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Moodys: Global issuance hits record high in 2016, despite lacklustre fourth quarter
Jan 12,2017

Global private debt issuance reached a record high of $3.9 trillion in 2016, up 9% from 2015, driven in part by stronger issuance in emerging markets, Moodys Investors Service said in a report today, citing Dealogic data. The record figure was achieved over the full year despite a 26% quarterly decline in the final three months.

Despite a weaker final quarter, global private market issuance reached a record high in 2016, said Rahul Ghosh, a Moodys Vice President -- Senior Credit Officer and co-author of the report. A strong third quarter, particularly in emerging markets, contributed to the record total over the year.

Issuers in advanced economies (AEs) tapped $502 billion in primary markets in Q4 2016, little changed from the same period in 2015, but down 26% over the quarter. Non-financial corporation (NFC) issuance rose 13% year-on-year, led by North American issuers, while financial institutions issuance was 14% lower than a year ago, mainly due to lower volumes by European issuers.

In 2016 as a whole, total private sector issuance in advanced economies climbed 3% compared to 2015 to stand at $2.65 trillion.

Total issuance in emerging markets in 2016 was 22% higher than the previous year at $1.294 trillion on growing Chinese primary markets, despite a 25% quarter-on-quarter decline in Q4.

Global high-yield (HY) placements increased 75% in Q4 2016 from depressed year earlier levels in virtually all regions that Moodys tracks. In particular, North American NFCs HY placements showed robust momentum in 2016. It was the only larger global primary market segment to grow on both the year and the quarter, according to Moodys classifications.

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Moodys and ICRA: Stable outlook for Indias power sector reflects improved coal availability, policy initiatives
Jan 12,2017

Moodys Investors Service and its Indian affiliate, ICRA, say that their stable outlook for the power sector in India (rated Baa3 positive by Moodys) over the next 12-18 months reflects sustained improvement in domestic coal availability, as well as the Indian governments policy initiatives, which will likely lead to improvements in the financial position of state-owned electricity distribution companies in the next two to three years.

In fact, we changed the outlook for the Indian power sector to stable from negative, because the increased domestic production of coal will ease constraints on fuel supply, says Abhishek Tyagi, a Moodys Vice President and Senior Analyst.

Moodys also says that the Indian governments debt restructuring of the financially weak distribution utilities n++ under the Ujwal Discom Assurance Yojana (UDAY) implemented by 17 states so far n++ will likely improve the companies financial capacity to make timely payments to power generators.

These distribution utilities will also benefit from the lower cost of power purchases, due to improved domestic coal availability, the subdued tariff level of short-term traded power, and flexibility provided by the government to generating companies for the optimal utilization of coal, says Sabyasachi Majumdar, an ICRA Senior Vice President.

ICRA points out that an improvement in domestic coal availability has substantially mitigated coal supply risk and the risk of under-recovery in fuel costs n++ due to a reliance on costlier coal imports n++ for thermal independent power producers (IPPs).

ICRA also says that the improving financial profile of distribution utilities n++ which are key off-takers n++ will benefit IPPs through a reduction in the receivable cycle, and a modest improvement in the plant load factor over the next 18 months.

In addition, ICRA notes the uncertainty as to the timing of tariff compensations for affected thermal IPPs, given that the relevant authorities have yet to decide on the timing of such compensations for imported coal-based projects affected by changes in regulations in Indonesia (Baa3 stable).

Moodys says that renewable generation could act as a complementary source of power, rather than a competitor to thermal energy.

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India-CERT Signs an MoU with US-CERT
Jan 12,2017

India and USA have signed a Memorandum of Understanding (MoU) between the Indian Computer Emergency Response Team (CERT- In) under the Ministry of Electronics and Information technology of the Government of India and the Department of Homeland Security, Government of the United States of America on cooperation in the field of cyber Security. The MoU was signed by Smt. Aruna Sundararajan, Secretary, Ministry of Electronics and Information Technology and Mr. Richard Verma, US Ambassador to India today.

The MoU intends to promote closer co-operation and the exchange of information pertaining to the Cyber Security in accordance with the relevant laws, rules and regulations of each economy and this Memorandum of Understanding (MoU) and on the basis of equality, reciprocity and mutual benefit.

Earlier United States and India signed an MoU on 19th July, 2011 to promote a closer cooperation and timely exchange of information between the organizations of their respective Governments responsible for Cyber Security. Since, 19.07.2011 regular interactions between CERT-In and US CERT are taking place to share the information and discuss cyber security related issues.

In continuation to the cooperation in cyber security areas both have renewed the MOU.

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India and Israel committed to strengthen bilateral relations in the field of Agriculture
Jan 11,2017

Union Agriculture and Farmers Welfare Minister, Shri Radha Mohan Singh met Israeli delegation led by the Agriculture and Rural Development Minister of Israel, Shri Uri Ariel to discuss issues relating to bilateral cooperation in agriculture between India and Israel. Both sides expressed satisfaction over the progress made in cooperation in the agriculture and allied sectors between the two countries.

Both sides expressed their commitment to further strengthen bilateral relations in the field of Agriculture which is manifested by the fact that the third phase of Action Plan for 2015-18 in the field of Horticulture has recently been finalized by the two countries. Under this program, as many as 27 Centres of Excellence (CoEs) in the cultivation of various fruits and vegetables, in 21 states, are being set up, out of which 15 CoEs are complete.

Further, both sides expressed the hope that while continuing the two countries could embark upon newer areas of cooperation at the Government to Government and Business to Business levels between the two countries so as to further enhance the relationship.

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Awards to be given to the Institutes/ KVKS/ Universities for Cashless Transactions under specific time limits
Jan 11,2017

Ministry of Agriculture and Farmers Welfare has taken several decisions to promote cashless transactions in the entire country. It was decided in the meeting of higher officers of DARE/ ICAR in Ministry of Agriculture and Farmers Welfare that awards will be given to the Institutes/ KVKs/ Universities for cashless transactions under specific time limits.

Ministry has decided that award of Rs. 5 lakh meant for ICAR and a sum of Rs. 1 lakh to KVK will be given for achieving 100% cashless in a week. Similarly, ICAR will be bestowed upon Rs. 3 lakh and KVK Rs. 50,000 in the form of incentives on achieving 100% cashless within two weeks and similarly for cashless within a span of 3 weeks, ICAR will be awarded Rs. 2 lakh and KVK Rs. 25,000 as prize.

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56.6% Growth in Foreign Tourists Arrival on E-Tourist Visa in December 2016 over the same period in 2015
Jan 11,2017

A total of 1,62,250 foreign tourists arrived in December 2016 on e-Tourist Visa as compared to 1,03,617 during the month of December 2015 registering a growth of 56.6%. UK (22.4%) continues to occupy top slot followed by USA (16.4%) and Russian Fed (7.7%) amongst countries availing e-tourist visa facility During December 2016.

The facility of e-Visa has been made available by the Government of India to the citizens of 161 countries, arriving at 16 International Airports in India. The number of e-Tourist Visa availed by foreign tourists visiting India during the month of December, 2016 has registered a substantial growth rate over the corresponding month of 2015. The salient highlights of e-Tourist Visa for and upto the month of December, 2016 are as follows:-

(i) During the month of December 2016 a total of 1,62,250 foreign tourists arrived on e-Tourist Visa as compared to 1,03,617 during the month of December, 2015 registering a growth of 56.6%.

(ii) During January- December 2016, a total of 10,79,696 tourist arrived on e-Tourist Visa as compared to 4,45,300 during January-December 2015, registering a growth of 142.5% .

(iii) This high growth may be attributed to introduction of e-Tourist Visa for 161 countries as against the earlier coverage of 113 countries.

(iv) The percentage shares of top 10 source countries availing e-Tourist Visa facilities during December, 2016 were as follows:

UK (22.4%), USA (16.4%), Russian Fed (7.7%), China (5.3%), Australia (4.6%), France (4.1%), Germany (4.0%), South Africa (3.7%), Canada (3.7%) and Republic of Korea (2.0%).

(v) The percentage shares of top 10 ports in tourist arrivals on e-Tourist Visa during December, 2016 were as follows:-

New Delhi Airport (36.6%), Mumbai Airport (23.1%), Dabolim (Goa) Airport (13.6%), Chennai Airport (6.0%), Bengaluru Airport (5.1%),Kochi Airport (4.7%), Kolkata Airport (2.5%), Hyderabad Airport (2.4%), Trivandrum Airport (1.9%) and Ahmadabad Airport (1.7%).

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Strong air passenger demand growth returns in November 2016: IATA
Jan 11,2017

The International Air Transport Association (IATA) announced global passenger traffic results for November 2016 showing the strongest demand growth in nine months. Total revenue passenger kilometers (RPKs) rose 7.6% compared to November 2015. Capacity (available seat kilometers or ASKs) increased by 6.5%, and load factor rose 0.8 percentage points to 78.9%.

Stronger demand for air travel reflects - and is supporting - a pick-up in the global economic cycle. As the stimulus effect of lower oil prices recedes in the rear view mirror, the strength of the economic cycle will play a key role in the pace of demand growth in 2017, said Alexandre de Juniac, IATAs Director General and CEO.

International Passenger Markets November international passenger demand rose 8.0% compared to the year earlier, with airlines in all regions showing growth. Total capacity climbed 6.8%, and load factor edged up 0.9 percentage points to 77.1%.

European carriers saw demand increase by 8.3% in November 2016, while traffic grew at an annualized pace of 12% over the past five months or so. This suggests that the disruption caused by terrorism and political instability has lifted, against a backdrop of a growing Eurozone economy. Capacity rose 6.8% and load factor climbed 1.1 percentage point to 80.8%.

Asia-Pacific airlines November traffic also climbed 8.3% compared to the year-ago period. Capacity increased 7.1% and load factor rose 0.8 percentage points to 77.4%. The strong upward trend in demand has slowed recently but it is not clear whether this is a longer-term development or just a brief pause.

Middle East carriers led all regions with a 12.2% demand increase. But the upward trend in the regions seasonally adjusted traffic has paused, with Novembers level coming in unchanged from that of July. Capacity rose 11.6% and load factor rose 0.3 percentage points to 68.7%.

North American airlines traffic climbed 1.5% in November. Traffic across the Pacific is growing rapidly but North Atlantic demand is moderating. Capacity rose 1.2% and load factor edged up 0.2 percentage points to 78.7%.

Latin American airlines saw November traffic climb 7.3% compared to November 2015. Capacity increased by just 2.9%, pushing load factor up 3.4 percentage points to 82.2%. The upward trend in international traffic has remained strong despite difficult conditions on the North America-South America route, supported by healthy international demand within South America.

African airlines experienced an 8.2% rise in demand compared to November 2015. Economic conditions in much of Africa remain challenging, particularly in the biggest economies of Nigeria and South Africa, but the upward trend in seasonally-adjusted passenger traffic has reasserted itself more recently, supported by strong demand on routes to and from Asia and the Middle East. Capacity rose 5.1% and load factor climbed 1.9 percentage points to 66.3%.

Domestic Passenger MarketsDomestic travel demand rose 7.1% in November 2016 compared to the same month in 2015, but results continued to vary widely, with China, India and Russia showing double-digit growth while demand declined in Brazil and Japan. Domestic capacity climbed 6.1%, and load factor improved 0.8 percentage points to 82.2%.

Air travel in Japan declined 0.5% in November. Traffic has trended sideways in seasonally-adjusted terms for the best part of two years, against a backdrop of weak momentum in consumer spending.

Russias 15.5% increase largely reflects favorable comparisons with the year-earlier period following the collapse of Transaero in autumn 2015. But the recovery in seasonally-adjusted domestic traffic is continuing, alongside signs that the countrys economic recession is easing.

The airline industry continues to deliver strong results. In 2017, for a third consecutive year, the industrys return on invested capital will exceed the cost of capital. Passengers benefit from the industrys success. Travel has never been more accessible - with great fares, many options and more destinations. Nevertheless uncertainty lies ahead. The threat of terrorism, questions over the durability of the economic upswing, rising oil prices and increasing protectionist rhetoric are among the concerns. The industry has reshaped itself and strengthened its resilience to shocks. We should see another solid year of collective profitability for the airlines in 2017. But we must be vigilant, said de Juniac.

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India is expected to post a 7.6 percent growth rate in FY2018
Jan 11,2017

The report analyzes the worrisome recent weakening of investment growth in emerging market and developing economies, which account for one-third of global GDP and about three-quarters of the worlds population and the worlds poor. Investment growth fell to 3.4 percent in 2015 from 10 percent on average in 2010, and likely declined another half percentage point last year.

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Foreign tourists arrival on e-Tourist Visa surges 56.6% in December 2016
Jan 11,2017

A total of 1,62,250 foreign tourists arrived in December 2016 on e-Tourist Visa as compared to 1,03,617 during the month of December 2015 registering a growth of 56.6%. During January- December 2016, a total of 10,79,696 tourist arrived on e-Tourist Visa as compared to 4,45,300 during January-December 2015, registering a growth of 142.5%.

This high growth may be attributed to introduction of e-Tourist Visa for 161 countries as against the earlier coverage of 113 countries. The facility of e-Visa has been made available by the Government of India to the citizens of 161 countries, arriving at 16 International Airports in India.

The percentage shares of top 10 source countries availing e-Tourist Visa facilities during December, 2016 were as follows: UK (22.4%), USA (16.4%), Russian Fed (7.7%), China (5.3%), Australia (4.6%), France (4.1%), Germany (4.0%), South Africa (3.7%), Canada (3.7%) and Republic of Korea (2.0%).

The percentage shares of top 10 ports in tourist arrivals on e-Tourist Visa during December, 2016 were as follows: New Delhi Airport (36.6%), Mumbai Airport (23.1%), Dabolim (Goa) Airport (13.6%), Chennai Airport (6.0%), Bengaluru Airport (5.1%), Kochi Airport (4.7%), Kolkata Airport (2.5%), Hyderabad Airport (2.4%), Trivandrum Airport (1.9%) and Ahmadabad Airport (1.7%).

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Global Growth Edges Up to 2.7 Percent Despite Weak Investment
Jan 11,2017

Global economic growth is forecast to accelerate moderately to 2.7 percent in 2017 after a post-crisis low last year as obstacles to activity recede among emerging market and developing economy commodity exporters, while domestic demand remains solid among emerging and developing commodity importers, the World Bank said in a report.

Growth in advanced economies is expected to edge up to 1.8 percent in 2017, the World Banks January 2017 Global Economic Prospects report said. Fiscal stimulus in major economiesn++particularly in the United Statesn++could generate faster domestic and global growth than projected, although rising trade protection could have adverse effects. Growth in emerging market and developing economies as a whole should pick up to 4.2 percent this year from 3.4 percent in the year just ended amid modestly rising commodity prices.

Nevertheless, the outlook is clouded by uncertainty about policy direction in major economies. A protracted period of uncertainty could prolong the slow growth in investment that is holding back low, middle, and high income countries.

n++After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon,n++ World Bank Group President Jim Yong Kim said. n++Now is the time to take advantage of this momentum and increase investments in infrastructure and people. This is vital to accelerating the sustainable and inclusive economic growth required to end extreme poverty.n++

The report analyzes the worrisome recent weakening of investment growth in emerging market and developing economies, which account for one-third of global GDP and about three-quarters of the worlds population and the worlds poor. Investment growth fell to 3.4 percent in 2015 from 10 percent on average in 2010, and likely declined another half percentage point last year.

Slowing investment growth is partly a correction from high pre-crisis levels, but also reflects obstacles to growth that emerging and developing economies have faced, including low oil prices (for oil exporters), slowing foreign direct investment (for commodity importers), and more broadly, private debt burdens and political risk.

n++We can help governments offer the private sector more opportunities to invest with confidence that the new capital it produces can plug into the infrastructure of global connectivity,n++ said World Bank Chief Economist Paul Romer. n++Without new streets, the private sector has no incentive to invest in the physical capital of new buildings. Without new work space connected to new living space, the billions of people who want to join the modern economy will lose the chance to invest in the human capital that comes from learning on the job.n++

Emerging market and developing economy commodity exporters are expected to expand by 2.3 percent in 2017 after an almost negligible 0.3 percent pace in 2016, as commodity prices gradually recover and as Russia and Brazil resume growing after recessions.

Commodity-importing emerging market and developing economies, in contrast, should grow at 5.6 percent this year, unchanged from 2016. China is projected to continue an orderly growth slowdown to a 6.5 percent rate. However, overall prospects for emerging market and developing economies are dampened by tepid international trade, subdued investment, and weak productivity growth.

Among advanced economies, growth in the United States is expected to pick up to 2.2 percent, as manufacturing and investment growth gain traction after a weak 2016. The report looks at how proposed fiscal stimulus and other policy initiatives in the United States could spill over to the global economy.

n++Because of the outsize role the United States plays in the world economy, changes in policy direction may have global ripple effects. More expansionary U.S. fiscal policies could lead to stronger growth in the United States and abroad over the near-term, but changes to trade or other policies could offset those gains,n++ said World Bank Development Economics Prospects Director Ayhan Kose. n++Elevated policy uncertainty in major economies could also have adverse impacts on global growth.n++

Regional Outlooks

East Asia and Pacific: Growth in the East Asia and Pacific region is projected to ease to 6.2 percent in 2017 as slowing growth in China is moderated by a pickup in the rest of the region. Output in China is anticipated to slow to 6.5 percent in the year. Macroeconomic policies are expected to support domestic drivers of growth despite soft external demand, weak private investment, and overcapacity in some sectors. Excluding China, growth in the region is seen advancing at a more rapid 5 percent rate in 2017. This largely reflects a recovery of growth in commodity exporters to its long-term average. Growth in commodity importers excluding China is projected to remain broadly stable, with the exception of Thailand where growth is expected to accelerate, helped by improved confidence and accommodative policies. Indonesia is anticipated to pick up to 5.3 percent in 2017 thanks to a rise in private investment. Malaysia is expected to accelerate to 4.3 percent in 2017 as adjustment to lower commodity prices eases and commodity prices stabilize.

Europe and Central Asia: Growth in the region is projected to pick up to 2.4 percent in 2017, driven by a recovery in commodity-exporting economies and recovery in Turkey. The forecast depends on a recovery in commodity prices and an easing of political uncertainty. Russia is expected to grow at a 1.5 percent pace in the year, as the adjustment to low oil prices is completed. Azerbaijan is expected to expand 1.2 percent and Kazakhstan is anticipated to grow by 2.2 percent as commodity prices stabilize and as economic imbalances narrow. Growth in Ukraine is projected to accelerate to a 2 percent rate.

Latin America and Caribbean: The region is projected to return to positive growth in 2017 and expand by 1.2 percent. Brazil is projected to expand at a 0.5 percent pace on easing domestic constraints. Weakening investment in Mexico, on policy uncertainty in the United States, is anticipated to result in a modest deceleration of growth this year, to 1.8 percent. A rolling back of fiscal consolidation and strengthening investment is expected to support growth in Argentina, which is forecast to grow at a 2.7 percent pace in 2017, while Repn++blica Bolivariana de Venezuela continues to suffer from severe economic imbalances and is forecast to shrink by 4.3 percent this year. Growth in Caribbean countries is expected to be broadly stable, at 3.1 percent.

Middle East and North Africa: Growth in the region is forecast to recover modestly to a 3.1 percent pace this year, with oil importers registering the strongest gains. Among oil exporters, Saudi Arabia is forecast to accelerate modestly to a 1.6 percent growth rate in 2017, while continued gains in oil production and expanding foreign investment are expected to push up growth in the Islamic Republic of Iran to 5.2 percent. The forecast is based on an expected rise in oil prices to an average of $55 per barrel for the year.

South Asia: Regional growth is expected to pick up modestly to 7.1 percent in 2017 with continued support from strong growth in India. Excluding India, growth is expected to edge up to 5.5 percent in 2017, lifted by robust private and public consumption, infrastructure investment, and a rebound in private investment. India is expected to post a 7.6 percent growth rate in FY2018 as reforms loosen domestic supply bottlenecks and increase productivity. Pakistans growth is projected to accelerate to 5.5 percent, at factor cost, in FY2018, reflecting improvements in agriculture and infrastructure spending.

Sub-Saharan Africa: Sub-Saharan African growth is expected to pick up modestly to 2.9 percent in 2017 as the region continues to adjust to lower commodity prices. Growth in South Africa and oil exporters is exp

November air freight demand reflects strong peak season: IATA
Jan 11,2017

The International Air Transport Association (IATA) released data for global air freight markets showing that demand, measured in freight tonne kilometers (FTKs), rose 6.8% in November 2016 compared to the year-earlier period. This was a slight slowdown from the 8.4% annual growth recorded in October 2016 - which was a 20-month high - but was still more than 2.5 times the average annual monthly growth rate of 2.6% over the past decade.

Growth in freight capacity, measured in available freight tonne kilometers (AFTKs), slowed to 4.4% November.

The uptick in freight growth coincides with an increase in the shipment of silicon materials typically used in high-value consumer electronics shipped by air, and an apparent turnaround in new export orders. A modal shift to air cargo following the collapse of the Hanjin Shipping Company in August may have also contributed.

Air cargo enjoyed a strong peak season in November. And there are encouraging signs that this growth will to continue into 2017, particularly with the shipment of high-value consumer electronics and their component parts. But, the trend in world trade is still stagnant. So it remains critically important for the air cargo industry to continue to improve its value offering by implementing modern customer-centric processes, said Alexandre de Juniac, IATAs Director General and CEO.

Regional Performance

Airlines in all regions except Latin America reported an increase in year-on-year demand in November.

Asia-Pacific airlines saw demand in freight volumes grow 6.1% in November 2016 compared to the same period in 2015 and capacity grew by 4.0%. Seasonally-adjusted volumes are now back to the levels reached in 2010 during the post-global financial crisis bounce-back. The increase in demand is captured in the positive outlook from business surveys in the region.

North American carriers freight volumes expanded 5.6% in November 2016 compared to the same period a year earlier, and capacity increased by 2.6%. Freight traffic across the Atlantic continued to strengthen, increasing by 9.0% in October. This is being driven in part by an increase in westbound import flows from Europe to the US helped by a strong dollar. However US exports continue to suffer from the strength of the US dollar.

European airlines posted a 9.0% year-on-year increase in freight demand in November. This was a slight slowdown compared to the 13.3% growth recorded in October, possibly attributable in part to the strike at Lufthansa. Notwithstanding this, the seasonally-adjusted growth trend is strong and corresponds with the sustained increase in export orders in Germany over the last few months and the ongoing weakness in the Euro. Capacity in the region increased by 4.8%.

Middle Eastern carriers enjoyed a boost in demand from the strong peak season with freight volumes increasing by 7.8% in November 2016, year-on-year. Seasonally-adjusted growth has slowed, however, mainly due to weak freight volumes between the Middle East and Asia, and the Middle East and Europe. Freight volumes grew by just 4% on these routes in the January-October 2016 period, compared with 8-11% over the same period in 2015. Capacity in the region increased by 5.1% in November.

Latin American airlines experienced a demand contraction of 1.3% in November 2016, compared to the same period last year. However in seasonally-adjusted terms growth levels are in-line with where they were at the start of 2016. The region continues to be blighted by weak economic and political conditions, particularly in the largest economy, Brazil. The within South America market has been the weakest performer to date with volumes down nearly 20% compared to the same period in 2015. Capacity in the region decreased by 1.6% in November.

African carriers posted the largest increase in freight demand among the regions in November, 10.9% year-on-year, and the seasonally-adjusted growth remains strong. However, capacity surged by 26.9% on the back of long-haul expansion, particularly by Ethiopian Airlines, and this caused the freight load factor to fall in annual terms for the 19th consecutive month.

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Moodys affirms Baa3 ratings of Indian state-owned oil refiners
Jan 11,2017

Moodys Investors Service has affirmed the Baa3 ratings of Indias three state-owned oil refining and marketing companies -- Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL).

Moodys has also assigned Baa3 ratings to the foreign currency senior unsecured bonds to be issued by BPRL International Singapore Pte. Ltd. and guaranteed by BPCL. The issuance is in the form of a drawdown from an MTN program.

The outlook on the ratings of all three oil refining and marketing companies is positive.

A list of affected ratings can be found at the end of this press release.

RATINGS RATIONALE

The ratings affirmation reflects the continued improvement in the credit metrics of the three oil refining and marketing companies, as diminished levels of fuel subsidies and moderated working capital requirement -- resulting from low oil prices -- have reduced borrowings, says Vikas Halan, a Moodys Vice President and Senior Credit Officer.

The sustained decline in crude oil prices since June 2014, along with the deregulation of diesel prices since October 2014, has led to a structural decline in total subsidies in India.

The amount of subsidies had fallen to INR276 billion in fiscal 2016 from INR 1.4 trillion in fiscal 2014. For the six months ended 30 September (1H FY2017), subsidies totaled INR78 billion.

Furthermore, the earnings of the oil refining and marketing companies have improved as the commissioning of new capacity and higher marketing margins have more than offset weaker refining margins.

We expect the earnings of the state-owned refiners to improve as their additional capacities become fully operational during fiscal 2018, says Halan, who is also the lead analyst for the oil refining and marketing companies at Moodys.

As a result of better earnings and lower borrowings, the credit metrics of the oil refining and marketing companies have improved to levels that are more consistent with a higher BCA.

Debt/EBITDA for all three had dropped below 2x as of fiscal 2016 against more than 3x-4x in fiscal 2014. RCF/debt was above 35%-40% for fiscal 2016.

These and other metrics position the companies strongly relative to previous expectation. Consequently, Moodys has upgraded the baseline credit assessments (BCAs) of all three oil refining and marketing companies to ba1 from ba2.

However, the companies will continue expanding their capacities in line with the growth in demand for petroleum products in India. Such investments have long gestation periods, thereby resulting in negative free cash flows at certain points of their investment cycle.

Further, the oil refining and marketing companies plan to invest in upstream assets through acquisitions. BPCL and IOC invested $1 billion in 2016, buying upstream assets in Russia.

The continued need to expand capacity and investment in upstream assets could result in increased borrowings and weaker credit metrics, especially if refining or marketing margins decline.

The BCAs already incorporate a moderate deterioration in credit metrics. Nevertheless, we expect their fundamental stand-alone credit profile to remain well positioned at the current level.

The three oil refining and marketing companies are government-related issuers (GRIs) and their ratings incorporate their BCAs plus a one-notch uplift reflecting our expectation for government support. Their Baa3 ratings and positive outlook are in line with Indias sovereign rating and outlook.

The BCAs could be upgraded further if the oil refining and marketing companies continue to manage their capacity expansion plans in such a way that their credit metrics continue to remain strong for their BCAs.

Specifically, RCF/debt staying above 20%-25% and EBIT/interest staying above 5x-6x will be indicative of upward pressure on the BCAs. An upgrade of the BCAs will not automatically lead to an upgrade of the issuer ratings. The final ratings will only be upgraded if the sovereign rating is upgraded.

The BCAs could be downgraded if the oil refining and marketing companies engage in more aggressive debt-funded expansion or acquisitions, such that their credit metrics weaken significantly. Specifically, RCF/debt falling below 10%-15% and EBIT/interest below 4x-5x will be indicative of downward pressure on the BCAs.

A downgrade of the BCAs will not automatically result in a downgrade of the issuer ratings.

The issuer ratings may face downward pressure if (1) the rating of the sovereign is lowered or (2) the government makes changes to the subsidy framework that are negative for oil refining and marketing companies, or (3) the oil refining and marketing companies BCAs deteriorate below ba3, or (4) the relationship between the oil refining and marketing companies and the government changes, which would require a reassessment of the level of support incorporated into the ratings.

The proposed foreign currency bonds are rated at the same level as BPCLs foreign currency issuer rating because the bonds are unconditionally and irrevocably guaranteed by BPCL and the guarantee is pari passu to all senior unsecured obligations of BPCL.

List of ratings affirmed

.Issuer: Indian Oil Corporation

..Foreign Currency Issuer Rating, Baa3

..Senior Unsecured Regular Bond/Debenture, Baa3

.Issuer: Hindustan Petroleum Corporation

..Foreign Currency Issuer Rating, Baa3

.Issuer: Bharat Petroleum Corporation

..Foreign Currency Issuer Rating, Baa3

..Senior Unsecured MTN Program, (P) Baa3

..Senior Unsecured Regular Bond/Debenture, Baa3

List of ratings assigned

.Issuer: BPRL International Singapore

..Backed Senior Unsecured MTN Program, (P) Baa3

..Backed Senior Unsecured Regular Bond/Debenture, Baa3

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Moodys: Asian LSI drop to 30.3% in December from 31.1% in November
Jan 11,2017

Moodys Investors Service says that its Asian Liquidity Stress Index (Asian LSI) fell to 30.3% in December from 31.1% in November.

Despite the improvement to 30.3% in December, the Asian LSI remains above the long-term average of 22.6%, highlighting the continued weakness in corporate liquidity across Asia, says Brian Grieser, a Moodys Vice President and Senior Analyst.

The index measures the percentage of high-yield companies with SGL-4 scores and increases when speculative-grade liquidity appears to deteriorate.

The Asian LSI reading of 30.3% in December is well below the record high of 37.0% reached in December 2008 amid the global financial crisis, according to the report.

During December, the liquidity stress sub-index for North Asian high-yield issuers decreased to 32.5% from 34.2% in November. Within this portfolio, the Chinese sub-index decreased to 34.3% from 35.7%.

At the same time, the Chinese high-yield property sub-index remained at 20.0% from, while the Chinese high-yield industrial sub-index decreased to 53.3% from 56.7%.

Meanwhile, the liquidity stress sub-index for South and Southeast Asian high-yield issuers increased to 26.2% from 25.6%, and the Indonesian sub-index remained at 26.3%.

In December, Moodys downgraded two high-yield issuers, bringing the total downgrades of high-yield issuers in 2016 to 50, compared to seven upgrades. This results in an annual downgrade/upgrade ratio of 7.14x, the highest level since Q4 2009.

Across Moodys portfolio of 122 rated high-yield issuers, the percentage of negative leaning outlooks -- meaning ratings with either a negative outlook or on review for downgrade -- declined to 35.2% in December from 36.1% in November.

At the end of December, Moodys rated 122 speculative-grade non-financial corporates in Asia (excluding Japan and Australia) with rated debt of $61.4 billion.

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The benefits of demonetization will help in sustaining economic growth in the longer term
Jan 11,2017

While releasing the survey on demonetisation to remonetisation process, Mr. Gopal Jiwarajka, President, PHD Chamber said that there is a mixed response from the economists, businesses and people.

Majority of the economists (81% Respondents) have cited a significant impact on Indias economic growth in the shorter term but the benefits of demonetization will help in sustaining economic growth in the longer term.

Survey of economists, businesses and people on a structured questionnaire was undertaken by the PHD Research Bureau of PHD Chamber of Commerce and Industry during the month of December 2016.

The survey got responses from more than 50 economists and analysts, 700 business firms and 2000 people.

In the business segment, 73% respondents are facing huge cash crunch due to demonetization as they are unable to fulfill their daily cash requirements to pay wages to daily wagers and contractual workforce.

Production process not only in the informal sector but also in the formal sector has been impacted directly or indirectly, said the survey.

Cash driven segments such as fruits and vegetable markets, horticulture and floriculture, agricultural and food processing, construction activities, among others have been impacted.

But the immediate effect would probably be short-lived and the long term effect will drive the Indian economy to new areas of growth in the coming times, said the survey study.

Though the contraction in GDP cannot be ruled out due to fall in economic activity, growth in demand will start gaining momentum once the economy moves out of the transition stage of demonetization to remonetisation, said Mr. Gopal Jiwarajka.

It is expected that removal of black money from the system would create a good scope for reduction in interest rates via-a-vis lower inflationary expectations and reduce the incidence of direct taxation, he said

While assessing the impact on people, 92% Respondents said that the major impact of currency crunch is seen on daily needs of the people such as purchase of eatables, dairy products and other necessities, according to the survey

58% Respondents are facing high level of difficulty in fulfilling their day to day activities. 89% Respondents reported unavailability of cash at banks and ATMs as a major hurdle in withdrawing/depositing cash from the bank/ATMs, said the survey study.

There is a need of setting up of digital literacy booths outside banks majorly in rural regions for spreading digital literacy across all sections of the nation, said Mr. Jiwarajka

Government should incentivize RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer) under the ambit of digital transfers so that more and more people adopt the available facility and are less dependent on cash transactions.

The threshold limit of Rs. 2,00, 000 for transactions under the RTGS and Rs. 50,000 for transfers under NEFT should be exempted from the service tax.

Also, removal of service tax charged while making payments through credit/ debit card or any other payment card up to Rs. 2,000 in a single transaction is a good start for the transformation of cash transactions to the digital transfers, however, the limit could be revised to Rs. 10,000.

Government should print more and smaller denominations such as Rs. 50, 100 and Rs. 500 notes so that there should be sufficient circulation of money in the market. Government needs to ensure that the sufficient quantity of money is being transported to the banks and ATMs in both rural and urban areas on time, he said

Facility of mobile ATMs in the Government, public sector and private corporate sector offices having more than 25 employees in their establishments, he added

Cash driven sectors such as constriction sector and Small and Micro Units (SMEs) should be facilitated by expanded cash limits for the payment of salaries of their daily wage and contractual workers, said Mr. Gopal jiwarajka

There is a need for low interest rates to propel a boom in Housing and Real Estate. This will substantially increase Employment as well as contribute towards GDP growth, he said

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Real estate & infrastructure investment trusts could raise Rs 50K crore: ASSOCHAM-Crisil
Jan 11,2017

The real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) can help raise close to Rs 50,000 crore in the near term given the interest shown by certain players in the infra and real estate space, noted a recent ASSOCHAM-Crisil joint study.

n++This amount can be utilised either for repayment of debt from banks/ non-banking financial companies (NBFCs)/financial institutions (FIs) or as a consideration to the existing sponsor for dilution of stake or both,n++ according to the study titled Building a new India, conducted by ASSOCHAM jointly with global research firm Crisil.

n++This will result in monetisation of sponsors investment in long gestation projects or result in release of loan funds for banks to fund other infrastructure projects,n++ the report said.

Both REITs and InvITs are vehicles created to primarily invest in revenue-generating real estate/infrastructure assets.

The ASSOCHAM-Crisil joint study also estimated that public sector banks need equity of Rs 1.7 lakh crore by March 2019, which is a tall order considering that banks have so far contributed to nearly half of the debt funding needed in the infrastructure space.

But, the study highlighted, a sharp fall in profitability has reduced capital generation from internal accrual of banks, while weak performance has diminished their ability to raise capital from external sources. And the capital needs can turn out to be higher if credit growth is stronger.

n++These constraints would necessitate a large part of infrastructure needs to be met from the corporate bond market,n++ said the study.

Considering the banking sectors core strengths - comfortable capitalisation, and adequate project appraisal and monitoring skills, over the past ten years, bank lending to the infrastructure sector has grown at a CAGR of 28 per cent, which is faster than the overall credit growth. Besides, the infrastructures share of bank credit has doubled from 7.5 per cent in 2005 to 15 per cent in 2016.

n++This rapid growth in lending to the infrastructure sector poses the risk of asset-liability mismatches (ALM) given that infrastructure project loans have long tenures of 10-15 years, while bank deposits, the main source of funds, typically have a maturity of less than 3 years,n++ the study noted.

n++Moreover, several banks are also nearing the group exposure limits set by RBI for lending to large infrastructure players,n++ it added.

The ASSOCHAM-Crisil study suggested that the ideal mode of financing infrastructure projects is for banks to focus on funding up to the pre-commissioning stage of projects.

n++Given their strong project appraisal and monitoring skills, and healthy capitalisation, banks are well placed to take up financing in the pre-commissioning phase, when project risk is the highest,n++ it said.

After the project is commissioned and stable, banks must refinance the debt through bonds to long-term investors, as such refinancing will free up considerable funds for banks and enable their redeployment in new projects.

n++While this financing model will allow banks to address their ALMs better, bond investors will also get good quality, long-term assets with stable cash flows,n++ said the study.

n++Plus, developers can benefit from reduced costs and fixed rates of interest that can help offset the interest rate risks inherent in bank loans,n++ it added.

n++For this to happen, the banks will, however, need to adopt a stronger risk-based pricing model for project loans. Banks can price their loans to reflect the evolving risk profile of projects,n++ further said the report.

The report also highlighted that credit enhancement would be the key to making corporate bonds attractive to investors.

n++Direct bond market funding of infrastructure projects comes with certain investment risks, and investors typically are risk averse, therefore, there arises a need for credit-enhanced structures that can help improve the credit ratings and increase their attractiveness for investors,n++ it said.

Highlighting that while large investors such as pension funds, provident funds and insurance companies have large corpuses they are restricted by regulation to invest only in highly-rated debt, therefore there is a need to bridge the gap between the low risk appetite of institutional investors and relatively high credit risk profile of infrastructure projects.

The study further suggested to look at innovative channels like green bonds for financing governments ambitious target of having 160 gega watt (GW) of solar and wind capacity by 2022 with investments worth about Rs 8 lakh crore, more so as banking channel alone would not be able to support such huge requirements.

The study also highlighted the need to liberalise investment norms for PFs and insurance cos. and allow them greater flexibility in their investments in terms of scope, which will help channel more funds for the infrastructure sector.

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