1. ISSUE
VOLUME
Cover Story….
Let’s export our way out of trouble
Open Forum…
India still out of the Net
Outlook….
Australian Dollar
Infocus….
The Cyprus Iseue: Yet Another Bailout!!!
Stats Watch….
Emerging Countries in World Trade
News…..
News on Emerging Markets
Investeurs
Chronicles
March 2013, Volume: 67

2. Figure Facts
Forex
Forward Rates against INR as on 30th March, 2013
Spot Rate 1 mth 3 mth 6 mth
US Dollar 54.36 54.74 55.41 56.35
Euro 69.58 70.07 70.97 72.24
Sterling 82.22 82.77 83.76 85.16
Yen 57.71 58.11 58.86 59.91
Swiss
Franc
57.05 57.47 58.22 59.31
Source: Hindu BusinessLine
Libor Rates
Libor % 1 mth 3 mth 6 mth 12 mth
US 0.20 0.28 0.44 0.73
Euro 0.06 0.13 0.22 0.42
Sterling 0.49 0.50 0.60 0.90
Yen 0.12 0.16 0.25 0.45
Swiss Franc -0.001 0.02 0.08 0.25
Forward Cover
1 mth 3 mth 6 mth
US 8.51% 7.83% 7.42%
Euro 8.57% 8.10% 7.75%
Sterling 8.14% 7.60% 7.25%
Yen 8.43% 8.08% 7.73%
Swiss Franc 8.96% 8.32% 8.03%
As on 30th March 2013 Source: Hindu BusinessLine
Commodities
Commodities Unit (1000kg)
Aluminum 102300
Copper 407950
Zinc 101700
As on 30thMarch 2013
Call Rates as on 30th March 2013-→7.00%-12.14%
Data from 18th
March to 30th
March 2013
Sensex Nifty
19,293
.20
18,835
.77
5835.
25
5682.
55
Gold (10 gm) Silver (1 Kg)
29553 29477
54272
53528
Crude Oil ($/barrel) Dollar/INR
109.50 110.00
54.29
54.39

3. Emerging countries in world trade Australian Dollar
The AUD/USD had a volatile March’13 closing at 1.0418 after tumbling as low as 1.0115.
Acceptance that the upcoming peak in the mining boom does not equate to a mining collapse,
combined with an improving outlook for China and building expectations that the RBA will not cut
interest rates supported AUD in March in pieces. However, It is vulnerable to changing risk
aversion.
Monetary status quo remains the norm. The Reserve Bank of Australia (RBA) opted to keep
monetary conditions by leaving the policy-setting repo rate unchanged at the current level of 3% at
its last meeting conducted on March 5th. We do not anticipate any imminent change in monetary
policy during the first half of the year. The Australian central bank has indicated that the economy
seems to be operating at a trend-growth level on the basis of recent macroeconomic data. It also
believes that there are signs of a gradual improvement in global economic conditions, and
particularly activity in China and the US. We project that the Australian economy will grow by 2.6%
and further accelerate to 3.1% in 2014 on the back of a more consolidated global economic
rebound and improving labour market conditions at home. The AUD has received favorable
tailwinds from recent developments in distressed European countries, particularly from news
regarding a multilateral assistance package for Cyprus from the Troika members (IMF/ECB/EC).
Following the news on Cyprus, the AUD benefitted from a surge of capital flows to higher yielding
currencies, somewhat offsetting the adverse effects from declining commodity prices.
Australia is the largest economy in the Asia/Pacific region fully rated as an investment-grade
sovereign credit.
We expect the currency to trade within a range, closing the year at 1.04.
Stats Watch Outlook-Australian Dollar
Bubble
- An economic cycle characterized by rapid expansion followed by a
contraction, or,
- A surge in equity prices, often more than warranted by the
fundamentals and usually in a particular sector, followed by a
drastic drop in prices as a massive selloff occurs, or,
- A theory that security prices rise above their true value and will
continue to do so until prices go into freefall and the bubble bursts.
Gloss

4. Cover Story
CAD (current account deficit) is the buzzword these days. A CAD of 5.4 per cent in the second quarter of FY-13 and a record high at 6.7% of GDP in the third quarter of FY-13
is reminiscent of the 1991 crisis when we were faced with a rising trade deficit, high inflation and the Gulf War.
The trade deficit of over $182 billion in first eleven months of the current fiscal, inflation above 7 per cent and the crisis in West Asia are conditions akin to 1991. However,
our economy is far more robust and in a position to meet such challenges.
With forex reserves of over $290 billion (sufficient to cover about eight months’ imports), and with encouraging inflows through FII, FDI, ECB (external commercial
borrowings) and private transfers, we are not faced with any immediate threat.
Nevertheless, sustaining such a high CAD will render the economy vulnerable to global challenges. It is clear that the main culprit for rising CAD is the merchandise trade
deficit; in services as well as on capital account, we have a comfortable surplus.
Given the inelastic nature of India’s imports, augmenting exports is the only option available for managing the CAD (the only option, perhaps, on the import side is curtailing
gold imports through high tariff). Fortunately, the Government as well as economists are on the same side on this matter.
MANUFACTURING EXPORTS HIT
Exports must act as drivers of the economy. If the Indian economy has clocked over 7 per cent GDP growth in the last decade, much of the same was contributed by a CAGR of
over 20 per cent in exports in the same period. The fact is that Indian exports and the economy are intertwined.
Manufacturing holds the key to India’s exports growth. This is because the share of manufactured products is increasing in the global trade basket. Overall exports suffered on
account of decline in exports of main manufactured products, such as engineering, gems and jewellery, petroleum and textiles. These four sectors contribute to about three-
quarters of India’s exports.
Contractions in global demand, rising manufacturing cost and fall in global commodity prices have affected exports. Making manufacturing competitive should be the focus.
The National Manufacturing Policy (NMP) and National Manufacturing Investment Zones (NMIZ) should add to competitive manufacturing.
However, let us also seek export-oriented FDI, which brings both technology and access to markets. Another challenge that confronts manufacturing is getting a skilled or
semi-skilled workforce.
MARKET OPPORTUNITIES
Unlike China, we have not been able to mobilize a workforce from rural India due to lack of skill. The National Skill Development Mission has taken the lead in imparting and
upgrading skill, but there has to be a greater synergy between manufacturing needs and skill development.
Exports are equally affected by macro-economic variables such as inflation, world demand, non-tariff barriers and exchange rate. Except for the last factor, the rest are not
favorable to exports. However, the global demand seems to be increasing.
The real-estate market in the US just saw its largest restorative growth since 2006 and the unemployment rate in the US declined to 7.8 per cent with the creation of 2,32,000
new jobs in February. The deficits of some European counties are becoming smaller. And the economies in Greece and Spain are recovering slightly.
Let’s export our way out of trouble

5. The economic growth of MIST countries (Mexico, Indonesia, South Korea and Turkey) is on the rise. Since exports this fiscal would be lower than last fiscal, we need to attempt a
35 per cent growth in 2013-14. This is an ambitious but achievable target, provided the right mix of policies is in place.
Exports can be made competitive through lower cost of credit, full rebate on duties and taxes, reduction in transaction costs and better infrastructure to reduce the delivery
cycle. However, aggressive marketing plays a pivotal role.
We have to be visible in the markets to get better returns. In a phase of contracted demand, return may take a longer period. Our demand for an ‘Export Development Fund’
emanates from this logic, coupled with the fact that a majority of exporters hardly have the financial wherewithal to meet the requirements of aggressive marketing. A fund with
a corpus of 0.5-1 per cent of exports can be a gamechanger.
India is a global leader in IT, yet we are struggling with a complete electronic data interchange module for agencies involved in exports and imports. A little progress has been
made, yet it is tardy and probably reflects the lack of will. A single window for exports, coupled with electronic flow of documents among the agencies concerned, will reduce the
transaction cost by 2-3 per cent. If that happens, a saving of $6-10 billion will be achieved in exports with no cost to exchequer.
We, simultaneously, need to build on future pillars of exports which could be brands, high-technology products, e–commerce and countries or regions with potential such as Iran,
China and Africa.
We need to exploit the opportunities in Iran for increasing exports of pharma, gems and jewellery, auto components and white goods, besides agriculture commodities.
The rising manufacturing cost in China, shifting of industries from coastal cities to distant landlocked regions, shortage of working population and a continuously appreciating
currency have started compelling China to shut down manufacturing in high labour intensive products, opening an opportunity for imports from India. However, a close look at
India’s export profile with focus on value-addition will hold the key.
DESTINATION AFRICA
Africa has emerged as an ideal region both for exports and investment. Consumer spending will double in Africa in the next 10 years and 75 per cent of countries in Africa will
have an average per capita income of over $1,000. There is a growing resentment against China, which needs to be exploited by us. Efforts of all agencies should concentrate on
Africa.
Let us set up a mega store such as the Dragon Mall in Dubai which is spread over a km and displays all products manufactured in China. African buyers do not visit China for
procurement of goods and instead place their order in Dubai.
If we provide similar exposure for Indian products at any place in Africa, it will be a huge support for Indian exports.
Let us not miss the bus again and allow South-East Asian countries to overtake us.
Source: Hindu Businessline

6. China and Brazil sign $30bn currency swap agreement
China and Brazil have signed a currency swap deal, designed to safeguard against future
global financial crises. The pact, first announced last year, will allow their central banks to
swap local currencies worth up to 190bn yuan or 60bn reais ($30bn; £20bn).Officials said
this will ensure smooth bilateral trade, regardless of global financial conditions.Along with
being the world's second-largest economy, China is also Brazil's biggest trading partner."If
there were shocks to the global financial market, with credit running short, we'd have
credit from our biggest international partner, so there would be no interruption of trade,"
said Guido Mantega, Brazil's economy minister.The agreement was signed on the sidelines
of the fifth Brics (Brazil, Russia, India, China and South Africa) summit being held in
Durban, South Africa.
Egypt seeks help as credit crunch bites
Egypt has hit breaking point in its ability to pay for imports of oil, wheat and other basic
commodities, forcing it to call in diplomatic favours or seek easy payment terms from
suppliers who hope for future advantage in return. Two years after ousting Hosni Mubarak,
new, Islamist leaders are struggling to win a credit line from the IMF as they try to manage
the hopes of 84 million people with a depreciating currency and an economy hooked on
state subsidies but starved of tourism revenues since the political upheavals began.
BRICS countries to form new development bank
The leaders of Brazil, Russia, India, China and South Africa have agreed to form
a new development bank that will fund infrastructure projects and
development in emerging markets. The bank is intended to fund development
and infrastructure projects in BRICS nations and elsewhere. First discussed a
year ago, it has been described as an alternative to the IMF and World Bank for
developing countries.
Bank of Cyprus big depositors could lose up to 60%
Bank of Cyprus depositors with more than 100,000 euros (£84,300; $128,200)
could lose up to 60% of their savings as part of an EU-IMF bailout restructuring
move, officials say.The central bank says 37.5% of holdings over 100,000 euros
will become shares.Up to 22.5% will go into a fund attracting no interest and
may be subject to further write-offs.The other 40% will attract interest - but
this will not be paid unless the bank performs well.It was known that the
wealthiest savers at the Bank of Cyprus would take a large hit from the bailout
deal - but not to this extent.
South Korea lowers growth forecast as exports slow
Korea has cut its growth forecast for the second time in three months, amid a
slowdown in its exports. The finance ministry now expects the economy to
grow by 2.3% in 2013, down from its earlier projection of 3%. Exports, which
account for almost half of South Korea's overall output, have been hit by weak
demand from markets such as the US and the eurozone. South Korea's economy
expanded by 2% in 2012, the slowest pace in three years.
Emerging Markets

7. InFocus
On 25TH March, 2013, Cyprus stuck a last minute Bailout Deal aimed at preventing the Country becoming the first country forced out of the single European currency. That
would have sent the region's markets spinning.
The deal, which also slashed the island's oversized banking sector, came as euro ministers in Brussels threatened to cut off crucial emergency assistance to Cyprus' embattled
banks if no agreement was reached.
Under the deal, Laiki, the country's second-largest bank, will be restructured, with all bond holders and people with more than 100,000 Euros in their accounts facing significant
losses. The bank will be dissolved immediately into a bad bank containing its uninsured deposits and toxic assets, with the guaranteed deposits being transferred to the nation's
biggest lender, Bank of Cyprus which survives the axe, but faces huge restructuring.Analysts have estimated investors might lose up to 40 percent of their money.
Getting the bank up to healthy EU-mandated capital levels will be made harder by the fact that Bank of Cyprus will inherit a €9bn debt Laiki had with the European Central
Bank.Employment will be badly hit as thousands of staff at both Laiki and the Bank of Cyprus will lose their jobs.
There will still be very tough restrictions on bank account access and the movement of cash out of Cyprus, to help prevent a bank run. The European commission said these
capital controls will only be enacted "exceptionally and temporarily", as requested by the Cypriot authorities.
The Question is whether this will be the end of Cyprus’s problems. Analysts say it is only the beginning. Cyprus has benefited for years from attracting the deposits of wealthy
individuals from around the euro zone. That business model is now broken and the country has nothing to replace it with. There is also a possibility that Cyprus might need
another bailout. The €10bn bailout raises Cyprus's debt to around 143% of GDP. With GDP likely to fall dramatically over the next few years, that ratio could start to look even
more perilous.
A deal to restructure Cyprus's debt by hitting private bondholders would go against EU promises that the Greek deal of that kind was an exception. All of which prompts
analysts to suggest Cyprus's euro zone partners might have to get involved again sometime in the future.
With their initial plan to tax all depositors, policymakers made it clear that they would, in certain circumstances, be prepared to take that money. Even though they did not go
through with it, this is likely to shake confidence in the banks if the financial crisis re-escalates in other countries, such as Spain or Italy.Meanwhile, larger depositors and foreign
companies with money in Spain and Italy are likely to start shifting that elsewhere, fearing that the Cyprus deal will be a model for future bailouts, further damaging already
weak financial institutions.
It is really sad that what was once a prosperous island considered a gateway to three continents, in the near term, will be reduced to just a couple of notches above a barter
economy.The drastic shrinking of the financial sector, the wiping out of wealth through the losses on deposits, the loss of confidence with the recent turmoil and the upcoming
austerity measures all mean that Cyprus is facing tough times.
The Cyprus Issue: Yet Another Bailout!!!!

8. It is ironic that despite the Internet penetration in India growing faster than most countries, 90 per cent of its population is still not connected.
A McKinsey report states that there will be 330 million Indians on the Internet in 2015, making it the second largest connected population in the world. However, even with
that number, India’s internet penetration will be a mere 28 per cent.
What’s more surprising is that for India to reach 40 per cent Internet penetration, a number that will match China’s penetration at that time, it will need to notch up more than
500 million Net users!
This is no easy task. The three biggest challenges in achieving this feat are limited access, low relevance and high cost. Adding to these challenges is India’s continued low
ranking across surveys measuring impact of the Internet on job creation and contribution to GDP.
Today, the Internet is primarily being used as a medium for social networking and entertainment in India, while its immense potential in enabling widespread access to
education, healthcare, employability and access to government services is still largely untapped.
We cannot be a connected nation if the large base of Internet users is not contributing towards India’s growth and development. India will truly earn the title of being a
‘connected nation’ the day it realizes the benefit of the Internet to drive inclusive national growth. This can only happen if India can unleash the full potential of the Internet and
drive community and national growth with urgency in the nation.
The McKinsey report states that the impact of the Internet in India is constrained by current gaps and obstacles in the Net ecosystem. While India scores well on the availability
of human and financial capital, it rates poorly on most other parameters such as Internet infrastructure, Internet engagement, e-commerce platforms, the ease of Internet
entrepreneurship, and the impact of e-governance.
TECHNOLOGICAL CHANGE
As we think through what is needed to become a ‘connected nation’, there are two key things that we have to keep in mind which will impact a majority of the impending
strategies.
A majority of the 170 million additional users to reach the magic number of 500 million in 2015 will be from semi-urban and rural India, which will only happen if these users
see the real relevance of the Internet in their daily lives.
By 2015, more than half of India’s Internet access is likely to be using a small-screen mobile computing device, which will make India’s Internet market very different, with the
need for a unique approach to content and design. It’s possible that a large part of these small-screen users will use low-cost feature phones with basic browsing capabilities
and will find it difficult to browse or consume highly textual content.
These factors put a very urgent need on the Government and industry to find effective ways of delivering all necessary services over small screens with basic browsing capabilities.
From an industry perspective, we have to think differently about the market and what it takes to win. Status quo will guarantee failure.
ECONOMIC FUNCTIONS
In my opinion, the following things are a must do for us to be called a truly ‘Connected India’.
Significantly scale efforts to increase awareness about the relevance of the Internet in contextual and meaningful ways to different audiences. As we go down the pyramid, the single
most important drivers for faster adoption of the Internet will be how its usage can boost productivity and impact livelihoods.
Open ForumIndia still out of the Net

9. For instance, showing a farmer how the Internet can give him relevant details such as weather, mandi pricing and eliminate the middleman to sell his crop directly will trigger
faster adoption. The Government and industry must redesign skill training focused on relevant areas such as education, financial transactions, agriculture, healthcare, and
government services to demonstrate speedy action.
Software and hardware innovation is imperative to enable solutions that meet the needs of the next wave of users who will largely be local language users, especially as we
move away from Urban India.
Currently, none of the Indian languages feature in the top 10 languages on the Internet. Content and application in local languages, along with interface-level innovations to enable
more intuitive ways of interacting with technology, will need to be driven to simplify ease of use.
The day a farmer can speak to his PC in his local language to access weather information will be when we see a real need for technology building up in rural India. The industry
will also need to think through ecosystem innovation in areas such as alternate power sources as lack of electricity is, and will continue to be, a key road block to Internet adoption
and usage.
The Government and the industry should keep striving to bring down the total cost of access to broadband and computing devices. Several governments abroad have driven
special tax incentives or subsidies to accelerate adoption in rural, SME and education segments. These initiatives need to focus not only on the device cost but the cost of
broadband access, which is a large component of the total cost of ownership.
Also, given the need to drive inclusive growth, just depending on the low-end devices for connectivity is not going to help India. These devices will have very limited use in the
delivery of education and other key services needed for inclusive growth, given their very basic browsing and computing capabilities. The Government will need a more strategic
approach that strikes a balance between cost and usage. As per the McKinsey report, the capture of the Internet’s value can be enhanced if India also enables increased access to
affordable fixed broadband and PCs or through enhancing smartphone access.
LAST-MILE ACCESS
Last but not the least; we need to ensure there is last-mile access. As the Government lays out the National Optical Fibre Network providing true broadband to 2, 50,000
panchayats across India, the industry has to work speedily on driving last mile. Otherwise, this will be India’s biggest missed opportunity.
We couldn’t agree more with the Finance Minister’s statement in the recent Budget about inclusive growth being India’s mantra for success. The need of the hour is for a robust
plan to enable large-scale Internet adoption and usage in education, healthcare, and government services that will drive personal growth for Indian citizens, leading to community
growth and ultimately national economic growth.
This is the only way India will increase the contribution of the Internet to its GDP. India will not be a connected nation if nothing changes. We have to collectively drive disruptive
change through a well-constructed plan and get commitment from the Government, academia, industry and civil society.
Source: Hindu Businessline

10. Disclaimer: InvesteursChronicles is prepared by Research & Analysis Team of Investeurs Consulting Private Limited to provide the recipient with relevant information pertaining to the world economy. The
information contained in the document is based on the releases made by various newspaper & publications; hence, we are not responsible for any inaccuracies in the information provided.
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