Private sector falters on coal block development

While state-owned Coal India Ltd has fallen back on its production targets, the private sector too has not made much headway in the coal mining sector.

According to Power Ministry estimates, of the 98 blocks that had been handed over to private sector players, production has commenced only in 13 blocks. As a result, the expected production by March-end 2012 is likely to be just around 20 million tonnes against the projected 100 million tonnes.

One of the main reasons for the dismal trend is that non-serious players have cornered a majority of the captive blocks on offer and have no plans to adhere to the project development milestones.

To send a warning signal, the Coal Ministry had, in May and June this year, announced the de-allocation of around 16 blocks handed over to private sector players and state-owned firms such as NTPC Ltd. Late last year too, the Ministry had issued notices to firms owning 84 coal and four lignite blocks for not having developed the projects within stipulated the time.

The delay in development of domestic resources has left the country with no option but to import to tide over the supply shortages. In five years, it is estimated that India could be forced to import almost 30 per cent of the coal required to meet its electricity needs.

This would mean that consumers across the country could find electricity prices shooting up.

Or else, distribution utilities would be pushed closer to bankruptcy on account of the increased strain on their finances from costly coal imports.

Back of the envelope calculations show that against a projected requirement of 742 million tonnes of thermal coal for fuelling coal-fired stations by the end of the Twelfth Plan (2012-17), only 527 million tonnes of domestic coal is likely to be available even in the best case scenario. This translates into a shortfall of 215 million tonnes or 29 per cent of the country's total requirement projected by 2017.

G-20 leaders must address global economic crisis

The upcoming G-20 summit should find solutions to the “frustrations” of the people hit by the global economic crisis and not just focus on domestic financial concerns, the UN chief, Mr Ban Ki-moon, has said.

“That is what you are seeing all around the world, starting from Wall Street. People are showing their frustrations by trying to send a very clear and unambiguous message to the world,” he said.

He asked world leaders to use the upcoming G-20 summit in Cannes to find solutions for the entire global economy and not focus merely on domestic financial concerns.

In a message to the G-20 leaders, the UN chief said: “business-as-usual or just looking at their own domestic economic issues will not give any answers to the current very serious international economic crisis.”

The G-20 leaders have a very “broad and important, crucial, responsibility to perform...towards the global economy,” Mr Ban, currently on a visit to Switzerland, told reporters there yesterday.

He said leaders of the developed and emerging economies should restore confidence and trust of the people and come out with a broader perspective to tackle the economic crisis.

He said the G-20 nations constitute 80 per cent of the world’s GDP and 85 per cent of the world’s population.

“We have to really address this issue with a sense of flexibility and compromise, and come out with actionable plans,” he said.

Protesters inspired by the “Occupy Wall Street” movement camped out in many European cities to protests against corporate greed and state cutbacks.

From London and Frankfurt to Madrid and Amsterdam, hundreds of demonstrators pitched tents following a global day of action on Saturday and vowed to maintain their campaign.

The G-20 summit will be held on November 3-4 in Cannes, France.

India to host World Steel Conference next year

In an indication of India's emerging importance on the world steel map and massive growth it is poised for in this sector, India has been awarded the right to hold the World Steel Conference in October next year.

The governing body of the World Steel Association, representing 170 producers and accounting for 85 per cent of world steel production, has decided to give the rights to hold the World Steel Conference in India from October 8 to 12 next year, according to an official announcement made  on October 14.

State-run Steel Authority of India Ltd. (SAIL) Chairman C. S. Verma made this offer in Paris on October 14 on behalf of India's committee consisting of six leading steel producers of India. He extended a warm invitation to all CEOs of leading steel producing countries and companies to attend the conference to be held in New Delhi.

Mr. Verma said the views expressed by the global steel barons would go a long way in making the steel industry more sustainable, in the backdrop of the global economic uncertainties and volatilities in the recent past. “The conference in New Delhi will give a glimpse of the rich heritage and culture of India,'' he added.

He informed that the Indian steel industry had grown multi-fold from a production of about two million tonnes of crude steel in 1950-51 to nearly 70 million tonnes in 2010-11. Indian economy has recorded an impressive GDP growth in the last few years.

A report released by the World Steel Association, based on the just concluded conference, has forecast that apparent steel use will increase by 6.5 per cent to 1,398 mt in 2011, following growth of 15.1 per cent in 2010. In 2012, it is forecast that world steel demand will grow further by 5.4 pr cent. The WSA also projected that India's steel consumption is likely to grow by 4.3 per cent to reach 67.7 million tonnes due to economic growth. In 2012, the growth rate is forecast to accelerate to 7.9 per cent.

The member steel companies representing host country committee from India include JSW Steel, SAIL, Rashtriya Ispat Nigam, Tata Steel, Essar Steel and JSW Ispat Steel.

Nobel Prize Winners in Economics

 

 

Introduced in 1967 but first prize was given in 1969. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel has been awarded 43 times to 69 Laureates between 1969 and 2011.

Why are the individuals awarded a Prize in Economic Sciences called Laureates?
The word "Laureate" refers to being signified by the laurel wreath.

In Greek mythology, the god Apollo is represented wearing a laurel wreath on his head. A laurel wreath is a circular crown made of branches and leaves of the bay laurel (In latin: Laurus nobilis). In ancient Greek laurel wreaths were awarded to victors as a sign of honour - both in athletic competitions and in poetic meets.

Year	Winner	Field
1969	Ragnar Frish Joan Tinbergen	Dynamic Econometric Model of Growth
1970	Paul Samuelson	Contribution in Economic Analysis
1971	Simon Kuznets	Modern Economic Growth Analysis
1972	Kenneth Arrow John Hicko	General Equilibrium and Welfare Economics
1973	W.W. Leontief	Input-Outpur Model
1974	Gunnar Myrdal F. Von Hayek	Contribution in Growth Economics
1975	Tjalling Koopmans Leonid Kontarovich	Optimum Resource Allocation
1976	Milton Friedman	Monetary History and Consumption Analysis
1977	James Meade Bertel Ohlin	Internation Trade and Capital Flow
1978	Herbert Simon	Decision Process in Organisations
1979	T. Shultz Arthur Lewis	Economic Growth in Backward Nations
1980	Corienz Klein	Model Related to Eonomic Fluctuation
1981	James Tobin	Analysis of World Financial Market
1982	George Stigler	Public Regulation
1983	Gerald Debrew	Modification in General Equilibrium Analysis
1984	Richard Stone	National Income Accounting System
1985	Franco Modigliani	Financial Market and Saving Analysis
1986	James Boochanan	Economic and Political Decision Making
1987	Robert T. Solow	Economic Growth Model
1988	Moris Allies	Optimum Utilisation of Resources
1989	H. Trigway	Use of Probability Theory in Economics
1990	Harry Marco Vitz William Sharp M. Miller	Portfolio Choice Principle, Capital Asset Pricing Model and Principle of Corporate Finance
1991	Ronald Coase	Transaction Costs and Property Rights
1992	Gerry Backer	Micro Economic Analysis of Human Behaviour
1993	Robert Fogal Douglas North	Quantitative Methods in Economic History
1994	Joah Harsanyee John Nash, R. Selton	Theory of non-operative games
1995	Robert Lucas	Development of Rational Expectations Theory
1996	James Mirillis William Vickrey	Incentive Structures Analysis
1997	Robert C. Merton M. S. Scollas	Derivative and Stock Operations
1998	Amartya Sen	Welfare Economics
1999	Robert Mundell	Analysis of Monetary and Financial Policy in Exchange Rate System
2000	James Heckman Daniel Macfaddan	For developing solution to solve decision making problem
2001	George A. Akerlof A. Michael Spence Joseph E. Stiglitz	Developing theories about financial markets that can be applied to both developing and advanced countries
2002	Daniel Kahnemann Vernon L. Smith	Human Judgment and Decision Making under Uncertainity
2003	Robert Engle Clive Granger	Methods analysing economic time series with time-varying volatility and common trend
2004	Finn Kydland Edward Prescott	Banks and explaining business cycles
2005	Thomas C. Schelling Robert J. Aumann	Game Theory Analysis
2006	Admund Phelps	International Trade-off between inflation and unemployment
2007	Leonid,Hurwicz, Eric Maskin, Roger Myerson	Mechanism Design Theory
2008	Paul Krugman	New Trade Analysis Theory
2009	Elinor Ostrom Oliver E. Williamson	Analysis of economic governance, especially the boundaries of the firm
2010	Peter A. Diamond Dale T. Mortensen Christopher A. Pissarides	Analysis of markets with search frictions
2011	Thomas J. Sargent Christopher A. Sims	Empirical research on cause and effect in the macroeconomy

Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 Approved

The Union Cabinet of India on 13 October 2011 approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 in the winter session of Parliament.

The Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and Recovery of Debts due to Banks & Financial Institutions (RDBF) Act so as to strengthen the regulatory and institutional framework related to recovery of debts due to banks and financial institutions through the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011.

The proposed amendments would enable banks to improve their operational efficiency, deploy more funds for credit disbursement to retail investors, home loan borrowers, etc. without fearing for recovery, thus bringing about equity. Further, mandatory registration of subsisting security interest (equitable mortgages) would promote innovation in credit information.

The suggested amendments would strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of the banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of non-performing assets.

The banks and financial institutions (FIs) were facing numerous problems in recovery of defaulted loans on account of delays in disposal of recovery proceedings. The Government, therefore, enacted the RDBF Act in 1993 and SARFAESI Act in 2002 for the purpose of expeditious recovery of non-performing assets (NPAs) of the banks and FIs. Although these two acts have helped in reducing the NPAs, banks have sent certain suggestions for further strengthening of the secured creditor rights.

Global Ratings firm Moody’s downgraded SBI’s Credit Rating

On 4 October 2011 the credit rating of the State Bank of India was downgraded by the Global ratings firm Moody’s. The ratings agency took SBI's grading to D+ from C-.

SBI had a shortage of capital to cushion bad loans or contingencies and thus started weakening asset quality. High interest rates in a slowing economy results in shorthand for loans that do not yield interest. This led Moody’s to adopt a negative view on SBI’s creditworthiness. As a result, the borrowing companies suffer. Rating downgrades usually are caution signals to bond investors. The Banking customers do not have encounter risk.

After the downgrade, SBI shares slipped 4% to Rs 1,787 on the Bombay Stock Exchange and the Sensex  dropped 1.77%  or 302 points to 15,685.

As of June 2011, the Capital Adequacy Ratio (CAR) of the SBI stood at 11.6 %. CAR is a measure of the back-up money a bank has to withstand loan uncertainties.

Tier-I capital stood at 7.6 % which was a little below the 8 % desired by the government. Tier-I capital broadly refers to shareholder equity.

Finance Ministry revised the Budget Estimate of Direct Tax Collection Upwards to Rs 5.85 lakh crore

The finance ministry in October 2011 revised the Budget estimate of direct tax collection upwards by Rs 53000 crore to Rs 5.85 lakh crore. The higher target marked an increase of 31% over last year’s collection of Rs 4.46 lakh crore. The Budget estimate of direct tax collection was revised upwards to bridge the shortfall that might occur due to reduction in customs duty on crude oil to offset price rise.

The growth in net direct tax collection in the April-September 2011 period was only 7% or Rs 1.94 lakh crore. But the overall gross collection rose by 23% to Rs 2.57 lakh crore. The collection was 36% of the budget estimates of Rs 5.32 lakh crore for 2011-12.

CBDT officials opined that the government will have to move fast on increasing the strength of the department. There are 1,200 posts of additional commissioners, considered the backbone of tax collection, of which there are at least 600 vacancies.

 CBDT created several new investigative departments, including a Directorate of Criminal Investigation with the mandate of inducting a marine and armed unit to tackle white-collar crimes and deal with tax evaders even on foreign shores.

CBDT’s request to enhance the manpower was personally vetted by finance minister Pranab Mukherjee and the file was moved to DoPT for final approval.

Government’s Fiscal Deficit surged to Rs 2.73 lakh crore in April-August 2011 Period

According to Comptroller General of Accounts data released on 30 September, the government’s fiscal deficit surged nearly two-fold to Rs 2.73 lakh crore during the first five months (April-August) of the current fiscal 2011-12 due to low revenue realisation. Deficit was Rs 1.5 lakh crore in April-August period of 2010.

The higher deficit in the April-August, 2011 was attributed to slowdown in net revenue collection following higher refunds and moderation in economic growth rate. The government decided to increase 2011’s borrowing target by an additional Rs 53,000 crore anticipating slower tax collections and lower disinvestment proceeds.

The deficit in the April-August period was 66.3 per cent of the target originally estimated at the beginning of the 2011-12 fiscal for the whole year.

Prime Minister's Economic Advisory Council (PMEAC) chairman C Rangarajan  pointed out that the target to cut fiscal deficit to at 4. per cent of the GDP for the current financial year would be missed. The government's decision to borrow Rs 52872 crore more from the market, over and above Rs 4.17 lakh crore estimated earlier for the current year, put pressure on the deficit number.

The net tax revenue receipts for April-August period stood at Rs 1.44 lakh crore, which is 21.8 per cent of the budget estimates. On the other hand, total expenditure was at 37.5 per cent of the target at Rs 4.72 lakh crore.

During April-August 2011, the direct tax mop-up was at Rs 96738 crore, which is 3.3 per cent less than the corresponding period in 2010 on account of huge refunds of Rs 57622 crore. The advance tax paid by corporates witnessed a marginal growth of 13 per cent to Rs 68000 crore in the second quarter of 2011-12, compared with the corresponding period in 2010. However, the indirect tax collection in the first five months stood at Rs 1.40 lakh crore, an increase of 26 per cent, over the corresponding period in 2010.

Finance Minister Pranab Mukherjee had lowered the fiscal deficit target to Rs 412,817 crore or 4.6 per cent of the gross domestic product from 4.7 per cent achieved during 2010-11.

Post Offices to Provide Visa Related Services in Remote Areas

India Post has signed a Memorandum of Understanding (MOU) with M/s VFS Global to provide visa related services for different countries through Post Offices. Memorandum of Understanding between India Post and M/s VFS Global was signed in Delhi on 30 August 2011 in the presence of Secretary, Department of Posts and senior officers from Department of Posts and VFS Global. The MOU sets out broad understandings and intentions of both the parties to provide visa related services at places where they are not currently available.

Post Office counters will be used for fee collections, providing visa applications forms, dissemination of visa information, biometric enrollment and other visa application process related services. India Post and VFS are also planning to cooperate in utilizing India Post’s courier service, Speed Post for movements of passports to VFS offices and concerned embassies, and their delivery back to the applicants. Both the parties will also explore to provide any other service that India Post may want to provide through VFS global network on mutually accepted terms.

M/s VFS Global is in the business of visa application services and is working with 35 governments across the world with over 450 offices in 50 countries. India Post and VFS realize that there are many areas of mutual interest and synergy between India Post and VFS would benefit the public at large.

Currently visa related services are largely available in metros only and the people from smaller cities and rural areas have to travel long distances in order to avail these services. Lack of information is also a major area of concern as this allows unscrupulous elements to cheat unsuspecting and vulnerable people. Engagement of India Post towards provision of visa related services is expected to address this situation to a large extent.

Finance Ministry relaxed Norms for Foreign Institutional Investments in Infrastructure Space

The finance ministry on 12 September 2011 relaxed the norms for foreign institutional investments (FII) in the infrastructure space by reducing the residual maturity and lock-in periods for investments in listed and unlisted bonds.

As per the new norms, FIIs were allowed to invest up to $5 billion in long-term infrastructure bonds having an initial maturity of five years and a residual maturity of one year compared to five years residual maturity before. FIIs were permitted to invest a maximum of $17 billion in long-term infrastructure bonds of an equivalent initial maturity but with a residual maturity period of three years compared to five years before. While the lock-in period for the $5 billion investment window was cut down from three years to one year, it will remain three years for the $17 billion investment.

The finance ministry had created a USD 3 billion window 9 August  2011 from the overall USD 25 billion limit. Qualified foreign investors (QFIs) were permitted to subscribe to debt schemes pertaining to infrastructure sector. $3 billion will continue to remain open to qualified foreign investors (QFIs) for investing in mutual fund debt schemes that invest in infrastructure sector.

The government had in May 2011 raised the FII investment limit to $25 billion for investments in listed and unlisted bonds from $5 billion before. The maturity period for these investments had been set at a minimum of five years and the lock-in period for three years. The scheme had been conceived to open new channels of funding for the infrastructure sector while deepening the corporate bond market. However the response to the scheme was founf to be tipid. The above changes were therefore introduced after consulting the Reserve Bank of India and the Securities Exchange Board of India (SEBI).

The new norms are expected to kick-start FII flows into the long-term corporate bonds and facilitate funding of infrastructure projects. Despite the $25 billion ceiling, only $109 million entered the market through this route as on 31 August 2011.

Union Government reconstituted NMCC under Chairmanship of V. Krishnamurthy

The Union Government on 26 September 2011 announced the reconstitution of the National Manufacturing Competitiveness Council (NMCC) under the chairmanship of V. Krishnamurthy. The NMCC was restructured vide a Government Gazette Notification dated 17 August 2011.

The council is to energise and sustain the growth of manufacturing industries and help in the implementation of strategies by the government.

Following the reconstitution, the council will comprise the Planning Commission Member (Industry), Department of Industrial Policy and Promotion Secretary, Finance Secretary, Heavy Industry Secretary, Micro, Small and Medium Enterprises Secretary and the Director-General of the Council for Scientific and Industrial Research from the government side.

The President of the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI) President and Associated Chambers of Commerce and Industry of India (ASSOCHAM) President will represent the apex industry organisations in the 28-member body.

Finance Ministry Chief Economic Advisor Kaushik Basu and Indian Council for Research in International Economic Relations Isher Judge Ahluwalia are the two economists in the reconstituted body.

The representatives of various industrial sectors included in the NMCC are Tata Group Chairman Ratan Tata, TVS Motor Company CMD Venu Srinivasan, S Kumars Group Chairman Mukul Kasliwal, Larsen & Toubro CMD A M Naik, ITC Ltd CMD Y C Deveshwar, Godrej & Boyce Ltd CMD Jamshyd Godrej, BHEL CMD B P Rao and HCL Infosystems Chairman and CEO Ajai Chowdhry.

NMCC was set up by the government as an inter-disciplinary body at the highest level to serve as a policy forum for credible and coherent policy initiatives in the manufacturing sector.

India Post Signed MOU with National Stock Exchange for Financial Awareness

India post signed a Memorandum of Understanding (MOU) with National Stock Exchange (NSE) on 26 September 2011 for deploying LCD TV screens in selected post offices across the country. The MOU was signed by Alka Jha, General Manager (BP), India Post and T. Vanket Rao, Vice President of National Stock Exchange. This MOU is aimed at creating financial awareness among the public. To begin with LCD TV screens will be deployed in 50 post offices across the country.  

These LCD TV screens shall be utilized for disseminating financial awareness and awareness on various postal products and services for the common public visiting post offices. This step will bring the financial market place closer to the people considering the importance and footfall at post offices.

Besides publicizing products available in post offices, India Post will use the facility to train the postal staff. Showcasing information about market will help people develop live skills about finances and people will be able to manage their finances better.

Bombay Stock Exchange (BSE) received SEBI’s Approval to set up SME Exchange

Asia’s oldest bourse Bombay Stock Exchange (BSE) on 28 September 2011 got an approval to set up an exchange for small and medium enterprises (SMEs) from the capital markets regulator Securities and Exchange Board of India (SEBI).

The permission from SEBI is likely to boost  BSE's efforts in offering multiple asset classes to Indian investors. The permission to set up SME will enable BSE to contribute towards the governmental agenda of greater financial inclusion and allowing promising enterprises of the future to access retail capital.

The new exchange set up by BSE will allow small unlisted domestic companies, with less than Rs 10 crore capital base, to raise money from the primary market.

BSE was committed to deliver the best products, services, and asset classes to all our stakeholders and look forward to the success of the SME segment. While the government has taken several measures to ease access to credit, giving them easier access to equity is the next step in that process. The new exchange will be a facilitator in raising funds for SMEs.

BSE SME Exchange conducted several seminars for educating the SMEs on the benefits of listing and the preparations required for listing on the BSE SME Platform across the country. BSE SME tied up with channel partners, who include various institutions and associations engaged in the development of SMEs. More seminars are lined up in this year.

BSE SME planned for sectoral seminars for auto ancillaries, infrastructure, pharmaceuticals, manufacturing, agro-based industries, suppliers to OEMS and the like.

National Stock Exchange (NSE), India’s largest exchange, is currently awaiting a formal Sebi approval to start a similar SME exchange. In May 2011 Sebi had given an in-principle approval to both BSE and NSE to set up SME exchanges.

Sebi had on 2 June 2011 allowed exchanges to introduce programmes to enhance liquidity of thinly-traded securities in their equity derivatives segments. NSE currently controls almost the entire equity derivatives market, with a turnover of about Rs 29.63 trillion in August. BSE’s comparable turnover was Rs 34.09 crore.

For the 12th time since March 2010 RBI hiked Repo Rate by 25 basis points to control Inflation

In a move to contain persisting inflationary pressure, the Reserve Bank of India (RBI) hiked the short-term policy rate (repo rate) by 25 basis points from 8 per cent to 8.25 per cent on 16 September 2011. The reverse repo rate as a result got automatically adjusted to 7.25 per cent and the marginal standing facility (MSF) rate to 9.25 per cent.

Repo rate is the rate at which banks borrow from the central bank and reverse repo is the rate at which banks park their funds with the RBI. The central bank raised rates for the 12th time since March 2010.

Headline year-on-year wholesale price index (WPI) inflation rose from 9.2 per cent in July to 9.8 per cent in August 2011. Inflation in respect of primary articles and fuel groups moved up in August. Year-on-year non-food manufactured products inflation rose from 7.5 per cent in July to 7.7 per cent in August 2011 suggesting a continupus demand pressures.

Oil marketing companies raised the price of petrol by Rs.3.14 a litre with effect from 16 September 2011. The rise in petrol prices is to have a direct impact of 7 basis points to WPI inflation, in addition to indirect impact with a lag.

GDP growth decelerated to 7.7 per cent in the first quarter of 2011-12 from 7.8 per cent in the previous quarter (January to March) and 8.8 per cent in the first quarter of 2010-11. The index of industrial production (IIP) slowed from 8.8 per cent year-on-year in June 2011 to 3.3 per cent in July 2011. Excluding capital goods, the growth of IIP was higher at 6.7 per cent in July 2011 compared with 4.4 per cent in June 2011. Cumulatively, the IIP increased by 5.8 per cent during April-July 2011, compared with an increase of 9.7 per cent in the corresponding period of 2010.

SEBI issued Substantial Acquisition of Shares and Takeovers Regulations, 2011

Securities and Exchange Boar of India (SEBI) on 23 September 2011 notified the new takeover rule under which an entity buying 25% stake in a listed firm will have to mandatorily make an open offer to buy an additional 26% shares from the public. The notification follows the decision taken at SEBI's board meeting in July 2011.

The new norms mark an increase in the open offer size for public shareholders from 20 per cent currently. The trigger for making such an offer was raised from 15 per cent under the existing regulations.

According to SEBI no acquirer shall acquire shares in a target company which taken together with shares or voting rights held by him entitle them to exercise 25 per cent or more of the voting rights unless the acquirer makes a public announcement of an open offer.

The new regulations, titled as The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 will come into effect from October 2011.

As per the new rules there would be no separate provision for non-compete fees, which allows promoters to higher price than the public shareholders, and all shareholders should be given the exit option at the same price. SEBI, as part of the new code, allowed voluntary offers subject to certain conditions.

Regarding control and offer size, SEBI mentioned that the existing definition of control would be retained and the minimum offer size shall be increased to 26% of the target company.

Accepting the recommendations of a SEBI-appointed panel on the matter, the regulator also decided to abolish the non-compete fees that acquirers generally pay to the sellers in merger and acquisition deals. While the recommendation on trigger was accepted, the suggestion for offer size has been kept lower due to intense opposition from industry and other market participants.

The panel had opined against non-compete fees for promoters which often worked out as high as 25% of the deal value.

A SEBI panel on new takeover regulation had in 2010 recommended an open offer for buying up to 100% in the target company, while suggesting an increase in the trigger limit to 25%.

RBI directed Banks to implement Fraud Risk Management Practices

The Reserve Bank of India (RBI) on 22 September 2011 directed banks to implement various safety measures related to credit card and debit card usage over a period of next two years in order to eliminate cases of fraud and ensure security of transactions.

The RBI emphasised on the need to migrate to Euro pay MasterCard Visa (EMV) chip and PIN based cards from the present magnetic strip cards as the magnetic strip card is vulnerable to skimming and cloning. The need for a complete migration to EMV chip and PIN based cards could be considered based on the progress of Aadhar (Unique Identification Card) in 18 months time frame.

The RBI directed banks to strengthen the existing payment infrastructure and future proofing system along with adoption of fraud risk management practices within a period of next 12-24 months. An imperative need was felt to secure card based transactions as well to protect the interests of the card holders.

In the circular issued in this repect the central bank directed banks to implement improved fraud risk management practices by 30 September 2012 and secure the technology set up by 30 September 2013.

International Bank for Reconstruction and Development (IBRD)

 

 

IBRD and its associate institutions a group are known as the World Bank. The Second World War damaged economies of the most of the countries particularly of those who were directly involved in the war. The global war had completely dislocated the multilateral trade and dislocated multilateral trade and had caused massive destruction of life and property. In 1945, it was realised to concentrate on reconstructing these war affected economies in a planned way. IBRD was established in December 1945 with the IMF on the basis of recommendation of Bretton Wood Conference. This is the reason why IMF and IBRD are called 'Bretton Wood Twins'. IBRD started functioning in June 1946. World Bank and IMF are complementary institutions.

India is a member of four constituents of the World Bank Group i.e. IBRD, IDA, IFC, and MIGA (Multilateral Investment Guarantee Agency) but not of its fifth institute ICSID (International Centre for the Settlement of Investment Disputes).

Objective of World Bank

According to the Clause I of the agreement made at he time of establishment of World Bank, it was assigned the following objectives:

1. To Provide long-run capital to member countries for economic reconstruction and development. World Bank provides capital mainly for following purposes -
   (i) To rehabilitate war ruined economies (this objective is fully achieved)
   (ii) To finance productive efforts according to peace time requirement.
   (iii) To develop resources and production facilities in underdeveloped countries.
2. To induce long-run capital investment for assuring BOP equilibrium and balanced development of international trade. (This objective was adopted to increase increase the productivity of member countries and to improve economic condition and standard of living among them).
3. To promote capital investment in member countries in following ways:
   (i) To provide guarantee on private loans and capital investment.
   (ii) If private capital is not available even after providing guarantee, then IBRD provides loans for productive activities in considered conditions.
4. To provide guarantee for loans granted to small and large units and other projects of member countries.
5. To ensure the implementation of development projects so as to bring about a smooth transference from a war-time to peace economy.

IMF Vs. World Bank

IMF and World Bank are Bretton Wood Twins. Both the institutions were established to promote international economic cooperation but a basic difference is found in the nature of economic assistance given by these two institutions. World Bank provides long term loans for balanced economic development, while IMF provides short-term loans to member countries for eliminating BOP disequilibrium. Both these institutions are complementary to each other. The eminent world economist George Schultz had suggested in American Economic Association Conference in January 1995, for the merger of IMF and World Bank.

Membership of the World Bank and Voting Right

Generally every member country of the IMF automatically becomes member of World Bank. Similarly, any country which quit IMF automatically expelled from the World Bank's membership. But under a certain provision a country leaving the membership of IMF can continue its membership with World Bank. If 75% member of the bank gives their vote in its favour.

Any member country can be debarred from the membership of World Bank on following grounds:

1. Any member country can quit the bank simply by written notice to bank, but such country has to repay the granted loans on terms and conditions decided at the time of sanctioning the loan.
2. Any country working against the guidelines of bank can be debarred from membership by the board of governors.

Like IMF, World Bank has also two types of members: 'founder members' and 'general members' the world bank has 30 founder members who attained membership by December 31, 1945. India is also among these founder members. The countries joining the World Bank after December 13, 1945 come under the category of general members. At present total membership of the World Bank is 182. The voting right of member country is determined on the basis of member country's share in the total capital of the bank. Each member has 240 votes plus one additional vote for each 1,00,000 shares of the capital stock held.

Capital Resources of World Bank

The initial authorized capital of World Bank was $ 10,000 million, which was divided in 1 lakh share of $ 1 lakh each. The authorized capital of the bank has been increased from time to time with the approval of member countries. On June 30, 1996 the authorized capital of the bank was $ 188 billion out of which $ 180.6  billion (96% of total authorized capital) was issued to member country in the form of shares. Member countries repay the share amount to the world bank in following ways:

1. Two percent of allotted shares are repaid in Gold, USD or SDR. 
2. Every member country is free to repay 18% of its capital share in its own currency.
3. The remaining 80% share is deposited by member country only on demand by the World Bank.

Bank is managed by an elected President. On July 1, 2007, Robert B. Zoellick became the 11th President of the World Bank. The headquarter of World Bank is at Washington DC.

IDA (established on Spetemeber 24, 1960) and IFC (established in July, 1956) are the tow main associate institutions of IBRD. These institutions work under the supervision of World Bank. MIGA is also an associate institution in the World Bank group.

Banks Lending Operations

IBRD gives loan to members in anyone or more of the following ways:

1. By granting or participating in direct loans but its own funds.
2. By granting loans out of the fund raised in the market of a member or otherwise borrowed by the bans and 
3. By guaranteeing the whole or part loans made by private investors through the investment channels.

Before a lone is made or guaranteed the bank ensure that the -

1. Project fro which the loan is asked has been carefully examined by the competenet committee as regards the merits of the proposal.
2. Borrower has reasonable prospect for the repayment of loans.
3. The loan is meant for productive purposes and 
4. Tthe loan is meant for reconstruction and development.

Functions of the World Bank

Presently, The World Bank is playing the main role of providing loans for development works to member countries, specially to under-developed countries. The World Bank provides long-term loans for various development projects of 5 to 20 years duration. The loaning system of the bank can be explained with the help of following points:

1. Bank can grant loans to a member country upto 20% of its share in paid up capital.
2. Bank also provides loan to private investors belonging to member countries on its own guarantee, but for this loan private investors have to seek prior permission from those countries where the amount will be collected. For such loans the consent of that country is also required whose currency is given in loans. For granting such guarantee, the Bank charges 1% to 2% as service charge.
3. The quantum of loans, interest rate and term and conditions are determined by the Bank itself.
4. Generally, Bank grants loan for a particular project duly submitted by the member country.
5. The debtor nation has to repay either in reserve currencies or in the currency in which the loan was sanctioned.

Besides, granting loans for reconstruction and development, World Bank also provides various technical services to the member countries. For this purpose, the Bank has established 'The Economic Development Institute' and a Staff College in Washington.

Appraisal of the World Bank Activities

Bank has sanctioned 75% of its total loans to developing countries of Africa, Asia and Latin America while only 25% was given to developed nations of Europe. IFC, IDA and MIGA were established as the associate institutions of the World Bank in extending financial assistance to member countries. Besides, the Bank also tried its best to coordinate the functioning of nations granting loans to underdeveloped countries. In 1958, the Bank played an important role in establishing 'India Aid Club' for providing specific economic assistance to India. It has now been renamed as 'India Development Forum'. Such types of clubs and forums has also been established for other developing countries. The Bank has also established its mission in various developing countries for providing technical assistance for development project in these countries. The Bank also takes the guidance of experts of various international institutions like FAO, WHO, UNIDO, UNESCO for providing assistance for various projects related to agriculture, education and water supply.

Indian Economy Overview

The overall growth of gross domestic product (GDP) at factor cost at constant prices, as per Advance Estimates was 8.5 per cent in 2010-11, representing an increase from the revised growth of 8 per cent during 2009-10, according to the monthly economic report released for the month of July 2011 by the Ministry of Finance. The index of industrial production (IIP) rose to 8.8 per cent in June 2011, year-on-year (y-o-y), on back of manufacturing and within that, the capital goods sub-segment. During April-June 2011-12, the IIP growth was registered at 6.8 per cent as compared to 9.6 per cent during 2010-11.
The eight core infrastructure industries grew by 5.2 per cent in June 2011 as compared to the growth of 4.4 per cent in June 2010. In addition, exports in terms of US dollar, increased by 46.4 per cent during June 2011. On the back of such facts, India’s GDP is projected to continue to grow at a brisk pace of 8.8 per cent in 2011-12.
In addition, India has entered the club of top 20 exporters of goods and reclaimed its position among top 10 services exporters in 2010. India's goods exports rose by 31 per cent in 2010, helping it to improve its world ranking moving up two places to 20 from 22 in 2009.
Furthermore, the number of millionaire households in India will grow from 2,86,000 to 6,94,000 between 2011-2020, at a growth rate of 143 per cent, as per a study by the Deloitte Center for Financial Services. Among emerging markets, India is likely to have the highest per capita wealth among millionaires with US$ 4.25 million — placing it ahead of the US. In comparison to other BRIC (Brazil, Russia, India and China) nations, India is likely to experience the largest growth at 405 per cent in total wealth held by the millionaires.

The Economic Scenario

India has been ranked at the second place in global foreign direct investments (FDI) in 2010 and is expected to remain among the top five attractive destinations for international investors during 2010-12, according to a report on world investment prospects titled, 'World Investment Prospects Survey 2009-2012' by the United Nations Conference on Trade and Development (UNCTAD).
India's FDI gathered momentum with the inflows growing by 310 per cent in June 2011 to touch US$ 5.65 billion. It is the highest monthly inflow during the last 11 years. The total FDI stood at US$ 16.83 billion during January-June 2011, nearly 57 per cent higher than the US$ 10.74 billion received during the same period last year.
Non-resident Indian (NRI) inflows in the first quarter of 2011-12 has witnessed a rise of 38 per cent as compared to the same period in 2010-11. NRIs invested US$ 1.54 billion in various NRI deposit schemes during April-June 2011.
Private equity (PE) investments in India stood at US$ 6.14 billion in value terms, while the number of deals increased by 33 per cent to 195, during January-June 2011, according to data compiled by Chennai-based Venture Intelligence. The rise in the value of the deals so far (June 2011) recorded a growth of 52 per cent, as compared to US$ 4.04 billion raised during 2010.
India's foreign exchange (Forex) reserves have increased by US$ 1.6 billion to register US$ 318 billion during the week ended August 19, 2011, according to data released by the Reserve Bank of India (RBI). The increase in Forex is largely attributed due to valuation changes.
The Government has approved fund raising worth Rs 60,950 crore (US$ 13.24 billion) by companies through external commercial borrowings (ECB) or foreign currency convertible bonds (FCCB) for infrastructure projects in the financial years 2009-2011.
India's merchandise exports have registered an increase of nearly 82 per cent during July 2011 from a year ago to touch US$ 29.3 billion, according to a release by the Ministry of Commerce and Industry. Exports during April-July 2011 reached US$ 108.3 billion, up 54 per cent over the same period a year ago, according to Mr Rahul Khullar, Commerce Secretary. Exports in the referred period increased on back of demand for engineering and petroleum products, gems and jewellery and readymade garments.

Brief Sectoral Update

The Indian metals and minerals sector has received PE investments worth US$ 650 million in the first half of 2011, according to estimates by VC Edge. The metal making industry has attracted PE players in addition the mining assets are also a major draw due to the sharp demand for ownership of raw materials.
India currently holds the 12th position in Asia and 68th position in the list of overall in the list of the world's most attractive tourist destinations, as per the Travel and Tourism Competitiveness Report 2011 by the World Economic Forum (WEF).Foreign tourist arrivals (FTAs) during the period January-June 2011 were 2.91 million with a growth of 10.9 per cent.
Moreover, India's domestic air traffic has been registered as the second highest rate after Brazil, according to global figures for June 2011, compiled by the International Air Transport Association. India's domestic traffic grew by 14 per cent in the same period as against Brazil's 15.1 per cent.
Furthermore, the Indian Railways has recorded earnings worth Rs 24,756.18 crore (US$ 5.37 billion) in the first quarter of 2011-12, as compared to Rs 22,074.92 crore (US$ 4.79 billion) during the same period last fiscal, registering an increase of 12.15 per cent. An increase of 12.61 percent in the total goods earnings and 10.52 per cent in the total passenger revenue earnings have been recorded during April-June 2011.
The Indian automobile industry, the seventh largest in the world, has currently estimated to have a turnover of US$ 73 billion, accounting for 6 per cent of its GDP, and is expected to record a turnover of US$ 145 billion by 2016. India's automobile industry is expected to grow by 11 to 13 per cent in the fiscal year ending March 2012, according to Pawan Goenka, President, SIAM. The Indian automakers sold 143,370 cars in June 2011, added SIAM.
Demand for two-wheelers has increased by 16 per cent in June 2011 to over 880,000 units, as compared to 761,000 units in June 2010, according to data released by six of the eight domestic two-wheelers manufacturers.
The growth of Indian agriculture and allied sector was a top agenda in Budget 2011-12 presented by Mr Pranab Mukherjee, the Union Finance Minister. He has estimated that the agriculture and allied sector would grow by 6 per cent in 2011-12.
In addition, sales of tractors continue to post sturdy growth numbers on the back of favourable monsoons and increased use of farm equipment for construction work. As many as 482, 256 tractors were sold in the domestic market in 2010-11. The sales are expected to increase by 15 per cent to 554,594 in 2011-12.
The number of subscribers using their mobile phones to access Internet is estimated to touch 46 million in September 2011, according to a report published by the Internet and Mobile Association of India (IAMAI) and market research firm IMRB, representing a 15 per cent growth quarter to quarter. There are about 40 million mobile Internet users as of June 2011 of which about 30 million are termed as active users.
Software as a Service (SaaS) is estimated to grow by 20.7 per cent in 2011 amounting close to Rs 538 crore (US$ 116.85 million) as compared to 2010 where it was close to Rs 445 crore (US$ 966.60 million), according to IT advisory firm Gartner Inc.Approximately 75 per cent of SaaS delivery can be regarded as cloud services as per Gartner, which is on its way to exceed 90 per cent by 2015. Customer relationship management (CRM) is the largest market for SaaS, which is expected to reach Rs168.83 crore (US$ 36.67 million) in 2011 to represent 32 per cent of the total CRM market.

Growth Potential Story

India's consumption growth story is expected to maintain its course of about 14 per cent growth over the next three years driven by three factors-inclusiveness, mix changes and specific consumption categories, as per senior analysts Vijay Chugh, Ashvin Shetty and Shariq Merchant in the report 'The Indian Consumer: a robust operator in an uncertain world'.
India will emerge as the second largest steel producer by 2013 with an installed capacity of 120 million tonnes (MT), riding on high levels of growth, construction, housing, real estate, automobiles and agriculture, according to Mr Beni Prasad Verma, Steel Minister. The demand for steel in the country is growing at an average of 10 per cent, which may even exceed to 12 per cent in the near future.
In addition, the Indian banking sector is poised to become the world's third-largest in terms of assets over the next 14 years—with its assets poised to touch US$ 28,500 billion by 2025—according to a report titled ‘Being five-star in productivity — Roadmap for excellence in Indian banking’, prepared for the Indian Banks’ Association (IBA) by The Boston Consultancy Group (BCG), IBA and an industry body.
Investment in logistics sector in India is projected to grow annually at 10 per cent. India's logistics market achieved revenues of US$ 82.1 billion in 2010 and is expected to reach revenue worth US$ 90 billion in 2011. The logistics industry forecasts to generate revenues worth US$ 200 billion by 2020, as per Eredene Capital PLC's 2010-11 annual report.
India's engineering research and development (ER&D) providers is estimated to capture about 40 per cent share of global offshore revenues in 11 key verticals by 2020, according to a new report titled 'The Futures Report 2011', by Global Futures and Foresight (GFF).
India's power sector will generate revenue of Rs 13 lakh crore (US$ 282.36 billion) during the Twelfth Five Year Plan (2012-17), as per Mr P Uma Shankar, Secretary, Ministry of Power. The plan is to generate 17,000 mega watt (MW) power during the referred period.
The beauty business in India is set for a remarkable growth. The roughly Rs 7,000 crore (US$ 1.52 billion) organised and unorganised hair and beauty industry is growing at a compound annual growth rate (CAGR) of 35 per cent, on back of an increase in the number of households upgrading to a lifestyle involving higher consumption. At this rate, the industry has the potential to become Rs 30,000 crore (US$ 6.52 billion) business by 2015.
The Indian media and entertainment sector will grow to Rs 1.2 lakh crore (US$ 26.06 billion) by 2015, according to a report, 'Indian Entertainment and Media Outlook' by PricewaterhouseCoopers (PwC). From a size of Rs 30,650 crore (US$ 6.66 billion) in 2010, the television industry is expected to rise at a CAGR of 14.5 per cent to reach Rs 60,250 crore (US$ 13.08 billion) and will continue to hold the largest share of revenues within the sector in the next five years.
The BMI India Retail Report for the second-quarter of 2011 forecasts that total retail sales will grow from US$ 395.96 billion in 2011 to US$ 785.12 billion by 2015.
India ranks first in the Nielsen Global Consumer Confidence survey released in January 2011. “India is one of the fastest growing markets in the world and the current consumer belief that recession would soon be a thing of the past has filled Indians with confidence,” said PiyushMathur, Managing Director, South Asia, The Nielsen Co. With 131 index points, India ranked number one in the recent round of the survey, followed by Philippines (120) and Norway (119).

Road Ahead

The Twelfth Five Year Plan (2012-17) is going to maintain its target growth rate at 9 per cent. The planning commission is due to firm up its approach to the Twelfth Plan on August 20, 2011, in a meeting chaired by Prime Minister Dr Manmohan Singh. The priority for resource allocation will continue to be the social sector and infrastructure.
The Government of India has set ambitious targets for more than US$ 1 trillion to be invested in infrastructure over the Twelfth Five-Year period (2012-2017)—more than double the amount invested in the previous five-year period, according to Eredene Capital PLC's 2010-11 annual report. Eredene is a specialist investor in Indian infrastructure with a focus on ports, logistics and transportation.
Significantly, the Government has set an export target of US$ 292 billion for 2011-12, up 19 per cent from US$ 246 billion in 2010-11.
Moreover, the Government of India has been ranked fifth in wielding economic clout globally after the US, China, Japan and Germany, and ahead of European powers France and the UK, according to a study authored by Kaushik Basu, Chief Economist Advisor.
Major players in India's fast-moving consumer goods (FMCG) industry will continue to pursue acquisitions over the medium term, given the scope for expansion in under-penetrated product segments and geographies, as per a report by credit rating agency Crisil. For the global FMCG majors, India remains an attractive market, with its growing economy, large population that offers considerable scope for additional geographic penetration, particularly in the rural areas, and low per-capita consumption.

References: United Nations Conference on Trade and Development (UNCTAD), Ministry of Finance, Press Information Bureau (PIB), Media Report, Consolidated FDI Policy

Quick Facts

	India's foreign exchange (Forex) reserves rose by US$ 266 million to US$ 316.763 billion in the week ended September 16, 2011, according to the Reserve Bank of India's (RBI) 'Weekly Statistical Supplement'.
	Net direct tax collection upto September 15, 2011, in 2011-12 grew by 6.7 per cent at Rs 1,27,858 crore (US$ 26.75 billion) as against Rs 1,19,849 crore (US$ 25.07 billion) collected from April 1 to September 15 in 2010.
	Private equity (PE) and venture capital (VC) investments grew by 29 per cent to US$ 648 million (around Rs 2,916 crore) in the period January-September 2011 as compared to US$ 500 million (around Rs 2,250 crore) in the same period last year.
	The index for eight core sector industries—crude oil, petroleum refinery products, coal, electricity, cement, steel, fertilizers and natural gas—rose 7.8 per cent in July 2011 compared to 5.7 per cent in July last year.
	Exports of spices during April-July 2011 increased 22 per cent in rupee terms and 26 per cent in dollar terms, with total receipts in the period at Rs 2,613.50 crore (US$ 585.46 million), compared to Rs 2,135 crore (US$ 464.92 million) during the same period last year.
	The wind energy sector has attracted foreign direct investment (FDI) worth Rs 1,510 crore (US$ 328.87 million) over the past three years. In the renewable energy sector, wind energy has emerged as the fastest growing category, according to Dr Farooq Abdullah, Union Minister for New and Renewable Energy.
	The monthly net investment by mutual fund (MF) houses in August 2011 has hit a 38-month high, at Rs 2,524 crore (US$ 547.18 million), according to the statistics from the Securities and Exchange Board of India (SEBI).
	Small Industries Development Bank of India (SIDBI) has announced its plans to disburse Rs 1,000 crore (US$ 209.36 million) to microfinance companies in 2011.

Manpower Employment Outlook Survey India (Q3/2011)

The Manpower Employment Outlook Survey for the third quarter of 2011 was conducted by interviewing a representative sample of 4,555 employers in India. Indian employers report bullish hiring plans for third quarter of 2011, with 49 per cent of employers expecting to increase headcount, 2 per cent predicting a decrease and 31 per cent anticipating no change. The Net Employment Outlook stands at +47 per cent.
After the data is adjusted to allow for seasonal variation, the Outlook stands at +46 per cent. The hiring prospects improved by 5 percentage points on year-over-year basis.
Employers in all four regions anticipate an increase in staffing levels during the third quarter of 2011. In the East, employers report the most optimistic Net Employment Outlook of +49 per cent, while in the North, the Outlook stands at a bullish +48 per cent. Employers in the West and the South report dynamic Outlooks of +45 per cent and +43 per cent, respectively.
Employers in all the seven industry sectors forecast an increase in staffing levels during the third quarter of 2011. The most optimistic hiring intentions are reported in the Wholesale & Retail Trade sector, with a Net Employment Outlook standing at +51 per cent. Services sector employers report bullish hiring plans, with an Outlook of +48 per cent, and dynamic hiring prospects are evident in the Finance, Insurance & Real Estate sector and the Mining & Construction sector, with Outlooks of +47 per cent and +46 per cent, respectively. The Manufacturing sector Outlook stands at +45 per cent.

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