Finxpress - February 22, 2015

FINXpress FEBRUARY 22, 2015 | A FINNICHE INITIATIVE

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In Focus

Opinion

Wholesale Price index Deflation | 2

Expectation from BJP Budget 2015| 4

Personality Dilip Shanghvi |11

Term of Week Special Drawing Rights | 6

Tech World Motorola Android Watch|12

February, 22 | 2015 | Volume 35

IMT saw its seniors performing for the last time at Crescendo 2015 and the distribution of awards

for IMT Oscars. In the Global Market oil prices continue to fall with US government reporting record high crude oil inventory as a result of which India tried to lower down its fiscal deficit. With the Budget around the corner, the corporate world is eyeing closely on the steps that will be taken by Wholesale Price Index (WPI)

government to boost the Indian Economy.

Deflation

Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about the ‘Wholesale Price Index (WPI) Deflation’. The Opinion gives an overview of ‘Expectations from BJP Expectations from BJP

Budget—2015’.

Budget - 2015

The term of the week describes ‘SDR—Special Drawing Rights’, which are international reserve asset created by IMF in order to increase the reserves of its member countries. Do have a look at Special Drawing Rights (SDR)

the market section, Tech world which brings to you about ‘Motorola Moto 360’ and Personality of the week, Dilip Shanghvi.

Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please do write to us and share your ideas.

Happy Reading!

Dilip Shanghvi

Regards

The Editorial Team Motorola Android Watch

Club FinNiche

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

- By J.Sindhuja

Whole sale price index (WPI) Deflation

WPI which is used as one of the measure of inflation It can be observed that main reason behind the in India slipped into negative zone

due to deflation is due to negative fuel price deflation and

continuous decrease in fuel prices. WPI measures world deflation is

showing its impact on India.

the changes in prices of goods that are bought and Consumers don’t seem to be too excited with it as sold in whole sale market and is considered primary articles and food articles show an increase important as it tracks dynamic movement of prices. in their prices due to low monsoon and the reason It was used by RBI to control inflation till 2014,but for the deflation is mainly due to international factors recently RBI has shifted to CPI

to make

its which are not under control rather than domestic.

decisions on changing rates. Government uses WPI India would be vulnerable again as soon as fuel to design fiscal, trade and other economic policies prices rise and deflation may not persist for long whereas businessman

track it know changes in time . Manufacturing products inflation is very less

prices of raw materials, machinery and other production costs. WPI is usually preferred than CPI as it gives weekly report of change in prices and has broader coverage which is classified into three categories i.e. primary articles (20.12%), fuel and power(14.91%)

and

manufacturing

products

(64.97%) as compared to CPI. Deflation, which is an indicator that overall prices have decreased

also indicates that it would not

favor Indian economy as whole. WPI

in January

slipped to –0.39% as compared to 0.11% in December which is recorded as second fall in last three months. If the categories of considered, we can see that

WPI

are

fuel and power

inflation has declined to –10.69% from –7.8% in December

whereas primary articles inflation which is a factor of concern as this would reduce

increased from 2.17% to 3.27% ,manufactured pricing power of

manufacturers leading to lesser

products inflation came down to 1.05% from 1.57% incentives to manufactured goods and this may also and food articles inflation increased from 5.20% to pull down CPI inflation to a level which is less than 8%.

what RBI aims at.

Deflation may be due to decreased spending which surprises in union budget. can

be

government,

individual

or

investment

spending or due to reduced supply of money. Indian It is government’s responsibility to revive growth and industry wants to fully utilize the low pricing situation must let RBI to act in its way. with help of RBI .They exhorted RBI to reduce the interest rates so that investment cycles would be Following are the steps to be taken by Jaitley: revived thereby boosting up the demand, but RBI 

Public investment should be made in a modest

has kept its rates unchanged waiting for the first full

way in

year budget to be released.

1,00,000 crore in this year and twice the

infrastructure in 2015-16 i.e. 50,000–

amount in the next year Apart from the Indian industry, WPI deflation has its  own implications on budget 2015 which is yet to be

CPI and WPI must be rightly analyzed.

released. Even though it doesn’t mean that

WPI) reflects inefficiency of Indian economy. As

deflation would persist for long time, it clearly

WPI reflects producer’s prices and CPI reflects

represents that underlying potential of inflation is

consumers prices, there is huge loss in value

dying as core inflation (non-food manufacturing)

as goods reached from producer to consumer.

dropped from 1.5% in December to 0.9%. It is time

This can be reduced by removing inter-state

to focus on growth rather than inflation. This

market barriers and improving supply chain.

deflation is due to the base effect and is expected to

Though

remain negative for two or more months even

eliminates inefficiencies in supply chain, there

though there is a rise in food and fuel prices as

should be a national market for all goods and

base effect lasts till august. CPI inflation rose to

services

Difference of 5.5%(5.11% CPI and –0.39%

Goods

and

service

tax (GST)

5.11% from 4.28% in December. As RBI started considering CPI as measure of inflation to make Thus India should concentrate on growth as WPI decisions on monetary policy there would be no deflation is showing weak signs of growth. change in interest rates unless there are some

- By Priti Sureka

The Finance Minister will announce the Budget on construction, manufacturing, financial services etc.

February 28th which will clear all the doubts and via domestic or international investors. Attracting

questions of people from the Modi Government and FDI is the first priority. India needs FDI to boost the which will unfold what the new government has for economy.

Modi Government’s first full fledged budget

its people in its store. But before that let us see what the budget should contain and address to expedite the growth procedure.

India is the second fastest growing service sector.

Some initiatives should be undertaken to enhance India’s ability of service exports. India ranks 10th in

Initiatives should be taken to

The government has already taken few measures to service exports worldwide. Government can look

meet

of

put fresh life into the economy which include into service tax structure in this regard. Most

common people from the “Modi

reallocation of coal mines, increasing limit of FDI in importantly, the finance minister must give the

Wave”

some critical sectors, making land acquisition easier surety of implementation of GST from April 1, 2016

the

expectations

etc.

onwards as decided yet, which is in a debatable

Firstly, with the introduction of ‘ Swachh Bharat Abhiyan’ , the government should invest in rural

situation since past few years. If not surety, then at least clarity regarding implementation should be

infrastructure in the form of regular pure water supply, harvesting of rainwater and making that potable, more number of toilets etc. Efforts should also be made to ensure the actual implementation and sustainability of those. Only announcement would do nothing. This will help in attracting tourism which will increase revenue from invisible exports for the Indian economy. Secondly, with the launch of Make in India campaign which aims at promoting domestic

manufacturing

sector,

the

upcoming

budget should show some facts and timelines for completion of some manufacturing projects. Along with that, Special Economic Zones should be revived as MAT is imposed at a very higher rate which will restrict the improvement of manufacturing industry. Therefore, MAT should be reduced to a feasible extent.

The next step should be to induce investments in

there so that investors can plan accordingly. In our country, installing a Wi-Fi network takes hardly two days, then why execution of policies which are for the overall benefit takes some years or some decades. The GST implementation will completely change the face of the economy. Tax is the largest source of revenue of the government. There will be uniformity in tax imposition across all the states and will also ensure less tax evasion.

Banking sector in India has witnessed many reforms Government must introduce some laws to exercise starting

from

interest

rate

classification,

reduction

requirements,

making

deregulation,

in

statutory

provisions

asset minimum control on the e-commerce sector. Here reserve RBI can take care of regulation and registration of

etc.

Now, different

payment

gateways,

foreign

exchange

government should think of how to help banks in matters etc. While, for the government imposition of

reducing the quantum of non performing assets certain percentage of sales tax is recommended. rather than just indicating them to do so. Here government can raise the disclosure standards, allow foreign equity participation in securitization or initiate recapitalization of banks.

Taking

the

government

financial needs

inclusion to

redefine

Another factor which government can look is spread of information of schemes. There are plenty of schemes for the benefit of people, but the problem is that many are not aware of the same and they seem

a

step this

ahead, to be complicated. Therefore, a separate body for strategy. promoting such schemes to every person should be

Financial awareness should be promoted among set up. Apart from just introducing new schemes, rural people before opening bank accounts for them.

The other thing which people will surely look for is Healthcare. India spends only 1.5% of GDP in Healthcare. Government must-

schemes function well. Also some schemes can be

consolidated for convenience.

Government must encourage start-ups. Capital must be made accessible and affordable at the same time.



Invest in medical infrastructure heavily



Improve doctor to patient ratio



Invest in medical colleges to have universal

Some tax exemption can be granted for the promotion of start-ups.

access to innovation and technology



government must take initiative to make the existing

Decline in domestic savings is a challenge. Saving rate of the country needs to go up in order to boost

Encourage NGOs

the GDP growth. Here tax incentives can play an

Education sector needs to be strategized. Expensive

important role to restore domestic savings.

education programs should be modified if there is To foster investment in infrastructure development, less job creation. After completing higher studies, deduction amount to invest in Infrastructure Bonds people tend to move out of India, therefore they can be increased. Also, exemption on payment of should

be

adequately

incentivized

by

the interest on home loan can be increased to stimulate

government. On the other hand, private investments home loans. in

education

and

healthcare

sector

can

be

encouraged to reduce the load of the government and to ensure efficiency. Aadhaar card should be used constructively which can fetch maximum results.

It is a big chance for the BJP Government to play a major role by addressing requirements of corporate, MNCs, Salaried individual and every common person living in India.

- By Shubra Sasmit

SDR: Special Drawing Rights The SDRs are an international reserve asset members interest on the SDR holdings according to created by IMF (International Monetary Fund) in their portion of quota subscription.

1969 in order to increase the reserves of its member Reserve asset created by IMF in

order

to

increase

the

reserves of member countries.

countries. SDRs value is calculated on the basis of The IMF allocates the SDR to member countries on the four key international currencies namely the US the basis of their quotas in IMF. SDRs are self dollar, pound sterling, Japanese yen and the Euro. financing as it charges on allocation that are then SDRs can be exchanged for freely used currencies used to pay the interest of the SDR, in other words if of the global integrated financial world.

you don’t use your share of SDR holdings, the charges to pay will equal the interest received, but

SDRs were a product of the Bretton Woods system in some cases if the member holdings of SDR rise which collapsed as there was shortage of two key above a certain threshold then it gets interest on the assets gold and US dollar to keep the exchange excess share of its respective holdings, and if you rates fixed, and the world shifted to a floating regime are low than your allocated holdings you pay of exchange rate. The value of SDR = 0.888671 charges for the shortfall. grams of fine gold during the Bretton Woods system, which incidentally was the value of the US The SDR were particularly useful in the aftermath of dollar too at that time. In 1973 when the Bretton the global financial crisis, as it generated liquidity Woods system collapsed, the SDR was then and supplied that liquidity in the global markets to reformed and was calculated on the basis of the the tune of $182.7 billion. The members often need four major used currencies of the world.

to buy or sell SDRs in order to either make up for the shortfall in their respective holding, in that case

The value of SDR in relations to the US dollar is the IMF acts as a go to link or an intermediary of the calculated on a daily basis and posted on the IMF entire process. SDRs are basically a voluntary

website. The basket of currencies against which the trading, under these conditions the parties gets SDRs are calculated are reviewed every 5 years by involved in the buying or selling of SDRs in their the executive board of IMF, so lately it has become respective limits. a sort of status symbol in the financial world to be referenced as the currency against which the SDR The SDR are often also seen as a bet against the will be calculated.

hegemony of dollars by various countries. The IMF reforms of 2010 pointed to the increase use of

SDR interest rate are interest charged to members SDRs and to incorporate more of the emerging on the regular IMF loans, the IMF also pays the market stable currencies significantly the Remnibi.

INDIAN MARKETS India’s national Stock Exchange’s NIFTY falls by 0.69 percent and Bombay Stock Exchange’s SENSEX ends 0.78% lower, snapping a seven-day winning streak, weighed down by a 3.2 percent fall in shares of Reliance Industries and as sentiment for blue-chips was hit after foreign in-

vestors sold index derivatives for which the reason being sentiment for blue chips was hit.

Fund allocations in India's Idea Cellular Ltd and Yes Bank Ltd to increase after their inclusion

Open

High

Low

Close

SENSEX

29,170.77

29,522.86

29,083.40

29,231.41

NIFTY

8,741.50

8,822.10

8,729.65

8,805.50

in India's NSE index, analysts say

Stocks to replace DLF Ltd and

BSE SENSEX

Jindal Steel and Power Ltd, NSE says in a statement

CNX NIFTY

COMMODITIES

Yes Bank and Idea may have

Commodity

Unit

Rs / Unit

% Change

Gold

10 grams

26311.00

-1.83

Silver

1 kg

36404.00

-1.67

Crude Oil

1 bbl

3215.00

-1.38

weights of 0.74 pct and 0.6 pct in the NSE index respectively

EXCHANGE RATES INR/ 1 USD

62.13

INR /1 EURO

70.74

INR/ 100 JAPAN YEN

0.52

INR / 1 POUND STERLING

95.67

INTERNATIONAL MARKETS

Open

High

Low

Close

NYSE Comp

11,042.78

11,111.41

10,976.26

11,108.86

NASDAQ

4,889.99

4,957.02

4,880.64

4,955.97

S&P 500

2,096.47

2,110.61

2,085.44

2,110.30

FTSE 100

6,873.50

6,921.30

6,819.80

6,915.20

CAC

4,757.52

4,841.69

4,683.19

4,830.90

DAX

10,946.88

11,081.81

10,765.02

11,050.64

NIKKEI 225

18,024.01

18,360.92

17,901.26

18,322.30

SSE 50

2,427.17

2,464.52

2,413.60

2,445.26

Hang Seng

24,717.49

24,871.79

24,653.88

24,832.08

Exclusive - Subsidy cuts in budget may disappoint investors India may slash its food and fuel subsidy bill by about $8 billion in next week's budget, two sources said, but despite the impressive headline, the cut is not as radical as free market champions had hoped for in Prime Minister Narendra Modi's first full budget. Most of the 20 percent cut in the budget for

subsidies results from lower global oil prices rather than structural changes, with the government's appetite for reform tempered by a heavy local election defeat in New Delhi this month.

"The total subsidy bill could come down to around 2 trillion rupees ($32 billion)," a senior government official, who has direct knowledge of the matter, told Reuters. That calculation was echoed by another source privy to budget discussions. Fuel subsidies are expected to drop by around two-thirds to 220230 billion rupees in the fiscal year that starts on April 1, thanks above all to a halving of international oil prices to around $60 a barrel. The sources said Finance Minister Arun Jaitley was likely to set the total budget for subsidies at about $32 billion, down from $40 billion in the current financial year. It will be the first full budget presented since Modi's Bharatiya Janata Party swept to power in India last May. It produced an interim budget in July that was largely designed by the outgoing Congress party

government.

Indian IT firms eye robotics, driverless cars for next round of growth After decades of low-margin work like server maintenance, India's information technology services firms are moving upscale in search of lucrative contracts for driverless cars and other advanced projects as online innovation changes clients' needs. Companies from Tata Consultancy Services Ltd to Wipro Ltd are all joining Infosys Ltd in investing in new, high-end technology, industry watchers say. Earlier this week Infosys bought U.S. automation specialist Panaya Inc for $200 million.

Triggering change is a wave of invention allowing machines to talk to each other online, dubbed 'the Internet of things'. Customers are ramping up: from about 5 percent now, strategy advisor Offshore Insights estimates automation and artificial intelligence work will grow to 25 to 30 percent of an IT outsourcing market seen by the national industry association as worth $300 billion by 2020.

Long wait for Airbus to bag replacement contract for IAF's Avros The wait is getting longer for Airbus, the European defence and aerospace aircraft major, to bag the over Rs 10,000 crore contract from Indian Air Force (IAF) for supply of 56 transport aircraft, which is a

replacement for the ageing fleet of Avro transport aircraft. Airbus along with Tata Advanced Systems

Limited (TASL) was the sole bidder for this contract. The government is in a dilemma over awarding the contract to Airbus as no other bidder had shown interest. The IAF intends to replace its ageing Hawker Siddeley 748 Avro aircraft fleet, with many of them in use for over four decades. The manufacturing of Avro had ceased in 1988. The European major Airbus Defence and Space has pitched its C-295, the twin-turboprop tactical military transport aircraft, priced around $30 million per piece. It is currently

manufactured by Airbus Defence and Space in Spain. The Ministry of Defence had asked eight global vendors to submit Request for Proposals (RFP). The vendors include Boeing, Ilyushin of Russia, Antonov of Ukraine, Franco-German consortium EADS (now rechristened Airbus), Embraer of Brazil and Alenia Aeromacchi of Italy.

Kavin Mittal wants to do in the mobile Internet space what his dad, Sunil Mittal, did in telecom Mittal Jr too adds thousands of subscribers every day - for his messaging app, Hike. And he feels he has embarked on a journey that will transform lives. In Delhi's business circles, few know Mittal well because he moved to London immediately after school. Somebody who saw him at a discussion forum

recently was impressed with his articulation and confidence: Mittal had come in denims. In January, Mittal acquired Zip Phone of the US (the deal was wrapped in less than a month), which has enabled him to offer free voice-calling service on Hike. In the next few months, he hopes to deliver services like cricket updates through voice packs. "There are 14 to 15 features that we are working on right now, which we will roll out over the next few months," says Mittal. Many wonder if Mittal will be able to open revenue streams for Hike, which is a free app. Some even say that he will scale it up to a size and then cash out of it. Mittal insists he is not interested in flipping the company, and revenue streams will open up soon. At the moment, Hike offers free stickers, coupons and games. For higher versions, there could be charges. Mittal feels it's possible to offer news feed and e-commerce on Hike. These offer more monetisation possibilities. Eventually, he sees messaging services as a tool for content discovery, some kind of a browser for apps. Still, Mittal realises that his venture is risky, and there are people around who don't find his business plans convincing.

No formal proposal from post office to set up bank: Raghuram Rajan Reserve Bank of India Governor Raghuram Rajan said on Friday the central bank had not received an application from India Post to set up a bank in the country. The country's postal office had been speculated to be interested in setting up banks across India. Earlier this month, it was among 41 applicants to run a new category of banks planned to bring basic banking services within the reach of millions. The Reserve Bank of India last year granted its first new banking licenses in India in a decade

and has said it would consider applications on a rolling basis.

Managing Director of Sun Pharma Advanced Research

Company

and

Shantilal

Shanghvi

Foundation.

October 01, 1955 Amreli, Gujarat

In 1997, he acquired Caraco Pharma, a loss making American company, with the aim of expanding Sun's reach in the United States and

University of Calcutta

turned them around in no time. The deal paid off; the US now accounts for 60% of Sun's revenue.

He also acquired Israel's Taro Pharma in 2007. He

2010: E&Y Entrepreneur Of

is also credited with steering Sun Pharma to fifth

The Year 2011:

place in the global generic drugs market.

Business

India

Businessman of the Year

Education

2011: CNN-IBN Indian of the

Shanghvi earned a Bachelor of Commerce degree

Year (Business)

from the University of Calcutta. He is an alumnus of J. J. Ajmera High School and Bhawanipur Dilip S. Shanghvi is a graduate in commerce from

Education Society College, from where he did his

Calcutta University. He is the Chairman and

schooling and graduation, respectively.

Managing

Director

of

Sun

Pharmaceutical

Industries Limited and holds extensive experience

In News

in the pharmaceutical industry.

On 19 Feb'15, he surpassed Mukesh Ambani as

the richest person of India, if one goes by the Mr.

Shanghvi

started

Pharmaceutical

promoter holdings in the listed companies of the

Industries with capital of Rs 10,000 in 1982 at

two groups. By virtue of his over 63% holding in

Vapi. He founded Sun Pharmaceuticals in 1983

three group companies — Sun Pharma, Sun

with five psychiatry products. Today, it is India's

Pharma Advanced Research and Ranbaxy Labs,

largest

drug

Shanghvi’s worth was about Rs 1.46 lakh crore

company. Appreciation of Sun's stock led to a 50%

($23.42 billion at an exchange rate of 62.34 to the

surge in his personal wealth, amounting to USD

dollar). In comparison, Ambani, through his 45%

4.7 billion. He has been named in the list of Asia’s

holdings in two group companies — RIL and

top ten wealthiest self-made billionaires, according

Reliance Industrial Infrastructure, was worth Rs

to Wealth-X. Shanghvi is also the Chairman and

1.32 lakh crore ($21.2 billion)

drugmaker

and

Sun

most

valuable

- Shashwat Shekhar

Motorola Android Watch

Near about Rs. 12,000

Motorola recently launched it’s android wear watch.

Motorola has used 1 GHZ single core Texas

Though it took time for the watch to hit the retail

instruments OMAP-3. The other brands generally

stores, the interesting design probably makes up

use

for it.

company uses a 320

Qualcomm

Snapdragon

400

SoC.

The

MAH batteries. The watch

has 4GB of storage space for music and apps. It The round look of Moto 360 distinguishes it from

has a 512 MB RAM. The battery life is of 16-18

the boxy designs of Samsung and LG android

hours but reduces significantly if one uses “ambient

watches. There is a black bar which hosts the LCD

light” mode. Moto 360 is priced at Rs 17,999 in

drivers and ambient light sensors. The display is

India. From the point of view of smart watches

edgeless and made up of corning gorilla glass

Moto 360 is a step in the right direction but still a lot

3.The watch comes with two types of straps–

is desired.

leather and steel. It weighs only 49 grams despite

it’s size. There is a heart rate monitor at the back.

Pros:

The bottom of the watch is covered in a shell. It is



for protection from water and dust.

The screen size is 1.56 inches with backlit LCD and a resolution of 320*390 pixels. The density comes out to be 205ppi. The display is not dense but the colour calibration and brightness makes up for it. The watch doesn’t have an always on mode.

There is a feature of ambient mode which shows outline of contents.

The circular design is stylish and looks futuristic.



The price is affordable.



Provision of wireless charging.

Cons:



The processor is inefficient.



The battery life is on the lower side.



Unstable Bluetooth connection with the phone.