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The Union Minister of Finance Shri Arun Jaitley says India-Africa together can shape the future of the world
May 23,2017

The Union Minister of Finance and Corporate Affairs Shri Arun Jailtey said that the African Development Banks (AfDB) Annual Meeting organized in India this year is a new chapter in India - Africa relationship. India-Africa together can shape the future of the world, he added.

Shri Jaitley said n++our commitment is reflected in high level engagement with Africa on a scale never seen before.n++ He further added that India-Africa partnership model is unique; the cornerstone is voluntary partnership without any imposition on partner and the partner is free to decide what is best for them.n++

Talking about the High 5 Agenda of the AfDB, the Finance Minister said that the High 5 Agenda is not different from Indian policy. n++If India is a bright spot, then Africa is not very far awayn++, he added.

Shri Shaktikanta Das, Secretary, Department of Economic Affairs, Ministry of Finance called Africa a continent of immense opportunities and said that there are opportunities for India and Africa to revive global growth.

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CBDT signs 2 Unilateral APAs with Indian taxpayers taking the number of APAs signed in the current Financial Year to four
May 23,2017

The Central Board of Direct Taxes (CBDT) has entered into two Unilateral Advance Pricing Agreements (APA) on 04th May, 2017 and 11th May, 2017 respectively, with Indian taxpayers. One of the Agreements also has n++Rollbackn++ provision.

The two APAs signed pertain to chip design/development of embedded software and Information technology (software development) sectors of the economy. The number of APAs signed in the current financial year now is four. The CBDT expects more APAs to be signed in the near future. The progress of the APA Scheme strengthens the Governments commitment to foster a non-adversarial tax regime.

The APA Scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the arms length price of international transactions in advance for the maximum of five future years. Further, the taxpayer has the option to roll-back the APA for four preceding years, as a result of which, total nine years of tax certainty is provided. Since its inception, the APA scheme has attracted tremendous interest among Multi National Enterprises (MNEs).

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Commissioning a Study on Common Risk Mitigation Mechanism for Solar Power Generation Projects in Solar Resource Rich Countries Under Aegis of ISA
May 20,2017

Argentina, Burkina-Faso, Chad, France, India, Ivory Coast, Mali, Namibia, Niger, Nigeria, Sn++nn++gal, Uganda and Yemen have jointly supported commissioning of a study to define and structure a Common Risk Mitigation Mechanism (CRMM) for solar power generation projects in solar rich countries today . This is a major step in the implementation of the Paris Declaration of the International Solar Alliance (ISA) adopted on 30 November 2015 and of the ISA Programme aimed at mobilising n++Affordable finance at scalen++. This instrument will dramatically lower the cost of finance for renewable energy and the overall price of electricity.

Today, the cost of capital represents a substantial amount of the final costs of renewable energy, in particular solar PV. The Council on Energy, Environment and Water calculates that in India it represents 70% of the total cost of solar power. The proposed CRMM will offer a simple and affordable tool that will create a secure environment for private institutional investment in solar assets. The instrument will help diversify and pool risks on mutualized public resources and unlock significant investments.

The study was entrusted by the Interim Secretariat to a task force chaired by Terrawatt Initiative (TWI), the World Bank Group, the Currency Exchange Fund (TCX), the Council on Energy, Environment and Water (CEEW) and also the Confederation of Indian Industries (CII). Public and private stakeholders and partners will be consulted to contribute to the initiative and to ensure collective buy-in and validation. Participating countries may each appoint a qualified representative who will liaise with the task force and convey information regarding countries specific expectations, experience and needs. They call all other countries lying fully or partially between the Tropics to join them and support this initiative to attract investments into the solar sector.

Background on ISA:

The International Solar Alliance is an initiative jointly launched by the Prime Minister of India and the President of France on 30 November 2015 at Paris, in the presence of the Secretary General of the UN, on the side lines of COP21. Under the ISA, solar rich countries lying fully or partially between the Tropics are invited to share and aggregate data regarding their needs and objectives; emulate successful practices; and set up common mechanisms and instruments, in order to address obstacles to deployment at scale of solar energy.

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5 times more Villages electrified in 2016-17 under DDUGJY as compared to 2013-14; Four-fold jump in Intensive Electrification of Rural Households
May 19,2017

Union Minister of State (IC) for Power, Coal, New and Renewable Energy and Mines, Shri Piyush Goyal addressed the media on DeenDayalUpadhyaya Gram Jyoti Yojana (DDUGJY) here today. The Minister said, Every state in the country has joined Power for All agreement. All the states have pledged to boost holistic development of entire village electrification process to provide 24x7 affordable and quality power to all which is planned under DDUGJY.

The Minister interacted with the regional media representatives from 12 State Capitals through video conferencing and informed them about latest achievements under the DDUGJY scheme in the respective States. Shri Goyal also launched the new dashboard for GARV application and booklet on rural electrification on the occasion.

Talking about the impact of good governance in Rural Electrification, Shri Goyal said, The Government is working on the concept of 4S i.e. Skill, Speed, Scale and now Sewa to improve the lives of the rural populace as the prime priority. The Minister further added, We have changed the rules of this game. Instead of counting 10% households in the village to complete electrification process, now the Government is focusing on providing power connections to each and every household of village, thus providing meaning to the concept of Antyodaya.

Shri Goyal said that, in line with the philosophy of Pandit DeenDayalUpadhyaya of ANTYODAYA (serving the last Man), on 20th November 2014, Government of India had approved DeendayalUpadhyaya Gram Jyoti Yojana (DDUGJY), an integrated scheme covering all aspects of rural power distribution viz., Feeder Segregation, System Strengthening, Metering. Prime Minister of India, Shri Narendra Modi, in his Independence Day address to the nation on 15th August 2015 pledged to electrify all Un-electrified villages within 1000 days. Government of India therefore taken up Village Electrification on Mission mode targeting completion by May 2018.

Shri Goyal further added that, out of the 18,452 un-electrified census villages in the country, 13,469 villages have been electrified up to 15th May, 2017. A comparison of Achievements and the Physical & Financial Progress under rural electrification scheme in 2013-14 & 2016-17 is given as follows:

Parameters2013-142016-172017-18 TargetElectrification of un-electrified villages1,1976,015 (5.02 times)Balance  un-electrified villages to be electrified by May 2018Intensive electrification of villages14,95663,330 (4.2 times)85,000Free Electricity Connections to BPL households*9.6222.42 (2.3 times)40 LakhGovernment of India Grant released to States**Rs. 2938.52 CroresRs. 7965.87 Crores (2.7 times)Rs. 4814 Crores

*Free electricity connections to BPL Households provided to256.81Lakh BPL families up to 30th April 2017
** Release of highest ever grant in any FY of Rs 7965.87 Crores to States

Background Information

The remaining rural electrification works of the erstwhile scheme have been subsumed into DDUGJY. The scheme outlay is Rs 43,033 Crores with Rs 33,453 Crores grant from Government of India. The overall outlay, with the subsumed rural electrification works, is Rs. 75,893 Crores including Grant of Rs. 63,027 Crores from Government of India.

Under new DDUGJY, Government of India provides grant at the rate of 60% of project cost (85% for special category States). Further, additional grant at the rate of 15% grant is provided (5% for Special Category States) on fulfilment of the prescribed milestones. Under this scheme, the new projects with an outlay of Rs. 42,553.17 Crores have been approved for 32 States/UTs including works of Feeder Separation (Rs 15572.99 Crores), System Strengthening & Connecting Rural Households (Rs 19706.59 Crores), Metering (Rs 3874.48 Crores), Village Electrification (Rs 2792.57 Crores) and SansadAdarsh Gram Yojana (Rs 398.54 Crores).

More than 350 Gram Vidyut Abhiyantas (GVA) deployed in the field to monitor the progress of village electrification works. GARV Mobile App ( was developed for monitoring progress of electrification in 18,452 un-electrified villages, in line with milestones. GVAs update in the GARV App, field photographs, data and other information. On 20th December 2016, updated GARV App had been launched for monitoring Household electrification in all 5.97 Lakh Villages. Updated GARV has the special feature of SAMVAD - engaging the citizens for establishing transparency and accountability.

The scheme is expected to transform lifestyle of villagers and bring in overall socio-economic development in rural areas. Following are the key outcomes of the scheme:

n++ Increased productivity in agriculture

n++ Reducing drudgery for women

n++ Improvement in children education

n++ Connectivity to all villages and households

n++ Viable and reliable electricity services in rural areas

n++ Improvement in delivery of health & education services

n++ Improvement in access to communications (radio, telephone, television, mobile)

n++ Improvement in public safety through lighting

The scheme has complete flexibility for selecting scope of works as per local requirement/priority of States. The population criteria have

Chitale Committee recommends several measures for Desiltation of Ganga
May 19,2017

Chitale committee on Desiltation of Ganga has recommended a slew of measures which include study of reach wise sediment transport processes along with establishing annual sediment budgets to guide de-silting activities, Preparation of annual reports (Sand registry) describing the previous de-silting/ dredging activity and a technical institute may be entrusted to conduct the sediment budget, morphological and flood routing studies that would examine and confirm the necessity of the de-silting of the reach under consideration.

The committee was constituted in July 2016 by the Ministry of Water Resources River Development and Ganga Rejuvenation to prepare guidelines for desiltation of river Ganga from Bhimgauda (Uttarakhand) to Farakka (West Bengal). Shri Madhav Chitale (Expert Member, NGRBA) was appointed as Chairman of the committee. The other members of the committee were: Secretary, Ministry of Water Resources, River Development & Ganga Rejuvenation, Secretary, Ministry of Environment, Forests & Climate Change and Dr. Mukesh Sinha, Director, Central Water and Power Research Station, Pune. The committee was asked to establish difference between desilting and sand mining and also to establish need for desilting for ecology and e-flow of the river Ganga.

The committee in its report says erosion, sediment transport and siltation are very complex phenomena. It is impossible to apply a n++one-size-fits-all‟ approach to sediment management and control, because the issues involved are frequently very regionally-specific. Local factors such as topography, river control structures, soil and water conservation measures, tree cover, and riparian land-use or land disturbance (for example agriculture, mining, etc.) can have a large impact on sediment loads in rivers. River control structures (such as reservoirs), soil conservation measures and sediment control programmes can cause downstream sediment loads to decrease, while factors such as land disturbance (clearing of vegetation, for example) or agricultural practices can cause increased sediment loads. At the same time, indiscriminate de-siltation works may result into more harm to ecology and environment flow. Thus, there is a need to evolve Guidelines, better broad principles, which should be kept in mind while planning and implementing de-silting works.

According to the report erosion, sediment transport and siltation in large rivers like Ganga are very complex phenomena and their estimation has inherent limitations and uncertainties. A reconnaissance of Main River Ganga on Google earth map reveal that different reaches are in a dynamic equilibrium phase. Sedimentation is mainly seen downstream of Bhimgauda barrage and near the confluences of tributary rivers with Ganga. The discharge congestion, large scale sediment deposition and its negative effects are mainly seen downstream of the confluence of Ghagra and beyond. The river flood plain drastically widens beyond the confluence of Ghagra and is estimated to be around 12 to 15 kms.

The committee says though de-siltation works can improve hydraulic performance of the river and this itself can justify undertaking de-siltation, these have no direct role in improving environment flow in the river. On the other hand, indiscriminate de-silting or sand mining would cause adverse impacts on river e-flow. Recognizing the importance of sediment transport in rivers, following basic principles of siltation in rivers should be kept in mind while considering de-siltation works:

n++ Catchment Area Treatment and Watershed Development works, along with good agricultural practices and river bank protection/anti-erosion works, are necessary to reduce silt inflow into the river system and must be undertaken in a comprehensive way.

n++ Erosion, movement and deposition of sediment are natural regulating functions of river and Sediment equilibrium of river should be maintained.

n++ Rivers should be provided with sufficient flood plains (lateral connectivity) without any hindrance to the flow.

n++ Instead of n++keeping the silt awayn++, strategy to n++giving the silt wayn++ should be adopted.

In specific reference to de-siltation works in river Ganga, in addition to MoEF&CC Sand Mining Guidelines, which are statutory in nature, and the GSI Guidelines, the committee has suggested following Guidelines;

1. River Ganga tends to achieve equilibrium on its own given the hydrology, sediment and natural bed and bank disposition. It is necessary to provide the river sufficient areas of flood plain and lakes along the river to moderate the flood level. Any encroachment of flood plain, reclamation of lakes or disconnection of lakes from river should be avoided; rather adjoining lakes/depressions may be de-silted to increase their storage capacities. The de-silting of lakes, etc., should be in such a manner that the sediment continuity is maintained and should not lead to head cut that creates safety issues for the river crossings, water intakes or river training works locally, downstream or upstream.

2. Upstream reaches of natural constriction works, like barrages/bridges, etc., tend to get silted leading to wandering of river. Possibly river training, cut-off developments and provision of extra water way near the constrictions could be tried after proper assessment without impacting the morphology of river elsewhere. The area freed from the development in the form of oxbow lakes should be used for flood moderation rather than reclaiming it for other purposes.

3. In case where constriction is causing large scale siltation, de-siltation along the preselected channel to deepen and attract the flow could be tried to guide the main course of flow. The dredged material may be dumped along the alternate channel which was to be closed to avoid bank erosion. Care shall be taken to develop stable channel which do not affect the flow either on upstream or downstream. Efforts should be made to provide silt continuity along the weirs and barrages.

4. Embankments, spurs and river training measures provided to protect the banks should not encroach upon the flood plains and delink the lakes, flood plains and other riverine environment from the river.

5. The proposed de-silting of any river reach need to be justified bringing out clearly the flooding caused due to siltation along with technical comparisons of the alternative flood mitigation measures with n++do nothingn++ or n++proposed de-silting/ dredgingn++ being other options. It should invariably be associated with sediment flux studies and morphological studies to confirm no significant adverse effect on downstream or upstream reach of the river including the safety and effectiveness of river crossings, water intakes, existing river bank / flood protection measures etc.

6. De-silting of the confluence points, especially with huge silt carrying tributaries, such as Ghagra, Sone, etc., may be necessary to make confluence hydraulically efficient.

7. Reservoirs in main river Ganga and its tributaries, particularly in upper reaches, should be operated in such a manner that first floods, having high silt load, are allowed to pass through without storage and river flows in later phases of the monsoon are only stored for use during non-monsoon season. This would require quantitative long term forecast with decision support system to be established for optimum reservoir operations.

8. Agricultural practices along the river flood plains should be such that it does not disturb the passage of flood by increasing the resistance to flow causing aggradations.

9. River morphological studies should be carried out to initiate in-stream channel improvement works. It shall be ensured that the head cut induced upstream should automatically de-silt the reach. The headcut induced should progress upstream slowly so that the flora a

Rank of India Improves in International Tourist Arrivals
May 19,2017

As per the UNWTO definition, International Tourist Arrivals (ITAs) comprises two components namely Foreign Tourist Arrivals (FTAs) and Arrivals of Non-Resident Nationals. The UNWTO in its barometer ranks countries in terms of their ITAs. So far only the figures of FTAs were compiled in India. However, now India has started compiling the data arrivals of Non-Resident Indians (NRIs), also.

The number of NRI arrivals during 2014 and 2015 were 5.43 million and 5.26 million, respectively. Accordingly, the numbers of ITAs in India during 2014 and 2015 were 13.11 million and 13.28 million, respectively. The data of ITAs, containing both the arrivals of NRIs and FTAs, is now as per International recommendations.

Due to this inclusion, Indias improved rank reflecting the true and comparable scenario has now been acknowledged by the UNWTO. As per the latest UNWTO Barometer for March 2017, Rank of India in International Tourist Arrivals in both 2014 and 2015 is 24 as against the previous rank of 41 and 40 in the year 2014 and 2015, respectively. With this inclusion the share of India in the ITAs has also increased from 0.68% (based on FTAs) to 1.12% in the year 2015.

Earlier Indias rank in the Travel & Tourism Competitiveness Index (TTCI), 2017 had also shown a 12 places jump from 2015. Rank of India in TTCI Report of 2017 was 40th as compared to 52nd in 2015, 65th in 2013 and 68th in 2011.

While UNWTO gives ranking in terms of numbers of ITAs, TTCI is composed of 14 pillars organized into four sub-indices of Enabling Environment, Travel & Trade Policy and Enabling Conditions, Infrastructure and Natural and Cultural Resources.

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Merchandise Exports from India Scheme being re-designed to make exports GSTcompliant
May 19,2017

The Merchandise Exports from India Scheme (MEIS) is being redesigned to make exports from India GST-compliant and the issue of working capital requirements under the new tax regime is being deliberated upon by the government, said Mr. Neeraj Prasad, Additional Commissioner, GST Cell, Central Board of Excise and Customs (CBEC).

He said that the GST regime would help build competitive advantage by leveraging supply chain. While manufacturing and trading activities at present times have a strong taxation orientation and the cost of logistics is high vis-a-vis the mature markets, adoption of GST will reduce the cost of production and distribution. It will also pave the way for the transfer of consignments directly from plant to the wholesaler and retailer, thereby eliminating the inventory cost in many supply chain operations.

Mr. Prasad said that technology in logistics, such as the use of advanced telematics, real-time vehicle tracking and route planning are likely to help manage and execute operations in a efficient and seamless manner and added that implementation of GST will finally set the ball rolling for the emergence of the hub and spoke model in the Indian transportation sector.

He said that job work under GST would encourage lean manufacturing even as the switchover to GST for the largely unorganized logistics sector would be challenging as the interplay of technology will intensify. GST, he said, would lead to re-alignment in the main verticals of supply chain and would bring down the dominating unorganised factor in the logistics business.

As regards the implications for State finances, Mr. Prasad said that the RBI in its latest report on state finances mentions that the introduction of the GST is likely to have an enduring impact on state finances as GST would lead to revenue expansion which would also possibly result in augmenting the shareable pool leading to greater transfer of resources from the Centre to the states. Furthermore, the Federal Reserve of USA, in a recent research paper states that the welfare enhancement through GST has the potential to expand the GDP by 3-4 percentage points.

Mr. Rajeev Agarwal, Senior Vice President (Outreach & Cpacity Building), Goods and Services Tax Network (GSTN), made a presentation on GST IT strategy. The mandate of GSTN, he said was to build the GST IT System to provide shared IT infrastructure and services to Central and State Governments, tax-payers and other stakeholders for implementation of GST; develop Common Registration, Return Filing and e-Payment services running on a Common GST Portal; integrate Common GST Portal with existing tax administration systems of Centre and States and build efficient and convenient interfaces for tax payers.

Sharing the GST Status Update, Mr. Harsh Mariwala, Chairman FICCIs Task Force on GST & Chairman, Marico Ltd, said that FICCI will be conducting three-day workshops on GST compliance for industry. FICCI, he said, would conduct training sessions for trade and industry starting from the first week of June. He added that FICCI has submitted compliances issues for the consideration of the government in some of the key sectors such as banking, financial, insurance, textiles, exports, ITes, transport and logistics.

Mr. Mariwala said that the Finance Minister was treating rates on a mechanical basis, which was a positive sign for industry as it meant current excise and VAT rates were being considered for fixing the tax slabs in GST. The GST Councils meeting, which is scheduled for the next two days, would primarily discuss the tax rates and exemptions under GST. He added that there would be disruptions in the implementation phase of GST and industry should prepare for it.

He said that FICCI was playing the role of a facilitator and disseminating information via various forums such as seminars about GST and helping industry to cope up with compliance issues. He added that the third series of interactive sessions on GST with KPMG was in the offing. Also, FICCI was releasing a monthly report on GST updates, which was being circulated among industry members.

Alluding to the issues, challenges, concerns and opportunities in the new tax regime, Mr. Sachin Menon, Co-Chairman, FICCIs Task Force on GST, said that the pre-requisites for smooth transition to GST were maintenance of level of inventory at each location and whether pricing of transition stock necessitate any change; co-relate closing inventory with excise invoices or other invoices and determine the extent of eligible credit; carry forward of credit allowed of tax reported in last return and ensure all invoices for goods and services received before appointed dates are accounted for in the last return; rejig of business processes - advance receipts, debit/credit notes, raising of PO, customers/vendor communication; devise strategy for pricing and promotional/incentive schemes across value chain (depot, distributor, dealer and retailer); and quick implementation of IT changes and IT to ensure smooth compliance process.

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The 14th Goods and Services Tax (GST) Council meeting approves GST rates for goods and GST Compensation Cess
May 19,2017

The 14th Goods and Services Tax (GST) Council Meeting, chaired by the Union Minister of Finance Shri Arun Jaitley, was held at Srinagar, Jammu and Kashmir yesterday. The fitment of rates of goods were discussed during the Council meeting. The Council has broadly approved the GST rates for goods at nil rate, 5%, 12%, 18% and 28% to be levied on certain goods. The Council has also broadly approved the rates of GST Compensation Cess to be levied on certain goods.

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India Ratings Downgrades IDBI Bank to IND AA; Outlook Negative
May 19,2017

The downgrade in the Long-Term Issuer Rating reflects the consistent drop in IDBIs share of systemic assets (domestic share of advances - 1HFY16: 3.0%; FY13: 3.5%) and liabilities (domestic share of deposits - 1HFY16: 2.8%; FY13: 3.2%) as the bank struggles with its asset quality challenges. The bank continues to grapple with a weak capital profile and the Reserve bank of Indias invocation of prompt corrective action framework would continue to weigh on its share of systemic assets and liabilities. The Negative Outlook reflects the high possibility of IDBI reporting its common equity tier 1 (9MFY17: 7.24%) below the minimum regulatory requirement (FY17: 6.75%) and continuously struggling with its core capitalisation level, both on an immediate and sustained basis, in the absence of a significant capital infusion from the government of India

The rating downgrade of AT1 bond and upper Tier II subordinated debt reflects the structural weakening of IDBIs standalone profile, likely elevated levels of credit costs, significant erosion of capital, limited visibility on capital infusion and the banks inability to timely garner equity capital by monetisation of its non-core assets. The downgrade of AT1 instrument also factors in weakening of IDBIs distributable reserve position which depleted to around 1.28% at end-December 2016 post accounting for nine-month losses, much lower than peers median of 4.50% for the same period.

For AT1 instruments, the agency considers discretionary component, coupon omission risk and write-down/conversion risk as key parameters to arrive at the rating. The agency recognises the unique going-concern loss absorption features that these bonds carry and differentiates them from the banks senior debt, factoring in a higher probability of an ultimate loss for investors in these bonds. The rating on AT1 bond reflects the banks standalone credit profile, along with its ability to service coupons and manage principal write-down risk over the Basel III transition period. Ind-Ra recognises that government support may be difficult to be relied upon by the holders of AT1 bonds considering loss absorption nature of these instruments.

In case the governments stake in IDBI drops below the majority level through a strategic divestment or otherwise, the credit profile of the bank will be reviewed on the basis of the transformation strategy and the strength of the strategic investors coming on board.


Corporate Stress Yet to Completely Show Up: Ind-Ra expects IDBIs credit costs (9MFY17 (annualised): 369bp; FY16: 415bp) to remain significantly high over the medium term, on account of higher fresh slippages and provisioning requirements on the current stock of stressed corporates. According to Ind-Ra, the stock of stressed corporates with minimal provisioning remains high for IDBI. A substantially large portion of this exposure could slip to a substandard category over the next few quarters (including unsuccessful cases under strategic debt restructuring) which, along with the ageing impact of NPLs recognised under the asset quality review, would put significant pressure on its profit and loss statement. IDBI reported stressed assets to total loans ratio of 21.45% at end-December 2016 (FY16: 18.96%). IDBIs pre-provision profitability and capitalisation levels remain weak due to muted credit growth and the impact of interest rate reversals on its margins. Ind-Ra expects IDBIs net interest margins to remain under pressure, as more stressed assets start slipping into the non-performing category.

Large Capital Requirement Through FY19: IDBIs capitalisation is modest at 7.24% (prior to adjusting the losses in 9MFY17; FYE16: 7.98%), driven by losses and a substantial increase in risk weighted assets adjusting for nine-month loan growth, indicating accelerated deterioration of its asset quality. The banks risk weighted assets/net advances ratio at around 150% at end-March 2017 is the highest in the system. Ind-Ra believes IDBIs inability to grow at a decent pace would continue to put pressure on its operating buffers, limiting its ability to absorb the expected increase in credit costs and operating expenses. Considering the banks existing capitalisation level and structural weakness, it could remain under pressure on the capital front even after an equity infusion by the government in line with past allocation. IDBI will need to raise fresh equity from capital markets by diluting some of the governments shareholding and plan for significant capital raising under Basel III. Ind-Ra estimates IDBI would need INR91 billion of Tier I capital (assuming CAGR growth of 9% over FY18-FY19) to maintain a Tier I ratio of 10% (including a capital conservation buffer of 2.5%) by FYE19. IDBIs ability to raise sufficient growth capital, along with the governments equity infusion in the short term, will be a key monitorable for its standalone credit profile and instruments linked to it, such as AT1 bonds.

Deteriorating Standalone Profile: IDBIs standalone credit profile is weaker than its peers on account of its bleak operating and capital buffers. In 9MFY17, high credit costs and weak net interest margin continued to impact the banks profitability, while its CET1 ratio was modest at 7.24% (prior to adjusting the losses in 9MFY17). IDBI Banks dependence on bulk deposit remains higher than those of similar rated peers, with a 42% contribution to its total deposits as of December 2016 (December 2015: 45%). On the liquidity front, IDBIs cumulative one-year funding gap as a percentage of assets marginally improved to 22% in FY16 from 24% in FY15. At end-December 2016, IDBIs liquidity coverage ratio was 115.3%, higher than the current regulatory requirement of 80%.


Negative: IDBIs Long-Term Issuer Rating could be further downgraded to Ind-Ras support floor for public sector banks if its share of systemic assets and liability continues to decline on a sustained basis.

The rating of AT1 instruments could be further downgraded if IDBI fails to raise sufficient equity capital or replenish distributable reserves in a timely manner. The ratings could also be downgraded in case of a significant (more than expected) decline in the asset quality is not buffered by timely support through equity infusions, leading to a consistent dilution in the banks capability to absorb losses.

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EPFO beneficiaries to get payment through electronic or digital fund transfer system
May 19,2017

The Ministry of Labour & Employment vide notification dated 4th May 2017 has provided for electronic or digital fund transfer / payment of EPF benefits, pension disbursement and insurance claim. For this purpose, suitable amendments have been made in all the three social security schemes administered by EPFO.

Such move is likely to benefit 4.5 crores EPF subscribers and around than 54 lakh pensioners. Now, payments will be made to the beneficiaries through electronic or digital fund transfer system only ensuring quick transfer of funds, easier tracking and reconciliation thereof.

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23.5% growth in Foreign Tourist Arrivals in April 2017 over April 2016
May 18,2017

Ministry of Tourism compiles monthly estimates of Foreign Tourist Arrivals (FTAs) & FTAs on e- Tourist Visa on the basis of Nationality-wise, Port-wise data received from Bureau of Immigration (BOI).

The following are the important highlights regarding FTAs & also FTAs on e-Tourist Visa from tourism during the month of April, 2017.

Foreign Tourist Arrivals (FTAs):

n++ The number of FTAs in April, 2017 were 7.40 lakh as compared to FTAs of 5.99 lakh in April, 2016 and 5.42 lakh in April, 2015.

n++ The growth rate in FTAs in April, 2017 over April, 2016 is 23.5% compared to 10.7% in April, 2016 over April, 2015.

n++ FTAs during the period January- April 2017 were 35.85 lakh with a growth of 15.4%, as compared to the FTAs of 31.08 lakh with a growth of 10.1% in January- April 2016 over January- April 2015.

n++ The percentage share of Foreign Tourist Arrivals (FTAs) in India during April 2017 among the top 15 source countries was highest from Bangladesh (23.07%) followed by USA (10.65%), UK (10.51%), Germany (3.28%), Australia (3.15%), Malaysia (2.98%), China (2.95%), Sri Lanka (2.85%), Russian Fed. (2.78%), Canada (2.43%), France (2.33%), Japan (2.14%), Afghanistan (1.69%), Singapore (1.69%) and Nepal (1.61%).

n++ The percentage share of Foreign Tourist Arrivals (FTAs) in India during April 2017 among the top 15 ports was highest at Delhi Airport (29.20%) followed by Mumbai Airport (15.48%), Haridaspur Land checkpost (12.88%), Chennai Airport (6.56%), Bengaluru Airport (5.67%), Kolkata Airport (5.01%), Cochin Airport (4.06%), Gede Rail Land checkpost (2.89%), Goa Airport (2.86%), Hyderabad Airport (2.60%), Ghojadanga land checkpost (1.69%), Ahmadabad Airport (1.35%), Trivandrum (1.34%), Tiruchirapalli Airport (1.31%) and Amritsar Airport (1.23%),

Foreign Tourist Arrivals on e-Tourist Visa

n++ During the month of April, 2017, total of 1.14 lakh tourist arrived on e-Tourist Visa as compared to 0.7 lakh during the month of April 2016 registering a growth of 63.4%.

n++ During January- April 2017, a total of 5.82 lakh tourist arrived on e-Tourist Visa as compared to 3.91 lakh during January-April 2016, registering a growth of 48.8% .

n++ The percentage shares of top 15 source countries availing e- Tourist Visa facilities during April, 2017 were as follows:-

UK (21.6%), USA (10.2%), China (6.1%), Russian Fed (6.1%), France (5.1%), Germany (4.7%), Australia (4.0%), Canada (2.9%), Spain (2.7%), South Africa (2.7%), Korea (Rep.of) (2.6%), Thailand (2.3%), Malaysia (1.7%), Netherlands (1.7%) and Singapore (1.6%).

The percentage shares of top 15 ports in tourist arrivals on e-Tourist Visa during April, 2017 were as follows:

New Delhi Airport (48.6%), Mumbai Airport (20.4%), Dabolim (Goa) Airport (7.2%), Bengaluru Airport (5.4%), Chennai Airport (5.1%), Kochi Airport (3.2%), Kolkata Airport (2.3%), Amritsar Airport (2.0%),Hyderabad Airport (1.9%), Trivandrum Airport (1.3%), Ahmadabad Airport (1.0%), Tirchy Airport (0.6%), Jaipur Airport (0.5%), Calicut Airport (0.1%)and Pune Airport(0.1%) .

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Bilateral Exercise Between Indian & Republic Of Singapore Navy Simbex-17 Commences
May 18,2017

As part of SIMBEX-17, the ongoing Bilateral Naval Exercise between Navies of the Republic of Singapore and India, lndian Naval Ships Shivalik, Sahyadri, Jyoti and Kamorta and one P8-I Maritime Patrol and Anti-Submarine Warfare Aircraft are participating. While INS Sahyadri and INS Kamorta are at Singapore since 12 May 2017, INS Shivalik and INS Jyoti would be joining directly for the sea phase of the exercise. The ships are under the command of Rear Admiral Biswajit Dasgupta, YSM, VSM, Flag Officer Commanding Eastern Fleet.

SIMBEX is an acronym for n++Singapore-India Maritime Bilateral Exercisesn++. Bilateral cooperation between Singapore and India was first formalised when RSN ships began training with the Indian Navy in 1994. This years edition of SIMBEX-17 being held in the South China Sea would be the 24th in the series and is aimed to increase interoperability between the RSN and IN as well as develop common understanding and procedures for maritime security operations. The scope of the current exercise includes wide-ranging professional interactions during the Harbour Phase scheduled from 18 May to 20 May and a diverse range of operational activities at sea during the Sea Phase to be held from 21 May to 24 May. The thrust of exercises at sea this year would be on Anti-Submarine Warfare (ASW), integrated operations with Surface, Air and Sub-surface forces, Air Defence and Surface Encounter Exercises.

During SlMBEX-17, the Singapore Navy is represented by RSN Ships Supreme, Formidable and Victory and Maritime Patrol Aircraft Fokker F50 in addition to the RSAF F-16 aircraft.

The two navies share a long standing relationship with regular professional interactions that include exchange programs, staff talks and training courses. Singapore Chief of Naval Staff, Admiral Lai Chung Han had earlier visited ENC and participated in lFR-16 held in February last year in the City of Destiny, Visakhapatnam. RSS Formidable and a Fokker F 50 aircraft participated in SlMBEX-16 which was held at Visakhapatnam and in Bay of Bengal.

INS Sahyadri, and INS Shivalik-both multi-role stealth frigates - are commanded by Captain Anil Jaggi and Captain R Vinod Kumar respectively while INS Kamorta, an Anti-Submarine Warfare Corvette is commanded by Commander Vipin Gupta. lNS Jyoti, the fleet replenishment tanker is commanded by Captain S Shyam Sundar.

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Ind-Ra: Impact of Demonetisation Waning on Construction Equipment and Commercial Vehicle Loans, MFI Loans Remain Under Spell
May 18,2017

India Ratings and Research (Ind-Ra) analysed the performance of various asset classes under its rated portfolio as of the collection month of February 2017. Commercial vehicle loans registered a stable performance and were able to weather the impact of demonetisation. Construction equipment loans registered an improved performance, driven by an increase in infrastructure spending and a rise in mining activity. Tractor loans continued to show mixed signals, with higher stress in early delinquency buckets but lower forward roll rate indicating fewer loans moving into greater delinquency buckets relative to the historical trend. Microfinance institutions (MFI) loans witnessed a sharp rise in delinquencies after demonetisation and remained under stress. Moreover, MBS transactions continue to show a stable performance, supported by an adequate credit enhancement (CE) cover.

After demonetisation, Ind-Ras Early Delinquency Index (EDI) for commercial vehicle (CV) loans increased by 153bp to 6.86% in February 2017 from the average for 1HFY17. However, the rise in weighted average (WA) 60+dpd delinquencies is extremely marginal in February 2017 compared with the average for 1HFY17, indicating fewer loans are moving into deeper buckets. 2016 vintage loans experienced slightly higher delinquencies compared with 2015 vintage loans. However, WA 90+dpd delinquencies remained at a low gradient compared with 2012-13 vintages. 2015 vintage outperformed previous vintages, with WA 90+dpd delinquencies falling to a new low of 1.25% in February 2017.

High frequency data on the underlying pools of construction equipment ABS indicates that the stress in the asset class is easing out. This is evident from a continual and significant drop observed in defaults, with WA 90+dpd delinquencies reducing 265bp in February 2017 from a high of 3.88% in November 2015. Also, the Ind-Ra Construction Equipment Gross Loss Index declined to 0.64% in February 2017 from 2.92% in February 2016.

The performance of tractor loans was mixed, considering short-term delinquencies rose and forward roll rate remained low in the last 12 months. 2016 vintage performed better across all vintages; WA 90+ delinquency for 2016 vintage loans stood at 3.26% in February 2017 (vintage with lowest delinquency at similar seasoning levels). However, farm loan waiver and pressure from the farming community may affect the credit discipline of borrowers.

Microfinance loans registered a sharp rise in delinquencies after demonetisation. Ind-Ras 0+days delinquency index increased to 10.82% in February 2017 from 0.45% in October 2016. The rise in delinquencies is expected to have a limited impact on the ratings of significantly amortised transactions that are cushioned by a high CE cover. However, local issues such as political interventions and loan waivers would continue to remain key imponderables for recent vintage loans.

Ind-Ra-rated MBS transactions registered a stable performance on account of an upright pool performance and adequate CE. WA 90+dpd delinquencies hovered at about 0.5% in FY17.

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Ind-Ra: Denim Industry Reels Under Cost Pressure; Credit Negative
May 18,2017

The denim industry which represents below 10% of the textile market is likely to face deterioration in credit profile in the absence of improvements in realisations in FY18, says India Ratings and Research (Ind-Ra). The sectors operating margins are expected to fall to 10%-11% in FY18 (9MFY17; 12.6%) due to cost inflation amid surplus capacity in denim standard products which have low cotton content.

Ind-Ra estimates prices to moderate in 2HFY18, highlighted in the report Stable Input Prices, Fiscal Incentives to Support Textile and Cotton in FY18. However the denim surplus situation and inventory losses are likely to pressurise margins. Moreover, the man-made industry demands a level playing field for the taxation of cotton, which is exempt from indirect taxation. If cotton is brought under the Goods and Services Tax (GST) then cotton fabrics including denim sectors profitability may come under pressure in the transitory period.

The agencies denim peer set average EBITDA margins deteriorated in 9MFY17 to 12.6% from FY16s 13.2%. The fall in margins is on account of players inability to completely pass on the increase in cotton prices, on the back of high competitive pressure, similar to the situation in FY14. Raw cotton prices have increased by 32.8% yoy in March 2017 and Ind-Ra expects it to remain elevated until 1HFY18. For Denim manufacturers cotton forms more than 35%-40% of the total raw material requirement. The agency notes that for many of the basic denim fabric manufacturers catering to domestic consumption average realisations remained steady, despite higher cotton prices in 9MFY17. However, some of them have been able to increase realisations for 4QFY17 partly passing the cost inflation with a lag. Denim garments players are likely to perform better than fabric players, as the retail margins may sustain as fabric prices remain under pressure.

Ind-Ra expects the denim sector to post robust volume growth of over 10%-15% in line with the past trend along with rising disposable incomes, rapid growth of the retail sector, westernisation trend, young population demographics, and versatility of denim as a fabric. However, Ind-Ra views that the capacity addition is growing at a faster rate. Moreover, the existing capacities will face competition from new-age cost efficient plants.

The denim fabric industry is cyclical in nature and is characterised by periods of excess capacity followed by narrowing the demand-supply gap. The apparent short project pay-back has encouraged a number of denim fabric manufacturers to put up additional capacity, higher than the estimated demand growth. Further capacity additions are likely to keep the domestic competitive pressures heightened. As per CMIE data, a moderate level of new capacity ramp-up is underway in FY18. This includes capital expenditure for expansion and backward integration by a few companies namely, Nandan Denim Limited, Raymond Uco Denim Pvt Limited and RSWM Limited (IND A+/Stable).

Overall, the credit profile for most players has come under pressure also due to the stretched working capital cycle and debt-led capacity expansion in the backdrop of operating margin pressure. Aggregate peer set net leverage (Net Debt/EBITDA) increased to 4.59x in 1HFY17 compared to 2.83x in FY16. The working capital cycle has got stretched to 61 days in 1HFY17compared to 54 days in FY16, on account of the high credit period and inventory holding for the new capacity ramp-up. Increased competition in the international arena and higher receivable days will impact the exports profitability. However, Ind-Ra believes the credit profile of value-add export-oriented manufacturers will remain robust. Industry players with diversified revenue lines with a mix of man-made textile products are better placed than the pure denim players. Also, companies with strong liquidity, low leverage and short working capital cycle are better placed to face the challenging times.

Ind-Ras rated portfolio includes Sangam (India) Ltd. (SIL; IND A+/Stable), Aarvee Denims Limited, (IND tA-/Negative), RSWM Limited and Ultra Denim Private Ltd (IND BB-/Stable). Financials of Nandan Denim Ltd, Jindal Worldwide Limited and KG Denim Limited also formed part of the peer set for this study.

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ADB Issues Green Rupee-Linked Bond to Support Renewable Energy in India
May 18,2017

The Asian Development Bank (ADB) has raised 3 billion Indian Rupees (INR), about $47 million, from a new issue of offshore Indian Rupee-linked bonds to help finance climate change mitigation and adaptation projects in India.

n++Todays fundraising represents ADBs maiden Indian Rupee green bond and shows the institutions long term commitment to financial market development in India,n++ said ADB Treasurer Pierre Van Peteghem. n++In todays markets, green bonds are an increasingly important source of financing for climate change projects and given ADBs strong engagement in the capital markets of developing Asia, it is a natural next step for ADB to issue green bonds in local currency.n++

The bond issue carries a 6.00% interest rate with a 3.75-year maturity, falling due in February 2021.

The bonds, which are denominated in Indian rupees but settled in US dollars, were underwritten by JP Morgan and TD Securities as Joint Lead Managers. The bonds were placed 9% in Asia, 70% in Europe, and 21% in the Americas. By investor type, 48% of the bonds were placed with banks, and 52% with fund managers.

Proceeds from the bonds will be mobilized into ADBs first cofinancing with the JICA LEAP Fund for the ReNew Clean Energy Project, a wind and solar power project across six states in India. India is ADBs fourth largest shareholder and its largest borrower, excluding cofinancing. In 2016, ADB approved $2.26 billion in sovereign loans and $795 million in private sector projects in India, its largest market.

ADB is a regular borrower in the mainstream international bond markets but has also led issuance in developing Asian countries as part of efforts to promote domestic bond markets as an alternative to bank lending. ADB plans to raise up to $30 billion from the capital markets in 2017.

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