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Investments in the industrial economy will be the key driver for sustaining a higher growth path & creating jobs-FICCI
Jun 14,2016

Commenting on the inflation numbers released today Mr. Harshavardhan Neotia, President, FICCI said, n++Latest numbers report prices edging up on the back of elevated food prices. Upward pressure in prices is noted in the case of fruits and vegetables and protein rich items. This clearly calls for a more proactive management from the supply side. Several steps have been taken by the government to augment supplies and improve distribution of such items. We hope that the situation would be managed well and that inflation will remain within RBIs indicative trajectory.n++ n++Industrial growth, particularly the manufacturing sector, continues to remain under pressure with limited signs of improvement in a few sectors. We need to broad base the growth impulses and this calls for support by way of an accommodative monetary policy. FICCIS latest Business Confidence Survey indicates some improvement in capacity utilisation rates and for this to translate into higher investments there is a need to strengthen demand further. Investments in the industrial economy will be the key driver for sustaining a higher growth path & creating jobs and the current situation calls for all measures to be deployed towards this endn++, Mr Neotia added.

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Government Approves two Proposals of Foreign Direct Investment (FDI) Amounting to Rs. 2.19 Crore Approximately
Jun 14,2016

Based on the recommendations of Foreign Investment Promotion Board in its 235thmeeting held on 20th May 2016, the Government has approved two FDI proposals involving FDI of Rs. 2.19 crore, and recommended one proposal for approval of the Cabinet Committee on Economic Affairs.

First approval was sort by Aurobindo Pharma for FDI of Rs 2.19 crore for the following categories:

(i) Grant of ESOPs to non-resident employee of Aurobindo Pharma Limited, after issue of Press Note 3 of 08.11.2011, which remained unexercised as on 11.06.2015, and against which no shares were issued upto as on 11th June 2015,(which could be vested and exercised later on and shares issued against them at that stage), totalling to 2,42,600 ESOPs and exercise amount aggregating to INR 1,11,11,080/-.

(ii) Grant of ESOPs to non-resident employee of Aurobindo Pharma Limited, after issue of Press Note 3 of 8 November 2011, which were exercised and shares issued against them after 8 November 2011 but before 11 June 2015, totalling to 1,18,700 ESOPs and the exercise amount aggregating to INR 1,08,72,920/-

Second approval has been sought by Sterling Commerce for acting as an Investing company for:

a) Curan software international Private Limited, Emptoris Technologies India Private Limited, Kenexa technologies Private Limited and Rational Software Corporation (India), which are currently owned by Overseas companies of IBM and currently dormant companies.

b) From time to time act as an investing company for companies undertaking software development, technologies services or those which have become dormant pursuant to transfer of their business to IBM India.

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EU brings policy and financial experts, business offering to help India achieve energy efficiency in Agricultural Demand Side Management
Jun 14,2016

Agriculture uses about 18% of the electricity consumed in India. This means that to tackle energy security, to implement Indias climate commitments, as well as to ensure food security and deal with water challenges, India must consider energy efficiency in irrigation. Hence, the European Union (EU) has brought policy and financial experts as well as European Business to India offering concrete solutions in this regard, said Mr. Tomasz Kozlowski, Ambassador, European Union Delegation to India.

While delivering his keynote address at a workshop on Agricultural Demand Side Management (AgDSM)-Adopting Technologies to Boost Efficiencies, the first in the series, organised by FICCI and European Commission, Mr. Kozlowski said that the partnership between India and the EU will facilitated policy dialogue, will bring best practices, business solutions and joint research and innovation and will look at financing models for clean energy and climate change.

In terms of finance, he said that the European Investment Bank has already provided loans for more than Euro 1.2 billion to support implementation of energy and climate related projects in India. Speaking about technologies and solutions, Mr. Kozlowski added that the EU was closely involved in developing offshore wind, solar parks and energy efficiency in India.

In his special address Mr. B P Pandey, Additional Secretary, Ministry of Power & Director General, Bureau of Energy Efficiency (BEE), said that there are about 20.27 million electrified pumpsets installed in agriculture sector. Further, due to the increasing demand for water to meet the agricultural needs, about 0.25 to 0.5 million new pump sets are being added annually, therefore by adoption of high efficiency pumps about 25-30% energycan be saved. He added that the industry had sufficient pumpsets to supply but there was a need to work out a feasible finance models for adoption of these pumpsets.

Speaking about the initiatives to achieve energy efficiency in various sectors, Mr. Pandey said that governments Perform-Achieve-Trade (PAT) scheme is a market-based mechanism launched in 2008 under Indias national climate change action plan, and is designed to increase the energy efficiency of the most energy-intensive sectors. The first phase of PAT was completed in March 2015 and the second phase began with the inclusion of three industrial sectors, of which two are railways and utilities. Similarly, the Labeling Program is providing the consumer an informed choice about energy saving, and thereby it is enabling cost saving of the marketed household and other equipment. He added that the government was promoting use of energy efficiency equipment such as LEDs as well.

In his theme presentation Mr. Nitin Zamre, Managing Director, ICF International India, speaking about the opportunities, he said that AgDSM is a recognised intervention area by every DISCOM and both EE and RE options are available for agricultural pumps. Also there star rated pumps available in India and there is increased awareness among farmers, pump manufacturers about it. He added that India was getting international support and cooperation as well to fulfil its commitment to INDC goals.

Pointing out the challenges, Mr. Zamre said that there was a lack of effective Centre-State coordination for policy push and demand-supply gap of star rated pumps. Also, concentration of agriculture pump manufacturers was inlimited locations and the high initial cost of EE pumps becomes a deterrent. He added that there was a need to make international technology easily accessible and mindset change towards transition to EE technology was also needed.

Ms. Henriette Faergemann, Counsellor (Environment, Energy & Climate Change), Delegation of the European Union to India, said that there are cost issues involved with the implementation of energy efficiency technology in agriculture but in the long term adoption of such technology would prove to be beneficial for green growth. She added that the EU had an incredible GDP growth with reduced emission by adopting energy efficient technologies and Indian too could attain the same by using energy efficient equipment.

Dr. A Didar Singh, Secretary General, FICCI, said that by bringing together stakeholders from the EU and India, the workshop focused on promoting cooperation between the two sides in the area of AgDSM, one of the biggest focus areas for Indian policymakers in the DSM space. The workshop is a stepping stone to build a framework for implementation of efficient pumping technology and best practices in Indian agricultural sector in cooperation with European partners.

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WPI inflation rises to 19-months high of 0.79% in May 2016
Jun 14,2016

The Wholesale Price Index (WPI)-based inflation accelerated to 19-months high of 0.79% in May 2016. The WPI inflation had entered into positive zone at 0.34% in April 2016 after 17-months of consistent deflation. An increase in inflation was mainly driven surge in inflation for primary articles and manufactured products, while inflation for fuel products moderated in May 2016.

Inflation of primary articles increased to 4.5% in May 2016 from 2.3% in April 2016. After 12 months of deflation, the inflation for manufactured products turned positive to 0.1% in March 2016 and accelerated to 0.9% in May 2016. However, the inflation for fuel items declined to (-) 6.1% from (-) 4.8%.

As per major commodity group-wise, inflation increased for foodgrains, vegetables, fruits, egg, fish, spices, sugar, iron ore, steel products, non-metallic mineral products, and machinery & machine tools in May 2016. On the other hand, inflation declined for milk, fish-marine, oilseeds, flowers, raw rubber, fodder, crude petroleum, mineral oils, edible oils, oilcakes, tea, wood & products, leather products in May 2016.

Inflation of food items (food articles and food products) rose to 7.8% in May 2016 from 5.4% in April 2016. Meanwhile, inflation of non-food items (all commodities excluding food items) declined to (-) 2.2% in May 2016 from (-) 1.9% in April 2016.

Core inflation (manufactured products excluding foods products) rose to (-) 0.4% in May 2016, from (-) 0.8% in April 2016.

The contribution of primary articles to the overall inflation, at 0.79%, was 125 basis points (bps) in May 2016 compared with 65 bps in April 2016. The contribution of manufactured products was 51 bps compared with 41 bps, while that of fuel product group was (-) 99 bps against (-) 75 bps in April 2016.

The contribution of food items (food articles and food products) to inflation rose to 232 bps in 0.79% in May 2016 compared with 164 bps to 0.34% in April 2016. Meanwhile, the contribution of non-food items (all commodities excluding food items) was (-) 154 bps in May 2016 compared with (-) 132 bps in April 2016.

As per the revised data, the inflation figure for March 2016 was revised up to (-) 0.45% compared with (-) 0.85% reported provisionally.

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Procurement of Rabi pulses reaches to 64,000 MT
Jun 14,2016

Procurement of Rabi pulses has reached to 64,000 MT as on June 13, 2016. Thus together with earlier procurement of 51,000 MT of Kharif, total domestic procurement of pulses by government agencies has reached to 1,15,000 MT.

The Government has also ordered further import of 12,500 MT pulses for buffer stocks which include 10,000 MT Masur and 2,500 MT Urad. So far 14,321 MT pulses have already imported by the government agencies against the total contracted quantity of 38,500 MT.

This was informed in an inter-ministerial review meeting chaired by Secretary, Department of Consumer Affairs, Shri Hem Pande. The meeting reviewed the prices of essential commodities and discussed measures to ensure availability these commodities at reasonable prices.

Shri Pande reviewed lifting and distribution of the pulses allocated from the buffer stock. Only Andhra Pradesh, Tamil Nadu, Telangana and Safal and Kendriya Bhandar in Delhi, have lifted allocated pulses. Lifting and requests for allocation is still awaited from other States. Shri Pande directed NCCF to start distribution of Tur and Urad through mobile vans in Delhi at Rs. 120/kg. He expressed hope such steps will also be taken up by other States to make pulses available at reasonable prices.

The meeting also discussed lowering of import duty on wheat. The representative of FCI informed that it has sufficient stocks of wheat to cater to requirements of PDS and buffer norms besides open markets sale operations.

The meeting was also reviewed the enforcement measures being taken by the States to check hoarding of essential commodities and suggested that these should be further strengthen.

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ADB, Munich Re Sign Deal to Boost Trade in Developing Asia
Jun 14,2016

The Asian Development Bank (ADB) and Germany-based Munich Re have signed an agreement on $250 million cover to help ADBs Trade Finance Program expand support for trade in developing Asia.

The agreement will see Munich Re, via one of its specialist primary insurers, provide up to $250 million insurance capacity on financing of trade transactions conducted by ADBs Trade Finance Program (TFP). The TFP fills market gaps for trade finance in developing Asia.

The agreement marks the first contractual business deal between Munich Re and ADB.

n++We are pleased to expand the programs risk distribution capacity through this agreement with Munich Re,n++ said Steven Beck, ADBs head of trade finance. n++With the private sector involved we can add capacity to trade financing in challenging markets, leverage ADBs own resources, and most importantly, expose the private sector to new markets.n++

Despite a recent global growth slowdown and softer economic activity in the Peoples Republic of China, developing Asia still accounts for about 60% of overall world growth. However many countries in the region still find it difficult to export or import key goods because they struggle to get the trade finance they need from international and local banks.

To fill that gap, ADBs Trade Finance Program provides guarantees and loans to banks to support trade, particularly in so-called frontier economies. In 2015, the program supported 1,908 trade transactions worth $2.5 billion, with banks in Bangladesh, Pakistan, Sri Lanka, Uzbekistan, and Viet Nam as the five most active users.

The agreement with Munich Re will enable ADB to provide even more support to the countries that need it most. The relatively short-term nature of transactions under the program also mean that funds can be rolled over quickly and could result in up to $500 million in additional trade finance support being extended annually.

Marcus Winter, head of Munich Res reinsurance development division said, n++The signing of this agreement is a milestone for the cooperation between ADB and Munich Re. Our partnership will further support Asian economies in their trade relations with the international community.n++

Short-term trade finance is considered a relatively safe investment, with statistics released yearly by the International Chamber of Commerce showing that its default rates only reach, on average, one fifth of comparable Moodys default rates for other forms of financing. ADBs Trade Finance Program was instrumental in creating these important industry-wide statistics. TFP conceived of and funded the first such statistics in 2010. Besides providing loans and guarantees to banks to support trade, the TFP aims to close market gaps also by creating knowledge products, such as these statistics, to fill information gaps and encourage greater private sector participation in financing trade in developing countries. Munich Res decision to enter the trade finance business was at least partly founded on these encouraging industry default rate statisticsn++affirming the relevance of ADB TFP knowledge products.

Munich Re stands for exceptional solution-based expertise, consistent risk management, financial stability, and client proximity. In the financial year 2015, the group - which combines primary insurance and reinsurance under one roof - achieved a profit of n++3.1 billion on premium income of over n++50 billion. It operates in all lines of insurance, with over 43,000 employees throughout the world. With premium income of around n++28 billion from reinsurance alone, it is one of the worlds leading reinsurers.

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Commercial Vehicle Loans Recover in 4Q16; Stress in Construction Equipment and Tractor Loans Unabated
Jun 14,2016

India Ratings and Research (Ind-Ra) believes that the recovery that started in commercial vehicle loans in the 2014 originations has picked pace for 2015 originations. As of 4Q16, the weighted average (WA) 90+dpd delinquency in the 2015 vintage stood at 1.03% (WA amortisation: 50%), which is 142bp lower than that in the 2014 vintage for similar seasoning levels and indicates a recovery.

Tractor loan portfolios across originators continue to show heightened stress with no improvement in 90+dpd delinquency for 2014 and 2015 vintages unlike commercial vehicle loans where the stress has subsided for recent vintages. While the agency maintains a negative outlook on tractor loans, the ratings of the current transactions may not be impacted due to a higher level of amortisations and credit enhancement build-up. 2015 vintage securitised tractor loans have performed better than 2014 vintage with the formers WA 90+dpd delinquencies dropping sharply to 4.73% compared to 9.37% for 2014 vintage at 11 months seasoning, which the agency considers to be an isolated instance at variance with the portfolio performance.

The stress in construction equipment loans remains elevated with little signs of recovery even after significant seasoning. The plateau observed in 90+dpd delinquency indicates that CE borrowers continue to face stress and are unable to repay loans after missing payments on over three instalments. As of 4Q16, the 180+dpd delinquency increased by 263bp to 3.90% in the 12 months ended March 2016, showing no reversal of loans to lower delinquency buckets.

A stable performance was observed in Ind-Ra rated mortgage loans owing to steady delinquency rates and high prepayment and amortisation levels.

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Ind-Ra: Highway Projects Worth INR255bn May Be Under Stress
Jun 14,2016

Around INR255bn of project level debt across 37 highway projects, both under construction and completed projects that were bid out by National Highways Authority of Indias (NHAI: IND AAA/Stable) may be under stress, says India Ratings and Research (Ind-Ra). Ind-Ra has identified stressed projects based on the sponsor credit profile, existing credit metrics of the projects and the ability for funding at the sponsor or project level.

Ind-Ras analysis highlights that out of the total projects bid out by NHAI, sponsors of around 102 projects could have limited flexibility to support projects if the need arises. Of these, the credit profiles of 37 projects (29 Projects under BOT Toll & 8 Projects under BOT Annuity) may be under stress, unless these projects undergo any structural transformation. Out of the 102 projects, around 54% of these are under implementation and the cumulative length of the potentially stressed assets is 3,360kms.

The strain which is visible in the cash flow of highway projects, as highlighted in Refinancing, Risk-balancing Could Steer Highway Sector Out of Troubles, is primarily due to the unfavourable macro-economic conditions, slippages from the original project timelines, lower traffic performance and higher debt levels. Ind-Ra believes the credit metrics for these projects are unlikely to improve substantially, unless the projects undergo structural changes, in terms of additional money infused by the sponsor which is difficult, or by way of debt restructuring or refinancing.

The outstanding rating of at least 20 of these projects is currently Default (by various agencies), while the balance projects have a non-investment grade rating. The projects under the latter is what Ind-Ra believes are at risk of default.

The existing debt levels of projects further compounds the problems of the sector already saddled with a plethora of issues. Ind-Ras analysis reveal that projects are 19% over leveraged over FY17-FY25 to meet the lenders restrictive covenants of 1.2x debt service coverage ratio. In case the over leverage is not reduced it could lead to the project breaching the restrictive covenants embedded in the financing agreements. In the absence of a major maintenance reserve creation this could lead to re-gearing for meeting the life cycle costs, especially with limited ability of the sponsors to infuse funds when it falls due.

The banking sectors exposure to the highway sector, declined to 7.1% in FY16 from 7.7% in FY15 (INR1.79trn compared to INR1.67trn). Ind-Ra expects the trend of the decline in banks exposure to the highway sector to continue in the medium term owing to the higher level of possible risk.

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Import of Vegetable Oil down by 25% in May 2016-Solvent Extractors Association of India
Jun 14,2016

The Solvent Extractors Association of India has compiled the Import data of Vegetable Oils (edible & non-edible) for the month of May 2016. Import of vegetable oils during May, 2016 is reported at 1,024,878 tons compared to 1,371,662 tons in May, 2015, consisting of 1,004,685 tons of edible oils and 20,193 tons of non-edible oils i.e. down by 25% due to highest stock at port and pipeline and reduced demand due to summer. The overall import of vegetable oils during first seven months of the current oil year 2015-16, November 2015 - May 2016 is reported at 8,593,587 tons compared to 7,833,524 tons i.e. up by 10%.

Sharp increase in RBD Palmolein Import (107%): - The import of RBD Palmolein during the first seven months of the current oil year i.e. from November 2015 to May 2016 jumped to 15.87 lakh tons from 7.66 lakh tons (107%) replacing import of CPO and expected to increase further in the coming months. The alarming increase in import of RBD Palmolein, seriously hurting the domestic refining industry. This situation has arisen due to the fact that currently the landed cost of RBD olein (finished product) is lesser than Crude Palm Oil (CPO - raw material). Due to this situation, the domestic refining industry is facing severe crisis of under-utilization of capacity and is on the verge of closure. Presently tax on export of CPO from Indonesia/Malaysia is higher by 5% in comparison to Refined Palm Oil/Olein. This differential will keep increasing with increase in prices of Palm Oil in the origin countries. Therefore, duty differential in India has to be made variable to be in line with the differential duty prevailing in Malaysia/Indonesia and justify to increase in duty difference between crude and refined vegetable oils from 7.5% to 15%.

Stock Position at Port and in Pipelines: - Current stock of edible oils as on 1st June 2016 at various ports is estimated at 865,000 tons (CPO 270,000 tons, RBD Palmolein 250,000 tons, Degummed Soybean Oil 210,000 tons, Crude Sunflower Oil 110,000 tons and 25,000 tons of Rapeseed (Canola) Oil) and about 1,465,000 tons in pipelines. Total stock at ports and in pipelines decreased to 2,330,000 tons from 2,440,000 tons in May 2016. Indias monthly requirement is about 16.5 lakh tons and operate at 30 days stock against which currently holding stock over 23.30 lakh tons equal to 42 days requirements. The overall stock as on 1st June, 2016 has decreased by 110,000 tons compared to 01 May 2015.

Import of Palm & Soft Oil Ratio: - Sharp increase in import of Soft Oils During November 2015 - May 2016, Palm Oil import has marginally decreased to 4,998,344 tons from 5,116,361 tons during the same period of last year, while, soft oils import sharply increased to 3,512,570 tons from 2,591,915 tons last year. The share of soft oils imports increased to 41% from 34% last year while, share of palm oil products down to 59% from 66%.

Average Prices and Rupee depreciation: - In last three months, due to reduction in stock of Palm Oil at origins, CIF Indian port prices of edible oils has moved upward. The difference between RBD Palmolein & CPO reduced from month to month.

Import of Non-Edible Oils: Import of Non-edible oils during November 2015 - May 2016 is reported at 82,673 tons compared to 125,248 tons during the same period last year. i.e. down by 34%. P.F.A.D., P.K.F.A.D., C.P.K.O. & RBD Palm Stearin are the major import of non-edible oils.

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Party time may come to end on auto fuel prices; Duty roll back may be answer: ASSOCHAM
Jun 14,2016

The party time on driving around on cheap fuel seems to be over, though there is no danger of hard times as yet even though the automobile fuel has witnessed about 20% increase in the recent past, an ASSOCHAM paper has said.

Sharp increase in the retail prices of automobile fuel, particularly diesel, the lifeline of the public transport, will have a cascading impact on the prices of a large number of consumer items, particularly food and beverages, further building the inflationary pressure and making the task of the Reserve Bank of India (RBI) difficult in moderating the interest rates, according to the Associated Chamber of Commerce and Industry of India (ASSOCHAM).

While the crude oil prices have shot up by about 20% in the last few months, the auto fuel prices at the filling stations have increased between 12 -18 % in different cities, depending on the level of state levies, adds the ASSOCHAM paper.

It said when the transportation costs go up, typically the entire food basket along with other materials, come under the cascading effect. In the present scenario, the big danger of the rising diesel prices is on the food and food a beverage which, as a group has weight of over 50 per cent in the retail inflation, measured by the Consumer Price Index (CPI).

The price of petrol in Delhi has touched Rs 63.2 per litre in June 2016 from Rs 56.61 in the month of March, 2016 with an increase of 11.3%. In Kolkata, it has risen to Rs 66.44 from Rs 62.32 in March 2016 (6.6%), Mumbai to Rs 66.12 from 62.75 (5.3%) and in Chennai Rs 62.47 from Rs 56.08 (11.3%), reveals the ASSOCHAM findings.

n++If the crude oil prices further go up, the government should seriously think of rolling back the duties which were imposed when the prices had touched rock bottom,n++ ASSOCHAM Secretary General Mr D S Rawat said while releasing the paper.

Similarly, the price of diesel in Delhi has also gone up to Rs 53.93 in June 2016 from Rs 46.43 in March, 2016 with an increase of about 16%. In Kolkata, increased to Rs 56.13 from Rs 49.57 in March 2016 (13%), Mumbai to Rs 59.21 from Rs 53.06 per litre (12%) and in Chennai to Rs 55.44 from Rs 47.13 in March 2016 (18%), adds the chamber.

The crude prices shot up from $25 per barrel to $50 per barrel in last six months on the back of pickup in demand from China, India and reduction in stock piles in US.

If the trends of rising prices continue, the profit margins could be hit since the corporate India is not in a position to pass on the rising raw material cost to the consumers even among the industrialized goods.

India currently consumes over four million barrels of oil a day and is on its way to overtake Japan to become the worlds third-largest guzzler, according to the IEA. An increase in the number of vehicles and growth in refining activities are pushing demand higher.

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Holistic credit assessment & monitoring imperative to rein in high levels of NPAs & restructured assets: ASSOCHAM-PwC study
Jun 14,2016

A holistic regulatory framework encompassing participation from all stakeholders in the credit rating ecosystem is imperative to improve the efficacy of credit rating agencies (CRAs) and effective credit risk assessment and monitoring in India, suggested an ASSOCHAM-PwC joint study.

n++Improving efficacy of CRAs needs to be looked from a holistic perspective where all participants in the ecosystem, the regulators, CRAs, corporate, investors (banks), borrowers and others need to work jointly towards a better system of credit risk assessment and monitoring,n++ noted the study titled Growing NPAs in banks: Efficacy of credit rating agencies, jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Pricewaterhouse Coopers (PwC).

Banks credit risk assessment, administration and monitoring have increasingly come into focus owing to considerable increase in levels of non-performing assets (NPAs) and stressed assets (SAs) in past couple of years, the study added.

n++The banks, apart from putting up a strong regulatory framework, should also upgrade their skills for greater due diligence to effectively evaluate the ratings given by the CRAs,n++ it said.

n++Besides, banks need to move towards risk based pricing whereby they can use rating as more than just a mandatory exercise by identifying greater incentives for them to adopt ratings,n++ suggested the study.

n++Banks and CRAs should be able to contribute to developing an ecosystem where credit assessments become more effective,n++ it added.

Banks should treat the credit rating only as an opinion and not as the gospel truth and the information generated by their ratings should be used in conjunction of banks credit risk framework to decide on suitability of loan exposure, further noted the ASSOCHAM-PwC study.

Banks should also be encouraged to develop their internal rating models and validate these ratings by comparing them with publicly available ratings and also seek more information from the rating agencies, if necessary to be doubly sure of their credit assessment process, it said.

A forward-looking and market based credit rating mechanism as part of a move towards risk based pricing can also help the system to take proactive corrective steps to reduce the burden of stressed assets and potentially reduce NPAs systemically and avoid panic and kneejerk reactions, recommended the ASSOCHAM-PwC study.

Besides, early warning systems along with dynamic rating mechanism measuring all the risks of the market can help the banks and other lending institutions to effectively predict the credit risk associated with the borrower and take necessary actions to mitigate such risks.

Considering that financial education in India is still at a nascent stage, the ratings should be displayed on a common website for comparison, the study recommended.

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Work under progress for launching LNG Barges on Ganga
Jun 14,2016

The Ministry of Shipping reviewed the follow up action on a Memorandum of Understanding (MOU) between Inland Waterways Authority of India (IWAI) and Petronet LNG for providing an LNG based alternative, fuel efficient and environment-friendly mode of transport on National Waterways, last week. The MoU was signed at the Maritime India Summit in Mumbai in April, 2016 with the objective of promoting the usage of LNG Barges on National Waterway-1(Ganga). IWAI and Petronet LNG have been asked to plan and coordinate their work plans in a manner such that LNG Barges could commence navigation on NW1 by December 2018.

Both the options of switching over from the existing diesel to LNG barges and introduction of new LNG barges are being considered. Although the switching over from traditional fuel (diesel) to LNG will entail an initial capital expenditure, the investment is likely to be recovered in four to five years at current prices. Higher fuel efficiency and negligible pollution are major attendant benefits of the new fuel. As per the present pricing, operating LNG barges will be much cheaper than diesel as fuel. LNG Barges would be a step towards achieving the commitments made by the country at COP 21.

Petronet LNG Limited will design, construct and operate LNG unloading, storage, bunkering and reloading facilities on the National Waterways (NWs). Four of the top public sector companies in the hydrocarbon sector of the country, viz. ONGC, Indian Oil Corporation, BPCL and GAIL own 50% of the equity in Petronet LNG, while 10% is held by GDF SUEZ and the balance 40% is held by the public. Action has already been initiated for preparing Detailed Feasibility Report and it is expected to be completed by December, 2016. Petronet LNG Ltd plans to set up a base depot at Haldia and fuelling stations at Sahibganj (Jharkhand), Patna (Bihar) and Ghazipur (UP).

IWAI will facilitate the switchover of bunker fuel from diesel to LNG by persuading the barge owners and the operators about the benefits of LNG. IWAI will also provide land, wherever possible, for the setting up of LNG storage and will develop jetties to facilitate bunkering. It is pertinent to note that there is a potential for 17.5 MT of cargo on NW-1 by 2020. IWAI was requested to explore the feasibility of seeking funding for the introduction of LNG Barges under the Ganga Action Plan. As National Waterways in Goa offer immense opportunities in transportation of iron ore and are closer to LNG storage facilities, the introduction of LNG Barges is being considered for that region too. The agencies responsible for framing and enforcing regulations related to the navigation of LNG Barges have been asked to study best practices and regulations on the subject for implementation in India.

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CPI inflation rises to 21-months high of 5.8% in May 2016
Jun 13,2016

The all-India general CPI inflation increased to 21-months high of 5.76% in May 2016 (new base 2012=100), while recording rise for second straight month. The CPI inflation had stood at 5.47% in April 2016. The corresponding provisional inflation rate for rural area was 6.45% and urban area 4.89% in May 2016 as against 6.17% and 4.68% in April 2016. However, the core CPI inflation declined to 4.49% in May 2016 from 4.71% in April 2016.

The cumulative CPI inflation has increased to 5.61% in April-May 2016 compared with 4.94% in April-May 2015.

Among the CPI components, inflation of food and beverages surged to 7.20% in may 2016 from 6.29% in April 2016 contributing to the dip in CPI inflation. Within the food items, the inflation galloped for vegetables to 10.77%, sugar and confectionery 13.96%, fruits 2.64%, meat and fish 8.67%, egg 9.13% milk and products 3.53% and cereals and products 2.59% on the other hand, inflation declined for oils and fats to 4.83%, and pulses and products 31.57% in May 2016.

The inflation for housing was flat at 5.35%, while that for miscellaneous items declined to 3.96% in may 2016. Within the miscellaneous items, the inflation for transport and communication eased to 0.63%, and health 5.10%, while increased for education to 5.85% and personal care and effects 6.14% in May 2016.

The inflation for clothing and footwear declined to 5.37% in may 2016, while the CPI inflation of fuel and light also eased to 2.94% in May 2016.

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Govt constitutes Working Group to examine consequential issues arising of amendments to India-Mauritius Double Taxation Avoidance Agreement & issues
Jun 13,2016

With a view to examine the consequential issues arising out of amendments to India - Mauritius Double Taxation Avoidance Convention and related issues, a Working Group headed by Joint Secretary (FT&TR-II), CBDT and comprising of departmental officers and representatives of SEBI, custodians, brokerage firms and fund managers has been constituted.

The Working Group will submit its report to the CBDT within 3 months, after examining the relevant issues.

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Ind-Ra: Excess Capacity in Manufacturing Sector Impacting IIP Growth
Jun 13,2016

Excess capacity in the manufacturing sector is constraining capex leading to a contraction in the Index of Industrial Production (IIP) growth, says India Ratings and Research (Ind-Ra). IIP contracted 0.8% yoy in April 2016 as against Ind-Ras forecast of 2.2%. The dismal performance of the manufacturing sector pulled the overall IIP growth down.

Factory output in April 2016 is a far cry from the 2.0% growth rate witnessed in February 2016. The eight core industries that comprise around 38% of IIP grew 8.5% in April 2016 compared to 6.4% in March 2016. This had raised hopes that IIP would show a further uptick from the marginally positive 0.3% growth in March 2016. Core sector growth has showed a clear uptrend since November 2015; however this has not found any resonance in IIP growth so far.

Electricity, which has a weight of 10.3% in IIP, continued its upward trend and grew at 14.6%yoy in April 2016. Mining growth has oscillated in the range 0.3% to 5.1% since July 2015. Though mining growth remains in positive territory, there is no indication of a clear trend emerging.

Manufacturing (75.5% weight in IIP) contracted further to negative 3.1% in April 2016 after slipping into negative territory in March 2016 (negative 1.0%) from a marginal uptick of 0.7% in February 2016. At the two-digit level industry grouping that registered sharp negative growth rates are food products and beverages (24.5%), electrical machinery (17.6%) and tobacco products (55.9%). Despite a sustained pickup in consumer durables, a sustained contraction in capital goods has taken a toll on the manufacturing sector. GDP data also showed that gross fixed capital formation registered negative growth of 1.9% yoy in 4QFY16, which is also the lowest in two years.

In a classical recovery cycle, the demand pulse is first felt in the consumer durables sector. Thereafter, it is transmitted to the basic and intermediary goods sectors and then it finally reaches the capital goods sector. Although the IIP data since November 2016 suggest that the demand pulse has begun to show up in the basic and intermediary goods sectors, Ind-Ra opines it is still too early to believe that a classical recovery cycle is underway. However, Ind-Ra is also of the view that if the demand pulse continues in the basic and intermediary goods sectors it will help several manufacturing sectors and subsectors that are still struggling with excess capacity and eventually support capex cycle revival.

Consumer durables maintained the upward momentum and grew 11.8% in April 2016 (March 2016: 9.9%) suggesting a pickup in private consumption demand. Ind-Ra believes this trend will get strengthened due to the impetus from rural demand in the wake of a better than normal monsoon this year. The basic and intermediate goods grew 4.8% and 3.7%, respectively, yoy in April 2016, but the production of consumer non-durables contracted 9.7%.

Finally, Ind-Ra believes there is an urgent need to change the base year of IIP to 2011-12 from the present 2004-05 to better reflect the manufacturing activity on the ground.

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