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FINXpress FEBRUARY 22, 2015 | A FINNICHE INITIATIVE
Term of Week
In Focus
Opinion
Tech World Special Drawing
Rights | 6
Motorola Android Watch|12
Dilip Shanghvi |11
Expectation from BJP
Budget 2015| 4
Wholesale Price index
Deflation | 2
Personality
Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.
Wholesale Price Index (WPI)
Deflation
Expectations from BJP
Budget - 2015
Special Drawing Rights (SDR)
Dilip Shanghvi
Motorola Android Watch
February, 22 | 2015 | Volume 35
IMT saw its seniors performing for the last time at Crescendo 2015 and the distribution of awards
for IMT Oscars. In the Global Market oil prices continue to fall with US government reporting record
high crude oil inventory as a result of which India tried to lower down its fiscal deficit. With the
Budget around the corner, the corporate world is eyeing closely on the steps that will be taken by
government to boost the Indian Economy.
Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about the
‘Wholesale Price Index (WPI) Deflation’. The Opinion gives an overview of ‘Expectations from BJP
Budget—2015’.
The term of the week describes ‘SDR—Special Drawing Rights’, which are international reserve
asset created by IMF in order to increase the reserves of its member countries. Do have a look at
the market section, Tech world which brings to you about ‘Motorola Moto 360’ and Personality of
the week, Dilip Shanghvi.
Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please
do write to us and share your ideas.
Happy Reading!
Regards
The Editorial Team
Club FinNiche
- By J.Sindhuja
WPI which is used as one of the measure of inflation
in India slipped into negative zone due to
continuous decrease in fuel prices. WPI measures
the changes in prices of goods that are bought and
sold in whole sale market and is considered
important as it tracks dynamic movement of prices.
It was used by RBI to control inflation till 2014,but
recently RBI has shifted to CPI to make its
decisions on changing rates. Government uses WPI
to design fiscal, trade and other economic policies
whereas businessman track it know changes in
prices of raw materials, machinery and other
production costs. WPI is usually preferred than CPI
as it gives weekly report of change in prices and
has broader coverage which is classified into three
categories i.e. primary articles (20.12%), fuel and
power(14.91%) and manufacturing products
(64.97%) as compared to CPI.
Deflation, which is an indicator that overall prices
have decreased also indicates that it would not
favor Indian economy as whole. WPI in January
slipped to –0.39% as compared to 0.11% in
December which is recorded as second fall in last
three months. If the categories of WPI are
considered, we can see that fuel and power
inflation has declined to –10.69% from –7.8% in
December whereas primary articles inflation
increased from 2.17% to 3.27% ,manufactured
products inflation came down to 1.05% from 1.57%
and food articles inflation increased from 5.20% to
8%.
It can be observed that main reason behind the
deflation is due to negative fuel price deflation and
world deflation is showing its impact on India.
Consumers don’t seem to be too excited with it as
primary articles and food articles show an increase
in their prices due to low monsoon and the reason
for the deflation is mainly due to international factors
which are not under control rather than domestic.
India would be vulnerable again as soon as fuel
prices rise and deflation may not persist for long
time . Manufacturing products inflation is very less
which is a factor of concern as this would reduce
pricing power of manufacturers leading to lesser
incentives to manufactured goods and this may also
pull down CPI inflation to a level which is less than
what RBI aims at.
Whole sale price index (WPI) Deflation
Deflation may be due to decreased spending which
can be government, individual or investment
spending or due to reduced supply of money. Indian
industry wants to fully utilize the low pricing situation
with help of RBI .They exhorted RBI to reduce the
interest rates so that investment cycles would be
revived thereby boosting up the demand, but RBI
has kept its rates unchanged waiting for the first full
year budget to be released.
Apart from the Indian industry, WPI deflation has its
own implications on budget 2015 which is yet to be
released. Even though it doesn’t mean that
deflation would persist for long time, it clearly
represents that underlying potential of inflation is
dying as core inflation (non-food manufacturing)
dropped from 1.5% in December to 0.9%. It is time
to focus on growth rather than inflation. This
deflation is due to the base effect and is expected to
remain negative for two or more months even
though there is a rise in food and fuel prices as
base effect lasts till august. CPI inflation rose to
5.11% from 4.28% in December. As RBI started
considering CPI as measure of inflation to make
decisions on monetary policy there would be no
change in interest rates unless there are some
surprises in union budget.
It is government’s responsibility to revive growth and
must let RBI to act in its way.
Following are the steps to be taken by Jaitley:
Public investment should be made in a modest
way in infrastructure in 2015-16 i.e. 50,000–
1,00,000 crore in this year and twice the
amount in the next year
CPI and WPI must be rightly analyzed.
Difference of 5.5%(5.11% CPI and –0.39%
WPI) reflects inefficiency of Indian economy. As
WPI reflects producer’s prices and CPI reflects
consumers prices, there is huge loss in value
as goods reached from producer to consumer.
This can be reduced by removing inter-state
market barriers and improving supply chain.
Though Goods and service tax (GST)
eliminates inefficiencies in supply chain, there
should be a national market for all goods and
services
Thus India should concentrate on growth as WPI
deflation is showing weak signs of growth.
- By Priti Sureka
The Finance Minister will announce the Budget on
February 28th which will clear all the doubts and
questions of people from the Modi Government and
which will unfold what the new government has for
its people in its store. But before that let us see what
the budget should contain and address to expedite
the growth procedure.
The government has already taken few measures to
put fresh life into the economy which include
reallocation of coal mines, increasing limit of FDI in
some critical sectors, making land acquisition easier
etc.
Firstly, with the introduction of ‘ Swachh Bharat
Abhiyan’ , the government should invest in rural
infrastructure in the form of regular pure water
supply, harvesting of rainwater and making that
potable, more number of toilets etc. Efforts should
also be made to ensure the actual implementation
and sustainability of those. Only announcement
would do nothing. This will help in attracting tourism
which will increase revenue from invisible exports
for the Indian economy. Secondly, with the launch of
Make in India campaign which aims at promoting
domestic manufacturing sector, the upcoming
budget should show some facts and timelines for
completion of some manufacturing projects. Along
with that, Special Economic Zones should be
revived as MAT is imposed at a very higher rate
which will restrict the improvement of manufacturing
industry. Therefore, MAT should be reduced to a
feasible extent.
The next step should be to induce investments in
construction, manufacturing, financial services etc.
via domestic or international investors. Attracting
FDI is the first priority. India needs FDI to boost the
economy.
India is the second fastest growing service sector.
Some initiatives should be undertaken to enhance
India’s ability of service exports. India ranks 10th in
service exports worldwide. Government can look
into service tax structure in this regard. Most
importantly, the finance minister must give the
surety of implementation of GST from April 1, 2016
onwards as decided yet, which is in a debatable
situation since past few years. If not surety, then at
least clarity regarding implementation should be
there so that investors can plan accordingly. In our
country, installing a Wi-Fi network takes hardly two
days, then why execution of policies which are for
the overall benefit takes some years or some
decades. The GST implementation will completely
change the face of the economy. Tax is the largest
source of revenue of the government. There will be
uniformity in tax imposition across all the states and
will also ensure less tax evasion.
Modi Government’s first full
fledged budget
Initiatives should be taken to
meet the expectations of
common people from the “Modi
Wave”
Banking sector in India has witnessed many reforms
starting from interest rate deregulation, asset
classification, reduction in statutory reserve
requirements, making provisions etc. Now,
government should think of how to help banks in
reducing the quantum of non performing assets
rather than just indicating them to do so. Here
government can raise the disclosure standards,
allow foreign equity participation in securitization or
initiate recapitalization of banks.
Taking the financial inclusion a step ahead,
government needs to redefine this strategy.
Financial awareness should be promoted among
rural people before opening bank accounts for them.
The other thing which people will surely look for is
Healthcare. India spends only 1.5% of GDP in
Healthcare. Government must-
Invest in medical infrastructure heavily
Improve doctor to patient ratio
Invest in medical colleges to have universal
access to innovation and technology
Encourage NGOs
Education sector needs to be strategized. Expensive
education programs should be modified if there is
less job creation. After completing higher studies,
people tend to move out of India, therefore they
should be adequately incentivized by the
government. On the other hand, private investments
in education and healthcare sector can be
encouraged to reduce the load of the government
and to ensure efficiency. Aadhaar card should be
used constructively which can fetch maximum
results.
Government must introduce some laws to exercise
minimum control on the e-commerce sector. Here
RBI can take care of regulation and registration of
different payment gateways, foreign exchange
matters etc. While, for the government imposition of
certain percentage of sales tax is recommended.
Another factor which government can look is spread
of information of schemes. There are plenty of
schemes for the benefit of people, but the problem is
that many are not aware of the same and they seem
to be complicated. Therefore, a separate body for
promoting such schemes to every person should be
set up. Apart from just introducing new schemes,
government must take initiative to make the existing
schemes function well. Also some schemes can be
consolidated for convenience.
Government must encourage start-ups. Capital must
be made accessible and affordable at the same time.
Some tax exemption can be granted for the
promotion of start-ups.
Decline in domestic savings is a challenge. Saving
rate of the country needs to go up in order to boost
the GDP growth. Here tax incentives can play an
important role to restore domestic savings.
To foster investment in infrastructure development,
deduction amount to invest in Infrastructure Bonds
can be increased. Also, exemption on payment of
interest on home loan can be increased to stimulate
home loans.
It is a big chance for the BJP Government to play a
major role by addressing requirements of corporate,
MNCs, Salaried individual and every common
person living in India.
Reserve asset created by IMF
in order to increase the
reserves of member countries.
SDR: Special Drawing Rights
The SDRs are an international reserve asset
created by IMF (International Monetary Fund) in
1969 in order to increase the reserves of its member
countries. SDRs value is calculated on the basis of
the four key international currencies namely the US
dollar, pound sterling, Japanese yen and the Euro.
SDRs can be exchanged for freely used currencies
of the global integrated financial world.
SDRs were a product of the Bretton Woods system
which collapsed as there was shortage of two key
assets gold and US dollar to keep the exchange
rates fixed, and the world shifted to a floating regime
of exchange rate. The value of SDR = 0.888671
grams of fine gold during the Bretton Woods
system, which incidentally was the value of the US
dollar too at that time. In 1973 when the Bretton
Woods system collapsed, the SDR was then
reformed and was calculated on the basis of the
four major used currencies of the world.
The value of SDR in relations to the US dollar is
calculated on a daily basis and posted on the IMF
website. The basket of currencies against which the
SDRs are calculated are reviewed every 5 years by
the executive board of IMF, so lately it has become
a sort of status symbol in the financial world to be
referenced as the currency against which the SDR
will be calculated.
SDR interest rate are interest charged to members
on the regular IMF loans, the IMF also pays the
members interest on the SDR holdings according to
their portion of quota subscription.
The IMF allocates the SDR to member countries on
the basis of their quotas in IMF. SDRs are self
financing as it charges on allocation that are then
used to pay the interest of the SDR, in other words if
you don’t use your share of SDR holdings, the
charges to pay will equal the interest received, but
in some cases if the member holdings of SDR rise
above a certain threshold then it gets interest on the
excess share of its respective holdings, and if you
are low than your allocated holdings you pay
charges for the shortfall.
The SDR were particularly useful in the aftermath of
the global financial crisis, as it generated liquidity
and supplied that liquidity in the global markets to
the tune of $182.7 billion. The members often need
to buy or sell SDRs in order to either make up for
the shortfall in their respective holding, in that case
the IMF acts as a go to link or an intermediary of the
entire process. SDRs are basically a voluntary
trading, under these conditions the parties gets
involved in the buying or selling of SDRs in their
respective limits.
The SDR are often also seen as a bet against the
hegemony of dollars by various countries. The IMF
reforms of 2010 pointed to the increase use of
SDRs and to incorporate more of the emerging
market stable currencies significantly the Remnibi.
- By Shubra Sasmit
Fund allocations in India's Idea
Cellular Ltd and Yes Bank Ltd
to increase after their inclusion
in India's NSE index, analysts
say
Stocks to replace DLF Ltd and
Jindal Steel and Power Ltd,
NSE says in a statement
INDIAN MARKETS
India’s national Stock Exchange’s NIFTY falls by 0.69 percent and Bombay Stock Exchange’s
SENSEX ends 0.78% lower, snapping a seven-day winning streak, weighed down by a 3.2 per-
cent fall in shares of Reliance Industries and as sentiment for blue-chips was hit after foreign in-
vestors sold index derivatives for which the reason being sentiment for blue chips was hit.
BSE SENSEX
CNX NIFTY
Open High Low Close
SENSEX 29,170.77 29,522.86 29,083.40 29,231.41
NIFTY 8,741.50 8,822.10 8,729.65 8,805.50
COMMODITIES
EXCHANGE RATES
INTERNATIONAL MARKETS
Yes Bank and Idea may have
weights of 0.74 pct and 0.6 pct
in the NSE index respectively
Commodity Unit Rs / Unit % Change
Gold 10 grams 26311.00 -1.83
Silver 1 kg 36404.00 -1.67
Crude Oil 1 bbl 3215.00 -1.38
INR/ 1 USD 62.13
INR /1 EURO 70.74
INR/ 100 JAPAN YEN 0.52
INR / 1 POUND STERLING 95.67
Open High Low Close
NYSE Comp 11,042.78 11,111.41 10,976.26 11,108.86
NASDAQ 4,889.99 4,957.02 4,880.64 4,955.97
S&P 500 2,096.47 2,110.61 2,085.44 2,110.30
FTSE 100 6,873.50 6,921.30 6,819.80 6,915.20
CAC 4,757.52 4,841.69 4,683.19 4,830.90
DAX 10,946.88 11,081.81 10,765.02 11,050.64
NIKKEI 225 18,024.01 18,360.92 17,901.26 18,322.30
SSE 50 2,427.17 2,464.52 2,413.60 2,445.26
Hang Seng 24,717.49 24,871.79 24,653.88 24,832.08
Exclusive - Subsidy cuts in budget may disappoint investors
India may slash its food and fuel subsidy bill by about $8 billion in next week's budget, two sources
said, but despite the impressive headline, the cut is not as radical as free market champions had hoped
for in Prime Minister Narendra Modi's first full budget. Most of the 20 percent cut in the budget for
subsidies results from lower global oil prices rather than structural changes, with the government's
appetite for reform tempered by a heavy local election defeat in New Delhi this month.
"The total subsidy bill could come down to around 2 trillion rupees ($32 billion)," a senior government
official, who has direct knowledge of the matter, told Reuters. That calculation was echoed by another
source privy to budget discussions. Fuel subsidies are expected to drop by around two-thirds to 220-
230 billion rupees in the fiscal year that starts on April 1, thanks above all to a halving of international oil
prices to around $60 a barrel. The sources said Finance Minister Arun Jaitley was likely to set the total
budget for subsidies at about $32 billion, down from $40 billion in the current financial year. It will be the
first full budget presented since Modi's Bharatiya Janata Party swept to power in India last May. It
produced an interim budget in July that was largely designed by the outgoing Congress party
government.
Indian IT firms eye robotics, driverless cars for next round of growth
After decades of low-margin work like server maintenance, India's information technology services firms
are moving upscale in search of lucrative contracts for driverless cars and other advanced projects as
online innovation changes clients' needs. Companies from Tata Consultancy Services Ltd to Wipro Ltd
are all joining Infosys Ltd in investing in new, high-end technology, industry watchers say. Earlier this
week Infosys bought U.S. automation specialist Panaya Inc for $200 million.
Triggering change is a wave of invention allowing machines to talk to each other online, dubbed 'the
Internet of things'. Customers are ramping up: from about 5 percent now, strategy advisor Offshore
Insights estimates automation and artificial intelligence work will grow to 25 to 30 percent of an IT
outsourcing market seen by the national industry association as worth $300 billion by 2020.
Long wait for Airbus to bag replacement contract for IAF's Avros
The wait is getting longer for Airbus, the European defence and aerospace aircraft major, to bag the
over Rs 10,000 crore contract from Indian Air Force (IAF) for supply of 56 transport aircraft, which is a
replacement for the ageing fleet of Avro transport aircraft. Airbus along with Tata Advanced Systems
Limited (TASL) was the sole bidder for this contract. The government is in a dilemma over awarding the
contract to Airbus as no other bidder had shown interest. The IAF intends to replace its ageing Hawker
Siddeley 748 Avro aircraft fleet, with many of them in use for over four decades. The manufacturing of
Avro had ceased in 1988. The European major Airbus Defence and Space has pitched its C-295, the
twin-turboprop tactical military transport aircraft, priced around $30 million per piece. It is currently
manufactured by Airbus Defence and Space in Spain. The Ministry of Defence had asked eight global
vendors to submit Request for Proposals (RFP). The vendors include Boeing, Ilyushin of Russia,
Antonov of Ukraine, Franco-German consortium EADS (now rechristened Airbus), Embraer of Brazil
and Alenia Aeromacchi of Italy.
Kavin Mittal wants to do in the mobile Internet space what his dad, Sunil Mittal, did in telecom
Mittal Jr too adds thousands of subscribers every day - for his messaging app, Hike. And he feels he
has embarked on a journey that will transform lives. In Delhi's business circles, few know Mittal well
because he moved to London immediately after school. Somebody who saw him at a discussion forum
recently was impressed with his articulation and confidence: Mittal had come in denims. In January,
Mittal acquired Zip Phone of the US (the deal was wrapped in less than a month), which has enabled
him to offer free voice-calling service on Hike. In the next few months, he hopes to deliver services like
cricket updates through voice packs. "There are 14 to 15 features that we are working on right now,
which we will roll out over the next few months," says Mittal. Many wonder if Mittal will be able to open
revenue streams for Hike, which is a free app. Some even say that he will scale it up to a size and then
cash out of it. Mittal insists he is not interested in flipping the company, and revenue streams will open
up soon. At the moment, Hike offers free stickers, coupons and games. For higher versions, there could
be charges. Mittal feels it's possible to offer news feed and e-commerce on Hike. These offer more
monetisation possibilities. Eventually, he sees messaging services as a tool for content discovery,
some kind of a browser for apps. Still, Mittal realises that his venture is risky, and there are people
around who don't find his business plans convincing.
No formal proposal from post office to set up bank: Raghuram Rajan
Reserve Bank of India Governor Raghuram Rajan said on Friday the central bank had not received an
application from India Post to set up a bank in the country. The country's postal office had been
speculated to be interested in setting up banks across India. Earlier this month, it was among 41
applicants to run a new category of banks planned to bring basic banking services within the reach of
millions. The Reserve Bank of India last year granted its first new banking licenses in India in a decade
and has said it would consider applications on a rolling basis.
Dilip S. Shanghvi is a graduate in commerce from
Calcutta University. He is the Chairman and
Managing Director of Sun Pharmaceutical
Industries Limited and holds extensive experience
in the pharmaceutical industry.
Mr. Shanghvi started Sun Pharmaceutical
Industries with capital of Rs 10,000 in 1982 at
Vapi. He founded Sun Pharmaceuticals in 1983
with five psychiatry products. Today, it is India's
largest drugmaker and most valuable drug
company. Appreciation of Sun's stock led to a 50%
surge in his personal wealth, amounting to USD
4.7 billion. He has been named in the list of Asia’s
top ten wealthiest self-made billionaires, according
to Wealth-X. Shanghvi is also the Chairman and
Managing Director of Sun Pharma Advanced
Research Company and Shantilal Shanghvi
Foundation.
In 1997, he acquired Caraco Pharma, a loss
making American company, with the aim of
expanding Sun's reach in the United States and
turned them around in no time. The deal paid off;
the US now accounts for 60% of Sun's revenue.
He also acquired Israel's Taro Pharma in 2007. He
is also credited with steering Sun Pharma to fifth
place in the global generic drugs market.
Education
Shanghvi earned a Bachelor of Commerce degree
from the University of Calcutta. He is an alumnus
of J. J. Ajmera High School and Bhawanipur
Education Society College, from where he did his
schooling and graduation, respectively.
In News
On 19 Feb'15, he surpassed Mukesh Ambani as
the richest person of India, if one goes by the
promoter holdings in the listed companies of the
two groups. By virtue of his over 63% holding in
three group companies — Sun Pharma, Sun
Pharma Advanced Research and Ranbaxy Labs,
Shanghvi’s worth was about Rs 1.46 lakh crore
($23.42 billion at an exchange rate of 62.34 to the
dollar). In comparison, Ambani, through his 45%
holdings in two group companies — RIL and
Reliance Industrial Infrastructure, was worth Rs
1.32 lakh crore ($21.2 billion)
October 01, 1955
Amreli, Gujarat
University of Calcutta
2010: E&Y Entrepreneur Of
The Year
2011: Business India
Businessman of the Year
2011: CNN-IBN Indian of the
Year (Business)
Motorola Android Watch
Motorola recently launched it’s android wear watch.
Though it took time for the watch to hit the retail
stores, the interesting design probably makes up
for it.
The round look of Moto 360 distinguishes it from
the boxy designs of Samsung and LG android
watches. There is a black bar which hosts the LCD
drivers and ambient light sensors. The display is
edgeless and made up of corning gorilla glass
3.The watch comes with two types of straps–
leather and steel. It weighs only 49 grams despite
it’s size. There is a heart rate monitor at the back.
The bottom of the watch is covered in a shell. It is
for protection from water and dust.
The screen size is 1.56 inches with backlit LCD
and a resolution of 320*390 pixels. The density
comes out to be 205ppi. The display is not dense
but the colour calibration and brightness makes up
for it. The watch doesn’t have an always on mode.
There is a feature of ambient mode which shows
outline of contents.
Motorola has used 1 GHZ single core Texas
instruments OMAP-3. The other brands generally
use Qualcomm Snapdragon 400 SoC. The
company uses a 320 MAH batteries. The watch
has 4GB of storage space for music and apps. It
has a 512 MB RAM. The battery life is of 16-18
hours but reduces significantly if one uses “ambient
light” mode. Moto 360 is priced at Rs 17,999 in
India. From the point of view of smart watches
Moto 360 is a step in the right direction but still a lot
is desired.
Pros:
The circular design is stylish and looks
futuristic.
The price is affordable.
Provision of wireless charging.
Cons:
The processor is inefficient.
The battery life is on the lower side.
Unstable Bluetooth connection with the phone.
- Shashwat Shekhar
Near about Rs. 12,000