Tuesday 20 December 2016

Ab #JiyoBefikar - Bajaj Allianz Life Insurance to launch something new this New Year!

My New years resolution - investing for my future. Our tomorrow depends on what we do today. Planning is bringing the future into the present so that you can do something about it now. The safest way to plan for future is buying an insurance policy. Insurance not only plans for you but also for your loved ones. It is an important factor while planning for the future. It ensures that under all circumstances your family continues to maintain their lifestyle and meet their dreams as well as aspirations. In this era of uncertainity, we look for a worry-free protection plan which not only give us a plain cover, but also aid us against diseases as well as disablity. It is essential to ensure that our loved ones are well covered before the one's journey into this world comes to end.

Bajaj Allianz Life Insurance is planning to launch it first ever online term insurance policy. You can buy online, chat with the agent online and also pay premium online at an ease. You can shield your family against the "IFs Of LIFE" in just a few clicks. Now #JiyoBefikar as insurance goes digital. 

Term insurance protection is often an ideal choice for people in their family-formation years because they are cheaper and it allows them to buy high levels of protection when the need for protection is often greatest. To put it in numbers, a term insurance plan of Rs 1 crore for a non- smoker profile aged at 30 would cost you less Rs. 20 for a day. A term insurance plan could pay off a mortgage or help in your kid’s education in your absence, ensuring financial security for years to come.

Online term insurance is also a great way to save your tax. Premiums paid are eligible for tax benefits under Section 80C of Income Tax Act. Bajaj Allianz Life Insurance has been a pioneer digital insurance plans. Online insurance makes buying experience for Indians extremely efficient, smooth and hassle free. Get More By Paying Less as online insurance plans are cheaper than agent linked insurance covers.

Life is full of "IF's". Presenting a complete protection plan built to safe guard you and your loved ones from various uncertainties in life. Don't let worry come knocking on your doors. Now #JiyoBefikar and invest in you and your loved ones' glee. Get ready for the launch of all new product from Bajaj Allianz Life Insurance on 23rd December. Follow the hashtag #IfsOfLife and check out more info from @BajajAllianzLIC

About Bajaj Allianz Life Insurance

Bajaj Allianz Life Insurance is India's leading private insurance companies which caters to all age- income profiles in diversified product portfolio. Bajaj Allianz Life Insurance is a joint venture between Allianz SE, the world’s leading insurer, and Bajaj Finserv Limited. Allianz SE is a leading insurance conglomerate globally and one of the largest asset managers in the world. Today, Bajaj Allianz Life Insurance has over 700 branches across India.

- Chaitanya Kulkarni

Thursday 3 November 2016

Mutual Fund of the month - ICICI Prudential Balanced Advantage Fund

ICICI Prudential Balanced Advantage Fund is a balanced category fund having a unique structure of allocating between equity and debt, using in house Price to Book value model. This fund can move in the range of 30%-80% of equity exposure, but will always maintain equity allocation above 65% by using equity derivatives, to keep the tax status of equity. As it can go beyond 65% too, so Fund management treats this fund as equity fund only, with less volatile returns. The primary reason I selected ICICI Prudential Balanced Advantage Fund is that it is an all weather fund which does well in all sorts of market conditions.


Fund Portfolio

ICICI Prudential Balanced Advantage Fund has a mix of large cap and mid-cap stocks. The fund since its inception continues to have large cap stocks, specifically private industry leading stocks. While large cap stocks represent established enterprises selected from the top 100 stocks by market capitalization, mid-caps are smaller business entities with long-term growth potential. Coming to the debt side, the funds hold high yielding 9.55% Hindalco bonds, treasury bills issued by RBI and Central government loan and State Development Loans.

Buying Low and Selling High

The basic equation for success in any market is to buy when the market is low and sell when the demand is high. The same goes with equity markets. Buy low and sell high and make money while you sleep. Though it sounds easy, but knowing when the market is at lowest point and analysing the highest point is challenging even for the market pros. ICICI Prudential Balanced Advantage Fund follows Price to Book model where it changes the allocation of equities and debt depending on the Price to Book ratio of Nifty. When the market does well, the fund moves out of debt investments into equities and vice versa, safeguarding your investments in market fluctuations.

As you see the above chart, ICICI Prudential Balanced Advantage Fund has given positive returns when the Sensex was negative. The main focus of any mutual fund investor is not to make money at once but at continuous intervals. The choice of fund manager to switch between equity and debt keep the twin emotions of greed and fear out of the minds of investors. The fund is truly an all weather fund. Take one example, BSE Sensex was trading at 22,994 on 9th May 2014. After 20 months, at the closing bell of 12 Feb, 2016, the Sensex stood at 22,996. ICICI Pru BAF managed to deliver returns of 8.65% in such bearish condition. In bull run, ICICI Pru BAF performs better than the market average. During the one year period of March 2014 to March 2015, ICICI Prudential Balanced Advantage Fund gave an astounding return of 47%.

Better returns than Bank FD

Bank FD is the most common instrument to gain money out of your savings. Over the years ICICI Balanced Advantage Fund has proved that even in bearish conditions, investors can get better returns than fixed deposits. The fund beat the returns from FDs over all four investment horizons that we considered (on 30 October 2015): one-, two-, three- and five years. Over the one-year horizon, it gave a return of 9.30%; over a two-year horizon it gave an annualized return of 19.57%; over three years, 17.56%; and over five years, 13.19%. Over all these horizons, an FD would have given an annualized return of 9%.

Tax Benefits

ICICI Prudential Balanced Advantage Fund is treated as an equity fund for taxation purposes. Long-term capital gains from it attract no tax while short-term capital gains are taxed at 15%. Whenever the fund’s allocation to equities goes below 65%, the balance allocation is made up by derivatives.

What's your number?

Buy right and sit tight. Decide the number you want to reach after investing for few years. To get the most out of this fund, investors must have long term horizon. theindiancapitalist.com is of opinion that investor must stay invested for 3 to 5 years to reap full benefits of this fund. Dynamic asset allocation Funds is our choice in the times of volatility.

Disclaimer - Mutual Fund investments are subject to market risks, read all scheme related documents carefully

Wednesday 28 September 2016

GST Simplified

The introduction of Goods and Service Tax ( GST ) would be a significant step in the field of indirect taxation reforms in India. GST would mitigate double taxation by amalgamating central and state tax into a single tax. Currently goods and services sold in India are taxed at 25%- 30% from the source to consumer by state, central and local administration. Post GST, the tax on goods and services is expected to be 18%. The Cabinet Committee of Economic Affairs calls 18% GST as neutral rate and most state finance minister agree on the same. The Constitution 122nd Amendment Bill ( GST Bill ) is passed unanimously by LokSabha and RajyaSabha. With the Odisha assembly approving the Constitutional Amendment Bill for GST, the requirement of 50 percent of states and UTs ratifying it has been completed.

The idea of moving towards GST was first mooted by then Finance Minister P Chidambaram in his 2006-07 budget. It was proposed then that the GST would be implemented by 1st April 2010. But the loss in revenue faced by states was not compensated. Manufacturing states like Maharashtra, Gujarat, Tamil Nadu, Karnataka and big city corporations of Mumbai and Bengaluru will face revenue loss. But the Government of India have decided to compensate the losses by implementation of GST.
GST Timeline - Ernst & Young Report

Features of GST
  • GST would be applicable on supply of goods and services as against the present concept of tax on the manufacturing of goods or sale of goods or on provision of services.
  • GST would be a destination based tax as against present concept of origin based tax.
  • It would be a dual GST with the Centre and the States simultaneously levying it on common base. GST levied by central government would be CGST and state government would be SGST.
  • Goods flowing from one state to another would be levied on  Inter-state GST. The move would bring huge relief for e-commerce and logistics companies. IGST would be collected by centre to avoid cascading effect of tax.
  • For the initial period of two years or further extended on the recommendations of GST Council, a non-vatable additional tax of 1% would be levied on inter-state supply of goods.
  • CGST, SGST and IGST would be levied at the rate mutually agreed upon by the centre and state under the aegis of GST Council.

GST would replace these central taxes
1. Central Excise duty,
2. Duties of Excise ( Alcohol for medical use, Narcotic Drugs, Opium, Cocaine, Morphine ),
3. Additional Duties of Excise ( Textile products)
4. Service Tax
5. Countervailing Duty ( additional excise for anti-dumping )

GST would replace these state taxes :
1. State VAT
2. Central Sales Tax
3. Purchase Tax
4. Luxury Tax
5. Entry Tax
6. Entertainment Tax
7. Taxes on advertisements
8. Taxes on lotteries, betting and gambling.

  • GST would apply to all goods and services except Alcohol for human consumption, Electricity and Real Estate.
  • Tobacco and Tobacco products would continue to incur additional excise duty.
  • GST on petroleum products would be applicable from a date recommended by the GST council.
  • Tax payers below the turnover of 20 lakhs per annum would be exempted from GST. More details on compounding tax awaited from GST Council.

The Constitution (122nd Amendment) Bill, 2014 has been approved by Loksabha and the RajyaSabha. A GST Council would be constituted comprising the Union Finance Minister, the minister of state (revenue) and the state finance minister to discuss and recommend the GST rate, inclusions, threshold and exemptions.To ensure harmonisation between centre and state, decision in GST Council would be taken by a majority of not less than three-fourth of the total votes cast and the states taken together would have two-third veto power. More than 18 states have ratified the bill and even President Pranab Mukherjee have approved the GST Bill. Goods and Service Tax Network was set-up for robust IT backbone to enable swift tax eco-system.

Read More - GSTN - Building the World's Largest Tax System

- Chaitanya Kulkarni ( theindiancapitalist.com ) 

Wednesday 31 August 2016

India Infrastructure Update - Operational Metro Systems ( August 2016 )

Urban transportation infrastructure in India needs big investment and a massive upgradation. It is estimated by various studies that 60% of Indians will be living in urban areas by 2050. After the success of Delhi Metro, lots of Indian cities are exploring the option to implement metro rail project across the country. As per Ministry of Urban Development (MoUD), about 316 kilometres of Metro rail is under operation and more than 500 kms of Metro rail is under construction across the country. This includes metro/mono rail systems promoted by state governments and private bodies under their own arrangements. It is important to note that urban transport is a state subject. Thus, the planning, execution and development of urban transport facilities are done by the states and union territories.

Smart Cities which are under execution of MoUD are incomplete with metro rail systems. China has 20 metro rail systems under operations and additionally investing trillions of Chinese Renminbi on bullet trains and maglev. India's first mono-rail ( Phase 1 ) is operational in Mumbai and final phase is expected to be completed by December 2016. Meanwhile, MoUD and National Highways Authority of India gave final approval to Metrino Pods system in Gurugram. As India mulls innovation in public transport, transport analyst are aware of the fact that Metro is the only viable option for India looking as population and financial constraints.

Metro Systems operational in India 

Delhi Metro

Operational: 213 km | Under Construction: 136 km | Proposed: 105.93 km

Delhi metro The Indian Capitalist
Brown Line - Janakpuri West - Botanical Garden will use Hyundai Rotem Driverless train
The 65.1 km Phase 1 was completed in 2006 while the 124.93 km km Phase 2 was completed in 2011. Currently the 159.327  km Phase 3 is under construction of which 23 kms has become operational. The rest 136 km of lines will open in sections one after the other from 2016 – 2018. Phase 4’s initial new lines & extensions have been finalised and construction is expected to begin in 2018. Within the next 3 years, more routes are expected to be added to Phase 4.

Kolkata Metro

Operational: 28.14 km | Under Construction: 63.39 km  | Approved/On Hold: 32.48 km

Kolkata Metro The Indian Capitalist
AC variant of Kolkata Metro coach manufactured by ICF, Ministry of Railways. Kolkata Metro has also ordered 14 new trains from CNR Dalian, China. 
Construction for it started in 1972 and a small 3.40 km section between Esplanade and Netaji Bhavan opened in October 1984, making it the first metro system in the country. Between 1984 and 1995, more sections opened up bringing its total length to 16.45 km. Kolkata metro was extended by 10.94 km to New Garia station which is also known as Kavi Subhash station.

Mumbai Metro

Operational: 11.4 km | Under Construction: 0 km | Approved: 68.2 km | Proposed: 77.3 km

Mumbai Metro The Indian Capitalist
Western Expressway Bridge in Andheri
OperationalVersova – Andheri – Ghatkopar – 11.4 km
Executed & operated by a JV of Reliance Infra (69%), MMRDA (26%) & Veolia Transport (5%)

Approved ( Construction to begin in September/ October 2016)

- Colaba – BKC – SEEPZ –  33.5 km
To be executed & operated by Mumbai Metro Rail Corporation Ltd – GOI (50%) & GoMH (50%)

- Dahisar – DN Nagar – 18.2 km
This line is part of the larger 40 km line between Dahisar & Mankhurd. To be executed by the Delhi Metro Rail Corporation

- Dahisar (E) – Andheri (E) – 16.5 km
This line is part of the larger 24 km line between Dahisar (E) & Bandra (E). To be executed by the Mumbai Metropolitan Region Development Authority.

Namma Metro ( Bengaluru )

Operational: 30.3 km | Under Construction: 27.1 km | Approved: 59.32 km | Proposed: 102 km

Bangalore Metro The Indian Capitalist
Cubbon Park Metro Station on Namma Metro's underground stretch
Construction for the first phase started in April 2007 following which the Baiyyappanahalli – MG Road  section of the Purple line opened in 2011. The 42.3 km Phase 1 is expected to be completed in 2017. After Phase 2 is completed in 2024 (est), the metro network will become 114.4 km long.

Rapid Metro ( Gurugram )

Operational: 5.1 km | Under Construction: 7 km

Gurgaon Metro The Indian Capitalist

In Phase 1 of the project which opened on November 14 2013, a 5.1 km line was built to link the Delhi Metro’s Sikanderpur station (Yellow line) with the business district of DLF Cybercity. As part of Phase 2, this line is currently being extended by 7 km on Golf Course Extension Road and is expected to be completed in 2018.

Chennai Metro

Operational: 10 km | Under Construction:  35.1 km | Approved: 9 km | Proposed: 132 km

Chennai Metro The Indian Capitalist

Construction for the first phase started in April 2009 following which the Koyambedu – Alandur section of the Blue line opened in June 2015. The 45.1 km Phase 1 is expected to be completed in 2019. A further extension of the Blue line as part of Phase 1 to Wimco Nagar is expected to be completed by 2020. Phase 2 of the project is currently in the proposal stage and in its latest avatar has been proposed to be 123 km long.

Jaipur Metro

Operational: 9.63 km (Phase 1A) | Under Construction: 2.35 km (Phase 1B) | Proposed: 23.099 km

Jaipur Metro The Indian Capitalist

Construction for its 9.63 km Pink line under Phase 1A started in 2011 and became operational in June 2015. Construction on Phase 1B, a 2.35 km extension of the Pink line, started in January 2014 and is expected to be operational in 2018. Phase 2 of the project includes a new Orange line which will connect the heart of the city with the Airport and onward to the Sitapura Industrial Area. This line is planned to be built on the Public-Private Partnership (PPP) model and is yet to be approved.

Information Source - themetrorailguy.com

- Chaitanya Kulkarni

Friday 26 August 2016

#UPI - India's fintech achievement

UPI India fintech achievement

United Payments Interface ( UPI ) is unique payment solution which empowers a recipient to initiate payment request from a smartphone. UPI is India's biggest banking achievement as real time money sending and receiving at such a large scale has not been attempted anywhere in the world. UPI is the gift to #DigitalIndia by National Payment Corporation of India (NPCI), the umbrella organisation for payments in India. NPCI has been featured in 5 brands that made in big in 2016 for their contribution to RuPay and United Payments Interface. NPCI says that UPI is now live and is available for the customers of 21 banks. State Bank of India is expected to launch their UPI app next month.

UPI offers instant, online bank payments, and is seen as a major change to the Indian financial sector. It enables banks to provide real-time payments through QR code enabled addresses and offers device fingerprinting for additional security. It also provides an option for scheduling push and pull transactions for various purposes like sharing bills among peers. One can use UPI app instead of paying cash on delivery on receipt of product from online shopping websites and can pay for miscellaneous expenses like paying utility bills, over the counter payments, barcode (scan and pay) based payments, donations, school fees and other such unique and innovative use cases.

United Payment Interface would be a big boost for fin-tech startups. Bengaluru based Ultra Cash are trying to implement a cash-less society at petrol pumps, mobile recharge centres and cafes through NFC based payments. UltraCash's team were successful in writing code to integrate their mobile payment platform with UPI. It would enable consumers to easily pay retail merchants from their phone. But their innovation does not need an internet connection. UltraCash's technology securely transfers payment data from one device to another, using sound waves with frequencies inaudible to humans.

UPI is currently available only on Android devices. To its optimum use, NPCI plans to introduce the same on other platforms including iOS, Windows and Indus OS. NPCI decided that only banks with 1,000 pilot customers, 5,000 transactions and a success rate of around 80% would be permitted to go live. It says such a threshold criteria helped the banks to refine their systems and procedure.

The inclusion of UPI with upcoming payment banks would enable cash-less society. Startups or big business would prefer digital payment over cash for accountability purposes. In future, we can use UPI for Cash on Delivery. It will be helpful for paying your Ola bills. Digital payments will bring down costs and thus we can see heavy discount on amount paid using UPI instead of cash. India has achieved what developed countries couldn't think of. With Jan Dhan, Aadhaar and Mobile (JAM), India has the most sophisticated payment system in the world.

- Chaitanya Kulkarni ( twitter.com/chai2kul )

Tuesday 23 August 2016

The 5 must-have Insurance Policies for SMEs

SME Insurance

Small Medium Enterprises play a crucial role in development of Indian economy. It employs 40% of India's work-force. According to DIPP statistics, India's SME sector manufactures over 7,000 products ranging from traditional to high-tech in both domestic and international markets. And with the surge in e-commerce business, it is slated to grow exponentially over the next five years. Despite all these promising numbers, India's MSME sector still remains the most challenging one's to operate.

Red tape, limiting regulations, dearth of finance, inadequate infrastructure, family run management and unskilled labour are the major reasons that hamper SME growth. Insurance is not just a legal mandate but a necessity for this sector. Adequate coverage can minimise internal and external risks of business enterprise. Sure, a majority of low-margin profit SMEs think of insurance as a burden but they themselves do not claim to be calamity proof.

For an SME, insurance is important because it provides protection against unforeseen eventualities; empowers the business; manages or reduce cost of unplanned risks; and enhances consistency and momentum of the business. Small businesses usually don’t have that kind of saving fund that can be diverted to resurrecting the business in case of an eventuality. This makes it all the more important for them to have an insurance plan. SMEs see a lot of business ups and downs and an insurance cover can provide them adequate financial support when the need arises.

The 5 must-have Insurance policies for SMEs

1. Employee Liability Insurance - Any employee including contractual workers are included in employee group insurance scheme. The policy covers statutory liability of an employer for death, bodily injuries or occupational diseases arising during the employment. A cover of Rs. 2 lakh rupees or more is an industry standard to cover all the hospital charges in Tier 1 cities. As a part of employee welfare, some business enterprises have tie-ups with nearby city hospitals where the family members of employees get free treatments.

2. Standard Fire and Special Perils policy - The insurance company will indemnify the insured due to loss because of fire which may be caused by natural fire, combustion, lightning, riots and natural disasters. Building, plant and machinery, furniture, business related goods are covered in these policies. Fire policy is an annual policy. The cost of fire insurance is calculated on the area of business activity. Fire exits, fire fighting drills, fire safety equipments reduce the risk of calamity and thus reduce the premium price. Fire photographs or newspaper article on fire acts as a legal proof for the claim.

3. Burglary Policy - Theft of physical products or copyrighted digital product is covered under burglary policy. Policies issued to business premises cover stock-in-trade, money in transit, goods in trust or on commission, fixtures and fittings, tools of trade such as typewriters, calculators and other similar property and cash and currency notes in locked safe against the risk of burglary and house-breaking. Burglary insurance can be essential for technology based startups as cyber crimes such as hacking, skimming and cloning can be covered in cyber security insurance.

4. Machinery breakdown policy - When the production of a factory grinds to a halt because of breakdown, it can result in huge losses. Especially when delivery schedules are tight and the penalties are strict. The policy broadly covers loss due to all kinds of accidental, electrical and mechanical breakdowns as a result of internal and external causes. Loss in freight charges due to mechanical breakdown is also covered.

5. Special Contingency Policy - This is an add-on insurance which covers against floods, earthquake, tsunami etc. Special contingency provides cover against external as well as internal risks. Loss to business due to strike, riots is add-on. The rate of premium varies from 1% to 2% of property to be covered.

- Chaitanya Kulkarni ( twitter.com/chai2kul )

Monday 22 August 2016

iNVESTSHIELD - Fight the uncertainity of life

Canara HSBC Oriental Bank of Commerce have recently launched a new ULIP plan 'iNVESTSHIELD' that is designed to protect the needs of today and tomorrow. A Unit Linked Insurance Plan is basically a combination of insurance and investment. The investments you do will be divided into two parts, a part of insurance and other one is mutual funds which consists of equity, debt and money market schemes.

iNVESTSHIELD is an exclusive online linked plan designed for customers  who wants things done at ease on their mobile phones or laptops. Online exclusive plans give hassle free buying experience and are inexpensive as they exclude the cost incurred by the agent. iNVESTSHIELD is a feature rich plan with USP being 'Premium Funding' option. In case of unfortunate event, premium funding option entitles immediate payout higher than sum assured or 105% of premium paid. The insurance company will fund the remaining premium for the remaining policy and the fund value will be paid on maturity.

iNVESTSHIELD plan gives dual results, wealth accumulation plus protection. The customer has the choice of switching between funds which helps you to avoid the market movements and safeguards your funds as policy nears maturity. The policy is best suited for young parents as the policy premium is paid by the company till maturity in case of any unfortunate event.

TheIndianCapitalist.com has listed down the benefits of Canara HSBC Oriental Bank of Commerce iNVESTSHIELD ULIP plan.

  • Flexibility to customise the plan as per one's need.
  • Zero premium allocation charge throughout the premium payment term of the policy.
  • Loyalty Additions for additional allocation of units to boost  the retirement fund.
  • Choice of Investment Funds ranging from 0% to 100% equity exposure, to match one's risk appetite.
  • Premium waiver benefit option which helps the parents to plan a secure future for their children.
  • Safety Switch Option enables one to move  funds systematically to a relatively low risk Liquid Fund to avoid market movements in the last four policy years.
  • Liquidity through partial withdrawals to help meet unplanned financial needs.
  • Tax benefits on premium paid and benefit received during Policy term under Section 80C and Section 10(10D), as per the Income Tax Act, 1961, subject to change in amendments.
TheIndianCapitalist.com is of a view that iNVESTSHIELD plan by Canara HSBC Oriental Bank of Commerce has a lot to offer to netizens. You can buy this plan here.

- Chaitanya Kulkarni

Friday 19 August 2016

#IPO - RBL Bank plans to raise Rs. 1,200 crore

Incorporated in 1943 as a regional bank in Maharashtra, RBL Bank Ltd is a Kolhapur based private sector bank offering range of banking products and services to large corporations, SMEs, agricultural customers, retail customers and development banking & financial inclusion (low income) customers.

As of March 31, 2016, RBL had 197 branches and 362 ATMs spread across 16 Indian states serving over 1.9 million customers.Information in this paragraph is taken from chittorgarh.com, India's No. 1 IPO Investment Portal. RBL acquired certain Indian businesses of the Royal Bank of Scotland (RBS), including the RBS's business banking, credit card and mortgage portfolio businesses, in 2014.

RBL's business segments consist of corporate and institutional banking, commercial banking, branch and business banking, agribusiness banking, development banking and financial inclusion and treasury and financial markets operations.Discuss this IPO on Chittorgarh.com, the most active IPO discussion forum.

RBL's Competitive Strengths:
  • Client focused approach to business resulting in growing brand recognition 
  • Robust multi-channel distribution system
  • Partnerships that expand reach in rural markets
  • Growing net interest and non-interest income
  • Risk management and balance sheet focus
  • Modern and scalable information technology systems infrastructure
  • Focus on operational quality and scalability.
RBL Bank Financial

RBL has won the award for best mid-sized bank from last 4 years. It has invested heavily on new technology, manpower and office spaces. The key object of the issue is to inject capital in more branches and ATM network and comply with BASEL III and RBI norms. TheIndianCapitalist.com is of opinion that investors should subscribe looking 5 years perspective. We may see a repeat of YES Bank growth story.

- Chaitanya Kulkarni

#MakeInIndia - Why Manufacturing matters the most?

India's economy has taken a significant stride in past two decade. It is now time to build on the economic gains and tackle the barriers to growth. India needs to generate more jobs for its bustling youth and create economic opportunity for all. India's GDP has seen a dominance from service sector. BFSI and IT have been the respected jobs in India. India's manufacturing contribution is low at 17% as of 2014 to GDP. To reverse the situation, India is planning to build prosperity corridors along its highways, rail lines and sea ports. Economic corridor development entails constructing world class infrastructure typically aligned to major transport system; connecting smart cities and industrial zones.

3,115 cars of General Motors and 3,093 Volkswagen cars were exported to Mexico in a single ship from Mumbai port.

The government of India announced National Manufacturing Policy with the objective of increasing Manufacturing to GDP share to 25% and creating 100 million jobs by 2022. PM Modi launched Make In India campaign in 2014 in aim of wooing global manufacturing companies. The Make In India initiative comprises of 25 industries which range from defence to small cars. Attention is being given to Ease Of Doing Business ranking. The government is successful in passing labour reforms, GST, Insurance Bill, Coal Mines and Mineral bill. Investments by FDI has been increased in all sectors except single brand retail. To spread the benefit of economic growth to 126 billion Indians, India must further develop the manufacturing sector.

10 Things to Know about Manufacturing in India

1. India is the world's third largest economy and has emerged as a global growth engine. India is also the fastest growing major economy with the GDP growth rate of 7.6% in FY16.

2. India's service sector has been the driver of country's economic growth, and is a major contributor to India's GDP. India is a major exporter of information technology, business outsourcing and software expertise, thanks to its smart engineers.

3. Services are the most dynamic aspect to Indian economy but the sector employs less than one third of India's population.

4. While services have been booming in Asia, manufacturing has lagged. India’s manufacturing makes up around 17% of gross domestic product, compared to Malaysia at 24% and Thailand at 33%.

5. India’s manufacturing sector is hamstrung by poor roads and unreliable power supplies; burdensome regulations, limited access to land and credit, and a lack of a workers skilled in high-end manufacturing.

6. To spread the benefits of economic growth to the poor, India must further develop the manufacturing sector. India is seeking to increase manufacturing’s share of gross domestic product to 25% and create 100 million jobs within a decade by simplifying regulations, improving infrastructure and providing other incentives.

7. The government is also promoting the Make in India initiative, which seeks to encourage global firms to set up manufacturing bases in India by offering tax incentives and simplified regulations.

8. The Delhi Mumbai Industrial Corridor is the world's largest infrastructure project. The governments hopes that such industrial corridor will contribute more than 25% to India's GDP. The DMIC project will have 2 power plants, 24 smart cities, 23 industrial hubs, 2 ports and six lane expressway of 1,500 km connecting Mumbai to Delhi. JICA has assured a funding of $4.5 billion.

9. The government also plans to build Mumbai - Bengaluru, Bengaluru - Chennai, Chennai - Vizag, Kolkata - Amritsar economic corridors. Work on DMIC has been started and other corridors are in executing stage.

10. A healthy manufacturing economy requires good roads, electricity and logistics facility. India plans to build 1,000 km in current year. India will also build 6 new mega ports under the Sagarmala project. The total investment in Sagarmala project is expected to be Rs 5 lakh crores.

- Chaitanya Kulkarni

Thursday 18 August 2016

China's leap into Quantum Communications

In a cloud of smoke, China's QUESS satellite soared into the dark sky. Quantum Experiment at Space Scale ( QUESS ), nicknamed Micius after a Chinese philosopher, lifted off from Jiuquan Satellite Launch Centre near the Gobi desert. The satellite is designed to test the limits of quantum communication, an avenue of scientific endeavour that would mean hack-proof communications.

Quantum encryption is secured against any kind of computing power because information is encoded in quantum particles is changed as soon as it is measured. Making the information impossible to clone. China's QUESS satellite is a big breakthrough in the field of cyber security. In simple encryption, the message sent by one party to another can be easily hacked and read by different parties. Stealing state secrets and defence secrets from governments is the top aim of cyber hackers. The information which they decode is valuable to the enemy country which can result to competitive advantage for the country.

The satellite's two year mission will be to develop hack-proof quantum communication, allowing users to send messages securely faster than the speed of light. Technically, nothing is hacked-proof but entangled protons will change in state if they are tampered with, allowing the users to know whether it is hacked or not. The success in the mission would also mean the birth of quantum internet. Physicists expect quantum internet to be faster than Li-Fi.

Micius is an experiment to explore something unknown. It might not work at all. But if it does, it might unlock potential for something Star Trek fans have dreamed of. QUESS have the potential to enable physical teleportation. A faster than light communication would allow us to explore our universe and even other universes.

- Chaitanya Kulkarni

Thursday 11 August 2016

Why India's SMEs lack innovation?

India is ranked 81 out of 141 in Global Innovation Index, which reflects to low innovation capacity of its private sector and Small Medium Enterprises (SME). Government of India classify SME to Micro, Small and Medium Enterprises (MSME). According to Ministry of MSME, India's 49 million registered MSME employed 111 million people in 2014 contributing around 37% to India's GDP. According to National Innovation Survey, 34% of the sample size found to be innovative. Majority of the firms were buying new machines to improve quality by reducing costs.

What makes startups different than MSME? India has the second largest startup ecosystem in the world. India's startup are creating pathbreaking solutions in the field of robotics, payment banks, transportation etc. A startup is a searching for answers it will sell, the customer it will serve and the way it will earn money by delivering value. Whereas, a SME is independently owned business run for profit for local markets. SME owner do not dominate the space they operate in. SMEs generally lack in financial capacity and the staff to undertake structured and sophisticated R&D. Most of the SME are operating in the existing product rather than making a new product. Startups raise funding on the basis of R&D but it found that banks and NBFC do not fund SMEs for innovation. A sales approach would never lead India's SME to holistic R&D.

Barriers to Innovation in Indian SME

To improve the innovation performance of Indian SMEs, it is important to understand key barriers in the innovation space. The barriers to innovation are classified into six categories: people, finance, information, government policies and infrastructure. TheIndianCapitalist.com is of opinion that the Indian market is mature to accept innovative products. Chinese cheap electronic rule the markets in Mumbai because of its innovation and cheap price.

People and skills

Development and implementation of innovative products demand skilled labour. The need for specialised skills in the form of scientists, technicians and engineers is more apparent in case of R&D. Highly educated students from India's IIT and IIM wish to be entrepreneurs. If not, they want to play a crucial role in MNCs. SMEs are no have option left but to employ non-skilled labour at low salaries. Small Startup encourage get skilled labour by giving out a small portion of company's share. In SMEs, there is distinction between owner and employees. The situation demands more targeted capacity building programs on internal management. There needs to be a system where SMEs have access to pool of skilled labour for conducting specific work.


The approach of banks towards SME needs to change. Most Credit Manager see the balance sheet of the SMEs and then decide whether to fund them or not. The future plans or innovation capacity of the firm is neglected. The MUDRA scheme launched by PM Modi has a dedicated fund for innovative SMEs. Startups and SME should be rated on innovation. Flipkart, India's largest e-commerce company is in losses since the launch year, but yet Kotak Mahindra Bank has given a loan of Rs 500 crores to them. Innovative products are accepted by the market than sales-pitched products. There is an urgent requirement of change in perspective of lending institutions. #StartUpIndia and MUDRA schemes will enable quick funding for R&D focused organisations.

Information as a barrier

Timely access to valuable information is critical for SMEs to gain strategic advantage in pursuing innovation. The information barrier refers to access to information on technology and markets. SME also lack information regarding government policies which support innovation. Many SME in India are unaware of the schemes run by National Small Industries Corporation (NSIC) and SIDBI. Branding of key scheme into a national campaign is much required. Modi's #StartUpIndia and MUDRA consists of old dish in a brand new platter.

Government Policies

The perception of government as a barrier rather than a facilitator for SMEs is serious issues. India is ranked at 130th globally in World's Bank 'Ease of Doing Business' survey. The low rank perceives the burdensome environment in which these SMEs operate. Modi promises least government participation in compliance. He also announced the three year inspection and tax breaks for newly founded MSMEs. The perception of most MSME owners in changing but it will still take some more years for holistic results.


It is unlikely for an SME to invest in laboratories and testing facilities. Government and Incubators need to invest more by building new research parks in key manufacturing zones. Most young startups use research parks built in there educational campuses. Lack of research zones is the main reason why India leads in technological startups rather than scientific, defence related companies.

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- Chaitanya Kulkarni

Wednesday 10 August 2016

5 Ways to Ease Correspondent Banking

Correspondent Banking enables banks to access financial services in different jurisdiction and provide cross border payment services which adds to international trade and financial inclusion. Correspondent Banking can be a risky business if compliance is not followed. To avoid huge penalties and repetitional damage, banks avoid dealing with clients with low volume or clients operating from risky areas. Different countries have different outlook over risky or war related products. Some examples, in a consortium with world's leading banks, India's State Bank of India has been shamed by local media for funding a company in US for manufacturing cluster bombs. 

HSBC Bank and Duetsche Bank's brand image were maligned by international media for enquiry in CFT (Combating the Financing of Terrorism) rules. Steven Vincent, a freelancing journalist has filed a multi million dollar lawsuit against HSBC, Credit Suisse, RBS, Barclays and Standard Chartered for Iran transactions. French Bank Credit Lyonnais has also been accused for providing services to Hamas affiliated group in France. Similarly, Bank of China has been accused of money laundering for Hamas and Palestinian Islamic Jihad in 2008. A CFT case comes with bad image for brands and a potential loss in share value.

India's Reserve Bank of India has fined 3 Indian Banks for flouting Anti-money laundering (AML) rules. The reason cited by RBI press release states ''weaknesses and failures in internal control mechanisms in respect to certain AML provisions such as monitoring of transactions, timely reporting to foreign investment units and assigning of Unique Customer Identification Code." Bank of Baroda, Punjab National Bank and HDFC Bank was fined for Rs 5 crores,  Rs 3 crores and Rs 2 crore respectively.

5 Ways to Ease Correspondent Banking Costs

Committee of Payments and Market Infrastructure, Bank of International Settlement has released a paper which guides central banks and correspondent banking participants on Model Correspondent Bank.

1. Use of KYC utilities

The use of Know Your Customer by respondent and correspondent bank which consists of up-to-date information and accurate information should be used in general to reduce the burden of compliance. The standardised format may be approved by ISO. Central Banks as an apex organisation play an important role in making changes which add to efficiency and reducing cost of due diligence.

2. Use of Legal Entity Identifier

In perspective to India, banks have been made mandatory by RBI to use Permanent Account Number (PAN) as valid legal proof for higher transactions. Aadhaar Enabled Bank Accounts (AEBA) have additional safety with valid fingerprints and eye scans. Several economists and regulatory bodies have lauded India's effort for OTP enabled banking from Re. 1 transactions. India has the most sophisticated payment network in the world ready for the Payments Banks and United Payment Interface. Use of sophisticated softwares like Finacle, SAP, Oracle is recommended.

3. Information sharing initiatives

The work conducted by various authorities related to AML and CFT is praiseworthy. The Financial Action Task Force and Basel Committee on Banking Supervision AML/CFT Experts Group are invited to further explore ways to tackle obstacles related to information sharing. Respondent and Correspondent Bank should use best market practices.

4. Payment Messages

It is recommended that banks decide individually which payment message method suits them individually. Payments messages in India do not contain data like passwords, profile passwords, birthdate. FATF and AMLEG are advised to create a model format for payment messages.

5. Use of the LEI as additional information in payment messages.

Correspondent banking services are an essential component of the global payment system, especially for cross-border transactions. There seems to be a variety of reasons for the general decline in correspondent banking relationships reported by many stakeholders. Often cited by correspondent banks as reasons for this decline are compliance with AML/CFT regulations, an increased perception of risk and some uncertainties on the potential impact of non-compliance. 

The measures recommended would alleviate costs. The exit of various banks from correspondent banking is of concern. The measures would help to decrease red flags related to due diligence and compliance.

- Chaitanya Kulkarni (twitter.com/chai2kul )
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