear their doubts.
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This program also put light on the members of Club Ecobizz and showed the work ethics of the club and also sent out the message that the club is totally committed to give quality knowledge to the university.
EB PATHSHALA “Preparing you for the best.” From darkness, lead me to light. With this motto Club Ecobizz started off its five day workshop – “EB Pathshala” from the 22nd -26th June 2015. It is an initiative by the newly formed wing KHOJ to educate and enlighten the students of IBS Hyderabad about the hot topic “Global Credit Crisis”, how when and what happened that lead to the crisis and also the basic concepts of a few subjects of semester 1. The week was flagged off by the VicePresident of the club Mr. Siddharth Padhiary by a presentation on how the major economies of the world like the United States and the European Union crashed and how they are recovering in modern times to regain its shape.
Then in the subsequent days the basic concepts of Financial Management-1, Economics, Quantitative Management-1and Accounts were discussed for helping the 1st year students to grasp the concepts and to have a clear idea of these subjects as they form the basics of the MBA curriculum. This initiative by “KHOJ” of Club Ecobizz was to impart the perfect blend of knowledge and skills and it was a great success as the participants in this week long program applauded it and were satisfied with the offerings.
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All ends with a message that Club Ecobizz strives to achieve excellence in whatever it does and what it imparts to other.
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Dear Readers, We believe you appreciate the transformation of ‘The Focus’. Your praise and encouragement has always been a source of motivation for us. Therefore, in case you have any comments or suggestions for improvement please leave them in the COMMENTS section of our website www.ecobizz.weebly.com. We at EcoBizz will be more than happy to incorporate your suggestions. For keeping in pace with latest developments, discussion forums and online events follow us on Facebook at https://www.facebook.com/eb.focus. Regards, Team Ecobizz
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