ECONOMY AFFAIRS AUGUST 2014

ECONOMY AFFAIRS AUGUST 2014

• RBI says 36% of total bad loans from six key sectors
  The Reserve Bank has said about 36 per cent of the overall 4.1 per cent bad assets in the system have been created by six sectors of the economy - infrastructure, metals, textiles, chemicals, engineering and mining. These sectors, though, have only 30 per cent of the credit share.
  
  The central bank, in its annual report for FY2013-14, said gross non-performing assets in the system have grown to 4.1 per cent in FY'14 from 3.4 per cent a year ago. It also said the contribution of mandatory priority sector loans to the overall bad assets have come down during the last fiscal.
  
  Stating that the state-run banks are the chief sources of stress, RBI said these six specifically identified sectors of infrastructure, metals and products, textiles, chemical and chemical products, engineering industries and mining and quarrying alone contributed 36 per cent of gross NPAs, as against their 30 per cent contribution to total advances.
  
  The gross non-performing assets ratio for the non-priority sector grew to 4 per cent as of March 2014 as against 3 per cent in the year ago period, while the same for priority sector stood stable at 4.4 per cent, it said. On reports of some improvement shown by the banks in the asset quality in the fourth quarter, the RBI hinted at there not being a cause for celebration yet, as this was due to the asset sales to ARCs.
  
  Additionally, it also highlighted the lurking threat, pointing out at the high growth in restructured assets during the previous fiscal 2012-13. It said the asset sales by all banks rose to Rs 127.1 billion in the March quarter, as against Rs 35.7 billion in the previous quarter and Rs 6 billion in the quarter before.
  
  In the overall asset quality stress scenario, gross NPAs at the state-run lenders rose to 4.7 per cent as against 3.8 per cent in the year ago period, while foreign banks also showed a rise in NPAs to 3.9 per cent from 3 per cent.
  
  Private sector banks provided some relief despite the overall gloomy business climate, with their gross NPAs being stable at 1.9 per cent, the RBI said.
  
  In the financial stability report released December last year, the RBI had estimated that gross NPAs increase to a peak of 4.6 per cent in September 2014, (from 4.2 per cent in September 2013) and then improve to 4.4 per cent in March 2015. Lending to the retail sector was the succour to the banks during this time, and the RBI annual report also cemented this point with data pointing to an increase in credit, coupled with a decline in NPAs.
  
  There was a marginal increase in share of retail credit to 19 per cent of gross credit as of March 2014, but gross NPAs from this portfolio declined to 2 per cent from 2.3 per cent in FY'13, the RBI said.
  
  What are NPA’s?
  A Non-performing asset (NPA) is defined as a credit facility in respect of which the interest and/or installment of principal has remained ‘past due’ for a specified period of time NPA is a classification used by financial institutions that refer to loans that are in jeopardy of default. Once the borrower has failed to make interest or principle payments for 90 days the loan is considered to be a non-performing asset. Non-performing assets are problematic for financial institutions since they depend on interest payments for income. Troublesome pressure from the economy can lead to a sharp increase in non-performing loans and often results in massive write-downs.
  
• Competition panel imposes Rs 2,545cr
  The companies penalized by the competition watchdog were Maruti Suzuki, Tata Motors, Honda Siel Cars India, Volkswagen India, Fiat India, BMW India, Ford India, General Motors India, Hindustan Motors, Mahindra & Mahindra, Mercedes-Benz India, Nissan Motor India, Skoda Auto India and Toyota Kirloskar Motor. The penalty - two per cent of these companies' average turnover in the past three years - will have to be deposited within 60 days of receipt of the order.
  
  A detailed investigation by the competition watchdog had revealed these carmakers violated rules with respect to agreements with local original equipment suppliers, as well as pacts with authorized dealers.
  
• Green nod to 3 investment zones
  The environment ministry has given its approval to three projects and finalized terms of reference for two others to be built on the Delhi-Mumbai Industrial Corridor (DMIC). The projects which got clearance on July 30 were the Dholera investment region in Gujarat; Manesar-Bawal investment region in Haryana; and Khuskhera-Bhiwadi-Neemrana investment region in Rajasthan.
  
  The ministry’s statutory appraisal panel finalized the terms of reference for the construction of the Dighi Port industrial area in Maharashtra and the development of the Pithampur-Dhar-Mhow investment region in Madhya Pradesh. All these are on the dedicated freight corridor (DFC), part of DMIC, which aims to develop industrial zones between Delhi and Mumbai covering 1,483 kilometers through six states.
  
  The Dholera investment region plans to build electronics, pharmaceuticals, automobile general manufacturing, agro and food processing and tourism sectors. The Manesar-Bawal region will take up projects related to engineering, technology, future technology, consumer products and service sectors. The Khushkhera-Bhiwadi-Neemrana investment region will deal with metal products, consumer-oriented sectors.
  
• Government notifies new FDI rules for Defense sector
  The Cabinet Committee on Security will be the final decision making body for Foreign Direct Investment (FDI) proposals in Defense beyond 49 per cent. This is even when the proposed inflow is in excess of Rs 1,200 crore.
  
  According to the new rules on FDI in Defense notified by the Department of Industrial Policy & Promotion, based on the Cabinet decision early this month, FDI proposals beyond 49 per cent vetted by the CCS need not be cleared by the Cabinet Committee on Economic Affairs (CCEA). So far, all FDI proposals with foreign investments over Rs 1,200 crore had to be cleared by the CCEA.
  
  The FDI limit to be cleared through the Foreign Investment Promotion Board (FIPB) route has been raised to 49 per cent from 26 per cent. The cap is composite and includes different types of foreign investments such as FDI, Foreign Institutional Investors (FIIs), Foreign Portfolio Investors (FPIs), Non-Resident Indians (NRIs), Foreign Venture Capital Investors (FVCI) and Qualified Foreign Investors (QFIs), it said. Further, portfolio investment by FPIs, FIIs, NRIs, QFIs and investments by FVCIs together will not exceed 24 per cent of the total equity of the investee or Joint Venture Company.
  
  The final clearance for FDI proposals within the 49 per cent limit will be given by the CCEA in case foreign investments exceed Rs 1,200 crore. All decisions on FDI applications will be normally communicated within a time frame of 10 weeks from the date of acknowledgement, the note said. The licence applications will be considered and given by the DIPP in consultation with the Ministries of Defence and External Affairs.
  
  The note specifically laid down that the applicant company seeking permission of the Government for FDI up to 49 per cent should be an Indian company owned and controlled by resident Indian citizens. The management of the applicant company should be in Indian hands.
  
  However, for proposals seeking approval for foreign investment beyond 49 per cent, the applicant could be an Indian company or a foreign investor. The condition of Indian management control is also not applicable in this case.
  
  What is FDI?
  Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.
  
• Diesel decontrol on hold for now
  The Ministry of Petroleum and Natural Gas has stopped short of proposing complete deregulation of diesel prices. In an inter-ministerial note on the pricing mechanism for petroleum products, the Ministry has endorsed the existing system of raising diesel prices by up to 50 paisa a liter every month.
  
  Once retailers bring their rates in sync with market prices, a fresh proposal will be put up for the Cabinet Committee on Political Affairs to consider decontrol, the note said. Petrol prices have already been deregulated.
  
• EPF interest rate @ at 8.75 %
  The Employees' Provident Fund Organization (EPFO) on 26th August announced a rate of interest of 8.75 per cent on provident fund deposits for the current fiscal year (2014-15), a move which would benefit its over five crore subscribers across the country.
  
  The decision to retain the interest rate at 8.75 per cent was taken at a meeting of the Central Board of Trustees - the apex decision making body of EPFO - chaired by Labor Minister Narendra Singh Tomar in Delhi. As per practice, the decision by retirement fund body EPFO's trustees would be implemented after the concurrence of the Finance Ministry. The sum assured under EDLI is provided in proportion to monthly wage ceiling which is Rs. 6,500 at present. It would be enhanced to Rs.15, 000 per month soon.
  
• India must increase milk production to 7.8 million tones
  The National Dairy Development Board (NDDB) has said India must increase the average incremental milk production from 4 million tons (mt) in the last 10 years to 7.8 mt in the next 8 years to meet the growing demand. India’s estimated demand for milk is expected to be about 155 mt by 2016-17 and 200 mt in 2021-22
  
• Government notifies rules allowing 100% FDI in Railways
  The Government has notified new foreign direct investment norms for the Railways allowing 100 per cent foreign investments through the automatic route in a number of areas.
  
  These include suburban corridor projects through the public private partnership (PPP) route, high-speed train systems, rolling stock including trans sets, coaches manufacturing and maintenance facilities, railway electrification, signaling systems, freight terminals, passenger terminals and infrastructure in industrial parks like railway line and sidings. However, FDI will not be allowed in train operations and safety.
  
• Cabinet lifts ‘one subsidized LPG cylinder a month’ cap
  Cooking gas consumers will now get 12 cylinders of 14.2-kg at subsidized rate in a year, even if they don’t consume one bottle/month. The Cabinet, in its meeting on 27th August, decided that while 12 subsidized LPG cylinders a year will continue to be supplied to all domestic consumers, there will be no separate monthly restriction. This changes the earlier decision taken on February 28. The Cabinet Committee on Economic Affairs decided to empower the Road Ministry to decide the mode of delivery of projects.
  
• Reserve bank simplifies norms to refinance ECBs
  The Reserve Bank of India (RBI) has delegated to banks the power to approve in cases where the average maturity period of fresh external commercial borrowing (ECB) is more than the residual maturity of an existing one. Till now, RBI decided such cases.
  
  It has specified some conditions.. The all-in cost of fresh ECB should be less than that of all-in cost of existing ECB. And, both borrowings should comply with the applicable guidelines. The refinancing in such cases is to be undertaken before the existing ECB matures.
  
  And, the borrower should not be in the default or caution list of RBI and not be under investigation by the directorate of enforcement. Foreign branches or subsidiaries of Indian banks will not be permitted to refinance an existing ECB this way.
  
  This facility will be available even when existing ECB was raised under the approval route, subject to the amount of new ECB being eligible to be raised under the automatic route. All other aspects of ECB policy have been kept unchanged.
  
• Union government launched financial inclusion scheme
  Banks opened a record 15 million accounts on 28th August, against a target of 10 million, as Prime Minister Narendra Modi launched massive financial inclusion programme, the Pradhan Mantri Jan Dhan Yojana. The scheme aims to take banking facilities to 75 million households by January 26, 2015, against the earlier deadline of August 15, 2015.
  
  For this, banks have to open another 60 million accounts in five months. To help lenders meet the target, the prime minister announced a life cover of Rs 30,000 for all those opening bank accounts by January 26. Under the scheme, each customer will also get a RuPay debit card, with an in-built accident insurance cover of Rs 1 lakh and an overdraft facility of Rs 5,000, subject to satisfactory operations of the account for at least six months.
  
  The life cover would be free for the scheme's beneficiaries. For the debit card, a fee of 50 paise will be charged per transaction. The scheme simultaneously launched the scheme at 600 programmes and 77,852 camps across the country. The prime minister also launched a mobile banking facility on basic phones; now, one can transfer funds and check the available balance using any handset, through the SMS platform. Under the Jan Dhan Yojana, all benefits from the Centre/states/local bodies are proposed to be transferred to the accounts of beneficiaries.
  
  Also, the government will push the Direct Benefits Transfer (DBT) scheme and try to restart it for liquefied petroleum gas. It is likely the National Rural Employment Guarantee Scheme will be included under DBT. For the entire exercise, the existing banking network will be strengthened - it will rope in an additional 50,000 business correspondents and set up about 7,000 branches and 20,000 new automated teller machines, in the first phase.
  
• Vijay Kelkar panel on gas prices
  To make new exploration and production activities viable, a committee under former finance secretary Vijay Kelkar has recommended market-linked pricing for domestic natural gas. The suggestion comes amid ongoing consultations by a committee of secretaries on a new gas-pricing formula.
  
  The committee, set up in 2013 to "prepare a road map for enhancing domestic production and sustainable reduction in import dependence by 2030", had brought out its first report in January. According to it, market-driven prices for gas will create a gas market in the country by increasing supply. Natural gas prices should be free from government intervention, it said.
  
  In the interim, the government should develop transnational gas pipeline infra to connect demand and supply centers across the country, frame guidelines for effective regulation through the Petroleum and Natural Gas Regulatory Board and develop additional gas sources like coal-bed methane and shale, besides encouraging trading in spot and future contracts for gas, it suggested.
  
  It suggested till market-linked prices were arrived at, the difference between market and subsidized prices of gas should be reduced, in line with fiscal-consolidation initiatives.
  
  Deliberating on subsidized sales, the panel noted it was unfair to supply natural gas at artificially low prices to all consumers, including those who could afford to pay higher prices, to support the priority sectors of power and fertilizers. Priority sectors could be supported by the government, which would get more taxes and royalty from a higher price, owing to transparent and targeted subsidies, the panel said.
  
• CBDT sets up committee to decide retro tax cases
  The Central Board of Direct Taxes today set up a high-level committee to scrutinize all Income Tax cases arising out of the retrospective tax amendment.
  
  The four-member committee will be headed by the Joint Secretary of the Foreign Tax and Tax Research-I unit of the CBDT. It will decide on such cases within of 60 days of receiving them from the Assessing Officer. It will be incumbent upon the AO to approach the committee when faced with an I-T case that is for the period before April, 2012.
  
  The other members on the panel include Joint Secretary (Tax Planning and Legislation-I), the Commissioner of Income Tax Appeals and the Director (Foreign Tax and Tax Research-I), who will also be the Secretary of the committee.
  
  According to the terms of reference for the new committee, it would, on receipt of the reference from the Assessing Officer "shall examine the proposed action of the Assessing Officer and after providing an opportunity to the assesses, take a decision on the proposed action".
  
• Minimum pension of Rs 1000 under EPFO
  The minimum monthly pension of Rs 1,000 for Employees’ Provident Fund Organization (EPFO) subscribers and increase in wage ceiling to Rs 15,000 a month will come into effect from September 1.
  
• Public debt rises to Rs. 6 lakh crore in June quarter of 2015
  India's public debt rose sharply to Rs. 6 lakh crore in the April-June period 2014 from Rs. 5, 63,911 crore in the corresponding period last year. For fiscal year 2014-15, gross and net market borrowing of Rs. 6 lakh crore and Rs. 4.61 lakh crore, respectively, show an increase of 6.4 per cent and 1.6 per cent over 2013-14, a finance ministry statement said.
  
  In April-June quarter of 2013-14, gross market borrowing was over Rs.5.63 lakh crore and net borrowing was over Rs. 4.53 lakh crore. During Q1 of FY15, the government issued dated securities worth Rs.1.98 lakh crore, higher than Rs. 1.51 lakh crore in Q1 of last fiscal.
  
  The public debt of Rs. 6 lakh crore excludes liabilities under the 'Public Account'. The total public debt increased by 3.7 per cent in June quarter, from previous March quarter.
  
  What is Public debt?
  Public debt, which is also sometimes referred to as government debt, is all of the money owed at any given time by any branch of the government. It encompasses debt owed by the federal government, the state government, and even the municipal and local government. It is, in effect, an extension of personal debt, since individuals make up the revenue stream of the government. Public debt accrues over time when the government spends more money than it collects in taxation. As a government engages in more deficit spending,the amount of debt increases.
  
  Many different types of debt make up public debt. A great deal of it is external debt, which is money that is owed by the government to foreign lenders, either in the form of international organizations, other governments, or groups like sovereign wealth funds, which invest in government bonds. Government debt is also made up of internal debt, where citizens and groups within the country lend the government money to continue operating. In some ways, this is a lot like lending to oneself, since ultimately the responsibility for it falls back on the very people lending money.
  
• GDP grows 5.7% in June quarter, most in 2 years
  For the quarter ended June this year, India’s economy grew at a nine-quarter high of 5.7 per cent, compared with 4.6 per cent in the previous quarter, driven largely by industry, even as the biggest segment of the services sector — trade, hotels, transport and communications — remained subdued, official data showed on 29th August. For the June quarter of 2013-14, gross domestic product (GDP) had increased 4.7 per cent. During the June 2014-15 quarter, the agriculture segment expanded 3.8 per cent, against 6.3 per cent in the previous quarter and four per cent in the corresponding period of 2013-14.
  
  The construction space expanded 4.8 per cent in the June quarter, against only 0.7 per cent in the previous quarter and 1.1 per cent in the year-ago period. The key indicators of construction, production of cement and consumption of finished steel, registered growth of 9.5 per cent and 0.7 per cent, respectively. During the quarter, the mining segment recorded growth of 2.1 per cent, following eight quarters of declines or stagnation.
  
  Services, the biggest sector of the Indian economy, didn’t fare very well, rising 6.8 per cent, slightly higher than 6.42 per cent in the previous quarter. However, it was lower compared with the 7.2 per cent growth seen in April-June, 2013-14.
  
• Fiscal deficit already at 61.2% of full-year target
  The Centre's fiscal deficit touched 61.2 per cent of the full-year Budget Estimate (BE) in April-July, only a notch lower than the 62.8 per cent in the same period last year. The deficit constituted 10.5 per cent of gross domestic product (GDP) in the first quarter (April-June) of the current financial year, slightly higher than 10.3 per cent in the corresponding period last year.
  
  The government has pegged its fiscal deficit, the gap between its expenditure and receipts, at Rs 5.31 lakh crore or 4.1 per cent of GDP this year. According to the data issued on Friday by the Controller General of Accounts (CGA), it touched Rs 3.24 lakh crore in April-July, the first four months of 2014-15.
  
  If the government spends more than Rs 2.06 lakh crore in the remaining eight months of the financial year, the deficit will swell, forcing it to borrow more from the market to finance this. This might crowd out private investment and put pressure on interest rates and inflation. The data issued by the CGA showed total expenditure during April-July at Rs 5.03 lakh crore or 28.1 per cent of the entire year's estimate, against 31.3 per cent last year.
  
  Plan expenditure in the four-month period this year was Rs 1.32 lakh crore or 23 per cent of the BE, compared with 27 per cent in the year-ago period. Non-Plan expenditure at Rs 3.71 lakh crore or 30.5 per cent of the BE was also lower from 33.5 per cent in April-July 2013-14. If expenditure was lower than last year, so were revenue receipts. Total receipts in April-July this year were Rs 1.79 lakh crore or 14.2 per cent of the full-year estimate, compared with 16.1 per cent in the corresponding period of the previous year. Of this, tax receipts were Rs 1.46 lakh crore, which is 15 per cent of the BE.
  
  What is Fiscal Deficit?
  When a government's total expenditures exceed the revenue that it generates (excluding money from borrowings). Deficit differs from debt, which is an accumulation of yearly deficits.)
  
  Difference between Fiscal deficit and Current Deficit
  Current account deficit means imports are larger than exports, or negative net exports. Fiscal deficit means government expenditure is larger than tax revenues. If saving=investment, then current account deficit= fiscal deficit.
  
  What is Plan and Non plan expenditure?
  Of these, plan expenditures are estimated after discussions between each of the ministries concerned and the Planning Commission. Non-plan revenue expenditure is accounted for by interest payments, subsidies (mainly on food and fertilizers), wage and salary payments to government employees, grants to States and Union Territories governments, pensions, police, economic services in various sectors, other general services such as tax collection, social services, and grants to foreign governments.
  
  Non-plan capital expenditure mainly includes defense, loans to public enterprises, loans to States, Union Territories and foreign governments.
  
• Services grew 6.8% in June quarter
  The services sector showed a lower growth of 6.8 per cent in April-June this year, against 7.2 per cent in the year-ago period, the financial year's first quarter. The growth was relatively less in trade, hotels, transport and communication. It is, however, more than the 6.4 per cent growth posted in January-March, the final quarter of the earlier financial year, 2013-14.
  
  According to the data issued on 29th August by the Central Statistics Office, the highest growth in the services category in the June quarter was in financial services at 10.4 per cent. Lower, though, than the 12.9 per cent growth in the corresponding quarter of last year and 12.4 per cent in January-March.
  
  About service sector
  Also known as the tertiary sector, the development of a country's services sector is an indicator of its economic development. India's services sector is a vital component of its economy, as it presently accounts for around 60 per cent of its gross domestic product (GDP). It has matured considerably during the last few years and has been globally recognized for its high growth and development.
  
  The growth in the services sector in India is expected to be around 5.6 per cent in FY 15 owing, particularly, to the growth in the IT sector. The services sector in India comprises a wide range of activities, including trading, transportation, communication, financial, real estate and business services, and community, social and personal services
  
• New RBI norms likely to hurt Asset Reconstruction Firms
  Asset reconstruction companies (ARCs) will see a reduction in business growth as banks are likely to benefit from faster resolution of bad assets under the new RBI guidelines.
  
  Banks have been increasingly selling bad assets to ARCs in a bid to clean up their balance sheets. Even as the new guidelines bring in more discipline with better realisations for banks, ARCs will have to bear the brunt.
  
  Under the guidelines, when a bank sells an asset to an ARC, the latter has to invest 15 per cent (earlier it was 5 per cent) in security receipts (SRs).
  
  Also, the planning time for NPA realisation or initial valuation of the SRs has been cut to six months from 12 months currently, which means immediately after six months ARCs have to get the SRs to be rated by a credit rating agency.
  
  There are 14 registered ARCs in India, of which, only four are active. The pressure to build books had forced ARCs to make unrealistic valuations. “ARCs’ total AUM had increased four-fold to Rs 42,000 crore in the year till June 30, 2014. This growth is expected to moderate to 30 per cent in the following 12 months because of the amendments to regulations announced by the RBI,” a Crisil report said.
  
  What are ARC’s?
  The word asset reconstruction company is a typical used in India. Globally the equivalent phrase used is “asset management companies". The word "asset reconstruction" in India were used in Narsimham I report where it was envisaged for the setting up of a central Asset Reconstruction Fund with money contributed by the Central Government, which was to be used by banks to shore up their balance sheets to clean up their non-performing loans
  
  A high level of NPAs in the banking system can severely affect the economy in many ways. The high level of NPAs leads to diversion of banking resources towards resolution of these problems. This causes an opportunity loss for more productive use of resources. The banks tend to become risk averse in making new loans, particularly to small and medium sized companies. Thus, large scale NPAs when left unattended, cause continued economic and financial degradation of the country. The realization of these problems has lead to greater attention to resolve the NPAs. ARCs have been used world-wide, particularly in Asia, to resolve bad-loan problems. However, these had a varying degree of success in different countries. ARCs focus on NPAs and allows the banking system to act as "clean bank".
  
  In India the problem of recovery from NPAs was recognized in 1997 by Government of India. The Narasimhan Committee Report mentioned that an important aspect of the continuing reform process was to reduce the high level of NPAs as a means of banking sector reform. It was expected that with a combination of policy and institutional development, new NPAs in future could be lower. However, the huge backlog of existing NPAs continued to hound the banking sector. It impinged severely on banks performance and their profitability. The Report envisaged creation of an “Asset Recovery Fund" to take the NPAs off the lender's books at a discount.
  
• IIM-C gets global accreditation
  Indian Institute of Management Calcutta has become the first IIM to achieve the AACSB accreditation in business programmes, giving a global recognition it its students and helping it to attract more foreign faculty to its campus.
  
  The coveted Association to Advance Collegiate Schools of Business (AACSB) accreditation has been earned by less than five per cent of the world's business programmes.
  
  IIM Calcutta will also have the scope to get more foreign faculty members to teach students and collaborate globally on areas of research. AACSB provides its members with a variety of products and services to assist them with the continuous improvement of their business programs and schools. IIM Calcutta has already been accredited by Association of MBAs and is a member in India of Community of European Management Schools.
  
  IIM-Calcutta
  Indian Institute of Management Calcutta was the first Indian Institute of Management to be established. It is consistently ranked as one of the best business schools in India and the Asia-Pacific region
  
• New TRAI regulations for international calling cards
  In a move that could lower ISD rates, telecom regulator TRAI on 19th August fixed the rate payable by international long distance players to local operators. TRAI in a statement said access charges have been fixed at 40 paisa per minute for wireless services and Rs 1.20 per minute for wire line services. Access charges for international subscriber dialing (ISDs) are paid by international long distance operators (ILDO) to local players.
  
  In the current prevailing regime, a consumer does not enjoy the option of choosing his/her ILDO and is dependent on access providers for making ISD calls. Under the new regulation, customers can buy calling cards from any ILDOs and get the advantage of competition in the long distance sector.
  
• IFC inks pact with Airtel Zambia
  In order to strengthen financial inclusion, World Bank’s arm International Finance Corporation (IFC) and Airtel Zambia has signed an agreement to increase access to mobile financial services in that nation. The agreement is valued at $1 million. IFC will provide market research and advisory services on agent network management and business strategy development.
  
  The project is part of the partnership for financial inclusion, a $37.4 million joint initiative of IFC and The MasterCard Foundation to expand microfinance and advance mobile financial services in Sub-Saharan Africa. In Zambia, 66 per cent of the adult population is currently excluded from formal financial services.
  
  International Finance Corporation:
  The International Finance Corporation (IFC) is an international financial institution that offers investment, advisory, and asset management services to encourage private sector development in developing countries. The IFC is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1956 as the private sector arm of the World Bank Group to advance economic development by investing in strictly for-profit and commercial projects that purport to reduce poverty and promote development
  
• ICICI bank introduces EMI facility for debit card holders
  ICICI Bank, the country’s largest private sector lender, has introduced an equated monthly installment (EMI) option for its customers on debit card purchases. The EMI option, which was so far limited to credit card holders, will now allows even debit card holders to convert their high-value transactions into equated monthly installments.
  
  Only debit card holders who have fixed deposits of minimum Rs 10,000 linked to the savings bank account will be allowed to exercise this option of buying products on an EMI of three, six, nine or 12 months. The customer is not allowed to break the fixed deposit till the end of the EMI term.
  
• States want GST levy turnover limit lowered to Rs. 10 Lakh
  
  The proposed goods and services tax (GST) faced fresh challenges on 20th August, as states demanded complete control over small traders in the new tax regime. They also stuck to their earlier demand of keeping the entry tax, petroleum and alcohol out of GST purview and making a provision in the Constitution Amendment Bill to compensate states for revenue loss after the new indirect tax system came into force.
  
  The committee, which met to discuss reports of its sub-committee on dual control, threshold and exemptions, managed to form a consensus with the Centre on the last two issues. It was decided the common threshold for levy of GST would be kept at Rs 10 lakh (Rs 5 lakh for special-category states), against Rs 25 lakh proposed by the sub-committee. They agreed to harmonize the exemption lists of states and the Centre which have 96 and 243 items, respectively.
  
  The unity among states on some of the issues might force the Centre to relent to an extent. Officials said this might not be an ideal GST but would still be better to begin with.
  
  "The Centre is infringing upon the fiscal autonomy of states and that is not acceptable to us. We get Rs 4,000-5,000 crore from purchase tax on foodgrain. If purchase tax is subsumed in GST, we will lose. So, there should be an in-built mechanism in the Bill to compensate us," said Haryana Excise & Taxation Minister Kiran Choudhry.
  
  The contentious issue of central sales tax (CST) compensation was not discussed on Wednesday, as Jaitley had already told states he would clear the dues of Rs 34,000 crore over three years. CST is levied by the Centre on inter-state movement of goods but collected by states.
  
  All about GST:
  The goods and services tax (GST) is a comprehensive value-added tax (VAT) on goods and services. France was the first country to introduce this system in 1954. Through a tax credit mechanism, GST is collected on value-added goods and services at each stage of sale or purchase in the supply chain.
  
  GST paid on the procurement of goods and services can be set off against that payable on the supply of goods or services. But being the last person in the supply chain, the end consumer has to bear this tax and so, in many respects, GST is like a last-point retail tax.Many countries have a unified GST system. However, countries like Brazil and Canada follow a dual system wherein GST is levied by both federal and state or provincial governments.
  
  In India, a dual GST is being proposed wherein a central goods and services tax (CGST) and a state goods and services tax (SGST) will be levied on the taxable value of a transaction. The central and state governments are discussing the GST system proposed to be implemented in India from April 1, 2010. Representing the states in the discussions is the empowered committee of state finance ministers.
  
• Finance ministry orders forensic audit on Dena Bank, OBC
  A forensic audit has been ordered by the Finance Ministry on Dena Bank and Oriental Bank of Commerce (OBC) following reports of misappropriation of funds to the tune of Rs.436 crore from fixed deposits received from customers. Investigation into the matter was on and further action would be taken on the basis of the findings of the investigation, he added.
  
• 5 Indian firms among Forbes' most innovative companies
  Five Indian companies, including Hindustan Unilever and Tata Consultancy Services, are among Forbes' list of the world's 100 most innovative companies that investors think are most likely to "generate big, new growth ideas".
  
  The annual 'World's Most Innovative Companies' list, released yesterday, has been topped by California-based global cloud computing company Salesforce for the fourth year in a row.
  
  The five Indian companies on the list are consumer goods company Hindustan Unilever, which is ranked 14th, followed by IT major Tata Consultancy Services (57), construction services firm Larsen & Toubro (58), pharmacy major Sun Pharma Industries (65) and Bajaj Auto (96).
  
• RBI panel to study tax structure on financial instruments
  The Reserve Bank of India, on 20th August, set up a working group to study various issues relating to taxation of financial instruments. The working group is expected to suggest appropriate rationalization measures to boost private financial savings.
  
• RBI sees India Inc. back in investment mode
  The Reserve Bank of India (RBI) on 21st August said the economy was emerging from a rocky stretch with a reversal in the corporate investment cycle, along with improvement in macroeconomic pointers like fiscal deficit and inflation. In its annual report for 2013-14 (year ended June 30), the central bank drew confidence from a stable government at the Centre.
  
  The report said………….
  Forward-looking surveys and economic indicators along with rising business confidence provided hope that the decline in private corporate investment "could be arrested" in 2014-15 and fresh investments of over Rs 1.2 lakh crore "could be realized".
  The economy was "poised to make a shift to the higher growth trajectory" and pegged gross domestic product growth at 5.5 per cent, compared with sub-five per cent rates in the past two years.
  
  The RBI noted the current financial year had started on a promising note, with industrial production beginning to look up and the inflation rate growing at a slower pace than last year.
  
  The central bank noted that the retail inflation rate had come down and indicators of manufacturing and services activity were strong. Also, the monsoon season had recovered to reach a rainfall level closer to normal, the report said.
  
  The biggest comforting factor for the central bank comes from the fiscal deficit. The government is showing a resolve to bring down the deficit, which reached a record high during the previous government's tenure. The fiscal deficit target for this financial year is set at 4.1 per cent of GDP.
  
  On the external front, the central bank sees the Indian economy "far more resilient" now due to moderation of current account deficit and a stable rupee, but it warned against market disturbence in the event of quicker monetary tightening by advanced economies.
  
• Stressed assets in infra sector rose sharply: RBI
  The Reserve Bank of India (RBI) has raised concerns about the sharp rise of stressed assets in the infrastructure sector, which have shot up from 8.4 per cent to 29.2 per cent in one year till March 2014, its annual report for 2013-14 said.
  
  According to the central bank, although stressed advances of the banks have declined marginally to 10 per cent of total advances in March 2014 from 10.2 per cent in September 2013, infrastructure sector’s contribution has shot up.
  
  The rise of stressed assets was sharp despite the share of advances to the infrastructure sector increasing only by 0.9 per cent to 14.4 per cent at the end of March. Iron and steel, textiles, mining (including coal), aviation along with infrastructure accounts for about 24 per cent of total advances but they comprise over half of the stressed assets.
  
  The report also states that the credit quality of banks has weakened significantly and specifically there has been deterioration in NPAs for both public sector banks and foreign banks. Gross NPAs has increased from 2.4 per cent of gross advances in March 2011 to 4.1 per cent in March 2014, according to the report. The capital adequacy ratio (CAR) has also declined from 15 per cent in December 2009 to 13 per cent in March 2014.
  
• Tighter norms for NBFCs to lend against shares
  The Reserve Bank of India (RBI) has prescribed tighter norms for non-banking financial companies (NBFCs) to lend against shares. The move is aimed at tackling volatility in the capital market due to offloading of shares by NBFCs. Now, for loans against shares, financial companies will have to maintain a loan-to-value (LTV) ratio of 50 per cent.
  
  The total capital market-related loan book of NBFCs is estimated at Rs 35,000 crore, sources say. Of this, margin funding is said to account for Rs 5,000-8,000 crore; the rest is accounted for by promoter financing.
  
  In the past, there have been attempts to address the margin-financing loophole that NBFCs with capital market exposure sought to exploit. Rules framed by the Securities and Exchange Board of India (Sebi) allowed brokers to provide only 50 per cent margins to customers. Many brokerages with NBFC arms allow them to trade with 20 per cent margins. This raises their leverage from twice the amount they put up as collateral to five times. The NBFC route allowed brokerage groups to use the regulatory grey area, as NBFCs are regulated by RBI, not SEBI.
  
  Now, NBFCs with an asset size of more than Rs 100 crore will have to inform stock exchanges about the shares pledged in their favor by borrowers seeking to avail of loans.
  
  There have been instances of NBFCs being overexposed to certain stocks, as well as borrowers being overleveraged. Currently, lending against shares by NBFCs isn’t subject to specific norms, apart from the general regulation of all NBFCs.
  
  In a nut shell
  • Under the new rules, NBFCs will have to maintain a loan to value (LTV) ratio of 50 per cent all along on loans given against shares
  • RBI says companies can accept only group-I securities as collateral for loans of value more than Rs 5 lakh
  • NBFCs with asset size of Rs 100 crore and above will have to report online to stock exchanges about shares pledged with them by borrowers for availing loans
    
• FDI jump 34% to $1.92bn in June
  Foreign direct investment (FDI) flows to India surged by about 34 per cent to $1.92 billion in June, according to the official data. In June 2013, the country had received FDI worth $1.44 billion.
  
  During April-June in this fiscal, the foreign inflows recorded a growth of 34 per cent. FDI was at $7.23 billion in April-June, 2014-15 compared to $5.39 billion in April-June 2013-14, the data by Department of Industrial Policy and Promotion showed. In May, the FDI figure ($3.60 billion) was the highest since September 2013 when the country received foreign investment of $4.13 billion.
  
  Amongst the top 10 sectors, telecommunications received the maximum FDI in the first quarter of the current fiscal at $2 billion followed by services ($738 million), pharmaceuticals ($680 million) and construction ($281 million).
  
  During the period, India received maximum FDI from Mauritius at $2.61 billion, followed by Singapore ($1.18 billion), the UK ($567 million), Japan ($695 million) and the US ($249 million). In 2013-14, FDI inflows in India were $24.29 billion against $22.42 billion in 2012-13.
  
  India requires around $1 trillion in the next five years to overhaul its infrastructure sector, including ports, airports and highways to boost growth. The government is taking more steps to boost FDI in the country. It has raised the foreign investment limit to 49 per cent in defence manufacturing and relaxed the policy in construction sector. The government has also proposed to increase the FDI cap in insurance to 49 per cent.
  
• Panel formed to review gas price mechanism
  Ahead of the September 30 deadline for announcing new gas prices, the government has set up a four-member committee of secretaries (CoS) to review the gas-pricing formula.
  
  This will consists of secretaries of the power ministry, fertilizer ministry and expenditure department as members. Petroleum ministry’s additional secretary Rajiv Kumar will be the member-secretary. The panel will give its report in two or three weeks.
  
  The previous United Progressive Alliance government had on January 10 notified a new domestic gas pricing formula, which would have doubled the rates to $8.4 a million British thermal units from April 1.
  
• Rs 90,000 crore undisclosed income detected: CBDT
  According to CBDT undisclosed income to the tune of Rs 90,000 crore was detected during 2013-14 in various searches and surveys conducted by the Income Tax department
  
• SEBI orders closure of PACL scheme
  Saying Pearl Agrotech Corp Ltd (PACL) ran a collective investment scheme, mobilizing about Rs 50,000 crore, the Securities and Exchange Board of India (Sebi) has asked the company to refund investors and wind up operations.
  
  This is the biggest crackdown on a large-scale illicit money-pooling scheme. At Rs 49,100 crore, the amount concerned is twice that collected by the Sahara group, which is said to have mobilized Rs 24,000 crore. The order said the company had mobilized Rs 44,736 crore till March 31, 2012, and another Rs 4,364.78 crore between February 26, 2013, and June 15 this year.
  
• RBI to conduct more frequent term repos
  The Reserve Bank of India (RBI) on 22nd August came out with a new regime for liquidity management to keep overnight rates close to the repo rate and entice banks to do more efficient liquidity management. Under the revised framework, RBI would conduct more frequent term repos. The central bank could also choose to sell part of the cash balances of the government for liquidity in the system. The banking regulator has retained the overall borrowing limit under term repo to 0.75 per cent of banks’ net demand and time liabilities (NDTL) and 0.25 per cent of banks’ NDTL for overnight repos. The central bank will continue to provide liquidity through the overnight fixed rate repos at the existing rate of eight per cent to the extent of 0.25 per cent of banks’ NDTL. These auctions will be conducted between 9:30 and 10:30 AM from Monday to Friday.
  
• SEBI gives nod for Realty, Infra investment trust norms
  Securities and Exchange Board of India (SEBI) on 10th August issued the guidelines under which Real Estate Investment Trusts (REITs) will be allowed to operate in India.
  
  An REIT operates a bit like a mutual fund, offering units to investors. The funds are invested in assets owned, and usually operated by the REIT. Investors stand to earn both dividends (from rental income of the property), as well as capital appreciation.
  
  According to the guidelines, investors will have to put in a minimum of Rs 2 lakh. The units can be traded on stock exchanges once listed. The trading lot for such units will be Rs 1 lakh.
  
  SEBI also cleared norms for Infrastructure Investment Trusts (InvITs). InvITs are similar to REITs, but focus on investments in infrastructure.
  
  Any REITs or InvITs entering the market will have to be listed. The minimum initial offer size should be Rs 250 crore. They can also borrow additional funds to acquire assets, but the borrowings cannot exceed 49 per cent of the value of the trust’s assets.
  
  To popularize REITs, the minimum asset size has been reduced to Rs 500 crore from the Rs 1,000 crore initially proposed. REITs cannot have more than three sponsors, subject to each holding at least 5 per cent. To ensure that they have enough skin in the game, it has been made mandatory for fund sponsors to jointly hold 25 per cent of REIT units for three years and continue holding 15 per cent thereafter. The new norms will also ensure that excessive leverage is not undertaken through REITs, while the Trustees will be required to be independent and not an associate of the sponsor or manager of the Trust.
  
  The minimum net worth of the manager has been increased to Rs 10 crore from the Rs 5 crore proposed in the draft norms. At least 80 per cent of the money mobilized by an REIT has to be invested in completed revenue-generating properties, while the rest can be put in developing properties, mortgaged-backed securities, shares of realty and G-secs, among others.
  
  The approved minimum net worth of an InvIT sponsor is Rs 100 crore (against the Rs 10 crore proposed). The net worth of the investment manager has been doubled to Rs 10 crore. For investors. the minimum investment size for InvITs is Rs 10 lakh. Those managing the InvIT should mainly be independent directors. To avoid a conflict of interest, associates of the trustee have been restrained from investing in the InvIT units.
  
  For non-PPP (public-private partnership) projects, credit ratings have not been mandated. The InvITs will invest in infrastructure projects, either directly or through a special purpose vehicle. The proposed holding of an InvIT in underlying assets cannot be less than ?500 crore. A publicly offered InvIT will need to distribute at least 90 per cent of its net distributable cash flows to investors.
  
• Bimal Jalan to head Expenditure Commission
  Prime Minister Narendra Modi approved the constitution of an Expenditure Management Commission (EMC). The Commission is expected to recommend major expenditure reforms that will enable the government to lower its fiscal deficit. Over time, a fiscal deficit in control will help the Government to strengthen the macro economy and ease inflation in the country.
  
  The Commission will be mandated with the task of suggesting an overhaul for reducing the food, fertiliser and oil subsidies and other ways of controlling India’s fiscal deficit. It is expected to submit its interim report before the presentation of the 2015-16 Budget next February. The final report is expected before the Budget of 2016-17. The Government will shortly issue the terms of reference for the Commission.
  
  Former Reserve Bank Governor Bimal Jalan will head the Commission. Members include former Finance Secretary Sumit Bose and former Reserve Bank Deputy Governor Subir Gokarn.
  
• Banks tighten free ATM payouts
  The Reserve Bank of India on 14th august said the number of mandated free transactions for savings bank account holders at other bank ATMs located in six metro centers will be reduced from five to three per month from November 1.
  
  The six metro centers -- Mumbai, New Delhi, Chennai, Kolkata, Bengaluru and Hyderabad -- are well-served in terms of payment infrastructure.
  
  Banks have been advised to provide their savings bank account holders with at least five free transactions per month at their own ATMs. Beyond this, banks may decide to levy transaction charges (not exceeding Rs. 20 plus applicable taxes per transaction) which are decided in a transparent manner.
  
• RBI board gives green signal for talks to appoint COO
  The Reserve Bank of India’s board has given its approval for initiating a dialogue with the Government for creating an additional position of a Chief Operating Officer of the rank of Deputy Governor. This is part of the Human Resources (HR) restructuring exercise, which also entails grouping of departments into five functional clusters, initiated by the central bank.
  
  Financial Services Secretary GS Sandhu said appointment of Chief Operating Officer (COO) or fifth RBI Deputy Governor cannot take place without amending the RBI Act.
  
• Insurance Bill sent to Select Panel
  The Union Government on 14th August sent the controversial Insurance Laws (Amendment) Bill to a Select Committee of the Rajya Sabha. The 15-member panel comprises Chandan Mitra, Mukthar Abbas Naqvi and Jagat Prakash Nadda (BJP), Anand Sharma, BK Hariprasad and JD Seelam (Congress), Satish Chandra Misra (BSP), KC Tyagi (JD-U), Derek O’Brien (TMC), V Maitreyan (AIADMK), Naresh Gujral (SAD), Ram Gopal Yadav (SP), Kalpataru Das (BJD), P Rajeev (CPI-M) and Rajiv Chandrasekhar (Independent) as its nominees.
  
• FDI policies and changes
  The Union Cabinet on 6th August cleared the proposal to set the composite cap for foreign investment in the defense sector at 49 per cent, compared with the current 26 per cent foreign direct investment (FDI) ceiling. But the management control of companies receiving these investments must remain in the hands of Indians. Also, some railway operations and projects were allowed to receive up to 100 per cent FDI.
  All proposals for FDI in the defense sector, even those for less than 26 per cent, will require approval from the Foreign Investment Promotion Board (FIPB); these clearances will be given on a case-to-case basis. By comparison, the decision for the insurance industry was that FIPB’s clearance would be required in proposals for more than 26 per cent FDI.
  
  FDI proposals worth Rs.1, 528 croes:
  FIPB has approved foreign direct investment (FDI) proposals worth Rs. 1,528.38 crore from 14 firms including ACME Solar Energy and Sinclair Hotels. The proposals were considered by the Foreign Investment Promotion Board at its meeting held on July 4. It rejected the FDI proposals of six companies and deferred decision on seven others.
  Of the proposals approved, pharmacy company Laurus Labs will invest Rs. 600 crore; ACME - Rs. 275; Sinclairs Hotels - Rs. 41.52 crore and Golden Agri Resources (India) Rs. 485.9 crore.
  
  Procedure of receiving FDI’s in India:
  An Indian company may receive Foreign Direct Investment under the two routes as given under:
  
  Automatic Route:
  FDI is allowed under the automatic route without prior approval either of the Government or the Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by the Government of India from time to time.
  
  Government Route:
  FDI in activities not covered under the automatic route requires prior approval of the Government which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic Affairs, Ministry of Finance. The Indian company having received FDI either under the Automatic route or the Government route is required to comply with provisions of the FDI policy including reporting the FDI to the Reserve Bank
  
  No FDI in train services:
  The 100 per cent foreign direct investment (FDI) in railways, approved by the Union Cabinet, will not be allowed in train operations, the government clarified on 7th August.
  
  What are FDI’s?
  Foreign direct investment (FDI) is a direct investment into production or business in a country by an individual or company of another country, either by buying a company in the target country or by expanding operations of an existing business in that country. Foreign direct investment is in contrast to portfolio investment which is a passive investment in the securities of another country such as stocks and bonds.
  
• SEBI bill introduced
  Union Government has introduced SEBI bill into the Lok Sabha on 4th August, this bill aimed at transferring the search and seizure power of the SEBI to designated court in Mumbai. This power, initially in the hands of the SEBI Chairman, has now been passed on to a designated court in Mumbai.
  The new provision will help the regulator in initiating action without any interference from First Class Judicial Magistrates in various cities. Further, the designated court has been allowed to consider applications from the regulator from the entire country. Once the court accepts SEBI’s application, the team positioned at the given location can initiate action.
  As regards the provision related to penalty, it has now been proposed that in case of any violation, the adjudicating officers can impose minimum penalties, of not less than Rs 1 lakh. However, the SEBI Board will have powers to enhance the quantum of penalty. Currently, there is a provision of just one penalty with no minimum level or range and with no discretion given to the adjudicating officers.
  Apart from these two new provisions, the Government has retained provisions in the ordinance in the revised Bill. These include assessing call data records in securities-related offences, registering money pooling schemes involving Rs 100 crore or more, attaching properties, and setting up special courts to try offences under the proposed Bill.
  The proposed Bill has a validity clause so that actions initiated under the earlier three ordinances will have continued effect. This has been done to remove the apprehension that once the ordinance lapses, the regulator may face legal battles in cases where assets have been attached or action initiated on the basis of power prescribed under the ordinances. So far, SEBI has initiated 1,358 attachment proceedings in 389 cases and recovered more than Rs 1,600 crore.
  
• India ranked No 8 on global list of Multi Millionaires
  The latest wealth index by New World Wealth that looks at multimillionaires — an individual with net assets of at least $10 million — has ranked India eighth in the global rich list, below countries such as the US, China, Germany and the UK but above Singapore and Canada.
  India is home to 14,800 multimillionaires. Mumbai is home to the highest number of them — 2,700, as many as that in Munich. Mumbai is the only Indian entry in the top 30 cities for multimillionaires. Hong Kong is the city with the largest number of multi-millionaires (15,400), followed by New York (14,300), London (9,700), Moscow (7,600), Los Angeles (7,400) and Singapore (6,600).
  As far as countries are concerned, the US tops the list with 183,500 people worth over $10 million, followed by China (26,600), Germany (25,400), UK (21,700), Japan (21,000), Switzerland (18,300) and Hong Kong (15,400).
  Over the past 10 years, millionaire and multimillionaire numbers have grown at vastly different rates. Millionaire numbers worldwide have gone up by 58% during this period, whilst multi-millionaire numbers have gone up by 71%. There are currently just over 13 million millionaires in the world (as of June 2014). Approximately 495,000 of these individuals can be classified as multi-millionaires.
  
• India ratings up FY15 GDP forecast to 5.7%
  India Ratings & Research revised its FY15 gross domestic product (GDP) growth forecast to 5.7 per cent from its April 2014 forecast of 5.6 per cent. However, it expects industrial GDP growth in FY15 to improve to 5.1 per cent from earlier estimates of 4.1 per cent (FY14: 0.4 per cent). If achieved, it will be the highest since FY12 (7.8 per cent). The Index of Industrial Production (IIP) grew 4 per cent over April-May 2014, it said.
  On inflation front, the agency expects Wholesale Price Index and the Consumer Price Index-based inflation to decline to 5.4 per cent and 7.9 per cent in FY15, respectively (FY14: 6.0 per cent and 9.5 per cent), expecting the government to intervene in the agricultural commodity market, should the prices rise. Current account deficit (CAD) is estimated to widen to $48.7 billion (2.2 per cent of the GDP), mainly due to improved industrial growth outlook which will boost imports. However, the financing of the CAD may not prove challenging due to higher capital inflow.
  
• Income from Alternate Investment Fund to be taxed at 30%
  The Finance Ministry has said that income of Alternative Investment Funds (AIF) will be taxed at the rate of 30 per cent. Such funds basically pool in money from domestic and overseas investors and invest on the basis of a pre-determined policy.
  The Central Board of Direct taxes was requested to clarify whether the income of such funds would be taxable in the hands of investors (contributors to the fund) or the trustees of the fund (who will be representing investors and know as Representative Assessee).
  
• FDI in Telecom jumps to $1.5b
  After registering a huge decline in the recent past, foreign direct investment in the telecom sector grew manifold to $ 1.5 billion in the first two-months of the 2014-15 fiscal. In 2013-14, the sector has received total FDI of $ 1.3 billion. FDI in the telecom sector, which includes radio paging, cellular mobile, basic telephone services, attracted only $ 9 million during April-May period of the last fiscal, as per the Department of Industrial Policy and Promotion.
  The companies that have won 4G spectrum in 2010 would soon start investing in the country to rollout their networks. In 2011-12, 2010-11 and 2009-10, the sector attracted FDI worth $ 1.99 billion, $ 1.66 billion and $ 2.55 billion respectively.
  Increase in the foreign investment inflows in the sector helped the overall FDI, which increased by 34 per cent to $ 5.30 billion during April-May.
  Other sectors that received large FDI inflows during the first two months of the current fiscal include services ($ 574 billion), Pharmaceuticals ($ 680 million) and power ($ 147 million).
  During the period, India received maximum FDI from Mauritius ($ 2.28 billion), Singapore ($ 982 million), the UK ($ 545 million) and Japan ($ 319 million). The inflows had aggregated to $ 24.29 billion in 2013-14, as against $ 22.42 billion in 2012-13.
  
• Flipkart aiming big
  For Flipkart, India’s largest internet company by estimated market value announced a $1-billion fundraising, the biggest so far by an e-commerce Company in the country
  
• TATA group to invest $35 billion in 3 years
  The Tata group will invest $35 billion (Rs 2,10,000 crore) in the next three years and lay special focus on four clusters - retail, defense & aerospace, financial services and realty &infrastructure - over the next 10 years.
  Termed Vision 2025, the plan will also include achieving a market capitalization comparable with the 25 most valuable companies in the world. In 2013-14, Tata Group's annual revenue grew 18.5 per cent to Rs 6, 24,757 crore ($103.27 billion), nearly 5.5 per cent of India's gross domestic product.
  
• Annual job growth doubled past decade: Economic Census
  Job growth in establishments during the United Progressive Alliance (UPA) government’s tenure was almost double the rise during the previous National Democratic Alliance (NDA) regime, provisional results of the Sixth Economic Census, issued on 30th July, shown.
  According to the report, issued by the statistics and programme implementation ministry, the average annual job growth during 2005-14 was 4.3 per cent, compared to a 2.5 per cent annual rise in jobs during 1998-2005.
  The economic census provides information on operational and economic variables, activity-wise, of the establishments across India. The latest round was conducted in January 2013-April 2014. The report noted the number of establishments in the country in 2013-14 were 58.5 mn. In 2005, the number of enterprises was 42.1 mn. The census defines an establishment as units engaged in production and/or distribution of goods and services, not for the purpose of sole consumption. An enterprise is termed as a multi-plant firm which can have multiple establishments across the country.
  Close to 60 per cent of these establishments were based in rural parts. Around 40 per cent of the total was functioning inside households and 41.1 per cent had fixed structures outside a household. The census also reflected the increase in women's participation. The proportion of women workers in the total workforce in 2013-14 was 25.6 per cent, compared to 19.3 per cent in 2005.
  
• Fiscal deficit zooms to 56% of budget target in April-June
  The Fiscal deficit has exceeded 56 per cent in the first three months (April-June) of the current fiscal. The Government has set a target of Rs 5.31 lakh crore, or 4.1 per cent of GDP. According to data released by the Controller of General Accounts (CGA), fiscal deficit in the first three months touched Rs 2.98 lakh crore. This is 56.1 per cent of the Budget target against 48.4 per cent during the corresponding period last fiscal. The expenditure during April-June of the current and previous fiscal is at the same level of 23 per cent of the Budget target.
  This fiscal, revenue mobilization slipped to 9.2 per cent from 10.6 per cent of the target. Both tax and non-tax revenue mop-up as a percentage of the Budget targets was less than in the last fiscal. Tax collection stood at 10.1 per cent, against 11.5 per cent of the target, while non-tax revenue mobilization was 7.2 per cent, against 8.9 per cent of the target.
  Another reason for the higher fiscal deficit could be payment of fuel subsidy. It is a normal practice that subsidy due of the last quarter (January-March) of the previous fiscal is paid during the first quarter (January-March) of the current fiscal.
  This quarter, the Government paid Rs 24,849 crore as fuel subsidy, which is 39 per cent of the Budget target, against 34 per cent in the last fiscal.
  What is Fiscal Deficit?
  Fiscal deficit is the difference between the government’s expenditures and its revenues (excluding the money it’s borrowed). A country’s fiscal deficit is usually communicated as a percentage of its gross domestic product (GDP)
  What are the causes of fiscal deficit?
  Government spending, inflation and lower revenue are among some of the main factors that point to fiscal deficit. The cynical nature of fiscal deficit does not only jeopardize the growth of the country but also the government’s economic management abilities.
  In an ideal financial system, which has a balanced fiscal deficit, the cost of expenditure is low while production and growth is advancing. But when there is an increase in fiscal deficit it means that the government is spending too much while it is earning less. Hence, it is important that the government keeps its expenses under control.
  One way the government earns money, is through taxes. For example, if the government lowered taxes or provided tax concessions to a particular group of people, then it would earn less, leading to an increase in fiscal deficit. And that’s one of the reasons why you will find the government giving a face-lift to the tax structures. In the same context, cutting of custom duty and excise duty will lead to declining revenues.
  Like India, many developing countries are making an effort to resolve big fiscal deficits. On the bright side, for India, among other sources of revenue, foreign investments and inflow of remittance s from Indians living overseas has helped avoid very high deficits.
  Fiscal deficit does not come about only in case of creating less revenue and spending more money. Another major reason for a growing fiscal deficit can be slow economic growth or sluggish economic activities.
  Difference between fiscal deficit and budget deficit
  Budget deficit is commonly known as the national debt. Budget deficit means that a country has more money going out when compared to the money its earning. Budget deficits can usually be resolved by raising taxes, cutting spending or a combination of both. Unlike fiscal deficit, while calculating budget deficit, the country’s borrowings are taken into consideration
  In case of fiscal deficit, it can be measured without taking into account the interest it pays on its debt. Fiscal deficit is basically the difference between the money it spends and the money it makes
  Difference between fiscal deficit and current account deficit
  Fiscal deficit is a percentage of the nation’s GDP and can be considered as an economic event in which the government expenditure exceeds its revenue. Meanwhile, current account deficit occurs when the country’s imports are greater than the country’s exports of goods, services and transfers.
  
• Fitch retains India’s rating
  Fitch Ratings said it has retained the 'BBB-' sovereign rating - the lowest investment grade - on India and a revision will depend on the government's efforts to introduce bold reforms. The agency has also retained 'stable' outlook for the country's ratings.
  Fitch said the Budget 2014-15 announced by the new government is positive of credit-ratings and further revision will be dependent on the government's willingness to make difficult choices.
  
• Food subsidy to touch Rs.1.31 lakh crore
  The government’s food subsidy bill is estimated to touch Rs 1, 31,086 crore annually to implement the food security law
  Food Security Law:
  The National Food Security Act, 2013 (also Right to Food Act) is an Act of the Parliament of India which aims to provide subsidized food grains to approximately two thirds of India's 1.2 billion people. It was signed into law September 12, 2013, retroactive to July 5, 2013. Under the provisions of the bill, beneficiaries are to be able to purchase 5 kilograms per eligible person per month of cereals at the following prices: 
  • Rice at Rs. 3 per kg
  • Wheat at Rs. 2 per kg
  • Coarse Grains (millet) at Rs. 1 per kg.
  Pregnant women, lactating mothers, and certain categories of children are eligible for daily free meals. The bill has been highly controversial. It was introduced into India's parliament in December 2012, promulgated as a presidential ordinance on July 5, 2013, and enacted into law in August 2013
  
• SEBI inks pacts with 27 regulators in EU
  Sebi has entered into pacts with 27 securities market regulators in the European Union (EU) for consultation, cooperation and exchange of information related to the supervision of Alternative Investment Fund Managers.
  The bilateral MoUs were signed in pursuance of the EU Alternative Investment Fund Managers Directive (AIFMD) which requires that adequate supervisory cooperation arrangements are put in place between EU and non-EU supervisory authorities including Sebi.
  AIFMD was adopted by the European Council and Parliament in July 2011. Under the AIFMD framework, such co-operation arrangements between EU and non-EU authorities is a pre-condition for allowing greater market access and cross border functioning of the AIF business.