(Current Affairs) Economy & Energy | July: 2014

Economy

Top 10 Global Markets for Australia

  • India has figured among the top 10 markets for the international business community as per Australia's International Business Survey.
  • India has also emerged as the most challenging of the top 10 countries to do business with.
  • AIBS 2014, a comprehensive study of Australian companies involved in international business, was released recently.
  • It found that India ranked as ninth important market currently. The country was also seen as the third important future market, with respondents saying they were planning on doing business in/within the next two years.
  • The survey captured data from more than 1,600 Australian businesses, reflecting the opinions of a wide range of firms from diverse industries operating in over 120 markets.
  • The United States (chosen by about 15 per cent), India (six per cent) and the United Kingdom and Indonesia (five per cent each) make up the remainder of the top five most important future target markets.
  • The survey found that the most important market for international business for the participants varied by the industry.
  • Education and Training industry stood as the most important market for Australian international business community when it came to India.
  • On the list of top most important overseas markets in terms of international revenue, India stood at the ninth position, while US and China took the first and second rank respectively.
  • On rating the ease of doing business in their most important markets as compared to Australia, only 9 per cent of businesses perceived India as an easier or much easier market than Australia, with 81 per cent regarding it as more or much more difficult.

Sino-Russia strategy

  • Russia is intensifying its shift towards China as Russia's relations with the West have sunk to their post-Cold War low over the Ukraine crisis.
  • China has refused to condemn Russia's takeover of Ukraine's Crimea and has adopted what experts called "positive neutrality" over the conflict.
  • The two countries are expected to sign a "fantastic package" of more than 40 agreements when President Vladimir Putin travelled to Shanghai recently for a two-day state visit and participation in a regional security summit.
  • Mr. Putin and his Chinese counterpart, Xi Jinping, will oversee the start of joint war games in a sign of closer defence ties between the two countries. At least 16 Russian and Chinese warships will train together in the East China Sea, where China is locked in a bitter territorial dispute with Japan.
  • Russia and China will undertake eight "strategic projects" in space, rocket engines, aviation and infrastructure.

E-auction of Iron ore

  • The Goa Mines and Geology Department will hold its third e-auction of iron ore on May 12, wherein six lakh tonnes of ore, lying at jetties and the Mormugao Port Trust (MPT) would be e-auctioned.

  • The State, through MSTC Ltd., has auctioned 1.62 million tonnes of iron ore through two e-auctions in February and March, realising around Rs.260 crore, which would go to the State treasury.

  • These e-auctions are held under the supervision of a Supreme Court-appointed monitoring committee, headed by U. V. Singh.

  • The Supreme Court, partially relaxing its October 5 ban on iron ore activities in the State, in December last had permitted the Goa Mines Department to auction about 15 million tonnes of iron ore lying at jetties, mining leases, plots, beneficiary plants and port, all under the supervision of its committee.

  • However, on April 21, the apex court lifted its ban on mining activities, but putting a cap of 20 million tonnes for annual production and ruling that since the renewal of all the deemed mining leases in the State had expired on November, 2007, and the operations carried out, thereafter, have been termed illegal, the mining lessees will not be entitled to the sale value of the ore sold in e-auction but to the approximate cost (not actual cost) of the extraction of the ore.

  • Making government the custodian of the money collected through e-auction, the court directed the State to pay 50 per cent of wages of all the workers who were laid off or were not paid salaries since the time the mining operations were suspended.

World's top Brand

  • Google has knocked Apple off the perch as the world's top brand in terms of value in the latest rankings released by global market research agency Millward Brown.
  • The internet search giant may occasionally tick off the public and regulators across the globe with regards to its data collection activities but it hasn't dented its brand value, according to Millward Brown's 2014 100 Top BrandZ report.
  • Google's brand value shot up 40 per cent in a year to $US158.84 billion ($A171.86bn), while Apple has seen its brand value drop by 20 per cent to $160bn.
  • As the report highlights, Samsung, HP and Sony -- all product-dominated companies -- have put in a far less impressive performance than the likes of Tencent, Facebook and Baidu.
  • The latter are up 97 per cent, 68 per cent and 46 per cent respectively, while the former have moved up 21 per cent, 19 per cent and, in Sony's case, a drop of 1 per cent.
  • Meanwhile, Twitter and LinkedIn are the latest entrants into the top 20 list, with brand values of $14bn and $12bn respectively.

Metro AG

  • German retailer Metro AG plans to have 50 wholesale stores in India by 2020 and make the country one of its 'focus expansion' markets alongside Russia, China and Turkey.
  • India has always been an important future growth market of Metro .
  • The Dusseldorf-based company was the first global player to enter the cash-andcarry wholesale segment in India, back in India. It currently operates 16 outlets in the country.

Prepayment fee on floating rate term loans

  • The Reserve Bank of India (RBI) said that banks cannot levy charges on individual customers if they choose to close their floating rate loans.
  • Some banks charge a fee if an individual borrower chooses to close his or her loan. This fee varies from bank to bank, and is mostly in the range of 1-3%.
  • In its first bi-monthly monetary policy review on 1 April, RBI had indicated that in the interest of their consumers, banks should consider allowing their borrowers the possibility of prepaying floating rate term loans without any penalty.
  • Accordingly, it is advised that banks will not be permitted to charge foreclosure charges/pre-payment penalties on all floating rate term loans sanctioned to individual borrowers.

No Special trade benefits for Russia

  • U.S. President Barack Obama intends to withdraw special privileges granted to Russia because the country is too economically advanced to need preferential treatment reserved for less developed countries.
  • Mr. Obama notified Congress that he intends to remove Russia from the Generalised System of Preferences (GSP) programme as Moscow is "sufficiently advanced" to warrant any preferential treatment.
  • Once Russia's eligibility is withdrawn, which would be effected via a presidential proclamation, U.S. imports of GSP-eligible goods from Russia will be subject to normal, non-preferential rates of duty.
  • The purpose of the programme, which allowed $19.9 billion in imports to enter the U.S. duty-free in 2012, is to assist developing countries to use trade to boost their economic development.
  • Russia has advanced beyond the level of economic development and competi-tiveness for GSP eligibility. As such, Russia should no longer qualify to receive GSP benefits.

'Global 2000'

  • Mukesh Ambani-led Reliance Industries leads the pack of 54 Indian companies in Forbes' annual list of the world's 2000 largest and most powerful public companies, with Chinese companies occupying the top three slots on the list.
  • The Forbes 'Global 2000' is a comprehensive list of the world's largest, most powerful public companies, as measured by revenues, profits, assets and market value.
  • China is home to the world's top three biggest public companies and five of the top 10.
  • The US retains its dominance as the country with the most Global 2000 companies at 564.
  • Japan trails the US with 225 companies in aggregate.
  • India is home to 54 of the world's biggest companies.
  • Reliance Industries is ranked 135 on the list with a market value of 50.9 billion dollars and 72.8 billion dollars in sales as on May 2014.
  • Reliance is followed by State Bank of India which is ranked 155 and has a 23.6 billion dollars market value.
  • The other Indian companies on the list are Oil and Natural Gas ranked 176, ICICI Bank (304), Tata Motors (332), Indian Oil (416), HDFC Bank (422), Coal India (428), Larsen & Toubro (500), Tata Consultancy Services (543), Bharti Airtel (625), Axis Bank (630), Infosys (727), Bank of Baroda (801), Mahindra & Mahindra (803), ITC (830), Wipro (849), Bharat Heavy Electricals (873), GAIL India (955), Tata Steel (983) and Power Grid of India (1011).
  • Also making the list are Bharat Petroleum (1045), HCL Technologies (1153), Hindustan Petroleum (1211), Adani Enterprises (1233), Kotak Mahindra Bank (1255), Sun Pharma Industries (1294), Steel Authority of India (1329), Bajaj Auto (1499), Hero Motocorp (1912), Jindal Steel & Power (1955), Grasim Industries (1981) and JSW Steel (1990).

Issue of Natural Gas Export

  • A bi-partisan group of 22 American senators have expressed reservation on the export of natural gas to Asian countries such as India and China, arguing that such a move by Obama Administration would result in an increase in cost for consumers and businesses at home.

  • They said the "large-scale exports of natural gas to Asia could also jeopardize America's goal of achieving energy independence, a goal made more achievable by the recent increase in domestic gas production".

  • The senators urged Mr. Obama to consider the impacts on American manufacturing and families that rely on natural gas.

  • The recent approval for export of liquefied natural gas from a sixth export facility has meant that the total approved exports now exceeds the amount of gas currently being used in every single American home and commercial business.

  • The exports well exceeds the high export scenario referenced by a Department of Energy study in 2012 that indicated prices could increase by up to 54 per cent and it would translate into more than $60 billion a year in higher energy costs for American consumers and businesses.

U.K. rich list

  • India-born Hinduja brothers have emerged as Britain's richest, valued at £11.9 billion, in the Sunday Times' annual list of the super rich.
  • Gopichand and Srichand Hinduja run the multinational Hinduja Group with interests across automotive, real estate and oil.
  • Arsenal shareholder and Russian tycoon Alisher Usmanov fell to second place after his estimated fortune dropped to £10.65 billion. He is followed by Laskshmi Mittal with £10.25 billion, registering a growth of £250 million.
  • London now has the most billionaires for any city with 72. The total number for U.K. has crossed 100 for the first time to reach 104 billionaires with a combined wealth of over £301 billion. The next most prosperous city in the world is Moscow with 48 billionaires, just ahead of New York and San Francisco.
  • The Duke of Westminster is the richest Briton with around £8.5 billion and is ranked 10th.

Automatic tax information

  • As they continue their efforts to clamp down on the menace of black money, India and other countries will have to wait at least till 2017 before the new global standard for automatic exchange of tax information comes into effect.

  • India, Switzerland and 45 other nations had agreed upon automatic exchange of tax information, which is seen as a major step forward in global efforts against banking secrecy practices.

  • Paris-based Organisation for Economic Cooperation and Development (OECD) sets the global tax standards and frames conventions against tax frauds, among others.

  • The new standard, expected to be finalised in September this year, provides for exchange of information on bank account balances, interests, dividends, other financial income and sales proceeds to compute possible capital gains.

  • By becoming part of the declaration, these countries have committed to implemen-ting automatic exchange of tax information. The declaration also comes as a boost for India, which is making efforts to get details from Switzerland on alleged illicit funds stashed away by Indians there.

  • Automatic exchange of information would allow for "collecting all bank information on non-resident to pass this information on to the countries of residence of these taxpayers so that they can no longer hide money on offshore accounts.

  • The standard was developed at the OECD and endorsed by the G20 Finance Ministers.

Agreement between TCS and Mitsubishi

  • India's largest software services firm Tata Consultancy Services (TCS) has signed an agreement with Japanese major Mitsubishi Corporation to form a single IT services unit.
  • The merger, in which TCS will hold 51 per cent stake and Mitsubishi 49 per cent, will create a new IT services company of significant scale in the Japanese market with annual turnover of over $600 million.
  • ITF brings its long-standing relationships with Japanese corporations, talented work-force and competencies in industries like retail, distri-bution and trading.
  • This will complement TCS' deep domain knowledge, technology expertise and strong execution track record.
  • TCS' Global Network Delivery Model (GNDMTM) capabilities will also enable the Japanese corporations' globalisation ambitions.
  • The company will provide tremendous additional value to clients in Japan, while employees will secure the advantages of building their careers in a global organisation.

Cadbury India is now Mondelez India Foods Ltd

  • Cadbury India, a subsidiary of Mondelez International, today changed its name to Mondelez India Foods Limited.
  • The change in name of Cadbury is in line with the gradual changeover of the name of all subsidiaries of Mondelez International globally, the company said in a statement.
  • However, the company said change in name of the company will have no impact on the names or packaging of its products like Cadbury Dairy Milk, 5 Star, Gems, Bournville, Perk, Celebrations, Choclairs, Halls, Bournvita, Tang and Oreo, which will continue to be sold under the same brand names as before.
  • From now onwards, the new name of the company will appear on the back of the products.

Novartis to buy Glaxo's cancer drugs

  • Novartis AG agreed to buy GlaxoSmithKline Plc's (GSK's) cancer-drug business for as much as $16 billion, form a consumer-health venture with GSK and sell its animal-health operations to Eli Lilly and Co. for $5.4 billion in an overhaul of the Swiss drug maker.

  • Novartis also will sell its vaccines business, excluding the flu operations, to GSK for $7.1 billion, the Basel, Switzer-land-based company said in a statement on Tuesday. That includes royalties and as much as $1.8 billion payments based on the achievement of certain business goals.

  • The transactions culminate a process that began last year when Novartis chief executive officer Joe Jimenez began reviewing the company's smaller businesses for possible sale.

  • GSK and Novartis's consumer-health venture will have about £6.5 billion ($10.9 billion) in revenue, GSK said. GSK will have majority control, with an equity interest of 63.5%.

  • The venture brings together brands including Novartis's Excedrin painkiller and GSK's Sensodyne toothpaste. GSK's vaccines purchase will add Bexsero for meningitis to its Cervarix for human papillomavirus.

TCS amongst top 10 global IT services companies

  • In a positive note to Indian IT industry, India's largest IT services provider, Tata Consultancy Services (TCS), has broken into the league of top 10 global IT services companies, moving from the 13th position in 2012 to the 10th spot in 2013.
  • Twelve years ago, when TCS' revenues were about $1 billion, then CEO S Ramadorai had laid out a vision to be among the top 10 by 2010.
  • According to experts, It's taken a little longer, partly because of the global financial slump of 2008-09, but the company has now got there, and considering the pace at which it is growing compared to its global counterparts, the ranking could get better fairly quickly in the years to come.
  • TCS is estimated to have IT services revenues of $10.1 billion (out of its total revenues of about $12.5 billion). IBM ($54.4 billion), Fujitsu ($32.1 billion), Hewlett-Packard ($29.2 billion) and Accenture ($25.4 billion) lead the list.
  • The research compares IT services, and excludes other areas such as BPO, R&D services and software/hardware products. And it uses figures for the four quarters of calendar year 2013. TCS rose to the 10th spot displacing Montreal-based IT services firm CGI.
  • India-based companies Cognizant, Infosys, Wipro and HCL are at the 15th, 18th, 20th and 25th positions, respec-tively, all of them rising by one to three spots compared to 2012. HfS Research believes that Cognizant could be in the top 10 in the next 2-3 years, may be at the expense of US IT company CSC. CSC's revenues last year had dropped compared to the year before.

Centralised bill payment system

  • An RBI panel made a case for centralised bill payment system catering to different financial instruments, like cheques, debit cards and mobile banking.

  • In order to ensure uniform and efficient implementation of operations of the bill payments system in the country, standards have to be set for process standards, business standards for establishing the relationship between all entities, and information exchange standards for trans-actions as well as settlements.

  • The RBI has sought comments on the Report of the GIRO Advisory Group till May 25. This centralised bill payments system, it said will provide accessible services across all parts of the country through a strong network of operational units/agents who will ensure in making this service accessible in urban as well as rural areas.

  • The report further said the standard setting role/ function has to be distinct from the operational aspects of the bill payments system.

  • Currently, the payment system in the country offers a variety of payment instruments to the public, like cheques and various e-payment modes in the form of credit cards, debit cards, pre-paid payment instruments (including mobile wallets) issued by both banks and authorized non-bank entities.

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