The International Air Transport Association (IATA) released data for global air freight markets in August 2016 showing that demand, measured in freight tonne kilometers (FTKs), rose 3.9% year-on-year. Freight capacity measured in available freight tonne kilometers (AFTKs) increased by 4.1% over the same period. Load factors remained historically low, keeping yields under pressure.
Industry conditions have improved since the particularly soft patch at the start of the year. Carriers in all regions except Latin America reported an increase in year-on-year demand in August. However, regional results varied considerably. For the third time in four months airlines based in Europe posted the highest collective annual growth of all regions, while airlines in the Middle East experienced their slowest growth in more than seven years.
August numbers showed improvements in cargo demand. While this is good news, the underlying market conditions make it difficult to have long-term optimism. World trade volumes fell by 1.1% in July with no improvement on the horizon. And the current global political rhetoric in much of the world is more focused on protectionism than trade promotion. Economies need to grow out of the current economic doldrums. Governments should be focused on promoting trade, not raising protectionist barriers, said Alexandre de Juniac, IATAs Director General and CEO.
Asia-Pacific airlines reported a 2.8% increase in demand for air cargo in August compared to last year. Capacity in the region expanded 1.2%. International traffic within the region has been the strongest of the big-four markets (Asia Pacific, Europe, North America, and Middle East) so far this year, with traffic up by 6.5% year-on-year in July 2016.
North American carriers saw freight volumes expand 5.5% in August 2016 year-on-year, and capacity increase by 3.7%. International freight volumes grew by 4.6% in August - their fastest pace since the US seaports disruption boosted demand earlier in 2015. However, seasonally adjusted activity has barely altered from 2008 levels. The strength of the US dollar continues to keep the US export market under pressure.
European airlines posted the largest increase in freight demand of all regions in August 2016 - 6.6% year-on-year. Capacity increased 4.7%. The positive European performance corresponds with an increase in reported new export orders in Germany over the last few months. European freight demand has now broken out of the corridor that it occupied between mid-2010 and the start of the year.
Middle Eastern carriers saw air freight demand slump to 1.8% year-on-year in August 2016 - the slowest pace since July 2009. Capacity increased by 6.9%. The strong upward trend seen in Middle Eastern traffic over the past year or so has halted. In seasonally-adjusted terms, volumes in July 2016 were slightly below those seen in January 2016. The weakening performance is partly attributable to slower growth between the Middle East and Asia. This suggests that Middle Eastern carriers are facing stiff competition from European airlines on the Europe-Asia route.
Latin American airlines saw demand contract in annual terms for the sixth consecutive month. FTKs in August 2016 fell by 3.3% compared to the same period last year and capacity decreased by 0.2%. The region continues to be blighted by weak economic and political conditions, particularly in the regions largest economy, Brazil.
African carriers saw demand rebound sharply in August to 3.7% - the fastest growth rate in 12 months. Despite this, freight capacity continues to outstrip demand, due to rapid long-haul expansion. Capacity surged in August year-on-year by 29.2%. The combination of rising capacity and modest growth has significantly affected the load factor of African airlines. In August 2016 it was almost six percentage points lower than a year ago and is around half the industry average.
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The recent government action to extend the minimum import price (MIP) on 66 steel products by two months till 4 December 2016 shows the governments desire to extend protection for a longer time, says India Ratings and Research (Ind-Ra). Many of the 66 products are mostly subject to an anti-dumping investigation, which is likely to be completed over the next two months. Ind-Ra believes that once this is completed anti-dumping duty (ADD) is likely to be imposed on most of these products for an extended period.
Ind-Ra had highlighted the need for safeguards in June 2016 in the report Steel Production May Not Rise in FY17, In the Absence of MIP. Ind-Ra notes that in August 2016, GoI reduced the items under MIP to 66 from 173 and imposed an ADD on most of the excluded items, namely on hot rolled flat products and cold rolled flat products. The ADD is slightly less restrictive since they apply only to a specified country of origin; in this case the six named countries included, Peoples Republic of China, Japan, Korea RP, Russia, Brazil and Indonesia which account for around 90%-95% of hot rolled products imported into India. While a notification for cold rolled flat products originating or exported from Peoples Republic of China, Japan, Korea RP and Ukraine accounted for around 90% of imports.
During April-August 2016, Indias steel imports declined by 34.5% yoy to 3.01m tonne. Ind-Ra expects GoI to continue to protect domestic steel players from cheap imports. Over FY15-FY16, GoI took various quantitative and qualitative steps to curb the increase in imports into India, however it is only post the imposition of MIP on 5 February 2016, the domestic steel industry heaved a sigh of relief.
The scope of ADD is restricted to the originating countries named and is therefore narrower in scope than MIP, its impact however when applicable is the same as MIP. The ADD imposed on steel products are not fixed and will be calculated at a rate which is equivalent to the difference between the amount identified in the notification and the landed value of the goods covered under ADD, provided the landed value is less than the amount specified. This will protect the domestic steel industry from cheap imports, in the event the landed price of steel further declines and will have a similar impact as MIP. The key difference between MIP and ADD is that MIP is applicable on the import of goods from any country, whereas ADD is specific to goods imported from certain countries/producers as is notified.
Under General Agreement on Tariffs and Trade (GATT) ADD is a more acceptable protection measure provided against dumping of products. GATT provides member countries with the liberty to protect the domestic industry from external injuries; however it is against the restriction of fair trade. Thereby any member country can use ADD for the protection of their domestic industry, in the event that an investigation proves that dumping by other countries is injuring the domestic industry.
The absence of safeguard measures either in the form of MIP or ADD on value added flat rolled products of alloy or non-alloy steel, clad, plated or coated will lead to a surge in imports. As raw material for these value added products, mainly flat products, are already under ADD and therefore domestic producers will be compromised if the end product is allowed to be imported freely at cheaper prices internationally. Ind-Ra expects the protection for the steel industry in the form of ADD or MIP to continue even beyond December 2016.
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In the midst of ringing cash registers on the back of festive sale, an ASSOCHAM-TechSci Research report has projected more than doubling of Indias market for the fast moving consumer goods to $104 billion by 2020 from the present level of $49 billion, growing at an impressive compounded annual growth rate of 20.6 per cent.
The optimism is based on steady economic growth, increasing share of organised retail, improving awareness about health and ethnic products being launched by the likes of Patanjali while a favourable demographic dividend is already given. n++It is certainly good news for giving a much-needed consumption boost to the economy, said ASSOCHAM Secretary General Mr D S Rawat.
Currently, India accounts for a share of just 0.68% of the Global FMCG market, this share is expected to increase significantly over the next 5 years mainly due to the macroeconomic factors such as improving demographics, rising disposable income, expansion of organised retail in tier II & III cities in India, changing consumer preferences etc, according to the study titled Indian FMCG Market 2020.
Major FMCG markets include USA, China, European Union, Japan etc. Globally, the FMCG sector is expected to grow at a CAGR of 4.4%, which when compared to India is a lot slower. Many foreign FMCG multinationals have established themselves in India.
Globally, the FMCG companies have now shifted their focus on E-commerce due to the increasing mobile internet penetration. Globally, the share of online sales of FMCG products accounted for around 5% in 2015, which is relatively higher than India where online FMCG sales accounted for a share of just 1-2% of the overall FMCG market in 2015.
The global economic growth has been decelerating as several large economies face decreasing economic growth, primarily China and the Eurozone, as well as a few key emerging markets like Brazil and Russia. This offers an advantage to India which has a significantly better economic condition.
Indian FMCG sector had a market size of USD43.08 billion in 2015. Well-established distribution networks, as well as intense competition between the organised and unorganised segments are the characteristics of this sector. The FMCG market in India is anticipated to grow at a significantly high CAGR during the forecast period and is expected to cross USD100 billion mark by 2020. FMCG in India has a strong distribution presence across the entire value chain.
The fast-moving consumer goods (FMCG) sector is an important contributor to Indias GDP growth. The sector includes food & dairy products, packaged food products, household products, drinks and others.
FMCG is the fourth largest sector in Indian economy and provides employment to around 3 million people accounting for approximately 5% of the total factory employment in India. The sector is characterized by strong presence of leading multinational companies, competition between organized and unorganized players, well established distribution network, and low operational cost.
The growth in the countrys FMCG sector is being fuelled by improving scenario in both demand as well as supply side. The major demand side drivers include growing affluence and appetite for consumption of the Indian consumer, growing youth population, rise in per capita expenditure, and increasing brand consciousness.
On the other hand, easier import of materials and technology, reduced barriers to entry of foreign players, and new product development, rapid real estate infrastructure development and improvement in supply chain efficiency are the major supply side drivers for the sector.
The growth of the FMCG sector, which primarily includes Food & beverages, personal care and household care has been driven in both the rural and urban segments. Rural consumption growth has outpaced urban consumption with the increase in percentage in monthly per capita expenditure in rural markets surpassing its urban counterparts over the past five years. Several government measures such as GST Bill, Food Security Bill and FDI in retail sector are expected to have a significant positive impact on the countrys FMCG sector in the coming years.
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A total of 9 mineral blocks put on auction including two from Karnataka iron ore plots with excellent response upto 100% bidding over reserve price, Secretary, Ministry of Mines, Mr Balvinder Kumar said at an ASSOCHAM event.
On the current status of mineral auction, He said, n++a total 9 nine blocks have been put on successfully auction including two from Karnataka iron ore plots and total 7 blocks are being put up to auctions by state government of Karnataka and we expect extremely good response in these seven mineral areasn++, said Mr Kumar while inaugurating an ASSOCHAM conference on India Mining Summit 2016.
The bids for the first iron ore in karnataka were 90% above the reserve price. In the second mine, the bid was almost 100% over reserve price and these are very encouraging results. He further said, the Government will be getting above Rs. 25000 crore by the way of royalties etc over the period of 50 years.
On the issue of aluminium industry minimum import duty hike or minimum import price (MIP), Mr Kumar said, we are examining this matter in great depth and two-three rounds of discussions have taken place with different segments of aluminium industry. So, either we may go for MIP or alternatively to increase the import duty but we want to develop consensus among the different segment of aluminium industry. We are working on it and in next 15 days will take decision on this issue.
Mr Balvinder Kumar, Secretary, Ministry of Mines said, n++we are also examining the both the options of buy back of shares or declaration of special dividend or both optionsn++.
By end of this fiscal year, minimum 40-50 mining leases to be auctioned by various states. 15 category C mines were re-auctioned, earlier cancelled by Supreme Court.
He further said, 250 districts District Mineral Foundation (DMFs) have been set up. They are implementing Pradhan Mantri Khanij Kshetra Kalyan Yojana (PMKKKY) and nearly 2800 crore have already got in these districts by district mineral foundations.
If we see exports, exports have increased tremendously. In 2015-16, it was 5.32 billion tonne; in this fiscal we have already bypassed that figure. Imports have also decreased sharply as against 2015-16 about 7 billion tonnes and now this has reduced to 1.022 billion tonnes. The overall mineral growth this year is about 10.6% in first five months. Iron Ore production has increased by 32% percent.
n++Backward districts to get 200-400 crore every year, the huge amount will be spent on social economic development of these areas and these district area soon see transformation in their overall development scenario and many of these districts are Maoist affectedn++, said Mr. Kumar.
n++SBI Cap consulting private sector participations in exploration of 100 mineral blocks to be explored by the agencies, the notification of this process will be in 2-3 weeks timen++.
n++Agencies to get 10 times of exploration fee if auctionable resources discovered; auctions to start after March 2017n++, said Mr. Kumar.
The Aero-geophysical survey to start in 3rd week of November to complete in 2-3 years, said Mr. Kumar.
He further said that we are also relaxing the guidelines governing exploration process to be easier and simpler.
Mr. Kumar focused on sustainable Mining- the star rating by self certification basis and if they dont get 4 or 5 star rating they will get 2-3 years to comply. By end of November, we will finish first phase of star rating.
To check illegal mining across the country through imaginary from National Remote Sensing Centre (NRSC); We are going to monitor all the mining area through the satellite imaginary. We are also going to launch mobile app where anybody can upload photo of illegal miningn++, said Mr. Kumar.
The automation of mining plan with online web portal giving real-time base data across all states, said Mr. Kumar.
n++The export duty structure on iron ore shall not be changen++. About the pending cases of section 10A2C, there are about 304 cases pending under this category, said Mr. Kumar.
Mining industry is in the phase of recovery where many reforms are taking place. Mining provides direct employment to 2.6 billion people. On real time basis, one can see production of all minerals across states.
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To reduce states discoms burgeoning losses, the Industry body ASSOCHAM has suggested linking of Cross Subsidy Charges (CSS) with aggregate technical and commercial (AT&C) losses faced by them.
In a note submitted to the Chief Minister of Haryana, Mr. Manohar Lal Khattar by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) says that n++will ensure that as states reduce their losses, additional charges levied on industry will correspondingly decreasen++.
The Associated Chamber of Commerce and Industry of India (ASSOCHAM) feels this will provide a level playing field and a fair window for private sector to operate at lower but reasonable operating cost.
The industry body lamented that the concept if CSS is higher than the Average Cost of Supply and Average Revenue realization (ACS-ARR) gap of any State, then the State has a public interest in levying CSS as a sign of protectionism.
Concept of open access to absorb excess generation of power was brought by the Government of India with a view to ensure higher operating efficiencies which shall cut down T&D losses. However, power tariffs paid by industry have increased sharply across States owing to a rise in the levy of cross subsidy surcharges (CSS) almost to an extent of 30-600%. In the State of Haryana, the CSS charges increased sharply from Rs. 930 MWh to Rs. 1570 per MWh.
The National Tariff Policy (NTP) had suggested capping the CSS at 20% of tariff. The NTP also introduced additional surcharge for consumers who shift to other sources apart from State Discoms. This is clear deviation from the fundamental principal of open access, which is one of the most important amendments suggested by the Electricity Act. While the Government of India has given the option of procurement of power through open access, the States have been levying various charges, restricting the concept and success of open access policy.
CSS is levied by state power distribution companies (discoms) to recover cost of supply. This comes at a time when most states have signed up for the Union governments Ujwal Discom Assurance Yojana (UDAY) schedule that aims to reduce losses and improve efficiency.
According to market estimates the gap between the average cost of supply (ACS) and the average revenue realization (ARR) of state-owned discoms is around 27 per cent, and around 35 per cent in big states such as UP and Rajasthan.
The National Electricity Policy (NEP) allows states to subsidies a section of consumers. It also has provisions for levying additional charges on consumers capable of paying higher rates to make up for the ACS-APR gap.
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Oil India (OIL), an Upstream Oil & Gas PSU, with intent of augmenting its reserves base and maximising recovery from its aging oilfields, has entered into a Memorandum of Understanding with the University of Houston (USA), one of the leading universities on oil and gas of the world. The MoU was signed today in presence of Sh. Dharmendra Pradhan, Minister of State (I/C), Petroleum & Natural Gas.
The MoU, amongst others, is focused to collaborate in the fields of Improved Oil Recovery & Enhanced Oil Recovery for production enhancement from matured fields, seismic interpretation & reservoir characterisation studies, improvement of drilling and well intervention practices and unconventional hydrocarbon studies. It is envisaged that the collaboration will help OIL to further consolidate and upgrade the various initiatives the Company has undertaken to improve production and contribute significantly to the energy security of the country. This will also contribute towards national obligation as set by Honble Prime Minister to reduce import dependency of oil and gas by 10% by 2022.
Located in the energy capital of the United States of America, home to the leading Oil & Gas operating companies and service providers, the University of Houston is a premier institute, involved in the quest of academic and translational excellence in the field of Oil & Gas through its outstanding faculty and research staff and has established well documented partnership with leading edge academia and industry subject matter experts.
Describing the signing of MoU as historic, the Petroleum & Natural Gas Minister Sh. Dharmendra Pradhan said this small event will lay huge impact in exploration sector. He said innovation, scientific temperament and institutional hand-holding is the way forward for the growth of oil and gas sector. He said that India is third largest energy consuming country in the world but is import dependent for crude oil. The Minister said that India is an aspirational society, bound to grow and move very fast. The import centric mechanism cant help meet our challenges. He said an ecosystem has to be created so that innovations, improvements and reforms are ushered in. Sh. Pradhan said if there is willpower, good strategy and innovative technology, a good ecosystem can be created which will help in better oil recovery from the fields. He said there is no dearth of intellectual talent or good institutions in the country but these need to be harnessed and supported for the countrys growth.
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Average assets under management (AAUM) of the mutual fund (MF) industry increased by 11.8% (by Rs1.697 lakh crore) to an all-time high of Rs 16.11 lakh crore during the quarter ended September 2016 as against Rs 14.41 lakh crore registered during the quarter ended June 2016, helped by strong participation from retail investors and robust inflow in equity schemes. Mutual fund industrys asset base surged 22.4% on yearly basis, mainly on account of huge inflows in equity schemes and strong participation through systematic investment plans (SIPs).The yearly rise in AAUM is largely on account of huge inflow in equity and equity-oriented schemes. In addition, retail participation increased significantly during the year.
On quarterly basis, of the 42 mutual funds (Mahindra Mutual Fund is new fund house), 38 fund houses registered rise in AAUM, while the rest resulted in fall during the September quarter. There were 02 mutual funds whose AAUM fell by over 10%n++Sahara and Taurus. In the quarter ended September 2016 there were 24 fund houses which witnessed a rise in their average quarterly AUM upto10%, while 14 AMCs saw a rise in the AUM in the range of 0.7%-9.2%.
BOI AXA postedthe highest rise among the fund houses which witnessed rise in AAUM, from Rs2753.99 crore to Rs3635.89 crore. It was followed by Mirae Asset which posted 31.6% rise.
The top five fund houses n++ HDFC, Reliance, ICICI Prudential, Birla Sun Life and SBI (UTI AAUM sifted to sixth position from top five) gained an aggregate of Rs9.13 lakh crore in their AAUM over the last quarter. Among the top 5 players, Birla Sun Life was the highest gainer as its AAUM increased by 13.3% or by Rs19788.11 crore to Rs 1.69 lakh crore over that in quarter ended June 2016. ICICI Prudential clocked the top position shifting HDFC down to second position in terms of AAUM. ICICI Prudential AAUM increased by 11.7% to Rs2.16 lakh crore. HDFC AAUM increased by 10.5% to Rs 2.13 lakh crore. UTI Mutual Fund gained 13.5% or Rs by 15164.66crore during the quarter and its AAUM stood at Rs 1.27 lakh crore. SBI MF increased9.7%, to Rs 1.32 lakh crore. Reliance MF AAUM increased by 9.7% at Rs 1.83 lakh crore.
In terms of absolute asset growth in July-September 2016 over April-June 2016, ICICI Prudential MF leads the pack with rise by Rs22689.88 crore rise followed by HDFC MF with Rs 20309.66 crore and Birla Sun Life MF is third with rise by Rs19788.11crore assets added in this period.Average Assets under Management (AAUM) for the quarter of July-September 2016 (Rs in crore)Mutual Fund NameAUM (Rs CR) September 2016^AUM (Rs CR) June 2016^Change (Rs CR)VAR (%)Axis Mutual Fund47179.2340867.936311.3115.4Baroda Pioneer Mutual Fund11702.629116.602586.0228.4Birla Sun Life Mutual Fund168880.81149092.7019788.1113.3BNP Paribas Mutual Fund6068.725411.16657.5612.2BOI AXA Mutual Fund3635.892753.99881.9132.0Canara Robeco Mutual Fund9319.828099.171220.6515.1DHFL Pramerica Mutual Fund24472.9221739.912733.0112.6DSP BlackRock Mutual Fund49851.5441415.658435.8920.4Edelweiss Mutual Fund2255.632032.38223.2411.0Escorts Mutual Fund294.90290.584.321.5Franklin Templeton Mutual Fund73666.1367592.816073.329.0Goldman Sachs Mutual Fund7098.666500.48598.189.2HDFC Mutual Fund213086.14192776.4820309.6610.5HSBC Mutual Fund8502.747839.05663.688.5ICICI Prudential Mutual Fund215985.85193295.9722689.8811.7IDBI Mutual Fund8128.366718.841409.5221.0IDFC Mutual Fund56656.2654091.382564.884.7IIFCL Mutual Fund (IDF)388.373220.127.116.11IIFL Mutual Fund370.36395.12-24.76-6.3IL&FS Mutual Fund (IDF)970.15946.8823.262.5Indiabulls Mutual Fund6731.296231.01500.288.0Invesco Mutual Fund22560.3719039.353521.0218.5JM Financial Mutual Fund13612.1312756.00856.136.7JPMorgan Mutual Fund
The Federation of Indian Chambers of Commerce and Industry (FICCI) in association with IMS Health, launched a knowledge paper titled Medical Value Travel in India: Enhancing Value in MVT, at the second International Summit on Medical Value Travel (MVT) - Advantage Healthcare India (AHCI 2016) . As per the study, India is one the key MVT destinations in Asia with over 500,000 foreign patients seeking treatment. It revealed that cost effectiveness, superior clinical outcomes and alternative medicine are key parameters on which India differentiates itself from other MVT destinations.
The FICCI - IMS Health study was commissioned in order to carry out an unbiased evaluation of India vis-n++-vis other popular MVT destinations across Asia and developed markets. The aim was also to understand key considerations for MVT patients and define guidelines that can strengthen as well as improve Indias position thereby emerging as as one of the most preferred MVT destinations across the world. The study is an effort to bring together key stakeholders of the MVT ecosystem including policy makers, providers and facilitators and help them work in conjunction to help India emerge as n++The Provider to the Worldn++. Mr. Bhavdeep Singh, Chair, FICCI Medical Value Travel Committee & CEO - Fortis Healthcare said, n++Over the last decade, India has grown to become a sought after destination for medical value travel because it has proven to be superior across multiple factors that determines the overall quality of care. However, to position ourselves as leading providers of quality healthcare, the medical value travel stakeholders in India will need to consolidate our efforts and strategize on how to leverage the available opportunitiesn++.
SAARC countries such as Bangladesh, Afghanistan and Maldives are major sources of medical value travel followed by African countries such as Nigeria, South Africa and Kenya. Proximity, cultural connect and connectivity are key reasons for inflow of patients from these regions. Few new sources of medical value travel too have emerged in the recent years such as Russia, CIS countries and Myanmar.
Dr Harish Pillai - Co-Chair, FICCI Medical Value Travel Committee, CEO, Aster Medcity & Head - Kerala Cluster, Aster DM Healthcare, said, n++India can leverage its civilizational connections with Middle East and SAARC countries to deepen relationships and leverage this advantage through wider MVT offerings.n++
Within treatments sought by MVT patients, India is considered preferred destination for cardiology, orthopedics, transplant and ophthalmology in curative care. India also enjoys high credibility in wellness and prevention through Alternative Medicine.
MVT in India has been spearheaded by large corporate hospitals who have created strong global equity with their high-end technology and qualified surgeons in super specialty areas like cardio surgery and orthopedic surgery.
The medical value travel industry has emerged as one of the fastest growing segment of the tourism industry. Globally the market is estimated at around USD 40-55 billion. Indias MVT market size was estimated at USD 3 Billion with CAGR (2010-15) of 15%, however, there is significant potential for accelerated growth given the opportunity size. As per 2015 data, while 11 million people travelled to seek treatment, only 500,000 foreign patients travelled to India seeking treatment. However, through adequate focus and effective execution, MVT in India can be a USD 9 billion opportunity by 2020 and establish India as n++The Provider to the Worldn++.
1. Globally ~11 million travel overseas for seeking medical care
2. MVT market was estimated between 40-55 billion USD in 2015, with a growth rate of 15%
3. 500,000 foreign patients seeking treatment in India
4. Alternative Medicine is one of the top drivers for Indias MVT industry
5. Indias AYUSH industry to grow at a CAGR of 25% between 2015-2018
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Migration to International Financial Reporting Standard (IFRS) 9, or its local equivalent, is likely to create operational challenges across many of Asia-Pacifics (APAC) banking systems. These issues would have a negative initial effect on capital, and potentially raise the volatility of earnings and regulatory capital ratios, says Fitch Ratings.
IFRS 9 is one of the more significant accounting changes that banks are facing, and will be implemented in 2018 for most major APAC markets. It requires banks to switch to recognising and providing for expected credit losses (ECL) on financial assets, rather than the current practice of providing only when losses are incurred. IFRS 9 will also change the way that banks account for a wide range of financial assets. Fitch expects the adoption of the new standard to lead to greater provisioning and earlier recognition of credit losses, which will have an impact on banks financial statements and regulatory capital.
Moving to an expected-loss approach will require significant process changes, including greater integration of credit risk management and internal accounting systems. Banks will also need more data on how portfolios perform though the credit cycle, and will need to build complex models of expected losses. The transition is likely to be more operationally manageable in sophisticated banking systems where there is better access to robust data.
It is too early to estimate the full effects of IFRS 9 on provisions, profitability and capital, as banks have been reluctant to disclose much beyond acknowledging that provisioning will need to be raised. For some markets, the change in accounting standards is happening at a time when banks are struggling to meet progressive increases in minimum capital requirements as Basel III is phased in.
In India, for example, it is possible that the local equivalent of IFRS 9 could be delayed. This is due to challenges faced by the banking system in meeting the capital required by end-March 2019 relating to the Basel III standards - currently estimated at around USD90bn. Banking systems that have been characterised by under-reporting of impaired assets also look vulnerable to the potential rise in provisioning. In China, banks are required to make provisions on reported loans at rates higher than in most other jurisdictions, but IFRS 9 could still expose asset-quality problems that Fitch has long highlighted - given the amount of non-loan credit disguised as financial assets.
In contrast, there are some countries in the region where the financial impact of IFRS 9 for banks could be softened by regulatory framework practices. These include Australia, Hong Kong, Korea, Malaysia, the Philippines, Singapore and Taiwan. Banks will still face provisioning pressures in these markets, but their current regulatory frameworks either already involve elements of the expected-loss approach or banks hold reserves that regulators did not allow them to fully release when IAS 39 was introduced. Regulators in most of these countries have also been progressively forcing banks to hold higher reserves, which will provide a buffer against potential losses. Nevertheless, the impact from moving to ECL is likely to vary from bank to bank even in the most prepared systems, reflecting the underlying riskiness of their assets and their own internal system capabilities.
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Downside risks to advanced country economic growth have risen in recent months, according to Fitch Ratings latest bi-monthly Global Economic Outlook (GEO) report. With populism gaining traction in many countries, the risk of political shocks adversely affecting the outlook for private investment has increased. At the same time, the capacity of central banks to engender stronger growth appears to be diminishing.
Fitch has revised down its forecast for US growth in 2016 to 1.4% in todays GEO from 1.8% in the July GEO.
This year is likely to see the lowest annual growth rate for US GDP since 2009 as oil sector adjustments, weak external demand and the earlier appreciation of the dollar take their toll on industrial demand, said Brian Coulton, Chief Economist at Fitch.
With eurozone growth looking likely to have peaked in early 2016 and no significant changes to Fitchs UK and Japanese growth forecasts - despite significant monetary policy moves - the outlook for the advanced countries is best described as a low-growth, muddle-through path. Advanced country growth over 2016 to 2018 will be hardly any better than the lacklustre 1.5% annual average growth rate seen over 2011 to 2015. Moreover, downside risks to advanced country growth have increased.
The rise in populism seen in many advanced countries could be a precursor to increased trade-protectionism and growing fragmentary tensions in the eurozone, both of which would increase uncertainty and damage prospects for private sector investment, added Coulton.
Meanwhile, the capacity of central banks to counter adverse growth shocks may be falling. The implications of low and negative interest rates for bank profitability, the increasing complexity of central bank easing announcements, reductions in interest income for savers and market distortions are complicating the transmission of unconventional monetary easing to the economy. Furthermore, the historically unprecedented nature of negative nominal interest rates may be limiting the benefits of central bank easing announcements on inflation expectations.
Rising political pressures and concerns about the effectiveness of monetary easing have contributed to growing support among policy makers for fiscal stimulus as a means of restoring growth. A wider shift to fiscal easing is increasingly apparent in the numbers and while its effectiveness may be hindered in some countries by high and rising public debt levels, a co-ordinated fiscal reflation is likely to have growth benefits, at least in the short term.
The Fed is likely to be the only major central bank tightening monetary policy in the near term as it lays the groundwork for a December rate rise. With unit labour costs and core inflation measures suggesting underlying inflation close to the Feds target and the labour market holding up, the conditions look to be in place for a continuation of gradual normalisation in the Federal Funds Rate. The ECB is expected to extend its quantitative easing programme beyond its current scheduled end-date of March 2017, and will likely need to adjust the limits on bond purchases. The new monetary policy approach adopted by the Bank of Japan (BOJ) opens the door for further cuts in the policy rate, taking it deeper into negative territory. This will allow the BOJ to steepen the yield curve while it varies its asset purchases to hold 10-year JGB yields flat at around 0%. We now forecast the BOJ policy rate will fall to -0.5% by end-2017.
In the UK, the Bank of Englands (BoE) aggressive easing package in early August has had a positive impact on sentiment. With recent UK data slightly better than expected, the BoE is unlikely to follow through on forward guidance to cut rates again before year-end.
Having been the main source of downside risk for global growth over the last couple of years, emerging market growth pressures have eased somewhat recently.
It is too soon to say the BRICs are back, but the macro picture in the big emerging markets is certainly steadying, said Coulton.
Most importantly, Chinas efforts to stabilise growth in the face of a sharp slowdown in exports and private-sector investment look to have gained traction. Russias economy looks to be stabilising after massive import compression, real wage adjustment and fiscal tightening saw domestic demand plummet in 2015. In Brazil, the impeachment of President Rousseff and installation of a new leadership team have renewed focus on fiscal reforms, which should support confidence and help the economy stabilise by year-end.
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Global economic growth will remain subdued this year following a slowdown in the United States and Britains vote to leave the European Union, the IMF said in its October 2016 World Economic Outlook.
n++Taken as a whole, the world economy has moved sideways,n++ said IMF chief economist and economic counsellor, Maurice Obstfeld. n++We have slightly marked down 2016 growth prospects for advanced economies while marking up those in the rest of the world,n++ he said.
The report highlighted the precarious nature of the recovery eight years after the global financial crisis. It raised the specter that persistent stagnation, particularly in advanced economies, could further fuel populist calls for restrictions on trade and immigration. Obstfeld said such restrictions would hamper productivity, growth, and innovation.
n++It is vitally important to defend the prospects for increasing trade integration, Obstfeld, said. n++Turning back the clock on trade can only deepen and prolong the world economys current doldrums.n++
To support growth in the near term, the central banks in advanced economies should maintain easy monetary policies, the IMF said. But monetary policy alone wont restore vigor to economies dogged by slowing productivity growth and aging populations, according to the new report. Where possible, governments should spend more on education, technology, and infrastructure to expand productive capacity while taking steps to alleviate inequality. Many countries also need to counteract waning potential growth through structural reforms to boost labor force participation, better match skills to jobs, and reduce barriers to market entry.
The world economy will expand 3.1 percent this year, the IMF said, unchanged from its July projection. Next year, growth will increase slightly to 3.4 percent on the back of recoveries in major emerging market nations, including Russia and Brazil (see table).
Advanced economies: U.S. slowdown, Brexit
Advanced economies will expand just 1.6 percent in 2016, less than last years 2.1 percent pace and down from the July forecast of 1.8 percent.
The IMF marked down its forecast for the United States this year to 1.6 percent, from 2.2 percent in July, following a disappointing first half caused by weak business investment and diminishing pace of stockpiles of goods. U.S. growth is likely to pick up to 2.2 percent next year as the drag from lower energy prices and dollar strength fades.
Further increases in the Federal Reserves policy rate n++should be gradual and tied to clear signs that wages and prices are firming durably,n++ the IMF said.
Uncertainty following the n++Brexit referendum in June will take a toll on the confidence of investors. U.K. growth is predicted to slow to 1.8 percent this year and to 1.1 percent in 2017, down from 2.2 percent last year.
The euro area will expand 1.7 percent this year and 1.5 percent next year, compared with 2 percent growth in 2015.
n++The European Central Bank should maintain its current appropriately accommodative stance,n++ the IMF said. n++Additional easing through expanded asset purchases may be needed if inflation fails to pick up.n++
Growth in Japan, the worlds number 3 economy, is expected to remain subdued at 0.5 percent this year and 0.6 percent in 2017. In the near term, government spending and easy monetary policy will support growth; in the medium term, Japans economy will be hampered by a shrinking population.
Emerging market growth expected to accelerate
In emerging market and developing economies, growth will accelerate for the first time in six years, to 4.2 percent, slightly higher than the July forecast of 4.1 percent. Next year, emerging economies are expected to grow 4.6 percent.
However, prospects differ sharply across countries and regions.
In China, policymakers will continue to shift the economy away from its reliance on investment and industry toward consumption and services, a policy that is expected to slow growth in the short term while building the foundations for a more sustainable long-term expansion. Still, Chinas government should take steps to rein in credit that is n++increasing at a dangerous pace and cut off support to unviable state-owned enterprises, n++accepting the associated slower GDP growth,n++ the IMF said.
Chinas economy, the worlds second largest, is forecast to expand 6.6 percent this year and 6.2 percent in 2017, down from growth of 6.9 percent last year.
n++External financial conditions and the outlook for emerging market and developing economies will continue to be shaped to a significant extent by market perceptions of Chinas prospects for successfully restructuring and rebalancing its economy, the IMF said.
Growth in emerging Asia, and especially India, continues to be resilient. Indias gross domestic product is projected to expand 7.6 percent this year and next, the fastest pace among the worlds major economies. The IMF urged India to continue reform of its tax system and eliminate subsidies to provide more resources for investments in infrastructure, education, and health care.
Sub-Saharan Africas largest economies continue to struggle with lower commodity revenues, weighing on growth in the region. Nigerias economy is forecast to shrink 1.7 percent in 2016, and South Africas will barely expand. By contrast, several of the regions non-commodity exporters, including Cn++te dIvoire, Ethiopia, Kenya, and Senegal, are expected to continue to grow at a robust pace of more than 5 percent this year.
Economic activity slowed in Latin America, as several countries are mired in recession, with recovery expected to take hold in 2017. Venezuelas output is forecast to plunge 10 percent this year and shrink another 4.5 percent in 2017. Brazil will see a contraction of 3.3 percent this year, but is expected to grow at 0.5 percent in 2017, on the assumption of declining political and policy uncertainty and the waning effects of past economic shocks.
Countries in the Middle East are still confronting challenging conditions from subdued oil prices, as well as civil conflict and terrorism.
Overarching policy challenge
Given the still weak and precarious nature of the global recovery, and the threats it faces, the IMF underscored the urgent need for a comprehensive, consistent, and coordinated policy approach to reinvigorate growth, ensure it is distributed more evenly, and make it durable. By using monetary, fiscal, and structural policies in concertn++within countries, consistent over time, and across countriesn++the whole can be greater than the sum of its parts,n++ Obstfeld concluded.
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The health of the Indian private sector economy improved in September, but to a lesser extent than in August. Output and new business increased at softer rates in both the manufacturing and service sectors. Meanwhile, prices charged were raised in line with higher cost burdens.
Reflecting softer expansions in activity at both service providers and manufacturers, the seasonally adjusted Nikkei India Composite PMI Output Index fell from Augusts 42-month high of 54.6 to 52.4 in September. Nonetheless, the latest above-50.0 reading was the fifteenth in as many months, highlighting ongoing growth in the country.
The headline seasonally adjusted Nikkei India Services Business Activity Index registered 52.0 in September. Down from Augusts 43-month high of 54.7, the latest reading pointed to a slower rate of expansion that was moderate overall.
The level of new business placed with Indian services firms increased moderately in September, following a solid rise in August. Panellists commented on sustained demand growth, but mentioned competitive pressures and unfavourable weather conditions as factors weighing on new work inflows. The upturn in order books at manufacturers also lost some momentum.
Outstanding business at Indian service providers rose for the fourth month running in September and at the quickest rate since July 2014. Goods producers saw a softer increase in work-in-hand, but one that remained solid.
Contributing to higher backlogs was broadly stagnant staffing levels at services firms and manufacturers, a trend that has been evident throughout 2016 so far. The respective indices recorded only fractionally above the crucial 50.0 threshold as the vast majority of panellists in each sector signalled unchanged headcounts.
Prices charged by Indian service providers increased in September, as was the case in August. The rate of inflation accelerated slightly, but remained marginal and below the long-run series average. Survey respondents attributed higher output prices to rising cost burdens. Factory gate charges also increased at a quicker pace that was, nonetheless, weak by historical standards.
Input prices facing service providers rose in September, having decreased in each of the previous two months. That said, the rate of cost inflation was moderate and weaker than the surveys historical average. Higher food and petrol prices were identified by panellists as factors contributing to the overall increase in average input costs. Purchase price inflation at manufacturers picked up, though remained below its long-run average.
Business optimism among Indian service providers fell in September, with the degree of confidence remaining below its long-run average. Challenging market conditions was frequently reported by panellists as a key factor weighing on sentiment. Those respondents anticipating activity growth over the next 12 months commented on improved marketing campaigns and hopes of a better economic environment.
Commenting on the Indian Services PMI survey data, Pollyanna De Lima, economist at IHS Markit, and author of the report, said: Service sector performance in India continued to improve relatively modestly in September, a trend that has been evident throughout the year-to-date. With manufacturing also on a softer footing, growth of private sector output and new orders eased in the latest month.
Over Q2 FY2016/17, however, the PMI Composite Output Index posted its highest reading since the Jan-Mar 2015 quarter, thereby suggesting a pick-up in GDP growth. This would be welcome by policy makers after the below-expectations figure of +7.1% y/y recorded in Q1.
The ongoing upturn in new work combined with muted employment growth led backlogs of work across the private sector to increase at the quickest pace in nearly two-and-a-half years. As a result of this, businesses may be more willing to take on additional workers as we head to the year end.
Food and petrol prices continued to climb in September, which placed pressure on operating costs. In response, private sector companies raised their own prices for the second straight month, although inflation remained relatively soft.
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The Cabinet Committee on Economic Affairs, chaired by the Prime Minister Shri Narendra Modi, has given its approval to an acquisition by ONGC Videsh (OVL) for 11% stake in JSC Vankorneft from M/s Rosneft Oil Company (Rosneft), the National Oil Company (NOC) of Russian Federation (Russia). Rosneft operates Vankor fields, with Vankorneft, its wholly owned subsidiary.
OVL will be paying an amount of US $ 930 million for acquiring 11% stake in Vankorneft.
The acquisition of stake in Vankorneft will provide 3.2 Million Metric Ton of Oil Equivalent (MMTOE) to OVL by 2017. It will also provide an opportunity to Indian public sector Oil and Gas companies to acquire new technologies from Rosneft. The acquisition is in line the ONGCs stated objective of adding high quality international assets to Indias Exploration and Production (E&P) portfolio and thereby augmenting Indias energy security.
Recently, an Indian Consortium comprising of Oil India (OIL), Indian Oil Corporation (IOCL) and Bharat PetroResources (BPRL) acquired 23.9% stake in Vankorneft at a cost of US $ 2020.35 million which will give them 6.56 MMTOE. Earlier in May 2016, ONGC Videsh (OVL) completed the formalities on acquisition of 15% stake in Vankorneft at a cost of US $ 1.284 billion which gave OVL 4.11 MMTOE.
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The Union Cabinet under the Chairmanship of Prime Minister Shri Narendra Modi has given its approval to introduce official amendments to the HIV and AIDS (Prevention and Control) Bill, 2014.
The HIV and AIDS Bill, 2014 has been drafted to safeguard the rights of people living with HIV and affected by HIV. The provisions of the Bill seek to address HIV-related discrimination, strengthen the existing programme by bringing in legal accountability and establish formal mechanisms for inquiring into complaints and redressing grievances. The Bill seeks to prevent and control the spread of HIV and AIDS, prohibits discrimination against persons with HIV and AIDS, provides for informed consent and confidentiality with regard to their treatment, places obligations on establishments to safeguard rights of persons living with HIV arid create mechanisms for redressing complaints. The Bill also aims to enhance access to health care services by ensuring informed consent and confidentiality for HIV-related testing, treatment and clinical research.
The Bill lists various grounds on which discrimination against HIV positive persons and those living with them is prohibited. These include the denial, termination, discontinuation or unfair treatment with regard to:
(ii) educational establishments,
(iii) health care services,
(iv) residing or renting property,
(v) standing for public or private office, and
(vi) provision of insurance (unless based on actuarial studies). The requirement for HIV testing as a pre-requisite for obtaining employment or accessing health care or education is also prohibited.
Every HIV infected or affected person below the age of 18 years has the right to reside in a shared household and enjoy the facilities of the household. The Bill also prohibits any individual from publishing information or advocating feelings of hatred against HIV positive persons and those living with them. The Bill also provides for Guardianship for minors. A person between the age of 12 to 18 years who has sufficient maturity in understanding and managing the affairs of his HIV or AIDS affected family shall be competent to act as a guardian of another sibling below 18 years of age to be applicable in the matters relating to admission to educational establishments, operating bank accounts, managing property, care and treatment, amongst others.
The Bill requires that No person shall be compelled to disclose his HIV status except with his informed consent, and if required by a court order. Establishments keeping records of information of HIV positive persons shall adopt data protection measures. According to the Bill, the Central and State governments shall take measures to:
(i) prevent the spread of HIV or AIDS,
(ii) provide anti-retroviral therapy and infection management for persons with HIV or AIDS,
(iii) facilitate their access to welfare schemes especially for women and children,
(iv) formulate HIV or AIDS education communication programmes that are age appropriate, gender sensitive, and non-stigmatizing, and
(v) lay guidelines for the care and treatment of children with HIV or AIDS. Every person in the care and custody of the state shall have right to HIV prevention, testing, treatment and counseling services. The Bill suggest that cases relating to HIV positive persons shall be disposed off by the court on a priority basis and duly ensuring the confidentiality.
There are no financial implications of the Bill. Most of the activities are being already undertaken or can be integrated within the existing systems of various Ministries under training, communication and data management, etc. The Bill makes provision for appointment of an ombudsman by State Governments to inquire into complaints related to the violation of the Act and penal actions in case of non-compliance. The Ombudsman need not be a separate entity, but any existing State Government functionary can be deputed or given additional charge.
There are approximately 21 lakh persons estimated to be living with HIV in India. Even though the prevalence of HIV is decreasing over the last decade, the Bill would provide essential support to National AIDS Control Programme in arresting new infections and thereby achieving the target of Ending the epidemic by 2030 according to Sustainable Development Goals.
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The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to M/s. HLL Lifecare, a Mini Ratna PSU under Ministry of Health & Family Welfare to sub- lease 330.10 acres of land at. Chengalpattu, located in the outskirts of Chennai, to setup a medical devices manufacturing park (Medipark) through a special purpose Vehicle. The shareholding of HLL in the project would be above 50%.
The Medipark project will be the first manufacturing cluster in the medical technology sector in the country, envisaged to boost the local manufacturing of hi-end products at a significantly lower cost, resulting in affordable healthcare delivery, particular in diagnostic services to a large section of people. The proposed Medipark would contribute to the development of medical devices and technology sector and allied disciplines in the country, which is still at a nascent stage besides generating employment and give a boost to the governments Make in India Campaign.
Medipark will be developed in phases, spread over seven years for completion. In the first phase, physical infrastructure will be developed and plots will be leased from third year onwards. Knowledge management center will be developed in the second phase, with grants and assistance from departments, which funds similar initiatives. HLL will sublease the land to investors, through a transparent bidding process to investors desirous to set up manufacturing units for Medical equipment and devices. In the initial phase, the land cost to the qualifying entrepreneurs from Medical Device and Equipment, Manufacturing Industry will be at a subsidized rate so as to attract others and the rate will go up gradually as the demand picks up. Thus the Medipark project will play an important role in enhancing quality health care delivery in India.
The project will reduce the dependence on imports and create a strong base for the growth of indigenous and domestic industry by providing access to state of art infrastructure and technology. The domestic manufacturing of medical devices and equipment shall not only usher in a regime of assured and affordable health care delivery but also deepen and strengthen the penetration of quality health care services.
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