ECONOMY AFFAIRS APRIL 2015
- Govt. hikes FDI cap in pension sector to 49%
The government has notified an increase in the cap on foreign direct investment (FDI) in the pension sector to 49 per cent from 26 per cent, paving the way for more foreign funds to enter the national pension system.
The increase in FDI cap for pension is in sync with the recent passage of the Insurance Laws (Amendment) Bill in Parliament, which allows a higher, 49 per cent foreign investment limit in the insurance sector.
The cap on foreign investment is composite and includes FDI, foreign portfolio investments (FPI) and investments from NRIs, according to a press note released by the Department of Industrial Policy & Promotion (DIPP). While FDI up to 26 per cent will be allowed through the automatic route, investments above that will have to be routed through the Foreign Investment Promotion Board (FIPB).
The Pension Fund Regulatory and Development Authority (PFRDA), 2013, pegs FDI in the pension sector at 26 per cent or such percentage as approved for the insurance sector, whichever is higher.
The increase in the foreign investment limit in the pension sector comes with certain riders. “Foreign investment in pension funds will be subject to the condition that entities bringing in foreign equity investment shall obtain necessary registration from the PFRDA and comply with other requirements as per the PFRDA Act…,” the notification said. - Capgemini acquires iGATE for $4 billion
French IT services company Capgemini on 27th April announced the acquisition of US-based IT services company iGATE for $4 billion. Through the acquisition Capgemeini, which has significant presence in the European market, is trying to widen its presence in North America.
A part from getting a strong-hold in the US, the buyout will also give Capgemini’s Indian operations a new scale, allowing it to compete on a par with the US and Indian companies. The company co-founded by Sunil Wadhwani and Ashok Trivedi is listed in Nasdaq. However, majority of its workforce is based in India. At present, iGATE has a revenue of around $1.3 billion and over 30,000 employees spread across its centers in India, the US, Europe and China.
In India, iGATE has centers in Bengaluru, Mumbai, Pune, Chennai, Hyderabad; while the French major has its centers in nine locations and employs more than 50,000 people. The deal is subject to necessary approvals and is expected to close in the second half of 2015 and iGATE will become the subsidiary of Capgemini North America. - WB report on NREGA
The World Bank said on 28th April that the spike in unmet demand for MGNREGA jobs is an indicator of increasing rural distress. Since the scheme is the only and therefore the best bet India has for mitigating the impact on the poor of the recent unseasonal rains, the government should take steps aimed at arresting delays in wage payments and the rising unmet demand for jobs.
The update projects that provided there is a pick-up to 11 per cent in the rate of investment in the economy, growth in the current year would be 7.5 per cent, 7.9 per cent in 2016-17 and 8 per cent in 2017-18.
Continuous strong momentum in reforms aimed at strengthening the business environment and enhancing the quality of public spending will further unleash the productivity that Indian firms need for creating jobs and becoming globally competitive.
The analysis of MGNREGA in the update shows that the programme’s impact on rural poverty in Bihar is only 1 percentage point as against its potential of reducing poverty by at least 14 percentage points. Among the main reasons why the potential is not being realised, the study says, is that the supply side is too slow to respond to the demand for work from the poor, workers not receiving the full scheme wage and delays in wage payments. - RS passes Regional Rural Banks Amendment Bill
The Rajya Sabha on 27th April passed the Regional Rural Banks (Amendment) Bill, 2014. The bill seeks to raise the authorized capital of Regional Rural Banks from Rs. 5 crore to Rs. 2,000 crore and enable them to mop up funds from the capital market. - India, US $500-b trade target
According to US Ambassador Richard Verma, India-US bilateral trade crossed the $100-billion mark in 2014 and both the US is keen to work with India towards achieving an ambitious $500 billion
India, however, needs to resolve issues related to land acquisition and foreign direct investment if it wants to attract foreign investments in its proposed smart cities
Verma was, however, upbeat on the possibility of a bilateral investment treaty between the two countries which, he said, would bolster investment confidence. - NTPC to invest Rs. 1,779 cr in AP solar project
NTPC Ltd’s board of directors on 28th April approved an investment of Rs.1,779.25 crore for the Anantpur Solar PV Project, Stage-I (5x50MW) in Andhra Pradesh. This is the first phase of the 1,000 MW ultra mega solar power project.
The company had entered into a power purchase agreement with state electricity distribution utilities Andhra Pradesh Eastern Power Distribution Company Ltd and Andhra Pradesh Southern Power Distribution Company Ltd.
The tariff, on televised basis for energy supplied from this solar plant, has been fixed at Rs. 6.16 a unit for a period of 25 years.
The power generation cost may further come down with regard to the remaining 750 mw capacity as that portion of the project would be undertaken through global bidding process unlike in the first phase where only the domestic vendors were involved.
NTPC plans to install 3000 MW of solar PV capacity during the financial year as compared to the existing installed capacity of 110 MW. - Govt. relaxes relief norms; Wheat Farmers to get full MSP of Rs 1,450 per quintal
The Centre has taken a series of measures to give relief to farmers whose crops were damaged due to unseasonal rains and hailstorms. The government has abolished the value cut on procurement of damaged grains. Now the farmers will get full value of their grains purchased by the procurement agencies. The center has relaxed the norms on moisture content in grains.
The Center decided to reimburse the amount of value-cut imposed on the purchase of wheat affected by unseasonal rains in six states including Punjab and Haryana. The move is aimed at ensuring that wheat farmers get the full minimum support price of RS 1,450 per quintal.
The central government will reimburse the amount of value cut imposed on the wheat being procured by the FCI and State Government Agencies in Gujarat, Haryana, Madhya Pradesh, Punjab, Rajasthan and Uttar Pradesh under relaxed quality. The government said that the quality of wheat has been badly affected due to untimely rains and hailstorms in March-April this year. The release said that taking the request of the State Governments into account, the Cabinet decided to provide the financial support to the State Governments, so that, they can freely help the farmers by procuring their wheat under relaxed specifications. - Nod for policy on testing norms for NELP discoveries
The Cabinet Committee on Economic Affairs on 29th April approved a policy on testing requirements for discoveries made under the New Exploration and Licensing Policy. The policy aims to settle the long-pending issue over discoveries in five blocks of ONGC and Reliance Industries
The policy will also help in bringing transparency and uniformity in decision-making as against the case-by-case approach in the past, the statement added. The policy allows contractors to choose from three options with regard to blocks stuck on account of testing.
Contractors can either relinquish the blocks or develop them after conducting a Drill Stem Test (DST) with 50 per cent of the DST cost being disallowed as penalty for not conducting the tests on time, or develop the discoveries without conducting the test in a ring fenced manner. Cost recovery for DST has also been capped at $15 million. - Core sector growth falls 0.1% in March; 2014-15 growth at 3.5%
A sharp drop in the production of steel, cement and refinery products resulted in a 0.1 per cent fall in the growth of the eight core industries in March, to its lowest rate in 17 months. Production growth in the eight sectors in fiscal year 2014-15 was at 3.5 per cent, which was lower than the 4.2 per cent growth posted in the previous fiscal year, according to figures released by the Commerce & Industry Ministry on 30th April.
The eight core sectors are coal, crude oil, natural gas, refinery products, fertiliser, electricity, steel and cement and account for 38 per cent of the overall Index of Industrial Production. Industry representatives are concerned that the fall in production in the core sectors indicates a slowdown in economic activity.
In March 2015, steel production declined by 4.4 per cent, cement by 4.2 per cent and refinery products by 1.3 per cent. Coal production and fertilizer output, on the other hand, posted growth of 6 per cent and 5.2 per cent, respectively. Production in the remaining three sectors also posted a rise in March, albeit at lower rates. While natural gas production posted an increase of 1.5 per cent, both crude oil and electricity grew by 1.7 per cent each. The previous low in the performance of core industries was a 0.6 per cent fall in production in October 2013.
In 2014-15, coal posted a growth of 8.2 per cent, electricity grew at 8 per cent, cement increased by 5.6 per cent, steel rose by 0.5 per cent and refinery products increased by 0.4 per cent. Production of natural gas fell by 5.2 per cent, crude oil by 0.9 per cent and production of fertilizers by 0.1 per cent. - AP and Telangana started insurance scheme
Andhra Pradesh and Telangana on 1 May 2015 introduced 5 lakh rupees Accident Insurance Scheme for transport drivers. It will also cover education of two children of the beneficiary.
Both the governments signed an MoU with an insurer to bear the additional amount of Rs. 3 lakh insurance cover, over and above the Rs. 2 lakh cover that the Union Government will provide through the Pradhan Mantri Suraksha Bima Yojana (PMSBY). To claim the benefit, the transport drivers have to register their names on a specified portal. About 11 lakh transport drivers and journalists in the two states will be benefited under the programme. About 16 thousand Home Guards in Telangana will also be benefited by the scheme. - Relief on MAT declared
Government has provided relief to foreign investors, clarifying that Minimum Alternate Tax (MAT) will not apply to capital gains on the sale of securities, royalty, technical service fees and interest income. This was part of amendments made to the Finance Bill. The relief is available only in those cases where the normal tax rate is below 18.5 per cent. The rules for the application of MAT for real estate investment trusts were also eased. - World Bank praises Jan DhanYojna
World Bank Chief Jim Yong Kim has praised Prime Minister Narendra Modi's Jan Dhan Yojna. In a panel discussion in Washington on the sidelines of the annual spring meeting of the International Monetary Fund and the World Bank, Jim Yong Kim said strong visionary leadership of Mr. Modi has resulted in extraordinary effort by India on financial inclusion of its people.
World Bank said, by January 2015, 125 million bank accounts have been opened under the Pradhan Mantri Jan DhanYojna launched in August 2014 for comprehensive financial inclusion with the goal of opening a bank account for every household in India. The World Bank Chief also said access to financial services can serve as a bridge out of poverty. - Center further relaxes wheat procurement norms
The Center on 20th April further relaxed quality norms for the procurement of wheat in Haryana, Rajasthan, Madhya Pradesh and Uttar Pradesh to provide relief to farmers affected by recent heavy rain and hailstorm. The Food Ministry has reduced the value cut for shriveled and broken grains on the requests received from these states.
The Department of Food and Public Distribution has decided not to impose much value cut in respect of more shriveled and broken grains.
Three rupees and 63 paise per quintal will be deducted on wheat having shriveled and broken grains above 6 per cent up to 8per cent and in case of wheat having shriveled and broken grains above 8 per cent up to 10 per cent, value cut of 7 rupees and 25 paise per quintal will be deducted.The value cut in respect of luster lost grains will remain the same. The value cut will be applicable from the date of relaxation allowed. - Center extends food security Act deadline
The period for identification of households eligible for coverage under the National Food Security Act (NFSA) has been extended up to September 30, 2015 through an order issued by the Department of Food and Public Distribution. Though the law stipulates that any such orders made under the Act are tabled in Parliament, the Centre has no such plans. The Act aims to provide subsidised food grains to over one billion Indians.
It also legally entitles beneficiaries of the Midday Meal Scheme, the Integrated Child Development Services scheme and the Public Distribution System, to food. Delays mean legitimate beneficiaries are denied the NFSA benefits. It was signed into law in 2013. - Prepare small banks for merger with large PSBs: Finance Ministry panel
Small public sector banks, with assets of less than Rs. 2-lakh crore, should be readied for merger with five large PSBs, a Finance Ministry-appointed panel has recommended.
PSBs with less than Rs. 2 lakh crore assets (loans plus investments) include Andhra Bank, Bank of Maharashtra, Dena Bank, Punjab & Sind Bank, Vijaya Bank, and United Bank of India.
The large PSBs, with the capability to acquire include Bank of Baroda, Bank of India, Canara Bank, Punjab National Bank and Union Bank of India.
Ahead of the consolidation, the small PSBs will need to reorient their portfolio and improve operational efficiencies over the next one year. The Working Group on Consolidation and Restructuring of PSBs has proposed that as a means to improve profitability by leveraging economies of scale and avoiding duplication, all PSBs should share infrastructure, including back-office space, IT backbone and telecom contracts through a “shared service organisation.”
State Bank of India had kick-started the process of consolidating its associate banks almost seven years ago. In 2008 and 2010, India’s largest bank took over State Bank of Saurashtra and State Bank of Indore. Currently, it has five associate banks.
The banks will need to raise almost Rs. 4.50-lakh crore in Tier 1 capital (which includes Rs. 2.40-lakh crore equity capital) by March 2018 under Basel III norms.
The Working Group has suggested that over the next one year all PSBs focus on four areas — improving risk management capabilities, shifting to profitability-linked performance metrics, leveraging technology to reduce costs, and developing capital-light business models.
To rapidly reorient smaller PSBs, a performance assessment of their loan portfolio will be made so that they can exit areas where they are not strong or are unprofitable. The next step for these banks would be to define the target customer segments.
After that, the large PSBs will identify the relevant acquisition targets based on complementary businesses and synergies. However, the panel suggested that any consolidation should be driven by market forces and decisions taken independently by the board of each bank.
There are 27 public sector banks, including State Bank of India’s five associate banks, in the country. As at March-end 2014, their share in total deposits and total advances was 77.22 per cent and 75.74 per cent, respectively. - E-Samiksha launched for monitoring implementation of budget announcements
Railway Minister Suresh PrabhakarPrabhuon 21st April launched E-Samiksha for monitoring the implementation of budget announcements. This portal will help to keep an eye on the implementation of the budget commitments.
The portal will mainly focus on Budget Review, Board Meetings, Zonal Railway Review, Infrastructure Targets and Project Implementation Review. E-Samiksha is a real time, on-line system for monitoring of follow-up action on the decisions taken during the presentations made by different ministries to the Prime Minister. - Govt retains interest rate for GPF at 8.7% for current fiscal
The government has retained the rate of interest for General Provident Fund (GPF) and other related schemes at 8.7 percent for the current fiscal. The 8.7 percent interest will apply on Provident Funds of central government employees, railways and defence forces, according to the notification issued by the Finance Ministry.
The rate of interest will be effective from 1st April 2015, it added. The interest rate for GPF is in line with the interest rate fixed for Public Provident Fund (PPF) at 8.7 percent for 2015-16. The government had, however, raised the interest rates for other small saving schemes.
The interest rate for senior citizens savings scheme was hiked from 9.2 percent to 9.3 percent and for Sukanya Samriddhi Account, the special deposit scheme for girl child, the interest rate has been hiked from 9.1 percent to 9.2 percent, respectively. The interest earning for Kisan Vikas Patra has been retained at 8.7 percent. - India to host first-ever Global Exhibition on Services
About 60 countries will participate in the first Global Exhibition on Services where host India will project itself as a leading service exporter. Prime Minister Narendra Modi will inaugurate the exhibition on 23rd April. During the two-day event, India will be showcasing its potential in sectors such as IT and telecoms, tourism, health care, logistics, education, research and development, space and professional services. It will also have over 5,000 structured buyer-seller meetings.
As many as 39 countries, including US, UK, South Korea, UAE, Hong Kong, Germany, Malaysia and Thailand, are going to put up stalls exhibiting their expertise in various services. The states that are participating are Assam, Bihar, Goa, Gujarat, Haryana, Jammu and Kashmir, Punjab, Rajasthan and Odisha. India has the second fastest growing services sector in the world after China. The growth of services sector GDP has been higher than that of the country's overall GDP during 2000-2001 to 2013-2014.The sector contributes 57 per cent to the country's GDP. India is also a leading exporter of services with a CAGR of 20.2 per cent followed by China at 16.6 per cent.
India had been also pushing for greater access in the services market under the Doha round of talks at the World Trade Organization (WTO). However, this has not seen much headway due to lack of interest on the part of the developed countries.
Ironically, India is also not part of the Trade in Services Agreement (TiSA), which is currently being negotiated among 23 countries outside the purview of the WTO. US and the European Union are also part of TISA, the talks for which was launched in 2012. Together, these countries account for 70 per cent of world trade in services. Once concluded, it will open the floodgates of services export from across all sectors such as a banking, telecom and construction among others. - GST: All States to get the benefit of additional 1% tax
The Centre has clarified that all States will be eligible to get a share of the additional one per cent tax proposed to be levied under the Goods and Services Tax (GST). The Centre aims to introduce this new indirect tax regime from April 1, 2016.
This has put to rest the earlier impression that only manufacturing States will get the benefit, which prompted States such as Delhi to demand a share of the pie. - RBI currency swap pact with Lanka
The Union Cabinet on 22nd April gave the Reserve Bank of India the green signal for an agreement with the Central Bank of Sri Lanka, to extend $1.1 billion as a special /ad-hoc swap outside the Framework on Currency Swap Arrangement for SAARC member countries. India has had a Framework Arrangement with SAARC countries since 2012. - Cabinet nod to amend negotiable instruments law
The Union Cabinet on 22nd April approved a proposal to amend the Negotiable Instruments Act so as to clarify on jurisdictional issues for trying cheque bouncing cases. The main amendment is the stipulation that the offence of rejection/return of cheque under section 138 of Negotiable Instruments Act will be enquired into and tried only by a Court within whose local jurisdiction the bank branch of the payee, where the payee presents the cheque for payment is situated.
The clarity on jurisdictional issue for trying cases of cheque bouncing would increase the credibility of the cheque as a financial instrument. This would help trade and commerce in general and allow lending institutions, including banks, to continue to extend financing to the economy, without the apprehension of the loan default on account of bouncing of a cheque.
Section 138 of the NI Act deals with the offense pertaining to dishonor of cheque for insufficiency, etc of funds in the drawer’s account on which the cheque is drawn for the discharge of any legally enforceable debt or other liability.
Action will be initiated to introduce the Negotiable instruments (Amendment) Bill, 2015 in Parliament in the second phase of the current session
Section 138 provides for penalties in case of dishonor of cheques due to insufficiency of funds in the account of the drawer of the cheque. The object of the NI Act is to encourage the usage of the cheque and enhancing the credibility of the instrument so that normal business transactions and settlement of liabilities could be ensured. - India ranks second in cyber attacks through social media
Cyber criminals are now using social networking sites to target users in India. According to a report from Symantec, a security solutions provider, India ranked second among nations that were most targeted for cyber crimes through the social media in 2014, after the US. - RBI revises priority sector lending norms, adds more categories
The specter of farmer suicides due to crop failure seems to have prompted the Reserve Bank of India to revise priority sector lending guidelines for banks, doing away with the distinction between direct and indirect agriculture lending and ensuring loan disbursal to the farm sector is evenly spread out throughout the year.
In its revised guidelines for priority sector lending for banks, the central bank said the present distinction between direct and indirect agriculture is dispensed with.
Henceforth, lending to the agriculture sector will include farm credit (which will include short-term crop loans and medium/long-term credit to farmers), agriculture infrastructure and ancillary activities. Bank loans to food and agro processing units will form part of agriculture.
As of now, within the priority sector lending (PSL) target of 40 per cent of average net bank credit (ANBC) as at March-end of the previous year, banks have to achieve a sub-target of 18 per cent (13.5 per cent direct lending and 4.5 per cent indirect lending) for agriculture.
PSL includes loans given by banks to agriculture, micro, small and medium enterprises, export, education, housing, social infrastructure and renewable energy.
Under the new guidelines, banks have been set a lending target of 8 per cent of ANBC for small and marginal farmers within agriculture. This is to be achieved in a phased manner – 7 per cent by March 2016 and 8 per cent by March 2017.
Small farmer means a farmer cultivating (as owner or tenant or share cropper) agricultural land of more than 1 hectare and up to 2 hectares (5 acres).
Marginal farmer means a farmer cultivating (as owner or tenant or share cropper) agricultural land up to 1 hectare (2.5 acres).
The RBI said priority sector non-achievement will be assessed on quarterly average basis at the end of the respective year from 2016-17 onwards, instead of annual basis as at present.
The RBI said a target of 7.5 per cent of ANBC has been prescribed for micro-enterprises. This is to be achieved in a phased manner – 7 per cent by March 2016 and 7.5 per cent by March 2017.
The loan limits for housing and MFI sectors under priority sector have been revised under the new guidelines.
Loans to individuals up to Rs. 28 lakh (Rs. 25 lakh earlier) in metropolitan centers (with population of 10 lakh and above) and loans up to Rs. 20 lakh (Rs. 15 lakh) in other centres for purchase/construction of a dwelling unit per family provided the overall cost of the dwelling unit in the metropolitan and other centers should not exceed Rs. 35 lakh and Rs. 25 lakh respectively. - National Institute of Electronics signs pact with Snapdeal
National Institute of Electronics and Information Technology (NIELIT), on 23rd April, signed a memorandum of understanding (MoU) with e-commerce giant Snapdeal to roll out digital marketing courses, aimed at helping small and medium business and artisans wanting to take the online route to become entrepreneurs.
The digital marketing courses will help the trainees understand the fundamentals of digital marketing and effectively utilize the online sales channel. As a knowledge partner, Snapdeal will provide inputs on the course and will facilitate industry interactions for the participants. - Panel concerns budget cuts in schemes
A Parliamentary panel has raised concern over drastic cut in budgetary allocation for several schemes including cyber security and research and development in medical electronics under Digital India programme. Digital India aims at making the country a knowledge economy. The Standing Committee on Information Technology, chaired by BJP MP Anurag Thakur, has also raised concerns over constraints faced by the National Informatics Centre, NIC on manpower and infrastructure.
On NIC, the panel said against the proposed allocation of Rs 1,300 crore, Rs 700 crore have been provided for 2015-16. The committee observed that the cut in the allocation will affect the pace of the overall technological development in the country. - Task force proposes setting up of Postal Bank of India
A Task Force has recommended the setting up of a fully professional Postal Bank of India to cover all those who are deprived of banking facilities. Its mandate will be to fulfill the objectives of the Pradhan Mantri Jan Dhan Yojana which is meant to benefit them across the country, particularly in the rural areas. The new institution will be known as the Postal Bank of India or PBI. It will offer full financial services as per the RBI norms. The Minister said the Task Force has also suggested that the proposed Postal Bank be set up under an Act of Parliament. As a statutory institution it would have utmost credibility. Its initial capital requirement of Rs. 500 crore will be fully met by the Central government. - Govt. allows EPFO to invest 5% corpus in stock markets
Government has allowed retirement fund body EPFO to invest five per cent of its corpus in exchange traded funds. It will result into an inflow of around Rs. 5000 crore into the stock markets during this fiscal. Investment will begin by one per cent and go up to five per cent by the end of this financial year. As per estimates, the EPFO's incremental deposits for 2014-15 would be around Rs. 80,000 crore. - India to add 10 MT urea capacity; invest Rs 60K cr: Govt.
India, a net importer of urea, is set to become an exporting nation in the next 5 years with an addition of 10 million tonnes (MT) in fertilizer production capacity at an estimated investment of Rs 60,000 crore, according to Fertilizer Minister Ananth Kumar
According to the Minister added that the government is working on revival and expansion plans with regard to 9 fertilizer (urea) plants in 5 years with an investment of Rs 60,000 crore, and the work has already been started on it. The government has already started the revival process of closed fertilizer plants in Talcher and Ramagundam. While for the other two plants in Gorakhpur and Barouni, the Cabinet has already given its approval.
For Sindri plant, the ministry is working on its revival process, he said. Besides reviving these five plants, Kumar said new plants will be set up by Rashtriya Chemicals and Fertilsiers at Thal in Maharashtra and by BVFCL in Assam.
The Minister also added there are proposals to set up plants in Madhya Pradesh and Karnataka. After all these plants get functional, India's urea production will increase by another 10 MT to 32 MT. The Minister also said that his ministry is considering paying fertilizer subsidy directly to farmers but the main challenge is that the 50 percent of the cultivators of land are not its owners. - Parliamentary committee supports higher import duty on steel
A Parliamentary panel has agreed with a Steel Ministry proposal to the Finance Ministry on hiking the import duty on steel, to provide relief to the domestic industry. The report of the Standing Committee on Steel and Coal, tabled in the Lok Sabha on 24th April, said that the ‘damp trend’ in the domestic steel industry has been accentuated by dumping of cheaper steel from CIS countries.
Similarly, imports from China in April-January 2014-15 rose to 2.9 million tonnes from 1.08 tonnes in the previous fiscal year. Year-wise import-export data of steel show that in 2014-15 imports were at 9.32 million tonnes compared with 7.93 million tonnes in the previous year.The panel also criticized the lack of research and development in the steel sector.It recommended more research and development (R&D) facilities to develop indigenous steel, which can be used by the power and automotive sectors. - Only 19% of farmers have crop insurance, says Assocham study
Less than 20 per cent Indian farmers have crop insurance, exposing a majority of them to the vagaries of weather and leading some of them to take their lives, as is being reported after untimely rains damaged Rabi crops.
According to an industry chamber Assocham-Skymet Weather study released on 12th April, at the all-India level, only 19 per cent farmers reported ever having insured their crops. The rest of them were found to be either unaware of crop insurance or not interested in it, while 24 per cent said that the facility was not available to them.
Only 11 per cent felt that they could not afford to pay the insurance premium, the study said. According to the report, there are about 32 million farmers who have been enrolled in various crop insurance schemes.
However, delay in claim settlements is one big reason for farmers not being covered, despite significant government subsidy. The government is piloting a modified National Agricultural Insurance Scheme, a market-based scheme with involvement from the private sector, to ensure timely claim settlement, among other things. - Retail inflation dropped
Easing of food prices, mainly milk and vegetables, pulled down the March retail inflation to a three-month low of 5.17 per cent. It was 8.25 per cent in March last year. The retail inflation as measured by Consumer Price Index was 5.37 per cent in February, and 5.19 per cent in January.
The easing prices of milk, vegetables and fruits brought down the CFPI (consumer food price index) to 6.14 per cent in March from 6.79 per cent recorded in February.
Inflation declined for ‘cereals and products’, although it was up in the case of protein rich items like ‘meat and fish’, as per the government data released on 13th April. The rate of price rise in the food and beverages segment as a whole was 6.2 per cent in March, lower than 6.76 per cent in the previous month. The CPI-based retail inflation has been calculated with a new base year of 2012.
Inflation in the fuel and light segment was 5.07 per cent last month, up from 4.72 per cent in February. In the housing segment, inflation was 4.77 per cent last month, as compared to 4.98 per cent. For the rural segment, the overall retail inflation was 5.58 per cent in March and 4.75 per cent for urban cent res. - Govt removes last 20 items reserved for production by MSMEs
The government on 13th April removed the remaining 20 items from the original list of over 800 items reserved for exclusive production by the MSME sector, thus bringing to an end a policy regime being followed since the 1960s to promote and facilitate the small sector, considered a big employment generator.
The de-reservation is being done “to encourage greater investment, incorporate better technologies, standard and branch building and enhance competition in Indian and global markets for these products
The 20 items include pickles & chutneys, mustard oil (except solvent extracted), groundnut oil (except solvent extracted), wooden fixtures, exercise books and registers, wax candles, laundry soap, glass bangles, steel almirah, rolling shutters, steel chairs and tables, padlocks, stainless steel and aluminium utensils.
The Ministry said an Advisory Committee constituted under Section 29B(2C) of the Industries (Development & Regulation) Act, 1951 on de-reservation periodically evaluates products /items reserved for exclusive production by micro and small enterprises. - India to clock 7.5% growth in 2015-16, overtake China: IMF
International Monetary Fund in its latest World Economic Outlook said, that India will overtake China as the fastest growing emerging economy in 2015-16 by clocking a growth rate of 7.5 per cent on the back of recent policy initiatives, pick-up in investments and lower oil prices.
IMF said India's growth is expected to strengthen from 7.2 percent in 2014 to 7.5 per cent in 2015. IMF added China will witness a deceleration with growth rate sliding from 7.4 per cent in 2014 to 6.8 per cent in 2015 and 6.3 per cent a year after.
Meanwhile, The World Bank has predicted 8 per cent GDP growth rate of India by 2017. The bank in its semi-annual report said, in India, GDP growth is expected to accelerate to 7.5 percent in fiscal year 2015 -16 and India's economic growth could reach 8 per cent in fiscal year 2017-18.
The bank in its semi-annual report said, in India, GDP growth is expected to accelerate to 7.5 percent in fiscal year 2015 -16 and India's economic growth could reach 8 per cent in fiscal year 2017-18, on the back of significant acceleration of investment growth to 12 per cent during 2016 to 2018.
The Bank in the report also said that the country is attempting to shift from consumption to investment-led growth, at a time when China is undergoing the opposite transition.
In an another report, 'World Bank's study of remittance', the Bank has said that India continues to be the leading nation in remittances pulling in 70 billion US dollar from its global migrant workforce in 2014.
The report said, total remittances throughout the world in 2014 reached 583 billion US dollar. It said that while United States, Saudi Arabia, Germany, Russia and the United Arab Emirates remained the top five migrant destination countries, India, China, Philippines, Mexico and Nigeria are the top five remittance recipient countries. - Raja misled former PM Dr. Singh: CBI
CBI tells Special Court Ex Telecom Minister A Raja had "misled" the then PM Manmohan Singh on policy matters pertaining to 2G spectrum allocation and said that Raja had deliberately advanced the cutoff date to favor accused firms. The agency said Raja had deliberately advanced the cutoff date to favor accused firms in 2G allocation.
It maintained that 2G spectrum was granted to "ineligible" companies like Swan Telecom Pvt Ltd and Unitech Wireless (Tamil Nadu) Ltd. CBI, in its charge sheet, had alleged that there was a loss of over Rs. 30,000 crore to the exchequer in allocation of 122 licenses for 2G spectrum.
The recording of evidence in the case involving Raja and 16 others had started on 11th of November 2011. The court has recorded statements of 154 CBI witnesses including Reliance ADAG Chairman Anil Ambani, his wife Tina Ambani and former corporate lobbyist Nira Radia. - Wholesale inflation hits record low
Contracting for the fifth straight month, wholesale price index (WPI)-based inflation hit a record low of -2.33 per cent in March, prompting industry to demand a policy rate cut by the Reserve Bank of India to spur growth. WPI inflation for February was at -2.06 per cent. Last March, it was at 6 per cent.
Inflation in the manufactured product category contracted year-on-year to -0.19 per cent (3.70 per cent), the lowest in five years, reflecting poor offtake. Fuel inflation inched up to due to an uptick in crude oil, but still remained negative at -12.6 per cent. - RBI extends present interest subsidy scheme for farmers till June 30
RBI has instructed banks to continue the earlier interest subvention scheme till June 30th since the new scheme may take some time to finalise. In 2014-15, interest subvention of 2 per cent was made available to banks on funds used for short-term crop loans up to Rs 3 lakh per farmer subject to some conditions. Also, additional interest subvention at the rate 3 per cent was made available to farmers repaying loans promptly. - CII expects economy to grow at 7.8-8.2 % in FY16
Driven by growth in industry and services sector, CII said it expected India’s economy to grow in the range of 7.8-8.2 per cent in the current financial year.
According to CII Industry and services were expected to continue on the path of recovery though there were risks that agriculture might be a dampener if there were disappointments on the monsoon front.
In the medium term a multi-pronged strategy of focusing on the manufacturing sector, providing greater impetus to skill development and investing in agriculture and infrastructure would raise the growth rate to 9-10 per cent. - Trade deficit widened
The country's exports declined 21.1 per cent, to 24 billion dollars in March this year. Imports contracted 13.4 per cent, to 35.7 billion dollars in March, leaving a trade deficit of 11.8 billion dollars.
Cumulative exports contracted 1.2 percent, to 310.5 billion dollars in the 2014-15 fiscal, and missed the annual target of 340 billion dollars. Imports slipped 0.6 per cent, to 447.5 billion dollars, leaving a trade deficit of 137 billion in the last fiscal. Oil imports tumbled 52.7 per cent in March this year. But gold imports almost doubled, to 5 billion dollars during the month. - WEF report on Urban development
World Economic Forum (WEF) released a report titled Urban Development Recommendations for India under the Future of Urban Development and Services (FUDS) Initiative. The report has been written in collaboration with Accenture.
The report highlights the importance of wider private-sector participation to bridge the urban infrastructure and services funding gap of 110 billion US dollars, which is widening due to India’s rapid urban population growth
The WEF in its report has made three recommendations on urban development which the Government of India can take so as to foster inclusive growth in urban India. They are integrate spatial planning at all government levels, creating a stable policy frame work for private investment in urban infrastructure, and also creating institutions to stimulate capacity building and attract talent to grow businesses
India with an urban population of 410 million is the world’s second largest urban population and its urban population is forecasted to almost double to 814 million between 2014 and 2050.
However, the urbanization rate of India is relatively low at 32 percent. As a result, India is witnessing accelerated migration from rural areas to cities. This in turn is leading to inadequate access to basic urban infrastructure and services facilities to urban population.
Towards this, Government of India under Prime Minister Narendra Modi is making some efforts. These include among others introduction of 100 Smart Cities initiative, launch of Heritage City Development and Augmentation Yojana (HRIDAY) and Swachh Bharat Abhiyan (Clean India Mission).
For all this, India needs an investment of more than 640 billion US dollars between 2012 and 2031 to deliver basic urban infrastructure to this growing urban population.
The WEF Future of Urban Development and Services (FUDS) Initiative serves as a partner in transformation to cities around the world as they seek to address major urban challenges and transition towards smarter, more sustainable cities in this rapidly urbanizing world. The FUDS Initiative works collaboration with local partners.
The report on India is the third in the FUDS Initiative. The first two presented the results of the initiative’s engagement with three Chinese cities: Tianjin, Dalian and Zhangjiakou. - BHEL and INTMA inked MoU
Bharat Heavy Electricals Limited (BHEL), an engineering and manufacturing company announced that it has inked a Memorandum of Understanding (MoU) with a Russian company named INTMA with an aim to set up a gas-based power project in Kazakhstan as well as further boost its presence in the CIS countries. BHEL, currently executing 23 major projects in 16 countries has set its footprint in over 75 countries. INTMA is one of the leading general Engineering Procurement and Construction contractors (EPC) in Russia and Kazakhstan. - New norms for appointment of non-official directors in public sector banks
The Centre has revamped the procedure for appointment of non-official directors (NODs) on the Boards of public sector banks (PSBs), insurance companies, and financial institutions.
This has been done with a view to professionalise the Boards of these banks and further provide requires skill sets to improve the quality of deliberations on these Boards
Besides, creating a dedicated web portal, where interested persons can apply online, the revamped procedure also provides for setting up of a high-level search committee.
This committee will go through the available applications and would recommend names to the government for approval. The applicant should have at least a graduation degree, should be less than 67 years of age and have 20 years of work experience, in
Persons of eminence with special academic training or practical experience in the fields of agriculture, rural economy, banking, cooperation, economics, business management, human resources, finance, corporate law, Risk Management, Industry and IT will ordinarily be considered.
Retired Senior Government Officials, Academicians, Directors of premier Management, Banking Institutes, professors with 20 years experience would be considered. Chartered Accountants with 20 years experience would also be considered.Non-official directors could be appointed for maximum six years or two terms. - 5 states account for 91% of all foreign firms in India
The presence of foreign companies operating out of India is overwhelmingly skewed in favour of five states, which account for over 90 per cent of the 3,250-odd foreign firms functioning in the country. An assessment of the state-wise distribution of these foreign firms operating in India shows that Delhi, Maharashtra, Karnataka, Haryana and Tamil Nadu account for 90.9 per cent of these companies, primarily on account of these companies choosing to set up their base in at least one main city in each of these states — Mumbai, Bangalore, Gurgaon and Chennai, apart from national capital of Delhi.
Even as Mumbai is widely touted as the financial nerve centre of Indian business, Delhi is clearly the top draw for foreign firms when it comes to setting up base in India. The data, culled out from the department of industrial policy and promotion statistics and the MCA21 repository, takes into account the registered offices of the foreign firms and not their manufacturing bases, which, in case of a number of manufacturing sector companies such as Delhi-based unit of Japanese trading firm Mitsui and Co. India, Mumbai-based German engineering firm Siemens India, Gurgaon-based India unit of Swiss consumer goods major Nestle and the Chennai-based India unit of US auto major Ford Motor Corp, extend beyond the state where they are headquartered
Interestingly, industrialised Gujarat figures below Uttar Pradesh and even West Bengal Andhra Pradesh (the undivided state) figured high up in the list of states with a presence of foreign firms, at number six in the overall pecking order.
From the last three years, 50 per cent of new foreign firm that have set shop in India are invested in just one of the 16 broad sectoral subgroups — business services, a general term that describes work supporting a business and includes sectors such as information technology, consulting and finance. Apart from other service sectors, including trading and the personal and community services head, the presence of foreign firms in the manufacturing sector is largely restricted to the equipment and machinery segment.
According to government norms, foreign company planning to set up business operations in India can incorporate a company under the Companies Act, 1956, as a joint venture or a wholly-owned subsidiary. Foreign equity in such Indian companies can be up to 100 per cent depending on the requirements of the investor, subject to equity caps in respect of the area of activities under the Foreign Direct Investment policy. - Service sector sees slight moderation in March
The service sector has seen a marginal improvement in March, according to an HSBC/Markit survey. The sector has a share of over 57 per cent in the country’s gross domestic product (GDP). The HSBC Purchasing Manager Index (PMI) for Services came down to 53 in March from 53.9 in February.
The private sector labour market saw payroll numbers stabilize in March, she said, adding that with unfinished business rising at a faster rate, companies are likely to start hiring in the coming months.
The survey said that the latest reading was indicative of a moderate rate of expansion that was slightly weaker than the prior month. Service providers remained upbeat on the prospects for business activity in 12 months’ time. On prices, HSBC said the cost inflationary pressures in the private sector as a whole firmed in March.
Meanwhile, inflation measured by the wholesale price index (WPI) was at (-) 0.39 per cent in January, (-) 0.50 per cent in December and (-) 0.17 per cent in November, respectively. With inflation dropping to record lows, industry is demanding a further easing of interest rates to boost growth.
Combined with manufacturing data, the Composite Output data showed a marginal decrease and fell to 53.2 in March from 53.5 in February. Still, the survey believed that business activity in the Indian private sector economy expanded for the 11th consecutive month in March. - RBI keeps policy rates unchanged
Reserve Bank of India governor, Raghuram Rajan on 7th April kept policy rates unchanged. The repo rate, or the RBI's short-term lending rate, has been left unchanged at 7.5 per cent, and the Cash Reserve Ratio has been left steady at 4 per cent. The RBI governor said, in his first bi-monthly policy review for 2015-16, that transmission of policy rates to lending rates has not taken place so far, despite weak credit off take and front-loading of two rate cuts.
Major Banks including the State Bank of India, HDFC and ICICI Bank have announced cut in their lending rates after RBI governor Dr. Raghuram Rajan expressed strong disappointment over non-transmission of policy rates. India’s biggest lender, the State Bank of India has lowered its base lending rate by 0.15 percentage point to 9.85 per cent. The new rate will be effective from 10th April. - Cabinet nod for amendments to Real Estate Bill
The Union Cabinet has approved amendments to the Real Estate (Regulation and Development) Bill to protect the interests of millions of consumers and curbed malpractices in the real estate sector. The decision was taken at the Cabinet meeting chaired by Prime Minister Narendra Modi in New Delhi
The bill provides for creating a uniform regulatory mechanism across the country and enhances the growth of construction sector. It also seeks to ensure accountability and transparency in the real estate sector to access capital and financial markets essential for its long term growth.
The bill is currently pending in the Rajya Sabha. Through the amendments to the Bill, the Cabinet has extended the applicability of the Bill to commercial real estate also. Ongoing projects that have not received Completion Certificates have also been brought under the purview of the Bill and such projects will need to be registered with the Regulator within three months.
The Cabinet Committee on Economic Affairs (CCEA) approved the four-laning of the Sultanpur-Varanasi section of National Highway-56 in Uttar Pradesh. This will substantially upgrade Varanasi’s connectivity to Lucknow and other parts of Central UP. The project will cost around Rs 3,800 crore on this 138 kilometer long stretch of the Highway.
The CCEA also gave its approval to the four-laning of the Varanasi to Ghazipur, Gorakhpur and further to Nepal section of National Highway-29 in the state. This is likely to improve regional connectivity and facilitate improved movement of people and goods in the region and across the border. The four laning of this 200 kilometer will have a cost of around Rs 4,400 crore. In an another decision, the CCEA gave its nod to the four laning of the Madurai-Ramanathapuram section of National Highway - 49 in Tamil Nadu. The project will cost approximately Rs 1,400 crore.
The CCEA also approved two significant foreign investments in the pharmaceutical sector, leading to investment worth Rs 4,187 crore in Aurobindo Pharma and Glenmark Pharmaceuticals limited. - Govt to color code industries based on pollution potential
The Centre has decided to re-categorize industries into Red, Orange, and Green based on pollution potential in order to adopt pollution criteria. A resolution to this effect was adopted at the two-day State Environment and Forest Ministers' Conference.
Industries under Red category will be given consent to operate with the validity period of five years, and industries under Orange category will be given consent to operate for ten years. Industries under green category will be given a onetime consent.
The two-day conference deliberated upon a wide range of issues including waste to wealth, ease of doing business, TSR Subramanian committee recommendations, forest, wildlife, pollution-related issues, biodiversity and climate change. Almost 30 ministers participated from different states, and 400 personnel took part in the conference. - TRAI recommends 112 as single emergency number for India
Telecom Regulatory Authority of India (TRAI) has proposed that a single number '112' can be used for all emergency phone-calls across the country including for police, fire and ambulance.
It said in its recommendations that similar to the '911', an all-in-one emergency service in the US, government can integrate all existing emergency numbers such as 100, 101, 102 and 108 into the proposed '112' helpline number. The regulator suggested that the existing emergency numbers can be retained as secondary numbers. TRAI also recommended setting up of Public Safety Answering Points to handle people's call in distress. - MUDRA to help 5.7 cr small units access cheap credit
Indian Prime Minister inaugurated Pradhan Mantri MUDRA (Micro Units Development and Refinance Agency) Yojana or PMMY on 8th April
This bank gives loans to small borrowers, at a very low interest. With this scheme they got loans of up to Rs. 50,000 from banks at much lower rates.
The new institution has initially been set up as NBFC (Non Banking Financial Company) and as a subsidiary of SIDBI (Small Industries Development Bank of India). Subsequently it will become a full-fledged institution set up under legislation. This will work as refinance, credit guarantee and also as a regulator of Micro Financial Institutions. - Centre comes out with draft rules for auction of minerals
State Governments will be required to identify, demarcate and geo-reference the area where a mining lease is proposed to be issued through electronic auctions, according to the draft of ‘The Mineral (Auction) Rules, 2015’.
State governments could also be required to obtain the green clearances and acquire all the land that it doesn’t own in the proposed area for the Mining Lease.
The bidding parameters will be based on a production linked revenue sharing model. Bidders will have to quote a percentage of the revenue as the bidding parameter.
If a bid is successful and a Mining Lease is awarded, an amount equal to the actual production from the mine, the percentage quoted by the bidder and average price of the mineral as given by the Indian Bureau of Mines shall be payable by the successful bidder.
The mining leases will be auctioned through the electronic route. In order to be eligible for participation in the bidding of a Mining Lease, the mineral reserve should not exceed more than 1.25 times the requirement of the bidder for its specified end-use over 50 years. - About 460 million people need up-skilling across 24 sectors: Report
Close to 460 million people will need to be up-skilled or re-skilled across 24 sectors, say the sector-specific reports prepared to map skill and human resource requirements up to the year 2022. The incremental human resource requirement across 24 sectors, such as automobiles, food processing, education, media & entertainment, health care, agriculture, etc is nearly 109.73 million, said the report, launched by Minister of State (Independent) for Skill Development and Entrepreneurship released on 9th April
The report, commissioned by National Skill Development Corporation and authored by consulting firm KPMG, says the top 10 sectors that account for about 80 per cent of incremental human resource requirements include building & construction, retail, beauty & wellness, transportation & logistics, furniture & furnishings among others.
These reports will serve as the baseline for all skill development initiatives being planned across the country, adding that the idea behind it was to understand which sectors are likely to face the biggest gaps. These reports will be used for the implementation of the recently announced Pradhan Mantri Kaushal Vikas Yojana for State Skill Missions, and for various other skill initiatives being planned. - Moody's ups India's rating outlook; Fitch keeps it stable
Rating agency Moody's has raised India's credit outlook to positive, while Fitch projected faster growth, raising hopes for an upgrade in its sovereign rating in the next 12-18 months. India's sovereign rating by Moody's stands at 'Baa3', the lowest investment grade and just a notch above 'junk' status, while it earlier had a stable outlook for the country.
Fitch, which maintained its equivalent 'BBB-' rating with stable outlook, on the other hand projected 8 per cent GDP growth for the current fiscal, higher than 7.8 per cent estimate of the Reserve Bank of India. It also indicated positive rating action, if the Government follows its fiscal consolidation roadmap.
Another agency Standard & Poor's also has a similar rating for India and it recently upgraded its outlook from 'negative' to 'stable'. The sovereign rating and outlook of a country are often used by foreign investors and global bodies to gauge its investment climate. They also have a bearing on the cost of overseas borrowing by domestic companies. - EPFO suspends Rs 1,000 minimum monthly pension scheme
Retirement fund body, Employees' Provident Fund Organization, EPFO has suspended the 1,000 rupees minimum monthly pension scheme from this month. The decision will hit about 32 lakh pensioners. The scheme was launched with effect from September 2014, hiking the pension amount to a flat 1,000 rupees per month for those who were getting lower amount earlier. With the suspension of the scheme, the beneficiaries will get pension at earlier rates. - SEBI ups limit for currency derivatives trades to $15 mn
Capital market regulator Sebi has raised the transaction limit in exchange traded currency derivatives to 15 million US Dollars, from 10 million dollars previously, for both foreign and domestic investors without having any underlying exposure.
The Securities and Exchange Board of India in a circular issued in Mumbai said the Foreign Portfolio Investors (FPIs) and domestic clients can take position (long and short) in foreign currency up to 15 million US Dollars or equivalent per exchange. It further said requirement of an underlying exposure has been placed to check speculation in the currency market. - Farmers must readily get 25% of claims, insurers told
The Center has asked state governments to ensure early completion of formalities for settling claims of farmers who lost their Rabi crops due to unseasonal rains and instructed insurance companies to provide 25 per cent of claim amount immediately without waiting for 'crop cutting experiments'.
In order to obtain fair and precise estimate of the yield of principal crops including wheat, rice, maize, sugarcane and cotton, 'crop cutting experiments' are conducted through stratified random sampling technique. Claims are fixed on the results of such experiments.
Besides, banks have been asked to extend the loan repayment period for farmers in affected states. As per latest estimates, Rabi crops on 85 lakh hectares across 14 states have been damaged due to unseasonal rains and hailstorms during February 28-April 4.
It has also been decided that the norms of National/State Disaster Relief Fund (NDRF/SDRF) will automatically be reviewed in April every year based on annual inflation derived from the Wholesale Price Index. These measures, including enhancement of financial assistance by 50 per cent in case of crop losses, have been carried out after revising the norms under NDRF/SDRF which came into effect from April 1.
Though the hike in compensation is meant for only up to 2 hectares under NDRF/SDRF norms, it still will benefit around 87 per cent of farmers. The latest agriculture census shows that the average land holding of farmers in the country is just 1.16 hectare. Nearly 67 per cent of farmers own less than one hectare whereas 22 per cent farmers own between one and two hectares.
Meanwhile, in view of damage to onion and potato crops, agriculture minister Radha Mohan Singh has written to all states including Uttar Pradesh, Maharashtra and West Bengal to purchase and maintain stocks of onion and potato under 'Market Intervention Scheme' as there is likelihood of increase in their prices in these states. - RBI issues outsourcing guidelines for NBFCs
Given that Non-Banking Financial Companies (NBFCs) extensively outsource some of their operations, the Reserve Bank of India on 10th April issued draft guidelines on managing risks and code of conduct in outsourcing of financial services by them.
The RBI said an NBFC intending to outsource any of its financial activities should put in place a comprehensive outsourcing policy, approved by its Board.
The policy should incorporate, criteria for selection of such activities as well as service providers, delegation of authority depending on risks and materiality and systems to monitor and review the operations of these activities.
Typically outsourced financial services include applications processing (loan origination, credit card), document processing, marketing and research, supervision of loans, data processing and back office related activities, besides others.
In the draft guidelines, the RBI said NBFCs should not outsource core management functions including internal audit, compliance function and decision-making functions like determining compliance with KYC (know-your-customer) norms for opening deposit accounts, according sanction for loans and management of investment portfolio.
Moreover, service providers should not be located outside India. NBFCs should retain ultimate control of the outsourced activity.
NBFCs would be responsible for the actions of their service provider including Direct Sales Agents / Direct Marketing Agents and recovery agents and the confidentiality of information pertaining to the customers that is available with the service provider.
Outsourcing arrangements should not affect the rights of a customer against the NBFC, including the ability of the customer to obtain redress as applicable under relevant laws.
The NBFCs should evaluate and guard against the risks – strategic, reputation, compliance, operational, legal, exit strategy, counter party, country, contractual, access, concentration and systemic – in outsourcing.
The RBI said outsourcing of any activity by NBFC does not diminish its obligations, and those of its Board and senior management, who have the ultimate responsibility for the outsourced activity. - Railway panel suggests dynamic fare system for all mail, express trains
Introduction of dynamic fare system for all mail and express trains, change in schedule of certain trains and their proper maintenance are some of the suggestions that a railway panel made for optimization of traffic. Currently, the dynamic fare system, which is being practised in airlines, is operational in limited number of special trains.
Under this system, fare goes up if the demand is high for berths. Railway Minister Suresh Prabhu had formed an eight-member committee in February to examine factors affecting growth of passenger and freight traffic and suggest a plan of action for traffic optimisation.
The committee, in its report submitted on 28th March, suggested various measures including capacity augmentation, system improvements requiring changes in rolling stock and infrastructure maintenance among others to achieve substantial traffic growth. The committee has also suggested using satellite for Indian Railways' operation and safety needs. - RBI moves to restrict bank exposure to corporate loans
The Reserve Bank of India (RBI) has proposed to lower the ceiling on how much a bank can lend to a single corporate group, in a move to curb risks in the banking sector at a time when bad loans are on the rise. Under the proposal, banks would only be allowed to lend up to 25 percent of their core capital, down from the earlier ceiling of up to 55 percent, starting Jan. 1, 2019.
The central bank also said it would consider setting a minimum percentage of capital requirements that companies must raise from corporate bond and commercial paper markets, saying the corporate sector had become too dependent on banks for their financial needs.
The RBI had said earlier that it planned to review the lending cap to companies to gradually align it with a 25 percent ceiling set by global standard-setter Basel Committee on Banking Supervision. - RBI eases bad loan provisioning norms
The Reserve Bank of India has relaxed the counter cyclical provisioning rules against bad loans by allowing banks to set aside up to 50 per cent of floating provisions, up from 33 per cent earlier.
Counter cyclical provisioning refers to the specific amount that banks need to set aside in good times above the mandatory provisioning requirement as prescribed by the RBI.
These are used only in contingencies or extraordinary times of economic or system-wide downturns. Banks have started building such reserves since 2010.
The new relaxation will be applicable for floating provisions held by them as of the end of December 2014.
The provisioning rules against bad loans by allowing banks to set aside up to 50 per cent of floating provisions, up from 33 per cent earlier.
In February 2014, RBI had allowed banks to utilize up to 33 per cent of counter cyclical provisioning buffer/floating provisions held by them as on March 31, 2013.
Mounting bad loans have been a concern for the RBI and this relaxation may help banks provide for such loans thereby reducing the hit banks may face on their profitability due to the bad loans.
According to ICRA rating agency, total banks' gross bad loans ratio could rise to as much as 5.7 per cent by March 2016, from 4.5 per cent last December. - SEBI proposes new fund-raising platform for start-ups
To help start-ups and young entrepreneurs raise funds, the Securities and Exchange Board of India, on 30th March, proposed an ‘Alternate Capital Raising Platform’, wherein such firms can raise money from institutions and high net worth individuals (HNIs) from the capital markets under a relaxed regulatory regime.
However, retail investors would be restricted from investing in such companies, given the risks involved therein, SEBI said, while adding that adequate disclosures would be required to be made without hampering the capital-raising potential of such firms in new-age sectors such as technology.
The move is aimed at helping such companies raise funds from within India and stop their flight to overseas markets. - Cabinet nod for 2,000-km gas pipeline
The Union Cabinet has approved construction of a 2000 km gas pipeline between Haldia in West Bengal and Jagdishpur in UP. The project to be built at a cost of over ten thousand crores, will benefit population at the route and bring piped natural gas to consumers there. The Government has also approved restarting of fertilizer units in Gorakhpur and Barauni. - Govt unveils new Foreign Trade Policy
The government on 1st April unveiled its much awaited Foreign Trade Policy 2015-20, FTP. The new policy focuses on boosting exports and create jobs while supporting the Centre’s Make In India' and Digital India' programs.
The policy document was released by the Minister of Commerce and Industry Nirmala Sitharaman in New Delhi. According to Sitharaman the new policy will support both manufacturing and service sector with special emphasis on improving the ease of doing business.
She also said, the government intends to promote stable and sustainable policy framework in both merchandise and service to give global competitiveness.
The government announced several incentives in the five-year Foreign Trade Policy for exporters, with an aim to double India's exports of goods and services to USD 900 billion by 2020 and to raise the India's share in world export from 2 to 3.5 percent.
The objective of the new policy is to create architecture for the Indian economy so that it can gain global competitiveness and promote the diversification of Indian export.
It’s also focusing on to expanding its market and better integration with major regions in order to rationalize imports and reduce the trade imbalance. The policy is specifically focused on boosting defence, hi-tech items and e-commerce exports of handloom products through courier or foreign post offices.
The new trade policy introduced two new schemes - the first one is Merchandise Export from India Scheme, MEIS for export of specific goods to specific markets. The other, Services Export form India Scheme, SEIS to increase the export of notified services. These two schemes will replace multiple schemes with different conditions for eligibility and usage.
Under the policy the export obligation under the export promotion capital goods scheme has been reduced to 75 percent from 90 percent to promote capital goods and domestic manufacturing and enable them to develop their production capacities for both local and global consumption.
The other objective of the policy is to move towards paperless working in 24x7 environment. The policy comes at a time when export growth contracted 15 per cent in February 2014-15, reporting a negative growth for the third consecutive month.
Other important points
The foreign trade policy treats two crucial issues- How it links up with ‘Make in India’ and
- The position it adopts on regional trade and investment pacts (also called FTAs, free trade agreements), a huge concern among sections of industry.
However, the policy recognizes both the potential and inevitability of FTAs as the cornerstone of world trade. The tenets of multilateralism — by which India rightly swears to this day — cannot be disregarded, but the fact is that the Doha Round is mired in disagreement.
Domestic producers, with the help of the right policies and WTO-permissible incentives, should move up the value addition chain, rather than hope for tariff sops to come their way. Indeed, the focus should be on negotiating the right trade deals rather than erecting trade walls, which will destroy our competitiveness and productive skills at a time when they sorely need to be enhanced.
A target to double India’s goods and services exports to $900 billion, raising its share in world exports from 2 per cent to 3.5 per cent, can be achieved through a more intelligent approach to openness
The policy promotes indigenous capital goods production — which has been in the doldrums for years and a major contributor to the current account deficit — by reducing the export obligation for those who source such goods through the EPCG scheme.
‘Duty credits’ for imports under the newly announced Merchandise Exports from India scheme — which clubs a number of earlier schemes and therefore irons out procedural hassles for exporters — can be made to vary with the indigenisation level of the exported goods. - PM dedicates expansion project at SAIL's Rourkela Steel plant to nation
Prime Minister Narendra Modi dedicates the Rs. 12,000 crore expansion project at SAIL's Rourkela Steel plant to the nation and said Center and States are equal partners in development.
Prime Minister Narendra Modi bore gifts for the people of Odisha on his maiden visit to the Steel City on 1st April, a day which also commemorates the formation of the state.
Not only did the Prime Minister inaugurate the modernized unit of Raurkela Steel Plant and dedicated it to the nation he also announced upgrading of a hospital into Super Specialty Center and Medical College and a second bridge on Brahmani river.
The Steel Authority of India Limited has completed the Raurkela Steel Plant's capacity enhancement programme by investing Rs 12,000 crore. It raised the plant's hot metal capacity from 2 million tonne per annum to 4.5 million tonne per annum. A new plate mill has been installed as part of a modernisation programme. PM Modi is the second Prime Minister after Jawaharlal Nehru to visit the plant, one of the five integrated plants of public sector steel giant SAIL. ' - RBI unveils steps to unlock financial expertise
The Reserve Bank of India on 1st April issued operational guidelines for Indian and foreign banks to set up shop in International Financial Service Centres (IFSCs), the first of which has come up in the Gujarat capital Gandhinagar.
IFSCs are meant to provide avenues for the finest financial minds to fully leverage their expertise to enable India to become a producer and exporter of international financial services.
In its guidelines, the RBI said public and private sector banks authorized to deal in foreign exchange will be eligible to set up IFSC Banking Units (IBUs) in IFSCs.
Further, only foreign banks having a presence in India will be eligible to set up IBUs. This will not be treated as a normal branch expansion plan in India and therefore, specific permission from the home country regulator for setting up an IBU will be required. Eligible Indian and foreign banks will be permitted to establish only one IBU in each IFSC.
For most regulatory purposes, an IBU will be treated on par with a foreign branch of an Indian bank. The applications of foreign banks will be considered on the basis of existing guidelines for setting up branches in India subject to the additional requirement of the home country regulator/s confirmation in writing of their regulatory comfort for the bank’s presence in the IFSC.
Parent banks will be required to provide a minimum capital of $20 million or equivalent in any foreign currency to enable their IFSC Banking Units (IBUs) to start operations in IFSCs. The IBUs will have to maintain the minimum prescribed regulatory capital on an on-going basis.
If a foreign bank is setting up an IBU then it will be required to provide a letter of comfort for extending financial assistance, as and when required, in the form of capital/ liquidity support.
The RBI said the liabilities of IBUs will be exempt from both cash reserve ratio and statutory liquidity ration requirements. For IBUs, the sources of raising funds, including borrowing in foreign currency, will be persons not resident in India.
Deployment of the funds can be with both persons resident in India as well as persons not resident in India. However, the deployment of funds with persons resident in India will be subject to the provision of Foreign Exchange Management Act.
Permissible activities of IBUs will include undertaking transactions, which will be in a currency other than the Indian rupee, with non-resident entities other than individual/ retail customers/ high net worth individuals.
IBUs can deal with the wholly owned subsidiaries/ joint ventures of Indian companies registered abroad. They are permitted to undertake factoring/ forfeiting transactions of export receivables.
These entities are allowed to have liabilities including borrowing in foreign currency only with original maturity period greater than one year. They can, however, raise short term liabilities from banks subject to limits prescribed by the RBI.
IBUs cannot open any current or savings accounts: They cannot issue bearer instruments or cheques. All payment transactions have to be undertaken via bank transfers.
IBUs are permitted to undertake transactions in all types of derivatives and structured products with the prior approval of their Board of Directors. They are not allowed to participate in the domestic call, notice, term, foreign exchange, money and other onshore markets and domestic payments systems.
When it comes to Indian banks setting up IBUs, the RBI said all prudential norms applicable to their overseas branches would apply to the IFSC banking units. Foreign banks setting up IBUs will adopt prudential norms as prescribed by RBI.
IBUs have to operate and maintain balance sheet only in foreign currency and will not be allowed to deal in Indian Rupees except for having a special Rupee account out of a convertible fund to defray their administrative and statutory expenses.
The loans and advances of IBUs will not be reckoned as part of the net bank credit of the parent bank for computing priority sector lending obligations. The RBI will neither extend liquidity support nor provide ‘lender of the last resort’ support to IBUs. - Aircel-Maxis deal: ED attaches Rs 742 crore assets of Dayanidhi Maran
Enforcement Directorate has attached DMK leader and former Telecom minister Dayanidhi Maran's properties worth about Rs 742 crore in the controversial Aircel-Maxis deal. The agency had registered a case against the Maran brothers under the Prevention of Money Laundering Act. Earlier, Dayanidhi Maran was interrogated over 2-3 days at ED's Delhi office in the first week of December last year.
According to CBI, Dayanidhi Maran, as Union Telecom Minister, misused his office to engineer the sale of telecom Aircel to Malaysia's Maxis Group in 2006. - India ranks 119 on FM Global Resilience Index
In the 2015 FM Global Resilience Index, India has been ranked a low 119 out of 130 countries. The Index measures business resilience of nations based on economic, risk quality and supply chain factors.
Norway has topped the Resilience Index for being the country best suited for companies seeking to avoid disruptions in their global supply chain operations.
Venezuela is ranked last on the list. India, despite its scope and global potential, ranks119, falling from 112th rank in 2014.On the economic parameter, which takes into account GDP, political risk and oil intensity, India is ranked 115, the same as last year.
In the risk quality factor, India is ranked 109 for its quality of natural hazard and fire risk management, a slight improvement from its 113th rank in 2014. In the third category of supply chain, which looks at corruption control, infrastructure and local supplier quality, India is ranked 89th, falling 11 spots from the previous year. - Center extends Food Security Act deadline by 6 months
Center has extended implementation of Food Security Act for another six months in the states. According to Union Minister for Food and Civil Supplies……- Despite unseasonal rain and hailstorm there is adequate storage of food grains and sugar to meet the demand of people.
- Ministry has received proposal for free distribution of grains to the farmers of hailstorm affected states.
- Land acquisition ordinance re-promulgated
The land acquisition ordinance, which the government could not get converted into a legislation in Rajya Sabha due to stiff opposition, was on 3rd April re-promulgated, a day before it is to lapse. President Pranab Mukherjee has signed the ordinance as recommended by the Union Cabinet on March 31.
The earlier ordinance is to lapse on 4th April as it has not been converted into a legislation during the first part of the Budget session as required under the Constitution.
The fresh ordinance, which is the 11th by the Narendra Modi government, incorporates nine amendments that were part of the bill passed in Lok Sabha last month. It is pending before the Rajya Sabha where the ruling NDA coalition lacks the numbers to get it passed.
The pending measure, titled Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement (Amendment) Bill, that was passed in Lok Sabha sought to replace the ordinance that was promulgated in December. - Integrated Textile Apparel Zone in Gwalior
In Madhya Pradesh, a global level Integrated Textile Apparel Zone is being set up in Gwalior. The Integrated Textile Apparel Zone is being constructed on about 200 acres at cost of Rs 1,000 crore. It will provide jobs to over 30 thousand people.
In the zone area, factories will be constructed on 75 acres, automation unit and residential facilities on 15 acres and fibre finishing and waste treatment plant will be constructed on 115 acres. It is likely to be completed by December 2016. Several companies are participating in construction of the zone. Ultramodern technology will be used for its development. The zone will produce grey fabric, technical textile, home finishing and yarn dyeing fabric. - Rs 1200 cr plant in Sri City
Global beverages company PepsiCo on 3rd April inaugurated its new manufacturing facility at Sri City industrial park in Chittoor district of Andhra Pradesh. PepsiCo chairperson and CEO Indra Nooyi and Andhra Pradesh chief minister N Chandrababu Naidu took part in the event.
The plant was built at an initial investment of Rs 500 crore. The facility will be expanded in phases, entailing a total investment of Rs 1,200 crore. Upon completion, it is set to become PepsiCo's largest manufacturing facility in India.
Spread across 86 acres, the first line of the plant started manufacturing on Friday. When it becomes fully operational, it would benefit nearly 33,000 farmers thanks to local sourcing of mangoes and other fruits
The PepsiCo plant will manufacture fruit juice-based drinks, carbonated soft drinks, and sports drinks, among other beverages. PepsiCo has deployed state-of-the-art technologies with an emphasis on production efficiencies, environment protection and safety. The plant will be PepsiCo’s most water-efficient beverage plant in India and the firm aims to procure LEED certification for this facility
LEED, or Leadership in Energy & Environmental Design, is a set of rating systems for the design, construction, operation, and maintenance of green buildings, homes and neighborhoods. It is developed by the US Green Building Council.
PepsiCo has a large manufacturing facility, with seven production lines in Telangana to cater to the markets of the undivided Andhra Pradesh and parts of Karnataka. The company, which has 22 brands in its product portfolio comprising food and beverages, has annual retail sales of about $1 billion.
Sitting on a land bank of 8,000 acres, Sri City currently houses 106 companies employing 25,000 directly The GVK group plans to set up a hospital, medical college and a research centre at Sri City with an initial investment of Rs 100 crore. - RBI relaxes KYC norms for Non-Banking Financial Companies
The Reserve Bank of India has relaxed the Know Your Customer norms and allowed sole proprietor firms to open accounts in co-operative banks by submitting a single proof of their business. Earlier, they were required to submit two such documents.
The Apex bank in a communication to urban, state and central co-operative banks said in cases where the banks are satisfied that it is not possible to furnish two such documents, they would have the discretion to accept only one of those documents as activity proof.
The RBI decision has come after being told that such firms were facing difficulties with regard to furnishing two documents as business activity proof while opening accounts of sole proprietary firms in certain cases.
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