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.