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The Financial Bulletin
FROM THE EDITOR
Money Matters Club IBS, Hyderabad Estd.—2005
Dear Readers,
Editorial Enquiries Contact Money Matters Club Contact No +918187896530 +918187896351
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This issue reflects the stories of Indian equity markets being affected by the passiveness of investors, analysis of Mr. Raghuram Rajan’s prediction of another bubble and his success in his first year as the Governor, revival of textile glory in Tamil Nadu & the craze of Bitcoins.
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It gives me the immense pleasure to come up with the September 2014 issue successfully. We are happy to announce the winner of “Article of the Month” award , Dharmangi. P. Sisodia from Indira School Of Business Studies, Pune for her outstanding write up on “Passive affair of Indian investor with equity market?”
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PASSIVE AFFAIR OF INDIAN INVESTOR WITH EQUITY MARKET? By Dharmangi. P. Sisodia, ISBS
Indian equity market is the engine which drives the
investor to decide how much growth is required and
vehicle of Indian economy by pumping the money
risk is expected in order to trade off between risk
into market.
and return.
There is no doubt that 2008 crisis has really squeezed
I would like to emphasize which factors are
the economy and has lost the trust of investors due to
affecting the movements in equity market, which
which participation in the capital markets in India
keeps investor away from the equity market as their
dropped significantly up to 64%. A good way to
first priority to invest?
measure this is to simply see how many companies
went public annually since 2007. Amount raised in 2007 through IPO was 39,496 which reduced to 280 cr in 2014. India badly needs equity participation to pick up. As of now, barely 6-7 per cent of Indians invest in the capital markets in one way or the other as compared to china i.e. 23%.
It is clearly evident that financial saving in Indian market is more likely to tend toward bank deposits (50 % of total saving), insurance, physical assets. The nature of the financial
the obvious question that comes to mind is why Indian investors invest in traditional financial assets. Why
not
share
or
There are various factors
debenture? Are they
such as economic, political,
really
foreign market, demand and
about volatility or risk?
supply of shares, market
The reason is people
capitalization of company,
struggle
to
save
earning per share,
because
of
low
speculation of shares and
income; people do not
companies or industry news
want to take risk by
which affect the equity
investing
market or share price of the
earned
company Is there a ‘high rise’ for equity market in India? Are
investors heading back to equity market? What really drives the equity market in India? One may think that, only the market force drives the equity market in India!!! There are many such factors in India which really squeeze or release, the equity market. When a people come across a word “stock market”, which
apprehensive
their
hard
money in eq-
uity market. According to statistical report, percentage of the people invest in equity market is as low as 6-7%, which is due to low purchasing power – low demand for product- less production of goods – price
increase- leads to increase in inflation –
worsen the economy of the country – which ultimately decreases the consumer confidence and investor’s reluctant to invest in market.
attached the word risk, volatility, fluctuation, insider trading, speculation which keeps the investors indifferent to invest in equity market. It is imperative for
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savings made in India;
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FB The majorities of Indian investors are extremely
ZyFin Research has announced the Consumer
conventional in approach and have no out-of- the-box
Outlook Index for February 2014. India has
thinking.
the
registered a score of 42.6; a score above 50 reflects
same investments over a period of time and less
optimism while below 50 is an indication of
circulation of money in the market. It is difficult to
pessimism.
The
investor
has
stuck
to
push into equity market unless and until investor won’t find compatible atmosphere and better return should drive the investor to the equity market. Secondly, volatility is a factor of equity market but manipulation must be controlled and there should be proper transparency.
I would like to conclude that Consumer sentiment index and consumer confidence index is next economic indicator to value equity market in India. One must be thinking what is the value of this
indicator to the investor? Why they should watch this number?
So, how does consumer spending affects equity market in India? Basically Consumer spending accounts for roughly two-thirds of our economy. When consumers are reluctant to spend, the economy is affected and when they open their pocket books, the economy moves.
These two indexes will give you an idea of where consumer spending is headed in the future. It is important to note that like most indexes you should look at how they trend over a period of four to six months rather than any month-to-month change. Understanding consumer and its implication will
In the past there have been number of studies on factor affecting equity market around the
globe
which drastically affect the equity market index but no research has been made which emphasize the consumer sentiment on the equity market.
help investor to understand the equity market.
My opinion is, market should not only drive analysis on the basis of the company’s performance or industry but at the same time consumer psychology and its behavior should be taken into consideration
What can be the best example of high stock wave in
while evaluating equity market price.
equity market of Narendra Modi winning election, jignesh shah NSDL, ICICI bank - during 2008 crisis?
Basically consumer sentiment is the measurement of consumers' attitude towards their financial positions and the present situation as well as expectations of the economic conditions. Similar to consumer confidence, consumer sentiment is directly related to consumer spending. Consumer sentiments play a big role in rise & fall of the sensex. News flash on the T.V change the mood of the investor here are certain instance where investor
sentiments
outperform
the
fundamental
analysis
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RESPONSIBLE FINANCIER: INDIA & ABROAD By Saamarth Bali, SIMS Pune
A bank is a financial institution involved in accepting
state owned banks and has put a tremendous pressure
deposits from the public and channels these deposits into
on their balance Sheets. The obsession of the Chinese
lending activities but in modern day the role of a bank
government with posting huge growth numbers is so
has become much more than its dictionary definition, the
deep that it has
entire economy runs on the back of a strong banking
trillion in 2008 to $ 25 trillion today; the Chinese
industry. In today’s world where globalization is
government in trying to achieve the objective of
happening at unprecedented pace and demand for money
economic growth has acted irresponsibly and has
is more than ever, the banks have to ensure that they do
therefore put huge pressure on the Chinese financial
not get engulfed in greed and should therefore act
system.
responsibly.
almost doubled its debt from $14
India’s story is however a bit different from both USA
Past is replete with many examples where the banks have
and China’s. India has a democratic political system
allowed themselves to be engulfed by this greed and have
and has a large population dependant on agriculture or
acted irresponsibly. I would like to illustrate my point by
small and medium enterprise for livelihood, this section
giving examples of USA and China.
of
USA is an economy which epitomizes capitalism and the
government, hence in order to achieve twin objectives
materialistic pursuits of the investment banks led them to
of profit as well as welfare India follows mixed
issue junk securities which were backed by subprime
economy. Thus Indian government encourages grant of
loans, these securities were then sold to customers all
easy loans to these sections of society (called priority
over the globe and were later on insured by insurance
sector lending) however there is no mechanism to
companies, so when the subprime borrowers defaulted in
monitor the correct and fruitful utilization of these
paying back the loans, the entire financial system in the
loans. One crop failure or any other glitch these people
USA collapsed, which triggered the global financial
are unable to pay off their loans, as a result the
crisis.
government gives them a loan waiver leading to further
China: the world’s second largest economy is also one of the most indebted economies, as per a survey, in 2009 one dollar of debt was required to generate one dollar of growth, now more than 4 dollars of debt is required to generate one dollar of growth in the economy. The debt to GDP ratio of China is more than 200% the primary reason for this debt crisis is the government directed lending which has been done to achieve the objective of
the
population
needs
assistance
from
the
increase in NPA of banks. It would be more advisable to have a watchdog that would ensure not only proper disbursement of loans, but would also oversee their correct
utilization
by
ensuring
proper
training
utilization of modern techniques and reduce the chances of failure. Further loan disbursement to achieve the priority sector lending targets set by the RBI should be discouraged.
jobs and stimulating growth rather than to
In order to achieve this loan should be provided in a
achieve economic profits as a result most of this debt has
staggered fashion, in the first tranche the loans should
gone into financing unproductive infrastructure projects,
be provided for the training and in the second tranche
such as building roads that do not see any traffic or
loan should be provided for financing the project along
building factories that run on half capacity, this has
with the working capital loan. Moreover the loan
created huge amount of nonperforming assets for the
should be granted after a fair assessment of the project,
creating
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FB that whether the project is capable of generating future cash flows or not, if not suitable suggestions to modify the project and make it profitable should be provide. Moreover, a watchdog that monitors the disbursement of these loans would ensure that these loans are provided to the target segment only. For growth to be meaningful it has to be inclusive, any society where more than thirty percent of population is below poverty line, does not have access to food, clean drinking water, basic healthcare and basic hygiene and sanitation, does not deserve to be called civilized society. Hence in keeping with the aims of the Indian Government, lending which focuses on these issues and simultaneously achieves asset creation will go a long way in achieving our twin objectives outlined above. If these steps are implemented then Indian banking system would be a step closer towards becoming a responsible financier.
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INDIA’S TRYST WITH POPULISM By Sainath Zunjurwad, SIMSREE
India is a country as diverse as it gets. There is a place
certainty. However, the durations and intensities of
for every sort of ‘ism’ under the Indian sun. The Left, the
these phases are not so easily predicted. And even if
Right, the Socialist, the Communist, and the Democrat
they could be, the pain of going through a recession
everybody has a little piece of heaven in this country.
cannot still be eliminated. The boom times bring out the
Populism! The crowning jewel among them all (the
‘good’ in people, the recessions the worst. How can a
evilest one, if you will), surely won’t be far away?
government
Populism exists in democracies as well as the myriads of dictatorships and socialist and communist set ups. Populism is pervasive. From the right to the left, across the entire political spectrum it thrives. For its advocates populism hSas obvious benefits, but then so does its opponents cite equally obvious harms. The issue is thorny.
scrape
through
a
recessionary
or
inflationary period, when emotions are running high? It has few avenues for exploration. It is constrained when
it comes to managing the government’s account. With domestic funds becoming scarce, it has to do a fine balancing act between its ‘credit’ and ‘debit’ accounts. People start feeling the pinch and the unease starts building up in the country. There are indications of, early signs of mounting protests. The tempo starts
The most noteworthy manifestation of populism can be
increasing and the government becomes increasingly
seen in the economic policies of the state. The
cornered. The prudent in the government advocate
government of the day is always interested in painting a
caution, advise tougher stances, and austerity. Others
rosy picture of the economy. More so in an election year.
advise opening the tap full throttle and shower the
The economy goes through cyclic phases – expansion,
nation with subsidies, import quotas and other freebies
peak, recession, and trough. This is well established. An
that the government can ill afford.
expansion must follow a trough, it’s an economic
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FB The struggle mounts, and little by little the prudent are
seen a month or so back. The minister unfortunately
edged out. The government gives in, and does all it must
had to again roll back the fare raises, with Vidhansabha
not do. It borrows from international markets at
elections looming in several important, large states.
increasing cost, and a time comes when the government’s
Again, a classic case of populism. Inability to withstand
finances spiral out of control, as was seen in the 1991
public pressure. However, he did push through 14%
economic crisis of “Balance of Payments”. This has been
price rise, thank god for these small mercies.
seen all over the world. It breaks the backbone of the economy.
This analogy can be extended to almost all industries and sectors. The government imposes price ceilings and
When successive Railways ministers do not increase rail
floors, Minimum Support Price, import duties and
fares for more than 20 years, under intense pressure from
quotas, trade restrictions. Some of these are certainly
the public and others, they are creating a price distortion.
necessary, justified and help prop up our still
The money, if it doesn’t come directly
embryonic industries. This is the necessary evil, when
from the pockets of the commuters, comes from the
pandering to the populists is not wrong. But good
government treasury, hence indirectly from the taxes paid
intentions seldom translate into good results. Solid
by these same commuters. The full price has to be paid.
understanding of the needs of the economy, the
One way or the other. There are no free lunches. What’s
willpower to stand up to public pressure and push
the upshot? With money
through the right reforms are needed to contain the
barely to prop up the
repercussions
Railways, nothing
this
there
is
‘necessary evil’. This is
for
the
where the leaders’ mettle
and
is
left
development integration
of
of
tested.
Reforms
taxation;
modern
in
defense,
the
insurance, retail, capital
service
markets, financial sector
remains the same, and
and other industries are
continues to deteriorate.
long
The life of the commuter
postponements only delay
ultimately
the inevitable. You cannot
technology services.
into The
becomes
overdue.
tragic. He has to pay the
‘protect’
price. It is the failure of the ‘representatives’ who were
industry forever. It need
elected to safeguard people’s interests, who give in to
to buck up and compete with the global companies. The
populism, which does no good to anyone and ends up
customers
hurting everybody. Whereas if these foolish price control
competitiveness brings out advancements in technology
decisions had not been taken, and the price had been
and efficiency. Everybody wins. If you are sick, you
allowed to increase gradually (naturally) over the span of
need to swallow the bitter pill.
20 years, its effects would have been tolerable for the
Populism
general public, and there would not have been such a hue
weakness-impatience and an inability to accept the
and cry over the 100% fare raise (Mumbai locals) as was
inevitable pain. When we indulge in populism, we do
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aren’t
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a
forced
to
pay
manifestation
of
the
Any
higher
the
domestic
prices,
human
FB not circumvent the pain, we merely succeed in delaying it. Today’s problems become tomorrow’s-but the intensity rises exponentially as we balk at facing the devil today. Future generations are left to pick up the pieces. This is a political hot potato. One thing, however, is crystal clear. Populism is inescapable. When you come to think of it, populism is just a form. It is a representation of, manifestation of human frailty. To forego long run benefits, in pursuit of momentary happiness. It is as old as the hills. We have to live with it, and make peace with it, we can strive to contain it. It will rear its ugly head time and again, but we must prevent it.
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STORY OF STOCK EXCHANGE By Abhishek Tripathi, IBS Hyderabad
Whenever we hear the word stock it sends a sort of
on paper and hence could be sold to other investor. But
electricity through our spinal cord. For majority of the
every story has a twist. And in this case the twist came
people stock market or stock trading is a way of making
in the form of SSC (South Sea Company). After seeing
fast cash. But there’s a huge history behind the form of
the success of EIL,SSC also launched its share and
stock trading we see today.
before it even went on its first voyage, it had build its
The first of its kind money lending took place in Venice ,
office in the most posh
in which the money lenders used to exchange among
area of London. But when time came to return the
themselves and used to fill the gaps that was left by the
dividend, the company couldn’t. This out crash caused
larger banks. The Venetian would carry a slate written
the government to ban the issuing of share till 1825.
with information to meets and to the client just like what a brocker dose these days. Now as the history enters the year 1500,we come to know that the first stock exchange was opened in Belgium. The brokers and moneylenders would meet there and would deal in business, government and individual debt issues and the best part was that they would deal in promissory notes and bonds because in
1500 there were no real stocks.
The first official stock market in London was opened in the year 1773,19 years before NYSE (New York stock exchange) but LSE was handcuffed with law restricting shares. In US NYSE was not the first stock exchange but it grew to be the most powerful one. The first stock exchange that actually opened in US was Philadelphia Stock Exchange. The
NYSE made its centre in
William street also known as THE WALL ST. For the next two centuries the NYSE was the sole king of stock
Now in 1600 when East India Company came up, they
exchange market. It had seen every thing, from the
use to trade in different commodities, but it looked like
great depression to the wall st. bombing which had left
everyone had share in the profit except the people living
38 dead. After the formation of NYSE many other
there. These fleets often lasted just one round. So in order
countries started coming up with there own stock
to minimize the risk of monitory loss, they started
exchange market, but these were seen as the launch pad
convincing people to invest in the voyage in return of
for upcoming industries, so that
profit. Soon people started spreading there risk by
themselves from LSE and than to NYSE. Later on
investing in many of such type voyage, thus came the
NYSE started facing a tough competition from
concept of portfolio management.EIL changed the way
NASDAQ
the business was done. The company would offer stocks
industry regulatory authority. From the inception it has
to the investors which would give them back returns or
been one of its own kind because it dose not have a
dividends. The company would give dividend on every
physical space .It is a network of computer that
voyage they undertook. The size of the company along
conducts trade electronically. NYSE has evolved itself,
with royal charters forbidding competition gave the
and still is the arguably the biggest stock exchange
investors a huge profit. Most of the shares were written
market and is inspiration for other markets as well.
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they could shift
which was a brain child of financial
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ANALYSIS OF THE REASONS BEHIND RAGHURAM RAJAN’S SOUNDING ALARM ON ANOTHER BUBBLE By PUSHPANJALI MITRA, SIMS
INTRODUCTION "Proceed cautiously, facilitate and participate in prudent innovation, allow markets to signal the winners and losers among competing technologies and market structures, and overall-as the medical profession is advised-do no harm." These were the words on 27th August 2005 with which Dr Raghuram Rajan ended his speech as the economic counsellor of the IMF’s Research Department. Raghuram Rajan is considered as the Global Financial Guru who could for see the Global Crisis coming amidst a market having a stable financial growth condition. He had a completely different view point regarding the spewing financial instruments coming up in the market namely the Credit Default Swaps (CDS) and Mortgage Backed Securities (MBS). He also cautioned about major market volatility which was seen after the collapse of the major investment bank giant Lehman
Brothers. Nobody took his prediction seriously until the world was hit by the recession. th
Though the country has announced the decision to stop infusing the money by October in the economy, the monetary stimulus which has been done for the past couple of years has led to the build up of an asset bubble, soaring stocks, along with low volatility in the commodity and equity markets. This article talks about the growing bubbles in the two of the major economies - China and US in the field of real estate and stock
market respectively. Due to the over-dependency of all other countries on these two economies slowly all the central banks will fail to prevent their economies if these economies face a slowdown. CURRENT SCENARIO OF ECONOMIES The Global Recession hit China by impacting the exports of the country. US, Japan and Germany constitute almost 50% of China’s exports and all were badly affected by the global meltdown. In order to lessen down the impact the country went for internal investment and development which eventually is
Similarly, on 8 August 2014, the same man predicted
creating a housing bubble. The government infused
another global crash warning that the world will not be
billions of dollars into the real estate industry to build
able to bear the cost of. The problem this time would be
up houses but according to the recent data 20% of the
because of the various steps that have been adapted by
sold housing units have been reported vacant.
the Central Banks of the economies to infuse money so
price of the housing sector has been declining since the
that the world can come out of the aftermath of the Glob-
inception of this year. Hence the slumping property
al Recession of 2008. The solution to prevent the burst-
market of the country is creating speculation which is
ing of the bubble is to wind up of the various monetary
leading to the fall in the prices of the properties. Well,
policies that have been framed and implement it in a way
this is the scenario which has always been seen right
which doesn’t neglect the long-term impact of it on the
before bursting of a bubble. And based on various data
economy. Soon after the recession in order to get the
and surveys, if there is an economic slowdown in
economy back on track the US Federal Reserve started
China, almost 50 countries of the world will be affected
the cycles of quantitative easing in the economy infusing
because of the various trade and economic ties they
billions of dollars in the economy.
have. The biggest example of that group will be
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The
FB Australia which is the biggest trading partner of China and which also fears a booming asset bubble because of an economic environment of low interest rates and low GDP growth.
CONCLUSION Raghuram Rajan is warning the world by saying that the money which has been infused in the economies by the United States and other economies like UK, China,
The US has been seeing a booming bullish stock market
Japan etc has though improved the situation of the
for the past 5 years which has shaken off all the reasons
economy but on the downside has fuelled the creation
pessimism the world is having regarding the post US
of bubbles. And like 2005 when he predicted the US
Recession era. Investors across the globe are investing in
Global recession, this time also he suggests the Central
the US markets making big profits but amidst the boom
Banks to tighten the monetary policies in the economy.
we should consider the case the current US stock market is overvalued by 80% based on few long term key measures of the financial data. The figures have been so high and consistent that there has been very few pullbacks by the foreign investors from the US economy. Other countries including Japan, UK, Greece, Spain have reported situations of bubble
formation which is right
now not considered harmful but is a warning for the world what the future holds for us.
Figure: The upwar d trend of the US Stock Exchange
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THE ONE HAND ECONOMIST! By Samitha Gowra, IBS Hyderabad
“Words are, of course, the most powerful drug used by
reasons to influence their decisions which proved their
mankind.” These words by Ruyard Kipling were one of
lack of conviction to that particular happening. This
the first influences on the man who has overcome the
frustrated a US President, Harry Truman to find out
whips and lashes of the economy and also has stabilized
whether there existed an economist with one hand, that
th
it as promised by him on the 4 of September, 2013.
is, with a single and focussed view point on the
Exactly a year after that date, i.e., today we get to see the
dealings of the economic conditions. Raghuram Rajan
results of the performance put up. And it has been given
was the one; his decisions had conviction and
a thumbs-up sign by many of the notable personalities
willingness to help out the country in the most difficult
who were masters in their own aspect in the field of
times it was ever facing.
finance,
including
Mr.
Duvvuri
Subbarao,
the
ex-governor of RBI. EDUCATION AND CAREER After his graduation at IIT Delhi and his management program in II-M Ahmadabad, he completed his PhD in MIT Sloan School of Management. He then joined as a lecturer in the Booth School of Business in the University of Chicago. He has also served as the Chief Economist of
the International Monetary Fund (IMF) for the period starting from October 2003 to December 2006. In November 2008, Dr. Manmohan Singh, the then Prime Minister of India appointed Rajan as the Chief Economic Adviser. In this year he also headed a high-level
In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector. Rajan argued that financial sector managers were encouraged to “take risks
that
generate
severe
adverse
with
small
probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks.
But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialize, financial position can be unwound and losses allocated so that the consequences to the real economy are minimized.”
committee on financial reforms, submitting the report
The response then was negative, calling Rajan
made to the Planning Commission. He was the President
“misguided and a Luddite”, but in reality what Rajan
for the American Finance Association in 2011. In 2012,
framed came to reality during the 2008 Economic
he replaced Kaushik Basu to be appointed as the Chief
Crisis, which was predicted by him. The Academy
Economic Advisor to the Government of India. He
Award winning documentary film, “Inside Job”, gained
prepared the Economic Survey for India in the year
key insights from extensively interviewing Mr. Rajan.
2012-13. Raghuram Rajan was seen to be as a person with remarkable intellect, vision and strategic acumen, who
The state of the economy on the Day one of his 3- year tenure was something like this:
Currency at all time low
indecisive in their nature, though they predict and assure
High inflation
a certain happening, they always leave a scope for other
Current account deficit maligning the economic
called a spade, a spade. The economists, were always
reputation 13
Tapers tantrums of the federal reserve
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Tapers tantrums of the federal reserve
Though this was the situation, he presented his 3,065 word manifesto at the appointed time which clearly and precisely stated his objective of bridging the gap between the now and the future to overcome the downturns caused by the global financial markets. The specialty of this person was that he had enough courage and confidence to walk the talk.
reforms. Speculations were ripe that there was a rough relationship between the government and the governor which was dismissed by Mr. Arun Jaitley who stated that “he has very high credentials and in his own field he is rated very high. He is doing his job to the best of his ability and his emphasis appears to be on the management of inflation, which is a legitimate effort.” This certification from the Finance Minister means that he is free to do his job with the same rigor and skill
His achievement after a year as the Governor of RBI, the
with which he has delivered on currency and bad loans
central bank of India, was noteworthy and made him a
in the first year.
person to bank upon, quite literally. The key points he focused on was controlling of inflation and stabilizing the external sector and clearly and crisply setting his agenda for his term as governor, as stated by his predecessor
It would be a pleasure to see what strategies he would chalk out for the rest of his term and putting India in a financially strong condition.
Duvvuri Subbarao. Also the rupee, which was at its worst, stabilized after Rajan took over, by the way of a $35 billion draw under the special swap arrangements with banks for deposits from overseas Indians. Though unpopular, Rajan decided that the only way to control the inflation was to use interest rates by increasing three of them and also made a merciless drive to prevent bad loans and recovery showed that he meant business. He balanced the economy as his vision had something for the financial markets as well as the common man in the form of inflation indexed bonds. An unconventional that he is, he has declared his intention to internationalize the financial market, saying that we there
was a need to look beyond the next few months. BARRIERS The Indian bureaucracy has played a major role in being a hurdle to implement Rajan’s policy frameworks in the form of trade union activism. His decision to have a COO at the rank of Deputy Governor is stuck for want of legislative changes. The other conflict between them was the recommendations of the Financial Sector Legislative
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“WHAT IS WRONG WITH BANKS?” -AN ANALYSIS WITH REGARD TO DECLINING ASSET QUALITY. -Sarthak Brahma, MNIT Jaipur
The Indian banks are the major mediators of finance in
referred to as Non-Performing. The deterioration of
the country and the R.B.I. depends on them for much of
asset quality and creation of NPAs thus results from
the implementation of its policies and regulation of
bad loans and debt concerning borrowers who have
credit control. The Indian economy is thus largely
themselves turned unyielding. Now since the money
dependent on and dominated by its Banking sector,
that banks use to advance these loans is not their own
predominantly among which the Public sector banks
but public money, the bank lending becomes
hold a major stake and leverage on the prioritized
increasingly skewed. The banks thus have to deal with
agriculture sector, industrial sector covering a wide
the NPAs through the profit they make and hence
range of massive units from Iron and steel, Power
overall profitability suffers. This, in turn results in
Industries, Coal to textile and aviation down the line to
harsh measures by the banks making the overall
the non-priority sector. The matter of such an important
credit/debit procedure difficult and cumbersome.
and fundamental sector facing problems of deteriorating asset quality and increasing Non-performing assets (NPAs) is thus of serious concern and gravity requiring a look at “What is wrong with Banks?”
The reasons for the problem are thus cyclic and
mul-
ti-dimensionary in nature. It is thus not possible to point out the conditions under which a said credit was sanctioned and how the appraisal for the concerned
To understand and answer this question, a careful anal-
project was carried out. Nor is it possible to monitor
ysis of NPAs and how they are produced is required. In-
individually the reasons that might have led to the
vestopedia defines NPA as “A debt obligation where the
projects becoming unprofitable or failing. However, a
borrower has not paid any previously agreed upon inter-
macro-economic analysis for the same can be carried
est and principal repayments to the designated lender for
out concentrating our focus on large scale borrowers
an extended period of time”. Presently, this extended pe-
and problems with these economic sectors. Also, the
riod is of 90 days and since the asset hence becomes un-
impact of global economic changes on small and big
profitable and ceases to produce any income, it is
projects and ventures as a whole can be estimated and a general perusal can be carried out for the same.
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name of social developments; but another reason is
overall economic expansion and a financial crisis that
that the recovery and credit mechanism of PSBs is
hit the world economy during 2008. As such, the asset
ineffective compared to private banks. The procedure
quality of banks suffered. A weak macro environment,
followed in extending and monitoring credit is another
high inflation and vulnerability of a large number of
contrasting factor.
infrastructural projects in India has bore damages on the asset quality. Policy paralysis still remains a compelling factor. To top it all, pressure from aforementioned infrastructural industries, Construction and Engineering and coal sector has further aggravated the situation, a recent example being slipping of stocks of SBI due to Supreme Court verdict on coal block scam. Going by Moody’s Research, poor financial profiles of state electricity board discoms is a key source of asset quality risk. Add all this up to the sluggish profitability of banks and we are looking at an estimated PSB gross NPAs of 4.4-4.7% as on March 31,2015,as against 4.4% as on March 31,2014.This condition of PSBs is far depressing than private sector banks. Of course it
cannot be neglected that PSBs are under some pressure from RBI to provide even risky loans in the
Certain measures of immediate and long term applicability must thus be taken to tackle the problem. Infrastructural issues must be addressed and stuck projects revived. Fundamental structural reforms need
to be brought about in discoms. Sale of NPAs to Asset reconstruction companies reduces reported stress; thus RBI prescribed Security Receipts need to be loosened so that write down and portfolio selloffs is boosted. The subjection of Public Sector Banks to fragile and ill structured sectors should be reduced. Restructuring of loans and advances by banks should be fostered to contain the deterioration in asset quality. However, the inherent risks due to restructuring in the long run need to be monitored and controlled. Loan advancement to potentially sick units should be checked by close monitoring of financial status and loan accounts of the borrower. All in all, the issue at hand is grave; Much is wrong with the banks and there is need to address the problem in right earnest.
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THE UNEXPLORED SIDE OF CURRENCY - Utkal Meher, S.C Bose and Comapny
Our day starts with many questions in our mind, but as a
friendly to trade. Why can’t government just print
human being, we normally do not bother to know about
more money and distribute it to all Indians? Wouldn’t
all the questions that blink in our mind. When I was
be we all wealthier if we print more money? Such
very young unfortunately, I used to think a lot. I had no
questions look very simple but for government it is
answer for two interesting questions, which used to
not so easy to print more money, because printing
wedge to my mind every day. However, these two
more money than require will lead the economy to
questions are very common and interesting, but still;
high inflation and we are no better off than before. As
confidently I can say that 90% of Indians are not aware
we know, if inflation will rise than the value of money
about the mystery behind these. The two questions
will go down and we will end up with the same. In a
were:
lay man language, if government will supply more
1. When gravity pulls everything down, why people who lives in South Pole of earth does not fall down. and 2. When government has power to print the currency, why are they not printing much money and distribute it to the poor who cannot afford his food, cloth and shelter. I know these above two questions stuck to every human being during their lifetime but we never bother to know the logic behind these.
money to people to meet their necessity, same time price for the commodity will also increase at the same time. The logic behind the increase in price of commodity (i.e. Inflation) due to the printing of currency by government has been illustrated below with
simple
examples
with
some
common
assumptions.
Let’s suppose the government of India has decided to print more currency to distribute it among the people. What would people do with this money? I am for sure
As a CA Student, I am very poor in subject like science
that most of the people will spend the same to fulfill
and geography, so I cannot answer the first question but
their requirements and needs. As we, all know human
defiantly I will explain about the second question,
needs are indefinite, so the more they have the more
which is much more interesting and mysterious than
they will spend. If I will take an example of this
your imagination. I will take you to the world of
generation, most of us want to have one i-Phone in our
currency to resolve the anonymity and logic behind
hand, and if you will ask me than definitely, I want the
these.
same.
In olden days when currency was not there people used to trade by barter system. Barter system is nothing but a form of trade between two people to exchange commodities. It was very difficult when both people had no commodity, which requires by each other. To resolve the same the ancient kings start using gold and silver to exchange commodities. Gradually the same converted into currency, which was very convenient and
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FB If government will give me money to spend than
decide the quantum of money to be printed. Let’s not
definitely, I will rush to i-Phone store. Due to such
go much deeper into it and keep the things simple.
reasons, the demand for the commodity will increase,
GDP is nothing but the aggregate of all the goods and
and if demand for the commodity will increase beyond
services produced in a country during a financial year
a certain quantity, the price will rise due to various
in rupee term or in a lay man language, it is the
factors. Now you will be thinking why price will rise.
numerical number of goods and services produced in a
Since we’re trying to argue this won’t happen, we will
year. However, more goods and services produced in a
suppose that Apple Inc. won’t increase the price of
country would not lead to a higher GDP every time,
I-Phone and the same increase in demand will continue.
because this statistical measure is co relate to some
We have to keep one thing in our mind that apple inc
other factors also.
(common for all manufacturing or Service industry) have a limited resource and to meet the demand of people he need to either expand his factory or recruit extra labor or ask their employees to work for over time etc.. Any of the above activity will leads to an increase in their per-unit cost and it will force Apple Inc to increase the price. The same logic of demand and supply applies to each commodity in the market. [The example that I have used in this paragraph is just for
informatory purpose for the better understanding of readers and no mean to get into the business expediency of the company]. Due to the above causes, the government of India (the same theory applies to whole of World) can’t print as much money as they want. If they will do so, with out any doubt the Indian economy will leads to the hyperinflation, which suffered by Germany in the 1920s and Zimbabwe in the nearer 2000s. In hyperinflation
stage, you need a bag of money to get one kg of rice.
Let me explain how GDP and printing of money links to each other. Suppose this year there is a production of 100 (i.e 5qty x 20/qty = 100) than RBI has to circulate Rs.100 (Approx). If RBI will circulate less money and in next year the quantity of production will increase to 15 instead of 5 than we can’t say that the GDP is 15qty x 20/qty = 300. Since money circulation hasn’t increased, deflation will occurs and price goes down or vise versa when there is a excess circulation of money. The printing of money is a discretionary power of RBI with the consultation of government. RBI prints money based on the prediction with the help of above factors. RBI can print more amount of money in a situation like war or any other economic crises. It is to be noted that the RBI need to have some value backup before
printing
the
money
or
circulating
to
commercial banks. Normally RBI keeps gold,
domestic government securities, foreign money etc. as
Now it is obvious to get a question regarding the base of
backup value. With this backing the RBI can print
currency printing by any government. When it comes to
currency has inherent value attached to it. This is the
India, it is the central bank of India formally known as
base for currency circulation.
Reserve Bank of India (RBI), which determines the amount of money to be printed in a fiscal year. The base is the economic growth of India or GDP. However, there are few more statistical factors, which help RBI to
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The currency with out which it is almost impossible to survive in the social world has a lot to explore in it. I hope I have unfolded the side of currency that you were not aware.
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“MODINOMICS- THE CHANGING FACE OF INDIAN ECONOMY” By Ankit Walia, IBS Hyderabad
The journey of Prime Minister Narendra Modi’s vision
His ‘rainbow’ strategy for India sought to draft a frame-
for ‘Ek Bharat, Shreshtha Bharat’
becoming part
work to preserve India’s family-based value system,
of the mainstream national discourse. Let us walk togeth-
focus on agriculture & women power, protect ‘jal,
er, think together, and make a determination to take the
jungle aur jameen’ (water, jungles and land), and em-
nation ahead together .His development and economic
power youth, democracy and knowledge – in effect
vision of India
proposing something for everyone in the wide spectrum
massive
promising a number of measures from
urbanization and price control to women’s
empowerment and dalit welfare.
of India’s diverse electorate. Modi spoke also of building Brand India through 5 Ts
PM Modi unveils a canvas that has broad brush strokes
- talent, tradition, trade, tourism & technology and
of the proposals, goals and intentions that charted out his
said India’s demographic and democratic dividend
vision to get the country out of the current state of crisis.
along with these plans will set in motion the investment
'Modinomics' is on full
cycle and revive India’s stalled growth.
display finally. It has shades
of politics, economics, social issues and spirituality, Modi tackled a surfeit of ideas to appeal to a wide audience - ranging from plans for cross country bullet trains, to developing a hundred new cities and satellite towns, setting up mechanisms to tackle price rise and building
IIMs & IITs in every state of the country.
He spoke at length on infrastructure, reviving tered power plants, modernizing railways,
shut-
setting up
gas grids and connecting India through optical fiber networks, but also combined that vision with proposals that will have a resonance with the aam aadmi and In-
dia’s farmers building agro infrastructure, setting up
All initiatives to bring India’s economy back on track are
mechanisms to monitor real time plantation and har-
to ensure that the very last person in the queue gets
vest of crops as well as courts to try hoarders and black
benefited as well. Poverty has no religion, hunger has no
marketers.
creed, and despair has no geography. The greatest challenge before us is to end the curse of poverty in India. My Government will not be satisfied with mere ‘poverty alleviation’ and commits itself to the goal of ‘poverty elimination’. With a firm belief that the first claim on development belongs to the poor, the Government will focus its attention on those who need the basic necessities of life most urgently.”
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Reforms are likely to be piecemeal rather than in one 'Big Bang' package for India. Maximum
governance,
Minimum government for mula is also a key factor into the economic vision for country. Urbanization, professionalization of PSUs, technological ad-
vancement, skill development and IT and prevention of corruption are the key highlights of Modi's economic vision for India. The highlights are –
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FB 1. Team India concept to strengthen the frame work, especially in relation to
the
regime would be rationalized and
Centre-State
simplified. Fiscal discipline would be adhered
relationship. Team India would include chief
to and programmes like MNREGA would be
ministers as equal partners with the Prime
linked to asset creation.
Minister. Team India also includes the plan to ensure that governance is
pro-active and
pro-people. 2. PM Modi promises to hear all voices with India
6.
Encourage FDI in all sectors barring multi-brand retail. Ensure minimum 50% profit over
cost
for
agricultural
of
production produce.
Agro-food
first as the motto. Bringing eastern parts on par
processing centres would be set up. it Will
with the western parts of the country, special
help industrial growth by making doing
emphasis on issues plaguing the Northeast like
business in India easier. Logistics and
Assam floods and lack of border infrastructure in
to be key priorities. Single window clearances
Arunachal and
in Centre as well as states. Global hubs for
Pandits to
Sikkim, return of Kashmiri Kashmir valley with dignity,
discussions on Article 370 and justice to Seemandhra have been incorporated in his vision.
manufacturing to be
power
developed. 50 new
tourists’ circuits to be developed. 7. Talking about power and electricity, Modi said Gujarat is the biggest hub for solar power in
3. Administrative, judicial, police, electoral reforms
Asia. However, he laid down an energy
to be taken up on a war footing. The vision also
roadmap for India too. He said East India has
expressed commitment to an
the perfect natural resources to generate hydro
effective Lokpal
and e-governance.
power, the South is perfect for wind energy and
4. Public spending on education to be raised to 6%
8. Modi has a prime focus also towards GST. The
setup. UGC to be restructured into higher
success of GST depends on building IT
education commission. Facilitate youth to earn
infrastructure
while they learn. Massive open online courses
implementation.
national
multi-skill
mission.
AIIMS like institutions in every state, promote ayurveda, yoga. National
e-Health Authority
to be set up. We
will
work
and
its
effective
Skill-mapping; launch
National health assurance mission to be setup.
5.
the western plains are ideal for solar panels.
of GDP. National e-library for schools is to be
for vocational training.
towards
conducive tax environment.
20
Tax
a
trusting
and
Bad governance like diabetes invites all kinds of problems. Good and effective governance is strength; India needs a holistic approach and the right direction. For the country to move ahead, only the top cannot proposer, we need to uplift the lower strata of society with good intentions, impression.
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commitments, focus and
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TAMILNADU BACK TO ITS TEXTILE GLORY By Hanumanth Kishore , IBS Hyderabad
The Asian countries like China and Bangladesh who
The performance of textile market in the current year too
were once textile giants of the world have started losing
has been good with 30 per cent growth in rupee terms
their edge while textile exports from Tripura, a textile
and 15 per cent in dollar terms. The whole of Tirupur, is
hub from Tamil Nadu is rising once again by overcoming
optimistic of maintaining the growth in export sector, in
its competitors, turning the city into a job magnet.
fact even doubling it if the government signs a Foreign
Before the emergence of china and Bangladesh as a renowned Textile supplier chain for the world, its Tirupur , the city in North-Western Tamil Nadu is called
Trade Agreement (FTA) with the European Union to which Export union reports that Europe will consume about 45 per cent of the city's total textile production.
the knitwear capital of India. Tirupur is known not only
According
for the textiles but also to its employment offerings from
Corporation, a Rs 700-crore Nationalized Textile
uneducated to educated in huge quantity. People from
corporation giant that supplies its product to major
Various parts of India lives in tirupur with employment
brands including Mother Care and Hanes which are
in Textile
recession 0f
known as Western Europe's largest stylish brand for
2008-2010, the textile industry is at marginal growth for
woman, “By Signing the Foreign trade Agreement with
the past four years but now the textile city today is ready
the European Union under the recognition of Indian
for its challenge of big growth. The
Industry
government, we can overcome Bangladesh and china".
representatives report stated the reason for growth is the
The customers from Various parts of Europe recognise
export orders from the European markets. Now Tirupur is
that the Tirupur is a better place when it comes to
set to exploit all the overseas orders that are getting
quality, delivery and reliability as well as it can deliver
diverted from Bangladesh and China due to internal
the huge quantity of products with its enormous labour
company issues related to workshop safety. The labour
power. But the Tirupur textile industries charge 10 per
rights is also a major problem which in turn increases
cent higher cost than that of Bangladesh that is keeping
labour
the customers away. The competition from Bangladesh
Industry. After a Great
wages
and
political
uncertainty.
to
the
Managing
director
of
BEST
due to its low cost of production was one of the biggest In the past financial year 2013-14, the knitwear
exports
threats for Tirupur. The Costs in India are 8-10 per cent
from Tirupur to European Markets logged growth of
higher than in Bangladesh but China's products are
around 40 per cent out of which the sales worth is about
10-15 per cent more expensive than those of Indian
Rs 18,000 crore, This report was
Narrated by the
product. Due to this pricing strategy, Indian firms have
Association, Which
not increased the prices to counter the competition so
President of Tirupur Exporters
seems to be major decision makers for garment exporters
Indian products are selling at a
in the city.
per cent.
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margin rate of 5-10
FB However, Tirupur textile industries are fortune that
The two major export products - categorised as 338
Bangladesh and china had on garment exports from India
(M/B knit shirts, cotton) and 339 (W/G knit shirts,
in the past few years. Huge concern on Safety of workers
cotton) by the US Textile and Apparel
and labour rights have become major issue for buyers
System reveals that where Tripura's Textile future lies.
from the Western Europe putting Bangladesh industry in
The textile city's share in
a crisis. In 2011-12,
hundreds of foreign labours died
has raised from 4.8% in 2005 to 6.6% in the first six
in a fire at a factory on the outskirts of Dhaka. In the
months of 2014. In the same period, Vietnam's share
current financial year, after the disaster at the Rana Plaza
rose from 2.3 to 6.8% and that of Bangladesh from 2.3
that killed around 1,100 workers in Bangladesh, the
to 5.7 %. China had a market share of 4.6% in 2005.
major Western brands stopped purchasing products from
This reached 11% in 2012, but has declined to 9.2% in
Bangladesh. The textile industry analyst have
reported
the first six months of 2014. Whereas in the case of
that the growth in garment exports from Bangladesh has
category 339, Tirupur has grown from 2.6% in 2005 to
slowed down to its lowest rate in 15 years, with the
4% in the first six months of 2014. The Vietnam and
buyers shifting to countries like
Bangladesh rose from 5.1% to 18.2% and from 1.6% to
Indonesia and Cambodia for further added that
India, Vietnam, purchase. The reports
Disney and GAP have already
diverted their orders to India from Bangladesh and more brands like Wrangler, Gerry Weber, JBC, Lee and K&L are expected to migrate soon. The cost of labour once
Bangladesh's unique selling
proposition had increased
twice the amount since it had it in last year. The minimum monthly wage was raised to Rs 4,100 last December.
22
3.4% respectively. Chinese
Category
exports in category 338
exports grew from 6.4%
in 2005 to 24.3% in 2013 but have declined to 20.1% in the first six months period of 2014. With a distinct price advantage over the textile rival China, the Indian exporters believe that India should grab the opportunity and the government should sign at least special agreements with exporting countries like it did with Japan recently if not showing keen
interest
in signing FTA Agreement with European union
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FB “Foreign customers Pre-order of products and
enquiry
Tirupur has its own labour and compensation rules that
companies that
are more favourable to workers compared to other
Bangladesh are increas-
textile towns like Surat and Ahmedabad in Gujarat and
ing and it is very important for us to be seen as price
Mumbai. To attract more labours the industry had
competitive. The increase in demand and hopes that the
started providing a marriage fund of about Rs 7,000-
government will sign more FTAs have motivated the in-
10,000 to women as her wedding expenses. Also, a
dustry to invest more in production capacities. After a
worker is eligible to receive
gap of nearly three years, The BEST Corporation has
months of work
started
industry. There is no cap in
of quality flow especially from the are currently Purchasing from
installing new capacities. It has set up giant
allowances after six
compared to five years in other bonus provision and a
production units at Karur and Avinashi in Central Ta-
worker can receive Rs 12,000-16,000 in a year as
milnadu and expanded its existing facilities. The industry
working
has recorded capacity addition of 15 per cent Plus 10-15
allowance and variable dearness allowance linked to
new factories are expected to start functioning. With the
inflation. Now more retail outlets and auto showrooms
new units in place, the Tirupur textile industries is faced
have cropped up in Tirupur. The traffic is congested in
with the problem of
manpower to meet the growing
the city with short roads and you can often spot luxury
products. The Textile sector is now
cars like Audi, Benz and BMWs on the city roads. With
issues regarding flexible labour rules and
Textile sector on an upward Trend, the once
wages are higher, yet production workers are hard to find
down-trended market town today wears the looks of a
in the state that forces the industry to scour for labour
boom town.
demand for its facing major
benefits apart from salary, Travelling
resources in other states especially in the eastern parts of the country. This has resulted in a major inflow of migrant labour to the textile town. Until 1990, Tirupur had a
population
of 150,000 but today there were around 800,000 people in the city. Out of which 600,000 people are employed in factories located in the
14-km industrial hub. This
have put additional pressure on the factory owners who have to provide housing, water and medical facilities to
their
Employees. The textile industry is seasonal and
there are certain months where the workers need to work overtime
to
meet
orders.
As of now, the Indian penal law allows only 50-55 overtime working hours in a quarter, which
translates
into an insufficient 30 minutes work a day per worker. Also, companies here are not showing major interest in growth instead they are preferring to remain a small- or medium-sized headaches
23
enterprise in order to avoid "regulatory and
labour
laws".
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AMAZON AND ITS DRONE DELIVERY By Indira Dutta, IBS Hyderabad
Amazon.com Inc is one of the World’s largest e-commerce company is testing drones to deliver goods to improve the efficiency in delivery. The goal of this new delivery system is to get package into customer’s hand in 30 minutes or less using this unmanned aerial vehicle.
Amazon also plans to add a feature to their drone that is common amongst most consumer drones, that is the requirement that each drone will safely stop operating and return automatically to a specific location on Amazon’s private property if the communications link to the drone is lost.
Chief Executive Officer Jeff Bezos unveiled the plan and said that the machine can carry as much as 5 pounds within a 10-mile radius.
Finally Amazon added that If the FAA doesn't grant Amazon's request, the company will move their drone research operations outside of the U.S.
Putting this vehicle into service will take some time, but Amazon will be ready as soon as the FAA grants permission. Presently FAA has strict prohibition for use of drones (unmanned vehicle) . For the time being US regulators ban package delivery service using this model aircraft. But it is a matter of time. In due course jurisdiction will come up with regulations to allow this. FAA has already said that it would revisit the commercial application of small drones later this year, with potential new rules in place perhaps by the end of 2015. Software giant like Google Inc joins Amazon in dreams of drone delivery system.
Delivery drones are also being used to deliver books by Australian company Zookal. China is also experimenting on the drones as well.
This is a very new technology and can bring down delivery time to as minimum as 30 minutes, so it should be tried, tested more at the same time it can be misused in many ways.
through its retail websites and focus on selection, price,
Amazon wants to operate this model plane in Amazon’s property. They also informed that they will do this operation away from densely populated areas and military or U.S. Government installations or airfields.
The US Federal Aviation Administration (FAA) has approved the use of drones for police and government agencies, issuing about 1,400 permits over the past several years. Civilian air space is expected to be opened up to all kinds of drones in the US by 2015 and in Europe by 2016. Amazon.com, Inc. (Amazon.com) serves consumers and convenience. The Company offers programs that enables sellers to sell their products on its Websites and their own branded Websites and to fulfil orders through them , and programs that allow authors, musicians, filmmakers, application developers, and others to publish and sell content. Therefore Amazon is getting
Experimentation with delivery by drones is part of a shift from the craft’s use by the U.S. military to spy on and kill suspected terrorist. Senator Edward Markey introduced the drone aircraft and privacy transparency Act, calling for measures to ensure drones are not used to spy on U.S. citizens.
popular and popular day by day all over the world. One
The company has tested the full spectrum of their drone’s capabilities including agility, flight duration and redundancy. They also claim to have developed sense-and-avoid sensors and algorithms that will allow the Prime Air drones to see obstacles and automatically avoid collisions.
Amazon, he can buy things, can use it for some days,
Amazon seeks to operate their drones within the visual line of sight of the operator and/or one or more observers, at less than 400 feet above ground level. 24
can choose to buy books as well as electronic gadgets
with a very competitive price through Amazon. They do ensure the quality of the product by their return policy. If someone has a premium account with and if he/she does not like the product can return without cost. This is the way Amazon is winning customer’s faith. Now they have defined potentiality in India and they are preparing to launch a portal for wholesale merchants in India,
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FB the first country outside the US where such an initiative is being planned by the Seattle based company. Amazon is growing rapidly and aggressively in India, challenging Flipkart , the leader e-commerce company in India. Amazon would invest $2 billion in India. There is no FDI restriction when it comes to online business to business operations. The Indian platform of Amazon will target small and medium enterprise. Since just one year, Amazon in India has set up a network of seven warehouse. Alibaba has taken the fight to Amazon in its home market by launching a portal in the US before the public offer. Amazon sees drones as the future of commercial delivery. The technology is one way Amazon can shave down shipping expenses which cost the company nearly $4 billion per year. Amazon has demonstrated that they are committed to developing drone technology to secure their future.
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THE LATEST CRAZE OF BITCOIN TRADING By Pallavi Gautam, IBS Hyderabad
The latest trend which has emerged in online trading and has got attention from all over the world is trade in BITCOINS. Something which was nothing has suddenly become ubiquitous as the US dollar. It may sound strange but this digital currency is gathering buzz all over the world. To further discuss on this , first we should know what bitcoin is. In simple words Bitcoin is a digital currency which is generated on the computer networks using software. Each user has a unique Bitcoin address, and thorough the software, the unique identity bitcoins are generated which are stored in the computer or mobile handsets as bits and bytes. They are used for or against real money and also can be traded in the market. Its origin is still a mystery ,but its concept is based on crypto-currency which was first described in 1998. Bitcoin came in the market around the start of 2009 and around 21million bitcoins have been generated so far. On April 9 th it was traded at $190 per bitcoin and on September 13th , it was traded at $ 477 per bitcoin. One can get the bitcoins by the dedicated software called Bitcoin Wallet and once you are finished with the purchase, your bitcoin address will work like a bank account. There are many websites like www.coinbase.com, www.weusecoins.com, etc. Which let the user to trade in bitcoins. Some of the e-commerce websites also accepts bitcoins as the mode of payment Though Bitcoin is creating ripples all over the world but still the biggest question is its acceptance at large scale. As it is not backed by any government, so trading in bitcoins carry larger risks of fraud and the key point is unlike the real world currencies that are backed by economic assets like gold, oil reserves etc. ,there is nothing in the case of bitcoins.
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PUBLIC PRIVATE PARTNERSHIP By Shreejita Laha, IBS Hyderabad
A democratic country is weak without the support of its people. Public private partnership (PPP) is a joint venture of the government with the private players where mainly the private players provide capital and the public servants or the government controls and organises the firm . There is a huge discrepancy in funding and controlling an organisation at the same time . At times resources are available but there is less of organising power and also vice versa. In some other cases the private companies only provide capital and also maintains the firm while providing the service to the public and getting tax reduction on their services while in few other cases the public firm is given the excellent expertise of the private players. PPP provides shared service delivery to the country through special purpose vehicle (SPV) which is a special company formed by the private sectors which builds ,maintains and operates the project and if the government has invested on the project then , it is given at share of equity .Originated in Britain in the 1990's through a public financial institution (PFI), PPP work for the betterment of the country and to implement value for money . In India the private firms hold upto 51% of the stakes . It is mainly focussed to provide improved services for related to irrigation , infrastructure ,telecommunication, water supply, power, railway, airport, tourism , education ,rural and urban development . After the financial crisis in 2008, PPP deals fell by more than 40% due to the economic turmoil but still there are large number of existing PPP projects as it is considered that PPP will stimulate economic growth and alleviate inflationary pressure by removing supply side . Private investments rate of return was higher than the rate with which the government issued bonds , so it was advantageous for the general public to invest in private firms . Public Private Partnership is segregated into a few types such as : Finance only which issues bonds or leases. Built Operate Transfer (BOT) where the private players do not change for their usage .Instead annuity is paid to them by public authority.
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Design Built Finance Maintain( DBFM) where designing , building and financing is done by the private players. Build Own Operate (BOO) which is established and owned by the private players itself till perpetuity with a long term agreement with the public firm. Concessionaire is one in which the private party is responsible for implementation, maintenance management and capital investment but the assets are publicly owned. The public firm may also provide financial support if required. PPP not only provides valued services to the nation buy also helps in nurturing the skills of countrymen providing job opportunities .It also provides innovative techniques while incorporating the extra knowledge of the expertise of the people . It also focus on the improvement of the present scenarios and also maintains the timeliness of the projects . If not only facilities better access to funds but also provides improved governance . There is proper accountability , integration and effective utilization of the resources . One more important fact is the increasing competition in the market which provides improved services and infrastructure. Few examples of PPP projects are demonstrated below 1) Alandur underground sewerage project in Tamil Nadu (2000) between Alandur municipality and the Tamil Nadu Urban Infrastructure Financial Services Limited (TNUIFSL) and IVRCL (Infrastructure and projects ltd and Va tech Wabag technologies Ltd). Project cost for sewage network was 34.6 crores and for sewage treatment plant was 6.68 crores . 2)Latur water supply project in Maharashtra (2006) between Maharashtra Jeevan Pradhikaran and Subash projects and Marketing Ltd ,UPL environmental engineers ltd and hydro comp enterprises India private limited for a cost of 182 crores and concession period of 10 years. 3) Vadora halol toll road Gujrat (1998) Between government of Gujrat and IL & FS for a cost of 161 crores and concession period of 30 years .
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Metro rail project have been announced in Lucknow and Ahmedabad for estimated amount of Rs 100 Crore.
Healthcare: As the government hospitals and its facilities are not worth utilizing with filthy environment , poor instrumentation, backdated technologies and poor working conditions . Approximately 29% of the Indians fall below the poverty line and depend upon free healthcare . Thus PPP gives a whole new opportunity for this untapped sector to evolve with upgraded technologies , proper working environment and good healthcare facilities. Upcoming Developments Indian Budget 2014 has emphasized on PPP to provide infrastructural development . Finance Minister Arun Jaitley has allocated Rs 1000 Crore for PPP development. Firstly a scheme for development of new airports in Tier I and Tier II cities will be launched through airport authority of india.
PPP is the basis for advanced development in all the sectors , be it health care , Education or infrastructure . It can also benefit many other sectors. The only need is to tap those potential markets which are yet to enter the PPP deal.
The government has also developed infrastructure investment trusts (InvITs) which emphasises on reducing pressure on the banking sector . A new Shyam Prasad Mukherji Urban Mission is proposed to be launched for the rural as well as urban development displaying the skill set of the people . Urban cities are also proposed to be better places through development of housing and infrastructure .Also intending to provide safe drinking water ,proper sewage facilities , use of recycled water to grow organic fruits and vegetables and also solid waste management .
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NARENDRA MODI’S 5 DAYS VISIT TO JAPAN By Aakash Goyle , IBS Hyderabad
Prime Minister Narendra Modi five days visit to Japan, is a successful mission winning financial support of the later nation for building infrastructure in India. Harping upon making India slogan Prime Minister engrossed himself in hard selling of India to the Japanese investors and asked them to perceive India as the competitive low cost manufacturing hub. The three deals namely democracy, demographic and demand which are primary for business to thrive are offered by India thus making it the most conducive destination for foreign investments. In order to facilitate business proposals and decisions of Japan two nominees from Japan will be a part of management team and the P.M. office. The union of two nations inculcated into a stronger bond between them with the up gradation to the level of special strategic global partnership with the signing of defence pact of regional stability and Tokyo’s word to double FDI in India.
The commitment to fund bullet train given by Japan to Modi helped him to move a step forward toward the realisation of his dream of running high speed trains on Indian tracks. He could see his vision turning into reality as Japan agreed to lend financial, technical and operational support to introduce bullet trains in India. The expectation of running high speed trains between Ahmadabad and Mumbai at an estimated cost around Rs 60000 to 70000 crores. In order to facilitate business proposals and decisions from Japan two nominees from Japan would be a part of management team under the Prime Minister’s office. Despite uncountable negotiations the curl nuclear deal remains elusive as both the parties failed to narrow down their differences over Tokyo’s continuous insistence for a tougher safeguard regime and “no nuclear test” clause in the bilateral agreement. Japan promised to give USD 35 billion to India over the next 5 years to promote development project as infrastructure and building smart cities, clean up the Ganga. In addition to this, Japan would life bar on Indian entities, one being Hindustan Aeronautic Limited which had been imposed in the aftermath of 1998 nuclear rests. Thus the removal of these bans will ensure cooperation of these companies with Japanese firms, including transfer of technology. Modi Also inaugurated TCS Japan technology and cultural academy that will strive towards enhancing technology and cultural knowledge between IT professionals of 2 nations. Japan also gave its acceptance to work with India in developing a treatment for the sickle cell Anemia after PM sought help for finding a remedy to cure this lethal disease found among tribals in India. Thus the Indian Prime Minister’s visit to Japan helped the two nations develope formidable relations and have fruitful exchanges.
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