Narendra Modi - ICFAI Business School

The Global AnAlyst | JUNe 20141

A RISING CHINA, INDIA & THE USA Triangular Relationship in a Multipolar World

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ASSESSING FMThe 4D Approach

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India’s Second Man of Destiny

Narendra Modi


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Prashant Gupta, IIT-K, IIM-L, CEO - Edunirvana Dr David Wyss, Former Chief Economist,

S&P & Visiting Fellow, Watson Institute at Brown University. NY, US

Dean Baker, Economist and Co-founder Center for Economic and Policy, Washington, US

William Gamble, President, Emerging Market Strategies, US Andrew K P Leung, International and Independent China, Specialist at Andrew Leung, International Consultants, Hong

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June 2014 vol. 3 | no.6

An Unchecked Mandate - A Fantastic Start

A four-letter word “Modi” has become the chant of a new generation of Indians and hundreds of millions of their seniors, including the minorities have given India’s most decisive

mandate since 1984. Yes, Narendra Modi is going to be Independent India’s most-hated and most-exciting Prime Minister in an election in which the world and India got divided in swinging from one side to another in an excruciatingly arduous nine-phased election - inarguably, the world’s largest free and fair democratic eleciton. For the world as well as India, Modi’s rise to the top has huge implications as it may involve a radical departure from status quo on policies from foreigin policy, governance and definition of socialism and secularism besides ground-shifting economic policies and initiatives. While the Congress has governed almost 82 per cent of the country’s 67-year old history, it has been decimated to a tally in Lok Sabha that doesn’t even officially qualify it as opposition.The mandate has many implications even as it raises crucial questions on what to expect for the country. Firstly, it is the most unchecked mandate in a generation not seen since Rajiv Gandhi’s times. Two, India’s growth rate has halted to a virtual stop that almost makes it look like a cookie that crumbled. Three, there is widespread apprehension amongst India’s minorities, mostly the Muslims about the policies of inclusiveness, religious freedom and develoopment. Four, there is great curiosity about the way forward on India’s economy and governance which has seen near-paralysis over the past one decade. Five, it is goodbye to coaltion politics which made the PM’s office run like a consensus party and so all eyes are on whether Modi will continue to include people or exclude wide sections of the population and their representatives whose support, his party in government does not really need.Lastly, whether India’s foreign policy will be one that is beligerant or one that continues to press forward its agenda with a bias for soft power. There are questions to be answered all along. Turn the page 32... - Team Global ANALYST


LEADERSPEAK

Indian citizens have placed their hopes in a new political configuration that’s capable of reviving the economy and enabling it to meet its considerable potential. If Modi is serious about meeting those hopes, he should frame a detailed initial response around speed — and make it a point that his administration takes decisive steps in its first 100 days.- Bloomberg

The main obstacles to the economic growth forecast are an uncertainty on monsoon and a delay in fast-tracking projects, if any, by the new government. The key risk is that expectations from the new government are so high, and that it does not deliver in a commensurate fashion to de-bottleneck the supply side. Despite these risks, India’s

Every good company knows that a customer-centric focus enables them to enhance the value for all its stakeholders. Every good government knows that credible policies with accountability and governance enable the country and the people to prosper. The key is effective implementation and execution.

- S Chandramohan, Group CFO, TAFE

The current non-system in international monetary policy is, in my view, a source of substantial risk, both to sustainable growth as well as to the financial sector. It is not an industrial country problem, nor an emerging market problem; it is a problem of collective action. The sooner we recognise that, the more sustainable world growth we will have. Raghuram Rajan, Governor, RBI

In a positive scenario, the Sensex would

move up to 30,000 by December end. FY15 will be a key year to

watch out for corporate profits. Banking, capital goods, infrastructure,

and power sectors will be chased.

Modi should find a way to disinvest as valuations

would be good in euphoric times. Large investors should stick

to large-cap stocks and small investors can buy

selective mid-caps as it is a bottom-up market.

- Nirmal Jain, Chairman,

India Infoline

Inflation management and fiscal consolidation as the key challenges before the new government while promising expeditious decisionmaking over the next few months. - Arun Jaitley, Finance Minister


medium-term growth prospects are good and will benefit from a stable government for the next five years.- Tushar Poddar, India Chief Economist, Goldman Sachs

The RBI should designate a specific category of

investors in banks known as authorized bank

investors (ABI), who would be allowed to hold as much as 20 per cent in banks without regulatory approval. Such investors would include funds with

diversified investors.- RBI (Nayak) Panel on

Governance of Bank Boards

According to Reserve Bank of India (RBI) report published in February 2014, there were nearly 350 million debit cards compared to 19 million credit cards. Credit card penetration in India has been on a downward journey and the cannibalization is benefiting debit cards and Internet banking. In 2012, the number of credit cards were 10-15 per cent higher than what it was in 2013 as banks are restricting the issuance of credit cards due to credit risk and higher non performing assets (NPAs).- Vishwas Patel, Chairman, PCI


LEADERSPEAK


If NAMO focuses on the right issues, in a manner that uses up India’s current and latent potential in all the seven areas discussed in this analysis, India will have a golden run. This is the tipping point, the turning point and the inflection point in India’s tryst with destiny. We hope Modi gets all the god-speed and support to succeed at India’s highest office at its most needed hour. There was never another point like this in a nation’s history that a mandate this strong came to a man so revered and yet paradoxically so hated that millions of voters in India, young and old have placed in a leap of faith. Hope Modi and his team grabs this and help India leapfrog to the status of developed nations that it desperately deserves...

COVER STORy

India’s Second Man of Destiny..........32

C O N T E N T S

VIEWPOINT

12 The New Government - Two Policy Challenges Amids the Western media often refers to India is as the ‘noisy’ democracy. As always, the noise has reached its peak during the electoral phase, but we can look forward tothe dust settling after the new government formation. A stable regime at the centrewill ensure that India regains its growth trajectory,

14 Election Results - Impact on Real EstateNo government has a magic wand which can solve all problems at once. Reforming the economy is a gradual process, and we need to be patient. A stable government at the centre has potential to boost the sentiments and in return, attract foreign money.

BANKING / FINANCIAL SERVICES

16 Indian Banking Sector - Realty Bites!Banks will have to recognize the fact that retail credit has its own risks and exposes them to individuals in large volumes as compared to corporate loans. The whole appraisal process and risk underwriting process has to take this into account.

25 Effective Bank Audit - Emerging ChallengesHistory will remember with gratitude names like Vinod Rai, Raghuram Rajan, Seshan, Sam Pitroda and Sreedharan who became legends in their own times for the contributions they made to the causes they took to heart. Here we look at the role of auditors in protecting the country’s resources and ensuring prudence in exploitation and use of precious resources for economic development.

INDUSTRy

18 Telecom - Dial ‘E’ for Exit?Almost CARE Research believes that the increased market share limit (50 per cent from earlier 35 per cent) would avail enough room for larger players like Bharti Airtel and Vodafone to go for acquisitions in most of the circles. Consolidation would provide much needed exit to some of the weaker players along with reducing the hyper-competitive environment in the sector.

53 E-Tailing in India - On a Firm FootingStudies indicate that India will go the China way in terms of web-only players dominating the online market, given the low organized retail penetration.


A RISING CHINA, INDIA & THE USA Triangular Relationship in a Multipolar World

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ASSESSING FMThe 4D Approach

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India’s Second Man of Destiny

Narendra Modi


SPOTLIGHT / PERSONAL FINANCE

22 Assessing Fund Manager - The 4D ApproachMutual fund investors generally prefer a fund due to its historical performance. In the context of an equity fund, the primary expectation is that the fund manager should outperform his stated benchmark. For eg., if his benchmark is that of Nifty 50 or Sensex, the fund’s performance should be better than the benchmark to justify investor confidence in the fund. The extent to which the manager outperforms the benchmark is the second important element of attraction.

START-UP XPRESS

30 2CSR

In an exclusive interview with The Global ANALYST, Sonia Agarwal, Co-Founder, 2CSR. shares her entrepreneurial journey, what prompted her to start 2CSR, challenges and strategies to combat these challenges in five years from now.

INTERNATIONAL

38 Russian Economy - The Challenges Ahead

With dark clouds of economic and political sanctions looming over Russia in the backdrop of the Crimean accession, Russia’s economic future is being arguably considered as shaky by many western economic and political pundits while the others from the pro-Russian bloc are upbeat about the country’s economic future in view of the speedy growth and market reforms undertaken by the government in recent times, which according to them would crenelate Russia from the ensuing embargos.

49 A Rising China, India and the US - A Triangular Relationship in a Multipolar World

The world has become increasingly multi-polar, inter-connected, and interdependent. Unlike previous times, American primacy will not always work. The shape and dynamics of the global order, however defined, are clearly changing rapidly in a multi-polar world.

BUSINESS ENVIRONMENT

44 One Person Company - Transforming form of Proprietorship A new business ownership concept is an alternative for Indians, who typically operate using the risky concept of a proprietorship.

CEO Corner

46 Management Education / B-Schools In In an exclusive interview with The Global ANALyST, Akhil Shahani, Managing Director, Thadomal Shahani Centre For Management (TSCFM) discusses about management education scenario in the country and the ways to tackle the lack of employability skills among the B-School grads etc.

REGULARS 03 Editorial 04 Leaderspeak

08 Decoding Data

10 In-Depth ANALYST

55 Bookshelf

57 Apolitical

58 Test Your Biz IQ

June 2014 Vol. 3 | No.6


India: Networked Readiness Index (NRI)

dEcodinG Data

Specifications Rank (out of 148)

Value (1-7)

Networked Readiness Index 2014 83 3.8

Networked Readiness Index 2013 (out of 144) 68 3.9

A. Environment subindex 91 3.8

1st pillar: Political and regulatory environment 73 3.6

2nd pillar: Business and innovation environment 103 3.9

B. Readiness subindex 85 4.6

3rd pillar: Infrastructure and digital content 119 2.7

4th pillar: Affordability 1 7.0

5th pillar: Skills 101 4.0

C. Usage subindex 91 3.4

6th pillar: Individual usage 121 2.1

7th pillar: Business usage 51 3.8

8th pillar: Government usage 41 4.5

D. Impact subindex 60 3.6

9th pillar: Economic impacts 50 3.5

10th pillar: Social impacts 73 3.7

When The Global Informa-tion Technology Report (GITR) and the Net-

worked Readiness Index (NRI) were created more than 13 years ago, the attention of decision mak-ers was focused on how to develop strategies that would allow them to benefit from what Time Magazine had described as “the new econo-my”: a new way of organizing and managing economic activity based on the new opportunities that the Internet provided for businesses.1 At present, the world is slowly emerging from one of the worst fi-nancial and economic crises in de-cades, and policymakers, business leaders, and civil society are look-ing into new opportunities that can consolidate growth, generate new employment, and create busi-ness opportunities. Information and communication technologies (ICTs) continue to rank high on the list as one of the key sources of new opportunities to foster innova-tion and boost economic and social prosperity, for both advanced and emerging economies. For more than 13 years, the NRI has provided decision makers with a useful conceptual framework to evaluate the impact of ICTs at a global level and to benchmark the ICT readiness and usage of their economies.

Extracting Value from Big DataData have always had strategic value, but with the magnitude of data available today—and our capability to process them—they have become a new form of asset class. In a very real sense, data are now the equivalent of oil or gold. And today we are seeing a data boom rivaling the Texas oil boom of the 20th century and the San Francisco gold rush of the 1800s. It has spawned an entire support industry and has attracted a great deal of business press in recent years. Big data can take the form of

need to select the data source it will use to create value. More-over, creating this value will re-quire the right way of dissecting and then analyzing those data with the right analytics. It will require knowing how to sepa-rate valuable information from hype. This world of big data has also become a source of concern. The consequences of big data for issues of privacy and other areas of society are not yet fully understood. Some prominent critics, such as Jaron Lanier,2 call on us to be cautious about read-ily believing any result created by the “wisdom of the crowd.” Moreover, applications of big data in military intelligence have created a growing concern for privacy around the world.Indeed, we are now living in a world where anything and everything can be measured. “Data” could become a new ideology.Courtesy: World Economic Forumw

The Global Information Technology Report, Big Data 2014

structured data such as financial transactions or unstructured data such as photographs or blog posts. It can be crowd-sourced or obtained from propri-etary data sources. Big data has been fueled by both technologi-cal advances (such as the spread of radio-frequency identification, or RFID, chips) and social trends (such as the widespread adoption of social media).Big data has arrived. It is chang-ing our lives and changing the way we do business. But suc-ceeding with big data requires more than just data. Data-based value creation requires the iden-tification of patterns from which predictions can be inferred and decisions made. Businesses need to decide which data to use. The data each business owns might be as different as the businesses themselves; these data range from log files and GPS data to customer- or machine-to-machine data. Each business will


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A mandate to take much-needed hard decisions: CRISIL

IN-DEPTH / BUSINESS INSIGHTS

The decisive mandate at the 2014 gen-eral elections has created the best en-vironment in a long time to bite the bullet on government finances so as to ensure a long and healthy phase of economic growth in India.

CRISIL believes the new government’s to-do list to revive the economy is a long one, but unfortunate-ly, there is limited ability to use growth-supportive monetary and fiscal policies. Typically, monetary (cut in interest rates) and fis-cal instruments (increase in government spending) are used to prop up a sagging economy in the short run. However, India has run out of such counter-cyclical policy ammunition as its inflation and def-icits remain high and, in fact, need to be trimmed. Says Roopa Kudva, CEO & Managing Director, CRISIL: “The lowest-hanging fruits are fast-track-ing of projects in pipeline and resolving iron ore and coal mining issues. This will improve the ef-ficiency of capital that is now stuck, pave the way for better returns on investment, create jobs, lift income growth and spur private consumption de-mand.” The other 5 imperatives for the new government are:

1. Taming inflation: This will require better monetary and fiscal poli-cy coordination, reducing food inflation through measures such as dismantling the APMC Act, and also bringing about a sea-change in the country’s storage and distribution capacities for fruits and vegetables. This is particularly important in the current year in view of the rising risks of monsoon failure spurred by El Nino.

2. Pragmatic fiscal consolidation: CRISIL believes this will entail reducing subsi-dies and curbing expenditure, and ensuring that the money spent on social welfare schemes create durable assets than remain just cash handouts. It is also critical to simultaneously introduce growth and revenue-enhancing measures such as clearing the long-pending Goods & Services Tax (GST) and improving tax compliance. 3. Improving asset quality at banks and recapi-talisation: The ability of banks to finance higher growth is limited because of the festering problem

of bad assets and inadequate capital. We will be looking out for decisive steps on distressed assets and capital infusion.

4. Encourage debt markets: CRISIL believes India’s corporate debt market needs to be fostered for growth to be sustain-ably funded. Banks alone cannot deliver the large amount of capital required to build out India.

5. Booster shot for manufacturing and employ-ment: Steps to revive the manufacturing sector will be critical. Clarity on land acquisition, environmental clearances, better infrastructure, and labor law re-forms - such as shifting its purview to the states -- will be critical to improve the business climate and boost manufacturing, which is in its worst phase in the last two decades. India’s manufacturing en-gine - represented in large measure by micro, small and medium enterprises - needs to do well if its fast-multiplying workforce has to find gainful em-ployment. Says Dharmakirti Joshi, Chief Economist, CRISIL: “Such an agenda will improve India’s competitive efficiencies and pave the way for its re-entry into the orbit of 6.5-7 per cent annual GDP growth.”

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Debottlenecking in the short-term, improving the economy’s growth potential and employment generation ability in the medium term.


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The Western media often refers to India is as the ‘noisy’ democracy. As always, the noise has reached its peak during the electoral phase, but we can look forward to the dust settling after the new government formation. A stable regime at the centre will ensure that India regains its growth trajectory, says Subhankar Mitra, Head - Strategic Consulting (West), JLL India.

The New GovernmentTwo Policy Challenges

tably between manufacturing and services through a lower tax rate by increasing the tax base and mini-mizing exemptions. Such a system is a major step towards transparent and corruption-free tax admin-istration. GST will be is levied only at the destina-tion and not at various points (from manufacturing to retail outlets). Currently, a manufacturer needs to pay tax when a finished product moves out of a fac-tory, after which it is again taxed at the retail outlet when sold.

Benefits to Centre and States It is estimated that India will gain $15 billion a year by implementing the Goods and Services Tax, as it would promote exports, raise employment and boost growth. It will divide the tax burden equitably between manufacturing and services.Benefits to Individuals and Companies In the GST system, both Central and State taxes will be collected at the point of sale. Both components (viz. the Central and State GST) will be charged on the manufacturing cost. This will benefit individu-als, as prices are likely to come down. Lower prices will lead to more consumption, thereby helping companies.If implemented the GST regime will revolutionize the logistics sector. It will also help create small and medium size enterprises and thereby create more employment. Various hinterland cities like Nagpur, Indore etc. will emerge as hotspots with robust de-mand for real estate.

There are several areas where reforms and interventions are required to pro-pel this growth. Out of these, two policies which have been delayed for a long time can dramatically change the macro economic scenario - GST and

REIT.Goods and Service Tax (GST)

One of the biggest taxation reforms in India, Goods and Service Tax (GST) will integrate State economies and boost overall growth by creating a single, uni-fied Indian market. While presenting his Budget in July 2006, Finance Minister Pranab Mukherjee had indicated that GST would come into effect from April 2010. However, up to the last budget no deci-sion has been taken.The implementation of GST will phase out other taxes such as octroi, Central Sales Tax, State-level sales tax, entry tax, stamp duty, telecom license fees, turnover tax, tax on consumption or sale of electric-ity, taxes on transportation of goods and services, et cetera. It is the only way out of the multiple layers of taxation that currently exist in India.

What is GST?Goods and Services Tax is a comprehensive tax levy on the manufacture, sale and consumption of goods and services at a national level. It employs a tax a credit mechanism to collect tax on value-added goods and services at each stage of sale or purchase in the supply chain.The system allows the set-off of GST paid on the procurement of goods and services against the GST which is payable on the supply of goods or services. However, the end consumer bears this tax as he is the last person in the supply chain. GST is likely to improve tax collections and boost India’s economic development by breaking tax barriers between States and integrating the country through a uniform tax rate.

What are the Benefits of GST?Under GST, the taxation burden will be divided equi-

VIEWPOINT


Two Policy Challenges

Challenges for Implementation of GSTThe biggest impediment on the way of implementing GST is getting all the state government on the board. Various State finance ministers have expressed their apprehension that it will reduce financial autonomy of the States and make them more dependent on the Centre.The success of the policy will depend on the deri-vation of right kind of revenue-sharing mechanism between the Centre and the States. We hope that a stable and decisive Central Government will be able to crack the deadlock.

Real Estate Investment Trusts (REITs) A real estate investment trust (REIT) is a company that owns, and in most cases operates income-pro-ducing real estate. REITs own many types of com-mercial real estate, ranging from office and apart-ment buildings to warehouses, hospitals, shopping malls, hotels and even timberlands. Some REITs also engage in financing real estate. The REIT system was designed to provide a real estate investment structure similar to the kind that mutual funds provide for investment in stocks. RE-ITs can be publicly or privately held, but only public REITs may be listed on public stock exchanges. RE-ITs can be classified as equity, mortgage or a hybrid.REITs were created in the United States when Presi-dent Dwight D. Eisenhower signed into law the REIT Act. REITs were created by the US Congress in to give all investors the opportunity to invest in large-scale, diversified portfolios of income-produc-ing real estate in the same way they typically invest in other asset classes – through the purchase and sale of liquid securities.Since then, more than 20 countries around the world have established REIT regimes, with more countries actively considering them. The spread of the REIT approach to real estate investment around the world has also increased awareness and acceptance of in-vesting in global real estate securities.The Government of India is still in the process of formulating legislations for REITs in the Indian real estate market. SEBI published its draft regulation in the last quarter of 2012. Once implemented, Indian REITs will help individual investors reap the ben-efits of owning interest in the securitized real estate market.The greatest benefit will be that of fast and easy liq-uidation of investments in the real estate market, in marked contrast to the traditional manner of dispos-ing of real estate. The government and Securities and Exchange Board of India, through various notifica-tions, is in the process of making it easier to invest

in real estate in India directly and indirectly through foreign direct investment, via listed real estate com-panies and mutual funds.

Benefits for Indian Real EstateREITs will enable retail investors to participate in the real estate space with small investment sizes. This will unlock a new source of project financing for real estate. As of now there is very little holding power available with the developers. Therefore, there is little interest with them to create high-grade com-mercial, retail or any other income generating assets.Even large developers strata sell commercial or re-tail projects to multiple HNI investors. Such a situa-tion creates complexity in maintaining and promot-ing these spaces, apart from creating title issues and many other complications. Once a REIT takes charge of a commercial property, the scenario improves sig-nificantly.Smaller developers will also be encouraged to create lease-hold assets, because REITs will provide them with exits and an incentive to develop high-grade buildings. This would have a very positive impact on the overall real estate industry, since develop-ers who are currently doing only residential proj-ects would be able to diversify their portfolios and achieve a more balanced growth. There would definitely be more momentum on the market, and various new asset classes hitherto considered non-viable by many developers would emerge in strength – for instance, student housing, senior living projects and rental housing schemes.

Challenges for REITsThere are several challenges to overcome before the successful implementation of REITs in India. To begin with, title certification in India is an ambigu-ous and cumbersome process, and this complexity discourages many potential foreign and domestic investors from buying into income-yielding proper-ties. Another issue is the valuation mechanism. Real es-tate valuation in India is largely unregulated and lacks a standard code of practice or ethics. In order to implement REITs, the government will have to ad-dress these issues via making and amending mul-tiple legislatures.It is to be hoped that the new government will se-riously look into the urban development and focus on the creation of right kind of built infrastructure that is the key for sustainable growth. REITs and the associated changes in the legislature need to find a place on a priority list that aims for larger develop-ments and subsequent employment creation.


No government has a magic wand which can solve all problems at once. Reforming the economy is a gradual process, and we need to be patient. As already stated, a stable government at the centre has potential to boost the sentiments and in return, attract foreign money, says Anuj Puri, Chairman & Country Head, JLL India.

ELECTION RESULTSImpact On Real Estate

gradual process, and we need to be patient. As al-ready stated, a stable government at the centre has potential to boost the sentiments and in return, at-tract foreign money. However, we cannot expect property prices to display the kind of sharp upward movement that were achieved before the Global Fi-nancial Crisis (GFC). Any such movement - or re-duction in cap rate - is, in my belief, at least 12-18 months away.

Affordable HousingIndia’s housing shortage is legendary, and the In-dian government has always kept low-cost housing in the focus. However, most developers have shied away from focusing on this space because affordable housing is a relatively low-margin business; and in high inflationary scenario, profitability remains a key concern. Equity participation by PE funds has also been limited in the budget housing space.The new Government may look at helping on quick-er land acquisition, faster approvals, easy and low cost funding availability and better infrastructure to make it a more interesting proposition for develop-ers and investors. In Gujarat (the home state of Mr. Narendra Modi), the government has been extend-ing a helping hand to developers who construct low-cost homes, although availability of cheap capital, lengthy approval process and affordable land avail-ability continue to remain challenges.

An improvement can definitely be expected in the near-term invest-ment sentiment. This will have an impact on the investment growth within the GDP. As a testimony to that, indus-trial GDP (comprising

of investment-heavy sectors such as mining, manu-facturing etc.) is forecast to grow at 3.5 per cent y/y (consensus of professional forecasters empanelled by the RBI) during current fiscal year 2014-15 as op-posed to an abysmal 0.6 per cent y/y in the previous fiscal year.Our day-to-day interactions with various investors clearly suggest that domestic money is in the search for good investment options; investors are eager to strike a deal at attractive valuations. However, for-eign money has been waiting in the wings and await-ing political stability before entering India. In that respect, a clear majority is the best possible scenario. Most investors are comfortable with a government with minor alliances as long as there is a clear agen-das and strong voice dictating those agendas. What investors are looking for in a ruling government is clear goals and the will and strength to achieve them. With the BJP winning by an overwhelming majority, there now a clear sentiment that this has indeed been achieved.Over the past few months, we have already seen improvement in the real estate investment scenario. Currently, at least USD 1.8 billion worth of funds are in the process of getting raised. With the BJP now in the driver’s seat, we expect the space to see a lot more traction and various investors to enter into the country.

Immediate Turnaround?No government has a magic wand which can solve all problems at once. Reforming the economy is a

VIEWPOINT


Impact on Real Estate

GST There is no doubt that adopting GST will be a ma-jor point on the new government’s agenda. The key challenge is to convince State authorities who cur-rently feel threatened over their tax autonomy. The biggest beneficiary of GST would be the logistics and warehousing sectors, as they would become more organized and could achieve the desired econ-omies of scale. This has strong and favorable impli-cations for real estate in India. Developers can ex-pect streamlining of taxation process as GST would free them from disparate levies such as stamp duty, electricity duty etc.

FDI Policy• With a view to protect the interest of small and

medium retailers and SMEs, the new govern-ment’s manifesto has more or less conveyed its resistance to opening up FDI in certain sectors.

• Retail is in the negative list as per the manifesto; however, if the country has to welcome FDI and international investors, it might need to consid-er the number of international retailers waiting on the side-lines in wait-and–watch mode.

• A few retailers have already announced their plans to go ahead with the cash & carry model of operation in India, therefore kick-starting a new cycle of investment in retail.

• The overall FDI policy will be conducive, as the new government is committed to promote FDI in other sectors and also to reforming the For-eign Investment Promotion Board (FIPB) func-tioning to make it investor-friendly.

Hospitality Sector I foresee healthy growth of the hospitality sector in the medium term, as the new government has a clear mandate to uplift tourism across various circuits and regions. Its focus is to build 50 tourist circuits with provision of affordable hotel amenities. Even in developed cities like Mumbai, budget hotels or serviced apartments, and midscale hotels together account for not more than 17-20 per cent of the total room inventory. This category, therefore, is poised to witness significant growth.

InfrastructureWith increased focus on shifting a portion of the commuter traffic from road and rail to inland and coastal waterways, the productivity of existing road-rail infrastructure will improve.New rail corridors such as Agri-rail and tourist rail

networks will create newer opportunities in the warehousing, cold storage and hospitality sectors, which definitely benefits real estate. All industrial corridor development plans envisaged but not im-plemented by the previous government are likely to be fast-tracked.

National Land Use PolicyOn the lines of the existing National Land Use Poli-cy, the new government is committed to streamline the process of acquiring non-cultivable land. The policy framework will be governed by the National Land Use Authority and will have to work closely with its factions at the State level and, also possibly, at the district level.

Business Optimism• According to a report by Grant Thornton this

year, optimism amongst Indian business own-ers has improved on the back of expectation of a new and stable government

• 69 per cent of businesses expressed optimism over the country’s economy in 2014, as com-pared to 57 per cent in the third quarter of last calendar year

• 90 per cent of Indian businesses believe their rev-enues will rise in 2014 while 76 per cent are most optimistic for increasing profitability this year

• As per a survey of leading recruitment firms by the media, hiring in India has been rising since the advent of the current financial year.

• Expectation is that hiring could rise anywhere in the range of 10-25 per cent in the April-June 2014 quarter over the Jan-Mar 2014 quarter.

• This change reflects the favorable transition of business sentiment rather than hard economic data.

Final Thoughts • Inflation and rupee health: The electoral result

may not have direct implications on the infla-tion story. With higher investments flowing into the economy, the rupee will gain strength in the near-to-medium term

• Exports: Exports is an external sector and is more dependent on the health of global economies than sentiment change in India. On the contrary, an immediate rise in business sentiment in In-dia could lead to higher imports, which would worsen the CAD to some extent


A recent report from CARE Ratings warns banks to be

cautious when it comes to growing their commercial real estate (CRE) and home loan portfolios. In FY2014, banks loan growth in the CRE segment was higher, at 22.4 per cent (year-on-year) as against 11.9 per cent in the previous year. In absolute terms, in FY2014, banks disbursed loans aggregating to Rs.28,300 crore to the CRE segment against Rs.13,400 crore in the year-ago period.The credit rating agency said the higher growth rate in credit to commercial real estate would have to be dealt with caution given the vulnerability of this sector in terms of asset quality.Given, how the troubles at reality sector are going to hurt banks and how they should tackle this challenge.Since 2005, the Indian real estate industry has seen many highs & lows. First the boom in the investment & development activ-ity resulting from the govern-ment’s policy to allow Foreign Direct Investment (FDI) in this sector that made the sector not only witness the entry of many new domestic realty players but also the arrival of many foreign real estate investment companies including private equity funds, pension funds and development companies the sector lured by the high returns on investments.The industry reached new heights during 2007 and early 2008, along with a growth in demand, substantial development and increased foreign investments. However, by mid 2008, the effects of the

global economic slowdown were evident here too, and the industry reversed the course. FDI inflow into real estate dropped significantly and what had emerged as one of the most promising markets for foreign investments experienced a downturn. A great degree of political uncertainty, liquidity issues, high interest rates and cautious sentiments are expected to underpin the real estate sector in 2014 too.As salary increases haven’t kept pace with the rise in home prices, Indians are getting more

leveraged than they were a decade back, burdening them with larger monthly loan payments. Such leveraged consumer, coupled with inflated home prices, can pose a risk to banks’ balance sheets.Another important indicator is the inventory data of unsold homes. According to the figures from property research firm Liasas Foras, Mumbai saw the maximum inventory of unsold homes at 155.27 million square feet or 48 months of unsold inventory during the first quarter of FY14. For NCR, the inventory

BANKING

Banks will have to recognize the fact that retail credit has its own risks and exposes them to individuals in large volumes as compared to corporate loans. The whole appraisal process and risk underwriting process has to take this into account, says CA Rishabh Adukia, ACA, ACS, LLB, Certified Financial Planner, [email protected]

BANKING SECTOR Realty Bites


0 20000 40000 60000 80000 100000 120000 140000 160000

SBI

ICICI Bank

Axis Bank

PNB

IDBI Bank

BOB

S&C Bank

HDFC Bank

BOI

UBI

144668

81422

52730

48475

36785

27157

26028

25020

24050

20581

has more than doubled to 31 months in the first quarter of FY14, while for Mumbai it has risen from 17 months to 40 months. Inventory denotes the number of months required to clear the stock at the existing absorption rate. An ideal scenario implies inventory should be in the range of eight to 10 months. But Mumbai would take four years to sell these homes despite a slew of discount schemes, new launches and back-room

negotiations.As per the NHB’s Residex, the index which tracks housing prices across 26 prominent cities in India, 16 cities saw a rise in the housing prices in the quarter ended December 2013. Latest figures released by the RBI indicate that the total exposure to this segment has surged 17.3 per cent to Rs 9.33 lakh crore during the financial year ended March 2013. This expansion needs to be viewed in light of the steep

acceleration in housing prices in all tier I and a couple of tier II cities in 2012-13.The situation has deteriorated in the real estate segment with loans amounting to an estimated Rs 7,700 crore tied to commercial and residential properties loans up for sale, according to data compiled by NPAsource.com, a portal that focuses on stressed assets.What is alarming is that the increase in exposure to the real estate segment is followed by the rise in the non performing assets (NPAs) as well. The gross NPAs in the financial system is set to rise 4.6 per cent to Rs 2.29 lakh crore by September 2014 from Rs 1.67 lakh crore or 4.2 per cent in September 2013, the Reserve Bank of India (RBI) said in its Fi-nancial Stability Report released in May first week.A correction could lead to reduced value of bank collaterals, thus more NPAs, which could then lead to an automatic cycle of an inherent correction in the economy. No asset class including real estate can remain inflated for an indefinite time. At some point, these will become big enough for a crash. A sudden fall, however, will be detrimental to the financial system and the economy at large. Banks will have to recognize the fact that retail credit has its own risks and exposes them to individuals in large volumes as compared to corporate loans. The whole appraisal process and risk underwriting process has to take this into account.

‘REALTY’ BITES!

BANKING SECTOR Realty Bites

Time to Face the Realty

Top 10 Banks’ Exposure to Real Estate (Rs.Cr)

CA Rishabh Adukia


Dial ‘E’ for Exit?TELECOM

CARE Research believes that the increased market share limit (50 per cent from earlier 35 per cent) would avail enough room for larger players like Bharti Airtel and Vodafone to go for acquisitions in most of the circles. Consolidation would provide much needed exit to some of the weaker players along with reducing the hyper-competitive environment in the sector.

At the same time, with increased market-share, larger players would get some pricing power but would not result in substantial change in the dynamics of the sector as voice and, to some extent, the data business being commoditized in nature. It will also lead to better utilization of passive infrastructure like telecom towers and networks.

- Revati Kasture, CGM and Head - CARE Research & Grading Services along with Anand Kulkarni, Sector Specialist - Telecom, Media and Technology (TMT).

INDUSTRY


Source: Department of Telecom (DoT), Telecom Regulatory Authority of India (TRAI) and CARE ResearchNote: Top3 Players – Bharti Airtel, Vodafone, Idea Cellular

Indian Telecom industry has been a fascinating story of super-normal growth of subscriber penetration, making India second largest

market in terms of subscribers. One prominent change over the years has been the shift from ‘administratively allocated’ spectrum to ‘auction based’ spectrum allocation, making the survival difficult for the weaker players in the industry considering the price of the spectrum. Over the years, Government kept on introducing more players in the telecom market fuelling the competition. The tally of operators per circle went up from 2-3 in mid-90s to 14-16 in 2008, resulting in hyper-competition, after Government allotted new licenses in 2008. The phenomenal growth in the Indian telecom markets attracted many foreign telcos to Indian shores. This created a divide amongst the players – incumbents, with higher market share, established brand name and more spectrum against the new comers who used price as the primary differentiator. Due to the presence of large number of operators, spectrum holding per operator in India is considerably lower as compared to their global peers.

Competition Eroded Profitability

One of the fall outs of hyper-competition is erosion of profitability for telcos over the period. When half a dozen new players entered the Indian markets in 2008, with their international partners with deep pockets, their first target was to gain the market-share, either by eating into the pie of existing players or increasing the penetration in the Indian market further or both. With a very high price elasticity of demand in the Indian markets, the new players kept on reducing the tariffs, forcing their incumbent competitors to follow through. The incumbent players had the cushion of efficient spectrum, higher ARPU subscribers, higher VAS composition in their revenue, established networks whereas the new players were completely exposed to these parameters started bleeding

heavily, looking for exit options.

Cancellation of 122 Licenses by the Supreme Court – A Forced Exit In February 2012, the Supreme Court of India cancelled 122 telecom licenses issued in 2008, after the alleged irregularities in license allocation process and ordered to auction the spectrum going forward. This was the beginning of consolidation as international players like Etisalat and S Tel closed their operations in India whereas others like Telenor, Sistema and Videocon reduced their footprints from a pan-India to a few circles, after cancellation of licenses. This led to average number of players in a circle coming down from 14-16 to 8-9. By looking at the global standards of 3-4 players, CARE Research believes that Indian telecom space would eventually be reduced to 5-6 large players with 1-2 regional players.

Spectrum Auctions – A great Leveler Higher spectrum prices have raised the entry barriers for telecom service providers to a great extent. The auctions held in February 2014 have established ‘Spectrum as the most strategic asset’ for the operators. Top 3 operators (Bharti Airtel, Vodafone and Idea) gulped almost 71 per cent of the total spectrum, widening the divide between Top 3 and weaker ones even further. The higher spectrum prices, being unaffordable to the bleeding operators, would compel them to get acquired by the larger operators, leading to much needed consolidation in the Indian telecom space.

Subscriber Share is Consolidating with Top 3 playersOver the years, subscriber and revenue market share is slowly

Spectrum Share - Overall Spectrum Share - Feb 2014 Auctions

Dial ‘E’ for Exit?

50% 50%

Top 3 Players Rest

71%

29%

Top 3 Players

Revati Kasture


being consolidated with the top 3 players as the same is being witnessed in spectrum holding. There are multiple factors responsible for attracting existing and new subscribers towards the top players – better network expansion by the top 3 players, better quality compared to the new players, data offerings, aggressive marketing etc. As a result, subscribers who got attracted towards the newer players because of the lower tariffs are now moving towards the top 3. Also, the top 3 are attracting sizeable portion of the incremental subscriber addition. At the end of March 2014, top 3 players had more than 50 per cent of the total subscriber share whereas during FY14, their share of incremental subscriber addition was more than that of all the subscribers. This can be attributed to the positive subscriber addition across top 3 players whereas rest of the players removed inactive players resulting in a negative growth.

4G – Threat Looms for pure 2G Data Players Most of the existing 2G operators are preparing themselves for the data battle which is expected to be witnessed once 4G services are rolled out by the likes of Reliance Jio. Threat of 4G cannibalizing the existing telecom services is primarily limited to data

services as voice capabilities of LTE are yet to be proven. But as contribution of data revenue in the total revenue is on the rise and as subscribers are looking for more integrated players, offering 2G, 3G etc, pure play 2G operators are expected to suffer and will be the primary targets for acquisition.

M&A Guidelines – Clarity is EmergingWith clarity on M&A guidelines emerging, the activity is expected to gather momentum as witnessed by the recently announced acquisition of Loop Mobile by Bharti Airtel. Considering that the acquirer has to pay market price for the spectrum of the acquired company if the same is obtained through administered mechanism, CARE Research believes that spectrum will no longer be the driver for consolidation.

Telecom wireless space in India is getting divided on the following lines – (i) Top 3 incumbents with deep pockets – Bharti Airtel, Vodafone, Idea, (ii) Other incumbents with struggling balance sheets – Rcom, Tata Teleservices, Aircel, Loop, (iii) Government owned – BSNL and MTNL (iv) the new comers - Telewings and Sistema with backing from their foreign parents and, (v) new players with Indian parent like Videocon. Consolidation would be driven to acquire subscriber base or spectrum. Incumbents are the major contenders for the ‘consolidator’ tag. There might be possibilities of a three-way merger among Tier-II players like Tata Teleservices, Sistema, Aircel, HFCL etc. As per the new M&A guidelines, the market share of a merged entity has now been raised to 50 per cent of the subscriber and revenue base as against 35 per cent ceiling that existed earlier. CARE Research believes that the increased market share limit (50 per cent from earlier 35 per cent) would avail enough room for larger players like Bharti Airtel and Vodafone to go for acquisitions in most of the circles. Consolidation would provide much needed exit to some of the weaker players along with reducing the hyper-competitive environment in the sector. At the same time, with increased market-share, larger players would get some pricing power but would not result in substantial change in the dynamics of the sector as voice and, to some extent, the data business being commoditized in nature. It will also lead to better utilization of passive infrastructure like telecom towers and networks.

Subscriber Share – Consolidation (March – 2014)

Sour

ce: T

RA

I and

CA

RE

Res

earc

h

Dial ‘E’ for Exit?

56%

124% 44%

-24%

-40%

-20%

0%

20%

40%

60%

80%

100%

120%

140%

Total Incremental (Last 1year)

Subs

crib

er S

hare

- To

p 3

vs R

est

Rest

Top 3 Players

Anand Kulkarni


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ASSESSING FUND MANAGERThe 4D Approach

Mutual fund investors generally prefer a fund due to its historical performance. In the context of an equity fund, the primary expectation is that the fund manager should outperform his stated benchmark. For eg., if his benchmark is that of Nifty 50 or Sensex, the fund’s performance should be better than the benchmark to justify investor confidence in the fund. The extent to which the manager outperforms the benchmark is the second important element of attraction. says M R Raghu, CFA FRM, Senior Vice President & Head of Research, Kuwait Financial Centre (Markaz), Middle East.

The author thanks Karthik Ramesh and Rajesh Dheenathayalan for assistance.

SPOTLIGHT / PERSONAL FINANCE ASSESSING FUND MANAGER


we can perform a 4-D analysis on this. Dimension 1: Persistent Bets:

Persistent

Bets-Top10

Perfor-mance-

2013 (%)

Weights Aver-age

(%)

ICICI Bank -3 7

Infosys 50 7

SBI -26 7

ITC 12 5

Tata Motors 20 4

L&T 0 4

Reliance Industries

7 4

HDFC Bank -2 3

TCS. 72 3Bank of Baroda -26 3

The manager persisted with 55 stocks in his portfolio that figured both in the beginning and end portfolios. The above table provides the list of top 10 arranged in terms of weight. As we can see, most of these persistent bets are large cap blue chip heavy weights and are reputable names in the Indian stock market. Excepting for a few like ICICI Bank, SBI, HDFC Bank and Bank of Baroda (all bank stocks incidentally!), all others have done well especially TCS and Infosys (IT stocks inciden-tally!). The weighted average performance of persistent bets is 6.71 per cent which is commend-able.

Dimension 2: Discarded BetsDuring the year, the fund man-ager sold out (or discarded) 19

In an attempt to beat the bench-mark, the fund manager is always in pursuit of winners and tactful in avoiding losers while selecting stocks. Where the winners outnumber the losers and where the fund manager’s commitment to winners (in terms of allocation) is better than the losers, he or she will gener-ate out performance or what is technically called as alpha (excess performance over the bench-mark). In other words, where a fund manager generates superior performance through consis-tently beating the benchmark, he/she is good at picking winners and avoiding losers. While this assessment sounds simplistic and hence reasonable, more often than not this 2 dimensional ap-proach to assessing fund man-ager performance may not be enough.In my view, the issue of fund management in the context of equity revolves around the concept of bets. There are bets that the fund manager sticks with and there are bets that he avoids. Hence, we need to view the issue from a 4-D perspective:

Dimension 1: Persistent BetsThese are bets that the fund man-ager is sticking with resolutely and believes in them strongly. A simple way to figure this out is to see if a particular stock is present at the beginning as well as end of an evaluation period. The reason why he persists with these stocks can be borne out of a thorough research and fund managers’ conviction about its future ability to perform. If the stock price of persistent bets move up, the manager gains and vice-versa.

Dimension 2: Discarded Bets These are bets that the fund man-ager has lost faith in and there-fore sold out. A way to find this

out is to see if a particular stock figures in the beginning portfolio but not in the end period portfo-lio. In this scenario, if the stock price gains after the manager has discarded them, the manager tends to lose out on performance.

Dimension 3Missed Bets: These are bets that the manager did not take or we can call it as “failed to buy” sce-nario. These bets will not figure either in the beginning portfolio or end portfolio. In such cases, where the stock price moves up, the manager loses out in terms of opportunity gain and vice-versa.Dimension 4: New Bets: These are bets that the manager took recently. A simple way to figure them out is when such stocks are present in the end period port-folio and not in the beginning period portfolio. Like persistent bets, the manager gains when such stocks move up and vice-versa.

Case Study: HDFC Top 200 FundLet us run through this 4D concept through the evaluation of the performance of HDFC Top 200 fund, one of the most popu-lar equity funds in India.

Fund Return-2013 4.05%

Benchmark, BSE 200 Return-2013

4.38%

Alpha -0.33%

As we can see, the fund has underperformed the benchmark albeit slightly during 2013. However, dissecting this further,

Persistent Bets

Missed Bets New Bets

Discarded Bets

+ - - +

- + + -

4 Dimensional Assessment

Conventional View

Better Perspective

The 4-Dimensional Approach to Assess Fund Managers’ Performance

The 4-Dimensional Approach to Assess Fund Managers’ Performance

SPOTLIGHT / PERSONAL FINANCE ASSESSING FUND MANAGER


Assessing Fund Manager

stocks while the table presents the top 10 in terms of weights. In some cases, the fund manager was right as in the case of LIC Housing finance, Tata Power, Titan, etc. But in many cases the fund manager paid a penalty of discarding some stocks whose performance later turned out to be very good. Good examples include Hindu-stan Lever, Sun Pharma, CMC and Britannia. The weighted performance of discarded bets is 0.49 per cent. In other words, had he not discarded them, he would have added 0.49 per cent to the portfolio performance.

Discarded Bets Perfor-mance2013 %

Weights (Begin-ning %)

HLL 9 1.7

LIC Hou.Fin. -25 1.2

Sun Pharma 54 0.9

Tata Power Co. -17 0.8

Titan Inds -19 0.7

Cairn India 2 0.6

M&M 1 0.5

CMC 36 0.5

NHPC -23 0.4

Britannia Inds 84 0.3

Dimension 3: Missed Bets

Missed Bets Perfor-mance 2013 (%)

Weights Index (%)

HCL Tech 104 2

NTPC -13 1

Kotak Mahin-dra

12 1

Ultratech -11 1

Hindustan Zinc -3 1

Asian Paints 11 1

Adani Enter-prises

-3 1

Nestle 6 1

Bhel -23 1

Hero Motors 9 1

The table in the previous colum displays a list of stocks that the fund manager did not look at all and in this case it runs into 125 stocks. However, a perusal of the top 10 among them in terms of weights reveals some interesting stuff. The greatest miss has been HCL Tech that performed more than 100 per cent during 2013. Given the names like TCS and Infosys in the persistent bets list, it is surprising to see HCL Tech missing. The list of missed bets is a mixed bag with many posting negative performance (NTPC, Ul-tratech, BHEL, etc). The weighted performance of this list is 2.55 per cent which is quite significant. In other words, had he pursued these bets, the portfolio perfor-mance would be better by 2.55 per cent.

Dimension 4: New Bets

New Bets Perfor-mance2013 %

Weights (End %)

Sesa Sterlite 3 2

Idea Cellular 61 0.3

Siemens 0 0.3

Jaiprakash Power Ven-tures

-50 0.2

Alstom T&D India

-9 0.2

Jet Airways (India)

-48 0.1

Above list is the smallest compris-ing in all 6 stocks. The biggest new bet is that of Sesa Sterlite that per-formed just 3 per cent while block buster performance of 61 per cent of Idea Cellular did not benefit much due to low weight. Simi-larly disastrous performance of stocks like Jaiprakash Power and Jet Airways did not hurt much due to lower weights. The total weighted performance of new bets is 0.09 per cent.

In summary, we can tabulate thus:Category Weighted Re-

turns (%)

Persistent bets 6.71

Missed bets 2.55

Discarded bets 0.49

New bets 0.09

While the portfolio benefited hugely through the persistent bets, it also suffered due to missed bets while the impact of discarded bets and new bets has not been pronounced. Caveat: In hindsight things always look very clear. Secondly, this analysis was performed taking into account the portfolio composition at the beginning and end of the evaluation period (2013). The performance of a portfolio is also affected by sev-eral transactions that happens in the intervening period and hence may cloud the analysis.Having highlighted the caveats, the idea of this research is to take the literature of fund manager performance one step higher by looking at the opportunity cost of missing something and also the opportunity cost of stick-ing with bad choices which can take a heavy toll on the portfolio performance. What makes a fund manager stick with a bet, discard a bet, miss a bet or take a new bet is a combination of several factors in-cluding his ability to pick stocks, ability not to get distracted by peer group pressure, ability to have sound advice and being vigilant. In the end, the aim of any active fund manager is to generate alpha which is the only reason why investors are ready to pay management fees. In the absence of such a proposition, an Exchange Traded Fund (ETF) can simply do the job. In an ETF scenario, there is only one bet i.e, Index composition!.


Emerging Challenges

History will remember with gratitude names like Vinod Rai, Raghuram Rajan, Seshan, Sam Pitroda and Sreedharan who became legends in their own times for the contributions they made to the causes they took to heart. Here we look at the role of auditors in protecting the country’s resources and ensuring prudence in exploitation and use of precious resources for economic development.- M G Warrier, Former General Manager, Reserve Bank of India

EFFECTIVE BANK AUDIT BANKING SECTOR


When the history of the first leg of LPG (Liberalization-Privatiza-tion-Globalization) reforms in In-dia covering the period 1990-2014 will be written, after a couple of decades, the role of institu-tions like the Supreme Court, Comptroller and Auditor General (CAG), Reserve bank of India and Election Commission will be critically analyzed. These institu-tions made up for the lapses of the legislators and the executive and made possible the emergence of India Growth Story.

India is a country which has viewed audit with respect and has integrated the audit function in almost all financial transac-tions managed by institutions including banks, government and corporates. CAG functioning with head office in New Delhi and offices in all important state capitals, about 2 lakh chartered accountants and offices of the state registrars of cooperative societies cover the organizations in government, private and coop-erative sectors.

In his April 2014 message in the Institute’s in-house magazine, CA. K Raghu, President, Institute of Chartered Accountants of India (ICAI) said:

“Let’s Gear Up for Effective Bank Audit

As you are aware, a healthy banking industry is the backbone of sustainable socio-economic growth in our country. However, I am constrained to note that our banking system is under strain because of mounting Non Performing Assets (NPAs), which according to Assocham study, is expected to reach 1,50,000 crore mark by end of FY14.

As the keepers of financial discipline in the country, this situation should worry us all the more. Given our training, expo-sure and skills, we can play a cru-cial role in reversing rising trend

of NPAs and vigilantly keeping our banking system healthy. By lending credibility to their finan-cial statements, audits and audi-tors have an extremely important role to play in building a resilient banking industry. As such, the exercise of Bank Branch Audit as-sumes paramount importance for the banking industry, the banking regulator, our members, as well as the nation as a whole.

Let’s conduct these audits in the most professional manner keeping a broader national vi-sion in mind. You will be aware that to help you to carry out this nationally important assignment in most proficient and ‘value add’ manner, the Auditing and Assurance Standards Board has recently released its 2014 Guid-ance Note on Audit of Banks. This Guidance note contains comprehensive guidance on the various critical aspects that the members need to be wary of while conducting Bank Branch Audits. Let’s also ensure compli-ance with relevant Standards on Auditing while carrying out Bank Audit engagement.”

This signifies the importance given to bank audit by the Insti-tute of Chartered Accountants.

In some of the recent rulings the Apex Court has upheld the CAG’s powers to audit the ac-counts of organisations in public and private sectors. The com-mendable work being done by CAG now, is not the brain-wave of Vinod Rai or his predecessor who have sharpened the tools of audit to make them effective in the present context.

Performance audit is a concept introduced as part of commer-cial audit carried out by the then Indian Audit and Accounts Department in the late 60s. The purpose was to go beyond mere checking of accounts and ensur-ing that each item of expenditure

was backed by a ‘voucher’ and find out whether the expenditure from public funds actually served the purpose envisaged when the outlay of expenditure was planned.

In the years that followed, the scope of audit has expanded along with the growth in pub-lic expenditure, multiplicity of sectors and ever-growing size of projects and extending geog-raphies. As the funding comes ultimately from the taxpayer, the difference between public and private sectors is also getting narrowed down. Suffice to say, when CAG comments on nation’s resources ‘sold out’ to private sec-tor, traditional accountants get a doubt about his jurisdiction.

India’s resources including financial resources deserve a more dignified treatment. If government or political leader-ship feel that CAG or for that matter any of the regulatory authorities should not comment on the performance part of policy decisions by ministries, it is time the country thought about having a separate authority to do the job. GOI should set up a ‘Performance Audit Authority’ which should have powers and competence to act as a watchdog to ensure that public expenditure is insulated from pilferages and leakages of the kind that are coming out every day. The present efforts of CAG, commendable though they are, do not result in online corrective measures which alone can minimize plundering of re-sources. Healthcare, not reasons for death through post-mortem, is the need of the hour for the Indian Economy as a whole.

Sometime back, the Supreme Court dismissed a Public Interest Litigation (PIL), which argued that the Comptroller and Audi-tor General’s reports on Coal-gate, airport privatization and power sector went beyond CAG’s

Effective Bank Audit


constitutional mandate. While dismissing the PIL, the Apex court re-emphasized the statutory mandate of CAG and explain-ing the processes which the CAG reports go through, clarified that, if the CAG exceeded his brief, Parliament will surely correct him and tell him that the methodology adopted by him for the prepara-tion of the report was not correct.This prima facie innocuous ob-servation by the court would not have attracted the attention the ruling did, but for the celebration of the Apex Court ruling on the Presidential reference on alloca-tion of natural resources. On the Presidential reference as it was duty-bound, gave the court’s view upholding the supremacy of Parliament on policy issues and in fact did not give any adverse view against any statutory body including CAG. During almost the entire tenure of Vinod Rai as CAG, the institution of CAG was being harassed and criticized for performing normal duties expected of the organisation, by a government caged by the rich and the powerful. Performance Audit has been a tool used by CAG since 1960’s. What Vinod Rai and his predecessor had done was just to sharpen the tool by infusing expertise into the audit team. By training and educating cadres down below and bringing professionalism in the perfor-mance of audit function, they im-proved the functional efficiency of the office. If similar initiatives had come from his counterparts heading several government departments and public sector or statutory organizations, the ag-ony UPA II government suffered during its fag end would have been much less.

The Apex court minced no words in clarifying that CAG is not a mere account-keeper. The cri-tiques who were of the view that accountant and auditor should bother only about the accuracy

of figures were, for reasons best known to them, pleading igno-rance of the changes that had happened in the law and prac-tice of accounting and audit and the reforms in the CAG’s office brought about by Vinod Roy and his predecessor, who understood the post-LPG scenario better. The present political leadership is the ‘who’s who’ of the rich and in-fluential class which has its own constituency interests to protect.

We are heavily dependent on government’s other arms like CAG and judiciary to come to rescue when extraneous compul-sions force government depart-ments and public sector organiza-tions to misappropriate or divert public funds to the advantage of their masters or greedy cor-porates and individuals. The differentiation between public funds and private resources is getting diluted, as either public resources are freely flowing to private sector or the exchequer is becoming responsible to make good the losses incurred by greedy individuals across sectors by mismanagement of businesses they own or operate.

The initial response from gov-ernment spokespersons to any revelations in reports of CAG is on dotted lines these days. First, CAG has exceeded his brief. Then, all his presumptions are not right. Third, even if some findings have some basis, losses are not as huge as are made out. Fourth, and that is the icing (as in Coalgate), in the given circum-stances, there were not many

options as several departments/ministries were slow in decision-taking. To the total discomfort of the government, this time around, even the mainstream media which usually shows some eagerness to protect governments from disgrace, refused to buy the government story without riders (Remember the zero-loss 2G Spectrum story of Kapil Sibal which was initially swallowed by a section of the media!).

Some analysts in the media who were not so much aware of the strength of the institution (CAG), even expressed the fear that the CAG-government face-off in the context of 2G controversy could see another oversight institu-tion fall by the wayside. That was far-fetched cynicism. In fact, the debate on 2G auction and CAG Vinod Rai’s observa-tion on government’s credibility as were healthy signs of India moving forward to a participative democratic system. Despite the massive efforts by UPA-II to play down the significance of CAG’s observations relating to the losses in the 2G scam, the audit report did play a proactive role in creating awareness about the corrupt practices in government, and across public and private sector organizations. Rai was successful in drawing attention to the erosion of people’s faith in government. At this stage of development, prudence demands that the average Indian should be credited with the maturity to un-derstand that the statement had implications beyond Rai’s own


We are heavily dependent on government’s other arms like CAG and judiciary to come to rescue when extraneous compulsions force government departments and public sector organizations to misappropriate or divert public funds to the advantage of their masters or greedy corporates and individuals.


personal defense in the 2G report controversy.

The shock to some in the context of report after report from CAG with more and more revelations about corrupt practices can be traced to the refusal of govern-ment and media in publicizing the evolution of the institution of CAG which has been silently molding itself in recent times to meet the challenges of changing times. Destiny had put Vinod

Rai as CAG at a time when the country needed a person of his stature in that position. His having gone through the thick and thin of finance ministry and certain other tough assignments gave him the analytical mind and investigative skill needed to expose mega scams.

The remarkable achievements of the CAG during his tenure are more attributable to the interest shown by an individual in pro-tecting public funds.

To ensure that the same thrust on ‘conscience keeping’ continues, the present approach of the CAG will have to be institutionalized by providing necessary legisla-tive and administrative support. CAG’s role in protecting the in-terest of the country in regard to public funds is similar to the role of the judiciary in protecting life and property. This points to the need to empower CAG to cause audit of any transaction involv-ing national resources and more importantly, to equip CAG’s office for the purpose.

A large number of the people’s representatives in legislatures continuing to be those who are rich and powerful in their own way and capable of managing politics and vote banks and not necessarily interested in the sound management of nation’s resources, we are dependent on government’s other arms like CAG and judiciary to come to

rescue when extraneous compul-sions force public sector orga-nizations to misappropriate or divert public funds.

As CAG’s audit is mostly a post-event affair and judiciary will take a view only when issues reach them after due process, me-dia has a major role to play. With

the exception of some financial newspapers and a few national dailies, media generally show interest in the sensation value of issues and refuse to take on them-selves the burden of working like a watchdog and educating their readers/viewers about how the drain on country’s resources


External Audits of Banks - Overview of the PrinciplesPrinciple 1: The audit committee should have a robust process for approving, or recommending for approval, the appointment, reappointment, removal and remuneration of the external auditor. Principle 2: The audit committee should monitor and assess the independence of the external auditor. Principle 3: The audit committee should monitor and assess the effectiveness of the external audit. Principle 4: The audit committee should have effective communication with the external auditor to enable the audit committee to carry out its oversight responsibilities and to enhance the quality of the audit. Principle 5: The audit committee should require the external auditor to report to it on all relevant matters to enable the audit committee to carry out its oversight responsibilities. Principle 6: The supervisor and the external auditor should have an effective relationship that includes appropriate communication channels for the exchange of information relevant to carrying out their respective statutory responsibilities. Principle 7: The supervisor should require the external auditor to report to it directly15 on matters arising from the audit that are likely to be of material significance16 to the functions of the supervisor. Principle 8: There should be open, timely and regular communication between the banking supervisory authority, audit firms and the accounting profession as a whole on key risks and systemic issues as well as a regular exchange of views on appropriate accounting techniques and auditing issues. Principle 9: There should be regular and effective dialogue between the banking supervisory authority and the relevant audit oversight body. Courtesy:Bank for International Settlements (Basel)


affect their pockets and living conditions.

The changes brought about in the vision and mission of the office of the Comptroller and Auditor General in recent years are worth accepting as a model for adapting with appropriate modifications by other arms of governance in Centre and states. These changes in the approach of CAG’s audit are consistent with the vanishing line between public and private funds as both originate from the nation’s ‘sovereign’ resources and the hard work of its people. We should sooner than later come out of the legacy of British rule inherited by us which has drawn a clear distinction between the assets owned by the rulers (read public funds in the present con-text) and wealth with the private sector or individuals, individual families or trusts/companies formed outside government own-ership. This distinction is causing several unethical practices in our country. Sometime back while talking to media, Vinod Rai has gone on record saying that he was open to guidance and expert advice from eminent statesmen.

Central and state governments should join hands with CAG’s ef-forts to ensure that the country’s assets irrespective of the nature of ownership are not plundered by unscrupulous elements. When CAG’s reports bring out glar-ingly corrupt practices or make suggestions for incorporating better practices to avoid earlier mistakes, looking at them from mere legal or accounting angle or defending individuals and organizations instead of learning from past mistakes, correcting them before further proceeding are not in the best interests of the country.

Performance Audit

Performance audit involves assessing whether government

policies, programs, and institu-tions are well managed and are being run economically, efficient-ly, and effectively. This is a task of potentially great significance - at a practical level for citizens, and at a more abstract level for the health and vitality of demo-cratic governance.

For performance auditing to focus on citizen trust in govern-ment, government audit orga-nizations should be equipped to design their audits to focus on equity as well as efficiency, and effectiveness. They need to provide work that allows citizens and elected officials to exercise accountability for the use of authority as well as the use of funds. When selecting and designing audits, audit organiza-tions should consider at least the following types of equity: costs, services, access and coercion. It is a matter of comfort that in the Indian context, CAG has evolved a system of Performance Audit which can meet these chal-lenges effectively. But neither the present audit arrangement nor the regulatory and supervisory framework goes beyond ‘compli-ance’ issues. When lawyers take charge of governance, laws get manipulated to suit the conve-nience of the masters who put them in charge of governance. It is in this context the concept of ‘service audit’ or behavior audit’ becomes relevant.

Long back, Kiran Bedi told an interviewer that every day, before going to sleep, she used to ‘audit’ her own interactions and activities during the day and satisfy herself that she was on the right track. This, she said, helped her to make necessary and appropriate corrections, where necessary, quickly. The service audit discussed here is expected to help institutions and through them the society to make online

corrections in policy formulation and implementation. Two recent incidents shocked those who took those in authority when they said ‘let law take its course’ seriously. One, the reported revelation that there was an apparent conspiracy between the CBI prosecutor in the 2G scam investigation and one of the accused in the scam. Two, in Kerala, the Director General of prosecutions advised the state government against reinvestigation of a sex scandal, despite the Apex Court having recommitted the main case to High Court rejecting a state government appeal. In both the cases, the public feeling is that individuals who took quasi-judicial/judicial decisions or gave opinion were guided by the support the accused garnered from the powers that be.

The institution of service audit should be responsible

To take cognizance of biased decisions by public servants including those in private sector who either handle public funds, like banks which accept public deposits or corporates which mobilize capital and funds from public.

To provide broad guidelines for formulating appropriate norms for a ‘code of conduct’ for such public servants.

To conduct selective audits and bring out reports for government to frame appropriate policy to ensure that service providers and public servants do not hijack the law of the land.

The above suggestions are illustrative and once accepted ‘in principle’ government may have to cause a comprehensive study before considering an appropriate legislative framework to support introduction of service audit.



START-UP XPRESS 2CSRA lot of companies don’t understand the new corporate law, and also confuse corporate social responsibility (CSR) with charity and philanthropy. What we want to do is help them understand how best to strategically invest in CSR activities, to make it a revenue generating process, given that this is allowed in the law. - Sonia Agarwal, Co-Founder, 2CSR.Mumbai-based 2CSR, the young CSR consultancy firm scouts for clients who want to know how to ‘give’ for social initiatives un-der a new corporate law. Thus it brings together the government, the corporates and the people - to cre-ate long-term sustainable impact in innovative ways. 2CSR came into existence with a mission to help such companies execute their CSR requirements, as per the law, wisely, sustain-ably, and economically. The promoters of 2CSR believe that CSR activities, if planned correctly and thoughtfully, can help a company become sustain-able, reputable and estab-lish a stronger connection with its stakeholders, cus-tomers, environment and its community - all while cutting costs.In an exclusive interview with The Global ANALYST, Sonia Agarwal shares her entrepreneurial journey, what prompted her to start 2CSR, challenges and strategies to combat these challenges in five years from now.

sonia agarwal

Priyam Gandhi


How the idea to start your start-up took shape? How it all did begin? Priyam and I met at a family function and within minutes of meeting each other, we found ourselves to be discussing the economic landscape of India, sharing our perspectives on how corporates and communities should interact and by the end of that week, we had decided to start a CSR consulting company to help companies structure their CSR initiatives. While Priyam was trained to be a policy analyst who worked at a Think Tank, I had worked with multiple retail and media com-panies, and had established two award winning entrepreneurial ventures; we both had similar driving forces and had the ability to design innovative and sustain-able systems and solutions.

Could you discuss the business model of the start-up?2CSR is a very new establish-ment that charges their corporate clients an affordable fee to help their clients understand their CSR requirements, strategy and ink an action plan, identify suitable met-rics to evaluate impact and assist their clients to report their CSR initiatives. 2CSR helps their clients facilitate the action plan by con-necting their clients to the appro-priate NGOs and social ventures.

What are the focus areas of the firm? 2CSR focuses on identifying a strategic CSR plan, that is not philanthropic but of economic value to the client and the community.

How do you define the USP of the start-up? We pioneer in innovating CSR strategies that help our clients achieve their CSR objectives; all while getting a greater return on investment, by cutting future costs, and/or revenue generating. We understand that all CSR activities have a direct impact on the company’s cash flow and often come with high opportunity

costs; thus, we help our clients design CSR plans that are symbiotic in nature making more initiatives feasible, sustainable and impactful.

How do you view the market po-tential? According to the Indian Institute of Corporate Affair 6000 companies are required to comply with the new CSR regulations this year; resulting in close to Rs.20,000 crore being invested in various CSR initiatives. With few capable players in the market, this is a large and a promising market to service. The number of companies needing advice and the CSR pools will only expand further as India continue to progress.

Which are the major markets for your company? The law applies to companies that are registered or have established operations in India. Given our positioning and offering, we have been of value to many corporates across industries. We are currently catering to companies headquartered in Mumbai and will expand our client base to other cities in due time.

Kindly share your experiences so far, the major challenges, and how did you overcome them? One of the biggest challenges so far has been to understand the grey areas of the law. While some

areas continue to be undefined by the law, 2CSR has discussed and vetted the strategies they work by certified accountants, reputable lawyers and the Ministry of Corporate Affairs.

How do you view the performance of the company so far? 2CSR came into existence in a timely manner. We have been able to create a sound knowledge base and network of facilitators to allow us to devise CSR plans that will be most appropriate for our clients. How is the competitive scenario in its key markets? Initially corporates were resistant to undertaking CSR initiative; but now understanding not only their legal obligations but also the benefits attached to exercising a right CSR program. What are your future plans? Where do you see the company five years from now? Priyam and I find 2CSR to be a very promising entity, by which we wish to provide solutions for current social challenges by creating effective people-private-public (PPP). With 2CSR, we hope to inspire more individuals and corporates to regard CSR in the right light and participate towards making a positive impact in India.What is your message for budding entrepreneurs? Be the difference you want to see.

START-UP XPRESS 2CSRServices

2CSR offers a comprehensive and a personalized solution for their clients, in a manner that is quantifiable, measurable, engaging and objective. These include:

• Strategy Building: An in-depth needs assessment of your company, and the surrounding localities that can help the management arrive at suitable targets and a plausible action plan for their CSR initiative.

• Execution: Working closely with various divisions of the management such as marketing, human resources, accounting and operations to help execute the agreed action plan for their CSR initiative. 2CSR will assist your company to identify and formalize the partnership with the right entities that include NGOs, social ventures and other supporting organizations.

• Impact Evaluation: A comprehensive evaluation of the executed CSR initia-tives, by conducting a meticulous impact analysis based on the preset metrics.

• Reporting: The new Companies Act, 2013, also mandates the qualifying companies to report their CSR activities and impact using defined reporting guidelines. 2CSR prepares these reports and professionally made micro-videos, brochures and other creative collaterals, for your company to proudly share with the government, shareholders, customers, suppliers and other supporting entities, of their CSR initiatives.


COVER STORY NAMO – India’s Second Man of Destiny

Great Expectations from Game-changer NAMO

Modi’s overwhelming mandate has given a great hope to the country – at a time when “India Shining” became “India whining”. Where does the hope come from? It comes from Narendra Modi’s track-record as Gujarat Chief Minister which has created a unique style of governance that replaced ad hoc policies with strategic policy-making and precise delivery mechanism with innovative ideas in smart governance. But before that, let’s address the basic questions: What is on Modi’s mind? Will he back his political posturing with actions on the ground that will rattle the secularist traditions of the country? What exactly is Modinomics? What will be the basic thrust of his economic policies? What will be the foreign policy like? What will be the broad policy framework and the style of governance? Let us look at all of that in detail...


COVER STORY NAMO – India’s Second Man of Destiny

On May 16, 2014 when the world’s eyeballs were pivoted to the Great Indian Election Results,

India had delivered the most stunning verdict not seen in a generation. The BJP got a massive mandate which decimated the Congress-I party in a landslide not seen since 1984. The Indian voter had delivered the most decisive verdict on showing the door to Congress-I giving them a tally of just 44 seats out of 500 seats while the NDA-led combine has bagged 334 seats. The man of the moment – Narendra Damodardas Modi – who at 63 led the most-successful campaign in the history of any democratic country in the world had the most emphatic victory making him ascend the post of Prime Ministership of the country. Having fought off massive media and public negativity on various aspects of his personal life and public perceptions built on the pogrom of 2002, Modi has risen from the ranks of a tea vendor to karsevak to party secretary to Gujarat CM to becoming the 15th Prime Minister of the country. His main planks, contrary to what a clueless Congress-I and a farci-cal AAP Party ran were a com-bination of three forces – Smart, Clean and Corruption-free Gov-ernance, Development and Inclu-sive Growth for the Poor and the Minorities.It stirred a nation in an unprec-edented way because for the last ten years, India had become the cookie that crumbled amongst all developing nations after taking over from an energetic govern-ment led by NDA until 2004. GDP growth fell from 9.5 per cent to 4.83 per cent, FDI has dwindled to just 4 per cent of the GDP, FII flows have shrunk to a mere 1 per cent of the GDP and the country’s potential itself became a mockery of its former glory; while China grew its GDP touching almost

$9 billion, India has languished below $2.3 billion. Not just that, there were two downgrades in Sovereign Rating, inflation soared to 9 per cent and remained stub-bornly at that for the last two years, corruption scandals shook the country’s three or all the four pillars of democracy with a mag-nitude unheard of and a currency crisis almost bludgeoned for war-room attention until dissipated. All these had a toll not just on the polity, markets and the foreign investors as they pulled back but also took a heavy toll on the coun-try’s businessmen and govern-ment machinery. Policy paralysis reined large, businessmen in In-dia made outbound investments instead of looking at the domestic consumer, projects to the tune of $125 billion got stalled due to var-ious issues, that’s roughly 8 per cent of India’s GDP.

Hope amidst AgonyFirst things first: With 337 seats, the NDA led by Narendra Modi has formed the government with 45 cabinet ministers - exclud-ing the PM. The tally both for the NDA and the for the BJP makes Modi the most powerful prime minister in three decades setting aside any need for coalition poli-tics or consensus-building which made previous regimes usher in reforms at a snail’s pace. There is no foreseeable need to cosy up to left-winged and centrist coali-tion partners who are whimsical. Modi and his team at NDA alone can call the shots. Of course, the Upper House is still not in BJP’s control but history proves that gaining control of the lower house is half the job done. It is not a seri-ous challenge at this time as more members retire and NDA alliance is gaining stronghold across the country.Secondly: With one of the leanest teams in place, Modi has kept his word on the business-like expedi-ency with which he would like to run the government. Let’s begin with the cabinet formation on

Day zero. True to the manifesto, Modi adhered to the slogan: Mini-mum Government, Maximum Governance. Key portfolios with huge overlapping areas of deci-sion-making and clearances were merged with limited resources. For example, Arun Jaitley, the new Finance Minister has got ad-ditional portfolios of Defence and Corporate Affairs. Now, Corpo-rate Affairs is something that has a deep wedge with policies dic-tated by the Finance Ministry for investments, capacity-building, foreign investments etc. Similarly, the rural affairs ministry along with Panchayat Raj have been merged under the portfolios of one minister Venkaiah Naidu. Another example, coal and power sectors – depending on each other for fuel linkages will be under one ministry. Similarly, the planning and statistics ministries will have one minister. Economists say this is an essential facet of Modinom-ics where many ministries with close-linkages are being collapsed into one unit, thereby being con-sistent with supply-side econom-ics – which focuses on efficiency of resources and synergization among various aspects of gover-nance. Eventually, this kind of approach is increasingly pro-business, speedens government decision-making and removes bureaucratic hurdles. In his previous avatar, in Gujarat, where he was the Chief Minister for over 12 years before anointing a successor, a woman in his previous cabinet, Modi had the same model of ministries – all of 16 ministers ran the entire state of Gujarat to become the top state in the country run like a clean and business-friendly state.Thirdly: Coming back to the cabi-net selection, by picking a strong team of new faces as well as regu-lars, he has already given a stern message that he is here for chang-ing the status quo. By capping the maximum age of entry for a cabinet berth at 75 years, he has


NAMO – India’s Second Man of Destiny NAMO – India’s Second Man of Destiny

cleverly weeded out the veterans in the BJP party like LK Advani and Murli Manohar Joshi to sit outside. By getting seven women ministers, he has stuck to his elec-tion promise of getting more em-powerment to women politicians. By giving a chance to rank new comers with strong technical back-ground like Piyush Goel (Power) and Gen.V.K Singh (MoS for Ex-ternal Affairs and North-East af-fairs), he has set the tone for fresh thinking in taking the inputs from technocrats and experts. Creating a ministry for North-Eastern States itself tells you that Modi wants to set right the imbal-ances crept into the system for the past several decades in isolating an important part of India that is see-ing more and more isolation and increasing incursions by China on the other hand. Piyush Goel, Min-ister for Power, Renewables and Coal etc. is a rank-holder CA with impeccable track-record in ensur-ing Gujarat became a zero-deficit state with excellent financial man-agement of the state Discoms (Power Distribution Companies) Fourthly: Though the Manifesto has outlined some contentious is-sues like Uniform Civil Code, Ar-ticle 370, Ram Mandir, Cow Wor-ship, etc. our understanding of the Man and the mandate is that given the state of the nation and still pre-carious economic vulnerabilities of the Indian economy, we are unlikely to see a Modi reminiscent of the recalcitrant days of 2002 or those rare electioneering postur-ing attempted at times giving lot of discomfort to the minorities and the liberals. Since the main issue in the election has been the economy and governance (or lack of it), the electorate was galvanized to vote for NDA based on Modi’s excel-lent economic track record as the CEO of the state of Gujarat. (See Box: Gujarat Rocks!). There would be little time in the first five years or even in the first eighteen months to expend ener-gies into re-set of a social agenda

that the hardliners in RSS or the party or the man himself will cre-ate. If he spends too much political capital on recreating a social fab-ric, Modi may run out of time to carry out the promises on which his administration and perfor-mance will be judged. It is impor-tant to note that the transparency and openness with which a new website for PMO (pmindia.nic.in) was created within minutes of the swearing-in ceremony show the resolve to think beyond the elec-tion issue matters. That’s where the greatest hope and redemption lies for Modi and his ministers – focus on the economy, stupid. Ev-erything else is distraction.

Foreign AffairsIn the previous stint between 1998-2004, BJP realised the impor-tance of governing without any deviations on the socio-religious front. That’s what got them here. If the BJP has been voted over-whelmingly, the support has come not only from the Hindus but also India’s non-Hindus, over 200 million of them, a population larger than those of all but five of the world’s most populous na-tions. Hence, it is logical to expect that BJP will not get side-tracked into clipping their “special privi-leges” and make school history books rewritten with Hindu na-tionalistic ideas. What will be at the forefront is the policy on back-ing up Modi’s fiery rhetoric on domestic and international issues with actions on the ground – like expelling Bangaladeshi immi-grants from India, talking tough with Pakistan on the trials of sus-pects in the 2008 terrorist attacks on Mumbai and taking on China over the disputed borders in La-dakh and Arunachal Pradesh.Talk about China in particular and foreign policy in general, the day one moves by Modi in combing up the comity of nations on the periphery of the Indian Ocean is a master-stroke in diplomacy and foreign relations because it

attempts to thwart the sinister moves by China to encircle Indian subcontinent through its “string of pearls” in the Indian Ocean. It is therefore, a pre-emptive strike to take India’s neighbours - Mal-dives, Mauritius, SriLanka, Ban-gladesh, Bhutan, Nepal, Pakistan and Afghanistan alongside in order to wean them away in the medium term from China’s over-tures. Having said that, India un-der Modi will have to collaborate more with China, if there is to be accelerator on the growth paths of the two countries. Strategically, China and India have had far closer economic ties before colonial powers overpow-ered their economies. Similarly, Russia, which used to be an old ally, might just become closer to India in view of the new Eurasian drive of Russian Premier Putin. Japan, let’s not forget is going to be another soft superpower that has had great equation with Modi government in Gujarat. Whether it is bullet trains or port infra-structure, the Japanese are com-ing to India in a big way and Modi may well make his first visit to the land of the rising Sun. It now remains to be seen wheth-er India’s relations with the big four- US, UK, Germany, Japan and France will be as dynamic as has been so far except the minor irritants like the US Visa issue denied to Modi. On the whole, expect plenty of fireworks from Narendra Modi on the foreign af-fairs. Modi will surely recognize the benefits of a mature foreign policy with the sole superpower America because both the coun-tries need each other in rebuild-ing a modern world free from terrorism, tyranny and threats to democracy. There is equal pressure from Obama Administration on the US President to make a quick dash to India to remove the blocks on the US-India relations. Expect enor-mous engagement between US once the dust settles down at 7



Race Course Road. US-American relations have been always in an overdrive under the Vajpayee Government and also the UPA regimes. So, do not write off the American juggernaut yet notwith-standing the cold vibes so far. Mo-di’s team has the tactical nerve to smoothen the relations with US in the long-run.

What to Expect from Modinom-icsModinomics has entered the world of tweets and blogs much before Modi entered the PMO. What does it mean really? Modi-nomics is actually the refined macroeconomic thinking that is closest to supply-side econom-ics which goes beyond what Keynism, monetarism, and now the classical economics mandate. It boils down to lowering of bar-riers for people to supply goods and services as well as by invest-ing capital. Modinomics, as has been proved in Gujarat, goes to make economic thinking essen-tially supply-side oriented as op-posed to the demand-side empha-sis of Keynesian economics. While that had its say in the economies of the war years, today’s world demands more innovative ways of increasing the potential sup-ply of output be it capital, techno-logical progress, quality of human resources, removal of trade and regulatory bottlenecks and so on. Modi has achieved supply-side economics by a mile in Gujarat. How does Gujarat score in this? Exceedingly well.A case in point: Jim O’Neil, the father of BRIC concept of invest-ing in Brazil, Russia, India and China made a ten-point thesis in his treatise that received global recognition and set capital mar-kets flocking to these markets. He predicted that if the BRIC nations follow his 10-point formula which helps in creating a Growth Envi-ronment Score (GES), they could overtake the G-7 in future. In 2012, O’Neil was in Gandhinagar, Gujarat to deliver a talk on his

economic theory to Modi and his top bureaucrats. As he came to the slide on the 10-point GES listing out the points, as many as 7 out of the 10 GES points, he said, could be technically implementable by an Indian State and on all of them Gujarat had made great strides in the last decade almost similar to what South Korea has achieved. O’Neil gave his endorsement of Modinomics then itself: “Narendra Modi’s economics seems to be in the right place”, he said in an interview after his meeting with Modi. What are those 7 GES score points? 1. Im-prove Governance 2. Raise the level of education 3. Improve the quality and quantity of universities 4. Increase agricultural productivity 5. Improve Infrastructure 6. Introduce a credible fiscal policy. 7. Improve environmen-tal quality. There are three points, but Modi knows the distinction path to ac-ing up the curve of development in leapfrogging from a vicious cy-cle to virtuous cycle of all-round development.On all these fronts, Narendra Mo-di’s government scored high in putting Gujarat on a high-growth pedestal. And understanding Gu-jarat’s achievements will give us a better sense of what to expect from the man of the moment – Modi. Gujarat is today considered the petro capital of India with the most developed gas pipeline net-

work, supplying piped natural gas to nearly 12,34,292 domestic households, 14870 commercial es-tablishments, 3760 industrial con-sumers and 325 CNG stations. A 2,200 kilometre gas-grid supplies gas to the industrial areas.Gujarat has 42 ports, 13 domes-tic airports and one international airport, its infrastructure is well ahead of other states, has an ex-tensive road and rail network. There are 83 product clusters, 257 industrial estates, 32 notified spe-cial economic zones (SEZs) and the upcoming Delhi-Mumbai In-dustrial Corridor (DMIC). In the ten years between 2001-02 and 2011-12, the GDP of the state grew at an annual average rate of more than 10 per cent per year. While the rest of India lan-guished at a paltry agricultural growth of below 4 per cent, Guja-rat alone achieved a growth of 11 per cent. Gujarat also stands as a replicable model of development and competitiveness despite hav-ing just fewer than 5 per cent of the total population of the coun-try. The Economist magazine ob-served whether Gujarat could do for India in the 21st century what Guangdong province did for Chi-na in the 1990s. There are other achievements that Gujarat has achieved which make it a model worth emulating. It at-tracted 13 FDI proposals worth

NAMO’s list of top 10 priorities for the EconomyGiving special emphasis to governance, Prime Minister unveiled a top 10 priorities’ list for the government. The aim is to kick-start economic growth and ensure a smooth decision making process. 1. Build Confidence in Bureaucracy 2. Welcome Innovative ideas and Babus to be given freedom to work 3. Education, Health, Water, Energy and Roads will be priority 4. Transparency in the government. E-auction to be promoted 5. System will be placed for inter-ministerial issues 6. People oriented system to be in placed in Government Machinery 7. Addressing concerns relating to Economy 8. Infrastructure and Investment Reforms 9. Implement Policy in time bound manner 10. Stability and Sustainability in Government Policy


•Jobs, Jobs, Jobs: Narendra Modi’s main plank for coming to power has been jobs and Modi’s first target is to achieve more than a crore jobs, of course, he can do this partially by lowering the retirement age of workers but going by the past record, Modi will bring in more projects of national scale which will bring in private-public partner-ships, wider foreign participations, long-term financing of projects etc. to get the job market red-hot.•GST: A uniform Goods Services Tax will replace all indirect taxes such as VAT, sales tax, central excise and service taxes. It is expected to bring down inflation as multiple layers of taxation that exist in India are going to go. Estimates say, GST introduction itself can boost India’s GDP by 2 per cent p.a. Of course, there are challenges!•A combination of Rajan-Jaitley-Modi: This is similar to the famous Volcker-Reagan era where the duo broke the back of inflation and put America back in business to rise to the top of the Superpower status in the 80s. At the moment, despite qualms about retaining Raghuram Rajan as RBI Governor, sanity is prevailing over the think-tank in Modi Team to allow free hand to Rajan in reining in inflation. Of course, even Rajan has come around to the view of the government that a balance between growth and infla-tion is in order. For NDA government regime, economists like Arvind Panagriya and Jagadish Bhagwati who have successfully given inputs for Guja-rat turnaround are going to be the standing army for Modi’s govern-ment. Already, Arvind Panagriya outlined that since the CAD (Cur-rent Account Deficit) has shrunk to less than 2 per cent of the GDP, there is a leeway to go up to 5.5 per cent of GDP to finance the CAD. In-teresting times for both Modi Team and Rajan to work together and get India back to a roaring growth path.•Clearance of pending Infra proj-

ects: As around $125 Billion worth of projects are caught up due to policy paralysis and fuel linkage is-sues, NDA government is expected to kick-start these projects as getting these back up on their feet gives an impetus to GDP. Immediate mon-etisation, re-awarding to stronger financial partners, clearances from various authorities, or encouraging bids from renewed interest groups is going to be a key focus area.• Subsidies and Privatization: PSUs getting privatized is always the in-thing with NDA government and Modi-led governance. Subsi-dies will also be redirected after proper rationalization and institu-tionalisation to prevent leakages. Since the NDA government has re-ceived a major drubbing in 2004 due to perceived indifference to welfare economics, some of the better sub-sidy measures are expected to con-tinue.• Defence Privatization: By giv-ing Jaitley the power over finance overlooking defence, Modi sent out a strong message to expect more fireworks in defence itself. There will be more privatization and even foreign ownership of hardware fa-cilities needed to modernise the defence. Expect quick deals with countries like Israel, Russia, France, Germany, Japan and UK.•Labour Reforms: This is going to be deep-dived by NDA government to bring out acceptable models of expediency in labour reforms to trade unions, workers and employ-ers. If you read Raghuram Rajan’s chapter on labor reforms in the Economic Survey of 2011-12 which covers skill development, inter alia, you will know what’s coming next. Also expect more repeal of useless laws – there are about 50-60 legisla-tions and most of them are going to see their last appearance in this gov-ernment regime.•Big Bang reforms in Insurance, Banking, Coal, Power and Agri-culture: Following the success of the Gujarat model of governance,

expect wider access to foreigners to get a pie of banking and insurance pies with emphasis on reciprocity for Indian firms expanding over-seas. But the biggest game-changer will be in Agriculture. Modi has always had fresh ideas in making farming more productive for the farmers by making it more supply-driven, giving better credit, access to soil preservation methods, making agriculture less input-intensive and more remunerative from a price re-alisation standpoint for the farmer. Expect a pan-India framework for a debate on Agricultural revolution with far-reaching reforms. (More on that later in the coming issues.)• Urbanisation: Whether it is the Freight Corridor, revival of the Road linking project or the 100 cities mega infrastructure project, huge urbanisation is going to be the hall-mark of this government.• Some Swadesi, Some Videsi mostly inclusive: Since Modi has always had a nationalistic fervour in his speeches; one can expect that most of the policies in economics, politics and foreign affairs will have the interests of domestic populace at centre-stage. Hence, we can ex-pect a tinge of nationalism in some of the indigenous industries of our ancient heritage and culture like the Indian systems of medicine of Ayurveda, Hatha Yoga, Unani and handicrafts to be revived and made a centrepiece. This is because Modi has a feeling of pride in things na-tional while allowing the foreigners come to India at our terms, where we cannot add value. In short, Swadeshi economics is the fulcrum of Modinomics, it must be said. At the same time in-clusive economics and inclusive governance in the seven areas have made all the difference to Gujarat in the last decade. These include, the economy, managing growth, agriculture, infrastructure, human capital, grassroots development and sustainability.

Modi’s Mantra of HopeA quick look at what’s Coming




$3.7 Billion over 2011-12 and be-came the state with the second highest number of FDI proposals. Gujarat is the top milk procuring

Inside the Gujarat Infra Model

There are various aspects of the Gujarat Infra Model and some of the key areas of development in the state are:1. quality of Road Infra 2. Water Supply 3. Port Infra 4. New Cities 5. Renewable Investments and 5. Health of State Discoms.2. Take Power Discoms: The balance sheet of the Gujarat State Discoms has been relatively healthy with overall debt declining gradually from Rs.33 billion in FY07 to Rs.15 billion in FY12. Overall debt at the national level, on the other hand, has increased steeply with negative overall net worth as a result of continued losses at the state discoms.3. Power Generation: Gujarat’s success is that power generation capacity in Gujarat has been driven by the private sector with 14GW added led by 8GW of coal capacity and 4GW of renewable capacity addition. Nationally, whereas private sector has 34 per cent contribution to the installed capacity, in Gujarat it is more than 61 per cent. Gujarat is today the only state with zero power deficit in FY14.4. Solar Policy: Gujarat has pioneered the country’s solar policy with a better flexibility to the developers. While the National Solar Mission makes the tariff decided by the reverse bidding process, in Gujarat preferential tariff is fixed by the government for the operation period. High irradiation, availability of land and effective policy structures has made Gujarat conducive for solar power installation. Another highlight of Gujarat Solar policy is the project to set up solar power plants over the 19000 kim long canal network of Narmada river. Not only does this prevent the evaporation of water but uses the natural river network has helped in producing more than 1.5mn units of energy.5. Roads: Gujarat’s focus is on upgradation and maintenance with a focus on connecting all the villages – almost 99 per cent of the villages are now connected by “pucca” roads.6. Water: Gujarat is a water-scarce state. On one side, there is desert and on the other side, it is Pakistan, as they say. Yet Gujarat has now become a water-surplus state with the largest desalination plant in Asia with a capacity of 336 million litres per day.7. New Cities: Gujarat International Finance Tech City is a project which aims to provide world-class infrastructure to the finance and technology firms, incentivising them to set up their base in Gujarat.

state in the country with 12.4 mil-lion kilograms of milk procured per day (roughly 38 per cent of India’s total milk procurement)

during 2012-13. It is the fourth largest milk producing state. It is the largest producer of processed diamonds- accounting for 80 per cent of India’s diamond exports. It is the largest denim producer in the country and the third largest in the world. It is the largest cot-ton producer and exporter in the country. On the infrastructure front, Gujarat leads the country. It has the highest number of opera-tional and commercial cargo ports in India. (See box: Inside the Gujarat Infra Model).With such a rich legacy, it is quite plausible to now to expect what Modinomics will do for India – more supply-side economics, strong and decisive policies for a balanced development of all the three sectors – Agriculture, Indus-try and Services.

An Unchecked Mandate - A Fan-tastic Start Modi has got all that he asked for now. And a pan-India appeal that puts him in a ratified field of rever-ence - he has a twitter handle that counts over 3 million (followed by even some heads of state) and a Hindi-heartland appeal that will shame any other national leader. If he focuses on the right issues as outlined above, in a manner that uses up India’s current and latent potential in all the seven areas, India will have a golden run. This is the tipping point, the turning point and the inflection point in India’s tryst with destiny. We hope Modi gets all the god-speed and support to succeed at India’s highest office at its most needed hour. There was never an-other point like this in a nation’s history that a mandate this strong came to a man so revered and yet paradoxically so hated that mil-lions of voters in India, young and old have placed in a leap of faith. Hope Modi and his team grabs this and help India leapfrog to the status of developed nations that it desperately deserves. - S Sridhar


RUSSIAN ECONOMYThe Challenges Ahead

With dark clouds of economic and political sanctions looming

over Russia in the backdrop of the Crimean accession,

Russia’s economic future is being arguably considered as

shaky by many western economic and political pundits while

the others from the pro-Russian bloc are upbeat about the

country’s economic future in view of the speedy growth and

market reforms undertaken by the government in recent

times, which according to them would crenelate Russia

from the ensuing embargos, says Hyma Goparaju, Managing

Director, Indigen Technologies (P) Ltd.

INTERNATIONAL


Having grown at a steady average rate of 4 per cent post the 2008

recession, the IMF, as an after effect of the geopolitical turmoil, has revised Russia’s growth fore-cast to a near zero rate at around 0.2 per cent for the year of 2014. With milder sanctions already being imposed in the form of visa restrictions, asset freezing and blacklisting of a few Russian companies, it becomes impera-tive to look at all possible prob-abilities of the impact of stricter sanctions not just on the Russian economy but on the fallout on the European Union and the rest of the world as well.

Economy – A Bird’s Eye ViewWith a GDP of $ 2 trillion (2012 figs), Russia is the eight largest economy representing close to 3 per cent of the world economy. After the collapse of the erstwhile USSR in 1991, Russia unleashed a slew of reforms by embracing market economy and globaliza-tion and as the iron curtain fell, the country went through a tumultuous decade of economic, social and political transforma-tion. Post 2000, Russia grew at an

average rate of 7 per cent rid-ing on the upward rising global growth curve and leapfrogged its GDP to $ 2 trillion. The once centrally planned economy today houses more than a hundred billionaires and is ranked third in the list of billionaires across the world just behind the US and China. Russia is one country which has enjoyed a geostrate-gic advantage in availability of natural resources and is exten-sively rich in oil, gas, metals and minerals. The country exports these commodities which form raw materials for many manufac-turing units and factories across the globe.While the services industry comprises 60 per cent of its GDP, manufacturing has a share of 36 per cent and agriculture holds a slice of 4 per cent in the pie of the Russian economy. Oil and gas constitute about 58 per cent of Russia’s export revenues with China and Germany being the topmost trading partners of the country. While the Russian econ-omy is completely commodity driven, 90 per cent of its exports to the US constitute minerals and raw materials. After having grappled with a negative CAD in the initial years, Russia began recording current account surpluses. Having got

tremendously benefited from the rise in oil price post 2000, the Russian exchequer reaped a windfall of petrodollars dur-ing the period of energy crises when prices of crude surpassed $ 100 per barrel. High oil prices from 2004 were a blessing for Russia and between 2000 and 2008 the country’s GDP doubled with the highest growth being achieved in 2007 at 8.3 per cent and the World Bank stated that year that Russia had achieved “unprecedented macroeconomic stability”.

From Russia, with LoveRussia has the largest reserves of commodities including oil, gas, metal and timber in the world which comprise 80 per cent of its global exports. Russia is the eighth largest gold holding coun-try in the world and is aiming at pinning down the petrodollar by making the ruble a reserve cur-rency in the coming years. Also 90 per cent of the country’s trade happens in dollars, the high-est in any emerging economy, thanks to its oil exports which is why Russia is in a serious contemplation to end its dollar dependence. The Russian Cen-tral bank recently even adopted the golden ruble as a symbol of financial stability sending strong signals to the west by bulwark-ing its local currency and airing its lofty plans. Russia has a foreign exchange reserve of $ 486 billion piled up as result of soar-ing oil revenues.The country caters to 24 per cent of EU’s gas and 30 per cent of its oil requirements. Russia’s bud-get deficit stands at 1.3 per cent of GDP against a 3.3 per cent for EU and government debt stands at 1.3 per cent of GDP against a whopping 87 per cent for EU. In the last decade, Russia brought down its Debt to GDP ratio dras-tically from a high of 70 per cent

Russian Economy

Unprecedented Macroeconomic Stability

Source: Rosstat, Ministry of Economic Development of the Russian Federation


to 9 per cent. The country is cur-rently running a current account surplus of 2.1 per cent of its GDP which is roughly four times its external financing requirements. It is also the third largest FDI at-tracting country and brought in $ 94 billion in 2013. Russia became a member of the WTO in 2012 after two decades of negotiations and with a population of 143 million, boasts of more than 50 per cent internet penetration and usage.Russia is the ninth largest consumer market in the world and fourth largest in Europe. With a per capita income hover-ing around $ 14,000, an average Russian is more attractive to a global marketer compared to an Indian or a Chinese with consid-erably lower per capita income. A remarkably high literacy rate of 99.7, one of the highest in the world, unemployment is at a rea-sonably low level at around 5.4 per cent in the country. Having made all the right moves, Russia soon burst into the global scene as an economic power to reckon with.However, the 2013-14 figures have not replicated the economic buoyancy of the previous years and the political turmoil caused as a result of the Crimean crisis is threatening to alter the macro-economic fulcrum attained after a decade long concerted effort by unleashing reforms and entre-preneurship. The first quarter of 2014 posted a growth rate of a meager 0.5 per cent and hope-fully alarm bells have gonged loud enough in the Central Bank of the Russian Federation which came into existence as recently as in the year 1990.

The Russian – Ukrainian Rip-ples The IMF has recently cautioned Russia of capital outflow of $ 100 billion due to political unrest and

cut its forecast to 0.2 per cent for 2014 down from 1.3 per cent it registered in 2013. The stock mar-kets have fallen 20 per cent. The ruble has weakened to an 8 per cent against the dollar and close to $ 64 billion has left the country which the Russian Central Bank has stated are the rubles that have been converted to foreign exchange. As a consequence, the Central Bank has raised the lend-ing rate to 7.5 per cent to arrest the flight of capital and to bolster the falling ruble. With the UN and IMF monitoring the develop-ments in Russia closely and the UN not recognizing Crimea as a part of Russia yet, the threat of sanctions gets serious. In the event of the inflow of invest-ments getting clogged and flight of capital increasing, the first task of the Russian Central Bank would be to protect the ruble which it could do by ploughing into its forex reserves and buying rubles to hold it as it did during the 1998 Russian Financial crisis when the Russian government spent $27 billion to save the ruble’s floating peg by widening its currency band and eventu-ally floating it freely. But such a move would mean diminishing the foreign reserves and making the economy vulnerable to an ex-ternal default. Alternatively, the central bank could let the ruble drop freely in the event of large exodus of capital but that move would generate massive inflation which could end up triggering a domestic banking crisis.It is also important to note that

any kind of sanctions imposed on Russia could now have seri-ous global ramifications. Russia exports 200 billion euros worth goods to the European Union of which 130 billion euros constitute oil. The EU imports around 30 per cent of its oil and gas, each from Russia and an embargo would pose an immediate threat to the economic equilibrium of the already battered EU which is just about beginning to recover from the Euro crisis that shook the world. Russia’s FDI (64 per cent) projects came from Europe and Russia is the third largest trading partner with the continent. Close to 47 per cent of FDI into Russia goes into the manufacturing sector with automotive industry getting the lion’s share and the sector generates the maximum amount of employment in the country. Russia has the largest number of automotive manufacturing units in Europe after Germany and France and many big auto names have invested in building capaci-ties to take advantage of trained manpower and economies of scales. As a result of which, sanc-tions would adversely affect the global auto industry that is grad-ually limping back to normalcy. US’s discovery of shale gas however lightens the burden off it as it would not have to import gas from Russia in the event of sanctions. But the USA does de-pend on Russia for several of its mineral and metal requirements, one such being titanium which is used by Boeing and sanctions

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Russia’s MICEX Index

Russian Economy

could impinge upon the financial tightness of the global automo-tive industry.It is yet another matter of concern that while in the year 2010, Rus-sia received 201 FDI projects, the year 2012 welcomed only 128 and this was prior to the Crimean cri-sis. Russia is overly dependent on its oil, metal and mineral indus-try for its growth and sustenance and has turned itself into the sup-plier of raw material for the glob-al factory. Close to fifty per cent of the Russian railway freight is exported and is raw material for the world. Finished or branded products churning out from Rus-sian factories are miniscule and the situation calls for a thorough re-evaluation of its manufactur-ing model. Russian brands are hardly known and other than vodka which is what comes to any layman’s mind when asked to recall a Russian product, no other name is invoked. While the country has continued to attract large FDI investments, domestic capital buildup and government investments are lower than the normal averages for emerging economies. Russian economy is chiefly dominated by large energy and metal indus-tries which have also helped in creating massive employment. However, the small and medium sector which is where entrepre-neurship spawns is a laggard in Russia accounting for only one-fourth of employment as com-pared to half in OECD countries and is also one of the reasons for low innovation activity in the country. While capacity utilization in Russia is remarkable, which is also the primary reason for low levels of unemployment result-ing in higher inflation levels; it is largely a result of the giant cor-porations like Gazprom, Rosnefit and Novatek that have generated massive employment. To make

its enterprises more competitive, Russia needs to improve gover-nance, reduce corruption, induce innovation and competition, encourage entrepreneurship at micro level and enhance domestic investments and productivity.

Russia – India, a firm Hand-shakeThe erstwhile Soviet Union and India have always maintained good relations ever since India’s independence. The five year plans in India were replicated from the central planning model of the Soviet Union and the coun-try also helped India in setting up large industries and dams. With the signing of the 1971 Indo-Soviet treaty of friendship the two countries took a step ahead in taking the cooperation between them forward and even after its expiry in 1991, Russia continued to support India in defence, secu-rity and strategic parameters.Bilateral trade between Rus-sia and India as on March 2013 stands at $ 6.25 billion which is negligible when compared with $ 100 billion with the USA and even China at $ 65 billion. While with Ukraine, the trade volumes are even lower at $ 2 billion, how-ever, Ukraine has been a strategic market for Indian pharmaceutical and electrical machinery exports. Pharma exports constitute 32 per cent of the $ 2 billion trade with Ukraine.

If the Russia-Ukraine standoff lingers for a longer time, there is the possibility of oil prices shoot-ing up which would directly affect India’s import bill. Large oil imports into India result in a widened CAD. In the last one year, the government of India and the RBI have worked in tandem to tame the CAD to lower levels. But if global oil prices rise, CAD is at a risk of receding to higher values. Also higher oil prices pressurize the rupee by weakening it further which could snowball into an inflation cycle. A similar or worse situation could be anticipated to emerge in countries whose economies are fragile and dependent on energy imports.While addressing the current crisis is certainly a humungous challenge for Russia, the devel-oped economies must also realize that economic embargos and sanctions are not the best ways and means to resolve geopolitical standoffs. As the global economy is beginning to relieve itself from the throes of a severe financial crisis, any sanction imposed on a large economy of the size of Russia can have a serial domino effect with the smaller neighbor-ing countries getting affected instantly, the ripples of which could travel far and wide in no time.

Ukraine Crisis Sends Russian Stock Market Tumbling


ADVERTORIAL / ECGC

• Risk Value covered- Rs.2,79,254 crores (Rs.2,60,528 crores in 2012-13 )

• Gross Premium - Rs.1304 crores (Rs.1157 crores in 2012-13)

• Gross Claims paid - Rs.898 crores (Rs.548 crores in 2012-13)

• Profit after Tax - Rs.360.69 1,00,000 active buyers all over the world. The data on the im-porters is used for underwriting commercial risks on the over-seas buyers. During the FY 2013-14, the Corporation added 17201 new buyers to its database. ECGC also covers risks of project exporters and financing banks involved in medium and long term exports. Under this segment, the Corporation issued 19 fresh Policy covers to exporters and 96 covers to banks during FY2013-14 for projects that are being ex-ecuted in Oman, Nepal, Bahrain and Malaysia. The Corporation proposes to pay a Dividend of Rs.88 crores to Government of In-dia. The Solvency Ratio of ECGC stood at 11.02 as on 31.03.2014 as against the minimum solvency ratio of 1.5 prescribed by Insur-ance Regulatory and Development Authority. The Corporation achieved most of its financial and non-financial targets as per the MOU signed with Ministry of Commerce & Industry and expects to get excellent grading for the year FY 2013-14.On the international front, ECGC continues to play an impor-tant role in representing India as a national Export Credit Agency (ECA). ECGC is a member of International Association of Credit & Investment Insurers (Berne Union). During the year 2013-14, ECGC has signed a Memorandum of Understanding (MOU) with The African Trade Insurance Agency and two Co-operation Agreements with the Export-Import Bank of the Republic of China and the Exim Bank SR, Slovakia. During the FY 2013-14, ECGC took various initiatives to promote exports and improve services to its customers viz. exporters & banks. The Corporation organized Export Risk Management Conclaves in association with D&B at important export centers in India during the FY as a part of its customer education and insurance awareness initiatives. Also, the Corporation organized export promotion seminars in association with Trade Bodies and Export Promotion Councils at various export centers. The Cor-poration provides a special window of cover to exporters and banks in respect of exports to Iran. The Corporation introduced three new products viz. Multi Buyer Exposure Policy for medium based exporters, Policy for small exporters and micro exporters during the FY. A comprehensive Buyer Score Card System has been implemented towards objective and expeditious credit limit approvals. The Corporation introduced a new country risk rating system with new features. The CMD also informed that the Corpo-ration opened its first overseas office at London in September, 2013. The overseas office mainly facilities better assessment and management of risks and also recovery of claims paid in Europe-an markets. The Corporation on its own will be shortly launching a full ledged Factoring services for exporters. The Corporation proposes to open -3- new domestic branches in 2014-15. Over-all, the Corporation expects to grow its business and also strive for better customer satisfaction during 2013-14.

ECGC reports all round impressive performance during 2013-14

crores (Rs.242.79 crores in 2012-13)• Proposed Dividend to Govt. – Rs. 88 crores (Rs.60

crores in 2012-13)

Export Credit Guarantee Corporation of India Ltd. (ECGC) registered an overall impressive performance during the FY 2013-14 with substantial growth in busi-ness, premium income, claim pay out as well as recover-

ies in its credit insurance business. ECGC was established in the year 1957 to support and strengthen Indian exports by provid-ing export credit insurance to Indian exporters and banks offer-ing credit towards exports. The organization is ‘iAAA’‘rated by ICRA which denotes highest claim paying ability. The Authorised Capital of the Corporation was increased from Rs.1000 crores to Rs.5000 crores in July 2013.Addressing a media meet to highlight business performance for the FY 2013-14, Shri N. Shankar, Chairman-cum-Managing Di-rector of ECGC mentioned that the Corporation was able to meet expectations of its customers as well as its stakeholders during the FY 2013-14.Though there have been signs of eco-nomic recovery in USA and Europe in 2013, political instability and strife in many countries like Libya, Syria, Egypt, Afghanistan, Sudan, Iraq, Turkey and Ukraine, heightened risks for exporters and financing banks. Therefore, the role of ECGC, the national export credit insurer of India, continues to be very important and crucial as export-ing without suitable credit insurance is fraught with huge risks. During FY 2013-14, ECGC paid out 381 claims worth Rs.109.29 crores to exporters under Policies issued to them and 175 claims worth Rs.639.55 crores to financing banks under Export Credit Insurance for Banks (ECIB) scheme. Average Annual Gross Claims Paid during the past three years is Rs.720 crores. Major sectors under which the claims arose in FY 2013-14 are Gems and Jewellery, readymade garments and textiles, engineering goods, chemicals, and agro products.During FY 2013-14, ECGC earned a gross premium of Rs.1303.73 crores, registering a growth of 12.7% over the previ-ous year. Average Annual Gross Premium Income for past three years is Rs.1155 crores and Average Annual Claim/Premium Ra-tio is 62.34%. The aggregate Risk Value covered by ECGC at Rs.2,79,254 crores during F.Y. 2013-14comprises those under Policies issued to exporters (49%) and that pertaining to cov-ers given to banks (51%). As on 31.03.2014,11,109 short term Policies and 311 ECIB covers were in force. ECGC has issued 78 Whole Turnover covers to banks under the ECIB scheme and 29426 accounts of exporters with 3677 branches of banks are covered. The Corporation presently covers around 55% of total export credit outstanding of banks in India. As regards Policy business, the Corporation presently underwrites risks on 237 countries of the world and maintains records of more than


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ONE PERSON COMPANYBUSINESS ENVIRONMENT

Transforming form of ProprietorshipThe concept of One Person Company (OPC) has been introduced in India, through Section 2(62) of Companies Act 2013, which was first recommended by Dr. JJ Irani Committee in the year 2005. OPC is basically a legal entity which functions on the same principle as a limited company, but with only one member and one shareholder. A new business ownership concept is an alternative for Indians, who typically operate using the risky concept of a proprietorship, says Bunty Hudda, CS, MBA (Finance) and LLB, Practicing Company Secretary, Ahmedabad, Gujarat.

Now, a per-son alone can start his or her own c o m p a n y ! One Person C o m p a n y

(OPC) is a new concept in India which has been introduced by the Companies Act, 2013. The Ministry of Corporate Affairs (MCA) has notified OPC con-cept vide notification dated 26th March, 2014 w.e.f. April 01, 2014 i.e. OPC concept is now a reality in India like other foreign coun-tries like the US, China and the UK.OPC combines benefits of a sole proprietorship and a company form of business. One Person Company is defined in the Com-panies Act as a Company which has only one member. A single shareholder holds 100 per cent shareholding and same person can become a Director in a Com-pany.

Technical Aspects: Member, Shareholding and DirectorsOne Person Company is defined

in the Companies Act as a Com-pany which has only one mem-ber. A single shareholder holds 100 per cent shareholding and same person can become a Direc-tor in a Company (Only a natural person who is a resident of India and also a citizen of India can form an OPC). Further the rules also specify that a person can be a shareholder in only one OPC at any given time. It simply means an individual cannot have two different OPCs in his name.There is no bar on more number of directors. However, as per the Act, the total number of directors shall not be more than 15.Minimum Capital Requirement:OPC will be formed as a ‘Private Limited Company’. Hence, mini-mum paid up capital will be Rs. 1, 00,000. NomineeThe person forming OPC has to nominate a Nominee with his written consent who, in the event of death or inability to contract of the sole shareholder of OPC, shall come forward and take over the reins of the one person company.

(Minor cannot become Member or Nominee in OPC. He cannot hold shares with beneficial interest).When a member in one OPC be-comes member in another OPC by virtue of his being a nominee in that another OPC, he shall need to comply with above mentioned requirement within 180 days.TaxationThe finance ministry has not spec-ified anything on tax rate of OPC, it is assumed that the rates of taxa-tion applicable for a private limit-ed company shall apply to OPC. Meetings of OPCEvery company shall hold first meeting of Board within 30 days


of date of incorporation and thereafter hold a minimum 4 board meetings every year in such a manner that not more than 120 days shall intervene between two consecutive board meeting.OPC shall be deemed to be com-plied with above provisions if at least one board meeting has been conducted in each half of a calen-dar year and gap between such two meetings is not less than 90 days. If there is only one director, no need to hold board meeting. It shall be sufficient compliance if all resolutions required to be passed by such a company at a board meeting are entered in a minute book – signed and dated by the member and such date shall be deemed to have the date of the board meeting for all the purposes.

Mandatory Conversion of OPC into another companyWhen paid up share capital of OPC exceeds Rs. 50 lakhs or its average annual turnover of relevant period exceeds Rs. 2 crores, it shall cease to be entitled to continue as OPC (Here relevant period means period immediately preceding 3 consecutive financial years). Such OPC shall be required to convert itself, within 6 months of exceeding its limit, into either

private company with minimum two members and two directors or Public company with seven members and three directors.

Conversion of Private Compa-ny into OPCA Private Company (other than Section 8 - Companies with chari-table objects), having paid up capital of Rs. 50 lakhs or less or average annual turnover during relevant period of Rs. 2 crores or less, may convert itself into OPC by passing Special Resolution in General Meeting after taking NOC form members and creditors.Process to start a One Person Company is as followsThe sole shareholder (Applicant) is re-quired to obtain a Director Identi-fication Number (DIN) as well as a digital signature certificate.• Apply for the name of the com-

pany.• Get the consent of the nominee

File the consent along with the final incorporation forms with the Memorandum and Articles and other required documents.

• After inspection of forms and documents, Registrar of Com-panies (ROC) will issue certifi-cate of incorporation.

OPC is best form of business due to following advantages:

• The biggest advantage of OPC over a sole proprietorship would be that in case of OPC, liability in case the business fails, is limited to only the business assets.

• Comparatively less stringent compliances with lower fees is applicable to OPC.

• Annual returns can be signed by the Director himself instead of a Company Secretary.

• Provisions of Section 139 re-garding Compulsory Rotation of Auditors shall not apply to OPC as per Rule 5 of Com-panies (Audit and Auditors) Rules, 2014

• Provisions of Section 98 and Section 100 to 111 (both inclu-sive) shall not apply to OPC i.e. relating to Tribunal’s pow-er to call Members’ meeting, Calling of EGM, Notice and Quorum for Meeting, Proxies, Voting rights, Postal Ballot, Circulation of members’ reso-lution etc. are not applicable to OPC.

Outlook On the point of rules and regulations, there are definitely fewer rules and regulations surrounding a One Person Company. The OPC will definitely encourage more proprietors to start OPC instead of forming a proprietorship. The concept is set to organize the unorganized sector of proprietorship firms. OPC is next big thing in India and will boost flow of foreign funds in India as the requirement of nominee shareholder would be done away with.However, experts feel the key challenge for such a company will be to ensure that supporting legislations also recognise such a company as an entity and not just an extension of a sole proprietorship.

Steps to Incorporate OPC

Transforming form of Proprietorship

• Obtain Digital Signature Certificate (DSC) for the proposed Director(s).

• Obtain Director Identification Number [DIN] for the proposed director(s).

• Select suitable Company Name, and make an application to the Minis-try of Corporate Office for availability of name.

• Draft Memorandum of Association and Articles of Association [MOA & AOA].

• Sign and file various documents including MOA & AOA with the Registrar of Companies electronically.

• Payment of Requisite fee to Ministry of Corporate Affairs and also Stamp Duty.

• Scrutiny of documents at Registrar of Companies [ROC].• Receipt of Certificate of Registration/Incorporation from ROC.


CEO Corner

“B-Schools themselves will need to adapt the best competitive practices that they teach in their classes to remain relevant to the ever changing business world.”Akhil Shahani, Manag-ing Director Centre for Management. He is also a Director at Kaizen Management Advisors Pvt. Ltd. He has a vast network in the education space to Kaizen. He has been in the education sector for the last 60 years and is involved in man-aging 24 institutions in Mumbai. He runs the non-profit SAGE Foun-dation which provides education and skills training for 100 villages in Maharashtra. He is a Past President of the American Alumni As-sociation, which pro-motes academic link-ages between US and Indian Universities. Regular speaker at ed-

ucational conferences and had been profiled in media. He has received the ‘Bharat Shiromani Award’ for his work in the education. After completing his MBA over 18 years ago, he started a range of ventures in the educa-tional sector. These include a business school for his educational trust and a vocational training franchise. Mr. Shahani earned his MBA from Kellogg Graduate School of Management.In an exclusive interview with The Global ANALyST, Akhil Shahani, Managing Director, Thadomal Shahani Centre For Management (TSCFM) discusses about management education scenario in the country and the ways to tackle the lack of employability skills among the B-School grads, and TSCFM’s future plans.


A recent survey says that 79 per cent of MBA graduates are not industry ready. Why do you feel that has happened?Peter Drucker, the father of mod-ern management thinking said; “What can be measured, can be managed”. The key to the issue of why MBA colleges are not able to graduate students as per the needs of recruiters is that both parties are using different mea-sures to determine quality. Re-cruiters measure candidate qual-ity through personal interviews and aptitude tests that determine if the job seeker has the right at-titude, skills and industry knowl-edge for the role. On the other hand, colleges measure graduate student quality using exams that primarily determine the students’ ability to memorize management theories. Although both colleges and recruiters are doing their best to focus on quality, since their quality parameters are different, there is a mismatch between what recruiters expect, and what col-leges deliver. We need a revolution in MBA education that better aligns the needs of recruiters to what is provided by colleges.

What can a college do to get students industry ready?The key focus of a college is to understand each student’s personal career goal on graduation and give that student the education required to reach that goal. This requires understanding of each student’s strengths and weaknesses and how they match to the chosen job role. Enabling each student to understand what aspects of the course they need to concentrate on to help them build the specific skills & knowledge needed to get their desired job e.g. a student who aspires to work in a PR firm should build skills in presentation and knowledge of market positioning as opposed to

a student who aspires to work as an investment bank analyst where he needs to develop skills in problem solving and knowledge of excel spreadsheet models. The college then needs to connect the specific student to the companies that have the job roles they aspire for. No point in giving a shy student a job interview in sales or a creative student a job interview in accounting, as they would probably do badly at that job even if they are selected.

What can industry do to help colleges produce job ready candidates?It is in the interest of industry recruiters to have access to a large pool of talented candidates that require minimal training once they join their allocated job roles. This can be achieved through having colleges that already provide this required skills and knowledge training in their curriculum before their students graduate. Recruiters can proactively connect to colleges and give inputs on what they are looking for in job candidates and how these colleges can alter their curricula to create this candidate pool. They can also have frequent guest sessions with students to share their experiences of how it is to really work in their industry, to give students a flavor outside their textbooks. Companies can also offer short internships

with actual project outcomes to students instead of looking at student interns as a source of low cost labor to do mundane activities. Successful internship projects give companies a chance to identify and train talented future job candidates while giving these talented candidates a reason to choose to work in this company on graduation.

Tell us more about Thadomal Shahani Centre For Management (TSCFM)?I am a big believer in practicing what you preach. We built TSCFM with the purpose of creating MBA graduates who are truly job ready. Many of the points I’ve suggested above to other MBA colleges are already being executed in TSCFM. We have created a unique education environment that we call the “Responsive Learning System”. In this, we conduct psychometric tests for each student to understand their strengths. We then ask students to determine their individual dream job role on graduation from TSCFM. We counsel them using a ‘Career Development Sheet’ that maps their unique strengths with the skills and knowledge needed to get the job role they want and show them what aspects of TSCFM’s curriculum they need to concentrate on to get there. The curriculum has been created to holistically develop our students’

India needs a revolution in MBA Education that better aligns the needs of recruiters to what is provided by colleges.

- Akhil Shahani, Managing Director,

Thadomal Shahani Centre for Management, Mumbai

Management Education


attitudes and skills along with industry knowledge to create a well-rounded job candidate. Each student’s progress through the two years with us is measured using a Corporate Readiness Score (CRS) that measures the students on the five parameters most desired by industry recruiters, namely; communication skills, problem solving, domain knowledge, leadership and professionalism. Along with this we have corporate guest sessions almost every week so students get a deep understanding of industry realities from senior managers. These initiatives have been developed with inputs from recruiters. We believe that the more we align our MBA education to what recruiters look for, the more job ready and successful our graduates will be.

Why do so many business schools have vacant seats? I personally feel that this is a good thing. Like other parts of India’s economy, stiff competition has entered the management education space with many entrepreneurs opening new institutes over the last five years. Students now have a wide variety of MBA college options in front of them and have the freedom to select the one that best suits their needs. This will improve the overall quality of education provided by colleges and they can no longer get away with having mediocre faculty teaching outdated curriculum leading to poor placements. Already, I have seen some of these weaker new colleges closing down due to lack of students & I believe that there will be more to follow.

What is the future of Management Education?Management education has a very bright future globally. This is because business is getting

more competitive and complex each year. Companies need to hire managers with the latest industry knowledge if they want to succeed. MBA institutes are the only source of structured management education that enable freshers and working professionals build the sort of industry knowledge needed by these companies. In fact, a greater number of students are looking at doing an MBA regardless of what their undergraduate degree is. However, I feel that management education will evolve over the next decade to include more specialized courses based on industry sectors and functional roles. Colleges themselves will need to adapt the best competitive practices that they teach in their classes to remain relevant to the ever changing business world.

What is your outlook on the Indian economy in 2014?The Indian economy is already recovering from the downturn of the last couple of years, with new optimism among industry leaders and new investments happening. Although we consider a 5 per cent annual growth rate to be less than ideal, this is much higher than what investors see in developed economies like US and Europe. With even China slowing down,

many global investors are putting their money back into India. This means that companies will grow faster over the next few years and will need to hire more MBA graduates to help them achieve their targets.

What would be your advice to a budding manager/MBA aspirant?Too many MBA aspirants are not clear what sort of career they want. When I ask them what their dream job is like, they say vaguely that they want a “good job in a good company”, but are not able to explain further as to what this means. If you don’t know what you want, you will just accept what is given to you and you may spend years moving from one unsatisfying job to another. With the abundance of information and resources available today, there is no excuse not to research on the industries, companies and job role options out there. Identify what looks interesting to you and figure out which college (MBA or non-MBA) could help you reach there. The key piece of advice I would give any budding manager is to make efforts to understand what they want from their career and also identify the best way to reach those goals.

Management Education


A RISING CHINA, INDIA AND THE US

INTERNATIONAL

A Triangular Relationship in a Multipolar World The world has become increasingly multi-polar, inter-connected, and inter-dependent. Unlike previous times, American primacy will not always work. The shape and dynamics of the global order, however defined, are clearly changing rapidly in a multi-polar world. History doesn’t end, Americana is not likely to be the same again, says Andrew K P Leung, SBS, FRSA,International and Independent China Specialist, Chairman, Andrew Leung International Consultants Limited, Hong Kong.

The paradox of GDP per cap-itaA c c o r d i n g to the World B a n k ’ s Internat ional

Comparison Program, in the course of this year, the Chinese economy will become the world’s largest in terms of purchasing power parity (PPP). This is the first time a developing country achieves this top slot, which has been held by the United States since 1872.Measured in money-of-the-day terms, however, there is a tremen-dous gap between the two econo-mies. Last year, China’s GDP was estimated to be 9.3 trillion U.S. dollars while the America’s econ-omy reached 16.8 trillion. How-ever, there is also a similar gap between the two countries’ GDP

growth rates. In the first quarter of 2014, China’s economy, albeit slowing, registered 7.4 per cent growth, compared with Ameri-ca’s 0.1 per cent. Taking into ac-count past trends, there is general consensus that China’s economy in nominal terms will overtake America’s by the early 2020s, if not sooner. But, even though China will soon be able to claim the top spot, the living standards of the average Chinese citizen are likely to re-main far lower than many other countries, both developed and developing. This is the paradox of China’s vast population. Accord-ing to the International Monetary Fund, China’s economy ranks 93rd in per capita purchasing power parity terms, just ahead of Turkmenistan and Albania but well behind Libya and Azerbaijan.Yet, is GDP per capita a sure-fired

measure of a country’s living stan-dards, let alone global power and gravitas? Not necessarily. Accord-ing to the World Fact Book of the Central Intelligence Agency, mea-sured in PPP, Macao and the Falk-land Islands occupy the world’s 4th and 9th positions, ahead of the United States at 13th position and Switzerland at 15th.

The Middle Income TrapHowever, experience has shown that when developing countries reach a certain level of per capi-ta income up to $12,000 in 2010 money terms, most languish in a low-value-added development, unable to lift the income and liv-ing standards to the next higher-income level. They tend to be trapped in low investment ratios, slow manufacturing growth; lim-ited industrial diversification; and poor labour market conditions. Examples include South Africa,


Thailand, Malaysia and Indone-sia, to quote but a few. In the case of China (GDP per capita at $6,091 in 2012 money terms), added challenges include the exhaus-tion of demographic dividend as the population ages as well as ecological constraints inhibiting resource-intensive growth.

China’s New Revolutionary Reforms That’s why China had to introduce unprecedented reforms at the lat-est Third Plenum of the 18th Party Congress last November, usher-ing an about-turn towards more sustainable and inclusive growth. This comprises rural land reform allowing peasants to mortgage or rent out their land; revamping the household registration sys-tem (hukou) so that rural migrant workers may be integrated in cit-ies; and boosting investments in education, healthcare and welfare provisions across the board so that people do not have to save money under the mattress (or in banks with suppressed deposit interest rates). All these measures will accelerate the growth of a better-educated, and better-cared-for consuming middle class who will serve to re-balance an economy too depen-dent on low-value-added manu-facture. The One China Policy is to be modified to add young blood in the aging demography. In addition, some seven million university graduates are now pro-duced every year. By 2020, the country will have over 195 million graduates, more than the current workforce of the United States. Even as the quality of China’s graduates leaves a lot to be de-sired, China already registers ad-vances in innovation. According to a 2012 report of the World In-tellectual Property Organization (WIPO), for the first time ever, China as a developing country tops the world in the filing of pat-

ents, trademarks and industrial designs. According to the Royal Society of the United Kingdom, China is overtaking the United States in the number of scientific citations this year. As far as infrastructure is con-cerned, China is unrivalled. She now has the world’s largest high-speed rail system criss-crossing the country at more cautious speeds exceeding 200 km an hour. An internet-enabled environment spawns the world’s largest inter-net user population in excess of 618 million by the end of 2013. There is a great deal of free flow of information across the various strata of the society, the state’s “Great Firewall” notwithstand-ing. Moreover, China’s capital is rap-idly going global, acquiring as-sets, resources, technologies and markets. Meanwhile, the process of turning the renminbi, the Chi-nese yuan, into a commonly ac-cepted international currency is gathering pace. According to the Petersen Institute of Interna-tional Economics, Washington D.C. (Subramanian, 2011), more currencies now move in tandem with the yuan than with the dol-lar. Pending full capital-account convertibility, the days when the yuan becomes an international re-serve currency would not be very far away. All these reforms are supported by the entrenchment of China as the central hub of a global supply and value chain. This is manifested by the fact that six of the world’s top busiest container ports are located in China, including Hong Kong. A greener China in the Making As smogs choke China’s cities while drying and polluted wa-ters threaten the very survival of the Chinese people, the country is becoming the world’s biggest polluter and leading green energy developer all at once. China tops

the world in solar, wind, and wa-ter energy capacities. According to a Bloomberg report (19 Febru-ary, 2014), China spent more on smart grids than the U.S. for the first time in 2013, with $4.3 billion invested, accounting for almost a third of the world’s total.

Challenges to the extant World Order and New Great Power Relations China’s economic and geopolitical footprints are now truly global. They are evident in distant shores such as Central Asia and Africa, and outward global investments in enterprises, resources and oth-er assets in the four corners of the world. In addition to growing eco-nomic dominance, China has also witnessed milestone advances in space exploration, a rapid build-up of military capabilities, and a more assertive foreign policy, es-pecially over disputed territories in the East and South China Seas. All these developments are seen to challenge extant American pri-macy in the world order. Throughout history, from Gre-cian times to the two World Wars, most great power transitions re-sulted in wars. This is known as the Thucydides Trap. Will history repeat itself? What does China’s President Xi have in mind when he referred to “New Great Power Relations”? What are some of the ingredients of his concept and how could they be applied in re-ality? The answer may become more apparent in the context of the following regional geopoliti-cal developments.

China Containment Strategy and the Indian Ocean According to successive National Intelligence Council reports, U.S. global leadership will remain but her capacity to lead is declining owing to financial constraints, rise of emerging powers particu-larly China, as well as new state

A rising China, India and the US


and non-state actors. Hence, a convert China containment strat-egy in all but name has been in-troduced in the form of America’s Asian Pivot, now re-branded as Asian Re-balancing. This has two prongs, military and economic. First, military ties are reinforced with a string of American allies in the Asia-Pacific. This also entails moving 60 per cent of America’s global naval assets to the region and strengthening American mili-tary ties with India. Second, a massive America-centric regional economic alliance is being nego-tiated in the form of a new Trans Pacific Partnership (TPP) initially excluding China. Then there is the India Ocean. Its strategic importance to America’s China containment strategy is made evident in a seminal book - “Monsoon – The Indian Ocean and The Future of American Pow-er, Random House, New York, 2010” - by Robert D Kaplan, se-nior fellow at the Centre for New American Security in Washington D.C., a national correspondent at The Atlantic, and a Member of the Pentagon’s Defence Policy Board. The “Monsoon” idea springs from the reality that much of China’s lifeblood of energy imports and trade flows traverses the East and South China Seas via the Indian Ocean. These economic routes are exposed to U.S. global naval dominance in the form of eleven aircraft-carrier battle-groups and various naval outposts in the Pa-cific and beyond. In particular, the narrow but indispensable Ma-lacca Strait near Singapore, under the influence of the 7th Fleet, acts as a crucial choke-point. Linking this naval dominance with India in the Indian Ocean would tight-en the containment loose against China. Rivalry and Inter-dependenceAmerica and China’s mutual inter-dependence is well-known. Apart from certain common secu-

rity interests such as over North Korea and anti-piracy, China needs the American market for exports and jobs-creation back home while America eyes China’s gigantic market for US investment and exports. In particular, China builds up excess savings through financial repression pending de-velopment of a sound financial system. Such excess savings are sterilized through massive invest-ment in US treasuries, supported by the greenback’s “exorbitant privilege”. This perpetuates America’s low interest rates, low inflation, excessive consumption, minuscule savings, and use of “quantitative easing” (or money-printing) as an easy way to keep things on an even keel. This global economic imbalance between America and China is an irony of the century, where a rela-tively poor developing country (in per capita terms) becomes the big-gest creditor to one of the world’s richest and most powerful. This is unsustainable, and China is be-ginning to change course. How-ever, adjustment will take time. Much will depend on the extent of global acceptance of the Chinese yuan as a trading, investment and reserve currency. In other words, the endurance of the greenback’s “exorbitant privilege”.

Emerging IndiaOn her part, India is also both a serious rival and close economic partner with China. According

to a study by the PHD Chamber of Commerce, an industry trade group in New Delhi, China has become India’s largest trading partner, with Sino-Indian trade reaching $49.5 billion during the first nine months of the cur-rent fiscal year. According to the study, China has edged out the United Arab Emirates—India’s previous top trading partner—and is comfortably ahead of the US and Saudi Arabia. As China grows domestic consumption to re-balance her economy, the pros-pects for massive Indian exports to China are alluring. Moreover, there are many in-stances where India and China’s interests coincide. For example, in the World Trade Organization, both countries act as leaders in co-ordinating negotiating strategies amongst developing countries. At international forums such as those on Climate Change, the positions of India and China are virtually identical. There are also mutual opportuni-ties for learning from each other – India from China’s excellent infrastructural development and China from India’s creative and inclusive society and its global en-trepreneurial flair. In the final analysis, while Amer-ica remains a staunch ally for In-dia, not least as a leverage against perceived China’s Indian encircle-ment, India has never allowed herself to be at America’s beck


Global economic imbalance between America and China is an irony of the century, where a relatively poor developing country (in per capita terms) becomes the biggest creditor to one of the world’s richest and most powerful. This is unsustainable, and China is beginning to change course. However, adjustment will take time. However, adjustment will take time. Much will depend on the extent of global acceptance of the Chinese yuan as a trading, investment and reserve currency.


and call. India’s sovereignty and foreign policy independence are guarded jealously.

Shifting Sands of GeopoliticsOn the other hand, China has not been idle with a counter-contain-ment strategy. Subtly, the Shang-hai Cooperation Organization (SCO) has now developed as a Central Asian alliance on a broad front, well extending beyond its original purpose of fighting ter-rorism and Muslim separatism. It now covers trade, investment, di-plomacy, military ties, culture and other exchanges. All in all, this provides China with a far-more secure, land-based supply routes for oil, gas and other resources from the Middle East and Central Asia, away from the Asia-Pacific maritime choke-points. China is also developing strong relations with the Middle East and Israel, as American interests there seem to wane in recent years. This comes in the wake of America’s recent attempts at rapprochement with Iran and America’s shale gas rev-olution, which promises to turn the US into a net energy exporter in the not distant future. Meanwhile, China has been cul-tivating Europe as the largest trading partner and investment destination. At a time of European economic anaemia, China is being welcomed by the European Union with open arms. The United King-dom, for example, wants to grow London as the world’s premier offshore RMB financial centre as the yuan continues its ascendency towards becoming an internation-al reserve currency. Meanwhile, quietly, China is de-veloping a monumental “Third Eurasian Land Bridge”, linking Europe through Turkey and Cen-tral Asia to China’s industrial sea-board by high-speed rail. In addi-tion, the Nicaraguan Parliament has approved the construction by a Chinese company of a much wider and deeper canal linking

the Atlantic with the Pacific, to fa-cilitate passage of huge container ships which even a widened Pan-ama Canal cannot accommodate. The only container port able to berth these juggernauts is the Li-anyuangang deep-sea port out-side Shanghai. Additionally, even before the lat-est Ukrainian crisis, a revanchist Putin has signed a deal tripling Russian gas exports to China, making it Russia’s largest energy customer by 2018. Russia is also eyeing China’s Union Pay, a cred-it-card-cum-international pay-ment system that has already cap-tured the world’s second largest market share by transaction value. Both are calculated to neutralize American anti-Russia economic sanctions. In sum, increasingly China is being wooed by Russia to balance against the United States, while the latter is also likely to prefer China on the side of Amer-ica to balance against Russia. In-dia, on her part, also has economic and diplomatic ties with Russia and is also likely to act in India’s best national interests. A Triangular Partnership between China, India and the United StatesIn other words, the world has become increasingly multi-polar, inter-connected, and inter-de-pendent. Unlike previous times, American primacy will not al-ways work. For the US, what counts is to maintain American global lead-ership in the Asia Pacific and in Europe’s heartlands. This is where Zbigniew Brzezinski calls “a Complex East” and “the Larger West” (encompassing Turkey and hopefully if not wishfully, Rus-sia eventually) (Strategic Vision, America and the Crisis of Global Power, Basic Books, New York, 2012). This entails a more accom-modating stance towards China’s core interests in the region, or at least avoiding too overt a con-frontation. It also suggests greater trust-building and more coop-

erative ventures between the two countries. For India, the need to maintain national sovereignty and an inde-pendent foreign policy is likely to remain in the foreseeable future. This may rule out a US-Indian anti-China bloc. Nor, according to Brzezinsky (ibid. Page 165), would such a bloc be in the best interest of America as it could gratuitously relieve Russia of some of the burden of balancing against China. More important-ly, it is likely to be misconstrued as an American alliance against Pakistan and its Muslim allies and proxies. The best option for India would appear to be developing even closer economic ties with China to exploit its vast market potential. Additionally, carefully selected military and other ties may be considered as a balancing ploy against Pakistan. At the same time, closer ties with the United States should continue as a bul-wark without sacrificing cordial relations with Russia.

Future Outlook On 23 November 2013, The Econ-omist featured a Special Report arguing that American global primacy will endure for the fore-seeable future. China is likely to want to compete within rather than overturn a long America-en-trenched international order. This may be true. Nevertheless, the re-port asks the tale-telling question at the end whether such primacy would remain workable when other emerging powers such as India, Turkey, Brazil and Indone-sia, also want to share influence within the system. Whatever the arguments, the shape and dynam-ics of the global order, however defined, are clearly changing rap-idly in a multi-polar world. His-tory doesn’t end, as Francis Fuku-yama predicted earlier (The End of History and the Last Man, Free Press, 2006). Pax Americana is not likely to be the same again.



E-tailing is a subset of e-commerce, is estimated to grow from $2.6 billion in 2014 to touch $76 billion by 2021, accounting for 7 per cent of the total retail market. Studies indicate that India will go the China way in terms of web-only players dominating the online market, given the low organized retail penetration, says Ashish JhalaniFounder & CEO, eTailing India.

E-TAILING IN INDIA On a Firm Footing

growth of informal retail (primarily of the Food & Grocery segment).It further adds that corporatized brick & mortar re-tail will increase in value from $34 billion to $212 billion by 2021, and its share of the total retail pie will just over double from the current 7 to 14.7 per cent. However, this type of brick & mortar retail will continue to face structural issues within the retailing ecosystem, which will be a challenge for retailers to address individually.

On the other hand, one key indicator that is not highlighted but it is the main driving force for the e-tailing growth; more than 51 per cent of online pur-chases are from tier 2-4 towns. The major reason for tier 2-4 towns lead the online purchasing trend is the low penetration of organized retail in these geogra-phies. Customers that have the disposable income in these geographies (due to growth in real estate prices) are unable to find “branded” merchandise for sale that they aspire to buy. As internet and lo-gistics infrastructure improves in these geographies we will see a surge in online purchasing which will be the major driving force in the growth.The 2nd largest growth factor would come from adoption of 4G by telecommunication companies and the increase in internet penetration. With wider reach and faster speeds, more consumers will be on-line thus pushing online sales higher.The 3rd largest factor would be availability of smart phones at very economical costs. Along with internet

The total size of the business of selling retail goods on the in-ternet is commonly known as e-tailing. It is approximately $2.billion. In India, e-tailing has the potential to grow more than hundred-fold in the next nine years to reach a value of $76 billion by 2021. The coun-

try’s growing internet-habituated consumer base, which will comprise 180 million broadband users by 2020, along with a burgeoning class of mobile in-ternet users, will drive the e-tailing story, The study titled - ‘E-tailing in India: Unlocking the Potential done by Technopark. The whitepaper reveals that e-tailing can provide employment to 1.45 million people by 2021. Its growth will spur the creation of new capabilities and human skills in the areas of logistics, packaging, and technology. Additionally, such growth will promote the rise of service entrepreneurs who will have the potential to earn $7.5 billion, annually, by 2021. It will open up international markets for the SME sec-tor and can become an important facilitator for the growth of the telecom and domestic air cargo indus-tries. Technopark.

Corporatized Retail – Leading the WayTechnopak estimates that, by 2021, the share of total corporatized retail, even in the best-case scenario, will increase from the current 7 per cent to 20 per cent. This implies that, on one hand, private con-sumption will continue to grow annually at 6 per cent, in real terms (or 13 per cent in nominal terms), while on the other hand traditional retail will still capture the bulk of the increase in consumption. In absolute terms, traditional retail will grow from $455 billion in 2012 to $1152 billion in 2021. The growth of traditional retail, in the current form, implies the growth of neighbourhood convenience stores in new urban centres and clusters, and the continued

INDUSTRY


E-Tailing in India

penetration and faster internet speeds, the smart phones will drive more online sales or online driver sales.The 4th largest growth factor would be the shortage of time for the fast grow-ing middle class where multiple family members work. As disposable income rises and the time to spend that decreas-es, more and more consumers will look to online for both everyday essentials and one time buys. Online shopping

it comes to online commerce. The B2B opportunity in sheer numbers is much larger than B2C (Business to Consum-er). In the US, the B2C eCommerce is $262 Billion versus B2B eCommerce, whichis almost $1 trillion. It is esti-mated that B2B eCommerce in India is close to $50 Billion. For businesses, this is a huge opportunity for growth.

Brick & Mortar Dilemma

The 5th growth factor would be the availability of larger product selection online. Online stores have “limitless real estate” and companies are able to list larger set of products available without worry about larger real estate investments. Consumers get choic-es they have never gotten at “one” place. In addition larger international brands have taken the online only route to enter India thus driving demand of those products to online companies.The 6th growth factor would be transparency of pricing across multiple sellers. Consumers are able to quickly compare prices and find the seller that has the best offer. The same exercise offline at best would take several days or even impossible to do given distances between stores.The 7th growth factor would be the innovation in payments for online purchases. As the cash on de-livery (which is the largest single payment method today in India) reduces and consumers adopt more payment options, this will drive online sales. COD though enabling eCommerce today has many issues with security, reach and reconciliation. As alternate payment methods are adopted, it would push online sales growth.

B2B OpportunityBusiness to Business is a less talked about topic when

India, just like China, will see the rise of online brands and companies. We may even see online brands venturing into brick and mortar models to capture additional retail market share. Some online companies have already started and some have an-nounced temporary or permanent stores to comple-ment their online business.Traditional brick and mortar brands and companies in India need to accept and adopt online – being the fastest growing sales channel and work on their omni-channel strategies. Omni-Channel is a strat-egy where all the sales, customer service and supply channels are seamlessly integrated. Online retail tra-ditionally will not make brick and mortar retail sales growth negative but it will slow down the growth. Companies such as Macys and Walmart in the US have successfully adopted and implemented omni-channel strategies. Both are on cutting edge of what they offer there digital savvy customers and ensure that they capture larger piece of the growth pie. They have been also successful at not losing any large number of customers to sites such as Amazon.Online retail is today’s reality; it is no longer the fu-ture anymore. What we will continue to see is the enormous growth of online retailers; growth of on-line only brands; adoption of online commerce by more brick and mortar retailers and brands; Online will continue to influence more retail purchasing de-cisions; Mobile and Tablets will become the largest online buying platform; Digital savvy customers will demand innovation from retailers etc.,

OutlookNevertheless, experts warn that the potential of In-dia’s e-tailing will continue to remain untapped if the current mindset, of exclusion and seeing e-tail-ing as a “passing fad”, prevails. E-tailing is different from retail and therefore requires a different mindset and fresh thinking from the policy makers as well as the private sector.

Ashish Jhalani

Ecommerce Growth in India


#GIRLBOSSThe founder of Nasty Gal offers a sassy and irreverent manifesto for ambitious young women

At seventeen, Sophia Amoruso decided to forgo continuing education to pursue a life of hitchhiking, dumpster diving, and petty thievery. Now, at twenty-nine, she is the Founder, CEO, and Creative Director of Nasty Gal, a $100+ million e-tailer that draws A-list publicity and rabid

fans for its leading-edge fashion and provocative online persona. Her story is extraordinary—and only part of the appeal of #GIRLBOSS.

This aspirational book doesn’t patronize young women the way many business experts do. Amoruso shows readers how to channel their passion and hard work, while keeping their insecurities from getting in the way. She offers straight talk about making your voice heard and doing meaningful work.

She’s proof that you can be a huge success without giving up your spirit of adventure or distinctive style. As she writes, I have three pieces of advice I want you to remember:

• Don’t ever grow up. • Don’t become a bore.

• Don’t let The Man get to you.

OK? Cool. Then let’s do this.

Sopphia provides a very candid account of her journey from a grungy shoplifter to CEO. Perhaps she divulges a little too much personal information, including details of a certain medical ailment, but Sophia clearly articulates how each part of her story contributed to her success as a #GIRLBOSS.

About the AuthorSophia Amoruso turned her hobby selling vintage clothing on eBay into Nasty Gal, one of the fastest growing companies in America. Her rise has been covered by major media like The New York Times, Forbes, Fortune, Inc., and The Wall Street Journal, and she has a devoted following on Twitter, Facebook, and Instagram.

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Own ItPowerful Speaking For Powerful Women

Everyone recognises a woman who “owns it.” She stands out for her ability to command attention and influence others. She’s captivating and magnetic. But how does she do it? Building on Sheryl Sandberg’s Lean In, Own It teaches you how to claim your place at the table

and ensure your voice is heard. Using her POWER and OWN IT models, Tricia Karp shows you how to master the art of creating powerful presentations for public speaking, ask for what you want, and redefine what women’s leadership means for you, on your own terms. This book is an inspiring call to action to shift past what’s held you back, so you can deliver the type of public speaking that makes you memorable for all the right reasons. You’ll learn how to navigate negotiating conversations too so you can ask for what you want with confidence and strength. As Sheryl Sandberg encouraged women to Lean In and pursue their goals with gusto, Own It gives you a clear road map and shows you how. It is all about how you own your own power, finding out what is YOUR message to share and having the confidence to share it. A must-have book for those committed to developing their own, and other women’s power and leadership.

About the AuthorTricia Karp is an executive coach, workshop leader, trainer and speaker. She founded The Powerful Speaking Intensive, a workshop specifically for women to discover the message that’s theirs to share, and to learn how to own the stage. Tricia is on a mission to help women develop their power and leadership. She has been fundamental in the success of many powerful speakers, including Olympic athletes, politicians, CEOs and small business owners.


The Charles Schwab Guide to Finances After FiftyAnswers to Your Most Important Money QuestionsThe financial world is more complex than ever, and people are struggling to make sense of it all. If you’re like most people moving into the phase of life where protecting—as well as growing-- assets is paramount, you’re faced with a number of financial puzzles. Maybe you’re struggling to get your kids through college without drawing down your life’s savings. Perhaps you sense your nest egg is at risk and want to move into safer investments. Maybe you’re contemplating downsizing to a smaller home, but aren’t sure of the financial implications. Possibly, medical expenses have become a bigger drain than you expected and you need help assessing options. Perhaps you’ll shortly be eligible for social security but want to optimize when and how to take it.

Whatever your specific financial issue, one thing is certain—your range of choices is vast. As the financial world becomes increasingly complex, what you need is deeply researched advice from professionals whose credentials are impeccable and who prize clarity and straightforwardness over financial mumbo-jumbo.

Carrie Schwab-Pomerantz and the Schwab team have been helping clients tackle their toughest money issues for decades. Through Carrie’s popular “Ask Carrie” columns, her leadership of the Charles Schwab Foundation, and her work across party lines through two White House administrations and with the President’s Advisory Council on Financial Capability, she has become one of America’s most trusted sources for financial advice.

Here, Carrie will not only answer all the questions that keep you up at night, she’ll provide answers to many questions you haven’t considered but should

About the AuthorCARRIE SCHWAB-POMERANTZ is president of the Charles Schwab Foundation and senior vice president at Charles Schwab & Co., Inc., where she has spent the past thirty years serving clients and advocating for investors.

Release Date: April 01, 2014

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Crown BusinessLean In For Graduates

Facebook CEO and author Sheryl Sandberg is pivoting off her earlier success with a new edition of LEAN IN, a book that started a trend that became a phenomenon. LEAN IN: FOR GRADUATES targets young women just beginning their careers, though it reaches out to others as well. Sandberg encourages all women to “dream big” when plotting out their work life and assessing their potential.

Expanded and updated exclusively for graduates just entering the workforce, this extraordinary edition of “Lean In “includes a letter to graduates from Sheryl Sandberg and six additional chapters from experts offering advice on finding and getting the most out of a first job; resume writing; best interviewing practices; negotiating your salary; listening to your inner voice; owning who you are; and leaning in for millennial men.

In 2013, Sheryl Sandberg’s “Lean In” became a massive cultural phenomenon and its title became an instant catchphrase for empowering women. The book soared to the top of best-seller lists both nationally and internationally, igniting global conversations about women and ambition. Sandberg packed theaters, dominated op-ed pages, appeared on every major television show and on the cover of “Time “magazine, and sparked ferocious debate about women and leadership. Now, this enhanced edition provides the entire text of the original book updated with more recent statistics and features a passionate letter from Sandberg encouraging graduates to find and commit to work they love. A combination of inspiration and practical advice, this new edition will speak directly to graduates and, like the original, will change lives.

About the Author

Sheryl Sandberg is chief operating officer at Facebook. Prior to joining Facebook, she was vice president of Global Online Sales and Operations at Google and chief of staff at the United States Treasury Department. She lives in Northern California with her husband and their two children.

Release Date: April 08, 2014

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Get me the number of Prof. Manmohan Singh, PV Narasimha Rao ordered his PA. His PA didn’t know the number. Rao said, “I want him to be called in 10 minutes. Find out from wherever, he teaches at Delhi University.” PA

found his number by dialling some contacts and connected Dr Singh to Narasimha Rao.It was 6 am. And Rao came on line to speak to Dr Singh. “Kya Professor Saheb. Bacchon ko Padhaare kyaa? Can you meet me at 9am today?” Dr Singh spoke in monosyllables of “yes” or “no” right from then. He said “yes” to Narasimha Rao’s request. The meeting turned into one of India’s most dramatic inflection points. For the first time, an RBI Gover-nor whose signature appears on a one rupee note becomes India’s new Finance Minister - and the rest has earned both Narasimha Rao and Manmohan Singh a place in history books. The duo along with a few other hand-picked talents took decisions that transformed the economic landscape of India forever.Dr Singh credited most of his success and boldness of de-cision-making to Rao’s unflinching support. But when the time came for Rao to bid a goodbye to this world amidst unprecedented Machiavellian drama and back-stabbing, Dr Singh, as per reliable sources did not even visit the hos-pital ward of Narasimha Rao before he passed out. For all the talk of “structural adjustments with a human face”, Dr Singh didn’t have the courage to bypass Sonia to even call on a person who he always called as his mentor.Twenty years after Narasimha Rao cherry-picked Singh to India’s most prestigious Ministerial portfolio, Dr Singh did a similar gesture in beckoning Dr. Raghuram Rajan to In-dia, to test his erudition, prescience and academic brilliance in the laboratory of the Monetary Policy at RBI. History will judge Dr Singh in different light than the judgements pass-ing on him now in the heat of the bitter most election just as history now sheds kinder light on Narasimha Rao’s Prime Ministership long after the suitcase scams and JMIM brib-ery cases faded into oblivion.While individual achievements in academics, intellectual prowess and the body of contribution to Economic thought-leadership besides the economic reforms unleashed as FM will take many more years to deep-mine, his ascent to

Prime Ministership has been his finest hour and most fallible moment. If you take the history of most Congress Prime Ministers outside of Gandhi dynasty anointed by a demagogic group of politicians, then Manmohan Singh has taken the brunt of brinksmanship and blindmanships all on himself unlike the rest. Guljarilal Nanda was always a standby PM. Whereas Lal Bahadur Shastri actually broke the back of Indira Gandhi to the point of almost driving her out of India to London because he took no nonsense from anyone, least of all encourage the nepotistic ways of Indira Gandhi. wThat leaves Narasimha Rao alone who took on the most um-brageous steps of taming the Gandhi parivar, taking baby steps and later giant strides to thwart the dynastic rule in its shameless march. He was checkmated by a con-federacy of dunces and a conspiracy of sycophants. That must have played out heavily in the mind of Dr Singh as he took on the role of ‘The Accidental Prime Minister’. He became silent and abrogated the responsibility of the chair of Prime Ministership by being blind to all that is happening under his ecosystem.He may have avoided the wrath of Sonia and the party colleagues but by becoming a Bakra for someone else’s surreptitious ways and ruthless pursuit of power with-out accountability, Dr Singh has earned only shame and sympathy in his last few years. It could be a “Saturn” dasa but his redemption in history can only come after time obliterates his scam-ridden second innings from public memory. Dr Singh’s story reminds me of the quote which sums up what happens when you don’t speak your mind:First they came for the Socialists, and I did not speak out-- Because I was not a Socialist.Then they came for the Trade Unionists, and I did not speak out-- Because I was not a Trade Unionist.Then they came for the Jews, and I did not speak out-- Because I was not a Jew.Then they came for me--and there was no one left to speak for me.A sad story. But as I said, history will judge Dr Singh better than what clouds our recent memory of his achievements. S Sridhar

APOLITICALFAREWELL DR MANMOHAN SINGHHistory will be kinder to you tomorrowIf the price of silence to unbridled corruption and loot of national wealth is a tenure to India’s third longest-serving Prime Ministership, Dr Singh has earned his place too in history books in more roles than what any son of a humble upbringing could have got. For that, Manmohan Singh gets my toast after stunning BJP victory. If only his personal integrity and scholarship and his crisis-management during the tumult of 1991 and again in 2008 had got a better say than his conscience which remained a mute spectator to the misdeeds of Congress.


q.1 Google recently bought a start-up which spe-cializes in using smartphones to translate signs, billboards or other written words in real time. Identify the start-up.Ans. Quest Visual q.2 This Beijing-based became the world’s sixth-largest smartphone vendor in the first quarter of 2014. The smartphone maker valued at $10 billion is planning to release a tablet computer in China next month as it steps up efforts to compete effectively with Apple Inc and Samsung. Which is this company?Ans. Xiaomiq.3 Relativity Media LLC, the US film and television producer run by Ryan Kavanaugh, is entering the In-dian market in a $100 million joint v e n -ture with B4U, a Bollywood net-work controlled by a India-born steel magnate. Who is he?Ans.Lakshmi Mittal.q.4 US-based life sciences com-pany Cancer Genetics recently ac-quired Hyderabad-based genom-ics services provider for $1.9 million (Rs 11 crore). Identify the company? Ans. BioServe Indiaq.5 Farmers in this country, the world’s second-

biggest rice and wheat producer, harvested 257.13 million tonnes of grains in the crop year to June 2013. Which is this country?Ans. Indiaq.6 A London-based company, which claims to have developed the world’s first Braille phone, costing just 60 pounds, for sale in UK. Which is this company?Ans. OwnFoneq.7 With the launch of RuPay in May this year, India joins the select group of nations which have their own card payment gateways. RuPay, the seventh pay-ment gateway in the world, will also facilitate ATM with-drawals, payments

at merchant outlets and online purchases. Ans. National Payments Corporation of Indiaq.8 Workers seeking higher pay protested around the globe at chains such as McDonald’s, Burger King and Wen-

dy’s amid a broader de-bate about raising the minimum wage. Which industry they represent?Ans.Fast-foodq.9 Zee Entertain-ment Enterprises Limited

(ZEEL) enters into the music label space with a latest venture. What is the name of its new venture?

Ans.Zee Music Company q.10 Expand the following - CEP-CI?Ans. Cashew Export Promotion Council of Indiaq.11 The TIME name for the magazine is actually an acronym. What is the full form of TIME?

Ans. The Interna-tional Magazine of Eventsq.12 Annual meeting of

which company is called the ‘Woodstock for the Capitalists’?Ans. Berkshire Hatha-way q.13 Who has ac-quired the apparel brand Spykar re-cently?

Ans. Future Lifestyle of Kishore Biyaniq.14 Who is the author of the current Amazon best

seller ” Capital in the twenty-first century”?Ans. Thomas Pikettyq . 1 5 W h i c h is the largest s e l l i n g beer in

US?Ans. Bud Light

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