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From the Editor’s Desk

Dear Readers, In this edition, Our Cover Story on Union Budget 2017-18 presents a thorough analysis of the various sectors like the rural economy, agriculture, defence, education and financial sector. Next in line is our economics section which covers the debate between Amartya Sen and Jagdish Bhagwati and it’s implications for the Indian Economy. In the section “Sector Analysis” the writers have analysed the micro housing finance sector – it’s prospects ,impact of demonetization and the government initiatives taken. The faculty section discusses about the cashless conundrum and the advantages and disadvantages of the same. The alumni section focuses on the experience at CRISIL and how SIMSR helped our alumnus to hone her skills and bag this coveted job. Lastly, I would like to express my deepest gratitude to our Faculty in Charge Prof. (Dr.) Pankaj Trivedi for always guiding and mentoring the FINLY team. I would like to thank our sponsors Finacue Research and Education for their tremendous support. Also, I would like to acknowledge all our readers, faculty members, finstreet team members, our sponsors and seniors for their encouragement and continued support. It gives me immense pleasure to announce Saswat Satpathy from XIMB as the winner and Shrinkhala Nayak from KJ SIMSR as the runner up. Congratulations and wish you all the best !!

-Shreya Gupta PGDM FS 2015-17 KJ SIMSR

Team FINLY

Prof. (DR.) Pankaj Trivedi Faculty Incharge

Shreya Gupta Editor-in-Chief

DESIGN TEAM Geetanjali

Swetanshu Sondagar

Aritra Guha

EDITING TEAM Aritra Guha

Abhinav Kulkarni

Aditya Shetty

Madhur Saxena

Krishnakant Sharma

Kriti Srivastava

Ankita Lavande

Nandini Chaturvedi

Reemal Prabhod

Vipul Varkar

Preyas Jain

Prateek Singh 3

Table of Contents

TABLE OF CONTENTS From the Editor’s Desk

Team FINLY

Cover Story

Article of the Month—Winner

Article of the Month—Runner up

Eco Section

Article by FINACUE

Faculty Section

Alumni Section

Sector Analysis

News Buzz

FIN Tweets

Trivia

Cover Story

Aritra Guha PGDM B 2016-18 Abhinav Kulkarni PGDM A 2016-18

2017

Union Finance Minister Mr. Arun Jaitley presented fourth budget of NDA Government on 1st February. This year, for the first time, budget was advanced by a month to complete its review and formal acceptance before the beginning of new financial year. As per every year, Economic survey was presented one day before annual budget. The economic survey projected economy to grow at a rate of 6.75% to 7.5%. However, projections for Industrial growth was lowered to 5.2% from last yearâ&#x20AC;&#x2122;s 7.4%. Hence, the budget was highly expected to have measures to boost investment, job creation and strengthen SMEs. Below is a quick summary of budget allocated to different sectors of the economy.

Cover Story

The Budget 2017-18: Backdrop: The budget 2017-18 was presented on the backdrop of demonetization of higher currency notes, GST, Rising prices of crude oil in the international market, consolidation of planned and non-planned expenditure and incorporation of Railway budget into annual budget. From budget point of view, Demonetization move was the most influential. Demonetization move had removed 86% of the currency out of economy overnight. Hence, it was expected that cost-benefits of this move and amount of black money exposed out of this move will be disclosed. However, the budget did not disclose these details. Instead, increase in cashless transactions due to demonetization was emphasized time and again. In addition to that, Government also faces a challenge to control current account deficit under control on the account of crude oil prices which have reached $54/barrel in recent times. It can be seen through provisions for energy sector in this budget. Below figure shows how government will earn revenue and where it will be spent.

Let us analysis Budget 2017 in context of various sectors in detail. Rural Economy: The Union Budget has mainly focused on rural economy. The governmentâ&#x20AC;&#x2122;s demonetization move had seriously impacted rural economy. It even resulted into loss of revenue and employment. Hence, the budget was expected to accompany with measures to trigger rural economy. In his speech, Mr. Jaitley emphasized governmentâ&#x20AC;&#x2122;s commitment towards the improvement in life and environment of farmers and the people in the rural areas. A huge sum of Rs. 1.87 lac crore was allocated to the rural, agriculture and related sectors which is 24% higher than that of the previous year. Mr. Jaitley proposed to increase spending on rural infrastructure to improve the quality of life in rural areas. The budget saw increase in allocation for roads, irrigation, housing and electrification. The budget allocated Rs 19,000 crore for Pradhan Mantri Gram Sadak Yojana (PMGSY)- Road development programme in rural areas. Mr. Jaitley mentioned the pace of road construction and development was 133 KM/Day under this programme in 2016-17. In addition to that, the budget saw 44% and 43% increase in allocations for Pradhan Mantri Awaas Yojana (PMAY)- a housing scheme for the poor and Deen Dayal Upadhyay Gram Jyoti Yojana- rural electrification programme, respectively. The budget allocated an additional Rs. 20,000 crore for the long-term irrigation fund under NABARD. A micro-irrigation fund will also be created with a corpus of Rs. 5,000 crore under NABARD. 6

Cover Story Finance Minister also announced Rs. 48000 crore as an outlay for the Mahatma Gandhi National Rural Employment Guarantee Scheme (MNREGS). This is the highest ever outlay for MNREGS. Last year, outlay for the same was Rs. 38500 crore. MNREGS, along with several other skill development programmes, is expected not only to strengthen the hands of rural population but also to help put more disposable income in to their pockets and ensure continuous demands for consumer goods. Industry welcomed the provisions made in the budget for the rural infrastructure. Defence: The Union Budget 2017-18 allocated Rs. 3.59 lac crore to the Ministry of Defence (MoD) which is a 5.6% increase in allocation as compared to previous year. This accounts for 12.77% of the total expenditures by central government. Out of the allocation, the 0.85 lac crore allocation is done for defence pension spend. The biggest questions being faced by the defence community is that whether this allocation is sufficient considering modernization of defence forces, operational preparedness and allocation for OROP as per govt. promise. With OROP having been implemented last year with a separate allocation, the pension has almost remained same as that of last year. As shown in below pie-chart, the Indian Army accounts for the biggest share in defence budget, followed by the Air Force, Navy, Defence Research & Development Organisation (DRDO) and Ordnance Factories (OFs). The primary reason for lionâ&#x20AC;&#x2122;s share for the Army is its overwhelmingly numerical superiority over the sister services.

Cover Story

Among the 3 forces, only Air Force is benefited by increase in modernisation budget whereas the Army and Navy have witnessed a decline in their modernisation budgets respectively. The increase in the Air Force’s budget is due to its signing several mega contracts such as the Rafale fighters and Chinook heavy lift helicopters. Considering the limited budgetary scope for signing of new contracts, the decline in modernisation budget is a great concern. In 2016-17, only 12% of the allocated modernisation budget was available for signing new schemes, while the rest being earmarked for the liabilities arriving out of contracts already signed. Considering the underutilization, MoD now carries a huge task of bringing efficiency in procurement process. Although some industry-wide proposals have been made, the Union Budget provides no specific incentives to push the ‘Make in India’ initiative in the defence sector. Among other initiatives, the government has promised to reduce income tax from present 30% to 25% for MSMEs with an annual turnover up to Rs. 50 crore. It is expected to benefit about 6000 MSMEs, which are presently supplying components and sub-systems to DRDO, Defence Public Sector Undertakings and large private companies. Education: The Union Budget 2017-18 allocated a sum of Rs. 79,685.95 crore for the education sector which is 9.9% higher than that of previous budget. Of the total allocation, Rs. 46,356.25 crore stands for the school sector and the rest for higher education. Education sector truly complements ambitious programs of govt. such as ‘Skill India’ and ‘Startup India’. Hence, it was highly anticipated that Budget will bring major reforms into the education sector. Some of the key provision can be listed as releasing CBSE from the responsibility of conducting examinations, restructuring of University Grant Commission, introduction of SWAYAM education portal with 350 online courses, introduction of ‘Sankalp’- A market related trading programme and a special scheme for employment in the textile sector. The government is continuously talking about learning via digital learning platforms. However, budget doesn’t offer much on this front. A total of Rs. 497 crore has been allocated to the elearning portfolio of higher education, which is less than that of Rs. 552 crore allocated in previous budget. The massive open online courses (MOOCs), a part of the overall e-learning segment, has been allocated Rs. 75 crore, same as that of last year. Also, the budget doesn’t mention any allocation for the proposed National Testing Agency for conducting major examinations or Innovation fund for secondary education segment.

Cover Story

Financial Sector: The Budget 2017 allocated an overlay of Rs. 10,000 Cr for recapitalization of PSU banks and increase allowable provision for NPAs to 8.5%. The later move is beneficial as it gives tax benefit. However, allocation for recapitalization hardly seems sufficient in considering current scenario. As per reports, collective NPAs of public sector bank have touched Rs. 6 lac crore and an immediate allocation of Rs. 89000 crore is required for their recapitalization. As current allocation falls too short of required allocation, NPAs remains the biggest concern for banking sector. Government has given signal that PSUs need to get out of their inefficiencies on their own. To mention key regulatory reforms, FM proposed to abolish Foreign Investment Promotion Board. A road map for the same is to be announced in next few months. In addition to that, it was also stated that certain relaxations in FDI Regulation are being considered and will be announced soon. Regarding GST, FM assured that preparation for GST are on schedule and govt. will soon be reaching out the trade and industry associations to create awareness. Also, there was no change in peak rate of Excise and Customs duties and the base rate of service tax. Funding for MSMEâ&#x20AC;&#x2122;s working capital for 3-4 months and a lower tax rate of 25% for turnover less than 50 Cr is a boost to small scale sector. But the overall corporate tax rate for other organization remains unchanged, so no incentives for firms to explore investment opportunities by taking leverage. Agriculture Sector: The Union Budget has allocated 10 Lack crore for rural credit for 2017-18. This is a big boost to the income of farmer in the next five years. As mentioned before ,a huge sum of Rs. 1.87 lac crore was allocated to the rural, agriculture and related sectors which is 24% higher than that of the previous year. The Budget also allocated 9000 crore for the Prodhan Mantri Fasal Bima Yojna. The coverage has increased from 30% of cropped area to 40%.

Cover Story

New Initiatives NABARDâ&#x20AC;&#x2122;s Long Term Irrigation Fund corpus has been increased to 40000 cr. It was also mentioned that a Dairy Processing and Infrastructure Development Fund will be set up with a corpus of 2000cr. e-NAM (National Agricultural Market), a single window online service integrating mandis( agriculture market) was introduced in 2016. Linking 585 mandis to the portal by March 2018 is the target. So far, 250 markets have been covered. Every new NAM will be given an assistance of Rs. 75 lakhs. Railways: For the first time, the railway budget is a part of the union Budget, and move that ended the colonial era tradition of providing a separate a railway budget. The railways expenditure has been allocated a budget of 131000 cr. 1. Rashtriya Rail Sanraksha Kosh to be created with budget allocation of 1 lack cr. Over a five year period for passenger safety. 2. All unmanned level crossings on broad gauge lines to be removed by 2020. 3. Railway lines of 3,500 kms will be commissioned in 2017-18. During 2017-18, at least 25 stations are proposed for station retro fitting. 4. 500 stations to be provided with lifts and escalators to make them differently-abled-friendly. 5. About 7,000 stations to be fitted with solar power systems in the medium term. 6. SMS-based Clean My Coach Service has been started. 7. 'Coach Mitra', a comprehensive interface to register all coach-related complaints and requirements, is in the pipeline. 8. All coaches to be fitted with bio-toilets by 2019. 9. A new Metro Rail Act is to be enacted by rationalizing the current laws. This will assist greater private participation and investment in construction and operation.

A hit or a miss?

Article of the Month-Winner

SaswatSatpathy XIMB, 2016-18

This year’s budget was unique not just because it broke the tradition of being presented on the last day of February and combined the railway budget with the general budget, but also because of the fact that it was being presented amidst uncertain conditions, both at home and abroad. With the “demon” of demonetization still looming large over the economy, the finance minister (FM), Mr. Arun Jaitley presented a budget that seeks to “Transform, Energize and Clean” India. Demonetization has brought the digital India agenda to the centre stage and the government has been quick to understand, that to tackle the problem of low tax compliance rate, it will have to strengthen the digital payment infrastructure as well as bring into force the GST as soon as possible. The proposal to set up a Payments Regulatory Board under the RBI certainly seems like a step in the right direction for the time being. Another move by the FM, which has received applause from all corners, is his proposal to abolish the FIPB (Foreign Investment Promotion Board). The board, which was constituted in the post liberalization era and is an inter ministerial body responsible for processing FDI proposals, has certainly over stayed its welcome and its imminent removal will bring in more reforms in the FDI policy. The FM also laid out plans for listing three general insurers and railway sector firms like IRCTC, IRFC and IRCON. Also on the cards is the plan to merge state owned oil companies to create a $ 100 Billion behemoth capable of competing with global oil companies. The proposed integrated company would have a higher bargaining power in buying assets and technology and also will be able to combat the uncertain oil market better. While there has been a proposal to merge the Authorities for Advanced Ruling (AAR) under Direct and Indirect tax laws, the area of quick dispute resolution remains unaddressed. The enforcement of GAAR will underscore the need for this to happen and it will be up to the government to rapidly fill the vacancies in the benches. Also, there were high expectations from the government to slash the corporate tax rates across the board, given that the trump administration plans to cut US tax rates and bring it down to 15%. India, with its high rates of Minimum Alternate Tax (MAT) and Dividend Distribution Tax, coupled with a corporate tax having a headline rate of 30%, lags behind on this key score. On the infrastructure front, the FM announced the government’s intention to provide infrastructure status to affordable housing, which will enable these projects to avail the associated benefits. 11

Article of the Month-Winner

The budget has also changed the definition of affordable housing (homes with carpet area of 30sq m in metros and 60 sq m elsewhere, instead of saleable area) which will bring in more homes into this segment. The holding period for property has also been brought down from 3 years to 2 years, which will in effect cause a drop in tax liability from marginal rates to 20%. This move will encourage investment in the real estate sector keeping in mind the proposed change in the base year of indexation from April 1, 1981 to April 1, 2001 for all classes of assets including immovable property, which will make the computation of the cost of acquisition more realistic. As for the railways, the government has pegged the capital expenditure for the national transporter at 1.31 lakh Cr., the highest ever. The railways plans to use these funds for construction of freight corridors, improving passenger amenities, upgrading signalling, redeveloping stations and expanding critical freight lines near coal fields and ports. As a result of this, the railways expects its revenue to grow by 10% riding on freight earnings, even as high pension and salary bills continue to thwart its efforts to maintain a stable operating ratio. The service charge on e-tickets booked through IRCTC has also been withdrawn to promote the use of the popular web portal. The government also plans to push the envelope on the cleanliness front with the plan to install Bio-toilets in all coaches by 2019. The FM, keeping in mind the revival of consumption in the hinterlands, has rolled out several sops for the low-income and rural consumers, the most crucial one being the increase in farm credit by Rs 1 lakh Cr to spur the flow of credit to the agricultural sector. The government has also maintained the subsidy at current-year levels, which will help clear previous yearsâ&#x20AC;&#x2122; dues of 32,000 Cr. The budgetary provision for MGNREGS has been the largest one for the scheme since its inception. This will help in the creation of productive assets for rural areas. Peripheral attention to the banking sector however is a point of concern, as very few tangible steps have been taken to bring in the necessary changes. There was no mention of a roadmap to bring in additional capital into asset reconstruction companies (ARC) since the FDI route hasnâ&#x20AC;&#x2122;t worked and is unlikely to work, given the unwillingness of PSBs to sell their NPAs at the mandated discounts. The government has doled out Rs. 10000 Cr. For the recapitalisation of banks, which means the PSBs would have to tap the equity market and sell non-core assets to cope up with bad loans. The introduction of electoral bonds, an alternative mechanism in political funding, is aimed at cleaning the system off of black money which earlier used to find its way into party coffers in the form of anonymous donations. In addition to this, the decision to cap anonymous cash funding to Rs. 2000 from the existing Rs. 20000 will also help in bringing some amount of transparency in the existing system Given the macro economic challenges of growing protectionism and risk of capital outflows, the FM has managed to deliver a well balanced, growth oriented and fiscally prudent budget.

Article of the Month-Runner up

Shrinkhala Nayak KJ SIMSR MMS A 2016-18

Can implementation of UBI (Universal Basic Income) help curb poverty?

India, has an estimated population of 1.3 billion people, and is one of the world’s fastest growing economy, yet around 29.5 per cent of people still live below poverty line, particularly in rural areas, according to a new government report. The Economic Survey 2016-17 stated the need to introduce Universal Basic Income (UBI), presenting it as a radical solution to alleviate abject poverty. According to the Survey, UBI is a “powerful idea” and would be more effective at combating poverty than existing state benefits. UBI is a proposed solution to deal with job losses and employment attrition in “post-industrial societies” that are witnessing extensive automation and use of artificial intelligence in the manufacturing as well as service sectors. UBI is currently being experimented in Finland and was rejected by Swiss voters in June 2016 referendum. What is Universal Basic Income? Universal Basic Income (UBI) means every citizen of India is guaranteed with a basic income which he/she will get at a regular interval of time. The idea is to provide from government treasury a fixed/basic monthly income to every citizen of India, so that they have some safety net in periods of financial uncertainty and avoid falling into the poverty trap. This income is not a part of the salary one receives from a job he/she is working, but as an extra income from the government. Government will not provide any subsidies in the form of schemes such as PDS, MNREGA, mid-day meals, etc., instead the government will calculate a level of basic income which is required by every individual and allocate that income from which they have to purchase food grains, education, meals, etc. at the market price. It can be argued as the best social welfare scheme by any government or society where its citizens have at least one source of basic income which will surely reduce the poverty level to some extent. What is the UBI amount? In India, it may range from ₹ 300 – ₹ 1,000 per month, based on the calculation of ₹ 32 per day poverty line, or an annual receipt of ₹ 3,500 to ₹ 10,000, as per different calculations and estimates.

Article of the Month-Runner up

Source: Economic Survey 2017 Challenges of UBI 1. India spends about 4% of its GDP on subsidies. UBI would take that figure up to about 11%. 2. UBI would bring an end to subsidies which may upset a large section of people who are used to subsidised commodities. 3. Indiaâ&#x20AC;&#x2122;s population is 1.3 billion, reaching out to every citizen would be a herculean and time consuming task. 4. Scaling up of banking infrastructure is required before such a scheme is implemented. 5. Highly skilled financial and human resource is required to manage the initiative. 6. Indian economy has still not reached the status of middle-income country and remains a low-income country. Hence it becomes financially difficult to implement UBI. 7. Government may opt for cutting down on spending or increasing taxes which may not go down well with general public. 8. Other challenges include corruption and leakages, duplication of beneficiaries, political unwillingness etc. Pros 1. Economic- It will spur self-employment and rapid financial inclusion which will result in reduction in economic inequality by providing sufficient purchasing power capacity to the poor. 2. Education- Families can spend more on education. Attendance levels in schools will rise due to better nutrition and redundancy of compulsion to support families. 3. Technological- Rural people will have access to new technology since UBI will assist in securing internet. Transfer of technology to rural areas will also speed up. 4. Administrative- UBI will not require targeting as it is universal and the scope for arbitrary exclusion will be reduced. 5. More money in the economy would boost economic growth. 6. Siphoning off funds and corrupt administration machinery menace will be dealt with under one umbrella. Cons 1. Economic- Providing modest UBI will hurt Indiaâ&#x20AC;&#x2122;s current policy of fiscal consolidation. 2. Social- Receiving UBI without working will lead to people taking it for granted. Such easy availability of money might not encourage people to take up jobs and ultimately, this will result falling into poverty trap. 3. For UBI to be effective India must first achieve gender equality so as to improve decision making process within every household. 14

Article of the Month-Runner up

1. High liquidity can lead to high inflation if production does not grow proportionately. It may result in inflationary pressure in the market disturbing the economy. 2. It will put a huge burden on government exchequer, already suffering from a large revenue foregone due to various subsidies. Feasibility of UBI in India to curb poverty In India, wide disparities still exist not just among villages and cities, but also in bustling metropolises such as New Delhi, Mumbai, Bangalore, Kolkata, Chennai, Hyderabad, Pune, etc., and tier 2/3 cities such as Agartala, Bhubaneswar, Indore, Kanpur, Kochi, Nagpur, Panaji and other major cities.

Source: Economic Survey 2017 Although smartphone penetration and increased mobile banking with promotion of digital literacy has increased, the fact remains that online transactions and the hidden costs involved may prove to be much costlier for the individual beneficiaries of the proposed UBI. UBI requires every citizen of India to have a bank account, as the money would be transferred to their accounts, in an automated system once implemented. Also, the problems faced by developed countries are different from developing countries, the latter needs to be evaluated in terms of enabling the poor in India to come out of the low-income trap. Changes in the basic structure of the Indian economy and its welfare schemes, is going to be a long-term exercise. The microeconomic structure of the economy matters more than the macroeconomic, and hence getting the microeconomic structure right, is the only way for UBI to be success15 ful.

Eco Section

Madhur Saxena PGDM- B, 2016-18 Vipul Varkar PGDM- B, 2016-18

Amartya Sen vs. Jagdish Bhagwati: Implications for Indian Economy

Introduction: Every once in a while, a bitter controversy erupts between scholars where the stakes in terms of public policies affecting the lives of huge numbers of people and the wealth or poverty of nations is high. They usually involve economists .The most important of these in the twentieth century was certainly Keynes and Friedrich Hayekâ&#x20AC;&#x2122;s long-running debate over the question of whether significant state interventions in fiscal and employment policies, above all massive government spending as Keynes thought, or, as Hayek believed, that there should be no intervention of the government and it may potentially prevent the economy from recovering from the Great Depression. The recent Sen-Bhagwati debate had something of the same character where two different way of thinking has resulted in back and forth debate between the stalwarts. Before we move on to the debate and its implications on the policy formulation for the Indian economy lets first take a look at the background of both the economists. Amartya Sen was born in Santiniketan, West Bengal. After getting education in India and Great Britain, he became well known for his research in social choice theory, political philosophy, and development economics. Senâ&#x20AC;&#x2122;s work on the causes of famine led to the development of practical solutions for preventing or limiting the effects of real or perceived shortages of food in the developing countries. He also devised methods of measuring poverty that yielded useful information for improving economic conditions for the poor. His theoretical work on inequality provided an insight about why there are fewer women than men in some poor countries in spite of the fact that more women than men are born. He claimed that this skewed ratio resulted from the substandard health treatment and childhood opportunities afforded to girls in those countries compared to boys. Sen has held professorships at Jadavpur University, University of Delhi, London School of Economics, Oxford University and Harvard University. He was awarded the Nobel Prize in 1998 for his contributions to welfare economics. Jagdish Bhagwati is a professor of economics at Columbia University and a Senior Fellow in International Economics at the Council on Foreign Relations. Jagdish Bhagwati graduated from Cambridge University in 1956 and continued his studies at MIT and Oxford. He was a professor at the Indian Statistical Institute, the Delhi School of Economics, and MIT before joining as faculty at Columbia. 16

Eco Section

Bhagwati is notable for his research in international trade and for his advocacy of free trade. He is the recipient of several prizes and honorary degrees, including Padma Vibhushan from the government of India along with Gold and Silver Stars from Japan's Order of the Rising Sun. His early books, particularly India: Planning for Industrialization (1970) and India (1975) opened the doors for current economic reform in India. He was also advisor to the finance minister during the reforms. Debate: Sen favours education and health measures as being the first steps to tackle poverty and other ills that beset India. Secondly, Sen advocates strong interventions through social welfare schemes, reaching people with food, jobs, education and health through the bureaucracy Bhagwati prefer rapid economic growth with strong proponent of Globalization, privatization and liberalization. He believed that the wealth generated through rapid economic growth can be utilised to tackle deprivations of various kinds. Secondly, Bhagwati prefers to empower people through measures like cash transfers instead of subsidized services, through which they can choose private or public providers of these services, which would result in less corruption and proliferation in the system as a whole. He believes that growth may raise inequality initially but sustained growth will eventually raise enough resources for the state to redistribute and mitigate the effects of the initial inequality. Now, that we have seen their debate let's take a look at whose doctrine must be followed by Indian government to develop and pull its people out of poverty. Where India stands now? Should India go for growth which would ultimately lead to development of social capital or it should try to develop social capital which would lead to growth? The best way to answer this question is to look at India’s journey since 1991 the point of time in Indian history after which it chose the growth part. So if Mr. Bhagwati’s logic holds true then India’s magnificent performance since liberalisation on economic front must translate into improvement in social indicators, If not then Mr. Sen seems to be winning the argument. So let us take a look at the education, health and income indicators to understand that whether the India growth story some time dubbed as shining India or Rising India actually helped India get rid of poverty and provide better healthcare & education facilities to its citizens or not? Since liberalisation the average life expectancy of a normal Indian individual increased 7 years to reach at 68 years from 57 years. The infant mortality rate also reduced to less than half from 80 to 38 per 1000. The GDP per capita of an Indian national also increased from approximately $309.3 to $ 1598.3 (2015). The literacy rate has increased from around 52% to 74% which clearly indicates a significant growth however the rates differ when you compare the rural and urban areas. The number of people living below poverty line also reduced from around 35% to 22%. All of above seem to be painting an image of developing India with improving standard of living but there is a different side of story as well. While during the early 2000s when India attracted huge FDI and emerged as a regional superpower, aspiring to be a global power and demanding a seat in Security Council of UN. There were several parameters over which the potential superpower under perform or is at par with its relatively poorer neighbours. India’s HDI ranking out of 188 countries is 130 which is worse than Iran (69), Srilanka (73), Maldives (104). The Maternal mortality rate is also at 174 per 100,000 live births which is higher than Bhutan (148) and almost equal to Bangladesh’s 176/100,000. The Infant mortality rate is 38 per 1000 births which is much higher than Bangladesh (31), Sri lanka (8) and Bhutan (27). 17

Eco Section

India performs worst on almost all social indicators among BRICS nations. All these figures raise serious questions that if Indiaâ&#x20AC;&#x2122;s neighbouring countries that have relatively lower GDP and less FDI inflows can provide better facilities for human development then the argument growth leads to development in living standards holds shallow. But this is the phenomenal economic growth only which has put India on the global stage and made the millions of Indians from middle class to fulfill their dreams of living a better life and aspire even more. The Jury is out and the debate is on. Who is right is up to oneâ&#x20AC;&#x2122;s personal understanding and judgement. All we wish for is an economic superpower India which is able to provide best health & education facilities to its citizen with opportunities to come out of poverty. So what do you think; who should the Indian policy makers follow Bhagwati or Sen?

Article by FINACUE

How PAYTM changed the playing field for the banks? PayTM denotes â&#x20AC;&#x2DC;Pay Through Mobileâ&#x20AC;&#x2122;, launched in 2010 by One97 communications as a prepaid mobile and DTH recharge company. It later made its way into the ecommerce market in the year 2014 and further added bus ticketing to its kitty in 2015. Today PayTM provides multiple products that ranges from primary mobile recharges to buying apparels or electronics that makes easy for customers to shop. Thus it has become both a payment platform as well as the marketplace.

Article by FINACUE

Paytm is considered India’s largest mobile commerce platform that offers mobile recharge and utility bill payments. Today consumers consider it a full marketplace on their mobile apps. Paytm is the consumer brand of India’s leading mobile internet company One97 Communications. One97 investors include Ant Financial (AliPay), SAIF Partners, Sapphire Venture and Silicon Valley Bank. In a short span of time Paytm has scaled to more than 60 Million orders per month. Paytm and other e-wallet and digital payments companies enjoyed an enormous growth after the announcement of demonetization. During demonetization Paytm has picked up its market. Paytm app is best for individuals who find it difficult in making payments for mobile recharge, to cable operators or transfer money to friends and pay to purchases across various sectors and services not limited to Uber, Makemytrip, Bookmyshow etc.

Paytm as a marketplace The Paytm Cash can be used for all the transactions on all paytm apps and mobile site as well. The customers get a cashback on paytm app after a successful transaction is done through certain business portals. The cash back takes 24 hrs to be credited to the customer’s paytm wallet. In 2014, they launched its mobile based marketplace and mobile app has been transformed into a fullfledged e-commerce marketplace offering categories from electronics, sports and health, home and kitchen and many more. Their vision for setting up ecommerce business is to remove middlemen and allow SMEs (Small and Medium Enterprises) that include manufacturers to sell their produce to consumers through online platforms directly. In 2016, Seller app was setup wherein the sellers on platform don’t need to give commission to Paytm on sales. The marketplaces like Flipkart and Snapdeal work on a commission based model.

Paytm wallet It is the digital payment instrument where one can transfer money from his or her bank account or credit card to use for transactions on the platform. It is necessary to set up an account using your mobile phone number and email Id to setup a Paytm account and transfer cash to the wallet.

Railway and Bus Ticket booking business Paytm has contracted with IRCTC for online payment option for booking tickets. IRCTC processes around 180 million transactions every year with 60 million wallet users. After raising funds from business tycoon like Ratan Tata and Ecommerce giant Alibaba, Paytm started bus ticket booking business too. There were booking of 20000 bus tickets a day in 2016.

Funding from Alibaba and Ratan Tata In 2015, Alibaba bought 25% stake in Paytm with vision of entering Indian market. The mobile recharge and Ecommere company got dollar 575 million from Alibaba. Funds were used for improving technology for mobile operations, platform for aggregating courier companies for deliveries and other marketing activities. In the same year Ratan Tata also invested in the company. The funds were utilized by Paytm in recruiting fresh talents, acquisitions and brand building. In 2016, the Reserve Bank of India set a monthly limit wherein individuals are not liable to keep or spend more than Rs 10,000 in their wallet in a month. If anyone is looking to upgrade the limit to Rs 1 lakh, need to get the account verified using the KYC process.Paytm online transactions are considered safe as millions of users transact on Paytm's secure payment platform every month. Mobile app is free and can be downloaded.

Article by FINACUE

The path In the beginning of 2006, One97 communications won first major international client operator in Afghanistan. It launched RBT (Ring Back Tone) for a GSM operator, GSM operator for a pan India service rollout and subscription based content services. In 2007, it won a GSM operator’s VAS business for select circles and a CDMA (Code division multiple access) operator for national level service roll out on voice platforms. In 2008, it partnered with IT company for enhanced voice and 3G applications. It won a GSM operator’s mandate for WAP and voice services. In 2009, it raised funding from Intel and SVB India and also forged partnership with media houses. It was awarded ‘HR excellence award’ at Amity Business School, ‘Emerging Company of the Year for Voice & Data’s Telecom Awards 2009 and was ranked as 10th fastest growing technology company in India. In 2010, One97 communications launched Paytm. One97’s product’Talk2Me’, won ‘Digital Innovation of the Year and ‘VAS Person of the Year’ won by Vijay Shekhar Sharma at IAMAI’s Digital Awards. In 2011, Paytm raised funding for SAP ventures and handled over 35 billion calls on monthly basis. It won mobile entrepreneur of the year and was recognized as top 6 companies at the Voice & Data’s telecom Awards. In 2012 over 500 million subscribers were handled on daily basis. The number of employees rose to 1000 during this year. It was recognized as the ‘Most Innovative Startup of the Year at Entrepreneur India event organized by Franchise India. In 2013, Paytm launched Ad works, a Mobile advertising platform. It received 3 lakh orders per day. It won ‘Knowledge Faber Best Mobile Wallet program’ award and ‘MMA-Smarties’ Award for mCommerce. One97 was featured in Inc.India Innovative100 list. In 2014, 22 million customers and 12 million app users got registered. More countries in Middle East and Africa got added to One97 map. Later, it acquired 8 lakh orders per day and also won Indian Express IT award. It received recognition among Delhi/NCR’s Top 50 brands at celebration by Paul writer and featured in Apple App Store’s Best of 2014 in Mobile/DTH Recharge & Shopping category. In 2015, Uber joined Paytm to use its wallet. This time it reached million dollars a day mark. Paytm was backed by Ratan Tata. 50 million wallets were registered and then it launched new app for wallet. IRCTC added Paytm wallet as mode of payment. Paytm won the Frost & Sullivan India ICT Award in B2C segment, as ‘Best Digital Wallet’ award at IAMAI, as Disruptive Digital Innovator award at NDTV Digitizing India awards. In 2016, IRCTC’s Payment Gateway was powered by Paytm and it raised funding from Mediateck. Over 1 lakh movie tickets were booked per day within 4 days of launch. Paytm won the ‘Mobile Wallet Provider’ of the Year Award in the B2C category.

Recent developments in Paytm This year that is in 2017, Paytm received official approval from the RBI to launch its payments bank and this is going to make the payment wallet stronger. As per RBI guidelines, the Paytm wallet will get transferred to the newly incorporated ‘Paytm Payments Bank’. Paytm users do not need to do operate additionally as this will happen automatically. All details that includes log in, wallet balance and user experience will remain as it is. The Paytm Payments Bank is planning to add features on the wallet like bank account, chequebook and a debit card. Interest can be earned on the money available in the account. Paytm Payments Bank Limited (PPBL) is 51% owned by Vijay Shekhar Sharma and 49% ownership is with One97 Communications Ltd and it will function as KYC Wallet. The user’s money is completely safe in the Paytm Wallet and if the wallet remains inactive for six months and has zero balance, it won’t be transferred to the Paytm Payments Bank wallet unless the user gives consent for t he sam e whi l e l oggi ng i nt o t he app, web or b y e -m ai l . Paytm now plans to make its presence in South East Asian markets like Indonesia, Thailand and Malaysia as they foresee great opportunity for payments on the go via the Paytm Mobile app.

Faculty Section

Prof. Vineet Swarup Visiting Faculty, Finance, KJ SIMSR

The Cashless Conundrum

In the aftermath of the demonetization exercise, we are now told that reducing the cash transactions was also one of the intentions of this exercise and that there are going to be many benefits from reducing the use of cash. Among the many benefits, let us look at the three benefits that are expected from reducing the cash transactions. 1. It will make the economy clean and reduce black money and corruption 2. It would reduce the cost of printing and storage of currency 3. It would increase the deposits in the banks and so reduce the interest rates and so increase the investments Let us understand, if indeed we would get these benefits 

Black money would get reduced with less cash since all income can be traceable but would be possible only if we are 100% cash less else there would be possibility of cash transactions. The downside of this would be the loss of informal economy and that may lead to lower consumption and job losses. Reduction in corruption seems to be difficult since the origin of corruption is not due to cash transactions. Most of the corruption originates in the government due to the presence of discretion and low accountability. Unless the government reduces discretion and becomes more transparent, it is difficult to see how less cash would help. If we were 100% cash less, there would be demand of payment in assets other than cash. The demand would not reduce since there is no incentive for the government to work on time. Bribes usually are used as “speed money” to get the things moving fast. Without a change in the way the government works, reducing the amount of cash may only cause more hardship and not much benefit.



With less cash usage, there would be reduction in printing and storage cost, but this would come with the cost of making digital transactions. We know that digital transactions are not free and somebody has to pay for the digital architecture. While the cost may be borne by the sellers ultimately all costs are finally borne by the buyers. The cost may not be small. Presently, it costs about Rs. 1.20 to print a Rs. 100 note and we may add another $0.80 for transporting and storage to get a total cost of Rs. 2 and the life of Rs. 100 note is about one year and say gets transferred about 30 times in the year. 22

Faculty Section

Under digital transactions, each time the transactions is done, there would be a Merchant Discount Rate (MDR) of 1%. Over the course of the year, the cost would be 100 X 30 X 1% = Rs.30 which is 15 times the cost to print the currency. If we add all the notes in circulation, we would find that cost of going cash would be much higher as compared to the cost of printing and storage of physical cash. ď&#x201A;ˇ

With less cash in use, more cash would be kept as a deposit in banks and it would lead to lower interest rates. Lower interest rates do not translate into higher investment as we can see in the chart below which shows the number of investment proposals with the RBI repo rate (as a proxy for the bank lending rates). As we can see, the repo increased, then decreased and again increased, but the investment proposals kept on reducing. The rate of interest plays only a small part in the overall decision of investment. The downside of lower interest rates is that the savers also would get lower rates and they would need to increase the savings to get a desired amount in the future. This would reduce consumption and possible still reduce the number of investment proposals.

The biggest disadvantage of going cashless is the loss of privacy. When we draw cash and then spend, there is no record of how the cash is spent. With digital transactions we would leave a trail of each transaction and anybody with access to data would know all about the person. Given Indiaâ&#x20AC;&#x2122;s weak privacy laws and the easy sale of personal information, we may want to have a discussion first on how the information would be stored and who would access such information. Overall, it can be said that going cashless may not be a panacea as it is being offered by the government. The move has both costs and benefits and at the current point, possibly the costs outweigh the benefits. If the government is keen on pushing digital transactions, it should first understand the implications of the move, enact better privacy laws and then give incentives to the citizens to move to cashless transactions.

Touching new heights with

Alumni Section

Aanchal Sharma MMS B, 2014-16 KJ SIMSR As a Finstreet Alumni, I would like to start by saying how very pleased I am to write for FINly again and for this opportunity to connect with fellow SIMSRites. I would also like to congratulate the FINly team on the thoughtful and quality output being put out with each edition. You guys have raised the bar higher, which is just as it should be, so keep up the good work! This article aims to provide readers with some perspective on my campus â&#x20AC;&#x201C;to- corporate journey with a few insights on fixed income research. I am currently working at CRISIL (Funds and Fixed Income Research Department) which is a global analytical company providing ratings, research, and risk and policy advisory services. It is also the company where I had worked as a summer intern. During my internship too I was working in Research but with the funds team. I received my PPI call sometime around the end of the fourth trimester. There was an interview with the Department Director after which I received a confirmation just before the last exam of the trimester. Currently I work as a part of the Fixed Income Indices team where a major part of my job is to maintain the 45 standard Indices provided by CRISIL covering the Indian Fixed Income market. CRISIL is the leading provider of debt and hybrid indices in India and our indices are used by mutual funds, insurance companies, provident funds and investors in Indian markets. We also provide over a 100 customized Indices to cater to different investment needs like maturity, liquidity and credit risk of issuer to create an appropriate benchmark for a portfolio. Besides the above marked-to-market indices we also provide customized held-to-maturity indices that are used as benchmarks for fixed income portfolios that are held to maturity and also government security indices for the Sri Lankan fixed income market. Basically we do for fixed income instruments what NSE and BSE do for equity. On a daily basis indices are created and disseminated after receiving fixed income valuations. For some indices we are also required to do valuation also and arrive at the yields using fixed income matrix or by polling the market participants. Besides this, we are required to rebalance the gilt and credit indices on a monthly basis while money market indices like those of CP and CD are rebalanced on a fortnightly basis. Finally, I would like to convey my best wishes to all fellow SIMSRites. Do make the most your time at SIMSR. No matter how tough or frustrating it gets here, you are still going to miss all of it (even your assignment groups!) when you leave to embark on your corporate journey. So my advice would be to focus on the learning, be a little flexible as far as placements are concerned and use this time as an opportunity to explore and experiment and of course enjoy yourselves while 24 you are at it!

Sector Analysis

Yash Parikh PGDM-B ,2016-2018 Krishnakant Sharma PGDM-A,2016-2018

Micro-Housing Finance

Micro-Housing: current Indian scenario Micro Housing Finance provides loans to people (especially lower income and working in informal sectors) to enable them to afford independent homes. Micro housing finance comprises mainly houses in the range of Rs.3L to over Rs.20L. However, the segment from Rs.3L to 10L is the most undercatered. In India, 67% of the whole population still lives in rural area. Although the per capita income of India is rising every year, there is still dearth of housings available for the middle and lower middle income people of India. Micro housing finance is often referred to as Affordable Home Loans. With rapid urbanization, people are moving from rural to urban in hope of better futures and job security. Because of this huge up-rise in the urban population, the housing sector has not been able to catch-up and many such people end up living in congested spaces such as slums. These slums, being cost feasible, are being filled up in exponential range. Acc. To the census of 2011, for the 78.86 million urban household, there were 78.48 million household stock. The real estatesâ&#x20AC;&#x2122; ever increasing prices make it impossible for such people to afford an independent house. Hence, to reduce the gap between the demand and supply of such homes, the Micro Housing companies come into picture. Such Micro housing companies aim to provide homes which can be differentiated based on the income level of people. The houses are defined on different parameters like the carpet area, housing cost, location, etc. The main purpose is to provide basic amenities to the middle and lower middle income people.

Why this sector now? This sector has shown great prospect showing a growth rate of 100% in the number of houses being built in the first half of 2016. From 2013, the total housing credit outstanding grew from 7 million to 9.5 million in 2014. This has led to emergence of new micro housing companies, and they have performed well when compared to the formal banking sector in terms of their balance sheet. Investing in the housing sector is an important factor as it plays an important role in the overall economic development. 25

Sector Analysis

Source: Working Group on Rural Housing for 12 th Five Year Plan, Ministry of Rural Development, Govt. of India

The total shortage in the rural household is 44 million for the 12th five-year plan as per the study conducted by India’s Ministry of rural development. Acc. to the same study conducted, financing of the same would be a very critical factor if the shortage of rural housing needs to be filled up. There has been Healthy Loan book growth (Gruh housing Finance – Average 29% over last 4 years) and there is an anticipation that there will 2.5L fresh loans expected to be issued in the current year.

Some Facts      

The Size of the whole market of affordable Housing market is estimated to be INR 11,00,000 Crore Number of Households – 2.2 Crore households Aggregate AUM of all AHFCs is well under 1L Crore The major player in this market are DHFL, GRUH and Mahindra Rural Housing Finance. These 3 collectively own a 90% market share Other Major players like Tata Housing with Macquarie and JLL(Jones Lang Lasalle) are still beginning investments Out of these companies only 2 companies are listed in the market- DHFL and Gruh Housing Finance

Government Initiatives Various steps have been taken up by the govt to tackle the housing shortage problem. One of the major scheme was the Indira Awaas Yojana, which focused on providing houses to the people under BPL. Since the beginning of this program, there have been 32.05 million houses constructed incurring an expenditure of INR 1,055 bn. The government has offered 100 per cent deduction for profits to an undertaking in affordable housing project approved during June 2016 to March 2019 and completed in three years.

Sector Analysis

Impact of Demonetization act Prime Ministerâ&#x20AC;&#x2122;s demonetization announcement is expected to have a positive impact on the housing sector. These include fall in the overall price of houses on account of elimination of black money portion of value and fall in interest rates on account of demonetization. Also this will be Increase in overall amount per house in White money which means Larger Ticket Size and Increase in overall borrowing on account of lower prices and interest rates. Moreover, the Prime ministerâ&#x20AC;&#x2122;s speech proved to be a game changer as it was announced that loans on houses upto Rs.9,00,000/- will get an interest subvention of 4% & loans taken on houses upto Rs.12,00,000/- will get an interest subvention of 3%. Also, 33% more Rural houses will be built.

Budget 2017 The recently concluded budget was in favor of the market as it announced that NHB refinance individual housing loans worth Rs.20000 Crores. The Affordable Housing companies received the Infrastructure status. This will give the companies easy access to institutional financing and higher limits on external commercial borrowings It is also mentioned that the government would like to treat this as a priority sector.

Conclusion Our analysis brings us to a conclusion that the next few years seem very bright for this sector. With opportunities to invest increasing, high amounts of capital inflow can be expected. Most companies have a very low NPA rate. The current scenario in India coupled with the political agenda of the BJP party which is in power puts this sector in the perfect place to outperform the markets. India is on the verge of a major structural change and this will be one of the beneficiaries in the process.

News Buzz

The electrical goods company Havells Sunday said it will acquire consumer durable business of Lloyd Electric & Engineering for about Rs1,600 crore. The deal is proposed to be executed on a debt free, cash free basis. This acquisition, when completed, will mark Havellsâ&#x20AC;&#x2122; foray into consumer durables industry. The transaction is subject to confirmatory due diligence and is expected to close in next 8 weeks. The company plans to finance the transaction through a mix of debt and internal accruals. The consumer business of Lloyd is engaged in sourcing, assembling, marketing and distribution of consumer durables including air-conditioners, TVs, washing machines and other household appliances. Indiaâ&#x20AC;&#x2122;s largest realty firm DLF Ltd will invest about Rs3,500 crore this year to complete construction of almost all of its existing housing projects. DLF has 18.5 million square feet area under construction in various housing projects, and it is targeting to complete about 1516 million sq ft by end of this year and create finished stocks amid slow sales in the residential segment. DLF has residential projects in Delhi, Gurgaon, Hyderabad, Kochi and Panchkula among others. The company has recently started developing two new office projects in Gurgaon and Chennai, totaling 4 million sq ft of leasable area, after it exhausted all commercial stocks. Ahead of its proposed merger with parent State Bank of India, State Bank of Travancore (SBT) will raise up to Rs600 crore to shore up additional tier-I capital by issuing Basel compliant bonds on private placement. However, there is time for the amalgamation to take shape as the complex merger process entails share swap as well as employee issues, among others. Banks in India are augmenting their tier-I capital, to gradually align themselves with global Basel III Capital Regulations to strengthen capital planning by creating buffer against potential stresses on asset quality and consequential impact on performance and profitability.

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TRIVIA

Jay Zâ&#x20AC;&#x2122;s new venture Shawn Carter, better known as Jay Z is on a new project and this time its not a new album but a venture capital fund. The rapper is seeking to launch his own VC fund and while no details have emerged about the size of the fund, reports suggest that the fund will look at investments in seed stage companies mostly in the tech space. Carter is not new to investing in privately-held companies. In 2015, he bought into the holding company for music streaming company Tidal for close to $56 million and a little over a year later, he sold a third of that company to Sprint Corp. in a deal that bumped the companyâ&#x20AC;&#x2122;s valuation jump to $600 million.

Umbrella Insurance: An umbrella insurance policy is extra liability insurance coverage that goes beyond the limits of the insured's home, auto or watercraft insurance. It provides an additional layer of security to those who are at risk for being sued for damages to other people's property or injuries caused to others in an accident. It also protects against libel, vandalism, slander and invasion of privacy. An umbrella insurance policy is very helpful when the insurance owner is sued and the dollar limit of the original policy has been exhausted. The added coverage provided by liability insurance is most useful to individuals who own a lot of assets or very expensive assets and are at significant risk for being sued.

Impact Investing Impact investing refers to investments "made into companies, organizations, and funds with the intention to generate a measurable, beneficial social or environmental impact alongside a financial return". Impact investors actively seek to place capital in businesses, nonprofits, and funds that can harness the positive power of enterprise. Impact investments occur across asset classes and investment amounts. Impact investments are structured similarly to those in the rest of the venture capital community. Investors may take an active role mentoring or leading the growth of the company, similar to the way a venture capital firm assists in the growth of an early-stage company. Hedge funds and private equity funds may also pursue impact investing strategies. Impact investments can be made in both emerging and developed markets, and target a range of returns from below-market to abovemarket rates, depending upon the circumstances.

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