Arbitrage Magazine - April 2023 - Finance and Investment Club | IIM Rohtak

Banking 2047: Indian NBFCs as the Driving Force for Financial Adaptation and Resilience amidst Global Recession

~ Attiso Bhowmick (UAS Bangalore)

The Winds of Change

While the ostentatious mainstream zeitgeist leaves no stone unturned to portray banks as the principal players in the game of finance, NBFCs have acquired their fair share of success. In an era where the penetration by banking institutions in India continues to be low, to achieve ease of access to financial services, non-banking financial companies (NBFCs) have demonstrated a remarkable track record. As a reflection of their growing assets, NBFCs have posed tough competition to the banking systems by serving as an alternative to the centralized banking industry. NBFCs are now nationally at a strategic turning point where they can serve as a tool to achieve India’s goal of financial inclusion. Since 190 million Indians are sti ll “unbanked”, by moving the needle beyond traditional “credit -scored” consumer finance, professional NBFCs have devised custom growth strategies that mainly serve the financially excluded and unorganized sectors. This article delves into a concise and comprehensive study of how NBFCs have formulated novel strategies to navigate the frenzied financial landscape of India and have been successful in creating a more robust and resilient financial market with more potential for fruitful investments.

Adapting to Crisis by Shifting Trends

Coupled with global trends, India’s FinTech ecosystem has witnessed colossal growth over the last few years, making it one of the world's largest and fastest-growing FinTech markets. In 2020, India topped the Asia-Pacific (APAC) list of countries in terms of the volume of FinTech investments. High-value deals in the NBFCs amid COVID-19 led to disruptions in the funding ecosystems. With the ubiquity of other investment options, it becomes worthy to conscientiously scrutinize the factors that led to the shift in trends. As indicated by the chart (Figure 1), there have been considerable investments in the FinTech sector. Although it was overshadowed by the pandemic, it was soon to catch up again once the pandemic subsided. However, the missing connection between NBFCs and FinTech is yet to be analyzed qualitatively.

Figure 1: Fintech funding in India Source: BLinC Insights

FinTech has allowed NBFC to reinvent its business model. The NBFC sector is always at the forefront of digitalization and technological acquisition in the financial services industry. Both large and small NBFCs have achieved digitalization in credit processes, business operations, and credit cycles to develop dynamic underwriting models. NBFC is agile and uses digital tools and platforms to make swift and easy deliveries. This has allowed NBFC t o expand its reach and serve non-bank people.

NBFCs have heavily relied on tools such as e-KYC, digital signatures, and Aadhaar-based verification to extend their reach and serve people without bank accounts. Furthermore, local language chatbots and voice bots, RPA, cloud computing, AI, and ML have helped their businesses to accelerate the process of connecting deeper with their customers and improving their overall customer experience. NBFC is also leveraging the proliferation of Indian smartphones and better Internet penetration by providing mobile-based financial services platforms in the local language. These indigenous platforms have guaranteed secure delivery systems designed to serve the unbanked segments in different regions, thus promoting financia l inclusion.

Source: Statista

The above chart (Figure 2) shows the yearly data on the amount of total credit deployed by the NBFCs in India. The data depicts an increasing trend of credits from 13.2 trillion INR in 2016 to 26.98 trillion INR in 2021. Thus, almost doubli ng the amount in five years! The advent of non-banking financial companies has made it hassle-free for the general public to utilize credit lines. Accessibility and remote coverage make NBFC the most approachable alternative for borrowers as compared to banks. Furthermore, credit from NBFC is more profitable than a bank because of its low cost. This helps to provide customers with affordable loans. Banks also have tedious paperwork and strict regulations, making it easier to get a loan from NBFCs. As the need for funding grows gradually, banks alone will not be able to meet this growing demand. Therefore, NBFCs will fund both the public and private sectors.

Adaptations to the crisis have always been the foundational target of an NBFC, which is been successfully implemented throughout the country. The shifting trends discussed above serve as evidential proof of such an endeavor. Only when easy and affordable credit is available, juxtaposed with technological innovation that drives efficient deliveries, can the finance industry be equipped to navigate future adversaries and unfavorable changes in the business landscape.

Figure 2: Value of credit deployed by Non-Banking Financial Companies

The MSME sector, which accounts for 29 % of India's GDP, is made up of 63.3 million enterprises and employs approximately 110 million people in India's rural and urban areas. Given its contribution to the economy, this sector is an important growth engine and is a fact recognized by the government and economic think tanks. Despite the impact of demonetization and the implementation of GST, the MSME sector was able to clock only a meager CAGR of approximately 10% over the last five years.

Credit availability and affordability are one of the major constraints that plague the growth of the MSME sector. Borrowing costs are high as only 16% of MSME companies have access to formal credit services. The introduction of GST was not effective in this respect as banks and financial institutions are constrained by the non-availability of valid documents and legitimate collaterals from the MSMEs and are faced with the challenges of improving distribution and penetration.

NBFCs serve approximately 20% of the sector's lending needs and have recorded a CAGR of 30% over the last five years. Focusing specifically on the lower bounds of the spectrum, NBFC has provided credit by leveraging product customization, deeper comprehens ion of the microfinance market, alternative data-driven underwriting models, risk-based pricing, and technological innovations. Focusing on MSME, NBFC has introduced its business model by

Figure 3: Credit Supply, Demand and Gap in the MSME Sector Source: Empower IAS

geographically focusing on niche segments, products, and sectors to improve its market penetration. Their target to penetrate the non-banking markets has resulted in better credit inclusions, which is a much-needed result to achieve resiliency in financial markets.

Figure

Loan Companies

Infrastructure Finance Companies NBFC-IFC

Asset Finance Companies

NBFC-AFC

Investment Companies

Micro Finance Institutions

NBFC-MFI

Systematically Important Core Investment Companies NBFCCIC-ND

Infrastructure Debt Funds

NBFC-IDF

Final Thoughts

The financial functions that NBFCs have inherited from commercial and public banks have grown over the years to pave the way for a new financial revolution that can counter the global recession. By encapsulating swift services with technology, NBFCs have meticulously crafted a new future of credit finance by extending their reach to the underserved demographic of the country. The impetus stimulated by the growth of NBFCs has served as the sole driver to bootstrap and rejuvenate the MSME sector which accounts for a significant chunk of the country’s GDP. While the revolution in Indian finances may have been the offshoot of a plethora of economic reforms, NBFCs have been the reinforcing factor to ensure its widespread implementation.

References

1. Sardar, R. (2016). Nurturing MSMEs to Bolster Make in India drive. BVIMSR’s Journal of Management Research, 8, 56-61.

2. Siriaram, M. S., & Upadhyayula, R. S. (2004). The transformation of the microfinance sector in India: Experiences, options, and future. Journal of Microfinance/ESR Review, 6(2), 6.

3. Nazneen, A., & Dhawan, S. (2018). A review of the role and challenges of non -banking financial companies in the economic development of India. International Journal of Economics and Financial Issues, 8(6), 90.

4. Das, S. K. (2016). Performance and growth of non-banking financial companies as compared to banks in India. International Journal of Multifaceted and Multilingual Studies, 3(3), 1-8.

4: Market Size of Different NBFCs

Source: EnterSlice Insights

Beyond the Game: A Look into the Business Strategies of Fantasy League Companies

“Dil Jumping Zapak Jumpak Jumpak, Thumping Thapak Thumpak Thumpak, Gili Gili Yo”

~ Saurav Motiramani

I’m sure you might have guessed, what the article will be about.

Fun Fact: So, the use of "Gili Gili Yo" in the IPL theme song is a nod to the beloved childhood game “Gilli Danda” in India and adds an element of nostalgia to the song for many Indian cricket fans.

We all know Indian Premium League (IPL) is round the corner, so let’s dive in and look how the IPL teams generate revenue. From players’ bats to t he bails to the stumps everything within the stadium has a price tag. The sponsors are the real source of income in the IPL, next in the lineup is Broadcasting Rights which are the IPL’s biggest financial contributors. Apart from these two major sources, the IPL Teams also generate revenue from Ticket Sales, Merchandise Sales and finally the prize money.

Perhaps not all of us will be fortunate enough to play for the IPL but, fantasy league platforms have made it possible to use your sports acumen create your own virtual team consisting of reallife players from upcoming matches and earn points based on the performance of those players in real-life matches.

Let's say you're a fan of cricket, and you want to create your own virtual team of players from the Indian Premier League (IPL). You could sign up for a fantasy league platform and create your team using real-life players from the IPL. Let's say you choose players like Virat Kohli, Rohit Sharma, and Jasprit Bumrah for your team. As the IPL season progresses, you earn points based on the performances of these players in real-life matches. For example, if Kohli scores 50 runs in a match, you earn points for his contribution to your team's score. If Bumrah takes 3 wickets in a match, you earn points for his bowling performance. So basically, you compete with other virtual teams in the fantasy league, and the team with the most points at the end of the season wins the tournament or a prize. The fantasy league company would charge a fee to participate in the tournament, and they might offer different levels of prizes depending on how well you do.

Overall, the fantasy league company provides a platform for you to create and manage your own virtual team and compete with other fans of the sport it could be cricket, football, F1, racing, basketball, and much more.

Fantasy league companies make money through a variety of revenue streams. Here are some of the most common ways:

1. Entry fees: Many fantasy league companies charge a fee to enter their leagues. These fees can range from a few dollars to hundreds of dollars, depending on the size and format of the league.

2. Premium subscriptions: Some fantasy league companies offer premium subscriptions that provide additional features and benefits to users. These subscriptions may include access to expert advice, advanced statistical analysis tools, and other resources that can help users improve their performance.

3. Advertising: Fantasy league companies can generate revenue by selling advertising space on their platforms. This can include banner ads, sponsored content, and other types of promotional material.

4. Sponsorships: Fantasy league companies can also generate revenue through sponsorships from companies that are interested in reaching their target audience. This can include partnerships with sports teams, leagues, or other organizations that are relevant to the fantasy sports industry.

5. Merchandise sales: Some fantasy league companies sell merchandise such as t -shirts, hats, and other items to their users. This can be a way to generate additional revenue while also promoting their brand.

Apart from this, there are several key factors that drive this revenue growth for fantasy league companies:

1. User Acquisition and Retention: The number of users is a major factor that influences revenue growth for fantasy league companies. Companies often spend a significant portion of their budgets on user acquisition through various marketing channels, including social media, influencer marketing, and partnerships with sports leagues. Retaining existing users through a user-friendly interface, offering engaging content, and providing personalized experiences also plays a crucial role in revenue growth.

2. In-App Purchases: Many fantasy league companies offer in-app purchases, which can include virtual goods such as coins, points, or power-ups. These can be used to enhance the user experience or access exclusive features.

3. Affiliate and Referral Programs: Fantasy league companies may also use affiliate and referral programs to generate revenue. This involves offering incentives to users who refer new users to the platform or promoting products and services related to th e sports industry.

4. Data Analytics and Licensing: Fantasy league companies have access to a wealth of data on player performance and other sports-related statistics. This data can be used to generate revenue through licensing agreements with other companies and organizations in the sports industry.

While each company may have a slightly different approach, the most successful companies tend to utilize a combination of these strategies to achieve sustained growth.

As the fantasy gaming industry has evolved th ese companies have adopted various strategies to have their share of the pie, few of them include the following:

1. User Engagement: One key strategy of fantasy league companies is to keep users engaged with their platform. They do this by creating a user-friendly and visually appealing interface, offering a wide range of sports and leagues to choose from, and providing regular updates on real-time matches and player performances.

2. Social Media Marketing: Fantasy league companies also use social media to reach out to potential users and create a buzz around their platform. They may create social media campaigns and contests, use influencers and celebrities to promote their platform, and share user-generated content to showcase the success of their users.

3. Targeted Advertising: Another strategy of fantasy league companies is to use targeted advertising to reach specific groups of users. They may use data analytics and user profiling to create personalized ads that appeal to individual users' interests and preferences.

4. Partnership with Sports Leagues: Fantasy league companies often partner with sports leagues to gain exclusive access to real-time data and statistics. This allows them to offer a more immersive and engaging experience for users, and also helps them to stay ahead of competitors in terms of offering the most up-to-date and accurate information.

5. Mobile-first Approach: Fantasy league companies often have a mobile-first approach, recognizing that many users prefer to access their platform through mobile devices. They create mobile-friendly apps and websites that are easy to use and navigate, and provide a seamless user experience across different devices.

Looking ahead, the industry is likely to see increased competition, with new entrants and existing players introducing new features and services such as augmented reality (AR) and virtual reality (VR) which could have a significant impact on the future of fantasy league companies.

Exchange-traded funds (ETFs)

~ Yash Gupta & Subham Roy (GLIM Gurgaon)

Exchange-traded funds (ETFs) have grown in popularity as means of investment for people seeking diversified exposure to several asset classes. ETFs offer investors cheap and simple investment vehicle that can be exchange traded, much like stocks. What are ETFs?

ETFs are investment funds that follow particular indices, such as NASDAQ or S&P 500, and are exchanged on exchanges. ETFs contain variety of securities, including stocks, bonds, and commodities, and they give investors chance to trade for diversified exposure to these assets. ETFs can be purchased and sold at market prices throughout day, in contrast to mutual funds, which are priced at conclusion of each trading day.

How do ETFs work?

ETFs operate by following certain index and maintaining portfolio of securities that closely resembles performance of that index. As an illustration, if shareholder buys ETF that tracks S&P 500 index, ETF will have basket of equities that correspond to S&P 500 index. By purchasing and selling securities in basket based on changes in index, ETF will then attempt to mimic performance of S&P 500 index. As ETFs are passive investments and don't require active management, they often have cheaper costs than mutual funds.

Figure 1: Growth of ETF globally (Source: Tradingqna.com)

Practical examples of ETFs

SPDR S&P 500 ETF (SPY)

One of oldest and most well-liked ETFs on market. It follows S&P 500 index, which represents 500 largest publicly traded American firms. SPY ETF is a great tool for investors to diversify their portfolios across various sectors and businesses and obtain exposure to U.S. equity market.

Nifty 50 ETF

Monitors Nifty 50 Index's performance, which consists of 50 largest and most liquid equities listed on National Stock Exchange (NSE). It is administered by number of fund companies, including SBI Mutual Fund, ICICI Prudential, and Kotak Mahindra.

iShares Core MSCI EAFE ETF (IEFA)

exposes investors to equities markets in industrialised nations outside of North America. The MSCI EAFE Investable Market Index, which represents 85% of the equity markets in Europe, Asia, and Australia, is what the IEFA ETF tracks. For investors wishing to diversify their portfolios outside of the US equities market, the ETF is a great option.

Figure 3: SPDR S&P 500 returns (Source: Twitter)

Figure 4: Nifty 50 ETF returns (Source: Personalfn.com)

Invesco QQQ ETF (QQQ)

Gives investors exposure to the 100 largest non-financial firms listed on the NASDAQ stock exchange, or the NASDAQ-100 Index. Given that the majority of the companies in the NASDAQ-100 index are in the technology sector, the QQQ ETF is a great option for investors seeking exposure to this market. The ETF is an excellent approach for investors to get exposure to the technology sector's growth potential.

Figure 5: iShares Core MSCI EAFE ETF (IEFA) returns (Source: fintel.io)

Figure 6: Invesco QQQ ETF (QQQ) returns (Source: investopedia.com)

Benefits of investing in ETFs

1. Diversification: Lowers the risk of concentration in a single stock or industry by allowing investors to trade a broad basket of securities.

2. Reduced fees: As they are passive investments that don't need active management, they typically have lower fees than mutual funds.

3. Liquidity: As they are traded on exchanges and can be bought and sold at market rates throughout the day, they are more liquid investments than mutual funds.

4. Tax efficiency: Better than mutual funds at reducing taxes because they typically have lower turnover rates and distribute fewer capital gains.

Risks of investing in ETFs

• Market risk: Because they are subject to market risk, their performance i s correlated with that of the underlying index. The ETF will perform poorly if the index does not.

• Liquidity: They can nonetheless face times of low liquidity, which could lead to wider bid-ask spreads and higher trading costs while being more liquid than mutual funds.

• Tracking error: Due to factors including fees, trading expenses, and changes in index composition, they may not completely track their underlying index. This can cause the performance of the ETF and the performance of the underlying index to diverge.

Figure 7: Benefits of ETF (Source: mutualfunds.com)

Figure 8: Risks of investing in ETFs (Source: mutualfunds.com)

Conclusion

ETFs are an excellent investment vehicle for investors looking to gain diversified exposure to various asset classes. They provide cost-effective and easy-to-use investment tool that can be traded on exchange, much like stock. ETFs offer several benefits, including diversification, lower fees, liquidity, and tax efficiency. However, like any investment, ETFs are subject to market risk, liquidity risk, and tracking error. It is important for investors to conduct thorough research and consult with financial advisor before investing in ETFs or any other investment vehicle.

References

1. Growth of Exchange Traded Funds (ETFs) globally and in India - Personal financeTrading Q&A by Zerodha - All your queries on trading and markets answered (tradingqna.com)

2. How ETF's Work | Exchange Traded Funds In India From ICICI Direct

3. Trove Finance on Twitter: "The S&P 500 index tracks the 500 largest companies listed on US stock exchanges. You can invest in this index through popular ETFs such as the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV). These #ETFs & many more are available via Trove. #Trovefinance #S&P500 https://t.co/UOmU7zXD6m" / Twitter

4. Top 7 Reasons Why Invest in SPY ETF (SPDR S&P 500 Trust ETF) (dailypik.com)

5. Quantum Nifty 50 ETF Fund of Fund: Aims to Grow Your Wealth with India’s Top 50 companies (personalfn.com)

6. AUM of Nifty 50-based passive funds crosses Rs 2 trillion. Have investors benefitted? (moneycontrol.com)

7. IEFA - iShares Core MSCI EAFE ETF - Portfolio Holdings, AUM (13F, 13G) (fintel.io)

8. BTC iShares Core MSCI EAFE ETF: Heavy EU Exposure May Be A Drag | Seeking Alpha

9. Invesco QQQ ETF | Invesco US

10. QQQ ETF Risks and Rewards (investopedia.com)

11. Explore what are the benefits of ETFs | Mutual Funds Sahi Hai

Fintech innovations and their impact on traditional financial institutions

~ Shreyas Kulkarni (MES Garware College of Commerce)

The financial industry's longstanding fortress of traditional banking and insurance establishments was once regarded as indestructible. Yet, with the introduction of fintech technology, these established enterprises have been forced on the defensive, causing unexpected market turmoil. Fintech is a term that refers to using technology to simplify and automate financial services, and it has upended the industry by providing substitutes for the standard banking operations.

Fintech has made waves in the banking indus try, impacting payments significantly. Platforms like Paytm, BharatPay, and GooglePay have revolutionized payments, providing cheaper and better solutions than conventional financial institutions. Their innovative payment structures enable companies of all sizes to accept payments from clients worldwide sans any intricacies or exorbitant fees. Providing a superior customer experience that is intuitive and user-friendly, fintech companies have challenged the long-standing dominance of traditional financial institutions in payment processing. It's not just about being easy and cost -effective, but also delivering simple payment interfaces. As a result, traditional institutions are feeling the heat.

Leveraging cutting-edge tech like biometrics, AI, and machine learning, fintech companies are shaking up payments. These improvements boost security, reliability, and user experience. Not only that, but fintech also offers financial services to previously excluded populations, such as the unbanked and underbanked, through mobile payments and digital wallets. This implies clients can exchange and get cash, pay bills, and make buys without a bank account, changing the lives of millions of individuals around the world.

As disruption spreads, traditional financial inst itutions face tremendous pressure. Fintech new businesses are taking a noteworthy share of the advertising and taking off them battling to keep up with development. To stay competitive, conventional monetary education must embrace a customer-centric approach and grasp innovation. This requires investing in digital channels, developing intuitive user interfaces and offering customized services based on the needs of existing customers.

Photo by Clay Banks on Unsplash

Another area where fintech innovations are shaking up the financial sector is lending. By offering cheaper interest rates and more flexible loan restrictions, peer-to-peer (P2P) lending platforms like Loan Club and Prosper are providing borrowers with an alternative to conventional banks. P2P lending platforms are circumventing conventional financial institutions and upending the lending environment by utilizing technology to link investors and borrowers. There are a number of reasons why P2P lending networks are successful. First off, compared to traditional banks, the platforms are able to offer cheaper interest rates because of their lower administrative expenses. P2P lending platforms may operate more cheaply since they don't require physical branches or a large staff, and they can pass these savings on to borrowers.

Fintech technologies are transforming the world of investing and making it easier and more inexpensive for people to buy shares. Robo-advisors are setting the pace for this shift by providing algorithm-based investing advice and building personalized investment portfolios depending on the client's objectives and risk tolerance. Examples of these firms are Betterment and Wealthfront.

Utilizing automated, algorithm-based financial planning and investing services has several advantages. In contrast to traditional financial consultants, who sometimes demand significant fees for investing advice, they provide a less expensive option. These businesses are able to provide their services at a fraction of the cost of typical financial advisers because they automate investment guidance using algorithms. Additionally, these investment and financial planning services provide a more tailored investing experience. The automated services may build investment portfolios that are suited to a person's needs by examining the person's financial objectives, risk tolerance, and investment preferences. This contrasts with conventional financial counselors who could provide a universal method of investing.

Fintech technologies are revolutionizing the insurance sector, and technologically forwardthinking businesses are driving this change. By providing a digital platform for clients to buy insurance policies, submit claims, and be paid, businesses like Lemonade and Metromile are upending the conventional insurance business model.

Photo by Jonas Leupe on Unsplash

There are several advantages to employing technical advances that are developed and put into use to increase the effectiveness of the platforms used by the insurance sector. First off, they provide a more convenient and user-friendly experience than traditional insurance providers, who sometimes ask clients to complete protracted forms and wait days or even weeks to get a quotation or submit a claim. Second, to deliver more precise risk assessments and customized insurance solutions, these businesses are utilizing technologies like artificial intelligence and machine learning. This enables businesses to develop insurance solution s that are suited to the needs of the person and give greater coverage at a lower cost.

Furthermore, by automating manual tasks and employing data analytics to enhance their business models, these platforms may simplify company operations and save expenses. These advantages are causing technologically innovative businesses to acquire market share and compete with established insurance providers. Although conventional insurance providers have begun to make technological investments and provide digital platforms, they are still unable to keep up with the rate of innovation and provide the same degree of comfort and customization as the market leaders. Fintech advances have not only upended established financial institutions, but they have also created chances for cooperation. Traditional financial institutions are collaborating with fintech firms to make use of their technological know-how and offer more creative and effective financial services. Due to this, collaborations between banks and fintech firms have increased in fields including payments, lending, and investment.

In conclusion, it is impossible to deny how fintech innovations are affecting established financial institutions. Fintech innovations have pushed conventional financial institutions to innovate and adapt as a result of the disruption of their long-standing business models. Fintech advancements, however, have also made it possible for conventional financial institutions and fintech businesses to work together. As a management student, I think that cooperation between established financial institutions and fintech firms will determine the financial industry's future. It is crucial for established financial institutions to embrace innovation and change in the financial sector.

Photo by Clay Banks on Unsplash

Microeconomics Analysis of the Home Decor Industry

~ Vishwas Bhalla

Market Structure:

1)Large number of sellers: Many small and large businesses operate in India's home decor market. These businesses offer a wide variety of products such as furniture, lighting, textiles, home accessories, and more. This creates a highly competitive market with a large number of sellers.

2)Product differentiation: Each seller in the home decor market tries to differentiate their products from others in the market through unique designs, quality, or features. This product differentiation is a key characteristic of monopolistic competition.

3)Low barriers to entry: The barriers to entry for the home decor market in India are relatively low, with many small businesses being able to enter the market with minimal investment. This low barrier to entry creates a competitive market with many sellers.

4)Advertising and promotion: In order to stand out in a highly competitive market, each seller has to spend a significant amount of money on advertising and promotion. This increases the cost of doing business and leads to lower profit margins.

5)Price flexibility: The sellers in the home decor market have some degree of flexibility in setting their prices, as they offer unique products. However, they still face competitive pressure, which limits their ability to set prices too high. This creates a market with fluctuating prices and limited pricing power.

Market Players:

There are numerous players in the Indian home decor market, both big and small. The following three players can be regarded as the top market participants in India's home decor sector based on their market presence, popularity, and clientele:

1)Pepperfry: Pepperfry is a well-known Indian online furniture and home accessories retailer. The company offers a wide variety of goods, such as cookware, home decor, and furniture. It serves a sizable consumer base and conducts business online, through a mobile app, and in real locations.

2)Home Centre: Owned by Landmark Group, Home Centre is a well -known retail chain for furniture and home furnishings in India. The business works through more than 50 outlets in India and offers a wide variety of products. It provides reasonably priced options for kitchenware, sofas, mattresses, curtains, and other furniture and home design items.

3)Urban Ladder: Another well-known online retailer of furniture and home accessories in India is Urban Ladder. The business offers a wide selection of furniture and home design items, such as sofas, beds, dining tables, home accents, and more. It works through its website, mobile application, and physical locations and has a sizable consumer base.

Yet this list is not exhaustive, as there are still a number of prominent firms in the Indian home décor market, including Fabindia, Godrej Interio, and Nilkamal.

Market Power:

1)For analyzing the market power, I’ll take the case of Pepperfry. In terms of unique selling proposition (USP), Pepperfry's main strength is its focus on offering a wide range of furniture and home decor products, including both mass-market and premium products, at competitive prices. The company also offers a range of customization options for customers, as well as strong customer service and after-sales support.

2)In terms of product homogeneity, the Indian furniture and home decor market is quite diverse, with a wide range of products and price points available. While there may be some standardized products, such as basic furniture pieces, there is also a high degree of differentiation in terms of design, materials, and finishes.

3)Pepperfry has been successful in retaining its market position in India, thanks to its strong brand reputation and its ability to adapt to changing market trends and consumer preferences. The company has expanded its product offerings to include new categories such as mattresses and home appliances and has also introduced new technologies such as virtual reality to enhance the customer experience.

4)However, Pepperfry operates in a highly competitive market, with a number of other online and offline players vying for market share. In order to maintain its position, the company will need to continue to differentiate itself through innovative products and services, as well as effective marketing and branding efforts.

5)Overall, while there are challenges ahead, Pep perfry is well-positioned to remain a major player in the Indian home decor market in the next few years.

Tapping into New Markets:

Pepperfry can enter new markets in the following ways-

1)International expansion: Pepperfry could consider expanding to new markets outside of India. This would involve researching potential new markets, understanding their economic and cultural context, and adapting the company's products and services to meet the needs of those markets. International expansion can provide new revenue streams and access to new customer segments, but it also requires significant investment in marketing, logistics, and supply chain infrastructure.

2)Partnerships and collaborations: Pepperfry could look for strategic partnerships with other companies, such as local retailers, designers, or logistics providers, to help expand its reach into new markets. These partnerships could provide access to new customer bases and help to establish the company's brand in new regions.

3) E-commerce strategies: As an e-commerce company, Pepperfry could leverage digital marketing and social media to reach new customers in different markets. The company could also consider optimizing its website for international audiences, offering translation services, and providing localized content and promotions to better appeal to local customers.

Price elasticities of demand and supply

The elasticity of demand-

1) Elasticity of demand is a measure of how sensitive consumers are to changes in price. When demand is elastic, a small change in price can lead to a relatively large change in demand, while inelastic demand means that changes in price have a smaller effect on demand.

2) For example, if the price of a high-end sofa increases by 15%, consumers may choose to postpone their purchase or consider alternative options, resulting in a larger decrease in demand than if the price of a lower-priced, more essential item were to increase by the same amount.

3) In contrast, products that are considered to be es sential items, such as basic furniture or lighting, may be less elastic in terms of demand, as consumers are less likely to be able to delay their purchases or switch to alternative products in response to changes in price.

4) Overall, the elasticity of demand for the home decor industry can vary depending on the specific product category, consumer behaviour, and market trends, and would need to be analyzed on a case-by-case basis.

The elasticity of supply-

1) The elasticity of supply in the home decor i ndustry can vary depending on the specific type of product.

2) For example, for items like picture frames, vases, or small home decor items, the supply may be relatively elastic because it is easier and quicker for manufacturers to produce more units in response to changes in demand or price.

3) On the other hand, for larger furniture items like couches, beds, or tables, the supply may be less elastic due to longer production times and more complex supply chains.

4) Overall, the elasticity of supply in the home decor industry can be influenced by a variety of factors, including the availability of raw materials, production costs, production capacity, and the number of competitors in the market.

CONCLUSION

The home decor industry in India has been experiencing significant growth in recent years and is expected to continue to expand in the future. The growing middle class, increasing urbanization, and changing lifestyles of people in India have been major drivers of this growth. As people's disposable income increases, they are investing more in decorating their homes, leading to a surge in demand for high-quality and trendy home decor products. In addition, the rise of e-commerce platforms has made it easier for people to access a wide range of home decor items, making the industry more accessible to a larger number of consumers.

"Rupee on the Rise: The Indian Currency's Potential as an International Trading Currency"

"Money makes the world go round" -

John Kander and Fred Ebb

~ Yogya Mahawar

Have you ever wondered which currency holds the most power in international trade? For decades, the US dollar has been the dominant currency in global transactions. But what happens when the currency used to make the world go round is limited to a select f ew? The US dollar's dominance in international trade has led to the creation of a global financial system that is heavily reliant on the US economy. This has given the US an undue advantage in international trade, allowing it to impose sanctions on countries that do not comply with its policies. The shift towards the Indian rupee as an international trading currency will help reduce the US dollar's dominance and create a more balanced and fair global financial system. Then why is dedollarization important? Well, for one, it reduces the risks associated with fluctuations in the value of the US dollar. In addition, it also helps to promote financial stability and reduce the power that the US wields over global finance.

Could the Indian rupee become the next big player in the world of international finance?

First, let's understand what it means to be an international trading currency. Essentially, it means that the currency is widely accepted and used for international transactions, including trade and investment.

To understand the current scenario of the rupee, let's take a closer look at the numbers;

In 2023, the Indian economy is projected to grow by 10.5%, making it one of the fastest-growing economies in the world.

As of 2023, the currency accounted for around 2% of global forex reserves, up from just 0.1% in 2010.

In September 2021, India's foreign exchange reserves stood at a record high of $642.453 billion, indicating a strong position in the global financial market. (Source: Reserve Bank of India).

The share of the Indian rupee in global currency reserves has been steadily increasing, from 0.6% in 2015 to 2.3% in 2021. (Source: International Monetary Fund)

In 2021, the Indian rupee was ranked as the 13th most traded currency in the world, with a daily average trading volume of $34 billion. (Source: Bank for International Settlements).

These numbers highlight the growing presence of the Indian Rupee in the i nternational market. In fact, in recent years, the Reserve Bank of India (RBI) has been working to promote the use of the rupee in international trade, and thanks to the efforts of the Reserve Bank of India (RBI), the Indian rupee is now emerging as a viable alternative.

The RBI's strategies include liberalizing foreign exchange regulations, signing currency swap agreements with other countries, and encouraging greater use of the rupee in cross -border transactions. One of the most significant strategies has been the signing of currency swap agreements with other countries, which allows for the exchange of currencies between two countries without having to use US dollars as an intermediary. As part of its efforts, the RBI has signed agreements with 18 countries to accept the rupee as an international trading currency. These countries include Japan, South Korea, and the UAE, among others.

So, what's the big deal with the Indian rupee becoming an international trading currency? Well, for starters, it means that more countries can now trade with India using their own currencies, rather than having to convert their currencies into US dollars first. This is a big deal because it reduces the dependence on the US dollar, which has been the primary currency for international trade for decades.

But what would this mean for India and the rest of the world? As the Indian rupee takes on the world, it's not just a matter of currencies exchanging hands, but it could also have far-reaching impacts on the Indian and global economies. The Indian rupee's internationalization means a rise in its demand, and in turn, its value, leading to a stabilizing effect on the Indian economy, a reduction in inflation, and attracting foreign investments.

However, the benefits of the rupee's internationalization aren't limited to India alone. It could usher in new opportunities for global trade and bring down transaction costs. This could create a more balanced global financial system, reducing the US dollar's influence and lessening its ability to impose its policies on other countries.

Despite the advantages, there are challenges that come with the rupee's internationalization. One of the biggest concerns is the possibility of exchange rate volatility. As the rupee is used more in international trade, its value could be subject to fluctuations in the global market. The Reserve Bank of India (RBI) will need to manage this issue carefully to ensure the rupee's value remains stable.

Another issue is the need to maintain adequate foreign exchange reserves. With increased demand, India must maintain sufficient foreign exchange reserves to meet the demand, while the RBI must balance promoting the rupee's internationalization with maintaining adequate reserves. In terms of the Indian economy, the rise of the rupee as an international trading currency could be a game-changer. By reducing the need for dollars in international transactions, India could save billions of dollars in foreign exchange costs. This could also boost India's foreign direct

investment and improve its credit rating, making it easier and cheaper for the country to b orrow money.

However, for the rupee to become a truly global currency, there are still obstacles to overcome. The Indian economy is relatively closed compared to other major economies, with restrictions on foreign investment and trade. This could limit the potential fo r the rupee to be used internationally, and therefore, these restrictions need to be addressed. Despite this, the rupee's potential advantages are significant, and it's essential to work towards overcoming these challenges and ensure its continued growth.

The Reserve Bank of India's smart maneuvers and the growing embrace of the rupee by foreign nations suggest its ascension as a significant player in international finance. The rupee's acceptance as a widely -used trading currency reinforces India's positi on as an economic powerhouse. Its integration in global commerce leads towards a more equitable financial system as the world shifts from the US dollar's dominance.

In conclusion, the Indian rupee's rise as an international trading currency is a signific ant milestone for India and the global economy. With the backing of the RBI and the support of 18 countries, the rupee is on its way to becoming a major player in the global financial system. While challenges may arise, the overall impact of the rupee's rise is likely to be positive for India and for the global economy as a whole. The future looks bright for the Indian rupee, and its continued growth and development will shape India's future and its place in the world of international finance.

So, what does the future hold for the rupee? Only time will tell. However, with the RBI's continued efforts to promote the use of the rupee in international trade, it is clear that the currency is on the rise. Whether it will become a major player in the global financial system remains to be seen, but one thing is for certain - the Indian economy is on the rise, and the rupee is leading the charge.

REFERENCES

Ministry of Finance, Government of India. (2016). India-Japan Currency Swap Agreement Comes into Effect.

https://rbidocs.rbi.org.in/rdocs/Publications/PDFs/RCF18022018FL.pdf

Reserve Bank of India. (2020). External Commercial Borrowings (ECB) Policy - Revised

https://www.rbi.org.in/Scripts/BS_CircularIndexDisplay.aspx?Id=11737

International Monetary Fund. (2021). World Economic Outlook, April 2021.

https://www.imf.org/en/Publications/WEO/Issues/2021/03/23/world-economic-outlook-april2021