abhyaas business bulletin compendium

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Business BulletinConnecting the dots


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The Abhyaas Business Bulletinfor the MBA aspirant in you.

16th Nov 2011 Edition ABB2011110

www.abhyaas.in 1The Abhyaas Business Bulletin

Amid the cancellation of hundreds of flights that had severely hit manypassengers over the last week, Vijay Mallya, founder and part-owner ofKingfisher Airlines insisted that the airline was not shutting shop, but was

only cutting the losses and improving productivity. However, the lowbudget arm, Kingfisher Red was axed in the end of September 2011.According to reports, the airline suffered a loss of Rs. 1,027 crore in2011-12 and has a mounting debt of Rs. 7,057 crore. Adding to its woes,share prices for Indias second-largest airline dropped to a record low, asmuch as 18% in the last week, to Rs. 17.55.Chairman Mallya blamed the surging prices of fuel, which have risen 41%since last year, and heavy taxes on aviation turbine fuel for the losses. Aperturbed Mallya tweeted, questioning the over-taxed and over-chargedairlines in India and the government not doing much to help with the

same. Sailing in the same boat, albeit in a better situation, Indias largestairline by market share, Jet Airways too reported a loss of Rs. 713 crore inits quarterly report for July-Sept. Jet Airways said that their earnings werehit by an exceptional forex loss due to depreciation of the rupee apart frommounting fuel prices. Similarly, Air India has accumulated a debt of Rs.42,570 crore and an operating loss of Rs. 22,000 crore as of March 2011.However, critics ofMallyas flamboyant ways believe that the root of all theproblems are his over-the-top business plans and strategies. Meanwhile,CEO Kingfisher, Sanjay Aggarwal did mention that the banks had beenasked for an increase in limit to support the operating costs of the airline.Some assistance came from the government when PM Manmohan Singh

mentioned thatallways to get Kingfisher out of trouble would be lookedat while Civil aviation minister Valayar Ravi too hinted at possibilities ofdiscussing with Finance Misiter Pranab Mukherjee any possible assistanceto the cash-strapped airlines. However a bailout by the government, laAir India, was denied by both parties.

Airline companies across the world have time and again run into viability

issues. Check out what the causes for this phenomenon are. Should

governments aid these companies? What do you think?

From the Editors desk

Dear Student,

Welcome to the first fortnightly November edition of the Abhyaas Business

Bulletin. This fortnight was eventful with many significant business eventsoccurring both nationally and internationally.While the bankruptcy of the Kingfisher airlines made business headlines inIndia, the RBIs tactics of increasing the interest rates does not seem to puta hold to the ascending inflation rates.Internationally, Italys economic crisis sent panic waves in the Eurozonecalling for the EU to intervene to put austerity measures in place, alsoresulting in the resignation of the Prime Minister Silvio Berlusconi. On theother hand, the 17th SAARC summit was a success, with conflictingcountries India and Pakistan making an effort to BuildBridges between

themselves which was the inherent theme of the congregation.Do read the entire bulletin to get more snippets of the business newsworld over. Apart from providing you with scoops, the aim of the bulletinis for you to go back and read about the articles in detail, in the process,enhancing your General Knowledge and Current affairs. This is exactly whywe have a few questions lined for you at the end of each bit. Do readextensively about topics being discussed to be thorough with them. Youwould get the answers for all these questions in Abhyaas GroupDiscussion and Personal Interview (AGP) programme!

Good luck and Happy Reading!

Index:Page 1 : Cover StoryPage 2 : Stock Market and IndicatorsPage 3 : National Business NewsPage 4 : International Business News

(Ms. Sonal Jaiswal)

Kingfisher Airlines in financial mess; asks government for help


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www.abhyaas.in The Abhyaas Business Bulletin 2

Stock markets across the world (1st 14th November, 2011) Macro Indicators

Bank Rate 6.00%

Repo Rate 8.50%

Reverse Repo Rate 7.50%

SLR 24.00%

CRR 6.00%

Exchange Rate(with USD) 50.0845

Inflation(WPI) % Change 11.81%

Commodity Indicators

Crude Oil(NYMEX)97.79

$/barrel

Crude Oil(BRENT)112.08

$/barrel

Gold Price(Indian Bullion)2936.4 INR

per gram

Synopsis

(As on 14 Nov 2011)

European debt crisis and domestic macroeconomicworries led to a fall of around 2% in Indianmarkets. Sensex declined by 362 points or 2.1% toclose at 17,118.74. On the other hand Nifty tumbledby 109 points or 2.1% to close at 5,148.35 duringthis period. Greek and Italian debt crises made the

markets around the world nervous. Japan's Nikkeiindex lost 2.6 per cent to close at 8,603.70. Marketshave been buoyed in the past few days as Greeceand Italy moved to form new governments andembarked on other steps to get their debt troublesunder control. Britains FTSE 100 gained 1.79% toclose at 5519.04. NASDAQ also gained 1.87% toclose at 2341.32. Benchmark crude oil hoveredabove $98 per barrel.


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During the week ending 29th October, food inflation, as measured byWholesale Price Index (WPI) rose to 11.81%, a slight decrease from12.21% in the week before, nevertheless very high. In the week that endedOct 22nd , commodities like milk, pulses and fruits became costlier by morethan 10%, whereas the vegetable prices rose up by 28.89% on a year-on-year basis making it more difficult for the aam aadmi. Protein-rich foods

such as eggs, meat and fish prices also surged upwards by 13.36% on anannual basis.In a bid to reduce the ever-rising inflation rates, the RBI has increased itsshort-term indicative policy rate, or the repo rate from 8.25% to 8.5%.This was RBIs 13th hike since March, 2010 with a hope that a further hikewould not be warranted as the inflation rates, according to them, are likelyto fall from December 2011.Financial analysts, however believe that increasing the interest rates isfutile and will adversely affect the investments.Though PM Manmohan Singh and Finance Minister Pranab Mukherjee

have expressed concern over the worrisome problem of the increasingfood inflation, what remains to be seen is what the UPA government can doto reduce it.

Do you know what bottleneck inflation is? Do you believe hiking of rates by

the RBI is helping in easing the inflation? What should India do to ease the

inflationary pressures in the economy?

Bharti Airtel announces Q2 results; net profit 38% lower

Moodys downgrades Indian Bank ratings; S & P upgrades

A second hike in the prices of petrol in less than two months, and thefourth hike this year occurred when the state-owned oil companiesincreased the price of petrol by Rs. 1.82 per litre on the 3rd November. Thishas amounted to a 40% hike in petrol prices since last year.While the PM defended his governments decision to hike the fuel pricesmaintaining that giving extra subsidies to oil companies could cause amajor budgetary crisis, Trinamool Congress Chief, Mamata Banerjee issuedan ultimatum to the UPA government that she would pull out her ministersoff the centre.

Citing the likely deterioration in asset quality, capitalization andprofitability, International credit rating agency, Moodys downgraded the

entire Indian banking system from stable to negative on November 9th.The Indian government seemed unperturbed by the rating and claimedthat the rating had no major significance as domestic lenders were muchstronger than their global peers.In contrast, a day after the Moodys rating, rival rater Standard and Poors(S & P) raised its assessment on Indias Rs. 64,00,000 crore bankingindustry country risk assessment (BIRCA), maintaining that localregulations were in line with the global standards. It propped India up one

notch from group 6 to group 5. A BICRA is scored on a scale from 1 to 10,ranging from the lowest risk banking systems (group '1') to the highest-risk (group '10').

What do rating agencies like Moody's and S&P do? Do you know any Indian

rating agencies? How should the Indian banking sector react to these

ratings?

Indias largest telecom operator has reported a net profit of Rs. 1,027 crorein the second quarter of 2012. This however, is its seventh consecutivequarterly profit drop, which is a 38% fall in the fiscal second-quarter profit.Also, compared to the previous quarter, where the profits were Rs. 1,215.2crore, there was a 15.5% drop in profits. The profit drop, it was reportedwas due to the foreign exchange losses because of which it lost 239 crorethis quarter, and the higher interest rates.However, in the African division, the consolidated revenue rose fromRs. 15,231 crore in Q2 of 2010 to Rs. 17,276 crore in the same quarter this

year.Total consolidated income had increased from Rs 1,52,300 crore for thequarter ended Sept. 30, 2010 to Rs 1,72,800 crore for the quarter endedSept. 30, 2011, representing an increase of 13.46%.

Recently TRAI had announced a policy decision that was welcomed by

telecom operators across the board. Check what the decision was and how it

would help the telecom sector in India.

Petrol prices hiked again

Contd. to page 4

Food inflation rising; RBI hikes repo rates


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B School Spotlight: Indian Institute of Management

With around 2.06 lakh applicants appearing for the Common AdmissionTest (CAT) this year, the competition to get into the best B-schools in thecountry is fierce. Cracking CAT, one of the most competitive exams in theworld is only the tip of the iceberg; the tougher ordeals are yet to come.The spotlight this fortnight is on the Indian Institute of Management - themost enviable and sought after brand in management study in the country.With the inauguration of 3 more IIMs this year, the total IIM count goes upto 13 and together they offer up to 2781 seats.Heres a list of the IIMs based on the year they were established, with theoldest ones topping the chart.

For any queries, please contact us at : [email protected]

In the wake of the severe economic crisis that the country is facing, Italy'sSenate has approved economic reforms demanded by the European Union(EU), paving the way for Prime Minister Silvio Berlusconi to resign and anew government to be formed. President Giorgio Napolitano is most likelyto appoint Mario Monti, a well respected economist and a former memberof the European Commission as his successor.Italys ever mounting debts of 1.9 trillion euros - which is bigger than itsentire economy, and its bankruptcy is now threatening the global financial

stability, more specifically, the euro zones economy. Analysts have saidItaly's inability to fund itself would pose a systemic risk to the euro zonegiven the size of its economy and the country's status as the world's third-largest government debtor.In a desperate bid to salvage the sinking ship, Italys parliament okayed theausterity measures sought by the EU that foresees 58.9 billion euros insavings. Austerity is a policy of taking official action by the government toreduce the amount of money it spends deficit-cutting. Such measures aretaken when the government faces a threat that it cannot honour or payback its debt liabilities exactly the situation that Italy faces currently. Afew austerity measures include special tax on the energy sector, increase inVAT from 20% to 21% and a freeze on public sector salaries till 2014.Close on the heels of the showdown in Greece and Italy, analysts havepredicted that the governments of France, Spain and Portugal need to pullup their socks lest they face the same scenario.

The South Asian Association for Regional Cooperation (SAARC) concludedits two day congregation in Maldives on the 11th of November. In his closingaddress, Mohammed Nasheed, President of Maldives and Chairperson of theSAARC summit said that the member countries of SAARC had agreed todirect the ministerial council of South Asian Free Trade Area (SAFTA) tointensify efforts to reduce the non-tariff barriers to trade. Also on the

agenda was expediting the process of harmonizing standards and customprocedures for these countries.SAFTA was a pact that was signed by the member countries of SAARC -Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka toeffectively create a smoother trade relationship between the South Asiancountries by eliminating most tariffs and trade barriers. Afghanistan, theeighth member state ratified the SAFTA protocol on the 4th of May, 2011.

Have you heard of MFN status? What does it mean? How do these kind of

bilateral and multilateral treaties help in increasing trade across the world?

Check the countries to which India has granted the MFN status.

Italy in financial crisis; Prime Minister resigns

Petrol, after the cabinet meeting on June 28 th 2010, is a deregulatedcommodity a commodity whose pricing is not decided by the governmentand the oil firms are empowered to decide its price.

What are the different crude oil sources that impact India's petrol prices?

What are the different tax components in the petrol price paid by a

consumer? How do they compare vis-a-vis other countries?

SAARC summit concludes; SAFTAs full implementation favoured

1. IIM Kolkata2. IIM Ahmedabad3. IIM Bengaluru4. IIM Lucknow5. IIM Kozkhikode

6. IIM Indore7. IIM Shillong8. IIM Ranchi9. IIM Rohtak10. IIM Raipur

11. IIM Tiruchirappalli12. IIM Udaipur13. IIM KashipurWhy are economies across the world running into debt traps? Do you know

the size of the debts and GDPs of these economies? How does India compare

on these metrics? Think of what the governments across the world need to do

to tackle this.


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The Abhyaas Business Bulletinfor the management aspirant in you

www.abhyaas.in The Abhyaas Business Bulletin

From the Editors desk

1stDec 2011 Edition ABB2011110

Cyrus Mistry chosen heir to the Tata Empire

Ending the speculation over who would be handed the reins of the Indianmultinational conglomerate, the Tata Group, the current Chairman, Mr.Ratan Tata announced on 23rd November that Cyrus Pallonji Mistry will be

taking over from him. Mr. Tata who has been leading the group since 1991will groom Mistry until December 2012, after which he would retire. Untilthen, Mistry has been appointed the deputy Chairman of the Tata Group.Cyrus Mistry is the younger son of construction tycoon Pallonji Mistry andis the Managing Director of Shapoorji Pallonji Group. His family owns thelargest single equity block of 18.4% in Tata Sons, the holding company ofthe Tata Group. Though he does not have a Tata surname, Mr. Mistry is nooutsider to the conglomerate. He has been on the board of the Tata Groupfor over five years; also his sister is married to Noel Tata, who was also incontention for the top slot.The Tata Group, a salt-to-software-to-SUV conglomerate is one of thelargest in India by market capitalization and revenue. It has operationsspread across 6 continents and 80 countries. Successfully, it has venturedinto motors, telecommunication, hotels, steel, IT, energy, chemicals andmany other arenas. It is one of the most successful, trusted and long-running business families in India, with Jamsetji Tata pioneering the legacyway back in 1868. In the recent past, under Ratan Tata, the diversifiedgroup has made multibillion dollar purchases and has gone global crackingdeals with European steelmaker Corus and British luxury car makersJaguar and Land Rover. While industry stalwarts hailed this decision, themarkets seemed to react tepidly to the news of Mr. Tata handling over the

baton to Mr. Mistry. A day after the news was announced, share prices ofTCS, Tata Motors, Tata Steel, Tata Coffee marginally decreased.Though Mr. Mistry has a sizeable task ahead of him with the global marketscenario being bleak, what remains to be seen is how he would rise up tothe challenges.

Index:

Page 2: Stock Market and Indicators

Page 3: National Business News

Page 4: International Business News

1

(Ms. Sonal Jaiswal)

Hello Reader,

Welcome to the edition covering the business happenings across India and

the world in the second half of the month of November. Many significantbusiness events occurred in India, all of which are discussed in detail in thebulletin.While Cyrus Mistry being chosen as the CEO in-waiting of the Tata Empireraised a few eyebrows, the UPA government sanctioning 51% stake toforeign direct investments across multi-brand retail outlets in India raisedmore eyebrows than they would have anticipated. Also, Vikram Akula, thefounder of SKS Microfinance making a rather unpleasant exit of his owncompany made headlines. Towards the later half of the month, IndiasGDPI that decreased significantly was a cause of concern.The international arena was rocked by the ever diminishing economy ofEurope with Hungary and France facing the music from credit ratingagencies.Do read the entire bulletin thoroughly to get a heads-up into the businessevents occurring in India and abroad. Another piece of advice do try andfigure out answers for the questions provided at the end of each of thenews bits. The intent of the bulletin, apart from just providing you with thesnippets of news is also for you to read more, and in detail about them.

Good Luck and Happy Reading!

Why do you think the stock markets have reacted negatively to this news?How big is Tata empire by annual turnover and market capitalization?Check out all those who headed Tata Sons before Ratan Tata?

1 t D 2011 Edi i ABB2011110


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Bank Rate 6.00%

Repo Rate 8.50%


SLR 24.00%

CRR 6.00%Exchange Rate(with USD) 51.9308



$/barrel

Crude Oil(BENT)109.5

$/barrel

Gold Price(Indian Bullion) 2905.04INR/gm

(As on 30th Nov)

Macro Indicators

Other Indicators

Overview

Stock Markets across the World (15th November 30th November, 2011)

2

India's Sensex and Nifty are beaten down by 4.2%in the last fortnight amid persistent selling byforeign institutional investors on fears of slowingdomestic growth, weakening rupee and rising debtconcerns in Europe. While Japan's Nikkei Stock

Average declined by 2.9% and closed at 8477.82,Shanghai Composite Index performed worse losing5% and the London's FTSE 100 lost around 3.7%while NASDAQ has been the biggest loser with 6%drop. Oil fell from the highest price in two weeks,paring the gains, as signs of rising U.S. stockpilescountered optimism about the economy of theworldsbiggest crude consumer.

1st D 2011 Editi ABB2011110


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Independent director P H Ravi Kumar has been appointed interim non-executive chairman with immediate effect. Akula will stay on as aconsultant till the end of March 2012 to assist with the transition.SKS Microfinance was Indias first listed microfinance company in India,when on July 28th, 2010 it made its debut on the Bombay Stock Exchange,offering its shares to the general public. However, shares have plungeddown over 90% since then to now.

3

Founder and Chairman of SKS Microfinance, Vikram Akula quit all theposts that he held in the organization on 23rd of November. The resignationcomes in the wake of SKS seeing a massive decline in its financial fortunes,and facing flak for being too aggressive in collecting repayments andincreasing the interest rates. The organization was started with a missionto eradicate poverty by facilitating borrowing needs in the impoverishedareas of the country. Meanwhile industry stalwarts - including GrameenBank founder Muhammad Yunus - pointed to SKS as a symbol of anindustry that was becoming irresponsibly pro-profit.

UPA grants 51% stake to FDIs in multi-brand retail

The Union government, on 24th November, decided to throw open Indias$450 billion retail sector to foreign groups to invest up to 51% in multi-brand retailers. It also increased the level of foreign direct investment(FDI) from a cap of 51% to 100% for single-brand retailers.This opened the doors for retail giants like Walmart and Tesco that havesince long sought to tap Asias third biggest economy. While proponents

say that this will change the way Indian consumers shop and the method inwhich supply chains in India run, opponents say that this would result inmillions of small retailers in India losing their sources of income.Touted as a move by the UPA government to reduce the soaring inflationrates, the decision evoked a ferocious political opposition from allies andsome UPA constituents. Chief Ministers, Ms. Jayalalitha and Ms. MamataBanerjee opposed the move and opposition party BJP said the parliamentwould not function unless the decision was reversed. Though FinanceMinister Mr. Pranab Mukherjee met Opposition leaders over the issue, themeeting failed to resolve the logjam in both the Houses of Parliament.

A day after announcing the policy on FDI, Pranab Mukherjee on 25thNovember sought parliamentary approval to spend a net additional 568.5billion rupees, on top of the budget target of around $244 billion, in thecurrent fiscal year that ends in March 2012.

Vikram Akula quits SKS Microfinance

Falling for the eight day in a row, the Indian rupee on Wednesday, 23rdNovember ended at 52.35/36 - its all-time closing low - against the U.S.dollar.Foreign funds have been pulling out of shaky stocks over the past weekand oil refiners who import about three-quarters of India's crudeconsumption have been heavy buyers of dollars in recent sessions. With

Indias GDP dips to 6.9%, lowest in more than 2 years

Indian economy grew at a rate of 6.9% in the second quarter (Q2) of thecurrent fiscal year, its slowest pace in more than 2 years according toreports released on 30th November. This is in opposition to the 8.4% in thesame period in the last fiscal year. Such a major decrease, coupled withQ1s rate of 7.7% has raised doubts over the governments target of 8.5%

for the year 2012. The global economy crisis, rising inflation rates, highinterest rates and a retreat of foreign capital are being attributed asreasons for the dropping GDP.While the RBI has hiked interest rates 13 times since March 2010 in aneffort to curb inflation rates, they have also accepted that it would havehurt the countrys growth prospects.

Rupee hits an all time low of 52.35

Do you support the proposed FDI into retail? What are the FDI limits invarious sectors in India? Compare India's FDI inflows with China. What doyou think are the reasons for this contrast. How are FII different from FDI?

What are the teething problems with microfinance sector in India and theworld? A government committee has submitted a report on microfinancein India. Identify the committee and study their recommendations.

Has Indian economy entered a slow down phase? Do you know the size ofIndian economy in Rs crores? What is India's rank in terms of GDP byabsolute value and purchasing power parity?

1st Dec 2011 Edition ABB2011110


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Moodys, the credit rating agency, warned France that its weaker growthprospects coupled with rise in the interest rates on the governments debt

could take a toll on its AAA rating. Only six countries in the Eurozonecurrently can boast of AAA rating off which analysts say, France, thesecond largest economy has the weakest economic fundamentals.Moody's, on the 21st of November, said that France pays nearly twice asmuch as Germany for long-term funding, adding that a 100 basis pointincrease in yields roughly equates to an additional 3 billion in yearlyfunding costs. Adding more weight to it, Fitch, another credit agency saidthat France would have trouble keeping up its AAA rating if Europeanleaders dontstop the present Eurozone crisis from worsening.Close on the heels of Greece and Italy, on 25 th November, Moody's cut

Hungary's government bond rating by one notch to Ba1, belowinvestment-grade, with a negative outlook. It cited rising uncertaintyabout Hungary's ability to meet fiscal goals, high debt levels as the mainreasons behind the downgrade from Baa3 as the forint, the local currencyfell to a record low.

France warned on credit rating outlook, Hungary downgraded

B School Spotlight:

For further info contact us at: [email protected]

Britain extends austerity measures, Britons revolt

George Osbourne, the Chancellor of the Exchequer announced on 29 th ofNovember that the government was falling behind its deficit reduction planand that the austerity measures would drag for another two years.Citing reasons such as the economic growth of UK not reaching thetargeted value and also the Euro-zone crisis, he took 1 billion out of theplanned child tax credit increases, 280 million off the working tax credits

and a 15 billion a year spending cuts to meet the borrowing targets.According to Treasury figures, the total austerity package now stands at147bn a year by 2016-17, up from 126bn in the March 2011 Budget.Public sector workers in Britain, on 30 th November, started their biggeststrike in their generation to protest the austerity measures with schools,courts, hospitals and airports shutting down.

the RBI reluctant to intervene in the market to check the rupee's slide,some analysts are forecasting that the partially convertible currency willslip to as low as 55 against the dollar. The rupee had on Tuesday, 22ndNovember plunged to its life-time low of 52.73 intra-day.The rupee has lost more than 14% of its value this year, making it theworst performing currency in Asia. The second-worst is the Thai baht,which has dropped only 3.5%. RBI meanwhile loosened rules for

companies to borrow abroad and raised the interest rate on bank depositsby its citizens living overseas to help stem the decline in Asias worst-performing currency.

Faculty of Management Studies, DelhiFMS was established in 1954 under the aegis of the University of Delhi andoffers management training to the professional managers in part-time andfull-time MBA programmes. It is widely known to be one of the oldestbusiness schools in India and correspondingly has a very strong alumninetwork. Consistently, it has been ranked among the top 10 B-Schools inIndia. Apart from being one of the best, it is also one of those colleges inIndia that give a high return-on-investment as the fees for it is only Rs.

10,500 per annum.The entrance exam for FMS, Delhi is CAT for the admissions from academicyear 2012-13 onwards. The cut-off percentiles could be very high becauseof its excellent reputation. The number of seats in the institute for a 2 yearMBA programme are 200.

For more details visit: www.fms.edu

Is the exchange rate of Rs 52.35 per USD nominal or real? How is a nominalexchange rate different from real effective exchange rate? Check out if thecurrent trend is a temporary phase or a structural correction.

Are Eurozone countries streamlined on fiscal and monetary policy? Whatis the difference between the two? How are these twin factors affectingEuro Crisis? What should Eurozone do with respect to these policies?

Is Britain right in extending austerity measures? What is your opinion?Would you suggest similar measures for India and China?

15th Dec 2011 Edition ABB2011120


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From the Editors desk:

15 Dec 2011 Edition ABB2011120


Industrial Production falls for the first time in 2 years From the Editors desk:

Indias industrial growth plunged into the red registering a negativegrowth of 5.1% in October, the first time in more than 2 years, accordingto reports released December 12th. Industrial output in Asias third biggest

economy hadntslumped into the negative zone since June 2009.Industrial production is the total of all the output of facilities producinggoods in a country that includes sectors like manufacturing, mining,electricity etc. Index of Industrial Production (IIP) is an indicator thatmeasures or records the growth of industrial output in various sectors.The index measures the growth in industrial activity and excludes allservices; also it is classified on the basis of consumption likeconsumption of basic, capital, intermediate and consumer goods. Whilecompared to a robust 11.3% IIP in October 2010, the index for this yearlooks dismal, which has far exceeded the forecasted 0.5-1% decline.The dreary outcome of the industry was attributed to the spiritlessperformance of major sectors such as manufacturing and mining coupledwith the ever-increasing interest rates and the global slowdown ofeconomies. The manufacturing sector that constitutes three-fourths of IIPfell a drastic 6% and the mining sector shrank by a higher 7.2% whilecompared to healthy rates of 12.3% and 6.1% for October 2010. Mostdisturbing was the sharp fall in production of capital goods by 25.5% incomparison with 21.1% growth same time last year. The silver liningthough was the growth of 5.6% in the electricity sector.These results indicated that the RBI will look to reduce its policy rates thathave been increased a record 13 times since 2010 in a bid to reduce the

rising inflation. However, with food inflation dipping to 6.6% for mid-November, a three-and-a-half year low, some easing actions may takeplace. In response, Commerce and Industry minister, Mr. Anand Sharma isto have a meeting with industry representatives on 19th December.

Hello Reader,

Welcome to the Abhyaas Business Bulletin for the month of December,covering all the significant business events across the world and India inthe first fortnight of December.

Within India, the Output of Industrial Production falling to unprecedentedlows coupled with the rupee reaching legendary lows caused greatconcern to the investors and the government alike. Uproar over theauthorization of the FDI in the retail sector by the cabinet causedpandemonium, disrupting the Parliament and causing the government toroll it back until further notice.Internationally, the European Unions summit in Brussels opened new

avenues with all EU nations other than Britain agreeing to a new treatydesigned to place the fiscal compact for the Eurozone on a legally bindingbasis. Also, though Mrs. Jayanthi Natarajan, IndiasMinister for Forests andEnvironment got a standing ovation for her address at the Durban Climatemeet, Canada was not impressed with the particulars of the Kyoto Protocoland became the first country to opt out of it to avoid fines.Do read the entire bulletin thoroughly to get a heads-up into the businessevents occurring around the world. Try and figure out answers for thequestions provided at the end of each of the news bits to better yourknowledge of current affairs. The intent of the bulletin, apart from just

providing you with the snippets of news is also for you to read more, andknow in detail about them.


1

(Ms. Sonal Jaiswal)

Do you know differences between lead and lag indicators? Which one isIIP? Accordingly, what should be the policy response of India towards it? Ismonetary policy a better tool to handle this issue than fiscal policy? ShouldRBI reduce rates now? How would this reduction impact IIP?

Index:






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15 Dec 2011 Edition ABB2011120


Bank Rate 6.00%

Repo Rate 8.50%


SLR 24.00%

CRR 6.00%




$/barrel


$/barrel

Gold Price(Indian Bullion) 2853.00INR/gram

(As on 14th Dec 2011)

Macro Indicators

Other Indicators

Overview


India's Sensex and Nifty were beaten down by 3.6%in the last fortnight amid persistent selling byforeign institutional investors on fears of slowingdomestic growth, weakening rupee and rising debtconcerns in Europe. While Japan's Nikkei Stock

Average declined by 0.91% and closed at 8519.13,Shanghai Composite Index performed worse losing5.38% and the London's FTSE 100 lost around2.22% while NASDAQ has seen losses of 3.30%. Thecrude oil market has been hanging around theupper end of its two month range. The big story ofthe fortnight is heavy decline in rupee value. Followup this story in the following pages in detail.

Stock Markets across the World(1stDecember 14th December, 2011)

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www.abhyaas.in The Abhyaas Business Bulletinwww.abhyaas.in The Abhyaas Business Bulletin

FDI in retail put on hold

Government considering 1,000 crore credit risk guarantee fund

Relentless pressure on the government from the Opposition and alliancesresulted in the suspension of its decision to permit Foreign DirectInvestment (FDI) in the retail sector. After an all-party meeting regardingthe same on 7th December, Finance Minister Pranab Mukherjee announcedin the Lok Sabha that the decision was put on hold and that it would betaken only after consultations with all the stakeholders including the

Opposition. This ended the 10-day impasse and put the parliament back towork.In the earlier weeks, the cabinet had approved a proposal of allowingforeign multi-brand retailers to bring in 51% FDI and foreign single-brandretailers were allowed to own 100% in Indian businesses causingtremendous uproar.

Prime Minister Manmohan Singh said on 13th December that the

government was pondering over a 1,000 crore Credit Risk Guarantee Fundin order to encourage banks to give loans to the economically weakersections of the society.Dr. Singh also called for greater attention to a participatory approach tourban development, with the institution of citizens' charters for delivery ofservices, to ensure that both public services and the private sector serviceproviders were made accountable.

3

No further debt restructuring for Kingfisher; Accounts blocked

On 9th December, Narain Meena, Minister of State for finance said thatthere was no plan of a second debt restructuring plan for the beleagueredKingfisher Airlines which has an outstanding loan of around Rs. 6,419crore which they would begin repaying to the State Bank of India (SBI) bySeptember 2012.SBI that leads the syndicate of banks that have helped in the debtrestructuring had an exposure of Rs. 1,457.78 crore, followed by IDBI Bankwith Rs. 727.63 crore, Punjab National Bank with Rs. 710.33 crore, Bank ofIndia with Rs. 575.27 crore and Bank of Baroda with Rs. 537.51. Of the

total outstanding of Rs. 6,419.60 crore, Rs. 750.10 crore has beenconverted into cumulative redeemable preference shares and Rs. 553.10crore as non-convertible cumulative redeemable preference shares to beredeemed after 12 years.Rubbing salt to its wounds, Mumbais service tax department froze 10accounts of Kingfisher and 11 accounts of Air India in the same week fordefaulting on service tax payments. While Kingfisher owed Rs. 70 crore, AIneeded to pay up around Rs. 150 crore.

Tata Power ties-up loans for Gujarat solar plant

Tata Power, Indias largest private sector utility firm said on 14th Decemberthat it had tied-up a debt component of 255 crore for its 25 megawattcapacity, Rs. 365 crore silicon photo-voltaic solar power project atMithapur in Gujarat.A consortium of domestic banks including State Bank of India and ExportImport Bank of India has successfully tied-up the loan requirementwhereas SBI Capital Markets Limited is to act as the sole financial advisor

and arranger.Tata Power Renewable Energy Ltd., a subsidiary of Tata Power isdeveloping the project which will be funded through a debt equity of70:30. The plant is expected to start power generation by end of Decemberthis year.

Do you support the proposed FDI into retail? What do you make out of thegovernment's decision to put off the FDI decision after the huge uproarfrom all corners?

What are cumulative redeemable preference shares? How would they helpKingfisher and the banks involved? What do you make out of the servicetax default of both King Fisher and Air India? Do you see a deeper patternfor corporate India with regards to the same?

How is this credit risk guarantee fund different from priority sectorlending norms that banks face? Is it a good idea? What else could be doneto make banking and financial reach more inclusive?

How does one decide on the optimal debt to equity ratio for a project? Fora solar plant, do you support high debt ratio? Has Tata Power chosen thefinancial partners wisely for this project? Why/Why not?



13/38


The rupee touched a fresh, all-time historic low of 54.34 intra-day on 15thDecember after closing on 53.71/72 on 14th December against theAmerican dollar, taking losses to 18.4% from its year-high in July.Sustained dollar demand from foreign banks and the oil companies putpressure on the rupee, while persistent weakness in capital flows keptdollar supplies limited. Traders believed that the rupee could slip to 55 to

the dollar by the end of December and head to 57 in the first quarter of2012.The euro too fell to an 11 month low of $1.29945 on 14 th December asinvestors speculated that more Eurozone countries would be downgradedby credit-rating agencies.

Rupee breaches 54 mark; Euro falls too

Canada exits Kyoto protocol to avoid penalties

B School Spotlight: XLRI Jamshedpur

Canada has become the first country to pull out of the Kyoto protocol inorder to save billions of dollars as potential non-compliance penalties. Only

a few days after arriving in Canada, Peter Kent, the environment ministerannounced the decision. Mr. Kent said that Kyoto, which covers around13% of global emissions, does not include the United States and Chinawhich were the two largest emitters and was more of an impediment to theeconomy of Canada.

XLRI School of Business and Human Resources was established in 1949 inthe Steel city of Jamshedpur, Jharkhand. It was visualized to be a partner inthe liberation and development journey of independent India with a visionof "renewing the face of the earth". Over the years, XLRI has developed itsown identity and is consistently rated as one of the best B-Schools in India.XLRI provides a wide variety of courses. However, the flagship two-yearcourses are Postgraduate Diploma in Personnel Management andIndustrial Relations for students interested in the HR profession andPostgraduate diploma in Business Management, the curriculum of

which is designed to closely integrate current management theory andpractice. Also, the General Management Programme (GMP) is the flagshipfulltime, one-year residential MBA programme offered by XLRI foraspirants with more than 5 years of work experience in managerialcapacity.The entrance exam to secure a seat in XLRI is Xavier Aptitude Test or XATwhich is being conducted on January 8th 2012.


EU Summit held in Brussels; Britain vetoes new treaty The congregation of the 27 nations within the European Union in Brussels,Belgium on 8th and 9th December was largely led by Germany and France,two ofEuropes biggest economies. Mr. James Cameron, Prime Minister ofBritain vetoed the strict treaty changes that needed the support of all themembers of the EU, including those not under the euro, such as UK to goahead. On his move that has come under fire for reportedly leaving Britainin isolation, the Prime Minister clarified his stand by saying that the treatywas not in the best interests of Britain a nation whose economy is in acalamitous state.

However, Angela Merkel, Chancellor of Germany declared that the other 26nations would be moving ahead with a new commitment towards closerfiscal union to preserve the euro. The new accord will hold the EUmembers to strict budgetary rules including a cap of 0.5% of GDP oncountries annual structural deficits; automatic consequences forcountries whose public deficits exceed 3% of the GDP and a requirement tosubmit their national budgets to the European Commission, which willhave the authority to request that they be revised.

What are all the factors impacting the slide of the rupee? Should RBIintervene to support it in the world markets? What do you think? Whatshould India do to ensure better rupee value in the longer run?

Do you believe this a good move by Eurozone countries? Why is Britainshying away from the treaty? What are their benefits/losses in stayingaway?

Is Canada right in withdrawing from Kyoto protocol? What has Indiayielded in the latest round of discussions and what did we gain? Overall doyou believe the world is going in the right direction with respect to theseenvironmental treaties?

1stJan 2012 Edition ABB2012010


14/38





Investors lose 20 lakh crore in stocks in 2011 From the Editors desk:

In a reversal of fortunes due to reasons that are manifold, at the end of theyear, investors saw their wealth deteriorate by about 20 lakh crore. Thebellwether indices of the Bombay Stock Exchange and the National Stock

Exchange fell by around 25% touching new and historic lows over thecourse of last year.The BSE Sensex plunged down to 15,454.92 on December 30, against lastyear's close of 20,509.09 falling down by 5,054.17 points, or over 24.6 percent. Much to the dismay of investors, the 50-share Nifty too experienced asteep fall of 1,510.30 points, or 24.62 per cent, to 4,624.30 on December20 from last year's close.Globally, the down gradation by S&P of the United States credit ratingrekindled the fears of another economic slowdown in the biggest economyin the world, causing panic and anxiety across the world. The politicalturmoil in the Middle East that resulted in revolution in most of the oil-exporting nations invariably caused the crude oil prices to rise up, pushingIndias import expenses upwards. Also, the Euro zone crisis, with theeconomies of Greece and Italy crashing also affected the Indian investorsina big way.While internally, the ever-rising inflation rates, the RBIs move toincrement the interest rates to counter them, fears of a looming recession,lack of reforms, the Index of Industrial Production registering a negativegrowth for the first time in more than two years and the rupee falling tounprecedented lows drilled holes in the pockets of investors, also causingthe governmentto reduce the anticipated growth rate of India.

While the IT stocks suffered because the slowdown in America andEurope, the shares of the telecom arena too did not look very bright withthe 2G scam coming to the fore. What remains to be seen however, is if theNew Year would change the sagging fortunes of investors.

Hello Reader,

Welcome to the last edition of the Abhyaas Business Bulletin for the year

2011.

In India, the overall performance of the stock market was disappointingwith investors facing the wrath of the global economic slowdown. Thereduced food inflation rates however, gave the common man a reason tocheer towards the end of the year.

In the international arena, apart from just football, Brazil beat UnitedKingdom to become the sixth biggest economy in the world. Also, UnitedStates chose its words carefully in not branding China a currencymanipulator,but said it needed to do lotmore in terms of currency value.

Apart from providing you with business events across the world, the aimof the bulletin is for you to go back and read about the articles in detail, inthe process, enhancing your General Knowledge and Current affairs.Exactly why we have a few questions lined up for you at the end of eachbit. Make sure you read extensively about topics being discussed to bethorough with them. You would get the answers for all these questions inAbhyaasGroup Discussion and Personal Interview (AGP) programme.

Wishing you a very Happy New Year!

Good luck and Happy Reading!

Index:




1

(Ms. Sonal Jaiswal)How is the above mentioned loss of Rs 20 Lakh crores computed? What does

Market Capitalization mean? Which Indian company has the highest market

capitalization? What does it mean for the company?



15/38


Bank Rate 6.00%

Repo Rate 8.50%


SLR 24.00%

CRR 6.00%




$/barrel


$/barrel

Gold Price(Indian Bullion) 2905.04INR/gram

(As on 31stDecember)

Macro Indicators

Other Indicators

Overview


Stock Markets across the World (15th December 30th December)

2

Indian markets are among the worst performersthis year with 25% losses. Most other major globalindices lost between 10-20% in 2011. Sensex andNifty are down by 0.24% and 0.59% respectively inthe last fortnight. While Japan's Nikkei advanced by

0.64% and closed at 8455.35.82, Shanghai SSEperformed worse losing 1.14% and the London'sFTSE 100 Performed better and advanced by 3.43%while NASDAQ has also advanced by 1.77%. Theoutlook for crude oil prices remains generally to thedownside, as persistent fears from the EU debtcrisis and signs of global growth slowing are likelyto keep crude oil prices under pressure.



16/38


Food inflation falls to 0.42%; lowest in 6 years

Hero Eco acquires UK-based Ultra Motors

Giving some respite to the aam aadmi towards the year-end, food inflationplunged to a 6-year low of 0.42% in the week ending 17 th December,according to reports released on the 29 th of December. After remainingdouble-digit for almost two years, food inflation dropped sharply in thelast one and a half months, stooping as low as 1.81% in the previous week.However, 0.42% has been the lowest level of food inflation since April,

2006. In sharp contrast, annual food inflation for the corresponding weeklast yearstood at 15.48%.According to official data released, onions grew cheaper by 59.04 per centyear-on-year during the week ending 17th December, potato prices weredown by 33.76 per cent, wheat prices also fell by 3.30 per cent; andoverall, vegetables became 36.02 per cent cheaper.Enthused by the dipping inflation rates, Finance Minister PranabMukherjee said that if the current trend prevailed, the overall inflationrate based on Wholesale Price Index (WPI) for the current fiscal year islikely to come down to 6%.

In a move to strengthen its presence in the global electric vehicle arena,Hero Eco acquired UK-based Ultra Motors for an undisclosed amount on28th December, 2011. Hero Eco, a Hero Group Company, is an umbrellaentity that includes Hero Electric, Hero Exports, Hero Cycles, Mediva,Winn and Hero Ecotech whose Chairman is Vijay Munjal and ManagingDirector is Naveen Munjal.Expansion plans of Hero Eco included investing Rs. 450 crore acrossbusinesses in the next five years and also setting up an electric vehiclefacilityin the USA in the next 18 months.Ultra Motors, at present has three manufacturing plants with its main one

in Taiwan; has operations in the U.K., the U.S., Germany, Taiwan and Chinaand a distribution network in 22 countries, including Switzerland, Japanand Australia.

3

Government to go ahead with 40,000 crore disinvestment plan

The finance ministry is planning to raise the budgeted disinvestmenttarget of 40,000 crore for this financial year by monetising thegovernment's equity holdings in Special Undertaking of UTI (SUUTI),selling residual holdings and divesting stakes in some companies tofinancial institutions.

However, not much headway has been made because of uncertain marketconditions. So far, the government has raised only Rs 1,144 crore fromstake sale in Power Finance Corporation (PFC). During the year, proposalswere mooted for disinvestment of several companies, including BHEL,ONGC and SAIL, but none of them materialised.Under the new plan, which will be put up before the Cabinet, thegovernment proposes to transfer the equity holdings of SUUTI, whichinclude 27.02% in Axis Bank, 11.89% in Larsen & Toubro and 8.99% in

ITC, to a holding company which are worth more than 32,000 crore atcurrent prices.

FedEx extends $1.4 m grant to Embarq

US-based global logistics major FedEx has given a grant of $1.4 million toEmbarq, a transport solutions provider to optimise city bus operations inIndia, Mexico and Brazil. The grant would be provided over a period of twoyears to Embarq, promoted by the World Resource Institute, to providetechnical expertise and solutions to sustainable transportation projectsthat will improve the public transit system in cities of the three nations,two among which are slated to be the fastest growing economies in theworld.Under the grant, Embarq India and FedEx will increase the technicalcapacity of city transport agencies to organise their bus systems, advising

How is inflation calculated? What is WPI? How is it different from CPI?Which is a better measure of Inflation? Why? Why is Indias food inflation

coming down? What could be the reasons?

What is Disinvestment? Is it good or bad for an economy? Is Government of

India successful in disinvestment? What are the Disinvestment targets and

achievements in the past few years ?

Which other companies produce electric vehicles in India and abroad? Why

is electric car concept like REVA not taken up in a big way in India? Check

for other acquisitions ,if any, made by Hero group in the past 5 years?



17/38


According to reports released by Centre for Economic and BusinessResearch (CEBR), a London-based economic forecaster, Brazil hasdeposed the United Kingdom as the sixth largest economy in the world the first time that the UK has been overtaken by a South-American nation.The reports released in the last week of December, 2011 havesubstantiated an International Monetary Fund (IMF) data that waspublished earlierillustratinga dramatic change in global fortunes.A multitude of factors that included vast reserves of natural resources, arapidly growing middle-class and a stable political situation that attractsinvestors worked in Brazils favour, which is also the biggest Latin

American economy. In sharp contrast, UKs economy is plagued byproblems of the Euro zone that include a national debt crisis, a prolongedeconomic downturn and lackof bank credit.Brazil grew at a rate of 7.5% last year but the government has slashed itsgrowth forecast to 3.5% for the year 2011, after the economy ground to ahalt in the third quarter of 2011 owing to high interest rates and theplunging Euro zone fortunes.The top five countries on the list were the United States, China, Japan,Germany and France respectively. India was placed tenth on the list, whilethe only other BRIC nation, Russia placed on the ninth place. Also, the

forecast by the economists said that a surge of growth over the next 10years in India and Russia will further push Britain to the eighth place. In aclaim that would ring alarm bells in France, the CEBR also stated that by2020, Britain would leapfrog France and would be the eighth largesteconomy in the world, one ahead of France.

Brazil overtakes UK as the worlds sixth biggest economy

B School Spotlight: MDI, Gurgaon

The United States Treasury blamed China for not doing enough with regardto the value of its currency, the Yuan, and exchange rate reforms, thusputting the American dollar at a disadvantage.Though it did not call China a currency-manipulator, some US diplomatshave argued that China has gained an unfair advantage and competitiveedge in the global markets by keeping the Yuan low artificially to boost

exports. The value of the Yuan, which Beijing manages closely, has risen by4 percent against the dollar this year and 7.7% since China dropped a firmpeg against the greenback in June 2010. However, the US Treasury did notseem very pleased with the rate and stated that the movement of the Yuanwas insufficient. The Treasury said it is in Chinas interest to allow theexchange rate to continue to appreciate, both against the dollar and againstthe currenciesof its other major trading partners.

Management Development Institute, established in 1973 and located inGurgaon is one of the most prestigious B-schools in India, consistentlyrated among the best business schools nationally. Having established itsfootprint worldwide, MDIs vision is to become one of the top businessschools in the world. MDI is the first Indian Business School and second inAsia to be accredited by International Institution Association of MBAs(AMBA), London.MDI offers a wide variety of management programmes but its flagshipprogramme is the Post Graduate Programme in Management (PGPM). It isone of the most coveted programmes at MDI and ranks amongst the verybest across the top B-Schools in India. The short listing of candidates isdone through CAT. Apart from PGPM, Post Graduate Programme in HumanResource Management, Post Graduate Programme in InternationalManagement, Fellow Programme in Management are provided by MDI.


US complains that China not doing enough on currency valueon areas like vehicle maintenance, procurement and technology, as well asdata collection and management.

What are your suggestions to Embarq India for making public

transportation within cities more efficient and effective? Why did FedEx

make this grant? What do you think of the size of the grant?

What is the size of Indian economy? How is it measured? India is also the

4th largest economy by PPP. What is PPP? And how is PPP is different from

the above article methodology?

How is China able to determine its currency value? What are the different

types of currency management systems? What kind of currency

managementdoes India have? Is it good or bad?

15th Jan 2012 Edition ABB2012010


18/38





Effective fiscal management need of the hour says FM of India From the Editors desk:

With the fiscal deficit on the rise owing to a decrease in revenue andgrowth expenditure, Finance Minister, Mr. Pranab Mukherjee stated thatprudent fiscal management was the need of the hour. Saying that the

deficit should not be allowed to go beyond a manageable limit, he addedthat managing receipts and payments was the key to keeping sovereignborrowings and debts under control. He also said that there were lessonsto be learnt from the current Eurozone crisis where sovereign fiscaldeficits of some nations had surpassed 100% of GDP, and warned thatsuch breach of fiscal deficit targets would have their implications.Fiscal deficit is essentially the difference between what the governmentspends and what it earns and is expressed as a percentage of GDP. When agovernment fails to match its expenses against its earnings, it tries tobridge the gap by borrowing and has to resort to deficit financing. Thebudgeted fiscal deficit target for the current financial year was estimated

to be 4.6% of the GDP, however, since the governments extra borrowingon account of rising subsidy bills, and resources from disinvestment notcoming through, the target is very much under pressure. The governmentis not likely to meet its disinvestment target of Rs. 40,000 crore and hasalready announced borrowing an additional Rs. 90,000 crore to bridge therevenue-expenditure gap. On the other hand, the subsidy bill during thecurrent financial year is expected to increase by an additional Rs. one lakhcrore.Mr. Mukherjee also discussed the need to provide better taxpayer services,making collection systems more rule-based and transparent as better

services would result in more compliance and said that all efforts werebeing made to improve collection of taxes. Emphasizing that timely refundwould increase the confidence among tax payers, he stated that refunds ofRs. 73,000 crore were already made so far this year.

Hello Reader,

Welcome to the Abhyaas Business Bulletin for the New Year! I hope thisyear brings you a lot more success, happiness, satisfaction and good luck.In this edition, we will cover the significant business happenings in Indiaand the world in the first fortnight of 2012.

The New Year brought some cheer to the common man as food inflationrates touching new lows and prices of vegetables reducing significantly.Also, the FDI in retail for single-brands and the Auto Expo held in thecapital made headlines in the nation. Internationally, the mass downgradeof European countries by credit rating agency, Standard and Poors

renewed fears of an impending global financial crisis, though the scenarioin the U.S looking much brighter.

Do read the entire bulletin thoroughly to get a heads-up into the businessevents occurring around the world. Try and figure out answers for thequestions provided at the end of each of the news bits to better yourknowledge of current affairs. The intent of the bulletin, apart from justproviding you with the snippets of news is also for you to read more, andknow in detail about them. All the answers to the questions would be

discussed in the Abhyaas GD-PI programme which has already begun.

Index:




1

(Ms. Sonal Jaiswal)

Which are the countries with debt to GDP ratio more than 100%? What are

PIIG countries? Why are some countries able to hold up their economy with

high levels of debt while others are not? Identify other ways to raise money

for government apart from disinvestment, borrowings and tax collections.



19/38


Bank Rate 6.00%

Repo Rate 8.50%


SLR 24.00%

CRR 6.00%


Inflation(WPI) % Change -2.90%


$/barrel

Crude Oil(BRENT)110.4

$/barrel

Gold Price(Indian Bullion) 2739.33INR/gm

(As on 15th Jan, 2012)

Macro Indicators

Other Indicators

Overview


Indian stock markets started the New Year on apositive note. Sensex and Nifty advanced by 4.53%and 5.23% in the last fortnight after havingdropped around 25% in the year 2011. Nikkeiindex barely advanced with a 0.53% increase overthe fortnight butChinas Shanghai Index performedbetter by advancing over 2.05% in the same period.London's FTSE 100 moved up by around 1.17%while NASDAQ has been one of the biggest gainers,registered a positive movement of 4.13% thisfortnight. While stronger economic news isemanating from US in the last quarter, re-emergingconcerns about Europe's debt crisis pushed theEuro to a 16-month low against the dollar.

Stock Markets across the World (1stJanuary 15th January, 2012))

2



20/38


100% FDI in single-brand retail notified

Moody's upgrades India's currency rating to investment grade

The government, on 10th January eliminated restrictions on Foreign DirectInvestment (FDI) in the retail sector for single brand owners and notified100% investment, increasing the cap from a previous 51%. However,foreign retailers looking at 100% ownership must necessarily source atleast 30% of their goods from domestic small industries, village or cottageindustries that have invested a maximum of 5 crore in their plants.

This would pave the way for global fashion brands like Adidas, Armani,Gucci etc. to intensify their consumer base in India, which are currentlyrunning with Indian partners. Commerce and Industry Minister, AnandSharma said that this initiative would provide the necessary stimulus andtechnical upgradation to the domestic manufacturing sector. Shortly afterthis was announced, shares of Indian retailers like Pantaloons andShoppers Stop rose significantly.

3

Food inflation turns negative; RBI may reduce rates

The year-end brought cheer to the junta and the policy makers as foodinflation entered the negative sphere dwindling to -3.36% during the weekending December 24th, maintaining the year-end low inflation rates. Also,during the week that ended the year 2011, it still remained negative at-2.9%. The lowest rates in around 6 years are attributed in part to thedecrease in the prices of edibles and in part to the base effect. Base effect,in economic parlance, is the rate of inflation in the corresponding year-agoperiod, which was 21% in the week ending 24th December and 19.1% in

31stDecember-ending week in 2010 respectively.The sharp decline according to the Wholesale Price Index (WPI) dataprompted C. Rangarajan, Chairman of the Prime Ministers EconomicAdvisory Council to state that the RBI would reverse its monetary policy inits next review to be held on the 24th of January and would look at acountermand to accentuate the industrial growth. Also, Finance Minister,Pranab Mukherjee said that if the same rates persisted, then the headlineinflation at the end of the fiscal year would be manageable.

U.S based credit rating agency, Moodys upgraded the country's rating ofshort-term foreign currency bank deposits from speculative' toinvestment' grade on 10th January. The Finance Ministry announced thatthe elevation in grade was made from NP (Not Prime) to P-3 (suggestingacceptable ability to repay short-term obligations). Domestic companieswill now have an advantage in raising funds from overseas markets atbetter rates and consequently, the money flow in the nation is to improve.In less than a month, this is the fourth upgrade by Moodys, boosting thechances of Indian banks in raising overseas deposits at finer rates. In thepast month, it upgraded short-term government bonds denominated indomestic currency from NP to P-3; increased long-term government bonddenominated in domestic currency from Ba1' to Baa3' an enhancementfrom speculative to investment grade. Also, the long-term country ceiling

on foreign currency bank deposit was upgraded from Ba1 to Baa3.

11th Auto Expo held in Delhi; Indian auto sector is 7th largest

The 11th Auto expo kicked off in the capital at Pragati Maidan from 7 11January, 2012. It saw a horde of car manufacturers unveiling theirautomobiles with Maruti Suzuki, the countrys biggest car manufacturerunveiling its compact sport-utility vehichle (SUV) XA Alpha and compact

multi-purpose vehicle (MPV) Ertiga. Indian design studio, DC Design alsorevealed Avanti the first sports-car from India while Ford showed off aswank design concept of the EcoSport, and called it the urban SUV.Amid this, the Society of Indian Automobile Manufacturers (SIAM),forecasted an increase of 11-13% in the car sales for the fiscal year 2013.

Why has this notification resulted in a positive market reaction? Which

industry sectors would be benefited from this? How does 100% ownership

help a foreign retailer in a new territory like India?

Is negative inflation a good sign for economy? Think of any other indicators

where base effect would have significant impact. What is headline inflation? Is

it different from WPI? Which organization determines the WPI?

What are the different speculative and investment grades used by S&P and

Moody's? How are speculative grades different from junk grades? How would

this upgrade help the economy of India?

Which are the six large auto markets other than India? What are the other

sectors in which India holds better rank in terms of market size? What is an

SUV? What are the different classes of Cars and how are they classified?



21/38


S & P downgrades France, Austria, 7 other Eurozone nations

B School Spotlight: S. P. Jain Institute of Management

Systems (US), Atmos Energy (US).

S. P. Jain institute of Management & Research (SPJIMR) is an autonomousmanagement institute in Delhi with entrepreneurial agility, personalfreedom with professional accountability and corporatized culture,structure and processes. It is rated as one of the best B-schools in Indiaand South Asia.The flagship course of SPJIMR is the Post Graduate Diploma inManagement (PGDM) which is a two-year, full time, residentialprogramme. Having 180 seats and currently running in its 27th year, it

offers specializations in finance, operations, marketing and informationmanagement and boasts of a successful and well-known alumnus. Apartfrom PGDM, SPJIMR offers many other programmes like Post GraduateProgramme in Management (PGPM), which is an eleven month, full-time,residential programme; Post Graduate Executive Management Programmespread over 4 phases over a 21-month duration etc.For more details log onto http://www.spjimr.org


Reigniting fears over Europe not being able to bail itself out of the financialcrisis, U.S based credit rating agency, Standard & Poors downgraded byone notch the triple A rating of France and Austria, and seven other nationsthat include Italy and Spain on a dark Friday, the 13th. Germany, Eurozonesbiggest economy though, retained its AAA rating along with Netherlands,Finland and Luxembourg while Portugals debt was relegated to junk.

Malta, Slovakia and Slovenia were downgraded by one notch, while Italy,Spain, Portugal and Cyprus were demoted by two notches.S & P said that the EU summit last month did not yield sufficient results ofto overcome a crisis. This also comes in the wake of talks between Greeknegotiators and holders of its debt breaking down over how largebondholders losses should be on 13th. If no agreement is reached, Greecewill need billions of euros to aid it in making a bond repayment in March.While the mass downgrade provoked immense backlash from the politicalcommunity in Europe, Frances Finance Minister, Franois Baroin tried todownplay it saying that policies of France would not be dictated by rating

agencies. Also, the Chinese news agency, Xinhua said that the Global creditrating agencies have a responsibility to not amplify the current financialdebt crisis.

Infosys, HDFC in Harvard Business Review's top 10 growth list

Bangalore-based IT services organization Infosys, and Mumbai-basedbanking and financial services company HDFC Bank were among the elite

group of 10 companies around the globe, identified by Harvard BusinessReview as those ones that have consistently fared better than othersaround the world over a ten-year period between 1999 and 2009, growingtheir net incomes by 5% every year, beating volatility.'Growth Outliers' was the name given to the elite list of 10 companies thathad a market capitalization of at least $1 billion. The other companiesincluded Yahoo Japan, ACS (Spain), Cognizant (US), Tsingtao Brewery(China), Indra Sistemas (Spain), Krka Group (Slovenia), Factsheet Research

US consumer sentiment strongest since May, 2011

According to Thomson Reuters and University of Michigan index released

on the 13th of January, Americans grew more optimistic about jobprospects early in the year as consumer sentiment rose to the highestlevels in eight months. Consumer sentiment recorded 74 which was thehighest since May, 2011 after it touched 69.9 in December, 2011. Morefrequent mentions of rising employment and lessened income uncertaintyprompted favourable buying attitudes as well, thus increasing the overallsatisfaction, said Richard Curtin, Director of the survey.

Why are few Euro countries downgraded while others are not? How does a

rating agency work and gain credibility? Do you agree with Xinhua's view

that rating agencies shouldn't amplify the crisis in the European economy?

How are 'Growth Outliers' identified? Would you invest in Infosys/HDFC

based on this input? What does EVA mean and who introduced it? How is it

calculated? Is it similar to 'Growth Outliers' concept?

Should this survey be taken seriously? Are there any such surveys

conducted in India and who conducts them? What are the different types

of sampling used in such surveys and which is the best method?


22/38

The Abhyaas Business Bulletinfor the MBA aspirant in you.From the Editors desk:

1stFeb 2012 Edition ABB20120201

RBI cuts CRR, Interest rates remain unchanged)


In a move that signals a reversal of its policy, on 24th January, the ReserveBank of India (RBI) slashed the cash reserve ratio (CRR) by 50 basis pointsfrom 6% to 5.5% with effect from 28th January, although the interest ratesremained the same. After keeping a tight check on the money supply to

tame inflation in the last two years, this step will release Rs. 32,000 croreinto the financial system, infusing more liquidity, or cash flow in a bid tohelp the economy out of the economic downturn, marking a change of

policy from fighting inflation rates to reviving the economic growth, whileensuring that inflationary pressures are well-contained.The CRR is the percentage or level of deposits that any commercial bankmust keep with the central bank. Now that the CRR rates have reduced,

lending by banks is expected to rise, thus resulting in more cash flowconsequently, an improved GDP. The repo rate which is the rate at which

the RBI lends to banks remains unchanged at 8.5% whereas the reverserepo rate at which the RBI borrows money from other banks is also thesame at 7.5%.

The Governor of the RBI, D. Subbarao stated that it was premature to cutdown interest rates based on the current outlook and that the government

must look at a debt consolidation which was paramount in loweringinterest rates without risk of resurgent inflation.Also, India's foreign exchange reserves rose by $731.8 million to $293.25

billion for the week ended Jan 20th due to revaluation in the foreign

currency assets after six straight weeks of continuous decline. Foreign-exchange reserves in a strict sense are the total foreign currency depositsand bonds held by central banks and monetary authorities, however in abroader sense, they also include gold, special drawing funds (SDRs) andreserve positions in the International Monetary Fund.

Hello Reader,

Welcome to the fortnightly edition of the Abhyaas Business Bulletin!

While the cover story is on the RBI reducing the CRR rates, signalingefforts to increase the growth rate now that the inflations rates are undertabs, predictions on Indias accelerating GDP in the coming years made

news. Other significant national business news included India signing amultilateral tax treaty and India being voted the s ixth most innovative

nation in the world by a GE report. In terms of company news, PirojshaGodrej being made the CEO of Godrej Properties signaled more youngentrepreneurs taking over the helms of major Indian companies.Internationally, the World Economic Forum held in Switzerland discussed

the looming global slowdown and other economic issues with reducedgrowth rates of Asian giants, China, India and Singapore added moresupport to the same.

Do read the entire bulletin thoroughly to get a heads-up into the businessevents occurring around the world. Try and figure out answers for the

questions provided at the end of each of the news bits to better yourknowledge of current affairs. All the answers to the questions will bediscussed in Abhyaas GD-PI programme!


Index:




How do you think the CRR cut impacts GDP growth and inflation? How is the

CRR cut different from SLR cut? What are special drawing rights and how

are they acquired?How do India's foreign exchange reserves compare with

those of other economies? What are the benefits and losses of such foreign

exchange reserves? What is your view on India's foreign exchange reserves?

(Ms. Sonal Jaiswal)


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Bank Rate 6.00%

Repo Rate 8.50%

Reverse Repo Rate 7.50%SLR 24.00%

CRR 5.50%


Inflation(WPI) % Change -1.03%


$/barrel

Crude Oil(BRENT) 111.29$/barrel

Gold Price(Indian Bullion)2784.0INR/gm

(As on 31stJanuary, 2012)

Macro Indicators

Other Indicators

Overview

After gaining around 12% in last four weeks, India'sSensex and Nifty have advanced 4.16% and 4.38%respectively in the last fortnight. While Japan'sNikkei index has been the biggest gainer which

advanced by 4.95% and closed at 8793.05,Shanghai Composite Index also performed better inthe last fortnight by advancing 3.57%. London's

FTSE 100 Advanced around 0.25% while NASDAQAverage has advanced by 3.94%. Crude oil futuresfell to the lowest level in three weeks, settlingbelow the USD100-a-barrel mark as appetite forriskier assets was weighed down after Standardand Poor's downgraded the sovereign credit ratings

of nine euro zone countries, including France.

Stock Markets across the World ( 16th January - 30th January, 2012)

Note: Markets in China were closed from 22nd to 27th January2012due to Springfestival.


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India signs multilateral tax pact Maruti Suzuki profits down 63.6%, shares surge by 6%

In a move to curb task evasion and to put a check on black money stashedabroad, India has signed the Multilateral Convention on MutualAdministrative Assistance in Tax Matters on 27th January, that promotesinternational cooperation while not violating taxpayers rights. It was

signed in Paris by Sanjay Mishra, Joint Secretary, Foreign Tax and TaxResearch Division, Department of Revenue and is based on internationalstandards of exchange of information and technology, providing extensive

forms of cooperation among the 32 signatory countries on all taxes andsimultaneous tax examinations thus facilitating an automatic exchange ofinformation. Also, assistance in terms of tax recovery and collection,exchange of information in criminal tax matters are all a part of the treaty.India was the 32nd country to join the pact along with nations like U.S, U.K,Germany, France, Japan, Canada etc.

Indias largest car-maker Maruti Suzuki on 23rd January reported a dismal

fall in net profit of the quarter 3 ending 31st December, 2011 to Rs. 205.6crore, down over 63% to a healthy Rs. 565.17 crore in the corresponding

period last year. Net sales of the company too declined to Rs. 7,663.6crore, reducing 17% to an year-before result of Rs. 9,276.73 crore.Chairman R.C Bhargava, however sounded positive stating that thingswould definitely look up in the final quarter of the financial year, with this

one being the worst because of the depreciating rupee, the labour unrestbringing the production in its factories to a stand-still and an industry-wide recession hitting its key small-car segment hardest.

What was interesting to note was that despite the abysmal performance,shares of Maruti Suzuki rallied nearly 6% at the end of trade on 23rd

January with hectic buying lifting the share price to Rs. 1,162.55.

Does India have any other bilateral pacts in respect to tax affairs? Which

countries does India have bilateral pacts with? How is the currentmultilateral tax pact expected to help India? Is China a part of the pact?

India will grow at 9.5% in 2013 says Ernst and Young

Global audit and consulting firm, Ernst and Young (E&Y), also part of the

Big Four accountancy firms worldwide has predicted that Indiaseconomy will grow at an accelerated 9.5% in 2013 ahead of China at 9.1%.But in 2012 the GDP will be a moderate 6.8%, opposed to the previous

estimation of 8%. The intensified accession in 2013 will be due to arecovering global economy, increase in exports and investments. This ispart of the second quarterly reports by E&Y on Rapid-Growth Markets

(RGM), the first of which was released in Oct. 2011. RGMs are those 25nations with economies and demographics of a certain size that by 2020,will account for 50% of the global GDP when measured at purchasing

power parity, thus being of immense strategic importance for businessdevelopment. In the current report released on 22nd January, a collectivegrowth of 5.3% is expected of the RGMs.

Which are the other 'Big Four' accounting firms? What are all the rapid

growth markets according to Ernst and Young? When was the last time

India had better growth rate than China? How much do India and China

together contribute to world's GDP? What is purchasing power parity?

Why have Maruti Suzuki shares traded upwards despite decreasing profits?

Were the markets irrational in this regard? How did the other automobilecompanies in the industry perform vis-a-vis Maruti Suzuki? What is the

labour unrest issue in Maruti Suzuki?

McDonalds says bye to Ronald; goes for costliest makeover ever

In a bid to attract more adult customers, McDonalds, the global fast food

major, is bidding goodbye to its mascot, Ronald McDonald and its famousbright red and yellow colours along with major changes to its menu. Theoverhaul that includes donning paler colours with more comfortable

seating, and doing away with Ronald, who appeals to kids has already beenput into place for one outlet each in Mumbai and Delhi. This also comes at

a time when other major food retailers like Starbucks, Dunkin Donuts andBurger King are planning to enter the Indian territory. While seniormanagement at the retail chain that serves around half-a-million peopleeach day is confident of the move, some others believe that McDonalds

inherent appeal in the Indian market lies with kids and the revamp maynot be as successful.Why do companies go for makeovers and name a few that have gone for a

make over in the recent past. How are makeovers different from

restructuring efforts? List out some of the successful as well as unsuccessful

makeover efforts over the years.


25/38


The 130-year old iconic U.S-based photographic film pioneer EastmanKodak Co filed for Chapter 11 bankruptcy protection on 19th January,declaring that it had 100,000 creditors with debts totalling $6.75 billion.The company has obtained financial aid of $950 million from the Citibank

to maintain its operations, and also said that it has assets worth $5.1billion. The loan and bankruptcy protection from U.S. trade creditors maygive Kodak the time it needs to find buyers for some of its 1,100 digital

patents, the key to its remaining value. The shares of Kodak droppeddramatically to 36 cents at which it last traded, followed by a suspension.Founded by George Eastman in 1888, and currently headquartered inRochester, New York, Kodak struggled to embrace more moderntechnologies like the digital camera - ironically a product it invented,marking one of the biggest causalities of the digital age.

Kodak files for bankruptcy China not on 2-digit growth rate, Singapore economy slows down

B School Spotlight: Indian Institute of Foreign Trade, Delhi

The Eurozone financial crisis is permeating across boundaries and Asia toohas not been left unaffected. According to reports released early in thefortnight, Chinas growth rate is no longer a two-digit one, falling to 9.2% in2011, the first time in three decades. While the good news was that it was

more than the estimated target of 8.0%, the bad news is that projectionsfor the coming years too suggested a descent to 8.5% in 2012.Also, Singapore Prime Minister Lee Hsien Loong stated that the

Singaporean economy too had begun to show signs of a slowdown, witheconomy growing at 4.8% for 2011 as opposed to the target of 5%. Hestated that the economy this year would grow register an annual growthbetween 1-3% and soothed nerves by saying that Singapore was preparedfor uncertainties.

IIFT was established in the year 1963 with the purpose of conductingcourses on foreign trade for the civil servants. Over the years, it hasevolved from being a centre of foreign trade to a complete business schoolthat now rests on a tripod: the MBA (International Business) programme,

Research and Management Development Programmes.The flagship course at IIFT is the MBA (IB), a general management course

with special emphasis on International Business and it offers majors inmarketing, finance, trading or systems and IT.Being one of the best B-schools in the country, IIFT has, over the years,undertaken path-breaking research studies with organisations like WTO,World Bank, UNCTAD and the Ministry of Commerce & Industry,Government of India. The Institute has also trained more than 40,000business professionals across 30 countries in various facets of

international business and trade policy via its Management DevelopmentProgrammes. Visithttp://www.iift.edu for more details.


What is chapter 11 bankruptcy and what is its comparable legal framework

in India? Which are the other famous companies that filed for bankruptcyacross the world? How are patents different from trademarks? Which

company has the highest number of patents in the world and in India?

World Economic Forum annual meeting held from 25-29 January

The 42nd Annual World Economic Forum (WEF) meeting was held in

Davos, Switzerland with its theme being "The Great Transformation:Shaping New Models". The WEF is a Swiss based non-profit organizationthat annually brings together international political leaders, business

leaders and entrepreneurs, intellectuals and journalists to discuss thetroubling and pressing economic issues that the world is facing today.

This year had President of the European Central Bank Mario Draghi, IMFManaging Director Christine Lagarde, WTO director-general Pascal Lamyamong many others who attended the forum. While entrepreneurs likeVikram Pandit, CEO Citi Group, Paul Polman, CEO Unilever, Bill Gates,

Founder, Microsoft spoke about various issues, political leaders like DavidCameron, Prime Minister of the U.K, Angela Merkel, Chancellor of Germany,Stephen Harper, Prime Minister of Canada spoke at the conference.

World Economic Forum theme in one of the earlier years was centred

around India. When was it and what was the exact theme? What are the

major outcomes of this world economic forum this year and earlier years?

Which other economies have had 2 digit growth rates in the last few years?

What factors prompted China's high growth trajectory in the last few

decades? What was the highest-ever growth rate of India in comparison?What was the targeted growth of India is the last 2 quarters?

h bh ll

15th Feb 2012 Edition ABB2012020


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Facebook Inc. goes public, valued between $75-$100 billion From the Editors desk:

In a much-anticipated move, Facebook, the worlds largest social-networking site filed for an Initial Public Offering (IPO) on 1st February,2012 seeking to raise $5 billion and valuing the company between $75billion and $100 billion. In an IPO that dwarfs that of Google in 2004 thatraised $1.9 billion at a valuation of $23 billion, Facebook finalized its S-1filing with the Securities and Exchange Commission (SEC) in Washingtonmaking it the biggest of a web firm in history.For a company that is just 8 years old, Facebook has done very well foritself. It was co-founded by current CEO, Mark Zuckerberg while atHarvard University in 2004 and currently has a user-base of 845 millionglobally. In terms of figures, the company produced a $1 billion profit in2011 from $3.71 billion in revenues, an 88% rise from the previous year.The company derives 85% of those revenues from advertising, with therest trickling from social games and other fees.

It has been believed that Zuckerberg, who owns 28% of Facebook and57% of its voting share, was long vary of an IPO believing that it wouldaffect the culture of the company and he wanted employees to focus onmaking great products, not the stock price. But, by the end of 2011,Facebook would have more than 500 shareholders that would trigger aregulatory requirement that it should start reporting financials publicly,and this was the first step to the IPO. Investment bank, Morgan Stanleywas hired as the top underwriter while JPMorgan Chase was its second co-lead underwriter, Goldman Sachs, the third. Face

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