Contents

Headlines ................................................................................................................................................ 1
Capital Goods .......................................................................................................................................... 6
FII & MFs ................................................................................................................................................. 7
Pradhan Mantri Jan Dhana Yojna ........................................................................................................... 7
Planning Commission .............................................................................................................................. 8
Manufacturing in India............................................................................................................................ 8
GDP, CAD, Inflation ................................................................................................................................. 9
International ......................................................................................................................................... 11
Corporate Governance Act & Companies Act 2013 .............................................................................. 13
Management Trends ............................................................................................................................. 13
Power Sector India ................................................................................................................................ 13
Coal ....................................................................................................................................................... 14
Coal Blocks ............................................................................................................................................ 15
Land Acquisition Bill .............................................................................................................................. 15
Taxation................................................................................................................................................. 15
IPO ......................................................................................................................................................... 17
Banking.................................................................................................................................................. 17
Social Schemes ...................................................................................................................................... 18
Markets ................................................................................................................................................. 19
Smart Cities ........................................................................................................................................... 20
FTA ........................................................................................................................................................ 21
Agriculture ............................................................................................................................................ 21
Infrastructure ........................................................................................................................................ 21

Infrastructure, Fiscal, Market and Structural Reforms

Headlines

Japan commits $35 bn investment in India

o Narendra Modi promised he would introduce special mechanisms like "Japan Fast Track
Channel" for Japanese investors here.
o nuclear energy cooperation
o special economic zones and national investment and manufacturing zones
o Japan to assist in the Mumbai-Ahmedabad high-speed rail

India and China are expected to sign a pact that will open the way for Chinese
participation in new rail tracks, automated signalling for faster trains and modern
stations
o India's rail system added 11,000 km of track in the 67 years since independence. China,
which added 14,000 km of track in the five years to 2011

o Chinese investment in the modernisation of India's railways could eventually

touch $50 billion
o another $50 billion in building India's ports, roads and a project to link rivers
The World Economic Forum has brought out its Global Competitiveness Report for 201415 that ranks us 71 in a set of 144 countries
o our position has slipped continuously in the last six years
o rank is lower than the other BRIC (Brazil, Russia, India and China) nations
o basic requirements (four pillars within), efficiency enhancers (six pillars) and
innovation and sophistication (two pillars)
XI jinping Visit
o Meanwhile in New Delhi, companies from the two countries signed business deals worth
$3.4 billion

o A $2.6-billion agreement was signed between IndiGo Airlines and Industrial and
Commercial Bank of China for leasing and financing of 30 aircraft
o Reliance Communications signed two MoUs, worth around $150 million each,
with Chinese telecom firms ZTE and Huawei Technologies, for equipment and
expansion of RComs 2G and 3G network
o Bank of China is also expected to open a bank branch in Mumbai.
o Besides, China is also planning to offer credit lines worth billions of dollars
through the EXIM Bank of India
o Industrial Extension Bureau (iNDEXTb), the nodal agency for investment
promotion in Gujarat and China Development Bank (CBD), iNDEXTb will assist
Chinese investors in obtaining the required clearances and creating
infrastructure facilities in the state's industrial parks
The BSE Sensex has gained 5,461 points or 25.8 per cent this year(18 September)
Why not invest in Ali Baba
o Alibaba's unusual partnership structure (which puts Ma firmly in the driver's
seat)
o China's limits on foreign ownership
o China's institutionalized opacity
o Predilection for censorship
o Disrespect for intellectual-property norms
Alibaba raised $21.8 billion in its initial public offering, more than any company in the
US.

****

Oil companies scale up dollar purchases

o State-run oil marketing companies (OMCs) have stepped up dollar-buying to

finance the rise in their crude oil purchases (cheap barrel rate of $100)
o The average daily dollar demand of these OMCs is $150 million; these days, it has
gone up to $300 million
o The three state-run OMCs---Indian Oil Corporation, Hindustan Petroleum
Corporation and Bharat Petroleum Corporation primarily meet their dollar
demand through state-run banks
o By the end of this month, there will be government debt payment, due to which
the rupee might weaken, though RBI might not allow it to weaken significantly
o ****
The US Federal Reserve on Wednesday renewed a pledge to keep interest rates near
zero for a "considerable time" and repeated concerns over slack in the labour market,
standing firm against calls to overhaul its policy statement (18 September)
o it announced a further $10-billion reduction in its monthly purchases, leaving the
programme on course to be shuttered next month
The expectation of a $100-billion Chinese investment in India got reduced on Thursday
as the country committed itself to investing only $20 billion here over five years
*******
Gold declines most in 14 mths, silver dips to 14-week low
o Poor demand and shifting of investment from commodities to other investment
avenues like dollar index and equity are the reasons
Gold regained its glitter to trade Rs 590 higher at Rs 27,550 per 10 grams in the national
capital on Friday, driven by ongoing festive and wedding season. Silver also recorded a
significant rise of Rs 550 to Rs 39,900 per kg on increased offtake by industrial units and
coin makers. 27 September

Narendra Modi government wants direct benefits transfer (DBT) for 80 per cent of
beneficiaries in five key schemes
o Aadhaars penetration among beneficiaries of these five schemes varies from 25
per cent to 60 per cent at present (21 Sept)
o The Supreme Court had ruled that the Aadhaar numbers could not be made
compulsory for people to avail of benefits of government schemes and subsidies

Rashtriya Ispat Nigam Ltd (RINL) has filed a draft prospectus with market regulator Sebi
for an initial public offering (IPO) through which the government will sell 10 per cent of
its stake in the company.
o IPO would hit the markets by early January as the entire book building process
takes about three months time.

o A discount of up to 5 per cent on the offer price shall be offered to retail

investors
It has identified SAIL, ONGC, NHPC, Coal India as a stake sale candidate in the current
fiscal
******
In the deal to be signed in gas hydrates, US and Indian scientists will carry out a second
and third phase of expeditions under the National Gas Hydrate Programme (NGHP) in
the deepwater areas of the eastern and western coasts and the Andaman Sea.
The cabinet also approved India's participation in the 30-metre telescope (TMT) project
at Mauna Kea, Hawaii, at a total cost of Rs 1,300 crore over 2014-23. The TMT will be
constructed for $1.47 billion by an international consortium from USA, Canada, Japan,
India and China.
In another agreement, a joint declaration of intent will be signed for cooperation in
higher education for implementation of a Global Initiative of Academic Networks (GIAN)
programme.

The delay sought by the government could be due to the coming Assembly elections in
Maharashtra and Haryana on October 15,
Besides RIL, the other beneficiaries of an increase in gas price would be Cairn India, Oil
and Natural Gas Corporation and Oil India
Govt. has deferred the much-awaited decision on new pricing guidelines till November
15.
Analysts estimate every dollar increase in gas price will push urea production cost by Rs
1,370 a tonne, power rates by 45 paise a unit, compressed natural gas prices by Rs 2.81
a kg and piped natural gas prices by Rs 1.89 per standard cubic metre

India is likely to turn down the US push for establishing a bilateral trade and investment
agreement (BTIA), the talks for which were commenced under the previous regime of
United Progressive Alliance (UPA)
o To push its exports into the Indian market, the US had been urging India to have
the pact with it that will have a special concessional tariff arrangement

With the economy back in recovery mode and the current account deficit (CAD)
narrowing, India is the best structural story in the emerging markets (EM), said BNP
Paribas in its Asia Strategy report.
o Indias benchmark indices have gained 26 per cent this year on the back of
foreign institutional investor investment of nearly $14 billion. (27 September)
o Since 2013, the seven Asian countries, including India, Indonesia and South
Korea, have received overseas investment of whopping $67 billion. India has
o seen one of the highest flows in Asia, so far this year.

FMCG consumption in urban India, in volume terms, rose seven per cent in the May-July
period, compared with a decline of 12 per cent in the same period last year.
o In value terms, consumption was up eight per cent during the period, against a
decline of four per cent seen in the year-ago period
o Rural FMCG consumption volume declined seven per cent from May to July,
against a fall of one per cent in the year-ago period.
o Among FMCG segments, in urban areas, volumes for personal care inched up
three per cent, compared with a two per cent increase last year
India is currently ranked 83rd among 148 countries (the World Economic Forum's
Networked Readiness Index (NRI)) - falling 15 places from 2013. The lack of digital
infrastructure, electricity shortfalls, low production and individual use of technology, are
some of the most significant impediments

the government's recent decision to increase foreign direct investment ceiling in the
defence sector, railway network and insurance sector
o FDI inflows from US to India during 2000-2014 stood at around $13 billion,
according to the department of industrial policy and promotion (DIPP)

The clean energy sector in India will be one of the first sectors that would benefit during
Prime Minister Narendra Modi's US trip
o The sector awaits investments worth about $1 billion from US companies
o $1 billion agreement between US Exim Bank and IREDA (renewable Energy) for
disbursal to grid-connected projects.
Projects need to have 30% locally sourced equipment

o
o Major impetus to solar power which imports largely from the US
o The country aims to add about 4,500 Mw of solar power capacity during the
current financial year to the existing capacity of 2,600 Mw

In the first half of the 2014, private equity entities pumped in $6 billion in India
strong corporate-friendly government at the Centre, coupled with strong RBI Governor
(who created foreign exchange reserves for the country) as well as equally strong
securities market regulator Sebi who have made some pro-active regulations
********************

Risks for India (by World Bank) include challenges to energy supply and fiscal pressures
from weak revenue collection in the short term and the impact of the 7th Pay
Commissions recommendations on public sector remuneration
Improve the investment climate, paired with prudent macro-economic policy and a
solid external payments position

GST could transform India into a common market

and dramatically boost
competitiveness
o GST has missed a number of deadlines and is not expected to come up before
April 2016
o Its transformational impact could be enhanced by a systematic dismantling of
inter-state check-posts
o GST will free up decisions on warehousing and distribution from tax
considerations

Both CII and FICCI Business Optimism Index has improved considerably shows their
survey

Based on the latest purchasing power parity (PPP) estimates released by the
International Comparison Program, India surpassed Japan to emerge as the third-largest
economy, with gross domestic product (GDP) of $5.7 trillion in 2011, accounting for 6.4
per cent of world GDP
foster innovation in a manner that promotes economic growth and job creation

Capital Goods

Downturn over the past couple of years, as orders thinned over projects stalled in an economic
downturn and for lack of clearances.
o Payment cycles worsened as power distributors delayed payments and companies, in
turn, squeezed their suppliers.
There is, however, light at the end of the tunnel.
o improving business confidence
o many grounded projects are coming back on track
o top executives with capital goods companies and industry analysts said the investment
cycle would take 6-24 months to revive
Softening prices of copper and aluminium are expected to boost profit margins
I do not see much growth in the power sector for two years in light of the Supreme Court order
cancelling coal blocks
Another positive development for the sector will be a decline in metal prices.
o Softening prices of copper and aluminium are expected to boost profit margins of some
capital goods companies by lowering their input costs

FII & MFs

investment by foreign institutional investors (FIIs), a key driver for the stock market rally,
has crossed $14 billion, one of the highest among major emerging markets (EMs)
(September)
Investors from abroad will have to put another $5 bn to surpass their last years tally of
$19 bn
QE 3 expected, 6 month gap is expected in easing and interest rate hike
Investors from Europe, Japan and now China have expressed interest in investing in
India. So, a large amount of money will come into the Indian markets
MFs, flush with investor flows, have pumped Rs 15,000 crore into the Indian market.
This is in contrast to last year, when MFs had sold shares worth Rs 20,000 crore; they
have been net investors so far in 2014, to the tune of Rs 4,500 crore.
MAT was originally introduced as a way to deal with companies that had very large
profits but did not pay much in the way of taxes due to various tax adjustments and
incentives
Now, applying the same provisions to FPIs structured as companies will mean an
effective tax rate of around 20 per cent on long-term capital gains, as opposed to zero
earlier.
o Indian capital market less attractive for FPIs
o India is one of the few countries that levy a capital-gains tax on non-residents.
Tax on short-term capital gains on capital market exits is charged at 15 per cent,
while long-term capital gains are exempt from taxation
o Foreign portfolio investors, like other investors in India, pay zero tax on longterm capital gains. This will change to a minimum tax of 18.5 per cent, plus
surcharge, taking the tax rate to 20.01 per cent
FIIs (now called FPIs) have been net-buyers to the tune of Rs 84,988.54 crore in the
Indian equity market so far this calendar year.(September)
MFs' exposure to software stocks hits all-time high (18 September)
Among major global markets, India has been one of the biggest recipients of FII flows
this year.
Even if the US ends its stimulus programme, it is not much of a worry for India, as other
regions like Europe and Japan continue to have loose monetary policy,

Pradhan Mantri Jan Dhana Yojna

creating 7.5 crore new bank accounts in the banking sector by January 26, 2015
Financial inclusion entails upfront costs but begins to pay off once a certain scale has been
reached

Increases CASA deposits by allowing peoples saving to be converted into national savings
Large amounts are poised to flow into bank accounts, thanks to the direct benefit transfer
scheme (DBT) rolled out in January 2013
Every account under the scheme comes with a RuPay debit card and Rs.5,000 overdraft facility in
the first phase. In the second phase, a Rs.1 lakh accident insurance facility and a Rs.30,000 life
insurance facility will be added
It has been decided to set aside Rs 50 crore from the Social Security Fund, managed by LIC and
worth about Rs 1,800 crore, sources said.
Under the Jan Dhan Yojana, anyone who opens an account before January 26, 2015, would get
Rs 30,000 life insurance cover
Under the scheme, banks have opened 30.2 million accounts as of September 8, 2014, and
mobilised about Rs 1,500 crore
Of the total accounts opened, 18.9 million are in rural areas and 11.3 million are in urban areas
Banks have been asked to set up camps from 8 AM to 8 PM on every Saturday to facilitate the
opening of accounts
The finance ministry had recently said 40 million bank accounts had so far been opened under
the Jan Dhan scheme and banks had mobilised Rs 3,700 crore.
UIDAIs total expenditure from inception to the end of August was estimated to be Rs 4,906
crore
Aadhaar-enabled transfer of benefits could bring down the governments fuel subsidy bill by 20
per cent

Planning Commission

The Commission and the planning methodology it follows was set up at a time when, for
ideological and practical reasons, development policy involved large-scale investment in publicsector projects for infrastructure and industry. Even agriculture and the social services required
investments and institution building by the public sector. The Commission was akin to a
corporate strategy department that sought to plan and coordinate these investments in the
context of a long-term perspective of the economy. Again, for ideological and practical reasons
this perspective focused on self-reliance as a key goal that translated into an import-substitution
strategy, with poverty eradication being added explicitly later.

Manufacturing in India

In August, the PMI declined to 52.4 points from Julys 17-month high of 53 points.
August was the 10th consecutive month of growth in the manufacturing sector

The Index of Industrial Production had shown capital goods production surged 13.9 per cent in
April-June, while the consumer goods space had contracted 2.1 per cent
Last years, India had produced 22.5 million tonnes of fertilisers. It consumes 51 million tones of
fertiliser and imports the rest.
Although manufacturing showed a 3.5% growth in the first quarter of the current financial year
against a fall of 1.2% last year, the revival is still precarious with the latest July figure for
manufacturing showing a fall of one% against three% growth in July last year.

Development in infrastructure leads to two pronged effects for the economy. It generates
demand for the industry and creates employment and also makes business activities competitive
in the international arena.
Currently, manufacturing contributes a mere 16% to Indias GDP, compared to a 56.5%
contribution by services.
Indias share of global manufacturing stands at little over 2%. Compare it to China which has
positioned itself as the workshop of the world over the years, accounting for 22.4% of global
manufacturing.
Expensive coal bought in e-auctions is expected to hurt some steel companies, following the
Supreme Courts verdict cancelling their captive coal mining blocks
Coal in e-auctions may cost companies about Rs 2,000-2,500 a tonne against Rs 700-800 a tonne
for captive coal,
Modi says make in India, but even thalis are from China Micro Enterprises provide 71% of non
farm employment
In India, the government only helps the big guys," he said. "We court foreign investors, but we
forget our own people, who have nowhere to go.
Only 20 per cent of Indian firms provide on-job training, according to World Bank research
Passenger vehicle manufacturers post good sales numbers in September
o Domestic sales of nine of the countrys leading automobile companies increased by seven
per cent more than the 195,339 units they sold in the same month last year
o Inventories at various dealerships were on the rise last month (September)
Growth in manufacturing activities slowed to a nine-month low in September, as the pace of new
orders declined, showed a widely-tracked HSBC Purchasing Managers' Index
o PMI was down to 51 points in September from 52.4 in August.
Supply chain delays and uncertainty were a major, yet under-appreciated constraint to
manufacturing growth and competitiveness in India
o State border check-points, tasked primarily with carrying out compliance procedures for
the diverse sales and entry tax requirements of different states, combined with other
delays, keep trucks from moving during 60 per cent of the entire transit time
o Long transit times and high variability or unpredictability in shipments adds to the delays
In an indication of a turnaround in the economy, sales of commercial vehicles (CVs) increased
8.59 per cent in September, after 16 months of decline
o

GDP, CAD, Inflation

Financial years first quarter, April to June, narrowed sharply to 1.7 ($7,8 bn) per cent of gross
domestic product + There was accretion of $11.2 bn to foreign exchange (forex) reserves
o contraction in the trade deficit, on a rise in export and dip in import
Rajan said Indias CAD had narrowed significantly with foreign cash flows but this money could
not be taken for granted. At some point, these investors will find better use of their money back
home and want to go out. We will have a financial difficulty when the money goes out.

The countrys exports during the first five months of this financial year rose 7.31 per cent to
$134.79 billion, compared with $12.56 billion in the year-ago period. Imports fell 2.69 per cent
from $196.22 billion to $190.94 billion.
Over the next few months, CPI-based inflation may moderate further toward 6.5-7.0 per cent,
thanks to a favourable base effect. (23 September)

But from December onward, the base effect will turn negative, which would push headline
inflation rate back to 7.5-8.0 per cent in the first quarter of 2015
September
o CREDIT GROWTH HAS DIPPED BELOW 10 PER CENT
o IIP SHOWED SIGNS OF REVIVAL, BUT HAS DROPPED SINCE
o RETAIL INFLATION IS STILL STUBBORNLY HIGH
o WHOLESALE INFLATION HAS SHOWN A STEEP FALL
o WPI-FOOD SHOWS STEEP FALL, CPI-FOOD DOESNT
o THERE HAS BEEN A STEEP FALL IN OIL PRICES
Sales in April-August dipped to 16,185 units, a fall of 34 per cent as compared to the same
period last year, according to the Society of Indian Automobile Manufacturers
S&P's outlook is in sync with that of two other rating agencies - Moody's Investors Service and
Fitch Ratings; all three agencies have the lowest investment grade rating for India, with a stable
outlook
One of the parameters on which S&P based its ratings and outlook was fiscal consolidation
The government is planning to borrow Rs 2.4 lakh-crore through bonds in the second half of the
financial year, taking the total borrowing to Rs 5.92 lakh-crore, Finance Secretary Arvind
Mayaram said in New Delhi
o The decision was taken by the government after the Reserve Bank of India (RBI)
transferred a surplus, amounting to Rs 52,679 crore, for the year ended June 30, 2014,
to the government.
Continuing a downward trend for the third consecutive week, India's foreign exchange reserves
fell by $101.3 million to $315.596 billion in the week to September 19 despite a rise in non-US
currency assets
S&P re-rating should buffer rupee when US Fed raises rates
The Reserve Bank of India (RBI) should consider raising interest rates to bring down the
persistently high inflation on a durable basis, an IMF working paper has suggested
The Wholesale Price Index-based inflation dropped to a 5-year low of 3.74 per cent in August,
while the retail inflation stood at 7.8 per cent.
Fed's own analysis points to a long-term rate of about four per cent when the long-term inflation
rate is two per cent
The rate of retail inflation in September eased to 6.46 per cent
o driven mainly by a significant drop in food prices and subdued demand for industrial
goods
o The rate, as measured by the consumer price index (CPI), had stood at 7.73 per cent in
August and 9.84 per cent in September 2013 (Favourable Base Effect)
o Still, among food sub-components, inflation in pulses rose from 6.88 per cent in August
to 7.18 per cent in September
Wholesale Price Index (WPI)-based inflation dropped to 2.38 per cent in September, the lowest
since October 2009
o three broad categories
Primary products
Manufactured items
Fuel & Power
Consumer Price Index (CPI)-based inflation fell to 6.46 per cent
WPI is a lead indicator for CPI, retail price inflation might decline further in the coming months

RBI has set a target of reining in CPI inflation at eight per cent by January 2015 and six per cent
by January 2016.
Growth in exports had fallen to 2.35 per cent in August
Why Rates should not be decreased
o Projection of lower kharif output
pulses is forecast to decline 15 per cent, oilseeds output is estimated to fall 12
per cent.
o Favourable Base Effect

Imports, however, surged almost 26 per cent, to a 16-month high of $43.15 billion in September
against $34.3 billion in the same month last year
This catapulted the trade deficit to a 16-month high of $14.25 billion in September, more than
double the $6.1 billion in the same month last year
o Growth of 449.7 per cent in inflow of gold and a 105.6 per cent rise in metalliferous ores
o OMCs (oil marketing companies) were importing more due to fall in prices
o The rise in import of metalliferous ores and mineral ores also point to an industrial
revival

International

The weakness of a German economy that has outperformed its peers since the regional debt
crisis comes as European Central Bank President Draghi ponders adding more stimulus to fight
the threat of deflation in the currency bloc.

he Euro area is falling into a lowflation trap with annual growth and inflation rates stuck between
zero and 1 percent

German investor confidence in August was the weakest since 2012 and business sentiment slid
for a fourth month.
At the moment, Xi is struggling just to meet this year's 7.5 per cent growth target; this week the
central bank rushed to inject another $81 billion into China's biggest banks to keep them lending.
China is now experiencing the weakest industrial-output growth since the 2008 global crisis, as
well as waning retail sales and investment activity
and if China suffers a bad-debt crisis as some analysts fear, the prospects for profit will grow
darker than ever
China's Gini coefficient, a measure of inequality, almost doubled between 1980 and 2010. This
year, income inequality in China surpassed that of the US, reaching "severe" levels according to
the University of Michiga

Being a superpower that is also a Communist dictatorship few admire leaves China with no
option but to buy support by investing in Africa, Sri Lanka and now India.
China's central bank joined its European counterpart in boosting liquidity to address weakening
growth
The People's Bank of China is injecting 500 billion yuan ($81 billion) into the nation's largest
banks
ECB President Mario Draghi this month announced a final round of interest-rate cuts and a plan
to buy privately owned securities as he seeks to revive inflation in the 18-nation euro area
Before the latest action, the central bank had made two targeted reductions in reserve ratios
after instructions from the State Council, China's cabinet

German economy had a strong start to the year but shrank by 0.2 per cent in the second quarter
and some economists have warned it could contract again in the third quarter, pushing it into a
technical recession.
o A media report at the weekend said the International Monetary Fund (IMF) will this
week cut its estimates for German economic growth in 2014 and 2015 to around 1.5 per
cent for each year due to the crises in Ukraine and West Asia
o Order levels were weak overall due to the subdued Euro zone economy and uncertainty
caused by crises abroad
o Germany's manufacturing activity shrinking for the first time in 15 months in September
as new orders dried up
Steel Authority of India Ltd Chairman Chandra Shekhar Verma is concerned about the fact that in
August this year, factory output in China grew the least in about six years
o + slowdown in China's housing market despite new stimulus measures such as easier
mortgages to buy second house
o China's massive steelmaking capacity and the year-on-year rise in production, the
mismatches between domestic demand and supply could lead to a marked rise in steel
exports.
o The gradual shift in the composition of Chinese exports - from flat to long products - is
proving unsettling for India, which has substantial idle capacity in the long-steel
segment.
o India-made long steel is at least $100/tonne costlier than its Chinese counterpart, its
import surge is inevitable, unless New Delhi revises customs duty
o It has given indications of raising import duty from 7.5 per cent to 15 per cent, in
conformity with WTO norms

Fitch Ratings has estimated growth in China's gross domestic product will fall from 7.7 per cent
in 2013 to 7.2 per cent this year
o

Corporate Governance Act & Companies Act 2013

requirement for woman directors

controlling related-party transactions, board independence
compulsory electronic voting (e-voting) facility at shareholder meetings of all listed firms
transaction that doesn't fall under ordinary course of business and isn't on an arm's length basis
requires shareholders' approval only when thresholds are triggered
What has changed?
Now, loans from members and their relatives by private companies aren't allowed, leading to
cases for refund of such deposits within a year.

The Rajasthan Assembly on July 31 had passed changes to the Factories Act, Industrial Disputes
Act, Apprenticeship Act and Contract Labour (Regulation and Abolition) Act.

Management Trends

Retail stores: How to compete E-Commerce?

Easy sorting, fast price comparisons, inventory transparency and ratings capabilities in stores
Digital signage, interactive ratings devices, faster checkout and many of the other things that
consumers love about online shopping
Loyalty Programs: It is not necessarily about transactions. It is about allowing interactions to
happen between the customer and the brands, and among customers.
For instance, if a consumer likes a page on Facebook, she is signalling a brand that she wants it
to communicate with her on the medium. So a brand must keep to that. But if you send her an
email it would switch the customer off.
Make the process of collection of data easier by allowing customers to choose how they are
communicated to
CRM is communicating with customers and engaging them with your brand. Loyalty is about
looking at the transactions between the consumer and brand

The internet's share in total advertising revenue is expected to double from eight per cent in
2013 to 16 per cent in 2018, according to a report by the Confederation of Indian Industry (CII)
and PricewaterhouseCoopers

Power Sector India

India's power sector has over Rs 5 lakh crore in outstanding debt, amounting to roughly 4.5 per
cent of GDP
nearly Rs 3 lakh crore in accumulated losses and it racks up Rs 60,000 crore more in losses every
year
Electricity regulatory commissions have been set up in states and at the Centre to set
independent tariffs

States have unbundled utilities to identify weak elements in generation - transmissiondistribution chains
Incentive schemes like the APDRP (Accelerated Power Development and Reforms Programme)
and the Restructured APDRP have been introduced
The losses have just kept mounting

To add to the sector's issues, coal is permanently in short supply. The monopoly coal producer,
Coal India Ltd (CIL), has not been able to meet demand. To do CIL justice, the Indian Railways
also finds it difficult to deliver coal in the required quantities because rail links are clogged. CIL
itself has receivables of over Rs 8,000 crore because its customers are in dire straits financially
Imported coal fluctuates in price and is vulnerable to external policy action. Indonesia, for
example, has imposed export duties.
Alternative to coal, LNG power plants
Unfortunately, KG-D6 has run into problems. Imports of LNG are much more expensive and
difficult to transport. It is very likely the price of domestic gas will soon be linked to international
rates and raised. So gas-based capacity is also under a cloud
Unit tariffs are on average 20-30 per cent less than the cost of generation

The sector has dozens of listed players and it needs massive investments: Big Demand Supply
Gap
Reliance Industries, too, has significant operations in the energy sector in America, especially in
shale gas

Coal

The Supreme Court on Wednesday cancelled all but four coal block allocations (25 September
2014)
o on the grounds of illegality under the Coal Mining Nationalisation Act
o The decision is estimated to impact around Rs 2.85 lakh crore worth of investments
linked to the 214 coal blocks and their end-use plants
o The government is fully prepared to face the socio-economic impact of coal block
cancellations
o Coal sector, which is looking for decentralisation, the court directed state-owned Coal
India Ltd to take over all the cancelled blocks
The verdict questions the credibility of the government's licensing processes
A process running for more than 20 years had been rendered illegal, implying that the clock
could be set back several years
The Supreme Court order has created a new legal framework for coal mining by ruling that only
the Union government and its entities can do it
To prevent immediate dislocation of power plants and other industry, the court has given six
months and has not immediately deallocated producing blocks.
Even with Rs 250 a tonne penalty, the cost of coal would be less than what these plants would
have purchased from Coal India. There is some problem with the quantification of penalty
because the cost of production is not the same for everyone. Uniform penalty is slightly
irrational
There should be opening up of the sector, just as it happened in aviation and
telecommunication.

Except in cases where there is a CBI investigation or a fraud has been detected, companies
having mining rights that have been cancelled should be given the first right of refusal. They
should be allowed to retain blocks if they match the winning bid price.
Analysts say following the cancellations, the countrys import bill would jump by $3 billion (Rs
18,000 crore) as companies will source coal from across the world

Coal Blocks

The Supreme Court is expected to deliver its final verdict on coal mine allocations later this
week. In its August 25 ruling, the court had ruled allocation of 194 blocks illegal under the Coal
Mining Nationalisation Act. (24 September)
In case of new legislation, the government might opt for an ordinance through which the assets
would be taken over and handed to a custodian appointed by the government.
Under the Coal Bearing Areas Act, government-owned companies acquire unworked land with
likelihood of coal deposits for mining and activities incidental to mining. For other activities, land
is acquired under the Land Acquisition Act.
Private captive block owners have to acquire land through direct purchase from individuals or
through government lease
Of these blocks cumulative coal capacity of 276 million tonnes (mt), long-term power purchase
agreements had been signed for 147 mt, while the rest was to be sold for end use at the market
price. About 28,000 Mw of power capacity will be affected due to the cancellation of coal block
allocation
In a submission to the court, an association of coal mining companies and power producers had
said their investment in end-use plants stood at about Rs 4 lakh crore
There could be some windfall gain for the central government this financial year from the fine of
Rs 295 a tonne on each block holder. The total fine comes to Rs 7,905 crore for operational
blocks. However, the finances of six states would be affected by this ruling, says the analysis

Land Acquisition Bill

Central land law of 2013, Consent Clause, which requires consent of 80 per cent of the affected
people for private companies and the consent of 60 per cent for PPP projects

Taxation

GAAR not yet come into effect

Vodafone:
o If the company did not have a fall back option if it lost its spectrum at the time of its
renewal through an auction, then there would be no business for the company and a
listing would not be able to get the right value in such a situation
o Up to four operators in any market is the ideal situation, Colao said, adding that
consolidation of telecom players in India was necessary to help the industry

o private sector could deliver much better, provided rules were made simpler,
enough resources provided and quick decisions taken
o So far, the company has invested Rs 70,000 crore in India.

o In fields such as education, health care, agriculture and financial inclusion, the
progress enabled by mobile is unparalleled.
o
A five-judge constitution Bench of the Supreme Court on Thursday struck down the
National Tax Tribunal Act, on the grounds that it encroached upon the power of the
judiciary and the principle of separation of powers.
o the finance ministry might have to look at alternative measures to speed
solutions to tax disputes.
o An estimated Rs 4 lakh crore of tax revenue is locked up in litigation in various
stages from commissioner appeal to courts.
o India has some 30 tribunals but their jurisdiction is a matter of controversy
India Ratings, a Fitch Group company, said cancellation of 214 coal blocks by the
Supreme Court could adversely impact the countrys economic recovery, though it
would clean the system in the long run
No two states are comparable. Chhattisgarh is not like Punjab or Haryana. Fifty per cent
of our population is below the poverty line and we stand to lose nearly Rs 1,000 crore if
GST is rolled out in its present form.
The gross direct tax collection till September 26 for the 2014-15 financial year was at Rs
3.37 lakh crore.
o Of this, corporate tax contributed was Rs 1.55 lakh crore during the period, the
official said.
o Personal income tax realisation stood at Rs 1.01 lakh crore
o The government has targeted to raise Rs 7.36 lakh crore from direct taxes in
2014-15, up from over Rs 6.36 lakh crore collected in the previous financial year
Ecommerce: case on Amazon by Karnataka Government
o Foreign investment is not allowed in e-retail
o Investment rules do not make a distinction between inventory-led and
marketplace model
o In the marketplace model e-commerce companies define themselves as service
providers and not as retailers, acting as hosts between buyers and sellers
o Wholesale trading within the group companies of an e-commerce retailer cannot
exceed 25 per cent of its total turnover
o The companies in question stock inventory much before the order is placed
manufacturing activity is yet to pick up Excise duty collection dropped 0.4 per cent to
Rs 14,288 crore
Total indirect tax collections (Customs, Central Excise, Service Tax) in these first six
months were only 38.8 per cent of the Budget Estimate of a 26 per cent rise for the full
year, of Rs 623,244 crore
o

Excise collection contracted 0.6 per cent during April-September to Rs 75,021 crore.
While Customs collection rose 5.5 per cent to Rs 89,324 crore in these six months,
Service tax collection grew 13.1 per cent, to Rs 77,466 crore.

IPO

only six companies have approached the market regulator with draft offer documents - the fewest
in more than a decade for the first nine months of a calendar year
Sebi has tightened disclosure requirements following the 2011 scam, when several companies
were found to be misusing money raised through IPOs
The regulator has also empowered itself to reject the documents it sees as inadequate.
Bankers are wary of reputational loss that might come with such rejections, and are playing safe
The year 2012 saw only 27, while it dropped to 20 last year
It takes up to six months for companies to go from appointment of directors to getting Sebi's
clearance and being market read

Indian banks and corporates doubled their fund-raising through international bonds
With more favourable view on Indian economy and business environment under the Narendra
Modi government, the risk premium for Indian papers began to climb down
o India Inc raised $8.4 billion through overseas bonds compared with $2.9 billion in the yearago period (may-sept)
o Spreads compressed by up to 150 bps after April (interest rate diff between indian and in
bonds with same maturity period)

Mergers and acquisitions deals in India have dropped 65 per cent sequentially to $4.7 billion in
the quarter ending September
o M&A deals in 2014, however, reached $21.7 billion, up 22.5 per cent from the same
period last year. (TILL 2ND QUARTER)
o FDI (foreign direct investment) is not happening and we need to convince the incoming
investors about our policy stability and other regulations
o

Banking

or the fortnight ended September 5, annual credit growth in the banking system fell to 9.68 per
cent, data released by the Reserve Bank of India (RBI) showed
This was the first time since October 2009 (9.01 per cent) that growth in bank credit fell below
10 per cent.
Though the retail and small & medium segments have been growing, corporate demand has
been slow. We are yet to see signs of a pick-up
The country's largest lender, State Bank of India, has cut deposit rates, as it has abundant
liquidity and has seen a slower-than-expected credit pick-up.
On the deposit front, it seems the banking system is flooded with liquidity - in the fortnight
ended September 5, deposits rose 13.78 per cent over a year ago.
***************************
PSBs need up to $37 bn capital to meet Basel-III norms

Basel-III is fully phased in from 2019

Global rating agency Moodys said on Monday the 11 Indian public sector banks (PSBs) rated by
it will need to raise up to $37 billion in external capital to meet Basel-III norms by March 2019.
the Indian PSBs will have to raise between Rs 1.5 lakh crore ($26 billion) and Rs 2.2 lakh crore
($37 billion) as Tier-I capital by FY1
o Basel-III norms raise the minimum required capital levels for total Tier-1 to seven per
cent and for Common Equity Tier-1 (CET1) capital to 5.5 per cent.
o Plus, banks will need to meet a capital conservation buffer in order to pay dividends,
Moodys noted.
o According to the rating agency, a significant part of the required capital Rs 80,000
crore ($13 billion) to Rs 90,000 crore ($15 billion) could be in the form of additional
Tier-1 (AT1) capital
While banks can tap the equity markets to raise capital, with still-low bank valuations, they
might struggle to raise the required amount
Under the transitional requirements, AT1 can account for the difference between the targeted
eight per cent Tier-1 requirement and the 5.5 per cent minimum CET1 requirement for March
2015
******************
In its next bi-monthly monetary policy review, due on coming Tuesday, the Reserve Bank of India
(RBI) might heed banks demand to relax the requirement of maintaining 95 per cent of Cash
Reserve Ratio (CRR), which stands at four per cent currently, on Saturdays
banks have to adhere to a requirement of 95 per cent of CRR daily (including on Saturdays) and
100 per cent on a fortnightly basis. Bankers say this is difficult, as RBI does not conduct its
Liquidity Adjustment Facility (LAF) on Saturdays.
On that day, since money market operations are not there, it becomes difficult for us to manage
a CRR requirement of 95 per cent. Then, we suggested in such a case even RTGS and NEFT
should not be there on Saturdays. But RBI believes these should,
Earlier, banks were allowed to maintain CRR at 70 per cent on a daily basis. In July 2013, when
the rupee-dollar exchange rate turned volatile, RBI had raised this requirement to 99 per cent,
among other liquidity tightening measures, to curb speculation in the currency market

Social Schemes

The Rashtriya Swasthya Bima Yojana (RSBY), the Aam Aadmi Bima Yojana (AABY) and the Indira
Gandhi National Old Age Pension Scheme (IGNOAPS) were sought to be merged
Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGS) be revamped by
including agricultural workers
The government is considering using labourers employed under the job guarantee scheme to
construct durable agriculture assets such as bunds, embankments and small irrigation projects in
farmlands, during the non-sowing period

The National Health Assurance Policy would be rolled out in phases in the current financial year
and it would go full steam in FY16
o seeks to reduce out-of-pocket expenditure on health expenses for the common man
o 50 essential drugs (in generic form) with a package of diagnostics and about 30 Ayush
drugs will be made available to all citizens at government hospitals and health centres
o to address the high maternal mortality rate and improve nutritional levels
o

Markets

MFs' exposure to software stocks hits all-time high (18 September)

The Finance Ministry had allowed the EPFO to invest up to five per cent of its funds in equity in
2005 and enhanced the limit to 15 per cent in 2008.
A recent notification by the labour ministry allows the EPFO to invest up to five per cent of its
funds in money market instruments
********
The Indian market posted its biggest single-day fall in about two months, ahead of the
derivatives expiry, as investors turned cautious on weak economic data in Europe and China (24
September)
o Nervousness also persisted with gold seeing some safe-haven demand, as the US and its
Arab allies launched a series of airstrikes against Islamic State in Syria

The India VIX index, a gauge of market volatility, jumped seven per cent to 12.41, ahead
of the expiry of derivatives contracts on Thursday
o Global markets also traded weak on the back of disappointment over China
unemployment data and a weakness shown by European manufacturing data
o Analysts said foreign investors appetite for stocks in emerging markets like India had
diminished, as the US Fed prepared to wind down its bond-buying programme and raise
interest rates
o The US dollar has gained against major global currencies in the past month.
o ***********
The share of mid and small-cap stocks in the total market capitalisation of the universe of listed
companies has touched a four-year high
o It is difficult to generalise about the index but some Tier-II and -III stocks are showing
signs of being in a bubble zone (risky for investors)
o Companies in the BSE Mid-Cap index now account for 16.5 per cent of the combined
market cap of all BSE-listed companies, up from 13 per cent a year ago and just shy of
the April 2010 all-time high of 16.6 per cent.
o In the past 12 months, BSE Mid-cap and BSE Small-cap indices have outperformed the
BSE Sensex and the BSE-100 by a wide margin
o Mid-caps have led the rally in the past few months, on the back of a large participation
of domestic retail investors. Any bad news would first be felt in this segment before it
reaches large-cap stocks
o At 12-month trailing price-to-earnings multiple of 13.22, the BSE Mid-cap index remains
cheaper than the Sensex, which is trading at 18.5 times trailing 12-month earnings of
member companies.
o

Smart Cities

Smart cities are broadly defined as urban spaces that are technologically integrated, wellplanned and environment-friendly
Smart cities are not a new concept and that several existing government schemes, including
JNNURM and Rajiv Aawas Yojana are in someways smart city projects
PPP (public-private partnership) model and efficient urban mobility schemes
100 smart cities in 10 years is being seen as a practical goal
First, getting a holistic team to work on a project of this nature is not easy. The Centre is
consulting states, industry, consultants and academicians
The second concern is over financing: Although the private sector (both domestic and
international players) has shown enthusiasm about engaging in the smart city project, the
industry is seeking assurance about return on investment
An initial estimate had put the figure at Rs 35,000 crore as the annual cost for the project but in
the Budget, Finance Minister Arun Jaitley allocated Rs 7,060 crore

Targeting cities

Hyderabad
Uttarakhand

FTA

India and some countries have demanded a parallel agreement on public stockholding for food
security
WTO has a long history of missing deadlines, mainly pertaining to those that benefit developing
countries. So, missing the July 31 deadline did not bring the world to an end
If the Bali Package has to be implemented, then the whole package has to be implemented
Earlier this month, after years of delay, India notified its agriculture subsidies at the WTO for
2004-05 till 2010-2011. In the notification, India said it had given subsidies worth $56.1 billion to
farmers. The notification indicated its domestic food security programmes had not breached the
WTO's prescribed limits
India is in no danger of crossing the 10 per cent threshold of food subsidies under the WTO's
agreement on agriculture and it will not breach the level in the near future.
developed countries have questioned the methodology adopted by India in calculating its
subsidies
Free Trade Agreement (FTA), which required tariffs to be reduced to zero in a phased manner
Ahead of his meeting with US President Barack Obama, Prime Minister Narendra Modi on
Monday (1 October 2014) made it clear that agreements on food security and trade facilitation
will have to go hand-in-hand.

Agriculture

The retail prices of fertilisers to the farmers are much lower than their cost of production or cost
of imports
The Government of India reimburses the difference in cost of production/ import and the retail
prices to fertiliser companies.
It is important to note that fertiliser subsidy is not for fertiliser companies but for farmers.

Centre has allowed the Punjab government to purchase and distribute grains in advance to
beneficiaries of the National Food Security Act (NFSA) for the next few months. (October)
o Punjab has become a decentralised procurement state: One that purchases and
distributes grains needed for PDS (public distribution system) and the Centre only foots
the subsidy bill
o Punjab is one of 11 states implementing the NFSA.
o The NFSA provides entitlement for cheap grains to 64 per cent of the Indian population
o

Infrastructure

With banks showing no interest in the National Highways Authority of India (NHAI)'s proposed
asset reconstruction company (ARC), the Authority has initiated talks with a clutch of nonbanking financial companies (NBFCs).
o Hopes to revive unfinished road projects through the ARC, which would take over the
bank loans extended to such projects

o
o
o

Many NBFCs have shown interest in the proposed ARC

NHAI's initial investment in the ARC is estimated to be around Rs 1,000 crore
The ARC will buy loans extended to the road projects in case of a default or funds crunch
and sell the completed projects to investors
o There are 20-25 projects, which can be funded through this route in the first phase
o Road projects worth Rs 1.8-lakh crore have been stuck owing to various issues ranging
from land acquisition, environmental clearance and other issues
o Private developers had previously bid aggressively for projects, but their traffic
estimates did not materialise
The roads ministry is in the process of revamping the model concessionaire agreement (MCA) to
make it more flexible in line with the changing market conditions.
o At the moment, MCA norms do not give any scope for changes or additions
o Because of this, earlier, the government had to come up with a policy for rescheduling
premium and an exit policy for developers