1. ISSUE
VOLUME
Cover Story….
India’s demographic dividend-Boon or Bane?
Open Forum…
Not just suicides: Indian Agriculture is a success story too
Outlook….
Aluminium
Infocus….
India & Italy in Troubled Waters
Stats Watch….
Index of Industrial Production
News…..
News on Emerging Markets
Investeurs
Chronicles
March 2013, Volume: 66

2. Figure Facts
Forex
Forward Rates against INR as on 15th March, 2013
Spot Rate 1 mth 3 mth 6 mth
US Dollar 54.07 54.53 55.15 56.05
Euro 70.60 71.21 72.06 73.27
Sterling 81.92 82.59 83.52 84.84
Yen 56.28 56.76 57.44 58.42
Swiss
Franc
57.36 57.86 58.57 59.59
Source: Hindu BusinessLine
Libor Rates
Libor % 1 mth 3 mth 6 mth 12 mth
US 0.20 0.28 0.44 0.73
Euro 0.05 0.12 0.22 0.43
Sterling 0.49 0.50 0.60 0.91
Yen 0.12 0.16 0.25 0.45
Swiss Franc -0.001 0.02 0.08 0.26
Forward Cover
1 mth 3 mth 6 mth
US 10.35% 8.10% 7.43%
Euro 10.51% 8.39% 7.67%
Sterling 9.95% 7.92% 7.23%
Yen 10.38% 8.36% 7.71%
Swiss Franc 10.61% 8.56% 7.88%
As on 15th March 2013 Source: Hindu BusinessLine
Commodities
Commodities Unit (1000kg)
Aluminum 103250
Copper 420350
Zinc 103200
As on 15th March 2013
Call Rates as on 15th March 2013-→7.00%-7.85%
Data from 4th
March to 15th
March 2013
Sensex Nifty
18877.
96
19427.
56
5,698.
50
5,872.
60
Gold (10 gm) Silver (1 Kg)
29632
29360
53726
54180
Crude Oil ($/barrel) Dollar/INR
110.10
109.80
55.05
54.16

3. Index of Industrial Production Aluminium
The aluminium market is set to stage a tentative recovery this year as world demand improves.
This will lift market sentiment and help support the aluminium price. Regional ingot premiums
are predicted to hit new record highs in the second quarter supported by improved market
fundamentals and the continuation of warehousing deals.
Last year, global demand for aluminium is estimated to have risen by 6%, lower than the 10%
growth it achieved in 2011 and 13% in 2010. The bright spots during 2012 were: production
cuts that limited oversupply, a softening ofkey raw material prices, and a sharp jump in
regional metal premiums earned by aluminium producers. In 2013, demand is expected to
grow by 7%. That may not seem like a very big increase, but is important as it marks the
beginning of a recovery. This estimate assumes that European demand will continue to decline,
but at a lower rate, and North America’s growth will remain flat at 4%.
On the supply side, The surplus reached 889,000 tonnes in 2011, 1.5 million tonnes (Mt) in
2012 and expected to peak at 1.8 Mt in 2013. In this context, the average price of aluminum has
fallen year on year by 16% in 2012 to 2,017 dollars per tonne, its lowest level since 2009,
when it collapsed under the impact of the financial crisis.A small market surplus is forecast for
2013, but the aluminium industry will remain buffeted by excess supply and high inventories
over the next few years.
London Metal Exchange aluminium prices continue to be volatile, though metal premiums are
clearly playing a bigger role in influencing results. On the upside, a surprise can come from a
flow of positive macro-economic news, while a key downside risk is from demand falling short
of estimates, especially when there supply has increased.
Stuck in a pattern of structural oversupply, the price of aluminumis forecasted to stay around
2,000 dollars per ton.
Stats Watch Outlook-Aluminium
Direct & Indirect Tax
The term direct tax generally means a tax paid directly to the
government by the persons on whom it is imposed. Indirect taxes such
as a sales tax or a value added tax (VAT) are imposed only if and when a
taxable transaction occurs; people have the freedom to engage in or
refrain from such transactions.
Gloss

4. Cover Story
Ten years ago, the India's growing masses were still considered a liability by many. Providing basic needs for all seemed to be a near-impossible task. Somewhere along the
line, however, economists discovered a silver lining: The world was aging, but India was growing younger. There was a "demographic dividend" that the country could hope
for, and ultimately exploit.
The Japanese workforce has been shrinking since 1995, and the Korean workforce will start to decline beginning 2015. China's working-age ratio will peak in 2013 and then
decline by a substantial amount in the next few decades. The second most populous country in the region (and the world) affords grounds for cautious optimism. India's
demographic transition is presently well underway, and the age structure of the population there is likely to evolve favorably over the next two to three decades.
Demographic Dividend refers to a rise in the rate of economic growth due to a rising share of working age people in a population. India's demographic dividend- i.e. its
working-age (15-59 years) population, as of now, largely consists of youth (15-34 years), and as a result its economy has the potential to grow more quickly than that of many
other countries, neighboring China. Technically, this usually occurs late in the demographic transition when the fertility rate falls and the youth dependency rate declines.With
fewer younger dependents, due to declining fertility and child mortality rates, and fewer older dependents, due to the older generations having shorter life expectancies, and
the largest segment of the population of productive working age, the dependency ratio declines dramatically leading to the demographic dividend. Combined with effective
public policies this time period of the demographic dividend can help facilitate more rapid economic growth and puts less strain on families. This is also a time period when
many women enter the labor force for the first time.
While the number of working age youth, the first input for the creation of the dividend is definitely on the rise. Nevertheless this huge chunk of high-voltage productivity
needs to find gainful employment and that's what does not seem to be happening in India. One cannot be too optimistic about this trend considering its poor education system
from bottom to top. India's literacy rate, after 60 years of independence, is around 63 per cent, China is 93 per cent. The situation in higher education is even more
problematic as the overall quality of the higher education system is well below global standards and it has shown no significant sign of improving. The government's plans for
expanding and upgrading higher education are inadequate both in size and scope. They are ineffectively drafted and hence are also impractical. On the quantitative side too,
there are problems. India now educates only about 10 per cent of the age group in higher education. Dropout rates among that 10 per cent are high. A growing number now
attends often low-quality colleges and other institutions that are little more than teaching shops and degree mills. After all 'in terms of human resource, it is not enough to
have lots of young people — these young people need to be properly educated to fully contribute to the positive development.
According the report, titled "The National Employability Report, Engineering Graduates, Annual Report-2012," although India produces more than 500,000 engineers
annually, only 2.68% meet the skill requirements of the IT products sector. The report estimated that nearly 92% of engineering graduates in India lack computer
programming and algorithms skills and around 56% lack soft skills and cognitive skills.The report further noted that only a very small percentage of engineers have the
competence to apply engineering mathematics to solve problems.
India’s demographic dividend-Boon or Bane?

5. Industry experts feel that there is a lack of adequate communication and collaboration between the government, academia and industry in India. For instance, while business has
changed drastically in the past 10 years, the curriculum in educational institutions is the same as it was a couple of decades ago. And the sheer process of bringing in any change
in the curriculum is so tedious that it simply gets bogged down.
What we are all focusing on right now in terms of employability is only the repair part. This is a low-hanging fruit. But this repair pipeline will run dry if the prepare pipeline, by
way of education reforms, is not fixed. And that is something that the government and academia need to work on.
This is, of course, not a problem for India alone; it is more important in the country, however, because of the numbers involved. According to a recent McKinsey report titled,
"Education to Employment: Designing a System that Works," there is a huge gap in almost all countries between what the educational system feels it provides and what
employers think they get. In the U.S., 87% of the education providers answered the question, "Are graduates adequately prepared?" in the affirmative, while only 49% of the
employers agreed. India actually scored better, with figures of 83% and 51%. The gap was the widest in Germany followed by the U.S. "Seventy-five million young people --
12.6% of global youth -- are unemployed yet only 43% of employers report there are enough qualified entry-level candidates," according the McKinsey study.
But is employability the main issue?
Does skilling millions of young people will improve their employability which in turn will help India realize its demographic dividend?
These precepts need closer examination, lest we are in for a rude shock a couple of decades down the road.
Currently, less than 20 percent of our workforce is formally or non-formally skilled; the rest is unskilled. While a majority of the unskilled population is counted as employed, the
reality is more than half of them are falsely counted as employed in agriculture. The past decade saw us create five crore jobs. During this period, the growth in the service sector
offset the shrinking jobs in manufacturing and other non-service industries. The best decade for China saw it creating seven crore jobs.Hence, the moot questions are:
• Is lack of skills hampering job creation, or is inadequate job creation a disincentive for investments in formal skilling?
• What are the prerequisites for creating one crore jobs every year, for the next 30 years?
• Can it be done?
The argument that jobs can be created largely by skilling people, and sufficient capital will flow, is presumptive. Even if capital were to flow, the absorptive capacity within a time
frame is challenging. The jobs-to-GDP ratio is about 50 percent for the service sector, and about 70 percent for non-service industries. As such, the service industry is over
represented in its share of the GDP, and does not have any more head room to be a bigger GDP contributor. Hence, it has limited scope to contribute a lion’s share to job
creation.For our demographic dividend to indeed become our strength, a minimum of seven enablers are a pre-condition:
1) Large-scale and sustained long-term investment in infrastructure and energy. Infrastructure creation being relatively labour intensive, it will help absorb the capital and labour
surplus.
2) Large and sustained capital flows into India or the service industry, creating large capital surplus for deployment into infrastructure, energy and water management.
3) India becoming a global-scale manufacturing hub, earning large and sustained surplus that will aid capital buildup for deployment in manufacturing and infrastructure.
4) Large-scale re-generation of arable land, world-class water harvesting and irrigation, and land and crop productivity to sustain and create jobs in agriculture.
5) Strong logistics and cold chain infrastructure that will eliminate wastage of agricultural produce and develop a global-scale agriculture and food industry.
6) Science- and technology-driven inventions and innovations to reach global markets with pricing power.
7) Long periods of relative internal and external peace, so that we do not waste the already scarce resources of capital and time.

6. The presumption that skilling will create jobs is like putting the cart before the horse. The idea will not take off because enrolment for skilling will not happen without a line of
sight for jobs. World-wide, non-formal skilling has always preceded formal skilling. Non-formal skilling initiates growth in an industry; formal skilling follows to create
productivity.
The industrial revolution and the IT revolution was birthed by gifted inventors, invested into by enterprising capitalists and set into motion by hordes of non-formal labor. It is
always a decade into the growth of an industry that formal labor skilling infrastructure develops.
We have age on our side. At a time when our prominent competitors such as China, Japan and even South Korea are facing a serious demographic squeeze, we stand at the cusp
of a remarkable demographic dividend. The International LaborOrganization has predicted that by 2020, India will have 116 million workers in the age bracket of 20 to 24
years, as compared to China’s 94 million. This demographic fact has the potential to be the biggest competitive advantage of India in the years to come.
However, Labor, like capital and land, will be a dead weight when not leveraged and deployed. If we want 50 years of sustained growth, then we should get our priorities correct.
In the absence of 50 years of sustained growth, regardless of whether we skill our people or not, our demographic dividend will turn into a burden. For a country with one-sixth
the global population and a fraction of the global land mass and energy reserves, it could be our worst nightmare.

7. Russia: Central Bank Holds Rates
The Central Bank left all policy rates on hold as expected at its monthly meeting and struck
a slightly more dovish note in its statement by dropping a previous phrase that
the economy was running close to its potential.The subtle shift in the financial regulator's
position followed President Vladimir Putin's nomination this week of Elvira Nabiullina to
replace outgoing bank chairman Sergei Ignatyev when he retires in June.Nabiullina, Putin's
top economic adviser, is seen as a trusted loyalist more likely to bow to political pressure
to prioritize growth over inflation by supporting rate cuts after she takes the helm at mid-
year.
Indonesia: Bukit Asam eyes several coal mines
State-owned listed coal miner PT Bukit Asam (PTBA) is seeking to acquire stakes in other
coal mining sites as part of its expansion plans, despite its large coal concession areas in
South Sumatra.PTBA has mining permits covering 90,832 hectares in Sumatra and
Kalimantan. Its coal resources total 7.29 billion tons with mineable reserves of 1.99 billion
tons.
Philippines: Public sector deficit hits P27 billion in 3Q 2012
THE consolidated public sector deficit for third quarter of 2012 reached P27.5 billion, or
0.4 percent of gross domestic product (GDP).Despite the significantly increased spending
of the national government, whose deficit as of third quarter doubled from P35.8 billion in
2011 to P71.6 billion in 2012, the consolidated public sector balance was bolstered by
strong performance from health insurance, local government units (LGUs) revenues, and
the monitored government-owned and -controlled corporations (GOCCs), which all ran
significantly higher surpluses than programmed.
South Africa: Manufacturing production climbs 3.9%
Manufacturing production increased by 3.9% year-on-year (y/y) in January
after an unrevised 2.0% (y/y) rise in December‚ data released by Statistics SA
showed. The 3.9% (y/y) increase in manufacturing production was due to
higher production in petroleum‚ chemical products‚ rubber and plastic
products (11.1% and contributing 2.8 percentage points); motor vehicles‚ parts
and accessories and `other` transport equipment (9.0% and contributing 1.0
percentage point); and food and beverages (4.9% and contributing 0.9 of a
percentage point).
Brazil: Rio May Lose R$38.5B in Oil Royalties
The economic fallout from Congress’ divisive decision to overturn the
presidential veto on the redistribution of oil royalties continued this week as
the main oil producing states reviewed their budgets and prepared themselves
for potential revenue cuts.The backlash from producing states was felt almost
immediately as Rio de Janeiro quickly started searching for ways it could hope
to recoup the potential losses that by 2020 could be as high as R$38.5 billion.
Russia: First Locally Generated Rating Ups Russia, Downs U.S.
Russia has begun to publish its own sovereign debt ratings in a move that is
widely seen as a challenge to the grade given by U.S. rating agencies, which
the Kremlin has said is not completely fair. Domestic rating agency Expert RA
issued its first sovereign debt ratingsthis week, with Russia getting an A- grade
– higher than its current BBB rating assigned by U.S. majors Standard & Poor's
and Fitch Ratings.
Emerging Markets

8. InFocus
The Diplomatic Spat between India & Italy is heating up over the Trial of Two Italian Marines Massimilian Latorre and Salvatore Girone charged with killing two Indian
Fishermen in February 2012.On 14th March, 2013 India's Supreme Court ordered the Italian ambassador not to leave the country after Rome refused to let the marines return to
India to stand trial for the killings. India said that it’s a breach of the sovereign guarantee given by Italian Government & its ambassador.
Points Of Disagreement
1. Jurisdiction: India and Italy disagree over where the two men should stand trial on murder charges. Italy has long maintained that since the incident happened in
international waters, its courts should handle the matter. It points to the 1982 United Nations Convention on the Law of the Sea, which says that a ship on the high seas
falls under the exclusive jurisdiction of its “flag state.” In the case of the EnricaLexie, that would mean Italy.Under UNCLOS, the flag state also has exclusive jurisdiction
over “incidents of navigation” involving its ship on the high seas.The Indian Supreme Court has rejected these arguments, noting that the shooting incident cannot
qualify as an “incident of navigation,” and that the alleged incident happened on an Indian boat.
2. Prosecution Of Marines: Italy also claims that the marines, as members of the Italian armed forces, are immune from prosecution in India for acts carried out in their
official capacity.Since India and Italy have not concluded a treaty in advance that determines whether or in what circumstances armed forces stationed abroad enjoy
immunity from local criminal jurisdiction, the immunity of the Italian marines is a question of customary international law.
3. Italian ambassador to stay put? Italian Ambassador Daniele Mancini gave his word to the Indian Supreme Court that the marines would return to India to stand trial.
It’s unclear whether the court’s order violates the terms of the 1961 Vienna Convention on Diplomatic Relations, which grants diplomats immunity from criminal and
civil prosecution in the countries that host them, with some exceptions.
4. Next Steps: When it informed India of its decision, Italy also formally called for a diplomatic solution to the dispute through UNCLOS.The convention requires the states
to settle their disputes by peaceful means such as negotiation, conciliation, or arbitration.In case they fail to reach a bilateral agreement through UNCLOS, they can turn
to a third party for arbitration.
The diplomatic row could also have consequences for India's ongoing negotiations over a free-trade deal with the European Union.Though the Outcome remains to be seen but it
can be said that it was very naïve on the part of Indian Government & the Supreme Court to allow the Accused to go back to Italy. However, having said that, Justice needs to be
given to the lateFishermen & their Families.
India & Italy in Troubled Waters

9. Most people are only dimly aware that there is a new revolution taking place in Indian agriculture. Think agriculture and you are likely to think of farmer suicides, loan write-
offs by the government, endless subsidies and widespread malnutrition. All those are relevant images, but there is also a lot of good news, which as in the way of such things
tends to get ignored. The government's latest Economic Survey reports some of it; for instance, growth in the production of fruits and vegetables in the last decade has looked
like industrial growth rates, averaging six per cent a year. Per capita availability, therefore, has gone up 50 per cent in 10 years - and yet the prices of fruits and vegetables have
gone up, pointing to even faster growth in demand. Milk production is not far behind horticulture, averaging 4.5 per cent annual growth over the decade. Fish exports,
meanwhile, have doubled in five years.
There is more. The production of pulses, after stagnating in the 1970s and 1980s and declining in the 1990s, has achieved a dramatic 56 per cent increase in production since
2000-01. Oilseeds production too has soared by 62 per cent; with additional imports, the per capita availability of edible oils has increased by a massive 150 per cent in the last
two decades. Meanwhile, potato production has more than doubled since 2000-01, and maize production has gone up 80 per cent. Cotton, of course, beats everything, its
production climbing from 9.5 million bales in 2000-01 to 35.2 million in 2011-12 - for which, thank the much-criticised Bt cotton.Most people don't also know that India is an
agricultural power in world markets. Although the production of wheat and rice has not gone up as fast as that of other food and non-food crops, output has grown faster than
population and, in the process, generated an export surplus. Taking the trade statistics for the last two years combined, India has become the world's largest exporter of rice
(17.75 million tonnes); export shipments of wheat are expected to total over 10 million tonnes during this period. Despite such large-scale exports, the country still has record
grain stocks.
What is one to make of all the good news? First, the farmer responds to price signals and incentives - in recent years, the biggest increases in procurement prices have been for
crops other than wheat and rice; and there is a clear, though small, shift in acreage away from these staples. Second, yields have been improving, so both technology and crop
practices have got better. Third, people are eating better, with a richer, more varied diet that includes more proteins like pulses and milk, more fruits and vegetables, and more
cooking oils. Finally, while there are substantial imports of commodities like edible oils, India is also a substantial agri-exporter of grain, fish and plantation products.
Is it success if, despite widespread domestic malnutrition, the country hoards and exports cereals? After all, the per capita availability (net of stocking and exports) of cereals
has not moved up over the years - a criticism made by many. Yet the evidence is that effective demand is being met. It could be that the majority is eating better, while a
significant minority doesn't get enough food - providing the justification for a law on food security. But in 1984, N T Rama Rao swept the Andhra Pradesh elections with the
irresistible offer of rice at Rs 2/kg. Since then, nominal incomes have risen 20-fold, and large numbers have the spending capacity to eat much better. So does the country really
need to provide rice (and wheat) to two-thirds or more of the population at just a rupee more per kg than what NTR proposed 29 long years ago?
Open Forum
Not Just Suicides
Indian Agriculture is a success story too

10. Disclaimer: Investeurs Chronicles 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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