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Term of Week

In Focus

Opinion

Personality

Tech World

Swaps | 6

TV innovation beyond

bend and curve |12

Arvind Panagriya

|11

Union Budget 2015 | 4

MARCH 1, 2015 | A FINNICHE INITIATIVE

Indian Railway Budget—

Positive intent but execution is

the key | 2

March, 1 | 2015 | Volume 36

Indian Railway Budget—

Positive intent but execu-

tion is the key

Union Budget 2015

Swaps

Arvind Panagriya

TV innovation beyond the

bend and curve

The farewell party for the batch 2013-2015 was organized amidst much delight at

completing their PGDM and with optimism looking at the future. We wish them good

luck in their future endeavors. Our students participated in the NDTV budget show in

Delhi for a discussion on the post budget analysis covering aspects related to personal

finance.

Club FinNiche releases its weekly magazine FinXpress, with the In Focus talking about

the ‘Indian Rail Budget—Positive Intent but execution is the key’. The Opinion gives an

overview of ‘Union Budget 2015’’.

The term of the week is ‘Swap’, which is a derivative in which two counterparties

exchange cash flows of one party's financial instrument for those of the other party's

financial instrument . Do have a look at the market section, Tech world which brings to

you about ‘TV Innovation Beyond Bend and Curve’ and Personality of the week, Arvind

Panagriya.

Club FinNiche welcomes any comments, suggestions or criticism regarding the

magazine. Please do write to us and share your ideas.

Happy Reading!

Regards

The Editorial Team

Club FinNiche

Disclaimer: FinXpress takes no responsibility for the opinions expressed in the magazine.

8.5 lakh crore Investment to

be done for next five years

out of which 85% is for de-

congestion of network and

improving efficiency.

‘Operation 5 Minutes’

launched to book tickets in 5

mins.

77 projects worth 96,182

crore for capacity expansion

are planned.

- By Shreyans Dhariwal

Every Rail Budget comes with a revelation of

dozens of new trains, increased ticketing

price, laying of new tracks. But this time the

picture was different, with Railway Minister

Suresh Prabhu diverging from the vogue of

such announcements and focussing on

execution of strategies and long term goals for

improving the existing track network,

redevelopment of stations and improving the

overall efficiency of railway management.

Mr. Prabhu emphasised on the chronic under-

investment in railways for several years

which has led to congestion and over-

utilisation. This cycle needs to come to an end.

The budget has the potential to be

transformational - by increasing capacity and

improving technology on the supply side,

improving quality of service on demand side

and focusing on transparency and efficiency

on operational side. The major highlight of the

budget was the 8.5 lakh crore investment in

Railways for the next five years, out of which

85% was allocated for decongestion of

network and improving the efficiency. Most

of this investment will be funded by long term

loans from various financial institutions and

multilateral agencies.

Some of the key points of the Budget are—

No increase in Passenger fares

Freight rates for coal increased by

6.3%, cement by 2.7%, urea by 10%

Plan Budget goes up by 52%to Rs 1.1

Trillion for 2016

Passengers can now book tickets 4

months in advance from a previous of

2 months

‘Operation 5 Minutes’ is being

launched to book tickets in 5 mins.

Open Wi-fi to be available in around

400 stations

CCTVs to be installed in special

women coaches for safety

Ordering of food from IRCTC site

while booking tickets

138 to be nationwide helpline number

for railway related queries and 182 for

security issues

77 Projects worth Rs 96,182 crore for

capacity expansion

6608km of track to be electrified and

track capacity to be increased by 10%

Policies for station redevelopment

needs to rebuilt and worked upon

All railway projects to be moved to

EPC model

Incredible Rail for Incredible India to

be launched

Market showed positive

response to the budget

wherein shares of domestic

railway companies surged

up to 11%.

With no increase in passen-

ger fares, budget is looked

upon as populist in nature.

Increase in freight charges

for cement and coal may

lead to rise in cement cost

and electricity tariff.

Shifting gears towards IT

support for innovation and re

-engineering.

Set major goals, drivers and

thrust areas for operational

excellence of Indian Rail-

ways.

Successive reduction in oil prices last year is

one of the main reasons behind keeping the

passenger fare stable, but this may change in

future, so the government has to do the

planning and speculation in a manner to keep

the fiscal deficit at minimum level. Due to

increase in freight charges for coal and cement

an increase of cement manufacturing cost by

Rs 7-10 per bag of 50 kg is expected, also rise

in electricity tariff throughout the country can

be seen because 70% of the energy demand is

met by Thermal power plants and for these

plants coal is the prime fuel for generating

electricity.

With major bulk commodities largely being

transported by railways in India and track

already has capacity utilisation in excess of

100%, improvement in efficiency and

expansion of capacity became utmost

important strategies for implementation.

In his speech Mr. Prabhu also talked about

setting goals for improving customer

experience, safer journey for travellers,

expansion of infrastructure and making

Indian rail financially self-sustainable. With

key drivers of adopting medium term

strategy, building partnerships, leveraging

additional resources, setting standards and

revamping management practises. Along with

these goals and drivers he also picked 11

thrust areas to empower the overall

operational capability of Indian Railways.

Prabhu’s speech did not elaborated on the

contingency plans for mitigating the risks

evolving from the heavy investment for 5

years. He needs to implement the long term

strategies in effective and planned manner to

avoid risks and uncertainties of failure. Also

with a massive investment strategy, they

should bring in technologies from foreign

players in the Indian market to provide a

digital facelift and provide a modern, fast,

secure and consumer friendly environment to

the Indian users. Around 5000 crore has been

allotted for IT and research. Among one of its

strategies, government has built up an

innovation council called Kayakalp for the

purpose of innovation and re-engineering in

the existing business models of Indian

Railways.

Finance Minister Arun Jaitley on Saturday

announced the Union Budget 2015 that put

forth boosting growth before painful reforms,

slowing the rate of fiscal deficit cuts and also

seeking to put domestic and foreign capital

into action. In his first full year budget, Jaitley

said India’s economy was about to take off.

Modi backed Finance Minister by tweeting that

the budget would further reignite their growth

engine.

The budget was expected to be a test of

nationalist willingness to reform a $2 trillion

economy with bloated public sector and weak

private investment, the budget fell short on

structural reforms and contained target which

for few sounded unrealistic. It drew a mixed

from economists. Some feel it is a path to an

investor friendly India, whereas others see a

lost opportunity in tackling structural

problems.

Here are few features from the budget:

Corporate tax cut from 30% to 25 %.

Fiscal Deficit decreased to 3.9% this year.

Jaitley targets 3% in next 3 years.

MNREGA allocation to be increased by Rs

5000 crore, its highest ever.

Rs 1000 crore allotted to Nirbhaya fund for

womens safety.

5 ultra-mega power projects with capacity

of 4000MW to be established.

Wealth tax replaced by 2% additional

surcharge.

Rs 246,727 crore allotted to defence.

Investments in infrastructure to go up by

Rs 70,000 crore

Rs 33,152 crore allocated to health sector

Mudra Bank, with Rs 20,000 crore capital,

to be set up for promoting SME’s

promoted by SC/ST

Deduction on pension hiked to Rs 150,000

from Rs 100,000

Service tax rate hikes to 14% from 12.36%

10 years imprisonment for concealment of

income and assets

AIIMS, IIT’s and IIM’s to be established in

different states

Visa on arrival to be increased to 150

countries in various stages.

Jaitley promised higher investment in India’s

roads and railways, offering tax cut to global

companies and tighter rules to get Indian

businessmen to invest at home rather than

stash wealth abroad. Jail sentences of upto 10

years warning was given to tax evaders.

He forecasted growth acceleration 8-8.5% in

fiscal year, up from 7.4% this year on terms

with Modi’s call to” Make in India”. The tax

changes and tougher enforcement would raise

by $2.5 billion next year.

- By Mohammed Zakir Ahmed

Corporate Tax cut from 30% to

25%. Service tax increased to

14% from 12.36%

Fiscat deficit to be decreased

to 3.9%. 3% target in next 3

years.

Jaitley forecasted inflation at 5% by end of

March much against RBI’s 6% target and create

a room to cut interest rates. He also pushed

deadline by a year to 2017/18 for cutting fiscal

deficit to 3%.

The budget concentrates on a years of

economic policy making including monetary

policy overhaul, a bankruptcy code and the

creation of a public debt management agency.

He scrapped the distinction between direct and

portfolio investors to encourage foreign

investor. He also simplified regulation of

financial markets.

Rating agency Moody’s gave budget a cool

reception, saying it was cool for India’s credit

and left stabilising government finances at

mercy of economic growth. Moody’s rates

India at lowest notch of investment grade.

"My proposals... lay down the roadmap for

accelerating growth, enhancing investment,

passing on the benefit of growth process to the

common man, woman, youth and child. People

who urged us to undertake 'big bang' reforms

also say the Indian economy is a super giant,

which moves slowly but surely," Jaitley told

parliament as he wrapped up a 90-minute

speech.

Visa on Arrival to be provided

for 150 different countries in

future

AIIMS, IITS and IIMS to be

established in new states to

promote education

- By Arihant Jain

Interest Rate Swap

Plain Vanilla Interest Rate Swap is the most

common interest rate swap. In this swap,

Company X agrees to pay Company Y a

periodic fixed rate on a notional principal

over the tenor of the swap. In return,

Company Y agrees to pay Company X a

periodic floating rate on the same notional

principal. Both payments are in the same

currency. Therefore, only the net payment is

exchanges. Most exchange rate swaps use the

London Interbank Offered Rate as the

reference rate for the floating leg of the swap.

Finally, since the payments are based in the

same currency, there is no need for the

exchange of principal at the inception of the

swap. This is why it is called notional

principal.

Valuing Interest Rate Swaps

There are two basic ways of valuing interest

rate swaps:

1. Valuing an Interest Rate Swap with Bonds

Valuing an interest rate swap in terms of

bond positions involves understanding that

the value of a floating rate bond will be equal

to the notional amount of any of its specific

settlement dated when the next payment is

set to the market (floating) rate. With this the

value of interest rate swap can be determined

as the difference between present value of the

fixed leg payments and the present value of

the floating leg payments.

2. Valuing an Interest Rate Swap with FRAs

At settlement, the payment made on a

forward rate agreement is the notional

amount multiplied by the difference between

a market rate and the contract rate specified

in the forward rate agreement. So swap can be

valued by using expected forward rates to

forecast the net cash flows and then

discounting these expected cash flows at the

corresponding spot rates, consistent with

forward rate expectations.

Currency Swap

A currency swap exchanges both principal

and interest rate payments with payments in

different currencies. The exchange rate used

in currency swaps is the spot exchange rate.

The valuation and application of currency

swaps is similar to the interest rate swap.

However, since the principles in a currency

swap are not the same currency, they are

exchanges at the inception of the currency

swap so that they have equal value using the

spot exchange rate. Also, the periodic cash

flows throughout the swap are not netted as

they are in the interest rate swap.

Commodity Swap

Firms may enter into commodity swap when

they agree to pay a fixed rate for the multi-

period delivery of a commodity and receive a

corresponding floating rate based on the

average commodity swap rates at the time of

delivery.

Volatility Swap

A volatility swap involves the exchanging of

volatility based on a notional principal. One

side of the swap pays based on a per specified

volatility while the other side pays on

historical volatility.

A swap is a derivative in which

two counterparties exchange

cash flows of one party's

financial instrument for those of

the other party's financial

instrument. The benefits in

question depend on the type of

financial instruments involved.

Interest Rate Swap

Currency Swap

Commodity Swap

Volatility Swap

INDIAN MARKETS

The Indian Budget revealed by the Fin. Minister Arun Jaitley was a mixed bag. The core

objective was to cut the fiscal deficit to 3.9% of the GDP, and to keep inflation below

6%. Some of the major reforms that were listed are bringing a new bankruptcy code,

setting up a public debt management agency, public contract resolution of disputes bill,

autonomous bank board bureau to improve management of public sector banks. The

market reaction was somewhat muted in the beginning but picked up .

BSE SENSEX

CNX NIFTY

Open High Low Close

SENSEX 29411.23 29560.32 28882.02 29361.50

NIFTY 8913.05 8,930.25 8,753.30 8901.85

The Market was muted in the

start but responded positively

during the close of the day .

BSE rose by 141.38 with Nifty

rising by 57.25 points.

Top gainers were Talbros

Automotive, Lokesh Machines,

and SIPROJECTS

COMMODITIES

EXCHANGE RATES

INTERNATIONAL MARKETS

Commodity Unit Rs / Unit % Change

Gold 10 grams 26477.00 0.95

Silver 1 kg 36736.00 0.94

Crude Oil 1 bbl 3067.00 1.09

INR/ 1 USD 61.6440

INR /1 EURO 69.0917

INR/ 100 JAPAN YEN 51.5085

INR / 1 POUND STERLING 95.4593

Open High Low Close

NYSE Comp 11,078.54 11,100.24 11,062.12 11,062.79

NASDAQ 4,985.03 4989.25 4960.88 4963.53

S&P 500 2,110.88 2,112.74 2,103.75 2,104.50

FTSE 100 6,949.73 6967.24 6929.84 6946.66

CAC 4,905.77 4951.48 4903.09 4951.48

DAX 11,337.11 11,401.66 11,301.34 11,401.66

NIKKEI 225 18,844.28 18,865.39 18,714.64 18,797.94

SSE 50 2,476.42 2498.72 2466.83 2474.56

Hang Seng 24,902.61 25,101.96 24,815.03 24,823.29

Budget 2015: Coal auction to bring revenue windfall for states, says FM Jaitley

Finance minister Arun Jaitley said that auction of coal mines is one of the top three

achievements of the government in its nine months’ period, it would bring several lakhs of

crores of rupees to the kitty of coal-bearing states. 19 coal blocks are recently auctioned in the

first lot by the government. The money from e-auction proceeds, he said, could be used for

creation of long-awaited community assets and for the welfare of the people. The companies

that had bagged the 19 blocks on offer include Reliance Cement, GMR Chhattisgarh,

Hindalco, Sunflag Iron and Steel, Jaiprakash Associates, Jaiprakash Power Ventures, OCL

Iron and Steel, Bharat Aluminium, Essar Power MP, Jindal Power and UltraTech Cement.

Arvind Kejriwal-led Delhi govt. slashes power charges by half, waives water tariffs

beginning March 1

Less than two weeks into office power charges were slashed by half and waived water tariffs

by, the Arvind Kejriwal-led Delhi government. This begins from March 1 for a majority of

consumers. Manish Sisodia, deputy chief minister told reporters that, every household with a

metered connection consuming 400 units of power will be charged half the existing tariff,

and water consumption up to 20,000 litres will be free.

Swine flu affects over 19,000 lives

The total number of deaths due to swine flu was 1041 and the total number of people

affected were 19046, according to the data collected by the health minister. HP Nadda, health

minister, on Friday admitted that the country is facing a shortage of laboratories for testing

swine flu and had assured that efforts were being made to set up such facilities in all states.

Cafe Coffee Day IPO likely to fetch $1 billion

India’s biggest home-grown coffee chain, Café Coffee Day is al set for a market debut that

could value it at almost $1 billion. It aims to list 20% stake, roughly raising $200 million,

within the next quarter. Café coffee day hired investment banks Kotak Mahindra capital and

Citi group and plans for IPO at the end of April.

TRAI proposes significant slash in roaming charges for SMS and calls

In an amendment released by Telecom Regulatory Authority of India (TRAI) to

Telecommunication Tariff Order, 1999 to cut short the roaming charges of SMS and voice

calls for the subscribers in the country. The draft submitted by TRAI is looking at a 35%

decline in the voice call charges and 80% drop in the SMS tariff. In view of the lack of

competition witnessed in the present national roaming services market, the Authority is of

the opinion that the best way forward is to prescribe cost based ceiling tariffs for voice calls

while on national roaming,” TRAI said in a draft amendment to its Tariff Order of 1999.

“Through the Amendment Order, the Authority intends to reduce the ceiling tariffs for

national roaming services Apart from this, TRAI now also allows the subscribers to port their

existing number from one state to another, which will help the customers to retain their

current mobile number.

Researchers break internet speed record, hit 1Tbps

A record breaking speed of 1Tbps during the tests of 5G data connections, was achieved by

UK researchers. University of Surrey's 5G Innovation Centre (5GIC) researchers say that it is

thousand times faster than the current data connections. BBC news reported that “At 1Tbps,

it would be theoretically possible to download a file 100 times the size of a feature film in

about three seconds. The speed is more than 65,000 times faster than average 4G download

speeds ”.

Another temple attack in US spreads concern among Hindus

A Sanatan Dharam temple was vandalized in Washington state with windows broken and

the word "Fear" painted on it, less than a fortnight after another temple was attacked. It is

the second attach and Hindus nationwide are highly concerned. The first attack was on

February 15, the Hindu Temple Cultural Centre in Bothell city, about 35 km from Seattle,

found a swastika painted on it and "Get Out" scrawled in large letters with spray paint. In the

US, white supremacists have adopted the Nazi swastika as an ideological symbol. It was

shocking for the hard-working, harmonious and peaceful US Hindu community numbering

about three million, who had made (a) lot of contribution to the nation and society, to receive

such signals of hatred and anger.

Arvind Panagriya, a native of Jaipur, is an

Indian-American Economist and the current

Vice-Chairman of NITI AYOG. He did his

Ph.D degree from the Princeton University.

Panagriya is an editor of India Policy Forum,

a jounal that is modelled on Brookings Papers

on Economic Activity.

He has written both technical and policy

papers. His technical papers have appeared

in American Economic Review, Journal of

International Economics. His policy papers

have appeared in Foreign Policy, Foreign

Affairs , World Economy. He writes weekly

column for Economic Times and also features

on a show called “Transforming India with

Arvind Panagriya”.

He has written/edited ten books. His last

book was “India-An Emerging Giant” was

published in 2008. Some of his previous

books include-” The Economics of

preferential trade agreement” and “Lectures

on International Trade” .

In the past he has been a Chief Economist of

Asian Development bank. He has also served

in the capacity of professor of Economics and

CO-Director, Center For International

Economics, University of Maryland. He has

also worked for World Bank, IMF, UNCTAD

and WTO in various capacities.

Arvind Panagriya is known to be a free

market economist and a supporter of Gujarat

model. He is also perceived to be close to

economist Jagdish Bhagwati. Together they

have coined the term “Gujarat Model” and

“Kerala Model, in their book India’s Trust

with destiny , to be used as metaphor for

growth by private entrepreneurship and state

driven development.

In News

Recently Arvind Panagriya, came in the news

when he said that India would like to switch

to strategic planning to achieve long term

goals. While giving an interview to

Doordarshan, he said that the planning

horizon should be of 7-8 years instead of 5

years.

In an interview given to Indian Express,soon

after taking charge of Niti Ayog as Vice-

Chairman, he also said that Niti Ayog would

focus on labour reforms and Small and

Medium Size Enterprises.

Sep 30,1952.

Rajasthan University

Ph.D– Princeton University.

TV innovation beyond the bend and curve

Samsung at CES presented another bended

"SUHD" TV lineup for 2015, which are Smart

TVs controlled by the organization's own

particular Tizen OS. However no evaluating or

accessibility points of interest were uncovered.

The organization did notice that the Tizen-

based brilliant TVs will emphasize more than

700 applications.

The "S" is said to speak to the top-end savvy

TV models from the company.Samsung's

progressive Curved TV takes you into the new

universe of immersive review and makes you

feel just as you are right amidst the activity.

The TV screen is bended at the right points to

give you the ideal survey distance.The Curved

Screen encompasses the viewer's faculties,

giving an upgraded feeling of profundity and

a hoisted immersive experience.Auto Depth

Enhancer parts every casing into numerous

regions and after that naturally advances the

differences for every zone to add more

noteworthy profundity to the scenes.

Samsung's creative UHD Up-scaling preparing

upgrades telecast TV shows and films and in

addition feature on interest and then some.

That implies not just does it handle UHD

sources at fresh 4K determination, it even

changes over lower determination substance to

a level of clarity that is very nearly like Ultra

High Definition. View the whole screen at the

same separation from your eyes, considering

clearer review of pictures on the corners of the

screen also.

Samsung's most astounding and ideal curve

(4200R*) gives the best survey experience from

an ordinary review separation of 3~4 meters.

Equivalent survey points on the whole screen

gives preferred differentiation over level

screen TVs. Decreased light reflection and

obstruction gives clearer and undistracted

survey. Clubbing the new environment with

competitive touch experience made it feel like

using two different operating system on the

same screen. Samsung is opening another time

of Curved TV with a definitive immersive

review experience. With the dispatch of

world's initially Curved UHD TV, Samsung is

mixing its inventive Curved structure element

with its UHD TV innovation. With this

dispatch, we are further increasing our

powerful item portfolio in the home

stimulation section.

- By Shikha Sharma

Curved and bendable

screens, giant sets, and

attempts to improve smart

TVs

Major television manufactur-

ers are hoping new flashy

features will help revive

sales