Infineeti January 2014 by InFINeeti- The Business & Finance Magazine of IIFT

InFINeeti | Annual Issue | January 2014

FROM THE EDITOR’S DESK

Dear Friends, Greeting from Team InFINeeti… Indian economy is going through a tough period. Inflation is high, fuel prices are touching the roofs and the government is finding it difficult to meet its fiscal and current account deficit targets. And above all, this being the election year, it is expected that populist measures may triumph over good economic decisions. The Food Security Bill is one such example. On the international front, the tapering of QE has started and whether it will have a positive or a negative effect- only time will tell. European economy is still recovering and it can be only hoped that it will only improve from here on and we would see some improvement by the end of this year. The same is applicable to the countries falling under the BRICS. This is an election year in India, and the impending government will have a huge bearing on the Indian economy and the financ ial markets. We know that there is loads of money that is spent in the national elections. How these elections are funded is the question running on everybody’s mind. Keeping this in mind, we have made election funding as our central theme of this edition and have looked into the history of how funding has been done previously. We have also proposed numerous solutions as to how the methods of election fund raising can be improved so as to bring the cost of elections down as well as to bring in more transparency in the system. We also saw Sensex touching the 21000 mark last year. We have published an article which deals with the role of instinct and rationale behind how stock market works. Apart from this, we have articles covering topics such as Basel III norms, QE tapering and M-banking in India. We also have an article which analyzes the great Indian investment story in some depth. Besides the insightful articles, the edition also features regular columns like FIN Trivia, FIN-lingos and News Chronicles. Since the next edition would be the budget edition we have presented few budget related trivia to make it interesting for the edition t o follow. We have also included a new column which looks into the top 10 financial happenings of the year. To add to it, we have two special sections: One being an interview given by a CEO of a renowned Mutual Funds player; and the other being a guest article written specially for InFINeeti by an analyst working in the premier Consulting Firm. We are extremely delighted to share with you all that IIFT completed its 50 years of existence this academic year. On this auspicious occasion, a stamp commemorating IIFT was released by the Hon’ble Prime Minister of India. IIFT is distinguished to be the only B-School to share such an honor. We have posted few snapshots of the ceremony. We hope that you will enjoy reading this New Year edition .Wishing you a very Prosperous and a Happy New Year! Happy Reading!!! ANKIT TIWARI & ASHUTOSH DESHPANDE

InFINeeti | Annual Issue | January 2014 2 4

CONTENTS

>>> Page 5

>>> Page 25

>>> Page 30

Basel III norms:

Contains interesting facts regarding Indian Budgets presented in parliament

Are the Indian Banks Prepared to bite the bullet

m-banking: The game changer for telecom sector

Guest article— the ills of indian economy: causes, effects & measures

Qe tapering: is rupee doomed amid fear of QE? Effects of proposed QE in Indian economy

COVER STORY

The great indian investment story: An Analysis of India’s Investment story

fIIFTy Years of IIFT: Release of the stamp on the auspicious occasion of completion of fifty years

FINANCING THE 2014 ELECTION “Financing the new ways to 35 fund the elections of the biggest democracy”

Top 10 events of 2013: Review of important events of 2013

Psychology of stock markets: Understanding the role of rationality and instinct

Budget trivia:

Honest answers Candid chat with Mr. Naresh Kumar Garg (CEO, Sahara Mutual Funds)

Regulars 37

News chronicles

Fin lingos

FIN Trivia

Fun with fin

InFINeeti | Annual Issue | January 2014 5

BASEL III NORMS ARE THE INDIAN BANKS PREPARED TO BITE THE BULLET? BY-KARTIK PURI & ROHIT MADHOGARHIA IIFT,KOLKATA

INTRODUCTION

requirements, Capital Conservation Buffer (CCB) has been intro-

Basel was developed as a set of standards and practices for banks to ensure that they maintain adequate capital during a

duced which requires banks to maintain 2.5% of RWAs in the form of Common Equity Tier 1 capital. RBI has set the leverage

financial crisis The word Basel is derived from the name of a city in Switzerland, Basel, which is the headquarters of the Bank for International Settlement (BIS). BIS is the world’s oldest international financial organization and exists to serve central banks in their pursuit of monetary and financial stability, to foster international cooperation in those areas and to act as a bank for central banks. Basel guidelines refer to broad supervisory standards formulated

ratio at 4.5% (3% under Basel III). Leverage Ratio is calculated as

by the group of central banks- called the Basel Committee on

Tier 1 capital divided by banks on and off balance sheet expo-

Banking Supervision (BCBS). The set of agreement by the BCBS,

sures. Letters of credit, derivatives and loan commitments are

which mainly focuses on risks to banks and the financial system

some of the items that banks keep off their books to portray a

are called Basel accord.

better position of their balance sheet. Basel III has been criti-

According to BCBS, "Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Super-

cized as the stringent capital requirements have been introduced at a time when the global economy is facing a slowdown.

vision, to strengthen the regulation, supervision and risk man-

Since the deadline for implementation is March’2018, the Indian

agement of the banking sector". The purpose of this accord is to

banks face the challenge to raise capital in order to meet the

ensure that financial institutions have enough capital on account

requirements of Basel III. It has been estimated that this would

to meet obligations, to improve the banking sector's ability to

require capital infusion of nearly ₹5 trillion. Out of this, ₹1.75

deal with financial and economic stress, improve risk manage-

trillion should come in the form of equity capital and ₹3.25 tril-

ment

lion as non-equity capital.

and

strengthen

the

banks'

transparency.

The guidelines set by RBI for the implementation of Basel III norms is stricter than as set by the BCBS. It requires banks to maintain a Minimum Total Capital (MTC) of 9% against 8% of total Risk Weighted Assets (RWAs) as prescribed by the Basel Committee. Also, the requirement for Minimum Common Equity Tier I capital has been set at 5.5% of total RWAs as compared to

Basel III norms strive to maintain financial stability but hampers growth. It seems contrary to the main goal of the 12 th Five Year Plan (2012-17) which is ‘faster, sustainable and more inclusive growth’. To achieve the Basel regulations, banks would need to raise their lending rates. Increasing the cost of credit mitigates growth and investment.

4.5% set forth in the Basel accord. In addition to these capital Basel III norms will require banks to undertake significant chang-

InFINeeti | Annual Issue | January 2014 6

when the economy is still recovering from slowdown, the banks will have less money at disposal to lend. The cost of capital is already high in emerging economies on account of savingsinvestment gap and tighter regulations.

A proposal to meet the adequacy is to consolidate the weaker banks with the stronger ones. Also, the capital requirements would force the development of the Indian bonds markets for banks to raise capital. es in its systems and processes to make upgrades, particularly in the areas of stress testing, liquidity and capital management infrastructure. The costs for implementation will affect the profitability and return ratios of the banks.

ROE is defined as the product of the return on assets (ROA) and the leverage multiplier. During the past three years, the Banks need to be pro-active and take adequate measures to protect their interests following the implementation of Basel III regime.

There is critical difference in terms of funding of banks between the advance economies and emerging economies like India.

Banks need to shift towards more retail loans as they typically tend to have a lower risk weight as compared to corporate bank-

Whereas the former focuses on short-term money and capital markets for funding, the emerging economies are still dependent on deposit-based funding. The emerging economies are therefore in conundrum in meeting the capital requirements. Another issue for capital raising that will be faced by banks is the lack of initiative on the political front. The focus of Indian politicians in the next general elections would not see any major banking reforms or capitalization for the banks. Also, it is unlikely that it will be on the priority list of the new administration that comes right after the elections. The Indian economy did witness the fleeing of foreign capital in the last quarter on announcement of roll-back of stimulus by the US Fed chairman Ben Bernanke. Though the proposed tapering of quantitative easing has been postponed, once started in early next year, it would lead to withdrawal of foreign capital from India leading to more problems in capital raising for the Indian

-ing. Banks should aim at maintaining a stable low-cost deposit base to ensure high profitability margin. One of the main reasons for the economic recession was the allocation of funds to high

banks. risk customers. Banks need to review their capital allocation to The financing high rates of growth in the emerging market and developing economies (EMDEs) led to the development of credit in these economies. With increase in demand for capital backup,

each customer segment and price their products in a way as to generate higher risk-adjusted returns.

InFINeeti | Annual Issue | January 2014 7

According to a recent report by Fitch ratings, Indian public sector banks are facing several challenges in meeting the Basel III regime. The declining profitability has hindered the capability of banks to raise the equity required to meet the regulations. It remains to be seen if banks can reverse the scenario and maintain profitability while ensuring the compliance of Basel III norms. Average ROE for Indian banks has been 16%. The enhanced capital requirements would negatively affect the ROE and shareholderâ&#x20AC;&#x2122;s expectations on the return. Though the implementation of Basel III norms is going to be a costly affair with major issues of meeting the capital requirements, the enhanced quality and quantity of capital with the banks would ensure that they are well positioned to meet any financial shock in the global economy. This would ensure strengthening of the banking system boosting the confidence of the investors.

InFINeeti | Annual Issue | January 2014 8

Financial lingos

igans, the repercussions can range from a steep sell-off in the stock to the companyâ&#x20AC;&#x2122;s bankruptcy and dissolution.

Stump the Chump C-note The act of challenging a person in the spotlight in an attempt to make he or she appears foolish. "Stump the chump" employs

The term came to prominence in the 1920s and 1930s, and was

tactics such as trying to make the hostile party look smart and in

popularized in a number of gangster films. C-note is used less

control while trying to make the other person look incompetent. Examples of trying to stump a chump include asking an authority or expert who is giving a presentation a question that they won't be able to answer and that could undermine their credibility, or giving a co-worker incorrect information that will cause them to reach incorrect conclusions .

frequently in modern slang, and has been replaced by "Benjamin" as Benjamin Franklin, one of the founding fathers of the United States, is on the $100 banknote.

Financial Shenanigans Grey Wave Acts or actions designed to mask or misrepresent the true financial performance or actual financial position of a company or entity. Financial shenanigans can range from relatively minor infractions involving creative interpretation of accounting rules to outright fraud over many years. In almost every instance, the revelation that a companyâ&#x20AC;&#x2122;s stellar financial performance has been due to financial shenanigans rather than management prowess will have a calamitous effect on its stock price and future prospects. Depending on the scale and scope of the shenan-

An investment or company thought to be profitable in the longterm or very long-term. The investor should not plan for an immediate or even short-term positive return, but rather only when s/he is much older and has grey hair.

InFINeeti | Annual Issue | January 2014 9

WILL M-BANKING BE THE GAME CHANGER FOR THE TELECOM SECTOR IN INDIA BY- ASHITA GUPTA -IMI, DELHI

INTRODUCTION We always come across telecom companies launching new “Talktime” or “Top Up” offers. The day has come when we will see them launching new fixed deposit schemes, current account offers, saving offers etc. Providing mobile money through mobile phones is a value added service offered through telecommunication companies. The issuance of which involves both telecommunication and bank regulations. INDIAN TELECOM SECTOR

India is the second largest telecommunication market in the world, and is also one of the fastest emerging mobile markets going global. *See Exhibit 1+. Key areas that will enable mobile banking sector to grow auxiliary are increased revenues from data services like the introduction of 2G, 3G services, increased mobile penetration in the rural sector, need to reduce opera-

gether at the branch were completed in a few minutes.

tional and capital expenditure because of active and passive

Notwithstanding these technological changes, there lies a big

allotment of telecom infrastructure. There are many opportuni-

challenge in front of us. We have not been able to reach out to a

ties that lie in investments in these segments.

large majority of the population through the traditional brick

Hence,

there

lays

tremendous

scope

launch

niche mobile banking products to meet the financial needs of customers in this sector.

and mortar banking model. India has the maximum number of households in the world (approximately 145 million) excluded from banking services. Despite the fact that it has an widespread network of bank branches and ATMs (80,000+), access-

INDIAN BANKING

Indian banking had its first encounter with information technology when computers made a breakthrough in India in the 1980s, which lead to the plodding eclipse of the data entry and manual ledger. A dramatic change was observed in customer experience when manual processes were replaced by automated ones. Services that required customers to spend hours to-

ing banking services has always remained a distant dream for many. Here comes M-Banking into play which provides a resort to millions to access banking services within flash of seconds and eliminating the need to stand in long queues.

InFINeeti | Annual Issue | January 2014 10

MOBILE BANKING Mobile banking is a term coined for a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant.

• Micro transaction processing capability: Telecom companies process billions of electronic transactions every day. There has been a robust technological capability that has been built over the past two decades to process high volume micro-transactions with a high degree of precision. These capabilities can be extended (with a certain degree of co-creation and customization)

The estimated banking penetration among middle and high in-

to banking and financial transactions as well.

come groups in India is about 45% while for low income groups it is less than even 5%. Comparing this with the 76.03 % of Teledensity and the projected Teledensity of 84% by 2012

CAN BE USED FOR: 

Banks have indeed realized the role that can be played by mobile banking in reaching out to the unbanked areas as well as the

Potentially provide a viable alternative as a cheapest way to reach rural customers



on the run customers and have tied up with leading providers

Some recent estimates peg the cost of setting up a micro banking outlet in the range of US$500 to US$800.

like Vodafone and Airtel to cater mobile banking services. Refer Exhibit 2.



Disbursals made by government constitute a large part of monetary transactions in rural India

With the advent to booming use of mobile phones, banking services and mobile money have been made available using the



Transfer of government payments electronically to the paupers will pay for itself as well as connect households

phones.

to a formal and secure financial grid. LEVERAGING MOBILE COMMUNICATIONS  Connecting people, anywhere, anytime: Mobile telephony connects more than 95 per cent of the country.

DESIGN AND DELIVERY OF THE ECOSYSTEM There are three enablers that hold the key to mobile banking quickly becoming a truly mass phenomenon in India.

• Large distribution network: Mobile connections and various value-added services are available across an extensive sales and



In its current state, the mobile payments system is com-

distribution network across the country. Many outlets are ser-

plicated and hence has remained limited to a small seg-

viced by a number of distributors, urban and rural. Telecom re-

ment of customers with high-end mobile phones. The

tail outlets across the country are over 3 million.

answer lies in ushering in easy-to-use technology which can be configured in low-end handsets.

EXAMPLE:  Pre-paid mobile recharges are bought by the customers at a

Educating customers about the security of mobile transactions and customizing them through vernacular inter-

retail end and are delivered through the network straight away.

faces will be important.

In case of any incident, call centers service the customer. The current model is akin to banking where the service is delivered directly by the banks to the customers.



The partnerships that build up the ecosystem among different stakeholders like banks, systems providers, MNOs need to be encouraged.

• Service customers on a large scale: The phenomenal growth of the Indian telecom sector has created service capacity of

Risks involved can be fraud, security, outsourcing, consumer aware-

enormous magnitude. All MNOs together serve more than 900

ness, technological risks and anti-money laundering controls.

million customers, through call centers or through self-care.

InFINeeti | Annual Issue | January 2014 11

MOBILE BANKING MODEL (SERVICES OFFERED)

age value is just R290.

A MODEL: MOBILE BANKING AS A KENYA’S GAME CHANGER

Though this growth has been the most strapping in mobile

FINANCIAL services growth in Kenya has been phenomenal over the past seven years. FinAccess survey released in Nairo-

money, usage of bank accounts has also more than doubled, from about 15% of Kenyans in 2006 to over 30% today.

bi on October 31 suggests that the proportion of Kenyan

A mobile banking product called “M-Shwari” was launched in

adults using formal financial services have more than doubled

November 2012 as an opportunity to seek additional financial

from about 30% in 2006 to 63% at present and over 75% in

needs for the large number of Kenyans who were using mo-

urban areas.

bile money but not bank accounts.

This growth has been powered by the adoption of mobile money transfer. The world leader with two-thirds of adults-

ROLE OF A GOVERNMENT

Kenya uses such a service. A service called “M-Pesa” transfers nearly a third of GDP each year in transactions whose aver-

EXHIBIT 1

Gauging at the benefits, Governments of certain countries

InFINeeti | Annual Issue | January 2014 12

like Nigeria are vetting proposals to license operators in the mo-

RECOMMENDATION

bile banking sector and thus laying the foundation of another There is little doubt that the mobile channel (as opposed to othtechnological revolution. The telecom companies are not being er financial service channels such as bank branches, POS termifavored by Indian Planning Commission to float banking institu- nals, ATMs or the internet) offers huge promise as a way of enations. The government is more in the favor of allowing financial bling treasurers to remotely carry out complex and important transactions to be done by banks to avoid any sort of financial operations that they may otherwise only be able to do within catastrophe. Although the telecom companies are not allowed to limited environments. And in the emerging markets, its effect on become banks themselves, there is an attempt made to set up a the financial service landscape may be monumental â&#x20AC;&#x201C; eclipsing framework to allow people to undertake basic operations even that of the internet. Hence, m-banking is actually a game through cell phones. A group of inter-ministerial authorities has changer for telecom industry in India. submitted a report to Telecom Regulatory Authority of India (Trai) recommending that people in remote areas be allowed to open accounts linked to their cellphones and withdraw money till Rs 5,000 a day.

EXHIBIT 2

InFINeeti | Annual Issue | January 2014

COVER STORY

FINANCING THE 2014 ELECTION “Financing

the new ways to fund the elections of the biggest democracy” By- Ankit Tiwari & Ashutosh Deshpande Indian Institute of Foreign Trade, Kolkata

COVER STORY

Former Prime Minister Atal Bihari Vajpayee once given the

The Representation of People Act (RPA) of 1951 which sets the

statement to a parliamentary committee that ‘‘every legislator

limits on the total amount that can be spent on election cam-

starts his career with the lie of the false election return he

paigns. But in 1960s, there were increasing concerns on the

files.’’

minds of the policy makers regarding the black money route

INTRODUCTION

covertly adopted by political parties to get election funding.

This quote from our former Prime Minister aptly describes the sorry state of affairs of election funding in India. General elections in India are due in a few months and the whole world will be watching with awe and admiration as to how a populace of more than 100 crores vote to elect the new government. But, increasingly, electing a new government is becoming a costly affair and the expenditure on elections is humongous. It raises several pertinent questions like how do political parties generate revenues? What are the sources through which they raise funds? Are the channels from where they raise funds legal, or there are shades of grey involved? Are the present forms of election funding rules transparent enough? Or can there be

The situation further exacerbated when in 1968, the then PM Indira Gandhi had put a ban on corporate funding to political parties on one hand and on the other hand did not open the option of state funding. The reason for the ban was to prevent large corporate houses to unfairly influence the policy decisions. But that decision created big problem for political parties regarding election funding. Now they can’t get funding from corporates which used to contribute the largest chunk of their funding and they would also not get the state funding. So, as a consequence black money funding increased drastically in India. In 1974, in one of the judgements, Supreme Court ordered that in calculating a candidate’s election’s expenditure, the party’s expenditure on that candidate must be included and then limit as to whether the candidate has spent the stipulated amount is

better way of funding the political parties so that transparency

checked. This was an attempt by the top court to bring the cost

can be brought into the system? In this article we have tried to

of election down. However the parliament, in 1975, through

answer these questions.

amendment to RPA act, nullified this judgement and the candi-

HISTORY OF POLITICAL FUNDING

dates were spending seamless amounts in the elections. From 1979 onwards, political parties were exempted from wealth

The overhaul and reform of the means by which candidates and political parties fund their election campaigns is one of the most important challenges in front of Indian democracy. Traditionally, political parties had different channels through which they use to garner funds, like membership dues, individual donations and corporate funding. Parliament had passed, in 1951,

and income tax provided they have filed annual income tax returns, listed their donations of above Rs 10,000 and declared the name of the donors. Corporate funding were again allowed from 1985 by the amendment in Companies Act, through section 293A with the condition that corporates can donate only

InFINeeti | Annual Issue | January 2014

COVER STORY

maximum of 5% of their average net profit over the last three

the activities of their chosen political representative and

years which will be subject to approval from the board of

thereby bringing in further transparency.

directors and also this information should be declared in P/L

TAKING CUE FROM OTHER COUNTRIES

statement of the company. The US system works exactly opposite to India as there is no Though according to law, political parties were required to disclose their political funding and file annual returns political

limit on election expenditure but it does has limit on contributions. In terms of reporting and disclosure requirements, the US system is much more transparent- as it requires disclosing contribution above certain lower limits. In most of Europe, the concept of grass root funding is prevalent. Reporting and disclosure requirements are very strict and the idea is to move away from corporate funding and move towards grass root funding i.e. by getting small donations from large number of party workers and supporters. Germany regulates the internal affairs of the party and thereby brings in much needed intra party transparency which ultimately helps in curbing illegal election funding. ROLE OF BLACK MONEY

parties rarely used to do this. In 1996, in one of the judge-

Before liberalization, the black money flowing in the Indian

ments, Supreme Court issued notices to political parties re-

economy was huge as tax rates were insanely high and also

garding the law and the political parties were forced to file

the economy was tightly regulated. So, funding used to be

returns bringing in some kind of transparency in the opaque

done by black money routes in order to receive the kickbacks.

funding process. Many other important changes took place

This led to the unholy nexus between political parties and

around the year 1998 to bring in more transparency like gov-

corporates houses. Without a limit on party spending and

ernment allowed partial state subsidy by allowing free airtime for national and regional political parties on the state owned radio and TV networks. Also, government made individual and corporate contributions to political parties completely tax deductible. But this law also required disclosing the identity of the donors. So, the tax incentive provided was over weighed by the disincentive to disclose the name as donors did not want to get recognized with the political parties they are funding. Another change that took place around the same time was that The Supreme Court gave a directive to election commission to collect information regarding the criminal background of candidates and make this information available to the general public so that they get to know about

with a ban on corporate donations, money for elections had

InFINeeti | Annual Issue | January 2014

COVER STORY

to be raised somehow. This appears to have accentuated the slide towards dependence on black money.

largest democracy in the world. We should be able to find a

Also, given the amount of money needed to spend on elec-

ble resources, especially given the trend that to win an election

sustainable model of funding as well as spending of the availa-

tions, nowadays, political parties prefer those candidates who can fund their election campaigns and this is increasing the trend of people with money and muscle getting the tickets and not the common man. So, this will increase the trend of wealthier people entering into politics to further enhance their wealth and not with the intention of serving the people. This is an increasingly dangerous trend as they will be the people who will

in India, a huge amount of investment is almost necessary. Is

be deciding the policy issues in the parliament. Also, this will

such a model possible to be implemented practically? We have

also increase the people with criminal background entering into

one good example.

the politics as they have both money and muscle power and this fact can be judged by the fact that many of the sitting MPs and MLAs has criminal cases pending against them. So, it becomes even more important to reduce the election funding so as to keep politics clean.

Arvind Kejriwal- led Aam Aadmi Party (AAP) demonstrated an almost ideal model for funding the Delhi Stat elections they fought and achieved commendable success. They had set a limit of Rs. 20 crores in accepting donations. At the same time they revealed all the donations made to them, an unprecedented act which put them on a very high moral pedestal .Once they had

CURRENT TRENDS AND HAPPENINGS

crossed the figure, they stopped taking donations. At the same time, they did not take help of any corporate funding- which

A prominent leader from the Lok Sabha had once made a candid confession a few months ago regarding his electoral spending. While speaking at a book release function, he admitted to have spent Rs. 8 crores in the 2009 Lok Sabha campaign, whereas the prescribed limit is only Rs. 25 Lacs, which is 32 times the official limit! Despite the stunning revelations, the

are said to play an important role in deciding the win-ability of an election. AAP volunteers went from street to street, house to house to solicit donations starting from as small an amount as Rs. 10. They also inculcated sophisticated online money transfers and international cheques so as to increase the reach of their funding.

matter was not picked up aggressively picked up by the mainstream media, because the leader spoke of something which everyone knew of! A notice from the Election Commission of India followed, as expected, as a routine exercise with no consequence.

SOLUTIONS So as to reduce the total expenditure on elections, long term strategies should be adopted by the major political players.

A Member of Parliament from Bihar had once famously claimed

These include use of advancing technologies and analytics to

that candidates slotted as under BPL category also spend in

achieve better reach and results. Use of Social Media- which is

crores! It is also said that the average expenditure per candi-

one of the cheapest and easiest way to communicate- should

dates comes to around Rs 4-5 crores. In many cases, money

be inculcated. Even if a candidate spends money to promote

spent on campaigning from the constituency exceeds the mon-

himself on social media, the total expenditure will be a fraction

ey they spend for the development of the constituency. These

of the prescribed limit. At the same time, if he inculcates ana-

are facts which we should not be proud of, especially as the

lytics into his system, he can reach out to his

InFINeeti | Annual Issue | January 2014

COVER STORY targeted

segment

17 in

much

better

way.

It is not always that money and muscle power wins, if one has the right agenda, a clean background and a focus on what one is going to do for the constituency and is able to communicate it to the voters, then there is no reason why one should spend millions of rupees.

will be able to curb the black money which is alleged to flow into these elections. Lastly, a few changes that can help raising funds cleanly like maintaining the confidentiality of donors which will remove the risk of political parties penalizing the people who will be funding the opposition parties. Also, public spending on elections can be

AAP has taken the initiative in showing us the way forward, but

increased and also government can encourage grass-root fund-

questions will be raised on whether the model is scalable

ing like in European countries. Also, like Germany regulates the

enough? Delhi, which was an epicentre for the anti-corruption

internal democracy in the parties we can also follow the same

movement and the launch pad for India Against Corruption (IAC)

by putting the condition that only those parties who have proper

was a home ground for Arvind Kejriwal to implement his meth-

internal democracy and those who have transparent processes

odology.

in place will be given the state funding. We hope that this yearâ&#x20AC;&#x2122;s election will throw more light on this issue and political parties and candidates will move forward and will be able to find better routes to garner funds . They can take a cue from Aam Admi party. Though the solutions include some decisions which may be harsh on the political parties, initiatives and strides towards the direction are essential for a clean and fair election process.

One of the good suggestions to curb the black money flowing in the election funding and to bring the cost down was given by MP Chief Minister Shivraj Singh Chauhan wherein he proposed that all elections i.e. assembly elections of all state and loksabha election should take place together every five years. This will bring down the cost of elections as India sees every year 2-3 elections and Election Commission as well as political parties have to spend a lot of money in these elections. While there are many things that need to be sorted out in this solution like nowadays many state doesnâ&#x20AC;&#x2122;t produce stable government and give fractured mandate. This is increasingly true at national level also. But still, if we see largely in majority of states government do complete their five years so if somehow this solution is worked out than we can definitely reduce the cost of elections as well

InFINeeti | Annual Issue | January 2014 18

GUEST ARTICLE: ILLS OF INDIAN ECONOMY CAUSES | IMPACTS | MEASURES BY– Aniket Nikumb Business Analyst, McKinsey & Company. (Views mentioned here are personal)

INTRODUCTION

playing itself out on India, demanding long-term, hard solutions

Ever since Goldman Sachs coined ‘BRICs’ in 2003, the world has

beyond the industry cry for lowering interest rates to boost

watched with expectant eyes the rise of an Indian economy

growth.

(democracy of a billion people along with Washington-styled

Some key economic issues that demand understanding are -

free markets makes an interesting case study) growing in excess of 7% year on year. However, the last couple of years have seen a slowdown in growth, leading to doubts whether we will make it to escape velocity from the orbit of under-development. What this article tries to do is a take a first –principles view of the economy and what might be going wrong, and then highlight

1. India’s economic growth is slowing down: A subject widely covered in press reports, India’s GDP growth rate has been slowing down, from 7-9% in FY04-FY08 to 6.2% in FY12, 5% in FY13 and an expected 4.5-5.5% in FY14. A few reasons why India is suffering from a slowdown are –

what are a few things we could do differently. a. Policy Paralysis: Due to political reasons, reforms have been A. The Ills of our Economy

slow. Investors’ wish list for reforms in direct tax via DTC, indi-

Over the last few months, financial newspapers have written

rect tax via GST, FDI in various sectors, ease of doing business

countless number of editorials on the economic slowdown, the

(permits, licenses, clearances et al) have remained unfulfilled.

sliding rupee and the endless delays in implementation of infrastructure projects. But, beyond the news- bites is Economics 101

b. Structural Issues: As I will highlight below, the Indian economy grew rapidly over the last decade but has a few structural

InFINeeti | Annual Issue | January 2014 19 issues – high trade deficit, significant fiscal deficit and sticky in-

decreasing. This can in turn lead to a vicious circle where more

flation.

and more of domestic currency is spent on importing same

c. External Factors: Most of the economic growth over the last few years was mainly seen in the service and manufacturing sec-

amount of goods, leading to a wider deficit and further leading to a depreciating currency and so on.

tor and hardly any in agriculture, industry and mining. A slow-

b. Higher Debt: Trade deficit may also be ‘financed’ through bor-

down in the West – primary consumer of outsourcing services

rowing the foreign currency (instead of paying with your domes-

out of India – subsequently reduced overall growth rate.

tic currency) – which must be serviced with interest in the future. More foreign currency interest payments could mean a

2. India’s trade is imbalanced: The summary of trade in goods

wider deficit further depreciating the currency. At some point,

and services below will show how starkly we are over-spending –

the deficit must convert to surplus or rising debt and interest

The gap between imports and exports must be ‘financed’ via

levels will bankrupt the nation.

borrowing. Of course, having a trade deficit isn’t necessarily bad; if the deficit is “invested” wisely such that the return on that investment exceeds the cost of borrowing, then the country effectively gains. The above chart clearly shows why this is not the case in India- since the major import items without corresponding exports are oil and gold - which are not investments but domestic consumables. Reducing this deficit will be a critical priority for the Finance Ministry, since a structural trade deficit will be harmful to the economy in the following ways -

3. India’s budget is imbalanced: Highlighted below is a summary of India’s revenue and expenditureSimilar to the trade deficit we saw above, the gap between Government expenditure and revenue must be financed via borrowings – either from its own citizens or via external institutions such as the IMF. As the chart above shows, Government revenues are a mere 63% of its expenditure, and a large part of the gap goes into –

a. Currency Depreciation and Domestic Inflation: Higher imports mean relatively higher demand for foreign currency vis-à-vis domestic currency – leading to the value of the domestic currency

Banking Sector Expanded—Handbook of Statistics

InFINeeti | Annual Issue | January 2014 20

a. Servicing interest payments on existing debt, and b. Subsidies – primarily on food, fuel and fertilizers Deficit financing is desirable when spent on creating valuable

reduces the purchasing power of money as more and more currency chases similar amount of goods. Sustained inflation can be harmful for the following reasons:

assets to accelerate economic growth (highways, power plants,

i. Expensive Borrowings: When inflation expectations are high,

ports et al) – but the nature of the subsidy spend in India is

lenders adjust interest rates for expected drop in purchasing

mostly welfare-driven (e.g.. subsidized kerosene gas, low cost

power of money, making capital more expensive. (If an investor

food grains etc.) – which are in the nature of consumption as

believed that an apple that costs Rs 10 today will cost Rs 11 in a

opposed to investments into the future.

year, he will demand at least a 10% interest to merely maintain

A fiscal deficit may be financed in one of two ways –

his purchasing power, plus an additional interest for privilege of using his money). A higher rate of inflation thus makes borrow-

a. Borrowings: Borrowing the difference from citizens (domestic

ings and therefore, investments more expensive.

debt) or external agencies (IMF, World Bank etc.) means the same must be repaid in future along with interest (which was

ii. Currency Depreciation: In general, exchange rates of coun-

already 3.2% of GDP in FY13, almost 3 times our defense budg-

tries adjust as per inflation i.e. a country with a higher rate of

et). Additional debt burden has the following consequences –

inflation will experience a depreciation in the currency value to

i. Interest Rate: Higher debt of a country makes it more risky in

the extent of the incremental inflation it experiences. This dis-

the marketplace – leading investors to demand a higher rate of

courages foreign investment and erodes domestic wealth.

return (interest) to compensate for it. In recent times, this was

B. What we can do differently

seen in problem European countries with Greece debt carrying interest rate as high as 22% ii. Crowding Out effect: Interest rates are set by the relative demand and supply of money, and when Government borrowings increase, the funds available for private investment become

Being neither an economist nor an expert on public policy, I only resort to first-principles to propose a few solutions. Below listed are a few starting point ideas that I think could be politically feasible and will go a long way in establishing the economic foundation of India:

lesser and more expensive – thereby affecting the economic

1. Subsidy Restructuring: India spends billions on fuel subsidy

growth of a country.

selling diesel at below-market prices (Petrol was recently moved to a market-driven pricing model). Numerous committees have

iii. Foreign Currency Risk: If debt is denominated in foreign currency, the liability is volatile to the movement of currency i.e. If one borrows $1Bn at US$1 = INR 40 and the INR depreciates to 50, then the capital liability itself increases by 25%. b. Printing additional currency: Another way to finance deficits is to print more money – since the world moved off the Gold standard (ie. having a commensurate precious metal for every currency note in circulation), currency notes are backed only by the solemn promise of the issuing Government. This is akin to a consistent inflation - an ‘invisible tax’ on the people because it

advised the Government to liberalize diesel pricing, and while steps have been taken in the right direction, the taxpayers will continue to subsidize diesel consumers till market-based pricing is introduced. Unlike kerosene, diesel is not a direct item of consumption and given the limited weight of fuel in the inflation index itself, the benefits (such as reduced subsidy burden, oil companies have more surplus for new exploration, consumers shift to fuelefficient/cheaper fuel engines) far outweigh the short-term increase in inflation. It may also make sense to re-consider the food subsidy: numer-

InFINeeti | Annual Issue | January 2014 21

ous studies have shown large wastage in distribution via the

While a few steps have been take in the right direction (service

public distribution shops, and the Government itself is keen to

tax, for instance, is one of the simplest tax laws in India), the

pursue a direct cash subsidy. Technology is a big constraint in

drafts of DTC and GST have been stuck in the Legislature for

implementation, but if we can move key subsidies (kerosene/

years now. A simpler tax regime has time and again led to in-

cooking gas, food et al) to direct transfer, they can be made

creased compliance – and this should be the top priority for any

much more targeted and effective.

Government.

2. Tax Reform: Our tax structure is complicated, antiquated and

3. Policy overhaul: Admittedly much easier said than done, it is

doesn’t seem to stop the billions in ‘black money’ that are out

important for our law-makers to consider a policy overhaul to-

there. A few logical tax reforms would be –

wards a more prosperous economy in the future:

a. Tax on agriculture: There seems to be no logical reason why

a. Ease of doing business: The World Bank ranks India 134th out

agricultural income is exempt from tax, especially given that the

of 189 in ease of doing business based on factors including reg-

sector is one of the most uncompetitive in the world. Normal

istering property, getting credit, enforcing contracts etc. With

slab rates (no tax upto 2L etc) should be extended to income

the help of technology and outsourcing, a lot of standardized

from agricultural activity: driving capital rationalization in the

legal requirements can be made online and highly user-friendly.

sector while expanding the tax base.

(For instance, I recall using a paper visa – which is just a simple print out to visit Singapore).

b. Simplification: Tax law in India is arcane, difficult and volatile: with numerous sections and provisions, with rules and notifica-

b. Policy Consistency: Over the last few years, we have had ma-

tions over and above the text of the Act itself. Simplifying and

jor policy flip-flops in terms of direction – and what bothers in-

consolidating taxes (income tax, wealth tax, STT, VAT, service

vestors more than a tough regime is a volatile one. We have

tax to name a few!) will be key to minimizing compliance costs

seen the Government effectively reverse a Supreme Court deci-

while maximizing compliance.

sion (a long-fought one at that) in the Vodafone tax case – with the law getting amended retrospectively. It is important to avoid such 180 degree directional changes, and project a consistent policy front to earn investor confidence.

InFINeeti | Annual Issue | January 2014 22

QE TAPERING : IS RUPEE DOOMED AMID FEARS OF QE TAPERING

BYâ&#x20AC;&#x201C; RAHUL SHARMA IIFT, KOLKATA

INTRODUCTION The year 2013 so far has been historic for Indian rupee, albeit for bad reasons as it saw its value getting depreciated to new lows of Rs. 68.80 against the US dollar on Aug. 28, 2013. The day also registered the single biggest fall in value of INR at 256 paise against the reserve currency of the world. Despite the fact that Indian economy pretty much came out unscathed from 2008 financial crisis, it has been a spiral down for INR from peak levels of Rs. 38.80 for a USD in Feb. 2008. Even taking case of this year in isolation, the INR has depreciated almost 12.26% at current levels of Rs. 61-62 for a USD from Rs. 54.7 at the beginning of the year, not to mention the near 25% depreciation levels it achieved meanwhile. This downslide has been attributed to a heady cocktail of various factors like policy paralysis on government front, a widening Current Account Deficit (CAD), strict investment norms in various sectors, a profligate subsidy regime which encourages mindless borrowing etc. But, the one factor that overshadows these conventional facets of Indian economy and which has been labeled as the biggest villain of INRâ&#x20AC;&#x2122;s miser-

ies is tapering worries of Quantitative Easing V. 3 by US government. Tapering worries of Quantitative Easing 3 by US government Now, let us take a quick look at the terms in the headline above. Quantitative easing is a fiscal stimulus measure taken by the central bank of a country involving purchase of distressed assets in the market for injecting liquidity into the economy and breathing life into the otherwise soft demand conditions. This unconventional measure is typical of a country entangled in the trap of a recession. The Federal Reserve (Fed) of USA initiated a series of quantitative easing programs after sub-prime crisis of 2008 to revive the economy on the verge of falling deeper into, probably, a depression. As a result, there was a creation of excess liquidity into the financial systems the world over. The Fed, post 2008 financial crisis, has carried out three stints of monetary easing policies: QE 1 of 1 trillion USD asset purchases, QE 2 of $600 billion USD, and QE 3, an open-ended monthly stimulus package of $85 billion USD purchase that started in 2012. Not going into the soundness of this approach, considering the fact

InFINeeti | Annual Issue | January 2014 23 that the 2008 crisis was itself a result of an unsustainable mort-

double whammy to Indian and other markets which are flushed

gage bubble and now there is an enormous investment bubble

with Fed sponsored liquidity. First, there wonâ&#x20AC;&#x2122;t be a sustained

in making, the improvements in the economic indicators of the

stream of investment due to dwindling liquidity caused by taper-

US economy, primarily politically sensitive job stats, has led the

ing. Second, which is even worse, initiation of tapering is an indi-

Fed considering to cease the fiscal stimulus provided by these

cation of an improving US economy and investors may as well

QE programs. The reverse of QE, commonly referred to as QE

pull out their money from Indian markets for investment in their

tapering is the suction of liquidity from the market by withdraw-

domestic economy.

ing from the purchase of assets by selling them once the economy is out from the danger of recession.

Despite the abovementioned cause and effect cycle there is an interesting anomaly in performance of another important eco-

Now, why is that so detrimental for Indian economy and its cur-

nomic indicator of Indian economy vis-Ă -vis the steep deprecia-

rency to this extent? In global markets, this measure to bring

tion in value of INR this year; its consistently rising stock mar-

back the US economy from a painful and sticky recession has

kets. This year while Indian rupee went south, stock markets

brought liquidity to the most underdeveloped of financial mar-

have been reaching new highs responding to an invigorated Fi-

kets around the world. These relatively less developed markets

nance Minister, since his makeshift reforms spree in September

like that of India and other emerging economies have been

2012, and a fresh promising face of new RBI governor. The pro-

offering a far higher return on the investments as compared to

spects of a market friendly dispensation at centre post 2014

western markets with near zero levels of interest rates and still

general elections has also kept investors tuned in, besides an

anemic growth rates. In US, with the improvement in job data,

artificially priced gold as a seemingly unaffordable investment

GDP growth rate and other vital economic indicators the Fed

option. But, dig a bit deeper and one will find, as also published

would be very happy to initiate the tapering of the QE program

by an Economic Times study, that the Indian stock markets are

which has swelled its balance sheet to a massive 3.7 trillion USD

living dangerously with the real value of Sensex somewhere

from 1 trillion USD in pre-crisis days. This as a result will deal a

around 16000 levels. The rest is Foreign Institutional Investorsâ&#x20AC;&#x2122; flab who are notorious for putting in money, and pulling it out equally fast, for short term market gains. So, if tapering were to happen in current Indian market scenario of softening fundamentals, sticky and high inflation and policy logjam almost a quarter of the stock market could be shaved off in no

InFINeeti | Annual Issue | January 2014 24

time with the FIIs having no solid reasons to stay back in the

attractive, in comparison to their global competitors, it also at

economy.

the same time gave the overseas importers a leeway to negoti-

Are we really doing this bad?

ate their contracts to trim costs as the take home INR revenue for Indian IT companies increased. On the other hand, a fast de-

The graphic shown above tells us that despite the INR was the worst currency vis-à-vis USD it was not the only currency to depreciate. Almost, all other currencies barring South Korean Won and Chinese Juan majority of other emerging markets’ currencies fell as compared to the US dollar on QE tapering fears. It was also during the same time when the INR depreciated the most. So, it would be safe to conclude that it was not only the INR that depreciated versus the USD, but USD also appreciated versus the INR, on back of revival signs in its domestic economy, and both are not same!

preciating INR would lead to inflated input costs for the IT companies further denting their margins as and when this temporary cycle takes the full circle. In long term, there is always a correction whenever the gains are quick and bubble-based. It is only the actual increase in productivity that can add real income to an economy. Coming back to number-value importance of any currency, or rather specifically talking about INR, suppose let’s say we come out with a new currency tomorrow, ‘New Rupee’, which counts the previous 100 Rupees as 1 New Rupee (100 times the previous currency). Now, at current levels, we would

So it’s not bad? No, it is obviously bad for any currency in the

be able to buy 1.6 USD for 1 New Rupee, but just this would be it

world to depreciate so fast in so little amount of time. From,

and it won’t have any affect whatsoever on the underlying econ-

1996 when INR was pegged to US dollar at Rs. 7.5 we have come

omy, its productivity and the purchasing power. The New Rupee

a long way today in developing a robust floating form of ex-

would buy 100 times as much goods and services than the usual

change rate system. The stock markets are maturing and have

Rupee in nominal terms but, it would also take 100 times the

been more patient than a decade ago, reserves are good and

effort to be earned as compared to the conventional Rupee. So,

market fundamentals one of the best and promising in the world

having discussed most of the facets of this year’s Rupee depreci-

and one unsung hero that has been instrumental in bringing

ation, we can conclude that an expanding economy that we are,

about this transformation is the Reserve Bank of India (RBI),

will probably continue to see the fall of Rupee in the longer term

often touted as the most transparent central bank in the world

and if the fall is smooth and calibrated, it is not necessarily a bad

for obvious reasons. The timely intervention of RBI on Aug. 29,

thing to happen. Luckily, RBI is there to oversee that transfor-

2013 of offering a special dollar facility to PSU Oil Marketing

mation of Rupee but, unless we fix the more chronic issues on

Companies (OMC) to directly buy dollars helped in arresting the

policy front there could be some major blips detrimental to

nosedive of the INR, leading to biggest single day rise in 15 years

economy, as and when the QE tapering comes. Until then, we

for INR at 225 paise.

can take heart from massive number-value of Japanese yen for a

Historical market trends, experts on the subject and back-end policymakers swear to the fact that rather than the value at which the INR is pegged against the USD it is the stability of that value that matters in determining the health of the economy. Whether, INR is pegged at Re. 1 or Rs. 50 or Rs. 100 for a USD, it is just a number and will always remain so. It is the underlying volatility, or the lack of it, behind the number which will assure investors of the grit of the economy in the face of prevailing global and domestic market forces (both positive and negative). Even while INR was depreciating and IT exports became more

USD, if a number it has to be.

InFINeeti | Annual Issue | January 2014 25

CROSSING THE PSYCHOLOGICAL HURDLE OF 21000 UNDERSTANDING THE ROLE OF RATIONALITY AND INSTINCTS IN THE STOCK MARKET MOVEMENTS -By Mohit Ambwani & Prince Gaurav MDI, Gurgaon

INTRODUCTION How important a role psychology plays in the Indian stock market? Does psychology have to do anything with the choice of shares people buy? Is there any rationality as to how the stock markets behave? We try to look at the answers to these questions and some more from the point of view of the Indian stock market. After a gap of 35 months, on October 24, 2013, Indian stock market breached the level of 21000 and also topped its record hit in January 2008. It was on January 2008 that the Sensex first crossed the 21000 mark after which it went down to 10000 levels. The all time closing high was on November 5, 2010 while its intraday high was clocked in January at 21,228.This was the second time that Sensex has closed above this level. But after touching the level, the Sensex was not able to sustain it.

(which was easily visible in 2008) behind the market touching 21000 psychological level missing. Also if we look at the P/E levels, the Sensex is trading at a lower level (that of 15.8) than it

If we look at the stock markets, we can witness the euphoria

was trading in 2010 (that of 20), when it closed at this level.

(which was easily visible in 2008) behind the market touching 21000 psychological level missing. Also if we look at the P/E levels, the Sensex is trading at a lower level (that of 15.8) than it was trading in 2010 (that of 20), when it closed at this level. If we look at the stock markets, we can witness the euphoria

The major reason that can be attributed to this is that the fundamentals of Indian economy continue to be weak. Rupee was among the worst performing Asian currency after the Federal Reserve (Fed) announced that it may start tapering towards the

InFINeeti | Annual Issue | January 2014 26

yearsâ&#x20AC;&#x2122; end. The economy which was growing at an average GDP

winning the upcoming elections. But underneath these factors

of around 8% for the past decade and was slated to grow at a

are lying some psychological factors that are causing the market

double digit rate over the coming years is growing at its unin-

to hover around its all time high despite the weak fundamentals

spiring lower rates. India is also reeling with huge fiscal and cur-

of the economy and are also making it difficult for the stock

rent account deficit. Inflation still remains a continuing threat

market to break free of its previous highest threshold level of

with RBI having already revised the repo rates upwards twice.

21000.

Further the current rally in stock is being driven by a few selected stocks which are currently priced at a considerably high level and most of the corporates are showing slowing profit growth. The economy is also marred by contracting manufacturing activity and uncertainty as to whether a stable government will be formed at the centre. It has also been badly affected by innumerable number of scams and frauds unearthing almost daily and lack of clear policy initiatives taken by the government. So, does any relationship exist between the stock market and macroeconomic growth of the country? If one looks at the stock market on a year-to-year basis, like during the period when Indian GDP was growing at a healthy rate, the BSE Sensex experi-

The market is made up of both the value (investors who invest

enced great volatility during that period. The relationship was

for a long time horizon) and intraday or short-term traders. Val-

that it would have been impossible to establish a link between

ue investors majorly concentrate on the stocksâ&#x20AC;&#x2122; fundamentals

the two factors. But when one looks at the relationship over a

before investing, they work out the intrinsic value of the stock

longer time horizon, one could easily make out that a fair

and buy/sell accordingly, on the other hand, daily traders play

amount of relationship exists.

more on the psychological factors before making their decision.

PSYCHOLOGICAL FACTORS

They are the chief reasons for the upswings and downtrends in the market. They are more driven by their need of immediate

As the stock market is a reflection of the corporate performance and GDP is the collective output of agricultural, industrial and services sector, so state of economy has a bearing on the stock that relationship may not be visible in the immediate terms. Further according to modern finance theory, stock price is con-

gratification. Greed and fear, together with herd instinct are supposed to be the three main emotional motivators of the stock market and business behavior (bull and bear market) and one of the causes for occurrence of business cycles. They make people act irrationally without cognition.

sidered as discounted present value of the firmâ&#x20AC;&#x2122;s payout, so there is a connection between economic activity and stock price. So what are the reasons that give rise to volatility in the Indian stock market that it becomes difficult to assess the economic condition effectively through it?

The psychology and trend of the market are over dependent on each other, i.e. one determines the other. As the Indian market was moving up (trend) in lieu with the global liquidity, many investors thinking they would lose in the profits in the emerging market of India( psychology), they developed an optimistic ap-

Experts are of the opinion that rally in the Indian stock market is being driven by easy global liquidity( as taper pushed by few months) and the other, that of Narendra Modi led government

proach towards their trade, and followed the suit and start investing in stocks that were driving up the market, as a result pushing the Sensex to its all time high, but as soon as the market

InFINeeti | Annual Issue | January 2014 27 touched its upper cap or its resistance level; due to the anchor-

also states that stock prices are unpredictable but time now and

ing bias, which states that people start with a suggested refer-

then, it has been proven that stock prices can be relatively pre-

ence point and make adjustment to reach their estimate, many

dicted based on the psychological factors, social movements,

investors (psychology) thought that market cannot go beyond

noise trading and fashions or “fads” of irrational investors in a

the current level as there was no positive information stemming

speculative market. Psychological factors also give rise to mar-

in from the economy which could sustain the momentum and

ket anomalies like January Effect, winner’s curse, equity premi-

started outward selling of their stocks, as a result, market came

um puzzle which cannot be explained by the EMH. The EMH

down (trend), thus proving the other part of the above proposi-

misses out on a very important aspect, information is not the

tion.

only factor influencing the stock markets that the hypothesis

More so, if we see this time around, the rally in stock is driven more so by the institutional investors rather than retail inves-

takes into account but expectations also plays out quite a significant role.

tors who have been witnessing the rally more from the sidelines. Both types of investors are affected by their respective

Conclusion

biases. Institutional managers following the herd instinct, try to

Indian Stock market like markets around the world is influ-

incorporate those stocks which the other money fund manager

enced by many psychological factors. They result in volatility

are possessing, no matter if the stock fells down, so that if they incur a loss, they won’t be the ones who will be held responsible and liable to criticism and if these stocks benefit, then they would be acknowledged for grabbing up the opportunity, plus also win over many customer accounts. In case of retail investors, their behavior is influenced by the experts opinion and they more or less trade on the recommendation given by these analysts. They are also affected by the decision of the majority group. Other major psychological biases that come into play and affect he stock market on day-to-day basis are the overconfidence factor( people tend to value their judgment highly), endowment effect( give more value to things owned by them), loss aversion, the prospect theory (people weigh losses more heavily than equivalent amount of gains), gambler fallacy (onset of certain random event is least likely to happen following an onset of events), representativeness( people base their expectations upon past performances) etc. Also people tend to react more to price changes than to intrinsic value of the stock. Efficient Market Hypothesis, Really? Most of the principles in conventional finance are based on Efficient Market Hypothesis, which states that markets are rational and most of the information are reflected in the stock prices. It

in the market and are responsible for market facing a stiff resistance at the 21000 level. They are also responsible for the market reaching at that level in the first place despite the weak fundamentals that the economy is dealing with. The current rally is driven more by irrationality than one’s focus on fundamentals. If the markets had been rational then it would have been possible to explain phenomenon like more than 2000 points rise in the Indian market on a single day. Psychological swings from over-optimism to over-pessimism are causes for peaks and bottoms in the market.

InFINeeti | Annual Issue | January 2014 28

HONEST CONVERSATION IN CONVERSATION WITH— Mr. Naresh Kumar Garg CEO, Sahara Mutual Funds

Team InFINeeti: Are the recent regulations in Mutual Fund industry

Answer: If you have observed, the stock markets have always remained

conducive for growth.

volatile. If we have to compare with developed nations, Indian markets

NARESH GARG: Regulations made by SEBI were always conductive for growth. They are necessary and beneficial for the growth of mutual funds. Any regulations denoted should move with time and catch the essence of the moment. Recent regulations are absolutely in line with time and I believe they are conductive for growth.

have always been volatile. This is truly reflected in the Stock Markets. At the same time, such conditions also gives high returns compared to stable market. Due to high returns equity always gives more return than Fixed Deposits. Hence the volatility of which you are talking about will benefit the MF as people will prefer investing in more rewarding equity than store their money in a fixed income deposit.

Team InFINeeti: What are the prospective areas for growth of Mutual Fund industry such as rural & tier II, III cities?

Team InFINeeti: Do you think a high rate of inflation will increase user savings and affect the investment in Mutual Funds? Do you think that

Answer: Mutual Funds are excellent options for those investors residing in tier II and tier III cities, looking at the ease and convenience.

tightening the monetary policy by RBI, for controlling inflation; will negatively affect the investor’s sentiments?

Looking back, the Unit Trust of India has focused using its officers which reached out to the rural areas and educated the masses of the Mutual Funds. If we see the reach of Mutual Funds, it is predominant only in 15-20 cities- which contribute a major portion of the money. Talking about Sahara MF, we have always focused on rural- education programs in order to reach out to the rural masses. Once they are informed of the benefits in investing in Mutual Funds, they automatically chose MF as a preferred choice .

Answer: As I have previously stated, equity markets give more returns. At the same it is not profitable for a user to invest more in savings. Those FDs will not cover the existing inflation. A 4-5% rate of inflation is ideal for growth, which India needs. But as the rate of inflation increases, it becomes more and more unacceptable. Hence for the people to get over it, they need to invest in such a way that the higher inflation rate is beaten- which is possible through Mutual Funds. Talking about the tightening, I think RBI is doing a good job. From the RBI’s perspec-

Team InFINeeti: What is your take on foreign Mutual Funds entering in India? Answer: In MF industry, entry of new players is always conductive. Not only will the market expand but also existing players mature with the entry. We must not forget that India is still a developing country and we need to learn from foreign Mutual Funds which have arrived from Developed Nations. There is a lot of which we can learn and inculcate. At the same time competition is always good for the betterment of Mutual Funds. Team InFINeeti: Will the volatility in the stock market affect investor’s attitude in looking at the Mutual Funds Industry?

tive it is necessary for it to do it. Team InFINeeti: 2014 is an election year- do you think a change in the political environment will affect the industry for the good? Answer: The economy always follows a business cycle. We have seen through recession and gloom. For the cycle to complete, it is only going to get better. 2014 is the year, where we are expecting the situation to change for good. People also receive the election year, the new government as a harbinger of change and we are also expecting that post elections, will affect the industry for the good.

InFINeeti | Annual Issue | January 2014 29

INTERESTING BUDGET TRIVIA 

Morarji Desai has presented a record 10 budgets .



There have been 78 Budgets since 1947, 12 of them were interim presented by 24 FMs



The word “Budget” has its origins in the French “bougette”, a “leather bag” or “purse”, which in turn is rooted in the Latin “bulga”, which roughly translates to a pouch



The first words for the first budget ever passed in the house were “when I presented my interim budget for free India’s Parliament a few months back”



Indian Finance Ministers have made it to the PM- Charan Singh, Morarji Desai, VP Singh, Manmohan Singh



John Mathai presented the first Railway budget for independent India. He later became the finance minister and had also presented the Union Budget in 1949 and 1950



Only Manmohan Singh and P Chidambaram have presented all the 5 budgets for a government.



Jawaharlal Nehru, Indira Gandhi and Rajiv Gandhi all have presented Budgets because their finance ministers had resigned .

InFINeeti | Annual Issue | January 2014 30

THE GREAT INDIAN INVESTMENT STORY -BY SNIGDHA SINGH AND JASMINE MAKKAR SPJIMR, MUMBAI

market. Investor sentiments have declined and so has the economy. The past three decades have been phenomenal for India, growing at an average annual rate of above 6%, seeming to give China, a close competition. However, the Indian ‘elephant’ and its bumbling tale are no longer touted as one to look up to. After a rapid growth of 8.5% in the last decade, the economy experienced a downturn since the end of 2012, reporting a startling figure of 4.4% growth in Q1, 2013. Despite the rise in exports following the slump in the rupee, the Current Account Deficit was at 4.9% in Q1, 2013, still higher than that of the previous quarter. INTRODUCTION However a paradox has always existed between the growth A roadmap to sustainable growth requires a nation to achieve a

story and the business climate regulations.

stable platform that will provide it with a good launch pad. First and foremost, the nation needs to identify its roadblocks and leverage its strengths to overcome such obstacles.

Most of the investments require government clearance. Businesses are required to seek authorization from regulatory bodies and government authorities at various levels. Adding to these

In recent times, India has lost its image of an attractive investment location to that of an economy amidst uncertainty. According to Indian Born Pepsico Chairman and CEO Indra Nooyi, India is no longer a 'must-invest' market for the foreign investors but has been a 'must-deal-with' country in respect of the poor investment climate prevalent in the country. Nooyi went on to say that, "Must-invest” means it's a destination and GDP is growing. “Must deal with” means there are infrastructure issues, the taxation policy is not clear or transparent. So people are saying, 'Do I have to deal with India?'

woes are the complications related to execution of contracts. India has been ranked 184th on “Enforcing Contracts” and 132nd on “Ease of Doing Business” out of 185 countries in the Doing Business Report 2012, World Bank. India’s image as a soughtafter investment destination has become blurred due to its high profile graft cases (October 2012 saw the cancellation of 122 telecom licenses, cancellation of coal mining licenses). Violation or breach of the contract terms often leads to a dispute with the state (e.g. Enron and India dispute over Dhabol project post 1991-92 reforms). This reflects poorly on India specially in global

COMPLEXITIES OF THE INVESTMENT CLIMATE

investor ratings.

The unchecked corruption, poor governance, looming elections

The labour laws in India are also restrictive in nature. The rules

and a sluggish economy has tarnished India's image in the world

that govern the payment of wages, retrenchment, closure and

InFINeeti | Annual Issue | January 2014 31 subject are. But companies in India as well have still been known to rally their activities to promote themselves with the government. The norms surrounding lobbying are too ambiguous and hence have led to several political debates that have brought to a standstill the expansion plans of major global players into India. This episode reiterates the importance and need of having and implementing sound investment policies in India.

FDI- A Step Forward? layoffs are governed by acts (Payment of Wages Act, 1936, the

FDI will be an important factor that will determine the impetus

Minimum Wages Act, 1948, and the Industrial Disputes Act,

to growth in India. The recent reforms were a welcome change,

1947) that vary across states and require permissions at various

but they came at a time when the markets are still very watch-

government levels. This restricts the growth of manufacturing

ful. FDI inflows are affected by several macroeconomic factors.

industries where the companies fail to take advantage of the

First, FDI inflows are significantly affected by the exchange rate

cheap labour.

stability of the economy. Fluctuations in the exchange rate represent an overall instability in a nation’s economy in terms of

RECENT EPISODES The Walmart story has been reduced to a tug of war game between the government of India and the American giant over the subject of regulatory norms for investment. According to Walmart, a major impediment to its entry in multibrand retail is the 51% cap on FDI in this sector. Walmart considers this too narrow a limit for its ambitious plans. It has been rallying for further relaxation of FDI norms, however the government has refused to accommodate to company-specific requirements. Many are of the opinion that the government is taking too tough a stance. Last year's lobbying debate brought to the

the linkages to the rest of the world through trade and capital flows and can lead to much undermining of investors’ confidence in our economy. Second, the performance of key sectors of the economy affect FDI flows. Both agriculture and the manufacturing sector have been stagnant and most of India’s growth has been propelled by services. The major sectors in the economy are not providing good returns and this will deter investors too. Third, the linkages of an economy to the international markets and its international competitiveness are also an important determinant of FDI flows. India ranks 59th out of 144 countries on

COUNTRY

ENFORCING CONTRACTS RANK

the Global Competitiveness for investing and doing business.

USA

The primary reasons cited for this are- bureaucracy, poor physi-

GERMANY CHINA

5 19

cal and social infrastructure. (Source- The Global Competitive-

BRAZIL

116

JAPAN

MANIFESTATION AND IMPLICATIONS OF DOMESTIC AND EX-

KOREA

TERNAL FACTORS- A BRICS COMPARISON

RUSSIAN FEDERATION

INDIA

184

ness Index 2012–2013: World Economic Forum)

The “BRIC” acronym, coined in 2001, gave significant recognition to the four nations in question. It also set in motion the animal

surface just how fuzzy the regulatory norms surrounding this

spirits of all the great investors of the world for BRICS.

InFINeeti | Annual Issue | January 2014 32

Source: Standard & Poor

The period of 2001-2007 saw huge amount of foreign capital and

Another problem lies in the overall financial sector outlook in

investment being diverted to these economies. The 2008 finan-

BRICS. In India, the commitment of the government to undertake

cial crisis changed that picture.

liberal reforms comes under direct clash with the steps undertak-

Presently the growth has stagnated in all of these countries. The

en by the RBI. The key focus of the RBI during the recovery peri-

share market index has shown a decline (Figure 2). Brazilâ&#x20AC;&#x2122;s index

od was inflation-targeting, whereas the government was trying

has been one of the worst performers in the world, losing almost

to play a balancing act between growth and inflation.

20% of its value. There are several reasons for the slowdown in BRICS.

One important paradox of the growth story is that the high rate of growth that these nations saw in the first 8 years of the mil-

First, the fast pace achieved by BRICS was largely financed by the

lennium gave impetus to a rising middle class, both a cause and

inflow of fast, volatile foreign capital which led to high capital

effect of the growth. However, the middle class also creates a

formation. However, the crisis quickly dried up the sources of

growing demand for physical infrastructure such as education

financial capital as the markets suddenly became risk averse and

and health facilities. In India, the government initiatives have not

key investors lost huge amounts of money.

been able to match this growing demand and the investment

Second, the foreign capital inflows were not matched by the

climate has not really encouraged foreign investors to invest in

commitment of the government of these nations. For example,

physical and social infrastructure.

China still remains a highly regulated market caught up in its

CONCLUSION

strict system of communism. India has undertaken reforms (FDI reforms), but the reforms were undertaken at a point when the world was still recovering from the crisis and the investments were not forthcoming.

With the elections round the corner, the tax policy uncertainty will continue to remain. The current need of the hour for the country is to provide multiple channels to invest for the savers, to overcome the rigidity of the systems and to form an integrat-

Third, the recent slide of both the Indian rupee and the Brazilian

ed and continual investment policy. A short term solution will be

currency has put a growing pressure on the Balance of Payments.

to pursue a Bilateral Investment Treaty with the US as a strategy

Adding to these woes is the fact that the foreign capital inflows

to promote investment and trade in India. To maintain macroe-

are not as forthcoming as they used to be. the government are

conomic stability inefficient subsidies and the tax reliefs need to

adding to the problems for the governments, which create a

be cut down. More importantly an attitudinal change of the gov-

trade-off between the goals of growth and stability.

ernment is once again needed along with the simplification of business policies and labour laws to promote transparency and mutual trust.

InFINeeti | Annual Issue | January 2014 33

CELEBRATING FIIFTY YEARS OF IIFT Releasing the stamp on the auspicious occasion of completing 50 years of IIFT

CELEBRATING 50 YEARS OF GLORY

The 50th year of IIFT has been truly golden for the institution. A few months ago, The Golden Jubilee celebrations were honoured by The President of India, Shri Pranab Mukherjee. On 10 th December, India Post issued a commemorative stamp to Mark the Golden Jubilee year, being the only B-School to receive such an honour. Finally, on 21st December, our Honourable Prime Minister, Dr. Manmohan Singh, participated in a function to mark the Golden Jubilee. In his speech, Dr. Singh recalled his personal memories associated with the institute. While Dr. Singh expressed happiness over the fact that IIFT, over 28 batches, has produced about 4,000 professionals, through its flagship MBA in International Business Programme, he called it a role expected of IIFT with great distinction. At the same time, he advised IIFT to develop courses on WTO and FTA. To grace the presence were Hon’ble Union Minister for Communications & IT, Shri Kapil Sibal and Hon’ble Minster for Commerce and Industry, Shri Anand Sharma. The presentation ceremony was also attended by The Director, faculty and students of IIFT at Prime Minister’s residence, 7 Race Course.

InFINeeti | Annual Issue | January 2014 34

CELEBRATING FIIFTY YEARS OF IIFT SOME SNIPPETS

RELEASED STAMP

PRIME MINISTER RELEASING THE STAMP

InFINeeti | Annual Issue | January 2014 35

TOP 10 FINANCIAL HAPPENINGS OF 2013



Government Shutdown: The US government shutdown over the budget standoff of the Congress caused a loss of productivity of nearly $ 2 billion. The shutdown also set off a series of chain reactions of concerns and market uncertainties across the globe.



Debt Ceiling Standoff: After legislation to avoid a projected fiscal cliff, all the attention was shifted to the debt ceiling, which needed extraordinary measures to enable the financing of the US government. The ceiling set on 2011 was as $ 16.4 trillion.



QE 3 tapering: Stock investors had to brace for turbulent times in the year given the projections of tapering of Quantitative Easing by the US Federal Reserve. A stronger dollar against Rupee would impact incoming FII’s, which is expected to strengthen on account of reduction of $ 10 billion in the Fed’s $ 85 billion QE3.



Sanctions against Iran: Any sanctions, positive or negative, with the oil-rich nation has a major impact on the economies of the world, and given India imports the largest share of oil from Iran. The nuclear agreement led to the Iranian Rial appreciating 3.45% against the Dollar, indicating diplomatic progress and positive Iranian expectations



WTO Agreement in Bali was the first ever multi- national trade in the history of WTO. Landmark agreement could boost trade upto $ 1 trillion.

InFINeeti | Annual Issue | January 2014 36

TOP 10 FINANCIAL HAPPENINGS OF 2013



Raghuram Rajan’s appointment as RBI Governor: Raghuram Rajan, who has served as the Chief Economic Advisor to the Finance Ministry and as the Chief Economist with the IMF previously, was appointed as the 23rd Governor of RBI. Immediately after assuming the office, he brought in some drastic measures including raising the repo rate and reduced the MSF etc. Moreover, since becoming RBI governor Raghuram Rajan has visited IIFT twice.



Maha Kumbh Mela: The largest peaceful gathering in the world attracted over 10 crores visitors this year! The budget for expenditure was about Rs. 1,200 crores and the revenue expected for the state government was around Rs. 12,000 crores, which is 10 times the budgeted expenditure! Whoa!



ISRO’s Mangalyaan: India launched its maiden Mars Orbiter Mission, making it only the fourth nation to reach Mars. The astonishing part of the project was that it cost India a little less than $70 million! A remarkable financial achievement too!



Rupee Depreciation: Due to multiple reasons including policy stagnation, and declining foreign investments, the rupee started depreciating in early 2013. It reached a all time low of Rs. 68.80 with respect to the dollar.



Narendra Modi declaration leads to cheers in Stock Market: Narendra Modi was declared the Prime Ministerial candidate of the NDA, the principal opposition to the ruling UPA. Given his business friendly approach and the perceived success story in Gujarat, Dalal Street showed some cheer in a hope of revival.

InFINeeti | Annual Issue | January 2014 37

Rising Bad Loans Pose a Threat for India

Bad loans in India have soared to a record high, reducing profits and stocks of state-owned banks and threatening to curb lending in Asia's third-largest economy. With India's growth slowing to a decade low and higher interest rates soaring high, companies are struggling to pay back what they have borrowed in recent years.

Reliance Industries to Up Output from India's Richest Gas Deposit NEW DELHIâ&#x20AC;&#x201D; Reliance Industries Ltd will raise natural gas output from a new well in India's richest gas deposit from this month, which could help it to reverse months of declining output. The company is expecting to add around 1.5-2 million metric standard cubic meters a day (MMSCMD) by this month from its current output level of around 12 MMSCMD. The additional output will come from the well located in MA field in the east coast Krishna-Godavri D-6 block, a company spokesman told

As a percentage of total loans, nonperforming assets at Indian banks climbed to 4.2% in September, up from 2.4% in 2009, according to the latest data available from India's central bank. Analysts expect the ratio to rise as high as 5.7% in the next four months. "We want to take action quickly before *the bad loan ratio+ gets

The Wall Street Journal on Friday. Production in the east coast KG-D6 block has declined from around 61 MMSCMD in 2010.

Indian Prime Minister Won't Seek Third Term

to the point it becomes alarming," Raghuram Rajan, Reserve

India's prime minister, Manmohan Singh, said he would step

Bank of India's governor, said after a policy meeting last month.

down after elections this spring even if his party wins. The popularity of the prime minister's ruling Congress party has

InFINeeti | Annual Issue | January 2014 38

fallen steeply in recent years as it grappled with corruption

Exports rose 0.9 percent to a record $194.9 billion, aided by a

scandals, food inflation, an economic slowdown and concerns

5.6 percent rise in petroleum exports. Imports dropped 1.4

about the safety of women in the country.

percent to $229.1 billion. A decrease in demand for foreign oil offset a record level of imported autos. Through 11 months of 2013, the trade deficit is 12.3 percent lower than the same period in 2012. Exports have strengthened, while imports are slightly lower.

Eurozone inflation drop puts pressure on ECB The 81-year-old Mr. Singh told a rare news conference that he was ready to make way for new leaders as the country

The pressure on the European Central Bank to ease monetary

heads toward national elections scheduled before the end of May. With close to two terms under his belt Mr. Singh is India's longest-serving prime minister in three decades.

US trade deficit declines to $34.3B billion

policy further in coming months increased up Tuesday after figures showed underlying inflation in the Eurozone fell to a record low. The U.S. trade deficit fell in November to its lowest level in four years, an encouraging sign for economic growth. Gains in energy production and stronger sales of American-made airplanes, autos and machinery lifted exports to an all-time high. The trade gap dropped 12.9 percent in November to $34.3 billion, the Commerce Department said Tuesday. That's the smallest monthly trade deficit since October 2009.

InFINeeti | Annual Issue | January 2014 39



The world’s first bank was Monte Dei Paschi di Siena, founded in 1472 and headquartered In Tuscany, Italy. It still operates today.



The word “millionaire” first popped up in literature in the 1826 novel “Vivian Grey” by Benjamin Disraeli.



Until the U.S Federal Reserve was created in 1908, individual banks could create their own money. 

Zombies, also called living dead, are companies that continue to operate even though they’re bankrupt.



Moraji Desai is the only president of India who presented the budget twice on his birthday, 29th February 1964 and 1968.



Oakley, Inc. chose the ticker symbol OO because it looks like a pair of sunglasses.

InFINeeti | Annual Issue | January 2014 40



The oldest known monetary law code, the Code of Hammurabi, was created ca. 1760 BC in ancient Babylon. It formalized the role of money in civil society by setting amounts of interest on debt, fines for wrongdoing, and compensation in money for various infractions of formalized law. 

Warren Buffett claims the worst investment he ever made was in 1993 when he bought Dexter Shoes. The loss to Berkshire shareholders was $3.5 billion. In his letter to shareholders he quoted a line from country singer Bobby Bare to explain his feelings on the failed acquisition: "I've never gone to bed with an ugly woman, but I've sure woke up with a few."



In 2011, Asia had more millionaires than North America for the first time ever, according to RBC Wealth Management. 

The first stock exchange can be traced back to Antwerp, Belgium in 1460. 

Michael Milken, the "Junk Bond King," originally gained notoriety after being indicted on 98 counts of racketeering and securities fraud in 1989. Although he was never convicted of racketeering or insider trading, he did plead guilty to reporting violations and was sentenced to 10 years in prison and a permanent exile from the securities industry. Today, the man once known as the epitome of Wall Street greed is the founder of many charitable projects, including the Milken Family Foundation, which has awarded over $60 million to more than 2,400 "master" teachers, and the Prostate Cancer Foundation, the world's largest philanthropic source of support for prostate cancer research.

InFINeeti | Annual Issue | January 2014 41

FUN WITH FIN SOLUTION

C T

M N

F I

D E L

M I

E R P

G R

I T

D M

O R

E F

A K

F O

Down

InFINeeti | Annual Issue | January 2014

CREDITS

MEET THE TEAM

MANAGING EDITORS

ANKIT TIWARI is a software engineer and comes with

Ankit Tiwari

a prior work experience with Infosys Limited . He intends to specialize in Finance & Marketing. He wants to pursue his career in investment banking. Additionally, he is an avid reader, likes writing in his spare time , loves reading newspaper and also loves playing and watching Cricket and lawn Tennis.

Ashutosh Deshpande ASSOCIATE EDITORS

Raghav Kapila Shubham Agarwal

ASHUTOSH DESHPANDE has completed his graduation

OUT GOING TEAM Aakanksha Hajela Bhushan Kanathe Kunal Maheshwari Mohmammad Umair Ansari Vaibhav Garg

in Computer Engineering from Mumbai University, post which he has worked with Mahindra Holidays. The author has inclinations towards Finance and Strategy. The author, an avid writer, has written for various blogs, football sites and magazines on topics ranging from Politics, Current Affairs to European Football. RAGHAV KAPILA has a Bachelorâ&#x20AC;&#x2122;s of Financial and

Cover design & Creativity partner

Gautham P. R.

Investment Analysis degree and has always had a motivation to pursue a career in Finance. He does not have any work experience but nevertheless has gathered knowledge in the finance domain through his passion and inclination towards the domain. Additionally, he is an avid read and keeps up to date with all current affairs.

SHUBHAM AGGARWAL He has completed his B.tech

FEEDBACK/QUERIES infineeti@iift.ac.in infineeti@gmail.com

Published by students of Indian Institute of Foreign Trade New Delhi | Kolkata

in production & industrial engineering from NIT Allahabad in year 2012. Before joining IIFT ,I worked as GET in Indraprastha gas limited for around 10 months. Moreover , I have a keen interest in finance and want to pursue my career in the same domain.

InFINeeti | Annual Issue | January 2014 43

REFERENCES

http://www.bis.org http://www.business-standard.com/article/finance/what-are-basel-banking-norms-113011100175_1.html http://www.asiamoney.com/Article/3239973/Indias-Basel-III-banking-blues.html?ArticleId=3239973 http://www.stockmarketsreview.com/extras/rbi039s_basel_iii_norms_are_aimed_at_strengthening_indian_banking_system_318086/ http://www.sciencedirect.com/science/article/pii/S0970389613000293 http://businesstoday.intoday.in/story/basel-iii-implementation-indian-banks/1/192162.html http://www.ijetae.com/files/Volume3Issue6/IJETAE_0613_90.pdf http://www.financialmail.co.za/features/2013/11/07/mobile-banking-kenya-s-game-changer http://lifeatnitie.com/entry-of-the-telecom-companies-in-the-banking-sector-the-next-revolution/ http://www.yesbank.in/knowledge-banking/telecom.html

http://www.investopedia.com http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1618166 http://www.thehindubusinessline.com/features/weekend-life/article3746356.ece http://casi.sas.upenn.edu/system/files/Gowda-Sridharan,+ELJ+paper,+Reforming+India%27s+Party.pdf

http://www.hindu.com/2002/07/17/stories/2002071700081000.htm http://thecalibre.in/in-depth-current-affairs/election-finance-in-india/092012/?p=1286/ http://eci.nic.in/eci/eci.html http://eciresults.nic.in/PartyWiseResult.htm http://www.frontline.in/static/html/fl1604/16041100.htm http://www.firstpost.com/economy/ten-things-you-didnt-know-about-the-budget-246129.html

InFINeeti | Annual Issue | January 2014