December 8, 2013 Volume 20
FinNiche
FinXpress
FinXpress Volume 20 Dec 8, 2013
From The Editorial FinXpress Special Edition
CONTENTS
From The Editorial ICICI Bank Wipro TE Connectivity
Continuing from what was started during summer internship , the editorial team brings forward a special edition of FinXpress geared towards concise company and financial knowledge to assist the seniors in their final placements and wish them luck . As a result, various on campus visiting companies have been covered and important insights on various on going financial happenings have been published. A number of significant events occurred during past few months as well various companies and their JD’s to help seniors n deciding about the various job opportunities offered to them. Do look over the ‘News of the Week’ section for further noteworthy news. The ‘Market of the Week’ covers the latest trends in the market this preceding week.
Mind Tree Accenture HSBC Gartner
We hope you enjoy the various articles in this edition of FinXpress. We look forward to your comments, acknowledgements and your criticisms regarding our online magazine. Do let us know if you want to have any additional section (s) in our special editions of Finxpress.
Michelin Axis Bank Cognizant
Happy Reading!!!
Deloitte Mu Sigma
Regards,
In focus
The Editorial Team FinNiche Club
News
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine. December 2013
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Companies
ICICI BANK ICICI Bank is India's largest private sector bank with total assets of Rs. 5,367.95 billion (US$ 99 billion) at March 31, 2013 and profit after tax Rs. 83.25 billion (US$ 1,533 million) for the year ended March 31, 2013. The Bank has a network of 3,536 branches and 11,162 ATMs in India, and has a presence in India and 19 countries in the form of subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore etc. Main groups in which ICICI is operating are Retail Banking, Wholesale Banking, SMEAG, Operations Group, Rural & Inclusive Banking. Awards:(2013) ICIC Bank has been one of the recipients of the Corporate Governance Asia Annual Recognition Awards 2013 ICICI Bank won 'Best Banker Efficiency & Profitability' by the Sunday Standard Best Bankers Awards 2013. ICICI Bank won the Asian Banking & Finance Retail Banking Award 2013 for the Online Banking Initiative of the Year ICICI Bank wins awards under the categories of 'Most Innovative Bank' and 'Most Innovative use of MultiChannel Infrastructure' at the Indian Bank's A sso ci ati o n 's BA NCO N Innovation Awards 2013. For the 4th consecutive year, ICICI Bank won the Celent Model Bank for the next generation technology oriented banking solutions. ICICI Bank was awarded a "Special IT Innovation Award" by Lenovo NASSCOM and CNBC-TV18. ICICI Bank was the winner of "6th Loyalty Awards" for My Savings Rewards.
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Key Drivers : Technology Capital: Investments in technology, Focus on customer convenience Human Capital : Attract the best talent, Build a meritocracy based system, Grooming potential leaders Speed Capital :Strategic agility, Institutionalize speed of response, Develop innovative products and services Culture & Organisational Structure: Continuous re-evaluation to meet business objectives in a flexible structure Key Milestones: 2000: ICICI Bank becomes first Indian bank to list on NYSE; acquires Bank of Madura 2000: Entry into insurance 2002: Merger of ICICI and ICICI Bank 2003: Beginning of international scale-up: first overseas branch in Singapore 2007: Acquisition of Sangli Bank 2010: Merger with Bank of Rajasthan 2012: Roll out of twenty five 24x7 Electronic Branches across 18 locations
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Corporate Social Responsibilities: In the words of KV Kamath, Chairman of ICICI Bank “At ICICI group we strive to ensure that India’s growth is inclusive not just in the communities it touches but in the diversity of opportunities it offers” Elementary Education: Work to improve the quality of schooling processes and outcomes in the public education system in India. School and teacher education reform programme in Rajasthan Chhattisgarh Curriculum and Textbook Development Sustainable Livelihood: India has an urgent need to create employment opportunities for those below the poverty line. The Foundation’s first steps in its sustainable livelihood initiative will be to strengthen two Rural Self-Employment Training Institutes (RSETIs) in Udaipur and Jodhpur, run by ICICI Bank. Primary Health: Goal is to improve the delivery of health services to remotely located and lowincome individuals and families. Strengthening Convergent Action for Reducing Child Under nutrition Nutrition Security Innovations Programme Finance : Goal is to ensure universal financial inclusion. Universal Access to Finance Effective and A ffo rdable Ri sk Management Solutions Poverty alleviation through ICICI Group companies Future Plans: In the month of Jan 2013 "Under the bank's foreign expansion plans, we will open branches in Australia, South Africa and Mauritius. We have sought Reserve Bank of India's (RBI) clearance and the same is awaited," as said by Managing Director and Chief Executive Officer Chanda
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Kochhar at the bank's Annual General Meeting on Monday. The bank will also open a full-fledged branch in China, where it already has a representative office In the December 2012 Unlike other banks which use Facebook only for promoting their products, ICICI Bank is looking at social mediums, such as Facebook as engagement platforms. The basic objective is to take convenience to a new level by allowing customers to avail a host of banking services on Facebook itself while socializing. With a fan following of over 9.5 lakh within 10 months and a couple of nice innovations on the social platform, India’s most technology savvy bank, ICICI Bank is showing other banks and companies how relationships can truly be built using the new world of social media.
Recent News:
Buy ICICI Bank, Axis Bank; sell ITC: Rahul Mohinder, of viratechindia.com recommends buying ICICI Bank with a target of Rs 1205 and Axis Bank with a target of Rs 1310 ICICI Bank may touch Rs 1190: Mayuresh Joshi Mayuresh Joshi of Angel Broking is of the view that ICICI Bank may touch Rs 1190 and Tata Steel may go upto Rs 440. L&T, Maruti, ICICI Bank top 2014 bets: Sandip Sabharwal, Market expert
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Wipro Limited Wipro Limited (formerly known as Western India Products Limited) is an Indian multinational information technology ,consulting as well as an outsourcing service company headquartered in Bangalore, Karnataka in India. The company today has 147,000 employees serving over 900 clients with the presence spread across 57 countries. Wipro is the third largest IT services company in India. It helps customers to do their businesses better by leveraging the industry -wide experience, deep technology expertise, comprehensive portfolio of services and a vertically aligned business model. On 31 March 2013, its market capitalization was 1.07 trillion ($19.8 billion), making it as India's 13th largest publicly traded company. Azim Premji is the major shareholder in Wipro with over 50% of shareholding. Wipro is globally recognized for its innovative approach towards delivering the business value as well as its commitment to sustainability. Wipro champions focus on optimum utilization of natural resources, capital and talent for the best results. Today they are a trusted partner of choice for global businesses looking to ‘differentiate at the front’ and ‘standardize at the core’ through technology interventions. In today’s world, Wipro is well positioned to be a partner and coinnovator to businesses in their transformation journey, help identify new growth opportunities and facilitate the foray into new attractive investible sectors and markets.
India Vegetable Products Limited in Amalner, Maharashtra IPO for capital in February 1946 Ventured in to the fledgling IT industry in 1981 Established software products and exports subsidiary, Wipro Systems Ltd. in 1983 Pioneers in marketing indigenous Personal Computers in 1985 Established a Joint venture with GE in 1989 Entered IT services in the 1990s we were among the pioneers in developing the ODC (Offshore Development Center) concept Software business assessed at SEICMM Level 5 in 1998 Listed on NYSE in 2000 (NYSE:WIT) The first company in the world to be assessed at PCMM Level 5 in 2001 Entered the BPO business in 2002
Entered the Eco-energy business in 2008
Spirit of Wipro The Spirit of Wipro is the core of Wipro. It is rooted in its current reality, but it Milestones also represents what Wipro aspires to be Wipro, one of the world's most trusted thus making it future active. The Spirit brands, is a name with a long history. is an indivisible synthesis of all three Here's a snapshot of Wipro’s journey up statements. It means manifesting to date: Intensity to Win, acting with sensitivity Established in 1945 as Western and being unyielding on integrity.
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TE Connectivity TE Connectivity, Ltd. designs and manu factu re s h igh ly en gi neere d solutions that connect and protect data and power. The company serves customers in more than 150 countries in a variety of industries including automotive, data communication systems, consumer electronics, telecommunications, aerospace, defense and marine, medical, energy and lighting. HISTORY On June 29, 2007, Tyco International was split and Tyco Electronics, along with Covidien, became separate, independently-traded public companies. The new independent company was known as Tyco Electronics Ltd. On March 10, 2011, the company changed its name to TE Connectivity which the company says it feels is more relevant to its position as a co mponent and co mmuni cations manufacturer. On February 16, 2006, a group of institutional investors, part of an existing lawsuit against Tyco International, sued the company to stop its proposed breakup plan. STRUCTURE As an independent company, TE Connectivity serves four major markets (as of 2011): Automotive (31%) Broadband Connectivity (26%) Energy and Industrial (29%) Consumer (14%) Sales by region (as of 2011) were: Europe/Middle East/Africa (35%), Americas (32%), Asia—excluding China (18%), China (15%).
VISION ELIVERING CONNECTIVITY INNOVATION Demonstrating strategic vision and pragmatism, our leadership team drives TE to become the company customers turn to first to meet their connectivity needs. Their forward thinking focuses on the important global trends that count on connectivity—and will be accelerated by it.
BUILDING A GREAT COMPANY WITH STRONG VALUES We believe there is more to building a great company than strong performance. It takes an unwavering commitment to core values and the highest standards of ethics and integrity. At TE Connectivity, we are dedicated to four key values.
INTEGRITY
We must demand of ourselves and of each other the highest standards o all laws and company policies. We are dedicated to diversity, fair treatme
ACCOUNTABILITY
We honor the commitments we make, and take personal responsibility fo ment that is an integral part of our culture.
TEAMWORK
We foster an environment that encourages innovation, creativity, excellen and promotes full participation and career development. We encourage o
INNOVATION
We recognize that innovation is the foundation of our business. We challe age, expect and value creativity, openness to change and fresh approach
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Mindtree In August 1999, Mindtree was cofounded by ten IT industry experts from Cambridge Technology Partners, Lucent Technologies, and Wipro. Mindtree is a global information technology solutions company with corporate headquarters in New Jersey, USA and Bangalore, India. The company has 28 offices located in USA, Sweden, UK, Germany, France, Sw itzerland, Belgium, Australia, Singapore, China, UAE and India. With 12,000+ expert engineers, the company is earning revenues over USD 430 million. The economic downturn after the dotcom bubble burst made the company to expand its offerings into information te chno l o g y se r vi ce s It p ro vi de s consulting-driven technology solutions to help businesses and societies flourish which makes it a strategic partner to over 40 Fortune 500 enterprises. The company is listed on Bombay Stock Exchange and National Stock Exchange, currently trading at 1372.80 on BSE (as on December,5, 1 PM) with revenues over $436 million USD (Sept, 2013) Mindtree and its employees (Mindtree Minds) are guided by its values: c o l l a bo r at i ve s pi ri t , u n re l e nt i ng dedication and expert thinking which helps to see possibilities where others see a full stop. The company has flourished under the leadership of Krishnakumar Natarajan, MD and CEO who received the Bloomberg UTV, CEO of the year, under the emerging companies category in 2011. To add to its honour, the company has been selected by Forbes Asia as one of the ‘200 Best Under A Billion companies’ of 2012, Ranked 19 in the list of top 25 best employers in India and ranked second among the IT companies by AON Hewitt best employers' survey 2011. Best corporate governance in India for 2012 by the World Finance magazine. Mindtree caters to broad range of December 2013
industries which includes, banking, capital markets, consumers and communications, consumer packaged goods, independent software vendors, insurance, manufacturing, media and entertainment, retail and travel and transportation. Its services includes, analytics and information management, application development and maintenance, EAI BPM, consulting, cloud, digital business, engineering research and development, independent testing, infrastructure management services, mainframe and midrange, mobility, SAP services and technologies. IT Services Mindtree has helped global organizations gain competitive edge by leveraging the right mix of technology, people, and processes to achieve strategic objectives. Its team of business, process and product experts ensures that IT initiatives are tied to business imperatives through quantifiable metrics. Its approach is consultative and business-led: first understand the business challenges and define the goals, then identify and implement the appropriate technology solution. Solutions provided by Mindtree to various industries are: Bluetooth, co rpo rate lending, di gi tal video surveillance, MindTest, mKonnect, mPromo, mSales, MWatch, secondary sales platform, store portal and VMUnify.
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Accenture A c c e n t u r e p l c i s a multinational management c on su lt in g , te ch nol ogy services and outsourcing company headquartered in Dublin, Republic of Ireland. It is the world's largest consulting firm measured by revenues[2] and is a constituent of the Fortune Global 500 list. As of 31 August 2013, the company did a revenue of $28.6 Billion with approximately 266,000 employees serving clients in more than 120 countries. Combining a solid understanding of business processes with deep industry knowledge and implementation rigor, Accenture Technology Consulting gives IT leaders practical solutions tailored to address their most crucial business challenges. Accenture common equity is listed on the New York Stock Exchange. Accenture helps its clients create value and architect change through unique spectrum of management consulting services: Analytics, Business Process Management, Cloud, Risk Management, Mobility, Operations, Smart Grid, Strategy etc. Accenture has wide spread presence across all in dustries i ncl udi ng, aerospace and defense, agribusiness, banking, automotive, capital markets, chemicals, communications, health, retail, travel etc.
IT Strategy The company’s comprehensive IT strategy services help organizations shape the direction of IT over the next three to five years to maximize shareholder and business value. It assist organizations in developing: A co mp re he n si ve I T str ate gy, including IT opportunity assessment, shareholder value diagnosis and IT December 2013
investment prioritization IT strategy for mergers and acquisitions, due diligence, divestitures and carve-outs Strategies for all key components of IT, including information strategy, IT sourcing strategy, IT systems strategy and IT infrastructure strategy Information and Data Strategy It help its clients to build the foundation for effective decision making by first identifying the critical information needed to run and grow the business; and then by developing and implementing a strategy, architecture and processes for sourcing, managing, governing and securing that information, both within and outside the firewall
Enterprise Architecture and Application Strategy Through Enterprise Architecture and Application Strategy services, the company creates a flexible and actionable road map that guides the selection, deployment, operation and refresh of a company’s application and technology landscape. Whether overhauling a single business system or defining an entirely new IT solution and service architecture, our comprehensive approach provides practical and i ndustry -specific roadmaps that can help your businesses grow and achieve cost-effective IT agility. Key elements of this work consist of enterprise architecture planning, governance, operating models, industryspecific architectures, and both custom and fra me wo rk -base d e nte rprise architecture development.
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HSBC Analytics HSBC Global Technology (GLT) is part of HSBC, headquartered in London, United Kingdom. The GLT network is spread across 6 offices in 5 countries. The first GLT was set up in April 2002 in Pune, India with a mandate to develop software for the company. The main purpose of GLT is to provide technology solutions and services to a large spectrum of customers spreading across multiple business functions and geographies
London, Paris, Dusseldorf, Hong Kong and Tokyo in addition to India.
In their strategy, they outline their vision – to be the world’s leading financial services company. They want to be the first choice of their customers and for their employees. If HSBC can be the best place to bank, and the best place to work , they will have built a sustainable business that will deliver for the long term for their customers, colleagues, shareholders, and society at large. They take great care when hiring new people because they know that the talent, creativity and dedication of our employees drive our success.
The HSBC Analytics Business service provides an opportunity to work on advance analytics offerings globally, covering multiple aspects of banking such as:
Analytics in HSBC Analytics involves data analysis, strategy development and implementation, forecasting and reporting. It forms the information basis for strategic planning by the senior management for businesses and enables effective decision making to satisfy business needs and requirements, along with addressing unforeseen challenges
Their Core values Dependable – do the right thing Open – to different ideas and cultures Connected – to customers, community, regulators and each other
Advanced Data Mining and Modeling Marketing and Customer Development Strategy Risk and Fraud Management Strategies Product and Portfolio Management Business Analysis, Reporting and Insights Information Management Marketing and Campaign Management Operations Analytics
HSBC has its set up for analytics team in Mumbai. This is in addition to expanding its investment banking and equity broking team. The new analytics team, which started operations in 2004, supports the group's global investment banking operations. Currently, the group's analytics teams are based out of New York, Mexico City,
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HSBC IB HSBC, with its headquarters in London, is one of the largest banking and financial services organizations in the world. HSBC's international network includes about 9,500 offices in 86 countries in Europe, the Asia Pacific, the Americas, the Middle East and Africa. Within this, the lender has 16mn customers and 1,240 branches in the UK. With listings on the London, Hong Kong, New York, Paris and Bermuda stock exchanges, shares in HSBC Holdings are held by around 200,000 shareholders in 100 countries. HSBC is also aiming to become the leading provider of exchange-traded funds (ETF) in the short term, and launched over 30 ETFs in 2010. In February 2010, HSBC Global Asset Management announced it was to launch two ETFs following Chinese and BRIC indices, with the possibility of an additional ETF tracking a Japanese index. SWOT Analysis Strengths Europe's largest banking group Hong Kong and the UK's largest bank One of the most highly capitalized banking groups in the world Large geographical and market reach Weaknesses HSBC was at the forefront of the US subprime crisis as a leading subprime lender in the market before the crash and has suffered during the economic crisis Facing potential claims over a number of charges that it engaged in fraudulent behavior Opportunities Post-crisis strategy is to concentrate on emerging markets The group is looking to become a leading provider of exchange traded funds
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Profit before tax rose by 15% y-o-y in
2011 Threats Impairment charges have remained a threat, weighing down on capital Divestment drive could lower earnings in the short-term Total operating expense rose by 10% y-o-y in 2011 IB at HSBC - STG Global Banking and Markets is the investment banking arm of HSBC. It provides investment banking and financing solutions for corporate and institutional clients, including: Investment banking Corporate banking Capital markets Trade services Payments and cash management Leveraged acquisition finance It provides services in equities, credit and rates, foreign exchange, money markets and securities services, in addition to asset management services. Global Banking and Markets has offices in more than 60 countries and territories worldwide, and describes itself as "emerging markets-led and financing-focused" The Strategic Transactions Group (“STG” or “The team”) is a team of highly qualified professionals providing advisory services on critical transactions to its major corporate clients worldwide by collaborating with, and supporting the global advisory team across regions (EMEA, Asia-Pacific and Americas).
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Gartner Gartner, Inc. founded in 1979, is an American information technology research and advisory firm h e a d q u a r t e r e d in Stamford, Connecticut, United States. It was known as Gartner Group, Inc until 2001. Gartner, Inc. (NYSE: IT) is the world's leading information technology research and advisory company. They deliver the technology-related insight necessary for their clients to make the right decisions, every day. From CIOs and senior IT leaders in corporations and government agencies, to business leaders in hightech and telecom enterprises and
Bradstreet. In 2001 the name was simplified to Gartner. In the course of its growth, Gartner has acquired numerous companies providing related services, including Real Decisions (which became Gartner Measurement, now part of Gartner's consulting division), and Gartner Dataquest (Gartner's market research firm). It has also acquired a number of direct competitors, including NewScience in the late 1990s, Meta Group in 2005 and AMR Research and Burton Group in early 2010. Gartner offers world-class, objective
professional services firms, to technology investors, they are the valuable partner to clients in over 13,000 distinct organizations. Through the resources of Gartner Research, Gartner Executive Programs, Gartner Consulting and Gartner Events, they work with every client to research, analyze and interpret the business of IT within the context of their individual role. It has 5,700 associates, including more than 1,435 research analysts and consultants, and clients in 85 countries. Originally a private company, the Gartner Group was launched publicly in the 1980s, then acquired by Saatchi & Saatchi, a London-based advertising agency, and then acquired in 1990 by some of its executives, with funding from Bain Capital and Dun &
insight on virtually any area of IT. More than 900 expert analysts cover 1,200 topics across the IT landscape Gartner analysts are based in 26 countries and speak 47 languages Gartner analysts have an average of 12 years experience in their specific field Gartner insights are drawn from a critical fact-base not available anywhere else. Each year Gartner manages: Interactions with clients in 12,400 distinct organizations world-wide 319,000 one-on-one client discussions 12,000 vendor briefings
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Gartner Gartner’s rigorous research process and proven methodologies provide the foundation for unbiased, pragmatic and actionable insight. Gartner can be the difference between success and failure in the outcome of their clients critical IT initiatives Gartner can helps clients save thousands or millions of dollars on purchase decisions and operating budgets Gartner is the key to their clients success in IT Gartner bring together Research insight, Benchmarking data, problem-solving methodologies and hands on experience to improve the return on their client’s IT investment. They follow three methods for that UNDERSTANDING: We know the issues you face 80% of the Fortune 500 use Gartner for their key technology initiatives We deliver business value in over 1500 high-impact initiatives a year CAPABILITIES: the data, tools and capabilities to help Gartner solutions address the specific needs of each industry Every solution makes use of our performance benchmarking data We employ seasoned consultants, with an average of 15 years experience EXPERIENCE: we help you deliver tangible results Our clients spend 38% less than their peers for the same workload Gartner Contract Optimization services help our clients realize hundreds of millions of dollars of real and measured savings annually Consulting engagements help clients improve performance and reduce risk
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Michelin Michelin is a Tire manufacturer based in Clermont-Ferrand in the Auvergne region of France. It is one of the two largest Tire manufacturers in the world along with Bridgestone. In addition to the Michelin brand, it also owns the BFGoodrich, Kleber, Tigar, Riken, Kormoran and Uniroyal (in North America) Tire brands. Michelin is also notable for its Red and Green travel guides, its roadmaps, the Michelin stars that the Red Guide awards to restaurants for their cooking, and for its company mascot Bibendum, colloquially known as the Michelin Man. Among Michelin's numerous inventions, there is the removable tire, the pneurail (a tire for trains made to run on rails) and the radial tire technology now used in modern "green tires" that reduce fuel consumption. Since the early days of MICHELIN brand, we have been following a unique concept in research and development – to develop and produce tires with outstanding overall performances. We won’t improve one key performance without improving simultaneously all others. MICHELIN tires, therefore, are a blend of high performance, combining
dedicated to the growth of the organization. From its inception till now Michelin has produced 166 million tires, close to 10 million maps and guides have been sold, 970 itineraries have been calculated by ViaMichelin. It has recorded net sales of â‚Ź 21.5 billion which shows that why it is the second best tyre manufacturer. It has a Global presence with 69 production facilities in 18 countries on December 31, 2012. It has marketing operation in more than 170 countries. Its global market share is 14.6% recorded in 2012. It is at the No.1 position in the world in energy-efficient tires. Its share is 52% in the consolidated net sales. It is No.1 in the world in radial tires as well as
retreading. Its share is 31% of the consolidated net sales. It is also No.1 in the world for Agricultural, Aircraft and Earthmover radial tires. MICHELIN travel partner is No.1 in Europe for maps, guides and digital travel-support services. MICHELIN Lifestyle has sold more that 15 million licensed products. Its share is 17% of the consolidated net sales. Michelin came to India almost a decade with no sacrifice the fundamental ago and today markets its range of benefits of every MICHELIN tire: High tubeless car radial , tubeless and tube Safety,More Mileage, Fuel saving type bus and truck radial tires. Michelin Michelin have always been the high in India offers Product for India Market running company with 1,13,400 for Passenger Cars, Truck & Bus, Two employees as on December 31, 2012 Wheeler & OTR (Off the Road).
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AXIS BANK
Axis Bank is the third largest private bank in India and offers an entire spectrum of financial services to customer segments covering the large and small corporate, MSME, Retail and Agri business. It is first new generation banks to begun its operations in the year 1994 promoted by UTI, LIC, GIC, NIC ltd. A brief review of each vertical under which the Bank operates is given below: RETAIL BANKING: It is a key driver for Bank’s growth strategy and it offers retail loans and accepts deposits which have seen a healthy CAGR of 26.3% over last five years. Added to this, it is also the largest issuer of debit cards in the country by making it a key player in the ever increasing card market. Travel Currency cards & Portfolio Investment Schemes (PIS) are some of the attractive offers rolled out to lure the NRI consumers. Along with this Axis Bank Privee caters to the HNI with its advisory services and personalized investment needs. BUSINESS BANKING: Cross-sell of transactional banking products, product innovation and a customer-centric approach have succeeded in growing current account balances and realisation of transaction banking fees. It is also an SEBI registered custodian which offers custodial services to both domestic and offshore customers.
TREASURY: Bank continued to be a dominant player in placement and syndication of Rupee denominated debt. During the year, the Bank arranged debt aggregating to Rs. 145,461 crore and retained its top position in arranging Rupee denominated debt for the fifth consecutive calendar year FINANCIAL INCLUSION: Initiatives like opening no frills account, micro deposits, Chhota-deposits and micro insurance, besides being an active player in the remittances market. It is also playing an important role in the direct benefit transfer and disbursal for various government schemes. C O R P O R A T E S O C I A L RESPONSBILITY: Bank’s initiative of “Reduce, Reuse & Recycle” was able to reduce wastage and able to recycle almost 8.7Tonnes of paper since its inception. Besides this Bank also manages a Foundation which is funded by 1% of bank’s profits and in turn helping around 17 NGO’s to provide sustainable livelihood. Along with this foundation also deliver in various initiatives like education, poverty elimination & health care.
CORPORATE CREDIT: It has pioneered a unique model of cross selling products to the corporate like loan syndicate, trade finance & treasury business. Keep in mind the weak macroeconomic indicators; Bank confined its exposure only with positive outlook industries and positive credit rating.
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COGNIZANT TECHNOLOGIES Cognizant is a member of NASDAQ 100, S&P 500 and is ranked among the top pe rfo rming and fastest g rowing companies of the world. It is a leading provider of Business process outsourcing, Information Technology and Consulting services. Cognizant enables its clients to make their current operations as efficient and effective as possible and also by making them invest in innovation. Originally founded as an in-house technology unit of Dun & Bradstreet in 1994, Cognizant started serving external clients in 1996 and now is headquartered at Teaneck, Bergen County, New Jersey, USA. The latest innovation is coined as SMAC (i.e. Social, Mobile, Analytics and Cloud) which is now being increasingly embedded into the IT architecture of its clients. Taken together, these technologies can enable the creation of hyper intelligent software platforms that address myriad issues, from sales to customer service to the design of new products to the management process. Cognizant Business Consulting (CBC) provides strategic and operational consulting services and drives business solutions for clients. Currently this profile is operating under the following verticals as mentioned below
Cards and Payments, Risk Management, Investment Banking and Brokerage, Asset and Wealth Management, and Securities Service. In addition to Application Development and Maintenance, the services increasingly in demand in this sector include EIM, Te s t i ng , C u s to me r R e l a t i o n sh i p Management, or CRM, Enterprise Resource Planning, or ERP, BPO, IT IS, and Business and Technology Consulting. INSURANCE services are catered to clients through operations likes Business Acquisition, Policy Administration, Claims Processing, Management Reporting, Regulatory Compliance and Reinsurance. We strive to improve the sales and marketing process, both by deepening direct retail customer relationships and s t re n g the ni ng i nte r ac ti o n s wi th networks of independent and captive insurance agents, often through the use of social and mobile technologies. HEALTH CARE For the year 2012 Cognizant’s healthcare business segment represented approximately 26.3% of its total revenues. The following are the industries which are served by Cognizant
BANKING FINANCIAL SERVICES Financial Services business segment serves leading financial institutions throughout the world. Its clients include banks, investment firms and insurance companies. In 2012, this segment represented approximately 41.3% of our total revenues. They primarily cater to the following segments BANKING services by assisting the clients areas like Retail Banking, Wholesale Banking, Consumer Lending, December 2013
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HEALTH CARE work with many leading glo bal healthcare o rg an i zatio ns, including healthcare payers, providers and pharmacy benefit managers. This industry today faces the dual challenge of improving the quality of care while lowering the cost of care and making healthcare affordable to a larger population which is driving their business. They partner with clients to enable their systems and processes to deal with the retail orientation of health care, such as the support of individual mandates and the adoption of mobile and analytics solutions to improve access to health information and decision making by end consumers.
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RETAIL/TRAVEL/HOSPITALITY caters to growing needs of the retailers by making them a provision for multi channel models and impact of SMAC on consumer interaction. CONSUMER GOODS segment is propelled with the need of consumer goods companies to accelerate product innovation to remain competitive and deliver top-line growth, the continuing drive to optimize global sourcing and supply chain management. OTHER SEGMENTS This comprises of the Communications, information, media & entertainment as sub segments and accounts to 10% of company’s net revenue. COMMUNICATION segments address its clients to keep pace with the change in technology by introducing new products and services, and improving the customer satisfaction and service.
LIFE SCIENCES division assists its clients by driving their innovation and virtualization in growing their business. Life Sciences solutions help transform many of the business processes in the life sciences value chain (Research, Clinical Development, Manufacturing a n d Su p pl y C h ai n , S al e s a n d I N F O R M A T I O N / M E D I A / Marketing) as well as regulatory and ENTERTAINMENT is enabling its clients administrative functions and general IT. to transform their business by means of the digital platform. Services are MANUFACTURING/RETAIL provided in critical areas such as the This segment represented approximately Digital Content Supply Chain and 20.4% of total revenues by catering to Media Asset Management. Digital the following industries. Distribution, Workflow. Automation; MANUFACTURING/LOGISTICS division Intellectual Property Management, Anticaters to needs of clients by making Piracy Initiatives; and Operational them more productive, competitive and Systems cost effective. Its service areas include service areas include Warehouse and Yard Management, Transportation Asset Management, Transportation Network Design, Global Trade Management and Analytics. Power generation sector, industry trends include the continued drive toward energy conservation, including “smart meter” installations, the need for better grid reliability and security, regulatory changes.
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Deloitte About Deloitte “Deloitte” is the brand under which tens of thousands of dedicated professionals in independent firms throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu Limited (DTTL), a UK private company limited by guarantee. Each member firm provides services in a particular geographic area and is subject to the laws and professional regulations of the particular country or countries in which it operates. DTTL and each DTTL member firm are separate and distinct legal entities. Each DTTL member firm is structured differently in accordance with national laws, regulations, customary practice, and other factors and may secure the provision of professional services in their territories through subsidiaries, affiliates, and/or other entities. Financial Advisory Sercvices(FAS): Deloitte has a Financial Advisory Services (FAS) function which provide a focused set of valuation consulting services to clients covering a wide range of industry segments. Specific areas of focus include business & intangible asset valuation, cost segregation, machinery & equipment valuation, construction advisory, real estate financial advisory, and lease advisory services.
most Financial engagements.
advisory
(FA)
Their FA practice takes on an industry vertical approach. It draws upon its pool of experts both in India and abroad specializing in various industries and integrates this with its global knowledge base thereby delivering strategic and financial solutions to assist clients through every phase of the economic cycle. Their integrated approach which involves combining skills to develop well -rounded solutions based on a full u n de rs t an di ng o f t he i r cl i e nt s ’ ambitions, business and environment extends a clear commercial advantage. Our edge lies in our ability to formulate multi-disciplinary teams and deploy the same at short notice to deliver results. Their clients include corporate, large national enterprises, public institutions, and successful, fast-growing companies. They offer services in a number of industry verticals ranging from co rpo rate finance, transactions, valuations, forensic & dispute resolution and reorganization with a focus on helping their clients increase value. Inside Financial advisory the main areas are:
Timely strategic financial advice is the
Corporate Finance Advisory Forensic and dispute advisory M&A Transaction services Reorganization services Valuation services
linchpin of all transactions that take place in today’s rapidly evolving competitive landscape. Deloitte understand this and assist in identifying opportunities for, or risks to, our clients' interests, which accompany
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Companies
Mu Sigma Mu Sigma is an analytics services provider. The firm’s name is derived from the statistical terms “Mu (μ)” and “Sigma (σ)” which symbolize the mean and the standard deviation respectively of a probability distribution. The company is ISO 27001 certified. Mu Sigma is headquartered in Chicago, Illinois, with its main delivery centre in Bangalore. Mu Sigma provides services to more than 75 fortune 500 clients in several distinct industries.
Analytics and data-driven decision making have been well recognized as a distinctive competitive advantage in a world of Big Data and increasing business complexity. However, organizations are challenged with scaling the use of analytics and making it an integral part of all business decisions. Mu Sigma addresses this critical need and enables organizations to institutionalize analytics and Decision Sciences in a sustainable manner.
Mu Sigma was founded by Dhiraj C Rajaram, a former strategy consultant f o r B o o z A l l e n Hamilton and PricewaterhouseCoopers, in 2004. In 2008, Mu Sigma raised its first institutional investment round of $30 million from FTVentures (now FTV Capital). In April 2011, the company raised an additional $25 million from Sequoia Capital. In December 2011, the company announced a $108 million round of financing from Sequoia and private equity investor General Atlantic.[4] In February 2013, Mu Sigma received an investment of $45 million from MasterCard, which placed the company over the $1 billion (Rs. 5,400 crore) milestone.
Mu Sigma solutions are divided into various horizontals and verticals. Some of the verticals are: Banking, Financial Services and Insurance CPG and Retail Pharmaceuticals Healthcare Technology, Media& Telecom Mu Sigma works with multiple business functions including Marketing, Risk and Supply Chain. Horizontals include:
Marketing Analytics Supply Chain Analytics Risk Analytics
The vision of the company is to — ”Enable businesses to institutionalize data-driven decision making”
December 2013
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In Focus
Why Foreign Investors Are Staying The Course Rudy Gopalakrishnan Economic Times 5 Dec, 2013,
04.27AM IST
Indian policymakers have concluded that the worst of India's economic woes are behind us. One only wonders where such optimism stems from. When the economy started to weaken in 2011, policymakers persuaded us that India had seen much worse and told us not to self-flagellate. However, when things began to look considerably worse than expected, policymakers convinced us that things are so bad that they could only get better.
which have been relatively immune from several macroeconomic pressure points.
From these actions, it would be safe to conclude that foreign equity investors buy companies that compound earnings and dump those companies that don't. The fact that a company is incorporated and listed in a growth market like India appears to be completely incidental. Now, it is well understood that one of the key reasons why foreigners have invested heavily in Indian Optimism of this nature has allowed equities is because of the high return on policymakers to postpone solving many of equity (ROE) Indian companies generate. India's long-term challenges. The financing of our current account deficit (CAD) via The ROE of Indian companies has started foreign equity inflows is a classic case in to decline, however, due to the decline in point. Policymakers today believe the the ROE of "core sectors". It is interesting to financing of India's CAD through foreign study what impact this has had on the equity inflows is a safe option. They currency, given higher ROEs is the key corroborate this belief in two ways. reason why foreigners have chosen to invest in India in the first place. Actually, a cause First, the value of foreign equity holdings in and effect relationship has repeated itself in Indian companies between September 2007 all emerging markets globally irrespective of and September 2013 has been on a gradual the size of a country's' CAD. uptrend, pointing to stability of holdings. Second, concentration levels of foreign Thus far, foreign investors have been — and equity holdings (85% of foreign equity are likely to be — patient for good reasons. holdings are in only 50 companies) have Every time the economy hiccupped and remained consistent over this period. This foreign investors sold the "islands of led policymakers to conclude that foreign excellence", they ended up buying these equity investors are deeply in love with stocks back at a significant multiple to the Indian equities which they will hold in price they sold them at. perpetuity. The lord of one of these "islands of A deeper analysis, however, reveals some excellence" — who also happens to be the interesting facts. Foreign holdings in "core CEO of HDFC Bank — has often reminded sectors" (telecom, power, engineering, PSU foreign investors of their follies. His banks) have declined by $48 billion as the expositions detailing the stupidity of foreign profitability of several companies has investors have served as a reminder that slowed in line with India's economic growth. well-managed Indian companies can Fortunately, this capital hasn't left the withstand several years of serious policy country given holdings have increased by a mismanagement. si mi l ar amo u n t in "i sl an ds of excellence" (sectors such as consumer goods, IT, pharma and private sector banks)
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In Focus
The New "Two Indias" Madhukar Sabnavis Business Standard 5 Dec, 2013 9:50 PM IST
In the last two decades, there has been much written and said about "two Indias" called India 1 and India 2 in the new millennium, and EMT and HMT India (English- and Hindi-medium) in the 1990s. One India was largely in the metros and large towns - the entry point for most multinational brands, and where the early adopters of new products were located. The second India was where the early majority of the market exists, and the markets where scale could be achieved. India 2 was always seen to be looking up to India 1 and adopting things a 'bit' later. However, mixes needed to be somewhat adapted for the local conditions and communication needed to go beyond the brand to layers of emotion.
Pradesh, Rajasthan and Uttar Pradesh) representing North India and the four South Indian states of Andhra Pradesh, Karnataka, Kerala and Tamil Nadu. The Bimaru states account for about 450 million people, and the four South Indian states, about 250 mn.
Let's first look at affluence levels. The average monthly per-capita household expenditure for North India across the states in both urban and rural regions is much lower than the India average of Rs 1,984 and Rs 1,054 respectively, while for the four southern states, it's largely higher. The same is true about the penetration of consumer items like televisions and twowheelers - and for latrines within the However, Amartya Sen and Jean Dreze's premises too. The average South Indian book India: An Uncertain Glory reveals the family has a better quality of life than its emergence of an interesting phenomenon. Northern counterpart. At one level, the greatest optimist about India's development can get depressed The difference on social indicators is just as reading the book, as it reveals the economic stark. The fertility rate in 2011 - births per and social inequality the growth model has woman - on an all India basis is 2.4. For bred. It clearly questions the 'Gujarat' the northern states, it's between three and model of development. That is something 3.6; for the southern states it's 1.7 to 1.9 government and economists need to perhaps explaining Nandan Nilekani's age consider as they plan for the nation in the divide observation for 2025. The percentage years ahead. However, a second interesting of women in the 20-24 age bracket married facet is hidden within the numbers, and by 18 in India overall was 47.4 per cent in that is worth pursuing. A new "two Indias" 2005-06. The comparative rates for the four is emerging. north Indian states range from 57 to 69, and for the south Indian states 15.4 to 54.8 Nandan Nilekani did hint at this in his book (the highest is for Andhra Pradesh). The Imagining India when he pointed out a same story emerges if one looked at double hump - a camel in India's indicators like female labour force demographics. He said: "By 2025, North participation and proportion of women India's population will be very young with a among organised sector employees. Even median age of just 26; but the median age when it comes to the female-to-male ratio in in South India would be 34 - similar to the 0-6 year age group, Rajasthan and Europe's in the late 1980s." Uttar Pradesh are well below the national average, while all the southern states are The statistics in An Uncertain Glory make well ahead. The story is the same across for interesting observations. Just as an literacy, education, health and other public indication, let's compare numbers for the services indicators. four "Bimaru" states (Bihar, Madhya December 2013
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In Focus The numbers may not be definitive but indicate that the North and South are evolving as two different economies, and could be treated as different countries. It's already well known that modern trade is more evolved in the South than the North. And basic infrastructure is also superior in South India versus the North. Marketers have been historically sensitive to the cultural difference between the two regions. And mixes have often been adapted for the same - from language to caste to modifying rituals in advertising and even products to suit local tastes and needs. Mass media has evolved in an isolatable manner and so m a de the c re ati o n of di sti nc t communication easy. However, as we move forward, this new dimension to the "two Indias" story could provoke fresh, fundamental thinking in marketing. It would be facile to say that more evolved market mixes would suit the South and that of more developing markets be adapted for the North, based on the indicators mentioned at the start of this piece. These numbers just indicate that the South is ahead of the development curve compared to the North, and is growing older.
FinNiche recognises that the two markets could be at different stages of evolution for the same category. There could be a penetration task in the North and a consumption task in the South; it could be a transactional task in the North and brand affinity-building in the South. Even the tonality of communication and the role of larger purposes assigned to brands could be different. As the South is older, brands should be less irreverent, yet able to stand for larger purposes including social causes given the market is more evolved, especially educationally. Some brand stances that work in the West today could be more easily used in the South for brands and categories that are more evolved in those markets; the North may still need some basic market development concepts. The greater presence of modern trade in the South means different shopper behaviour, at least for a core segment, and hence different media opportunities to drive brand -building.
This thinking is still nascent and could take firmer shape in the times to come. The evolution of India's demographic, economic and social indicators shows that there is another way to unbundle India in the However, it may be interesting to consider future to extract greater value for brands different tasks in these markets and and businesses. Something worth thinking develop both marketing mixes and about. communication palettes accordingly. This
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In Focus
CAD likely to remain lower in Q3 and Q4: India Ratings PTI December 4
Pick-up in exports and decline in gold imports are likely to keep the country’s current account deficit lower during the rest of the fiscal compared to the same period last year, India Ratings today said in a research report.
According to a recent estimate by the International Monetary Fund, the US economy is expected to grow at 1.6 per cent in 2013, while Germany and France are expected to grow at 0.5 per cent and 0.2 per cent, respectively.
“We expect the CAD to be lower in the remaining quarters of the FY’14 than the corresponding quarters in FY’13 in view of a pick-up in exports and a significant drop in gold imports,” it said.
“An improvement in the demand conditions in advanced economies coupled with rupee depreciation is helping merchandise exports,” the report said.
Merchandise exports increased 11.9 per In the July-September quarter, CAD cent to $81.2 billion in Q2 FY’14 from $73.9 narrowed to $5.2 billion or 1.2 per cent of billion in the first quarter. GDP against $21 billion or 5 per cent of GDP in the same period last fiscal. Depreciation of the rupee has improved the competitiveness of Indian exports, Gold imports in Q2, 2013-14 dropped to particularly of textiles and textile products, $3.6 billion from $16.4 billion in April-June leather and leather products and quarter due to hike in duties and other chemicals, the report added. measures taken by the government to curb the inward shipments of the commodity, It further said that though some increase in the report said. import growth in the second half of this fiscal is expected, it will be limited due to The report believes that despite the uneven stable crude prices and lower gold imports. global recovery, the momentum witnessed in export growth will continue in the near However, the report said that due to the term as there are signs of improvement in nuclear deal with Iran, tensions in West both the US and the core economies of euro Asia are likely to ease leading to reduced zone. volatility in crude prices.
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Is PPP a failed model? Atul Chaturvedi Economic Times 2 Dec, 2013, 11:02 AM IST
Our Nation over the years has been fed with the theory that PPP model is some kind of a magic wand which will solve all issues of infrastructure deficiency plaguing our country. My own experience tells me that this notion is far removed from reality. Across sectors we are seeing slow and steady demise of this once celebrated model. Before we examine reasons for this sorry state of affairs it may not be out of place to mention the various Models in Vogue: Design–Build (DB) – The Private Sector designs and builds infrastructure to meet Public Sector Performance Specifications. The cost overruns are transferred to the Private Sector.
maximising efficiencies and innovations of Private Enterprise PPPs can provide much needed Capital to finance Government Programs and Projects, thereby freeing public funds for core Economic and Social Sector. Inspite of all these noble intentions and so called support from policy makers why is this proving to be a failure? The Private sector is now no longer as enthusiastic as it was in being a “Partner in Progress”. Surface transport Ministry is giving PPP model a decent burial and reverting to EPC contract. We keep reading about the struggles of Reliance pertaining to Gas Exploration. The fate of Power Sector is well documented. The success stories, can be counted on finger tips.
Operations and Maintenance (O & M) – in The Public Private Partnership (PPP) model this model the Private Sector operates was supposed to be a collaborative model publicly owned assets for a specified period. between Govt. Agency and the Private Sector. It is anything but that. The Build Own Operate (BOO) – The Private Governmental entity arrogates to itself the Sector finances, builds owns and operates a power of Auditor and Investigative Agency facility for Public Sector. all rolled into one. The Poor Private Sector partner is treated as trash and is left Build Own Operate and Transfer (BOOT) – wondering whether it was a crime to bid in The Private Sector finances, builds, the first place. operates and transfers the asset to Public Sector after a specified period. The atmosphere of distrust prevailing in the country has further aggravated the Why PPP? situation. The Babus are religiously refraining from taking any decision. They To my mind the basic reason why our smell a rat where none exists. Talk to any policy makers over the years pushed for senior bureaucrat and the standard refrain PPP model was to tap the efficiency and is – why take decisions which will be management skills of the Private Sector. questioned at a later date. We have been The other fundamental reason was to cut taught “Not taking a decision is a bigger red tape and improve flexibility. crime than taking a wrong decision‟. The Government bodies are bound by inflexible opposite seems to be true as far as Govt. rules and regulations which makes decision bodies are concerned. We have never seen making very difficult. The PPP model was any „Babu‟ being penalised for not taking supposed to change the rules of the game decisions. On the other hand you have ensuring speed of implementation and countless cases of bureaucrats facing wrath avoiding cost overruns. In addition to of Investigative agencies. Even officers, long November 2013
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In Focus retired are questioned. K. C. Parakh, Shyamal Ghosh are some names which readily come to mind. I am sure they must be ruing the day they decided to join the Govt. service.
FinNiche was levied penalty and the project completion certificate was withheld. If this be the attitude how can this model survive in the long run. The PPP model in its current ‘avatar’ needs to be given a decent burial or suitably tweaked to respond to changing Economic & Political environment of our country. Govt. Agency and the Private Sector have to be partners in progress and not adversaries. The bureaucrats manning the Govt. Agencies need to get down from their high horses and should be equally made accountable for the success or failure of the Projects. If Private Sector can fire executives for non-performance what stops Govt. from demanding same from its officers. All this requires a change in mindset.
The inflexibility of the Govt. partner in a PPP model can go to silly extremes, A few years back someone narrated an interesting incident. As part of the PPP Service Agreement the Private Party was supposed to provide a certain quantity of assets. As the project progressed it was realised that the contracted quantity of fixed assets would not be required for the next five years. The Private Party requested the Govt. Agency to give them authority to defer the purchase at it would amount to locking Capital. The Private party went to the extent of suggesting that they are willing to securitise the Govt. Agency in the It’s high time we woke up from our slumber intervening period and procure the asset or our Infrastructure would remain frozen when required. Not only was this simple in time. request not accepted but the private party
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China’s investment binge : unsustainable? —- The Economist
TO become rich, poor countries must enlarge their productive powers, mobilising workers, absorbing new technology and accumulating capital. They must expand what economists call the “supply side” of the economy, which determines how much a country can produce, and therefore how much it can earn and spend.
large. If this imbalance is not corrected, they argue, China may eventually suffer from an investment bust, causing a sharp slowdown in spending—perhaps even a contraction. Among the most prominent critics of China’s economy is Michael Pettis of the Guanghua School of Management at Peking University. Investment, he points out, accounts for a dizzying 48% of China’s spending Investment plays a dual role in development, adding both to demand and, when projects reach fruition, to supply. But China’s high rates of investment are nothing to celebrate, Mr Pettis argues in a recent book. They are both excessive and misdirected. As a consequence China is misallocating capital on a grand scale.
The other side of the economy— demand—can also intrude on the story. In the course of development, poor countries often struggle to keep spending in check. They are prone to inflation and trade deficits, which must be financed by foreign borrowing. Sometimes these excesses result in a financial crisis that leaves demand in the dumps and supply in disarray. Simply put, successful development entails expanding supply as quickly as possible without allowing Much of the investment is financed by demand to grow even faster. bank loans and other kinds of debt. In principle, it should create useful assets China’s policymakers fret a great deal that have a higher economic value than about the supply side of their country’s the liabilities incurred to finance them. But economy. They worry a b o u t if the investment is misconceived, the accommodating the flow of rural migrants debts will prove difficult to repay. Perhaps to the cities, amassing the physical four or five years from now, Mr Pettis infrastructure appropriate to their believes, China will reach the limits of its ambitions, and upgrading the country’s “debt capacity” and suffer a sharp technology. Such concerns fill their five- slowdown in capital expenditure. year plans and 60-point plenary resolutions. Consumption will not be able to compensate for this drop-off in Critics of China’s growth model, in investment, Mr Pettis argues. Household contrast, tend to focus on the demand spending accounts for only about 35% of side. This is not because China’s China’s demand. Thus even if it were to spending is too strong. On the contrary, grow by about 10% a year, it would China’s domestic demand has fallen short contribute only 3.5 percentage points to of supply in 22 out of the last 23 years, China’s growth. This simple arithmetic and inflation last year averaged under 3%. once prompted Mr Pettis to predict that China’s critics worry instead about the China’s “average growth in this decade composition of China’s demand. will barely break 3%”. He was even Household consumption accounts for too prepared to bet on it, entering into a small a share and investment looms too lighthearted wager with our Free
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NEWS
Consumption is suppressed by a variety of mechanisms that deprive households of income and transfer it to corporate borrowers. The most powerful, in Mr Pettis’s opinion, is the cap the government places on the interest earned by household deposits in banks. One might think that low interest rates would encourage consumption by reducing the reward for saving. But the evidence suggests that Chinese households save to meet certain goals, such as making a down-payment on a home. If saving yields little, they simply do more of it. Mr Pettis thinks of this “financial repression” as an invisible tax on household saving, which might amount to as much as 8% of GDP. In a thought experiment, Mr Pettis imagines China’s government taxing half of household income to build bridges to nowhere. This, he rightly points out, would be unfair to households and a colossal waste of resources. But it would not lead to unsustainable debts, as he claims, since the bridges are financed with taxes, not by debt.
FinNiche
comfortable if consumption played a bigger part in the economy. But China’s capital stock still seems more productive than Thailand’s or South Korea’s. And even if investment is stripped from the figures and countries are ranked solely by the remaining components of GDP (namely consumption and net exports), China is still the world’s second-biggest economy. Whatever its flaws, the development of China’s supply side is undoubtedly impressive. It boasts an industrious, mobile workforce, ingenious entrepreneurs eager to absorb new tricks and serviceable, even occasionally lavish, infrastructure. The demand side of its economy, if China’s critics are to be believed, is more precarious. But it is hard to think of a developing economy that has been held back for long by a shortage of demand.
China’s investment binge can endure because the saving that China taxes exceeds the investment it subsidises. Many of China’s companies are heavily in debt. But as a country, China consistently spends less than it earns, generating a current-account surplus and adding to its foreign assets. China is, then, living within its means. And those means are now considerable. It produces over $8 trillion-worth of goods and services, without undue strain on its capacity. There is little question that capital does not always go to the most deserving investment, and that the lives of China’s citizens would be more
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Is the fall in CAD a fall in the Gold Demand? —- Vivek Kaul, FirstPost
The current account deficit for the three month period of July to September 2013 has come in at $5.2 billion or 1.2% of the gross domestic product (GDP). This number is so good that it prompted the Reserve Bank of India(RBI) to release the numbers a month earlier than scheduled. In technical terms, the current account deficit is the difference between total value of imports and the sum of the total value of its exports and net foreign remittances. Or to put it in simpler terms, it is the difference between outflow (through imports) and inflow (through imports and foreign remittances) of foreign exchange . The current account deficit for the April to June 2013 period had stood at 4.9% of GDP, whereas for the July to September 2012 period it had stood at 5% of GDP. Also, this is the lowest current account deficit that the country has seen since the period of three months ending June 2009. A high current account deficit is not deemed to be good for a country primarily because it means that the outflow of foreign exchange is much greater than its inflow. So in India's case it means that the outflow of dollars is much greater than the inflow of dollars. This means a greater demand for dollars than supply. Hence, those who need dollars sell rupees to buy them. This leads to a situation where the value of the rupee falls against the dollar. This is precisely what happened between May and August 2013, when the rupee went from around 54 to a dollar to almost 69 to a dollar. When this happened, Indian importers had to pay a significantly higher amount in rupee terms, for what they were importing. India produces very little oil and imports nearly 80% of its requirement. Hence, the oil marketing companies had to pay a higher amount for the oil that was being imported. But these companies are not allowed to sell cooking gas, diesel and
DECEMBER 2013
kerosene at a price which is greater than the cost price. The government subsidies them for this under-recovery. This adds to the expenditure of the government and hence, leads to the fiscal deficit going up, which has its own set of problems. Fiscal deficit is the difference between what a government spends and what it earns. There are two ways of controlling the current account deficit. One is to ensure that the country earns more foreign exchange than it was doing in the past. The other is to clamp down on the demand for foreign exchange. For a government it is always easier to clamp down. Hence, the government went about increasing the import duty on gold. The duty is now at 10% in comparison to 2% earlier. Another rule, which required a gold importer to re-export 20% of all the gold that he imported, was also introduced by the government. These two significant changes ensured that gold imports came down dramatically. Gold imports during the June to September 2013 period stood at $3.9 billion, down nearly 65% from the same period in 2012, when it had stood at $11.1 billion. In the period of April to June 2013, the gold imports had stood at $16.4 billion. This dramatic fall in gold imports is a major reason behind this fall in current account deficit. In absolute terms the fall in gold imports has been $12.5 billion ($16.4 billion - $3.9 billion) between the three month period ending in June 2013 and the three month period ending in September 2013. The current account deficit for the April to June 2013 period was $21.8 billion. For the period July to September 2013 period, it has come in at $5.2 billion. The absolute difference is $16.6 billion. Of this nearly $12.5 billion or nearly three fourths of the fall has been because of lower gold imports. A fall in the value of the rupee
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products.
(India), of the World Gold Council as saying “ demand in neighbouring countries The major fall in current account deficit such as Thailand has increased and some has been because of a massive fall in gold of this may be because of India demand.” imports. And this has meant that the demand for dollars to buy gold has gone The point is that a clamp down on gold down dramatically as well. This has been imports leading to a major fall in gold one of the major reasons for the rupee imports doesn't necessarily mean a fall in increasing in value from around 69 to a gold demand. These are two difference dollar in end August to around 62.4 to a things. An increase in gold smuggling has dollar currently. huge social implications. It is worth remembering that some of the biggest The current account deficit was around mafia dons of Mumbai in the seventies $87 billion last year. With the clamp down and the eighties started as gold smugglers on gold imports, the finance minister P before getting into other illegal activities. Chidambaram has said in the recent past that he expects the current account deficit That apart, there are financial implications to be less than $56 billion in the financial to this as well. A major reason why year ending March 2014. Does a fall in Indians buy gold is to protect themselves gold imports also mean a fall in demand from inflation. Over the last few years the for gold? India produces almost no gold of consumer price inflation(CPI) has been its own. But things are not as simple as higher than the interest being paid on that. fixed deposits and other fixed income instruments. In this environment, gold has It is worth remembering here that gold looked like a good bet given that it has imports were banned in India until 1990. given positive returns in each of the years At that point of time, gold smuggling was a between 2002 and 2011. fairly lucrative operation. As a recent article in The Economist points out “India Hence, buying gold was a perfectly consumed only 65 tonnes in 1982. Until rational thing to do at an individual level. 1990 imports were all but banned. Bullion The Indian financial system is rigged had to be smuggled in and its price within towards helping the government borrow India was about 50% higher than outside money at low interest rates (You can read it.” the complete argument here). Given this, it is not surprising that Indians are Gold smugglers are also using fascinated by gold at an individual level. neighbouring countries to get gold into Though at an aggregate level it has led to India. A November 17, 2013, report in The major problems. One of the problems has Times of India points out “In the past few been the weak deposit growth of banks. months, over 50kg of gold worth more than Rs 15 crore has been smuggled This basically means that deposits have across the Indo-Bangladesh border alone. been growing at a much slower pace than Sources in Directorate of Revenue loans being given by banks, due to the Intelligence (DRI) said Nepal too has fact that people have been diverting their come up on the radar with some recent savings into gold and real estate, in the seizures on the border. Sources said this hope of beating inflation. And this in turn was only a fraction of what was being has led to higher interest rates. With the smuggled through these borders.” government clamping down on gold imports, the hope was that it would lead to A report in the DNA quotes people saving more money in bank and Somasundaram P R, managing director other fixed income deposits. But is that
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NEWS
Rupee recovery gives rare relief to FM —- Reuters
A recovery in the rupee is giving Finance Minister P Chidambaram rare relief in his battle against a threatened credit rating downgrade to junk status by reducing pressure on the government's subsidy bill. Still, the minister can only meet his fiscal deficit target of 4.8 percent of GDP by rolling over a substantial amount of subsidy spending into next year's budget and by finding big savings elsewhere, two senior finance ministry officials said. ‘ But a 10 percent rise in the rupee - which slumped to a record low late in August means Chidambaram can at least reduce the amount of subsidy spending that gets pushed into next year's budget to $12 billion from a previous estimate of $15 billion, these officials said.
fuel, food and fertiliser has blown out, economic growth has slumped to its weakest level in a decade and a programme to sell state assets is in tatters. The government had initially budgeted spending of about $36 billion for subsidies, but that swelled to $52 billion when the rupee hit its record low. Reflecting the economy's weakness, net tax receipts in the first seven months of the fiscal year are about 7 percent higher than the year-earlier period, the slowest pace in four years and well below the fullyear budget target of 19 percent. This could create a budget hole of some $2.4 billion. We will need savings of up to 50,000 crore if the shortfall in tax receipts is between 10-15,000 crore.
Other budget headaches mean he will have to find about $8 billion in savings from budgeted spending plans to meet the deficit target, they said. The sources, who have direct knowledge of the budget issues or have been briefed on them, declined to be identified because the revised budget numbers are not yet public.
Expected income of $8.8 billion from the sale of government stakes in state-run companies looks increasingly out of reach.
Chidambaram wants to put the house in order before the 2014 election campaign kicks off and the U.S. Federal Reserve begins cutting its monetary stimulus. National elections have to be called by May 2014 and emerging markets are on edge as investors speculate on when the U.S. central bank might reduce its economic stimulus, which could prompt capital to shift into U.S. assets.
The government still hopes to bring in nearly $3.5 billion more by selling its remaining stake in Hindustan Zinc Ltd and Bharat Aluminium Co (BALCO) before the end of the fiscal year.
Based on the sales price and oversubscription, the sale will raise around $270 million, which would take the total amount raised so far from state asset sales this fiscal year to about $500 million.
Chidambaram also hopes to make savings by strictly implementing rules on allocating funds to other ministries, which will slow down how quickly they receive the money.
Chidambaram has said the fiscal deficit target is a line that will not be crossed as he seeks to fend off the threat from Standard & Poor's to downgrade India's sovereign credit rating, currently clinging to the bottom rung of investment grade.
The revenue position will be clearer by the end of December, by which time Indian companies will have deposited their advance tax payments for the third quarter. The government expects major savings from ministries like drinking water The budget is under pressure on a and sanitation, rural development, number of fronts; subsidy spending on defence, trade, communications, power
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