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FROM THE EDITOR
The Financial Bulletin Money Matters Club IBS, Hyderabad Estd.—2005
Dear Readers,
Editorial Enquiries Contact Money Matters Club Contact No +91 9013613028
Faculty Co-ordinator Dr. Sudhakar Reddy
Swarnendu Newsletter Chakravartty Coordinator +91 9903606380
It gives me the immense pleasure to come up with the “Celebration edition” of the Newsletter of Money Matters Club. This is the 10th year of Money Matters Club, IBS Hyderabad and we decided to celebrate by giving you the best magazine our club has ever released. The articles talk about various recent issues as well as continental analysis. Industry analysis has been done by all MMCians and I hope you enjoy reading our latest publication. Happy reading!!!
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Swarnendu Chakravartty Newsletter Coordinator Money Matters Club, IBS Hyderabad
FB
TABLE OF CONTENT
Page 2- A glimpse of FMCG industry
Page 103- BRIC's bank- Plain Tokenism or a
Page 7- A glimpse of Aviation industry
strong alternative to World Bank?
Page 12- A glimpse of banking industry
Page 105- Greece crisis
Page 16- A glimpse of IT industry
Page 108- Eurozone- A failed experiment
Page 23- A glimpse of Iron and Steel
Page 113- Indian economy
industry
Page 119- Can India become a developed
Page28-A glimpse of Telecom industry
nation?
Page32– A glimpse of start ups in India
Page 123- Soaring onion prices bringing
Page37– A glimpse of Automobile
tears.
industry
Page 127- E-commerce-future risk and hope
Page43- A glimpse of fertilizer industry
Page 138- Strategic oil reserve
Page49– A glimpse of Agriculture
Page 140– Top runners- media and
industry
entertainment
Page 53– Industry knowledge- banking
Page 147- Impact of El-Nino on Indian GDP
Page 57– Insurance sector
Page 151– Impact of GST on Indian economy
Page 60– Continental Story- Australia Page 74- Continental StoryNorth America Page 79– Continental Delicacy-Europe Page 89– Fraudulent and corrupt practices using bit coin technology Page 93– Organic farming Page 96– Digital India’s impact on economy Page 99– Top runners in e-commerce
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FB
A Glimpse of FMCG Industry By, MMC Diaries, IBS Hyderabad
The top news in FMCG Industry
Kishore Chhabria run Allied Blenders & Developers
ITC targets Rs 1 lakh crore revenue from FMCG
has restructured the top management with a new
business by 2030
managing Director and Chief Executive, Anupam
ITC is targeting a revenue of 1 lakh crores by the mid of 2030 from its FMCG business. The company plans to achieve this through investing heavily into FMCG. The company is investing Rs 3,500 crore in West Bengal in two factories, InfoTech centre and one hotel. The company is also investing Rs 6,000 crore at the Telangana paper mill to double capaci-
Dutta who was earlier heading Kellog’s South African branch. The company plans to go public with a share sale amounting to Rs 1000 crores over the next 18 months. Anupam Dutta’s major role in the company is to devise ideas and strategies for ADB apart from making this Initial Public Offering (IPO) a success.
ty. ITC was planning an outlay of Rs 25,000 crore
Britannia lines up capex of Rs 500 crore this
across 65 projects in the country. Additionally at
fiscal
present the consumer spend on FMCG products of
Britannia Industries has planned a capital expendi-
ITC value a sum total of 11,000 crores.
ture of Rs 500 crore this financial year and a sub-
JL Morison to enter more baby care categories this
stantial investment in the next two-three years as
JL Morrison is planning to increase its brands in the
well. The company even plans to spend Rs 45
baby care segment such as diapers, toiletries and
crores on Research and Development centre in
apparels in the current financial year as the compa-
Bengaluru by the end of the present year.
ny forecast huge potential in baby care products.
Procter & Gamble slashes shampoo prices to take
The company also plans to invest heavily on mar-
on rival Hindustan Unilever
keting both online and offline by increasing the
Due to intense competition in the FMCG industry
number of distributors. Additionally it plans in
world’s largest FMCG Company Procter & Gamble
setting up its own website during this year rather
(P&G) has slashed its shampoo prices by 17% to
than selling it through online marketplace than Flip-
regain its market share from its rival Hindustan
kart and Snapdeal.
Unilever Limited. The parent company of P&G in a
Kishore Chhabria brings Anupam Datta from Kellogg's to head Allied Blenders; eyes IPO 4
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FB move to regain its initial market share capital has
Hindustan Unilever files detailed project report
planned to restructure its brand portfolio by cutting
to clean-up mercury mess in Kodaikanal
down about 100 brands to focus on only those
The company which faced social media activism
products which generate about 90% of its total
over charges of soil contamination at a thermom-
sales. This is being done with an idea to concentrate
eter plant that it ran in Kodaikanal till 2011 has
on those brands which help company generate rev-
filed a report for proposed soil remediation with
enues.
Tamil Nadu Pollution Control Board. The company
Emami Raises Rs 950 crore for Kesh King Buy Emami Ltd has raised 950 crores debt to partially fund the acquisition of Kesh King brand of hair products over that an additional Rs 1684 crores shall be funded by the company through its internal accruals. With this acquisition the company has entered into ayurvedic hair and scalp care treatment. The
officials said that they would immediately start the process on obtaining the consent of the Tamil Nadu Pollution Control Board i.e. a state run board which works with a Scientific expert Committee supervised by the Supreme Court to reduce soil contamination near and around factories.
company plans to export Kesh Kings brand to mar-
Bajaj Corp and Dabur see credit crunch in rural
kets where there is sizeable Indian dispora to make
distribution
it a pan India brand.
Bajaj Corporation and Dabur India Limited are two
GST to encourage local production of Incense
badly hit companies facing a credit crunch in the
Sticks
rural distribution due to reduced disposable in-
With the implementation of the proposed Goods
come which has forced the wholesalers to store
and Service Tax the incense stick manufacturing
less amount of goods.
company shall have the flexibility for promoting
The major reason behind the decreased disposa-
their local production. Currently the incense stick
ble income is on the account of the reduction of
companies manufacture the incense sticks in Odhi-
the minimum support prices for farmers and the
sa and Bihar and get them transported to Mysore
wages from their usual level. Further shortage of
for adding fragrance. This entire process is cumber-
rainfall and shortage of funds distributed by the
some, time consuming and costly. With the imple-
government’s rural jobs programme has added to
mentation of GST and one indirect tax regime they
the problem.
will be able to manufacture in several locations.
5
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FB How FMCG cos are breaking the mould and giving
HUL heightens online sales of new variants
bigger portfolios to the young
In the context of looking out of opportunities by
Recent trends in the FMCG companies has shown a
Hindustan Unilever Limited (HUL) for doing busi-
tremendous change in the top management by giv-
ness online due its large potential, the FMCG giant
ing the opportunity to younger people rather than
has tied up with online grocery portal BigBas-
the old hierarchal way of giving to the old experi-
ket.com for sale of their Knorr brands of soups.
enced people. This has been the key mantra of
The company choose Big Basket due to its pene-
many companies including Pepsico, Godrej, L’Oreal
tration in local markets covering a total of more
and many other this is because there is a change in
than 10 million customers and its ability for
the market dynamics and the companies feel that
providing door step and efficient service.
the younger people can connect with the buyer
FMCG to hold prices despite Yuan effect
much easily than the older people.
Consumer Durables companies depend-
FMCG firms’ CSR spend up by 57%, Nestle misses
ent on Chinese imports are unlikely to
target
pass on the benefits of the depreciating
With the Implementation of the Companies Act mandating every company to spend 2% of its revenue on Corporate Social Responsibility saw major companies like ITC Ltd, Hindustan Unilever Ltd, Nestle India Ltd, Godrej Consumer Products Ltd, Dabur Ltd, Emami Ltd spending a total of Rs 342 crores comfortably meeting their obligation of 2% whereas for Nestle it’s spending on CSR activities saw a decline of 64.4% in its spending as compared to last year therefore not being able to meet the 2%
yuan to Indian consumers in terms of lower prices. The depreciating rupee has not helped in benefiting from the falling Chinese currency making durable companies hold on to prices on the eve of the festival season. The reason behind this is that the rupee is also depreciating along with the Yuan and the cost of production is going up due to which reducing prices is not possible.
threshold by a huge margin.
6
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FB Godrej to tap rural markets for household insecticides FMCG Major Godrej is planning to increase the insecticides business and expects an increase in the sales by 35% in the next two years. The company plans in manufacturing non electric products like Good Knight Fast in order to increase in sales in rural markets due to shortage of electricity. Further it sees a great opportunity in the African Markets apart from India and Indonesia and plans to expand its operations in Bangladesh and Myanmar. ITC denies receiving notice from Uttar Pradesh government on excess lead in Yippee noodles ITC has made it clear that it has not received any notice from Uttar Pradesh Authorities signalling presence of lead in Yipee Noodles and pasta. The company had internally and externally tested it’s noodles and pasta for the presence of lead in laboratories in India, Italy, Singapore and Japan. Further the tests showed absence of lead which it continuously displays on its website for consumer satisfaction.
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A Glimpse of Aviation Industry
FB
By MMC Diaries, IBS Hyderabad Government to infuse additional Rs 800 crore into
Soman from the post of its flight safety chief after
Air
discussing
India
the
issue.
The Civil Aviation Ministry is to be given additional
High rentals near airport: Fewer ATCOs ups risk
Rs 820.25 crore, including Rs 800 crore equity infu-
The high cost of renting, or buying, a flat near the
sion in Air India.
airport has worsened the city's air traffic control's
Boeing, Airbus, HAL and others tap expertise of
(ATC) manpower problem.
IITs
Airports facing ATC shortage, need to hire 1,500
to
spot
talent
&
possible
hires
At the Indian Institute of Technology (IIT) in Kharag-
ATC officers .
pur, a group of students is working on technology
To take the current work load, the Airports Au-
that may help power micro-aerial vehicles (MAVs)
thority of India (AAI), which provides ATC services
or mini-drones for Boeing.
in the country, needs to add at least 1,500 more
New navigation system Gagan to ease landing in
ATC officers to the current roster of 2,600, say ATC
airports
sources.
India has adopted a new navigation system that
Five small airports being constructed for Rs 740
may help address some of these issues.The GPS-
crore:
Aided Geo Augmented Navigation, or Gagan, can
In this regard, five locations -- Hubli and Belgaum
allow as many as 50 aircraft to safely operate in air-
(Karnataka), Kishangarh (Rajasthan), Jharsuguda
space that two planes take at present
(Odisha) and Tezu ( Arunachal Pradesh) -- have
DGCA ousts Air India flight safety chief for failure
been identified."The estimated project cost for
to
record
Hubli is Rs 141.44 crore, Belgaum is Rs 141.87
Air India's chief of flight safety was removed from
crore, Kishangarh is Rs 160.05 crore, Jharsuguda is
his position for failing to keep flight data of all
Rs 200 crore and Tezu is Rs 96.5 crore"
flights for a period of six months. AIl flight safety
Pursuing with Boeing technical issues affecting
chief, A S Soman for failing to maintain 100% flight
Dreamliners:
data records of all flights for a period of six months,
The Boeing 787-800 Dreamliners have technical
as
reliability issues involving aircraft software as well
keep
is
required
data
by
the
regulator
.
Air India may request DGCA for Soman's reinstate-
as failure of some of the components.
ment National carrier Air India may request aviation regulator DGCA to reconsider its order removing A S 8
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Government
Government
FB British Airways slashes hand luggage size for
ness hours on July 31.
speedy boardings
The UK's flag carrier British Airways has slightly re-
Aviation ministry seeks alternative 5/20 policy
duced the size of the hand luggage for economy
for airlines to fly abroad
class travellers for speedy boardings. The ministry is set to ask the Cabinet to decide on Air India inducts 534 cabin crew till May 1: Mahesh
a replacement for the current 5/20 policy, which
Sharma
requires an airline to have at least five years of experience in domestic operations and 20 aircraft
Air India has selected a total of 534 candidates to
in its fleet before seeking to spread its wings
induct them into the airline as part of its plan to
abroad.
hire 800 additional cabin staff.
No arbitrary hike in air ticket cancellation charges:
Air France-KLM, Delta Air Lines announce discount
Mahesh Sharma
in economy class fares for flights from India
The government today said Indian carriers were
Air France-KLM, along with its joint venture part-
free to fix reasonable charges for cancellation of pre
ner Delta Air Lines, has announced discounts in
-booked air-tickets and denied that the fees has
economy class fares on its flights to North Ameri-
been arbitrarily hiked up to Rs 4,000 by the airlines
ca,
for
domestic
Canada
and
Mexico
from
India.
travel. State-run AAI plans to explore international markets
Kingfisher Airlines' company secretary Bharath Raghavan leaves
In a regulatory filing, the airline said that Raghavan has resigned from the services of United Breweries (Holdings) Ltd with effect from the close of busi-
9
After GMR and GVK groups, Airports Authority of India could become the third Indian player in the overseas airports space, with the state-run company planning to explore international markets. "AAI has the expertise and capability in airports development.
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FB Second airport to be set up in NCR: Union MinisUnited Bangladesh plane with 173 people on board makes emergency landing at Raipur
ter Mahesh Sharma Second airport to be setup in Alwar,Rajasthan. Write now there is a dilemma whether it will be
A United Bangladesh plane with 173 people on
set up in Alwar or NCR as Alwar is not a part of
board landed under emergency conditions at the
NCR.
airport
here
this
evening
due
to
British Airways offers 15% discount on India-UK flights
AirAsia, Vistara seek to double winter flights from October
British Airways is offering a 15 per cent discount on tickets from India to the UK and also some oth-
AirAsia India and Vistara, the country's newest car-
er European destinations.
riers, have sought to double the number of weekly flights during the winter schedule starting in Octo-
India to see demand for 1,740 new planes over 20 years: Boeing
ber Air India plans to replace ageing A320s on Gulf
Raising its forecast for the Indian market, Boeing
routes
today said the country will need 1,740 new air-
National carrier Air India plans to deploy new fuel-
craft worth $240 billion over the next 20 years.
efficient planes on the Gulf routes, replacing A320
GMR Hyderabad International Airport gets nod
classic aircraft
for e-boarding facility
Maharashtra to develop 21 airports: State Finance
GMR Hyderabad International Airport has re-
Minister Sudhir Mungantiwar
ceived approval for implementing end-to-end e-
The Maharashtra government plans to develop at least 21 small airports in a phased manner as part of its 'Make In Maharashtra' campaign within four years.
10
boarding for domestic passengers. Once fully implemented, a passenger would need only a mobile e-boarding card and his Aadhaar number to gain entry
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
into
the
airport.
FB New terminal at Cochin Airport to start by May Customs seizes 7 luxury jets of top private charter
next year: Oommen Chandy
firm Ligare Voyages over dues The new terminal at the Cochin International AirOne of India's top aircraft charter companies has been grounded for the past three weeks with the
port will be operational by May next year, Kerala Chief Minister Oommen Chandy.
customs department seizing seven of its luxury jets over nonpayment of duties from locations across
Flight delays affect over 43,800 passengers in Ju-
the country.
ly, most from Air India: DGCA
AirAsia India set for management rejig; Chandilya
As many as 43,818 passengers were affected by
to become MD
flight delays last month, with majority of them being Air India travellers
AirAsia India is likely to entrust the additional responsibility of Managing Director to current CEO
Cochin International Airport becomes world's
Mittu Chandilya in its first management revamp
first to operate on solar power
since commencing operations in June last year.
Cochin International Airport here today became the first in the world to operate completely on
Air India to operate 230 flights for Haj Pilgrimage
solar power.
Air India has announced to operate special flights for Hajj pilgrims from seven Indian cities - Delhi, Srinagar, Mumbai, Kochi, Hyderabad, Goa and Nagpur.
Jet Airways raises bridge rupee loan of about Rs 1,650 crore
IndiGo IPO's $4-bn valuation is market specula-
In a move that negates its efforts to cut costly
tion: Aditya Ghosh, president
debt and interest costs, Jet AirwaysBSE 0.31 % has raised a bridge rupee loan of about Rs 1,650 crore,
India's civil aviation sector is hugely under-served and airlines need to build more capacity to match
as its application to raise more overseas loans awaits approval from the Reserve Bank.
booming demand, IndiGo President Aditya Ghosh told ET Now. 11
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FB and Managing Director (CMD) of national carrier Air Pegasus launches Chennai-Bengaluru direct flight
Air India for one month or till Ashwani Lohani takes
over
from
him.
Air Pegasus, promoted by ground handling service
Vistara to offer daily flight between Delhi-
provider Decor Aviation, today announced the
Bhubaneswar
launch of direct flights between Chennai and Bengaluru.
Vistara on Wednesday announced plans to connect Bhubaneswar in Odisha to its network. The flights between Bhubaneswar and Delhi will com-
Vistara crosses half-a-million passenger mark
mence from October 1, 2015 and opened bookings for the sector.
Tata-SIA joint venture carrier Vistara today crossed the half-a-million passenger mark with the airline achieving the feat in a little over seven month of its operations.
Much awaited draft aviation policy likely to delayed further The much awaited draft aviation policy is likely to be delayed further as certain provisions including
SpiceJet offering tickets for as low as Rs 799 in 3day sale
easing of international flying norm for domestic carriers,
are
Low fare carrier SpiceJet on Thursday announced the sale of more than 1,00,000 seats on offer with one way fares starting as low as Rs 799. An additional 10% discount will be available for those booking through SpiceJet's mobile app on Apples iOS and Android. Rohit Nandan to continue as Air India CMD for one more month Rohit Nandan will continue to work as Chairman 12
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
expected
to
be
reworked.
A Glimpse Of Banking Industry
FB
By MMC Diaries, IBS Hyderabad Goldman Sachs to Buy General Electric Capital
alistic and could not justified as well as
Bank's Online Deposit Platform
they were lacking in their planning and
Goldman Sachs, the US based investment
these agencies issued orders stating that
firm, is planning to acquire General Electric
deficiencies should be fixed within time
Capital Bank's online deposit platform. It will
otherwise they would have to suffer forced
result in shift of $8 billion from GE Capital
divestiture or higher capital requirements.
Bank to Goldman in online deposit accounts and $8 billion in brokered certificates of deposits. From
So, 12 banks including Bank of America Corporation,
Goldman
Sachs
Group,
JPMorgan Chase & Co.etc. were supposed Goldman’s
side
this
transaction
achieves greater funding diversification and
to resubmit their report before July 1, 2015.
strengthens the liquidity profile of GS Bank by providing an additional deposit gathering channel as said by Goldman treasurer, Liz Beshel Robinson. And from GE’s side, the move is part of a strategy to scale back its finance operations to focus more on industrial operations. The shift comes as large financial institutes face stiffening regulatory requirements.
U-turn on payments banks: SBI head sees 'opportunity' for all 11 entities, such as Reliance, Airtel, Vodafone, Birla Group, Mahindra, among others, to set up payment banks etc are approved to set up payment banks. According to Arundhati Bhattacharya, there is a huge number of opportunities by setting up the payment banks .She said that it is
12 Largest Banks of US Forced To Resubmit Their Plans for Navigating a Bankruptcy Federal banking regulators said in a state-
the fact that there is a challenge in it but as well as there is opportunity too like two sides of a coin.
ment that 12 largest banks of the United States have resubmitted their plans for navigating a bankruptcy that would not require a taxpayer bailout.
After the license was issued the license, she had said these banks would be coming in without any risk, they would be coming in with an agile system and delivery mod-
In the previous year, government agencies found that assumptions of banks were unre-
13
els and that they have not been held hostage by industry-level agreements and
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB wage limits.
the loan, the borrower will have to forego the
Challenging times for banking sector: RBI
premium
According to RBI Deputy Governor H.R.Khan, Indian banking sector is going through challenges like low
Under the new product, 'Extraa Home
credit, low profit etc. Return on equity and assets
Loans', the bank will target middle-aged
were falling while bad loans were rising. And more-
individuals in the affordable housing seg-
over Indian banks are to meet the global capital re-
ment
quirements. The government's Rs 75,000 crore capital infusion program will help towards that .He also
The interest rate and other terms of the
said that banking space would become more com-
loan under this product will be on a par
petitive adding that RBI will give licence to small
with the bank's existing home loan rate.
finance banks later next month. Steel industry debts increasing pressure on bankICICI ties up with IMGC to offer a mortgageguaranteed
home
loan
ing sector: CS
product Brokerage firm Credit Suisse has expressed concern over the banking sector's
ICICI Bank, India's second largest lender, has tied up with Indian Mortgage Guarantee Company (IMGC) to offer a mortgageguaranteed home loan product that will en-
exposure to the steel industry, which is sitting on piles of debt at a time when metal prices continue to fall fearing recession
in
China,
the
largest
buyer.
able individuals to borrow more by way of home loans and take a longer tenure loan than they are otherwise eligible for.
There have been instances of default in payments. The said debt burden in some of these steel companies appeared to
14
The borrowers will have to pay a one-time
have reached unsustainable levels, and a
premium of about 1-2 per cent of the loan's
recovery of these accounts appeared un-
amount and depending on their age, salary ,
likely without meaningful haircuts. There-
the margin that they can offer and type of
fore we expect the steel sector to be the
occupation. In the event of pre-payment of
key source of stress for banks in FY16 and
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB FY17.
As of now, the share of stress loans - restructured loans and bad loans - is in the range of 9.5-10 per cent of banks' loan book.
Economic growth is still below levels that the country is capable of. Inflation projections of January 2016 (as of early August 2015) are still at the upper
It remains negative on banks with significant steel sector exposure, such as State
limits of RBI’s inflation objective. The willingness of banks to cut base rates
Bank of India, Punjab National Bank and Bank of Baroda where infra and steel sec-
SBI developing low-cost model to counter
tors continue to contribute bulk of the loan
payments
banks
growth (45-60 per cent for FY15). Among the private banks, ICICI Bank has the highest steel sector exposure. SBI is developing a low cost model to compete with payment banks. The only RBI’s top priorities are lowering inflation, tackling
advantage which the payments banks
distressed assets
would have over other banks is that they would be able to get access to remote
Raghuram Rajan said in the central bank’s
parts of the country.
2014-15 annual report thatLower inflation,
According to Bhattacharya, There will be
faster resolution of distressed assets and
payments banks associate sitting in every
ensuring banks have enough capital to
second home in a village as their opera-
make provisions will be the top macroeco-
tional costs are lower compared to nor-
nomic priorities for the Reserve Bank of
mal banks.
India (RBI) in the immediate future.
To counter that, SBI would be opening cus-
He has termed following 3 areas as work in
tomer service points (CSPs) in unbanked
progress and described them as challenges
panchayats and also train youth with mini-
in current macroeconomic environment.
mum education so that they are able to operate a mobile phone, printer and a scan-
15
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FB ner. Bhattacharya said that the mobile wallet
with equal representation from each side
which SBI had recently launched, Buddy,
and the Governor having the casting vote.
would also work within the realm of a pay-
Under the current system, the Reserve Bank
ments bank.
Governor is appointed by the government,
The biggest disadvantage which the pay-
but controls monetary policy and has veto
ments banks would have is that they would
power over the existing advisory committee
not be able to give loans as they do not have
of RBI members and outside appointees
any history of the credit profile of their cus-
that sets rates.
tomers.
RBI asks Government to speed up reforms in banking system
Government, RBI reach consensus on mone-
The Reserve Bank of India (RBI) warned the
tary policy committee
Government that any delay in reform of the
The government and the Reserve Bank have
banking system in the country would lead
reached a consensus on the structure for the
to greater risk in the economy.
proposed interest-rate setting Monetary Poli-
RBI Governor Raghuram Rajan has written
cy
in his overview of the central bank’s annual
Committee
(MPC),
report
2014
The government has proposed to set up the MPC, which will consist of representatives
15 that the current stress in the banking
from the Finance Ministry and RBI to decide
system suggests that the real economy will
on interest rate. The revised draft of the Indi-
not wait for the banking system, and a slow
an Financial Code (IFC), released by the Fi-
pace of reform could lead to greater, rather
nance Ministry last month, had suggested
than lower risk residing in the banking sys-
doing away with RBI Governor's veto power
tem.
and wants a 7-member MPC to take decisions by a majority vote. Of the seven members, four would be government nominees and the rest from RBI. Reports suggest the consensus arrived at between the government and RBI is for a six-member committee 16
According to him Financial sector reforms need to move on many fronts and there is also a need to increase efficiency through greater entry and competition. He also stressed the need for more participation in the country’s financial markets to increase
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB their size, depth, and liquidity. He said that for a country as big and populous as India, reforms cannot be shots in the dark, subjecting the economy to great uncertainty and risk. Wherever possible, India has to move steadily but firmly, ever expanding the scope of reforms while always limiting the uncertainty they create.
17
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FB
A Glimpse Of I.T. Industry By MMC Diaries, IBS Hyderabad
Infosys announces Aikido enhanced service offer-
Net income for the IT big grew by 9.7 per cent
ings
consecutive (up thirteen per cent year-on-year) to
INDIA's second-largest software services firm In-
$420.1 million compared to $382.9 million. Reve-
fosys proclaimed new services - Aikido - thus on
nue rose twenty two.6 per cent to $3.09 billion.
focus on style thinking, platforms and knowledge-
Cognizant also raised its full year revenue and EPS
based IT as a part of its efforts to come to industry-
guidance for the second time this year. "Fiscal
leading growth numbers. These services area unit
2015 revenue is expected to be at least $12.33
aimed toward serving to shoppers address 3 key
billion, up at least 20.1 per cent compared to 2014
aspects of their business: a non-disruptive renewal
and non-GAAP diluted earnings per share is ex-
and simplification of their existing landscapes, intro-
pected to be at least $3," the software services
duction of latest offerings and business models in
provider said in a statement.
exceedingly dynamic business surroundings, and making a culture of innovation in their organisations. Announcing new services at the Infosys town
3. Software product start-ups facing talent
hall here, business executive and MD Vishal Sikka
crunch at entry level
same, "... 3 steps forwrd Ki, Do and Ai; every of those by themselves facilitate enterprises on an ex-
With start-ups emerging by the day and innova-
cellent new path, every of those helps assemble
tive
and tie along lots of Infosys services we provide to
nute, software product engineering has now be-
shoppers these days and together the 3 of those
come one of the most sought-after career options
become even additional powerful than the 3 on an
in the country.
individual basis by themselves."
The reasons are many. To begin with, India is at
2.Cognizant revenue rises 22.6% in Q2, profit up
the nascent stage of software product innovation
9.7%
cycle and has the potential to reach $100 billion in
products
created
by
the
mi-
this segment by the end of 2015. The number of IT services supplier cognizant Technology Solutions
software product firms in the country too has mul-
firm reportedly quarterly revenue and profit on top
tiplied enormously over the decade from just
of analysts' expectations, helped by higher outlay
about a 100 in 2000 to nearly 2,400 now. Howev-
by shoppers in North America, particularly within
er, Indian software product start-ups are experi
the aid and money sectors. 18
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB encing talent crunch at the entry level. Retaining
five years old with sub $1 million revenue annually
talent beyond one cycle of product development
and be a member of select accelerator or venture
has become quiet challenging for organisations.
capital firm, Microsoft added in the statement.
This is a growing concern for the industry as growth of the sector is directly proportional to the
availability
of
the
right
5.Wipro to acquire Designit for Rs 595 crore
talent. Wipro will acquire global strategic design firm Designit for 85 million euros (about Rs 595 crore)
4.Microsoft to offer free cloud services to Indian start-ups
as part of the strategy to strengthen its digital services business. The acquisition will be made by Wipro Digital, the digital business unit of Wipro,
Microsoft will offer free its Azure cloud services to
according to a company statement issued on
Indian start-ups for speeding up the entrepreneurial
Thursday.
ecosystem in the country, the global software major
"This investment marks a further stage in Wipro's
said on Tuesday.
move to evolve the digital offer it takes to market.
"Our Azure cloud services , valued at $120,000 will be given free to qualified start-ups under the 'BizSpark plus programme' for building the entrepreneurial ecosystem in the country," the company's Indian subsidiary said in a statement here.
This would be the first acquisition by Wipro Digital, a business unit formed recently to tap into the digital opportunities in the market. The purchase consideration of 85 million euros includes a per-
Cloud services such as software as a service, platform as a service and infrastructure as a service are provided by vendors over the internet to enterprises across verticals to drive their businesses. "Start-ups need all the help they can to get access to the right tools, technology and guidance. At Microsoft, we are committed to supporting these
formance based contingent consideration payable over three years," it said. The acquisition is subject to customary closing conditions and regulatory approvals and expected to be closed in the current quarter. The final payout could range between 70 per cent and 105 per cent of purchase consideration,
startups and through the BizSpark Plus program we want to support India's upcoming entrepreneurs," said Microsoft Ventures India director Rajinish Menon. Qualifying startups must be privately held, below 19
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FB 5.Microsoft's mobile future hinges on success of
its Nokia phone business .
Windows 10
Most of the job cuts will be in the phone hardware business, underscoring the company's shift in fo-
Microsoft Inc's future in mobile devices likely hinges on the software maker's ability to convince developers to create apps for the phone version of Windows 10 after its ill-fated Nokia acquisition helped trigger 7,800 layoffs.
cus to software and cloud from hardware.
The job cuts announcement is an acknowledgement
broadcaster YLE.
that its 2013 $7.2 billion purchase of Nokia was nev-
This is the second round of job cuts since Satya
er going to help paltry sales of its Windows Phone,
Nadella took over as chief executive in February
and that it needed a new approach.
2014. Microsoft said last July it would slash up to
The cuts indicate that Microsoft will likely focus its
18,000 jobs.
About a third of the layoffs will be in Finland, where Microsoft will shut down a product development unit, according to Finland's national
mobile efforts on its high-stakes Windows 10 software release, due in late July, rather than on devel-
8.IT outsourcing firms seek booster shot from
oping smartphones, analysts said. The software's
Obama's healthcare reforms
apps are supposed to work across desktops, tablets and phones with little tweaking.
IT outsourcing firms are betting on US Presi-
The company is betting that the popularity of Win-
dent Barack Obama 's healthcare reform to rev up
dows on desktop PCs will lead to more apps for the
revenue growth which is slowing as the $146 bil-
mobile version of Windows and entice more con-
lion industry's key financial and manufacturing
sumers to buy its phones.
clients spend less on software services. The United States is the biggest market for
Link- economic times
the outsourcing industry , which is dominated by Tata Consultancy Services, Infosys and Wipro.
6.Microsoft hangs up on Nokia business, to cut
It also accounts for 90 per cent of all healthcare
7,800 jobs
related contracts, which researchers Everest Group expect to more than double to about $68
Microsoft Corp said on Wednesday said it would cut 7,800 jobs, or nearly 7 per cent of its workforce,
billion in 2020 from nearly $31 billion two years ago, largely due to "Obama care".
and write down about $7.6 billion related to 20
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FB August 1, 2014, had a 91 per cent approval of em"In terms of technology maturity, other sectors like
ployees.
manufacturing, banking, are a lot more mature than healthcare," said Rajib Bhattacharya, head of
10.HackerEarth helps find top-quality coders for
a health care software unit that the country's fifth
tech companies
largest outsourcing firm Tech Mahindra set up last month. Like many other start-ups, HackerEarth, too, was 9.Infosys' Vishal Sikka among highest rated CEOs in
conceived in a college dorm room. That probably
the world
explains
the
hostel-like
atmosphere
at
its
Koramangala office in Bangalore. The office is located on the top floor of an electronics godown. It CEO Vishal Sikka has emerged as one of the highest
has bare bones furniture and no air-conditioning.
rated CEOs in an employee's choice survey.
But that doesn't seem to dampen the enthusiasm
Conducted by Glassdoor, the survey recognises 50
of its founders and other team members.
highest-rated CEOs at large companies (1,000 or
Gupta and Prakash met at IIT Roorkee; the former
more employees) judged by the people who work
was in a four-year programme while the latter was
for them in the US.
pursuing a five-year course. Their common inter-
Google CEO Larry Page has taken the top spot, fol-
est in coding brought them together. Gupta, the
lowed by Nike's Mark G Parker. Facebook CEO Mark
more articulate of the two, explains HackerEarth's
Zuckerberg is ranked at No 4 while Apple CEO Tim
genesis during his batch's placement season in
Cook comes in at No 10.
2011. "We had a brilliant batch mate. All of us as-
Sikka, ranked 35th, is second among four Indian-
sumed he would be placed on day zero. Unfortu-
origin executives featured by Glassdoor - behind
nately, a week into the placement process, he had
Cognizant CEO Frank D'Souza who is ranked 33rd.
yet to get an offer. While reflecting on the pro-
Stryker's Kevin Lobo is ranked No 43, while Adobe
cess, we realised it was subjective and not driven
CEO Shantanu Narayen is at No 47.
by data. Recruiters only screened for some key-
The Infosys head who joined the company on June
words. We wanted to make the process transpar-
14, 2014, and was elevated to the post of managing
ent and meritocratic rather than based on the
director and chief executive officer (CEO) effective
21
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB school/college you went to," says Gupta, who was
workers they need is like asking them to work
picked up by Google from the campus.
with one hand tied behind their backs," said Rob-
The duo initially started a website for people to ask
ert Atkinson, president of the Information Tech-
questions and share recruitment-related issues.
nology and Innovation Foundation, in an op-ed in
Gupta worked for a brief while with Google, which
the Courier Post.
he says helped him "network with the right crowd".
That is when Gupta and Prakash came up with the
Vivek, who says he "is a programmer by heart",
idea of putting up programming challenges. The
continued his studies. When the website started
challenges are set up by expert freelancers or
getting traction, they realised it could be converted
companies looking to hire talent. Anybody could
into a business opportunity to help companies re-
take part in the challenge. What this also did was
cruit better, faster and cheaper. After talking to a
help companies tap into talent from smaller cities
host of recruiters, they found that the pain point in
and colleges they typically don't visit for hiring. "It
recruiting technical talent in India was the screening
expanded the talent pool," says Prakash, who is
process. "You advertise for one Java position, there
also HackerEarth's CTO. "Programming talent has
are 100 resumes. How do you screen them effec-
no pedigree of college or school. If I can weed
tively?" was a question they had to confront.
those 100 resumes to six or seven who crack the challenge, then the recruiter can focus more on getting a better fit." Indresh Gahoi is one such beneficiary of Hack-
11.American IT industry calls for raising cap on H-
erEarth's move to make hiring more meritocratic.
1B visas
The graduate of Madan Mohan Malaviya Engineering College, Gorakhpur, says HackerEarth's
More than 5,45,000 tech jobs remain vacant in the
coding challenges prepared him well for inter-
US which is having a deep impact on Silicon Valley-
views and helped him get a job with Druva Data
based firms, American IT industry has said while
Solutions in Pune. HackerEarth's corporate clients,
arguing in favour of raising the cap on H-1B visas to
which includes companies like Wipro and Adobe,
attract the brightest minds from across the globe.
also feel this method of recruiting is better. "Our
"Silicon Valley's advanced, traded industries power
partnership with HackerEarth helped us hire some
innovation and growth throughout the US econo-
top-notch coding talent," says Asha Poluru,
my. But denying companies access to the skilled
22
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FB Chief People Officer at US-based tech company Al-
13.Infosys to open its first overseas campus in
timetrik.
China
12.IBM to set up data centre in India
Infosys has announced establishing its first overseas centre outside India in China with an invest-
Technology firm IBM plans to set up its second data
ment of about $120 million to tap in the burgeon-
centre in India to cater to the demand from various
ing Chinese market.
sectors including financial services and government.
An MOU in this regard was signed between In-
The US-based firm already has a data centre in
fosys and the local Chinese provincial government
Mumbai.
at the India-China Business Forum, which was ad-
With explosive growth being seen in data creation
dressed by Prime Minister Narendra Modi in
and consumption, technology companies like IBM
Shanghai. "The development centre, to be estab-
and Microsoft are aggressively investing in setting
lished in China's Guizhou province, with a staff ca-
up data centres to host information and offer cli-
pacity of about 4,500 will help to focus on Chinese
ents various applications and analytics services.
and global markets," Rangarajan Vellamore, CEO,
Last year, Microsoft had announced plans to offer
Infosys China.
its commercial and cloud services - Azure and Office 365 - from three local data centres by the end of
The centre, first to be established by Infosys out-
2015.
side India, will be ready by next year, he said. The
The Redmond-based firm had said it sees the cloud
new Infosys centre is taking shape as India is
opportunity in India to be a $2 trillion opportunity.
pressing China to open its markets for Indian IT
In October last year, IBM announced the expansion
firms to address the $48 billion trade deficit in the
of its global cloud network with its cloud centre in
bilateral trade, which stood at $70.6 billion last
Mumbai.
year.
IBM has centres across London, Amsterdam, Beijing, Hong Kong, Singapore, Melbourne, Toronto, Dallas and Raleigh.
23
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FB 14.Capgemini to buy IGATE in USD 4 billion deal
Capgemini plans to buy United States-based IGATE Corp for $4 billion cash to make North America its biggest market and is raising its sales outlook for 2015 after a solid first-quarter, the French IT services company said on Monday. IGATE, a technology and services company with strength in the financial services sector but also active in retail, manufacturing and healthcare, had 2014 revenue of $1.3 billion, with double-digit growth and a 19 per cent operating margin. The deal will be financed through a combination of Capgemini's own cash, debt and an equity portion that will not exceed a 6 per cent dilution of the French company's share capital. Capgemini said it had the backing of shareholders representing 54 per cent of IGATE's share capital and that the deal would enhance earnings by 12 per cent in 2016 and 16 per cent in 2017.
24
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A Glimpse of Indian Iron & Steel Indutry
FB
By MMC Diaries IBS Hyderabad China, Korea, Japan ship 75% of India's steel Q1
tion and net present value (NPV) of dereserved for-
imports
est land so that the balance land could be trans-
China, South Korea and Japan together shipped almost 75 per cent of 25.7 lakh tonne finished steel imported by India in the April-June quarter of the current fiscal. China lead the tally with 7.23 lakh tonnes (LT) followed by South Korea (6.03 LT), Ja-
ferred
to
the
company.
This apart, Posco has paid only Rs 54 crore of the total Rs 95 crore demanded by the Odisha Industrial Infrastructure Development Corporation (IDCO) towards land acquisition cost.
pan (5.9 LT), Ukraine (95,340 tonne) and Germany
Adhunik Group appoints Mohanlal as Group CEO
(89,070 tonne). In 2014-15, imports grew 71 per
Adhunik Group, with interests in steel, mining and
cent to 9.32 MT compared to 2013-14, making India
power has appointed Mr Mohanlal as the new
a net importer of the metal.
group CEO with effect from August 1, 2015. He will
IISCO steel plant sends first export consignment for Nepal relief work
be operating from Rourkela and will be responsible for the steel business and mining operations of the group. Soon after joining, Mr Mohanlal visited
Steel Authority of India's newly expanded and mod-
Adhunik Alloys & Power Limited (AAPL) and
ernised IISCO Steel Plant (ISP) at Burnpur, dis-
Adhunik Power & Natural Resources Limited
patched its first export consignment last week. The
(APNRL)-the steel and power plant of the group-
consignment is bound for Nepal and will be utilised
along with Agarwal, accompanied by plant heads
for urgent rehabilitation work in that country fol-
and senior executives.
lowing the series of massive earthquakes that hit the
Himalayan
nation
in
April
this
year.
Odisha wants Prime Minister Narendra Modi to review Posco project
Tata Steel's talks with Klesch for long products biz sale in Europe ends Tata Steel's impending deal with Anglo-American entrepreneur Gary Klesch for the sale of its lossmaking long products steel business has fallen
The Odisha government today said it wanted the
through, increasing troubles for the debt-laden
Prime Minister or the Union Cabinet Secretary to
steelmaker
review the Rs 52,000 crore Posco project. Posco has not paid arrears of Rs 86 crore towards land acquisi25
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
in
Europe.
FB to 2 years to materialise ArcelorMittal expects India to be active on M&A in
The estimated Rs 5,000-crore joint venture (JV)
steel, mine
between
Global steel giant AreclorMittal expects merger and
SAILBSE 3.17 % can take up to two years to for-
acquisition (M&As) activity in the Indian steel and
malise, a top official of the global steel producer
mining industry The Luxembourg-based group also
has
ArcelorMittal
and
domestic
giant
said.
expressed optimism over its pact with state-run steel maker SAIL to establish a plant in India to ca-
In May, NRI billionaire Lakshmi Mittal-led Arce-
ter to the rapidly expanding automotive sector.
lorMittal and PSU giant SAIL agreed to set up an automotive steel plant with an estimated investment
of
Rs
5,000
crore.
Tata Steel unions call for government support after Gary Klesch withdraws from deal talks POSCO signs deal with Shree Uttam Steel and Tata SteelBSE 1.17 % unions said the UK steel indus-
Power to set up steel plant in Maharashtra
try needs support from government so it can be competitive in a global market, as it continues to be
Shree Uttam Steel and Power Ltd, part of Uttam
at a disadvantage because of high energy costs,
Galva Group and Korea's steel giant POSCO have
compounded by environmental levies which are not
signed a Memorandum of Agreement (MoA) to
faced by its competitors in Europe.
set up an integrated steel plant in India. The MoA, which was signed in Mumbai on Tuesday, would
Kamdhenu Ispat to invest Rs 50-crore on capacity expansion
be the first step of a process to establish a joint venture (JV) between the two companies. The
Kamdhenu Ispat, which is into the manufacturing
proposed JV plans to set up 3 million tonne per
and marketing of TMT bars and decorative paints,
annum (mtpa) integrated steel plant at Satarda in
will invest up to Rs 50 crore for increasing steel
Maharashtra due to come up in two phases.
making capacity of its Rajasthan plant to 72,000 tonnes.
Tata Steel says import pressures may worsen after yuan devaluation
ArcelorMittal-SAIL's Rs 5,000-crore JV can take up 26
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FB Steel giant SAILBSE 3.17 % is planning to buy a 51 per cent stake in Odisha government-run pig iron Tata Steel LtdBSE 1.17 % said on Tuesday import pressures on the Indian and European steel industries could intensify following the devaluation of the
producer IDCOL Kalinga Iron Works. "IDCOL has submitted a proposal to SAIL offering 51 per cent of its share to SAIL.
yuan, as a flood of cheap imports from China continues to impact profitability.
MCMA asks govt to review steel quality control order
Posco teams up with Uttam Galva for $1.5 billion Maharashta steel plant
The Metal Containers Manufacturers Association (MCMA) today said the central government
South Korean steel giant Posco on Tuesday became the third big foreign company after General Motors and Foxconn to announce a billion-dollar-plus in-
should review the proposed steel and steel products Quality Control Order which is likely to hit the trade
severely.
vestment plan in Maharashtra, boosting the western Indian state's attempts to regain its status as the country's premier investment destination.
Under the proposed Steel and Steel Products (Quality Control) Order, 2015, government is set to bring several steel products under a mandatory
Government proposes quality control order for additional 19 steel products The government has proposed to issue quality control orders for three stainless steel products and 15 non-alloy steel products, which have a direct bearing on human health. So far, the government has notified 15 steel products under two steel quality
Bureau of Indian Standards (BIS) registration Steel companies may miss target of 300 million tonne production by 2025 Low domestic demand and cheap imports could force Indian steelmakers to go slow on output, a move that can cloud India's target of producing 300 million tonnes of the alloy by 2025.
control orders, Minister of State for Steel Vishnu Deo Sai said in a written reply to Rajya Sabha.
Steel processing unit set up by SAIL, Prime Gold inaugrated in Madhya Pradesh
SAIL planning to buy majority stake in Kalinga Iron Works 27
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FB Steel Authority of IndiaBSE 3.17 % (SAIL) has informed the union government that the public secSteel and Mines minister Narendra Singh Tomar inaugurated a steel processing unit set up under a joint venture between Steel Authority of India Limited and Prime Gold Private Limited in Billowa in
tor company found it financially unviable to set up an integrated steel project in Telangana as proposed by the government in the state bifurcation Act.
Madhya Pradesh. While Prime Gold has 74 per cent stake, SAILBSE 3.17 % has the remaining 26 per cent stake in this unit, which will produce one lakh tonnes of TMT bars for which some 60,000 tonnes of billets will be supplied from SAIL plants to this unit annually. Portal for sale of steel at competitive prices soon: Transport Minister Nitin Gadkari
Steel makers should be more competitive: FM Arun Jaitley Union finance minister Arun Jaitley has urged Indian steel producers to overcome 'transient challenges' by strengthening their own competitive-
The government will soon launch a portal for sale of
ness. Addressing delegates at a seminar on
steel at competitive prices to boost construction
'Roadmap to 300 MT: Opportunities & Challenges
activity , after 95 lakh tonnes of cement was booked
for Secondary Steel', he outlined the challenges
online, Road Transport and Highways Minister Nitin
faced by Indian steelmakers owing to large scale
Gadkari said.
dumping and uncertainty in the global market.
JSW Steel to invest Rs 5,000 cr on capex in FY16
Scan Steels to raise up to Rs 50 crore
JSW SteelBSE -0.41 % expects to invest about Rs
Scan Steels today said it plans to raise up to Rs 50
5,000 crore on various capital expenditure projects
crore through a preferential issue of convertible
in this fiscal ending March 2016, its Chairman and
equity
Managing
Director
Sajjan
Jindal
has
said.
Financially unviable: Wind's not fair for SAIL's steel unit in Telangana
28
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
share
warrants.
FB "A meeting of the Board of Directors of the company will be held on August 31, 2015, inter alia, to consider and approve raising up to Rs 50 crore by way of preferential issue of convertible equity share warrants to the promoters subject to approval in the general meeting," Scan Steels said in a BSE filing.
Tripartite meet on Posco project on August 25: Odisha Steel and Mines Minister The much-awaited tri-partite meeting on the country's biggest FDI project proposed by Posco is scheduled to be held in New Delhi on August 25, Odisha Steel and Mines Minister Prafulla Kumar Mallick said today.
Global steel output declines 3.8% in July World steel production dipped 3.8 per cent in July 2015 over the year-ago period, with China, which accounts for half the global output, registering an even sharper 4.6 per cent fall. July's decline in crude steel output continues the trend seen in the whole of this year, but is worrisome as it is steeper than earlier months.
Troubles in China may impact Indian steel sector: Assocham The troubles in China are expected to spell disaster for the Indian steel industry as desperate Chinese manufacturers would aggressively dump their products abroad, industry body Assocham said today.
29
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FB
A Glimpse of Indian Telecom Industry By MMC Diaries IBS Hyderabad
Telecom Industry Airtel 4G Services Launched in Tawang, Kohima, and Dimapur:
paid subscribers across India: India's
second-largest
operator
Vodafone
Wednesday launched a double validity on pre-
Bharti Airtel on Monday announced the commercial
paid
launch of its high speed 4G services in the border
The offer on rate cutter pack will enable custom-
district of Tawang in Arunachal Pradesh. On Tues-
ers to talk more at affordable price and an oppor-
day, the company also announced the rollout of the
tunity to double the validity of the product at a
service in Kohima and Dimapur in Nagaland.
nominal cost of Rs 7.00, the telco said in a state-
The firm said customers can experience high speed
ment. This offer, according to Vodafone will be
wireless broadband on Airtel 4G and get on to the
applicable to all its pre-paid customers across all
digital superhighway to enjoy uninterrupted HD vid-
22 operational circles across India, starting Thurs-
eo streaming, superfast uploading and downloading
day.
of movies, music and images. Airtel 4G is available
Optimise Networks to Minimise Call Drops, Says
to customers across a range of smart devices including mobile phones, dongles, 4G hotspots and
rate
cutter
packs.
Telecom Minister: To curb the menace of call drops, India's Telecom
Wi-Fi dongles.
Minister Ravi Shankar Prasad on Tuesday asked
Bharti Airtel to buy Augere to boost 4G play:
mobile operators to optimise their networks, even
Bharti Airtel on Wednesday said that it has inked a
as he promised full support on policy front includ-
definitive agreement to acquire 100% equity stake
ing on installation of towers. The problem of fre-
in Augere Wireless Broadband India Pvt. Ltd.
quent call drops has worsened in the recent
Augere Wireless had won a block of 20 MHz of 4G
months. At a meeting last evening, Prime Minister
spectrum (in the 2,300 MHz band) in the Madhya
Narendra Modi also voiced concern over call
Pradesh-Chhattisgarh circle for Rs 122.46 crore in
drops and directed the officials to resolve the
the 2010 auctions. The company - owned by France
problem urgently.
Telecom and a clutch of private equity funds such
'Spectrum Sharing Will Help Smaller Players, Ease
as Harbinger Capital and New Silk Route - initially
Network Congestion':
announced plans of rolling out 4G services in late
Spectrum sharing will help large telecom com-
2011.
panies address network congestion and make it easier for small players to provide
Vodafone launches double validity offer for pre30
advanced mobile
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB technologies like 3G and 4GOperators, however,
According to an official in the Department of Tele-
would need to strike a balance between the costs of
com, BSNL lost about 17.8 million wireless and
sharing (0.5 percent increase in spectrum usage
over 2 million wireline subscribers between March
charges) and the benefits derived from spectrum
2014 and March 2015. Stating the reasons respon-
sharing, it added.
sible for the loss of wireless subscribers, the offi-
In a bid to ease telecom congestion, the govern-
cial said BSNL was not able to match the aggres-
ment on August 12, allowed companies to share
sive marketing of services by private telecom op-
airwaves in the same band so as to reduce call
erators.
drops but did not allow leasing of spectrum.
Reliance Jio’s 4G beta launch today for employ-
Indian Mobile Services Market to Reach $21.4 Billion in 2015: Gartner
ees: Mukesh Ambani-led energy-to-retail conglomer-
Mobile connections in India will grow to 880 million
ate Reliance Industries (RIL) is set to start its
in 2015 - an increase of five percent from 837 mil-
fourth generation (4G) bundled mobile and data
lion connections in 2014 - and spending on mobile
services through a beta launch on August 15, coin-
services will grow four percent to reach $21.4 bil-
ciding with the India's 69th Independence Day.
lion (roughly Rs. 1, 39, 656 crores) in 2015, infor-
Reliance Jio, the telecom arm of RIL, seeks to test
mation technology research and advisory company
the network with one lakh Reliance employees to
Gartner Inc. said on Wednesday.
start with before a commercial launch in Decem-
The spending on mobile services will be driven by
ber.
data services, which is expected to grow 15 percent
Microsoft to work with Andhra Pradesh govern-
to reach $6.5 million (roughly Rs. 42,419 crores) in 2015, said the American information technology
ment on 'White Spaces' project: Global technology giant Microsoft will be working
research and advisory firm.
with the Andhra Pradesh government on a pi-
BSNL Lost Almost 20 Million Subscribers Last Year:
lot project called the 'White Spaces' in Srikaku-
DoT
lam, a technology that uses unused television
State-run BSNL lost about 20 million subscribers in
spectrum to deliver low cost Internet connec-
the last financial year as the telecom operator could
tivity.
not match aggressive marketing by private opera-
It is for the first time that this kind of a tech-
tors besides persisting issues related to coverage
nology is being implemented in India, accord-
and quality of its services.
ing to an official release.
31
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB per
to
offer
Internet
of
Things:
Tata Docomo to add 300 3G sites in Kerala:
Reliance Communications today tied up with
Tata Docomo, the unified brand of Tata Teleserv-
the Silicon Valley-based Jasper to provide In-
ices, today announced their 'superior' 3G network
ternet of Things (IoT) solutions, starting with
expansion plans across Kerala circle. As a part of 3G
the companies belonging to the Indian con-
enhancement, the company is scaling up its net-
glomerate.
work with additional 300+ New 3G towers across
The tie-up will provide solutions to the upcom-
Kerala.
ing smart cities, making electricity distribution
All major towns and District headquarters will be
grids smarter for public safety and on the
covered across the state, the company said.
healthcare front, Reliance Group president (IT
Videocon to roll out 4G mobile services by year end:
and Innovation) Alok Srivastava told reporters
Arvind Bali On 11th August, Videocon’s CEO Arvind Bali said, “Telecom plans to start its 4G mobile services in some circles, including Punjab, by the end of this
here. Airtel, Vodafone and Idea gain maximum revenue market share in Q1 : Sunil Mittal-led Bharti Airtel BSE 3.51 % and No 3
year.
carrier Idea Cellular BSE 1.65 % cornered maxi-
The 4G services will be launched including in Pun-
mum incremental revenue market share
jab, Haryana, Gujarat and Madhya Pradesh.
(RMS) in the fiscal first quarter 2015-16, riding
Asia's telecom companies face regulatory risks, stiff
on strong data services penetration and reve-
price competition: Standard & Poor's:
nue growth. Market leader Bharti Airtel cap-
Telecom companies in the Asian region, including
tured the highest incremental RMS of 34% in
India, face regulatory risks and intense price compe-
the April-June quarter, while Idea's grew to
tition that can undermine returns and investment, a
32.8%.
report by Standard & Poor's (S&P) Rating Services.
The country's second-largest mobile carrier,
The ratings agency said Asia's large population, GDP growth, and voracious appetite for data services will boost revenues across most of the region's telecom markets. Reliance Communications ties up with US firm Jas-
32
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FB Vodafone India, maintained its incremental RMS at 24.7%, as per revenue data put out by the Telecom Regulatory Authority of india. IBM looks to sell its data analytics products to telcos: IBM expects to bag new contracts from India's telecom operators for implementing analytics tools that will help them get more revenue out of existing customers and improve their data product offerings by better understanding
33
customer
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demands.
A Glimpse of Indian StartUps
FB
By MMC Diaries IBS Hyderabad START UP
2014-16 batch is in India interning with Hop-
Start Up Culture isn’t just a Fad, Signals CXO
scotch, an e-retailer for baby products, founded
Money
by an alumnus from the batch of 2009.Previously,
According to ET poll 6 out of 10 CXO-level execu-
she worked on launching True Vino, an online
tives in INDIA have invested their portion of wealth
wine accessories store, with her brother.
in start-ups. This indicates that start-ups investing is
HNI’S Wake Up to Startups as New Investment
more than just a fad and here to stay for the top
Class
honchos of Indian industry. The survey was con-
High net worth individuals have pumped in over rs
ducted on 100 randomly selected CXO and it re-
1200 crore into venture capital funds focused o
vealed that 60 out of 100 CXO had invested sums
investing in early stage entrepreneurs, underlying
ranging from few lakhs to several cores in start-
the growing popularity of start-ups as an asset
ups.As many as 79 CXO said they would recom-
class. These investments have flowed in over the
mend to others to invest in startup. The poll is first
past year into six such funds which have together
of kind which covers the CXO executives in various
raised rs 4360 crore data shared by these funds.
diversified sector such as banking & finance, insur-
CAs Now Get Ready to Travel in the Start-up Bus
ance to FMCG & retail and from manufacturing to
When
technology.
broached an idea for fundraising with his tax advi-
Bitten by Startup Bug, B-school Grads Head Home
sor, he was in for a surprise. Jeenendra Bhandari,
Spurred by the boom in ecommerce and start-ups
partner at tax firm MGB and Co, made IIT Delhi
in India and rising investor interest, students from
alumnus Bhavnani an offer he could not refuse –
top global business schools are returning to India to
he offered to pick up a stake in Bhavnani’s start-
jump on the bandwagon – not an easy decision giv-
up
en that studying overseas can be three times costli-
Zophop is not the only start-up Bhandari has in-
er and student loans need to be repaid. Even stu-
vested in, nor is he the only chartered accountant
dent in first year of MBA at Stanford are excited
(CA) to have done so. The boom in the start-up
about the Indian opportunity. Of the 11-12 of Stan-
ecosystem has caught the attention of chartered
ford’s class of 2016 students who applied from In-
accountants (CAs), some of whom are seeking eq-
dia, 3-5 are already sure of coming back immediate-
uity stake for the non-audit services they offer.
ly
Most of such investments are made through
or
in
about
a
year
after
graduation.
Zophop
Ananya kejriwal from Harvard Business School’s 34
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
founder
Vinayak
Bhavnani
Zophop.
FB the family offices of the CAs and tax advisors. As per
OLA Rides Home With Top Startup Honour
regulations, auditors are not allowed to pick up
India's largest cab aggregator Ola has driven away
stake in the company they audit.
with the highest honour, winning the Startup of the Year award at the jury meeting of the first Jio Economic Times Startup Awards which picked
Start-ups Real Life TARDIS Helps Keep Calls private
eight individuals. The jury members included Soft-
Many Indian start-ups opted out of cubicles and
Bank Corp President Nikesh Arora and comprising
cabins for an open plan, but the good old phone
the country's best-known entrepreneurs.
booth is making its way in.Companies like Zomato,
Other winners included Anu Acharya of Map-
StoryXpress and even coworking spaces such as In-
MyGenome who won the Midas Touch Award for
vestoPad have installed British-design phone
Best Investor — who won in the Women Ahead
booths in their offices to allow employees some pri-
category, Jaydeep Barman of Faasos in the Come-
vacy while making video or phone calls. Uber, Zostel
back Kid category, Forus Health for the top Social
and Myntra have sleep pods and bunk beds.
Enterprise, BrowserStack for the best Bootstrap
“We have an open work environment and there’s
Champ, Purple Squirrel Eduventures in the Best on
no concept of cabins or even fixed desks,” said a
Campus category and GreyOrange Robotics for
Zomato spokeswoman. “Thus, soundproof tele-
being the Top Innovator.
phone booths allows our folks to take calls with
"The central theme behind the decisionmaking
minimum disruption. A lot of collaborative work
was to identify companies with true potential,"
happens across time zones and it’s important that
said Arora, who presided over a three-hour-long
calls can be taken privately.” The new way of con-
meeting of seven jurors who picked the winners.
necting employees in the age of BYOD(bring your
Besides Arora, the jury included Kunal Bahl of
own device) has come along way from the time of
Snapdeal; Rohan Murty of Catamaran Ventures;
wired telephone booths, the first of which was in-
Rishad Premji of Wipro; Meena Ganesh of
stalled in 1903 in London by the Grang Central Rail-
GrowthStory; Sharad Sharma of software products
way. But while start-ups have sought to break down
think tank iSPIRT and VG Siddhartha of Cafe
barriers with open office plans, globally companies
Coffee Day. In a meeting that saw intense, yet al-
are increasingly realising the need for an element of
ways cordial, debate, the jury examined and de-
privacy in the workplace.
bated five shortlisted candidates in each category,
35
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FB which had been winnowed from thousands of ap-
its flourishing startups, largely remains a reliable
plications by ETand its knowledge partners Zinnov
but shudderingly slow train. To change this, a
and iSPIRT. Zinnov curated the shortlist for seven
‘Disrupt India’ initiative must be sold.
categories while iSPIRT curated the Bootstrap
The prime minister himself has been a great brand
Champ category.
ambassador of breaking with tradition and reap-
Ola along with healthcare technology company
ing the ensuing rewards. Democratic politics is
Practo and Hector Beverages were thrown into mix
tied to public perceptions of order and well-being.
by the jury which on its own decided to widen the
Entrepreneurship, too, has its own set of parame-
consideration set of companies for the top award to
ters of compliance. But what Indian entrepreneur-
even include firms that hadn't applied.
ship truly needs is to push these limits and step
The jury was unanimous that whichever company
out of it. India needs innovation, which, in turn,
was chosen as the Startup of the Year must have
can be propelled only by disruptive R&D that is
the potential to grow into one of India's top corpo-
not joined at the hip to cost-benefit reports. This
rations in the next few years.
means inculcating a culture of actively seeking potential failure.
Disrupt India, and Start Up Will Follow Disruption is still a dirty word for most Indians. But
‘Ever tried. Ever failed. No matter. Try Again. Fail
disruption is not just throwing the spanner in the
again. Fail better’ is a motto that India could do
works and inviting chaos. This helps to start things
well to not only heed, but embrace. Paradigm
over. Prime Minister Narendra Modi’s call to the
shifts have been the cornerstones of western sci-
nation on the Independence Day was to ‘start up,
entific and technological — and thereby economic
stand up’. For a country that is traditionally risk-
— prowess. With ‘Disrupt India’, India can go to
averse, this is easier said than done. Playing it safe
very core of Modi’s call for ‘Startup India’: turning
has made us laggards while other nations have bro-
from the preservative powers of Brahma to the
ken out. Central to this larger chalta hai mentality is
disruptive genius of Nataraja.
our fear of failure. To try out radical ideas, while sounding good on paper especially when dealing with supremely successful innovations in other countries, still comes with looming notions of failure. Which is why, Indian entrepreneurship, despite
36
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FB vest Rs120 crore – Rs150 crore to launch a bus IIFL launches Rs1000-crore startup fund for the
service all of which has attracted leading investors
rich
including Sequola capital, Nexus venture partners
Wealth manager IIFL wealth management is raising
and IDG ventures. Delhi based Shuttl secured
a fund of Rs1000 crore to be invested in startups
about Rs19.5 crore from Sequola capital and angel
and venture capital funds as high net worth Indians
investors and ZipGo is in talks to raise funding
look to benefit from the exponential rise in startup
from Orios venture partners. Cityflo founded by
activity across the country. The firm-a part of the
IIT Bombay graduates in June also discussing with
Mumbai based financial services company which
Nexus venture and IDG venutres for its maiden
also owns mid-market- focused private equity firm
funding round. Rbus and Cityflo target long dis-
India alternatives and a slew of reality funds- has
tance commuters primaliry office goers. Rbus
robbed in a battery of stalwarts from the startup
charges Rs500 for 10 rides a week, for which it has
sector as it aims to be first- off- the block amongst
tied up with chartered bus operators. The startup
peers who are also planning similar moves. 40% of
has recently launched a mobile application for ex-
corpus to go directly to startups, rest to be invested
isting customers; it will be available to all by Sep-
in venture capital funds.
tember.
After Ola & Uber success, bus aggregators to take
Is this the right seed for your crop?
the wheel
As India’s startup industry blooms, everyone from
After ola and uber disrupted the taxi booking mar-
uber wealthy individuals to institutional funds are
ket, a new set of startups is looking to transform.
on their toes to invest in the startups. Entrepre-
Emerging companies such as Rbus, Shuttl, ZipGo
neurs are being very choosy about the seed for
and Cityflo recently began providing bus service ,
the company. They all are looking for potential
including to business hubs such as Bandra Kurla
investors, keen to bring onboard only those who
complex in Mumbai , allowing computers to book
can handhold them and help their firm to grow
seats in air conditioned buses either online or
right. In their views not every investor is a good
through mobile applications. Rbus has recently
seed investors.
raised a huge amount of seed stage fund from India
A good seed investor can work closely with found-
quotient and angel investors Anupam Mittal.
ers to help them deduce product market fit for
Ola India’s largest cab aggregator is looking to in-
their offering. It is very important for an investor
37
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FB to believe in the portfolio startup’s vision, trust the team and give them the freedom to work independently.
Startup Investors Queue up to Join a New Aam Aadmi Party Venture capital investors are aggressively scouting for start-up deals in India. Startups offering delicious foods and affordable hotel rooms to digital users gaining funds from various ventures including Orios venture partners who are tweaking to invest in companies that cater this vast demographic. Investors has seen an aspirational middle class population with smart phones and data connections on it, making easier to afford online shopping. It’s not just about 70-80 mil population that are currently online. It’s about 200-300 million that will be online in upcoming two and three years. Venture capital firms in India are taking leaf out of the Chinese and US markets where startups catering to the value or mass-market segment growing rapidly. Chinese social shopping service Mogujie is valued at $2billion after its latest fundraise where on the other hand Jet.com, a US- based ecommerce company recently on boarded Alibaba group as an investor. In India startups suck as OYO Rooms and Zo Rooms offer budget hotels stay beginning at less than Rs1000 for one night and food tech venture yumist offers meals at less than Rs100. Orios, Matrix Partners are already injecting money in startups that serve a broader demographic than just the affluent urban population. Entrepreneurs have begun to understand the Indian online market and they have learnt if you want to build a large company you have to target a every individual customer segment. While such business models are still in search of investors to become first in the market and take advantage of lower valuations. Orios has backed food-tech venture yumist which began operations in October and online accommodations marketplace Zo rooms that launched this year.
38
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FB
A glimpse of Automobile Industry By MMC Diaries, IBS Hyderabad
INTRODUCTION:
169,300 units in January 2015, up 3.14 per cent from the year-ago period.
The Indian auto industry is one of the largest in the
Car market leader Maruti Suzuki India witnessed
world with an annual production of 21.48 million
8.6 per cent higher sales at approximately 118,551
vehicles in FY 2013-14.
units in February 2015, out of which 107,892 were
The automobile industry accounts for 22 per cent of
sold in domestic market and 10,659 units were
the country's manufacturing gross domestic prod-
exported.
uct (GDP).
Hyundai Motor India Ltd (HMIL) reported a 2.4 per
An expanding middle class, a young population, and
cent growth in total sales at 47,612 units in Febru-
an increasing interest of the companies in exploring
ary, compared with 46,505 units in the same
the rural markets have made the two wheelers seg-
month last year.
ment (with 80 per cent market share) the leader of
In the two-wheeler segment, Hero MotoCorp wit-
the Indian automobile market. The overall passen-
nessed sales of 484,769 units in February 2015.
ger vehicle segment has 14 per cent market share. India is also a substantial auto exporter, with solid export growth expectations for the near future. Various initiatives by the Government of India and
TVS Motor Co posted 15 per cent higher sales at 204,565 units against 177,662 units. Bajaj Auto sold a total of 243,000 two and threewheelers segment.
the major automobile players in the Indian market is expected to make India a leader in the Two Wheeler and Four Wheeler market in the world by
In terms of exports, the way India is structured,
2020.
we will go towards a global supply market just because we are well positioned in terms of cost and
MARKET SIZE:
skill set. We are well versed in dealing with small car industry and that is a growing segment. If we
Sales of commercial vehicles in India grew 5.3 per cent to 52,481 units in January 2015 from a year ago, according to Society of Indian Automobile
look at the last quarter, the passenger cars have outgrown the utility vehicles segment, which was not the case in the past few years.
Manufacturers (SIAM). Sales of cars also grew for a third month in a row to 39
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FB So we see a huge increase in sales in the A, B segments globally and India can become a hub for this.
seven India-based auto parts makers. Mahindra Two Wheelers Limited (MTWL) has
We have had a lot of enquiries in terms of global
acquired 51 per cent shares in France-
customers wanting Indian companies to set up shop
based Peugeot Motocycles (PMTC).
for them. Suzuki Motor Corp is planning to sell the automobiles made in the Gujarat plant, in Africa. Investments
Tata Motors Ltd, India’s largest automobile maker, will sell trucks in Malaysia, Vietnam and Australia to strengthen its presence in
To match production with demand, many auto mak-
the Asia-Pacific region.
ers have started to invest heavily in various segments in the industry in the last few months. The industry has attracted foreign direct investment
Government Initiatives
(FDI) worth US$ 12,232.06 million during the period April 2000 to February 2015, according to the data released by Department of Industrial Policy and Promotion (DIPP).
The Government of India encourages foreign investment in the automobile sector and allows 100
Some of the major investments and developments
per cent FDI under the automatic route. Excise
in the automobile sector in India are as follows:
duty on small cars, scooters, motorcycles and commercial vehicles was reduced in February last
DSK Hyosung has announced to set up a plant in Maharashtra and is planning to add 10-15 dealerships in the next financial year (FY 15-
40
year to 8 per cent from 12 per cent to boost the ‘Make in India’ initiative of the Indian government.
16) mostly in the tier-II cities and introduce
Some of the major initiatives taken by the Govern-
more models in the 250cc segment.
ment of India are:
Germany-based luxury car maker Bayerische
Under the Union budget of 2015-16, the Gov-
Motoren Werke AG’s (BMW) local unit has
ernment has announced to provide credit
announced to procure components from
of Rs 850,000 to farmers, which is ex-
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB pected to boost the tractors segment. The government is aligning to ensure that at least one family member is economically
What’s New?
strong to support the family. This is expected to improve the sentiments of entry-
Four Wheeler Segment:
level two-wheelers. Maruti Suzuki S-Cross launched ,to be available The Government plans to promote eco-friendly cars in the country i.e. CNG based vehicle, hybrid vehicle, electric vehicle and also
exclusively in Nexa showrooms Maruti Suzuki S-Cross is the first car from the company to be powered only by diesel engines
made mandatory of 5 per cent ethanol blending in petrol.
The new car will be available at the Nexa network, introduced recently, across the country.
The government has formulated a Scheme for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles in India, under the National Electric Mobility Mission 2020 to encourage the progressive induction of reliable, affordable and efficient electric and hybrid vehicles in the country.
Built on a new platform, the S-Cross has features, including cruise control, rain sensing auto wipers, self-adjusting hydraulic clutch and rear seat recliner. With the aim of reaching an annual sales figure of 2 million vehicles, the country’s largest carmaker also announced that over 35 Nexa showrooms are already operational in 23 cities. The company has planned 100 such showrooms by the end of
The Automobile Mission Plan for the period 2006– 2016, designed by the government is aimed at accelerating and sustaining growth in this sector. Also, the well-established Regulatory Framework under the Ministry of Shipping, Road Transport and Highways, plays a part in providing a boost to this sector.
2015-16. Renault Kwid Bookings for Renault's upcoming small car, the Kwid, have started in India. Few Renault dealers in the country have started accepting bookings for the Kwid. Depending on the region, dealers have been asking for a booking amount of Rs 25,00045,000. Toyota Land Cruiser 200 Facelift
41
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FB The name Land Cruiser needs no introduction as its
company said here today, adding it also offers 15
one of the icons of the motoring world but these
per cent more fuel efficiency.
days the agenda of this big SUV has changed a bit as in order to counter the new crop of luxury SUVs,
The Ferrari California T symbolises elegance, sportiness, versatility and exclusivity
Toyota have given this big beast a makeover in order to make it more premium. The biggest changes are in terms of looks as now there are redesigned grille, headlamps, bumper, fenders and
Ford Figo Aspire Ford Figo Aspire is the latest compact sedan in its class and does hold the edge in terms of modern aesthetics over the rest of its competition. Ford
bonnet.
Figo Aspire comes with a muscular bonnet while
Toyota Launches new Etios Xclusive Special Edition
the rear side is also designed elegantly. It’s the
Toyota India has launched the Etios Xclusive Special
new nose design of the Ford Figo Aspire that really
Edition in India, a move to inject some freshness
gives it its appeal – it is different and stands out
into the sedan. Several minor additions to the exte-
from the crowd that is something that the buyers
riors and interiors have been made to the Etios as
in in the Indian market crave.
part of the Xclusive special edition package.
Maruti Suzuki launches ‘Onam’ limited edition of
Audi launches A6 Matrix sedan
Alto 800
German luxury carmaker Audi launched an updated
The Maruti Onam limited edition Alto 800 comes
version of A6 sedan in India, priced at Rs 49.5 lakh
laced with a package of 15 additional features
(ex-showroom Delhi).
such as reverse parking sensors, music system
The updated version, Audi A6 Matrix, comes with a
with speakers, power car charger, Onam graphics
new engine comprising seven-speed S-tronic trans-
and decal, embroidered cushions, designer seat
mission, Matrix LED headlights and an advanced
covers
infotainment system.
Nissan launches limited edition Datsun GO
The sedan also features eight airbags and advanced
Nissan Motor India launched a festive season lim-
voice dialogue system.
ited edition version of its multi-purpose vehicle
Ferrari launches California T The new California T, powered by an 8-cylinder tur-
Datsun GO priced at Rs 4.1 lakh (ex-showroom Delhi).
bocharged engine, can gain a top speed of 316
The Datsun GO NXT limited festive edition will be
kmph and can attain 100 kmph in 3.6 seconds, the
available between August and December 2015
42
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FB across all 196 Datsun outlets in India, the company
Yamaha Motor India Group launched its new
said in a statement.
321cc engine sports bike 'YZF-R3 priced at Rs 3.25
It will offer add-ons worth Rs 20,000 at a minimal
lakh (ex-showroom price Delhi).
price increase of just Rs 5,000.
With all-new engine and chassis designs, the YZFR3 sports a solid combination of class-leading power and a lightweight body that achieves high
Mercedes-Benz launches AMG S63
levels of riding performance and styling worthy of
Luxury car maker Mercedes-Benz launched its flag-
the 'superbike'.
ship Mercedes-AMG S63 at a premium price of Rs
Hero Xtreme Sports, Hero Passion PRO launched
2.53 crore (ex-showroom Bangalore), pursuing its
in Madhya Pradesh
aggressive product strategy. This was also the ninth
Leading two-wheeler major, Heromoto Corp Ltd
AMG model the company was adding to its portfo-
(HCML) here today launched two new bikes in
lio. The Mercedes-AMG S63 sets new standards in
Madhya Pradesh where it already commands a
terms of driving dynamics, lightweight construction,
market share of 50 per cent.
efficiency and bespoke craftsmanship
The company launched "Hero Xtreme Sports and
Two Wheeler Segment:
more attractive edition of Hero Passion PRO"
Royal Enfield announces entry into Indonesian mar-
bikes in Madhya Pradesh.
ket
Honda eyes premium motorcycle market in India
Royal Enfield, the two-wheeler division of Eicher Motors announced its entry into the Indonesian market, with plans to commence retail operations in the Southeast Asian country in the coming months.
with the 'biggest ever' launch of CBR 650 R The two-wheeler maker launched CBR 150 R, CBR 250 R, CBR 650 R (Rs 7.69 lakh) and Livo 110 cc (Rs 57,090 exshowroom New Delhi) and unveiled one new model — CB Honda Hornet 160 cc — across
The company announced its future plans for Indo-
eight cities at a special event called 'Honda
nesia, the third largest two-wheeler market in the
Revfest'.
world, as a part of its growth strategy and focused international thrust of leading and expanding the global mid-sized motorcycle segment (250-750cc). Yamaha launches sports bike 'YZF-R3' 43
Yamaha Fascino 113cc Scooter Launched The Fascino is the first lifestyle scooter that has
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB been launched by Yamaha for the Indian market.
ment (R&D) hub. It has set up National Automo-
The Fascino is mainly targeted at female riders, just
tive Testing and R&D Infrastructure Project
like the Ray.
(NATRiP) centres as well as a National Automotive
The overall design language of the Fascino is quite
Board to act as facilitator between the govern-
curvy and trendy, giving it a very distinctive look.
ment and the industry. Alternative fuel has the potential to provide for
Road Ahead
the country's energy demand in the auto sector as the CNG distribution network in India is expected to rise to 250 cities in 2018 from 125 cities in
The automobile industry in India is expected to be the world's third largest by 2016, with the country currently being the world's second largest two-
2014. Also, the luxury car market could register high growth and is expected to reach 150,000 units by 2020.
wheeler manufacturer. Two-wheeler production is projected to rise from 18.5 million in FY15 to 34 mil-
If you look at the automotive industry today, there
lion by FY20. Furthermore, passenger vehicle pro-
are three key parameters that are driving the au-
duction is expected to increase to 10 million in FY20
tomotive industry. This industry is changing as fast
from 3.2 million in FY15.
as the IT industry. So there is lightweighting that
Automobile exports grew at a CAGR of 14.65 per
comes with low emission, then safety and connec-
cent during 2010-15. Passenger Vehicles, Commer-
tivity. The scope for growth in this industry is huge
cial Vehicles, Three Wheelers and Two Wheelers
especially in these areas.
grew by 6.89 per cent, 13.77 per cent, 18.69 per cent and 16.60 per cent CAGR during 2010-15. Two wheelers accounted for the largest share of exports at 69.4 per cent in FY15. Passenger vehicles comprised a sizeable 16.7 per cent of overall exports. Exports of three wheeler vehicles registered around 11.1 per cent share in exports in FY15. The government aims to develop India as a global
The vision of AMP 2006-2016 sees India, “to emerge as the destination of choice in the world for design and manufacture of automobiles and auto components with output reaching a level of US$ 145 billion; accounting for more than 10 per cent of the GDP and providing additional employment to 25 million people by 2016.�
manufacturing as well as a research and develop44
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FB
A glimpse of Fertilizer industry BY MMC Diaries, IBS Hyderabad
Introduction
at these 57 units are engaged in the manufactur-
Indian Fertilizer Industry is one industry with im-
ing of urea while is of them produce calcium am-
mense scopes in future. India is primarily agricul-
monium nitrate and Ammonium Suphate. The re-
ture oriented country and its economy is highly
maining 20 fertilizer plants produce complex ferti-
based on the agrarian produce the agricultural sec-
lizer and DAP. There is also a member of medium
tor and its other associated spheres provide em-
and small scale industries in operation.
ployment to a large section at the country’s popula-
As per government of India records as on 31-1-
tion and share about 25% to the GDP. The Indian
2014 the Indian Fertilizer Industry has made a pro-
fertilizer industry is one of the allied sectors of the
duction at 120.61 MT of nitrogen (N) and 56.59
agricultural sphere. India has emerged as the third
MT of phosphate (P) nutrient. The installed capac-
largest producer of nitrogenous fertilizers. The
ity of urban India is estimated to be 210 .61 MT.
adoption of book to break five year plan has paved
These successes in the production by fertilizer
the way for self sufficiency in the production of
companies of India have groaned India, the 3rd
food grains. In recently production has gone up to
largest fertilizer producer in the world.
an extent that there is scope for the export at food reins. The surplus has been foliated by the way of chemical fertilizers. The large scale use of chemical fertilizers has been instrumental in bringing about
Agriculture is the back bone at Indian Economy. It earns about 14% of the India’s foreign exchange. And its contribution is about 21% of GDP, and 65% of the population agriculture employs.
the green revolution in India. The fertilizer industry in India began its journey way back in 1906. During this period the first single super phosphate factory was established in Ranipat in Chennai. In the pre and post independence era a couple of large scale fertilizer units like as the Fertilizer Corporation of India in Sindri, Bihar and the Fertilizer and Chemical Travancore of India in Cochin, Kerala were estab-
The development of industry, trade, commerce, infrastructure, transportation communication etc depends upon agriculture. Fertilizer plays an important role for increasing agricultural production and productivity of land. After green revolution the use of chemical fertilizer and insecticides are increased.
lished. At present there are 57 large scale fertilizer
Indian economy is based on five year plan and the
units. The units manufacture an extensive range of
government gave adequate emphasis in all five
phosphate, nitrogenous and complex fertilizers 29
year plan in the area of agriculture. The tenth plan has assessed that agriculture production in world
45
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FB grows at the rate of 4% but in the next 3 year of
in the required quantities. The Indian Fertilizer
plan the country was able to ensure about 1.5%
Industry is the most energy intensive sectors ac-
rate of growth. The use of chemical fertilizer is con-
cording to the context of environmental discus-
sidered as the basic tool to increase the agricultural
sions. As there is increasing productivity through
production.
the implementation of competent and pollution
Comparing the hector vise agricultural production
free technologies in the manufacturing sector it
of India with other developed nation is very low.
would be desirable in combining economic, envi-
The use of chemical fertilizer is necessary to in-
ronmental and social development objectives. To-
crease the productivity. For the purpose the central
day the Indian fertilizer industry in the past 50
and state government declared various scheme for
years has grown in size and stature as it ranks
the development of Indian agricultural production.
third in the world. In 1950-51 in India the per hectare consumption of fertilizer was less than 1/4th of the global average. During this particular period the production
History Fertilizer is defined as any substance which is organic or inorganic, natural or artificial, supplies one or more of the chemical elements required for plant growth. Carbon, oxygen and hydrogen are directly supplied by air and water and therefore not treated
was by and large in the purview of public sector and co operative sector. Government introduced the Retention Price Scheme (RPS) in the year 1977 with the goals of providing fertilizers to farmers at reasonable rates without affecting the profitability of the manufacturers.
as nutrients by the fertilizer industry. One of the vital industries for the Indian economy is the Indian
List of Fertilizer Industry in India
Fertilizer Industry as it manufactures a very critical raw material for agriculture which is the major oc-
CFL : Coromandal Fertilizer Limited
cupation of the country. The fertilizers especially
DMCC : Dharmsi Morarji Chemicals Company Lim-
like the ammonia urea plants are energy demand-
ited
ing in their operation.
FACT : Fertilizers and chemical Travancore Limited
Indian fertilizer industry's main objective is to en-
FCI : Fertilizer Corporation of India Limited
sure the supply of primary and secondary nutrients
46
GFC : Godavari Fertilizers and Chemical
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FB GNFC : Gujarat Narmada Valley Fertilizer Company
tilizer technology developed significantly as the
Limited
chemical needs of growing plants were discov-
GSPC : Gujarat State Fertilizer Company Limited
ered. Modern synthetic fertilizers are composed
HCL : Hindustan Copper Limited
mainly of nitrogen, phosphorous and potassium compounds us the secondary nutrients added.
HFCL : Hindustan Fertilizer Corporation Limited
The use of synthetic fertilizers has significantly im-
IFFCO : Indian Farmers Fertilizer Co-operation Lim-
proved the quality and quantity at the food availa-
ited
ble today but their long term use is debated by
IISCO : Indian Iron steel Company Limited
environmentalists.
JCF : Jayshree Chemicals and Fertilizers
Though much euphoric services sector growth in
KKIBHCO : Krishak Bharti Co-operative Limited
Indian economy has drawn the attention over the globe, still its importance brings confusion when
MCFL : Mangalore Chemical and Fertilizer Limited
we come across the parameters like increasing
MFL : Madras Fertilizer Limited
inequality and a stalemate in condition.
MMTC : Minerals and Metals Trading Corporation
Agriculture the backbone of Indian Economy still holds its relative importance for more than a bil-
NFL : National Fertilizers Limited
lion peoples. The Government Of India from time
RCFL : Rashtriya Chemical and Fertilizers Limited
to time has taken considerable steps for the uplift-
SAIL : Steel Authority of India Limited
ment of Agriculture Sector. Here we have ana-
SFC : Shriram Fertilizers and Chemical
lyzed the performance of Fertilizer Industry being one of the vital parts in agricultural production
SPIC : Southern Petrochemicals Industries Cooperative Limited
and Government's policy initiatives for the same. Fertilizer in the agricultural process is an im-
TISCO : Tata Iron and Steel Company Limited
portant area of concern. Fertilizer industry in India
JAEL : Juari Agro Chemicals Limited
has succeeded in meeting the demand of all chemical fertilizers in the recent years.The Fertilizer Industry in India started its first manufacturing
Scenario for fertilizers in India:
unit of Single Super Phosphate (SSP) in Ranipet
Fertilizer is a substance to soil to improve plants’
near Chennai with a capacity of 6000 MT a year.
growth and yield. First used by ancient farmers fer-
India's green revolution in late sixties gave a posi-
47
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FB tive boost to the sector. The sector experienced a
include fertilizer prices, high yielding areas, irrigat-
faster growth rate and presently India is the third
ed areas, fertilizer nutrient prices and previous
largest fertilizer producer in the world.
years' fertilizer consumption. An estimate of the
According to Given Statistics, total capacity of the
demand and supply till the end of the 11th five
industry as on 30.01.2003 has reached a level of
year plan is given in the chart below:
121.10 lakh MT of nitrogen (inclusive of an installed capacity of 208.42 lakh MT of urea after reassessment of capacity) and 53.60 lakh MT of phosphatic
[ N = Nitrogen , P = Phosphate, K = Potasium ]
nutrient. Presently there are 57 large fertilizers plants in the country producing urea, DAP, Complex fertilizer,
Growth Of The Industry
Ammonium Sulphate (AS) and Calcium Ammonium
The Indian fertilizer industry has come a long way
Nitrate (CAN).
since the setting up of the manufacturing unit of Single Super Phosphate (SSP) near Chennai in
The Fertilizer Association of India (FAI) has set up a
1906. A new impetus to the growth of Indian ferti-
model which is based on several factors that
lizer Industry was provided by the set up the two
Year
Supply
Demand
Demand
De-
fertilizer plants -Fertilizer and Chemicals Travan-
N+P
N+P+K
Supply
mand of
core of Indian Limited (FACT) in Kerala and the
Gap
K
Fertilizer Corporation of India (FCI) in Bihar. This was during the forties and the fifties. The aim was
N+P+K
to create an Industrial base that would provide India with self reliability in food grains. 2007-
16950
23125
8835
2660
08 2008-
17585
24085
9305
2805
09 2009-
18595
25035
9405
2965
monium chloride (2) Increase in the selling prices of all other fertilizer by 40% and (3) Introduction
19912
25960
9178
3130
11 2011-
19965
26900
10235
3300
48
ment implemented three major policy decisions (I) decontrol of Ammonium Sulphate CAN and am-
10 2010-
12
With the effect from 25th July 1991, the govern-
of a subsidy ceiling on SSP. However within a span of three weeks, the government revised the extent of the price like to 30% with effect from 14th
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FB august 1991 and exempted the small and marginal farmers from it completely.
manufacturing countries of the world. The department of fertilizer is responsible for the
India witnessed significant growth of the fertilizer
planning promotion and development of the ferti-
Industry during the sixties and the seventies. By
lizer industry. It also takes into account the import
2003, India has an installed capacity of 12.11 million
and distribution of the fertilizer and also the finan-
MT of nitrogen and 5.36 million MT of phosphate.
cial aspect. There are four main divisions of the
Today with 57 large sized fertilizer plants manufac-
department. These include fertilizer imports,
turing a wide variety of the nitrogen, complex phos-
movement and distribution, finance and accounts
phate. Fertilizers the India fertilizer industry is the
fertilizers projects and planning and administra-
3rd largest producer in the world. One of the major
tion and vigilance. It makes an assessment of the
factors that have led to the rapid increase in the
individual requirements of the States and Union
production capacity of fertilizers in India is the poli-
Territories and those lays out an elaborate supply
cy environment. With the formulation and imple-
plan. Though the soil of India is rich slit, it lacks
mentation of investor friendly policies large invest-
chief plant nutrients like potassium nitrogen and
ment poured in to the private public and co-
phosphate. The increase in the production of ferti-
operative sector’s and this and this propelled the
lizer and its consumption acts as a major contribu-
growth of the Indian fertilizer industry.
tor to overall agricultural development.
In order to meet the demand for gas this is one of
The Indian large size fertilizer units manufacture
the prime requirement for the production of nitrog-
wide varieties of nitrogenous and phosphate com-
enous fertilizers. India has entered into joint ven-
plex fertilizers. In 2005-06 large fertilizer units
tures with foreign companies in number of coun-
were 56. In addition to the nitrogenous and phos-
tries. Joint ventures have also been established for
phates complex fertilizers the large scale units
the supply of phosphoric acid. Indian fertilizer man-
produce urea and ammonium Sulphate as by
ufacturing companies has joined hands with compa-
product. The single super phosphate is produced
nies in Senegal Oman, Jordan, Morocco, Egypt, Tu-
in India by 9 units. These are 72 small and medium
nisia and other countries. It is therefore evident
scale fertilizer units. These unites operate mainly
that the Indian fertilizer industry has witnessed ex-
to produce SSP. The production of urea in India
tensive growth and development in a short span of
has reached near self-sufficiency. The requirement
time. With such extensive growth it is not surprising
of the nitrogenous fertilizers is met through the
that the India ranks Germany, the leading fertilizer 49
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FB indigenous industry. In the case of phosphate fertilizer the raw materials and intermediates are imported in large scale. With the aid of the imported raw material prophetic fertilizers are produced to meet the requirements for the domestic market. The requirement of potash (K) is met entirely through imports. No fertilizer unit of India has any reserve of potash. The growth of the fertilizer industry was at its peak in the 1970s and 1980s. The growth was a bit stagnant in the last decade of the 20th century. With many radical steps been taken by the government of India the industry is expected to grow again.
50
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FB
A glimpse of Agriculture industry in India By Akarshan Behra, IBS Hyderabad
INDIAN AGRICULTURE –Status Quo Agriculture Sector of the Indian Economy is one of the most significant sectors of India. It is the only means of living for almost two-thirds of the working class in India. The country is the largest producer, consumer and exporter of spices and spice products. It ranks third in farm and agriculture outputs. Agricultural export constitutes 10 per cent of the country’s exports and is the fourth-largest exported principal commodity. Many crops are raised in the agriculture sector of India. Rice, wheat, maize, millets and pulses are the major food crops. Oilseeds, sugarcane, cotton, jute & Mesta, and potatoes are the major cash crops. Tobacco, chilies, ginger, onion, turmeric, tapioca, sweats potatoes, etc. are minor cash crops. Among plantation crops tea, coffee and rubber are the important ones. We observe that cereals and pulses occupy about 3/4th of the gross area under cultivation. A clear trend in an increase in the percentage area under the cash crops is discernible. Plantation crops occupy a very small percentage (less than 1%) of the total area under crops. During 1951-91 the gross area under cultivation increased by about 61 percent. The gross area under cereals and pulses increased by about 52 percent, while the gross area under cash crops increased by 92 percent or so. In the earlier times, India was largely dependent upon food imports but the successive stories of the agriculture sector of Indian economy have made it self-sufficing in grain production. The country also has substantial reserves for the same. India depends heavily on the agriculture sector, especially on the food production unit after the 1960 crisis in food sector. Since then, India has put a lot of effort to be self-
51
sufficient in the food production and this endeavor of India has led to the Green Revolution.
FARMER SUICIDE- The main agenda But there is always the other side of the coin. Farmer Suicide is a major issue and has become the need of the hour to look into it. In the past 17 years, close to 3 lakh farmers reeling under mounting pressure have taken their lives. The farmers’ suicide rate in India has ranged between 1.4 to 1.8 per 100,000 total populations, over a 10 -year period through 2005. These are stark signs of the grim crisis. According to the National Crime Records Bureau of India, farmer suicides account for 11.2% of all suicides in India. Taking a look at the past we can trace a few prevailing factors that are responsible for the pathetic plight of farmers. The high land taxes of 1870s, regardless of the effects of frequent famines on farm output or productivity, combined with colonial protection of usury, money lenders and landowner rights, contributed to widespread penury and frustration among cotton and other farmers, ultimately leading to Deccan Riots of 1875-1877. The British government made efforts to limit the interest rate charged by money lenders to farmers, but applied it selectively to areas that served British trading interests. Rural mortality rates, in predominantly agrarian British India, were very high between 1850 to 1940s. However starvation related deaths far exceeded those by suicide, the latter being officially classified under "injuries". Death rate classified under "injuries", in 1897, was 79 per 100,000 people in Central Provinces of India and 37 per 100,000 people in Bombay Presidency.
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FB To look into the present scenario, various reasons contribute to farmer suicides in India. Many experts and researches have opined several and relevant factors and characteristics that are held responsible for the same. Some of the common and major ones are discussed below. Drought As much as 80% of India's farmland relies on flooding during monsoon season, so inadequate rainfall can cause droughts, making crop failure more common. In regions that have experienced droughts, crop yields have declined, and food for cattle has become scarcer. Agricultural regions that have been affected by droughts have subsequently seen their suicide rates increase. Even climate change that is being observed by many has astonished the farmers. Places where heavy showers occurred now face scanty rainfall. On the other hand, places like Rajasthan, famous for their zero rainfall, have witnessed rains for the past few years. New economic policy Structural changes in the macro-economic policy of Indian Government that favored privatization, liberalization and globalization is the root cause of farmer suicides. However, there have been differences among economists and experts regarding the same. Opponents believe that macro environment cannot be responsible for such mishappenings. While proponents think that the policies adapted by the government directly affect the growth opportunities of farmers.
crops and farmer suicides. BT cotton (Bacillus Thuringiensis cotton) was claimed to be responsible for farmer suicides. The BT cotton seeds cost nearly twice as much as ordinary ones. The higher costs forced many farmers into taking ever larger loans, often from private moneylenders charging exorbitant interest rates (60% a year). The moneylender was claimed to collect his dues at harvest time, by compelling farmers to sell their cotton to him at a price lower than it fetches on the market. According to activists, this created a source of debt and economic stress, ultimately suicides, among farmers. Scholars claim that this BT cotton theory made certain assumptions and ignored field reality. Personal reasons Personal reasons can be attributed asFamily problems with spouse, others. Chronic illness. Personal failure. Marriage of daughters. Political affiliation. Property disputes. Debt burden. Price crash. Borrowing too much (e.g. for house construction). Losses in non-farm activities. Habits like drinking, gambling, etc. Losses in non-farm activities. Failure of bore well.
STATISTICS GM crops A number of social activist groups and studies proposed a link between Genetically Modified (GM) 52
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Farmer suicides in the Indian
FB states (2012)-Top 5 states The National Crime Records Bureau of India reported in its 2012 annual report that 135,445 people committed suicide in India, of which 13,754 were farmers (11.2%).Of these, 5 out of 29 states accounted for 10,486 farmer suicides (76%) – Maharashtra, Andhra Pradesh, Karnataka, Madhya Pradesh and Kerala. As per National Crime Records Bureau, the number of suicides by farmers and farm laborers increased to 12,360 in 2014 against 11,772 in 2013. Of these suicides, 5,650 were farmers’ suicides.
SCOPE FOR IMPROVEMENT Narendra Modi’s attention to the woes and plight of farmers during election campaigning has raised a lot of hope for improvement among members of the beleaguered community, but can he deliver? In other words, Can farmers look ahead to their “acche din” (good days)? There are number of short-term as well as longterm measures that can help to solve the issue. Few of them can be discussed below. Providing a guaranteed assured monthly income to farmersThe government should set up a National Farmers Income Commission which should have the mandate to compute the monthly income of a farm family depending upon its production and the geographical location of the farm. It would ensure that the farmer is still engaged in the agricultural activity.
Build a strong network of mandisEven Bollywood actor Aamir Khan has suggested 53
the same in his TV show, Satyamev Jayate. There is an immediate need to strengthen the network of mandis across the country which provides farmers with a platform to sell their produce. Leaving it to markets will result in distress sale. Marketing fruits and vegetablesFor a country which was able to build up an excellent marketing network for one of the most perishable commodities -- milk – there is no reason why a similar approach cannot be adopted in providing a viable marketing network for fruits and vegetables. This has to be accompanied by a skill development programme, imparting improved technology and practices for the young farmers as well as women. Even the farmers should be aware of the new methods to expand their businesses like venturing into online grocery. Co-operative farmingCo-operative farming needs to be encouraged. Appropriate laws must be framed to make cooperatives more independent and effective. Drawing from the experience of the Amul co-operative in dairy farming, Mother dairy and Safal, a similar system needs to be adopted for vegetables/fruit farming. Many of small co-operatives of organic farmers which have done wonders. Upgrade storage facilitiesLack of storage for food grains is appalling. It was in 1979 that under the Save Food Campaign, the government had promised to set up grain silos at 50 places in the country. This should be the top agenda of the government. Not even a single grain should be allowed to go to waste. Restrict imports-
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FB Importing food is importing unemployment. The government must raise import duties on agriculture, horticulture and dairy products and refuse to buckle under the pressure being exerted through the Free Trade Agreements. It should not accept the European Union's demand for opening up for dairy products and fruits/vegetables by reducing the import duties. Studies have now shown that indiscriminate signing of FTAs and bilateral agreements has been disadvantageous to the country. It is time to revisit the trade treaties and protect domestic agriculture, and thereby millions of livelihoods. IntegrationAgriculture, dairy and forestry should be integrated. Agricultural growth should not only be measured in terms of an increase in food grain production but should be seen in the context of the village eco-system as a whole. This will also shift the focus to low external input sustainable agriculture (LEISA) practices. At the same time such an approach will limit the ecological footprint. Rethink the Green RevolutionThe Green Revolution areas of the country are facing a crisis of sustainability. With soil fertility devastated, water table plummeting and the environment contaminated with chemical pesticides and fertilizers, the resulting impact on the entire food chain and human health is being increasingly felt. The Government should launch a nation-wide campaign to shift farming to non-pesticides management techniques. The government with its citizens shall begin to care about its farmers. They provide us food, which is the main source of consumption. If the provider of the food is not with us, then we shall prepare ourselves for another famine just like the one in 1943 in Bengal region.
54
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FB
Industry Knowledge: Banking By MMC Diaries, IBS Hyderabad
Basic Structure
ume of all commercial banks.
1. Reserve Bank of India:
b) Private sector banks:
Reserve Bank of India is the Central Bank of our
Private sector banks are those whose equity is
country. It was established on 1st April 1935 under
held by private shareholders. For example, ICICI,
the RBI Act of 1934. It holds the apex position in the
Others
banking structure. RBI performs various developmental and promotional functions. It has given wide
Source: ICRA, ThomasWhite Report on Indi-
powers to supervise and control the banking struc-
an Banking
ture. It occupies the pivotal position in the monetary and banking structure of the country. It is
With the help of above Figure, we assess the per-
owned by the government of a country and has the
formance of India’s leading banks on key metrics,
monopoly power of issuing notes.
such as credit portfolio size, net interest margins (NIM) and non performing assets (NPA) ratio.
2. Commercial Banks: Commercial bank is an institution that accepts deposit, makes business loans and offer related ser-
Public Sector Banks:- The Public Sector Banks
vices to various like accepting deposits and lending
(PSBs), which are the base of the Banking sector in
loans and advances to general customers and busi-
India account for more than 78 per cent of the to-
ness man. These institutions run to make profit.
tal banking industry assets. Unfortunately they are
They cater to the financial requirements of indus-
burdened with excessive Non Performing assets
tries and various sectors like agriculture, rural de-
(NPAs), massive manpower, falling revenues from
velopment, etc.
traditional sources, lack of modern technology
Commercial bank includes public sector, private
and excessive governmental equity.
sector, foreign banks and regional rural banks: a) Public sector banks:
Private Sector Banks:-On the other hand the Pri-
It includes SBI, seven 7 associate banks and 19 na-
vate Sector Banks are making tremendous pro-
tionalized banks. Altogether there are 27 public sec-
gress through innovation & services and mergers
tor banks. The public sector accounts for 90 percent
& acquisitions. They are leaders in Internet bank-
of total banking business in India and State Bank of
ing, mobile banking, phone banking, ATMs. The
India is the largest commercial bank in terms of vol-
PSBs are of course currently working out Challeng-
55
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FB ing strategies even as 20 percent of their massive
ment of the US$ 100 billion New Development
employee strength has dwindled in the wake of the
Bank (NDB) envisaged by the five-member BRICS
successful Voluntary Retirement Schemes (VRS).
group as well as the BRICS “contingent reserve arrangement” (CRA).
The RBI has decided to allow nominated banks
Foreign Banks :- As far as foreign banks are con-
to import gold, including coins, on a consignment
cerned they are likely to succeed in the Indian Bank-
basis, extending its clarification issued in Novem-
ing Industry. There are more than 45 Foreign banks
ber 2014, which had eased certain categories of
who have branches in India and more than 39 for-
gold imports.
eign banks who have their representative offices in
India.
(MSME), RBI has permitted setting up of an ex-
To help Micro Small and Medium Enterprises
change-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs. Government Initiatives There have been a lot of developments in the Indian banking sector.
The Government has announced a capital infu-
sion of Rs 6,990 crore (US$ 1.1 billion) in nine state run banks, including State Bank of India (SBI) and Punjab National Bank (PNB), but based on new effi-
The government has increased the provisions under the Rural Housing Fund
by Rs
10,000 crore (US$ 1.9 billion) to Rs 40,000 crore (US$ 7.5 billion). It has also sanctioned the development of a central “Know Your Customer” (KYC) depository, to bring the structure of banking payments at par with the global standards15.
ciency parameters such as return on assets and return on equity. In a statement, the finance ministry said, “This year, the Government of India has adopted new criteria in which the banks which are more efficient would only be rewarded with extra capital
RRBs accounted for 29 per cent of NABARD’s total credit in 2010–11. Therefore, the government has proposed a Rs 10,000 crore (US$ 1.9 billion) investment in NABARD specifically for refinancing the RRBs
for their equity so that they can further strengthen their position." 56
The Union cabinet has approved the establish-
Current Bank Rates
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FB Bank Rate
: 8.25%
fore. Banks in India are focusing more and more to
: 4%
provide better services to their clients and have
Cash Reserve Ratio Statutory Liquidity Ratio
: 21.5%
also started upgrading their technology infrastruc-
Policy Repo Rate
: 7.25%
ture, which can help improve customer experi-
Reverse Repo Rate
: 6.25%
ence as well as give banks a competitive edge.
Marginal Standing Facility Rate Base Rate
: 8.25%
Many banks, including HDFC, ICICI and AXIS are
: 9.70%-10.00%
exploring the option to launch contact-less credit
Savings Deposit Rate
: 4%
and debit cards in the market soon. The cards,
Term Deposit Rate
: 7.50%-8.25%
which use near field communication (NFC) mechanism, will allow customers to transact without having to insert or swipe.
The performance of the Indian economy is one of Future Growth Prospects
the strongest drivers for the banking industry’s growth and vice versa (also shown in Figure 1), and the average
The Indian economy is now on the threshold of a major transformation, with expectations of policy initiatives being implemented. Positive business sentiments, improved consumer confidence and more controlled inflation should help boost the economic growth. Higher spending on infrastructure, speedy implementation of projects and continuation of reforms will provide further impetus to growth. All this translates into a strong growth for the banking sector too, as rapidly growing business
GDP growth of 8.1 per cent expected over 2011– 16 will facilitate the expansion of the banking sector27. The government policies bringing in monetary stability will also benefit and shield the industry from global economic or political turmoil. Figure 6 compares the performance of the top banking stocks, which exhibits a similar growth trend. However, a keen observation reveals that the banking sector has outperformed the market 2010 onwards.
turn to banks for their credit needs, thus helping them grow. Also, with the advancements in technology, mobile and internet banking services have come to the
A boost in the banking industry is also expected from the rising per capita income in India, which along with a growth in the earning population of the country will lead to a higher number of people
57
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FB utilizing banking services. The per capita income growth is expected to be a major driver, as the Indian population primarily comprises of conservative spenders who invest in property and other necessities. Higher disposable income will increase the retail credit, with consumers investing in a wide range of products.
Another important parameter for assessing the performance of the banking industry is the domestic credit provided as a percentage of the GDP.
Banking in India is moderately consolidated, with the top 10 players accounting for approximately 60 per cent of the total industry. The Indian banking sector is majorly dominated by public sector banks. Figure 5 describes the market shares of the leading players (based on total credit portfolio), along with the respective shares of government, private and foreign banks.
58
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FB
Insurance Sector By MMC Diaries, IBS Hyderabad
INSURANCE SECTOR:
turn as compared to other traditional plans. The plan provides comparatively higher percentage of
DHFL Pramerica Life to focus on pan-India expan-
the sum assured as money-back benefit at speci-
sion :
fied intervals for a longer policy term, the company said in a release issued here.
DHFL Pramerica Life Insurance Company (DPLI), which is eyeing 50 per cent revenue growth in the
PFRDA to launch online facility to open NPS ac-
current financial year, plans to expand beyond the
counts
northern region to strengthen its presence across the country. The company had already opened four
Pension fund regulator PFRDA is set to launch an
branches in the north and east and 10 in the theyst
online facility for opening of accounts under the
and south zones. The company will leverage on
National Pension System (NPS) to net in prospec-
DHFL distribution network.
tive customers. They have also urged the govern-
Bajaj Finserv rules out IPO for insurance ventures
ment to offer tax-breaks to pension schemes falling on the lines of other financial products like
Other insurance companies are readying them-
mutual funds and insurance, to popularise pen-
selves for public listing, Bajaj Finserv has ruled out
sion
products
in
the
unorganised
sector
any such plans for both of its two insurance subsidiaries -- Bajaj Allianz Life and Bajaj Allianz General.
LIC mops up 7K cr from relaunched senior citizens
They have not taken any call on the IPO so far.
pension
scheme
There is no need for them to list either of their two insurance ventures as they are already wellcapitalised.
Life Insurance Corporation of India (LIC) has so far collected over Rs 7,000 crore under its senior citi-
Bajaj Allianz Life launches traditional plan 'Cash
zen pension scheme 'Varishth Pension Bima Yoja-
Assure'
na'. The private sector players have already several Ulip products and are able to provide better op-
Bajaj Allianz Life Insurance launched 'Cash Assure', a
tion to their customers. But, LIC which had re-
traditional money-back plan with higher rate of re-
vamped its products to meet the regulations did-
59
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FB n't have any Ulip product for last one and half years. LIC hopes that with the launch of new Ulip prod-
IRDAI asks life insurers to avoid delay in pension
uct, it can be able to grow its marketshare.
payment
HDFC to sell 9% stake in HDFC Life to UK's Standard
Insurance watchdog IRDAI has issued directive to
Life
life insurers to streamline process to ensure time-
for
over
Rs
1700
crore
ly payment of pension to policyholders who have HDFC will sell 9 per cent stake in HDFC Life to its
bought such products from them. The Insurance
British joint venture partner Standard Life for a little
Regulatory and Development Authority of India
over
crore.
(IRDAI) has asked life insurers to start sending
The British firm would be increasing its stake to 35 per
communications from September onwards to all
cent from 26 per cent as the Indian government has
policyholders who have bought pension products
allowed up to 49 per cent FDI in the domestic insur-
from them and whose payment is due from April
ance sector. It has businesses in the UK, Europe, North
1, 2016. Through these communications the com-
America,
panies will ask the policyholders what payment
Rs
Asia
1,700
and
Australia.
option they have chosen for their pension. Reference:
(http://economictimes.indiatimes.com
PNB Metlife launches flexible term plan
2015)
PNB MetLife today launched new online term
IRDAI allows banks to tie up with more than one in-
plan - MetLife Mera Term Plan-a flexible term
surer
plan, offering multiple options to financially pro-
The Insurance Regulatory and Development Authority of India (IRDAI) allowed banks to tie up with more than one insurer, from life, non-life and standalone health insurance segments, here today. Banks have been allowed by the IRDAI to sell three products each from all life, non-life and stand alone health insurance. However, it will not be mandatory for banks to implement the same and it has been left up to them to take a call on the 60
subject.
tect one's family. The plan offers protection to policyholders including features like adding spouse in the life cover, increasing monthly income option growing @ 12% p.a., life stage benefit, child benefit option to cover one's child's education expenses till they turn 21. The company's research highlighted that people are typically keen to get flexibility in their cover related to life stage and are concerned about their family's fi-
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB nancial
LIC
future
chief
or
S
their
K
child's
Roy
education
elected
if
something
Chairman
of
were
apex
to
happen
body
of
to
them.
insurers
Life Insurance Council is a forum that connects the various stakeholders of the sector. It develops and coordinates all discussions between the Government, regulatory body and the public. It has representatives from the 24 insurance companies currently operating in India. LIC chief S K Roy was today elected as Chairman of the Life Insurance Council, the apex industry body of insurers in the country. Roy was elected in a poll conducted among all the 24 members of the Council here. He will be heading the three- member Executive Committee (EC), a key body of the Council, for a period of three years. UK-based Aviva writes off £24-million goodwill in India operations Aviva has written off goodwill in its Indian operations after it fired a few top fund managers for procedural lapses. The company at the same time is also raising its stake in the local joint venture to 49% before selling off completely. An impairment of £24 million (2013: £29 million) has been recognised in respect of this associate, reducing its goodwill to nil.
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FB
Continental Story: Australia By MMC Diaries IBS Hyderabad
Australia officially the Commonwealth of Australia,
Australia is a developed country and one of the
is an Oceanian country comprising the mainland of
wealthiest in the world, with the world's 12th-
the Australian continent, the island of Tasmania,
largest economy. In 2014 Australia had the world's
and numerous smaller islands. It is the world's sixth
fifth-highest per capita income. Australia's military
-largest country by total area. Neighbouring coun-
expenditure is the world's 13th-largest. With the
tries include Papua New Guinea, Indonesia and East
second-highest human development index global-
Timor to the north; the Solomon Islands and Vanua-
ly, Australia ranks highly in many international
tu to the north-east; and New Zealand to the south-
comparisons of national performance, such as
east. For at least 40,000 years before the first
quality of life, health, education, economic free-
British settlement in the late 18th century,Australia
dom, and the protection of civil liberties and po-
was inhabited by indigenous Australians, who spoke
litical rights. Australia is a member of the United
languages grouped into roughly 250 language
Nations, G20, Commonwealth of Nations, ANZUS,
groups. After the European discovery of the conti-
Organisation for Economic Co-operation and De-
nent by Dutch explorers in 1606, Australia's eastern
velopment (OECD), World Trade Organization,
half was claimed by Great Britain in 1770 and initial-
Asia-Pacific Economic Cooperation, and the Pacific
ly settled through penal transportation to the colo-
Islands Forum.
ny of New South Wales from 26 January 1788. The population grew steadily in subsequent decades; the continent was explored and an additional five self-governing crown colonies were established. On 1 January 1901, the six colonies federated, forming the Commonwealth of Australia. Since Federation, Australia has maintained a stable liberal democratic political system that functions as a federal parliamentary democracy and constitutional monarchy comprising six states and several territories. The population of 23.6 million is highly urbanised and heavily concentrated in the eastern states and on
Australia is a constitutional monarchy with a federal division of powers. It uses a parliamentary system of government with Queen Elizabeth II at its apex as the Queen of Australia, a role that is distinct from her position as monarch of the other Commonwealth realms. The Queen resides in the United Kingdom, and she is represented by her viceroys in Australia (the Governor-General at the federal level and by the Governors at the state level), who by convention act on the advice of her ministers. Supreme executive authority is vested by the Constitution of Australia in the sovereign,
the coast.
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FB but the power to exercise it is conferred by the Con-
overlapping six-year terms except for those
stitution specifically on the Governor-General. The
from the territories, whose terms are not fixed
most notable exercise to date of the Governor-
but are tied to the electoral cycle for the lower
General's reserve powers outside the Prime Minis-
house; thus only 40 of the 76 places in the Sen-
ter's request was the dismissal of the Whitlam Gov-
ate are put to each election unless the cycle is
ernment in the constitutional crisis of 1975. The
interrupted by a double dissolution.
federal government is separated into three branches:
Australia's electoral system uses preferential voting for all lower house elections with the ex-
The legislature: the bicameral Parliament, defined
ception of Tasmania and the ACT which, along
in section 1 of the constitution as comprising the
with the Senate and most state upper houses,
Queen (represented by the Governor-General), the
combine it with proportional representation in a
Senate, and the House of Representatives;
system known as the single transferable vote.
The executive: the Federal Executive Council, in
Voting is compulsory for all enrolled citizens 18
practice the Governor-General as advised by the
years and over in every jurisdiction,as is enrol-
Prime Minister and Ministers of State
ment (with the exception of South Australia).
The judiciary: the High Court of Australia and other federal courts, whose judges are appointed by the Governor-General on advice of the Council
The party with majority support in the House of Representatives forms the government and its leader becomes Prime Minister. In cases where no party has majority support, the Governor-
In the Senate (the upper house), there are 76 senators: twelve each from the states and two each from the mainland territories (the Australian Capital
General has the constitutional power to appoint the Prime Minister and, if necessary, dismiss one that has lost the confidence of Parliament.
Territory and the Northern Territory). The House of Representatives (the lower house) has 150 members elected from single-member electoral divisions, commonly known as "electorates" or "seats", allocated to states on the basis of population,with each original state guaranteed a minimum of five seats.Elections for both chambers are normally held every three years, simultaneously; senators have
There are two major political groups that usually form government, federally and in the states: the Australian Labor Party and the Coalition which is a formal grouping of the Liberal Party and its minor partner, the National Party. Within Australian political culture, the Coalition is considered centre-right and the Labor Party is considered
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FB centre-left.Independent members and several minor parties have achieved representation in Austral-
1. FLORES Location
South East Asia
Coordinates
8°40′29″S 121°23′04″ECoordinates:
ian parliaments, mostly in upper houses. Following a partyroom leadership challenge, Julia
8°40′29″S 121°23′04″E
Gillard became the first female Prime Minister in June 2010.The most recent federal election was
Archipelago
held on 7 September 2013 and resulted in a majori-
Area
ty government for the Coalition. Liberal Party leader
Area rank
Tony Abbott was sworn into office as Prime Minister by the Governor-GenerAustralia is a federation
Lesser Sunda Islands
13,540 km2 (5,230 sq mi)[1] 60th
Highest elevation
2,370 m (7,780 ft)
consisting of six states, three federal territories and
Highest point Poco Mandasawu
seven external territories. The Australian mainland
Country
consists of five of the six federated states (with the
Indonesia
sixth state, Tasmania, being located on an island in close proximity to the mainland) and three federal
Province
East Nusa Tenggara
territories (including the small, somewhat anoma-
Largest settlement
lous Jervis Bay Territory) which constitute the
Demographics
world's sixth-largest country by total area. In addi-
Maumere (pop. 70,000)
Population
1,831,000 (as of 2010)
Density
135 /km2 (350 /sq mi)
tion, there are six island territories, known as external territories. Three of the external territories are inhabited, and the other three, besides non-
Flores is one of the Lesser Sunda Islands, an island
permanent scientists, are uninhabited. Australia
arc with an estimated area of 14,300 km² extend-
additionally claims part of Antarctica as the Australi-
ing east from the Java island of Indonesia. The
an Antarctic Territory.All states and two of the
population was 1,831,000 in the 2010 census and
three internal territories have their own parlia-
the largest town is Maumere. Flores is Portuguese
ments and administer themselves; all remaining
for "flowers".
territories are administered by the federal govern-
Flores is located east of Sumbawa and Komodo
ment, but with Norfolk Island having some degree
and west of Lembata and the Alor Archipelago. To
of self-governmenal of Australia on 18 September.
the southeast is Timor.
These are the country under Australia continent :64
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FB To the south, across the Sumba strait, is Sumba and
about 4,514 km² (1,825 sq mi). The provincial capi-
to the north, beyond the Flores Sea, is Sulawesi.
tal and largest city on the island is Mataram. It is
On 12 December 1992, an earthquake measuring
somewhat similar in size and density with neigh-
7.8 on the Richter scale occurred, killing 2,500 peo-
boring Bali and shares some cultural heritage, but
ple in and around Maumere, including islands off
is administratively part of NTB along with sparsely
the North coast. Flores is part of the East Nusa
populated Sumbawa. It is surrounded by a num-
Tenggara province. The island along with smaller
ber of smaller islands locally called Gili.
minor islands are split into eight regencies (local
The island was home to some 3.17 million Indone-
government districts); from west to east these are:
sians as recorded in the decennial 2010 census
Manggarai Barat (West Manggarai),[5] Manggarai
the latest estimate (for January 2014) gives the
Tengah (Central Manggarai), Manggarai Timur (East
population as 3,311,044.
Manggarai), Ngada, Nagekeo, Ende, Sikka and Flores Timur (East Flores).[6] Flores has 39.1% of the East Nusa Tenggara provincial population as of 2010, and the most Indonesians of all islands in the province. It is the island with the 9th most Indonesians. Among all islands containing Indonesian territory, it is the 10th most populous after Java, Sumatra, Borneo, Sulawesi, New Guinea, Bali, Madura, Lombok, and Timor.
Lombok is under the administration of the Governor of the province of West Nusa Tenggara (Nusa Tenggara Barat). The province is administered from the provincial capital of Mataram in West Lombok. The island is administratively divided into four kabupaten (regencies) and one kota (city). They are as follows, with their areas and populations at the 2010 Census and according to the latest (January 2014) official estimates:
2. Lombok
In September 2010, Central Lombok some villag-
Lombok is an island in West Nusa Tenggara prov-
ers were reported to be walking for several hours
ince, Indonesia. It forms part of the chain of the
to fetch a single pail of water. Nieleando, a small
Lesser Sunda Islands, with the Lombok Strait sepa-
coastal village about 50 kilometers from the pro-
rating it from Bali to the west and the Alas Strait
vincial capital, Mataram, has seen dry wells for
between it and Sumbawa to the east. It is roughly
years. It has been reported that occasionally the
circular, with a "tail" (Sekotong Peninsula) to the
problem escalates sufficiently for disputes
southwest, about 70 km across and a total area of 65
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB and fighting between villagers to occur. The prob-
ards and a large majority of the population live in
lems have been reported to be most pronounced in
poverty. Still, the island is fertile, has sufficient
the sub-districts of Jonggat, Janapria, Praya Timur,
rainfall in most areas for agriculture, and possess-
Praya Barat, Praya Barat Daya and Pujut. In 2010 all
es a variety of climate zones. Consequently, food
six sub-districts were declared drought areas by
in abundant quantity and variety is available inex-
provincial authorities.Sumbawa, the other main is-
pensively at local farmer's markets, though locals
land of the province, also experienced severe
still suffer from famine due to drought and sub-
drought in 2010, making it a province-wide issue.
sistence farming. A family of 4 can eat rice, vege-
Many of the visitors to Lombok and much of the
tables, and fruit for as little as US$0.50. Even
islands goods come across the Lombok Strait by sea
though a family's income may be as small as
or air links from Bali . Only 40 kilometres (25 mi)
US$1.00 per day from fishing or farming, many
separate the two islands. Lombok is often marketed
families are able to live a contented and produc-
as “an unspoiled Bali,” or “Bali’s sister island.” Cur-
tive life on such astonishingly small incomes. How-
rently with support of the central government Lom-
ever, the people of Lombok are coming under in-
bok and Sumbawa are being developed as Indone-
creasing pressure from rising food and fuel prices.
sia 2nd destination for international and domestic
Access to housing, education and health services
tourism. Lombok has retained a more natural, un-
remains difficult for many of the island's indige-
crowded and undeveloped environment, which
nous population.
attract travelers who come to enjoy its relaxed pace
The percentage of the population living in poverty
and the opportunity to explore the island's un-
in urban areas of Nusa Tenggara Barat in 2008 was
spoiled, spectacular natural beauty. The more con-
29.47% and in 2009 it was 28.84%. For those living
temporary marketing campaigns for Lombok/
in rural areas in 2008 it was 19.73% and in 2009 it
Sumbawa seek to differentiate from Bali and pro-
reduced marginally to 18.40% For combined ur-
mote the island of Lombok as a standalone destina-
ban and village the figures were 23.81% and in
tion. The opening of the Lombok International Air-
2009 it fell slightly to 22.78%.
port on 1 October 2011 assisted in this endeavour.
In Mataram in 2008 the percentage of the population that was unmarried was 40.74%, married
Nusa Tenggara Barat and Lombok may be consid-
52.01%, divorced 2.51% and widowed 4.75.
ered economically depressed by first world stand-
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FB 3. Melanesia
National boundaries sometimes cut across archi-
Melanesia (and occasionally Australasia) extending
pelagos. The names of the political units in the
from the western end of the Pacific Ocean to the
region have changed over time, and sometimes
Arafura Sea, and eastward to Fiji.
have included geographical terms. For example,
The name Melanesia (in French "Mélanésie" from the Greek μέλας, black, and νῆσος, islands) was first used by Jules Dumont d'Urville in 1832 to denote an ethnic and geographical grouping of islands whose inhabitants he thought were distinct from those of Polynesia and Micronesia.
the island of Makira was once known as San Cristobal, the name given to it by Spanish explorers. It is in the country Solomon Islands, which is a nation-state and not a contiguous archipelago. The border of Papua New Guinea and Solomon Islands separates the island of Bougainville from nearby islands like Choiseul, although Bougainville is geo-
A distinction is often made between the islands of New Guinea and what is known as Island Melanesia,
graphically part of the chain of islands that includes Choiseul and much of the Solomons.
which consists of "the chain of archipelagos, islands, atolls, and reefs forming the outer bounds of
4. NEW CALEDONIA :
the sheltered oval-shaped coral sea". This includes
New Caledonia is a special collectivity of France
the Louisiade archipelago (part of Papua New Guin-
located in the southwest Pacific Ocean, 1,210 km
ea, the Bismarck Archipelago(part of Papua New
(750 mi)
Guinea and Solomon Islands), and the Santa Cruz
(10,026 mi) east of Metropolitan France. The ar-
Islands (part of the country called Solomon Islands).
chipelago, part of the Melanesia subregion, in-
The country of Vanuatu is composed of the New
cludes the main island of Grande Terre, the Loyal-
Hebrides island chain (and in the past 'New Hebri-
ty Islands, the Chesterfield Islands, the Belep ar-
des' has also been the name of the political unit lo-
chipelago, the Isle of Pines, and a few remote is-
cated on the islands). New Caledonia is composed
lets. The Chesterfield Islands are in the Coral Sea.
of one large island and several smaller chains, in-
Locals refer to Grande Terre as Le Caillou ("the
cluding the Loyalty Islands. The nation of Fiji is com-
pebble").
posed of two main islands, Viti Levu and Vanua Le-
New Caledonia has a land area of 18,576 km2 (7,172 sq mi). Its population of 268,767 (Aug. 2014 census) consists of a mix of Kanak people (the original inhabitants of New Caledonia), people
vu, and smaller islands, including the Lau Islands. The names of islands in Melanesia can be confusing:
east
they have both indigenous and European names.
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of
Australia
and
16,136 km
FB of European descent (Caldoches and Metropolitan
val forces include two P400 class patrol vessels, a
French), Polynesian people (mostly Wallisians), and
BATRAL, and a patrol boat of the Maritime Gen-
SoutheastAsian people, as well as a few people of
darmerie. The air force is made up of three Casa
Pied-Noir and Maghreban descent. The capital of
transport aircraft, four Puma helicopters and a
the territory is Nouméa
Fennec helicopter, based in Tontouta. In addition,
New Caledonia is a sui generis collectivity to which
760 gendarmes are deployed on the archipelago.
France has gradually transferred certain powers. It
At the last census in 2014 New Caledonia had a
is governed by a 54-member Territorial Congress, a
population of 268,767. Of these, 17,436 live in the
legislative body composed of members of three
Loyalty Islands Province, 45,137 in the North Prov-
provincial assemblies. The French State is repre-
ince,
sented in the territory by a High Commissioner. At
ince.Population growth has slowed down since
a national level, New Caledonia is represented in
the 1990s, but remains strong with a yearly in-
the French Parliament by two deputies and two
crease of 1.7% between 1996 and 2009.
senators. At the 2012 French presidential election, the voter turnout in New Caledonia was 61.19%.
and
183,007
in
the
South
Prov-
Natural growth is responsible for 85% of the population growth, while the remaining 15% is
For 25 years, the party system in New Caledonia
attributable to net migration. The population
was dominated by the anti-independence The Rally
growth is strong in South Province (2.3% per year
–UMP. This dominance ended with the emergence
between 1996 and 2009), moderate in North
of a new party, Avenir Ensemble, also opposed to
Province (0.7%), but negative in the Loyalty Is-
independence, but considered more open to dia-
lands, which are losing inhabitants (−1.3%).
logue with the Kanak movement, which is part of the Kanak and Socialist National Liberation Front, a coalition of several pro-independence groups
Over 40% of the population is under 20, although the ratio of older people on the total population is increasing.[49] Two residents of New Caledonia
The Armed Forces of New Caledonia (French: Forces
out of three live in Greater Nouméa. Three out of
armées de Nouvelle-Calédonie) include about 2,000
four were born in New Caledonia. The total fertili-
soldiers, mainly deployed in Koumac, Nandi,
ty rate went from 3.2 children per woman in 1990
Tontouta, Plum, and Noumea. The land forces con-
to 2.2 in 2007
sist of a regiment of the Troupes de marine, the Régiment d'infanterie de marine du Pacifique. The na-
68
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FB New Caledonia has one of the largest economies in
Financial support from France is substantial, rep-
the South Pacific, with a GDP of US$9.89 billion in
resenting more than 15% of the GDP, and contrib-
2011 The nominal GDP per capita was US$38,921
utes to the health of the economy. Tourism is un-
(at market exchange rates) in 2011. It is thus higher
derdeveloped, with 100,000 visitors a year, com-
than New Zealand's, though there is significant ine-
pared to 400,000 in the Cook Islands and 200,000
quality in income distribution,and long-standing
in Vanuatu.Much of the land is unsuitable for agri-
structural imbalances between the economically
culture, and food accounts for about 20% of im-
dominant South Province and the less developed
ports. According to FAOSTAT, New Caledonia is
North Province and Loyalty Islands. The currency in
one of world's largest producers of: yams (33rd);
use in New Caledonia is the CFP franc, pegged to
taro (44th); plantains (50th); coconuts (52nd).The
the euro at a rate of 1,000 CFP to 8.38 euros. It is
exclusive economic zone of New Caledonia covers
issued by the Institut d'Emission d'Outre-Mer.
1.4 million square kilometers. The construction sector accounts for roughly 12% of GDP, employing
Real GDP grew by 3.8% in 2010 and 3.2% in 2011, boosted by rising worldwide nickel prices and an increase in domestic demand due to rising employ-
9.9%
of
the
salaried
population
in
2010.Manufacturing is largely confined to smallscale activities such as the transformation of foodstuffs, textiles and plastics.
ment, as well as strong business investments. In 2011, exports of goods and services from New Cale-
6. TIMOR
donia amounted to 2.11 billion US dollars, 75.6% of
Timor is an island at the southern end of Mari-
which were mineral products and alloys (essentially
time Southeast Asia, north of the Timor Sea. The
nickel ore and ferronickel). Imports of goods and
island is divided between the sovereign states of
services amounted to 5.22 billion US dollars. 22.1%
East Timor, on the eastern part, and Indonesia, on
of the imports of goods came from Metropolitan
the western part. The Indonesian part, also known
France and its overseas departments, 16.1% from
as West Timor, constitutes part of the province of
other countries in the European Union, 14.6% from
East Nusa Tenggara. Within West Timor lies an
Singapore (essentially fuel), 9.6% from Australia,
exclave of East Timor called Oecusse District. The
4.5% from the United States, 4.2% from New Zea-
island covers an area of 30,777 square kilometres.
land, 2.0% from Japan, and 27.0% from other coun-
The name is a variant of timur, Malay for "east"; it
tries.The trade deficit in goods and services stood at
is so called because it lies at the eastern end of
3.11 billion US dollars in 2011.
the Lesser Sunda Islands. Timor is located north
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FB of Australia, and is one of the easternmost Sunda
people of East Timor now have an opportunity to
Islands. Together with Sumba, Babar and associated
review the status of their territory. Agreements
smaller islands, Timor forms the southern outer ar-
signed on 5 May 1999 between Indonesia, Portu-
chipelago of the Lesser Sunda Islands with the inner
gal (the former colonial power) and the United
islands of Flores, Alor and Wetar to the north, and
Nations provide for a ballot on 8 August on a pro-
beyond them Sulawesi.
posal for autonomy. If the autonomy proposal is
GEOGRAPHIC CONDITIONS:MAJOR ISSUES THAT
rejected, the UN will assume authority in the terri-
AFFECTED ITS ECONOMY.:
tory and independence could soon follow. Howev-
East Timor is a poor country, with health issues including malaria and dengue fever. Sources of revenue include gas and oil in the Timor Sea, coffee growing and tourism. East Timor has been an im-
er a series of issues and problems in Indonesia and in East Timor itself could endanger the prospects for a peaceful ballot and a stable process of transition to either autonomy or independence
portant issue for both Indonesia and for Australia-
ITS CONTRIBUTION TO GDP AND CHALLENGES IN
Indonesia relations since 1975, when the collapse of
THE DEVELOPMENT:
Portugal's willingness to continue colonial rule
The Timor-Leste government has access to signifi-
(after the fall of the authoritarian Caetano regime in
cant oil and gas revenues from the Timor Sea,
April 1974) was followed by an attempted declara-
with US$14.6 billion in its sovereign wealth Petro-
tion of independence in East Timor and then by in-
leum Fund. These revenues have funded a raft of
vasion by Indonesia. Australia's interest in East Ti-
social security schemes and massive investments
mor has reflected the legacy of contacts during
in infrastructure. However, the government faces
World War Two (when Australian commandos oper-
a significant challenge: some projections forecast
ated against the Japanese with assistance from
that these revenues will be exhausted by 2025,
many East Timorese), and controversy over the
and there is presently no obvious way to replace
manner of Indonesia's invasion, the deaths of five
them. This means that the development decisions
journalists working for Australian media in October
the government makes in the next few years will
1975, and ongoing allegations of human rights and
be critical to determining whether Timor-Leste
other abuses while East Timor has been incorpo-
has a future as a thriving middle-income state, or
rated as a part of Indonesia.
whether it declines further into poverty. In Timor-
After 23 years of incorporation into Indonesia, the
Leste 41% of the population lives below the
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FB basic needs poverty line, with estimates that 58% of
conflict, which peaked between 1825 and 1831
communities live in poor housing conditions and
and led to more than three years of martial law,
the majority have no access to clean water and san-
cost the lives of almost 1100 Aboriginals and
itation. Yet across the country hundreds of brand
settlers. The near-destruction of Tasmania's Abo-
new prefabricated houses lie vacant. These houses,
riginal population has been described by some
the product of the government’s 2011 Millennium
historians as an act of genocide by the British.
Development Goals (MDG) Suco Program exemplify
ISSUES THAT AFFECTED ITS ECONOMY:
the difficulties of development in one of Australia’s nearest neighbours.
For most Tasmanians a darker reality lies behind the seductive tourism brochures showcasing the
7. Tasmania:
state’s pristine wilderness, gourmet-magazine ar-
abbreviated as Tas and known colloquially as
ticles celebrating its burgeoning food culture, and
"Tassie") is an island state that is part of the Com-
newspaper stories gasping at a world-leading art
monwealth of Australia. It is located 240 kilometres
museum. Tasmania ranks at the bottom among
(150 mi) to the south of the Australian mainland,
Australian states on virtually every dimension of
separated by Bass Strait. The state includes the
economic, social, and cultural performance: high-
main island of Tasmania, the 26th largest island in
est unemployment, lowest incomes, languishing
the world, and the surrounding 334 islands.[12]The
investment, lowest home prices, least educated,
state has a population of 507,626 (as of June 2010),
lowest literacy, most chronic disease, poorest lon-
almost half of which resides in the Greater Hobart
gevity, most likely to smoke, greatest obesity,
precinct, which forms the metropolitan area of the
highest teenage pregnancy, highest petty crime,
state capital and largest city Hobart.
worst domestic violence. It seems not to matter which measure is chosen, Tasmania will likely finish last. The underlying problem is simple but in-
The Aboriginal population was estimated to have been between 3000 and 7000 at the time of colonisation, but was almost wiped out within 30 years by a combination of violent guerrilla conflict with
tractable: Tasmania has developed a way of life, a mode of doing things, a demographic, a culture and associated economy, that reproduces underachievement generation after generation.
settlers known as the "Black War", intertribal conflict and, from the late 1820s, the spread of infectious diseases to which they had no immunity. The 71
Everyone knows the problems; they are manifest, reported day after day. The reality is that
THE FINANCIAL BULLETIN | CELEBRATION EDITION | moneymattersclub.com
FB Tasmania has bred a dominant social coalition that
less well paid than their co-workers on the main-
blocks most proposals to improve. Problems and
land. However, it is rather obvious that the aver-
challenges are debated endlessly, with no resolu-
age person will work for less in Tasmania because
tion. Most discussion avoids mention of the uncom-
the cost of housing is considerably lower than on
fortable truths at the source of underperformance.
the mainland. There is a counter argument that
Ultimately, Tasmania doesn’t change because its
food and petrol costs are higher in Tasmania, pri-
people don’t really want to. They don’t need to
marily because these essentials are controlled by
change because their way of life is mainly financed
two major retailers who, lacking effective national
by the mainland. Far from helping overcome this
enforcement of a competitive environment, quite
pattern, the nation’s resource-boom prosperity is
shamelessly plunder the Tasmanian consumer.
enabling
under-
Here are the largest contributors to the Tasmani-
achievement. It’s allowing the government to pay
an economy – the sectors that pay for a pleasant
an ever-expanding proportion of the population not
lifestyle for 500,000 islanders.
and
cementing
Tasmania’s
to work; it’s driving up wages, materials, transport,
1.PROCESSESD METALS
regulation, exchange rates, and other costs that make Tasmania’s traditional industries uncompeti-
2.TOURISM
tive; and it’s allowing government to subsidise non-
3.MANUFACTURED GOODS
performing industries.
4.WOOD AD PAPER
ITS CONTRIBUTION TO GDP:
8. SUMBAWA: Sumbawa is an Indonesian island, in the middle of
Tasmania has a diverse economy with hundreds of
the Lesser Sunda Islands chain, with Lombok to
significant exporters. The exports go mainly to Asia,
the west, Flores to the east, and Sumba further to
and Japan is Tasmania's largest single customer.
the southeast. It is part of the province of West
Keeping the money going around within the State, the greatest demand is generated by the public sector. There are probably more government jobs per head of population in Tasmania than anywhere else in Australia. Public servants in Tasmania sometimes agitate for higher pay, on the basis that they are 72
Nusa Tenggara, but there are presently steps being taken by the Indonesian government to turn the island into a separate province.[1] Traditionally the island is known as the source of sappan wood used to make red dye, honey and sandalwood. Its savanna-like climate and vast
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FB grassland is used to breed horses and cattle and to
eruption. Then, she focused on the volcanology
hunt deer.
aspect, studying how particles are formed and
ISSUES THAT AFFECTED ITS ECONOMY:
spread in the air. This will allow Kandlbauer to as-
The year 1816 was known as “the year without summer.� On April 5, 1815, the Tambora volcano located on the island of Sumbawa in Indonesia suddenly erupted with a resounding detonation that could be heard 1,400 km away. This already massive eruption was nothing compared to what came
sess the climate reaction in case a Tambora style eruption were to happen today. However, she is going beyond the environmental aspect by also examining the socioeconomic aspect of such a disaster. 9. NEW ZEALAND
5 days later in what would become the largest volcanic eruption in recorded history. Over 100 km3 of pulverized rock was ejected into the atmosphere in
ISSUES THAT AFFECTED ITS ECONOMY:
an explosion 52,000 times more powerful than the Hiroshima bombing, killing at least 60,000 people.
1. New Zealand has an unacceptable unemploy-
As a result, not only did the mountain go from a
ment rate of 6.5% or 154,000 unemployed as of 4
height of 4,300 m to 2,850 m, but CO2 was released
Aug 2011. There is plenty of work to do and most
into the atmosphere in such quantities that it im-
people say there is not the money to pay people.
pacted the climate on a global scale. In 1816, several regions of the world experienced a climatic shift, with a temperature drop of a few degrees Celsius, impacting agriculture to such an extent that it caused famine and disease in Europe.
2.
According to a report in 2001 by Every Child
Counts, up to 270,000 children live in poverty. Every Child Counts (ECC) is a coalition of nongovernmental organizations and individuals working to improve the status and wellbeing of New
What if such an eruption were to happen in our
Zealand children. The coalition is driven by Barnar-
modern society? This is the question Jessica Kan-
dos, Plunket, UNICEF, Save the Children and Te
dlbauer is trying to answer through her PhD at the
Kahui Mana Ririki. Half of these are Maori or
University of Bristol. In order to do so, Kandlbauer is
Pacifika..
conducting a four-phase research project. First, she investigated historical documents and contemporary literature in order to reconstruct the Tambora
73
3. Small and medium sized businesses, who create the vast majority of jobs, say
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FB they have too much red tape. In New Zealand, our
Until the early 1980s, the New Zealand govern-
350,000 or so SMEs (less than 100 employees)
ment focused on maximising agricultural produc-
make up more than 99% of all businesses and ac-
tion and farmers enjoyed large subsidies. Agricul-
count for about 60% of employment. (Massey Uni-
ture’s contribution to GDP peaked in 1973 and
versity).
1980, boosted by soaring commodity prices and
4. The money supply in NZ has increased until the
record sheep and beef exports.
end of September 2008 but has declined since then
Things changed in 1985, when the government
and is now static. (RBNZ website). The money sup-
floated the dollar and began phasing out support
ply is related to the ability to spend on wages and
for agriculture, including fertiliser subsidies and
salaries.
tax concessions. The agriculture industry’s contri-
ITS CONTRIBUTION TO GDP:
bution to GDP has been generally declining since
Goods-producing industries are all the manufacturing, construction, electricity, gas, water supply, and waste management industries.
then, with the occasional rise. This industry is strongly affected by commodity prices, currency fluctuations, and weather-related events such as droughts.
In the 1970s, trade and tariff barriers protected New Zealand manufacturers from foreign competition. In the mid-1980s, the country went through a host of market reforms that threw the economy wide open. As a result, manufacturing steadily de-
There has been a rise in activity in the mining industry in recent years. This industry’s contribution to GDP has risen by 1 percent since 2007. 10. New Guinea:
clined as a proportion of New Zealand’s GDP. Forty years ago, manufacturing made up 26 percent of GDP. In 2009, this industry made up 13 percent of GDP. New Zealand has been promoted as a major world food exporter. Our statistics show that agri-
is a large Island in the South West Pacific region.It is the world's second-largest island, after Greenland, covering a land area of 786,000 km2..
culture’s relative contribution to GDP decreased
ISSUES THAT AFFECTED ITS ECONOMY:
significantly, from 10 percent in 1972 to 4 percent
After the state was nearly bankrupted in 2001,
in 2009. However, this decline does not include any
real per capita income has risen by 150 per cent
downstream effects in related industries such as
and private sector employment has more than
dairy product manufacturing.
doubled.
74
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FB The PNG economy is projected to grow 7.5 per cent this year, supported by high government spending, high commodity prices, and a US$16 billion lique-
The Gross Domestic Product (GDP) in Papua New
fied natural gas (LNG) project, which is now enter-
Guinea expanded 8.40 percent in 2014 from the
ing its peak construction phase. Business is also
previous year. GDP Annual Growth Rate in Papua
booming. A recent survey of PNG’s top 100 Chief
New Guinea averaged 3.67 percent from 1995 un-
Operating Officers (COOs) found that 90per cent
til 2014, reaching an all time high of 11.10 percent
expect company profits to be higher in 2012 than in
in 2011 and a record low of -6.34 percent in 1997.
2011, with none expecting a decline. Two thirds
GDP Annual Growth Rate in Papua New Guinea is
said their 2011 profits had exceeded expectations.
reported by the Bank of Papua New Guinea. Pa-
With over US$27 billion (equivalent to 190 per cent
pua New Guinea, one of the poorest and most iso-
of 2011 GDP) expected to be invested in the mining,
lated countries in the world, has been growing
oil and gas sectors before the end of the decade,
consistently in recent years. Papua New Guinea is
PNG’s medium-term growth outlook is strong.
rich in natural resources, such as oil, gold and cop-
Rising inequality is partly a result of constraints on non-mining investment. While the stock of private sector employment has doubled over the last decade, ADB estimates show that less than 5 per cent of the population, (or roughly 10 per cent of the working age population) are currently able to earn a wage in the formal economy. The Asian Development Bank estimates that less than 10 per cent of the working age population are currently able to earn a wage in the formal economy, These con-
per. Natural resource extraction, the most important sector of the economy, accounts for 60 percent of GDP and a large share of government revenues. Agriculture is also important, since it employs up to 85 percent of the population. Revenues from natural resource exploitation have resulted in high government spending and a construction boom. Yet, as the country suffers from endemic corruption and lacks a functioning legal system, inequality has been increasing.
straints combined with rising firm profitability have led to a dramatic outflow of investment funds from PNG over the last decade. ITS CONTRIBUTION TO GDP:
75
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FB
Continental Story: North America By MMC Diaries, IBS Hyderabad
More than ever, for the businesses, governments, non-profits and many other
organizations,
adopting a global mindset is becoming a necessity so as to remain viable and relevant in today’s global marketplace. Not only this, but, it’s very well accepted that with each passing day, organizations and societies are becoming less homogenous and we find ourselves dealing with cultural diversity in many stages of our lives. Be it our neighborhood, our school, our workplace or any other community, we find ourselves interacting with people who are way different from us. Of course there are similarities, but, it is the ability to discern which differences are making a difference, and that is the key to fulfilling the promise of global diversity.
Increasing demands for diversity from our partners, clients, customers and other stakeholders. North America is one such continent which is ethnically diverse. Located wholly within the Northern Hemisphere and almost wholly within the Western Hemisphere, can also be considered as the northern subcontinent of the Americas. GEOGRAPHICAL LOCATION This subcontinent of the America is located in the Northern Hemisphere and is bordered to the north by the Arctic Ocean, to the east by the Atlantic Ocean, to the west and south by the Pacific Ocean, and to the southeast by South America and the Caribbean Sea. Being the third largest continent by area, following Asia and Africa, and the fourth by population
In the evolution of leadership, diversity is not de-
after Asia, Africa, and Europe, covers an area of
fined just by some race or gender. It also takes in
about 24,709,000 square kilometers which is ap-
consideration the whole human experience — age,
proximately equal to about 16.5% of the earth's
culture, education, personality, skills and life experi-
land area and about 4.8% of its total surface.
ences. If managed effectively, this cultural diversity
Northern America combiningly is made up of
offers the flexibility and creativity that a country
northern-most countries and territories of North
needs to recover from the economic crisis and con-
America, Canada, the United States, Greenland,
front a few of the many forces challenging the
Bermuda, St. Pierre and Miquelon. Among these,
country. Some of which include:
Canada and United States are two of the largest
Economic and social upheavals
countries of the continent.
Major demographic shifts
Geologically, Canada is one of the oldest regions
Globalization
in the world, with more than half of the region
An urgent need to innovate to renew economic
consisting of Precambrian rocks that have been
growth
76
above sea level since the beginning of the Paleo-
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FB More than ever, for the businesses, governments, organizations,
clients, customers and other stakeholders. North America is one such continent which is eth-
adopting a global mindset is becoming a necessity
nically diverse. Located wholly within the North-
so as to remain viable and relevant in today’s global
ern Hemisphere and almost wholly within the
marketplace. Not only this, but, it’s very well ac-
Western Hemisphere, can also be considered as
cepted that with each passing day, organizations
the northern subcontinent of the Americas.
and societies are becoming less homogenous and
GEOGRAPHICAL LOCATION
we find ourselves dealing with cultural diversity in
This subcontinent of the America is located in the
many stages of our lives. Be it our neighborhood,
Northern Hemisphere and is bordered to the
our school, our workplace or any other community,
north by the Arctic Ocean, to the east by the At-
we find ourselves interacting with people who are
lantic Ocean, to the west and south by the Pacific
way different from us. Of course there are similari-
Ocean, and to the southeast by South America
ties, but, it is the ability to discern which differences
and the Caribbean Sea.
are making a difference, and that is the key to ful-
Being the third largest continent by area, follow-
filling the promise of global diversity.
ing Asia and Africa, and the fourth by population
non-profits and many other
In the evolution of leadership, diversity is not defined just by some race or gender. It also takes in consideration the whole human experience — age, culture, education, personality, skills and life experiences. If managed effectively, this cultural diversity offers the flexibility and creativity that a country needs to recover from the economic crisis and confront a few of the many forces challenging the country. Some of which include:
Economic and social upheavals
Major demographic shifts
Globalization
An urgent need to innovate to renew economic
growth Increasing demands for diversity from our partners, 77
after Asia, Africa, and Europe, covers an area of about 24,709,000 square kilometers which is approximately equal to about 16.5% of the earth's land area and about 4.8% of its total surface. Northern America combiningly is made up of northern-most countries and territories of North America, Canada, the United States, Greenland, Bermuda, St. Pierre and Miquelon. Among these, Canada and United States are two of the largest countries of the continent. Geologically, Canada is one of the oldest regions in the world, with more than half of the region consisting of Precambrian rocks that have been above sea level since the beginning of the Paleozoic era. Canada is very rich as far as mineral
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FB resources are concerned.
Generally, the languages spoken in North America
CLIMATE
are English, Spanish, and French. But, Danish is
North America is a very large continent which sur-
also prevalent in Greenland.
passes the Arctic Circle and the equator. Greenland,
Canada is officially bilingual, two languages being
along with the Canadian Shield is tundra with an
French and English.
average temperatures ranging from between 10 °C
RELIGION
to 20 °C degrees, but central Greenland is com-
Christianity is predominantly the largest religion
posed of a very large ice sheet. Climate west of the
followed in North America. he United States has
Cascades is a temperate weather with average pre-
the largest Christian population in the world, with
cipitation 20 inches, whereas, Climate in coastal
nearly 247 million Christians (70%), although oth-
California is described to be Mediterranean, with
er countries have higher percentages of Christians
average temperatures in cities like San Francisco
among their populations. Mexico has the world's
ranging from between 57 to 70 over the course of
second largest number of Catholics, surpassed on-
the year.
ly by Brazil.
DEMOGRAPHY
DEMOGRAPHIC MAKEUP OF POPULATIONS OF
Canada and the United States are economically the
NORTH AMERICA
wealthiest and most developed nations in the conti-
The percentage of the population in both the larg-
nent followed by Mexico which is a newly industri-
est countries of North America which are Canada
alized country. The countries of Central America
and the United States that is 65 or over has been
and the Caribbean are at various levels of economic
and is projected to continue to rise in future years
and human development. For example, small Carib-
to around 10 to 15 percent of these countries’
bean island-nations, such as Barbados, Trinidad and
population. This is in contrast to the population of
Tobago, and Antigua and Barbuda, have a higher
Mexico, growing at about 1.9 percent per year, of
GDP (PPP) per capita than Mexico due to their
which around one-third is under age 15. Popula-
smaller populations. Despite Greenland's vast re-
tions in the three countries making up North
sources in oil and minerals, much of them remains
America have been increasingly urban reflected by
untapped, and the island is economically depend-
significant growth in the number and size of urban
ent on fishing, tourism, and subsidies from Den-
areas, and a significant rise in the percentage of
mark. Nevertheless, the island is highly developed.
the population that is urban
LANGUAGES
78
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FB ECONOMIC CONDITIONS
fewer resources with which to deal with the
Differences, in income and wealth, between gen-
health consequences of pollution or other envi-
der, race, or other social statuses have somewhat
ronmental problems to which they can be ex-
been narrowing across North America; however,
posed.
differences do still exist. Generally, the lowest in-
People with higher incomes and more wealth
come people of the three countries are more likely
have much better access to health care and other
to belong to racial minorities and to households
means to counter unhealthy development pro-
headed by females. For some families in North
jects and the means to protect and beautify their
America, real wages have actually declined. The im-
physical surroundings. People with higher income
pact of that decline is more reliance on multiple
and wealth tend to place higher value on
sources of household income. Because of the need
wildlands and to visit them for recreational activi-
to travel to different jobs, and for other reasons,
ties. Paradoxically, North Americans with higher
such as rising gasoline prices, some working people
incomes and wealth are likely to have a far greater
now spend more on transportation than on hous-
impact on the natural environment than do lower
ing. Thus, despite continuing overall economic
income segments of societies. High-income Ameri-
growth across North America, there has been grow-
cans consume much more, use more energy, have
ing income inequality in all three countries since the
a larger development footprint, and generate
1970s.
more waste.
IN CANADA
IN MEXICO
Income and social inequality can negatively affect
Mexico is facing truly significant demographic
social stability and welfare sustainability. Typically
transition that is changing the numbers and the
people of lower social and economic status are
age distribution of its population. This transition
more affected by environmental problems. In addi-
has very large and far reaching economic implica-
tion, across Canada, forest and grassland clearing,
tions. Mexico’s demographic transition is very typ-
mineral resource extraction, industrial pollution,
ical of countries all around the world. Changes like
housing and commercial development, road build-
medical advances mean longer life expectancies.
ing, and overfishing are among the large-scale activ-
Decreased fertility rates across almost all seg-
ities that can take a disproportionate toll on low-
ments of the Mexican population are a key demo-
income communities. Lower income people have
graphic change factor. In fact, this decrease is one
79
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FB of the most rapid in the world going from 6.5 in 1970 to around 2.2 at present. These trends and advances also have meant rapid urbanization as wealth, education, and social security have risen. One trend that is different from the other North American countries is the level of outward migration, which has been massive.
IN UNITED STATES The focus is on the race/ethnicity composition of the U.S. population and change in its demographic composition since 1990 (table 1). The race/ethnicity makeup of the U.S. population has been changing dramatically since the 1990 Census. Generally, Asian/Pacific Islander and Hispanic components of the population have been growing fastest. The greatest percentage growth of a region’s race group has been Asian or Pacific Islanders in the Rocky Mountain Region. There was loss of non-Hispanic White population in the North and Pacific Coast Regions.
80
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Continental Delicacy– Europe
FB
Europe, the land that brought the western culture
Following are some information regarding the
into being is the second smallest continent in the
countries of Europe:
world. It comprises the western most part of Eurasia. Of all the countries in it, Russia is the largest
ALBANIA
country and Vatican City the smallest country in
CAPITAL: TIRANA
terms of area. It is the third most populous conti-
POPULATION: 2,821,977
nent after Asia and Africa comprising 11% of the
GDP: $32,259 billion
world population.
Albania, a member of the European Union is also
This land has brought to the globe various
the member of the UNO,NATO and IMF. Albania is
cultural, political and industrial trends and reinvent-
an upper-middle income economy (WB, IMF) with
ed the world history. It is the birthplace of the mod-
the service sector dominating the country's econ-
ern era where the fall of the ancient Roman empire
omy, followed by the industrial sector and agricul-
lead to the Renassaaince of the whole world leading
ture. Its GDP in 2012 stood at 30% of the EU aver-
to a modern era. The Industrial Revolution also be-
age and 35% consumption .It has emerged from a
gan here in the United Kingdom gave birth to a radi-
centrally planned economy to a free market capi-
cal political and cultural shift .World wars also origi-
talist. Agriculture is the major sector and tourism
nated here in which Europe became a loser and US
is growing at a faster pace.
and THE Soviet Union became a global power. European Integration lead to the formation of EUROPEAN UNION in 1945 to bring about peace and cooperation between nations as Europe majorly suffered from the country conflicts that lead to the Second World War. Today, the EU is an important body which has brought about love and cooperation between country neighbours.EU faced a major financial crisis in Recession 2008 but it has handled these issues with flying colors. These countries follow the laws of European Union whether inside or outside the eurozone.
81
ANDORRA CAPITAL: ANDORRA LA VELLA POPULATION: 85,428 GDP: $4.510billion It is also known as the principality of Andorra. Sixth smallest nation in Europe. The tourism industry accounts for nearly 80% of the GDP. Summer and winter resorts are the main attraction and Agriculture is also important.
ARMENIA CAPITAL: YEREVAN
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FB POPULATION: 2,974,693
gan here in the United Kingdom gave birth to a
GDP: $20.821billion
radical political and cultural shift .World wars also
The economy relies heavily on investment and sup-
originated here in which Europe became a loser
port from Armenians abroad. Armenia's economy
and US and THE Soviet Union became a global
was largely industry-based – chemicals, electronics,
power.
machinery, processed food, synthetic rubber, and textile – and highly dependent on outside resources. Recently, the Intel Corporation agreed to open a research center in Armenia, in addition to other technology companies .
European Integration lead to the formation of EUROPEAN UNION in 1945 to bring about peace and cooperation between nations as Europe majorly suffered from the country conflicts that lead to the Second World War. Today, the EU
AUSTRIA
is an important body which has brought about
CAPITAL: VIENNA
love and cooperation between country neigh-
POPULATION: 8,602,112
bours.EU faced a major financial crisis in Reces-
GDP: $402.420billion
sion 2008 but it has handled these issues with flying colors. These countries follow the laws of Eu-
Europe, the land that brought the western culture
ropean Union whether inside or outside the euro-
into being is the second smallest continent in the
zone.
world. It comprises the western most part of Eurasia. Of all the countries in it, Russia is the largest
Following are some information regarding the countries of Europe:
country and Vatican City the smallest country in terms of area. It is the third most populous continent after Asia and Africa comprising 11% of the world population. This land has brought to the globe various
ALBANIA CAPITAL: TIRANA POPULATION: 2,821,977 GDP: $32,259 billion
cultural, political and industrial trends and reinvent-
Albania, a member of the European Union is also
ed the world history. It is the birthplace of the mod-
the member of the UNO,NATO and IMF. Albania is
ern era where the fall of the ancient Roman empire
an upper-middle income economy (WB, IMF) with
lead to the Renassaaince of the whole world leading
the service sector dominating the country's econ-
to a modern era. The Industrial Revolution also be-
omy, followed by the industrial sector and agricul-
82
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FB ture. Its GDP in 2012 stood at 30% of the EU aver-
CAPITAL: VIENNA
age and 35% consumption .It has emerged from a
POPULATION: 8,602,112
centrally planned economy to a free market capital-
GDP: $402.420billion
ist. Agriculture is the major sector and tourism is growing at a faster pace.
ANDORRA CAPITAL: ANDORRA LA VELLA POPULATION: 85,428 GDP: $4.510billion It is also known as the principality of Andorra. Sixth smallest nation in Europe. The tourism industry accounts for nearly 80% of the GDP. Summer and winter resorts are the main attraction and Agriculture is also important.
ARMENIA CAPITAL: YEREVAN POPULATION: 2,974,693 GDP: $20.821billion The economy relies heavily on investment and support from Armenians abroad. Armenia's economy was largely industry-based – chemicals, electronics, machinery, processed food, synthetic rubber, and textile – and highly dependent on outside resources. Recently, the Intel Corporation agreed to open a research center in Armenia, in addition to other technology companies . AUSTRIA
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FB AZERBAIJAN
BULGARIA
CAPITAL: BAKU
CAPITAL: SOFIA
POPULATION: 8,388,000
GDP: $128 billion
GDP: $3700 billion
POPULATION; 7364570
It is the member of IMF and WB. It has a strong bank-
It has an emerging economy with an upper mid-
ing structure. It is growing in terms of agricul-
dle income group that contributes to more than
ture ,tourism, science and technology and is forward
80% of the GDP. The labor force is 2.45 million
looking
people, of whom 7.1 per cent are employed in agriculture, 35.2 per cent are employed in industry and 57.7 per cent are employed in the services sector
BELARUS CAPITAL: Minsk POPULATION: 9,481,000 GDP: $176.921 billion
CROATIA
Officially known as the Republic of Belarus, Most of the
CAPITAL: ZAGREB
Belarusian economy remains state-controlled and has
GDP: $89.357billion
been described as “soviet style”. The currency of Bela-
POPULATION: 4284779
rus is the Belarusian ruble (BYR). Tourism is a dominant
Croatia has a high-income economy, data shows
industry there.
that Croatian nominal GDP stood at $57.371 bil-
BOSNIA CAPITAL: SAREJEVO GDP: $38.08billion
lion, or $13,401 per capita in 2013, while purchasing power parity GDP was $86.570 billion, or $20,221 per capita
POPULATION: 3871643 The national currency is the Convertible Mark (KM), controlled by the currency board. Annual inflation is the lowest relative to other countries in the region at 1.9% in 2004. According to Eurostat data, Bosnia and Herzegovina's PPS GDP per capita stood at 29 per cent of the EU average in 2010. 84
DENMARK CAPITAL: COPENHAGEN GDP: $255.866 billion POPULATION: 5678348 A country in Northern Europe. Denmark forms part of the cultural region called Scandinavia, to-
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FB gether with Sweden and Norway. As a result of its acclaimed "flexicurity" model, Denmark has the most
GREECE
free labour market in Europe. Unemployment compen-
CAPITAL: Athens
sation is high.
GDP: $294 billion POPULATION: 10,815,197 It is faced a major debt crisis in 2008 which shocked the world, its cause being US house
ESTONIA
mortgages .It lead to low growth rates ,low in-
CAPITAL: TALLINN
come levels and an unemployment leading to a
GDP: $36.845 billion
major recession in 2008.
POPULATION: 1,371,243 A country in the Baltic region of Northern Europe and a a democratic parliamentary republic divided into fifteen counties, with its capital and largest city being
ITALY
Tallinn. Estonia is considered a high-income economy
Its capital is Rome with A GDP of $2.157 trillion
by the World Bank. It is very rich in energy resources.
and a population of 60,795,612 is an important economy of today. It is a capitalist market economy, third largest in the Eurozone. Italy intro-
GERMANY
duced the common European currency, the Euro
CAPITAL: BERLIN
in 2002. It is a member of the Eurozone which
GDP: $3.618 billion
represents around 330 million citizens. Its mone-
POPULATION: 81063883
tary policy is set by the European Central Bank.
Germany is a social market economy with a highly skilled labour force, a large capital stock, a low level of corruption, and a high level of innovation. It is the world's third largest exporter of goods, and has the largest national economy in Europe which is also the world's fourth largest by nominal GDP and the fifth
FRANCE
one by PPP.
CAPITAL: PARIS GDP: $2,580.75 billions
85
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FB POPULATION: 66,616,416
It
is
a
doubly
It is a member of the prominent G8 countries. It is the
speaking microstate in Central Europe. It is
World’s seventh largest and Europe’s second largest
a
economies by PPP. It is a forerunner in agriculture, en-
of principality, headed by the Prince of Liechten-
ergy, transport and science sector.
stein. Economically, Liechtenstein has the highest
constitutional
landlocked
monarchy
with
German-
the
rank
gross domestic product per person in the CYPRUS
world when adjusted by purchasing power parity.
CAPITAL: Nicosia GDP: $23.613 billion
Lithuania
POPULATION: 1,141,166
Capital: Vilnius
It is an island country in the USA.The major driver of
Population: 3,043,429
economy is here the Transport and Communica-
GDP: $82.622 billion
tions.The CYPRIOT economy faced a major financia cris
It is a country in Northern Europe .One of the
in earlier years.
three Baltic states, it is situated along the southeastern shore of the Baltic Sea, to the east of Sweden and Denmark. The official language, Lithuanian, and Latvian are the only two
Latvia
living languages in the Baltic branch of the Indo-
Capital: Riga
European language family.
Population: 2,070,371 GDP: $51.058 billion
Luxembourg
It is a country in the Baltic region of Northern Europe,
Capital: Luxembourg
one of the three Baltic States. It is bordered by Estonia,
Population: 562,958
Lithuania, Russia, and Belarus, as well as a maritime
GDP: $53.174 billion
border to the west with Sweden.
It is a landlocked country in Western Europe. It is bordered
by
Belgium
to
the
west
and
Liechtenstein
north, Germany to the east, and France to the
Capital: Vaduz
south. As a representative democracy with
Population: 37,340
a constitutional monarch, it is headed by a grand
GDP: $3.545 billion
duke, Henri, Grand Duke of Luxembourg. It is the
86
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FB world’s only remaining grand duchy.
Monaco Capital: Monaco
Macedonia
Population: 36,371
Capital: Skopje
GDP: $4.694 billion
Population: 2,058,539
It is a sovereign city-state and microstate, locat-
GDP: $22.147 billion
ed on the French Riviera in Western Eu-
Macedonia is a country located in the central Balkan
rope. France borders the country on three sides
peninsula in Southeast
while the other side borders the Mediterranean
Europe. It
is one
of
the successor states of the former Yugoslavia, from
Sea.
which it declared independence in 1991. Montenegro Capital: Podgorica Malta
Population: 620,029
Capital: Valletta
GDP: $9.499 billion
Population: 416,055
It is a sovereign state in Southeastern Europe. It
GDP: $14.129
has a coast on the Adriatic Sea to the south-west
It is southern European island country comprising an
and is bordered by Croatia to the west, Bosnia
archipelago in the Mediterranean Sea. Its location has
and Herzegovina to the northwest, Serbia to the
historically given it great strategic importance as a na-
northeast and Albania to the south-east.
val base, and a succession of powers. Netherlands Moldova
Capital: Amsterdam
Capital: Chisinau
Population: 16,919,139
Population: 2,913,281
GDP: $818.249 billion
GDP: $17.693 billion
It is a small, densely populated country located
is a landlocked country in Eastern Europe, bordered
in Western Europe with three island territories in
by Romania to the west and Ukraine to the north, east,
the Caribbean. The Netherlands' name literally
and south.
means "Low Countries�, influenced by its low land and flat geography, with only about 50% of its land exceeding one metre above sea level.
87
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FB gions with their own regional governments.
Norway
Romania
Capital: Oslo
Capital: Bucharest
Population: 5,165,802
Population: 19,942,642
GDP: $351.603 billion
GDP: $403.579 billion
It is a sovereign and unitary monarchy whose territory
It is a unitary semi-presidential republic located
comprises the western portion of the Scandinavian
in Southeastern Europe, bordering the Black Sea,
Peninsula
between Bulgaria and Ukraine. It also bor-
plus
Jan
Mayen
and
the Arctic archipelago of Svalbard.
ders Hungary, Serbia, and Moldova.
Poland Capital: Warsaw
Russia
Population: 38,483,957
Capital: Moscow
GDP: $996.477 billion
Population: 143,975,923
It is a country in Central Eu-
GDP: $3.458 trillion
rope,
It
bordered
by
Germany,
is
a
country
in
north-
the Czech Republic and Slovakia,
ern Eurasia. It is a federal semi-
Ukraine and Belarus, Baltic sea and
presidential republic.
Lithuania.
the largest country in the world,
Russia is
covering more than one-eighth of the Earth's inPortugal
habited land area. Russia is also the world's
Capital: Lisbon
ninth
Population: 10,427,301
144 million people in November 2014.
most
populous
nation
with
nearly
GDP: $280.360 billion It
is
a
country
on
the
Iberian
Peninsula,
San Marino
in southwestern Europe. It is the westernmost country
Capital: City of San Marino
of mainland Europe. The country also holds sovereign-
Population: 32,576
ty
GDP: $1.17billion
over
the
Atlantic
archipelagos
of
the Azores and Madeira, both autonomous re88
It is an enclaved microstate surrounded by Italy,
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FB situated on the Italian Peninsula on the north-eastern
Population: 46,439,864
side of the Apennine Mountains.
GDP: $1.619 trillion It is a sovereign state located on the Iberian Pen-
Serbia
insula in southwestern Europe.
Along with
Capital: Belgrade
France and Morocco, it is one of only three coun-
Population: 7,209,764
tries to have both Atlantic and Mediterranean
GDP: $95.859 billion
coastlines.
It is a sovereign state situated at the crossroads between Central and Southeast Europe, covering the
Sweden
southern part of the Pannonian Plain and the cen-
Capital: Stockholm
tral Balkans.
Population: 9,801,616 GDP: $464.264 billion
Slovakia
It is a Scandinavian country in Northern Europe.
Capital: Bratislava
It borders Norway and Finland, and is connected
Population: 5,397,036
to
GDP: $158.428 billion
the Ă–resund
Denmark
by
a
bridge-tunnel
across
It has a population of over five million and an area of about 49,000 square kilometers. The largest city is the capital, Bratislava.
Switzerland Capital: None
Slovenia
Population: 8,211,700
Capital: Ljubljana
GDP: $480.938 billion
Population: 2,061,085
The Swiss Confederation is a federal directorial
GDP: $62.949 billion
republic consisting of 26 cantons, with Bern as
It is a nation state in southern Central Europe, located
the
at the crossroads of main European cultural and trade
called Bundesstadt ("federal city")
seat
of
the
routes. Turkey Spain
Capital: Ankara
Capital: Madrid
Population: 77,695,904
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federal
authorities,
FB GDP: $1.508 trillion
It is a walled enclave within the city of Rome.
It is a parliamentary republic in Eurasia, largely located
With an area of approximately 44 hectares, it is
in Western Asia, with the smaller portion of Eastern
the
Thrace in Southeast Europe and it is bordered by eight
nized independent state in the world by
countries.
both area and population.
smallest
internationally
recog-
Ukraine Capital: Kiev
As a continent, the economy of Europe is cur-
Population: 44,429,471
rently the largest on Earth and it is the richest
GDP: $353.3 billion
region as measured by assets under manage-
It has an area of 603,628 km2, making it the larg-
ment with over $32.7 trillion compared to North
est country entirely within Europe and the 46th largest
America's $27.1 trillion in 2008. In 2009 Europe
country in the world, it is also the 32nd most populous
remained the wealthiest region but Figures re-
country in the world with a population of about 44.5
leased by Eurostat in January 2009 confirmed
million.
that the Eurozone had gone into recession in the third quarter of 2008. It impacted much of the
United Kingdom
region. In early 2010, fears of a sovereign debt
Capital: London
crisis developed concerning some countries in
Population: 64,511,000
Europe, especially Greece, Ireland, Spain, and
GDP: $2.549 trillion
Portugal. As a result, measures were taken, espe-
The United Kingdom is the 22nd-most populous coun-
cially for Greece, by the leading countries of the
try, with an estimated 64.5 million inhabitants.[4] It is
Eurozone.
a constitutional monarchy with a parliamentary system of governance.
Vatican City Capital: Vatican city Population: 842 90
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FB
FRAUDULENT AND CORRUPT PRACTICES(FINANCE) USING BIT COIN TECHNOLOGY BY Annie Steffi, ME 2nd year, Sydney
ABSTRACT : Fraudulent and corrupt practices include the solicitation, payment or receipt of bribes, gratuities or kickbacks, or the manipulation of loans or Bank Group-financed contracts through any form of misrepresentation. the Bank has adopted a comprehensive anticorruption strategy.1 The five pillars of the strategy are:(1)Preventing fraud and corruption within World Bank projects(2) Helping countries that request Bank support in their efforts to reduce corruption;(3)Taking corruption more explicitly into account in country assistance strategies, country lending considerations, policy dialogues, analytical work, and the choice and design of projects;(4) Adding voice and support to international efforts to reduce corruption(5) And Protecting the Bank from internal fraud and corruption. Bitcoin (symbol ) is virtual currency based on peer-to-peer technology. It is designed to operate without any central authority and enables transaction confirmation Every single transaction till date is present in this ledger. Due to this, true anonymity is not present in bitcoin. Our security is based on the hardness of the Computation Quadruple vector Algorithm assumption in bilinear maps.
INTRODUCTION: Bitcoin transaction process and highlight the use of cryptography for the purposes of transaction security and distributed maintenance of a ledger. Instead, multiple intermediaries exist in the form of computer servers running bitcoin software. By connecting over the Internet, these servers form a network that anyone can join. Transactions of the form payer X wants to send Y bitcoins to payee Z, are broadcast to this network using readily available software applications. Bitcoin servers can validate these transactions, add them to their copy of the ledger, and then broadcast these ledger additions to other servers.Recording transactions is accomplished without the intermediation of any single, central authority. The most important part of the bitcoin system is a public ledger that records financial transactions in bitcoins. The first bitcoin ATM was installed in October 2013 in Vancouver, British Columbia, Canada.In October 2013, Chinese internet giant Baidu had allowed clients of website security services to pay with bitcoins. During November 2013, the China-based bitcoin exchange BTC China overtook the Japan-based Mt. Gox and the Europe-based Bitstamp to become the largest bitcoin trading exchange by trade volume. Some mainstream websites began accepting bitcoins 2013. WordPress started in November 2012 followed by OKCupid in April 2013, Atomic Mall in November 2013, TigerDirect in January 2014, and Overstock.com that same month. Bitcoin was first mentioned in a 2008 research paper published under the name Satoshi Nakamoto. The miners confirm the transactions.The transaction is broadcasted to the bitcoin network. To spend bitcoins, you have to know the private key. Anyone who knows your public key, can send you bitcoins.Every 91
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FB ”account” consists of the public key (= bitcoin address) and the private key. For large amounts, 6 confirmations is considered safe. For small payments or with payments with trusted peer, 0 confirmations is usually ok.In the process called mining, all transactions are collected in a block. A new block is mined in about every 10 minutes.Bit coins are saved in digital wallets and Transactions are verified by a decentralized network of a computers users from across the globe.Bit coins are represented by the symbols BTC or XBT.Bit coins can be sent and received through the internet similar by sendng cash digitally.The currency is exchanged through direct peer to peer transactions with out going through an external bank,financial Instituton or Government. A Number of Electronic Market places called bit coin Exchanges allow for the purchase or sale of bit coins using different currencies.The digital wallet in which bit coins are stored are saved either on a user’s computer or in cloud locations.These wallets are virtual bank accounts or storage locations.Bit coins are traded across the internet on a honor based system.Its value is determined by the Number of Bitcoins in circulation. BIT COIN TRANSACTION : bitcoins reside in what is known in the bitcoin system as bitcoin addresses. The ownership of a particular amount of bitcoins reduces to the capability of sending payments (over the Bitcoin network) from the bitcoin address(es) with which these bitcoins are being associated. The capability of sending payments from Bitcoin addresses is controlled via digital signatures (we introduced above) that involve pairs of a public key pk and a private key pa. In particular, each bitcoin address is indexed by an unique public ID|an alpha numeric identi_er which, in fact, corresponds to the public key pk. The private key pa, which is the counterpart of pk, gives control over the bitcoins held in this address. The Bitcoin transaction process has mechanisms in place which guarantee that (a) the verification transaction each transaction record is distributed among multiple participants in the network, (b) the recording of each transaction is time discretized, i.e. transactions are linearly ordered with consecutive time stamps, (c) the participants in the payment network compete and are rewarded for recording a transaction, and (d) multiple nodes cross-check transaction record. Initiating a transaction:Suppose that Alice would like to send Bob 1 bitcoin using the Bitcoin network. To do that, both Alice and Bob need to have bitcoin addresses. Call these address Alice and addressBob. Then Alice needs to issue and (digitally) authenticate a message of the sort addressAlice is sending addressBob 1 bitcoin."Because each bitcoin address is identi_ed by a public key
92
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FB Verifying a transaction:Before executing a transaction (which amounts to recording the transaction on the ledger) the Bitcoin protocol has to verify two aspects of the transaction message: addressAlice is sending addressBob 1 bitcoin". First, is it Alice who has broadcast the transaction message? PROJECT DESIGN STAGE Corrupt influences may be brought to bear on project design to: • Overstate physical requirements and over-dimension project components to increase potential corrupt earnings during implementation; Manipulate project design to benefit particular suppliers, consultants,contractors, and other private parties; • Allow officials of the Borrower unfettered discretion in allocating project resources amongst beneficiaries;Define procurement and financial management arrangements in such a way as would enable project managers to divert funds for unauthorized purposes PROCUREMENT STAGE The risk of corruption in the procurement of goods, civil works, and services is particularly high. Corruption at this stage may originate on the Borrower (purchaser or employer) side or on the supplier (contractor or consultant) side. IMPLEMENTATION STAGE Corrupt and fraudulent actions during contract implementation and contract management can be very costly for a project and may be the main cause of cost overruns. Often they involve collusion between the supplierpurchaser and the contractor-employer. CYBER THREATS IN THE BIT COIN TECHNOLOGY CHOP CHOP ATTACK The attacker intercepts an encrypted frame and uses the access point to guess the clear text.The attack is performed as follows:The intercepted encrypted frame is chopped from the last byte.Then the attacker builds a new frame 1 byte smaller than the original frame.The attacker makes a guess on the last clear byte.To validate the guess he/she made the attacker will send the new frame to the base station using a multicast receive address.If the frame is not valid(i.e., the guess is wrong) then the frame is silently discarded by the access point.The frame with the right guess will be relayed back to the network.The hacker can then validate the guess he/she made.The operation is repeated until all bytes of the clear frame are discovered. FRAGMENTATION ATTACK 93
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FB The attacker sends a frame as a successive set of fragments.The access point will assemble them in to a new frame and send it back to the wireless network.Since the attacker knows the clear text of the frame,he can recover the key stream used to encrypt the frame.The attacker can use the key stream to encrypt new frames or decrypt a frame DURATION ATTACK The attacker exploits vulnerability in the virtual carrier-sense mechanism and sends a frame with the NAV field set to a high value.This will prevent any station from using the shared medium before the NAV timer reaches zero.Before expiration of the timer,the attacker sends another frame.By repeating this process the attacker can deny access to the wireless network. ARCHITECTURE
IMPLEMENTATION Following quadruple vector Algorithm is used for Implementing the process 1.A recurrence matriz used is as a key.Let it be A.. 2.Generate a “quadruple vector� T for 44 values,i.e from 0 to 255. 3.Multiply r=A*T; 4.Consider the values to mod 4. 5.A Sequence is generated using the formula [40 41 41]*r. 6.This Sequence is used as a key 7.Convert the plain text to equivalent ASCII Value 8.Add the key to the individual numerical values of the message 9.New offset the values using the offset rules 10.This would be the cipher text generated 11.For the Decryption the key is subtracted from the cipher text and use the offset rule to get the original message.
CONCLUSION Bitcoin transaction process and highlight the use of cryptography for the purposes of transaction security and distributed maintenance of a ledger. the protocol uses cryptographic algorithms for the security of transactions and for the implementation of distributed maintenance of a public ledger. 94
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FB
Organic Farming By Sachin Kumar, IBS Hyderabad
After green revolution Indian farmers started using
ments (IFOAM), an international umbrella organi-
chemical fertilisers, pesticides and High Yield varie-
zation for organic farming organizations estab-
ty (HYV) seeds for farming. But after a few decades
lished in 1972.
they realised that the productivity of soil decreased over time and now they required more of fertiliser to grow same amount of crop. This lead to a thinking that is using of chemical fertiliser is not the best way and other alternatives can also be developed. So the modern researches are being conducted and one of the way suggested is organic farming.
According to a report, "Global Organic Foods & Beverages Market Analysis by Products, Geography, Regulations, Pricing Trends, & Forecasts (2010 – 2015)� the global organic food and beverages market will grow at the compounded rate of 12.8%. This will result in a significant expansion of the market, which was estimated at $57.2 bil-
Organic farming is the use of green techniques such
lion in 2010. By 2015, the global organic food and
as crop rotation, green manure, compost, and bio-
beverages market is expected to reach $104.50
logical pest control. No chemical fertiliser is used
billion.
which helps the soil to retain its fertility in long run. It was found that due to high use of pesticides it has
In India, National Centre of Organic Farming
entered our food chain which affects our health and
(NCOF) under Ministry of Agriculture is responsi-
many species of insects and birds had been affect-
ble for implementation of National Project on Or-
ed. So the use of biological pest control is used
ganic Farming (NPOF). It was stared in 10th Five
which helps in conserving the environment.
Year Plan and continued since. It is responsible for
Therefor organic farming can be defined as the use
research and formulation of rules and regulation
of scientific knowledge in traditional farming meth-
in the area of organic farming.
ods so as to achieve a sustainable growth and environment protection which will bring happiness for
India stands at an advantageous position in organ-
all to achieve the objective of a happy world which
ic farming because the benefits of Green Revolu-
has food and health for all.
tion does not reach every part of the country and
Organic agricultural methods are internationally regulated and legally enforced by many nations, based in large part on the standards set by the International Federation of Organic Agriculture Move95
the poor conditions of farmers does not allows them to invest in costly fertilizers and pesticides. Our farmers were also reluctant to use new technology. This resulted in farmers still using the old
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FB farming method in agriculture. So what is to be
an opportunity and investing in this sector
done is that only new scientific knowledge is to be
to increase awareness and research in or-
introduced in these farming practices which will re-
ganic farming.
sult in increase in agricultural productivity. This will
India has got a role model in form of Sikkim
help in saving chemical fertilizer which is scares and
and states want to replicate its experience.
is often imported which cost a lot of scares foreign
Many organizations are coming up with the
exchange.
idea of organic market where organic
There are many problem also associated with or-
products can be traded. For Example Ah-
ganic farming in India. The organic farmers need to
medabad Municipal Corporation is spon-
be certified by organizations like Participatory Guar-
soring an organic market in Ahmedabad.
antee Systems (PGS) which make them label their
People in India and the world are getting in-
product as organic. This tag only enables them to
creasing conscious about their health and
export their product as organic which helps them
are opting for organic product.
fetch good price for their product. But the problem
Organic products generally sales at a premium
is that most of our farmers are illiterate and lack
price so it can bring you extra revenue.
awareness. Therefor either they do not have
Many multinational companies are now going
knowledge about organic farming or they are not
green with organic products which will give
able to get certificate for their organic product. Due
a big market to organic products in near
to limited awareness people lose a lot of revenue.
future.
The production of organic fertilizer is done at a low
Government is planning to have MSP for or-
level and they do not enjoy the economy of scale
ganic products which will give security to
that chemical fertilizer enjoy, that makes organic
organic farmers.
farming a costly exercise. Sometimes organic fertilizers are not available as very few people are inter-
The Indian states involved in organic farming in
ested in producing organic fertilizers. Many fake
India are as follows - .
organic products also enter into the market and this
•Gujarat
affects the profitability of original organic farmers.
•Kerala •Karnataka
New opportunity in this Sector:Many State Governments are recognizing it as 96
•Uttarachal •Sikkim
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FB •Rajasthan
•Bharatpur Bajra and wheat
•Maharashtra
•Jhunjhunu Pulses and wheat
•Tamil Nadu
•Alwar Wheat and bajra
•Madhya Pradesh
•Banswara Maize
•Himachal Pradesh
•Cotton-grass •Jaipur Guar
The main organic agricultural products of India are
When the agriculture productivity is decreasing
as follows-
and farmers condition is getting worse then this
•Bajra-mustard-wheat
organic farming gives and alternative opportunity
•Chilly
which can go a long way in increasing agricultural
•Cereals-cereals
productivity and also improving the condition of
•Cereals-pulses
farmers. Organic Farming can give us food security
•Kholar
at the same time conserving our environment.
•Maize •Ginger •Soybean •Large cardamom •Passion fruit •Dungarpur Pulses-cereals •Bajra •Mustard •Til •Wheat •Nagour Guar-cumin •Guar-wheat •Moong •Mustard •Ganganagar Cotton •Bhilwara Urd •Jaisalmer Bajra 97
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FB
Digital India’s impact on economy By Vaibhav Agarwal and Anirudh Sharma, IIFT
As a kid, I always saw my father juggling with so
people. Its main motive is to ensure that all the
many documents. There was a passport, a ration
work is done electronically and we go completely
card, an Aadhar card, a pan card, degrees, certifi-
paperless in the coming years. The GOI has set a
cates, IT return certificates and what not. I always
deadline of 2019 for completion of this mammoth
used to wonder how come he has so many docu-
task.
ments. Fast forward it to the time when I was packing my bags for my journey to IIFT, Kolkata. And I was stuck with the same problem. I had almost the same documents and I could not afford to miss any or my registration might have been hampered. Now, let us think of another case; you are far away from your home and suddenly you need to get hold of a very important document, say birth certificate. Now, you have to sign the papers in the municipal corporation of your town or city to get it done; but at the same time you cannot afford to go home. You just sit and think of a way out.
Digital India was formally launched by the Honourable Prime Minister of India Mr. Narendra Damodardas Modi on 1st of July, 2015. All the stalwarts including the likes of Mr. Mukesh Ambani, Mr. Ratan Tata, Mr. Azim Premji, Mr. KM Birla committed a total of 4.5 lakh crore towards digitalising India. Huge job opportunities are to be created in the IT sector with Tata group already announcing 60,000 jobs. Also, corruption, which has been one of India’s major problems, is set to take a back seat with high transparency due to this program.
These are a few instances of some general problems we all face in day to day life. These are the essential things we want do and we still always find difficult, cumbersome or time consuming. There are many similar things; in fact there are so many that we will lose our count. So the question that arises in our mind
Now let us come back to the problems discussed in the opening paragraph of this article. With Digital India, you will have the facility of Digital Locker, where you can save all your documents and it can be accessed through any place via internet. So, in short, it avoids your difficult task and saves your precious time. The second problem can be solved
This is a part of what Digital India aims at. It aims at providing e-solutions through e-Governance to everything you can think of. It is a flagship program of Government of India which aims to provide connection between all government run institutes and
98
through e-signature. As the name suggests, you can digitally sign your document through Aadhaar e-KYC service. Now these solutions are just about the problems discussed above. There are many more things such as broadband highways which
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FB will include laying down of optical fibre network in
that too when the condition to be counted as a
all the 2.5 lakh gram panchayats of this country and
literate is so lenient. India has some of the cheap-
enabling them to connect to each and every part of
est mobile internet plans; but this fact goes for a
the world with high speed internet, mobile phones
toss when it comes to country’s average income
to everybody which aims at connecting all the
of just INR 7378/month. The troubles are further
44,000 remaining villages to mobile connection by
manifested when we take into account the poor
2018, public internet access program to provide
condition of telecom network infrastructure in
common service centre in 1.5 lakh villages, e-
India. But I am hopeful, and so is everybody I sup-
Governance which aims at reforming government
pose, because, “Hope is a good thing, maybe the
through technology, e-Kranti which provides with
best of things and no good thing ever dies”.
electronic delivery of services, information for all through data available on social media and site like mygov.in, electronics for manufacturing such as mobiles and set top boxes, IT training for 1 crore people from villages and towns and, at last, early harvest program which aims at biometric attendance system at all central government offices.
Now, that we have discussed all the details and positives & negatives we should go on discussing about how it will affect the Indian Economy. Imagine a huge wheel which is very difficult to rotate as its moment of inertia is very high. Now suddenly, as engineers, the first things that comes to our mind is that if it is set in motion it won’t stop easi-
After discussing so many details and vision about
ly as well? And this is absolutely true! This is what
how India is all set to change, let us examine the
the beautiful part is. This huge wheel is what we
ground reality as well. I do not wish to put off the
refer to as the Indian Economy which is sluggish in
reader or the government’s plans but I firmly be-
nature and needs a push which can set it into mo-
lieve that everything should be taken into consider-
tion. Now the role of Digital India as discussed
ation and deliberation is a very important part. Ac-
above would generate jobs in IT sector first of all,
cording to a global study by Mckinsey and Facebook
then it would create further jobs in manufacturing
- ‘Offline and Falling Behind: Barriers to Internet
sector because of rapid infrastructure growth. This
Adoption’, almost 1 billion people in India are with-
would need to the rise of skilled labour in India
out an internet connection which comprises of 25%
which is currently at a mere 2%. When all this is
of the similar world population. Also, 26% of Indian
taking place we can safely assume that the aver-
population or almost 30 crore people are illiterate,
age income of a common person would increase.
99
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FB So the lower class would shift towards middle class and middle class will tend to rise towards upper class, thus setting the wheel into motion. In India, as we all know that two-third of the population is directly or indirectly dependent or agriculture which comprises of just 14% of GDP. Isn’t that poor use of such vast human resource? The problem that arises now is that all these people cannot be directly shifted to the tertiary sector in a short span of time; they will have to move to manufacturing sector first. And this is precisely where Digital India as a campaign would help in providing manufacturing sector jobs. All these things, combined, will lead to a push to rotate the giant wheel of Indian Economy and once set into motion India would never see growth rate of less than 10% for years to come. Our honourable finance minister Mr. Arun Jaitley and many eminent economists have constantly emphasized on the potential of India reaching and maintaining an above 10% growth rate and with such ambitious plans the day does not seem far away.
The skewed way GDP contribution and population are divided. Broadly speaking, Digital India is all set to build a robust, secure and strong infrastructure, a customizable ecosystem to help the citizens and development of skills and technology. With billions of dollar flowing in India will have a stronger Foreign Direct Investment, helping in stronger foreign exchange reserves, which in turn would make the country more stable and financially shock proof. Now, let us talk about a major tracker of economy: Gross Domestic Property. When we talk about developing countries, according to the World Bank report, a 10% increase in mobile penetration increases the per capita GDP by 0.81% and the same increase in broadband penetration increases the per capita GDP by 1.38%. Digital India project is expected to increase the broadband penetration across India by 50% ( which is currently at 7%) and mobile penetration in rural India by 30% ( which is currently 45%) in next 2 years, the corresponding increase in GDP could be 9% i.e. approximately $180 billion. India, with its 65% population below 35 is a very young country, and thus, should modify itself into a potential hub for manufacturing and services sector. With campaigns like Make in India and Digital India, our country is, certainly, on the right track. Let us hope that India is able to fight all the odds and reclaim its lost title of a Golden Bird. In this age of information and technology, what else could be better than a vision which encapsulates the masses and connect them to this world. Let us all work together in the direction of Digital India. 100
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FB
Top Runners in E-commerce By Payal Punn, IBS Hyderabad
Electronic commerce commonly known as Ecom-
about 28.3 billion yuan (US $4.63 billion) in Suning
merce is a type of business model that enables a
to become its second-largest shareholder, while
firm or individual to conduct business over an elec-
Suning will buy no less than 27.8 million new
tronic network, typically the internet. It operates in
shares of Alibaba for 14 billion yuan (US $2.33 bil-
all four of the major market segments: business to
lion). The deal is the latest in a series of acquisi-
business, business to consumer, consumer to con-
tions by Alibaba as its founder and executive
sumer and consumer to business.
chairman Jack Ma tries to diversify. It faces do-
Snapdeal has raised $500 million (roughly Rs. 3,197
mestic competition from Internet giants Baidu and
crores) from Chinese hardware manufacturer Fox-
Tencent.
conn and Alibaba along with existing investor Soft-
Online shoppers are expected to increase from 20
Bank. Snapdeal has so far raised over $1.1 billion in
million in 2013 to 40 million in 2016, as an addi-
eight funding rounds, and its last investment round
tional 200 million Indians will access the Internet
in October 2014 was a reported $627 million
in the next three years, with majority of them
(roughly Rs. 4,009 crores) led by Japanese telecom
coming online through smartphones. A significant-
and media group SoftBank Corp. Other investors in
ly low (19 percent) but fast-growing Internet pop-
Snapdeal include Bessemer Venture Partners, Ratan
ulation of 243 million in 2014 is an indicator of the
N Tata, Kalaari Capital, Nexus Venture Partners, and
sector's huge growth potential in India. It also pre-
eBay. A news report in June had covered the ru-
dicts that the Indian e-commerce market is esti-
mours of a potential investment in Snapdeal, where
mated to grow at a compounded annual growth
the two Chinese companies were planning to invest
rate (CAGR) of 63 percent to reach $8.5 billion (Rs.
together for a 10 percent stake that would value
54,304 crores approximately) in 2016 showing
the company at roughly $5 billion (roughly Rs.
growth in the levels of mobile, Internet and in-
32,100 crores). Snapdeal's high-profile acquisitions
creased consumer demand. "Online travel ac-
include FreeCharge, Shopo, eSportsBuy, Grabbon,
counts for nearly 71 percent of the e-commerce
Doozton, Smartprix, Exclusively.in, UniCommerce,
business in India. This business has grown at a
RupeePower and LetsGoMo.
compound annual growth rate (CAGR) of 32 per-
Alibaba and Suning have signed a deal according to
cent between 2009 and 2013.
which Alibaba will invest US $4.63 billion for a near-
The global e-commerce industry generates over
20% stake, and will work together on online and
$1.2 million (roughly Rs. 7.9 crores) in revenue
high-street sales. New York-listed Alibaba will invest
every 30 seconds with Facebook, Pinterest and
101
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FB Twitter contributing $5,483 (roughly Rs. 3,57,800),
the feature. Users can share products, wishlists,
$4,504 (roughly Rs. 2,93,904) and $4,308 (roughly
and carts with their phonebook contacts, and chat
Rs. 2,81,114) respectively. Social media pages pro-
with them. Users can also share their screens and
vide information regarding new products in the
browse together. The product took 4-5 months to
market, user reviews, ratings of the product, recom-
develop.
mendations, and information technology (IT) prod-
The average mobile app usage in India has grown
ucts. According to analysts, social networks increas-
by at least 131 percent and has outpaced the
ingly have direct links to e-commerce sites, which
global growth rate. According to the panellists
provide complete product description, availability
from firms like PricewaterhouseCoopers (PwC) the
status, pricing and delivery information, and access
shift from e-commerce to m-commerce and per-
to product reviews and ratings, all of which help
sonalised apps are factors responsible for the
prospective buyers to make a purchase.
growth. "At present the app economy has created
Flipkart will go the Myntra way, the company it had
about 75,000 direct jobs in India, and has the po-
acquired last year, by operating only through mo-
tential to reach 600,000 over a period of time. The
bile app from September. Launched in October
number of smartphone owners using mobile apps
2007, Flipkart currently has one crore page visits
of e-commerce companies has gone up from
daily, reaching 1,000 plus cities, and delivers 80 lakh
1,680 (21 percent) in May 2014 to 4,320 (54 per-
shipments per month, backed by superior technolo-
cent) in May this year, based on real-time mobile
gy and supply chain. "Based on research, most Indi-
usage data across 8,000 handsets in the country”.
ans have only 19-20 apps on their android or iOS
Around nine billion apps will be downloaded in
smartphones. Out of this, 15-odd apps are the ones
India in 2015, more than five times the number of
that can't be deleted. Users are low on memory and
apps downloaded in 2012 (1.56 billion) at a cumu-
keep deleting apps and install them as and when
lative annual growth rate (CAGR) of 75 percent.
required. As people can uninstall apps so “app only”
MakeMyTrip is the first in the country to an-
is a challenge for Flipkart.
nounce the launch of a train-booking app that lets
Flipkart announced the launch of Ping, a new in-
users book and search for train tickets in six differ-
app chat feature that lets users share product imag-
ent languages - Hindi, Tamil, Telugu, Malayalam
es and chat with each other while shopping. The
and Gujarati - in addition to English. The app al-
feature has been rolled out to the Flipkart apps for
lows users to book General and Tatkal quota train
Android and iOS, but users need an invite to access
tickets on all routes in India, and claims to be the
102
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FB only rail-booking app that enables return-ticket
sectors including defence, construction, railways
bookings. The app also covers enquiry of fare de-
and medical devices. The government aims at in-
tails, PNR status, seat availability, selection of berth
creasing the share of manufacturing in the eco-
preference and information on nearby stations if no
nomic growth to 25% in the next one decade from
trains are available from the boarding station. With
the current 16%. It also aims at creating 100 mil-
online rail penetration at 43 percent in 2014,
lion jobs during the period.
providing value-added services on mobile will fur-
Snapdeal has appointed former Adobe executive
ther accelerate the growth and adoption of online
Rajiv Mangla as Chief Technology Officer (CTO).
rail-bookings. MakeMyTrip also shared its rail-
Previously, he spent about 10 years at Adobe Sys-
booking trends from non-metro markets in the
tems where he most recently served as VP Engi-
news release.
neering, Digital Marketing. The technology team
The government is soon expected to allow foreign
at Snapdeal is currently 1,000 people strong and
and domestic companies with manufacturing units
the company looks at doubling it by the end of
in India to sell their products through online portals
this year. In the past few months, Snapdeal has
directly to consumers. At present, there is no policy
significantly ramped up its technology leadership
with the regard to direct online sale of goods by
team and has hired senior leaders like Anand
manufacturing units. According to the proposal of
Chandrasekaran (ex-CPO Bharti Airtel), Gaurav
the Department of Industrial Policy and Promotion
Gupta (India Head of Scalearc), Amitava Ghosh (ex
(DIPP), those companies which are manufacturing
-CTO Taxi For Sure) and Viraj Chatterjee (ex-
in India and have FDI, even if it is up to 100%, would
Director Engineering Adobe Systems).
be permitted to sell their products through e-
Snapdeal will spend $100 million (Rs 640 crore) in
commerce platforms. At present, manufacturing
the next three years on research and develop-
companies in sectors such as mobile phones and
ment (R&D) as the competition hots up in the
electronic items tie up with domestic e-commerce
booming e-commerce industry in India. Snapdeal
players to sell their product. Under the Make in In-
had acquired a startup, Fashiate, in March this
dia programme, the government is taking steps to
year for an undisclosed amount. Founded in 2010,
improve ease of doing business in the country be-
Snapdeal has over 40 million registered users and
sides easing norms for foreign direct investment to
more than 1.5 lakh business sellers. It counts
attract overseas investments. In the last few
eBay, Temasek, Myriad, Tybourne, Blackrock and
months, the government has eased FDI policy in
Premji Invest among its investors. It alsonacquired
103
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FB Hyderabad-based mobile technology startup MartMobi (in May), payments and mobile recharge startup Freecharge (estimated at $400-450 million) as well as picked up stakes in digital financial services platform, RupeePower and logistics venture, GoJavas. From the inception of the Internet and e-commerce, the possibilities have become endless for both businesses and consumers. However, just like anything else, e-commerce has its disadvantages including consumer uncertainties, but nothing that cannot be resolved or avoided by good decision-making and business practices. In the coming years, e-commerce is expected to contribute close to 8-10% of the total retail segment in India. This growth is bound to continue provided e-commerce companies focus on innovating, building strong technology infrastructure and delivering the best customer experience.
104
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BRICs bank – Plain Tokenism or a strong alternative to World Bank? By Swapnil Karia, SCMHRD, Pune
The Old World: Dominance of the West Post World WAR II, all the nations formed a consortium of power that would help prevent the recurrence of such wars. Thus the Bretton Woods Conference lead to the establishment of three such institutes that facilitated harmony and stability in the world through trade and financial support. These institutes were World Trade Organisation (to facilitate trade), International Monetary Fund (to promote macroeconomic stability) and World Bank (for development assistance). World Bank was formed to give assistance to projects across the world through soft loans. These funding was given solely based on the merit of the development project. The ideology of the country or the political affiliation of the leaders did not play any role in the dynamics of World Bank. But over the years, the funding from World Bank was primarily used to rebuild Europe. Asian development needs suffered as most of the financial aid by World Bank was directed towards the West. In fact, till now India does not have a seat in World Bank security. The IMF unlike World Bank is not a democratic institution i.e. larger your contribution, larger is your voting right. USA enjoys a voting right of 17.69% where as China and India have 4.0% and 2.44% respectively. In 2011 the world's largest developing countries i.e. the BRIC nations have issued a statement declaring that the tradition of appointing a European as managing director undermined the legitimacy of the IMF and called for the appointment to be merit-based.
The New Beginning: Emergence of the “NDB” out of the Political Gridlock The five BRICS countries comprises of Brazil, Russia, India, China, and South-Africa. BRICS repre-
105
sent almost 3 billion people which accounts for 40% of the world population, with a combined nominal GDP of US$16.04 trillion i.e. 20% world GDP. The BRICS nations represented 18% of the world economy. With the emergence of the BRICS nation there was a need to have a separate bank. Reforms to allocate more voting power to the emerging economies like the BRICS nations were agreed by the G20 in 2010; however Congress then had not approved these recommendations. Thus the heavy handedness of the IMF and World Bank lead to the rise of the New Development Bank –“NDB” (BRICS Bank). The NDB would have its headquarters in Shanghai, China but it would be headed by an Indian president. Also the first chair of Board of Governors will be from Russia and the first chair of the Board of Directors will be from Brazil while a regional office centre would be established in South Africa. Interesting Time: The New Dynamics The world is no more a unipolar arena where power-politics is dominated by the West; instead we are experiencing a new era of economic and social growth driven by developing economies. The dominance of the US dollar as a reserve currency is deemed to be undermined if the NBD, i.e. the BRICS bank can transform itself into a clearing house for trade and finance in non-USD currencies. The IMF and World Bank have failed to meet the demands of the developing economies. The establishment of NDB might initiate a change in the status quo of IMF and World Bank where in they would try to incorporate more voting rights for the BRICS nations. Some critics argue that there would be conflict of interest and power amongst the BRICS nations since China would aggressively try to amass disproportionate wealth and power through NDB. China is expected to make the biggest contribution of $41 billion followed by $18 billion each from
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FB India, Brazil and Russia and $5 billion from SouthAfrica. China has contributed most to the NBD, it has the biggest surpluses and foreign exchange reserves in the world (nearly $4 trillion, almost oneand-a-half times the size of Indian economy) and hence its influence on NBD would be greater than that of other members. The NDB is a testimony to the China’s global leadership. China needs to be careful to balance its own influence on the bank and the impact of other members. This becomes all the more crucial when BRICS members do have diverging interests and even conflicting interests (such as territory disputes between China and India) among themselves. China should not use the bank as a platform to only favour its own national interests such as the Renminbi’s internationalization; instead China should promote equality with the bank as a common platform for all developing countries to realize their development dreams. BRICS Bank India being one of the major growing economies has earned its mettle among the BRICS nations. Through NBD India is improving on its multinational ties with China. The status quo is already changing as India was recently invited by China to be a member of the 21-nation Asia-Pacific Economic Cooperation (APEC). This move will not only boost India’s economy but also enhance the effectiveness and importance of the APEC. As a member of the G20, the East Asia Summit, as well as an ASEAN partner, India has propagated its ‘look east’ policy from 1991 and has already signed trade agreements with Japan, South Korea, Singapore, Thailand, Malaysia and ASEAN. Also it would encourage India to speed up its trade liberalisation process. Thus this new membership in APEC will enhance capacity building, trade proliferation & investment cooperation in the region.
the new bank. The selection of Shanghai as the headquarters for the BRICS Development Bank might hurt Narendra Modi’s domestic ratings. But he was quick to dismiss all these apprehensions and he underscored India’s priorities by highlighting the importance of resolving the boundary dispute. He has also urged the Chinese President, Xi Jinping that peace must be maintained on the border until there is a resolution. Xi also called for speedy negotiations to settle this boundary dispute and dismiss all allegations of cross-border incursions. Confrontation Vs Collaboration The NBD has a planned capital base of US$50 billion, rising eventually to $100 billion while the World Bank has US $232 billion capital reserves. We must realize that NBD is not a competitor to World Bank but it is an attempt by BRICS nations to provide hassle-free funding for the infrastructural projects through its Contingent Reserve Arrangement (CRA) framework and thus creating better conditions of living in these nations. Thus most certainly the new BRICS development bank is not going to replace IMF and World Bank any time soon as the latter will still remain powerful players in global economic arena. The relationship between these two is a complementary relationship rather than a conflicting one. But in the long run the competition between the two might intensify and the final outcome will depend on balance of power between the two poles of the world: the developing countries and the developed countries. With the emergence of two poles the world is becoming highly dynamic and unpredictable.
The critics have started picking holes in the structure, operations, goals and potential limitations of 106
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Greece Crisis
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By MMC Diaries, IBS Hyderabad HOW IT ALL STARTED?
to resort to a massive debt binge. Greece's entry
The Greece crisis continues to occupy a center-
into the Eurozone in January 2001 and its adop-
stage in the global financial markets as of June
tion of the euro made it much more easier for the
2015. The crisis has been brewing for more than six
government to borrow because of the declining
years. The debt crisis originated from the Greek
greek bond yields and interest rates .For instance,
government's excessive and wasteful expenditure.
the yield spread between 10-year Greek and Ger-
When Greece became the 10th member of the Eu-
man government bonds plunged from more than
ropean Community on January 1, 1981, its economy
600 basis points in 1998 to about 50 basis points
and finances were in good shape, with a debt to
in 2001. As a result, the Greek economy boomed,
GDP ratio of 28% and a budget deficit below 3% of
with real GDP growth averaged 3.9% per year be-
GDP. But the situation deteriorated dramatically
tween 2001 and 2008, the second fastest after
over the next 30 years.
Ireland in the Eurozone .But that growth came at a
After 2008, GDP growth rates were lower than
steep price, in the form of rising deficits and a bur-
the Greek national statistical agency had an-
geoning debt load. This was made worse by the
ticipated.
fact that these measures for Greece had already
Huge fiscal imbalances developed during the
exceeded the limits mandated by the EU's Stability
five years from 2004 to 2009. The output
and Growth Pact when it was admitted into the
increased in nominal terms by 40%, while
Eurozone. Greece's debt to GDP ratio was at 103%
central government primary expenditures
in 2000, well above the Eurozone's maximum per-
increased by 87% against an increase of only
mitted level of 60%. Also, Greece's fiscal deficit as
31% in tax revenues
a proportion of GDP was 3.7% in 2000, also above
The salaries of the workers in the public sector rose
the Eurozone's limit of 3%.
automatically every year, instead of being based on
After the financial crisis of 2008-09, investors be-
factors like performance and productivity. Pensions
gan demanding much higher yields for sovereign
were also generous. A Greek man with 35 years of
debt issued by the PIIGS (Portugal, Ireland, Italy,
public-sector service could retire at the ripe old age
Greece, and Spain) as compensation for this add-
of 58, and a Greek woman could retire with a pen-
ed risk. By January 2012, the yield spread between
sion as early as 50 under certain circumstances. As
10-year Greek and German sovereign bonds has
a result of low productivity, eroding competitive-
widened by a whopping 3,300 basis points, ac-
ness, and rampant tax evasion, the government had
cording to research by the Federal Reserve Bank
107
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FB of St. Louis.
vices). The direct contribution of Travel & Tourism
As Greece's economy contracted in the aftermath
to GDP is expected to grow by 3.4% pa to
of the crisis, the debt-to-GDP ratio peaked at 180%
EUR16.2bn (7.4% of GDP) by 2024.
in 2011. The final nail in the coffin came in 2009,
CAN GREECE RECOVER?
when a new Greek government led by Papandre-
The future of its economy and its ability to provide
ou's son George came into power and revealed that
high and rising living standards to its citizens de-
the fiscal deficit was 12.7%, more than twice the
pend on growth-enhancing reforms and not simp-
previously disclosed figure, sending the debt crisis
ly restraining in spending or obtaining debt relief.
into higher gear.
It is high time to recognize that Greece’s economic
TOURISM IN GREECE AND IT’S IMPACT ON GDP
challenges are rooted in its problems of competi-
Greece is still a safe country to travel to. Greece
tiveness, productivity and social inclusion. The
attracts more than 16 million tourists each year,
power to address these issues does lie with
thus contributing 18.2% to the nation's GDP in
Greece.
2008. The same survey showed that the average
The Global Competitiveness Report of 2014,
tourist expenditure while in Greece was $1,073,
showed that the country was indeed making
ranking Greece 10th in the world.[148] The number
measurable improvements in the functioning of its
of jobs directly or indirectly related to the tour-
goods and labour markets. Improvements to the
ism sector were 840,000 in 2008 and represented
business environment and moves towards the lib-
19% of the country's total labor force. In 2009,
eralization of professions were injecting competi-
Greece welcomed over 19.3 million tourists a major
tion into markets and making them work better.
increase from the 17.7 million tourists the country
The country was also getting its macroeconomic
welcomed in 2008.
house in order, addressing such tricky issues as
The direct contribution of Travel & Tourism to GDP
raising the retirement age and reforming the civil
in 2013 was EUR11.2 billion which is 6.5% of GDP.
service.
In the year 2014, the contribution of Travel & Tour-
Greece was finally returning to growth after years
ism to GDP in 2014 was EUR11.8 billion which
of recession. Yet since the beginning of the year,
was7.0% of GDP. This primarily reflects the eco-
Greece has been rolling back reforms, halting pri-
nomic activity generated by industries such as ho-
vatizations and reintroducing barriers to efficien-
tels, travel agents, airlines and other passenger
cy. This backsliding is not just bad for negotiations
transportation services (excluding commuter ser-
with creditors but also for Greece’s long-term eco-
108
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FB nomic prospects. THE GREEK AUSTERITY PLAN PENSIONERS
• Raising the age at which one can qualify for a state pension to 65 for everyone. Women had previously been
able
to
retire
at
60.
• Increasing the number of years of contributions to the social security system to qualify for a full pension. This goes up from 37 to 40 years between now and 2015. CIVIL
SERVANTS
• Ending the extra two months salary routinely given to civil servants at the end of the year for those earning
more
•
Cancellation
than of
3,000 bonuses
euros
such
as
per holiday
month. reimbursements.
• Average salary reduction of 7% in publicly owned businesses. PRIVATE SECTOR 20% reduction of the minimum wage for younger workers. THE •
RICH
New
taxes
imposed
on
luxury
goods,
such
as
cars,
swimming
pools
and
yachts.
• Special levies on profitable firms and individuals with high earnings CONSUMERS • •
VAT
increase 20%
from increase
19%
to
21% in
on duty
• 63% increase in duty on tobacco.
109
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most
consumer on
goods. alcohol.
Eurozone: A failed experiment?
FB
By Himanshu Garg, SIMSREE Classical economic theory tells us that there are
Sr. No.
Criterion
1
Inflation of no more than 1.5 percentage points above the average rate of the three EU member states with the lowest inflation over the previous year
2
A national budget deficit at or below 3 percent of gross domestic product (GDP)
five types’ of regional trading agreements that can be created to bolster trade amongst nations. The most binding of these agreements is the monetary union, and the only large scale example in contemporary times is the Eurozone. In this type of trade agreement, all barriers to import and export of goods and services are removed, and the mem-
3
ber countries establish common economic policy for the union as well as adopting a single currency. It is a great boon to the member nations’ econo-
4
mies, by removing several of the impediments of international trade such as trade restrictions, and foreign exchange rates on the viability of business.
5
National public debt not exceeding 60 percent of gross domestic product. A country with a higher level of debt can still adopt the euro provided its debt level is falling steadily Long-term interest rates should be no more than two percentage points above the rate in the three EU countries with the lowest inflation over the previous year The national currency is required to enter the ERM 2 exchange rate mechanism two years prior to entry
The Eurozone took shape in 1998, when eleven of
Table 1: Maastricht Criteria
the EU member nations met the Euro convergence
Source: Reuters
criteria (Table 1: Maastricht Criteria). The Euro officially came into effect on January 1st 1999,
Subsequently, seven more nations complied with
Greece met the Maastricht Criteria in 2000, and
the Maastricht Criteria- with the latest being
adopted the Euro in 2001.
Lithuania on January 1st 2015- and adopted the Euro, totalling 19 out of the 28 countries of the European Union. Figure 1: European Union & Eurozone
110
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FB Ireland, Spain and Portugal fail to make repay their debt A number of countries in the Eurozone, namely Greece, Ireland, Portugal, Spain and later Italy faced sovereign debt crises and started to pose a serious threat to Europe and the European counFigure 1: European Union & Eurozone
tries.
Source: The Economist Spain, after the collapse of 2008, saw a rise in The Eurozone worked very well in the initial years, the free trade, and the strong currency allowed many of the member nations to prosper. The European Union seemed to be a resounding success, from 2001 to 2008, the Euro strengthened vs the dollar from $0.84/€ to $1.60/€. Several economists even went so far as to predict that the US Dollar would collapse due to the surging Euro. Alas, come 2008, the world witnessed the greatest financial crisis since the Great Depression.
the levels of personal debt. Although the public debt stood at 60% of the GDP, the problem was due to foreign exposure of private debt. Spanish banks were relying heavily on whole sale finance from abroad. Portugal had a large current account deficit and external debt which was fuelled by private sector borrowing. Greece, Portugal and Ireland were the worst hit whereas Spain & Italy were considered fiscally vulnerable economies. As evident from Figure 3: Eurozone bond yields, the bond yield rate for Greece was the highest. This meant that the Greek government had the costly credit, due to lenders’ scepticism of the Greek economy. The main factor contributing to this was the current level of debt, with the Greece economy being highly leveraged.
Figure 2: USD/EUR (2002-present) 111
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FB By March 2010, Greek government had approved a harsh austerity package which included freezing pensions, tax on alcohol, fuel & cigarettes and pay cuts in the public sector. To prevent the situation from getting any worse, the IMF, European Commission and the ECB had to step in. The collaboration, commonly known Figure 3: Eurozone bond yields
as the troika, in May 2010, approved a bailout
Source: Thomson Reuters Datastream as on
package of the â‚Ź110 billion. Along with it came a
11/08/2015
lot of sanctions, namely cuts in spending and tax hike. Greece accepted more cuts as a part of the
What is wrong with Greece? Greece has been in trouble since the day it joined the Eurozone. Greece, at the time of the amalgam-
deal, however the unrest amongst the citizens was evident. Greek citizens were bitter about these austerity measures.
ation, was unable to meet the Maastricht Criteria requirements. However it was only in October 2009 when they announced that they had been under reporting figures and had not met the criteria since 1999 that the Eurozone actually learnt of Greece’s real economic condition. Figure 4: Unemployment in Greece Being a part of the Eurozone, Greece had access to
Source: Eurostat
cheap credit. However the sunny days soon ended and the Financial Crisis of 2008 occurred. Greece being a highly indebted countries was greatly affected by the crisis. Coupled with the rampant tax evasion problem faced by the Greeks, the government had no substantial revenue. Following the crisis, an even lower percent of the population
As the government had low revenue, they were laying off government employees. Unemployment in Greece was at all-time high. As evident from the graph, compared to the European Union, the employment rate of Greece was abysmally low (Figure 4: Employment Rate Greece vis-
was able to pay taxes, crippling the system further. 112
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FB à-vis Europe). Employees were disgruntled and the buying capability of the citizens deteriorated. Demand touched new lows and the dissatisfaction was evident.
Figure 6: Debt in the European Union Source: Eurostat
Finally a list of huge bailout conditions was proposed to the Greeks, which was accompanied Figure 5: Employment Rate Greece vis-à-vis Europe
with an extensive dwelling upon the proposals.
Source: Eurostat
The midnight of June 30, 2015 went without a deal & Greece missed the deadline for €1.5 bil-
Despite these measures, the Greek economy did
lion payment to the IMF which led to Greece fall-
not recover and in March, 2012 a second bailout
ing into arrears.
package worth €130 billion had to be approved.
The Greek referendum, in which the Greeks vot-
The Greek economy did not see any movement
ed “No” to the bailout conditions might result in
towards recovery and finally in 2011, after lasting
Greece leaving the euro colloquially termed
negotiations, Europe’s leaders had to slash the
“Grexit”.
Greek debt. Private investors would have had to
Implications of the Grexit
write down the Greek bonds by 50%. A Greek exit will result in Greece switching back to Drachma which, given the current Greek economy, will be highly undervalued. Trying to service their debt using such an undervalued currency will result in hyperinflation. Simultaneously, being a major importer, using their devalued Drachma for such imports might cause recession. Greece is indebted to other European countries 113
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FB as well. In a situation where Greece defaults, it will afflict other European economies. Countries like Spain, Portugal, Italy & Ireland who have just recovered from their own Debt Crises may fall back into a crisis. It will further lead to a domino effect which will adversely affect the global economy, which can cause a crisis much worse than the crisis of 2008. Sadly, even if a Greek exit is averted, Greece does not have a bright future. It has slipped back to a mostly cash economy, with shuttered banks and capital controls. Dried up banks are depending on the Emergency Liquidity Assistance (ELA) nominally by the Bank of Greece but controlled by the ECB. To push growth, banks need to reopen and offer trade credits for imports. This in turn requires ECB to raise the cap on ELA which is currently at €89 billion. Just like the case of Cyprus two years ago, depositors in Greek will be reluctant to keep their cash back in banks. Along with strict controls, there will be austerity measures like increase in VAT, which contributes almost 1% of the GDP. The euro summit didn’t specify precise targets, but creditors have stipulated a budget surplus of 1-2% of GDP this year and next year. Pursuit of such targets will weaken a frail economy.
Grexit: Impact on the Eurozone Should Greece decide to exit the Eurozone, it will be a herculean task, a process which would take months or years. The associated uncertainty that will prevail will adversely affect the euro and can damage the currency’s stability. The exit may be also be perceived as an inability to handle crisis by the Euro members and may spread a fear of exit by other crisis struck nations. Countries like Portugal will be under extreme pressure with investors selling Portuguese bonds and look for ways to extract money from the local banks of the nation. However the fact of the matter remains that it is very hard to evaluate and calculate the precise impact of the Grexit on other European nations as the extent to which it will be contagious cannot be accurately predicted.
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Indian Economy
FB
By Monica Datta and Monica Samal, IBS Hyderabad According to the IMF, the Indian economy is the
2012-13.India has capitalized its economy based
"bright spot" in the global landscape. India also
on its large educated English-speaking population
topped the World Bank’s growth outlook for 2015-
to
16 for the first time with the economy having
of IT services, BPO services, and softwareservices
grown 7.3% in 2014-15 and expected to grow 7.5-
with $167.0 billion worth of service exports in
8.3% in 2015-16.
2013-14. It is also the fastest-growing part of the
become
a
major
exporter
economy. The IT industry continues to be the larg-
69 Years of India
est private sector employer in India. India is also
The Economy of India is the seventh-largest in the
the fourth largest start-up hub in the world with
world
over
by nominal
GDP and
the third-
3,100
technology
start-ups
in
2014-
largest by purchasing power parity (PPP). The coun-
15.The agricultural sector is the largest employer
try classified as newly industrialized country, one of
in India's economy but contributes to a declining
the G-20 major economies, a member of BRICS and
share of its GDP (17% in 2013-14). India ranks sec-
a developing economy with approximately 7% aver-
ond worldwide in farm output. The Industry sector
age growth rate for the last two decades. India's
has held a constant share of its economic contri-
economy became the world's fastest growing major
bution(26% of GDP in 2013-14).The Indian auto
economy from the last quarter of 2014, replacing
industry is one of the largest in the world with an
China's.
annual production of 21.48 million vehicles in FY
The long-term growth prospective of the Indian economy is moderately positive due to its young population, corresponding low dependency ratio,
2013-14.India has $600 billion worth of retail market in 2015 and one of world's fastest growing ECommerce markets.
healthy savings and investment rates, and increas-
India's two major stock exchanges, Bombay Stock
ing integration into the global economy. The Indian
Exchange and National Stock Exchange of India,
economy has the potential to become the
had a market capitalization of US$1.71 trillion and
world's 3rd-largest economy by the next decade,
US$1.68 trillion respectively as of Feb 2015, which
and one of the largest economies by mid-century.
ranks 11th & 12 largest in the world respectively
India has the one of fastest growing service sectors in the world with annual growth rate of above 9% since 2001, which contributed to 57% of GDP in 115
according to the World Federation of Exchanges. India also home to world's third largest Billionaires pool with 97 billionaires in 2014 and fourth largest
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FB number of ultra-high-net-worth households that
the Gangetic plains and the Indus valley housed
have more than 100 million dollars.
several centres of river-borne commerce. Most
India is a member of the Nations, the South Asian Association
for
Regional
Coopera-
tion,theG20,the Fund, the World Bank, the World Trade
Organisation,the Bank,
the United
Na-
tions and the New Development BRICS Bank.
overland trade was carried out via the Khyber Pass connecting the Punjab region with Afghanistan and onward to the Middle East and Central Asia. Although many kingdoms and rulers issued coins, barter was prevalent. Villages paid a portion of their agricultural produce as revenue to the rul-
Timeline of the economy of the India
ers, while their craftsmen received a part of the
Pre-colonial period (up to 1793) The citizens of
crops at harvest time for their services.
the Indus Valley Civilisation, a permanent settlement that flourished between 2800 BC and 1800 BC, practiced agriculture, domesticated animals, used uniform weights and measures, made tools and weapons, and traded with other cities. Evidence of well-planned streets, a drainage system and supply reveals their knowledge of urban planning,
which
included
the
world's
first
ur-
ban sanitation systems and the existence of a form of municipal government.
Assessment of India's pre-colonial economy is mostly qualitative, owing to the lack of quantitative information. The Mughal economy functioned on an elaborate system of coined currency, land revenue and trade. Gold, silver and copper coins were issued by the royal mints which functioned on the basis of coinage. The political stability and uniform revenue policy resulting from a centralised administration under the Mughals, coupled with a well-developed internal trade network, en-
Maritime trade was carried out extensively be-
sured that India, before the arrival of the British,
tween South India and southeast and West Asia
was to a large extent economically unified, despite
from early times until around the fourteenth centu-
having a traditional agrarian economy character-
ry
the Malabar and Coromandel
ised by a predominance of subsistence agricul-
Coasts were the sites of important trading centres
ture dependent on primitive technology. After the
from as early as the first century BC, used for im-
decline of the Mughals, western, central and parts
port and export
of south and north India were integrated and ad-
AD.
Further
Both
north,
the Saurashtra and Bengal coasts
played an important role in maritime trade, and 116
ministered by the Maratha Empire. After the loss at the Third Battle of Panipat, the Maratha Empire
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FB disintegrated into several confederate states, and
than any systematic effort at modernisation of the
the resulting political instability and armed conflict
domestic economy.
severely affected economic life in several parts of
British territorial expansion in India throughout
the country, although this was compensated for to
the 19th century created an institutional environ-
some extent by localised prosperity in the new pro-
ment that, on paper, guaranteed property
vincial kingdoms. By the end of the eighteenth cen-
rights among the colonizers, encouraged free
tury, the British East India Company entered the
trade, and created a single currency with fixed ex-
Indian political theatre and established its domi-
change rates, standardized weights and measures
nance over other European powers. This marked a
and capital markets within the company held ter-
determinative shift in India's trade, and a less pow-
ritories. It also established a system of rail-
erful impact on the rest of the economy,
ways and telegraphs, a civil service that aimed to
Colonial period (1793–1947) From the beginning of
be free from political interference, a common-law
19th century British East India Company's gradual
and an adversarial legal system. This coincided
expansion and consolidation of power brought a
with major changes in the world economy – indus-
major change in the taxation and agricultural poli-
trialisation, and significant growth in production
cies, which tended to promote commercialization of
and trade. However, at the end of colonial rule,
agriculture with a focus on trade, resulting in de-
India inherited an economy that was one of the
creased production of food crops, mass impoverish-
poorest in the developing world, with industrial
ment and destitution of farmers, and in the short
development stalled, agriculture unable to feed a
term, led to numerous famines. The economic poli-
rapidly growing population, a largely illiterate and
cies of the British Raj caused a severe decline in
unskilled labor force, and extremely inadequate
the handicrafts and handloom sectors, due to re-
infrastructure.
duced demand and dipping employment. After the
The 1872 census revealed that 91.3% of the popu-
removal of international restrictions by the Charter
lation of the region constituting present-day India
of 1813, Indian trade expanded substantially and
resided in villages, and urbanization generally re-
over the long term showed an upward trend. The
mained sluggish until the 1920s, due to the lack of
result was a significant transfer of capital from India
industrialisation and absence of adequate trans-
to England, which, due to the colonial policies of
portation. Subsequently, the policy of discrimi-
the British, led to a massive drain of revenue rather
nating protection (where certain important indus-
117
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FB tries were given financial protection by the state),
tion, economic interventionism, a large govern-
coupled with the Second World War, saw the devel-
ment
opment and dispersal of industries, encouraging
and central planning, while trade and foreign in-
rural-urban migration, and in particular the large
vestment policies were relatively liberal. Five-Year
port cities of Bombay, Calcutta and Madras grew
Plans of India resembled central planning in
rapidly. Despite this, only one-sixth of India's popu-
the Soviet Union. Steel, mining, machine tools,
lation lived in cities by 1951.
telecommunications, insurance, and power plants,
The impact of British occupation on India's economy is a controversial topic. Leaders of the Indian independence
movement and economic
histori-
ans have blamed colonial occupation for the dismal state of India's economy in its aftermath and argued that financial strength required for industrial development in Europe was derived from the wealth taken from colonies in Asia and Africa. At the same time, right-wing historians have countered that India's low economic performance was due to various sectors being in a state of growth and decline due to changes brought in by colonialism and a world that was moving towards industri-
run public
sector, business
regulation,
among other industries, were effectively nationalised in the mid-1950s. Jawaharlal Nehru, the first prime minister of India, along with the statistician Prasanta Chandra Mahalanobis, formulated and oversaw economic policy during the initial years of the country's independence. They expected favourable outcomes from their strategy, involving the rapid development of heavy industry by both public andprivate sectors, and based on direct and indirect state intervention, rather than the more extreme Sovietstylecentral command system. The policy of concentrating simultaneously on capital- and technology-intensive heavy industry and subsidising man-
alisation and economic integration.
ual, low-skill cottage industries was criticised by Pre-liberalisation
Indi-
economist Milton Friedman, who thought it would
an economic policy after independence was influ-
waste capital and labour, and retard the develop-
enced by the colonial experience, which was seen
ment of small manufacturers. The rate of growth
by Indian leaders as exploitative, and by those lead-
of the Indian economy in the first three decades
ers' exposure to British social democracy as well as
after independence was derisively referred to as
the planned economy of the Soviet Union. Domestic
the Hindu rate of growth by economists, because
policy tended towards protectionism, with a strong
of the unfavourable comparison with growth rates
emphasis
in other Asian countries.
118
period
on import
(1947–1992)
substitution
industrialisa-
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FB Since 1965, the use of high-yielding varieties of seeds,
increased fertilisers and
im-
proved irrigation facilities collectively contributed to the Green Revolution in India, which improved the condition of agriculture by increasing crop productivity, improving crop patterns and strengthening forward and backward linkages between agriculture and industry. However, it has also been criticised as an unsustainable effort, resulting in the growth of capitalistic farming, ignoring institutional reforms and widening income disparities.
regulation. In response, Prime Minister Narasimha Rao, along with his finance minister Manmohan Singh, initiated the economic liberalisation of 1991. The reforms did away with the Licence Raj, reduced tariffs and interest rates and ended many public monopolies, allowing automatic approval of foreign direct investment in many sectors. Since then, the overall thrust of liberalisation has remained the same, although no government has tried to take on powerful lobbies such as trade unions and
the Emergency and Garibi
farmers, on contentious issues such as reforming
Hatao concept under which income tax levels at
labour laws and reducing agricultural subsidies. By
one point rose to a maximum of 97.5%, a record in
the turn of the 21st century, India had progressed
the world for non-communist economies, started
towards a free-market economy, with a substan-
diluting the earlier efforts.
tial reduction in state control of the economy and
Subsequently
increased financial liberalisation. This has been Post-liberalisation period (since 1991)In the late 1970s, the government led by Morarji Desai eased restrictions on capacity expansion for incumbent
accompanied by increases in life expectancy, literacy rates and food security, although urban residents have benefited more than rural residents.
companies, removed price controls, reduced corporate taxes and promoted the creation of small scale
Growth then moderated due to the global finan-
industries in large numbers. The collapse of the So-
cial crisis starting in 2008. In 2003,Goldman
viet Union, which was India's major trading partner,
Sachs predicted that India's GDP in current prices
and the Gulf War, which caused a spike in oil prices,
would overtake France and Italy by 2020, Germa-
resulted in a major balance-of-payments crisis for
ny, UK and Russia by 2025 and Japan by 2035,
India, which found itself facing the prospect of de-
making it the third largest economy of the world,
faulting on its loans. India asked for a $1.8 billion
behind the US and China. India is often seen by
bailout loan from the International Monetary
most economists as a rising economic superpower
Fund (IMF),
and is believed to play a major role in the global
119
which
in
return
demanded
de-
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FB economy in the 21st century. Starting in 2012, India entered a period of more anaemic growth, with growth slowing down to 4.4%. Other economic problems also became apparent: a plunging Indian rupee, a persistent high current account deficit and slow industrial growth. Hit by the U.S. Federal Reserve's decision to taper quantitative easing, foreign investors had been rapidly pulling out money from India though this has now reversed with the Stock market at near all-time high and the current account deficit narrowing substantially. India is ranked 142nd out of 189 countries in the World Bank's 2015 ease of doing business index. In terms of dealing with construction permits and enforcing contracts, it is ranked among the 10 worst in the world, while it has a relatively favorable ranking when it comes to protecting minority investors or getting credit.
120
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FB
Can India become a developed nation? By Mayank ,Vinod Gupta School of Management, IIT Kharagpur
The definition of developed nation always has a
supplier of raw materials to British empire and
vagueness and debate hovering around it. While
Ottoman empire, then as one of the centre of cap-
from the perspective of an investor developed na-
italism and industrialization then as centre of
tion is the one which possess advance economic
technological leader, countries such as Israel , Tai-
structure such as capital access, regulations, mone-
wan, Japan have become developed in pursuit of
tary stability while from the perspective of an econ-
their existential challenges and shaping their
omist a developed nation is the one exhibiting high
economies in most robust way as an feedback to
level of GDP, GNP, per capita income, robust ter-
external threats and stimulus. But the major turn-
tiary and quaternary sector and from the perspec-
ing point in history of world was World War II
tive of a social advocate a developed nation is the
which implicitly drew the line between the na-
one which has high levels of Human Development
tions. On one side there were those riding the
Index and low level of poverty. Developed nation
wave of rejuvenation and on other hand there
can’t be characterized by a single definition; IMF
were those who were marinating in their blissful
identifies 37 nations to be developed, World Bank
ignorance.
identifies 74 countries to be advanced or developed
Economy of India has a history of perpetual down
while OECD considers its 34 members to be devel-
beating starting from colonial exploitation then
oped.
License raj, emergency. Hysteric from more than
Let’s not hung up upon arbitrary definitions the
250 years of colonial exploitation it was only in
whole concept of developed nation is relative in
1991 that India finally embraced the globalization
nature i.e. how matured and evolved a nation
after 44 years of independence and economy
stands with respect to others. One needs to look
started rolling from its slumber.
into the chronology of nations which have crossed the barrier to become developed. Nations such as United Kingdom, Netherlands had amassed substantial wealth during the colonial expansion by leveraging upon the wave of industrial revolution and are growing at a very sluggish rate post industrialization era, other first world countries such as United states have greased their economy over a long period of time reaping from every era, firstly as an 121
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FB million labor force needs the most of revamping. If we compare some of developed economies all of them have minimal dependence on agriculture for employment. All major developed economies like US has only 0.7% labor force in agriculture sector, Germany has 0.9% labor force in agriculture, Japan with only 3.9% have minimalistic agriculture dependence and major labor force employed in service sector with moderate and robust manufacturing sector. Fig 1-Indian GDP (1950-2010)
Now from the experience of major developed
From above graph it is evident how 1991 liberaliza-
economies the countries which maintained to
tion up shifted the GDP growth of India shedding its
cross the barrier of being developed is by enabling
inhibitions as inward economy with little or no
its entrepreneurs, who in turn create employment
space to breath.
for others. Silicon Valley in US, Toshiba, Fujitsu,
Albeit the Nominal GDP of India being $2.3 Trillion
Sony and Mitsubishi in Japan, Daimler, SAP and
standing at rank 7th in the world, the huge popula-
Siemens in Germany are empirical examples.
tion base of 1.2 billion makes per capita GDP come
Same can be corroborated from the ratio of con-
down to $1808 at a dismal rank of 131st in world.
tribution of service sector in GDP and percentage
Almost all the advanced or developed economies of
of labor employed in service sector. Ironically ac-
the world share a common characteristic i.e. their
cording to latest World Bank report India ranks
economies cater to a relatively very small domestic
132 in ease of doing business among 185 econo-
population. Now if we focus upon demographics of
mies.
India there are around 502 million labor force as of
Looking back at economy of India the major re-
2014 estimates of which 49% are engaged in agri-
tarding factor for Indian economy has been long
culture sector, 20% in industrial manufacturing,
dependence on agriculture. Simple mathematics
31% in services and contrastingly the contribution
here that If we need 250 million people raising
of these sectors is 17% by agriculture, 26% by in-
farms for 1200 million peoples than either food
dustry and 57% by services. Evidently agriculture
prices should sore up or farmers remain in pov-
sector being the least productive and engaging 250
erty. But if 50 million are engaged in agriculture
122
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FB then their earnings will grow up by 5x times without
high overall enrollment rate for primary educa-
changing the price of agro products. But where
tion, among rural children of age 10, half could
these 200 million will go? For that we need National
not read at a basic level, over 60% were unable to
level skill development. Government of India’s lat-
do division, and half dropped out by the age 14.
est adventure with ‘Make in India’ campaign may
Indian government allocated 1.58% of GDP cur-
look however promising but for a strong building a
rently to Healthcare in contrast to global median
strong foundation is fundamental. With only 2.3
of 5%.
per cent of the workforce in India trained in formal
One devastating problem which is plaguing the
skill compared to 68 per cent in the UK, 75 per cent
growth of India for always is shoddy infrastructure
in Germany, 52 per cent in the US, 80 per cent in
- power, electricity, roads, railways, ports, air-
Japan and 96 per cent in South Korea. A technologi-
ways, public health, education institutions all are
cally-illiterate people, the logic goes, will remain at
in continuous abysmal state of despair. India has
best technology-consumers but not active participa-
11 major ports, which are managed by the Port
tors.
Trust of India. Five of these ports are on the east
Tantamount to development of economy is human
coast of India and six are on the west coast. These
capital. Composite statistic of life expectancy, edu-
ports handle 82% of cargo and are operating be-
cation and per capita income indicators which is
yond their capacity. India has a road network of
called as Human Development Index (HDI) accounts
over 4,689,842 kilometers of which only 54% is
the people-centered policies in addition to national
paved. Example of South Korea is illustrious
income. While Norway tops the list of HDI with
enough to emphasize the importance of infra-
0.944 HDI for year 2014 all the developed countries
structure development which brought it from one
fills the top echelons of the list and India sits at end
of the poorest economy in 1960’s to world 11th in
of deck with 135th rank. Major benefactors of HDI
2014.
are life expectancy at birth, mean and gross years of
Undoubtedly recent endeavors by Government of
schooling and per capita GNP. India faring equally
India such as GST bill, Land reform bill, Make in
dismal in all factors owning to inefficient education
India are quintessential to revamp the economic
system, incapable health and sanitation system,
structure and reinstate the lost faith in economy
huge population. As of 2011, enrollment rates are
after perpetual down beating but all these eco-
58% for pre-primary, 93% for primary, 69% for sec-
nomic reforms highlight only one facet of being
ondary, and 25% for tertiary education. Despite the
developed country. A country without its popula-
123
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FB tion feeling an upliftment in its standard of living and happiness cannot claim to be developed only on macroeconomics indicators as it is the peoples who define economy not vice versa. In a long road towards being developed there has to be a felt sense of upliftment in quality of living. Be it access to power and energy, education, healthcare, opportunity to work, regulations, civil rights etc all these are intertwined and organic to development. There is a urgent need to dismantle the rigid system of bottleneck regulations and multiple clearances for aspiring entrepreneurs to breath in and prosper, reforming the agriculture sector with more productive and rewarding technological revamp and leverage upon huge human capital by establishing more goal oriented skill development institutions. Stipulating a timeline or prospective year for India to become developed nation is highly irrational in virtue as current speculations don’t take into account the unanticipated external and internal turmoil, the only prudency is setting the foresight learning from hindsight.
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FB
Soaring onion prices bringing tears By Akarshan Behera, IBS Hyderabad sight. The average price of onion at Lasalgaon
Onions are considered an indispensable ingredient
wholesale market – which saw an arrival of 3,500
of most Indian cooking, providing the foundation
quintal – was Rs 4,300 per quintal. A day before in
for a thousand different curries and other dishes.
Pune, which witnessed an arrival of 5,560 quintal,
Onion prices have been an important political issue:
the price stood at Rs 4,500 per quintal. Attributing
they were regarded as the decisive factor in the
the rise in prices to decreased arrival, traders at
1998 state elections in Delhi and Rajasthan. In the
both the market said it was the highest in the last
last two years, onion prices have crossed Rs 50 per
two years. Last year on the same day, the average
kilogram at least four times. The Delhi government
price of onion at the Lasalgaon market was Rs
is selling onions through government run shops to
1,675 per quintal, with 16,885 quintal arrival in
help the consumers. But, it is nothing compared to
the market.
the huge demand for the onion.
REASONS FOR PRICE RISE Failed Monsoon The price of onion is at 2 year high in Lasalgaon market. National Horticultural Foundation says there’s a fall in supply as harvesting has been delayed in Gujarat Rajasthan and MP. It says deficient rainfall could lower Kharif output in Maharashtra, Karnataka, AP, the three major onion
Lasalgaon mandi- Asia’s largest onion market
growing states in India. Stored Rabi crop has
Forty-five percent of the onion produce in India
halved from 28 lakh tonnes in July to 14 lakh
comes from the states of Maharashtra and Karna-
tonnes now. Only a few parts of India have re-
taka. The price of onion in the wholesale markets of
ceived excess or normal Monsoon in 2015. Most
Lasalgaon and Pune breached the Rs 4,000 per
other parts have received less than normal Mon-
quintal mark on Monday, making it the highest in
soon this time.
the last two years. Though the National Agricultural
Shifting consumption
Cooperative Marketing Federation (NAFED) has decided to extend the deadline to invite bids for im-
Shifting consumption pattern among Indians have often been blamed for the rise in food prices, in-
porting onions, no quick resolution seems to be in 125
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FB cluding onions. Indian are consuming fewer cereals,
demand is pushing up prices. Also delayed release
like wheat, and more vitamin- and protein-rich
of stocks and hoarding has been noticed. This can
foods, like onions and chicken, experts say. This
be a reason for higher retail prices. The price ma-
means prices for non-grains have been rising faster
nipulation was traced to the doorstep of traders
than those of grains for several years now.
controlling release of onion stocks to Nasik’s ma-
Dependence on Major Producing States
jor markets of Pimpalgaon and Lasalgaon where
Onion is the mainstay of many Indian staple recipes, but 45 per cent of the produce comes from the states of Maharashtra and Karnataka. As a result, if harvest is hit in just one-two states, onion prices tend to rise. The area under onion cultivation in Maharashtra is expected to decline this year. Lower production from a state that accounts for nearly 25 per cent of onions produced in the country, has impacted supplies.
rates are threatening to breach the Rs 5,000 a quintal mark. Having solved the onion fiddle, at least its cause, the government is wielding the import stick to cool prices that can prove politically calamitous ahead of elections to major states like Madhya Pradesh, Chhattisgarh, Delhi and Rajasthan. Reflecting a rising concern in government as it fights high food inflation and economic woes like a yo-yoing stock market and a sliding rupee, the Centre is pushing states to ensure quick release of stocks.
Hoarding
SCOPE FOR REVIVAL
The onion production in 2012-13 declined only 5%
Concerned over rising onion rates, the union gov-
and storage was less by just 2 lakh tonnes, market
ernment has imposed a minimum export price
arrivals fell steeply by 20-40% in June-July 2013.
(MEP) of $ 300 per tonne on the kitchen staple to
The mismatch between demand and supply has led
curb overseas sales and check retail prices. Onion
to hoarding of onions and is leading to artificial rise
prices have risen to about Rs 25-30 per kg in the
in onion prices. Hatched by traders operating from
national capital from Rs 15-20 per kg a fortnight
major onion markets in Nasik in Maharashtra — as
ago. The MEP, which is the rate below which no
it sought to figure out why a relatively small drop in
exports are allowed, has been re-introduced bare-
production led to sharply reduced market arrivals. It
ly three months after the previous government in
appears that stored onions are being released slow-
March had abolished it.
ly into the market which together with continuing
126
Also, the centre is now readying to import onions
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FB from countries like Pakistan and China, in order to meet the country’s insatiable demand. But it’s only a stopgap solution. The use of laws like the Essential Commodities Act and other inspection mechanisms have been suggested while the Centre encourages states hit by soaring onion prices to explore direct contractual procurement. This can be helpful to curb hoarding in the onion market. Apart from all, until infrastructure, distribution and technology improve, and wastage is reduced, governments may find their fates depend on this pungent bulb and Indian shoppers will have plenty to cry about.
127
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E-commerce-future risk and hope
FB
By MMC Diaries, IBS Hyderabad INTRODUCTION Recalling the Malgudi days, money transfer and
The researchers worked and finally started developing a basic framework to go about this.
transactions were often seen as a tedious task. But
Finally a huge data base was maintained and
with the advent of technology and the seeping of
these data bases were interlinked via a client serv-
internet and electronic media into the system has
er model.
actually led to a great ease in the commercial world. The new generation neither has the time not patience to wait for anything. This on-the-wheels generation seeks everything to happen in seconds. Science and technology have actually converted this dream into reality by development of various online platforms. One of them is E-Commerce.
Soon SAAS i.e. Software as a service was introduced. Here by simply using a web browser, you could interlink all your information and design an online portal for your products. In this model the applications are generally hosted by a vendor or service provider and made available to the customers typically over the internet.
E-Commerce as the name suggests stands for electronic commerce. Not going into the mundane defi-
The advent of this particular technology was
nitions of e-commerce, let’s understand this con-
nothing but the birth of modern commercial sys-
cept in a simpler way.
tem which no one had imagined before; that had
E-Commerce is essentially a business model through which you may carry out one or all of your
the power of replacing the contemporary merchandising set up.
business processes online. These intermediate pro-
And ever since coming to the present it has
cesses include: supply chain management, transfer
become a part and parcel of our lives that we do
of money, providing an online market place and so
not have to look or wait for our favourite product
on.
to come to the retail store rather we order it online, because now it’s just a click away.
HISTORY The story began around 1985 when the internet was already spreading its roots across the globe that the idea of online transactions hit the minds of the techies.
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FB than an individual and a company. BUSINESS TO CONSUMER: Such an activity when transactions are carried out between an individual and a company. BUSINESS TO GOVENMENT: Transactions between a company and any vertical of the government say Municipal Corporation, courts etc. fall under this category. CONSUMER TO CONSUMER: A business model where two or more customers can trade beE-COMMERCE
TYPE
tween each other. MOBILE COMMERCE: Financial transactions done through wireless handheld devices such as laptops, mobiles etc. over the internet.
MARKET SHARE OF INDIA
Now that we understand what is e-commerce let us have a look at how much of the market has it already captured and try to understand how rapidly it is growing.
A brief definition of five major types of E-commerce is given as: BUSINESS TO BUSINESS: A type of business activity which is carried out between companies rather 129
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FB
As we can directly infer from the graph, in 2013 the market in India amounts to only 12.6 bilIf we look at the above graph, we understand that e -commerce still forms a very small part of the total retail marketing share in India. And when compared to the world India still stands far behind many major countries in the world.
lion dollars whereas countries like UK, Japan China and US are taking a major leap with 48,52,64and 177 billion dollars respectively. Nevertheless the share is expected to rise rapidly to 20 billion dollars by 2017. This ensure that there is a significant scope for the investors to put in their money in this growing market and gain a fair share & position in the market. This gives a clear positive correlation between the profitability and ROI. As the market share increases, the profit margin is expected to rise which ensures the investors for achieving economies of scale and greater market power.
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FB HOME AND FURNISHING: ikea, asos TRAVEL: amadeus, sabre RESTAURANTS: foodpanda, quora
Key Investment Sectors
MUM AND BABY: babyoye, mumzworld GIFTS AND FLOWERS: goecart, fusiondesign BUBBLE
OR
BLOOM?
A similar situation of internet revolution created a wave earlier in 2000. Now the question remains the same, whether this will again form a bubble or the e-commerce sector flourish seamlessly. Well comparing the situation in 2000 and now, it is very evident that at that time there were not proper resources or infrastructure for the ecommerce
platform
to
develop.
But recent changes in the technology have actually allowed this to extend its reach from major segIf you do not know which in which sector to invest, this graph provides you with a clear idea of the percentages of market of different segments of ecommerce. Some of the examples of the successful E-
ments like tourism and travels to minor segments like daily vegetables. Right from online banking and booking to ordering raw vegetables you have an application to take care of your needs e.g. Localbaniya, bigbasket.
commerce models in these particular segments are: FASHION: shopify, ilovefashion ELECTRONICS: samsung, LG HEALTH AND BEAUTY: asendia, bostinno 131
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FB Moreover the tech-savvy generation loves to be pampered by the applications which makes their work easy. Hence this is more likely to bloom in near future. Future of E-Commerce Industry E-Commerce market is thriving and poised for robust growth in Asia. There are many players in ECommerce across the world who had a great beginning, but their success depends on their understanding of the market conditions and offering various types of features to target consumers. Predicting the future of E-Commerce is difficult because only some segments have greater growth opportunities such as travel and tourism, electronic appliances, hardware products and fashion apNot only all these are successfully running but all these
are
making
huge
profits
as
well.
Online travel has traditionally been the largest ECommerce sub sector by revenue in India. Never-
This will be clearer with an example, say
theless, online retail is moving ahead and is ex-
Flipkart: It was founded in 2007. But within 8 years of its existence, closed funding round over $500 million and valuation
at
$15.5
billion.
Which is greater than any brick and mortar retail shop in India. The statistics are surprising but also
pected to match online travel revenues by the end of 2015. To improve margins online players are diversifying their offerings to include hotel reservations, along with regular ticketing services. To make the most of this, the players need to develop skill sets that are different from the ones re-
true. This wakens us to the fact that it is this model, with its phenomenal reach that has the power of delivering
parel.
such
stupendous
results.
quired in the ticketing segment. They will have to manage challenges associated with diverse supplier base, technological constraints, customer experience and authenticity of information and griev-
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FB ance re-dressal. The online retail segment has
countries like U.S.A. and U.K., but its expanding at
evolved and grown significantly over the past few
an alarming rate adding around 6 million new en-
years. Cash-on-delivery has been one of the key
trants every month. As the higher growth in the
growth drivers and is accounted for 50% to 80% of
number of new entrants is escalating daily, cus-
online retail sales.
tomary retailers will feel the need to switch to
Online merchants have the advantage of being able
online business.
to reach customers at global level 24 hrs a day and
E-Commerce in India has become 4 times its size
7 days a week. The opportunity to shop online is
from 3.8 Billion $ in 2009 to 17 Billion $ in 2014. It
virtually unrestricted as the internet removes the
is expected to cross the 100 Billion $ market with-
barriers to retail shopping such as limited stores,
in next 5 years. The year 2014 is known as “Billion
operating hours and inability of some customers to
Dollar Year� was most critical for E-Commerce in-
get to a conveniently located outlet.
dustries with many companies attracting private
To ensure that E-Commerce maintains the stream
equity investments which sky rocketed them to
that it has gained in recent years, the government needs to focus on the regulatory front. Unlike many other countries, India still does not have dedicated E-Commerce laws. The Sales tax laws needs to be revised, as they are creating problems for online retailers while they are in the process of deciding warehouse locations. E-Commerce is set to continue on its growth path because of the stabilization of the Indian economy and interest demonstrated by many reputed players who are investing in ECommerce segments, Combined with support from Government of India. India being a developed country with rapid growth of technology we cannot exclude the role played by E-Commerce industry. Though the internet user base of India is lagging behind when compared to 133
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FB billion dollar valuations within less than a decade of
standards that needs to be followed by e-retailers
operations.
in E-Commerce segment to become strong market leaders, listed out as follows,
E-Commerce increases efficiency: E-Commerce is an economic phenomenon that broadly affects the production, exchange, distribution and consumption of products and services all round the world. Due to pressure from E-
Marketing promotions and Customer acquisitions. Customer retentions and Loyalty. Customer experience and Satisfaction. Customer assets growth and Value creation.
Commerce companies weaker and inefficient distribution channels would be eliminated and more effi-
Pros and Cons in E-Commerce Ecosystem: (Indian
cient one will be introduced and enhanced.
Context)
Value in E-Business is created only if firms adopt E-
PROS:
Business models, which respond to relevant e-value drivers. The 4 e-value drivers are interrelated, they are Efficiency, Complementaries, Customer relation and Innovation.
Annual disposable income per household to grow by two and half times by the end of 2015. Discretionary spending expected to form a major portion of expenditure in India.
Players in E-Commerce:
Rapid growth is expected in the sales of PC’s, tab-
Amazon continues to dominate the world E-
lets and smartphones. There is a rapid increase in
Commerce industry with product sales of 61 Billion
time spent online by Indians. Probability of growth
USD in 2014. In India Flipkart is the largest e-retailer
in internet user base, mirroring that of the voice
valued at 11 Billion USD. Global E-Commerce mar-
user base. Volume and average value of transac-
ket has become more advanced in terms of technol-
tions is higher for credit cards than debit cards.
ogy, awareness and payment systems.
Increase in number of payment options.
Alibaba accounts for more than 80% of all online
CONS:
purchases in China and after its expansion globally
Causes for concern are low average broadband
it is emerging as one of the leading global E-
speed and flat average internet speed.
Commerce player.
Online payment landscape marred by low pene-
According to analysts there are 4 key performance
tration of credit and debit cards; high failure rate
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FB of online payment transactions.
unauthorized access and Theft & Fraud.
DIGITAL E-COMMERCE CYCLE & SECURITY ISSUES:
Investments in E-Commerce Sector
Security is a very key aspect in online shopping
Venture capitalists investing across e-commerce
sites. Now a days a huge amount of money and re-
verticals:
sources are being spent on internet shopping, because it’s easier and more convenient.
The recent trends of investing in E-Commerce suggest that online retail, group buying and online
There are certain phases in E-Commerce transac-
travel segments were the top 3 segments to re-
tions, they are:
ceive funding from Venture Capitalists in India.
Information Phase: In this phase the required
Venture Capitalists were observed to be investing
security measures are Confidentiality, Ac-
more in vertical focussed E-Commerce start-ups in
cess Control and Integrity checks.
India. Early stage funding in E-Commerce sector in
Negotiation Phase: The required measures in this phase are secure contracts, identifica-
India has also picked up with a few companies providing seed funding.
tion and digital Signatures. Payment Phase: Encryption is the important
Valuations – too good to be true?
security tool here. Delivery Phase: Here secured delivery and integrity
checks
are
required
security
measures in this phase.
The rapid growth of E-Commerce companies has attracted new players. Though many of these new companies do not have any significant differentiator in their businesses, they have been successful
E-Commerce security mainly revolves around the protection of its assets and consumers bank accounts or credit card details from unauthorized access, use, alteration, or destruction. While security
in attracting investments. However, most of these companies are not yet profitable and are only growing on volumes. This raises concerns relating to a valuation bubble.
features do not guarantee a secure system but they are necessary to build one. The main features of security are Authentication, Authorization, Encryp-
Companies competing on price to gain customers:
tion, Auditing, Integrity, and Availability. The types
One of the reasons that justifies this concern is
of security threats found here are denial of service,
that companies are looking to acquire customers
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FB by selling below the cost price. They are mainly competing on price to overcome competition – at
a study done by leading investment banking firm.) Time for stronger mergers and acquisitions:
the expense of investors’ funds. The sale to market cap valuation ratio of leading E-Commerce players is around 1:100, which implies a mismatch between their sales, margins and valuations.
The year 2014 saw some high profile mergers and acquisition in the Indian digital commerce sector. The biggest one being the Flipkart and Myntra merger, which was INR 20 Billion deal helping re-
Creative Accounting methods:
duce competition in the market. The Ibibo Group,
The second reason relates to accounting methods
subsidiary of the South African mass media com-
adopted by E-Commerce companies. Some of these
pany Naspers, acquired Pilani Soft Labs, which
are amortizing discounts that they provide on sales
runs bus ticketing website redbus.in for about
as capital expenditure, based on the premise that
USD 135 Million. Ola cabs acquired the rival Taxi-
this will benefit them in later years, instead of ac-
ForSure for USD 200 million to eliminate the com-
counting for this in the year of sale. This leads to
petition. These deals have further increased inves-
inflation of their balance sheets.
tors’ confidence in this sector. Mergers and acqui-
VC Players banking on growth of E-Commerce to
sition trends are expected to follow in the coming
make lucrative exits
years as the industry consolidates backed by high
Several venture capitalists are investing in E-
valuations and scaling up operations.
Commerce space because they feel this is the right
Living on Valuations:
time to invest in this space and they do not want to
The staggering growth of digital commerce is
miss out on its current wave of popularity. They
attracting investors from within and outside the
think it is necessary to have an E-Commerce compa-
country. The home grown players Flipkart and
ny in their portfolios, as this would allow them to
Snapdeal are taking every necessary step to stay
sell their stake at higher prices.
ahead in the race. Online players remain optimis-
The E-Commerce sector would continue to receive
tic of the profitability of their ventures in the long
funding from VC’s despite concerns relating to valu-
term and continue to invest heavily to build capa-
ation bubble. Early stage focussed players would
bilities and gain bigger share of the market.
invest major parts of their funds (40%) in internet
As per analysts, the INR 200 Billion investments in
based companies by the end of 2015. (According to
E-Commerce in 2014 were driven by sky-high valu-
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FB ations. The valuation of Flipkart sharply increased
would pose a challenge for local companies. Inter-
from USD 1.9 Billion at the start of 2014 to reach
national players have larger financial resources
$11 Billion by the end of the 2014. It raised 1.9 Bil-
than their Indian counterparts. This enables them
lion USD in three rounds of fund raising despite in-
to bear losses and restricts supplies to their coun-
curring losses of around INR 4 Billion. Similarly,
terparts. This enables them to bear losses and re-
Snapdeal saw its valuation increase from USD 350
strict supplies to their competitors by buying out
million to USD 3 Billion after raising funds of USD
supplies from vendors. This could drive out small-
850 million. Snapdeal also posted losses of INR
er domestic players from the market.
2.64billion in Fiscal year 2014. The valuation can play a major role for an E-Commerce player irre-
Low margins promoting E-Commerce players to look at new business models:
spective of the profitability of the company. The majority of E-Commerce companies are price Challenges for E-Commerce Sector
players due to stiff competition they face and the
Lack of touch-and-feel a mental barrier for online
race to acquire maximum number of customers.
shopping:
This results in very low margins or none at all.
Most Indian Customers prefer to sample a product
Taxation challenges:
before making a purchase. This applies to all categories such as Clothing, shoes, perfumes and accessories. Lack of touch and feel in online shopping could lead to issues such as wrong product sizes (in shoes and clothing). This creates a mental barrier for consumers to shop online.
E-Commerce is the ‘new normal’ with goods and services having moved from a physical platform to a digital one i.e. goods and services being transacted online or being themselves digital. The current tax laws could pose significant challenges in E -Commerce, especially international transactions,
Increased competition with entry of global players:
and this calls for a new tax system which specifi-
The growth potential of the online retail segment in
cally recognizes and deals with E-Commerce.
India is attracting leading international players. The
The Indian Revenue, having been aware of the
entry of International players would increase com-
unique challenges posed by E-Commerce, consti-
petition in the segment. The advanced technologi-
tuted a High powered committee (HPC) on
cal capabilities of global players in areas such as
‘Electronic Commerce and Taxation’ in 2001 to
Customer analytics and recommendation engines
examine the then current as well as proposed tax
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FB treatment of E-Commerce. In 2013, OECD and G20 countries adopted a 15-point action plan to address Base erosion and profit shifting strategies adopted by companies to minimise their tax costs through artificial structures; Action 1 of Base Erosion and Profit Shifting (BEPS) deals specifically with tax chal-
high valuations that are doing the rounds today. Since the bubble is prevailing in privately held Indian E-Commerce companies and the valuations are closely linked to valuations of US tech startups, the below events may result in investor pullback,
lenges in E-Commerce in detail. A macroeconomic event. E-Commerce Valuation – An Asset Bubble - ?
Declining valuations of US based private compa-
A big question in investors’ minds is whether E-
nies such as Uber and Dropbox.
Commerce is a bubble in India. Valuations are on
If a big Indian Internet company struggles to raise
the rise for the better part of two years due to con-
cash.
stant supply of funds from VCs. India is experiencing
IMPACT POINTS:
a wave of prefix investing which involves a market bias for companies with an ‘e’ as a prefix or ‘.com’ as a suffix. The E-Commerce companies are also competing on price to overcome competition.
Founding team and its credibility Traction and near term expected revenue Potential market size Growth and engagement
Valuation is no longer a metric that denotes the ab-
Competition, market forces and multiples
solute true and fair value of the company, but a plethora of macro and micro factors. Possible End Game Scenarios Predicted by An Asset Bubble: An asset bubble, is a periodic phenomenon where
“Investment Analysts”: 2015:
the value of assets increases much faster than its real underlying value. Sooner or later, the high prices become unsustainable and they fall dramatically
Industry Saturation & consolidation underway. Substantial customer acquisition costs (“CASH BURNS”) to increase awareness and
until the item is valued at or even below its true
footfalls.
worth. In this case, because the E-Commerce companies are still not publicly listed, the underlying is the book value of the business as against the sky
138
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FB through venture debt and through more mature investors. Abundant amount of start-ups conceived with the strategy of being absorbed by a bigger player. 2017: Investors start exiting smaller players to corporate houses. Planned and strategized growth to show maximum underlying value to be able to get listed. Smaller players will eventually run out of cash and shut down operations. 2018: Upon going for an IPO, company’s listed price shall not match the company’s valuation at the last round of funding. This is going to cause a major crash where early exits will be lauded and lot of investors are going to be an unhappy lot. Though, one or two major players will make successful IPO exits for their investors & founders and eventually turn into industry giants. So, according to analysts over valuation of E-Commerce companies is clearly seen and investing in these companies, if they enter into an IPO is always a risky option.
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Strategic Oil Reserve
FB
By Milan Modi It was rightly quoted, “In the 21st century,
had supported Isreal and supplied arms when
the world will look upto those nations which are
members of OAPEC attacked Isreal in 1967(2). The
rich in oil”. It is true that when a country starts oil
economy of many nations suffered and then they
exploration, it is investing in long term gains, as oil
felt a need to avoid such situation in the future.
has become the backbone of many economies. In times when the producers of oil and gas are themselves at war or demand sky high prices, we need at some reserves to sustain ourselves. What is Strategic Oil Reserve:
During the recent tensions between Russia and Ukraine, the oil exports from Russia declined and the world looked on other suppliers of oil. The impact of this was not prominent as OPEC countries (of which Saudi Arabia is a major player) re-
Crude oil is store in stockpiles or in reserves
duced the prices of oil to keep Russia out of com-
so that the country or a private entity can use it in
petition. However this reserved oil would have
case of excess demand. This reserve can be used
been useful if these nations had increased the oil
when there is an emergency in the world market
prices instead of decreasing it.
and it becomes impossible for nations to use the oil from its importing partners. Why we need it:
Countries with Strategic Oil Reserve: USA: United States of America currently holds the
There are many instances when a country
largest amount of Strategic Oil Reserve in the
can rely of its reserved oil, although for few days. In
world. As of 2015, it holds oil reserves equivalent
times when there is attack from other country, at
to 691 million barrels which corresponds to 37
times when the producers of oil are at internal con-
days of consumption. There are 4 crude oil re-
flict, in case the producers demand very high price
serves in the US, located near the Gulf of Mexico,
for oil, EU or OPEC imposes sanctions on oil produc-
each located near a major petrochemical refining
ers like the one on Iran.
industry.
In 1973, the western world suffered from
Japan: It has the world’s second largest emergen-
the after effects of “first oil crisis”. The then OAPEC
cy reserve of oil with a reported capacity of 600
(Organization of Arab Petroleum Exporting Coun-
million barrels. The SPR is composed of 2 types of
tries), stopped supplying oil to USA, UK, Japan, Can-
stockpiles – state controlled which consists of 324
ada and Netherlands. This was due because USA
million barrels and privately held reserves which
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FB consist of 129 million barrels. The SPR (Strategic Petroleum Reserve) in Japan is run by Japan Oil, Gas and Metals National Corporation (3). China: The Chinese SPR is controlled by the government. China has a total of 684 million barrels of reserved oil which can last approximately for 90 days. (3) EU: According to the Council Directives of EU, all the 27 members must have strategic oil reserve with in the territory of EU and it must last for approximately 90 days (average daily internal consumption). India: The image below shows the oil reserve in Vizag. It is one of three strategic crude oil storages being built by Indian Strategic Petroleum Reserves Limited (ISPRL). Two other storages are coming up at Mangalore and Padur (near Udupi) on the western coast. The capacity of all the three facilities will be 5 MMT while the total cost is estimated to be Rs.4,098 crore. Filling up these caverns with crude will require more than Rs.25,000 crore.(4) There are other countries as well which have implemented strategic oil reserve project.
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Top Runners-Media And Entertainment
FB
By MMC Diaries, IBS Hyderabad
I&B ministry mulls adding more names to the pool
centres in seven other cities by this year-end. Du-
for Prasar Bharti panel
bai, Saudi Arabia and London are the international
The Information and Broadcasting Ministry is plan-
locations where it plans to set up units. Smaaash
ning to broaden its pool from which it intends to
offers a wide range of games that offer a superla-
select four new part-time members of the Prasar
tive virtual-reality experience, and combines the
Bharati Board by including some more names. The
best of sports, music and dining into an interac-
Ministry had earlier prepared a list comprising sev-
tive, innovative and involved entertainment expe-
en people including Bollywood star Kajol, singer
rience.
Anoop Jalota, former Prime Minister Atal Bihari
Star Network sells its 25.99% shareholding in
Vajpayee's media advisor Ashok Tandon and jour-
Ekta Kapoor’s Balaji Telefilms
nalist Minhaz Merchant. The Prasar Bharati Act’s Board should have six part-time members and curently there are four vacancies. A committee headed by Vice President Hamid Ansari and comprising Information and Broadcasting Secretary and Chairman of Press Council of India (PCI) would choose the members. As per the Prasar Bharati Act, part-time members have to be persons of eminence in public life.
Rupert Murdoch-owned Star Network has sold its entire shareholding of 25.99% in Ekta Kapoor promoted Balaji Telefilms in a block deal on the Metropolitan Stock Exchange of India (MSEI) at an average price of Rs 63.6 a share. This values the block deal at around Rs 108 crore. Star India bought the stake in Balaji Telefilms, promoted by Ekta Kapoor, in 2004 as all of Balaji’s soaps were doing very well for Star Plus, improving the chan-
Smaaash Entertainment to go global; invest Rs 285
nel’s viewership. Star India initially picked up a
crore by 2016-17
21% stake in Balaji Telefilms in 2004 from the pro-
Smaaash Entertainment Pvt Ltd, a sports-centric
moters for Rs.123 crore. Later, it increased its
virtual entertainment company in which cricket icon
stake to 25.99% through an open offer. The com-
Sachin Tendulkar has a minority stake, will invest
pany thought it wise to buy shares in Balaji to be
about Rs 285 crore by 2016-17 as it plans to go in-
able to put some restrictions on the content com-
ternational and also open facilities in seven more
pany. For instance, Balaji was not allowed to pro-
cities. The first such centre was established in
duce prime-time serials for other channels. The
Mumbai in 2012, followed by Delhi and now in Hy-
idea was to exercise some control over the soft-
derabad. The company plans to open the 'Smaaash'
ware house. Gradually, Star’s dependence on
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FB Balaji reduced. Ever since, Star has been looking to
Information and Broadcasting minister Arun Jait-
sell its stake in the company. Star struggled to sell
ley today said that Phase-III auctions of FM Radio
the stake to other buyers in the market. As per an
will 'boost' the radio news sector in the country
analyst the actual valuation of this deal should have
and reach out to smaller towns and cities provid-
been 15-20% higher than the original prices of
ing quality information to the audiences."This pro-
Rs.123 crore. The delay has got to do with the fact
cess would give fillip to the expansion of radio ser-
that there were no takers for a stake in a television
vices in the country across 294 cities and 835
content company. Shares of Balaji Telefilms gained
channels. Due to the expansion, radio news would
as much as 20% on Wednesday 5 Aug 2015, their
reach out to smaller towns and cities thereby
sharpest rise since 12 April 2010, after this large
providing quality information to the audiences,"
block deal on the stock.
Mr Jaitley said in a meeting of the Consultative
Indian Broadcasting Foundation appoints Girish
Committee of the I&B ministry.Officials said that
Srivastava as its secretary general
under the Phase III radio expansion, private chan-
Indian Broadcasting Foundation, the apex body for the broadcasting sector in India, was set up in September 1999 to promote and represent the interests of the Indian broadcasting sector. IBF members manage more than 350 channels and about 90 per cent of television viewership. The Indian Broadcasting Foundation (IBF) appointed Girish Srivastava as its Secretary General.In a career spanning over 24 years, Srivastava has worked with Nasscom (National Association of Software and Service Companies), Bechtel Corporation, Bechtel Management Consulting, Reliance Industries, Toyo Engineering India as well as on projects mainly funded by international donor agencies.
nels would be allowed to carry news bulletins of the All India Radio (AIR).Mr Jaitley, who chaired the meeting to discuss 'All India Radio and DD News,' said the public broadcasters provided content with a public service mandate keeping aside profit motives.He also informed the members that edu-entertainment format was being introduced to add variety to the platform.Mr Jaitley said that new social media initiative 'talkathon', organized by the Ministry, is seen having a visible impact and could be taken up as a regular format for government communication more frequently in the future. Government bears 94 per cent of expenditure on FTII
students
in
2014-15
Phase-III FM auction to boost radio services in In-
The government has borne approximately 94 per
dia: Arun Jaitley
cent cost per student at the Film and Television
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FB Institute of India (FTII) for the academic year 2014-
AIR in trouble over criticising government notices
15, Lok Sabha was informed today. the Twelfth Five
to media over coverage of Yakub case
Year Plan, a sum of Rs 80 crore has been allotted for upgradation of FTII. The premier institute is in the process of aligning the syllabus and course content in view of the technological development so as to enhance the analytical and creative abilities of the students. The performance of the institute is periodically assessed through meetings of the society and Governing Council, Audit and Annual Report submitted by the institute and audit by Comptroller and Auditor General. Government plans to do away security clearance to MSO, media Government plans to do away with national security clearance for Multi System Operators in the media sector. Minister of State for Home, Haribhai Parathibhai Chaudhary said in Lok Sabha that the Home Ministry has recently streamlined/relaxed national security clearance norms for certain sensitive sectors of the economy including the media sector. "These guidelines also include the proposal to do away with national security clearance for multi system operators in the media sector�, he said in reply to a written question. The new policy guidelines are aimed at bringing about a healthy balance between meeting the imperatives of national security and facilitating the ease of doing business and promoting investment in the country, he said.
144
The government has sought an explanation from the director general (news) of All India Radio (AIR) for broadcasting a story which reported criticism by the Editors' Guild of notices to three TV channels. Last week, the government had issued notices to three TV channels for their coverage of the controversy surrounding the hanging of Mumbai blasts convict Yakub Memon. Top sources at Prasar Bharti and Ministry for Information & Broadcasting (MIB) told ET that AIR director Mohan Chandak was pulled up by MIB officials on Tuesday as well as Wednesday for clearing four news items the government found unsuitable, including the Guild's criticism of the government's actions against the channels. AIR's coverage of Manipur chief minister Ibobi Singh's criticism of the Centre's peace deal with Naga insurgents, Bihar chief minister Nitish Kumar's reference to former PM AB Vajpayee's advice to then Gujarat CM Narendra Modi on Rajdharma, and criticism by Kumar and Lalu Yadav of Modi's speech last week in Gaya, has also displeased the centre. Prasar Bharti chairperson A Surya Prakash and CEO Jawhar Sircar refused to comment for this story but ET learns that two AIR editors could face action soon. The reports in question were part of hourly news bulletins in Hindi and English on Sun-
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FB day and Monday. Chandak too refused to comment
censing representative in India, Bangladesh, Paki-
for this story.
stan and Sri Lanka. The move followed an agree-
Expect BARC TV data for sub-1 lakh population
ment between Warner Bros Consumer Products
from
September
(WBCP) and Turner Broadcasting System Asia Pa-
Television rating agency Broadcast Audience Re-
cific, under which Cartoon Network Enterprises
search Council (BARC) India has said it will start re-
(CNE), the latter's licensing and merchandising
porting data for urban and rural population with
arm, will represent WBCP's portfolio in specified
less than 1 lakh from next month."BARC India is re-
markets. The licensing rights would include cate-
leasing data of urban markets with a population of
gories such as toys, apparel, accessories, publish-
1 lakh and above. The same for less-than 1 lakh ur-
ing, stationery, gift, novelties as well as branded
ban and rural markets is yet to be released, which
foods, personal care products and licensed adver-
we are expecting to report in September," BARC
tising promotions in the region. CNE has a net-
India CEO Partho Dasgupta told PTI.Currently, the
work of 76 partners with footprint in traditional
agency releases data from 10,760 households (1L+
retail, modern trade and e-commerce. In the re-
cable and satellite) and going forward, it will be re-
gion, Turner runs 55 channels in 13 languages in
porting on 20,000 households.BARC India has in-
38 countries, including CNN International, CNNj,
vested Rs 280 crore this year, which includes Rs 100
CNN, HLN, Cartoon Network, Adult Swim, Boom-
crore in the watermarking technology.It also plans
erang, POGO, Toonami, World Heritage Channel,
to report data on the digital platform, going for-
Warner TV, Oh!K, TCM Turner Classic Movies,
ward. Watermarking technology is a method of em-
truTV, WB, MondoTV, TABI Channel and HBO.
bedding data into digital multimedia content, which
Prasar Bharati, Digital Television Russia ink deal
is used to verify the credibility of the content or rec-
Two of the world’s leading broadcasters – Prasar
ognise the identity of the digital content's own-
Bharati, India’s public service broadcaster, and
er.BARC India currently provides ratings on a week-
Digital Television Russia (DTR), Russia’s #1 Pay-TV
ly basis.
programmer, today signed a Memorandum of Un-
Warner Bros, Turner ink licensing pact for South
derstanding (MoU) on cooperation that will set
Asia
the stage for a new media era in both countries.
Warner Bros Consumer Products appointed Cartoon Network Enterprises its consumer product li145
This strategic alliance will focus on high quality production, marketing and distribution of content
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FB related to art, culture, trade & science, research
between Rs 250-320 crore. At present, the nation-
and technology etc. Joint production and exchange
al chains include PVR, Inox, Carnival and Cinepolis.
of TV programs and related services will give audi-
The Indian multiplex space has been in consolida-
ences in both countries an unprecedented access to
tion mode as lack of space for opening new cine-
a rich variety of thematic entertainment and factual
ma halls, low footfalls in a large number of malls
content. This partnership will cross-promote each
and high rentals have made the organic growth
nation’s unique culture and traditions through co-
difficult. In June, PVR LtdBSE 1.94 % acquired real
operation in all areas in the mediaarena. From ad-
estate major DLF's DT Cinemas for Rs 500 crore.
aptation of iconic TV programs in each broadcast-
Inox and a private equity player were also said to
er’s library, right up to the sharing of best practices,
be in the race for DT Cinemas. In January, Mexican
this coming together will not only benefit viewers in
multiplex chain operator Cinepolis fully acquired
India and Russia, but will also inspire media execu-
Essel Group's Fun Cinemas. In December 2014,
tives in both countries to explore new and exciting
Carnival Group acquired Big Cinemas from Anil
ways of communicating their stories. This Septem-
Ambani-led Reliance Group for an estimated Rs
ber, Russia’s leading journalists will be in India to
700 crore, making it the biggest deal in this sector.
produce TV programmes on Indian economy, tech-
In July 2014, Inox Leisure had acquired Gurgaon-
nology and culture. This series will be aired in Rus-
based rival Satyam Cineplexes in a Rs 182-crore
sia’s highly rated FTA channels, Russia 1 and Russia
deal to strengthen its presence in north India. It
24.
also bought multiplex cinema theatre firm Fame
Inox to invest Rs 320 crore in 3 years, eyes regional
India and Calcutta Cinema Private Ltd (CCPL ) in
acquisitions
West Bengal. At present, Inox operates 377
Multiplex operator Inox plans to invest up to Rs 320 crore to open 128 screens in the next 2-3 years while it continues to scout for acquisitions, especially for regional players, to expand footprint across India. The company would spend between Rs 2-2.5
screens in 97 properties across 52 cities in the country. In order to provide better services, Inox has started paperless tickets service on a pilot basis for sale of tickets through the website or app and ticketing aggregators.
crore each to open new screens, with the cost de-
SVG Media, Komli Media India merging to form
pending on the location where the screen will come
mobile
up. To open 128 screens, the company will invest
Digital media platform SVG Media said it is merg-
146
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marketing
giant
FB ing Komli Media's India media business and global brand rights with itself to create India's largest mobile marketing company. The combined entity will have a combined share of 60 per cent of digital ad-tech spends in India, and a reach of over 150 million Indian Internet users across all screens, it said in a statement. Under the terms of the deal, Komli India will function independently alongside existing SVG Media group businesses: Tyroo Technologies, DGM, and SeventyNine; while SVG Media will serve as an umbrella company, it added. SVG Media, through its operating brands, will now have operations in India, Indonesia, Middle East, Singapore, Japan, Beijing and Australia. RevX, the mobile remarketing unit recently spun out of Komli Media expanding from India to global markets, will continue to operate as a standalone company that is unrelated to this merger. SVG is working hard to be the first billion dollar digital marketing platform from India, he added. Television
rating
agencies
BARC,TAM
form
a
meter
management
company
It's possibly the biggest media news of the year. BARC India, the television rating company formed by broadcasters, advertising agencies and advertisers, and TAM India, the television audience measurement joint venture between Nielsen and Kantar Media, have announced formation of a new meter management company. The firm will run measurement meter operations and supply raw data to BARC India. With this development, the role of TAM as a composite TV audience measurement agency will end, even as it will be a stakeholder in the new enterprise. The meter company will have the meter assets and panel management operations of the present BARC India and TAM India panels, which will be jointly owned by BARC India, Nielsen and Kantar with management control resting with BARC India. To start with, the company will have 34,000 meters covering all of India (22,000 of BARC and 12,000 of TAM), and will supply raw data to BARC, which will use its own statistical processes and sampling design. 94 FM channels cumulative provisional winning price Rs 1147 crore At the close of the 25th day of bidding in the e-auctions for the first batch of channels under the Phase III of FM Radio expansion, 94 channels in 56 cities became provisional winning channels with cumulative provisional winning price of about Rs 1147 crore. An official statement released here said that the aggregate reserve price of these 94 channels was about Rs 459 crore. Till now 100 rounds of bidding have been completed at the end of day 25 of the e-auctions and the cumulative provisional winning price exceeded the total reserve price of the first batch i.e. Rs 550.18 crore by Rs 597 crore or 108.5 per cent, the ministry said.The Auction for the first batch comprising 135 FM Channels in 69 existing cities of Phase II began on July 27th 2015. The channel allocation stage will continue till the bids are received for any of the 135 ch.s 147
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Impact of EI-Nino of Indian GDP
FB
By MMC Diaries, IBS Hyderabad El-Niño El Niño is a local warming of surface waters which takes place in the entire equatorial zone of the central and eastern Pacific Ocean and which affects the atmospheric circulation and direction of winds world-wide. It usually peaks around Christmas, hence the name of the phenomenon, El Niño, which is Spanish word for Christ Child. The atmospheric variations which arise as a result of El Niño and La Niña events are together called the Southern Oscillation. Ocean Nino Index (ONI) is a major of southern oscillations. It is also the East-West balancing movement of air masses between the Pacific and the Indo-Australian areas. El Niño is a permanent feature of the Pacific Ocean and occurs on average every 4 to 5 years, sometimes less (2 to 3 years), sometimes more (8 to 11 years). The phenomenon proper lasts 12 to 18 months; also a recent very unusual event lasted from mid-1990 to mid-1995. Its influence on climate is global and it can trigger severe floods and droughts.
El-Niño year The vast tropical Pacific Ocean receives more sunlight than any other region on Earth. Much of this sunlight is stored in the form of heat in the ocean. Normally, the Pacific trade winds blow from east
Wind directions
to west, dragging the warm surface waters westward, where they accumulate into a large, deep
Normal Year Trade winds push warm ocean currents westward from the eastern and central Pacific towards Indonesia and Australia. The warmer water heats the air, causing rain clouds to form over Asia. 148
pool just east of Indonesia, and northeast of Australia. Meanwhile, the deeper, colder waters in the eastern Pacific are allowed to rise to the surface, creating an east-west temperature gradient along the equator known as the thermocline tilt.
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FB The trade winds lose strength with the onset of
cific, sea level drops as much of the warm surface
spring time in the northern hemisphere. Less water
water flows eastward. This shifts rain clouds east-
is pushed westward and, consequently, waters in
wards
and
Asia
is
left
dry.
the central and eastern Pacific begin to heat up (usually several degrees Fahrenheit) and the thermocline tilt diminishes. But the trade winds are usually replenished by the Asian summer monsoon, and the balance of the thermocline tilt is maintained. Sometimes, the trade winds do not replenish, or even reverse direction to blow from west to east. When this happens, the ocean responds in a several ways. Warm surface waters from the large, warm
Statistics of Indian Monsoon during El-Niño years
pool east of Indonesia begin to move eastward. Al-
Rainfall data for past 30 years is studied and im-
so, the natural spring warming in the central Pacific
pact of El-Niño on Indian monsoon is analyzed. It
is allowed to continue and also spread eastward
can be seen that, during most of the El-Niño years
through the summer and fall. Beneath the surface,
India has experienced drought. During El-Niño
the thermocline along the equator flattens as the
years, rainfall reduces.
warm waters at the surface effectively act as a 300foot-deep cap preventing the colder, deeper waters from upwelling. Due to this, the large central and eastern Pacific regions warm up (over a period of about 6 months) into an El Niño. On average, these waters warm by 3° to 5°F, but in some places the waters warms more than 10°F higher than normal (up from temperatures in the low 70s Fahrenheit, to the high 80s). In the east, as temperatures increase, the water expands, causing sea levels to rise anywhere from inches to as much as a foot. But in the western Pa149
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FB Year 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
Occurance of Event Normal Year Strong El Niño Weak La Niña Weak La Niña Normal Year Moderate El Niño Strong El Niño Strong La Niña Normal Year Normal Year Moderate El Niño Normal Year Normal Year Normal Year Normal Year Normal Year Strong El Niño
Impact on Monsoon% Rainfall of LPA Normal 96.91 Severe Drought 84.77 Above Normal 109.10 Normal 97.75 Below Normal 91.56 Drought 89.02 Severe Drought 83.55 Excess 117.04 Normal 98.71 Above Normal 107.37 Normal 96.90 Below Normal 94.00 Normal 98.91 Above Normal 109.89 Normal 101.71 Normal 98.62 Normal 96.62
Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Impact on Monsoon% Occurance of Event Rainfall of LPA Moderate La Niña Normal 98.65 Strong La Niña Below Normal 92.72 Weak La Niña Drought 89.63 Normal Year Below Normal 92.18 Moderate El Niño Severe Drought 78.76 Normal Year Normal 101.82 Weak El Niño Below Normal 91.14 Weak La Niña Normal 98.98 Weak El Niño Normal 100.84 Moderate La Niña Above Normal 107.16 Weak La Niña Normal 99.54 Moderate El Niño Severe Drought 79.39 Strong La Niña Above Normal 104.41 Weak La Niña Normal 103.30 Normal Year Below Normal 94.76 Normal Year Above Normal 106.00
pacts GDP negatively. Currently, agricultural contribution to total GDP has decreased to around 12% (2012) from previous years 30% (1981). Below diagram shows Indian GDP statistics during normal year and El-Niño year. During El-Niño years, reduction in rainfall has caused reduction is agricultural production and hence GDP growth rate has decreased.
Parameters Average(All years) Median(All years)
Agri-culture & Gross Domestic Agri-culture & Agriculture Agriculture Allied Services - Product - % Allied Services Share to Total % Growth El-Nino Rainfall % Growth Rate Growth Rate Share to Total GDP % Rate (YoY) strength [mm] (YoY) (YoY) GDP 0.04 866.64 21.13 24.70 3.31 3.17 6.24 -0.08 882.00 21.89 25.73 3.54 3.32 6.21
Statistics of Indian Agricultural production and GDP during El-Niño years
Average(Normal Years) Median(Normal years)
-0.30 894.25 -0.31 886.25
21.09 21.65
24.51 25.06
5.12 4.74
4.75 4.38
6.82 6.54
Average(EL nino Years) Median(El nino years)
1.05 783.81 0.84 787.00
21.25 22.31
25.29 26.51
-1.90 -1.06
-1.55 -1.00
4.51 4.15
Average (Severe El Nino Years) Median (Severe El Nino Years)
1.73 808.95 1.73 808.95
22.85 22.85
27.17 27.17
-2.35 -2.35
-2.07 -2.07
3.92 3.92
Average (Bad El Nino Years) Median (Bad El Nino Years)
1.10 735.45 1.10 735.45
22.72 22.72
27.19 27.19
-4.14 -4.14
-3.44 -3.44
3.46 3.46
Average (Mild El Nino Years) Median (Mild El Nino Years)
0.69 795.43 0.71 805.35
19.71 20.03
23.41 23.78
-0.56 -0.16
-0.34 -0.11
5.33 5.64
Monsoon is very essential for agricultural production in India. There are many businesses which use agricultural products as raw material. Reduction is rainfall directly impacts agricultural production and subsequently agricultural and allied services. Due to less production of agricultural products in country, prices of food increase and country has to rely on imports from other countries. This weakens the foreign reserve of the country. Also, people spend more money in buying necessary goods like food items which decreases purchasing power for other luxury goods and services. Agriculture and agriculture and allied services contribute to Indian GDP. Decrease in production im-
150
Predictions about El-Niño for 2015 by meteoro-
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FB logical departments Indian meteorological department (IMD) has predicted normal rainfall of 93% of LPA(Below Normal) and moderate El- Niño during monsoon Sky met has predicted 102% of LPA rainfall (Normal) and weak El- Niño during monsoon US weather report has predicted 0.6 – 1.4 degree Celsius increase in temperature due to El- Niño which is not significant Australia weather bureau and Japan meteorological agency are expecting strong El- Niño during Indian monsoon season. Predictions for Impact on Indian GDP In case of El- Niño in the range 0.6 – 0.8 Oceanic Niño Index (ONI) Impact on agricultural share to GDP: Decrease by 1.38% Impact on agricultural and allied service share to GDP : Decrease by 1.10% Impact on GDP growth : Decrease by 1.49%
In case of El- Niño in the range 0.9 – 1.3 Oceanic Niño Index (ONI) Impact on agricultural share to GDP: Decrease by 1.63% Impact on agricultural and allied service share to GDP: Decrease by 2.68% Impact on GDP growth: Decrease by 3.36%
In case of El- Niño in the range 1.4 – 1.9 Oceanic Niño Index (ONI) Impact on agricultural share to GDP: Decrease by 1.75% Impact on agricultural and allied service share to GDP: Decrease by 2.66% Impact on GDP growth: Decrease by 2.90%
151
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FB
Impact of GST on Indian Economy By Amit Somani, XLRI
As per Mr. Arun Jaitley, GST is the biggest indi-
funded, however it is a long drawn out process
rect tax reform in the history of India. His coun-
and hence many exporters prefer to forego it
terpart in UPA govt. Mr. Pranab Mukherjee de-
which is not the case with GST.
scribed GST as a land mark reform. So the above two statements by political stalwarts of opposing parties give us an idea about the importance of GST on Indian economy. Some of the major
Removal of Cascading effect of Taxation - Current tax structure results in cascading effect of taxation. This is primarily because if the tax is
differences between the current Indirect Tax Particulars Rate of Tax
Current Indirect Tax structure Service Tax – 14%, Excise Duty – 12.36%, Vat- Varies from 0% to 20%, CST – 2% Service Tax credit and Excise duty credit cannot be utilized for payment of VAT and vice a versa. No credit available on CST
Goods and Service Tax 27% (proposed)
Goods and Services covered
All goods and services except the negative list and exemptions.
Along with current exemptions and negative list, tobacco, alcohol and petroleum are also excluded.
Revenue sharing model
Central Govt. – Service Tax, Excise Duty. State Govt. – VAT and CST
Proportionate sharing
Input Tax Credit
Credit available for all taxes paid.
structure and GST are paid to state government say VAT or CST then
Positive Impact of GST Increase in GDP - GST is expected to increase India’s GDP by 2%. This is because GST would reduce input costs and subsequently the price of goods which would give India a competitive advantage in export market. Although indirect taxes paid on exported goods and services is re152
no credit is available on any input tax paid to Central Government and vice a versa resulting in higher cost for consumers. However this anomaly would be removed by GST as Input Tax Credit would be available whether the tax is going to Central or State government which would ultimately reduce the price for consum-
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FB ers.
get themselves registered under GST so that even their goods become eligible for credit
Reduction in tax evasion - As stated earlier a seller of goods will receive credit on taxes paid on services consumed and vice a versa. So there
which would ultimately widen the tax base. Further threshold limit for registration would also be increased under GST.
would be a lesser incentive for them to evade taxes. Furthermore input tax credit would also
Increased Government Revenue - Due to in-
be available on inter-state sales resulting in high-
crease in earnings of different entities govern-
er reporting of these transactions. Thus govern-
ment would be able to generate higher Income
ment would be able to reduce tax evasion.
Tax revenue. At the same time widening of tax base and lower evasion of taxes would result in
Reduction of Legal Hassles - GST is expected to streamline the current haphazard indirect tax structure. Plethora of taxes along with numerous
increased indirect tax revenues. Hence government would be able to reduce its fiscal deficit because of higher tax proceeds.
amendments has resulted in countless number of legal cases. Hence entities instead of focusing their energy into their operations have to be concerned about the legal suits. However a single tax with a simple input tax credit mechanism and without any classification disputes would reduce the legal suits and allow the entities to function in peace.
Negative Impact of GST Decrease in state support to Manufacturing GST is a tax which is levied at the consumption stage, i.e. the state where goods are actually purchased, whereas CST is a tax which is levied at the production stage i.e. the state where goods are actually produced. So in current tax regime states have an incentive to export
Widening of Tax base - Under GST firms would
goods to different state so that they could earn
be incentivized to source inputs from other reg-
CST, which is not the case with GST. So it is pos-
istered dealers who are already paying indirect
sible that now exporting states may reduce
taxes. So this would be reduce the competitive
their interest in expanding manufacturing activ-
advantage of unregistered dealers which didn’t
ities which contradicts the current central gov-
charge any indirect taxes. So even they would
ernment’s Make in India initiative.
153
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FB government and some taxes by central governExtremely high GST rate - To ensure that GST is
ment which is very similar to current structure
revenue neutral, government has proposed GST
and it would increase administrative compli-
rate of 27% which would be one of the highest in
ances for taxpayers.
the world. Such a high GST rate would actually increase the cost of certain goods which current-
1% tax on inter-state movement of goods -As
ly faces the benefits of lower rate of VAT or par-
specified earlier high exporting states such as
tial exemption under Service Tax Act. At the
Gujarat, Tamil Nadu were at a loss due to intro-
same time such high rate of GST would wipe off
duction of GST. So as to appease them GST in-
most of the benefits of GST.
troduced a provision under which states would have a power to charge an additional 1% tax on
Harm to industries which trade within state -
movement of goods from their border. This
GST would result in lowering of taxes on inter-
provision on one hand would increase the cost
state sales of goods. However this would harm
of the product and on the other hand would
Small scale industries (SSI) and unorganized sec-
result in cascading effect of taxation as no cred-
tor as they mainly deal within the state and one
it would be available on this tax paid.
of the competitive advantages that they have over large scale industries is that they do not
Impact of GST on certain industries
have to pay CST. This loss in competitive advantage may result in closing of several SSI which would have a detrimental impact on level of employment as SSI are comparatively labour inten-
1. Direct-to-home (DTH) industry - Tax evasion in the cable industry will come down after introduction of GST forcing cable operators to raise tariffs. This will provide DTH operators
sive.
with competitive advantage. Dual GST Concept - Every state currently has its own tax collection body and it is not feasible to completely disband them. So GST in India has dual concept of State GST and Central GST under which some taxes would be collected by state 154
2. FMCG industry – There won’t be any substantial tax differences for FMCG firms. However they will benefit from lower warehouse costs, more efficient supply-chain planning and inventory reduction.
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FB 3. Automobile Industry - This sector would ben-
2/3rd majority in both the houses of parliament
efit as GST rate of SUVs and cars is likely to be
and legislatures of half of the states. To get the
lower than the present excise plus VAT rate.
approval of states NDA government has diluted
Tractors may be taxed at lower rate in GST.
certain provision of Act such as allowing states
4 Paper Industry - High GST rate of 27% will in-
to charge 1% tax on inter-state movement of
crease their tax burden, thereby impacting their
goods and exclusion of certain commodities
profitability.
from purview of GST. After failing to get the bill
6 Cinemas - The implementation of GST will lead to lower entertainment taxes and hence improving their profitability. 7 Transportation industry - Truck drivers would be greatly benefited as GST would reduce administrative compliances because they have to deal with lower number of check-posts which would eventually improve their productivity.
passed in the last session of parliament the NDA government has plans to introduce the bill in the current parliament session and the bill was approved by the cabinet just a few days back. However to get the bill passed it would need support of Congress which seems unlikely as it plans to corner government on issue of corruption.
8) Telecommunication Industry - Increase in service tax under GST would make their services more expensive.
Conclusion There are positive as well as negative aspects
Hence we can conclude that industries which
of GST. Most of the negative aspects arise due
currently enjoy the benefits of low taxation
to leeway given to state government to bring
would be harmed by introduction of GST and in-
them on-board. However we have to under-
dustries with high rate of taxation would be ben-
stand that a perfect GST is not possible in a fed-
efitted.
eral structure like ours. Once introduced GST would help in attracting new investments and
Current Progress on GST and the Road Ahead
increasing GDP by 2%. So all political parties should rise above political pettiness and help in passing of this law.
To be enacted as law GST needs to be passed by 155
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FB
Team of 2016 First row (L-R)- Paritosh Nawal– Secretary, Sunil Kumar– Gen. Secretary, Krutartha Sahoo– Operations Coordinator Second row (L-R)- Vihar Shah– Executive Member, Ritika Singhal– Executive Member, Sneha Verma– Executive Member, Bhasha Rathore– Marketing Coordinator, Indira Dutta– Executive Member, Ajay Singh– Marketing Coordinator, Shreejita Laha– Executive Member, Apoorva Kherde– Executive Member, Radhika Tyagi– Events Coordinator, G Akhila– Executive Member, Ayushi Saxena– Executive Member Third row (L-R)- Mukul Sinha– Executive Member, Arnav Shah-Operations Coordinator, Vineeth Verma– Treasurer, Harsh Sachdeva– Public Relations Coordinator, Dr. Sudhakar Reddy– Faculty Coordinator, Vishal Soneja– Financial Research Coordinator, Himanshu Gupta– Executive Member, Kuntal Rakshit– Executive Member, Satish Bhatia– Executive Member, Navanshu Sinsinwar– IT Coordinator, Swarnendu Chakravartty– Newsletter Coordinator
Team MMC Diaries
156
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FB
157
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