INDUSTRY NEWS DIGEST

VOLUME 3 NO. 6

1- 30 JUNE, 2012

PUBLISHED MONTHLY BY: CENTRAL LIBRARY

AMITY UNIVERSITY, LUCKNOW CAMPUS LUCKNOW

PREFACE

Industry News Digest attempts to provide a unified overview of the industries. Volume 3, Number 6 (1-30 June, 2012) is the Sixth issue of the bulletin published during 2012. In this issue, one article entitled A BRIEF REPORT AUTO AND AUTO ANCILARIES IN INDIA MARCH, 2012 has been included. Abstracts in this digest are scanned from The Economic Newspaper. It is hoped that this issue will reach a wide and interested users. In case the full text or any other information is desired, the same may be obtained from the library.

Librarian

Content Index
Subject Page Number

A BRIEF REPORT AUTO AND AUTO ANCILARIES IN INDIA MARCH, 2012.4

Automobile Industry.15 Banking/ Credit Services..18 Biotechnology.21 Drugs/ Pharmaceuticals22 Education and Training28 Electronics/ Telecommunication..31 Export/Import32 Foreign direct investment.34 Human Resource Development36 Indian/ Global Economy...38 Industry News ...43 Information Technology....44 Infrastructure Investment.45 Public Sector Undertaking45 Tax/Taxation...46

A BRIEF REPORT AUTO AND AUTO ANCILARIES IN INDIA MARCH, 2012

1. OVERVIEW OF AUTO INDUSTRY

1.1 Current Status One of the major industrial sectors in India is the automobile sector. Subsequent to the liberalization, the automobile sector has been aptly described as the sunrise sector of the Indian economy as this sector has witnessed tremendous growth. Automobile Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles except in some special cases. The norms for Foreign Investment and import of technology have also been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive. At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological upgradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is also allowed under automatic route in this sector. With the gradual liberalization of the automobile sector since 1991, the number of manufacturing facilities in India has grown progressively. The cumulative production of automobile for April-December 2011 registered a growth of 14.94 per cent over same period in 2010. Production in December 2011 increased by 10.91 per cent year-on-year. Automotive Industry comprises of automobile and auto component sectors and is one of the key drivers of the national economy as it provides large-scale employment, having a strong multiplier effect. Being one of the largest industries in India, this industry has been witnessing impressive growth during the last two decades. It has been able to restructure itself, absorb newer technology, align itself to the global developments and realize its potential. This has significantly increased automotive industry's contribution to overall industrial growth in the country.

The turnover of the auto component industry stood at Rs. 1821.27 billion (USD 39.9 billion) for the period April 2010 to March 2011, registering a growth of 34 per cent (in rupee terms) over the previous year.

1.2

Growth Drivers of Indian Automobile Market

1. Rising industrial and agricultural output 2. Rising per capita income 5

3. Favourable demographic distribution with rising working population and middle class 4. Urbanisation 5. Increasing disposable incomes in rural agri-sector 6. Availability of a variety of vehicle models meeting diverse needs and preferences 7. Greater affordability of vehicles 8. Easy finance schemes 9. Favourable government policies 10. Robust production 1.3 1. 2. 3. 4. 5. 6. 7.
India's Position in World's Production Well-developed, globally competitive auto ancillary industry Established automobile testing and R&D centres Among one of the lowest cost producers of steel in the world Worlds second largest manufacturer of two wheelers Fifth largest manufacturer of commercial vehicles Manufactures largest number of tractors in the world Ninth largest car manufacturer in world

India's growing Automobile Production

Automobile Production Trends Category Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total 2004-05 1,209,879 353,703 374,445 6,529,829 467,853 2005-06 1,309,300 391,083 434,423 7,608,697 9,743,503 2006-07 1,545,223 519,982 556,126 8,466,666 11,087,997 2007-08 1,777,583 549,006 500,660 8,026,681 10,853,930 2008-09 1,838,593 416,870 497,020 8,419,792 11,172,275 2009-10 2,357,411 567,556 619,194 10,512,903 14,057,064 (Number of Vehicles) 2010-11 2,987,296 752,735 799,553 13,376,451 17,916,035

1.4

Domestic Sales

1. Passenger car sales increased by 4.24 per cent to 1.946 million units (from 1.867 million units in 2010),
two-wheeler sales by 16.22 per cent to 13 million units and three-wheeler sales by 4.74 per cent to 525,000 units 2. For 2011-12, passenger cars sales are expected to grow at 0-2 per cent, two-wheelers at 13-15 per cent and commercial vehicles at 18-20 per cent. Passenger Vehicles registered grew 18.14 per cent in this period while two- wheelers, commercial vehicles and three wheelers segments recorded growth of 29.75 per cent, 24.66 per cent and 42.63 per cent respectively

3. Overall automobile exports registered a growth rate of 28.97 per cent during April- December 2011.

Automobile Domestic Sales Trends Category Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total 1.5 Exports

2004-05 1,061,572 318,430 307,862 6,209,765 7,897,629

2005-06 1,143,076 351,041 359,920 7,052,391 8,906,428

2006-07 1,379,979 467,765 403,910 7,872,334 10,123,988

2007-08 1,549,882 490,494 364,781 7,249,278 9,654,435

2008-09 1,552,703 384,194 349,727 7,437,619 9,724,243

2009-10 1,951,333 532,721 440,392 9,370,951 12,295,397

(Number of Vehicles) 2010-11 2,520,421 676,408 526,022 11,790,305 15,513,156

In 2010 (April-August), overall automobile exports registered a growth rate of 48.42 percent. Passenger vehicles, two wheelers, commercial vehicles and three wheelers segments grew by 5.07 percent, 56.71 percent, 91.51 percent and 114.86 percent respectively in 2010 (April-August) over 2009 (April-August).
Automobile Domestic Sales Trends Category Passenger Vehicles Commercial Vehicles Three Wheelers Two Wheelers Grand Total 1.6 2004-05
166,402 29, 940 66,795 366, 407 629, 544

2005-06
175,572 40, 600 76,881 513,169 806, 222

2006-07
198,452 49,537 143,896 619,644 1,011,529

2007-08
218,401 58,994 141,225 819,713 1,238,333

2008-09
335,729 42,625 148,066 1,004,174 1,530,594

2009-10
446,145 45,009 173,214 1,140,058 1,804,426

(Number of Vehicles) 2010-11

453,479 76,297 269,967 1,539,590 2,339,333

Major Automotive Players in India Companies Ashok Leyland Asian Motor Works Bajaj Auto BMW India Daimler Chrysler India Eicher Motors Fiat India Force Motors Ford India General Motors India Hero Honda Motors Hindustan Motors Honda Hyundai Motors Kinetic Motor Mahindra & Mahindra Maruti Suzuki Piaggio Royal Enfield Motors Skoda Auto India Suzuki Motorcycles Swaraj Mazda Ltd Tata Motors Cars Toyota Kirloskar TVS Motor Co Volvo India Volkswagen India Yamaha Motor India

Segments LCVs, M&HCVs, buses M & HCVs Two and three wheelers Cars and MUVs Cars LCVs, M & HCVs Cars MUVs and LCVs Cars and MUVs Cars & MUVs Two wheelers Cars, MUVs and LCVs Two wheelers, cars and MUVs Cars and MUVs Two wheelers Three wheelers, cars, MUVs, LCVs Cars, MUVs, MPVs Three wheelers, LCVs Two wheelers Cars Two wheelers LCVs, M & HCVSs, buses MUVs, LCVs, M&HCVs, buses Cars, MUVs Two wheelers M & HCVs, buses Cars Two wheelers

1.7 1.7.1 1.

Profile Of Major Players In India Tata Motors Instigated in the year 1945, Tata Motors has a wide network of retailers and suppliers across India. It was in 1954 that the company launched its first vehicle. Today more than 3 million Tata cars and heavy vehicles glide through Indian roads. The company gained the prestige of being the first from engineering industry of India to be listed under the New York Stock Exchange in September 2004. Besides being second biggest in the passenger car division, Tata Motors is also ranked as fifth highest in the category of medium and heavy commercial vehicles at international level. its customers. It's foremost indigenously made car was Tata Indica, followed by a mini-truck Tata Ace in 2005. In the year 2009, the firm marked its name in the pages of automotive history by introducing the world's fuel efficient and cheapest car - Tata Nano. Mahindra and Mahindra Mahindra and Mahindra is the flagship company of Mahindra Group. It was set up in 1945 to make general purpose utility vehicles for the Indian market and soon it started manufacturing agricultural tractors and light commercial vehicles (LCV). The company has recently started a separate sector, Mahindra systems and automotive Technologies (MSAT) in order to focus on developing components as well as offering engineering services. Mahindra and Mahindra have two main operating divisions. One is the Automotive Division for the manufacturing of utility vehicles, LCV and three wheelers. General Motors In 1928 General Motors began with assemblege of Chevrolets, trucks, buses and batteries. Although it closed operations in 1954, it has been in Indian market as a part of tie-ups with Hindustan Motors to produce Bedford trucks, Vauxhall cars, Allison transmission and off- highway equipments. In 1994, General Motors India was incorporated as a 50-50 joint venture with C.K. Birla Group of Companies. In 1999 it became a fully owned subsidiary of General Motors when General Motors Overseas Corporation bought the remaining shares. The existing General Motors plant was originally built by Hindustan Motors. In 1994 General Motors modernized it. The plant is located at Halol, near Vadodara, Gujarat. Ford India Ford has been in India since 1907 when it launched Model A here. In 1926, Ford India was established, but the operations were discontinued in 1954. Again in 1995, Ford Motor Company received government approval to establish Mahindra Ford India, Limited (MIFL).

2.

3. With the help of its associates, Tata Motors offer high end manufacturing and automotive solutions to

1.7.2 1.

2.

1.7.3 1.

2. 1.7.4 1.

2. It was a 50:50 joint venture with Mahindra and Mahindra Limited (M & M). In November 1998 Ford

received approval to increase its take in the joint venture to 92.18%. The Company was re- christened as Ford India Limited. It has set up a modern, integrated manufacturing facility in Maraimalai Nagar near Chennai.

3.

1.7.5 1.

Bajaj Auto Ltd Bajaj Auto Ltd. is the largest exporter of two and three wheelers. With Kawasaki Heavy Industries of Japan, Bajaj manufactures state-of-the-art range of two-wheelers. The brand, Pulsar is continually dominating the Indian motorcycle market in the premium segment. Its Discover DTSi is also a successful bike on Indian roads. Since 1986, there is a technical tie-up of Bajaj Auto Ltd. with Kawasaki Heavy Industries of Japan to manufacture state-of-art range of latest two-wheelers in India. The JV has already given the Indian market the KB series, 4S and 4S Champion, Boxer, the Caliber series, and Wind125. Maruti Udyog In February 1981 Maruti Udyog Limited (MUL) was incorporated under the provisions of the Indian Companies Act, 1956. It was established to meet the growing demand of a personal mode of transport caused by the lack of an efficient public transport system. A license and Joint Venture Agreement was signed between Government of India and Suzuki Motor Company (now Suzuki Motor Corporation of Japan) in October 1982. It manufactured India's first affordable cars. In the past twenty years it has diversified into various type of passenger cars catering to the need of different section of the population. The manufacturing Unit of is located at Palam Gurgaon Road, Gurgaon, Haryana. Hero Honda Motors

2.

1.7.6 1.

2. 1.7.7

1. Hero Honda Motors, an India based Two-wheeler Company. It is regarded as the Worlds Largest
Manufacturer of Two-wheelers.

2. It manufactures geared and gear-less two-wheelers. It caters low powered bikes to high power bikes to

its wide pool of 15 million customers world wide. Products like Hero Honda Splendour, Hero Honda Passion, CD Dawn, Hero Honda CBZ and Hero Honda Karizma are extremely popular among masses. Their products are well known for fuel efficiency and as well as power delivery coupled with affordability. Its gearless or step-thru models like Hero Honda Street and Hero Honda Pleasure are also gaining huge popularity amongst young Indian ladies.

1.8

Opportunities and Incentives in Auto Industry

1. The Department of Heavy Industry (DHI), in the Ministry of Heavy Industries and Public Enterprises,
is the nodal authority in India for promoting the development and growth of the automotive sector. The department is also concerned with the development of the heavy engineering industry, machine tool industry, heavy electrical industry, industrial machinery, etc.

2. The Government of India is in the process of forming a National Automotive Board (NAB) which
would become a formal set-up to look into the issue of recall of vehicles and hence improve manufacturing standards. The prospective body, to oversee technical and safety aspects of vehicles, will have representatives from all the nodal ministries and automotive bodies such as the Automotive Research Association of India (ARAI).

3. Similarly, the Government of Gujarat has also announced its plan to disburse 240 acres of land at

Sanand to the All India Plastic Manufacturers Association (AIPMA) to set up a plastic park that could attract an investment of about Rs 50 billion (US$ 981.65 million). The Government's move marks its eye for detail as the measure has come in the light of the fact that a finished car would require about 150 kgs of plastic.

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2. OVERVIEW OF AUTO COMPONENT INDUSTRY

2.1 Current Status
The Indian auto component industry is one of India's sunrise industries with tremendous growth prospects. From a low-key supplier providing components to the domestic market alone, the industry has emerged as one of the key auto components centres in Asia and is today seen as a significant player in the global automotive supply chain. India is now a supplier of a range of high-value and critical automobile components to global auto makers such as General Motors, Toyota, Ford and Volkswagen, amongst others. Further the segment has created a niche by diversifying its portfolio into aerospace, power segments and prosthetics. The strategy and plan to look into newer markets outside the country also helped the auto component manufacturers to survive the global recession. Acquisition by automotive major such as Mahindra and Mahindra helped the sector in expanding its technology and providing value-added services to the customers. The evolution of the Euro emission norms also made the manufacturers rethink their business plans to meet the demand for improved products.

The potential compounded annual growth rate (CAGR) of the auto component industry is estimated to be around 26 per cent in the period 2010-11. Exports from the auto component industry are estimated to be worth US$ 5 billion in 2010-11. Indian components business at Rs 248 billion (US$ 4.87 billion), 49.7 per cent of which is formed by two-wheeler segment. Passenger vehicles, commercial vehicles and three-wheelers follow with 24.7 per cent, 23.1 per cent and 2.5 per cent of the share respectively. Europe accounted for 36 percent of exports followed by Asia and North America at 28 percent and 23 percent respectively. Although the proportion of exports to Europe declined from 40 percent last year to 36 percent, however in absolute terms the exports grew by 46 percent. Exports to North America and Asia grew by 65 percent and 48 percent respectively. With exports to North America, Europe Asia and other parts of the world are improving, a full recovery of exports are expected to gain strength in 2011-12. 2.2 Major players Sona Koyo Steering Systems, Rane Madras and Rane TRW Systems are the key players in steering systems.

11

Bharat Gears, Gajra Bevel Gears and Eicher are some of the major players in the gears sub- segment. Two international companies, GrazianoTrasmissioni and SlAP Gears India, have set up their base in India. Clutch Auto, Ceekay Daikin, Amalgamations Repco and Luk Clutches are the major players in the clutch sub-segment. RaneBrake Lining and Rico Auto are the key players manufacturing clutch-facings. GKN Driveshafts (India) and Delphi cater to the drive shaft requirements of passenger cars and SonaKoyo Steering Systems services to the commercial vehicle segment. Brakes India, KalyaniBrakes and Automotive Axles are the three major brake system suppliers in the country. Rane Brake Lining, SundaramBrake Lining, Hindustan Composites and Allied Nippon dominate the brake linings sub-segment. Jamna Auto and Jai Parabolic are the major manufacturers of leaf springs. Gabriel India, Delphi and Munjal Showa are the key manufacturers of shock absorbers. Lumax, Autolite and Phoenix Lamps are the key players in the headlights sub-segment. Premiere Instruments and Controls is the leading player in the dashboard sub-segment. Jay Bharat Maruti, Omax Auto and JBM Tools are the major players in the sheet metal parts subsegment. Lucas TVS, Denso, Delco Remy Electricals and Nippon Electricals are the key players in this segment. Phoenix Lamps, Autolite, Hella India and Lumaxare prominent players manufacturing sheet metal parts. 2.3 Policy Initiatives The government has taken many initiatives to promote foreign direct investment (FDI) in the industry.

1. Automatic approval for foreign equity investment up to 100 per cent of manufacture of automobiles
and components is permitted 2. The automobile industry is delicensed 3. Import of components is freely allowed The Ministry of Heavy Industries and Public Enterprises has envisaged the Automotive Mission Plan 2006-2016 to promote growth in the sector. It targets to:

1. 2. 3. 4.

Increase turnover to US$ 122 billion US$ 159 billion by 2016 from US$ 34 billion in 2006 Increase export revenue to US$ 35 billion by 2016 Provide employment to additional 25 million people by 2016 The automotive sector is expected to contribute 10 per cent of the country's GDP by 2016 The auto component industry welcomed the government's announcement of excise duty rollback being limited to 2 per cent during the Union Budget 2010. The government also announced the increase of the deduction limit for Research and Development (R&D) in the sector from 150 per cent to 200 per cent.

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3. CHALLENGES AHEAD
Indian auto industry is one of the most promising and growing auto industries across the world. But at this juncture the Indian auto industry is facing various challenges catering to the growing domestic market. The three major challenges faced by auto industry are described below: 3.1 Rising oil price International price of crude oil has crossed US$ 120 per barrel and is rising at an alarming rate. The forecast of market experts that the crude oil price will plateau around US$ 100 per barrel has been proved wrong. The skyrocketting crude oil price rise will affect the economic growth of most of the nations of the world including India. The prospects of India and China of becoming economic superpower will be seriously affected. Also, the rise in oil prices will impact the growth of global automotive industry. Unless the use of alternative fuels increases, it is very unlikely that the situation will change for the better. This necessarily means that more and more investments should be directed towards R&D, establishing mechanisms to translate R&D results into products and their efficient manufacturing. This will also require radical redesigning of engines. 3.2 Fuel Technology Technology is significant and needed to ignite the growth of auto industry. Whether its a two- wheeler or a car, technology drives the growth. The challenge of alternative fuel technology ensures a brighter vision of the auto industry in the country. The increasing environmental pollution has become a concern for manufacturers and all associated with the industry. All of them are struggling hard to come up with a holistic and integrated approach to reduce carbon dioxide emission. Some of the initiatives to reduce the level of automotive emission include introduction of fuel-efficient cars, obligatory periodic maintenance, and inspection of automotives, designing automotives with recyclable materials, use of alternative fuels like CNG, LPG, biodiesel, and introduction of electric and hybrid cars. Car manufacturer like Maruti Suzuki has already introduced the new concept of using recyclable substance for car production in its dazzling car Maruti Suzuki A-Star. After the production of Maruti Suzuki AStar, the company thrives to apply the same concept in all its future car models. 3.3 Nurturing Talented Manpower In India, engineering colleges and technology institutions impart engineering education. Many of these institutions used to provide training in automotive engineering through well-established Internal Combustion Engineering (ICE) and Mechanical Engineering departments. However, the new wave of IT, electronics and communication technology has forced these institutions to close down ICE departments and also reduce the number of Mechanical Engineering departments. The well-known ICE department of the Indian Institute of Science that produced high quality research and trained manpower is a sad example of these developments. It is true that more than 50 per cent of the total components of the current automobiles are electronic and that the importance of communication technology is also increasing. However, the advances and training in these areas cannot be at the cost of the fundamental aspects of auto engineering including thermodynamics. Therefore, we need to redesign our automotive engineering courses and brand them properly to attract good students. This will help in not only increasing the number of auto engineers, which is crucial to the growth of the auto industry, but also getting the human resources to carry out research in the auto sector and achieve breakthroughs necessary for designing the next-generation vehicles. There is also an urgent need to improve the quality of skilled and semi skilled manpower working in the auto industry. To do this the existing vocational educational institutions have to be upgraded and more number of such institutes should be started. Today, most of our vocational educational institutes have poorly trained, unmotivated and uninspiring teaching faculty, and outdated equipment, machines,

13

syllabus and governance system. National Knowledge Commission, in its recent report has given several recommendations to improve vocational training in this country. The Central Government has accepted all the recommendations. Two major recommendations are rebranding the vocational education by updating the syllabus and public-private partnership (PPP) in the establishment and governance of vocational educational institutes. Accordingly, the finance minister has allotted an initial amount of Rs. 1,000 crores in this year's budget to establish a corporation of Rs. 15,000 crore outlay through PPP model. It is hoped that this corporation will help immensely in revolutionising and making the vocational education more relevant to the contemporary needs. The third area that needs to be addressed immediately is the shortage of human resources in auto design. The government as well as the professionals have realised that creative people in India need to be given training by which they can come into the mainstream and design contemporary products in general and autos in particular. National Institute of Design at Ahmedabad is playing a seminal role in producing good designers. However, the output of the institute is very small. Therefore, in the first of its kind National Policy of Design, the Government has suggested to establish four such institutes, immediately. Even these institutes will not be able to meet the current demand for designers. Therefore, many more institutes need to be established either through public-private partnership or solely by private sector.

14

Automobile Industry 1. Car Sales in UPA-II Mode

Indias largest carmakers by volume struggled to lift sales in May due to a sharp rise in petrol price and slack demand after recent hikes in car prices, but resurgent two-wheeler manufacturers posted double-digit growth. Maruti, Indias largest carmaker, posted a 4% dip in sales at 89,478 units despite the excitement surrounding new launches such as the Ertiga and the refurbished DZire. Sales of its older models such as Alto, WagonR and Estilo also fared badly, falling 29% to 29,895 units. Hyundai Motor, the countrys second-largest manufacturer, posted a mere 3% increase in sales at 32,010 cars in May and warned of tough, depressed market conditions ahead. Tata Motors sales rose 6% to 20,503 cars The recent hike in petrol price has depressed market sentiment, and with the macro-economic indicators providing no cause for cheer, the demand outlook doesnt seem bright, Hyundais Director (marketing & sales) Arvind Saxena said. Indian carmakers have been battling to lift sales in a sluggish environment marked by high interest rates, low economic growth and uncertainty surrounding the governments stand on auto fuel subsidies. In March, the government increased excise duties, forcing most car companies to raise prices, and causing a sharp slowdown in sales. Last month, the government hiked the price of petrol by Rs 7.54 per litre, affecting sales of companies with a big portfolio of petrol cars, such as Maruti. The sluggish start to the year and weak GDP forecasts may force the Society of Indian Automobile Manufacturers (SIAM) to cut its forecast of 10-12% sales growth for the year ending March 2013. We did not expect that sales would be so low. The economic sentiment is not positive and customers are wary of buying new cars, said Sugato Sen, senior director, SIAM. The Economic Times, 02.06.2012 p. 1

2. Toyota, Maruti Suzuki Give Competition to Tata Motors in Taxi Segment

The taxi segment in India is witnessing a major churn as carmakers such as Toyota, Maruti Suzuki and Hyundai begin to aggressively compete in a market that is dominated by Tata Motors. And initial reports say the new entrants have successfully made deep inroads into a lucrative segment. The commercial segment representing metered taxi, radio cabs and aircooled vehicles had been a Tata Motors bastion for long with its Indigo and Indica duo ruling the domestic market and taking its sizeable market share. But in recent months fairly new entrants especially Toyota and Maruti Suzuki are changing the game with its new massmarket models such as the Etios sedan and SX4 that is increasingly preferred by local fleet operators. Toyota volumes are gaining at the expense of Tata Motors. Toyota Etios is now a preferred option due to its high mileage and brand name. Even though it (Etios) is more expensive (in terms of price), operators are lapping it up and treating it as a luxury taxi, said Amit Bhandari of India Reality Research (IRR) in its report. The big chunk of Indian market is now getting converted into GPS-assisted radio cabs and taxis, where customers pay a fixed tariff at a premium and are ready to shell more for assured quality. And Toyota and Maruti are pushing their new cars like the Etios and the Dzire to cash in on their stronger mileage and superior brand. We will change the game, said Toyota Kirloskar Motors deputy MD 15

(marketing) Sandeep Singh.The company has taken a specialised strategy to gain market share in the commercial segment. It is training taxi drivers in Bangalore on chauffeur etiquettes as well as prudent use of new technology. The Economic Times, 04.06.2012 p. 5

3. Hero MotoCorp to Invest Rs. 2,575 Crore in Two New Plants, R&D Centre
The worlds largest two-wheeler maker by volume, Hero Moto-Corp, will invest Rs. 2,575 crore to set up two new manufacturing plants in Gujarat and Rajastan and a new R&D centre by 2013-14. Hero, which saw an unprecedented growth in volumes, crossed the six-million units mark in the last fiscal. It will raise its installed capacity to nine-million units by 2013-14. It will invest in two plants in Rajasthan and Gujarat. The first would come up at Neemrana by first quarter of FY 2014 with Rs. 400 crore investment and will have an initial installed capacity of 7.5 lakh units per annum. Its proposed Gujarat plant will see an investment of Rs. 1,100 crore and have 1.2 million units capacity by the second quarter of 2013-14. Hero MotoCorp MD and CEO Pawan Munjal told reporters in Delhi on Monday, Once the fourth and fifth plants gets on stream, our total manufacturing capacity in India will reach beyond nine-million units from the current seven million coming from three plants in India. We are gradually moving towards South and would aim to spread our manufacturing operations across the country. The company also announced plans to set up an integrated research and development (R&D) centre spread across 250-acre near Jaipur in Rajasthan entailing an investment of Rs. 400 crore. The new facility would enable Hero to independently design and develop bikes, scooters and other two-wheelers after its snapped its 27-year-old JV ties with its Japanese technology partner Honda in December 2010. The Indian promoter of the firm, the BM Munjal family, had bought the entire 26% of Honda in Hero Honda for Rs. 3,841.83 crore. The Economic Times, 05.06.2012 p. 6

4. Hero Advances Relaunch of All Models with out Honda Tag

Just a year since it donned its new brand identity, two-wheeler market leader, Hero Moto-Corp (HMCL), the worlds largest two-wheeler manufacturer by volume sales, is in the process of rolling out all its models under the Hero brand name, two years ahead of the deadline. We will be re-launching our entire range under the Hero brand name, and will complete the exercise by the second quarter of this fiscal, HMCL MD & CEO Pawan Munjal told ET. As per its agreement with Honda, Hero could retain the erstwhile Hero Honda brand till June 2014. However, the company has undergone a path-breaking brand transition since unveiling its new identity in London in August last year. The company also closed its first financial year (FY 2011-12) since embarking on its solo journey with record sales of 6.2 million units of two-wheelers. The company has relaunched its best-selling models Splendor and Passion under the Hero brand name this quarter, he added. ET, as early as 9 February, 2011, had reported that Hero 16

will drop the Honda brand name from its flagship products as the Munjals owned HMCL were keen to carve out an independent identity at the earliest. Hero MotoCorp, which reported its highest-ever monthly sales in the first two consecutive months of this fiscal April (5,51,557 units) and May (5,56,644 units) - is set to embark on its global journey by starting exports to new countries, also under the Hero brand name. The Economic Times, 11.06.2012 P. 4

5. Maruti to Merge Suzuki Power train with Itself

The board of Maruti Suzuki, Indias largest carmaker, has proposed to merge Suzuki Powertrain India Ltd (SPIL), the diesel engine and transmission firm with itself, by entering into a stock swap transaction with its Japanese parent Suzuki Motor. The merger will not result in any cash outflow. The move is seen as a bid by the Japanese carmaker to align the engine manufacturer with the expansion plans of Maruti Suzuki, which is planning to increase production capacities of its diesel powered cars. The merger would see SPIL being spun into Maruti Suzuki by December, this year, in exchange for Maruti Suzuki shares that are valued at about Rs. 1,500 crore ($268 million). The swap ratio has been fixed at 1:70 whereby Suzuki would receive one share of Maruti (of Rs. 5 each) for every 70 SPIL shares (of Rs. 10 each) that will take parents stake to 56.21% from the current 54.2%. Maruti would issue fresh 13.17 million shares to close the transaction, thus increasing its paid-up capital by Rs. 6.5 crore. It is expected that the necessary regulatory approvals and legal requirements for the merger may be completed by end December 2012. Once the merger is approved, the books of accounts of SPIL will be merged with MSI with effect from April 1, 2012, the company said in a statement. Maruti Suzuki shares rose 3.34% to Rs. 1,146.30 at close of trading at the BSE on Tuesday. The merger will enable Maruti Suzuki to align the expansion of the diesel engine maker with its own expansion plans, as demand for diesel engine cars outpace petrol fueled cars in India. The Economic Times, 13.06.2012 P. 3

6. INITIATIVE WOULD BE IMPLEMENTED FROM JULY 1

Indias leading automobile manufacturers have come together to voluntarily set up a recall code, which will become operational from as early as next week, a norm that is institutionalised in all developed markets. Lemon Cars is a pejorative for cars that carry a manufacturing and safety defect. They are not an uncommon occurrence in the Indian automotive landscape. With the new recall code, companies will require improved manufacturing processes to meet higher safety standards and will also result in better quality products. The implementation of the new customer complaints on new cars would lead to faster and surer claims based on such engineering defects. Society of Indian Automobile Manufacturers (SIAM) members have decided to declare any defect or engineering flaw in vehicles on their own. India, unlike its counterparts in Europe, US and Japan, is yet to put a 17

statutory mechanism in force, which can strictly enforce corrective action from automobile makers for manufacturing flaws. In India, automakers are under no obligation to recall any vehicles till date, unlike their western counterparts, which is mandated across all major markets where notified entities ask for recalls and also levy strict penalties on manufacturers for any known violations. This new recall code initiative would be implemented from July 1, leading to a process whereby leading automakers like Maruti, Suzuki, Hyundai, TVS Motors, Tata Motors, Toyota, Volkswagen, Honda, Ashok Leyland, Eicher, Bajaj Auto, Hero MotoCorp and Mahindra & Mahindra would come forward to disclose any known defects or flaws in their vehicles to the public. The Economic Times, 26.06.2012 P. 5

Banking/ Credit Services

7. SBI Favours CRR Cut of 1%, not Rate Tweak
Countrys largest bank State Bank of India favours a reduction in the cash reserve ratio over a rate cut in the Reserve Bank of Indias monetary policy review on June 18. "We expect the RBI to cut CRR by 1%...we have made a request. It will recharge a lot of investor sentiments, the economy and also stock markets," SBI chairman Pratip Chaudhuri told reporters on the sidelines of a meeting of heads of public sector banks with finance minister Pranab Mukherjee. The meager 0.1% rise in industrial production in April has increased the pressure on the Reserve Bank of India to reduce repo rate, the rate at which it lends to banks. However, Chaudhuri felt a reduction in cash reserve ratio (CRR) was a more effective tool in spurring growth than policy rate reduction by the central bank. CRR is the portion of deposits that banks are required to keep with the central bank. In the last six months, RBI has reduced CRR by 125 basis points which currently stands at 4.75%. It is a tool used by banks to regulate growth in credit. The Economic Times, 13.06.2012 P. 7

8. Retail Credit Boom Could Hit Savings Rate: RBI Panel

The retail credit boom carries the potential to derail the countrys steady savings rate despite a higher economic growth, a high-powered working group, led by RBI deputy-governor Subir Gokarn, has said. The group cautioned there will be the downside risk of a stagnant or even lower savings rate due to rising retail credit penetration, which makes consumers to spend in anticipation of future income. The panel, however, projected that the countrys savings rate may rise to around 38-39% of the GDP by the end of the 12th Five Year Plan if economic growth returns to at least the 8% level. The savings rate was 33.3% at the end of March 2012. Notwithstanding the positive impact of the evolving demographic profile, the household savings rate could remain stagnant or even decline as financial liabilities increase with greater retail credit penetration, the panel said in its report submitted to the Planning Commission. Economist Dipankar Dasgupta, a former professor with Indian Statistical Institute, felt the savings rate projection of 38-39% may be 18

unrealistic as the country has developed some kind of consumerism amid high growth and the propensity to save has diminished among the upper middleclass segment. The extent to which household physical assets were funded through loans and advances increased sharply between 2004-05 and 2006-07, coinciding with the high growth phase and real estate boom. The panel also recognised that large shocks to growth and high inflation can pull back savings growth. The Economic Times, 18.06.2012 P. 10

9. Clamouring for an RBI Cut, India Inc is now Cut Up

The Reserve Bank of India kept interest rates unchanged on Monday, ignoring the widespread chest-beating over an economy at stall speed, and sending a clear signal that its focus is on fighting rising prices squeezing the lives of millions of Indians. Governor Duvvuri Subbarao, who appears to have made a habit out of doing the unexpected and leaving the markets nonplussed, also did not cut the cash reserve ratio. The CRR stipulates the portion of deposits that banks must keep with the central bank. Stocks, bonds and currencies fell. Economists cheered the status quo, but industrialists, who blamed high interest rates for sluggish investments, were furious. The RBI said a cut in rates would fuel inflation instead of aiding economic activity since most investments are stalled due to several factors, a not-so-subtle reference to policy inertia at the government level. The persistence of overall inflation both at the wholesale and retail levels, in the face of significant growth slowdown, points to serious supply bottlenecks and sticky inflation expectations, the RBI statement said. The central bank also gave no indication about its next course of action, triggering speculation that the next cut may be as far away as October unless the global economy plunges into crisis, or the government moves swiftly to fix its finances. The CII and industry are disappointed by the monetary stance taken by the Reserve Bank of India, said Chandrajit Banerjee, director-general at the Confederation of Indian Industry (CII). The Economic Times, 19.06.2012 P. 1

10. RBIs Rate Status Quo neednt Alter Your Plans

The Reserve Bank of India (RBI) has surprised the market once again. However, the surprise wasnt a pleasant one unlike the April policy, as the market regulator chose to retain the policy rates in its policy review on Monday. Markets both equity and bond were hoping for a rate cut. The speculation about a possible reduction in repo rates and cash reserve ratio gained momentum on the back of a half-a-percent cut in policy rates by the central bank in its annual policy in April this year. Since most market participants were pinning their hopes on the rate cuts to revive the fortunes of the market, the RBI move seems to be a bad news for investors. At least, in the short term. The RBI has said that it is not cutting rates now. It hasnt said that it wont cut rates in future. But markets are overreacting because they had unrealistic expectations from the RBI. The banking regulator has rightly said that a mere reduction in rates wont prop up growth, says Devendra Nevgi, founder & principal partner, Delta Global Partners. Soon after the RBI announcement, the yield on the 10-year benchmark bond rose to 8.12% from its opening of 19

8.05%. The benchmark stock index, the BSE Sensex, also was down 1% soon after the announcement. The Economic Times, 19.06.2012 P. 9

11. e-Payment Must For PSBs from July 1

The finance ministry has asked state-run banks to stop making payments to their customers through cheques from July 1 and to migrate totally to electronic payment channels, a move aimed at cutting costs in a sluggish economy. In a circular issued to chairmen of public sector banks and regional rural banks, the ministry said all payments to customers, staff, vendors and suppliers as well as disbursement of loans and payments towards investments should be made only through the electronic mode. According to the ministrys estimate, state-run banks spend Rs. 4,000-8,000 crore every year on handling of cheques. The cost of handling a cheque during its life cycle, from printing till storage and destruction, is Rs. 25 to Rs 40, said a finance ministry official. Banks have significantly invested in technology as well as in developing various applications for electronic payment. That should be put to use. The circular said concerted efforts should be made by the banks and their sponsored regional rural banks to popularize e-payments and to bring down the number of transactions through cheques. Banks need to undertake the audit of adoption of e-payment and action must be taken against officers concerned where the cheque-based systems are found to be in use, the circular said. The ministry has asked the banks to identify branches accounting for the highest share in business. The top 20% branches in terms of business volume will have to reduce cheque-based transaction by at least 20% in the current fiscal, the circular said. We have told banks to reduce the charges for NEFT (National Electronic Funds Transfer) to zero for value up to Rs. 1 lakh, the official quoted above said. Any loss of revenue in such cases can be made up through higher savings on the cost of cheque or ATM transaction. The Economic Times, 28.06.2012 P. 13

12. Rating Change to Hurt India Inc & Banks: RBI

Dollar-borrowing costs for Indian companies and banks could soar, straining their alreadyfragile finances, if rating companies downgrade Indias sovereign rating that is just a notch above junk. A rating change could have some cliff effects, the Reserve Bank of India (RBI) said in its Fifth Financial Stability Report, referring to the consequences of a possible rating cut. This could affect both availability and cost of foreign currency credit lines for Indian corporates further. The impact is also being felt by Indian banks as they are the primary source of foreign currency-denominated funding for Indian firms like buyers credit. Standard & Poors has said India could be the first among the so-called BRIC nations to get downgraded to junk status and become a fallen angel if it does not set its fiscal house in order. Fitch and Moodys have also expressed their concerns about deteriorating macroeconomic fundamentals. The worsening economic climate could bloat the banking sectors bad loans, though available capital buffers could help them withstand a shock, the RBI said. Bad loans may rise to 4.6% of total loans in March 2013 in the most severe risk scenario, up from 2.9% at the end of March 2012. Under normal scenario, it could range between 3.3% and 3.5%. Banks increasing reliance on mutual funds and insurance companies for funds is an indication of rising risk in 20

the system, which could amplify the instability of the financial system during times of stress, the half-yearly report said. The Economic Times, 29.06.2012 P. 1

Biotechnology
13. Viruses Turn Out to be New Apps of Biology
Synthetic biology uses synthesised DNA to create biological functions not found in nature Most of us would regard viruses as dangerous organisms. But synthetic biologist Andrew Hessel sees them as the apps of biology, providing infinite possibilities for us to create new living systems. From his point of view, viruses are chemical codes that add features to the organisms that they infect. Imagine the firefly. If one could transpose its magic code on other organisms, according to Hessel, we could have trees that glow instead of the electric lamps that we use. No one is trying to make such trees at the moment, but some scientists have already developed bacteria that glow. The San Jose-based start-up Geneweave has just engineered a bacteriophage a virus that infects bacteria as a diagnostic tool for hospitals to screen their workers for bacterial infections. The phage makes the bacteria glow, thereby announcing their presence. Viruses have more roles than we realise, says Hessel, who works at the Singularity University in the Silicon Valley. They are just software and we will see them become a big industry as diagnostic tools, as gene therapy, used to hunt down diseases where antibiotics dont work, and so many other things. Synthetic biology is a rapidly expanding discipline that uses synthesised DNA, the genes of most living beings, to create biological functions not found in nature. These genes are edited using a computer and then synthesised from scratch using chemicals. Synthetic biologists dream of a day when they could design a gene using a computer and then print it out the next day, the way we have begun to produce industrial products. It is considered to be a solution to our most pressing problems like environmental pollution and shortage of food and energy. Synthetic biologists hope to create food and fuel, and drugs and chemicals, without damaging the environment. Although the subject is riddled with serious problems, scientists are taking the first tentative steps towards their goal. After 750 attempts, scientists at Stanford University, including prominent synthetic biologist Drew Endy, have found a way to write, erase and rewrite information into the DNA of bacteria called Escherichia Coli. This ability to program DNA could one day let us switch off cells when they become cancerous. Researchers at University of Australia made a seamless couture dress out of red wine by using nonhazardous Acetobacter bacteria to transform the alcohol into cellulose fabric by pouring and wrapping it against a human body or a mold. The Economic Times, 25.06.2012 P. 4

14. Avian Flu Viruses Could Evolve in Nature

It might be possible for human-to human airborne transmissible avian H5N1 influenza viruses to evolve in nature, new research has found. The findings, from research led by Professor 21

Derek Smith and Dr Colin Russell at the University of Cambridge, were published on June 22 in the journal Science. Currently, avian H5N1 influenza, also known as bird flu, can be transmitted from birds to humans, but not (or only very rarely) from human to human. However, two recent papers by Herfst, Fouchier and colleagues in Science and Imai, Kawaoka and colleagues in Nature reveal that potentially with as few as five mutations (amino acid substitutions), or four mutations plus reassortment, avian H5N1 can become airborne transmissible between mammals, and thus potentially among humans. But until now, it was not known whether these might evolve in nature. The Cambridge researchers first analysed all of the surveillance data available on avian H5N1 influenza viruses from the last 15 years, focusing on birds and humans. They discovered that two of the five mutations seen in the experimental viruses (from the Fouchier and Kawaoka labs) had occurred in numerous existing avian flu strains. The Economic Times, 25.06.2012 P. 4

Drugs/ Pharmaceuticals
15. FIPB Starts Clearing Investments in Drug Sector Again
The Foreign Investment Promotion Board (FIPB) has resumed clearing investment proposals in Indian drug companies, a move that will revive deal flow in the Rs. 62,000 crore domestic pharma sectors. The board has cleared four proposals of foreign financial investors, but again deferred a decision on stake buys by multinational drug companies, extending uncertainty over new rules to check rising cases of promoters of domestic drug companies selling out to foreign players. At its meeting on May 9, the FIPB cleared Plethico Pharmaceuticals proposal to raise Rs. 490 crore by selling 22% stake through the foreign currency convertible bonds (FCCB) route and Ankur Drugs plans to raise Rs. 40 crore by selling shares to overseas Indians. The board had earlier deferred a decision on both saying that the new rules on foreign direct investment in the sector were yet to be finalised. The government also allowed foreign investors to pick additional stake in Sun Pharma Advanced Research, the R&D arm of Sun Pharmaceutical which is raising about Rs. 200 crore through a rights issue. Clearance was also given to Mauritius-based Mozart Ltds proposal to raise Rs. 300 crore by inducting another foreign investor in the company. The FIPB, however, again postponed a decision on two applications involving strategic buyers. No decisions were taken on Mauritius-based Ambrose Pvt Ltd's proposal to buy 40% stake in Sutures India for Rs. 199 crore and Spain's Chemo Group's offer to buy 100% stake in Ordain Healthcare Global for Rs. 58 crore. In October, an inter ministerial group headed by the prime minister decided to make the Competition Commission of India the approving body for all foreign investments in the sector, ending a decade long policy of automatic FDI approval in the sector. The Economic Times, 01.06.2012 P. 7

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16. Govt Plans to Reduce Pharma Industrys Dependence on China

The government has initiated a process to reduce Indian drug industrys growing dependence on China for raw materials, including the critical penicillin, which is needed to manufacture most of the anti-infective drugs.An industry executive told ET that the Organisation of Pharmaceutical Producers of India (OPPI) has submitted a list of drugs sought by Commerce Minister Anand Sharma when the Group of Ministers met on May 25. The minister had asked the industry body to share details of the drugs, out of the 74 price controlled bulk drugs whose production has either shifted to China or whose manufacture in India has become dependent on imports from China. India needs to be self-sufficient to achieve its goal of becoming a major global supplier of low-cost drugs, an industry executive said, adding that the OPPI, an association of multinational firms, conveyed this to the commerce ministry officials. India fixes the retail prices of drugs that are made from 74 bulk drugs active pharmaceutical ingredients or intermediates, the basic chemical used to make a medicine. Though the Rs. 62,000-crore Indian industry ranks among the global players in finished drugs, it has to depend on China for raw materials. The minister had raised this issue in the earlier meeting of the group of ministers on April 25, recommending an inter-ministerial consultation to tackle this serious threat in the drug security of the nation. He had pointed out that the country was dependent on China for penicillin, the key raw material for most antibiotics in the country. According to industry body Indian Pharmaceutical Alliances secretary general DG Shah, health ministry data shows that about two-thirds of raw materials used by Indian companies are imported from China. We are practically dependent on China. This is a serious issue, he said. Most anti-infective drugs, accounting for about 20% of the Indian drug market, are made using two derivatives of penicillin, Pen G or 6APA, Shah said. The Economic Times, 05.06.2012 p. 6

17. Panel to Set Norms for MNC Stake Buys in Pharma Cos
The government has formed an inter-ministerial panel for finalising guidelines for allowing MNCs to buy equity stakes in Indian drug companies, as it seeks to end the regulatory uncertainty that is holding up clearances of such proposals. An eight-member Special Group, headed by an additional secretary in the finance ministry, will lay down the guidelines by the month-end that will deal with the basic concerns expressed by various stakeholders. FIPB, the body that clears foreign investment proposals in the country, will clear brown field FDI applications in the pharma sector on the basis of these parameters. Stake acquisition proposals of foreign drug companies have not been approved for the past few months because of the confusion that has been caused by the government deciding to approve these applications on a case-bycase basis without framing appropriate guidelines. Following a spate of acquisitions of Indian drug companies by MNCs in the last 2-3 years, concerned were raised by some local companies and health activists that if foreign players come to dominate the . 62,000-crore local market, medicine prices will rise and so will dependence on imported drugs. In October, an inter-ministerial group headed by the prime 23

minister decided to make competition regulator Competition Commission of India (CCI) the approving body for all brownfield foreign investments in the sector, ending a decade-long policy of automatic FDI approval. The Economic Times, 07.07.2012 P. 5

18. Cost-Based Pricing to Hit Exports, Says Pharma Lobby

The Indian Pharmaceutical Alliance says the export earnings of the manufacturers will be hit if the government continues with the cost-based pricing mechanism under the proposed drug policy. A Group of Ministers is finalising the National Pharmaceutical Pricing Policy (NPPP), which seeks to fix the prices of 348 essential drugs and their combinations to make them more accessible to the poor. The drug price regulator currently uses the cost-based pricing mechanism to regulate prices of medicines made using 74 bulk drugs (ingredients). In a letter to Commerce Minister Anand Sharma last week, a group of large pharma companies said that about nine Asian and Middle-East countries, including Saudi Arabia, the UAE, Turkey and Jordan, have a legal provision that links the retail price of imported medicines to their price in the country where they are manufactured. Hence, any abnormal reduction in prices of medicines in the country would have a direct impact on our export realisation, the Indian Pharmaceutical Alliance (IPA) said. The IPA, which counts Ranbaxy, Cadila and Sun Pharma among members, accounts for about a third of the Rs. 45,000 crore worth of drugs exported from the country every year. The pharma companies said that adoption of the costbased pricing method could disincentives big drugmakers because they incur higher costs due to implementation of best manufacturing processes. The Economic Times, 09.06.2012 P. 5

19. Mankind Changes Pharma Game With Pulp Marketing

Brands like Manforce, Unwanted-72, Preganews and Gas-o-Fast will never win awards for subtlety, but they sure do find takers over the counter. Such consumer brands many with a coital connection are one of the main drivers of the robust growth Mankind Pharma has been witnessing: 16-18% annually, against the industry average of 13-14%, with chunky net profit margins of 12-13%. Its also one of the reasons for this Rs. 2,120-crore company becoming Indias eighth largest drugmaker, ahead of pharma majors such as Pfizer and Lupin Labs. They have used the pulp marketing technique very well. Their ads are in your face and branding not polite, unlike other contraceptive brands, says Harish Bijoor, a brands consultant. That has made their products become a talk of local nukkad; selling their products in unconventional places like paan shops has helped product sales, he adds. The story of Mankind Pharma has the makings of a Bollywood script. In 1984, Ramesh Juneja, a 33-year-old medical representative with Lupin Labs in Indore, decided to quit his job in 1984 and, along with family members, set up his own formulation business called Bestochem. By

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1999, Juneja felt it was time to strike out on his own. It was a time when pricing was not considered a barrier for selling medicines. The Economic Times, 13.06.2012 P. 4

20. Pharma Cos Need Aggressive R&D and Patent Filing

Indian pharmaceutical companies need to go for aggressive research and patent filing, like China and Japan, industry experts said. Our Indian companies are just beginning to realise that they also need an R&D department as merely quality control would not help. Unless spending on R&D is scaled up, it will be difficult to create new molecules. It is time to go for aggressive research and patent filing just like China and Japan, Deputy Controller of Patents & Designs, Intellectual Property Office, KS Kardam said at a workshop on 'Patenting Pharmaceuticals in India'. The next stage of development for the Indian pharmaceutical sector lies in the aspect of value creation, for which intellectual property becomes indispensable, he said. Over the next few years, it is expected that the patent laws will provide impetus to the launch of patent-protected products, Krishna Sarma, a member of Advisory Council of India of Drug Information Association (DIA) and managing partner at Corporate Law Group, said. The Economic Times, 11.06.2012 P. 6

21. Tatas Weigh Options to Exit Advinus Therapeutics

Tata Group-owned drug discovery and services firm Advinus Therapeutics has initiated talks with a few foreign drug companies that could lead to the salt-tosoftware conglomerate exiting the company completely or selling its new molecule research business, said two persons familiar with the development. An industry executive, who has been briefed about the plans by senior Advinus executives, said at least three MNCs Eli Lilly, Daiichi Sankyo and Takeda Pharmaceuticals have showed interest in buying the drug discovery unit located at Pune. But a buyout of the entire Tata stake in the Indian company cannot be ruled out either, he added. In addition to discovering new molecules, the Bangalore-based Advinus Therapeutics also provides pre-clinical research services to foreign companies. It is possible that this business may be retained in the company. Advinus CEO Rashmi Barbhaiya said it was not appropriate for him to comment on such speculative story. An Eli Lilly spokesman said the company does not comment on market rumours or deal speculation regarding business development while Daiichi Sankyo, Takeda and a Tata Group spokesman did not respond to e- mail queries. The Economic Times, 15.06.2012 P. 3

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22. Lipitor Market Shrinks 96%, Ranbaxy to Take Hit

A higher than expected price erosion of cholesterol-lowering Lipitor, the worlds best selling drug, is set to affect the earnings of Indian drug makers Ranbaxy Laboratories and Dr Reddys. The market of atorvastatin, the generic version of Lipitor, shrunk 96% in the US on May 30 the first day after expiration of Ranbaxy Laboratories 180-day marketing exclusivity as several new players entered the market. While Ranbaxy has been selling atorvastatin in the US for the past six months, Dr Reddys was waiting for Ranbaxys marketing exclusivity to end to launch its version of the medicine. Generic Lipitor is pricing as much as 96% below its wholesale acquisition cost on the heels of Mylan Inc, Apotex and Sandoz entering the market, Ricky R Goldwasser, pharma analyst at financial services firm Morgan Stanley, said in a note released on June 1. The three companies had launched atorvastatin in the US on expiry of Ranbaxys marketing exclusivity. Pfizer Incs Lipitor has recorded peak annual global sales of $13 billion. Ranbaxy is estimated to have earned about $600 million from the sales of atorvastatin so far. Morgan Stanleys Goldwasser said he expects the medicines price to fall further as its market gets crowded. We expect pricing to drop further as additional players enter the market, which could include those (companies) with tentative approval, he said in the note. Analysts had estimated atorvastatins price erosion at about 90% after worlds largest generic drug maker, Israels Teva Pharmaceuticals, last month announced that it would not launch the drug. The Economic Times, 16.06.2012 P. 5

23. India, Brazil & China Defend Generic Drugs

India, Brazil and China have defended the right of poor countries to access cheap generic medicines at the World Trade Organisation, resisting attempts by the US, Japan and some other developed countries to club counterfeits or copies of patented drugs with fake or spurious ones. The cases of seizure of high quality generic or off-patent drugs by third countries that hold patents for these could gain legitimacy if counterfeits are confused with fakes, an Indian official told ET. We cannot allow this as it could seriously hinder access to cheap drugs by the poor. In a recent meeting of the WTOs Trips Council, developed countries such as Canada, Switzerland and the EU said they considered counterfeiting to be one of the most serious problems to be discussed by the council. These countries said counterfeit medicines not only cause economy loss but also put the lives of patients at risk as they could be dangerously substandard. India, Brazil and China, however, argued that infringing intellectual property rights should not be confused with sub-standard products. Intellectual property violation in medicines should not be mixed with sub-standard products and the issue of fake drugs should be discussed at other forums and not the World Trade Organisation, the three countries said at the meeting in 26

Geneva. It is an attempt by developed countries to paint all generic medicines produced by developing countries with a dark brush and create doubts on the quality of such drugs, said Abhijit Das, head of the Centre for WTO Studies at Deli-based Indian Institute of Foreign Trade. The Economic Times, 25.06.2012 P.11

24. NPPA Likely to Revise Prices of 50 Drugs Soon

Indias drug price regulator, National Pharmaceutical Pricing Authority, is expected to soon revise prices of about 50 medicines, including painkillers and diabetes drugs.Two officials in the ministry of chemicals and fertilizers said the drugs under review include painkiller ibuprofen, anti-inflammatory drug prednisolone, and insulin that is used for the treatment of type 1 and type 2 diabetes mellitus. These officials said the regulator might consider increasing the price of both imported and locally-made insulin. Under Indias drug pricing laws, the maximum retail price of medicines made using 74 bulk drugs are fixed by the government. The MRP is decided by giving a top-up on the cost of production of a drug if it is made locally, or over the landed price declared by companies for imported ones. Companies periodically seek approval of the regulator to raise the price of their drugs if there is a hike in the cost of production or of any ingredient. The NPPA is expected to discuss price revision in its bi-monthly meeting next week, one of the officials quoted above said. If the price of drugs used to treat diabetes is increased, it would benefit Danish company Novo Nordisk, US-based Eli Lilly, Sanofi Aventis, Biocon and Wockhardt. India is home to an estimated 60 million diabetics. Among the 50-odd drugs, some are bulk drugs, or the chemical used to make a drug. A change in price of any of them will correspondingly translate into prices of several brands made using the raw material. The Economic Times, 26.06.2012 P.5

25. Drug Marketing Code May Become Mandatory Soon

The department of pharmaceuticals will meet drug makers next month to discuss making a drug marketing code mandatory that aims to end the widespread unethical practice of drug companies giving gifts and incentives to doctors to prescribe their medicines after criticism that the industry violated the voluntary norms. The move follows a complaint by Congress MP Jyoti Mirdha to the department of pharmaceuticals that she has got evidence to prove that drug companies did not adhere to the code proposed by the department about a year back, a government official with direct knowledge of the development said. The meeting, scheduled for July 18, will also be attended by members of Medical Council of India, the body that regulates doctors and medical colleges in the country, the official added. Industry bodies confirmed the meeting. Mirdha, who is also a member of the parliamentary standing committee on health, was instrumental in exposing the scam at drug controller general of India (DCGI) office and rejecting the department of pharmaceuticals drug pricing policy. Mirdha did not 27

respond to a mail query seeking details about her letter to the department of pharmaceuticals. Last year the department of pharmaceuticals floated the uniform drug marketing code of conduct but made it voluntary despite calls from health groups and sections of the drug industry that it would be ineffective if not made compulsory with punitive provisions. The Economic Times, 29.06.2012 P.10

Education and Training

26. IIT Faculty, Alumni Step Up Opposition to One Nation, One Examination System
The face-off between the government and IIT Council on one side and the IIT faculty and alumni on the other over the common entrance examination is getting fiercer. Despite the unanimous agreement of the respective councils of IIT,NIT and IIIT, human resource development minister Kapil Sibal is finding it difficult to put in place one nation, one examination system. The IIT faculty and alumni have stepped up their opposition. The loud protests from the IIT faculty and alumni against the governments education reform efforts come at a time when the beleaguered Manmohan Singh government least needs it. Fridays rejection of the common entrance examination by the Senate of IIT Kanpur has been followed with rumblings among the faculty members of IIT Kharagpur that they too are opposed to the common entrance examination. Faculty members at IIT Kharagpur claim that their objections to the common entrance examination have not been properly conveyed to the IIT Council. IIT Kharagpur director Damodar Acharya denies this. This is totally wrong. The resolution of theMay2 meeting of the Senate was widely circulated and I have received no complaints. Moreover, on May 30, I held a meeting of the Senate to convey and explain the decision of the joint councils of IITs, NITs, and IIITs on the common examination. There were no murmurings or objections, Acharya told ET. The Economic Times, 11.06.2012 P. 7

27. Each Student to Get Mentored at IIM-Calcutta

IIM-Calcutta is considering a proposal to get each of its 450 students mentored by a designated alumnus over the two-year MBA. The proposal is still in the making, but if passed by the institute, each student will get his/her personal mentor for better guidance, more case studies and research programmes to work on. "We are yet to formalise the proposal where every student will have one alumnus as a coach, but the plan has been in the anvil for a while, said an IIM Calcutta professor, who did not wish to be named. If cleared, it will be rolled out in the next few months." The director of IIM-Calcutta did not respond to an email query sent by ET last Thursday. The traditional ways of interacting with alumni only on special occasions never really worked for the oldest IIM, the professor said. The rationale behind the one-on-one guidance is that the inherent connect forged with an alumnus is stronger than the link with a faculty member. A closer network between an alumnus and a student ultimately benefits all during the placement season and fundraising as well. Sources in the institute say the idea came from the feedback generated by 28

the students and from discussions on how to change mentoring from an unstructured practice to something formal. IIM-Calcutta will not be the first top-notch management institute to have its students trained by alumni on an individual basis for the entire tenure. The alumni association at ISB is in the process of gathering preferences from 710 students out of a batch of 770 who want to be coached exclusively by one alumnus. A similar form has been sent to the alumni and the expertise of those who volunteer will be matched to the needs of the students. The Economic Times, 15.06.2012 P. 8

28. Psychology & Smart Marketing

In classical marketing, it is generally acknowledged that the right brain influences emotive responses that dominate our buying decisions associated with low-value goods, while the objective left brain governs decisions with a higher impact on costs. Research on this subject conducted by Dr Robert Cialdini, professor of marketing at Arizona State University, US, reveals interesting insights, governing not just human beings but even animals, providing answers to the query, Why we do what we do? For instance, a polecat is a natural enemy of a turkey. At its very sight, the turkey squawks, pecks and claws with rage. While expectedly, even a stuffed polecat draws this aggressive response from a turkey, what is intriguing is what happens when a stuffed replica of a polecat has a recorder embedded in it and plays the cheep-cheep sound of baby turkeys. Intriguingly, the behaviour of the turkey turns diametrically opposite! It starts greeting and accepting the polecat underneath itself, demonstrating a sense of protection and affection. This behaviour, however, turns to aggression and attack on the polecat the moment the recorder is turned off. Ethnologists confirm that this change in behaviour is not unique to the turkey. Cialdini terms these fixaction patterns as click-whirr, referring to such strangely divergent behavioural demonstrations. The Economic Times, 16.06.2012 P. 9

29. IIT JAB meet comes up with solution

The emergency meeting of the IIT joint admission board (JAB) in Delhi on Saturday agreed to work out the modalities of the JEE advanced examination. It also discussed a possible resolution of the current stand off between IITs and the IIT Council chaired by HRD minister Kapil Sibal. A person close to the matter said the JAB has worked out a compromise formula in which students in the top 20 percentile in each board would be eligible to appear for the JEE Main exam. However, the board marks will not be given any weightage. The Economic Times, 24.06.2012 P. 2

30. Institution-building is Nation-building

Institutions are identified with a social purpose and permanence, transcending individual human lives and intentions, and with the making and enforcing of rules governing cooperative human behaviour. Individuals may form communities, but it is institutions alone that can create a nation, observed Benjamin Disraeli. 29

What makes an institution endure? What factors govern the prospects of perpetuity? What drives the need to connect and collaborate? These are vital questions to reflect upon to unravel the components of institution-building. In the words of Robert Browning, a leader must recognise that our aspirations are our possibilities. Leadership of an institution is not just a duty, but an obligation. In a highly-acclaimed article, What Business Can Learn from NonProfits in Harvard Business Review of July-August 1989, Peter Drucker observed succinctly: Non-profits need management even more than business does because they lack the discipline of the bottom line. True indeed. The way forward would be governed by a shared vision, strong focus on execution, measurable outcomes, accountability and transparency paving the way in creating sustained institution building and enhanced equity of the enterprise. A pearl is an oysters biography, observed Federico Fellini. A strong constitutional framework, a relevant set of bye laws, a well-articulated vision document, a transparent value proposition, a robust secretariat to enable efficient execution, and a platform for collaborations and alliances, clear performance measures to achieve the goals are all integral components of what a leader has to institutionalise. Institution-building is nation building. The abiding purpose of any institution is to unravel remarkable possibilities of contributing through a collective process, which is the bedrock of its existence. An institution must endeavour to build the dreams of its collective future on the history of its rich past; a vision to excel, without losing out on that which is essential and definitive. As Shelley wrote in his wonderful poem Adonais, we perhaps must acknowledge that: The splendours of the firmament of time/May be eclipsed, but are extinguished not. Like stars to their appointed height they climb. The quest of an institution must be to do exceptional things, to realise its vision but even more importantly stay committed to doing ordinary things exceptionally well. The Economic Times, 26.06.2012 P. 6

31. Only Toppers will Appear in IIT-JEE

Students will have to put in more hours for school board exam preparations even as they put in long hours for IIT-JEE. Its very unfair. This is worse than giving board results 50% weightage (another formula considered earlier), says Abhishek Barthwal, 17, an IIT aspirant for 2013. Earlier, you had the chance to appear. Now only toppers will appear. There will be immense pressure first to perform well in boards, then in the two exams, he says. Barthwal is voicing the concern of a large number of students who are taking the exam in 2013. The new rules have dealt a blow to students who began preparation for the exams a couple of years ago. Coaching centres placing emphasis on rote learning of school syllabus will now mushroom. But students from poor or rural backgrounds, who do not have access to private tuitions for their school syllabus or cannot pay for them, will lose out. This is one decision that will go against the poor, who dont have the opportunity to study in elite schools, said Anand Kumar, founder of Super 30, a coaching institute that trains only the economically underprivileged. The decision should have been implemented 2014 onwards so that students who have already begun preparations are not affected, Kumar says. Those sitting for the exam in 2014 are equally concerned though not as impacted as the current class-XII batch. Padmanabha Prasanna Simha,16, scored 96.48% in his class X examinations and will sit for his joint entrance test in 2014. I will now have to change my study pattern and prepare for long answer formats and theories rather than concentrate only on the IIT entrance tests, says the

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Bangalore-based Simha, who studies in VVS Sardar Patel Pre-University College. That one seat in IIT is worth pursuing all these challenges. The Economic Times, 29.06.2012 P. 3

32. Jobless Rate in FY12 Below 4%

The labour department is set to peg unemployment for 2011-12 at below 4%, admitting to faulty assessment of 9.4% for the previous fiscal and adding to the list of inflated official data released in the past. The department has estimated unemployment for 2011-12 at 3%-4%, which will be reported in its second annual employment and unemployment survey, an official told ET. The official said the revision in the figure follows correction in the methodology used, better training of field officers and improvement in the sample size and choice. Not only have we changed our methodology after consulting top experts, the sample size is more than double the number interviewed in the first year and we have covered the entire country, the official said. The figure is closer to the 2.8% estimate of the National Sample Survey Organisation in 2008. The labour department official said, The first time we were in a hurry and had not prepared well. There were some inaccuracies in the methodology used, which led to inflated numbers. The Economic Times, 29.06.2012 P. 10

Electronics/ Telecommunication
33. Cabinet Clears New Telecom Policy: NO ROAMING CHARGES SOON
The Union Cabinet on Thursday approved the National Telecom Policy 2012 that aims to do away with roaming charges, introduce a pan-India mobile permit that will enable mobile phone firms to offer all communication services, allow operators to share and trade spectrum and facilitate consolidation in the sector. Telecom Minister Kapil Sibal said the Cabinet had made five changes to the new rules he had unveiled in October last year before clearing it. The key change is that the new policy states that spectrum will refarmed, a move that has been strongly opposed by incumbent GSM operators. But the policy does not spell out details on refarming, which involves redistribution of spectrum in the 900 MHz band largely held by incumbents, and substituting it with frequencies in the 1,800 MHz. Conditions of refarming, issues on spectrum pricing, participation by operators in the auction and other issues will be decided by the Empowered Group of Ministers, a top telecom ministry official said. Other changes include scrapping the proposal to give more powers to the telecom regulator and dropping plans to introduce a Spectrum Act, the legislation to govern management, pricing and allocation of airwaves in the country. Spectrum Act, suggested by the oneman committee, has been scrapped because it would be difficult to determine spectrum prices with an Act and let market forces decide the actual price, the official quoted above said. The new policy has deleted a controversial clause in the draft version that said that revenue generation would continue to be a secondary objective of the government, and instead states that affordability and availability of effective communication will be core objectives of the policy. The Economic Times, 01.06.2012 P. 3 31

34. DoT to Bargain with Telcos for Lowering Reserve Price

The telecom department (DoT) has offered to reduce the reserve price for airwaves in the upcoming sale if existing mobile phone companies agree to match the auction-determined price for their frequencies over the remaining life of their licences. This proposal forms a key part of a package the DoT is attempting to cobble together to reach a settlement with companies that have vigorously opposed sector regulator Trais controversial recommendations on pricing and refarming of spectrum. But the compromise attempt may not succeed as dual-technology companies such as Reliance Communications and Tata Teleservices are unhappy with the proposals. Reduction of the reserve price is a major demand of all telcos, but both Reliance Communications and Tata Teleservices have sharply criticised the DoTs plan to make incumbents pay the auction-determined price for their existing 2G airwaves over the remaining licence period. All telecom licences in the country are valid for 20 years, and unlike pure-play GSM operators like Bharti Airtel and Vodafone, the dualtechnology companies have more than 10 years to go before their permits expire. The Economic Times, 15.06.2012 P. 1

Export/Import 35. ANOTHER KNOCKOUT PUNCH TO ECONOMY

Foreign investors taking exposure to Indian stocks through participatory notes (PNs) have pared their positions. The governments clarification that it would not tax PN holders did little to boost the prospects of these offshore derivatives in April. The share of p-notes in total investments by foreign institutional investors (FIIs) in April was at 7.9% the lowest monthly reading in seven years according to Securities and Exchange Board of India (Sebi) figures. This data was not publicly available before September 2003. PNs are notes issued by foreign funds and brokers to offshore investors who do not access the Indian market directly. The investment is made on their behalf by FIIs registered with Sebi. The value of participatory notes as a percentage of FIIs stock and debt investments was 10.4% in March and 11.5% in February. It was as high as 50% in August and September, 2007, the peak of the bull run that year. It was widely perceived that if FIIs have to pay tax as per GAAR (General AntiAvoidance Rule), then they will pass it on to PN holders. So, the general assurance that PN holders will not be taxed did not turn out to be very convincing, said Shefali Goradia, partner at BMR & Associates, a law firm that advises on tax and regulatory matters. While most foreign brokers have stopped issuing PNs to clients, hazy prospects are forcing many FIIs to stay away from Indian equities. Most hedge funds, which are among the biggest users of participatory business, have of late, significantly reduced investing in India because of the uncertainty around market conditions, said Vikas Khemani, president, Edelweiss Securities. The Economic Times, 02.06.2012 p. 1 32

36. Dumping Duty Sought on Solar Gear

Indian manufacturers of solar equipment are seeking anti-dumping duty on imports from China, Malaysia, Taiwan and the US on the grounds that local industry is bleeding because of ridiculously low price of foreign equipment. The industry wants anti-dumping duty on imports of solar photovoltaic (PV) cells and modules, and has filed an application to the directorate general of anti-dumping and allied duties (DGAD). Globally, theres a huge capacity of solar PV cells and modules. The selling price is artificial and not at all related to the cost of the product currently, said S Venkatramani, general secretary, Indian Solar Manufacturers Association. The application was filed in January and DGAD is looking into the matter. He said Indian industry has a very low capacity and dumping of foreign products is making their condition even worse. The industry is not only struggling but its existence is challenged today. Lack of level-playing field for manufacturers in India vis--vis competition from certain non-market economies, where we are virtually competing with the country and not companies, said Vivek Chaturvedi, CMO, Moser Baer. The association believes that the recent move by the US to impose anti-dumping duty on Chinese solar equipment proves that theres a strong case. The US recently imposed 31% anti-dumping duty on Chinese solar imports, going as high as 250% for some companies. US manufacturers had alleged that Chinese products are eating their local market. While the industries bat for a level playing field, government is trying to help local industries as much as they can. The Economic Times, 02.06.2012 p. 5

37. Exports Dip 4.2% in May on Euro Crisis

India's exports fell 4.2% to $25.7 billion in May from a year ago, piling on more bad news for the economy struggling with nine-year low growth and facing a rating downgrade to junk status. The outlook for exports for the coming months is uncertain as the euro zone teeters on the brink of serious crisis, prompting the government to announce sops last week to push up exports. Imports also dropped 7.4% in May from a year ago to $41.9 billion leaving a trade deficit of $16.3 billion, higher than the $ 13.9 billion in April but less than $18.5 billion in May last year. Exports had risen 3.2% in April. Government will intensify measures to diversify its export markets, commerce secretary SR Rao said releasing the data. The data suggests that sharp rupee depreciation has not helped exports as it has coincided with deceleration in global growth, particularly Europe. the positive impact from INR depreciation on exports was offset by the fall in global growth, negating the positive impact of INR depreciation on reducing the trade deficit, Nomura economist Sonal Varma said in a note after the data release. All the key exports sectors engineering goods (-15.67%), petroleum products (-26.07%), gems and jewellery (-9%) and readymade garments (-15.82%) reported negative growth. The Economic Times, 15.06.2012 P. 13

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38. RBI Hikes Export Credit Refinance Limit

Reserve Bank of India has offered Rs. 30,000 crore of additional liquidity by way of higher refinance against export credit but banks may not be too eager to avail it. The banking regulator has raised the rupee export credit refinance limit to 50% of outstanding, instead of 15% now, to release additional funds at the prevailing repo rate of 8% per year. Banks will enjoy this enhanced limit from June 30. RBI said the impact of a higher refinance limit will be equivalent to about 50 basis points reduction in the cash reserve ratio even as it kept the ratio unchanged at 4.75%. We may not use the enhanced limit immediately as we are comfortable in terms of liquidity, Allahabad Bank chairman and managing director JP Dua said. The move is going to help banks with tight liquidity position. RBI said the move has the potential to release additional liquidity of over Rs. 30,000 crore to banks and encourage banks to increase credit flow to the countrys sagging export sector amid weak global demand. The Economic Times, 19.06.2012 P. 10

Foreign direct investment

39. Theres a Lot More Needed than 49% FDI
Emirates, which has been unofficially dubbed Indias national carrier, has expressed doubts over the efficacy of the governments attempts to increase foreign investment in aviation, pointing to obstacles such as possible government interference and absence of proper incentives. In a candid interview to ET, Emirates President Tim Clark also expressed unhappiness over the small increase in foreign equity ownership in airlines, saying 49% does not give management control. If we put our money, we would like to have a say in the way an airline is run and 49% cant give that. Emirates as an airline doesnt get additional seats if we were to put money into an Indian carrier. If the government of India gives some incentives with the 49%: a clean balance sheet, no debts, guaranteed firewall against government interference, freedom to procure assets in a free and transparent way So, there is a lot more needed in addition to 49%... you need to ring-fence the investor, he said. Buying into Indian airlines means putting equity into them first. Then one has to have a business plan... it is its implementation in the Indian environment which is a challenge, Clark said. The Economic Times, 13.06.2012 P. 3

40. Higher FII Cap for Govt, Corp Bonds Likely

Foreign portfolio investors may be allowed greater headroom to invest in bonds issued by the government and Indian companies as part of a plan being finalised by policymakers to attract higher capital flows and boost the local currency, which has fallen over 25% in the past year. The qualified financial investor (QFI) scheme introduced by the government will also be operationalised soon, with the RBI making enabling changes. Under the QFI scheme, foreign 34

individual investors can buy into Indian stocks. The government sounds confident that this could also attract more inflows. The finance ministry may announce this week that the annual cap for foreign investment in government securities and corporate debt will be raised from the current level of $35 billion, a government official involved in the policymaking process said. Foreign investors are currently allowed to buy up to $60 billion of Indian debt every year. This is divided into three categories: $15 billion of government securities (g-secs), $20 billion of bonds issued by companies while the rest $25 billion is reserved for infrastructure bonds. The proposal being considered is to carve out a higher limit for gsecs and corporate bonds at the expense of the $25 billion set aside for infrastructure bonds, said the official. Overseas investors have so far not shown much interest in buying paper issued by infrastructure companies while the demand for government and corporate debt has been on an upswing. The Economic Times, 25.06.2012 P. 1

41. Govt May Tweak FDI Policy for IKEA

The government may tweak the foreign direct investment policy for singlebrand retail to meet certain conditions laid down by Swedish retailer IKEA, which has proposed to invest Rs. 10,500 crore in India. IKEA has shown some reservations regarding some clauses in the policy. We have decided to revise some provisions to bring more clarity in the domestic sourcing condition, a top official of the department of industrial policy and promotion (DIPP) told ET. The department frames policy on FDI. IKEA, the worlds largest furniture maker, has demanded flexibility in the clause that makes it mandatory for retailers to source 30% of their inputs from domestic small and medium enterprises. SMEs are defined as units that have invested up to $1 million in plant and machinery. IKEA has said that it should be allowed to continue sourcing from its vendors even after they cross the $1-million investment limit. The retailer has also demanded that the 30% domestic sourcing limit should be viewed for a cumulative period of 10 years of operation. Earlier this year, the government increased the FDI cap in single-brand retail from 51% to 100%, subject to the domestic sourcing clause. Following the move, it received an application from only one investor shoe company Pavers England. Last week, the Swedish home products firm confirmed plans to invest in the country. It filed its application with the DIPP on Friday. The DIPP is also looking at bringing clarity in issues such as definition of value of products to be mandatorily sourced from small enterprises, and what defines a brand. We may also bring changes in the definition of value and what constitutes a brand, among other things, the official said. Clarification would also be given specifying the date on which small units supplying inputs to single-brand stores are required to have a valuation of $1 million or less. The Economic Times, 27.06.2012 P. 7

42. States Free to Oppose FDI in Retail

States opposing foreign direct investment in multi-brand retail have the constitutional right to do so and it should be respected. However, those who favour it should be allowed to go ahead, the minister added, indicating the government may push for opening the sector even if it does 35

not manage to build a consensus on the issue. We recognise those states who are in favour of it. It is their right. They are democratically elected governments of the provinces. Similarly, there are states that have reservations. Under the Constitution, we have to respect their wishes too," Sharma said talking to the media on Friday in New Delhi. Though the Union Cabinet had approved up to 51% FDI in November last year, the Centre has not yet introduced the policy change as the decision was met with strong opposition from a number of states, including West Bengal, Bihar and Kerala. The Economic Times, 30.06.2012 P. 13

Human Resource Development

43. Law Graduates favour Litigation Practices over Corporate Jobs
Litigation practice, which has traditionally lost out to high-paying corporate advisory jobs as a preferred career choice among law students, is once again generating significant enthusiasm among fresh graduates, say lawyers and industry watchers. Litigation bars in the country witnessed considerable interest from law graduates in the first half of 2012 as rise in number of litigations, many of which involve corporate elite and prominent leaders, are inspiring young jobseekers. Entering the courtroom and learning from arguments are more interesting and in long term it gives good money and respect both, says 22-year-old Kavita Shetty, a final year student of Mumbai-based Government Law College, who interned with DSK Legal and plans to join litigation after her graduation. Lawyers say some of the sectors that have seen a surge in litigation include banking, mining, foreign currency convertible bonds (FCCB) related cases, and several other high-profile law suits such as Vodafone tax case, 2G spectrum case, etc. Also, many feel that litigation offer challenges that one finds continuously stimulating and gives flexibility to be ones own boss. Last two years were not good as far as economy is concerned. Situations like liquidation, winding up, bad debt recovery and corporate frauds among others are keeping advocates very busy, says Dinesh Sharma, founder of Personnel Junction, a firm specialising in legal recruitments. Lawyers say its not just fresh graduates who are entering litigation but even veterans are coming back to courtrooms amid an increase in new and more challenging areas that could be explored, such as International Commercial Arbitrations and Regulatory Advice. Says Vyapak Desai, head of international litigation practice and capital markets practice at a research-based law firm, Nishith Desai Associates (NDA), Litigation practice has recently become more exciting because of rising inbound and outbound transactions, which is producing more challenging work for lawyers. This was not the case couple of years back. The Economic Times, 05.06.2012 p. 6

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44. Five Ways To... Agree to Disagree With Boss

HAVING DISAGREEMENTS with your boss is part and parcel of professional life. In an organisational culture which encourages differences rather than compliance, bosses welcome contrary views and are open to an alternative solution. But in organisations where you are confronting a not-so-openminded boss, you need be handle the situation with care to avoid an ugly outcome. Experts tell Sreeradha D Basu how to go about it.

1 Dont Do It Publicly Never disagree with your boss in a meeting or in front of others. Request a private meet to discuss such issues," Also, its much better to put across your differing views face-to-face, rather than over e-mail or phone," he says. 2 Start on Positive Note Always start such a conversation with your boss on a positive tone. This helps reduce resistance, more so, if you are dealing with a boss with a delicate ego. "Its much better to start out highlighting the positives or complimenting the boss on his/her analysis or opinion before politely trying to put your point across," 3 Do Your Homework "Have your facts and figures in place and make sure you have all the necessary data to back up your argument. The more organised you are, the better," says Arvind N Agarwal, president, corporate development and HR, RPG Enterprises. Try to put across the point that you are being helpful, rather than critical. 4 Bide Your Time Sometimes, if you have that option, it is prudent to listen and then come back to the boss in a few days time instead of reacting right then. "Let that moment pass over. Come back in a few days saying I have been thinking it over and there is another way you could look at. That then, is your moment and there is a better chance of your boss listening to your views," says Agarwal. 5 Know When to Quit At the end of the day, your boss gets the final vote, so notwithstanding the most logical arguments, you may still be required to implement decisions with which you disagree. Needlessly going on and on under such circumstances can be counterproductive and may prove to be damaging. In such a situation, its best to stop pushing and just let it go. The Economic Times, 26.06.2012 P. 6

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Indian/ Global Economy

45. FALLOUT OF DISMAL GROWTH IN FOURTH QUARTER OF FY12
A worried government sprang into damage control mode on Friday, jolted into action by avalanche of criticism that has followed a shock drop in economic growth rates for the last quarter. As economists and analysts took the knife to their growth forecasts amid deafening criticism of the UPA for its stewardship of the economy, key government functionaries from the prime minister downwards sought to project an impression they were mindful of these concerns and would act. The Prime Ministers Office (PMO) said it was putting in place a mechanism to monitor progress and ensure the speedy implementation of projects both public and private sector -- involving investments of more than Rs. 1,000 crore. Finance Minister Pranab Mukherjees office said he would meet with industry leaders later this month to address corporate concerns, he and Commerce and Industry Minister Anand Sharma held a meeting with industry lobby group CII on Friday where growth concerns were discussed. While existing rules and laws have to be followed, it was widely felt that a lot of the delay is avoidable if only there is a will to resolve matters, a statement from the PMO said, suggesting some resolve on the part of the government to get stalled investments going. Along with the shock drop in GDP growth rate to 5.3% in the January-March quarter, government data released on Thursday showed that capital formation had dropped to less than 30% of GDP, the first time since 2004-05. Data from private forecaster CMIE shows that many investment plans are stuck at implementation stage, something that the government can easily address. Several mega projects involving billions of dollars of investments have been held up, many of them for years as ministers pull in different directions and the bureaucracy, scared of taking decisions that can questioned later by government auditors, dithers. South Korean steelmaker Posco's proposed $12-billion steel plant in Orissa has for instance been held up for seven years, awaiting regulatory clearances and hobbled by land acquisition issues. The Economic Times, 02.06.2012 p. 3

46. Revenue Growth in Q4 Slowest in Over 2 Years

Revenues of India Inc grew at their slowest pace in more than two years, stung by a slump in investments, policy inertia and rising cost of inputs, according to an ET study. An analysis of 2,302 listed companies shows a 13.5% year-on-year revenue growth for the quarter to March, as against 19.3% in the December quarter and 17.8% in the three months to September. The analysis, which excluded companies in the finance and petroleum sectors, covered performances for the last 13 quarters. But it is not all gloom and doom. The analysis also shows that firms recorded an improvement in operating margins and debt servicing. India Incs operating profit margins improved from the December quarter, as did the interest coverage ratio a matrix that measures a firms ability to pay interest on borrowings. Even the year-on-year fall in net profit was lower in the March quarter, compared with that in the previous two quarters. Although both operating profit margin and interest coverage ratio were 38

below the year-ago figures, the levels reflect a pause in the downtrend in companies margins and profitability throughout 2011. The biggest challenge for Indian companies, the study notes, is the slowdown in revenue growth.

47. Net Profit Fall Lower Than Q2 and Q3

The slowdown in revenue growth coincided with the disappointing March-quarter GDP growth. GDP rose 5.3% in the three months to March from a year ago, the lowest in nine years, dragged down by a moderation in services and consumption. Sales growth has slowed down in the last quarter of FY12, reflecting the slowdown in GDP growth. We expect it to be on a slower trajectory in FY13, vis--vis FY12, said Bhupinder Sethi, head of equities at Tata Asset Management. According to the study, India Incs interest costs in the March quarter jumped 47.4% to Rs. 30,123 crore, a record high at 3.47% of revenues. It was also the eighth consecutive quarter of high, double-digit rise in interest costs. On the brighter side, the March quarter net profit for the companies under review was down only 8% from the year-ago period, marking an improvement over the 20.6% fall in the December quarter and 37.9% drop in the September quarter. India Incs operating profit margins for the March quarter stood at 14.3%, an improvement from the preceding two quarters, but down 200 basis points from the previous corresponding quarter. One basis point is one hundredth of a percentage point. The interest coverage ratio stood at 3.8, which was higher than the preceding two quarters but down 170 basis points y-o-y. The ratio had dipped to 3.4 in the December quarter. The Economic Times, 04.06.2012 p. 1

48. India Inc Sees Economy Growing at Less than 7%

India Inc is yet to buy into the governments reform promises as the majority expect high input cost and policy inaction to weigh on growth this fiscal amid persisting inflationary risk, showed a poll by ING Research. Most corporates expect the rupee slide to continue this fiscal, while they maintained a robust outlook on corporate sales, the survey showed. While nearly 80% of the 220 corporate entities polled expect the economy to grow at below 7% this fiscal, lower than the Reserve Bank of Indias forecast of 7.3%, a similar majority sees headline inflation at above 7%, worse than the RBIs indication of 6.5%. Indias growth in January-March slumped to 5.3%, the weakest in nearly a decade, prompting a new round of downgrades from investment banks. Our in-house view of persistence of inflationary risks stems from the likely transmission of hike in prices due to excise taxes, higher railway freight costs, rising electricity prices and expected increases in administered fuel product prices, said the ING Research report. Additionally, food prices may continue to pose a risk going forward given that the economy is severely supply constrained, the report added. Corporates have dim hopes for any near-term recovery of the weakening Indian currency, with more than 50% expecting the rupee to breach the 58 per dollar mark, while 15% bet for 60 per dollar in the near term. The rupee has weakened by more than 15% since February. Indias current account deficit, currently at 4% of gross domestic product, is likely to worsen and the lack of capital flow may put further pressure on the rupee. Even if capital flows are estimated at $2-3 billion 39

per month, it would be insufficient to finance the current account deficit which is expected to be $5-6 billion, the report said. RBI has pumped in about $20 billion in the spot market in the second half of FY12 to curb the fall of the rupee. The Economic Times, 04.06.2012 p. 16

49. Stimulus Hopes Spark Rally in Global Markets

US and Europe shares rallied more than 1% and the euro gained on Wednesday as European officials urgently explored ways to rescue Spain's debt-laden banks and expectations grew that major central banks would act to bolster a slowing global economy. Brent crude jumped above $100 a barrel while gold hit a one-month high, leading a broad rally in the commodities sector. Silver soared 4% and copper gained 2%. But comments from European Central Bank President Mario Draghi dented some of the optimism after he dashed hopes for more long-term, cheap loans, saying it was not up to the ECB to make up for other institutions' lack of action. The ECB resisted pressure to provide more support for the euro zone's ailing economy at its regular monthly policy meeting by holding its main interest rate steady at 1%. But investors held out hopes after Atlanta Fed President Dennis Lockhart said the Federal Reserve may need to consider additional monetary easing if a wobbly US economy falters or Europe's troubles generate a broader financial shock. Fed Chairman Ben Bernanke testifies before the US congressional Joint Economic Committee on Thursday and could provide hints on the possibility of further monetary easing. The Group of 20 economies is scheduled to meet later this month. Markets again look to central bankers like dogs to pieces of meat. Will the dog get the meat and will it taste as good? said Peter Boockvar, equity strategist at Miller Tabak in New York. Draghi didn't bring the meat the market dogs were hoping for as he seems to be standing pat for now, likely waiting for more stress to develop before announcing something new of substance. The Economic Times, 07.06.2012 P. 1

50. Three Global Banks to Sell India Safe Story in Europe

Barely a week after the plunge in GDP growth to a nine-year low of 6.5% in 2011-12 delivered a shock, a small but growing number of voices feel the pessimism is overdone. At least three global banks will hold investor conferences in Europe over the next few months to highlight India's potential. We believe the India story is still intact and a few decisions will not stop inflows. In the wake of uncertainty in Europe, a GDP better than the most, we feel investors will park funds in a safe and attractive proposition India, BNP Securities has written to the Finance Ministry. BNP Paribas has finance ministry participation in its road show in Europe. Bank of America Merrill Lynch and HSBC are also planning similar shows, perhaps to ensure

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that investors cash-in on the opportunity that may have presented itself in form of the current crisis. Crisis gives you an opportunity and if you miss it you do it at your own peril, said Thomas Mathew, joint secretary (capital markets) in the finance ministry, adding that most global banks found the India story attractive enough and were willing to sell it to investors. Most analysts now say stocks are attractively valued for long-term investors and a lot of money would have rushed in but for concerns over Europe. The Sensex, according to current earning estimates, is trading at a multiple of 13 times earnings for the current year, against a long-term average of around 15. The Economic Times, 08.06.2012 P. 15

51. PepsiCo Lines Up 50 New Products to Counter Rivals

PepsiCos Frito-Lay plans to launch more than 50 new products as it invests in scale and innovation to continue its domination in Indias . 7,500-crore salty snacks market. Our innovation programme is stronger than ever before, Vidur Vyas, vice president, marketing, Frito-Lay India, said. We are investing in innovation and technology and have over 50 new products at various stages of testing, he added. He said innovation is key to succeed in a cluttered market where more than a thousand brands mostly small ones fight it out. What stands out in this market will be scale and innovation which we need to play on, Vyas said. Frito-Lay, which has about 150 products or variants, launched 16 new pack sizes and variants in the last couple of months, displaying increased urgency and aggression despite signs of a consumer slowdown. The numbers dont include the Lehar brand. Frito-Lay seems unfazed by the slowdown in sales of consumer products, margin squeeze in industries due to rising food and fuel prices, and the Indian GDP growth rate slipping to its slowest in nine years in 2011-12. We are very optimistic about the market as the potential is far more than we realise and thats the reason why the market is growing, Vyas said. The $65billion US major has been mostly credited for the rapid expansion of the snacks market since it entered the segment in 1995, helping it grow 20% a year. When PepsiCo introduced Lays and Cheetos brands in 1995, there were only two large competitors Haldirams and Amrit Agro, which owned potato chips brand Uncle Chips that was later acquired by the US cola giant. PepsiCos Kurkure launched in 1999 was a runaway success. The Economic Times, 12.06.2012 P. 3

52. World Bank Marginally Ups Growth Forecast to 6.9%

The World Bank has marginally raised Indias growth forecast for the current financial year from its January estimate, going against the tide that has seen many brokerage and international banks cut targets for the current year after GDP growth dropped to a nine-year low of 6.5% in 2011-12. 41

In its Global Economic Prospects, June 2012, released on Wednesday, the World Bank expects Indias economy to expand 6.9% in 2012-13 against its 6.8% forecast in January this year. The development bank has, however, pared estimates for 2013-14 sharply, pegging it only at 7.2% against 8.5% estimated initially, warning the developing world of a long period of volatility in the global economy. Growth in India was particularly weak due to monetary policy, stalled reforms and electricity shortages, which along with fiscal and inflation concerns, cut into investment activity, the bank said in its assessment of the South Asia region. It said policy uncertainties, fiscal deficits, entrenched inflation, and infrastructure gaps will negatively affect investment activity and limit regional growth. India will see growth (measured at factor cost) increasing to 6.9, 7.2 and 7.4% in fiscal years 2012-13, 2013-14 and 2014-15 respectively, it said. It predicts a modest global GDP growth of 2.5% in 2012, rising to 3% in 2013 and 3.3% in 2014. The Economic Times, 13.06.2012 P. 10

53. CMIE Sees Inflation at 7.3% Due to Weaker

The continuing depreciation of the rupee is expected to fuel inflation and push the headline number to 7.3% for FY13, making a reduction in interest rates for borrowers unlikely in the near term, an economic think-tank has said. The Centre for Monitoring Indian Economy (CMIE) has upped its fiscal-end inflation target to 7.3% from the 6.7% and Reserve Bank's 6.5%, due to the slide in the rupee. Driven by the rupee depreciation, headline inflation is expected to go up to 7.3% in FY13 from our previous forecast of 6.7%, the CMIE said in a briefing. Such a scenario reduces the possibility of a cut in interest rates anytime soon and hence, we cannot have easing in interest rates before the second half of the fiscal, it said. A CRR cut would be more effective (in transmission), the agency recommended to the RBI. In its mid-quarter policy review last week, RBI sounded hawkish, going back to its inflation management role after giving signals of easing due to the sharp dent in growth in its earlier policy announcements. The rupee has been one of the worst performing currencies at present, having lost nearly 30% since last August due to a variety of reasons like fall in capital flows on concerns over the current account deficit. It touched an all-time low of 57.37 to the dollar during trading. The Economic Times, 25.06.2012 P. 10

54. Corp Profits to Grow 21% in FY13

India Inc is expected to post 21.6% growth in its profit in the current fiscal on the back of softening of input prices and steady interest rates. We expect corporate profits to grow by 21.6% in FY13, after falling by 0.6% in FY12, CMIE stated in a report on Sunday. The improvement would be seen across segments, the report said, adding that the net profit of the manufacturing sector is likely to grow by a healthy 23.6% and that of the financial and nonfinancial services sector by 23.4% and 13.4%, respectively. Besides the softening of input prices, an improved performance would be driven by slower rise in other expenses as well, CMIE said. The Economic Times, 25.06.2012 P. 10

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Industry News
55. Future Group Sells Finance Arm to Warburg Pincus for Rs. 800 Cr
US private equity giant Warburg Pincus has agreed to buy a controlling stake in financial services firm Future Capital Holdings for about Rs. 800 crore. The move is part of its strategy to tap opportunities in Indias capital-starved micro, small and medium enterprises sector. Warburg will pay Rs. 162 a share to buy 66% stake, valuing the non-banking finance company at Rs. 1,050 crore. In addition, Warburg will infuse Rs. 100-crore worth of fresh equity, taking the total investment to Rs. 793 crore. Future Capital Holdings is currently part of the Kishore Biyani-led Future Group. The deal involves a three-way transaction, including a primary issue of preference shares. Warburg will buy 40% from Future Value Retail and Pantaloon Retail, both part of the Future Group, which will be left with the residual 13.6% stake. Warburg will then make an open offer for 26% stake. If the offer fails to get Warburg shares equivalent to 26%, the Future Group will make up for the shortfall by selling part of its stake. The $40-billion buyout firm will simultaneously infuse Rs. 100 crore into Future Capital by subscribing to cumulative convertible preference shares, helping the NBFC ramp up operations. After the three-way transaction gets over, Warburg will hold 70% stake in Future Capital. FCH plans to focus on mortgages given directly to SMEs and two-wheeler financing. This gives us an opportunity to back best in class management team to address under served section of the market, said Vishal Mahadevia, managing director, Warburg Pincus. We will have a strongly capitalised company that can provide financial service. What we can bring as Warburg Pincus is patient capital. The Economic Times, 05.06.2012 p. 6

56. Cos Advance Tax Outgo Up 10% in April-June

Indian companies have reported an average increase of about 10% in advance tax outgo in the April-June quarter, according to sources in the income tax department. The increase in advance tax mop-up, which is a measure of companies performance, comes at a time the economy is faced with sluggish growth and currency depreciation. For fiscal 2012-13, the tax department has projected direct tax collection at Rs. 5.70 lakh crore, up 15% from ayear earlier. Companies pay advance tax in four installments - in June, September, December and March. It is the advance tax paid in December that usually gives a clearer picture of the revenue collection for the respective fiscal, even though some experts read a trend in the first installment in June. This year, during the April-June period, most corporates in banking, pharmaceutical, cement and financial sectors have paid more than what they had paid during the same period a year ago. However, advance tax payment of Reliance Industries (RIL), one of the top five taxpayers in the country, declined to Rs. 770 crore from Rs. 900 crore. This is the first time in the past five years tax outgo of RIL has dipped below the previous years figure. Tax outgo of banks, both private sector and public sector, rose 43

significantly, with the largest lender State bank of India paying Rs. 1,200 crore advance tax in first quarter, up Rs. 100 crore from the previous year. HDFC Bank paid Rs. 500 crore against Rs. 400 crore a year ago, while IndusInd Bank paid Rs. 60 crore against Rs. 40 crore a year earlier. The Economic Times, 16.06.2012 P. 7

Information Technology
57. Google to Make Product Search a Paid Service
Googles free product search would soon be a paid service in the US under which merchants and retailers will have to pay for listings of products. We are starting to transition Google Product Search in the US to a purely commercial model built on Product Listing Ads. This new product discovery experience will be called Google Shopping and the transition will be complete this fall, Google Shopping Vice President (Product Management) Sameer Samat said in his blog on Thursday. The new initiative seen as a step to boost companys revenue will in addition provide the customers a higher quality shopping experience. ... shoppers can easily research purchases, compare different products, their features and prices, and then connect directly with merchants to make their purchase, Samat said. The service will be based on bid price and relevance giving the merchants and retailers a greater control over where their products appear on Google Shopping. Over a period of time they will also have the opportunity to market special offers. The internet company has begun experimenting with some new commercial formats on Google.com that will make it easier for users to find and compare different products. These include larger product images that give shoppers a better sense of what is available and also the ability to refine a search by brand or product type. These new formats would be labeled sponsored, and take space currently occupied by AdWords. Users may be able to view details regarding a product in one place and make a decision on the product and merchant of their choice. Google Shopping will empower businesses of all sizes to compete effectively and it will help shoppers turn their intentions into actions lightning fast. The changes are a first step toward providing technology, tools and traffic to help power the retail ecosystem, The Economic Times, 02.06.2012 p. 3

58. Indian IT Cos Lag in Innovation: Murthy

Indias software companies are ill-prepared to cope with the major challenges they are facing, industry veteran and iGate chief executive Phaneesh Murthy has said. Despite attaining revenues of $100 billion (. 5.6 lakh crore) in information technology and related services, software firms have not innovated adequately and relied too much on cost arbitrage, Murthy, a former head of sales and marketing at Infosys, told ET in an interview. We havent done much innovation. For 20 years, the IT industry has been working on the principle that it can provide cheap engineers who work at cheaper rates. Murthys comments come amid slowing 44

growth for software companies, which are seeing clients in their main markets the United States and Europe turn cautious about spending on information technology. Software industry body Nasscom has projected that growth for the sector in the year to March 2013 will slow down to between 10% and 14%. At the same time, fundamental technology shifts are taking place as services move to the cloud and the use of mobile devices increase rapidly in organisations. Honestly, the most fundamental problems of this industry have not been tackled until now, said Murthy, 48, pointing to the call centre industry which is facing attrition rates of 80-90%. It is being handled in a pathetic manner. A proper ecosystem needs

to be created.
The Economic Times, 16.06.2012 P. 7

Infrastructure Investment
59. Industry Seeks Infra Investment Push
Industry leaders have urged the government to accelerate infrastructure investment and help revive mega projects to boost business sentiment and revive sagging economic growth. The president of industry body Assocham, Rajkumar Dhoot, met Prime Minister Manmohan Singh to present an agenda for revival, while a CII delegation of CEOs met the PMs Principal Secretary, Pulok Chatterji, and the chairman of the PMs economic advisory council, C Rangarajan, to push for effective government action. Dhoot suggested quick progress in highprofile infrastructure projects such as the dedicated freight corridor and the industrial corridor between Mumbai and Delhi. CII raised similar concerns. We have asked the government for short-term interventions for development of the sector. There are sovereign obstacles and policy hurdles which need to be looked into, said Vinayak Chatterjee, who leads infrastructure initiatives of CII. The Economic Times, 13.06.2012 P. 10

Public Sector Undertaking

60. PSUs Key to Achieving Pre-2008 Savings Level
India will have to bolster its public sector savings over the next five years for the nation's savings rate to reach pre-crisis levels, the Planning Commissions Working Group on Savings has said in a report. Household and private corporate savings are likely to be stagnant to marginally up during the 12th Five-year Plan period, according to the report, leaving PSU savings as the only avenue for the government to firm up the countrys savings rate. However, the turnaround in PSU savings will depend on the governments ability to reduce its fiscal deficit to 2% of GDP for most part of the Plan period, says the report. Public sector savings are made up of government savings and reserves generated by public sector units in the form of internal resources. The challenge 45

will also be to do away with fuel subsidies and reduce the losses incurred by state electricity boards, says the report submitted to the plan panel in May. Assuming an average growth rate of 8% and an inflation rate of 5% over the next five years, the working group has estimated that a jump in public sector savings will be able to pump up the countrys gross domestic savings (GDS) to an average of 36.2% during the Plan period 2012-17. PSU savings are expected to rise to almost 5 % of GDP by the terminal year of the 12th Plan, from just 0.2% in 2009-10. On the other hand, private corporate savings are expected to be at an average of 8.4% of GDP during the current plan period, marginally up from 8.2% in 200910. The Economic Times, 16.06.2012 P. 7

61. PSUs must Declare Financial Impact of Govt Directives

In a move that could vindicate UK-based hedge fund TCIs stand on Coal India, the Standing Committee on Finance has suggested a mandatory requirement for state-owned companies to disclose the financial impact of government directives. The move is prompted by Comptroller and Auditor Generals suggestions that some of the government directions to PSUs may have financial bearing on companies and need to be disclosed to ensure greater financial transparency. If adopted, experts say the move will help minimise interference by injecting greater caution among government officials of parent ministries of PSUs and provide more information to investors. Aneesh Srivastava, CIO, IDBI Federal Life Insurance, says the move will result in higher corporate governance and help investors in taking informed decisions. All PSUs should state the financial implications of the government directives. Butthis may not provide an answer to allthe issues affecting them. The Standing Committee submitted its report on the Companies Bill to the Speaker on June 26. The ministry of corporate affairs (MCA) will now draft the amended bill, which is expected to move in the monsoon session of Parliament. Without naming CIL, the committee report states that in the light of the recentcase, where a similar directive given to a PSU by the government with regard to entering into FSAs with power companies, it was necessary to have a fresh look at the matter in the interest of functional autonomy and operational efficiency of PSUs. The Economic Times, 30.06.2012 p. 5

Tax/ Taxation 62. Retro Tax Likely to Spare Most Foreign M&A Deals
The controversial provision to retrospectively tax indirect transfer of Indian assets through deals executed overseas is likely to spare a large number of transactions by excluding those where the Indian assets account for less than half the total deal size. The retrospective amendment to the Income-Tax Act, part of this years budget and which most tax experts say is targeted at Vodafone Plc, says overseas acquisitions and mergers that involve substantial Indian assets will be taxed here. It does not define substantial. It (substantial) could be 46

defined as more than 50%, a finance ministry official told ET. The finance ministry has begun internal discussions on administrative guidelines to be issued in the form of a circular to provide clarity on how such transactions will be dealt with by the tax authorities. The clarification is intended to reassure edgy foreign investors, including foreign institutional investors and private equity investors, and also help improve the overall investment climate. Such a definition of substantial stake change would be in line with the one provided in the Direct Taxes Code that is likely to be implemented from the next fiscal. Experts say the clarification will give much-needed relief to foreign investors as it will help exclude transfer of Indian assets in a global scheme of merger and acquisition, where these assets account for only a small proportion of the deal. The Economic Times, 04.06.2012 p. 3

63. Assessee, Minor Children Eligible for Separate Tax Exemption

The Kolkata Income Tax Tribunal has put to rest the vexatious issue of whether longterm capital gains (LTCG) earned by minors when clubbed with that of their parents are eligible for deduction separately under Section 54 EC of the Income-Tax Act. The clause exempts long term capital gains up to Rs. 50 lakh if they are reinvested in prescribed securities. The tribunal ruled in favour of an assessee who earned Rs. 5.5 crore long-term capital gains from the sale of shares of one Arc India. His daughter and son, both minors, earned Rs. 49.47 lakh and Rs. 39.5 lakh, respectively, from the share sales. The assessee invested Rs. 50 lakh in Rural Electrification Corporation bonds in his name and the respective LTCGs earned by his minor children under their names. The assessing officer clubbed the long-term capital gains made by the assessees minor children in his hands, but limited deduction under Sec 54 EC only to investment of Rs. 50 lakh in the assessees name. He disallowed deduction for investment in REC bonds made by the assessees minor children on the ground that the upper limit of Rs. 50 lakh applied to the aggregate amount of LTCG, including that of the parent and children. However, a division bench of the Kolkata ITAT ruled in favour of the assessee, saying that only the net taxable LTCG needs to be clubbed with the parents income and not the gross LTCG as was done by the assessing officer. For example, if a parent and his minor child earn Rs. 51 lakh each in long-term capital gains, only Rs. 1 lakh of the minors gain, and not the whole Rs. 51 lakh, need to be clubbed with the parents Rs. 1 lakh for tax assessment. The Kolkata ITAT ruling will come as a major relief to the parents whose income includes taxable long-term capital gains of their minor children by way of clubbing, said chartered accountant Bhupendra Shah. The Economic Times, 07.06.2012 P. 8

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64. Corporate Tax Mopup Dips 2.82%

Corporate tax collection declined by 2.82% in the first two months of the current fiscal, reflecting the countrys dismal growth scenario, but the personal tax segment bucked the trend by rising 10.02%. A finance ministry statement on Wednesday said corporate tax collection for the April-May period stood at Rs. 24,329 crore, against Rs. 25,035 crore in the year-ago period. Gross direct tax collection during the period grew only 3.62% to Rs. 52,232 crore. However, net direct tax collection was significantly higher at Rs. 35,323 crore, almost triple of the Rs. 12,956 crore collected in the corresponding period of the previous fiscal. The growth in net tax collection was largely on the back of low refunds. This surge in net collections was due to a decline in refunds by (-) 54.85% as compared to the year-ago period, the statement said. The refunds over the two months aggregated to about Rs. 16,900 crore, which was significantly lower than that in the corresponding period of the previous fiscal. Refunds in 2011-12 had amounted to about Rs. 95,000 crore. Official data released on Tuesday showed that industrial production grew by 0.1% in April, reinforcing the gloomy prognosis of experts. The countrys GDP growth had slowed to a nineyear low of 5.3% in the last quarter of 2011-12, indicating an overall weakness in the economy. For the current fiscal, the government has set a direct tax collection target of Rs. 5.7 lakh crore, which is 15.2% more than the Rs. 4.95 lakh crore collected last year. But given the current pace of economic growth, this is likely to prove difficult. The Economic Times, 14.06.2012 P. 11

65. Advance Tax Collections Rise 4.9% to Rs. 33,089 Crore

Advance tax payments by India Inc grew by a meagre 4.9% in the three months to June, reflecting crimping growth and suggesting muted corporate profits in the days ahead. Preliminary data released by the finance ministry on Tuesday showed that companies paid . 33,089 crore as advance tax in the first quarter of the fiscal, compared with . 31,631.3 crore in the year-ago period. Payments by the countrys top 100 companies rose 5.33% in April-June 2012 over the corresponding quarter of the previous fiscal. The data showed Reliance Industries, Bharat Heavy Electrical, Bharti Airtel, Steel Authority, Punjab National Bank and Larsen and Toubro paid lower tax in the quarter, an indication that slowdown was hurting industrial profits. Bharti Airtel showed the biggest drop. The telecom operator paid . 6.4 crore in the quarter, as against . 169.5 crore in the year-ago period, registering a fall of 96.22%. The Economic Times, 20.06.2012 P. 13

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66. GAAR wont be Invoked for P-Notes

The income-tax department has spared the popular participatory notes (P-notes), through which many foreign investors invest in India, from the ambit of the controversial tax avoidance rules in a bid to allay investor concerns over the law that has been put off by a year after it seriously dampened sentiments. The department on late Wednesday put out the detailed guidelines on the general anti-tax avoidance rules (GAAR), stating that rules will apply only to income earned after April 1, 2013. The draft rules that have been put up for discussion say the investors of foreign institutional investors will not be covered attract GAAR under any case. Beside, the rule will apply only to cases above a certain monetary threshold, which has not been spelled out in the draft. Where an FII chooses to take a treaty benefit, GAAR provisions may be invoked in the case of the FII, but would not in any case be invoked in the case of the non-resident investors of the FII, the draft circular says. If a FII chooses not to take any benefit under a treaty entered into by India and subjects itself to tax in accordance with the domestic law provisions, then, the GAAR shall not apply to such FII or their non-resident investors. GAAR proposes to deny tax benefit to any arrangement that is entered into with the sole purpose of avoiding tax payment, raising the spectre of tax on investments in Indian stocks and bonds, known as portfolio investments, routed through Mauritius with which India has a tax avoidance treaty. The avoidance rules were proposed in the budget, but implementation was deferred after investors and markets reacted negatively to the proposals. The Economic Times, 29.06.2012 P. 11

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