Companies & Sectors
Future Group ties up with Patanjali
 Kishore Biyani-led Future Group has entered into a marketing partnership with Baba Ramdev-led Patanjali Ayurveda to sell its products and expects to do business worth Rs.1,000 crore in the next 20 months.
 
"We will sell Patanjali products under this partnership. We went to see their food park. These products have something that can bring revolution in India," said Biyani, founder and CEO of Future Group.
 
"We are jointly going to set up an office for collaboration in Rishikesh. Within the next 20 months, we will jointly do a business of Rs.1,000 crore."
 
Patanjali products will be available in all Future Group retail outlets in 240 cities.
 
"We wanted to partner a 'Swadeshi' retail chain. Indigenous products should get more respect. We provide world-class quality products with low price. Hence, customers are benefited from it. We will partner Future Group in manufacturing also wherever possible," Baba Ramdev told reporters.
 
Future Group and Patanjali Ayurveda have foodparks in Bangalore and Haridwar, respectively.
 
Ramdev said Patanjali's business will cross Rs.5,000 crore by the end of 2015-16 fiscal.
 
He said: "We will launch Patanjali noodles on October 15. It will be all over India. Maggi used to sell for Rs.25, we will offer it for Rs.15. Its taste-maker will be health-maker. It will have no added lead or MSG."
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Online aggregators creating fresh buzz in hotel bookings
The $800-million online hotel booking space in India is getting filled up by a host of aggregators, catching the attention of not just the netizens who are on the move but also venture funds as more people board to the travel bandwagon seeking comforts within a budget.
 
In the process, these aggregators are also demanding certain standards from the hotels in their drop-down -- complimentary breakfast, free wi-fi, spotless linen, air-conditioning, television with cable, hygenic rooms and bathrooms, safety and security.
 
According to a report by ratings agency ICRA, it is estimated that 8.4 million Indians are likely to book hotels online by 2016 up from 3.5 million in 2014. It also said the online hotel industry was expected to grow to $1.8 billion by 2016 from the current $0.8 billion.
 
A host of players have also cropped up seeing the potential growth -- OYO Rooms, Vista Rooms, Zo Rooms, Treebo, Zip Rooms, RedDoorz and WudStay, to name a just few among a host of others that are mushrooming by the day.
 
According to a report by the global investment banking firm Jefferies, online budget hotel aggregators like SoftBank-funded OYO Rooms have also emerged as "a major disruptive force in the online hotel booking space in India."
 
"Based on room-nights booked, OYO Rooms is already much ahead of online travel agencies (OTAs)like Makemytrip, though average transaction size is lower. With 20 percent of sales closing through OTAs, these could drive significant traffic to OTAs in the near-term but may capture the lower end of the market in the long run," it said.
 
The OTAs are agents selling travel products and services like airlines, car rental, cruise lines, hotels, railways and vacation packages on behalf of suppliers.
 
The report also said, OYO Rooms leads the race having already raised over $126 million in funding from SoftBank, Sequoia Capital and Light speed Ventures amongst others and reported to have been valued at $400 million in the latest round.
 
"We have around 3,000 hotels and 30,000 rooms across 124 cities in India in our portfolio. We do half a million bookings per month," Kavikrut, chief growth officer at OYO Rooms told IANS.
 
Asked what is the edge of booking through OYO Rooms over other direct online hotel bookings, Kavikrut said: "It is the predictability that we offer. Customers get what is promised to them."
 
Ritesh Agarwal founded Oravel Stays in February 2012. In May 2013, Oravel transformed from a discovery marketplace to a managed marketplace for standardized hotels by launching OYO Rooms.
 
The ICRA report said, travellers are increasingly using the internet to research and book flight tickets and hotel accommodation, swapping traditional travel agents for OTAs.
 
"The deepening penetration of internet usage and smart phones in India has lead to increased booking of hotels through online portals and applications in recent times," it added.
 
"We wanted to redefine the way hotel industry is perceived to be. We wanted to make things more predictable for the customers," Ankita Sheth, co-founder (with two other) and head of partnerships, Vista Rooms told IANS.
 
Vista Rooms, is a new startup marking its entry as an online branded accommodation aggregator, targeting tier II and III cities of India. It has a network of around 480 properties in 55 plus cities.
 
The online startup has already raised an undisclosed amount of funding to expand its network of branded stays, bolster its technology and hire new talent.
 
The average prices of the hotels vary between Rs.1,500-2,000 per night, Sheth said, adding: "Hotels are our partners, we will help improvise better model."
 
According to Jones Lang LaSalle Incorporated (JLL), a professional services and investment management company specializing in real estate, since aggregators do not make capital investments in land & building, but only provide a booking engine for by renting unused accommodation their model is comparatively easier to sustain.
 
"Aggregators are merely technology platforms that provide bookings to economy & budget accommodations while charging their booking fees," Mandeep Lamba, managing director - hotels, JLL India told IANS.
 
"The differentiation is purely to attract different segments of travellers who are seeking alternate to hotel accommodation at a comparatively lower price point." 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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Rain check: Monsoon deficit shock continues for third year
The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015, says ratings agency CRISIL
 
For the second year in a row, India has had a deficient monsoon. In June, the Indian Meteorological Department (IMD) had forecast 12% shortfall in rains, and the actual deficit turned out to be 14%. The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third straight shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015, says a research report.
 
According to ratings agency CRISIL, at an all-India level, rainfall deficiency peaked to 16% in mid-September but improved slightly in the last two weeks. "Although this is no good news for kharif crops - rains in July and August are most crucial - there might be some respite for the rabi crop as reservoir storage levels have stabilised. However, the improvement in rains was not enough to bring relief in severely deficient states. The situation is most precarious in Maharashtra and Karnataka, where reservoir levels as of 1 October 2015, were 43% below normal. That does not augur well for rabi crops in these states," it said.
 
For the second year in a row, India has had a deficient monsoon. In June, the Indian Meteorological Department (IMD) had forecast 12% shortfall in rains, and the actual deficit turned out to be 14%. The weak south-west monsoon this time is particularly worrying for the economy, especially the farm sector, because it is the third straight shock after deficient rains in June-September 2014 and the unseasonal downpour in March 2015.
 
Rainfall deficiency was most acute in the north-west region at 17%, followed by central at 16%, south peninsula at 15% and east and north-east at 8%. In the north-west and east and north-east, rainfall deficiency was lower compared with last year. But for central India and the south peninsula, the deficiency this time is higher, the ratings agency said.
 
CRISIL said, this time, five states have seen a rainfall deficiency of 20% or more. At 45.8%, Uttar Pradesh (UP) had the highest deficiency, which is nearly as bad as last year’s 47.2%. In Haryana, the deficit was 36.7%, in Punjab 31.7%, in Maharashtra 25.2% and in Karnataka 19.9%. While irrigation cover is high at about 77-99% in UP, Haryana and Punjab, it is low at around 18- 34% in Maharashtra and Karnataka. The impact of deficient rains, therefore, differs by geography, it added. 
 
CRISIL’s DRIP (Deficient Rainfall Impact Parameter) captures the interaction between vulnerability (low irrigation) and weather shocks (rainfall deficiency). DRIP scores are naturally high for Maharashtra and Karnataka. UP, too, features here despite its healthy irrigation cover. That’s because its eastern part has been under a prolonged dry spell with acute rainfall deficiency since the last week of July. 
 
The longest dry spell this season was in the Marathwada region of Maharashtra. Despite abundant rains in June, which supported sowing, a prolonged dry spell that began in early July increased rainfall deficiency in this region to 54%. This is believed to have damaged sown crops such as pulses, soybean, and cotton. 
 
For UP and Maharashtra, CRISIL said, it was a double-whammy with two consecutive years of sub-par rains. Last year the high rainfall deficiency in these led to highest DRIP scores. Together, Maharashtra, UP and Karnataka account for close to 30% of India’s kharif foodgrain production.
 
Kharif sowing picked up in July because of abundant rains in June. However, as rains receded by July-end, sowing slowed and lagged long-term trends, even though it was better than last year. 
Overall kharif sowing this year is 1.3% higher than 2014, but 2% below the long-term trend. The crops that have suffered the most are jute and mesta. Foodgrains sowing is 2.7% more than 2014, but 3.5% below long-term trend.
 
While overall sowing of pulses is more than last year, that’s not the case for crucial crops such as tur (arhar) because of dry spells in Maharashtra, Uttar Pradesh and Karnataka, which are the key growing areas, CRISIL said.
 
The Ministry of Agriculture recently released its first advance estimates of kharif production for fiscal 2016. Overall kharif foodgrain production is seen 0.2% lower than the second advance estimate of last year, with categories such as tur, maize and ragi showing lower production levels.
 
Which crops and states have been impacted?
 
CRISIL’s DRIP scores indicate that overall foodgrain scores are higher than those recorded in 2012 (when rains were delayed and deficient) and in 2014. The most affected crops are tur (arhar), jowar and soybean.
 
Similarly, at the state-level, in two of the three states with highest DRIP scores – Maharashtra and Karnataka – DRIP scores this year are higher than in 2012 and 2014.
 
Why is overall food inflation low?
 
CRISL said, despite the negative impact of inadequate rains, food inflation has remained low. Between April and August, food inflation (measured by consumer food price index) has averaged 3.9%, down from 8.6% in the corresponding period of last fiscal. The sharpest fall was unmistakably in fruits and vegetables, where a high-base effect (sharp price spikes in 2014) offered relief. 
 
"But even leaving this out, food inflation is sharply down. That is because inflation in cereals, eggs and milk categories has plunged nearly 400-560 basis points (bps). The only category where inflation this year is higher is pulses and onions. In pulses, production has suffered due to lower output in 2014, damages due to unseasonal rains in March 2015 and shortfall in sowing (especially tur) this year. As a result, inflation in pulses stands at an average 20% this year so far, with August inflation crossing 25% for the category, and surging to 42% for tur. Long dry spells have hurt onion output, too, causing its inflation rate to spiral to 51.7% in August," the ratings agency added.
 
According to CRISIL, there are three reasons for this year's decline in food inflation, proactive food management by the government, restricted hikes in minimum support prices (MSP) and role of international prices. 
 
Like last year, the government has continued to curb spikes in the prices of certain commodities by clamping down on hoarding (extending the ban on onion hoarding by one more year) and allowing imports of pulses, prices of which are lower abroad. 
 
Lower hikes in MSP in recent years have also significantly contributed to low inflation in foodgrains. For both paddy and wheat, MSP hikes this year were less than 4% -- well below the 8-9% average seen in the last decade. Lower MSP hikes keep overall farm prices subdued as it often acts as a benchmark for traders in the open market. 
 
A sharp fall in global prices of agri-commodities following a supply glut has kept domestic food prices low. This is especially true of commodities such as oilseeds where global prices have fallen nearly 20% so far, and, where import dependence is almost 62%. Similar is the case of cereals where global prices are almost 17% lower compared with 2014 and where import dependence is 27%. For commodities that are exported, low global prices have meant higher domestic supplies, which have helped keep prices low. An example of this is sugar, where global prices have fallen by about 29% so far.
 
In addition, restrictive fiscal policy also helped in keeping demand under check, CRISIL said.
 
What does it mean for GDP growth?
 
CRISIL said, in fiscal 2016, it expect GDP growth to be marginally higher at 7.4% compared with 7.3% in fiscal 2015. While industry is expected to grow 50 bps faster than last year at 6.6%, services growth is seen 40 bps lower at 9.8%.
 
"Agriculture and allied sector growth is expected below trend for the second year in a row. In fiscal 2016, we expect growth in this sector at 1.5%. Agriculture GDP comprises crops (foodgrains and horticulture), livestock, forestry and logging, fishing and aquaculture. Past data show that growth in livestock, fishing and aquaculture categories has remained healthy at 5% to 5.5% even in years of weak monsoon. These two sectors comprise nearly 27% of the agriculture and allied sector GDP, and their growth rates could hold up this year too."
 
"Foodgrains production this year could however be lower as suggested by advance estimates released by the Ministry of Agriculture. But the rest of the agriculture and allied category will provide cushion. And finally, a low base – last year agriculture GDP growth was 0.2% - will provide a lift," the ratings agency said.
 
Rural demand falling
 
Almost half of India’s GDP comes from rural areas. About 40% of India’s households engage in agriculture and within this group, two-thirds are heavily reliant on it. The impact of a monsoon shock is accentuated due to high vulnerability of the farm sector stemming from disproportionately high dependence on agriculture income, high agricultural indebtedness and farmer suicides, low irrigation buffer and poor crop insurance cover. 
 
The ratings agency said, as agriculture suffers, the biggest impact will be on rural demand, which has already slowed in the past few years. "This is especially true for automobile sales. Sales plunged sharply in fiscal 2015 in segments with high rural focus, and the trend has continued or even amplified this year too, in certain segments. In tractors, a second year of weak rainfall has caused sales to fall nearly 16% so far in the current fiscal. In fiscal 2015, sales had dipped 13%," it added.
According to CRISIL, due to falling wage growth, the rural incomes are already dented. "Add three consecutive monsoon shocks and what you get is significant erosion in farm income. Another factor that has hurt is falling export prices of agriculture commodities. India exports 11% of rice and 3% of wheat production. Their global prices have fallen by nearly 17% compared with last year. In addition, slower growth in rural wages has hit small cultivators, who supplement their income with off-farm wages -- more so if they are marginal farmers (owning less than a hectare of land). The sharp slide in rural wages has meant off-farm income growth is also moderating. Farm incomes have over time suffered due to falling productivity of agriculture, un-favourable input costs and output price dynamics," it said.
 
Will El Nino continue to affect Monsoon in 2016?
 
In 2014 and 2015, the El Niño effect - a climatic condition, which warms equatorial Pacific waters – created havoc. The condition weakens the Asian monsoon, often causing drought in north-west and central India and heavy rainfall (or even floods) in north-east. In the last decade, El Niño was one of the factors responsible for two of India’s most severe monsoon failures (2002 and 2009).
 
CRISIL said, as per early information available, El Niño is predicted to continue in early 2016 as well. The National Oceanic and Atmospheric Administration (NOAA) attaches a 95% chance of El Niño continuing into the Northern Hemispheric winter in 2015 (December to February) and a 55% chance that it will gradually weaken in late spring 2016 (March, April and May). However, the impact on Indian monsoon in 2016 will depend on the strength of its occurrence, it added. 
 
How DRIP works
 
The DRIP index, which is a product of the percentage rainfall deviation and unirrigated area, captures both the magnitude of the shock (rainfall deficiency) and the vulnerability of a region (percentage of unirrigated area). Higher the DRIP score, greater the impact of rainfall deficiency; the impact more pronounced for unirrigated crops and regions/states. 
 

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