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FINXpress FEBRUARY 22, 2015 | A FINNICHE INITIATIVE

Term of Week

In Focus

Opinion

Tech World Special Drawing

Rights | 6

Motorola Android Watch|12

Dilip Shanghvi |11

Expectation from BJP

Budget 2015| 4

Wholesale Price index

Deflation | 2

Personality

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

Wholesale Price Index (WPI)

Deflation

Expectations from BJP

Budget - 2015

Special Drawing Rights (SDR)

Dilip Shanghvi

Motorola Android Watch

February, 22 | 2015 | Volume 35

IMT saw its seniors performing for the last time at Crescendo 2015 and the distribution of awards

for IMT Oscars. In the Global Market oil prices continue to fall with US government reporting record

high crude oil inventory as a result of which India tried to lower down its fiscal deficit. With the

Budget around the corner, the corporate world is eyeing closely on the steps that will be taken by

government to boost the Indian Economy.

Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about the

‘Wholesale Price Index (WPI) Deflation’. The Opinion gives an overview of ‘Expectations from BJP

Budget—2015’.

The term of the week describes ‘SDR—Special Drawing Rights’, which are international reserve

asset created by IMF in order to increase the reserves of its member countries. Do have a look at

the market section, Tech world which brings to you about ‘Motorola Moto 360’ and Personality of

the week, Dilip Shanghvi.

Club FinNiche welcomes any comments, suggestions or criticism regarding the magazine. Please

do write to us and share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

- By J.Sindhuja

WPI which is used as one of the measure of inflation

in India slipped into negative zone due to

continuous decrease in fuel prices. WPI measures

the changes in prices of goods that are bought and

sold in whole sale market and is considered

important as it tracks dynamic movement of prices.

It was used by RBI to control inflation till 2014,but

recently RBI has shifted to CPI to make its

decisions on changing rates. Government uses WPI

to design fiscal, trade and other economic policies

whereas businessman track it know changes in

prices of raw materials, machinery and other

production costs. WPI is usually preferred than CPI

as it gives weekly report of change in prices and

has broader coverage which is classified into three

categories i.e. primary articles (20.12%), fuel and

power(14.91%) and manufacturing products

(64.97%) as compared to CPI.

Deflation, which is an indicator that overall prices

have decreased also indicates that it would not

favor Indian economy as whole. WPI in January

slipped to –0.39% as compared to 0.11% in

December which is recorded as second fall in last

three months. If the categories of WPI are

considered, we can see that fuel and power

inflation has declined to –10.69% from –7.8% in

December whereas primary articles inflation

increased from 2.17% to 3.27% ,manufactured

products inflation came down to 1.05% from 1.57%

and food articles inflation increased from 5.20% to

8%.

It can be observed that main reason behind the

deflation is due to negative fuel price deflation and

world deflation is showing its impact on India.

Consumers don’t seem to be too excited with it as

primary articles and food articles show an increase

in their prices due to low monsoon and the reason

for the deflation is mainly due to international factors

which are not under control rather than domestic.

India would be vulnerable again as soon as fuel

prices rise and deflation may not persist for long

time . Manufacturing products inflation is very less

which is a factor of concern as this would reduce

pricing power of manufacturers leading to lesser

incentives to manufactured goods and this may also

pull down CPI inflation to a level which is less than

what RBI aims at.

Whole sale price index (WPI) Deflation

Deflation may be due to decreased spending which

can be government, individual or investment

spending or due to reduced supply of money. Indian

industry wants to fully utilize the low pricing situation

with help of RBI .They exhorted RBI to reduce the

interest rates so that investment cycles would be

revived thereby boosting up the demand, but RBI

has kept its rates unchanged waiting for the first full

year budget to be released.

Apart from the Indian industry, WPI deflation has its

own implications on budget 2015 which is yet to be

released. Even though it doesn’t mean that

deflation would persist for long time, it clearly

represents that underlying potential of inflation is

dying as core inflation (non-food manufacturing)

dropped from 1.5% in December to 0.9%. It is time

to focus on growth rather than inflation. This

deflation is due to the base effect and is expected to

remain negative for two or more months even

though there is a rise in food and fuel prices as

base effect lasts till august. CPI inflation rose to

5.11% from 4.28% in December. As RBI started

considering CPI as measure of inflation to make

decisions on monetary policy there would be no

change in interest rates unless there are some

surprises in union budget.

It is government’s responsibility to revive growth and

must let RBI to act in its way.

Following are the steps to be taken by Jaitley:

Public investment should be made in a modest

way in infrastructure in 2015-16 i.e. 50,000–

1,00,000 crore in this year and twice the

amount in the next year

CPI and WPI must be rightly analyzed.

Difference of 5.5%(5.11% CPI and –0.39%

WPI) reflects inefficiency of Indian economy. As

WPI reflects producer’s prices and CPI reflects

consumers prices, there is huge loss in value

as goods reached from producer to consumer.

This can be reduced by removing inter-state

market barriers and improving supply chain.

Though Goods and service tax (GST)

eliminates inefficiencies in supply chain, there

should be a national market for all goods and

services

Thus India should concentrate on growth as WPI

deflation is showing weak signs of growth.

- By Priti Sureka

The Finance Minister will announce the Budget on

February 28th which will clear all the doubts and

questions of people from the Modi Government and

which will unfold what the new government has for

its people in its store. But before that let us see what

the budget should contain and address to expedite

the growth procedure.

The government has already taken few measures to

put fresh life into the economy which include

reallocation of coal mines, increasing limit of FDI in

some critical sectors, making land acquisition easier

etc.

Firstly, with the introduction of ‘ Swachh Bharat

Abhiyan’ , the government should invest in rural

infrastructure in the form of regular pure water

supply, harvesting of rainwater and making that

potable, more number of toilets etc. Efforts should

also be made to ensure the actual implementation

and sustainability of those. Only announcement

would do nothing. This will help in attracting tourism

which will increase revenue from invisible exports

for the Indian economy. Secondly, with the launch of

Make in India campaign which aims at promoting

domestic manufacturing sector, the upcoming

budget should show some facts and timelines for

completion of some manufacturing projects. Along

with that, Special Economic Zones should be

revived as MAT is imposed at a very higher rate

which will restrict the improvement of manufacturing

industry. Therefore, MAT should be reduced to a

feasible extent.

The next step should be to induce investments in

construction, manufacturing, financial services etc.

via domestic or international investors. Attracting

FDI is the first priority. India needs FDI to boost the

economy.

India is the second fastest growing service sector.

Some initiatives should be undertaken to enhance

India’s ability of service exports. India ranks 10th in

service exports worldwide. Government can look

into service tax structure in this regard. Most

importantly, the finance minister must give the

surety of implementation of GST from April 1, 2016

onwards as decided yet, which is in a debatable

situation since past few years. If not surety, then at

least clarity regarding implementation should be

there so that investors can plan accordingly. In our

country, installing a Wi-Fi network takes hardly two

days, then why execution of policies which are for

the overall benefit takes some years or some

decades. The GST implementation will completely

change the face of the economy. Tax is the largest

source of revenue of the government. There will be

uniformity in tax imposition across all the states and

will also ensure less tax evasion.

Modi Government’s first full

fledged budget

Initiatives should be taken to

meet the expectations of

common people from the “Modi

Wave”

Banking sector in India has witnessed many reforms

starting from interest rate deregulation, asset

classification, reduction in statutory reserve

requirements, making provisions etc. Now,

government should think of how to help banks in

reducing the quantum of non performing assets

rather than just indicating them to do so. Here

government can raise the disclosure standards,

allow foreign equity participation in securitization or

initiate recapitalization of banks.

Taking the financial inclusion a step ahead,

government needs to redefine this strategy.

Financial awareness should be promoted among

rural people before opening bank accounts for them.

The other thing which people will surely look for is

Healthcare. India spends only 1.5% of GDP in

Healthcare. Government must-

Invest in medical infrastructure heavily

Improve doctor to patient ratio

Invest in medical colleges to have universal

access to innovation and technology

Encourage NGOs

Education sector needs to be strategized. Expensive

education programs should be modified if there is

less job creation. After completing higher studies,

people tend to move out of India, therefore they

should be adequately incentivized by the

government. On the other hand, private investments

in education and healthcare sector can be

encouraged to reduce the load of the government

and to ensure efficiency. Aadhaar card should be

used constructively which can fetch maximum

results.

Government must introduce some laws to exercise

minimum control on the e-commerce sector. Here

RBI can take care of regulation and registration of

different payment gateways, foreign exchange

matters etc. While, for the government imposition of

certain percentage of sales tax is recommended.

Another factor which government can look is spread

of information of schemes. There are plenty of

schemes for the benefit of people, but the problem is

that many are not aware of the same and they seem

to be complicated. Therefore, a separate body for

promoting such schemes to every person should be

set up. Apart from just introducing new schemes,

government must take initiative to make the existing

schemes function well. Also some schemes can be

consolidated for convenience.

Government must encourage start-ups. Capital must

be made accessible and affordable at the same time.

Some tax exemption can be granted for the

promotion of start-ups.

Decline in domestic savings is a challenge. Saving

rate of the country needs to go up in order to boost

the GDP growth. Here tax incentives can play an

important role to restore domestic savings.

To foster investment in infrastructure development,

deduction amount to invest in Infrastructure Bonds

can be increased. Also, exemption on payment of

interest on home loan can be increased to stimulate

home loans.

It is a big chance for the BJP Government to play a

major role by addressing requirements of corporate,

MNCs, Salaried individual and every common

person living in India.

Reserve asset created by IMF

in order to increase the

reserves of member countries.

SDR: Special Drawing Rights

The SDRs are an international reserve asset

created by IMF (International Monetary Fund) in

1969 in order to increase the reserves of its member

countries. SDRs value is calculated on the basis of

the four key international currencies namely the US

dollar, pound sterling, Japanese yen and the Euro.

SDRs can be exchanged for freely used currencies

of the global integrated financial world.

SDRs were a product of the Bretton Woods system

which collapsed as there was shortage of two key

assets gold and US dollar to keep the exchange

rates fixed, and the world shifted to a floating regime

of exchange rate. The value of SDR = 0.888671

grams of fine gold during the Bretton Woods

system, which incidentally was the value of the US

dollar too at that time. In 1973 when the Bretton

Woods system collapsed, the SDR was then

reformed and was calculated on the basis of the

four major used currencies of the world.

The value of SDR in relations to the US dollar is

calculated on a daily basis and posted on the IMF

website. The basket of currencies against which the

SDRs are calculated are reviewed every 5 years by

the executive board of IMF, so lately it has become

a sort of status symbol in the financial world to be

referenced as the currency against which the SDR

will be calculated.

SDR interest rate are interest charged to members

on the regular IMF loans, the IMF also pays the

members interest on the SDR holdings according to

their portion of quota subscription.

The IMF allocates the SDR to member countries on

the basis of their quotas in IMF. SDRs are self

financing as it charges on allocation that are then

used to pay the interest of the SDR, in other words if

you don’t use your share of SDR holdings, the

charges to pay will equal the interest received, but

in some cases if the member holdings of SDR rise

above a certain threshold then it gets interest on the

excess share of its respective holdings, and if you

are low than your allocated holdings you pay

charges for the shortfall.

The SDR were particularly useful in the aftermath of

the global financial crisis, as it generated liquidity

and supplied that liquidity in the global markets to

the tune of $182.7 billion. The members often need

to buy or sell SDRs in order to either make up for

the shortfall in their respective holding, in that case

the IMF acts as a go to link or an intermediary of the

entire process. SDRs are basically a voluntary

trading, under these conditions the parties gets

involved in the buying or selling of SDRs in their

respective limits.

The SDR are often also seen as a bet against the

hegemony of dollars by various countries. The IMF

reforms of 2010 pointed to the increase use of

SDRs and to incorporate more of the emerging

market stable currencies significantly the Remnibi.

- By Shubra Sasmit

Fund allocations in India's Idea

Cellular Ltd and Yes Bank Ltd

to increase after their inclusion

in India's NSE index, analysts

say

Stocks to replace DLF Ltd and

Jindal Steel and Power Ltd,

NSE says in a statement

INDIAN MARKETS

India’s national Stock Exchange’s NIFTY falls by 0.69 percent and Bombay Stock Exchange’s

SENSEX ends 0.78% lower, snapping a seven-day winning streak, weighed down by a 3.2 per-

cent fall in shares of Reliance Industries and as sentiment for blue-chips was hit after foreign in-

vestors sold index derivatives for which the reason being sentiment for blue chips was hit.

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 29,170.77 29,522.86 29,083.40 29,231.41

NIFTY 8,741.50 8,822.10 8,729.65 8,805.50

COMMODITIES

EXCHANGE RATES

INTERNATIONAL MARKETS

Yes Bank and Idea may have

weights of 0.74 pct and 0.6 pct

in the NSE index respectively

Commodity Unit Rs / Unit % Change

Gold 10 grams 26311.00 -1.83

Silver 1 kg 36404.00 -1.67

Crude Oil 1 bbl 3215.00 -1.38

INR/ 1 USD 62.13

INR /1 EURO 70.74

INR/ 100 JAPAN YEN 0.52

INR / 1 POUND STERLING 95.67

Open High Low Close

NYSE Comp 11,042.78 11,111.41 10,976.26 11,108.86

NASDAQ 4,889.99 4,957.02 4,880.64 4,955.97

S&P 500 2,096.47 2,110.61 2,085.44 2,110.30

FTSE 100 6,873.50 6,921.30 6,819.80 6,915.20

CAC 4,757.52 4,841.69 4,683.19 4,830.90

DAX 10,946.88 11,081.81 10,765.02 11,050.64

NIKKEI 225 18,024.01 18,360.92 17,901.26 18,322.30

SSE 50 2,427.17 2,464.52 2,413.60 2,445.26

Hang Seng 24,717.49 24,871.79 24,653.88 24,832.08

Exclusive - Subsidy cuts in budget may disappoint investors

India may slash its food and fuel subsidy bill by about $8 billion in next week's budget, two sources

said, but despite the impressive headline, the cut is not as radical as free market champions had hoped

for in Prime Minister Narendra Modi's first full budget. Most of the 20 percent cut in the budget for

subsidies results from lower global oil prices rather than structural changes, with the government's

appetite for reform tempered by a heavy local election defeat in New Delhi this month.

"The total subsidy bill could come down to around 2 trillion rupees ($32 billion)," a senior government

official, who has direct knowledge of the matter, told Reuters. That calculation was echoed by another

source privy to budget discussions. Fuel subsidies are expected to drop by around two-thirds to 220-

230 billion rupees in the fiscal year that starts on April 1, thanks above all to a halving of international oil

prices to around $60 a barrel. The sources said Finance Minister Arun Jaitley was likely to set the total

budget for subsidies at about $32 billion, down from $40 billion in the current financial year. It will be the

first full budget presented since Modi's Bharatiya Janata Party swept to power in India last May. It

produced an interim budget in July that was largely designed by the outgoing Congress party

government.

Indian IT firms eye robotics, driverless cars for next round of growth

After decades of low-margin work like server maintenance, India's information technology services firms

are moving upscale in search of lucrative contracts for driverless cars and other advanced projects as

online innovation changes clients' needs. Companies from Tata Consultancy Services Ltd to Wipro Ltd

are all joining Infosys Ltd in investing in new, high-end technology, industry watchers say. Earlier this

week Infosys bought U.S. automation specialist Panaya Inc for $200 million.

Triggering change is a wave of invention allowing machines to talk to each other online, dubbed 'the

Internet of things'. Customers are ramping up: from about 5 percent now, strategy advisor Offshore

Insights estimates automation and artificial intelligence work will grow to 25 to 30 percent of an IT

outsourcing market seen by the national industry association as worth $300 billion by 2020.

Long wait for Airbus to bag replacement contract for IAF's Avros

The wait is getting longer for Airbus, the European defence and aerospace aircraft major, to bag the

over Rs 10,000 crore contract from Indian Air Force (IAF) for supply of 56 transport aircraft, which is a

replacement for the ageing fleet of Avro transport aircraft. Airbus along with Tata Advanced Systems

Limited (TASL) was the sole bidder for this contract. The government is in a dilemma over awarding the

contract to Airbus as no other bidder had shown interest. The IAF intends to replace its ageing Hawker

Siddeley 748 Avro aircraft fleet, with many of them in use for over four decades. The manufacturing of

Avro had ceased in 1988. The European major Airbus Defence and Space has pitched its C-295, the

twin-turboprop tactical military transport aircraft, priced around $30 million per piece. It is currently

manufactured by Airbus Defence and Space in Spain. The Ministry of Defence had asked eight global

vendors to submit Request for Proposals (RFP). The vendors include Boeing, Ilyushin of Russia,

Antonov of Ukraine, Franco-German consortium EADS (now rechristened Airbus), Embraer of Brazil

and Alenia Aeromacchi of Italy.

Kavin Mittal wants to do in the mobile Internet space what his dad, Sunil Mittal, did in telecom

Mittal Jr too adds thousands of subscribers every day - for his messaging app, Hike. And he feels he

has embarked on a journey that will transform lives. In Delhi's business circles, few know Mittal well

because he moved to London immediately after school. Somebody who saw him at a discussion forum

recently was impressed with his articulation and confidence: Mittal had come in denims. In January,

Mittal acquired Zip Phone of the US (the deal was wrapped in less than a month), which has enabled

him to offer free voice-calling service on Hike. In the next few months, he hopes to deliver services like

cricket updates through voice packs. "There are 14 to 15 features that we are working on right now,

which we will roll out over the next few months," says Mittal. Many wonder if Mittal will be able to open

revenue streams for Hike, which is a free app. Some even say that he will scale it up to a size and then

cash out of it. Mittal insists he is not interested in flipping the company, and revenue streams will open

up soon. At the moment, Hike offers free stickers, coupons and games. For higher versions, there could

be charges. Mittal feels it's possible to offer news feed and e-commerce on Hike. These offer more

monetisation possibilities. Eventually, he sees messaging services as a tool for content discovery,

some kind of a browser for apps. Still, Mittal realises that his venture is risky, and there are people

around who don't find his business plans convincing.

No formal proposal from post office to set up bank: Raghuram Rajan

Reserve Bank of India Governor Raghuram Rajan said on Friday the central bank had not received an

application from India Post to set up a bank in the country. The country's postal office had been

speculated to be interested in setting up banks across India. Earlier this month, it was among 41

applicants to run a new category of banks planned to bring basic banking services within the reach of

millions. The Reserve Bank of India last year granted its first new banking licenses in India in a decade

and has said it would consider applications on a rolling basis.

Dilip S. Shanghvi is a graduate in commerce from

Calcutta University. He is the Chairman and

Managing Director of Sun Pharmaceutical

Industries Limited and holds extensive experience

in the pharmaceutical industry.

Mr. Shanghvi started Sun Pharmaceutical

Industries with capital of Rs 10,000 in 1982 at

Vapi. He founded Sun Pharmaceuticals in 1983

with five psychiatry products. Today, it is India's

largest drugmaker and most valuable drug

company. Appreciation of Sun's stock led to a 50%

surge in his personal wealth, amounting to USD

4.7 billion. He has been named in the list of Asia’s

top ten wealthiest self-made billionaires, according

to Wealth-X. Shanghvi is also the Chairman and

Managing Director of Sun Pharma Advanced

Research Company and Shantilal Shanghvi

Foundation.

In 1997, he acquired Caraco Pharma, a loss

making American company, with the aim of

expanding Sun's reach in the United States and

turned them around in no time. The deal paid off;

the US now accounts for 60% of Sun's revenue.

He also acquired Israel's Taro Pharma in 2007. He

is also credited with steering Sun Pharma to fifth

place in the global generic drugs market.

Education

Shanghvi earned a Bachelor of Commerce degree

from the University of Calcutta. He is an alumnus

of J. J. Ajmera High School and Bhawanipur

Education Society College, from where he did his

schooling and graduation, respectively.

In News

On 19 Feb'15, he surpassed Mukesh Ambani as

the richest person of India, if one goes by the

promoter holdings in the listed companies of the

two groups. By virtue of his over 63% holding in

three group companies — Sun Pharma, Sun

Pharma Advanced Research and Ranbaxy Labs,

Shanghvi’s worth was about Rs 1.46 lakh crore

($23.42 billion at an exchange rate of 62.34 to the

dollar). In comparison, Ambani, through his 45%

holdings in two group companies — RIL and

Reliance Industrial Infrastructure, was worth Rs

1.32 lakh crore ($21.2 billion)

October 01, 1955

Amreli, Gujarat

University of Calcutta

2010: E&Y Entrepreneur Of

The Year

2011: Business India

Businessman of the Year

2011: CNN-IBN Indian of the

Year (Business)

Motorola Android Watch

Motorola recently launched it’s android wear watch.

Though it took time for the watch to hit the retail

stores, the interesting design probably makes up

for it.

The round look of Moto 360 distinguishes it from

the boxy designs of Samsung and LG android

watches. There is a black bar which hosts the LCD

drivers and ambient light sensors. The display is

edgeless and made up of corning gorilla glass

3.The watch comes with two types of straps–

leather and steel. It weighs only 49 grams despite

it’s size. There is a heart rate monitor at the back.

The bottom of the watch is covered in a shell. It is

for protection from water and dust.

The screen size is 1.56 inches with backlit LCD

and a resolution of 320*390 pixels. The density

comes out to be 205ppi. The display is not dense

but the colour calibration and brightness makes up

for it. The watch doesn’t have an always on mode.

There is a feature of ambient mode which shows

outline of contents.

Motorola has used 1 GHZ single core Texas

instruments OMAP-3. The other brands generally

use Qualcomm Snapdragon 400 SoC. The

company uses a 320 MAH batteries. The watch

has 4GB of storage space for music and apps. It

has a 512 MB RAM. The battery life is of 16-18

hours but reduces significantly if one uses “ambient

light” mode. Moto 360 is priced at Rs 17,999 in

India. From the point of view of smart watches

Moto 360 is a step in the right direction but still a lot

is desired.

Pros:

The circular design is stylish and looks

futuristic.

The price is affordable.

Provision of wireless charging.

Cons:

The processor is inefficient.

The battery life is on the lower side.

Unstable Bluetooth connection with the phone.

- Shashwat Shekhar

Near about Rs. 12,000