Banking News - 2014-05-17

Banking News May 17, 2014
Here is an endeavour to bring you in one folder all banking related unedited
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Compiled by: Anup Sen
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Sensex at new high; rupee at 11-month peak
The Business Line
Published on May 17, 2014
Mumbai, May 16: The stock markets and the rupee welcomed the
crowning of Narendra Modi as Indias 14th Prime Minister by
opening Fridays trading session at a significant high.
Immediately after opening, the Nifty and the Sensex spiralled and
breached the 7,500 and the 25,000 levels, respectively, while the
rupee strengthened to an 11-month high against the dollar as news
of the BJP gaining a majority trickled in.
The win comes at a time when India needs a stable, pro-
development and decisive government. It is apparent that such a
result has increased the confidence in the countrys future
prospects, with the S&P BSE Sensex crossing the 25,000-mark, said
Ashishkumar Chauhan, MD and CEO of the BSE.The second half saw
sustained profit booking settling the indices while adding over Rs.
1.12-lakh crore to investor wealth.
The Nifty opened 147 points up at 7,270 before touching an intra-
day high of 7,564 and finally closing at 7,203, up 1.12 per cent. The
NSE recorded its highest notional turnover in equity derivatives ( Rs.
4,36,884 crore) and highest number of trades in the cash market
(1,18,05,386). The Sensex opened 366 points up at 24,272, zoomed
to an all-time intra-day high of 25,376 (1,470 points over
Thursdays close) and finally closed at 24,122, up 0.9 per cent.
Commenting on the poll results, Navneet Munot, Chief Investment
Officer at SBI Mutual Fund, said: Given the BJPs manifesto and
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Modis track record, India can be expected to leap-frog in building
physical and social infrastructure using innovative technology.
Foreign institutional investors bought net equities worth Rs. 3,635
crore while domestic institutional investors offloaded equities worth
Rs. 349 crore.
Rupee appreciates
The rupee closed at Rs. 58.83 to the dollar, up 25 paise over its
previous close. Formation of a stable government will help in
improving sentiment and result in foreign capital inflows. However,
over a three month period, volatility in the rupee is likely to subside
and the focus will shift to the evolving macro economic
fundamentals, said TC Guruprasad, Managing Director,
CentrumDirect.
Retail investors on the BSE also sold net equities to the tune of Rs.
739 crore. Barring IT, consumer durables and FMCG, all the broader
and sectoral indices closed in the green.
Volatility was down 33.92 per cent and the volatility index India Vix
closed at 24.2925. With a strong mandate, we believe Indias
growth story will remain strong, at least in the next few months.
The path to strong long-term economic growth implies some pain in
the interim, especially given the fiscal consolidation imperative and
inflation moderation target, said Gautam Chhaochharia of UBS
Securities.
P J Nayak Committee Report
UFBU calls for demonstration on May 21
L N Revathy
The Business Line
Coimbatore, May 16: The United Forum of Bank Unions (UFBU) has
given a call to its members to organise demonstrations all over the
country on May 21 after office hours.
The demonstration is to express the unions demand for outright
rejection of the Nayak Committee recommendation.
Further programmes will be given if the RBI/Government does not
reject the panels report, the UFBU said in a statement.
INDIA DECIDES 2014
Verdict to spur growth: India Inc
Sanjeev Sharma
The Tribune News Service
New Delhi, May 16: India Inc has given a rousing welcome to the
incoming Narendra Modi-led NDA government with the expectations
that given Modis track record, it will revive growth and sentiment.
The CII complimented the BJP on its strong performance in the
General Election. The outcome of the election reaffirms Indias
vibrant and dynamic democracy and will have a major role in
reviving growth and investors sentiments, said Ajay Shriram,
president, CII.
The industry hopes that the mandate will trigger growth and
employment. Ficci hopes that this mandate will help the leadership
restore much-needed investors confidence, attract higher
investments and generate employment, especially in the
manufacturing sector, said Sidharth Birla, president, Ficci.
Birla said the nation awaits an era of minimum government and
maximum governance. The industry must be seen as a key factor in
the nation's advancement by enabling an efficient provision for
goods and services and creation of jobs, he said.
Rana Kapoor, president, Assocham, said, Sentiments are extremely
positive, the new government now must take all measures towards
securing economic, social and national mandates for the nation.
India's growth story will depend on inclusive job creation, and
income and wealth creation models, he said.
Prathap C Reddy, chairman, Apollo Hospitals Group, said the people
were looking for an accelerated pace of change and had huge
expectations from the new leadership.
Industry captains say the mandate is for action and good
governance. Harsh Pati Singhania, director, JK Organisation, said,
The historic mandate given to the BJP is the mandate for action. It
clearly signals the nations desire for good governance and
development.
Singhania said the focus must be on improving Indian business
competitiveness, especially in the manufacturing sector and making
India an easier place to do business in. The formation of the new
government may also revive consumer sentiments and sales. P
Balendran, vice-president, General Motors India, said, Customer
sentiments are expected to improve in the medium to long-term
period with a new government at the Centre. We expect the excise
duty cuts to be retained in the June's Budget and interest rates to
fall or remain at current levels for any chance of the recovery for the
automobile sector during the second half of the year.
The big mandate is being seen as one that will provide political and
economic stability. GVK Reddy, founder chairman and managing
director, GVK Group, says the people's confidence and the mandate
for stability have ensured that there will be economical and political
stability in the times to come. We are confident that with a strong
mandate, the new government will do well and implement economic
policies that will benefit the countrys people and its industry," he
added.
The real estate industry is looking for policies that boost demand. P
Sahel, vice-chairman, Lotus Greens Developers, says the Indian real
estate industry awaits a robust government, which will make the
market viable for sellers and buyers. The industry has been
advocating for a single window clearance system, transparency in
government proceedings and reduced cost of borrowing from banks
for many years.
Govt with clear mandate will reduce uncertainty
With the BJP-led NDA scoring a landslide victory in the elections,
rating agency Fitch today said a government with a clear mandate
would reduce uncertainty and take decisive policy actions to address
economic challenges. A government with a clear mandate reduces
uncertainty and increases chances of decisive policy action to
address the economic challenges that India faces. We will see
whether the new government takes those chances, Fitch said.
The rating agency further said the new government should focus on
bringing growth back to higher sustainable levels, which would
require a strong pick-up in investments. Outlining the steps to
strengthen investment climate, Fitch said a clear strategy for fiscal
consolidation, enhancing fiscal credibility and creation of a low-
inflation environment would be essential to restore confidence.
Further, a new structural reform push that could include reforms
related to governance, infrastructure bottlenecks and reduction of
red tape would also be key issues which need to be looked upon, it
said.
Time to gain from labour reforms
Sean Dougherty, Veronica Frisancho & Kala Krishna
The Financial Express
Recent Supreme Court action has reintroduced labour reform
into Indias public debate. Even modest deregulation has
improved total factor productivity substantially; this sets the
scene for a deep liberalising reform
India has some of the more restrictive labour laws in the world, but
a large informal sector to which these do not apply. Therefore, firms
thinking of growing in size and becoming formal must trade off the
advantages of size with the disadvantages of facing regulations.
This dilemma keeps Indian firms small and informal unless they
have a lot to gain by growing, i.e. when they are very good indeed.
The result, it is argued, is a skewed firm size distribution with a very
long tail of smaller, less productive firmsmany of which operate in
the informal sectorwhich employ nearly 90% of the Indian
workforce. Such a skewed outcome makes sense given the uneven
protection of employment across the formal and informal sectors,
with the latter being virtually unregulated. Strict labour laws may
also result in market concentration, as these regulations act as a
barrier to becoming large.
A number of studies have argued that strict (and obsolete) labour
laws explain Indias manufacturing problem. Although the country
has recorded impressive output growth rates since the 1970s, the
share of manufactures in total output has remained stagnant at
around 15%. Moreover, the top seven goods exported during 2012-
13 represented over 50% of the country's total exports and these
were all relatively capital-intensive goods: petroleum products,
gems and jewellery, transport equipment, nuclear and mechanical
machinery, electrical machinery, organic chemicals, and
pharmaceutical products. In contrast, ready-made garments,
traditionally an unskilled-labour-intensive export, saw its share in
total Indian exports decline from 12.5% to less than 6% between
2000 and 2013.
There has been a recent renewal of interest in pursuing labour
market reforms in India, and it has been an issue in the run-up to
the current elections. Last year the ministry of finance argued in its
Economic Survey that labour regulations appeared to be an
impediment to the growth of jobs in manufacturing, a message
emphasised in last months IMF Article IV review and earlier OECD
Surveys (2007, 2011). Articles in the The Economist and the New
York Times give colour to the scarcity of quality jobs in the country,
and highlight how stringent labour laws appear to have played a key
role. The latest in-depth official figures on employment from the
2011-12 Employment and Unemployment Survey (NSSO) suggest
that only 20% of those employed in India are on a regular wage or
salary with a contract. Clearly, such a system does not provide a
stable work environment and may be costly for firms.
How large are the effects of such laws? In our recent paper we
provide some idea of these costs in terms of their impact on
productivity. We use state-level variation in labour market reform
and firm-level data on the performance of industrial establishments
in recent years to tease out the effects of such reforms. Using plant-
level data between the late 1990s and the late 2000s, we find
evidence of the impact of reforms of employment protection
legislation (EPL) and related labour market policies on plant-level
productivity in India. Identification of the effect of EPL reforms
follows from a difference-in-differences estimator that takes
advantage of the state-level variation in labour regulation reform
and heterogeneous industry characteristics. The fundamental
identification assumption is that EPL is more likely to restrict firms
operating in industries with higher labour intensity. The results
show that labour market reform mattered, and more so in labour-
intensive industries.
A strength of our work is that the labour reform measure (OECD
2007) used is much more comprehensive and appropriate for the
post-1991 period analysed than the Besley-Burgess (2004) index,
popular in the EPL literature in India. The labour reform index we
use covers 50 specific subjects of possible reform in seven major
areas of labour regulation in addition to the IDA, taking into account
both formal and informal amendments at the state level. An
additional strength is the use of plant-level information from the
Annual Survey of Industries (ASI) to evaluate the direct effect of
EPL in India. We take advantage of the ASI panel data to obtain
plant-level total factor productivity (TFP) measures that control for
simultaneity and selection bias (using the Olley-Pakes approach), in
contrast to previous work on the topic that has, due to the lack of a
panel, mostly measured the effects of EPL on labour productivity at
the industry level.
New findings
We find that the modest easing of regulations in Indian states that
has taken place in recent years was enough for firms in states with
higher levels of pro-employer reform to benefit substantially
through gains in TFP. Our point estimates indicate that, on average,
plants in labour-intensive industries and in states that have
transitioned towards more flexible labour markets have TFP
residuals 25.4% higher than those registered for their counterparts
in states with less EPL reform. However, no important differences
are identified among plants in industries with low labour intensity
when comparing states with high and low levels of EPL reform.
We also verify that the different strategies used by plants to
partially overcome the constraints imposed by labour regulations
generate heterogeneous effects of state-level labour reform, both by
plant size and type of ownership. Given the extensive use of
contract labour among large plants and voluntary retirement
schemes among public plants, smaller plants and private plants
could accrue the largest productivity gains from state-level labour
reforms. Of course, these additional TFP gains are relative and do
not imply that large plants and public plants are not held back by
the current regulations.
Although our EPL reform indicator shows that state-level actions,
both de facto and de jure, have already led the way in labour
reform, these reforms could be taken much further. Out of the 20
states surveyed, only three had conducted more than half of the
potential procedural or administrative changes they were surveyed
about, suggesting that there is still much room to ease the burden
of labour regulations at the state level. Given the difficulty in
carrying out reforms at the central level, states may be in a better
position to accelerate their own labour reform processes while
prioritising reforms according to the characteristics of their home
industries. However, the central government urgently needs to
resolve ambiguities in the Supreme Courts ruling and provide clear
general guidelines, particularly in areas such as contract labour and
fixed-term contracts.
Until recently, labour reform had taken a backseat in discussions of
structural reforms in India. However, recent contract labour cases
have split the Supreme Courts bench and have forced the issue of
labour market deregulation back into the public debate. In addition,
the government has expressed a newfound desire to seiz(e) the
demographic dividend, increasing chances that labour law reform
will be back on the reform agenda. However, there is still little
clarity on the type of reform we should expect; many worry that the
government may just impose stringent regulation for contract
labour instead of implementing a deep liberalising labour reform
that can put India back in the manufacturing business.
Heart diseases: Sugar may be the culprit behind ailments
The Press Trust of India
Sugar has a direct effect on risk factors for heart disease...
Melbourne, May 16: Sugar has a direct effect on risk factors for
heart disease and is likely to impact blood pressure, independent of
weight gain, a new research has warned.
Dr Lisa Te Morenga, Professor Jim Mann and colleagues from New
Zealand's University of Otago conducted a review and meta-analysis
of all international studies that compared the effects of higher
versus lower added sugar consumption on blood pressure and lipids
(blood fats or cholesterol) both of which are important
cardiovascular risk-factors.
They located dietary intervention trials published in English-
speaking journals between 1965 and 2013, comparing diets where
the only intended differences were the amount of sugars and non-
sugar carbohydrates consumed by the participants, and which
measured the effects of these diets on lipids and blood pressure.
They found 37 trials reporting effects on lipids and 12 reporting
effects on blood pressure. The findings from the individual trials
were then pooled to determine the overall effects from all the
studies.
"Our analysis confirmed that sugars contribute to cardiovascular
risk, independent of the effect of sugars on body weight," said Te
Morenga.
"Although the effects of sugars on blood pressure and lipids are
relatively modest, our findings support public health
recommendations to reduce added sugar in our diets as one of the
measures which might be expected to reduce the global burden of
cardiovascular diseases," Te Morenga said.
Te Morenga said previous research showed that there did not appear
to be any special metabolic effect of sugars making people more
likely to gain weight on high-sugar diets compared with low sugar
diets when the total amount of carbohydrates and energy remains
the same.
"However our latest study did find significant effects of sugars on
lipids and blood pressure among these types of energy-controlled
studies. This suggests that our bodies handle sugar differently to
other types of carbohydrates.
"We were also relatively surprised that there was a positive
association between sugars and cardiometabolic risk factors given
that a large body of the research which met our inclusion criteria is
funded by the food industry. This is because such trials are less
likely to find a significant association between sugars and health
outcomes," Te Morenga said.
"In subgroup analyses we showed that by excluding the trials
funded by the food/sugar industry, we found larger effects of sugar
on lipids and blood pressure," said Te Morenga. "Our work provides
further evidence to support these recommendations which have
been disputed by the food industry," she said.
The findings were published in the Journal of Clinical Nutrition.
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