09 Mar, 2017
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Indian Economy News
March 9, 2017
ND has initiated a new section of daily news, where our news desk compiles the latest news on the Indian economy, to keep our readers abreast and updated on daily economic state of affairs.
The economy news compilations bring business news reports that are relevant today and tomorrow, based on the new pattern of current affairs, and for English awareness. This gives vital inputs on the various sectors of the Indian Industry and trade.
Indian ETF market doubles in three years to US$ 4 billion
Livemint: March 09, 2017
Mumbai: India has the world’s second-fastest growing exchange traded funds (ETF) market, behind only Japan, with assets more than doubling to $4 billion from $1.9 billion in the past three years, a Bloomberg Intelligence report said.
“While that’s mostly due to greater adoption of ETFs to gain low-cost market exposure, about a third of the boost came via the Reliance Mutual Fund’s CPSE ETF,” the report added.
The CPSE ETF was launched by Goldman Sachs Asset Management India on 18 March 2014, and comprises 10 stocks, which are majority-owned by the Indian government: Oil and Natural Gas Corp. Ltd, GAIL (India) Ltd, Coal India Ltd, Rural Electrification Corp. Ltd, Oil India Ltd, Indian Oil Corp. Ltd, Power Finance Corp. Ltd, Container Corp. of India Ltd, Bharat Electronics Ltd and Engineers India Ltd.
Currently, Reliance Mutual Fund manages the CPSE ETF after Goldman Sachs exited the mutual fund business in India.
The ETF was tailor-made for the government to sell its stake in certain companies and has gained 47% in the past year.
This of course, was led by strong gains in stocks of state-run companies. National Stock Exchange’s PSU index has gained 44.6% in the last one year, while benchmark 50-share Nifty added 19.5%.
The CPSE ETF has outperformed the Nifty because 66% of its assets are in energy companies, which have surged with a rebound in oil prices. Brent crude has rallied 21.7% over the past one year.
Also, with institutions such as Employees’ Provident Fund Organization (EPFO) committing huge investments into this fund, hopes are high that the government may prompt state-run agencies and companies to invest in it.
“ETFs have benefited as a preferred vehicle for divestment purposes. The CPSE ETFs have helped grow the assets invested in ETFs in India,” said Deborah Fuhr, managing partner of ETFGI LLP, a research and consultancy firm on global ETF trends.
“This is likely to continue,” said Fuhr, adding education is key to investors understanding when and how to use ETFs.
Individual investors can invest a minimum of Rs5,000 in the CPSE ETF, while the maximum is Rs10 lakh. Non-institutional investors and qualified institutional buyers can invest a minimum amount of Rs10 lakh.
India and Japan are the two countries using the flexible ETF structure to help achieve their economic goals, in very different ways though, the Bloomberg Intelligence report said, adding they are the only two countries with ETF growth of more than 100% over the last three years.
Bank of Japan buys ETFs, including custom-made products that are focused on companies and their levels of capital spending as a way to stimulate a struggling economy.
However, the Indian ETF industry is still at a nascent stage, and the offerings have been limited.
“The CPSE ETFs are not typical in developed markets. ETFs are being embraced as tools to assist with short-term, tactical and long-term strategic investments by institutional investors, financial advisers and many retail investors in developed markets,” said Fuhr of ETFGI.
“In developed markets, the ETF offering is much broader and investors have the freedom to decide how much to invest in their home market, in international markets and in various asset classes,” added Fuhr.
Tractor industry likely to post 16%-18% sales growth
Times of India: March 08, 2017
Chennai: The tractor industry has been doing well of late, and now a report says the segment is all set for strong 16%-18% sales growth.
According to the report by CRISIL Research, domestic tractor sales are expected to close fiscal 2017 with impressive 16%-18% growth, riding a monsoon-led surge in demand that was enough to offset the impact of demonetisation in the latter half. The previous two fiscals had seen double digit de-growth as monsoons played truant and farm sentiment wilted. Sales revived as the southwest monsoon came in normal.
“Rains were 97% of the long-period average, timely and well-distributed, resulting in Kharif production increasing 10% on-year (according to second advance estimates), and Rabi sowing also 5.7% higher on account of sufficient reservoir levels,” said the report.
“This helped unleash pent up demand. So much so, October saw a record 44% spurt, lifting sales for the April-October period by a whopping 26%. The surge was brought on by festive cheer as the two major festivals – Dussehra and Diwali – coincided in October, and customers grabbed the lenient financing terms and credit period extension offered by dealers with both hands.”
The fervour could well have continued, going by the inventory with distributors, but for the demonetisation move. Transactions in the rural areas, which account for the bulk of domestic tractor sales, are largely cash-based.
With cash drying up, sales took a beating – with de-growth of 13% in November, and a modest growth of 7% in December and 5% in January.
“Growth is expected to remain in single digits even for February and March, as farmers cope with the note ban, and gradually shift to using cheques and online transfers (NEFT, RTGS) for making purchases,” said the report.
Pending payments of Kharif harvest have been slow to materialise – while in Rajasthan and Bihar, the farmers still haven’t received a major part of their dues, in Gujarat and Maharashtra, sentiment has been hurt by low prices.
Further, with financiers focusing on collection of instalments delayed by the note ban, tractor loan disbursals – and thereby sales — are expected to be slow. But the impact is expected to be short-term, and sales should recover by the first quarter of 2017-18.
Prasad Koparkar, senior director, CRISIL Research, said: “Rabi sowing has defied the note ban impact and is progressing well, especially in states like Madhya Pradesh and Rajasthan. With faster acceptance of non-cash transactions in these states, demand for tractors is projected to see healthy growth going forward. However, the southern states – particularly Karnataka and Tamil Nadu – are reeling under drought conditions and demonetisation has only worsened the situation. Hence, recovery here is going to take longer.” Indications are that the south-west monsoon will be normal this year as well.
While there is a threat of El-Nino conditions developing in the second half of next fiscal, the Kharif season could very well escape unscathed. Tractor sales would also benefit from favourable budget announcements such as record farm credit disbursal of Rs 10 lakh crore and other rural development initiatives.
“Based on this, we see tractor volumes picking up in coming quarters, though, for lack of a low base as was the case this year, fiscal 2018 could close with a relatively sober growth of 8-10%,” said the report.
Binaifer Jehani, director, CRISIL Research, said: “Maharashtra, Madhya Pradesh and Uttar Pradesh are expected to drive demand. Growth in the peninsular region would be driven by Andhra Pradesh and Telangana, though Karnataka and Tamil Nadu could experience stress for a while, the overall region should perform well, given normal monsoons and consistent pace of rural development activities.”
IndiGo, GoAir to expand in Gulf
Business Standard: March 08, 2017
New Delhi: Unfazed by the slowdown in West Asia, Indian carriers are expanding their network in the region.
IndiGo is launching flights to Sharjah later this month and plans to launch a service to Doha its seventh international destination in April. GoAir is likely to begin its international operations with flights from Kochi to Doha and Dammam in the second half of the year.
Around 22 million passengers travelled between India and countries in the West Asia accounting for nearly 40 per cent of all international air traffic from India in 2016. This does not include passengers who travelled onward to other destinations from hubs such as Dubai or Doha. This makes the region an attractive bet for Indian airlines.
However, business was impacted last year and demand growth did not match the growth in capacity. Airline yields, which are revenue charged per passenger, came under pressure as low crude oil price impacted local economies. Both Air India Express and Jet Airways have said their financial performance was impacted due to weakness in Gulf market.
But this is not turning to be a dampener for Indian carriers’ plans. While the demand may not be at its peak the market assures a steady year-long traffic. Air India Express which earns about 90 per cent of its revenue from Gulf routes is introducing a Delhi-Bahrain-Doha service in summer. Recently it added flights to Dubai and Abu Dhabi from Delhi besides increasing frequencies on Gulf routes from Kerala.
” We have recently announced Sharjah as our 6th international destination. We have also introduced new flights to the existing Muscat network. Middle-East has been an important market for IndiGo and expanding operations to Sharjah and Muscat is a testament to the growing demand from the sector,” said IndiGo’s chief commercial officer Sanjay Kumar in a statement.
Jet Airways flies wide body Airbus A330 and Boeing 777 aircraft to destinations such as Doha, Kuwait and Dubai. Sources say there is no immediate plan to redeploy the aircraft to other destinations as the airline expects the Gulf economies to bounce again.
“The slowdown in Gulf region is on expected lines and is likely to impact Indian carriers more than their Gulf peers. We see the slowdown impacting yields and later even volumes,” said Kapil Kaul, South Asia CEO of Centre for Aviation.
Parle to launch Frooti Fizz, the first extension of the brand in 32 years
Livemint: March 08, 2017
New Delhi: Parle Agro Pvt. Ltd is launching a fizzy version of Frooti—the first brand extension for the popular mango drink launched 32 years ago.
Frooti Fizz is an attempt to build on the success of the original fruit beverage, which is Parle Agro’s largest revenue earner, making up more than 60% of the company’s sales.
Frooti Fizz, priced at Rs15 for a 250 ml PET package, Rs30 for a 500 ml PET package and Rs25 for a 250 ml can, will be retailed across 1.2 million outlets of the estimated nine million outlets in the country, according to the firm.
Parle Agro has set for itself the target of increasing annual revenue to Rs5,000 crore by 2018, from Rs2,800 crore, said Nadia Chauhan, joint managing director and chief marketing officer.
The firm has experimented with a fizzy variant in the past. In 2005, it launched Appy Fizz—the country’s first fruit-based fizzy drink that has grown at more than 20% a year in the past five years.
“Parle Agro created the fruit plus fizz category in 2005 with the launch of Appy Fizz. Today, we hold maximum market share in this category. The launch of Frooti Fizz is a step towards taking this category to the next level. Mango continues to be India’s largest consumed fruit flavour and there’s space for the fizzy version of the mango drink in the market,” Chauhan said in an interview.
Parle Agro’s decision to launch Frooti Fizz, comes four months after the Food Safety and Standards Authority of India (FSSAI) set new standards for carbonated fruit beverages.
According to regulations, beverages with a fruit juice quantity below 10% but not less than 5%, and 2.5% in case of lime or lemon, should be called carbonated beverages with fruit juice.
FSSAI’s norms came about two years after Prime Minister Narendra Modi, in September 2014, urged multinational carbonated beverages firms like Coca-Cola Co. and PepsiCo Inc. to mix natural fruit juices (at least 5%) in aerated beverages to help boost fruit sales for Indian farmers.
Firms lined up to launch carbonated fruit drinks even before FSSAI set the standards. In July 2016, Real juice maker Dabur India Ltd launched Real VOLO, a fizzy drink that has 20-25% fruit juice content. In February, Bisleri International launched Bisleri Pop, an aerated fruit-based drink, to re-enter the carbonated beverages market that it exited in 1993.
Coca-Cola India, the local arm of the American beverages maker, sells Fanta Green Mango, a carbonated drink that has 10.4% fruit content. Its rival PepsiCo India Holdings Pvt. Ltd sells Nimbooz Masala Soda that has 5% lemon juice. Both Coca-Cola and PepsiCo are working on more fruit-based carbonated beverages, Mint reported on 22 July 2016.
The carbonated beverages category has experienced a decline in sales in recent years as juices and fruit-based drinks grew at a brisk pace.
In 2015, the juices category posted a volume growth of 20.06% and a value growth of 25.78% over the previous year.
Fizzy drinks, in the same period, grew 8.42% by volume and 10.82% by value, according to market research firm Euromonitor International.
Next year, Parle Agro will get into new categories and launch products in its existing business lines. Besides Frooti and Appy, Parle Agro sells Bailey branded water and soda and Hippo branded snacks, among others. More than 81% of its revenue comes from beverages, while water accounts for about 12.5% and the remaining comes from food and other products, according to the company’s website.
The company will be spending about Rs100 crore on the launch of Frooti Fizz, including the marketing expenses, said Chauhan.
Some analysts are skeptical about the potential of Frooti Fizz. “It’s a bit surprising why the company is launching a fizzy version of a successful brand when the carbonated beverages market is witnessing slow growth. It could have, instead, looked at the fortified drinks segment. As an extension of a successful mass brand, it might work, but eventually, the company will have to focus on fortified drinks,” said Rajat Wahi, partner and head (consumer markets), at consulting firm KPMG in India.
Mango-based drinks account for the largest chunk of the juice-based drinks category in India. Coca-Cola’s Maaza, which the American firm acquired in 1993 from the Chauhan family-owned Parle Bisleri Ltd along with other brands such as Limca, Citra, Thums Up and Gold Spot, is still the market leader. Other brands in the category include PepsiCo India’s Slice and recent entrant Manpasand Beverages’ MangoSip.
Maaza led the Rs11,922 crore juices (up to 24% fresh juice content) market with a 36.1% share (retail volume), followed by Parle Agro’s Frooti (24% share) and PepsiCo’s Slice (22%) in 2016, according to data compiled by Euromonitor International.
Coca-Cola is targeting more than doubling annual sales of Maaza to $1 billion by 2023, from $400 million in 2015, Mint reported on 18 February 2016.
Jaipur, Srinagar top two best airports globally in small airport category
Economic Times: March 08, 2017
New Delhi: Jaipur and Srinagar airports, managed by Airports Authority of India (AAI) have been ranked amongst the best airports in the category of 2 to 5 million passengers per annum across the world.
“Based on the results of the survey carried out by the Airports Council International (ACI), a global non-profit organization of Airport Operators on Airport Service Quality (ASQ), Jaipur and Srinagar airports have been rated as world’s No.1 and 2 respectively in the category, “Best Airport by Size” in the traffic volume of 2 to 5 million passengers per year,” said a release from AAI.
Jaipur Airport has also been rated as the best airport in the category of “Best Airport by Size and Region” in the traffic volume of 2 to 5 million passengers per year, the release added.
India to outpace US to emerge as second largest economy by 2040, PwC says
HT Business: March 07, 2017
New Delhi: India will outpace the United States to emerge as the second largest economy in purchasing power parity (PPP) terms by 2040, global management consultant PricewaterhouseCoopers has forecast in a report.
India’s GDP growth is estimated to have slowed to 7.1% in 2016-17 from 7.9% in 2015-16 after the government decision to scrap Rs 15.44 lakh crore worth of high denomination notes or 86% of currencies in circulation. However, analysts expect the economy to bounce back from 2017-18 on rising consumer demand.
By 2040, India’s gross domestic product in PPP terms will grow to $30 trillion from $8.7 trillion in 2016, while US will grow from $18.6 trillion to $28.3 trillion, said the PwC report titled “The World in 2050”.
China will continue to lead the chart with its GDP rising from $21.3 trillion to $47.4 trillion by 2040.
By 2050, China’s GDP in PPP terms will touch $58.5 trillion followed by India ($44.1 trillion) and the US ($34.1 trillion).
However, India’s GDP measured in terms of dollar will grow to $28 trillion to emerge as third biggest by 2050, after China ($49.9 trillion) and the US ($34.1 trillion). In 2016, India’s GDP size was just $2.3 trillion, a fraction of China‘s $11.4 trillion and $18.6 trillion of the US.
The seven leading emerging economies (E7)—China, India, Russia, Brazil, Indonesia and Mexico—will surplus the seven leading developed nations that includes the United States, United Kingdom, Germany, Japan and France, PwC said.
“The world economy could more than double in size by 2050, far outstripping population growth, due to continued technology-driven productivity improvements. Emerging markets (E7) could grow around twice as fast as advanced economies (G7) on average,” it said.
As a result, six of the seven largest economies in the world are projected to be emerging economies in 2050 led by China, India and Indonesia.
The US could be down to third place in the global GDP rankings while the EU27’s share of world GDP could fall below 10% by 2050.
UK could be down to 10th place by 2050 while France out of the top 10 and Italy out of the top 20 as they are overtaken by faster growing emerging economies like Mexico, Turkey and Vietnam respectively, PwC said.
But emerging economies need to enhance their institutions and their infrastructure significantly if they are to realise their long-term growth potential, it added.
Hotstar ties up with Zapr Media Labs for mobile audience analytics
Livemint: March 07, 2017
New Delhi: Leading broadcaster Star India Ltd’s digital streaming platform Hotstar and Zapr Media Labs, a Bengaluru-based media tech company, have announced a strategic partnership to drive the next wave of mobile audience analytics in India.
The two companies will work together to create a deep understanding of mobile audiences that can be leveraged by brands to create personalized communication through advertising and offers. The first set of consumer analytics data will be shared with advertisers in the coming few weeks.
While access to the internet has been exploding in India in the last few years, especially on the mobile screen, mobile marketing has been constrained till date by the lack of platforms that marry deep user engagement and audience segmentation.
While many brands have deployed significant amounts of money on mobile in the last few years, especially through banner and in-stream display ads, marketers have been frustrated by the lack of brand building vehicles online that allow them to leverage deep audience analytics, Star India said in a statement.
In what is clearly a trail-blazing move for digital marketing, the partnership could herald the emergence of more robust audience analytics beyond attributes of age and gender and better accountability for results in the mobile marketing sector.
“In the transition from the broadcast world to the digital world, advertisers got a data bonanza but in the process had to give up the ability to engage consumers who are actually paying attention to what they are saying,” Ajit Mohan, chief executive officer (CEO) of Hotstar, said. “Hotstar has the opportunity to build the world’s first platform on digital where consumers are engaged and immersed while at the same time delivering deep audience understanding that allows brands to talk to individuals rather than segments. We believe that we have a shot at creating the world’s premier truly personalized advertising service, which benefits both brands and consumers.”
Hotstar crossed 200 million downloads at the end of February.
Sandipan Mondal, co-founder and CEO, Zapr Media Labs, said, “We are excited to partner with Hotstar and Star on our journey to build a world-class media-tech company out of India. Over the past few years, Zapr has grown into one of the world’s largest media consumption repositories and audience cross-targeting platforms and this partnership further reinforces the incredible response we have received from our partners across brands, agencies and broadcasters. We look forward to accelerating the pace of our research & development, growing our product portfolio and building a deeper and long lasting relationship with the larger media and advertising industry.”
The strategic partnership is accompanied by a minority investment in Zapr Media Labs by Star India. The terms of the deal were not disclosed.
Zapr’s proprietary technology platform analyzes television viewership across 600+ channels in India providing targeted digital analytics and insight into offline consumption behaviour. Zapr has built an analytics platform that combines this proprietary understanding with enriched data that allows advertisers to use it for sharper audience targeting and analysis.
For Hotstar, the partnership signals a clear intent to evolve from a media start-up to a full-fledged technology and analytics company that shapes the next wave of mobile usage and advertising in India.
With more than 60 million users in the month of January, the platform already boasts of some of the highest daily engagement. The announcement is a step in the direction of becoming a personalized advertising service.
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