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Editorial

Season’s greetings,

In this edition we have Mr. T.S. Vijayan – Chairman, IRDAI, discussing the transformation of the Indian Insurance Industry. He highlights the reforms in the areas of Re-Insurance, Solvency norms, expense management, products and its distribution, analytics and disaster management. We thank Mr. Vijayan for his contribution to the newsletter.

For this month, APAS column evaluates the level of intermediation of banking in India. It discusses the extent of economy and government’s dependence on the banking sector, how it changes with the profile of an economy and the way forward for India.

The economic indicators showed mixed performance. The manufacturing PMI fell from

52.6% in May to 51.3% in June. Growth in core sectors slowed to 3% in June from 4.4%

in May, mainly due to contraction in crude oil and natural gas production. IIP fell from

4.1% in April to 2.7% in May, mainly due to a sharp fall in capital and consumer goods.

PMI services and composite PMI were respectively at 47.7% and 49.2% both declining

from 49.6% and 51.2% in the previous month. Inflation rose to 5.4% in June from 5.01%

in May, primarily driven by food inflation. WPI has been experiencing a downfall.

The Reserve Bank of India (RBI) tightened the norms for acquisition/transfer of control of non-banking financial companies (NBFCs) by making it mandatory to seek prior approval from it. RBI issued a notification reviewing the guidelines on restructuring of advances by NBFC’s. Finance Ministry of India has released a revised draft of the proposed Indian Financial Code (IFC) that will replace multiple laws governing the financial sector. In the Third Bi-Monthly Monetary policy Statement, 2015-16, announced on 4th August 2015, RBI left key rates unchanged. However, there is hope for a cut in future with favorable real income effects that could accrue from weaker commodity prices, in particular crude oil, and a possible step-up in agricultural activity if monsoon conditions improve.

The insurance regulator is planning to streamline insurance companies' corporate governance issues, in an exercise aimed at protecting the interest of policyholders. In this regard the regulators has proposed that the companies should strengthen the structure of their boards. The finance ministry has said that foreign shareholding in parent companies of insurance ventures would not be counted as overseas ownership for computation of foreign direct investment in the insurance ventures.

On the infrastructure front we have an article that talks about Mr. Modi’s Digital Campaign in India. Also, the cabinet approved the proposal to permit utilization of India’s capital contribution to SAARC Development Funds (SDF) for economic and infrastructure windows.

The minimum contract size in equity derivatives segments has been revised to Rs. 5 lacs. The union cabinet has introduced composite caps for simplification of foreign direct investments.

We hope that this newsletter is insightful and we welcome your inputs and thoughts and encourage you to share them with us.

Ashvin Parekh

Table of Contents

Guest Column – Mr. T.S.Vijayan –

Chariman - IRDAI

APAS Team

Intermediation of Banking in

India: Extent of dependence and

the way forward

Economy

IIP update – May

Inflation update - June

PMI update – June

Core Sector update – June

Banking Sector

Changes to NBFC Management

Control Norms

RBI recasts norms for Advances

by NBFC’s

Indian Financial Code

3rd Bi-Monthly Monetary Policy

Statement, 2015-16

Insurance

Boards to streamline Corporate

Governance

Foreign shareholding in insurance

firms' parent companies not to

count for FDI

Infrastructure

Modi’s Digital Campaign

Government allows use of its

capital to SAARC Fund for

infrastructure sector

Capital Markets

Revision of minimum contract

size in equity derivatives segment

Introduction of Composite Caps

Capital Market Snapshot

Economic Data Snapshot

Ashvin Parekh – Managing Partner, APAS

Indian Insurance industry is currently going through

second transformation phase after it is opened up for

private participation in the year 2000. Till the year

2014, while witnessing periods of both highs and

lows, the industry has progressed from an annual

total premium income of around Rs. 45,000 crore to

around Rs. 4,00,000 crore whereas total claims paid

are more than Rs. 2.6 lakh crore and total assets

under management close to Rs. 21 lakh crore. In

December, 2014, Insurance Act, 1938 was amended

by the Insurance Laws (Amendment) ordinance which

was followed by Indian parliament passing

corresponding legislation in March, 2015. Most of the

discussions on the amendment were focused on

increasing the cap on foreign investment in Indian

insurance companies from 26% to 49%. Even though,

this is an important feature of the new law, the

legislation has paved way for other far reaching

changes in the way the business would be

transformed in this country to cater to the insurance

coverage needs of all sections of population. Some of

the areas where we will be witnessing the changes

are:

Reinsurance – Foreign reinsurance companies can

open branches in Indian now. It is expected that the

situation would enhance the reinsurer engagement in

developing more appropriate products for Indian

market. Even though, in the immediate future, the

expected number of foreign reinsurers who are likely

to open branches in India is less than 10, this will have

impact on the nearly 300 companies which currently

take business out of India. The big question is whether

all such business will be absorbed by the companies

incorporated in India and branches operating from

India. This is especially so because the second bucket

for which the Indian direct insurers have to offer

business, before ceding the business outside the

country, are those entities that have opened offices in

SEZS (IFSC) in India.

Solvency Norms – So far, the requirements of

solvency margin are largely governed by the principal

legislation itself which have tended to be static over a

long period of time. With the responsibility now given

to the Regulator to specify solvency norms, it could

move to some sort of risk based solvency which is

increasingly adopted internationally. Such a scenario

will have influence on the risk profile and risk

management practices. The erstwhile concept of

having a minimum 150% required solvency margin

could undergo change as this is expected to impact

the way insurance companies operate in India.

Mr. T.S.Vijayan – Chairman – IRDAI

Expense management – It is often felt that expense

margin envisaged in the erstwhile provisions was too

high and was tuned to a business model of physically

preserving records and sales effort made by individual

agents and brokers. With the acceptability of e-

commerce, emergence of other distribution channels

and the laws supporting maintenance of electronic

records, it should get reflected in the expense margins

of insurance products as well and the need is to bring

new set of Regulations which shall potentially affect

the way insurance business is transacted in India. The

mass-based schemes like the Prime Minister’s Jeevan

Jyoti Bima Yojana and Prime Minister’s Suraksha Bima

Yojana have demonstrated the way forward.

Suitable Products and Distribution – We, in India,

have always been concerned with the availability of

suitable insurance products for every segment of

population. In fact, insurance is essentially needed by

low income segments of the society and farmers,

which has not really happened given the limitations of

accessibility and cost structure of insurance products.

To reach out and cover the unreached population

through cost efficient products by embracing

technology and indigenous distribution solutions

could be a game changer in the insurance sphere.

Analytics – The rating systems in India are largely

based on underwriting experience which needs to be

fine-tuned depending on geographical characteristics

and risk profile of

the segments. With easy availability of computing

power, it is possible to enhance data analysis which

facilitates such fine tuning. Electronic processing of

insurance services will be the first stem in collecting

useful data in a standard form in a centralized facility

to better understand the manner in which products

are designed and sold and serviced. Analytics would

decide how to reach the target segments and

enhance the relevance of insurance products in the

coming years.

Disaster Management – The increasing concentration

of economic activities in particular location(s) due to

rapid urbanization is to be addressed. When natural

disasters or other catastrophes strike such locations,

the damage potential is directly proportional to

concentration of wealth and assets in that area and

hence proper catastrophe insurance covers assume

greater significance. The situation is no different in

case of rural areas where the natural disasters have

severe effect on the farming community and as such

appropriate agricultural insurance products are

needed. An impediment for agricultural insurance

penetration in India is relatively low land holding of

farmer. Hence, the plot level agricultural insurance

which recognizes and caters to plots even of a size of

an acre will be needed. Concerted efforts of the

industry and government agencies are needed in

designing necessary insurance covers in the areas of

agriculture insurance and disaster management.

Efficient financial intermediation is the foundation for

growth and stability of any economy. Financial

systems across the globe combine bank based and

market based intermediation. However, the blend of

these channels of intermediation varies significantly

with the profile of the economy. The dependence on

banking intermediation ranges from less than 20% in

the United States to over 60% in Austria, Hungary and

New Zealand. While these levels are not constant, it is

generally observed that market based intermediation

has gained importance in the past two decades.

It has been observed that the GDP levels of the

economy, sectoral composition and size of firms, and

country’s institutional characters such as legal

framework and enforcement of contracts and

property rights impacts the dependence on banking

intermediation. It can be noted that insurance

companies, pension funds and mutual funds account

for a larger share of GDP in richer countries or the

developed economies. With growing levels of GDP, it

is expected that the financial literacy increases and

therefore the use of market based channels of

intermediation. Sectors with tangible and

transferable capital where output is easier to pledge

as collateral (such as construction), are more

dependent on banking credit. On the other hand,

service sector relying on human capital are more

dependent on equity or bond markets. Smaller firms

typically rely on banking channel to avoid the fixed

costs associated with tapping the capital markets.

Flight of investors to safe markets defines the

development of market based intermediation in

economies with laws offering higher protection to

holders of equity (especially the minority

shareholders) and debt securities and where

managements have less freedom to seek protection

under the law.

Whatever be the blend of banking and market

intermediation, they complement each other in

development of the financial system of the economy

and both are positively linked with the growth. BIS

Quarterly review that analyzed the relationship

between financial structure and economic growth

suggest that in emerging economies further market

deepening would boost GDP growth while any gains

from further development of the banking sector

would be limited.

Extending the same argument to Indian economy,

India, as an emerging economy has so far seen critical

dependence on banks for financial intermediation.

With positive reforms taking place in India post 1990,

alternate channels of intermediation are emerging.

Such channels include non-banking financial

companies, insurance and pension funds, and mutual

funds and market based intermediaries amongst

others. However, the high level of dependence on

banks for intermediation is still a concern with

alternate channels not taking off big way in India yet.

Since India still doesn’t have deep debt markets or

highly developed pension or insurance sectors, these

alternate channels are able to play only a very small

role in intermediation. All this is leading to heavy

dependence on banking system for financial

intermediation.

As the relationship between the economy profile and

the level of banking intermediation indicates, India

should be moving towards more of market based

intermediation owing to the facts such as more

dependence on service industry, growing financial

literacy, spurt in start-ups and small businesses, and

the new government paving way for investor friendly

climate. Corroborating these reasons are the

challenges facing the banking sector in India. Coupled

with persisting capital and governance issues, and

non-transparent procedures of disbursement leading

to mounting NPAs, continued dependence on

intermediation of banks may be a challenge and the

need to address this is imminent. Also, going forward,

to keep or grow the level of intermediation of banks,

huge capital needs to be pumped into the sector.

While government does not show signs of diluting its

52% stake in the public sector banks in the banking

system, sourcing additional capital remains a major

hurdle. Further, the industry, government and the

regulator’s attention to the cost of intermediation

and a large extent of inefficiency is conspicuous by its

absence.

It is high time we recognize the dependence on

banking intermediation and develop and grow market

channels of intermediation with conducive

regulations and friendly reforms to remain robust and

stable economy. Countries that rely relatively more

on bank financing tend to be more severely hit when

recessions coincide with a financial crisis. India

survived the 2008 recession due to financial and

regulatory prudence. Going forward also let’s retain

our prudence but balance it with the growth of

market channels of intermediation.

- APAS Team

IIP (Index of Industrial Production) – May

The index of industrial production (IIP) for the

month of May came in at 2.7%, falling from 4.1%,

led by a sharp fall in capital goods and consumer

goods data.

From a use basis, growth rates for sectors stood as

6.4% for basic goods, 1.8% for capital goods, and

1.2% for intermediate goods. The consumer

durables and consumer non-durables recorded

growth of -3.9% and -0.1%, respectively.

The Indices of Industrial Production for the Mining,

Manufacturing and Electricity sectors for the month

of May 2015 stand at 128.8, 187.5 and 195.0

respectively, with the corresponding growth rates

of 2.8%, 2.2% and 6.0% as compared to May 2014

(Statement I). The cumulative growth in the three

sectors during April-May 2015-16 over the

corresponding period of 2014-15 has been 1.5%,

3.2% and 2.8% respectively.

Some of the important items showing high positive

growth during the current month over the same

month in previous year include H R Sheets,

Conductor, Aluminium, Lubricating oil, Copper and

Copper Products, Wood furniture, Vitamins, Tea

and Carbon Steel.

Some of the other important items showing high negative growth are: Woollen Carpets, Grinding Wheels, Viscose staple fibre raw, Ayurvedic Medicaments, Aerated Waters and Soft Drinks, Fruit Pulp, Telephone Instruments (incl. Mobile Phones & Accessories) and Tractors (complete).

1.7

2.6

5

2.1

4.1

2.7

Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15

IIP (%YoY)

CPI (Consumer Price Index) - June

Consumer price index- (CPI) based inflation for June

jumped to a four-month high of 5.4%, primarily driven

by higher than expected food inflation.

It was 5.01% in May. CPI food inflation for June rose

substantially to 5.48% versus 4.8% in May.

Cereals and Products inflation was seen at 1.98%.

Clothing and footwear inflation was 6.34% in June as

against 6.12% in May. Core CPI inflation was seen at

4.85%. Vegetable price inflation had increased to

5.37% in June from 4.64% in May. Combined fuel and

light inflation is 5.92% in June, while it was 5.96% in

May.

The corresponding provisional inflation rates for rural

and urban areas for June 2015 are 6.07% and 4.55%

respectively.

WPI (Wholesale Price Index) – June

The annual rate of inflation, based on monthly WPI,

stood at -2.40% for the month of June, 2015 as

compared to -2.36% for the previous month.

Core inflation declined to (-) 1% in June 2015 from (-)

0.6% in May 2015.

Inflation of primary articles was steady at (-) 0.8%,

while that for manufactured products declined to (-)

0.8% in June 2015. However, the inflation of fuel

items rose marginally to (-) 10.0% in June 2015 from

(-) 10.5% in May 2015.

As per major commodity group-wise, inflation eased

of fruits, vegetables, milk, 'egg, meat and fish', iron

ore, bakery products, sugar, cement, iron, steel,

aluminium, industrial machinery, electrical

machinery, and electrical accessories restricting any

rise in inflation in June 2015.

On the other hand, inflation increased for food grains,

spices, raw jute, oilseeds, sugarcane, raw rubber,

fodder, flowers, crude petroleum, mineral oils, edible

oils, oilcakes, tea, cigarette, cotton yarn, man-made

fibre, plywood, basic inorganic chemicals, fertilizers

restricting any fall in inflation in June 2015.

Inflation of food items (food articles and food

products) eased to 1.9% in June 2015 from 2.3% in

May 2015. Meanwhile, inflation of non-food items (all

commodities excluding food items) rose to (-) 4.1% in

June 2015 from (-) 4.3% in May 2015.

-3

-2

-1

0

Feb-15 Mar-15 Apr-15 May-15 Jun-15

WPI (%YOY,2014-15)

5.37

5.17

4.86

5.01

5.4

Feb-15 Mar-15 Apr-15 May-15 Jun-15

CPI (%, YoY)

PMI update

Service PMI - June

June data pointed to a decline in output in the Indian

private sector economy. Falling to 49.2, from 51.2 in

May, the seasonally adjusted Nikkei India Composite

PMI Output Index recorded below the crucial 50.0

threshold for the first time since April 2014.

Reductions in activity were centred at service

providers, as manufacturing production rose during

the month.

The seasonally adjusted Nikkei Services Business

Activity Index posted 47.7 in June. Down from 49.6 in

May to its lowest level since March 2014, the latest

reading was indicative of a moderate rate of decline.

Business activity fell in five of the six monitored

categories, the exception being Hotels & Restaurants.

Underlying the drop in services activity was a further

contraction in new business. Indian service providers

raised employment further in June. The rate of job

creation was, however, only marginal and slower than

the long-run series average.

Manufacturing workforce numbers were broadly

unchanged in the latest month. There were mentions

of delayed payments from clients. Backlogs of work at

manufacturers also rose marginally.

Manufacturing PMI - June

Indicating a slowdown in India's economic upturn, the

country's manufacturing sector growth slackened in

June as the new order flow hit its lowest level in 10

weeks. The monthly HSBC India Purchasing Managers'

Index (PMI) fell to 51.3 in June from 52.6 in May,

largely because of the new orders rising at their

slowest pace September.

New business expanded at a noticeably weaker pace,

in part reflecting a loss of momentum in export

business. On employment, there were no significant

changes in payroll numbers since the opening month

of 2014 and firms reportedly maintained a cost-

cautious approach to hiring. On prices, the easing in

inflation rates was a welcome move. Moreover,

costs and charges both rose at rates that were

historically muted.

Core Sector Growth - June Growth in the eight core sectors — coal, crude oil,

natural gas, refinery products, fertilizer, steel, cement

and electricity — slowed to 3% in June after a six-

month high of 4.4% in May, mainly on account of

contraction in crude oil and natural gas production.

The Eight Core Industries comprise nearly 38 % of the

weight of items included in the Index of Industrial

Production (IIP).

Coal sector grew by 6.3 % in June, 2015 over June,

2014. Crude oil growth shrank by 0.7%, while Natural

gas production declined by 5.9%. Steel and Cement

production increased by 4.9% and 2.6% respectively.

Growth in the output of refinery products also slowed

to 7.5% as against 7.9% in May (but much higher than

-0.1% in June 2014), while fertilizer production was up

5.8%.

Also, Electricity production slowed to 0.2% in June (as

against 5.5% in May and 15.7% in June 2014).

RBI Makes Changes to NBFC Management Control Norms

The Reserve Bank of India (RBI) tightened the norms

for acquisition/transfer of control of non-banking

financial companies (NBFCs) by making it mandatory

to seek prior approval from it.

The RBI in a “Notification” on 9th July, 2015, said any

acquisition/transfer of control of an NBFC needs prior

approval from the central bank by modifying the May

26, 2014 directions which stand repealed.

The prior written permission of RBI shall be required

for any takeover or acquisition of control of an NBFC,

which may or may not result in the change of

management. NBFCs shall submit an application, in

the company letter head, for obtaining prior approval

of the Bank, along with the certain documents. A

public notice of at least 30 days shall be given before

effecting the sale of, or transfer of the ownership by

sale of shares, or transfer of control, whether with or

without sale of shares.

The provisions of these Directions shall be in addition

to, and not in derogation of the provisions of any

other laws, rules, regulations or directions, for the

time being in force.

RBI recasts norms for Advances by NBFC’s

RBI on 30th July, 2015 issued a notification reviewing

"The guidelines on Restructuring of Advances by

NBFC’s".

RBI allowed non-bank lenders to retain the 'standard

asset' tag on a restructured loan for an extended

period if an infrastructure project is mired in court

cases or has been stuck due to reasons beyond the

control of promoters.

The RBI had first allowed the NBFCs to

restructure infrastructure loans in January this year,

giving them the facility so far restricted to banks. In

the review of the guidelines issued on 30th July, the

central bank said an asset can be treated as

'standard' if the date of commencement of

commercial operations of an infrastructure project

loan is missed due to arbitration proceedings or

a court case.

The ability to treat the asset as a standard loan

got extended to up to four years from the earlier two

years. For projects stuck due to reasons beyond the

control of promoters, the leeway is only for one more

year over the earlier announced two years. Non-

infrastructure projects, excluding commercial real

estate, will also get a leeway of an extra year over the

earlier announced one year taking the total benefit to

two years. The RBI made it clear that all the

flexibilities are subject to the account continues to be

serviced as per the restructured terms.

It also eased norms for restructuring of project

loans which have had ownership changes before the

date of commencement of commercial operations

and the project has failed to start operations.

Thus, NBFCs will be eligible for a further extension of

date of commencement of commercial operations

without attracting a non-performing asset account

tag.

Indian Financial Code

Finance Ministry of India has released a revised draft

of the proposed Indian Financial Code (IFC) that will

replace multiple laws governing the financial sector.

The Draft IFC has been revised in the light of the

comments received and hosted now as "Revised

Draft IFC" on the home page of the Ministry of

Finance.

The proposed financial code also lays down a

framework for inflation-targeting under which the

central bank and government will together set the

target.

The modifications mainly relate to: strengthening the

regulatory accountability of financial agencies,

removing the provision empowering FSAT to review

Regulations, rulemaking and operational aspects of

capital controls, monetary policy framework and

composition of the Monetary Policy Committee

(MPC), regulation of systematically important

payment system and others, removing the provision

of special guidance etc.

Further the modifications have taken into

consideration the enactments subsequent to the

submission of The Financial Sector Legislative

Reforms Commission (FSLRC) report; namely The

Pension Fund Regulatory and Development Authority

Act, 2013 (PFRDA Act) and Securities Laws

(Amendment) Act, 2014. However, the modifications

in the revised Draft IFC remain consistent with the

overall structure and philosophy of the FSLRC Report.

A "draft" inviting comments on the revised draft IFC

has been attached along with. All stakeholders

concerned are requested to forward

comments/suggestions that they may wish to submit

on the Revised Draft IFC by 8th August 2015.

Third Bi-Monthly Monetary Policy Statement, 2015-16

In the Third Bi-Monthly Monetary policy Statement,

2015-16 , announced on 4th August 2015, RBI left key

rates unchanged -- repo rate at 7.25% and CRR at 4%.

According to the policy statement, global economic

activity has recovered modestly in Q2 of calendar

2015. The US economy rebounded on stronger

consumption growth and steadily improving labour

market conditions, though recent wage data suggest

continuing slack. The Euro area has grown at a

moderate pace through the first half of 2015,

supported by consumer spending, easing financing

conditions and a modest downturn in still-high

unemployment.

In India, the economic recovery is still work in

progress. After strong rainfall in June, July has been

below par, but on net, the monsoon is near normal.

Although overall business confidence is positive, the

level of optimism was a shade lower in April-June

than in the preceding quarter.

Headline consumer price index (CPI) inflation rose for

the second successive month in June 2015 to a nine-

month high on the back of a broad based increase in

upside pressures, belying consensus expectations.

The sharp month-on-month increase in food and

non-food items overwhelmed the sizable ‘base

effect’ in that month. Food inflation rose 60 basis

points over the preceding month, driven by a spike in

prices of vegetables, protein items - especially pulses,

meat and milk - and spices. Turning to the balance of

inflation risks, most worrisome is the sustained

hardening of inflation excluding food and fuel.

Moreover, the full effects of the service tax increase,

which took effect from June, will feed through over

the rest of the year.

Relative to the projections of the second bi-monthly

statement, inflation projections in this bi-monthly

statement are elevated by the higher than expected

June observation but reduced by prospects of softer

crude prices and a near-normal monsoon thus far.

The outlook for growth is improving gradually.

Favourable real income effects could accrue from

weaker commodity prices, in particular crude oil, and

a possible step-up in agricultural activity if monsoon

conditions continue to improve.

Strengthening boards to streamline corporate governance

The insurance regulator is planning to streamline

insurance companies' corporate governance issues,

in an exercise aimed at protecting the interest of

policyholders. The regulator has also proposed that

companies strengthen the structure of their board

and expand it so that there's no conflict of interest

between different roles such as investment and audit

committee.

Insurance Regulatory & Development Authority of

India (IRDAI) has taken a more consultative approach

in framing regulations for the insurance sector. The

"Investment Regulation Draft" was circulated among

members for comments.

The investment policy of Life, General and Health

insurers, as approved by the Board shall be

implemented by the investment committee.

“The board shall review the investment policy and its

implementation on a half-yearly basis or at such short

intervals...keeping in mind protection of

policyholders' interest," IRDAI said in the draft.

While audit committees, which are compulsorily

headed by a chartered accountant, have the edge,

the regulator is planning to mandate insurers to

include the company's chief risk officer in the

investment committee to improve compliance and

tackle risks.

The insurance regulator has also suggested barring

companies from making fixed deposits in promoter

banks, and proposed that 25% of unit-linked

insurance funds be invested in government

securities.

The regulator said that the insurer should audit all

investment transactions covering both shareholders

and policyholders' funds through an internal or

concurrent auditor. The decisions taken by the

investment committee shall be recorded and be open

to inspection by the officers of the authority.

Foreign shareholding in insurance firms' parent companies not to count for FDI: Finance Ministry

The finance ministry has said that foreign

shareholding in parent companies of insurance

ventures would not be counted as overseas

ownership for computation of foreign direct

investment in the insurance ventures.

Earlier, foreign ownership in a firm was calculated by

also taking into account the proportion of overseas

holdings in the parent firm.

Provided that the manner of computation of foreign

The Insurance Regulatory and Development

Authority of India (IRDAI) had said that "every insurer

being an Indian insurance company and who have

already been granted certificate of registration for

carrying on insurance business in India shall ensure

the compliance of Indian owned and controlled as

specified in Section 2(7A) of the Act within six months

from the date of notification of these regulations."

holding of such Indian promoter or Indian Investor

Company shall be in accordance with clause (p) of rule

2," said the notification from the department of

financial services, Ministry of Finance.

According to the “Notification” dated 19th February,

2015, Clause (p) of rule 2 says that total foreign

investment in an Indian insurance company would be

the sum total of direct and indirect foreign investment

by foreign investors in such company, calculated in

accordance with IRDAI regulations.

Mr.Modi’s Digital Campaign

There is quite some stuff that you can do via mobile

apps with regards government in India. And even if

you still have to physically visit the respective

offices, these apps can help prepare you better.

Here are six government applications available to all

of us–

Narendra Modi app – PM Modi launched his own

mobile app earlier this month. Called 'Narendra

Modi', the app is live now on Android Play Store and

can be downloaded by Android users free of

cost. The mobile app will keep users updated about

news related to PM's office, his messages to citizens

and his talks on his radio show 'Mann ki Baat'.

The app is another step from the PM to make

himself more accessible to citizens.

Ministry of External affairs app – The MEA mobile

app provides information about ministry's services

and activities. Users can read press releases, Lok

Sabha activities, tender notifications and even

access passport services through the app.

Incredible India app – This app is an effort by the

tourism ministry to update domestic and

international travellers about registered service

providers, recommended places, and warnings of

fraud and approved travel agents.

Government of India Calendar 2015 – This app will

help keep a track of the working days and holidays

for a particular government organization. It also

gives access to PMO tweets and PIB releases.

Swachh Bharat Abhiyaan – This was launched

during the digital India week. It is likely to be the face

of PM Modi’s pet Swachh Bharat Drive. The app lets

users create a profile and take up challenges

pertaining to cleanliness in particular areas.

Mygov app – MyGov's major aim is to include

citizens in governance initiatives. It is designed as a

citizen engagement platform and citizens can log in

and share their suggestions, feedbacks and ideas

with central ministries and other government

institutions. Users of this app can join discussions,

take polls and form groups around topics of interest.

The app is also being utilized for crowd sourcing

ideas- for instance, it was the MyGov platform

(through the web one) that the government used

to ask citizens for ideas for an app for the PMO

office.

Government allows use of its capital to SAARC Fund for infrastructure sector

Government cleared the utilization of India's capital

contribution to SAARC Development Fund (SDF) for

promoting cross-border infrastructure projects, trade

and growth. The Cabinet approved "The proposal to

permit utilization of India's capital contribution to

SDF for Economic and Infrastructure Windows".

So far, India's capital contribution was only for the

Social Window of SDF. The approval will help in

promoting projects such as cross border

infrastructure. Such projects will help improve intra-

SAARC trade and growth potential of the SAARC

region, and also in promoting financial inclusion and

social security to disadvantaged/vulnerable sections

of society in the region. There are no additional

financial implications for India, as it only entails a

restructuring of India's capital contribution to the

SDF.

SDF was set up in 2008 to improve the livelihood of the people and to accelerate economic growth, social progress and poverty alleviation in the SAARC region.

It provides for utilization of the Fund for projects in three windows -- Social, Economic Window and Infrastructure.

The Social Window focuses on poverty alleviation and social development projects. The infrastructure Window covers projects in the areas such as energy, power, transportation, telecommunications, environment, tourism and other infrastructure areas. The Economic Window for non- infrastructural funding.

At the 18th SAARC Summit in November 2014, leaders had agreed to operationalize the SDF's Economic Window and Infrastructure Window for implementation of regional and sub-regional projects. In light of the pressing need to address infrastructure bottlenecks for improved growth of the SAARC region, it is pertinent to use India's capital contribution to SDF for its Economic and Infrastructure Windows in addition to the Social Window.

Minimum Contract Size in equity derivatives segment revised

Capital markets regulator Securities and Exchange

Board of India (Sebi), has issued a “Circular” on 13th

July, 2015, increasing the minimum contract size in

equity derivatives segment to Rs. 5 lakhs. At present,

the minimum contract size in equity derivatives

segment is Rs. 2 lakhs.

The framework for determination of lot size for

derivatives contract has been modified.

The provisions specified in the circular shall be made

effective from the next trading day after expiry of

October 2015 contracts.

This circular has been issued in exercise of powers

conferred under Section 11 (1) of the Securities and

Exchange Board of India Act, 1992 to protect the

interests of investors in securities and to promote the

development of, and to regulate the securities

market.

Introduction of composite caps for simplification of Foreign Direct Investment (FDI) policy to attract foreign

investments

The Union Cabinet on 16th July, 2015 approved a

proposal to scrap the distinctions among different

types of overseas investment by shifting to a single

composite limit.

“Introduction of composite caps for simplification of

foreign direct investments” was one of the most

important decisions.

The new policy also means portfolio investment up to

49% will not need government approval or have to

comply with sectoral conditions as long as it doesn't

result in transfer of ownership and/or control of

Indian entities to foreigners. Also government's

decision to introduce composite caps has potential to

speed up foreign exchange flows in India.

As per the media reports, the sub-limit for portfolio

investment in the banking and defense sectors will

continue for now. Under the existing policy, there are

different caps for separate investment categories like

FDI, FII and NRIs. Under the existing policy, there are

different caps for separate investment categories like

FDI, FII and NRIs. The composite foreign investment

caps will now encompass all types of foreign

investments.

The government endeavors to put in highly

liberalized FDI policy which is not only friendly to

foreign investors but also addresses the concerns of

domestic constituency by increased manufacturing,

job creation and overall economic growth.

Sources: National Stock Exchange

Sources: Bombay Stock Exchange

Oil and gold - two of India's biggest imports - have seen sharp

price falls.

The stock markets globally have been in the downtrend.

India's stock markets seesawed on 28th July, 2015, struggling

to snap a three-day losing streak. The Nifty touched the 9000

mark in early March, and has since then fallen back below

the 8,400 mark. The BSE’s benchmark index Sensex lost over

550 points to close at 27,561. Foreign investors sold net

equity worth ₹859.94 crore, while domestic institutional

investors bought net equity worth ₹238.66 crore. Retail

investors bought ₹43.40 crore of net equity on the BSE.

Greece events have been taken care of, at least for the time

being. As for China the endgame is still some distance away.

Corporate profitability remains poor and market breadth

appears to be weakening.

Indian equities are looking precarious, and a deeper

correction looks highly likely as the ruling BJP government

faces roadblocks in its reform agenda due to a lack of

majority in the 245-seat upper house.

The Indian rupee fell to its lowest level in almost

six weeks. On speculation importers are

stepping up dollar purchases to pay month-end

bills. It strengthened against the US dollar after

international crude oil price fell.

Sources: APAS Business Research Team

Sources: APAS Business Research Team

Sources: APAS Business Research Team

63.41 63.46 63.45 63.4963.57

64.20

63.8063.82

64.1463.99

62.60

62.80

63.00

63.20

63.40

63.60

63.80

64.00

64.20

64.40

$/₹ (July-2015)

7.81

7.75

7.78

7.81 7.87

7.84

7.817.83 7.83

7.817.81

7.82

7.81

7.65

7.70

7.75

7.80

7.85

7.90

GIND10Y (July-2015)

8445

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CNX Nifty (July-2015)

27946

28172

27661

28446 2842028371

27459 2756327705

28115

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BSE Sensex (July-2015)

15.56

16.31 16.0115.13

16.37 15.88

15.3314.57

0.00

5.00

10.00

15.00

20.00

25.00

Indian VIX (July-2015)

Countries GDP CPI Current Account

Balance Budget Balance

Interest Rates

Latest 2015* 2016* Latest 2015* % of GDP, 2015* % of GDP,

2015* (10YGov), Latest

Brazil -1.6 Q1 -1.5 0.9 8.9 June 8.4 -4.2 -5.5 12.5

Russia -2.2 Q1 -3.6 0.3 15.3 June 14.7 4.3 -2.8 10.5

India 7.5 Q1 7.6 8.0 5.4 June 5.4 -1.0 -4.1 7.83

China 7.0 Q2 6.9 6.7 1.4 June 1.4 3.0 -2.7 3.19^

S Africa 2.1 Q1 2.0 2.3 4.7 June 4.9 -5.2 -3.8 8.11

USA 2.9 Q1 2.3 2.7 0.1 June 0.4 -2.6 -2.5 2.36

Canada 2.1 Q1 1.6 2.2 1.0 June 1.2 -2.9 -1.8 1.54

Mexico 2.5 Q1 2.7 3.3 2.9 June 3.0 -2.3 -3.4 6.04

Euro Area 1.0 Q1 1.5 1.8 0.2 June 0.2 2.5 -2.1 0.75

Germany 1.0 Q1 1.7 2.0 0.3 June 0.5 7.5 0.7 0.75

Britain 2.9 Q1 2.4 2.4 Nil June 0.3 -4.8 -4.4 2.20

Australia 2.3 Q1 2.4 2.8 1.5 Q2 1.7 -3.2 -2.4 2.90

Indonesia 4.7 Q1 4.9 5.5 7.3 June 6.2 -2.9 -2.0 8.29

Malaysia 5.6 Q1 5.5 5.6 2.5 June 2.6 3.4 -4.1 3.92

Singapore 1.7 Q2 3.1 3.2 -0.4 May 0.4 21.3 -0.7 2.65

S Korea 2.2 Q2 2.9 3.3 0.7 June 1.0 7.5 0.4 2.43

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