PepsiCo to invest Rs. 33,000 crore in India: Indra Nooyi

PepsiCo Inc, the maker of Pepsi-Cola, Frito-Lay snacks and Tropicana juice, plans to invest Rs. 33,000 crore ($5.5 billion) in India by 2020 to expand its presence in the country, it said on Monday.

PepsiCo's plans come after rival Coca-Cola Co, the world's largest drinks maker, said in June last year it would invest a total of $5 billion between 2012 and 2020 to grow its business in Asia's third-largest economy.

PepsiCo and Coca-Cola's investments, driven by a growing middle class with higher disposable incomes, are likely to be welcomed by Indian officials who are trying to restore foreign investor confidence after growth has fallen to a decade-low.

"India is a country with huge potential and it remains an attractive, high-priority market for PepsiCo," chief executive officer Indra Nooyi said in a statement.

"We've built a highly successful business in India over the course of many years and we believe we've only scratched the surface of the long-term growth opportunities that exist for PepsiCo and our partners," said Indian-born Ms Nooyi on a visit to the country.

PepsiCo and its partners plan to invest in expanding their product range, doubling production capacity and improving their sales and distribution network, especially in rural markets, the company said.

The company has 38 bottling plants and three food plants in India, according to its website, and generates more than 10 billion rupees in annual sales from eight products including Pepsi and Frito-Lay potato chips, it said.

PepsiCo saw volumes in its snack business in Asia, the Middle East and Europe rise 4 percent in the July-September quarter, led by double-digit growth in China, Pakistan and Turkey. On the drinks side, volume rose 7 percent.

India is trying to attract more foreign investments by opening up various sectors including retail and telecoms in a bid to narrow its current account deficit.

Separately Britain's biggest clothing retailer Marks & Spencer on Monday opened its largest store in India in Mumbai, while Unilever said in April said it would raise its stake in Hindustan Unilever to as much as 75 percent from 52 percent.

However, India has also had some high-profile departures as the government has been seeing as struggling to pass reforms. India's economy also slowed to a decade low of 5 percent in the fiscal year through March, while inflation has been accelerating.

In October BHP Billiton Ltd surrendered almost all its oil and gas blocks in the country, citing an inability to carry out exploration operations.

Copyright: Thomson Reuters 2013

FLIPKART : Leading The Way

Continuing its capital-raising successes, online retailer Flipkart.com has mopped up a further $160 million (. 976 crore) from mostly new investors, taking the total in the fifth round to $360 million (. 2,196 crore). 
The latest funding values Flipkart, considered the Amazon of India, at over $1.6 billion, or . 9,760 crore. This is similar to its valuation in July, when it raised $200 million. Incidentally, Flipkart is worth more than the total market cap of all 15 listed retail companies, including Future Retail, Shoppers Stop etc. Among brand-led firms, Flipkart’s valuation is comparable with heavyweights such as P&G India and Tata Global Beverages. Flipkart Deal Shows E-Commerce Potential 
Tata Global Beverages owns Tata Tea, Tetley and Himalayan). It is also more valuable than 28 banks, including the likes of IDBI Bank, Union Bank, Central Bank of India, etc. 
Investment advisory firm Dragoneer Investment, investment bank Morgan Stanley Investment Management, private equity firm Sofina and Vulcan Capital participated in the latest round. 
Tiger Global — one of the first backers of the Bangalore-based company — also invested. 
“It’s the quality of the asset that is attracting investors,” said Raja Lahiri, partner at advisory firm Grant Thornton India. “E-commerce is a cash-intensive business. The top four-five players in this space will keep attracting investments in the next few years.” 
Experts point out that the latest fund-raising by Flipkart is an indicator of the growth potential of the . 10,000-crore online retailing industry, which is expanding at 54% annually, according to Internet and Mobile Association of India. Ecommerce is expected to grow to $200 billion (. 1.2 lakh crore) in India by 2020.
Besides Flipkart, online marketplace Snapdeal has so far raised about $50 million (. 305 crore) while fashion e-tailer Myntra received about $25 million (. 152 crore) in risk capital. “These new investors are willing to participate again if required like Naspers, Accel, and Tiger. Investor alignment with our strategy is very important,” said Sachin Bansal, 32, co-founder of Flipkart. 
Started as primarily an online book store in 2007 by two former Amazon India employees — Sachin Bansal and Binny Bansal — Flipkart has till date raised $541 million (Rs 3,300 crore). In the first phase of this round, Flipkart raised $200 million from South African Internet company Naspers, venture fund Accel Partners, and investment firms Tiger Global and Iconiq Capital. 
The company has ventured into payment gateway solutions this year by launching PayZippy. Flipkart, which employs close to 3,000 people, has close to 10 lakh visitors on its website every day. 
The company’s revenues were . 217 crore in 2011-12, according to a filing with the ministry of corporate affairs. But in 2012-13, it soared to an estimated . 2,000 crore. 
“Flipkart has got its timing, investments and vertical business strategy right,” said Rajesh Sawhney, angel investor and founder of GSF Superangels. “It will be difficult to replicate Flipkart’s success again, as that phase of scale is already over. New entrepreneurs will have to mine newer verticals.” The company changed its model from being inventory led to that of an online marketplace earlier this year. 
As per India’s current FDI rules, foreign investors are not permitted to invest in branded online retail business. Some experts feel that the change in model is also attracting foreign capital. 
The participation by San Francisco-based Dragoneer Investment Group ratifies Flipkart’s success globally. A long-term investor, Dragoneer, has backed companies such as Facebook, Alibaba and 360Buy in the past. “All our investors think long term; this is patient capital,” said Bansal. “Dragoneer also brings a network that is really helpful.” 

Source: The Economics Times

Rupee ends 0.74% lower at 62.23 after Rajan surprise

The rupee fell and bond yields surged after the Reserve Bank of India (RBI) surprised markets with an increase in the repo rate on Friday, putting its focus squarely back on managing inflation and the fiscal deficit.

The rupee extended losses after the decision, falling as much as 62.61 to a dollar, before suspected central bank intervention helped ease some of the losses. It closed at 62.23/24 to a dollar versus 61.77/78 on Thursday.

The RBI provided some reprieve to the bond market by unwinding some of the cash tightening steps undertaken since mid-July.

Still, the surprise 25 basis points increase in the policy rate to 7.50 per cent and the cautious stance on inflation, led to fears that the central bank was not done with raising the repo rate. The bond and interest rate swap curves steepened.

"We actually think the entire policy statement is slightly hawkish given the modestly greater focus on inflation over growth and the central bank's admittance that the WPI inflation is likely to be higher than originally anticipated," said Nizam Idris, a strategist with Macquarie Capital.

Bond yields rose, with the 10-year bond yield closing at the day's high of 8.58 per cent, up 39 bps on the day. The negative spread between the 1-year and 5-year OIS shrunk to 46 bps from 70 bps on Thursday.

The RBI lowered the marginal standing facility rate for banks by 75 basis points to 9.5 per cent and the minimum daily average cash balance that banks need to maintain to 95 per cent from 99 per cent previously.

The cash-tightening steps were initiated by the central bank in mid-July when the rupee began sliding to a series of record lows, to fall to as much as 68.85 to a dollar in late August.

RBI Governor Raghuram Rajan said the RBI would further ease tight cash conditions if the rupee stabilised.

The overnight rate, at which banks lend to each other, fell to 9.25 per cent from 10.25-10.40 percent levels after the RBI decision.

"It is an honourable exit for the RBI and is the best way Rajan could take a step back towards normalising things. The hike in repo rate gives the message that inflation is still high but he is trying to bring down the MSF corridor," said Manish Wadhawan, head of interest rate trading at HSBC in Mumbai.

"The bond yield curve and the OIS curve is steepening and it will steepen more until the central bank's next policy review in end-November."

Still, it gained 2 per cent during the week reflecting the recent inflows from the RBI's forex swap facilities as well as the Federal Reserve decision to continue with monetary stimulus.

It had fallen as much as 20 percent to record lows in late August, but has recovered around 9 per cent since Dr Rajan took office on Sept 4.

Sensex extended falls to nearly 3 per cent, with banking stocks leading declines before they retraced some losses to close down 1.85 per cent. The main banking index ended down more than 4 per cent.

Copyright: Thomson Reuters 2013

ADOPT AND ADAPT Starbucks Goes Plush for India, Gives its Stores a Local Flavour

  If Starbucks to you means the ubiquitous chain that sells coffee on the go through hundreds of small stores all over the US, its Indian avatar might come as a bit of a shock. 
The world’s largest coffee chain is positioning itself as an aspirational brand in this tea-drinking nation, and is going over the top with its stores, some of the plushest it’s opened anywhere in the world. “We believe a coffee house should be a welcoming, inviting and familiar place for people to connect, so we design our stores to reflect the unique character of the neighborhoods they serve,” a Tata Starbucks spokesperson said in an emailed reply. 
Starbucks entered India in October 2012 through an equal joint venture between the Seattle-based retailer and Tata Global Beverages. The alliance has opened 15 stores in India so far — in premium locations like Horniman Circle, Colaba and Bandra in Mumbai, Connaught Place in Delhi and Koregaon Park in Pune. Experts say it’s following the same strategy it adopted in China, where it opened in prominent locations to increase visibility to consumers. A person familiar with Starbucks’ India strategy, who asked not to be named explained, “Right now, the idea is to familiarise Indians with Starbucks.” 
Research on the coffee chain showed that for Indian consumers, coffee is not the primary reason to visit a café — and very few order a beverage to take away with them. Most consumers spend about 45 minutes in a café, using it as a spot to meet friends and relatives. 
So, Starbucks wanted its stores to be as appealing as possible while givingconsumers a unique “Starbucks experience”, the person familiar with Starbucks plans said. That meant stores in India don’t fit the global design template — each store has been designed differently, with “local” touches incorporated. For example, the store in New Delhi’s Connaught Place has ropes and chatai on the walls and henna patterns on the floor, with pictures of Indian spices on its walls. The store in Select Citywalk mall has locally-crafted wood paneling, while the Pune store incorporates localised railings and a rich display of antiques and copper. “The idea was to bring about the traditional elements of this country and present them in modern settings,” said the person quoted above. This is an experimentation phase, and Starbucks will eventually reach a standard format and design for its Indian outlets. Darshan Mehta, the chief executive of Reliance Brands, says he has so far visited four Starbucks outlets in Delhi and Mumbai. “They are beautiful in terms of shape, size and coziness. The Horniman Circle store is truly the high-end of Starbucks spectrum,” he says. Along with its locallysourced coffee, the outlets offer an Indianised food menu — with items like murg kathi wrap, wasabi kotumbwadi and chicken makhani pies next to the English muffins on offer. 
“Our stores are designed in-house and the mission of each designer is to create a spectacular third place that is steeped in the local culture and designed to reflect the unique characteristics of each neighborhood,” the Tata Starbucks spokesperson said. However, rival coffee chains don’t think this strategy is sustainable. “They would definitely like to make a statement through the first fifty stores. It’s very likely that later they will look at kiosks and routine stores,” says the marketing head of a rival coffee chain. “As far as their store ambience goes, they are overdoing it,” he added. 
The chief executive of another rival coffee chain agreed. “The focus and investments on ambience and store location is obvious. Many of us don’t have the bandwidth to invest so much on ambience,” he said, asking not to be named. 
Prices at Starbucks are in line with the premium store strategy: the chief executive of the rival coffee chain quoted has noted that Starbucks has increased prices for its food and beverages by as much as 20% in three months. “It’s an unprecedented move; most of us (coffee and quick service restaurants chains) are focusing on value and giving combo deals to consumers. Starbucks has done the opposite. Maybe, they can pull it off because of their deep pockets, but we can’t afford to take up prices and alienate consumers who are anyway looking a value deals,” he said, asking not to be named. 

Source: The Economics Times

Sensex soars 540 points as rupee nears 64 per dollar

The BSE Sensex surged 540 points or 2.8 per cent on Tuesday as the Indian rupee neared 64 per dollar mark. The broader Nifty traded over 160 points higher.

The trigger for sharp gains in Indian stocks was an over 1.5 per cent gain in the Indian rupee. The partially convertible rupee hit a high of 64.17 and is on track for its fourth straight day of gains after snapping a three-week losing streak.

As of 10.20 a.m., the rupee traded at 64.21 as against Friday's close at 65.24 per dollar. The rupee tracked higher euro, which gained against the dollar after disappointing US jobs data raised hopes that the Fed Reserve may be hesitant to announce tapering of stimulus as early as next week.

A surge in exports also helped sentiments. India's merchandise exports posted double-digit growth in the month of August, while imports were "contained", trade secretary S. R. Rao said on Monday, offering some respite for the troubled rupee. Official data is due later this week.

Sentiment in the currency has improved since Reserve Bank of India governor Raghuram Rajan unveiled a slew of proposals to support the rupee and open up markets on Wednesday, providing a breath of fresh air for investors unnerved by the country's worst economic crisis in two decades.

Gaurav Kapoor of RBS told NDTV that Dr Rajan has changed the thinking that central bank has a hands off approach to the rupee. He shared a vision for overhauling the financial sector and also announced two specific and unconventional measures to support the rupee, Mr Kapoor added.

Mayruesh Joshi of Angel Broking told NDTV that steps taken by Raghuram Rajan are not only aiding the Indian rupee, but also leading to a huge momentum in the Bank Nifty.

The Bank Nifty traded above the key 10,000 levels rising over 2 per cent today. The BSE Sensex, which has gained over 1,000 points in the previous three sessions, rose another 500 points in early trade today. The broader Nifty neared the 5,850 levels and is now trading above the 200 day moving average, considered to be a bullish signal.

Favourable global factors also helped sentiments on the Street today. Asian stocks rose to a three-month high on Tuesday as investors turned their attention to more data out of China,  while oil nursed heavy losses as fears of an imminent U.S. military strike against Syria receded even further.

A recent run of upbeat factory activity data from China, Europe and the United States further underlined that the global economy was on a firmer footing.

Source: NDTV Profit
(With inputs from Reuters)

Rupee Turbulence Forces Airlines to Hike Fares Ahead of Festive Season

 

In a surprise move, India’s carriers have taken away all promotional fares from their inventory, and in addition hiked prices by at least a fourth, one month before the festive season. SpiceJet, India’s second-biggest budget carrier, late on Tuesday, raised prices by up to 25%. “The rise in our operating costs has been abrupt, serious and largely driven by the rapidly weakening rupee. About 75% of the total spending is either directly or indirectly influenced by the US dollar, which has appreciated by 25% in this year alone,” said a spokesperson for SpiceJet. He added the airline “is in no position to absorb the additional burden and we are compelled to put through the fare hikes to neutralise the impact of increase in costs.” 
Most other airlines, including Jet Airways, IndiGo and Go Air, have followed suit. Air India hasn’t yet raised its fares, but is likely to soon implement a hike. “The increase of between 15% and 25% across sectors is very significant in the current economic environment, and early signs are that minor growth momentum that the air industry was seeing in July and August has been squashed. This increase has been forced upon the airlines on account of their rising input costs on account of the rupee falling, as well as the increase in the ATF,” said Sharat Dhall, president ofYatra.com. “If one carrier raises fares, we will have to match it. Also, it’s about time that we raised fares, since they were at record lows,” said an executive at a low fare carrier. 
As a result, a Delhi-Mumbai one way spot fare is now upwards of . 9,000 on almost all airlines, up 23% over last year. Prices for tickets booked even for a month in advance are about 25% higher. A one way ticket between Mumbai and Bangalore costs between . 6,793 and . 10,087 depending on how long before the actual date of travel it’s booked. 
“We were discussing a fare hike yesterday. We will likely implement them today,” said a senior executive at national carrier Air India. 
The latest fare hike comes earlier than usual, as airlines typically raise fares during the festive season, which starts in October. The hike will further hit load factors of these carriers, which have already been struggling to filling up their aircraft as a slowdown in the economy saps demand for travel. But their input costs have been steadily on the rise. State-run oil refiners recently raised jet fuel prices by 6.9% with effect from September 1. Jet fuel accounts for the biggest chunk — more than 40% — of an airline’s input costs, and was until recently the major reason for their continuous losses. 
The carriers have also been impacted by a historic fall in the rupee, which has further impacted their fuel costs, plane lease rentals and a chunk of their salary bill, which is paid to expatriate employees. The rupee has fallen about 19% against the dollar this year on fears about how India will fill the yawning gap in its current account. The airlines have, however, been unable to pass on the rise in costs, because of a major slowdown in air travel. 
Number of domestic passengers increased below 1% in January-May to 25.9 million. There is unlikely to be a substantial increase in the numbers soon. Hit by low demand, India’s carriers have been selling way below cost, cutting fares to their lowest in two years in July and August. Sydney-based CAPA-Centre for Aviation said in a recent report that Indian carriers will in the current quarter post net losses of $400 million to $450 million. “The only advice to travellers for the festive season is to plan their travel well in advance and go ahead with their bookings right away, as it is unlikely that we will see any reduction in prices from here to the end of the year,” said Dhall. He, however, added that the latest fare hike will curb demand even further, especially in the month of September. “Demand or bookings may decline by up to 5%,” he added. 
“What we have done is just gone back to levels of two months earlier. Even at this rate, considering almost 60% of our flights are booked a month in advance, we would have to fill 100% of our aircraft to make any money,” said an executive at a top budget carrier.

Source: The Economics Times

WARDING OFF FAKES FMCG Cos Take Legal Route to Bell Copycats Cos such as Pidilite, Emami, Dabur hit by trademark infringements

With smaller rivals gnawing away at their market share, India’s leading fast moving consumer goods (FMCG) companies are increasingly seeking court intervention to eliminate the possibility of any trademark infringement these days. 
Legal counsels, representing FMCG companies such as Asian Paints, Pidilite, Emami and Dabur, have in recent months approached the courts to check imitations of their products which are freely peddled in markets. “We have become more aggressive in the past couple of years. In fact, we have opened a separate division called Brand Protection Cell, which is made up of retired police officers, and works towards hunting down such counterfeit products,” says Harsh Agarwal, director of Emami India. 
Recently, Kolkata-based Emami, maker of ‘Boro Plus’ and other brands, moved the Bombay High Court and got a favourable ruling against HN Pharmacy and Nakoda Enterprises; both firms were engaged in some kind of trademark violation by trying to copy Emami’s popular Zandu Balm, used for pain relief. 
Also, the country’s largest ayurvedic medicine maker Dabur India won a case in the Bombay high court against Ahmadabad-based Bajaj Herbals regarding infringement of its toothpaste brand Meswak. The court fined the promoters of Bajaj Herbals for . 15 lakh, asking them to pay . 10 lakh to Tata Memorial Centre in Mumbai for the treatment of poor patients, and the rest . 5 
    lakh to Dabur India. 
The Burman family, promoters of Dabur India, was also engaged in a case in Delhi High Court involving its air freshener Odonil, where a local company was camouflaging its product by calling it 
    Odokill. 
“Over the years, Dabur has taken steps to protect its brand and trademark against infringement, both in India and abroad, besides taking on spurious product manufacturers and counterfeiters,” said Ashok Jain, VP-Finance & Company Secretary, at Dabur India. 
India’s largest paint company Asian Paints also had its share of trouble when lesser-known Oriental Oil and Paint tried to sell its product by calling it Jay Utsav, which comes close to Asian Paint’s Utsav. 
Pidilite Industries, the country’s largest adhesive maker, known for its popular ‘Fevicol’, had to take court’s help against Jubilant Agri & Consumer Products to protect its brands Fevicol Marin and Marin as Jubilant had applied for the registration of its Marine Plus. “As companies diversify into various product segments, in-house strategies are coined for better IP protection, particularly against the growing menace of counterfeit,” said Advait Sethna, advocate and counsel, specialising in IP Laws. 
“These proactive steps, coupled with IP raids by enforcement agencies against counterfeit, are helping to strengthen valuation of IP today, especially in the backdrop of the present economic slowdown,” he added. 
Hard times require tough steps and this is a good move by domestic consumer companies, feels a senior consumer analyst of a UK-based investment banking firm. “In the long run, such steps pay off as even consumers become aware of genuine and fake,” said the analyst, requesting anonymity. Rampant misuse of any trademark would eventually lead to its dilution, eroding the value of the brand, and companies are dead serious about protecting their intellectual property. 
Mumbai-based contract manufacturer VVF India, for instance, has approached the court to protect its bathing soap brand ‘Jo’, alleging that its brand is being compromised due to the “almost identical and deceptively similar” product called ‘Jijo’. “Companies are trying to protect their brands by taking various steps which include raids by court-appointed commissioners and police to seize the infringing products,” says Rahul Chaudhry, partner at Delhi-based IP firm Lall Lahiri & Salhotra (LLS). 

Source: The Economics Times

Rupee, Sensex rally; Raghuram Rajan fuels confidence but faces some sceptics

The rupee gained its most in a week on Thursday after new Reserve Bank of India (RBI) chief Raghuram Rajan unveiled a spate of measures late on Wednesday to attract more inflows, including offering a concessional forex swap rate to banks for attracting deposits from overseas Indians.

The rupee gained 1.6 per cent to close at 66.01/02 against Wednesday's close of 67.065/075, a second day of gains and its biggest daily percentage gain since August 29. It rose to an intraday high of 65.53.

Stock markets, too, closed with over 2 per cent gains. The BSE Sensex advanced 412 points to close at 18,980, while the Nifty closed at 5,592, up 145 points. The Bank Nifty saw its biggest 1-day gain in four and a half years.

Amid the cheer over Dr Rajan's energetic Wednesday debut, investors warned that he cannot by himself be expected to repair an economy mired by slowing growth and a record high current account deficit that has helped fuel a drop in the rupee of as much as 20 per cent this year.

"This is certainly not the bottom. Rajan means business, but most of his measures are just statements of intent, especially in the light of government finances being so precarious," said G. Chokkalingam, managing director and chief investment officer at Centrum Wealth Management.

"The continued deceleration of the industrial economy, the fiscal conditions, and the Fed tapering worries will continue to weigh," he said.

Dr Rajan faces pressure from investors to roll back the central bank's controversial steps to defend the rupee by draining cash from the market and raising short-term interest rates at a time when investors are clamouring for ways to boost growth.

The government has struggled to push through politically tough reforms needed to fix the economy, and elections due by next May raise the prospect of expensive populist spending that could threaten the country's sovereign credit rating, which is one notch above junk status.

On Thursday, however, scepticism was trumped by euphoria over Dr Rajan, a prominent former chief economist at the International Monetary Fund, unexpectedly unveiling a flurry of proposals in his first day at the helm of the central bank.

Some new measures that he announced to prop the rupee included providing exporters and importers more flexibility in hedging their forward currency contracts, as trading firms had long complained about regulation that left them unable to quickly cope with rapid currency movements.

Among the chief challenges and difficult decisions Dr Rajan faces is navigating uncertain global conditions marked by rising military tension over Syria, which is pushing up India's oil import bill, and the prospect of an end to US monetary stimulus.

The RBI has been the main line of defence against the rupee so far, with Dr Rajan's predecessor Duvvuri Subbarao having opted to sacrifice near-term economic growth, putting interest rate cuts on hold in a quest for financial stability.

With economic growth remaining weak, investors are already clamouring for the RBI to change course.

"I will not give in to the personality and sentiment. I will look at data," said Phani Sekhar, a fund Manager at Angel Broking in Mumbai.

"The governor has no control on fiscal policy so what do you expect the RBI to do? If Rajan continues focusing on inflation, his newly found fan club will vanish sooner than later."

IN SEARCH OF REFORMS
Asia's third-largest economy is suffering from sluggish investment as well as slowdowns in the manufacturing and services sectors.

Investors have expressed little faith that New Delhi can push through substantial reforms, such as a hike in subsidised fuel prices, that could help revive confidence in the economy.

Measures the government has passed, including curbs to gold imports and opening up sectors for foreign investments, have been dismissed as too small or not helpful enough by markets.

India's lower house of Parliament approved changes aimed at luring foreign asset managers to run retirement funds on Wednesday, but foreign firms say the new law is unlikely to immediately trigger a flood of investment.

The rupee is by far the biggest decliner among the Asian countries, even more than the 13 per cent fall in the Indonesian rupiah, a country also suffering from a current account deficit and concerns about economic growth.

Economists say the government will ultimately need to step in to provide more long-lasting support for the rupee.

"India's myriad cyclical and structural impediments will continue to hold back the economy for the time being, and risks of a deeper crisis are non-trivial," Deutsche Bank wrote.

"But (Wednesday's) statement shows a fresh and cohesive vision of monetary and financial sector policy from a newly appointed central bank governor can shine a much-needed light on India's promise and potential."

Copyright @ Thomson Reuters 2013

Raghuram Rajan's big-ticket announcements today

Reserve Bank of India governor Raghuram Rajan on Wednesday announced a slew of proposals in his first day of office.

Below are some highlights of the proposed action.

MONETARY POLICY

• Postpones first monetary policy statement as governor to September 20 from September 16
• To set up a panel on how to strengthen monetary policy framework, which will submit report in three months

RUPEE, CAPITAL INFLOWS

• To allow exporters to re-book cancelled forward currency contracts up to 50 per cent of the value of cancelled contracts and up to 25 per cent for importers
• Will push for more trade settlements in rupees, open up financial markets for those who receive rupees to invest back in
• Will offer a special window for swapping foreign currency non-resident (FCNR) deposits with a minimum tenor three of years and more, at a fixed rate of 3.5 per cent per year
• Will raise overseas borrowing limit of 50 per cent of unimpaired Tier I capital to 100 per cent for banks
• Borrowings mobilized under this provision can be swapped with RBI at a concessional rate of 100 basis points below the ongoing swap rate prevailing in the market

DEBT/BROADER MARKETS

• Will introduce cash-settled 10-year interest rate future contracts
• Will examine introduction of interest rate futures on overnight interest rates
• Will steadily but surely liberalise markets, restrictions on investments and position-taking
• To issue inflation-indexed savings certificates tied to CPI to retail investors by end November
• Need to reduce requirement for banks to invest in government securities in a calibrated way

BANKING SYSTEM

• To set up external committee to screen bank license applicants
• Hopes to announce licenses within, or soon after, January 2014
• Will push foreign banks to set up wholly-owned subsidiaries
• Will look at continuous or on-tap bank licensing system for applicants
• Will issue guidelines to free rules on setting up bank branches for domestic commercial banks
• To look at rising non-performing assets and restructuring/recovery process
• Need to accelerate the working of debt recovery tribunals and asset resconstruction companies
• Proposes to collect credit data, examine large common exposures among banks
• Will encourage banks to clean up their balance sheets
• Will encourage banks to commit to raising capital when necessary
• Bad loan problem is not alarming yet, but will fester if unaddressed
• To set up committee that will access every aspect to financial inclusion

Source: NDTV Profit

RBI revises gold import norms, says SEZ supplies not exports

The Reserve Bank of India (RBI) today revised gold import norms, saying that supplies of the metal to special economic zones (SEZs) will not be counted as exports to qualify for further purchases from overseas.

As per existing norms, 20 per cent of every lot of imported gold has to be made exclusively available for the purpose of exports.

"Gold made available by a nominated agency to units in the SEZ and export oriented units (EOUs), Premier and Star trading houses shall not qualify as supply of gold to the exporters," RBI said, while revising its notification of August 14.

It said that entities and units in SEZs and EOUs, Premier and Star trading houses are permitted to import gold exclusively for the purpose of exports.

The RBI has taken several measures in recent weeks to curb demand for gold, considered one of the major reasons for the widening current account deficit.

The deficit touched a record 4.7 per cent of the GDP in the last fiscal. The government aims to bring it down to $70 billion this fiscal from $88 billion in 2012-13.

Gold imports in April-July rose 87 per cent to 383 tonnes.

Source: NDTV Profit

7 reasons why India is staring at a currency crisis

The Indian economy is in a dangerous position today and the situation can potentially spiral out of control. Here's how.

A current account deficit occurs when a country is importing more goods and services than it is exporting (if the reverse was true, it would be in a surplus). India's current account deficit has exploded 1125 per cent since 2007, going from $8 billion to $90 billion. In other words, India is importing $90 billion more than it is exporting.

However, in 2007, India had $300 billion in foreign exchange reserves. It could cover its current account deficit 37.5 times over. Currently, India's foreign exchange reserves have gone down to $275 billion: it can only cover its current account deficit 3 times.

India's current account deficit has grown steadily throughout the past 5 years: it did not just balloon up overnight. Since many of the countries that trade with India only accept foreign currencies in return (mainly the greenback), it would seem obvious for India to continuously maintain a growing stockpile of foreign reserves through the years; alas, India did not do that. It's no wonder that Prime Minister Manmohan Singh tried to reassure the country that unlike 1991 when "the country only had foreign exchange reserves for 15 days of imports.... now we have reserves for seven months". 7 months before we run out of reserves? That hardly sounds reassuring.

Here is where the situation can begin to sound grave. The US economy, 5 years post the 2008 financial crisis, is starting to make an economic emergence. When a country's economy is growing, interest rates start to go up, and the country starts printing less money than required. We are now sitting on a dangerous situation where, not only is the rupee depreciating heavily against the dollar, but the supply of dollars is likely to shrink in the coming months. We emphasized the need for US dollars in order to keep the currency account deficit in check. This puts an additional burden on the rupee.

Furthermore, two additional factors will be at play here. Firstly, the push in interest rates in the United States and overseas creates higher incentives for international investors to invest abroad versus India. Already, the impact is being felt. Since March of this year, foreign exchange reserves have already dropped by $14 billion due to investors opting to invest in the US and other countries versus India.

Secondly, it is important to note that a current account deficit cannot be labeled as "bad" just because it is not a current account surplus. After all, most developed countries run high current account deficits. A high current account deficit can be required if a country is growing and requires imports to fuel growth. A way to measure the health of a current account deficit is to compare it to the country's GDP. Academic studies suggest that a current account deficit which is 2.5 per cent of a country's GDP is sustainable.

What makes India's situation dangerous is that it is currently at almost 5 per cent of its GDP. Furthermore, economists polled around the world are expecting India's GDP to drop even further this fiscal year.

What does this all mean? Ultimately, the faith the marketplace places on its economy is what gives it reassurance. Sentiments run the market. What are the current signs pointing to?

1. Rupee weakness

Further weakening of the rupee due to a lower supply of dollars and higher interest rates abroad.

2. GDP growth

Economists predicting a lower GDP for the current fiscal year, a disastrous sign since we just witnessed a GDP drop from 6.2% to 5% from the last fiscal year to the current fiscal year.

3. Current account deficit

A further rise in India's current account deficit.

4. Foreign reserves

The government signaling that within months it might run out of foreign reserves.

5. Short-term debt

$170 billion in short-term debt to pay, while in 2008 it was just $80 billion.

6. FII investment

From May to August 2013, FII investments in India having gone down by $2 billion.

7. Elections

Both the private and public sectors staying clear on investment strategies until next year's elections.

When taking all of this into account, it will require a heroic effort by the newly appointed RBI governor, Raghuram Rajan, to prevent a currency crisis from unfolding.

Source: NDTV Profit
By: Raghu Kumar

Rahguram Rajan: Will tackle economic issues 'one step at a time

Faced with declining value of the rupee and a widening current account deficit, RBI Governor designate Raghuram Rajan today said there is no magic wand to solve the challenges before the country overnight and he will endeavour to deal with them one at a time.
     
Mr Rajan, 50, who has been in the Finance Ministry as the Chief Economic Advisor for a year, will replace Duvvuri Subbarao as RBI Governor who demits office on September 4.
     
"We have enough ideas. It is not just the currency, it is financial inclusion, it is growth. I think there is a lot to do. There are challenges in the economy... These things are not going to be overcome overnight. There is no magic wand. But there are undoubtedly solutions to many of the problems that the RBI can tackle and the job is to go ahead and do it.
    
"We will do it one step at a time. Make sure that it progresses every day," he told reporters on his last day of office at the Finance Ministry.
     
Mr Rajan, a former IMF chief economist, was appointed as the Chief Economic Advisor in the Finance Ministry in August last year. His appointment as the 23rd central bank chief comes at a time when the economy is battling industrial slowdown, declining rupee, rising prices and all-time high current account deficit.
     
"Expectations are challenging. I think the job is a complex one. There are many issues including managing institution itself...
     
"I think in some ways there are commonalties among bureaucracies but each organisation has its own culture, has its own tempo... I am looking forward," he said.
     
Besides combating the key issues like volatile rupee and current account deficit, Mr Rajan will have to take a call on continuing with RBI's practice of mid-quarter policy review every 45 days, which was initiated by Mr Subbarao.

Source: NDTV Profit

How to Make Your Personality Stand Out

Don't be loud. Other people find noisy people to be obnoxious and annoying. We don't want that, do we?

Know when it is right to argue with someone. Learn to accept that others may be right and you may be wrong. Nobody likes to be around someone constantly pointing out that they are right.

Know when to speak up. Defend friends in tough situations.

Don't be afraid to talk to others. Always look people in the eye when you're talking with them. It makes you appear more confident. Nobody wants to talk to someone who can't stop staring at their feet. Remember to stand up tall. Never slouch.

Respect and value everyone and everything.

You get what you give

Having a sense of humor is a plus. Know the right time to laugh. It's good to crack a few jokes every now and then, but don't overdo it.

Remember personality doesn't mean that you should have looks. Personality means to represent the people how you are. You should have confidence in your eyes, voice and your face too which should obviously reflect to others

Don't be afraid to be different. People will admire you for your unique personality

Be kind and considerate. People who truly practice these virtues to everyone they meet can be true to themselves and still stand out.

How to Be Bold

"Begin, be bold and venture to be wise."

-Horace

If you're shy, hesitant, or passive, you run the risk of leading a boring life marked by routine and unfulfilled goals. Most progress has been led by people who were bold--scientists, public servants, artists, entrepreneurs, and others who didn't wait for opportunities; they created opportunities. So if you want to be bold and unstoppable, here are some ways to kick start your momentum.

Pretend you're already bold. If you were to switch places with somebody who is as bold as bold can be, what would they do in your shoes? If you already know someone who's bold, imagine how they'd act. If you don't know anyone like that, think of a character from a movie or book who's daring and brave. Spend one hour a day or one day a week pretending to be them. When you do this, go somewhere that people don't know you and won't act surprised when you do things that are out of character. Go through the motions and see what happens--you might discover that amazing things happen when you're bold, and you might be convinced to carry this bold behavior into your everyday life.

Make the first move. Whenever you're feeling hesitant--especially in your interactions with others--swallow your pride and make the first move. Ask your acquaintance if they'd like to go to the bar down the street for drinks after work. Tell the person you fancy that you've got two tickets to a concert and you'd like them to come with you. Give your significant other a big hug and apologize for that time you overreacted a few months ago. Smile and wink at the attractive cashier.

Do something unpredictable. What could you do that would completely surprise the people who know you? Wear high heels? Skydive? Take a dance class? Bold people aren't afraid of trying new things, and one of the reasons they're so exciting to be around is that they keep you guessing. You can start small, perhaps by wearing a color or style of clothing that you don't normally wear, or visiting a place you normally wouldn't visit. Eventually, you may get to the point where you entertain ideas that make other people's eyes widen when you mention them.

GDP growth at 4-year low: key takeaways

India's economy grew at 4.4 per cent in the April-June quarter, the slowest quarterly rate since the global financial crisis. This was also the third consecutive quarter of below 5 per cent growth, building more pressure on the government to take immediate action to resuscitate it. The Indian economy grew at 5.4 per cent in the same quarter last year.

1. GDP or gross domestic product for the first quarter came in below estimates of 4.6 per cent. During the previous quarter, the country's economy grew at 4.8 per cent.
2. Agricultural sector output was however better that estimates at 2.7 per cent against 1.4 per cent during the January-March quarter
3. Industry output during the April-June quarter was worse than estimates, up 0.2 per cent. Industry output in the previous quarter grew 2.7 per cent
4. Manufacturing sector showed a de-growth of -1.2 per cent, showing a sharp drop in manufacturing activity
5. Trade, hotels, transport segment, a key indicator of services sector, posted the biggest drop in growth to 3.9 per cent from 6.2 per cent
6. Private final consumption expenditure growth which reflects consumer demand slowed down to 1.6 per cent during the first quarter
7. Gross fixed capital formation dropped 1.2 per cent in the first quarter, a reflection of investment activity slowing down
8. There was no pick up in exports during the quarter, data showed a de-growth of -1.2 per cent
9. Government spending on community, social & personal services went up sharply during the quarter to 9.4 per cent from 4 per cent a quarter ago
   
   
   Going forward government finances are likely to get stretched
   Source: NDTV Profit