October’12
Symbiosis Centre for Management
Leadership-Entrepreneurship B-School
About SCMHRD
Leadership-Entrepreneurship B-School SCMHRD was established in 1993. Ever since its inception, SCMHRD has strived to bring Indian ethos, Management concepts and technological advances together in an effort to redefine the management paradigm in the new age. SCMHRD has successfully pioneered the implementation of Kaizen on campus. The practice helps in keeping the campus clean and gives the students a feeling of ownership, inculcating in them a feeling of belonging and camaraderie. The SCMHRD culture provides the students an environment that allows them to think and reflect, to explore and express.
VISION To become a Centre of Excellence for Global leadership and entrepreneurship, the standards of which others are measured by.
MISSION To create leaders and entrepreneurs of tomorrow, their dedication to excellence, absolute.
EDITORIAL Hello everyone, These days the world is fraught with high unemployment rates, lack of clarity on Eurozone's future and worsening forecast for future economic growth. The IMF World Economic Outlook (WEO) for October 2012 projected the global growth rate at 3.3% which is weaker than its July 2012 predictions. Though the global picture looks gloomy, on the home turf the Indian government has come up with flurry of reform measures ending the policy paralysis. Though the actual implementation remains a big question mark considering the fervent opposition from various strata of the society, we still have reason to be optimistic (considering that is all we can do). International investors have some reason to rejoice after the new reforms approved by the Indian government to allow 51% FDI investments in Retail, 49% in Airlines and Insurance Sector and 26% in Pension Fund sector. The imminent downgrade of India's sovereign debt by global rating agencies seem to have been stalled at least for now (Times of India, Sep 18). Most importantly by raising the price of Diesel by INR 5, the Indian Government has shown that it is willing to put fiscal discipline over populist measures like subsidies. These policy decisions might have been taken after the government found itself without any other way of saving the day, but as they say “It is the result that matters, not the means” However not everything is hunky-dory. Many scams have come to light. Be it our very own Coalgate or the more wide reaching one of LIBOR manipulation which saw the ouster of the legendary Bob Diamond of Barclays. Considering such diverse economic situation, the latest issue of FINALYST also tries to cover a wide array of topics so as to give you a snapshot of what all is really going on and to bring to you some intriguing opinions and articles. We have an article on LIBOR which highlights the concepts, the scandal as well as the recent developments. LIBOR is crucial as around $300 Trillion of securities are based on it. The scandal brought out the inefficiencies that exist when substantial power is given to a handful of entities. But then these incidents are the learning curves and now we can hope to see a much more transparent system of LIBOR determination. In the article “Double Digit Growth The road ahead” the current situation of the Indian economy is critically analysed and an attempt is made to determine what the future would be like. In this day and age no financial magazine would be complete without talking about FDI policy reforms in India. The article “Impact of FDI reforms in retail on the Indian Economy” goes in depth to analyse the Pros and Cons of FDI in retail and explains the related concepts. There are other articles on Currencies and other Macro Economic issues which are interesting and informative. This issue is aimed at providing clarity to the reader regarding the myriad economic policy changes and activities going on in India and around the world. Happy Reading..!!
-Saumil Pandya & Rohit Godbole
CONTENTS 1 Double Digit Growth-Road Ahead for India
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2 Quiz
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3 FDI in Retail a “Frankenstein” for the Indian Economy?
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4 Global uncertainty V/S. Problems of Indian Economy
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5 Crossword
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6 Libor- Evolution Story
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7 Currency Manipulation: A dilemma or a real antagonist of declining Rupee
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8 Reviving the Indian Economy
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Double Digit GrowthRoad Ahead for India further low from the 4% or more growth that's typical after deep recessions.
After the growth numbers for first half of the year 2012 are out, the anticipation that major economies of the world will continue to put up a dismal show has become a reality. U.S, the biggest economy of the world grew only by 1.8% during the first two quarters of the year 2012, the same as for all of 2011. Certainly, the situation cannot be assumed to be improved. In fact, looking back to 2010 -- the first full year since the recession ended -- with its growth of 2.4%, the three-year span will be the three slowest consecutive years of economic growth, outside the great depression, back to 1930. According to IMF, U.S is expected to grow by about 2% this year and only a little faster in 2013, far below the long-term annual average of 3.4% and
The picture of Europe is even gloomier; the rapidly cooling economy is both a cause and an effect of the sovereign debt crises, and of the fiscal problems. The debt crises in a number of European countries worsened in the second half of 2011 which aggravated the weaknesses in the balance sheets of banks sitting on related assets. As the world now is more interconnected than it was ever before; the problems looming over the United States and the European Union are bound to have ripple effects on other economies either through trade or through financial channels. The Big Question: So the question arises, that when the global economy is growing only about an average of 2.5 to 3 percent, is it possible for a country like India to post a healthy growth rate which it witnessed for the major part of the last decade? For growth, a country should continuously enhance the production of goods and services and should be able to sell them in a market at a margin. So, the economic growth has two components-the supply side and the demand side. Fortunately for India, the demand side is not entirely dependent upon the developed world as it is not entirely an export driven economy like China. India has more of a mixed model, where the export of products and services to the world forms a part of the economy and the other major part comes from its domestic consumption. It is this
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domestic market which provides India with a strong demand side and is only expected to rise further. For boosting the supply side, the country needs investment in both capital goods and allied infrastructure -- to add capacity and to increase productivity; rise in capital investments also positively impact the consumption side through multiplier effect on national income. The investments can either be financed through the domestic savings (including govt.) or through the foreign investments or debt. India's debt to GDP ratio, at 68.05% is highest among BRIC nations and raising further foreign debt will put pressure on the economy. Therefore, majority of the investments have to be financed from domestic savings and foreign investments. As domestic savings increase with growth, with rise in disposable income the growth engine can be continued. But, investments will happen only when the investors see growth prospects; therefore, for boosting growth, India needs to eliminate the structural inefficiencies from its economy which is dragging the investment spending. Few major areas which are critical to the health of the economy and need immediate govt. attention- not only to bring the economy back on the path of high growth but also for sustaining that growth are:
1)Productivity of agriculture sector: Agriculture yield (kg per hectare)
Source: World Bank
Agriculture productivity in India is very low compared to the global standards. This problem is very acute knowing that almost 60% of the total population depends upon agriculture for living; and low productivity not only directly becomes responsible for their poverty but also contributes to food inflation at large. Productivity is low particularly because of: 1)Small average producer size compared to global standards. This causes a .Hindrance in exploiting economies of scale b. Employability of high technology production methods unfeasible 2)Excessive dependence on rain water. Almost 60% of the total agriculture land depends solely on rain water for harvesting 3) Excessive wastage due to inefficiencies in post harvest storage and logistics & supply chain. Approximately 16 to 40 percent of the yield across different categories gets wasted due to poor transportation and lack of cold storage facilities After years of neglect, agriculture is in serious need of investments, the desired levels of which can be achieved by attracting private investments. Therefore, Opening up of the long pending multi brand retail sector for FDI is a step in the positive direction. This will indirectly increase the stake of corporate in agriculture and thus will help in employing better production technology and improving backend logistics Govt. spends approx. Rs. 1 lakh cr. each year on providing direct subsidies which have failed to achieve the desired results. So, Direct subsidies can be done away with gradually and Investment should be focused on improving the irrigation channels and rural transportation to attract private investment. 3
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2) Low share of manufacturing sector in GDP Share of GDP
Source: CIA world factbook
small scale operations only can help b. Liberalizing the labour markets like doing away with size related lay-off restrictions as like none in the service sector may help 3) Large fiscal deficit India has highest levels of deficit among the BRIC nations and when the BRIC countries are competing among themselves for the foreign investments this proposition is surely not desirable for the country.
Boosted first by the reforms and further by the tax exemptions, the service sector; including IT, Pharmaceuticals and Outsourcing has been the major growth driver for the country and contributes more than 50 percent to its GDP at present. But the problem is that these sectors are not labour intensive and therefore they cannot employ masses. Further, the employment opportunities generated are mainly for the special skilled, leaving the vast majority of low skilled work force unemployed. Over the next couple of decades India will add 110 million workers to its labour force, which is more than U.S., China, Russia and Japan will add combined. Although it will be a source of great competitive advantage, if the young don't get jobs this will be catastrophic--as this will ignite social tensions and create rift. Therefore, Promote unskilled labour-intensive industries in organized manufacturing sector such as footwear, apparel, toys etc. The average size of manufacturing unit is very small in India: almost 90% of employment in the sector is with enterprises having less than 10 employees and this has prevented the sector from achieving economies of scale and has also affected productivity. Therefore, a. Taking off the restriction from certain sectors for
FISCAL DEFICIT (% of GDP) 5.70%
6.00% 5.00% 4.00% 3.00%
3.56% 2.89% 2.57%
2010-2011
2.00% 1.00% 0.00% Brazil
Russia
India
China
Source: economywatch.com
High fiscal deficits typically cause three problems 1) Balance of payments crisis 2) High interest rates because of the crowding out effect 3) High inflation with currency depreciation being a key contributor Although balance of payments crisis for India in the immediate future will be an exaggeration, because of the other two reasons the required rate of return from investments will increase. This will decrease the amount of investments made in a country and eventually affect growth. A significant part of deficit is due to the fuel and the fertilizer subsidies which account for nearly 2.5 percent of the GDP, but now with all time high interest rates and recent dip in the currency valuation continuing with such high levels of subsidies could send the economy into stagflation.
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Also, doing away with all the subsidies would be a very tough decision for the govt; but the govt. can A. Link the petrol prices to the international crude oil prices as done globally b. Reduce the level of subsidies provided for diesel and LPG c. Come out with a road map to completely de-regulate the diesel and LPG prices over the next 16-20 months 4) Poor condition of the allied infrastructure
increased by 6%. The situation in the interiors is worse. Even the industrial hubs have to face long power cuts leaving the production capacity underutilized, thus impacting the productivity. This leads to an increase in per unit product cost of the small scale industries, making their products uncompetitive to their global peers. Power generation can be increased by improving fuel availability, by awarding new projects swiftly, and by checking distribution losses. Therefore, govt. Can: A) Draft a clear policy for land acquisition and associated resettlement and rehabilitation (R&R) issues, to provide forest and environment clearances swiftly for coal mines
A. Low power generation
B) Upscale the average size of mines to bring automation
Power Consumption per capita (kWh)
of operations in both open cast and underground mines C) Prepare bid documents for awarding new projects for power plants with end to end approvals in place D) Privatize power distribution in Tier 1 and Tier 2 cities to reduce AT&C losses B. Infrastructure bottlenecks
Source: World Bank
Power consumption per capita, is seen by many as an indicator of how developed an economy is; India's average power consumption per capita is around 25% of that of China and Brazil this itself states that how much attention this sector requires to match its peers. Power generation has been unable to keep pace with the rise in GDP. While the country's GDP for the past 5 years has grown with an average of 8.5%, power generation during the same period has only
Infrastructure is widely considered as one of the most important factors for a country's development. It not only supports other industries but its development in itself can be a boost for GDP; the biggest example of which is China. But, infrastructure deficit is one of the major reasons which can impede India's future growth aspects. Rapid growth in the past has put existing infrastructure under a lot of pressure and if not improved it will succumb.
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According to planning commission, to witness a growth of 9-10 percent India needs to invest around 10% of its GDP in infrastructure. The government plans to achieve this by investing Rs 1 trillion in infrastructure during the 12th five year plan; but securing the required funding remains a challenge as the sector requires huge investments with long term time frame which cannot be met with short term cash flows; therefore, financing channels need to be diversified to ensure required funds. So, A. Restrictions can be eased for long term saving schemes such as insurance, pension and provident funds to invest in infrastructure B. Banks with strong funding base can be encouraged to take up the equity route to invest in infrastructure to meet project specific requirements
C. Foreign infrastructure funds and pension funds can be encouraged to invest in infrastructure projects by easing norms D. Risk-return equation for the private players can be improved by addressing issues related to risk allocation, project implementation including land acquisition and contract enforceability Conclusion: The decisions require are definitely not easy and require lot of grit and gumption from the govt. especially when the political allies are not supportive. Despite this recently the govt. has taken some positive steps and 'Whether the Indian economy will bounce back or will die a slow death' will largely depend upon till how far the govt. can continue doing that. -Ankit Maggu, MBA 2 SCMHRD,PUNE
QUIZ.............
5)What is meant by Hundies in Finance?
1) stock that experiences a sudden drop, usually the result of investors reacting to negative news.
6) What is an Incoterm?
2) He is the pioneer in mutual fund industry and often referred as the Father of Index Fund investing. He created the first S&P 500 Index fund. Identify this famous person?
7)SBI Cards & Payments Services Pvt. Ltd. is a JV between the State Bank of India and _____? 8)1st Indian bank to open an international branch...
CONNECT!
3)
9)SEBI has a dedicated portal to enable Investors to lodge and follow up complaints they may have. What is the portal called? 10)
IDENTIFY ME???
4) In the financial world, what is a zombie
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Answers on Page 23
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Oct ‘12
Is FDI in Retail a “Frankenstein” for the Indian Economy? “Organised retail is only 5% of the Indian retail market. So, there's enough opportunity for everyone to co exist” “FDI in retail will sound a death knell for the small traders” These are some of the contrasting reactions from various quarters to the recent FDI reforms approved by the Indian government. In a situation where development is put on hold for want of funds, these reactions need to be taken seriously to really understand the issues arising from these reforms and whether they represent the greater good of the Aam Aadmi. The masses themselves appear to be confused about the pros and cons of the recent reforms and their implications on different sectors. So, they often end up conforming to populist opinions or to those ingrained in their mind by the media. This article aims to clear the air about what FDI really means to us and also measure its financial impact on the Indian economy and hopefully, come to a conclusion that would resolve this dilemma.
(Foreign Institutional Investment) in the sense that FII refers to the investments made by foreign institutions / entities in secondary markets of another country. FII is short term and does not look at ownership and management stake. It is more like investing in a business to get returns rather than taking management control and actually running the company. FIIs include hedge funds, insurance companies, pension funds and mutual funds. FDI under the automatic route does not require prior approval from either the Government or the RBI. Investors are only required to notify the regional office of the RBI within 30 days of receipt of inward remittances and file the required documents with that office within 30 days of issue of shares to foreign investors. FDI under the Foreign Investment Promotion Board (FIPB) route is required for composite proposals involving foreign investment / technical collaboration. FDI under theCabinet Committee of Foreign Investment (CCFI) route is required for proposals falling outside the automatic route and having a project cost of Rs. 6000 million or
What exactly is FDI?
more.
FDI, or Foreign Direct Investment, refers to an investment made by a company / entity into a company / entity based in another country. Entities making direct investments typically have a significant influence and control over the company into which the investment is being made. These investments can be made in a number of ways, either by setting up a subsidiary or an associate company in the foreign country, by acquiring shares of an overseas company, or through a merger or a joint venture. FDI is different from FII
What are the reforms all about? On September 14th, the Indian government announced sweeping reforms regarding FDI limits in various sectors. In the broadcasting sector, the limit was raised from 49% to 74% in the cable TV, DTH and mobile TV segments, but excluded news channels and FM radio, where the cap of 26% has been left unchanged. In the power sector, 49% FDI has been approved in power trading exchanges. Of this, total FDI should not exceed 26%, while investments by FIIs should be restricted to 23%. In
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the aviation sector, 49% FDI has been approved in the scheduled domestic airlines segment (upto 100% by NRIs via the automatic route) and upto 74% for non scheduled and cargo airlines. Very recently, there has been government approval for 49% FDI in the insurance sector and 26% in the pension fund sector.
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opening up the sector to foreign players. However, due to strong opposition from global players, the Department of Industrial Policy and Promotion (DIPP) has relaxed the 30% sourcing norm. Now, the sourcing no longer has to be from small and medium sized industries.
The biggest game changers are the retail sector reforms. Till now, FDI upto 100% was allowed for cash and carry wholesale trading and export trading under the automatic route and FDI upto 51% in single brand retail. The new reforms now permit 100% FDI in single brand retail and 51% FDI in multi brand retail with prior government approval, thus
FDI in multi brand retail: The most debated of the reforms from the entire gamut is the government's approval for FDI in multi brand retail. There has been a lot of hue and cry about this decision from various quarters, with both the optimists and the sceptics raising some very pertinent questions. So let's have both perspectives out in the open.
Points against FDI in Retail
Points in Favour of FDI in Retail
1) The biggest argument being made is that this decision will sound the death knell for the small mom and pop store owners in the country, leading to millions of people losing their jobs. 2) Also, the entry of global giants like Wal Mart, etc. will act as a huge entry barrier for domestic players interested in entering the retail space. 3) They will not be able to provide the convenience and customer connects provided by the local kirana stores. Facilities like credit to the regular customers, flexibility to return and exchange goods, easy access, etc. simply cannot be matched by Big retail. 4)The non uniform decision of the government to allow each state to decide whether to allow such business or not, will further increase regional inequalities. 5)Due to selective implementation, the objective of the sourcing clause, which was introduced to benefit SMEs, is now becoming a mockery, benefitting the larger players. 6)There are fears that India will start becoming a dumping ground for sub standard goods.
1) The reforms will bring in much needed funding to the cash strapped retail sector. 2) The global giants will also bring their best practices coupled with better technology and improve the current levels of efficiency manifold. 3) It will be able to create millions of jobs, thus providing the added push to the economy. 4.The farmers will eventually benefit as the middlemen will be completely removed from the equation, thus getting them the best price for their crops. 5) The retail sector in India is enjoying an extremely high growth rate of approximately 46%. Hence, even with the entry of global giants, there will be enough space for domestic players to enter and co exist. 6)Heavy investment by big retail in supply chain, cold storage, etc. will give a boost to the retail infrastructure in the country. 7) There will be a check on food inflation as the global players would control it through their healthy competitive practices.
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What are the financial implications of increasing the FDI limit in retail? FDI is considered to be the life blood of and an important vehicle for the economic development for developing nations. The major impact of FDI is on the contribution to the growth of the economy. The following table shows the FDI inflows and the corresponding GDP for that year:
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09
FDI (Crores) 12645 19361 14932 12117 17138 24613 70630 98664 85700
GDP (at Factor Cost) 1925017 2097726 2261415 2538171 2877706 3275670 3790063 4303654 3635496
Thus, we can see that there is a strong correlation between FDI and GDP growth. Since independence, India's BOP on its current account has been negative. Since 1996-97, its overall BOP has been positive, largely on account of increased FDI and deposits from Non Resident Indians (NRIs), and commercial borrowings. The fiscal deficit has come down from 4.5 per cent in 2003-04 to 2.7 per cent in 2007-08 and revenue deficit from 3.6 per cent to 1.1 per cent in 2007-08. As a result, India's foreign exchange reserves shot up 55 per cent in 2007-08 to close at US $309.16 billion an increase of nearly US $110 billion from US $199.18 billion at the end of 2006-07. Domestic saving ratio to GDP shot up from 29.8% in 2004-05 to 37.7% in 2007-08. For the first time India's GDP crossed one trillion dollars mark in 2007. The rapid development of the telecom sector was due to the FDI inflows due to international players entering the market and transfer of international technologies. With a growth rate of 45%, the Indian telecom industry has the highest growth rate in the world. The same growth story
applies to the real estate, automobiles, metallurgical industries and chemicals sectors. This shows the importance of FDI in the growth of the economy. The policy states that multi brand retailers must bring in a minimum investment of $100 million or more. Now, assuming that 10 players enter the country with an investment of $500 million each, they would already have invested around 8% of the $70 billion Indian organized retail industry. Sahara India plans to invest $542.5 million dollars initially and start its retail operations under the “Q� brand name. Bharti Wal Mart plans to invest another $18.81 million to expand its retail operations. This trend is expected to continue into the future due to the rapid growth of the organized retail sector and the Indian retail industry in general. Thus, we can see that these reforms would restore the lost investors' confidence to a great extent and would ultimately prove beneficial to the different stakeholders in the long run. But, the success of these reforms depends on speedy implementation and whether it receives complete support from all the stakeholders involved. Will the opening up of the Indian retail sector to foreign players ultimately prove to be beneficial for the Indian economy and the general public? Only time will tell. -Abhishek Narayan MBA 1st year SCMHRD
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GLOBAL UNCERTAINTY V/S. PROBLEMS OF INDIAN ECONOMY While the global economy was suffering from a meltdown in 2008-09, the Indian economy was flourishing with a remarkable GDP growth rate of 8-9%. It even reached 9.55% before it started declining though we were hoping for a double-digit growth. If I ponder over the reasons, it was obvious Indian investments' share in the GDP was around 38% which in turn boosted foreign investments in India. Inflation was not that serious a problem, crude oil was affordable; all three sectors were performing well. These factors led to a good credit rating of the country and she was also called one of the best investment zones. We can say that the Indian economy was going through a purple patch in its history.
In spite of the best results during recessions, India could not continue the trend for long. Currently India's GDP growth is oscillating between 5-6% and so are the targets. The sudden stunted performance of the Indian economy in recent times has created hysteria all over. As India has become an integral part of the global economy, ups and downs are bound to impact it. But we cannot solely blame the global factors for any of the upshots. In latter part of this article I will list out the events that the Indian economy has gone through, categorizing their causes into internal (India)and external (global) and giving an introspective view on whether global uncertainty played a major role in India's unexpected performance or whether there are lethal termites in India itself silently eating up its growth. Let's analyze a few economy related news for the past couple of years: SCAMS: India went through four major scams in past: namely 2G scam, CWG scam, Adarsh Society scam and mining scam. Another scam is on the way called “Coal Scam”. What could be the reasons for such scams occurring in India in a recurrent manner? The effects are many; the most obvious ones are the monetary loss of potential income to the government of India (GoI) bolstered by the drainage of money into the foreign banks. Talking about the side effects, we have seen the well-known agitations by team Anna and Baba Ramdev, BJP led tamaasha disrupting parliamentary operations incurring huge losses to the GoI. POLICY PARALYSIS: Umpteen bills are under hold in the parliament still waiting to be called Acts. Major ones are land acquisition bill, pension reforms bill, regulatory reforms bill and the most famous one, the Lokpal bill. Foreign Direct Investments (FDIs) in various sectors are just on paper and global uncertainty is surely not a 10
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determinant factor in these bills not being passed. Rather GOI's inefficiency and political instability are impeding the passage of bills. Effects of policy paralysis are largely on the Indian economy. Infrastructure development, the backbone of any country's economic development, has been hindered in large scale just because of land issues, Yamuna expressway took 11 years for realisation, Posco Steel is still waiting to setup a plant in Odisha. Criminalisation in politics is growing exponentially but still the purview of the Lokpal bill is not decided. It is evident how these issues are cocooning the country and shackling our economy. DROUGHTS: No one can be blamed for weak monsoons but the govt can anticipate such risks and make provisions. India's poor food distribution system and lack of storage facilities has allowed our food grains to be wasted and thus making them insufficient. Though India's Finance Minister Pranab Mukherjee has said inflation is a sign of growth, I believe a double digit one is not so.
FISCAL DEFICIT: India failed to achieve its fiscal deficit target of 4.6% by 1.3% in the last fiscal year and is nowhere near to this year's target of 5.1%. Again the reasons lie within India itself. GoI has failed in its entire attempt to reduce the subsidy burdens, implementing direct tax code (DTC) and goods and services tax (GST). A rosy scheme of unique identity card (UID), an attempt to reduce the intermediary subsidy leakages is not bearing fruit. High fiscal deficit has directly affected India's growth trajectory.
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CURRENT ACCOUNT DEFICIT (CAD): Indian exports have been inconsistent in the past years, simultaneously; value of imports has risen consistently, unsurprisingly leading to a high CAD. In March 2012 India's CAD was at an all time low valuing -21.70 billion USD. More than 70% of India's crude oil requirement is imported and the recent rise in crude oil prices has considerably increased our import value further enhanced by high gold imports. The major effect was rupee value depreciation complementing the increase in import value and forming a vicious cycle. Rupee value depreciation has significantly increased subsidy burdens. Analysts say that every time the rupee depreciates by Re 1 against the US dollar, the fuel subsidy bill increases by Rs 8,000 crores (Source: The Economic Times). High CAD complements high fiscal deficit, often this problem is called twin deficit problem which causes an economic crisis.
ENERGY CRISIS: India's power supply is 10-12% below demand. Northern parts of India recently faced grid failures affecting more than 600 million people. Surprisingly the major problem is not India's power generation capacity but fuel shortages in the form of coal and gas for thermal power and water for hydropower. Most of the Indian coal mines are unutilised and fuel supply agreements (FSAs) are not in place. Import of coal has become costly because of taxes in exporting countries like Australia and Indonesia and rupee value depreciation causing a big problem for power generators. State electricity boards (SEBs) are in no good situation: high subsidy in tariffs, failing to collect bills and power theft has put the SEBs in debt. Total debt of SEBs currently forms around 6% of GDP but still there are no signs of reforms.
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All the above cited issues led to the reduced confidence in India's economic growth and thus low foreign investments in the country. Though in recent time FII figures are considerably better which is a welcome change. After analyzing the problems of the Indian economy and their causes we can say that global uncertainty is not the only reason for India's declining GDP growth rate. The problem lies in India's weak governance, failure in implementing various policies and reforms, high subsidies, high-level of corruption, etc. But still I leave it up to you if you want to pass on the blame to global crisis and neglect India's core issues impeding her economic Abhishek Agarwal growth! MBA 1st year SCMHRD,Pune
Foreign Exchange Summit-2013 The Finance Club at SCMHRD has made a mark in organizing seminars in specialized areas of Finance. In the past, the Club was appreciated for its well organized conclaves, viz: “Banking Conclave- 2005”, “Risk Management Seminar- 2009”, “Valuation and Financial Modeling Seminar – 2010”. In 2012, Finance club organized a successful seminar on “Commodity Markets” which witnessed a heavy footfall. Continuing our legacy, this year we bring forth the “FOREIGN EXCHANGE SUMMIT - 2013”. Date: 12th January 2013. The seminar will mainly comprise of:
? Paper presentation by Research Scholars, Industry Experts and Academia
? Paper Presentation by students
? Corporate Panels on contemporary issues like
Linkages between Forex market and other Financial Markets Strategies for investment in volatile and highly sensitive Forex market Forex as the global asset Class
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CROSSWORD 1
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Across: 1. CEO of Barclays who was fired over LIBOR Scandal 3. Company in talks with Vijay Mallya to buy stake in United Spirits. 6. India's largest export market 10. Currency of Afghanistan
Down: 2. Swedish furniture giant interested in setting up shop in India 4. Country contributing the largest share (190 billion Euros) to ESM. 5. Country which is the largest Imports source for India 7. CAG Chief 8. State with lowest unemployment rate in India as per Labour bureau report. 9. French Company to win $12 Billion Indian fighter jet deal recently 11. British Agency similar to Indian SEBI Answers on Page 20
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LIBOR ~ EVOLUTION STORY The recent LIBOR rate rigging scandal by Barclays has brought into sharp focus the lack of transparency and ethical standards in activities we assume don't have any malpractice or fraud involved. It has also brought LIBOR Rate and its implications to the various economies in limelight. Before studying this topic further it would be beneficial to understand what LIBOR really is and why is it important to the world economy and what steps should be taken to strengthen LIBOR.
that the rate at which a mortgage is due will move in same direction as LIBOR as its rates are calculated on LIBOR + few percentage points. Around $800 trillion in derivatives and other financial instruments are affected by the Libor which is approximately 12 times the global GDP! So a small movement of even a few basis points will result in losses of great proportion. The following pie-chart will show the distribution of financial deals worth ~ $300 trillion referenced on LIBOR.
LIBOR demystified‌
LIBOR or London Interbank Offered Rate is a rate at which banks are willing to borrow short term monetary requirements from other banks. LIBOR was first started in 1986 by British Bankers Association to provide some structure and method to the way banks lent money to each other in 10 different currencies for 15 different maturities. There are 18 Lending Banks which contribute to calculation of Libor. Every morning each of the 18 banks have to send in data to Thomas Reuters between 11:00 AM to 11:10 AM about the rate at which they are willing to lend to other banks. This information is treated with full confidentiality. Then the rates received from the lending banks are arranged in a descending order and the top 4 rates as well as the bottom 4 rates are removed. The average of the remaining 10 rates is taken and that is the LIBOR rate for that particular currency and maturity. Libor is looked at as the indicator of the health of the banking sector and also of the credit worthiness of the banks. Libor affects the general public as many loans are based on Floating Rates which derive its value from LIBOR which means
LIBOR SCANDAL What went wrong?? At the height of the financial crisis in late 2007, many banks stopped lending to each other over concerns about their financial health with some banks submitting much higher rates than others. Barclays was one of those submitting much higher rates, attracting some media attention. This prompted comment that Barclays was in trouble. Following much internal debate and a controversial conversation with a Bank of England official, Barclays began to submit much lower rates. While those paying interest on loans would have benefited from lower Libor rates, savers and investors would have lost out. Currently there are 12 global banks which under investigation with reference to tampering with the LIBOR & EURIBOR interest rates. Some of them are JP Morgan Chase, Goldman Sachs, Royal Bank of Scotland, HSBC, and Citibank etc.
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LIBOR IMPACT : How does LIBOR affect global economies, government and common people?? The exact volume of transactions using LIBOR is unknown, as most are over-the-counter (“OTC”) bilateral transactions. But, it has been estimated that a single basis point distortion of LIBOR rates applied across the board has an impact of $35 billion a year. For a systematic distortion of, say, 12 basis points, that figure would be nearly $420 billion, equivalent to more than half the pre-tax profits of the world's banks last year. While floating-rate borrowers would have gained, the bank that held that loan, as well as anyone else who held floating-rate debt in an investment portfolio, would have lost money due to the underreporting of LIBOR. These investors would include people saving for retirement in a 401(k), pension funds, hedge funds, mutual funds, endowments, and more. According to the U.S. Commodity Futures Trading Commission (CFTC), $10 trillion of loans are indexed to LIBOR. In the US, around half the floating rate student loans are tied to LIBOR. On the adjustable mortgages front about 45% of Prime loans and 80% of subprime loans are tied to LIBOR. 75% of municipalities have some or the other contract tied to LIBOR rates. ARM (ADJUSTABLE RATE MORTGAGES)
An ARM is a type of mortgage tied to an economic index, mainly LIBOR. With an ARM, you lock in an interest rate, typically a low one, for a fixed period. Once that period ends, the mortgage resets to the current interest rate of that index. Adjustable rates transfer part of the interest rate risk from the lender to the borrower. If LIBOR is down when the mortgage rate resets, your monthly payment will be lower. If LIBOR is higher, your premium each month will rise. STUDENT LOAN
Many banks will lend money to students with rates
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that are tied to LIBOR. For instance, you may take out a student loan with a rate that's LIBOR plus 2 percent or LIBOR plus 7 percent. The difference in percentages is based on the creditworthiness of the borrower and/or the co-signer. And just as with ARMs, when the LIBOR is up, your student loan payment will be higher. When it's down, it will be lower. LIBOR won't have any bearing on a fixed-rate federal student loan. INTEREST RATE SWAP
In an interest rate swap (IR swap), a party that borrows at a floating rate and a party that borrows at a fixed rate effectively “swap” their payment responsibilities. The party with the fixed-rate obligation pays the party with the floating-rate obligation a floating rate, and the party with the floating-rate obligation pays the party with the fixed-rate obligation a fixed rate. The net effect is that their exposures are switched; the party with the floating obligation now has a fixed obligation and vice versa. When LIBOR fell dramatically after the 2008 crisis, revenue from interest rate swaps went through the roof. According to FDIC data, net interest revenue at one of the biggest swaps dealers, JPMorgan, including trading revenue on interest rate derivatives, more than doubled from $6 billion to $14 billion a quarter between Q3 2008 and Q3 2009, despite the notional value of its swaps book shrinking from $54 trillion to $48 trillion over the same period. Other banks in the swaps business saw large revenue increases as well. LIBOR Research In a paper by Abrantes-Metz, Rosa, Sofia Villas-Boas and George Judge. “Tracking the Libor rate”, in order to identify tampering and human influence on market processes the authors use a method that is based on the empirical phenomenon known as
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Benford's law (1938). According to this law, in many naturally occurring numerical data sets, the leading digits are not uniformly distributed but instead follow a logarithmic weakly monotonic distribution. Under Benford's law the digit distribution for the First Significant Digit (FSD) and Second Digit are given by Prob(FSD=d) = log10 (1 + d-1), d = 1,2,3…….,9 and Prob(SD=d) = log10(1+(10k + d)-1), d = 1,2,3…….,9 Since Benford (1938), others have published studies showing that Benford's FSD law applies to a surprisingly large number of data sets, like population of cities, electricity usage, and the daily returns to the Dow Jones. To indicate the incidence of Benford like digit distributions as it relates to Libor we use daily one month Libor rates over the period 1987 to 2005. When looking at one month Libor for the period of January 2007 to May 2008,as well as Feds Funds Effective Rate and the one month Treasury Bill (TBill) two striking features emerge: 1)The nearly constant Libor for at least seven and a half months 2)The different volatility pattern between the Libor rate and the benchmark rates T-bill and Fed Funds Rate, when no reason seems to justify such pattern differences. LIBOR as Today… As a fallout of the LIBOR scandal the FSA Managing Director Martin Wheatley stated that the LIBOR money market rate would see a major overhaul in the way of substantial new strict regulations, but the way the rates are set won't change fundamentally. The FSA has proposed a new regulatory system with criminal sanctions for manipulations. One of the major developments is that the BBA (British Bankers Association) would be losing out its governance role completely. It is set to be replaced by a new body which will be selected by a tender process. The
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probable candidates are NYSE Euro next and Bloomberg. The number of currencies and rates for which LIBOR is calculated would also be reduced from 150 i.e. 10 currencies * 15 maturities to only 20. These reforms are aimed at improving the transparency of the whole process as well as restore the stakeholder confidence. INDIA PERSPECTIVE… MIBOR IN THE MAKING… MIBOR is determined similarly like LIBOR and came into existence in 1998. MIBOR or FIMMDA-NSE MIBOR is published by the National Stock Exchange (NSE) and the Fixed Income Money Market Dealers' Association (FIMMDA) based on rates polled by NSE from a representative panel of 30 banks and primary dealers. The rate reflects the market-clearing rate on Indian instruments. MIBOR is still in the nascent stage as only the overnight MIBOR is widely used while the other variants like three-month and sixmonth MIBORs are not popular mainly because the inter-bank deposit market for these maturities is not well-developed. The NSE tries to guard against the risk of manipulation by using a number of sophisticated statistical tools, but none of these can offset the inherent flaw in the calculation which gives space for manipulation: there is no means of cross-verifying whether banks actually charge the rate they poll in the calculation of MIBOR as the deals are essentially OTC. Indian Banking Industry is dominated by PSBs (Public Sector Banks) and RBI cannot function independently, hence these institutions are powerless when it comes to regulations. Power must be vested in their hands to build a more secure system with proper code of conduct defined to avoid a possible SCAM happening in India… this time replicating a Global failure of Financial Industry. It is wise to learn from mistakes, better still if it's from other's mistakes!! -Finance Club, SCMHRD
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Oct ‘12
Currency Manipulation: A dilemma or a real antagonist of declining Rupee The plight of rupee is no news to anyone. But the point is we attribute all sorts of reasons to it ranging from huge current account deficit to high inflation, from stalled economic reforms to dwindling foreign inflows due to grim global economic outlook etc. But currency manipulation rarely finds a mention. Manipulation, in economic terms, refers to actions which cause otherwise stable prices to move and enable the manipulator to extract profit out of it. But ask the question, what is the first name that strikes when someone talks about currency manipulation and China would be the most probable answer. Some even argue that it is one of the major reasons for India's sub-optimal export returns. However, there is more to currency manipulation than just at inter-country level. There are several domestic participants in the Indian foreign exchange market, the likes of hedge funds, private equity funds etc, which bet on rupee volatility and are suspected of indulging in currency manipulation at the domestic level. To corroborate this point, let's take a look at some statistics. The average daily turnover of global foreign exchange market stands above $4 trillion which is much more than that of global equity market. According to Alpari forex, an online forex trading service provider, currency trading today globally constitutes over 60% of trading volumes and is the largest market in the world followed by commodities market and equity market respectively.
Some economists may argue that the size of forex market in India is not big enough to cause volatility in the rupee exchange rate. But as indicated by the triennial Survey report of the Switzerland-based Bank for International Settlement (BIS), the daily average turnover of foreign exchange market in India in April 2010 exceeds $27.4 billion which is several times higher than that of equity market. Several analysts are of the view that currency Trading, which includes spot transactions, outright forwards, foreign exchange swaps, currency options & currency swaps, will lead the Indian Financial Markets in the days to come. On 29 July 2011, India's exchange rate stood at Rs 44.19 to the US dollar. By 15 December, this had fallen to Rs 56.60, a depreciation of 28%. On 16 February 2012, it rose again to Rs 47.06, an appreciation of over 15%. By 20 June 2012, it was down again to Rs 57.14 to the dollar and presently hovers at around Rs 55.52. This has often led to the charge that when there are such -sharp oscillations in prices irrespective of whether the underlying entity is exchange rate or any other commodity like gold they are likely to have been caused by deliberate actions of few persons or firms i.e. by market manipulation. This volatility is much too high to be attributed to just external factors & has led to serious suspicions about the presence of currency manipulators in the Indian forex market. But the question that still remains is whether it is actually possible to manipulate a market as big as this. Straightforward economic reasoning can't explain how this is possible. Dr Kaushik Basu, Chief economic advisor
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to the Govt. of India, in his recent paper shows that it is possible. The Cournot-currency manipulation model Dr. Basu demonstrates the manipulation process using Cournot model. But before looking at how it is applied in context of the Indian forex market, let's briefly comprehend the basic functioning of this model. Cournot model in economics is applied to a market where several entities compete for the amount they will produce with an underlying premise that each one is aware of the quantity that others are producing. Taken as a whole, the total market demand is known and at equilibrium, it is generally equal to the sum of the production quantities of each entity. Let's use an example of a market which is a duopoly (for the sake of simplicity). Suppose the 2 entities are A & B, the total market demand is D1 & it is known (from past market analysis) that entity B produces q1 quantity on an average. Now, entity A only needs to subtract this quantity from the market demand to obtain the demand for its own production (which we call residual demand for entity A). Using this new production quantity of A, the same procedure can be repeated by entity B as well to obtain the residual demand for its own production. In this way, the two entities would continue to adjust their output levels until neither entity can gain further by adjusting its output. This is when we say that market has achieved Cournot equilibrium i.e. when, given each entity's present output, the other entity's profit-maximizing output is its present output. An important point here is that in case of an oligopoly market, although it appears that profits earned by each entity are by means of perfect competition but actually it is not so since each entity has a huge market share & knows that it
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can alter the market price by adjusting its output. Therefore, we can say that in such a market, the total output is lower than what it would be in case of a perfectly competitive one & the product price, in turn, is higher. Dr Basu writes that a market suitable for a manipulator is one where there are several small firms & few large strategic firms. He says that such a market can be easily modeled by extending the standard cournot model where small firms act as price taking agents which are generally individuals & tourists with modest turnovers who buy and sell forex (either directly or through bureaus at exchange) without any hope of affecting the currency exchange rates while the bigger ones act as Cournot firms having extremely high turnover like the 99 member banks of the Indian forex market regulator, Foreign exchange Dealers' Association of india (FEDAI) etc. Using the application of Cournot oligopoly game, a manipulator organizes his strategy in two periods. In period 1, he uses the buying strategy to estimate the net demand for dollars in the market & buy the maximum number of dollars which can be bought without altering the exchange rate. But the point to note here is that by doing so, he has shifted the equilibrium to the tipping point. Any smallest activity of buy or sell would move the equilibrium exchange rate up or down. It can be empirically proved that the net demand for dollar in India is often positive. Therefore, in normal circumstances where the exchange rate has not peaked, the cournot equilibrium price shifts upwards as a result of several individual transactions (since smaller firms operate independently & do not have the market power of altering the exchange rate by adjusting & timing their transactions unlike their bigger counterparts). In period 2, say following a month, observing the equilibrium movement & 19
Finalyst
assuming everything else remaining the same, the manipulator now uses the selling strategy & manages to sell off all the dollars he bought at higher prices thus making huge profits. Implication The regulators, especially in emerging economies, have very little understanding about how manipulators game others & hence have not been able to deal with the situation adequately. Dr Basu mentions that inadequate understanding of manipulation is a major roadblock in effective policy formation as it often leads to common mistakes. The regulations devised may be too imprecise that manipulators can easily circumvent them or so severe that they inflict a collateral damage on legitimate activities in the market jeopardizing transparency & hence investor confidence. By means of this paper, he intends to reveal the art of market manipulation so as to educate the regulators across different markets (forex, equity & commodity) to first deeply understand & acknowledge the presence of manipulators as this is something which involves a high level of sophistication & deep pockets and is not as straightforward as it appears to be. The next step would be to devise regulations which actually tackle the root cause adequately. He shows the kind of policy issues that can open up by taking the reference of the futures market. According to him, since the manipulator somehow needs to reflect his future plans to buy or sell dollars to market, imposing requisite restrictions on futures trade in currency may neutralize manipulators' leverage. But given the other valuable functions of futures market, any decision must be backed by solid reasoning.
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The RBI has shown rational thinking in this direction by recently imposing limits to overnight open positions as well as intra-day positions held by dealers in inter-bank forex market. In addition to this, the regulator has also stipulated that forex positions in the inter-bank forex market cannot be netted by undertaking positions on stock exchanges & vice-versa. These broad level checks signify that the central bank also concurs with the argument presented in the paper but they are not the destination. The paper also opens up further questions like what would happen if multiple manipulators enter the market or what if they don't use the futures route in their strategy. These issues should lay the foundation for follow-up research, the answers to which should culminate into adequately stringent & transparent regulations which would be in best interests of the investors. -Abhay Agarwal MBA Core 1st Year NMIMS, Mumbai
ANSWERS TO CROSSWORD Across: 1. Bob Diamond 3. Diageo 6. UAE 10. Afghani Down: 2. Ikea 4. Germany 5. China 7. Vinod Rai 8. Gujrat 9. Dassault 11. FSA
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Oct ‘12
Reviving the Indian Economy Global uncertainty- The way forward for Indian economy The performance of the Indian economy in 201112 was marked by sluggish growth, high fiscal deficit and widening current account deficit. The past year recorded the slowest growth in Indian economy, with marked fall industrial and agricultural output. With inflation sticky around 7% for the larger part of the year and with a deficient monsoon, there is an upside risk of further deterioration of macro-economic factors. Concurrently, a risk of widening twin deficits (budget and fiscal) has accentuated concerns for an already overheated economy. Failing economies in the EU and slumped growth in the US have put pressures on the financial markets and exchange rates snowballing fears of a global meltdown. (RBI, 2012) After a sharp recovery from the global economic crisis and two successive years of robust growth, GDP plummeted to a nine year low of 6.5% during 2011-12. This slowdown was reflected across all sectors of the economy. For the first time in a decade, industrial sector contribution to GDP dropped to a single digit. A lethargic growth of less than 4% in agricultural sector contributed heavily in dragging the economy down. After impressive years of fiscal consolidation, there has been a marked deterioration in the gross fiscal deficit ratio, which currently stands at an alarming 5.9% of GDP. Increasing subsidy expenditures and partial fiscal stimulus, post 2008, have contributed heavily to this situation. Furthermore, stalled financial reforms have made it difficult to put fiscal consolidation back on rails. A rapidly increasing current account deficit at 4.5% of GDP is causing investors to shun Indian markets as an investment
destination. In addition to this, subdued equity inflows, depleting forex reserves and rising external debt have tarnished India's relative attractiveness in the eyes of global investors. Uncertainty due to EUs sovereign debt crisis, downgrade of several EU economies, the relative instability of Euro as a common currency and US sovereign debt downgrade have kept foreign markets volatile for quite a while. With high levels of inflation impeding growth levels and a toothless monetary policy upsetting the liquidity needs of industrial sector, inclusive financial reforms is the need of the hour. Policymakers need to have a relook at the existing fiscal and governmental policies, rejig them to suit the demands of our economy. Sustainable growth of the economy can be possible only if concrete steps are taken to stabilize macro-economic indicators. Several areas of improvement can be chalked out, however, there are four crucial areas wanting immediate governmental intervention for their betterment. It is imperative that these measures are taken to revive business confidence and jumpstart investments and growth. (Nayar, 2012, March) Reforms in Infrastructure Sector In the past, our robust growth has been substantially driven by large infrastructure investments and is expected to be driven by the same in the next decade. However, over the past 2 years, infrastructure sector has reached a point of morass wherein new investments have slowed due to large bottlenecks. Elongated gestation periods and shortages in input have deferred investments. Gross Domestic capital formation (as a % of GDP) which is an indicator of the
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investments has declined persistently from 32.9% in 2007-08 to 30.4% in 2011. Investment in infrastructure plummeted from 2.2 Trillion rupees in 2010 to 1.0 trillion rupees, with roads, telecom, power and ports accounting for most of it all. Investment in power sector is dried due to electricity board losses. Road projects have dried up due to issues in land acquisitions and challenges in environmental and legal clearances. Availability of finance is another logjam affecting investments. Higher capital spending is required from Central and State government to insulate domestic economy from any external slowdown factors. The government should revive some of the high impact projects like Dedicated Freight Corridor (DFC) and Delhi Mumbai Industrial Corridor (DMIC) as a means of stepping up investments. The Land Acquisition Bill needs a speedy pass to create regulatory clarity and swift availability of contiguous tracts of land for infrastructural development. Interministerial consensus needs hastening to provide legal and environmental clearances to various Central/State government projects in the power and mining sector. However, a careful balancing of environmental and growth needs would be necessary. Adopting models like the one in Singapore where multiple agencies sit together to quickly clearing investment projects is a much needed initiative, the onus of which clearly rests on the bureaucratic machinery. It is imperative to allow private sector participation in railways, irrigation, and water supply to accelerate project deployment, execution and delivery. Notable examples in this regard would be the Yamuna Expressway and Bandra Worli Sea Link projects.
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Grew by a scanty 4%. The agricultural sector is riddled with problems related to MSP, insufficient irrigation, improper storage facilities, and unavailability of timely credit and lack of infrastructural and technological support. The existing Public Distribution System reeks of inefficiency and leakages, where storage facilities are stretched to their limits, often leading to wastage. Revising the PDS and a complete refurbishment of the food management system is necessary to plug leakages and improve availability. Experts have suggested the use of coupons and cash transfer system to ensure efficiency in the distribution system. Technological breakthrough is essential to augment the supply of pulses, vegetables, fish and meat to address supply constraints, which is necessary to contain inflation. Scientific technology like Low External Input Sustainable Agriculture (LEISA) promoted alongside with Integrated Pest Management system can help improve productivity in a viable manner without causing environmental distress. (RBI, 2012)
Reforms in Agriculture Over the years, agricultural contribution to GDP is rapidly diminishing. During 2011-12, agriculture
Source: RBI Annual Report 2012
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Reforms in Manufacturing sector Alarm bells were rung this year when the IIP (Index of industrial output) figures came in. The IIP posted a shameful growth of 2.9% during 2011-12 as compared to the previous years. Slowdown was attributed to moderation in domestic and external demand, increase in interest rates, subdued business confidence and slowdown in consumption. Capital goods production posted a marked decrease. Increase in the lending rates worsened liquidity constraints thereby tightening growth. Since manufacturing industry is heavily dependent on core sectors, structural bottlenecks in these sectors affected industrial performance in the past year. Dedicated investment framework in sectors like power, logistics is necessary to sustain manufacturing growth. Heavy investments in electricity can put a stop to long hours of load shedding leading to uninterrupted output. Supply chain efficiency and reduction in transportation costs can be achieved by strengthen the existing road and rail network (DFC and DMIC). Decision making of the government should be transparent by reducing discretionary powers of officials; this will simplify the legal and environmental compliance framework. Fiscal incentives and interest subsidies need to be extended to the proliferating SMEs to increase their contribution to the economy.
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Reforms in FDI policies Post liberalization, Indian has remained one of the hottest destinations for FDI. For the year 2011-12, FDI inflows rose to 42 billion USD, up 33% from 201011. Most of these investments were routed from Mauritius, with services sector being the biggest beneficiary. In spite of these comforting FDI figures, a RBI study noted that the actual FDI inflow fell short by the potential inflow by 25%. Although the FDI policies were revised in 2006 to attract more investors, analysts remain speculative about sustained inflow in the face of a challenging business environment. According to an Ernst & Young report, foreign investors are frustrated with the lengthy gestation process taken to obtain clearances and approvals. (Babani, 2012) With the GAAR policies aiming at taxing these investors, the environment is set to become more hostile to the latter. Government needs to make the environment more conducive by clearing the air around GAAR, and by clarifying its intent more clearly. Transparent governance policies to streamline the cumbersome legal procedures are clearly the need of the hour. Availability of skilled labor, better access to power and transportation, labor reforms and decrease in bureaucratic red-tapism would make the investment climate more favorable. Cash strapped sectors like insurance, aviation, retail and cable
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should be opened up to foreign investors in order to leverage FDI for growth. Large inflows of FDI can go a long way in bridging our widening current account deficit and creating employment.
ANSWERS TO QUIZ 1.Airpocket stock 2.John Bogle 3.Angelina Jolie stock index: An index made up of a selection of stocks from companies associated with actress Angela Jolie. The index was created by Fred Fuld of Stockerblog.com; it includes the stocks of movie studios and producers that have had a connection with Angelina Jolie 4.Zombies, also called living dead, are companies that continue to operate even though they're bankrupt
Source: RBI Monthly Bulletin, April 2012
Conclusion Growth in the economy has remarkably slackened; in response to the global economic environment. There is a need for more prudent reform policies in various sectors as an impetus for growth. With our current infrastructure being ill suited for the economy, improvements in this area will boost the performance of core economy sectors. Our manufacturing sector needs more focus and attention, for, in the long run, the growth of the service sector would heavily depend on the manufacturing base. A quantum increase in food productivity is necessary for achieving the 'staggering' 4% growth in agriculture in the coming years. An expenditure switching strategy is needed that reduces government's revenue spending by cutting subsidies with a step up in capital expenditure. (RBI, 2012)
5.Bills of Exchange 6.Incoterms, or the International Commercial terms are a series of pre-defined commercial terms published by the International Chamber of Commerce (ICC) widely used in international commercial transactions. Intended primarily to clearly communicate the tasks, costs and risks associated with the transportation and delivery of goods. 7.GE Capital 8 Bank of India, in London 9.SCORE (Sebi Complaints Redress System) 10 J.P. Morgan
-Aditi Vidyarthi & Nitin Bhat Senior Associate Consultants Infosys
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THE FINANCE CLUB The Finance Club of Symbiosis Centre of Management & HRD is a student initiative which started in 2005. The Finance Club functions as the interface between the student community and the financial world. Its objective is to enable prolific interactions among the student community, coupled with valuable inputs from the faculty, the academia and representatives from the industry. The club provides a platform for all students to come together and explore the field of finance, leading to awareness amongst students with respect to the current financial aspects surrounding the economy and the industry.
Activities of the Finance Club :
! Finalyst - The Bi monthly Finance Journal of the Finance Club
! Knowledge Series
! BizFluence
! Pre-Budget and Post-Budget Analysis
Past Events:
! Research Seminar on Commodity Markets - Feb 2012
! First Academic Summit on Valuation and Financial Modeling - Nov 2010
! Integrated Risk Management Seminar- 2009
! Banking Conclave - 2005
Upcoming Events:
! A summit on “FOREIGN EXCHANGE� - Jan 2013
SENIOR MEMBERS
JUNIOR MEMBERS
Ashok Reddy Debi Dash Niladri Dey Rishi Shah
Apurva Ghare Dhruv Desai Nidhi jain Rohit Godbole Saumil Pandya Shaily Kukreja Vinay Tripathi
Contact Us: Finance Club, SCMHRD +91 7709079996 Fax : +91-020-22934306 Email: financeclub@scmhrd.edu Web: www.scmhrd.edu
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