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Under-served SME sector needs timely delivery of bank credit and customised products & services, say bank and industry professionals
Aug 18,2016

The SMEs sector, the driver of growth, requires special handholding efforts by banks, needs timely delivery of credit and customised products and value added services through digital innovations.

This prescription was held out by eminent panellists to foster the growth of SMEs which are seen as drivers of growth.

Ms Usha Ananthasubramanian underlined the need for segmentation of different groups of customers as women and youth entrepreneurs were joining the ranks of borrowers and laid stress on creating products to cater to each segment. Timely delivery of credit, she said, was critical as SMEs were not averse to paying half a percentage more as interest. The sector needs handholding since the entrepreneurs lack financial acumen but are excellent technocrats. Measurement of customer satisfaction, she said, was done by banks on a quantitative basis and there was need to factor in intangible parameters for assessing satisfaction.

Mr. Rakesh Singh stressed the need to cut turnaround time for SMEs to allow them to churn their turnover speedily. He called for collaboration amongst different service providers to integrate technology for the benefit of the customers. He said the survey concept for measuring customer satisfaction was followed by foreign banks and some independent surveys go deeply into the quality of service by banks.

Mr. Rajat Verma said that the industry should remain aware of the fact that the lowest level of NPAs were in micro finance and the highest in financing large corporates. He said that with the transition to digital paperless transactions is a revolution in Indian banking and now all banks, Indian or foreign, enjoyed a level playing field.

Mr. Sanjay Bhatia said the MSME sector was constrained by high interest rates and paper-intensive lending process. He called for re-scheduling of repayments by this sector as current repayments were restricted to between three and five years without considering the status of the project. The MSME sector, he emphasised, needed to be nurtured as it was the single largest employer after agriculture.

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Environment Minister Dedicates Facilities to People under Sansad Adarsh Gram Yojana in Madhya Pradesh
Aug 18,2016

The Minister of State (Independent Charge) of Environment, Forest and Climate Change, Shri Anil Madhav Dave, dedicated a number of facilities the people of Jahanpur Gram Panchayat in district Sihor in Madhya Pradesh under Sansad Adarsh Gram Yojana. The village houses about 100 families.

The Minister dedicated a night shelter, particularly for the benefit of people performing a circumambulation (Parikarama) of River Narmada. A toilet has also been constructed to prevent people from defecating in the open.

Shri Dave also inaugurated a water filter plant, with an objective to provide 20-25 litres water per day per family. An auditorium, with a view to encourage people to organize cultural activities and a Panchayat Bhawan, have also been dedicated to the people. The Environment Minister also planted a sapling on the occasion. He distributed school uniforms to children of the village and held discussions with women members of NGOs.

Shri Dave also held a review meeting with officers of the concerned departments to review the various works being undertaken.

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Differential duty structure a big challenge for toy industry: ASSOCHAM
Aug 18,2016

Due to Inverted Duty Structure, Indias Toy Industry which is dominated by the micro, small and medium enterprises (MSMEs), is struggling hard for their survival due to heavy imports duty, reveals ASSOCHAM latest statement.

The paper on Indian toy industry brought out by ASSOCHAM has stated that though the toys, games, sports equipments, parts & accessories are classified under HSN Chapter Heading 95, many of the raw materials used in the manufacture of these toys fall under different Chapters and are levied different rates of Import Duty, thereby, the input cost of toy manufacturing in India is way high compared to imported toys.

The chamber further states that almost all parts used in toys are specifically classified in classification other than toys parts, so each toy part must fall under its specific classification such as, a toy motor must fall under the classification of motors are not toy parts; same is true for screws etc. The duty on such parts can be 0,5,7,5 and 10 percent + CVD. Also the Customs duties on toys may vary from 0 to 10% with exceptions.

There is an anomaly n++importing of toy attracts 5% duty, whereas importing raw materials for domestic manufacturing attracts 20-30% duty, making domestic production costlier,n++ said Mr. Sunil Kanoria, President ASSOCHAM.

It may be interesting to note that for a zero duty on parts, the effective rate of duty on such a part is more than twice that of a finished toy, said Mr. Kanoria.

Due to non-availability of many quality raw materials in the country, manufacturers have to import them to maintain quality of the finished product. It may be seen that in all these cases, the effective difference for manufacturing toys in India using these raw materials are very high and this has a negative impact on the growth of Indian toy manufacturing sector. Rather than earning foreign exchange through exports, the country is losing so much through imports. Unless immediate corrective measures are taken, Tiny & Small manufacturers cannot survive.

The Indian toy industry caters to nearly four crore kids in the age group of 12 years across the country but domestically manufactured toys account for a meagre 15 per cent of the market and the rest of the market is flooded with imported toys from countries like China, the United States (US), the UK, Korea and Malaysia among others.

The toy industry in India is highly fragmented, unorganised and is predominantly dominated by micro, small and medium scale manufacturers. Besides, there are nearly 2,000 units in the organised sector. The toy industry employs nearly 25 lakh people both in the organised and unorganised sector. Nearly 70 per cent of toy market in India is unorganised.

Emergence of video games has dented the toy business across the world as there is an evident shift from traditional toys and games to video games. As a result, international toy manufacturers have also expanded their operations in the video game segment.

ASSOCHAM suggests the government should undertake some training programmes and set up training centres for these workers to train them so that they are able to increase their efficiency and productivity. Marketing tie-ups for the toy industry both at the state as well as the national levels are suggested by ASSOCHAM.

The government should provide easy credit facilities to the toy industry and marketing assistance like bar coding and ISO certification to the Indian toys. ASSOCHAM suggests that the government should create ways and means by which talented toymakers, innovating educationists and committed designers team up to salvage the sector of our design heritage.

There should be cluster based development programmes for the toy industry as it is highly fragmented and unorganized. Special assistance, grants and financial support by the government is suggested by ASSOCHAM to enhance the industrys technological, research and developmental facilities to match with its international counterparts.

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Need to promote research & innovation in homeland security on PPP mode: Hansraj Gangaram Ahir
Aug 18,2016

There is a need to promote homeland security in the public-private partnership (PPP) mode and encourage research and innovation to speedily tackle threats posed by terrorism to internal security, Minister of State for Home Affairs, Mr Hansraj Gangaram Ahir said at an ASSOCHAM event.

n++Though we are employing manual force in the form of huge army but when it comes to equipment, we need the co-operation of industry which needs to focus on carrying out research and innovation to thwart various methodologies used by terrorists,n++ said Mr Ahir while inaugurating an ASSOCHAM conference on Homeland Security.

n++We want to promote industry and the Prime Minister and governments ambitious Make in India project offers you plenty of opportunities in the homeland security sector,n++ he said.

n++We want to put an end to Chinas supremacy in the homeland security sector,n++ added the minister.

On the ongoing unrest in Jammu and Kashmir, he said that the government will take concrete steps in this regard. n++Everyone knows that it is the game plan of the neighbouring country and though it is not the right time to attack but India can very well protect itself from terrorist activities.n++

He said that over the years, our security forces have shown a lot of restraint. About 4,000 soldiers have got injured due to stone pelting and it is concerning that people are even raising voice against use of pellet guns.

Terming Pakistan as coward and very weak from within, the minister said that though Pakistan does not let any opportunity to tease India but it never highlights what action it has taken against the terrorists.

Mr Ahir also said that government will work towards police modernisation.

On Pakistans invitation to India to talk on Kashmir, he said n++The Prime Minister has made it very clear to Pakistan that from now on there will be no more talks on Kashmir but only on PoK (Pakistan occupied Kashmir) and he will take a decision on the same most effectively.n++

Sharing his viewpoint on the same, Mr Ahir said, n++Though there has been a tradition of going for talks but Pakistan has not kept its word as such we are yet to take a decision in this regard.n++

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BARC develops portable kit for detection of Chromium contamination of water
Aug 18,2016

Chromium is widely used in various industries like leather, steel, chrome plating, paint manufacturing, wood preservation etc. Untreated effluents from these industries cause widespread contamination of water as been reported in several parts of the country.

Chromium in the environment primarily exists as Trivalent Chromium Cr(III) and Hexavalent Chromium Cr(VI). The later is toxic and the World Health Organization has classified it as carcinogenic and can cause stomach ulcers and cancers and severe damage to kidneys and liver.

As per Indian standard IS10500 for drinking water, the maximum permissible concentration of Cr(VI) in drinking water is 50 microgram per litre. The US Environmental Protection Agency (EPA) recommends a still lower permissible concentration of 10 microgram per liter.

Detection of Cr(VI) at such low levels is not only technically challenging but also expensive and time consuming since it involves collection of water samples from affected areas, transport to laboratory, storage and finally analysis. The method can be used for limited water samples with errors due to conversion of Cr(III) to Cr(VI) and vice versa during transport and storage.

BARC has developed a simple, user friendly, quick and cost effective kit for onsite determination of Cr(VI), which meets IS10500 as well as EPA criterion. It provides the much needed solution to measure the level of Chromium contamination in drinking water and tap water, lakes, rivers as well as ground water. The procedure involves adding a specified amount of specific reagents to the water sample and identifying the developed colour.

The colour develops within 5 minutes and the distinction can be made with naked eye. For ease of comparison a colour chart is provided with the kit. Water samples can be immediately categorized as being safe or toxic for drinking from Chromium(VI) point of view. The kit provides several advantages including onsite detection and instantaneous results, elimination of use of sophisticated instruments for analysis, low investment on infrastructure for production of the kit, easy availability of raw materials and very good accuracy for the intended purpose.

Existing kits for onsite detection of Chromium (VI) are currently imported and the cost of analysis is beyond Rs.100 per sample. In comparison, analysis using BARC kit costs Rs.16 per sample. This is yet another example of BARCs efforts towards Make in India campaign of the Government of India.

The technology of the BARC kit for Cr(VI) detection has been transferred to M/s LTEK Industries, Nagpur.

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NMCG and IOC sign MoU for industrial use of treated water
Aug 17,2016

Union Minister for Water Resources, River Development and Ganga Rejuvenation Sushri Uma Bharti has said that a new beginning has been made with the foundation laying of STP in Mathura which will provide treated water for industrial use. Laying the foundation of 20 MLD STP in Vrindavan the Minister informed that the STP will be built at a cost of Rs. 40 crore. She said a nine kilometer pipeline from Laxmi nagar to Gokul barrage will carry the treated water to Mathura refinery. An MoU was also signed to this effect between National Mission for Clean Ganga (NMCG) and Indian Oil Corporation (IOC). Sushri Bharti said that with the adoption of hybrid annuity mode by NMCG the complexion of Yamuna will change completely in Mathura-Vrindavan by the year 2018. She said, every effort will be made to stop the flow of polluted water of Yamuna from Delhi to Mathura Vrindavan. The Minister said that with the use of pressure technology in irrigation we would be able to save about 60 percent water of Ganga and Yamuna which will help to maintain good e-flow of water in these rivers.

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Fitch: 1H16 Global Banks Rating Trend Still Negative
Aug 17,2016

Global bank rating trends were negative again in 1H16 for the fourth consecutive negative six-month period, says Fitch Ratings. The global distribution of Outlooks deteriorated in 1H16 as Negative Outlooks (22%) far outweighed Positives (5%), a level not seen since 2009.

Emerging market (EM) banks experienced the majority of negative ratings trends, heavily influenced by rating actions in Brazil, Russia, Saudi Arabia and Nigeria. In EMs, 29% of bank ratings are still driven by sovereign support, either directly or via state-supported parents. Sovereign downgrades triggered many EM bank downgrades because they signalled weakened ability to support. Almost 30% of EM bank Outlooks are Negative.

In the developed markets (DM), there was some good news. There were 16 rating upgrades of DM banks in 1H16, the highest number since before the global financial crisis. Six Swedish and Dutch banks were upgraded and an improved operating environment paved the way for upgrades in Slovenia. Cyprus banks ratings were also upgraded but ratings are still low in the B category.

Negative Outlooks (13%) still outweigh the Positives (10%) in the DMs but the gap is narrowing. DM banks have made significant progress in reducing legacy assets and strengthening capitalisation and we expect those banks, which have successfully restructured operations, to see some upside rating potential. However, banks that remain weighed down by large asset quality problems could be downgraded over the next one to two years. This is the case for the Italian banks where ratings Outlooks are mostly Negative. For Japans three large banks Outlook changes to Negative in 1H16 were driven by the changed Outlook on the sovereigns rating.

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Moodys: Global Integrated and E&P Sectors Shift to Stable on Cost-reduction, Business Efficiencies and Oil Price Uptick
Aug 17,2016

Buoyed by an expected recovery in oil and natural gas prices, alongside greater business efficiencies and cost-reduction efforts, Moodys changed its industry outlooks for both the global integrated oil and exploration and production (E&P) sectors to stable from negative. This marks the first change in outlook to stable for both sectors in nearly two years.

For the cyclical E&P sector, EBITDA has stabilized following a precipitous drop in cash flow, with prices for oil and natural gas recovering somewhat from a deep trough in the first quarter of 2016. And even as E&P restructurings and bankruptcies are expected to continue until commodity prices stabilize above breakeven levels, the larger, better-capitalized E&P companies growth will offset the smaller, leveraged companies weakness, leading to overall sector stability and eventual growth.

Stress in the E&P sector led to a surge in debt restructurings and bankruptcies in 2015-16, with many established companies succumbing to the tough operating environment, noted Amol Joshi, a Moodys Vice President. But significantly, efficiency gains, cost reductions and the shutting down of expensive marginal production have reduced breakeven costs for a leaner E&P sector -- a positive in whats otherwise been a challenging operating environment.

For integrateds, Moodys change in outlook to stable reflects expectations that the companies dominant upstream divisions are unlikely to deteriorate further following their accelerated cost-cutting efforts and higher realized oil prices.

Based on Moodys oil price estimates, the sector is not likely to generate sufficient operating cash flows to cover reduced capital spending and cash dividends until 2018, noted Elena Nadtotchi, a Moodys Vice President. Consequently, we expect integrated companies to continue to execute on the announced asset sales plans to help plug negative free cash flow in 2016-17.

The sectors EBITDA declined by around 40% in 2015 and is anticipated to fall further by roughly 10% in 2016 overall, owing mainly to lower oil prices in 2016 and weak operating conditions for refining. Even so, integrated companies substantially realigned cost structures to lower oil prices, which -- along with expected production growth -- suggests these companies are positioned to generate cash flows and positive earnings at current prices.

Nevertheless, integrateds face longer-term challenges of raising returns on capital at $40-$60/barrel oil prices, and delivering profitable growth in production beyond 2020.

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Special Summary Revision of Photo Electoral Rolls w.r.t. 01 January 2017 as qualifying date
Aug 17,2016

The Commission has decided to take up revision of electoral rolls with reference to 1st January 2017 as the qualifying date. The revision shall be a Special Summary Revision in all States and Union Territories (Except certain Assembly Constituencies of Andhra Pradesh and Telangana).

2. Adequate publicity and awareness drive shall be ensured by DEOs & CEO regarding the summary revision programme. All the DEOs and CEO shall get the revision schedule properly disseminated to media, political parties and social organizations/RWAs and reach out to electors/eligible population extensively well before the date of draft publication of electoral rolls. For making the purpose of publication of draft rolls effective, series of SVEEP events, multiple and periodic meetings with political parties at Taluk, district and state levels and regular press meets may be organized. All DEOs and CEO should separately call meetings of political parties and explain the schedule and seek cooperation expected of them before the date of draft publication. The draft publication should be done on the due date with fanfare and the copies of draft rolls should be handed over to political parties in public meeting in the presence of press, media and celebrities.

3.Periodic reporting to the Commission of progress made during the revision process in the prescribed Formats available at ECI dashboard shall be done regularly and in accordance with the procedure laid down therein. The CEO must check it to ensure its status. At all DEOs/EROs do the necessary entries in the dash board for e-roll monitoring and in All India E-roll Monitoring Application (AIERMA).

4. It is further clarified that NERP activities shall continue concurrently with revision. However, it must not cause any dislocation to roll revision activities which are of statutory in nature.

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Indias exports better placed in its product diversification: PHD Chamber
Aug 17,2016

Indias exports are better placed in product diversification as concentration of its top ten export products is only 58% as compared to most of the top ten leading export countries of World viz. Hong Kong (89%), Republic of Korea (86%), Japan (77%), UK (71%), Germany (70%), USA (68%), China (68%), Netherlands (63%) and France (60%), said an analysis conducted by PHD research Bureau of PHD Chamber of Commerce and Industry.

Higher the percentage of the country, the more it is concentrated to exports of few products and lesser the percentage of the country, the more diversified it is in terms of export diversification of its products.

India has consistently diversified its top ten export products as concentration of top ten export products was 60% in 2010 and 58% in 2015.

Notwithstanding the excellent diversification of export products, Indias export growth trajectory has showed lackluster performance due to slowdown in demand in the destination countries. Although things are improving in logistics and export infrastructure front, the cost of credit to exporters is still high as compared to its competitors in the international market said Dr. Mahesh Gupta, President, PHD Chamber of Commerce and Industry.

As world economy witnessed slowdown in demand, all the leading export countries posted a negative growth in 2015 except France. Export growth was negative in Netherlands (-17%), Italy (-13%), Germany (-11%), UK (-9%), Republic of Korea (-8%), USA (-7%), Hong Kong (-5%), China (-3%) but positive in France at (1%).

India stands 19th in the list of exporters (worldwide) with merchandise exports valued at US $262 billion. Indias share in world exports is estimated at 1.6% with a growth rate of ( - )15.5% in the year 2015-2016 (for details refer Annexure II).

Further, a ray of hope is emerging with decent efforts undertaken by the government in improving the ease of doing business and reforms in the export infrastructure, he said.

With the continuous reforms, exports showed a positive growth of 1.27% in the month of June, 2016 and hopefully one can anticipate an incremental growth scenario in the coming months too, said Dr. Mahesh Gupta.

Going ahead, there is lot of potential for India to enhance its exports as 7 out of the top 10 export destinations of India such as USA, UAE, Hong Kong, China, UK, Singapore and Germany are also among the top ten export destinations of leading World exporters.

As these destinations are already in focus of our exporters, the need of the hour is to enhance our competitiveness in terms of reduced costs of capital and improved exports logistics to increase our volumes of exports, said Dr. Mahesh Gupta.

Going ahead, the continuous pace of reforms at domestic front and recovery in the international market would help India to remain in positive exports growth trajectory in the coming months.

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There are Interesting, profitable and challenging times for the financial sector
Aug 17,2016

The Reserve Bank of India Governor, Dr. Raghuram Rajan, sought to disentangle the performance monitoring maze that public sector banks have to contend with, suggesting that n++It was important to streamline and reduce the overlaps between the jurisdictions of the authorities, and specify clear triggers or situations where one authoritys oversight is invoked.n++

Dr. Rajan said, n++A variety of authorities - Parliament, the Department of Financial Services, the Bank Board Bureau (BBB), the board of the bank, the vigilance authorities, and various regulators and supervisors including the RBI - monitor the performance of the public sector banks. With so many overlapping constituencies to satisfy, it is a wonder that bank management has time to devote to the management of the bank.n++

The RBI Governor said that there is a need to move much of the governance to the banks board, with the Government exercising its control through its board representatives (chosen by the BBB), keeping in mind the best interests of the bank and the interests of minority shareholders. Wherever possible, public sector bank boards should be bound by the same rules as private sector bank boards - one reason why the RBI has recently withdrawn the Calendar of Reviews PSBs were asked to follow. Similarly, board membership of public sector banks should pay as well as private sector banks if they are to attract decent talent, he emphasised.

As boards take decisions, Dr. Rajan suggested that the Department of Financial Services could move to a program role such as ensuring government programs such as PMJDY are well designed, appropriately remunerated to banks, and progress monitored; a coordinating role that ensures that financial institutions join a common KYC registry and a developmental role for revitalizing institutions like the Debt Recovery Tribunals through appropriate legislation. RBI, he added, would perform a purely regulatory role, and withdraw its representatives on bank boards, subject to legislative change. Over time, RBI should also empower boards more, for instance offering broad guidelines on compensation to boards but not requiring every top compensation package be approved.

Furthermore, the Governor pointed out that given strong oversight from the banks board, the Central Vigilance Commission and the Comptroller & Auditor General should get involved only in extraordinary situations where there is evidence of malfeasance, and not when legitimate business judgment has gone wrong.

He said the time had come to move more to improving the operational efficiency of stressed assets, and creating the right capital structure so that all stakeholders can benefit. This implies simultaneous action on two fronts. Where necessary, new project management teams have to be brought in, sometimes as owners, and where this is not possible, as managers. A creative search for new management teams, including the possible use of public sector firms or private sector agents, is necessary, as are well-structured performance incentives for non-owner teams such as bonuses for meeting cash flow/profit benchmarks and stock options.

n++These are interesting, profitable, and challenging times for the financial sector. Interesting because the level of competition is going to increase manifold, both for customers as well as for talent, transforming even the sleepiest areas in financial services. Profitable because new technologies, information, and new techniques will open up vastly new business opportunities and customers. Challenging because competition and novelty constitute a particularly volatile mix in terms of risk, Dr. Rajan said.

He said, despite increased competition, profitability of banks can increase. The comparative advantage of banks may lie in their access to lower cost deposit financing, the data they have on customers, the reach of their network, their ability to manage and warehouse risks, and their ability to access liquidity from the central bank. These should then be the basis for the products they focus on.

India, he said, will have enormous project financing needs in the coming days. Even though bankers are very risk averse today, and few projects are coming up for financing, this will change soon. What is in the pipeline is truly enormous - airports, railway lines, power plants, roads, manufacturing plants, etc. Bankers will remember the period of irrational exuberance in 2007-2008 when they lent without asking too many questions. n++I am hopeful that this time will be different. Here are ways it can be different and risks lowered. First, significantly more in-house expertise can be brought to project evaluation, including understanding demand projections for the projects output, likely competition, and the expertise and reliability of the promoter. Bankers will have to develop industry knowledge in key areas since consultants can be biased. Second, real risks have to be mitigated where possible, and shared where not. Real risk mitigation requires ensuring that key permissions for land acquisition and construction are in place up front, while key inputs and customers are tied up through purchase agreements. Where these risks cannot be mitigated, they should be shared contractually between the promoter and financiers, or a transparent arbitration system agreed upon, n++ he said.

The third element of project structuring, said, was an appropriately flexible capital structure. The capital structure has to be related to residual risks of the project. The more the risks, the more the equity component should be (genuine promoter equity, not fake borrowed equity, of course), and the greater the flexibility in the debt structure. Promoters should be incentivized to deliver, with significant rewards for on-time execution and debt repayment. Where possible, corporate debt markets, either through direct issues or securitized project loan portfolios, should be used to absorb some of the initial project risk. More such arms length debt should typically refinance bank debt when construction is over. Hopefully, some of the measures taken to strengthen corporate debt markets, including the new bankruptcy code, should make all this possible. Fourth, financiers should put in a robust system of project monitoring and appraisal, including where possible, careful real-time monitoring of costs. For example, can project input costs be monitored and compared with comparable inputs elsewhere using IT, so that suspicious transactions suggesting over-invoicing are flagged?

And finally, the incentive structure for bankers should be worked out so that they evaluate, design, and monitor projects carefully, and get significant rewards if these work out. This means that even while committees may take the final loan decision, some senior banker ought to put her name on the proposal, taking responsibility for recommending the loan. IT systems within banks should be able to pull up overall performance records of loans recommended by individual bankers easily, and this should be an input into their promotion.

As for the challenges faced by Public Sector Banks, the most pressing task is to clean up their balance sheets, a process which is well under way. A parallel task is to improve their governance and management. Equally important is to fill out the ranks of middle management that have been thinned out by retirements, and to recruit talent with expertise in project evaluation, risk management, and IT, including cyber security.

Concluding his address, the RBI Governor said that with changes in technology, cyber security, both at the bank level and at the system level, has become very important. n++I think it would be overly complacent for anyone of us to say we are well prepared to meet all cyber threats. A chilling statement by an IT expert is 12 We have all been hacked, the only question is whether you know it or you dont. While the statement may be alarmist, it is an

Despite the Current Decline, Oil Market on the Path to Rebalancing-OPEC President
Aug 17,2016

n++Higher oil demand is expected in the 3rd and 4th Quartersn++, HE Dr Mohammed Bin Saleh Al-Sada, Qatars Minister of Energy and Industry and current OPEC President said, expressing positive sentiments in a brief released from OPEC.

He added that, since February of this year, the oil price had experienced a steady improvement following a decline in crude oil production, supply outages and a decrease in oil inventories, while the global demand for oil improved in that period.

Dr Al-Sada said that the recent decline observed in oil prices and the current market volatility is only temporary. These are more of an outcome resulting from weaker refinery margins, inventory overhang - particularly of product stocks, timing of Brexit and its impact on the financial futures markets, including that of crude oil.

The Minister said, the economies of major oil consuming countries are expected to improve which in turn would augment oil demand in the coming quarters, especially in preparation for the approaching winter season in the Northern Hemisphere. This expectation of higher crude oil demand in 3rd and 4th Quarters of 2016, coupled with decrease in availability is leading the analysts to conclude that the current bear market is only temporary and oil price would increase during later part of 2016.

He reminded that investment is needed not only to meet the growth in demand but also to stem the natural decline of oil production from operating wells. He alluded to the expected decline in the oil supply vis-n++-vis the demand and tightening of the markets in the period ahead, due to the unprecedented drop in capital expenditure in the Oil & Gas projects across the globe during 2015 and 2016 leading to curtailment of investments which were scheduled to be undertaken over the next four years.

OPEC continues to monitor developments closely, and is in constant deliberations with all member states on ways and means to help restore stability and order to the oil market. An informal meeting of OPEC member countries is scheduled to take place on the sidelines of the 15th International Energy Forum which will take place in Algeria from 26 to 28 September 2016.

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Pickup in Factory Output Not Assuring; Further Price Shocks Cannot be Ruled Out
Aug 17,2016

India Ratings and Research (Ind-Ra) opines the industrial growth will not return to a sustained and high growth path so long as excess capacity in the manufacturing sector remains and private sector investment cycle does not revive. A consecutive month of positive growth in the Index of Industrial Production (IIP) though is encouraging, Ind-Ra believes it is still too early to expect an improvement and stability in industrial growth. Also, Ind-Ra believes that food inflation despite favourable monsoons could surprise on the upside and food items could be anything ranging from potato, tomato, onion, milk, egg, pulses etc., as has been the case in the past.

The retail and wholesale inflation for July 2016 at 6.07% and 3.55% came in higher than Ind-Ras expectation of 5.83% and 1.8%, respectively. IIP maintained its second consecutive month of positive growth at 2.1% in June 2016 as against 1.1% yoy in May. The IIP growth had turned positive in February and March and negative in April 2016.

Manufacturing output (75.5% weight in IIP) increased to 0.9% yoy in June 2016 from 0.6% in the previous month. Such a marginal increase in manufacturing does not generate confidence that the downtrend in manufacturing has been reversed. The capacity utilisation in manufacturing has been hovering in the range of 70%-75% now for nearly five years.

Food products & beverages, chemicals & chemical products, petroleum products, motor vehicles & trailers, non-metallic mineral products and textiles, which together have a weight of 51% in manufacturing, clocked higher growth rates in June 2016 than in the previous month. Mining and electricity grew 4.7% and 8.3% in June 2016 as against 1.4% and 4.7%, respectively, in the previous month.

The disconnect between IIP and industrial gross value added data is making it increasingly difficult to discern the sectoral as well as overall industrial and manufacturing output growth trend. The base year used for IIP calculation is 2004-05, while industrial gross value added is based on 2011-12 prices. The use of 2004-05 means a lot of data relating to industrial/manufacturing output is not captured by IIP.

At the use-base level, capital goods output continued its negative trend. Capital goods output contracted 16.5%yoy in June 2016 against a contraction of 12.3% in May 2016. This reinforces the lacklustre investment demand in the economy. Basic and intermediate goods continued with the positive trend and clocked higher growth rates than the previous month. Consumer durables maintained the positive growth trend, although growth rate moderated to 5.6% in June from 6% in May 2016. Consumer non-durables reversed the seven months of negative growth rate and clocked 1% in June 2016 as against negative 2.3% in May 2016.

Inflation, both retail and wholesale, surprised on the upside, reinforcing the upside risks to the inflation trajectory emphasised upon by the central bank in its second and third bi-monthly monetary policy reviews. Rainfall has been above normal so far and the area sown under pulses and cereals, as reported by the agriculture ministry, is larger than in the previous year. This has raised the expectation that food inflation will moderate in the coming months and bring down the overall inflation.

Retail price inflation rose further to 6.07% in July 2016 from 5.77% in June 2016, led by higher food price inflation. Among the various components of retail inflation, food prices rose for the fourth consecutive month in July 2016 (8.4% in July versus 7.8% in June). Vegetable prices moderated to 14.1% in July from 14.8% in June 2016; however, this was more than offset by a sharp rise in prices of sugar, cereals, egg, milk and pulses. Sugar prices increased to 21.9% in July 2016 from 16.8% in the previous month. Services inflation showed a slight uptick to 4% in July 2016 from 3.8% in June 2016, led by higher inflation in the personal care category (July: 7.3%; June: 5.9%).

Wholesale Price Index (WPI) inflation increased to 3.55% in July 2016 from 1.62% in the previous month, led by the sharp rise in food inflation. WPI excluding fruits, vegetables, pulses and sugar stood at 1.75% in July 2016. Although these four commodities have been the key drivers of WPI, even with the exclusion of these items WPI has picked up pace in the last two months. Core (non-food non-fuel) inflation turned positive and came in at 0.09% in July 2016 after 16 months of consecutive deflation.

Food inflation component of wholesale inflation rose to 11.82% in July from 8.18% in June 2016, once again led by a sharp rise in prices of pulses, fruits, vegetables and sugar. Prices of fruits and vegetables rose to 22.33% in July 2016 from 11% in the previous month. Food grains (cereals and pulses) and sugar prices rose to 13.57% (June: 10.90%) and 32.33% in July 2016 (June: 26.09%). Although part of the reason for price rise could be attributed to the base effect, it is time to question our current understanding of the food economy and its demand and supply dynamics.

An analysis of food inflation data over the past six to seven years suggests that nothing has been able to tame food inflation. The goal post shifts each time food inflation surprises on the upside. It has become routine to put the blame on the failure of monsoon, unseasonal rainfall, the futures market in agricultural commodities and sometimes on hoarding/ black-marketing and so on. Ind-Ra believes that something more structural has happened in the economy about which we talk but are still not ready to admit - shift in the income, consumption and the aspiration dynamics of people who are at the bottom of the pyramid. So long as we do not get this right, addressing food inflation on a sustained basis will remain a pipe dream.

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India set to seize big opportunity in logistic costs saving through Sagarmala
Aug 17,2016

Augmenting operational efficiency of ports & optimizing logistics evacuation can give boost to Indian trade and help seize the big opportunity of growth in Indian cargo traffic at ports which is estimated to increase to 2.5 bn MMTPA by 2025, says a report prepared under the Sagarmala port-led development programme of Ministry of Shipping. The Origin Destination study on cargo traffic projections & logistics bottlenecks emphasis on the need for creation of efficient infrastructure at requisite demand and logistic chain centres.

Currently 95% of Indias trade by value and 70 % by volume take place through maritime transport. Globally, maritime nations such as China, South Korea and Japan have effectively used their coastline for port-led development. It is therefore essential for India to optimize logistics cost and identify capacity additions required at different ports to prepare for future traffic flow. Focusing on the total demand and supply situation of major EXIM flow of key commodities currently being handled by ports, the report suggests i) the opportunities to optimize logistics cost for existing and future cargo capacities and ii) Capacity additions or reconfigurations needed at various ports to prepare for future traffic flow, including new ports development.

The study estimates the potential to save around INR 35,000-40,000 Crores per annum by optimizing logistics flows for key commodities by 2025. Some of the key drivers identified for this are promoting coastal shipping of bulk commodities like coal, setting-up coastal clusters for bulk commodities like cement & steel and providing last-mile connectivity of ports with National Highways and Railway network.

Identifying the opportunity of increase in cargo traffic to 2.5 bn MMTPA by 2025, the report suggests various enablers for unlocking this opportunity under Sagarmala. Establishing new transshipment port, creating dedicated coastal berths ports for coastal shipping, setting up storage capacities at origin-destination ports to shorten turnaround time and developing adequate ship-repair facilities in the maritime states are some of these key enables suggested in the study.

It also captures the overall opportunity with India to save on logistic costs, make Indian goods more competitive in the global markets and hence drive its port-led-development agenda under Sagarmala. The programme aims to change the way logistics evacuation happens in India, save logistics costs nationwide for cargo handled and evacuated through seaports, boost overall economic development through ports and empower coastal communities.

The vast scope of Sagarmala implies that partnership with and support from key stakeholders is essential for success of the programme. Aligning with the governments Make in India campaign, private-sector participation through PPP models will be explored for developing port infrastructure, railway infrastructure and coastal shipping. The Ministry is also reaching out to relevant stakeholders through workshops and meetings with the project development consultants for alignment on proposed ideas under the programme.

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Record handling of automobiles at Mumbai port
Aug 17,2016

Continuing its march to set ever higher records of handling cars, Mumbai Port has set a new record of shipment of 6316 cars on a single ship on its new berth OCT- 2. This is a quantum jump over the previous record of shipment of 5376 cars.

The ship M. V. HOEGH ST PETERSBERG berthed on 6th August 2016 and sailed on 9th August 2016 with 6316 cars shipment mainly consisting of 3115 cars of general motors and 3093 cars of Volkswagen and exported mostly to Mexico.

Mumbai Port Trust is consistently contributing to the Make in India campaign by facilitating the export of Made in India cars.

Mumbai Port has been focusing on the export and handling of cars and has emerged as number one port on the West Coast of India growing at about 25% for last few years. It is committed to improve the facilities & help reducing the cost of handling cargoes.

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