The Financial Bulletin: August,2017 Edition

MONEY MATTERS CLUB Presents..

August 2017, edition

The Financial Bulletin

The Financial Bulletin

FROM THE EDITORS

Money Matters Club IBS, Hyderabad Estd.—2005

Dear Readers, For Editorial Enquiries Contact: Newsletter Coordinators:

It gives us immense pleasure to come up with the August, 2017 issue successfully.

Shreeya Rawat: 91-8109473910 Shreya Bagaria: 91-7207216651 Faculty Coordinator: Dr. Sudhakar Reddy For Advertising Contact:

In this issue, we bring to you the much talked about GST which got implemented this year and the impact of demonetization on Swiss banks.

Happy reading!!!

Harshita Sipani: 91-9163297728

Can we help?

For further inquiries, subscription and advertisement : E-mail us @ mmcnewsletter1@gmail.com You can login to: www.moneymattersclub.org

All rights reserved.

Money Matters Club, The official Finance Club of IBS Hyderabad.

Visit us at for further information.

Shreeya Rawat Shreya Bagaria Newsletter Coordinators

Swiss Bank During Demonetization Have you ever wondered what happened to the Indian currency that was with the Swiss bank during demonetization? Finding the answer to this question we will need an understanding of the “Hawala system”. Hawala means an illegal transfer of money from one geographic boundary to another. It’s not only in India but also in the Middle East and some parts of Africa.

Coming back to the Swiss bank, there are two facts need to be understood.

Firstly, Swiss banks don't keep Indian rupees. They keep Swiss Francs. You need to exchange rupees for Swiss Francs before depositing in the Swiss banks. This is done illegally through Hawala network.

And secondly, after demonetization liquefying money to and from Swiss banks is now tougher - since the demonetization has disrupted the smooth functioning of Hawala networks, the money stored in Swiss banks can’t be bought back to India by those who have stored it there. Since the money is deposited as Swiss francs which requires conversion into Indian rupees before it can be of any use in India and maximum of the Hawala networks no longer have valid currency for such transactions. Thus, they can neither help you put money into the Swiss banking system nor remove money from it.

And more surprisingly, Mr. Modi has signed an agreement before August 2016.

As per the agreement rules, all banks having Indians populace accounts in countries like UAE, Swiss, Canada, UK, US will have to share the account related data with Indian IT department.

A special team is already on place and is working since October 2016. In one of the recent speeches of Mr. Modi, he disclosed that from now on the data related to those flying to nations like US, Europe, UAE and Canada will be analyzed to an extent where the government will learn what they did in the period of their international travel. This includes those going as visitors and mainly business visa.

Ultimately you are in a big trouble if your money is in Swiss bank, the solution to this is instead of converting the money into Indian rupee try to convert it into any other currency and acquire some property in that respective country.

Wait for the right time and you will be done.

By: Aman Maheshwari

Paradigm Shift Towards “DIGI-FIN” Indian Economy Change is the only constant in this universe and evolution over a period of time is the only weapon to maintain the pace and ace the race to become a better efficient entity emerging as true winners.

India has always witnessed several developments challenging the existing stereotypes and the accustomed norms. In the last two decades, intervention of the cutting-edge technology in almost every sector has impacted in such a way that it has successfully opened up new economic and societal opportunities that has never previously existed. Banking, financial services and insurance (BFSI) has emerged as the highest paid profiles replacing the old favourites.

The advent of automation and artificial intelligence are replacing the most powerful “human-mind” leading to the second machine-age. The financial system is witnessing the increased use of internet and usage of intangible (digital) information is the new trend. This has indirectly resulted in the network growth (penetration effect) and easy access to large and cumbersome data resulting in improving efficiency and effectiveness.

The Indian financial and banking sector has witnessed a change over the past few decades. 70’s was the phase when banking shifted from class to mass. Since then banking and financial system has evolved with growing infrastructure and ICT hybridisation resulting in a major shift towards “Digital Financial system”.

This has led to eliminating the need to physically visit banks for different individual purposes. The recent is the broadband expansion, e-commerce and online trading. Various apps like Paytm, Mobikwik, Jio Money wallet are proving to make life easier when it comes to financial transactions.

The increasing pace of the web-driven technology and the adaptation rates at which people integrate the existing and prevailing technology with their lives is conclusive of the fact that the new players are able to make certain products and services dispensable to the consumers more rapidly. The best example can be the digital wallets and kiosks facilitating the time consuming tedious transactions to be boiled down to just a finger-tip touch away. Also, Government of India has introduced BHIM- Bharat Interface for Money which is based on Unified Payment Interface (UPI). Digitized payments through mobileapps is not only reducing human-efforts and convenience but also accelerating the overall transactions. Aadhar card linkage with the client bank account increases the level of security making it hack-free.

There are certain challenges associated with digitization and the drift towards modernisation. Reduction in human intervention has resulted in decline in human resource requirement in the BFSI sectors. It has been predicted that the already employed employees will be laid off in the near future especially the entry-level profile postings. Automation has both pros and cons talking from different perspectives. Also, there is a certain amount of considerable cyber risks. The recent example cited can be of the Ransomware virus affecting seventy percent of the ATMs in India causing lot of inconvenience to common man. Hence a more stringent legal system and highly regulated IT body of trained individuals needs to be encourage to avoid any kind of forgery and malfunctions.

Considering the macro parameter, digitization and automation will definitely bloom the overall Indian economy however acceptance on a micro level and acquainting with the trending technology of the mass is definitely going to pose a problem at least in the near future. Overcoming such challenges needs awareness and extensive reach out to the rural population so that they stay on.

By: Kajori Chattopadhyay

Make In India- Finance Provision Make in India is an initiative taken by the Prime Minister, Narendra Modi which was launched in 2014 with two major objectives of boosting the industrial and manufacturing base of the country and to provide large scale employment opportunities to the unemployed population. India saw a huge rise in its attractiveness as a destination of Foreign Direct Investment (FDI) in 2015, with a total of $63 billion flowing into the country. For the purpose of development, a total of 25 key industries were shortlisted such as power, telecommunications, tourism, etc.

In lieu of the new programme, the Central Government rolled out an action plan to promote and encourage entrepreneurs to take initiative in the twenty-five core areas. A start-up environment was facilitated by creating an Investor Facilitation Cell for the provision of easy funding. A 12,000 crores fund was also set aside by the government in the form of two investment and loan programmes. For meeting the funding requirement of the MSME sector startups, the finance ministry has set up a unique programme called ‘India Aspiration Fund’. SIDBI stated the objective of IAF to “catalyse tens of thousands of crores of equity investment into start-ups and MSMEs (micro and small enterprises), creating employment for lakhs of persons, mostly educated youth, over the next four to five years,” A tax exemption would be given to the start-ups which are critical of growth for a period of three years.

SMILE also aims to provide quasi-equity and short term loans to SMEs which will be not so stringent with the loans applications and approval. The Finance Ministry along with SIDBI will help create more than 20 lakh employment opportunities, both direct and indirect.

Major institutional changes are required to make India competitive as the world market on a large scale across various domains, such as agro food processing centres, multi-modal logistics, IT centres, Biotechnology, railways, urban infrastructural facilities. The Make in India transformation would be done in a combination of viable and non-viable projects undertaken mostly by the PublicPrivate-Partnership entities for the development, implementation and management of the projects. They need to be designed in a way such that a Financial Rate of Return of approximately 14% and above can be maintained with the help of private sector funds.

Apart from the above, the government has also designed other policies for specific industries. Area based incentives (SEZs), state based incentives, export incentives (under foreign trade policy) and relaxation on FDI caps are the highlights of the program.

FDI has gone up by 60% at USD 77.86 billion after the Make In India launch in 2014. It is helping India to develop as a global manufacturing hub and an attractive investment destination. About 26 new e-commerce companies came up after September 2014. By 2020 India may become the electronic manufacturing hub due to the ease of getting funds and an expected boost in the market to USD $400 billion by 2020.

By: Shikha Sharma

Should Air India be Privatised ?

What do we understand by the term privatisation? It is basically the process of transferring ownership of a public undertaking to the private sector which can be both profit and non-profit organisation. As we all know, Air India is the fourth largest domestic airline in India in terms of passengers carried after IndiGo , Jet Airways and SpiceJet, it has a market share of 13% as of March 2017. Owned by Air India Limited, an Indian Government enterprise serving 90 domestic and international destinations.

But we have witnessed a downhill in the success of Air India. It is operationally wasteful and unfit to contend with private area administrators. The carrier has been horribly fumbled throughout the years. It is tottering under a pile of obligation and is getting by on doles from the administration. Truth be told, Air India is the ideal case that demonstrates why the administration ought not be in the matter of working together. The Comptroller and Auditor General of India pointed out numerous holes in the Government version and they said that the airline has failed to achieve many of the objectives in various functional areas mandated under the financial restructuring plan which provided equity infusion of Rs30,231 crore till FY 21. This resulted in reduction of revenue and increased need of short term loans eroding the benefit of financial restructuring plan.

Later, it was found that the airline lost revenue due to its own inefficiency for example lack of aircraft availability, faulty deployment , low utilisation of human resources like mismanagement of manpower and lack of ancillary revenue.

In order to cope up with the losses for the last seven years the need for privatisation was given a thought. The National Institution for Transforming India chaired by prime minister Narendra Modi has given its recommendations to the civil aviation ministry which will decide on the process of disinvestment in Air India. Now the question is- do we need privatisation or disinvestment in this case.

Disinvestment helps in improving the finances. What we should do right now to curb the losses is privatise. For many, disinvestment would be an attractive option because it would mean that the airline will remain a public sector entity with all manners of officials and ministers continuing to lord over the behemoth but rebranding and privatising can save the airline in the long run.

Therefore according to my opinion Air India should be privatised.

By: Agnija Das

Introduction Of Option Trading Mechanism In Commodities Market On September 28, 2015 with the merger of FMC and SEBI the new churning of new options, new products, more participants, technology etc. became a vision and mission. Keeping the above objective in mind, new chairman of SEBI Ajay Tyagi on April 26 ’17 announced a slew of measures, including introduction of Option Trading in the commodity market.

The Securities and Exchange Board of India (SEBI), on Tuesday 13 June ’17 laid out rules for the introduction of commodity options which will result in bringing growth and development of MCX and NCDEX. Currently the market offers futures which are riskier but with the introduction of options the investors will be able to differentiate between trading and hedging which will also be beneficial to SMEs. Initially market was set up for farmers benefit but very few participated but, with the launching options will open a window for farmers if any entity like bank which lends to them, aggregate their produce and trade on their behalf.

The turnover of exchange for the year 2015-2016 was approx. Rs.67 Lakh Crore which is not much to write home about. If compared with the equity derivatives, commodities transact only 2% of the value of equity derivatives traded in NSE. The new reforms are expected to break this jinx.

The main reason why investors/traders/foreign entities stay away from commodity exchanges is their frequent suspensions and banning of contracts and high volatility. This has to be taken care by the regulator in order to bring more liquidity.

Though with all the challenges the following prospects are expected: 



  

Competitive in world market which will attract foreign participations, FIIs and FDIs. Increasing the turnover of the market.

More participation of banks, mutual fund companies etc.

Increase in participants confidence and worldwide market spread.

There will be less logistic hurdle which will lead to be in line with global practices.

By: Krupa Shah

RBI’s take on State Finance Amidst all the uproar with respect to the declaration of waiver in many states, its amazing that insufficient light has been thrown on the Reserve Bank of India (RBI).

Alongside different parts of the economy, the Indian tax assessment framework has experienced huge changes since 1991. With the presentation of GST from 1 July, the change procedure has a noteworthy push. The report makes an intense contention for GST by gathering deductions from the experience of real VAT (esteem included duty) usage in states prior. The refining of the expansion effect of VAT/GST presentation from the experience of different nations would be necessary perusing for policymakers choosing whether GST rates ought to unite.

The most imperative perspective, in any case, is that the RBI report reasons that there can be no single ideal rate for exhausting items. This is vital as GST has infrequently been entirely censured for its four-level structure.

With regards to the ideal rate of burdening products, there is an immense measure of writing offering arrangements as various standards. F.P. Ramsey (1927), who thought of standards for ideal ware tax assessment in view of various presumptions stated: "In raising a microscopic income by proportionate assessments on given wares the charges ought to be, for example, to reduce in a similar extent the generation of every ware exhausted", subject to specific conditions.

This leads one to the backwards flexibility control in which versatile merchandise are exhausted not as much as inelastic products. Be that as it may, since the interest for necessities is more inelastic than the interest for extravagances, this administer is hard to actualize without horribly abusing the standard of value. Curiously, Ramsey himself has a disclaimer toward the start of the paper that he is not handling the parts of conveyance while going after an answer for ideal tax collection.

Different merchandise with bring down avoidance penchants incorporate items going through outskirt checkpoints. Thus, in perspective of broadly varying avoidance penchants, it is exceedingly impossible that uniform expense rates will prompt a not so much exorbitant but rather more compelling assessment organization. Indeed, in nations that face extreme consistence issues, the ideal arrangement is probably going to include particularly separated expense rates in light of simply authoritative purposes. Furthermore, all observational computational examinations distributed so far yield non-uniform ideal duty rates.

Against this foundation, the GST board has contrived a four-level expense structure. In a nation like India where there is abnormal state of imbalance and blemished markets, this is by all accounts the best arrangement. Income era may take a hit if, and just if, the supposition of an expanded expense base is not satisfied. Be that as it may, given the experience of extension in coordinate assessment base after demonetization (an extra 9.1 million individuals recording returns) and the primary quarter impose accumulations in FY18, one can be sure that the multi-level GST will be the Pareto-ideal arrangement going ahead.

Another hazard, of the spate of ranch advance waivers being declared by states, which the report highlighted , is happening as expected. After Uttar Pradesh, a few states have now reported an entire waiver for agriculturists. As of now in FY16 , as per amended evaluations, the GFD/GDP (net monetary deficiency to total national output proportion) ruptured the limit of 3% surprisingly since FY05.

By: Priyansh

GST – ONE NATION ONE TAX GST has been hailed as India's 'biggest tax reform. The GST will create a common market for over 1.25 billion people. It's a blanket indirect tax that will include several indirect state and federal taxes such as value added tax (VAT) and excise duty, and different state taxes, central surcharges, entertainment tax, luxury tax and a slew of related levies by local bodies. GST is going to be implementing from 1st of July.

GST is a 'destination-based' tax, which means it's charged where goods are consumed, as opposed to where they are produced. Because it shifts the power that several Indian states have had in imposing indirect taxes on the production and movement, a centralized GST Council has been set up that will decide which taxes will fall in the purview of states. Manufacturing will get more competitive as GST addresses cascading of tax, inter-state tax, high logistics costs and fragmented market. Increased protection from imports as GST provides for appropriate countervailing duty .Less developed states will get a lift.

Manufactured goods could become cheaper which will be a successful step towards Make in India.

Why is it a big deal?

The GST is expected to add two per cent to the country's GDP, besides making the movement of goods easier across states. Because so far taxes have varied across states, often commercial trucks have had to go through multiple checkpoints to obtain the necessary permits and pay several taxes to the states they pass on their routes, which causes delays and encourages bribery.

A uniform tax will make that movement of commercial products smoother.

Change is definitely never easy. It is important to take a leaf from global economies that implemented GST and overcame the teething troubles to experience the advantages of having a unified tax system, easy input credits, and reduced compliances.

DIFFERENCES BETWEEN A GST AND NON- GST REGIME: In a GST regime there will be no cascading burden of tax on tax that means we can set off the taxes which were paid before. In a non gst regime there will be cascading burden of tax on tax that means we can’t set off the taxes which were paid before.

GST SLAB RATES: GST is divided in to 4 slabs i.e. 5,12,18, and 28 %.

GST is going to subsume all other 17 indirect taxes which are laid at central and state level.

CENTRAL TAXES THAT GST WILL SUBSUME: 

Central Excise Duty



Duties of Excise (medicinal and toilet preparations)



Additional Duties of Excise (goods of special importance)



Additional Duties of Excise (textiles and textile products)



Additional Duties of Customs (commonly known as CVD)



Special Additional Duty of Customs (SAD)



Service Tax

STATE TAXES THAT GST WILL SUBSUME: 

State VAT



Central Sales Tax



Purchase Tax



Luxury Tax



Entertainment Tax (not levied by local bodies)



State cesses and surcharges

BENEFITS FOR BUSINESS AND INDUSTRY 

Gain to manufactures and industry:

The subsuming of all other taxes will help in increasing the competitiveness of goods and services in the international market and give boost to Indian market exports.

BENEFITS FOR CENTRAL AND STATE GOVERNMENTS: 

Simple and easy to administer:

GST would be simpler and easier to administer than all other indirect taxes levied by state and central government. 

Better control on leakage:

In GST, there is an in-built mechanism that would incentivize tax compliance by traders.

BENEFITS FOR CONSUMER: 

Relief in overall tax burden:

Because of one single tax i.e. GST, the tax burden will be reduced on the people.

By: Barkha Mandhana & Lekhya S

Our

monthly

Newsletter–

The

Bulletin is circulated and

Financial

read by all

prestigious Business Schools, Corporates and Faculties since last 9 years and our mission is to nationalise this soon.

If you wish to subscribe to our monthly newsletter then kindly visit our website and subscribe. www.moneymattersclub.org

THE FINANCIAL BULLETIN MONEY MATTERS CLUB Official Finance Club Of I.B.S. Hyderabad