SBI demands to get rid of CRR but RBI refuses

State Bank of India, one of Indias most respected banks, came up with a suggestion to scrap the cash
reserve requirement held by the Reserve Bank of India.

Chairman of SBI, Mr. Pratip Chaudhuri is said to be the one to propose this suggestion.

Cash reserve is basically the part of deposits that banks keep with the central bank of the country, in
our case the RBI, and no interest is paid on it.

If the SBI chairman is not able to do business as per our regulatory environment, he has to find some
other place," said RBI deputy governor KC Chakrabarty, as reported by the Press Trust of India.

In response to this, Chaudhari said that the RBI could at least consider paying some interest on the cash
reserve as they as banks provide interest to their customers.

For a while now, CRR has been a bone of contention between the RBI and bankers. The RBI, has no
plans of getting rid of CRR. Bankers argue that CRR is a non-performing asset and that the sum that
they keep with the RBI hinders their functioning in terms of ability to lend huge loans.


Everonn Education gains an 8% on buyout of Centum Learning
Everonn Education Ltd crossed over 8 per cent today after the company struck a deal with Bharti group
company, Centum Learning.

Bharti group, however, refused to reveal the deal size or their stake in the combined entity.

At around 10.00 a.m this morning, Everonn Education was trading 6 per cent higher at Rs 179.35. It hit
a high of Rs 183.55 and a low of Rs 170.8.

"The deal is part of the Bharti group's plans to exit non-core businesses," Economic Times reported.

This transaction is in line with our stated objective of focusing our energies on our core businesses,"
Centum chairman Rakesh Bharti Mittal said.

Everonn Education provides end-to-end training programmes and skill development solutions and with
this deal it would hope to help expand its reach in the Indian training space.


Nationwide strike brings 2/3rd of banking to a halt
Over two-thirds of banking activity in the country was affected today as employees of public sector
banks and some old private banks went on strike to protest against a new legislation that would give
more voting powers to bank shareholders and pave the way for corporate entry into banking.

The two-day strike call given by the United Forum of Bank Unions (UFBU) was followed by most public
sector banks.

"Over 70,000 bank branches and a million (10 lakh) bank employees participated in the strike today," C
H Venkatachalam, general secretary, All India Bank Employees Association, said. He added that the
same response was expected on the following day too.
RBI goes by policy panel view on rates
Most of the members of the Technical Advisory Committee (TAC) on Monetary Policy of the RBI had
proposed a status quo in policy rates during the first quarter review of the monetary policy on July
31st.

The RBI did not change the repo and reverse repo rates in the policy review.

Of the seven external members, five suggested that the RBI should not change the policy rate. They
felt that given the fiscal dominance, double-digit consumer price inflation and no realistic expectation
of credible action from the government, the RBI needs to focus on tempering inflation expectations,
the central bank said.

Some suggestions that did come forward were to maintain adequate liquidity to support growth,
reducing the cash reserve ratio (CRR) by 25 basis points or making the open market operations (OMOs)
more active.


Apple-Samsung patent battle nears end
Apple and Samsung, both have claimed, in their closing arguments of their patent battle, that the spirit
of Silicon Valley is their innovation.

The multimillion dollar patent deal has seen Apple demanding damage costs of up to $2.75bn from
Samsung. The former has alleged the latter for willful infringement of its design patents and so-called
trade dress rights for the iPhone and iPad in the US.

Samsung has sued Apple in return over the alleged use of its wireless transmission patents and other
underlying mobile-phone technology. Samsung now looks at a $422m damage cost from its rival in
compensation.

Later this week, the jury decided in Apples favor by awarding it $1.05 billion in damages, which could
be tripled as the jury found Samsung acted willfully.

It is said that Samsung could now possibly face a costly ban on sales of key smartphone and tablet
products. The week also saw Samsung shares fall by more than 7 per cent, causing its biggest drop in
nearly four years.


Top six companies add Rs 17,658 crore in market capitalisation; RIL biggest
gain
The combined market capitalisation (m-cap) of six of the top Sensex companies rose by Rs 17,658 crore
last week. Reliance Industries was seen as the biggest gainer with Rs 10,696 crore.
The list of gainers include: RIL, ONGC, CIL, Infosys, SBI and ICICI Bank.
TCS, ITC, HDFC Bank and NTPC saw corrosion in their market cap, in an overall bullish stock market,
where the Sensex gained 0.75 per cent.
RIL's m-cap saw an astonishing leap of Rs 10,696 crore to Rs 2,63,794 crore and shares of the company
gained 4.22 per cent during the week.
ONGC's market value jumped a good Rs 2,225 crore to reach Rs 2,41,179 crore. Infosys added Rs 2,196
crore to Rs 1,35,024 crore.
Similarly, Coal India Ltd saw its m-cap rise by Rs 1,168 crore to a total of Rs 2,21,356 crore, while ICICI
Bank added Rs 812 crore to its m-cap at Rs 1,10,879 crore.
The value of SBI jumped by Rs 561 crore to Rs 1,27,250 crore during last week.
RIL topped the market valuation chart, followed by TCS, ONGC, CIL, ITC, HDFC Bank, NTPC, Infosys, SBI
and ICICI Bank.


Canara Bank to launch life insurance cover scheme
Canara Bank has announced the launch of a new life insurance scheme called "Canara Freedom
Suraksha. "It offers a cover of Rs one lakh for all its savings bank customers as a value-added service
at a very nominal premium", the bank said in a statement.

A K Gupta, the bank Executive Director, said the facility will be launched on Tuesday, 21st August
2012. This life insurance is a Canara Bank initiative in association with its joint venture company
"Canara HSBC Oriental Bank of Commerce Life Insurance Company".

To add to this, the cover is provided without any medical test and merely on a declaration of good
health by customers. It will cover both, natural and accidental death.

A K Gupta also mentioned that the annual premium rates (inclusive of service tax) are Rs 177, Rs 366
and Rs 988 for age groups of 18-35, 36-50 and 51-59, respectively.

Meanwhile HDFC has come up with a new fixed rate for home loans with a launch of a new product
where interest rates are fixed for ten years. Under the new scheme, rates are 125 basis points lower
than HDFC's existing fixed rate loans. Home loans of up to Rs 10 lakh are available at a fixed interest
rate of 10.75% and loans between 10 lakhs to 75 lakhs at 11%.


Google rolls out g-India with an eye on local business
Google, for the very first time, is holding g-India across five Indian cities to increase its business
network and to reach out and cultivate an ecosystem of business partners, clients and software
developers.

Google plans to promote its products ad increase its usability among small and medium enterprises
(SMEs).

Google has made its mark in the hardware and software sector like search, cloud computing, analytics,
and office productivity, which makes India a large market for the internet biggie.

The marketing campaign aims to increase the consumption of software and hardware as a service .

"Google has been operating through independent software vendors, but it needs to build a stronger
network with right set of partners who can take Google's cloud solutions beyond tier-II cities, reaching
out to traders, merchandisers and small-scale manufacturers," said Sanchit Vir Gogia, senior analyst at
technology market researcher Forrester Research.

Google's event is being held in the following five cities: Chennai, Bangalore, Hyderabad, Delhi and
Mumbai between July and September. The Chennai event which was held in July was seen as a success
and the second round was held in the first week of August in Bangalore.

With g-India in the forefront, Google is slowly matching every step with their competitors such as
Microsoft and SAP. "Companies like Microsoft have been in the market for decades and have built-up a
network of business partners that help it reach out to more and more customers," Forrester's Gogia
said. "But technology landscape is changing and Google is very well positioned for it."


Infotech Enterprises eyes control of JV with Pratt & Whitney
The rupee softened by six paise to rest at 55.34 against the US dollar, in volatile trade. This occurred
due to an increasing demand for the US currency from oil importers.

The rupee reached a high of 55.25 a dollar at the Interbank Foreign Exchange (Forex) market. This was
a small increase compared to Friday's close of 55.28.

On 13th the rupee reached its all day high of 55.19 on dollar selling by exporters amid sustained
capital inflows into the stock market quoted the Financial Express.

The weak dollar overseas also boosted the rupee sentiment in early trade, said Forex traders.

The rupee had touched a low of 55.47 a dollar in the late morning session on dollar demand from
importers amid hesitancy in local shares. However, with shares recovering in the latter part of the day
and the US dollar losing its momentum in the international market, the rupee settled at 55.34.


Rupee down 6 paise Vs US dollar at 55.34 in volatile trade
The rupee softened by six paise to rest at 55.34 against the US dollar, in volatile trade. This occurred
due to an increasing demand for the US currency from oil importers.

The rupee reached a high of 55.25 a dollar at the Interbank Foreign Exchange (Forex) market. This was
a small increase compared to Friday's close of 55.28.

On 13th the rupee reached its all day high of 55.19 on dollar selling by exporters amid sustained
capital inflows into the stock market quoted the Financial Express.

The weak dollar overseas also boosted the rupee sentiment in early trade, said Forex traders.

The rupee had touched a low of 55.47 a dollar in the late morning session on dollar demand from
importers amid hesitancy in local shares. However, with shares recovering in the latter part of the day
and the US dollar losing its momentum in the international market, the rupee settled at 55.34.

China export and import growth slows sharply in July
China growth in industrial output fell to a three-year low in July.

Exports rose by a mere 1% from a year earlier, down from 11.3% growth in June and imports rose by
4.7% compared with 6.3% in June.

Analysts have cautioned that the data was weaker-than-expected and may see Beijing introduce
immediate actions to spur growth.

"Trade data has come in dramatically below expectations - the worst export growth number (excluding
Chinese New Year) since November 2009 - highlighting the risk that the external environment poses to
an economy in the midst of a rapid internal slowdown," said Alistair Thornton of IHS Global Insight in
Beijing.

There has been a sharp decline in industrial production and growth in retail sales have also fallen short
of forecasts.

China's economic growth has slowed in recent months. Its economy expanded at an annual rate of 7.6%
in the April to June period, the slowest pace of growth in three years. Analysts say that this rate may
further slow down.

Keeping this in mind, China's central bank has cut its key interest rates twice since the start of June
and reduced the amount of money the country's banks must keep in reserve, in a bid to boost lending.


India Post joins hands with Infosys
One of Indias biggest software services exporter Infosys Ltd., has been chosen by India Post to
transform its financial services platform.
The project is expected to cost Rs. 700 crore.
Infosys Finacle core banking and McCamish Insurance platforms are to be deployed for the project.
Infosys plans to train 35,000 personnel of India Post and implement an electronic content management
system to process the lakhs of documents that are generated across the postal network.
India Post has a network of around 1.5 lakh post offices across the country and with Infosys by its side,
as its technology and consulting partner; India Post plans to improve its delivery of financial products.
Infosys will also install 1,000 ATMs for India Post. The project, part of the India Post 2012
modernization programme, aims at bringing transparency, agility, flexibility and scalability to India
Posts operations, a joint statement said. It is expected to reach out to about 200 million customers
of India Post and would help improve efficiency, it said.



SBI Q1 net up 137%, but non-performing assets hurt
Indias largest public sector bank, State Bank of India (SBI) has reported a net profit of Rs 3,752 crore
for the quarter ended June. This confirms an increase of 137% over the net profit for the corresponding
period last year.

The surge in non-performing assets is accompanied by disappointment among investors with the stock
closing down 4.3% at Rs 1,888. SBI chairman Pratip Chaudhuri acknowledged that their expectations of
bad loans to peak turned out to be wrong.

He said, Although loans of over Rs 6,700 crore slipped into the non-performing assets category, this
quarter, the bank had seen upgrades of loans worth Rs 1,600 crore. Of the remaining Rs 5,000-odd
crore, Rs 2,000 crore of loans are already on the mend but we could not give shape to them in the
quarter," he said.

Chaudhuri added that given the slowdown in the corporate sector, the bank was focusing on home and
auto loans to generate credit growth. "We expect inward migration of home loans (from other lenders)
to pick up as our new rates are the most competitive," said Chaudhuri.

He said that the bank was protecting its spread by eliminating dependence on wholesale funds and
reducing its investments in government bonds.


Industrial growth in June contracts by 1.8%
Bogged down by a poor show by the manufacturing sector, especially capital goods, industrial growth
contracted by 1.8 per cent in June. This is the third such slide in four months, causing further
deterioration in the overall economic scenario.

Planning Commission Deputy Chairman Montek Singh Ahluwalia, as well as Finance Minister P.
Chidambaram, took up the issue of our dwindling economy at his maiden press briefing earlier this
week, dubbed the Index of Industrial Production (IIP) numbers for June as disappointing and
reiterated the need to promote critical sectors to boost growth.

Ahluwalia did not sound optimistic either. At the IIP data released today, he said, As per the data,
industrial growth in June declined to minus 1.8 per cent from a robust expansion of 9.5 per cent in the
same month a year ago.

No surprise, therefore, that the manufacturing sector as a whole ended up in a poor zone with a 3.2
per cent contraction in growth during June.

The manufacturing sector, which constitutes over 75 per cent of the IIP basket, also reflected poorly in
the April-June quarter with a decline by 0.7 per cent in growth as compared to a 7.7 per cent growth in
the same quarter of 2011-12.


Amazon makes Facebook game, challenges Zynga
Online retail biggie Amazon launched its first online social game in order to challenge San Francisco
based social game services provider Zynga.
The game is titled "Living Classics" and is tailored for online social networking sites like Facebook,
where Zynga rose to fame.
The Seattle-based company -Amazon - newly announced its Game Studios and has big plans for it.
Amazon released a statement saying, We know that many Amazon customers enjoy playing games,
including free-to-play social games. We believe we can deliver a great, accessible gaming experience
that gamers and our customers can play any time."
"Living Classics" challenges players to reunite a family of animated foxes ranging about settings from
literary works such as Alice in Wonderland, King Arthur, and The Wizard of Oz- this was done to pay
tribute to Amazons roots as a seller of digital books.


TCS, HDFC partner to invest in sports education startup
India's software exporter giant and the top mortgage lender of the nation are not the first things to
come to your mind when you think sports or education, but Tata Consultancy Services and HDFC have
come together, to invest in a startup, in the business of sports education. This partnership, just like
TCSs and HDFCs joint venture Intelenet, has been enabled by Susir Kumar and the team that built
Intelenet into one of India's most prominent BPOs.

Kumar and the Intelenet team decided to go with the idea of having Kids Out Of Home (KOOH).
Kumar and company did not have to work too hard in convincing the management team of HDFC and
TCS considering their previous successes. N Chandrasekharan, the CEO of TCS, a fitness buff himself
was more than pleased with the idea. Both TCS and HDFC invested 15 per cent each in KOOH.

KOOH will compete with startups such as Edusports, Leapstart and Sportseed, which provide
outsourced sports education for schools.

KOOHs vision is to take structured curriculum, technology and infrastructure to schools to motivate
children to come out and play.


RBI wants government to simplify foreign investment regime
Indias bankers bank - Reserve Bank of India has recommended that the finance ministry of India
simplify the countrys foreign investment regime. RBI hopes that the new finance team at the North
Block considers their suggestion which they have been trying to pursue for the last couple of years.

According to the RBI, any foreign investment in a company that is in excess of 10% of its shares should
be considered as FDI and any foreign investment less than 10% should be considered as portfolio
investment.

All Qualified Financial Investors (QFI) that want to invest through the portfolio route will have this
proposal as a part of single window framework. This proposal will provide a simple structure for foreign
investors to invest in Indian companies.

The RBI is keen on this proposal keeping in mind India's current account deficit which has worsened to
4.2% of GDP in 2011-12 and the depreciating value of the rupee.

Sebi chairman UK Sinha and the Ashok Lahiri Committee of 2004 have suggested a similar proposal in
the past.

A simple distinction between FDI and portfolio investments, such as this, is being suggested, keeping in
mind the success of this distinction in a number of countries such as Brazil and South Africa.
HDFC Bank's m-cap surges past SBI's
Private sector giant HDFC Bank on 27th July 2012 toppled Indias largest nationalized bank State Bank
of India (SBI) to become the country's most valued lender in terms of market capitalization.

The tug-of-war continued for the top slot in the entire market between software biggie TCS and state-
owned major ONGC, with the former toppling the latter yet again.

An upsurge in the stock market caused SBI's scrip to go under pressure and it settled at 3.77% lower,
while HDFC Bank gained more than 3%.

As a result, HDFC Bank's m-cap rose to Rs 1,37,554 crore, making it the sixth most valued firm, as
opposed to Rs 1,30,263-crore m-cap of SBI, which slipped to the seventh slot, according to BSE data.


Archaic labour law returns to haunt Indian IT sector
The booming software industry is worried about the possibility of arcane rules and regulations falling
upon it.

Employers in Bangalore, home to some of the world's most prominent software companies, are worried
that at a time when the industry is in a bad phase, a law might cause severe stress.

The law in question the archaic law- was made applicable to IT companies starting this year.

IT companies have so far enjoyed exemption from this archaic law - the Industrial Employment
(Standing Orders) Act, 1946 - for more than a decade now.

With the implementation of this law, IT companies will have to comply with complicated and
unnecessary procedures, be exposed to 'inspector raj', and end up encouraging union activity in a
sector that has been so far free of union groups.


State Bank of India raises fixed deposits rate for NRIs by 0.25%
State Bank of India has increased its rate of interest on its fixed deposits for Non-resident Indians (NRIs)
by 0.25 %.

SBI released a statement saying that between 3 to 5 years, a 9 % interest would be attracted on term
deposits as against the existing 8.75 % for the same period.

The new rate of interest will be effective from 17th July 2012. However, interest rate for other
maturities has been left unchanged.

Earlier this month, Bank of India had also slashed its interest rate on fixed deposits by 0.25 % on select
maturities.SBI had last revised the interest rate on fixed deposits on March 22 this year.






Employees earning up to Rs 5 lakh annually exempt from filing income tax
return
On 20th July 2012, the Finance ministry of India declared that any employee with an annual
income of up to Rs. 5 lakhs will not have to file tax returns. This will be seen to in effect from
the 2012-2013 assessment year.
The last date for filing of income tax return, for which this rule is applicable, is the 31st of July
2012.
There are certain terms and conditions to avail this advantage. 1. There should be no other
income other than the one mentioned officially 2. The employee should provide the employer
with his/her permanent account number (PAN) and income, if any, in the form of interest on
savings bank account and returns on Form 16.


Prices Dampen Consumer Sentiment: Blufin
According to Blufin, the month of June witnessed the worst consumer sentiment with the index level
dropping to 40.3. The index is based on how inflation, prices and the employment market influence
consumer sentiments.

The rise in prices of fuel and food items partnered with a downward trend observed within the
employment sector has made the situation go from bad to worse. According to Alay Desai COO of
Blufin, the month of June marked a critical period for consumer confidence with the employment
sentiment index being very low.

Desai opines on the recovery of the Indian Economy being contingent on the Monsoon.

Below is an edited transcript of his interview with Latha Venkatesh and Ekta Batra.

Q: June is turning out to be worse than the previous five months?
A: A downward trend has been observed for the first time in the last five months with the consumer
confidence dropping to 40.3.

Q: What are the major causes of the pessimism? Do consumers reflect pessimism about any specific
situation like perhaps employment or growth?
A: The month of June saw the worst employment sentiment index. Through the months preceding June
the sentiments on inflation and spending aspects were low. However, for the first time the
employment index affected the overall consumer confidence index.

Q: Do you see further pessimism coming in from the inflation side in terms of preliminary readings for
July?
A: At this point it is difficult to predict readings for July due to ongoing surveys through the month.
Combining the effects of the business cycle indicator with ongoing surveys it could be said that the
monsoon will play an important role in economic recovery. The absence of such a recovery will lead to
further pessimism amongst the consumers.

Q: Can you give us a color on which sectors exactly are impacted by either lower or higher spending
sentiment?
A: The spending sentiment is tracked by the patterns observed in four sectors consumer durable, two
wheeler, four wheeler and home sales. In June, home sales and the four wheeler markets have taken
the worst hit. While consumer durables hold steady ground, the improvement in the two wheeler
segment depends on the monsoon.


MFIs Must Become More than Commercial Lenders
In a recent case of 14 Foxconn employee suicides, the company which is the biggest manufacturer of
electrical components around the globe received a lot of negative media publicity. The media blamed
the suicides on low wages and poor working conditions. However, as per the account of a Chinese
professor, Foxconns working conditions are supposedly better compared to the general Chinese
standards.

To escape the medias radar, the company reduced its employee work force by 1/3rd and relocated to
several cities to disperse its working population. Hence, even if the overall suicide rate does not drop,
the number of suicides recorded per location will be fewer in number.

This is quite a lesson to learn for Indian Micro Finance Firms which are strongly held responsible for
suicides. People tend to believe that financial stress is one of the major causes of suicide. However,
studies conducted state otherwise. In India, the highest numbers of suicides are observed in richer
spaces such as Pondicherry & Kerela with rates such as 47.2 and 31 respectively. Compared to the same
the suicide rates in poorer states such as Bihar, UP, Jharkand, Rajasthan & Orissa have much fewer
rates ranging from 1.1 to 10.8.

According to the data published by WHO on rates of suicides observed within various countries globally,
nations such as Belarus (36.6), Sri Lanka (30.7), Japan (25.3), Finland (18.8), and Switzerland (17.5)
indicate the worst suicide ratios. Nations such as Zimbabwe (7.9), Nicaragua (3.5), USA (10.8) and India
(10.7) are considered as being better off.

Suicides are attributed more to factors such as depression, culture and psychological reasons rather
than financial burdens. In the state of Andhra Pradesh, suicide rates are very high. The state records
about 15,000 suicides per year which amounts to about 40 per day. In the lieu of the socio economic
scenario within AP, MFIs have been held responsible for influencing suicides.

Since this a major political issue, it is being dealt with carefully. The state has passed a law through
which it has the right to arrest MFI officers for reasons such as annoying debtors. The debtors have
been informally told to stop repayments and this has dropped the repayment rate from 98% to 20%.
This has threatened the MFIs towards bankruptcy.

While MFIs believe that alliance with the state governments will help them sustain, the opposition in a
given state will make sure they dont. For example, considering the high growth rate of MFIs in UP, it is
quite possible that there will be suicides observed among the borrowers. This will result in validating a
blame game between Mayawati and Mulayam.

In a politically charged nation such as India, it is quite futile for the MFIs to hope for sustainable
initiatives from the Malegam committee of the RBI. Although at a global scale, MFIs have been looked
upon positively as helping the poor the same is not observed within India. This is because in India, the
government directly competes with MFIs wanting monopoly for itself. In India as opposed to other
nations, instances of politically influenced defaults are high and rival MFIs compete by giving funds to
borrowers that leads to over borrowing and further debt.

In order for MFIs to sustain and be looked upon as more than just pure commercial lenders they will
need to take several steps. These would include spreading their activities among many states without
being dominant in any, getting women borrowers to stage protests for them, getting involved in growth
of livelihood, provide services such as insurance, provide clients with wholesale solutions and more

Without doing so, it will be very difficult for them to be considered as exceptions within political
systems that cancel loans.

An Insight on Investment Influences
Certain investors from Gurgaons Citibank branch had a tough moment as they were defrauded of a sum
of INR 3 billion by their relationship manager. The manager made his clients sign blank cheques which
he later deposited in the accounts of his family members.

Why do the rich fall prey to such schemes with very little protection? Perhaps this has some thing to do
with the nature of Economy and investments before liberalization.

Prior to 1991, the rate of interest on regulated products was very low. If one was interested in earning
higher returns on their investments, they would have to tap into the unregulated market. However, the
level of risk involved in the same was on the higher side.

During this period an individuals political and economic connections played an important role in the
level of privileges that one could avail. Individuals with such connections would be demarcated from
the ordinary lot. The same followed even as far as investment opportunities were concerned. The
access to information on level of risk and return on investment towards unregulated goods was
contingent on the relationships and connections that one might have. In that phase, financial decisions
were more relationship based rather than being transaction based.

There are two types of systems in portfolio management discretionary and non-discretionary. In a
non-discretionary system the financial advisers role is restricted with the client having more decision
making capability. In a discretionary system such as that followed by mutual funds and hedge funds the
client plays a small role and cannot say much as far as the investment decisions are concerned.
However, if clients are made to sign blank cheques within the guise of a non-discretionary system such
as observed in the case of the Citibank fraud, it quite works out the same as the discretionary system.
At least within the discretionary system the individual knows what theyre getting into.

It might not be worth spending a lot of time and energy on the Citibank fraud case for several reasons.
The fraud included unregulated products and is covered by criminal laws. Also those affected are
resourceful enough to hire expensive lawyers who can fight their case and moreover it would be better
to spend the regulators resources on regulated products concerning small investors who are not as well
equipped as the rich.


Economic Slowdown
Given the financial instability created by the 2008 recession, Economists question the intent of the
architects whove created the current Economic system. Were these architects naive or extremely
smart but very subtle? As citizens we put a lot of our faith in the stability of central banking and
market friendly finance regulators, but what should one think when these very same institutions fail
us.

Insurance has often been looked upon as a safeguard during Economic crisis. During the great
depression from 1930 to 1932 about 5000 banks collapsed. However, during 1934 only 9 banks failed in
all. This was post the introduction of insurance deposit.

Other measures such as financial regulations in customer banking deposit relations and central banking
were introduced to minimize risks and promote stability.

The recent financial crisis overlooked breakdown of one its strongest points and structures which was
central banking. The immense faith in the central banking system was a result of experiences such as
decrease in percentage of inflation in 1983, tackling the stock market collapse in 1987, proactive
action during the crises in 1997-98 and so on. In fact, it was even looked at as a source that would be
the permanent answer to inflation.

The price of real estate rose by 150% from 1995 to 2006 in the US. Prices went on rising with bankers
relying on regulators to exercise control and stability and vice versa.

In a highly unstable environment, it is essential to be prepared and foresee the collapse of the
strongest Economic pillars and think of creative ways of dealing with them.

The Role of the Private Sector in Determination of India's Global Image
India seeks to be leader among the 3rd world developing nations but it certainly is no role model. The
country has been outdone by several other developing countries.

The tide has however changed course as India seems to have potential to be an Economic superpower
and perhaps even a permanent member of the UN. The role played by the corporate sector and certain
individuals has made a paramount contribution towards determining Indias global position.

During the phase of the cold war, India strengthened its ties with the US through migration, seeking
admission in Western universities and so on. Trade relations between the two nations flourished as the
US became Indias greatest trading partner. Post the end of the cold war and Economic reformation,
the private sector initiatives directed the change in Indias total global influence.

The sectors that set India apart are IT & BPO. Indias potential has many analysts in the US concerned.
This situation has even inspired a television series called Outsourced and Bangalored is used a term
to refer to an individual whose job was outsourced to someone from the city of Bangalore.

Almost all fortune 500 companies have set base in India. Companies such as Accenture and IBM have
more Indian employees than in the US.

Some of the Indian global spearhead initiatives include the take over of Corus by Tata Steel, Tata
Motors acquisition of Jaguar Land Rover, the take over of Novelist by Birla and so on. Tata Nano has set
a distinct identity for India in the auto domain and also Bajaj is planning competition in liaison with
Renault Nissan.

Indian companies are even setting foot in Latin America and Africa. Even telecom companies such as
Bharti Airtel and Essar have set foot in Africa to provide their services. Companies such as Sterlite have
set their eyes on Mozambique to explore its coal potential.

According to Economist Arvind Subramanian, India holds the highest rank in outward foreign investment
as part of its GDP. This is a record breaker for a low income country.

The government has also played a major role in supporting Indias Economic initiative. As a result of
this, the US supported Indias bid to be part of the UN Security Council and also waived nuclear rules.

However certain social conditions and corruption still continue to dampen Indias overall global image.


MNCs in Rural India: At a Turning Point

A "symbiotic relationship" is how Sanjeev Chadha, chairman and CEO of PepsiCo India, describes the
work that the food and beverage multinational undertakes with thousands of farmers across India. "We
help them with progressive farming techniques and they are of huge benefit to us in securing a reliable
supply chain," he says. Some observers would call what Pepsi is doing corporate social responsibility
(CSR); others more cynically might say it's simply another example of multinational corporations
(MNCs) trying to figure out how to make inroads in India's challenging, but potentially lucrative rural
market.
Whatever the words used by executives like Chadha for such initiatives, it is impossible to discuss
multinational strategies in rural India without mentioning CSR. In its various forms, it is a critical part of
their rural growth plans, often out of sheer necessity. Filling the gaps left by government, MNCs have
built roads in rural India that help them deliver their goods, provided education and health care for
communities whose workforces they rely upon, and implemented environmental programs to protect
precious natural resources needed to keep supply chains running smoothly.
"In some cases, I am sure CSR activities are mostly rhetoric," says Harbir Singh, Wharton
management professor and co-author of a new book titled, The India Way: How India's Top Business
Leaders Are Revolutionizing Management. "But CSR is more legitimate in India than in the U.S., where
infrastructure has been built and government is seen as addressing societal development agendas."

Yet now there's a shift in how MNCs look at their entire rural India investments beyond CSR. With
growth drying up in developed markets and their center of gravity shifting to emerging markets, MNC
businesses in India are under pressure to prove that their rural strategies aren't just about doing well
from a CSR perspective. They also need to show head office that these strategies are doing well from
a business perspective. In short, the strategies must start delivering top- and bottom-line results.
After years of false starts, missed opportunities and flawed strategies, a number of MNCs' India
businesses are getting close. Others already are there and are ramping up their rural investments.
None can take that fine balance between doing good and doing business for granted, as Nokia, Coca-
Cola and Max New York Life -- among the companies profiled in this special report -- show. And it's for
that reason that at PepsiCo India, "our rural agenda has been driven by purpose and now is moving
into performance," says Chadha.
Spending Power
For many MNCs, there's a lot more riding on their rural India performance than there once was as
India's growth story spreads to the heartland. Two-thirds of the country's one billion consumers live in
rural India, where almost half of the national income is generated. A report by Technopak Consultants
and the Confederation of Indian Industries, a trade body, estimates that the country's rural consumer
market generated US$425 billion of revenue, up from US$266 billion the previous year.
The big reason for the growth is that India's rural consumers are steadily gaining more spending
power. The number of rural households earning less than US$760 a year is down from 65% to 24%
since 1993, while those with an income of US$1,525 have more than doubled from 22% to 46%.
Combine these factors with improved roads and other infrastructure in rural India to help products
reach their markets, and it's easy to see rural India's attraction.

"We are finally beginning to see that rural India has cash and is able to spend at the same time," says
Vijay Govindarajan, professor of international business at Tuck School of Business at Dartmouth
College in New Hampshire, who is also the chief innovation consultant for General Electric. "This is a
remarkable combination for companies."
But any company coming to India for the first time that thinks it will be easy to take advantage of that
combination is mistaken. Rural India is hugely complex, not least because of its diverse pace of
development. As a recent study from IMRB International, a research company in Mumbai, notes, some
markets are big but not as affluent as other markets (Uttar, Bihar Pradesh) while some are affluent but
not very large (Himachal Pradesh, Goa). Experts also say that strategies need to take into account the
vast number of languages and cultural differences across India's hinterland, while keeping strategies
highly flexible and adaptable.
It can mean developing products and services tailored specifically to the rural market. When LG
entered India in the mid-1990s, numerous brands were vying for shelf space with hardly anything to
distinguish them from competitors. The South Korean company developed two color television sets for
the rural market, Sampoorna (which means "complete" in Hindi) and Cine Plus. At US$65 and US$107
respectively, the sets were priced slightly higher than the black-and-white televisions that other
manufacturers were selling in rural markets and that had become obsolete in urban homes. LG was
also the first to offer gaming with its cut-price TVs and menus in English and Hindi. Now LG has
refrigerators, washing machines and microwave ovens targeted at price-sensitive consumers sold from
hundreds of retail and distributor outlets across the hinterland, with rural markets contributing 40% of
its revenue.
Much also depends on the sector and products sold. In fast-moving consumer goods, for example,
MNC products are capturing a sizable portion of rural consumer spending in a number of areas, with
year-on-year increases in rural spending in 2009 on MNC shampoos (70%), washing powder (60%)
and toothpaste (112%), say researchers at IMRB. What's more, they say, the average spending on
these products is growing faster in rural than in urban markets.
Soap Operas
In the course of ramping up the performance of their rural strategies, MNCs are applying the lessons
already learned. One of those lessons is that the benefits of a first-mover advantage are tough to hang
on to as rural Indian consumers' tastes change rapidly, with questionable brand loyalty.
That applies even to a groundbreaker like Hindustan Unilever Ltd. (HUL), the country's largest
consumer-products company owned by Anglo-Dutch Unilever. It made waves in the hinterland in 2001
when its Shakti Project enlisted self-help groups to develop a network of women -- largely from very
low-income households -- into entrepreneurs, selling baskets of HUL products door to door. Today,
42,000 women earn a living by selling HUL products in more than 100,000 villages in 15 states. "India's
rural narrative has been defined by HUL," notes Pradeep Lokhande, founder of Rural Relations, a
Pune-based consumer-relationship management organization.
In the meantime, HUL has embraced other novel distribution strategies, such as selling products like its
Sunsilk and Clinic shampoos in small, inexpensive packets for low-income Indians in the hinterland
with little spare cash. Thanks to those efforts, the company has one of the most extensive distribution
networks in the country, with 6.3 million retail outlets, including one million that it services directly.
Rural India currently accounts for nearly half of HUL's revenue.
But HUL's lead regularly comes under threat. In December, for example, rival MNC Procter & Gamble
launched Tide Naturals, which is a 30% cheaper version of its Tide detergent targeted at rural
consumers -- a global first for the Cincinnati-based MNC. The launch was part of the parent company's
"purpose-inspired growth strategy" to "touch and improve more consumers' lives in more parts of the
world." Within weeks of its launch, Tide Naturals shook up India's US$8 billion detergent market by
clinching a 0.6% share of the market, according to AC Nielsen.
HUL's response has been to turn to a local court to contest P&G's use of the word "naturals" to
promote its new product. With neither side backing down, the case continues.
While other MNCs aren't necessarily going to be airing their competitive grievances in court, they can
expect fast, nimble competitors to take them by surprise and grab market share if they don't stay close
to their customers -- which is no small feat in a country like India, which has 642,000 villages, some
with populations as low as 500.
'Uncharted Water'
Nowhere is that more evident than in mobile telephony. Mobile phone penetration in India jumped from
1.4 units per 100 people in 1995 to 51 units currently. In the 12 months to September 2009, the
number of mobile subscribers increased 55% to 142 million, according to the Telecommunications
Regulatory Authority of India.
Taking a lead in that growth has been Nokia, the US$55 billion Finnish mobile handset maker, which is
one of the companies profiled in this special report. As part of a global emerging market focus since
2006, rural India now accounts for 40% of Nokia India's US$5 billion annual revenue. But it's a
crowded business to be in. Along with Samsung, LG, Sony Ericsson and Motorola, there are a number
of handset makers not only from China selling cut-price handsets, but also from India's home-grown
companies that are chipping away at Nokia's market share lead with hand sets that are cheaper, more
practical or both.
Now Nokia, like other handset makers, is branching out and forging alliances with various partners to
offer mobile banking and other services along with its handsets. "It's uncharted water" -- as Gerald
Faulhaber, a business and public policy professor at Wharton, puts it -- one in which "customers are
pushing the companies and taking them out of the comfort zone."
Doing so successfully requires one thing: "listen to people," states Karishma Kiri, a Seattle-based
strategy and product management consultant at The K2 Group, who was a director of Microsoft's
Unlimited Potential initiative which provides computers, software and IT training in emerging markets.
"A lot of companies tend not to listen to [what] rural consumers say they need."
That's not as clear-cut as MNCs might think. The jury is still out on the mobile services launched by
news agency Reuters last year and other service providers to deliver agriculture information to farmers'
mobile phone. According to Rural Relations' Lokhande, the demand hasn't been strong. "There's a
perception mismatch between the farmers and the service provider," he notes. While the companies
assert that the service is useful, affordable and personalized, many farmers figure they can get daily
rates from their state agriculture marketing boards for two cents, or half the price.
In rural areas, finding the magic price points that don't eat into margins yet boost volume is an ongoing
battle, with a lot hinging on distribution. "We have to build, and are building much deeper 'go-to-market'
systems in rural India. They have to be extremely cost-efficient, much more so than they are in the
urban areas," says PepsiCo's Chadha.
The US$43.2 billion MNC has been in India for more than 20 years and now claims to have overtaken
Nestle as the top food and beverage company in the country. Overall, India has indeed been treating
the company well, even during the downturn. India revenue at its drinks business grew 40% last year,
while volume jumped 32%, well outpacing most other countries in PepsiCo's portfolio.
But it's not resting easy. Last year, it invested US$200 million -- the most ever in any single year -- as
part of a US$500 million plan to expand its distribution infrastructure, while increasing R&D and adding
four new plants to the 45 it already has in the country.
To make those investments pay off, rural India -- which currently accounts for 20% of PepsiCo India's
business -- is taking center stage. "Over the next 10 years, I see rural India forming 40% to 50% of our
national business, and in the future, growth will be powered by the rural areas," says Chadha.
Is that a long time to wait? "If any company wants [quick] financial results from the rural initiative, it is
seriously mistaken," says Tuck's Govindarajan. "You have to look at the next decade and not the next
quarter."
K2 Group's Kiri agrees. "The rural incubation work of multinationals is part of their business," she says.
"But they need to be less focused on [year-on-year] success and spend more energy on building
innovative solutions and business models for this segment. It's a long haul."


BIG is no longer better
The Reliance Anil Dhirubhai Ambani Group is rebranding all its businesses as Reliance rather than
maintaining individual identities for each service, the head of brand and marketing for Reliance
Communication, Sanjay Behl told ET. Reliance Communications is the Groups telecom arm.



The aim is to transition from multiple Reliance sub brands to a singular iconic Reliance master brand, he
said.



As a result, the group will lose the small ADAG tagline in several of its current logos and the suffix in
brands like Reliance Mobile. All of these will now be branded as Reliance with descriptors like GSM or
CDMA for the telecom business, Mr Behl said.



The objective is contemporarising and strengthening the brands physical identity, he said. He did not
elaborate beyond this.



The company will also change some of the Big brands that it uses in its entertainment business, for
example Big Pictures will now become Reliance Pictures and Big TV will become Reliance Digital TV, he
said.



The company will start rolling out the new brand identity from this month, he said, adding that much of the
brand changes will be visible in the upcoming cricket tournament ICC World Cup.



ADAG is present in several businesses notably, telecom, power, infrastructure and entertainment.



In August this year, Anil Ambani, the groups head, announced that he had resolved all differences with
brother Mukesh, the chairman of RIL , Indias largest company by market capitalisation. These
differences stemmed from differing interpretations of parts of a family settlement in 2005 which divided
the groups various businesses between the two brothers.



In the recent past, there been persistent rumours that Mukesh might buy a stake in RCOM, the telecom
company. Such rumours have been strenously denied by both sides. On Thursday, ADAG sources
described the dropping of ADAG as a simple rebranding exercise, unrelated to any strategic intent.


China to retain advantage despite India's demographic rise
China would retain its economic advantage against India in the next two decades despite decline in
population and the labour force, a top Chinese analyst has said.



Playing down concerns that the future demographic shift would help India to over take China, M Wan Jun,
a researcher said, "It is too early to say whether India will surpass China economically, as China is also
gradually shifting its growth mode."



Wan is from the Institute of Economics at the Chinese Academy of Social Sciences said. He was reacting
to US Census Bureau forecast that structure of Asian economies would change as India is set to overtake
China as the most populous country by 2025.