ECONOMY AFFAIRS DECEMBER 2014

ECONOMY AFFAIRS DECEMBER 2014

• Delaying construction increasing cost: Panel
  The Parliamentary Standing Committee on Defence has rapped the government for the steep cost escalations and repeated delays in the construction and commissioning of naval vessels in the country. The committee made the observations in a detailed report submitted to Parliament in the last week of December, 2014
  
  Three of the major projects which saw steep cost overruns are Project 15A for guided-missile destroyers, which has increased from Rs. 3,580 crore to Rs. 11,662 crore; Indigenous Aircraft Carrier (IAC), under construction at Cochin Shipyard Limited, which has shot up by six times from Rs. 3,261 crore to Rs. 19,341 crore with dates revised from 2010 to 2016; and Project 28 for Anti-submarine corvettes which doubled from Rs. 3,051 crore to Rs. 7,852 crore.
  
  There has been a spurt in accidents of naval vessels in the recent past, the committee observed and in most cases the reason for mishap is either material failure or human error, the report said.
  
  The Navy had informed the committee that a ban by the Ministry of Finance on creation of posts owing to austerity is severely impacting recruitment, training and deployment, and requested for a review of the ban. The Navy’s response was to the committee’s inquiry on the growing shortage of officers and sailors since 2007.
  
  Reviewing the progress on the new mountain strike corps being raised by the Army, the committee expressed dismay that the government had not made any additional fund allocation and it was being raised with “war wastage reserves.”
  
  The panel also expressed dissatisfaction over critical shortages in missiles and artillery guns and developing basic products such as rifles. There was failure on the part of the government in procuring life-saving bullet proof vests for the troops “jeopardising the lives of thousands of soldiers.”
  
  Overall, there are 37 cases of procurement pending at 13 different pre-Contract Negotiation Committee (CNC) stages and 27 cases lying at post-CNC stages. This makes a staggering 64 cases of capital procurements pending, the committee noted with concern.
  
• Ordinance on land acquisition
  The Centre on 29th December recommended an ordinance to make significant changes to the Land Acquisition Act so as to fast track projects in key sectors such as power, roads, defence and housing. A Cabinet meeting, chaired by Prime Minister Narendra Modi, took note of the difficulties in implementing the Land Acquisition Act. The Centre claimed that the amendments will strengthen the provisions to protect the interests of the ‘affected families’ and also reduce procedural difficulties in acquiring land required for ‘development’.
  
  The Centre has been interacting with States on the Act. In June, several States, including those ruled by the Opposition, had conveyed to the Centre that the present Act was creating trouble in acquiring land for even State projects. Their main objections were to the compulsory consent of 80 per cent of the affected landowners and the social impact assessment of the alienated land.
  
  The Act had kept out of its purview 13 most frequently used laws for land acquisition. The Centre was supposed to bring in a notification in Parliament to extend the provisions of compensation and rehabilitation and resettlement (R&R) to the people affected by land acquisition carried through the 13 Central Acts, as mentioned in the Fourth Schedule. However, the Centre said the ordinance will bring these Acts under the purview of the Land Acquisition Act. “These Acts are applicable for national highways, Metro rail, electricity-related projects, etc. Thus, a large percentage of farmers and affected families were denied the compensation and R&R measures prescribed under the Act,” a Government statement said, adding the amendments will benefit farmers and affected families.
  
  The ordinance proposes a fast-track process for defence and defence production, rural infrastructure (including electrification), housing for poor (including affordable housing), industrial corridors and infrastructure projects (including projects taken up under the public-private partnership mode). The ordinance does away with the clauses on compulsory social impact assessment and approval of 80 per cent of people whose land is being acquired.
  
• Cabinet nod for hiking stake in IFCI
  Government on 29th December approved raising its stake in IFCI Ltd to 51 percent by infusing Rs 60 crore in the country's oldest financial institution. IFCI was set up in 1948 as a statutory corporation under the Industrial Finance Corporation Act, 1948. The Act has since been repealed by the Industrial Finance Corporation (Transfer of Undertaking and Repeal) Act, 1993 and IFCI Ltd was registered under the Companies Act, 1956 on March 31, 1993, it said. The current shareholding of Government of India in IFCI after inclusion of the preference share capital was 47.93 percent, it said. Therefore, IFCI is not a Government Company under section 2(45) of the Companies Act, 2013. A contribution of Rs 60 crore to the capital of the company would raise the shareholding of the Government to 51 percent. The Finance Ministry had sought the Cabinet approval to hike its stake in the IFCI to 51 percent by pumping in Rs 60 crore, and make it a 'government company'. IFCI's total paid-up capital of about Rs 1,925 crore comprised Rs 1,662 crore as equity capital and nearly Rs 264 crore as preference share capital.
  
• Norms eased for abroad investments
  Reserve Bank on 29th December relaxed the norms for Indian companies investing abroad by doing away with the ceiling for raising funds through pledge of shares, domestic and overseas assets. Earlier, the fund rising for the purpose of overseas investment by Indian companies were subject to various limitations.
  
  In addition to joint ventures (JVs) and Wholly Owned Subsidiaries (WOSs), the RBI has announced similar concession for pledging of shares in case of step down subsidiary.
  
• Banks vulnerable to financial contagion: RBI
  India's close ties between lenders would leave the banking system especially vulnerable to contagion in case of trouble at a single institution, the Reserve Bank of India (RBI) warned in a report on 29th December.
  
  That means trouble at a single bank among the top five most connected lenders in India could lead to contagion that wipes out nearly 50 percent of Tier I capital in the banking system under a severe stress scenario, the RBI said in its semi-annual Financial Stability report.
  
  The central bank did not identify the top five banks used for its study. It said its stress tests involved conditions such as potential failure by a bank that is a net lender, a net borrower, or both. The RBI also used money markets as one of its variables for stress tests given banks frequently lend to each other in short-term maturities.
  
  India's non-banking financial firms (NBFC) also pose a risk to the banking system due to their close ties with banks, the RBI warned in the report.
  
  This so-called shadow banking system is worth $190 billion in India, ranking it third largest among BRICS countries and 15th in the world, the RBI said.
  
• DP growth to be much better in 2015-16: Finance Minister
  India's economic growth is expected to pick up in the current fiscal and will be "much better" in 2015-16, Finance Minister Arun Jaitley said on 29th December. Indian economy was growing at over 9 per cent for three years before it was impacted by the global financial crisis of 2008. The growth rate fell to sub-5 per cent in the last two consecutive fiscals -- 2012-13 and 2013-14. In the first half of the current fiscal, it improved to 5.5 per cent, up from 4.9 per cent recorded in 2013-14 fiscal.
  
  The government the GDP growth to be 5.5 per cent in 2014-15, up from 4.7 per cent recorded last year. Minister of Commerce and Industry Nirmala Sitharaman said India is among the few countries for which IMF has upgraded its growth outlook.
  
  The mid-year economic review of the government has projected that the economy has potential to grow at a much faster pace, she added
  
• New norms for Municipal bonds
  To give a boost to the Centre’s ‘smart cities’ initiative, market regulator SEBI on 30th December proposed a new set of norms for listing and trading of municipal bonds on stock exchanges so as to channel household investments into urban infrastructure development. SEBI has released a concept paper and invited comments from the public.
  
  According to the regulator, a municipal authority issuing the bonds will have to obtain rating from a credit rating agency registered with SEBI.
  
  Also known as ‘Muni Bonds’, these instruments will have a minimum tenure of three years. Muni Bonds are popular in the West where municipalities raise a bulk of their funding requirements through these instruments.
  
  In India, however, issuances of such bonds have totalled Rs 1,353 crore till now. The tax structure is seen as the main impediment to Muni Bonds attracting funds. Data show that such bonds attract money if made tax-free.
  
• Inter-ministerial panel on fuel linkages
  An inter-ministerial panel on fuel linkages has recommended providing coal to end-use plants linked to the blocks that have been cancelled by the Supreme Court. The first category is of those end-use plants (EUPs) which already had long-term linkages/LoAs (Letter of Assurances) but were later converted to tapering-linkage. The second category is of those EUPs which were granted tapering linkages.
  
  Tapering linkages are interim supply arrangement made for power projects where production from linked captive coal blocks was delayed.
  
  EUPs linked with the operational blocks should not be covered under the current arrangements as they are entitled to receive coal till March 31, 2015. EUPs to be supplied coal under current proposal would be offered coal from the mines nearest to them and they should lift coal by road, it added.
  
  EUPs linked with those coal blocks which are under the investigation of CBI and FIRs have been registered against them should not be considered for supply of coal.
  
• Committee on Natgrid
  A high-level committee, headed by the Union Home Secretary, has been set up to allay apprehension of data sharing by various government agencies with Natgrid, the proposed real-time intelligence sharing set up. The committee, constituted by the government, will discuss with various stakeholders of Natgrid like IB, R&AW, CBI, and CBDT and remove their apprehension on breach of security and misuse of information
  
  The committee will also hold discussions with state governments and chalk out strategy on how to bring synergy in data sharing, coordination and dissemination of information.
  
  Work for early set up of the National Intelligence Grid (Natgrid) was slowed down after the NDA government assumed charge as it did not extend the services of the then CEO Raghu Menon in July 2014.
  
  Natgrid seeks to synergise more than 20 categories of database from agencies like, railways, banks, airlines, credit card companies, immigration and others, and make it available to the law enforcement officers.
  
• TRAI recommends 22% lower base price for 3G spectrum auction
  Telecom regulator TRAI on 31st December recommended a base price of Rs 2,720 crore per Mhz for pan India 3G spectrum, about 22 per cent lower than the previous auction which would provide some relief to mobile operators. Government in 2010 had auctioned 3G spectrum at pan-India reserve price of Rs 3,500 crore per megahertz.
  
  Besides, the Telecom Regulatory Authority of India has recommended that DoT should put additional 15 Mhz for auction, which has to be obtained in exchange of spectrum that is with the Defence services. The Department of Telecom, however, is optimistic of getting 5 Mhz of 3G spectrum (2100 Mhz band) from the Defence Ministry.
  
  The regulator has recommended that the DoT should take all measures to ensure that the 2100 MHz spectrum which was earlier assigned to S-TEL in three service areas -- Bihar, Orissa and Himachal Pradesh -- is also put to auction. STel closed its business in India after the Supreme Court cancelled 122 licences in February 2012 in the 2G spectrum allocation case.
  
  Incidentally, the 2010 reserve price for 3G spectrum had formed the basis of CAG estimating notional loss figure of Rs 1.76 lakh crore in 2G spectrum allocation case of 2008.
  
  The auction for 800, 900 and 1800 megahertz bands is expected to be held in February and DoT is also mulling auctioning 3G radiowaves (2100 Mhz) along with these three bands.
  
  TRAI has recommended that in upcoming auction of 2100 MHz band spectrum, an auction-specific cap should be placed that no bidder would be permitted to bid for more than 2 blocks in an LSA if 3-4 blocks are available in that licence service area.
  
  TSTP (Test Schedule Test Procedure) which prescribes the process and method for measurements and tests to be carried out to ensure the required roll-out of the 3G network should be finalised at the earliest but, in any case, no later than the conduct of the February 2015 auction, TRAI said. The regulator has said that list of areas under rural exchange along with the names of the towns under them should be made part of the auction document.
  
• President signs ordinances on coal, insurance
  President Pranab Mukherjee on 26th December signed the ordinance to push reforms in the coal and insurance sectors. These ordinances were cleared by the Union Cabinet on 24th December after the government was unable to pass bills for these in the Winter Session of Parliament that ended on 23rd December.
  
  The bills could not be taken up in the Rajya Sabha as a united Opposition held up proceedings for much of the month-long session. The government is in a minority in the Rajya Sabha.
  
  The Insurance Laws Amendment Bill, 2008 could not be taken up for discussion despite being approved by the Select Committee of the Upper House. The Coal Mines (Special Provisions) Bill, 2014 has already been approved by the Lok Sabha during the session, but that too could make no progress in the other House, as the Opposition stalled the Rajya Sabha over religious conversions and other issues.
  
  Brief information on Ordinance
  Under Article 123, President can promulgate an ordinance, when the house is not in session, according to Supreme court the power to issue an ordinance is essentially an emergency power to be used only in extraordinary situations. If employed otherwise, it a naked subversion of Parliament and a violation of the constitutional structure, under which it is the job of the legislature to make laws and the task of the executive to implement them.
  
  According to PRS Legislative Research, since the first Lok Sabha in 1952, as many as 643 ordinances have been promulgated, of which the current NDA government already accounts for six in its first six months in office. Just before the 2014 general election was announced, the UPA government had issued a slew of anti-corruption ordinances.
  
• Decline in India’s Uranium production
  At a time when India is trying to ramp up its uranium export, its own domestic production of the yellow cake has declined by 10-15 per cent after operations in the country’s oldest and richest uranium mine in Jaduguda in Jharkhand has been stopped by the State government. Department of Atomic Energy sources said it has taken steps to increase the production from other mines to maintain the supply and demand, but the low quality of ore from other mines has increased the production cost.
  
  The overall mining production has gone down substantially by 10-15 per cent after the mining in Jaduguda has been stopped. The government has often cited ‘mismatch between demand and supply of domestic uranium’ as the reason for under-functioning of the nuclear power reactors. Of the 20 reactors, 10 nuclear power stations use domestic fuel and generate 2840 MW of electricity.
  
• Open up coal sector to enhance production: Advisory Group
  Opening up of the coal sector and up gradation of state-run Coal India and its subsidiaries are vital for scaling up domestic production of the dry fuel, says a report submitted to the government on 22nd December.
  
  The final report of the Advisory Group for Integrated Development of Power, Coal, and Renewable Energy for suggesting measures for enhancement of coal production in the short, medium and long term was presented to Power and Coal Minister Piyush Goyal in New Delhi on 22nd December.
  
  The group, headed by Suresh Prabhu (now Union Minister for Railways) has called for certain improvements in Coal India and its subsidiaries including Central Mine Planning and Design Institute Limited (CMPDI). The Advisory Group's report has emphasised on the need for opening up the coal sector to supplement the domestic production of Coal India and a few other Companies.
  
  It touched upon the issues of Coal Block Auction Process, Coal Linkage Rationalization and Swapping of Coal Linkages and stressed on the need for urgent action on coal linkages to power plants already commissioned, and likely to be commissioned by March, 2015.
  
  Various options should be explored to develop Railway Infrastructure from Coal Mines to main Railway System including through a JV Company on Infrastructure by CIL, it said.
  
  The report also called for expediting reforms in the distribution sector with targeted actions including privatization or PPP (public private partnership) in distribution.
  
  There is also a need for enhanced role of and improvements in working of CEA (Central Electricity Authority), Amendments to Electricity Act, Tariff Policy and Standard Bidding Documents, the report said. Among various other suggestions, the group said the transmission constraints needed to be addressed. The Advisory Group was set up by the government on 25th June 2014.
  
  The Group chaired by Prabhu, consists of R V Shahi (Former Power Secretary), Pratyush Sinha (Former Chief Vigilance Commissioner), Anil Baijal (Former Home Secretary), Partho Bhattacharya (Former CMD Coal India, among others, as members. The government has already announced plans to augment CIL's production to an annual 1 billion tonnes by 2019. CIL accounts for about 80 percent of India's total coal production.
  
• Evasive borrowers classified as non-cooperative: RBI
  Borrowers unwilling to repay bank loans despite the ability to do so run the risk of being classified as non-cooperative. Clamping down on errant borrowers, the Reserve Bank of India on 22nd December said the move will ensure that companies classified as non-cooperative will not get fresh funds.
  
  A non-cooperative borrower is one who deliberately stonewalls legitimate efforts of lenders to recover their dues. Along with the modified definition, the central bank has also prescribed norms for classifying/declassifying a borrower as non-cooperative borrower and reporting information on such defaulters to the Central Repository of Information on Large Credits (CRILC).
  
  This move will help rein in borrowers who have defaulted on dues despite the ability to pay, thwarted lenders’ efforts at recovery by not providing necessary information, denied access to assets financed/collateral securities, obstructed sale of securities, and so on.
  
  Further, if a promoter/director of a non-cooperative borrower is on the board of another company, then loans to the latter will become dearer.
  
  The central bank’s cut-off limit for classifying borrowers as non-cooperative would be those having aggregate fund-based and non-fund based facilities of Rs. 50 million ( Rs. 5 crore) from the bank/FI (financial institution) concerned. A non-cooperative borrower in the case of a company will also include its promoters and directors (excluding independent directors and government/lending institution nominees). In the case of business enterprises other than companies, non-cooperative borrowers would include persons in charge and responsible for the management of the enterprise.
  
  The RBI said banks/FIs will need to make higher provisioning as applicable to substandard assets for loans sanctioned to any other firm that has on its board directors/promoters of a non-cooperative borrowing company. However, for the purpose of asset classification and income recognition, the new loan would be treated as standard assets.
  
• RBI tightens norms to deal with errant borrowers
  Banks can now classify errant borrowers, particularly promoters of companies that have not repaid dues, as ‘non-cooperative’, making it difficult for them to get fresh loans. The new norms will apply to individuals, promoters and directors of companies, excluding independent directors and directors nominated by the government and the lending institutions.
  
  A non-cooperative borrower is a defaulter who, despite having the ability to pay, stonewalls lenders by not providing information sought and by denying them access to collateral. The rules are applicable for loans over Rs 5 crore. Banks will have to disclose such accounts to the Central Repository of Information on Large Credits.
  
  The new category is in addition to the one on wilful defaulters. The main difference between wilful defaulter and non-cooperative borrower is – the former not only fail to repay the debts, but also diverts the available funds for some other use, while the latter doesn’t pay the debts despite availability of funds.
  
  According to bankers, it is difficult to tag a wilful defaulter because of the legal recourse available. Banks also need evidence of funds being siphoned off to establish wilful default.
  
  The rules about non-cooperative borrowers do not have any such provision. Banks will, therefore, find it easier to label a borrower ‘non-cooperative’. The provisioning requirement for subsequent loans to such borrowers will be higher.
  
  As non-performing assets or bad loans in the banking system have mounted over the past few years in a slowing economy, the government and the central bank are taking steps to improve recovery. The government is planning to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act and the debt recovery tribunal laws to deal with bad loans, especially those resulting from wilful default.
  
  In a nut shell:
  A non-cooperative borrower is anyone who does not pay on time despite having the ability to do so or stonewalls recovery efforts of lenders
  
  Criteria for declaring a non-cooperative borrower: 
  • Those with aggregate fund-based and non-fund-based facilities of Rs 5 crore
  • For a company, non-cooperative borrowers will include promoters and directors (ex independent directors and govt nominees)
  • For a business not a company, non-cooperative borrowers will include those in charge of the management
  
  Result of declaring non cooperative borrower:
  Further loans become difficult as any fresh exposure to such a borrower will need higher provisioning by banks. Directors of non-cooperative entities will find it difficult to continue on other companies’ boards.
  
  New loans to a company with a non-cooperative borrower on board will also need higher provisioning (however, the new loans would be treated as standard assets)
  
  Way of identification: 
  • A committee under an executive director of the lender will decide on who is a non-cooperative borrower
  • The borrower must get enough time to respond to a show-cause notice
  • The order of the committee must be reviewed by another committee headed by lender’s chairman or CEO
  • The second committee will finally decide on declaring a borrower non-cooperative
  • Banks must report information on these borrowers to Central Repository of Information on Large Credits
  • The status of these borrowers should be reviewed every half year by the banks’ boards
  
  
• Coal, Power sector reforms recommended
  An advisory group headed by railway minister Suresh Prabhu has made a strong case for opening the coal sector to supplement production by Coal India. The advisory group, set up on 25 June by the Centre, has suggested steps to enhance coal production in the short, medium and long terms, as well as improvements needed in Coal India.
  
  The group submitted its report on 22nd December. To ensure round-the-clock power supply, the group has pressed for reform of electricity distribution, including privatization and public-private partnerships, separation of carriage and content in distribution licences, and an enhanced role for and improvements in the working of the Central Electricity Authority.
  
  It suggested transmission constraints be removed through short- and long-term actions and sought a greater push for adding thermal power capacity.
  
  Moreover, the group has recommended phasing out old and inefficient thermal power plants that burn excessive fuel.It has argued new coal-based power plants should be obliged to set up a renewable energy generation station as specified by the government.
  
  Further, the group has emphasised the need for strengthening penalties to improve quality of service and grid discipline, establishing regional regulators in consultation with states and a mechanism to review of the performance of regulatory commissions through a forum of regulators.
  
• Two bills referred to select committee
  Rajya Sabha on 23rd December referred two bills, including one that aims at bringing country's banking payment system in sync with international practices, to the Select Committees. The Payment and Settlement Systems (Amendment) Bill, 2014 and The Repealing and Amending Bill, 2014 were passed by Lok Sabha in the winter session of Parliament.
  
  The Select Committee for Payment and Settlement Systems (Amendment) Bill, 2014 consists of 13 members. The bill also aims at increasing transparency and stability of the financial market.
  
  The other bill sent to the Select Committee is the Repealing and Amending Bill, 2014, which seeks to repeal 90 Amendment Acts which have become redundant. Both the committees have been asked to "report to the Rajya Sabha by the last day of the first week of the next session.
  
• CAG questions success of PPP road projects
  The Comptroller and Auditor General of India (CAG), has questioned the effectiveness of public-private partnership (PPP) projects in the road sector. In its report on implementation of PPP projects of the National Highways Authority of India (NHAI), the auditor has said road users will have to pay Rs. 28,096 crore more as toll charges to developers of seven projects, due to extension of the concession period.
  
  The seven projects span across different States, including Rajasthan, Himachal Pradesh, Uttar Pradesh and Orissa. This increased payout for road users will be spread over two-to-seven years without the users getting any additional benefits such as wider roads. As these toll revenues ( Rs. 28,096 crore) would be collected over 15-20 years, the net present value of the revenue is Rs. 3,233 crore, as estimated by the CAG.
  
  The additional burden on users arises because the NHAI extended the concession period – the period for which a developer can collect toll from road users – for the projects by considering the traffic that can be tolled. This method of arriving at toll revenue for structuring projects is not prescribed by the standard contract agreement. The CAG report was tabled in Parliament on 23rd December.
  
  The CAG has also called for better implementation of PPP projects by the NHAI, noting there were delays at various levels of project planning and implementation, all of which resulted in increased costs.
  
• Health budget cut
  The government has ordered a cut of nearly 20 per cent in the 2014-15 health care budget due to fiscal strains, putting at risk key disease control initiatives in a country whose public spending on health is already among the lowest in the world.
  
  Two health ministry officials told on 23rd December about Rs 6,000 crore , or $948 million, had been slashed from their budget allocation of around $5 billion for the financial year ending March 31, 2015.
  
  Despite rapid economic growth over the past two decades, successive governments have kept a tight rein on health care expenditure. India spends about one per cent of its gross domestic product (GDP) on public health, compared with three per cent in China and 8.3 per cent in the United States. The United Nations estimates about one third of the world’s 1.2 billion poorest people live in India.
  
  In addition to the health care budget, the finance ministry has also ordered a spending cut for India’sHIV/AIDS programme by about 30 per cent to Rs 1,300 ($205.4 million). India had the third-largest number of people living with HIV in the world at the end of 2013, according to the UN AIDS programme, and it accounts for more than half of all AIDS-related deaths in the Asia-Pacific.
  
• Four PSUs sign JV pacts
  Coal India Ltd. (CIL),and state gas utility GAIL India Ltd., on 24th December, signed agreements to invest Rs.9,000 crore in a plant to convert coal into gas and use this fuel to manufacture fertilizer. CIL and GAIL, along with Rashtriya Chemicals and Fertilizers (RCF) and Fertilizer Corp of India Ltd (FCIL), will set up an integrated coal gasification-cum-fertilizer and ammonium nitrate complex at Talcher in Odisha by 2019
  
  The plant will be built by the two joint ventures — the upstream consortia for converting coal into synthetic gas or syngas, and the downstream plant to manufacture urea and other fertilizers.
  
  GAIL will hold 35 per cent in the upstream venture, called GAIL Coal Gas (India) Ltd. FCIL will take 11 per cent interest while RCF and CIL will pick up 3 per cent each. The balance 48 per cent will be given to technology provider and financial institutions.
  
  The downstream venture, Talcher Chemicals and Fertilizers Ltd., would be led by RCF and CIL with 40 per cent stake each while GAIL and FCIL will take 10 per cent each. The plant would manufacture 1.3 million tonnes of urea and other fertilizers annually
  
  India is deficit in urea production. At present, India is producing about 22 million tonnes of urea, and there is a gap of 10 million tonnes.
  
  According to oil Minister Dharmendra Pradhan the upstream venture would cost Rs.3,000 crore, while the downstream fertilizer plant would be set up at a cost of Rs.6,000 crore. According to Power Minister Piyush Goyal the use of coal gasification technology for production of fertilizers would lead to annual subsidy savings of Rs.3,000 crore.
  
• Nod for 100% FDI in medical devices
  The Government has eased investment rules for the medical devices industry by allowing 100 per cent foreign direct investments (FDI) under the direct route for both new and existing projects, Finance Minister Arun Jaitley announced
  
  While 100 per cent FDI was already allowed in the sector, foreign investors had to seek permission of the FIPB for investing in or taking over existing companies. By allowing both greenfield and brown field investments under the direct route, FIPB scrutiny will now not be required even for investment in existing projects. Foreign investors will, however, continue to go through the FIPB route for investing in existing pharmaceutical companies.
  
  The medical devices industry is governed by the same rules as the pharma sector, where 100 per cent FDI in new projects is allowed under the automatic route but Government approval is needed for acquiring an existing company.
  
• Cabinet clears road for CIWTC sale
  The Union Cabinet on 24th December gave its approval to a proposal that will facilitate the Narendra Modi-led government's first strategic sale of a public sector unit (PSU). It cleared an improved voluntary retirement scheme (VRS) for employees of the near-defunct Central Inland Water Transport Corporation (CIWTC), so that it becomes easier for the government to sell the Kolkata-headquartered unlisted company to an investor.
  
  CIWTC has been making losses since its inception in 1967, set up with the purpose of operating a fleet of ships on rivers in West Bengal and Assam. The government has been trying to divest the company since 2004. If and when the sale of CIWTC takes place, it will be the first such privatisation by the Modi government.
  
• World Bank credit to AP
  The World Bank has approved $ 75 million credit for the Andhra Pradesh Rural Inclusive Growth Project, a project designed with focus on increasing economic opportunities for small and marginal farmers, especially from SC and ST households, covering 5,000 villages in 150 most backward mandals.
  
  As part of the implementation, investments would be made in developing a network of social enterprises for food, nutrition, sanitation and other social enterprises operating at community and district-level.
  
  The project would support the government in its efforts at creating an enabling policy framework with real time analytics across sectors through the various missions established. On the human development front, investments would be made in improving access to services in health, nutrition, water & sanitation.
  
  The A.P. Rural Inclusive Growth Project envisaged linking of small and marginal farmers to urban markets and make them competitive across the value chain so that they would be able to take advantage of potential benefits from allied sectors like horticulture, livestock and fisheries. Investments would be made in increasing nutritional content of products like milk, vegetables and poultry.
  
  The project would specifically support in increasing incomes of 2.5 lakh small & marginal farmers by at least 50 per cent by enhancing productivity and improving their access to markets.
  
  Focus would be on producers who have built up productive assets and have the potential to exploit growth opportunities for high value commodities including red gram, milk, poultry, small ruminants, fisheries, turmeric, cashew and coffee.
  
  The project is also aimed at working towards improving the coverage and service delivery of social protection entitlements for 5 lakh poorest households, mainly hailing from SC/ST communities. One of the key aspects of the project was to invigorate and create local markets by connecting rural producers and enterprises with rural consumers.
  
  Another major feature would be enhancing the quality of consumption by poor households by making nutrient rich snacks available through nutria-shops and creating awareness on the benefits of these products.
  
  Emphasis would also be on the human development side with community led approaches to improve access to water and sanitation in 1,000 targeted villages adopting saturation mode to cover all households and rural institutions such as schools, anganwadi and health centres besides helping them achieve open defecation free status.
  
• Centre launches auction process for 24 coal mines
  The Central Government, on 25th December started the auction process for cancelled coal mines with the launch of a portal for electronic bidding for 24 coal blocks in the first tranche. The Union Cabinet, on 24th December, approved re-promulgation of the coal ordinance and necessary guidelines for mine allocations, a move that could make the kitty of coal-rich states fatter by Rs.7 lakh crore over the next 30 years. Entire auction process will be transparent, efficient and conducted online.
  
  The 24 mines for which auction process has started include 7 for the power sector, 16 for other end-use steel and cement plants as also captive power units, and one mine for steel.
  
• NHAI burdened users with heavy tolls: CAG
  The National Highway Authority of India (NHAI) burdened users with an extra Rs.28,361 crore while providing undue benefits to private parties by fixing a longer concession period, the Comptroller and Auditor-General (CAG) has said in its audit report on the implementation of the National Highways project. The CAG said the NHAI failed to fulfil the role assigned to it by the government and provided undue benefits to private parties — including Reliance Infrastructure, L&T and IRB infrastructure among others — to the tune of Rs. 2,928 crore.
  
  The report, titled “Implementation of PPP projects in NHAI,” covered 94 projects under phases II, III, IV and V of the National Highways Development programme (NHDP) constituting 45.41 per cent of the total 207 BOT projects as on March 31, 2012.
  
  Tabled in Parliament on 23rd December, the report notes that in the case of the Delhi-Agra NH project, awarded to Anil Ambani’s Reliance Infra, clause 31.3.1A, relating to withholding of toll collection in case of failure to achieve major milestones, was missing from the concession agreement.
  
  The report said there would be an additional burden of Rs.30,247.60 crore on users due to levy of partial tolls on incomplete projects, non-realization of toll revenue from annuity projects due to delay in completion, and a longer concession period among other reasons.
  
  The CAG also said the NHAI failed to achieve the 20 km a day target for widening and up-gradation of national highways during 2009-10 to 2012-13. “The NHAI’s best achievement was 17.81 km per day during 2011-12 which dropped to a mere 3.06 km per day during 2012 despite availability of sufficient funds,” the report said.
  
• Make tax evasion criminal offence: SIT
  The Special Investigation Team, SIT on black money has pitched for making tax evasion a serious criminal offence. The purpose is to force foreign countries to reveal names and account details of Indians stashing illicit wealth abroad. SIT Chairman Justice M B Shah told PTI that the step will help add more teeth to India's pursuit of black money kept abroad and check generation of unaccounted wealth within the country.
  
  At present, tax evasion is a civil offence in India and it is dealt under the Income Tax Act, while forex violations are dealt under the Foreign Exchange Management Act. Both the laws are civil in nature and do not have criminal proceedings attached.
  
  Justice Shah said if tax crimes remain civil in nature, foreign governments will not cooperate. He added that if it is made a crime, the foreign governments would be bound to reveal the names.
  
  In its latest report submitted to the government, the SIT pointed out that more than 25 countries have made tax crimes a predicate offence. It suggested making tax evasion of 50 lakh rupees and above a predicate offence, saying this would enable easier investigation.
  
  Stringent legislations recommended: The Parliamentary Standing Committee on Finance has recommended stringent enforcement of legislations like the Narcotics and Psychotropic Substances Act, Foreign Exchange management Act and Prevention of Money laundering Act to unearth black money.
  
  The report of the Committee, tabled in both the Houses of Parliament on 16th December, said, active coordination among different agencies like the RBI, Income Tax, Central Excise and Customs should be facilitated.
  
• RBI eases refinancing norms for infrastructure loans
  The Reserve Bank of India (RBI), on 15th December, allowed banks to flexibly structure the existing project loans — to infrastructure and core industries — with the option to periodically refinance them. Earlier, this option of periodic refinancing was available only to new loans in these segments.
  
  Only term loans to projects, in which the aggregate exposure of all institutional lenders exceeds Rs.500 crore, in the infrastructure sector and in the core industries sector will qualify for such flexible structuring and refinancing,’’ the RBI said in a notification to all banks.
  
  Banks were asked to fix a fresh loan amortisation schedule for the existing project loans once during the life time of the project, after the date of commencement of commercial operations (DCCO), based on the reassessment of the project cash flows, without this being treated as ‘restructuring’.
  
  The RBI also said the viability of the project is re-assessed by the bank and vetted by the Independent Evaluation Committee. RBI said that banks could refinance the project term loan periodically (say 5 to 7 years) after the project has commenced commercial operations.
  
  The refinance could be taken up by the same lender or a set of new lenders, or combination of both, or by issue of corporate bond, as refinancing debt facility, and “such refinancing may repeat till the end of the fresh loan amortisation schedule.’’
  
  The RBI also said that banks could also provide longer loan amortisation as per the flexible structuring of project loans to existing project loans to infrastructure and core industries projects which are classified as ‘non-performing assets’ (NPAs).
  
• Consensus on GST
  The Centre and the States have reached a consensus on the Constitution Amendment Bill on Goods and Services Tax, GST after Finance Minister Arun Jaitley's meeting with state Finance Ministers. With the end of the deadlock, the GST Bill is likely to be tabled in the current session of the parliament. According to various sources the petroleum products are likely to be kept outside the Bill and the Centre may try for a constitutional provision for the GST compensation fund. The entry tax is likely to be subsumed into the GST.
  
  Cabinet nod: The Union Cabinet has approved the Constitution Amendment Bill on Goods and Services Tax, GST clearing the way for its introduction in ongoing session of Parliament to bring about long-pending indirect tax reforms.
  
  The Bill was approved by the Cabinet on 17th December and it is likely to be tabled in the ongoing winter session of Parliament that concludes on December 23. The government aims to roll out the GST from April 1, 2016.
  
  The revised Constitutional Amendment Bill was brought before the Cabinet after the Centre and states earlier this week reached a consensus on contentious issues, including those related to petroleum product taxation, which were holding up the proposed nation-wide indirect tax regime for about seven years.
  
  The GST will subsume most of the indirect taxes like excise duty and service tax at the central level and VAT and local levies on the states front. The GST Bill was last introduced in the Lok Sabha in 2011 by the then UPA government but lapsed, requiring the new NDA government to come with a new Bill.
  
  States, which earn over 50 per cent of their revenues from taxes on petrol and other petro products, wanted it to be out of GST so they could continue with levying different tax rates on these products.
  
  In the three rounds of talks that held last week, states insisted that the compensation part should be included in the Constitution Amendment Bill. The idea of moving towards the GST was first mooted by the then Finance Minister P Chidambaram in his Budget 2006 -07. Initially, it was proposed that GST would be introduced by April 1, 2010.
  
  Constitution Amendment Bill introduced: Finance Minister Arun Jaitley on 19th December introduced a Constitution Amendment Bill to enable the introduction of Goods and Services Tax (GST) Bill in the Lok Sabha. Moving the Constitution (One Hundred and Twenty Second Amendment) Bill, 2014, Mr Jaitley said, adequate safeguards have been taken in the Bill to maintain the rights of states on taxes. He assured that the proposed Goods and Services Tax Bill will provide more than adequate protection to the states. Finance Minister said no state is going to be a loser as their losses will be compensated initially for three years, which may be extended to five years. The GST bill will cover all goods and services, except alcoholic liquor for human consumption. Petroleum products will remain outside the purview of the bill till it is notified by the Goods and Services Tax Council.
  
• Trade deficit widened
  An over six-fold jump in gold imports in November has pushed country's trade deficit to one-and-a-half year high of USD 16.86 billion in the month, causing fresh concerns for economic policy makers . Although exports went by 7.2 percent, the highest in the last four months, gold imports soared by 571 percent to USD 5.61 billion (over Rs 35,000 crore) in November to widen the trade gap.
  
  Besides the precious metal, higher imports of transport goods, fertiliser, machinery and electronic goods added to the trade gap which rose to its highest level since May 2013. The surge in gold imports has raised fresh concerns of widening current account deficit.
  
  Both Reserve Bank and government have been saying that CAD levels are comfortable despite an upward trend, but the huge jump in gold imports may cause fresh worries to them. Besides, import curbs were eased on 28th November which could also lead to further rise in imports this month onwards. Exports contribute about 25 percent in the country's GDP. It was in negative zone in October.
  
• Inflation hits zero level, lowest in over 5-years
  Declining prices of vegetables and fuel items pulled down the inflation to zero level in November, the lowest in about five and half years, exerting pressure on RBI to cut rates to boost growth. The Wholesale Price Index (WPI) based inflation was at 1.77 percent in October and 7.52 percent in November 2013.
  
  As per data released by the government on 15th December, the WPI inflation remained flat mainly on account of falling prices of vegetables, especially onion, edible oil, petrol and diesel. In view of the moderation in WPI inflation, which has been on declining trajectory for six months, the industry has stepped up its demand for a rate cut.
  
  The Reserve Bank has maintained a status quo in interest rate since January. The RBI factors in retail inflation while formulating its monetary policy. In its policy earlier this month, RBI Governor Raghuram Rajan had hinted at a rate cut early next year if inflation continued to decline and government took steps to contain fiscal deficit. Food inflation, which is on decline since May, fell to nearly three year low of 0.63 percent.
  
• SEBI norms for reclassification norms
  The Securities and Exchange Board of India has spelt out the conditions under which promoters of companies may be reclassified as public shareholders, has provided five situations which may result in a request for reclassification. The first is that of promoters who seek reclassification after the company has been acquired by another entity.
  
  The promoters request the company to terminate the shareholders agreement and want to classify themselves as public shareholders post termination of shareholding agreement. Then, informing the developments to stock exchanges, besides giving up their special rights and privileges by an amendment to the Articles of Association of the company after obtaining shareholders’ consent through postal ballot. The second arises when a company seeks reclassification of the status of the promoter’s daughter post her marriage with a family member of a business competitor.
  
• Finance panel submits report to President
  The Fourteenth Finance Commission, headed by former Reserve Bank of India Governor YV Reddy, has submitted its report to the President of India. The recommendations relate to the period April 1, 2015 to March 31, 2020. The Commission — a constitutional body — was recently been given time till December 31 to submit its report. The extension was given to enable it to examine financial projections and carry out consultations with the Governments of Andhra Pradesh and Telengana. Besides spelling out the formula for devolution of Central taxes, the Finance Commission report is said to have made some observations on Goods and Services Tax (GST). It has considered the impact of the proposed GST on the finances of the Centre and States and the mechanism of compensation in case of any revenue loss.
  
• India on track to 5.5% GDP growth, says ADB
  According to Asian Development Bank India in this financial year would achieve GDP growth rate of 5.5%. It said that India on track to achieve projected 5.5% economic growth rate in 2014-15 as declining oil prices present a golden opportunity for many beneficial reforms, Asian Development Bank said
  
  Falling global oil prices present a golden opportunity for importers such as Indonesia and India to reform their costly fuel subsidy programmes, ADB chief economist Shang-Jin Wei said.
  
  ADB said Indian government has demonstrated willingness to tackle contentious reforms by eliminating diesel subsidies, but it must extend its efforts to reach the forecast of 6.3% GDP growth in FY2015.
  
  ADB lowered the GDP growth projection for the region to 6.1% in 2014, from 6.2% earlier, and to 6.2% in 2015, from 6.4% earlier. Cutting the GDP forecast for China to 7.4% in 2014 from 7.5% earlier, and 7.2% in 2015 from 7.4%, ADB said the growth moderation in PAC is seen extending.
  
• RBI fined ICICI, BOB for KYC violations
  The Reserve Bank of India (RBI) has slapped a penalty of Rs 50 lakh on ICICI Bank and Rs 25 lakh on Bank of Baroda for lapses in adhering to know-your-customer (KYC) norms. Further, the RBI has cautioned State Bank of India, Axis Bank and State Bank of Patiala to put in place appropriate measures and ensure strict compliance of KYC requirements in future.
  
• Regional Rural Banks bill in LS
  The Regional Rural Banks (Amendment),Bill 2014 was introduced in the Lok Sabha on 18th December. The bill seeks to amend the existing Act so as to increase the authorized capital of each Regional Rural Bank from Rs 5 crore to Rs 2000 crore divided into Rs 200 crore of fully paid share of 10 rupees each. The bill also provides that the authorized capital of any Regional Rural Banks shall not be reduced below one crore rupees and shares in all cases to be fully paid up shares of Rs 10 each. It also provides that the issued capital of each rural bank shall not be less than one crore rupees.It also has the provision for the continuance of managerial and financial assistance from Sponsor Banks beyond the first five years of functioning of Regional Rural Bank.
  
• India GDP 5.5%: Finance Ministry
  India's GDP is expected to rise to 5.5 percent in the current fiscal from 4.7 percent last year on back of improving macro-economic situation, says the Finance Ministry's Mid-Year economic review which also flagged fiscal challenges like subdued revenue collections.
  
  The review projected that 7-8 percent economic growth was within reach in the coming years and said inflation has fallen dramatically and that declining oil prices will help in containing CAD at around 2 percent of GDP.
  
  The 'Mid-Year Economic Analysis 2014-15' tabled in Parliament on 19th December also assumed that the Reserve Bank would maintain status-quo in the interest rate till March 2015 and a stable outlook for rupee. Industry has been demanding cut in interest rate amid slowing industrial production. The GDP growth was sub-five percent in the past two financial years.
  
  The review, however painted a rosy growth prospect in the medium term saying "the trend rate of growth of about 7-8 percent should be within reach. With basic 'public good' provision and investment tapping into cheap labour, India can easily get closer to its growth frontier laying a strong foundation for the long-run". The review expects the retail inflation (CPI) to be in the range of 5.1-5.8 percent in the next five quarters.
  
• CBDT signs first bilateral Advance pricing agreement
  The Central Board of Direct Taxes (CBDT) on 19th December signed a bilateral Advance Pricing Agreement (APA) with a Japanese company. This is India’s first bilateral APA. The APA is for five years. APAs will improve the investment climate in the country The scheme has been introduced to bring about certainty and uniformity in transfer pricing matters of multinational companies and reducing litigation.
  
• SEBI bars 260 entities
  In its biggest ever crackdown for suspected tax evasion and laundering of black money through stock trading platforms, the Securities and Exchange Board of India (SEBI) barred 260 entities on 19th December, including individuals and companies, from the securities markets.
  
  While the SEBI would further probe these cases, it has also decided to refer the matter to the Income Tax Department, Enforcement Directorate, Financial Intelligence Unit, among other agencies, for necessary actions on their part.
  
  Through two separate interim orders, SEBI said that these 260 entities would be restrained from accessing the securities market and from buying, selling or dealing in securities, either directly or indirectly, with immediate effect till further directions.
  
• PM meeting on Plan panel revamps
  No unanimous decision emerged in the meeting convened by Indian Prime Minister Narendra Modi, regarding revamping of Plan Panel. The meeting was held with all the Chief Minister’s of the country to express their opinion, on scrapping the plan panel. The meeting was held on 7th December.
  
  Centre stand
  Planning commission is not relevant in the times of reforms. The new proposals made by Prime Ministers said that………
  
  Team India: The Prime Minister described 'Team India' as a combination of three teams – the Prime Minister and Chief Ministers, the Union Council of Ministers and the bureaucracy in the Centre and States.
  
  Cooperative Federalism: Invoking the spirit of "cooperative federalism", Modi said that the current global scenario offered a chance for India to take a big leap forward and stressed the need for a suitable body to replace the Planning Commission so that the strengths of the country can be suitably harnessed. He said the question of role, relevance and restructuring of the Planning Commission had been repeatedly questioned for more than two decades. The first introspection was done after the launch of economic reforms, in 1992, when it was felt that in light of changing Government policy, a different approach was required. In 2012, the Parliamentary Consultative Committee stressed the need for a serious look at the Planning Commission and the need for a new body to replace it. Former Prime Minister Manmohan Singh had stressed the need for a relook at the Planning Commission towards the end of his term, the Prime Minister added.
  
  Bottom to top approach: He said it is impossible for the nation to develop unless states develop. He said the process of policy planning also has to change from "top to bottom" to "bottom to top."
  
  Oppositions stand
  Congress Chief Ministers questioned the Government’s approval to scrap the Planning Commission, which was announced by the Prime Minister on August 15. Instead, they demanded that the Centre reinvent the plan panel rather than scrapping it and replacing it with a new body.
  
  Consensus on three issues: In the meeting there was consensus in three issues. 
  • Federalism must be strengthened
  • States must get more powers and
  • States must have greater flexibility to implement schemes and programmes.
    
• FICCI bats for GAAR deferment, fiscal relief for SEZ developers, units
  The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged the Finance Ministry to defer the introduction of General Anti-Avoidance Rules (GAAR) under the Indian Income-Tax law.
  
  In the pre-Budget interaction with the Revenue Secretary Shaktikanta Das, a high-level FICCI team led by its President Sidharth Birla also pitched for abolition of dividend distribution tax and minimum alternate tax on SEZ developers and units.
  
  The chamber has suggested several “carve outs” to existing provisions on indirect transfers, including tax exemption in cases where the shares of a foreign company are listed and traded on a stock exchange outside India. Also, no tax should be imposed on group restructuring, it said.
  
• Now portal for FTAs
  To ensure better utilisation of Free Trade Agreements (FTAs), the Commerce Ministry has launched a trade portal providing exporters with information on preferential tariffs and rules of origin in such markets. The ‘India Trade Portal’ will also have other information of importance to exporters such as technical barriers faced by trade in different markets.
  
  India has signed a number of FTAs with various countries and regional blocs over the last few years, but exporters have not been able to utilise them well because of lack of knowledge about what the agreements offered. The Indian Trade Portal will make available important data for use of exporters and importers at one place, in a user friendly manner and this will contribute to ease of doing business for trade and industry
  
  The portal has been developed by the Federation of Indian Export Organisations (FIEO) and will also be maintained by it.
  
  Important FTAs signed by India include ones with Japan, South Korea, the 10-member Asean and Sri Lanka.
  
• Sun-Ranbaxy merger gets conditional nod
  The Competition Commission of India has approved the Sun Pharma-Ranbaxy merger with some caveats. According to the conditions imposed by the Commission, the merged entity will have to divest seven drug formulations in which its combined market share goes up to 95 per cent, resulting in a monopoly.
  
  This $4-billion agreement is the first merger deal where CCI had sought opinion from the public in a statement. According to the terms inked between Ranbaxy and Sun Pharmaceuticals in April, each Ranbaxy shareholder will get 0.8 shares of Sun Pharmaceuticals for every share of Ranbaxy.
  
• Infosys founders sell stake worth %1.1 billion
  Some of the founders of Infosys Ltd sold shares worth $1.1 billion in India's second-largest IT services exporter on 8th December, cashing in on a more than 20 percent gain in the stock since the company picked its first outsider as chief executive.
  
  The shares were sold by N.R. Narayana Murthy, Nandan Nilekani, S.D. Shibulal and K. Dinesh, members a group of seven engineers who founded Infosys in 1981 by pooling together US $250, stock market filings showed.
  
• Centre recommended increasing list of natural disasters
  The Centre has recommended to the14th Finance Commission for inclusion of soil erosion, lightening and bamboo -flowering in the list of natural disasters. Minister of State for Home, Kiren Rijiju said the recent floods in Jammu and Kashmir, Assam and Meghalaya, centre sent relief teams immediately to the affected states to mitigate the impact of floods. On the cyclone Hudhud which hit the coastal areas of Andhra Pradesh and Odisha, the Minister said that the government responded quickly and dispatched relief teams in time and also announced relief package.
  
  On drought like condition in some parts of the Maharashtra, Mr. Rijiju said that Agriculture Minister had already responded on the issue in the House. He said that the government is making efforts to strengthen the Disaster Management Authority at national, State and District levels to empower the citizens to respond to natural calamities effectively.
  
• SBI launches home-grown index to track economic trends
  Country’s largest Bank, State Bank of India on 9th December launched monthly economic index, a tool that will primarily track manufacturing activity to offer a forward-looking economic trends. The SBI Composite Index rivals the existing data point from British lender HSBC.
  
  The SBI index has been developed on the basis of the bank’s internal loan portfolio, which mirrors the credit demand in the country, and other data sets available in public domain.
  
  The index would also take into account other indicators of economic activities such as consumer spending, mining, interest rates, inflation and exchange rates on a monthly basis. The indices would be released every month post-RBI’s credit growth numbers, she said, adding the data collection would not be outsourced as was the case with the HSBC data.
  
• Centre approves disinvestment of ONGC, NHPC
  The Centre has approved ONGC and NHPC for disinvestment. This is in line with the Action Plan 2014-15 on Disinvestment. Finance Minister Arun Jaitley gave this information in the Rajya Sabha on 9th December.
  
  Disinvestment increases the quantity of stocks of central public sector enterprises in the market. Hence, the recent fall in the share prices of Coal India, ONGC and NHPC is nothing unusual. It does not indicate any diminished appetite for these stocks, the Finance Minister clarified.
  
• CAD narrowed down to 1.7 % in 2013-14: Arun Jaitley
  Finance Minister Arun Jaitley has said, the current account deficit, CAD, has narrowed down from 4.7 per cent in 2012-13 to 1.7 per cent in 2013-14. He attributed the decrease to lower trade deficit brought about by a modest recovery in exports and sharp fall in imports particularly of Gold.
  
  Mr Jaitley said, the CAD stood at 7.8 billion dollars in the first quarter the current financial year. He was replying to a question about reduction in level of CAD. He said, recovery in exports and fall in non gold imports could be due to sharp depreciation in exchange rate of the rupee as well as slowdown in non-agricultural growth output.
  
• Panel suggested 49% cap on foreign investment
  The Select Committee on the Insurance Laws (Amendment) Bill, 2008 has recommended a composite cap of 49 per cent on foreign investment in insurance. This will include all forms of FDI and foreign portfolio investments. At present the Foreign Direct Investment limit in the sector is 26 per cent. The chairman of Committee is Dr. Chandan Mitra.
  
  Committee said that……….
  • The hike will benefit the country’s insurance sector and facilitate to meet its capital requirements.
  • The incremental equity should ideally be used for expansion of capital base to strengthen the insurance sector.
  • Inclusion of a person from the insurance industry in the Securities Appellate Tribunal as an expert.
  • Amendments to Securities and Exchange Board of India Act.
  • Linking the imposition of penalties on the companies on the basis of gravity of the offence committed by them.
  • The health sector should be given utmost priority and capital requirements of health insurers should be retained at 100 crore rupees.
  • The Committee was unanimous that a reduction in the paid up equity capital in the sector as compared to life and general insurance would encourage non-serious players.
  • Insurance Regulatory Development Authority, IRDA, in consultation with the Medical Council of India should formulate regulations to ensure that malpractices in the health insurance sector could be avoided.
  The report includes dissenting notes of four members P. Rajeev of CPI(M), Derek O Brien of TMC, Ram Gopal Yadav of SP and K. C. Tyagi of Janata Dal (United). The Rajya Sabha had appointed a 15-member Select committee, in August this year, to scrutinize the long pending Insurance Laws (Amendment) Bill, 2008. The Bill was held up for nearly six years on account of political differences. The government is likely to bring the Bill for consideration of the Upper House as early as next week.
  
• New Coal Bill protects govt officials
  The Centre is taking steps to protect government officials involved in allotting coal blocks from prosecutions and legal proceedings. The Coal Mines (Special Provisions) Bill, introduced in the Lok Sabha on 10th December to replace an Ordinance, states that no suit, prosecution or other legal proceeding shall lie against the Central Government, nominated authority, commissioner of payment or designated custodian or any person acting on their behalf in respect of anything which is done or intended to be done in good faith under this Act.
  
  The Bill stipulates that a private sector entity cannot own more than 26 per cent in public-private joint ventures in case of coal block allocations.
  
  However, if there is more than one private sector entity in a venture, then their total stake should not exceed 49 per cent. The Bill also prohibits government companies from alienating or transferring any interest in such joint ventures by taking loans or advances from banks or financial institutions.
  
  The need for such a law arose after the Supreme Court on September 24 de-allocated 204 blocks given between 1993 and 2010.
  
  The Bill gives a clear roadmap for the Centre to auction/allocate coal blocks. The Centre proposes to empower a Tribunal to resolve disputes between a successful bidder and prior allottee.
  
• Implement Food Security Act by April: Centre
  The Centre on 10th December asked to stop supply of subsidised food grain to Above Poverty Line (APL) families from April if States which have not yet implemented the National Food Security Act fall in line by then. Only 11 States and Union Territories (UTs) have fully or partially implemented the food law so far. States such as Jharkhand and Odisha had expressed their inability to meet the April deadline but gave an assurance to have the NFSA implemented by June and August, respectively. Uttar Pradesh is likely to begin operations in 64 districts by March.
  
  Among the States to have partially implemented the scheme, Himachal Pradesh and Karnataka had no system for doorstep delivery of rations while Aadhaar coverage across some of them, such as Chhattisgarh and Madhya Pradesh, were poor. Having a digitised list of beneficiaries was a challenge in many States including Rajasthan, Haryana and Punjab.
  
  The NFSA aims to provide 5 kg of rice, wheat and coarse grains at Rs. 3/kg, Rs. 2/kg and Rs. 1/kg respectively per person each month and cover two-thirds of the population. States were given a year to identify beneficiaries and the April deadline marks a second extension since the scheme came into force last July.
  
• Cabinet nod to cut govt stake in PSBs to 52%
  Public Sector Banks (PSBs) will be able to rise up to Rs 1.6 lakh-crore from markets as the Union Cabinet on 10th December allowed the dilution of government equity in these lenders up to 52 per cent. This would enable these banks to partly meet Basel III requirements by March 31, 2019. The Cabinet Committee on Economic Affairs approved putting in place a new ethanol blending policy under which the price of ethanol would be fixed according to the distance of sugar factory from the depots of oil marketing companies. Under the ethanol blending programme, 5 per cent ethanol is doped with petrol.
  
  The much-awaited amendments to the Electricity Act were cleared, opening the gates for reforms in power transmission and distribution.
  
  The amendments are likely to come up in the ongoing session of Parliament. If the PSBs are permitted to bring down government holding to 52 per cent in a phased manner, they can raise up to Rs. 1,60,825 crore from the market, said an official statement, issued after the Cabinet meeting.
  
  This means that the government would require to give almost Rs. 79,000 crore (for common tier-I equity) during 2015-19, which will maintain its holding at 52 per cent.
  
  Other decisions of cabinet
  • Debt recovery tribunals to be set up in Chandigarh, Bengaluru, Ernakulam, Dehradun, Siliguri and Hyderabad to expedite cases pertaining to bad loans
  • Cabinet approves amending the Lokpal and Lokayuktas Act, 2013; the Act will be amended to state 'Leader of Opposition' will also mean 'Leader of the Largest Party in Opposition of the Government' in the Lok Sabha
  • Solar plants in defense sector: Green signal given to install solar power plants in defense and paramilitary establishments
  • Solar parks: 25 solar parks of 500 Mw capacity each to be set up; financial support of Rs 4,050 crore needed; Cabinet Committee on Economic Affairs also approves scheme for setting up 1,000-Mw grid connected solar power projects by PSUs and central government organizations.
  
  
• GST talks hit the compensation roadblock again
  The Centre’s efforts to introduce a Constitutional Amendment Bill in the ongoing Parliament session to bring in the Goods and Services Tax regime suffered a blow with States rejecting the draft, saying that it did not address their concerns.
  
  The taxation of petroleum products and entry tax continued to be the sticking points between the Centre and the States.
  
  Finance Minister Arun Jaitley’s assurance to the Lok Sabha that the Centre will partially pay the dues on Central Sales Tax (CST) this fiscal did not appear to convince the States. Hectic parleys continued between the Centre and the States on Thursday over the issues which threatened to derail the Centre’s efforts.
  
  The Empowered Committee of State Finance Ministers, headed by Abdul Rahim Rather, conveyed to Jaitley that the States do not want petroleum products to come within the ambit of proposed dual-GST. They were also not willing to allow entry tax to be brought within the proposed new regime.
  
  The most important demand from the States was that the compensation formula for GST losses, if any, should form part of the Constitutional Amendment Bill.
  
  This comment came hours before a committee, including Rather, and few State Finance Ministers (of Haryana, Punjab, Chhattisgarh and West Bengal) were to meet Jaitley to sort out the contentious issues.
  
  The Centre is keen to take forward the process of GST implementation, which is the biggest ever tax reform initiated in the country. One of the reasons for the delay in GST is the trust deficit between the Centre and the States in payment of CST-related dues. With Jaitley coming forward to bridge this trust deficit, expectations were running high that both the Centre and the States will move forward.
  
• World Bank to give another $1.1b for eastern freight corridor
  The Government and the World Bank on 11th December signed a $1.1-billion deal for a second loan for the Eastern Dedicated Freight Corridor. The project was approved by the World Bank board in April. The Eastern corridor is 1,839-km-long and extends from Ludhiana to Kolkata.
  
  An earlier loan of $975 million for the 343-km Khurja-Kanpur section in the EDFC programme was approved by the World Bank board in May 2011 and is already under implementation. Another major contract for systems is under evaluation.
  
  Ninety per cent of the 1,245-hectare land needed for the project has been acquired from 2,000 land owners with Rs. 336 crore paid as compensation in addition to the agreed resettlement and rehabilitation benefits
  
  The government plans to set up seven integrated manufacturing clusters using EDFC as the backbone, the release said.
  
• Indo-ASEAN trade to touch $100 billion next year
  India’s trade with the 10-member Asean bloc is set to touch $100 billion by 2015 from around $80 billion at present, thanks to the benefits flowing from the free trade agreement signed with the region, said Nirmala Sitharaman, Minister for Commerce & Industry.
  
  The Minister said that India’s trade with the CLMV countries was concentrated in only a few items and there was tremendous scope to deepen and widen the trade basket.
  
  Skill development, agricultural products, manufacturing, project exports and energy were some of the areas where there was scope for more trade, Sitharaman said.
  
  Referring to the FTA in services and investment that will come into force in July 1, 2015, Sitharaman said seamless connectivity will spur people-to-people contacts and tourism, create new enterprises and millions of jobs for people in the region.
  
  This will be enhanced especially when the economic corridors along the India-CLMV road and rail lines will be fully developed, she added.
  
• UN puts India growth at 6.3%
  India’s economic growth is expected to improve to 6.3 per cent in 2016 with the country leading economic recovery in South Asia, according to a United Nations report. The UN World Economic Situation and Prospects 2015 (WESP) report, launched on 11th December, also said India is likely to make progress in implementing economic policy reforms and help provide support to business and consumer confidence.
  
  It said global economic growth is forecast to continue increasing over the next two years, despite legacies from the financial crisis continuing to weigh on growth, and the emergence of new challenges, including geopolitical conflicts such as in Ukraine, and the Ebola outbreak in West Africa.
  
  The global economy is expected to grow 3.1 per cent in 2015 and 3.3 per cent in 2016, compared with an estimated growth of 2.6 per cent for 2014, when the pace of expansion has been moderate and uneven.
  
  It said India, which is estimated to record a 5.4 per cent economic growth in 2014, will see GDP growth improving to 5.9 per cent next year and 6.3 per cent in 2016.
  
  Economic growth in South Asia is also set to gradually pick up from an estimated 4.9 per cent in 2014 to 5.4 per cent in 2015 and 5.7 per cent in 2016.
  
  Economic growth had slowed to 4.7 per cent in 2012, according to the UN report. During 2014, East Asia, including China, managed to register relatively robust growth, while India led South Asia to a moderate strengthening.
  
  Developing countries as a group are expected to grow at 4.8 per cent in 2015 and 5.1 per cent in 2016, up from the 4.3 per cent estimated for 2014.
  
• India is on growth track, says IMF
  The International Monetary Fund on 11th December said the focus on governance and financial inclusion measures taken by the government were positive signs that India was back on the growth track. In India, the growth was stalled for some time, but the measures taken by the new government started showing signals of growth, it said.
  
  The IMF also said, in India lack of infrastructure was a major hurdle for developmental activities, which the government needed to address for speedy growth.
  
• Railways open FDI opportunity
  Foreign investors can put in as much as Rs 90,300 crore in India’s rail infrastructure through the foreign direct investment (FDI) route suggests a list of projects released by the railway ministry.
  
  The Rs 63,000-crore Mumbai-Ahmedabad high-speed corridor project is the single largest. The other big ones include the Rs 14,000-crore CSTM-Panvel suburban corridor, to be implemented in public-private partnership (PPP), and the Rs 1,200-crore Kachrapara rail coach factory, besides multiple freight line, electrification and signalling projects.
  
  According to the Railway Board, the discussions at the previous investor meet surrounded the overview of five models of participative policy, framework of engineering, procurement and construction (EPC) contracts and sectoral guidelines for foreign and domestic investment. The ministry’s brass has also deliberated on a new model concession agreement under the PPP model and new projects like station development to be rolled out under PPP with investors.
  
  Among the companies that have so far expressed interest in the ministry’s PPP initiative are Reliance Infrastructure, Larsen & Toubro, Siemens, Adani Ports, GMR, Tata Infrastructure, Gammon, Jindal Steel and Power, JSW, Bombardier, GE, Alstom, Electromotive Diesel, Bharat Heavy Electricals, NMDC, HSBC and JPMorgan.
  
• SIT submitted second report on black money
  The Special Investigation Team, SIT on black money in its second report submitted to the Supreme Court has revealed that persons on the HSBC list held 4,479 crores rupees in off shore accounts. In an official statement, it said that out of 628 names on the HSBC list received from France, 201 are either non-residents or non-traceable, leaving 427 persons’ cases as actionable cases. The Central Board of Direct Taxes has directed its officers to finalise the assessments for all 427 actionable cases, whose names are appearing in the HSBC list. Out of these 628 persons in the HSBC list balances are shown against 339 persons and no amounts are shown against 289 persons or entities. In respect to the 289 persons or entities further investigations and assessments are being taken by the income tax department. It said the Income tax department and other agencies including Enforcement Directorate are probing cases involving unaccounted wealth totalling 14,958 crore rupees within India.
  
  The statement said, income tax department has finalised assessment of 79 assesses and an amount of 2,926 crores rupees has been brought to tax towards the undisclosed balances in the accounts relating to these persons. These assesses have been levied tax and interest. Penalty proceedings have been initiated in 46 cases. Such penalties have been levied in three cases so far. With regard to the other assesses, proceedings are pending. Prosecutions have been initiated in six cases for wilful attempt to evade taxes and in 5 cases.
  
• Saradha scam: CBI arrests Bengal Transport Minister
  The Central Bureau of Investigation on 12th December arrested West Bengal Transport Minister and senior Trinamool Congress leader Madan Mitra for “cheating and misappropriation of funds” in connection with the multi-crore Saradha scam. He is the first Minister in the Mamata Banerjee Cabinet to be arrested in the scam.
  
• WTO talks fail to clinch deal on trillion dollar IT tariff cuts
  Talks on cutting trade tariffs on hundreds of information technology goods failed to reach agreement on 12th December, diplomats at the World Trade Organization (WTO) said.
  
  However, it was unclear how further talks would overcome the obstacle of China and South Korea's deadlock over liquid crystal display (LCD) screens, which several participants had identified as the main hurdle to a deal. South Korea, home to top LCD producer LG Display Co Ltd, wanted LCD screens to be one of the products to have its tariffs slashed by the deal, they said. But China, which wants to foster its own LCD industry, had steadfastly refused.
  
  Although 12th December’s deadline for finishing the negotiation was an artificially imposed one, the US ambassador to the WTO, Michael Punke, had said the talks' "success or failure" would be decided this week. His European Union counterpart, Angelos Pangratis, had said: "Later it will not be easier ... Now is the moment."
  

Norms of choosing statutory auditorsPublic Sector Bank (PSB) Boards will now have a say in the selection and appointment of its statutory central auditors. In a policy change, the Finance Ministry has delegated the work of selection and appointment of statutory central auditors to individual PSBs for the year 2014-15 onwards.

This move will provide autonomy to bank boards' in selection and appointment of statutory auditors, said an official release.

Hitherto, Boards of PSBs had virtually no say and were required to accept the name of the chartered accountancy firm referred to it by a panel set up by the department of financial services (DFS) in the Finance Ministry.

The Panel comprised among others representative of DFS and Chairman of the Indian Banks’ Association.

Under the new framework now put in place, the Reserve Bank of India (RBI) will provide to the PSBs the criteria for selecting the statutory central auditors.

The office of Comptroller and Auditor General (CAG) will provide the list of eligible auditors available with them and PSBs can make the selection out of the list with the prior approval of RBI.

This latest Government move to allow PSBs to select its statutory auditor is seen as victory of sorts for bankers, many of whom were keen to get the authority to appoint statutory auditor.

Not all endorse this move with some even wondering what had prompted the policy change when the earlier system of DFS panel deciding on the statutory auditor worked well.

Core industries grew 6.3% in OctoberSignaling a revival in economic growth, output in the eight core industries grew 6.3 per cent in October 2014. The picture is substantially better than the group’s performance last October, when the cumulative output shrank 0.1 per cent.

The eight core industries are coal, fertilizers, electricity, crude oil, refinery products, natural gas, steel and cement. For the April-October 2014 period, the core sectors produced 4.3 per cent more, marginally higher than the 4.2 per cent growth recorded in same period last year.

The performance for October 2014 was bolstered by a 16 per cent increase in coal production and a 13.2 per cent rise in electricity generation.

While coal output had contracted 3.5 per cent in October 2013, electricity generation grew 1.3 per cent in same month last year. The eight core industries’ had a weightage of 38 per cent in the index of industrial production.

Status quo in monetary policyThe Reserve Bank Governor Raghuram Rajan-led Reserve Bank of India (RBI) kept the policy rate unchanged for the fifth time in a row on 2nd December

The repo rate continues to be at 8 per cent while the cash reserve ratio has also been retained at 4 per cent. On the inflation trajectory, Rajan said he expects it to ease further and average at the 6 per cent.

Driven largely by a base-effect, the consumer price inflation for October had come in at 5.52 per cent, the fifth consecutive month that it declined.

Following are the highlights of RBI’s bi-monthly monetary policy statement:

 

• Short-term lending (Repo) rate unchanged at 8 per cent.
• Cash reserve ratio (CRR) unchanged at 4 per cent.
• Statutory Liquidity Ratio retained at 22 per cent to unlock banking funds.
• GDP growth for current fiscal estimated at 5.5 per cent.
• Projects retail inflation at 6 per cent by March 2015-end.
• Projects retail inflation to lower in November, rise again in December.
• Says change in monetary policy stance at the current juncture is premature.
• Hints at lowering policy rate early next year if fiscal, inflation conditions improve.
• Weak revenue realisation a threat to fiscal deficit target.
• Next bi-monthly policy statement on February 3.

Cabinet okays changes in Companies Act
The Union Cabinet on 2nd December approved the introduction of Companies (Amendment) Bill, 2014 in Parliament to make certain changes to the existing Act to create a better business environment.

It also approved introduction of the comprehensive Anti-Hijacking Bill 2014, besides amendments in the Regional Rural Banks Act.

The changes proposed in the Companies (Amendment) Bill include scrapping the requirement for minimum paid-up share capital and consequential changes, making a common seal optional, prohibition of public inspection of board resolution filed in the registry and inclusion of provision for writing off past losses/depreciation before declaring a dividend for the year.

The changes proposed in the Bill, if approved, will also exempt related-party transactions between holding companies and wholly-owned subsidiaries from the requirement of approval of non-related shareholders. The audit committee has been empowered to give approvals for such transactions on an annual basis.

The Cabinet approved amendments in the RRBs Act 1976 to enhance authorised and issued capital to strengthen their capital base and to bring flexibility in the shareholding between Central and State Governments and the sponsor bank. The term of non-official directors appointed by the Centre will be fixed at not exceeding three years.

It also approved introduction of the comprehensive Anti-Hijacking Bill 2014 as the current law, the anti-hijacking Act 1982, was last amended in 1994. The Cabinet has approved repealing this Act and withdrawal of the anti-hijacking Bill 2010.

The Cabinet has also approved ratification of the Beijing Protocol, 2010, to which India is a signatory.

Highway projects
The Cabinet Committee on Economic Affairs on 2nd December approved the four-laning of three national highway sections – Lucknow to Sultanpur, Nagina to Kashipur and Singhara to Binjabahal. The projects will be carried out in a build-operate-transfer mode, on a design, build, finance, operate and transfer basis. The Lucknow to Sultanpur section on the National Highway 56 in Uttar Pradesh will cost Rs. 1,352 crore including the cost of land acquisition and the total length of the road will be 126 kms.

The Nagina to Kashipur section on National Highway 74 between Uttarakhand to Uttar Pradesh will cost Rs. 1,471.40 crore for a length of 99 km.

The Singhara to Binjabahal section on National Highway 6 in Odisha will cost Rs. 1,077.11 crore for the 104 km strech.

Govt relaxes FDI policy for real estate sector
The government on 3rd December eased foreign direct investment (FDI) norms for the construction development sector

Notifying the decision taken by the Cabinet in November, the Department of Industrial Policy and Promotion (DIPP), the nodal agency for all FDI policy, said foreign developers would now be allowed to exit a project only after completion or after completing the basic trunk infrastructure such as roads, water supply, street lighting, drainage and sewage.

Earlier foreign developers were not allowed to take out the invested amount before three years from completion of minimum capitalisation. However, now the foreign firm can take its money out or transfer its stake to another non-resident company before completing the project on approval from the government.

100 per cent FDI under the automatic route can now come in projects that have been completed by way of townships, malls and shopping complexes, and business centres. This was not allowed earlier.

Projects in semi-urban and peripheral locations of Tier I cities or locations in Tier II and Tier III cities could also take off at this scale, as land prices in these regions and the total capital investment requirement were attractive

Besides, under the new policy, the DIPP has also reduced minimum area requirements. Unlike the previous policy, foreign real estate developers can now invest in construction development projects having a minimum floor area of 20,000 sq meter. Earlier the requirement was 50,000 sq meters of built-up area. Similarly, the capital requirement was decreased from $10 million to $5 million.

Between April 2000 and September 2014……..

• The construction development sector received about $24 billion, constituting 10 per cent of the overall FDI into the country during the period.
• Since 2012-13, FDI inflow into the sector has slowed drastically.
• In 2012-13, it fell to $1.3 billion from $3.1 billion the previous year.
• It again declined to $1.2 billion in 2013-14. During the first six months of this financial year, only $568 million has flowed into this sector.

Govt sets up panel to facilitate US investments
The government has constituted an inter-ministerial committee to ease investment from the US. This is meant to tap the renewed interest among American businessmen in the India story
The committee, to be headed by the secretary in the department of industrial policy and promotion (DIPP), would fast-track investment proposals from the US and address the issues related to implementation of the projects where money is to flow in. At present, Amitabh Kant is the DIPP secretary.

Besides, the committee would identify bottlenecks faced by American investors in implementation of their investment proposals and address those in consultation with the agencies and state governments concerned

The committee will also closely monitor and coordinate the process to ensure investment from that country is put on the fast track in various sectors, and opportunities of investment and technology transfer are fully exploited. It will interact with US companies, as well as ministries and departments of the central and state governments.

The panel will initiate action to ensure the US companies investing here are given hand-holding services, and to promote an easy and attractive environment in all sectors, particularly manufacturing.

Members of the committee will include officials from the finance, environment, power, road transport, railways, defense, civil aviation, telecom, health and external affairs ministries.

At present, the US is ranked sixth among countries from where India has got the highest foreign direct investments. The country’s around $13 billion of investment here from April 2000 to September 2014 accounts for 5.65 per cent of the total FDI inflows to India during the period.

In the first six months of the current financial year, American investors have brought in $1.2 billion, which is higher than the $806 million they had in the entire 2012-13.

RBI issues norms for trading platform for MSME receivables
To help micro, small and medium enterprises (MSMEs), the Reserve Bank of India (RBI) on 3rd December permitted setting up of an exchange-based trading platform to facilitate financing of bills raised by such small entities to corporate and other buyers, including government departments and PSUs.

Issuing detailed guidelines in this regard, RBI said the Trade Receivables Discounting System (TReDS) should have a minimum paid up equity capital of Rs 25 crore and non-promoters would not hold over 10 per cent of the equity capital of TReDS.

Micro, Small and Medium Enterprises (MSMEs), despite the important role played by them in the economic fabric of the country, continue to face constraints in obtaining adequate finance, particularly in terms of their ability to convert their trade receivables into liquid funds, RBI said.
The foreign shareholding in the TReDS would be as per the extant foreign investment policy.

Among others, RBI said, TReDS should have sound technological basis to support its operations, be able to provide electronic platform for all the participants and information about bills, discounting and quotes should be in real time supported by a robust information system.

RBI asks banks to adopt easy norms for m-banking registration
The Reserve Bank of India, on 4th December, asked banks to make the registration process for mobile banking services easy, and activate the services at the earliest to expand the reach of mobile banking. Releasing the operative guidelines for mobile banking transactions, the RBI said there is a slow pick-up of mobile banking services despite the high mobile density in the country. Banks should strive to provide options for easy registration for mobile banking services to their customers, it added.

The RBI told banks to use mobile-banking in a widespread manner with standardisation in procedures relating to on-boarding of customers for mobile banking as also the subsequent processes for authentication, including accessible options for generation of MPIN by customers.

The central bank also advised banks that in order to quicken the process of MPIN generation and also widen the accessibility of this process to their mobile banking registered customers, banks could consider adopting various channels and methods, including a ‘common website’ which could be designed as an industry initiative.

EU bans imports from Ranbaxy unit
Ranbaxy Laboratories is in trouble once again with Germany citing a unit of the drugmaker’s Dewas plant late last month for non-compliance and imposing a ban on products manufactured at the unit. The red flags highlighted in the non-compliance report include deficiencies in design and operation of the clean-rooms, controls for preparation of components (including sterilisation) and equipment and controls over aseptic filling.

RBI announces norms for trade receivables discounting system
To make it easier and faster for micro, small and medium enterprises (MSMEs) to get their dues, the RBI put out final guidelines for setting up of a Trade Receivables Discounting System (TReDS).

TReDS will be like an exchange where an MSME that has some receivables pending from a large corporate will be able to trade the bill. So, if an MSME has to realise Rs. 100 from a corporate, it can exchange the bill with one of the participating entities on the exchange for, say, Rs. 95. The buyer of the bill will then recover the Rs. 100 from the corporate concerned, pocketing the profit of Rs. 5.

India's GDP growth rate will overtake China's over 2016-18: Goldman Sachs
According to Goldman Sachs, India is set to overtake China and become the fastest-growing emerging market during 2016-18. According to this rating agency Indian economy was beginning a new growth cycle, driven by reduced macro imbalances, benign global conditions (lower commodity prices) and structural reforms.

The Asia-Pacific research division of the foreign investment banking firm believes the Indian economy is on the mend. In 2015, Goldman Sachs expects the markets to give 13 per cent returns (after factoring in currency depreciation). The brokerage expects Nifty to close at 9,500 by the end of 2015, which is, however, less than 9,960 predicted by Macquarie.

Structural reforms and the focus on reviving the economy is expected to boost India’s gross domestic product (GDP) growth to 6.3 per cent in calendar 2015 (6.5 per cent in FY16) and 6.8 per cent in calendar 2016 (7 per cent in FY17), forecasts Goldman Sachs. In contrast, it expects China to grow by seven per cent in 2015 and 6.7 per cent in 2016. India’s growth is expected to accelerate in the coming years, while China would witness a gradual slowdown in growth

Goldman Sachs also expects the Indian rupee to remain largely stable against the dollar, thanks to the capital flows. This means that even as the US Federal Reserve begins to increase rates next year, India will not see the kind of turmoil seen in 2013. However, India's rupee could appreciate strongly against other developed market currencies such as the euro and the British pound.

White label ATMs can accept international cards, says RBI
The Reserve Bank of India (RBI) on 5th December allowed third-party white label automated teller machines (ATM) to accept international cards, including international prepaid cards, and said white label ATMs can now tie up with any commercial bank for cash supply. The currency conversation rate will be fixed by a local bank, RBI said in a notification on its website. White label ATMs are operated by independent operators, usually through tie-ups with particular banks, where the bank’s ATMs could be used.

Reliance signs pact with Pemex for oil hunt in Mexico
Reliance Industries Ltd (RIL) and Mexico’s state-owned Petroleos Mexicanos (Pemex) have entered into an agreement for assessment of potential upstream oil and gas business opportunities in Mexico. They will also jointly evaluate value-added opportunities in international markets.

RIL and Pemex will share expertise and skills in the relevant areas of oil and gas industry, including for deep-water oil and gas exploration and production.

RBI recommended Gandhiji image on notes
A Reserve Bank panel has decided against the inclusion of any other national leader's image on banknotes saying that no other personality could better represent the ethos of India than Mahatma Gandhi. On the advice of government, RBI had constituted a Committee for designing future currency note in October 2010

According to Finance Minister Arun Jaitley the Committee, inter alia, deliberated on the issue of changing the existing image of Mahatma Gandhi and inclusion of certain other personalities in the new design of banknotes.

FDI equity flows in India
After Delhi and Maharashtra, Tamil Nadu has topped in foreign direct investment (FDI) equity inflows in the current financial year, according to Commerce Minister Nirmala Sitharaman. None of the other states has touched the $1,000-million mark.

According to Reserve Bank of India (RBI) data, Tamil Nadu received $1,990.88 million during the April-September 2014 period. This is the third-largest after Mumbai — which includes Maharashtra, Dadra & Nagar Haveli, Daman & Diu — which received $2,578.76 million. New Delhi (Delhi and part of Uttar Pradesh and Haryana) received $2,424.61 million.

The FDI equity inflow during the current financial year stood at $14,472.24 million. Among the southern states, Andhra Pradesh received $789.69 million, Karnataka $562.20 million and Kerala $45.69 million. In 2011-12, Tamil Nadu received $1,422.39 million, which increased to $2,807.45 million in 2012-13 and dipped to $2,116.24 million in 2013-14.

Widen tax base: TARC
The Tax Administration and Reform Commission (TARC) has suggested reintroducing the Fringe Benefits Tax (FBT) and Banking Cash Transaction Tax (BCTT) to widen the tax base, minimizing various tax exemptions, and staying away from amnesty schemes as these cause inequity among taxpayers.

In its third report given to the finance ministry, the panel headed by Parthasarathi Shome said unlike earlier, even legislators and government officials should be kept under the purview of FBT, which was first introduced in 2005 by then finance minister P Chidambaram. Both FBT and BCTT were unpopular taxes and withdrawn before the general elections in 2009.

Shome was stated to be the main brain behind FBT and BCTT even earlier. The report was made public at a time when Budget exercise for 2015-16 in the finance ministry is on.

The report also suggested taxing farmers with large land holdings. It said farmers having high income, such as Rs 50 lakh and above, could be taxed. It recommended wealth tax base be increased by including intangible financial assets in the base while considerably raising the threshold and decreasing the wealth tax rate.

The commission said the finance ministry should look at widening its tax base as more than 50 per cent of registered central excise taxpayers are not filing returns. Only 33 per cent of registered persons under service tax filed returns in 2012-13 and the number fell short of the previous year’s figure by approximately 100,000. It noted unanticipated introduction of the negative list might have led to the drop.

There is a gap in the number of corporate tax payers registered with the I-T department vis-à-vis the number of working companies registered with the Registrar of Companies even though all of them are legally required to file returns mandatorily.

The commission said TDS coverage should be expanded to capture more and more transactions, especially those that involve large amounts of cash but remain outside the tax net. It said exemptions and deductions based on area and industry should be minimised, if not done away with.

The report said the revenue boards should move towards multi-year audits from the current single-year audits and the frequency of audits should be determined by risk assessment and compliance behavior of the taxpayers and the availability of resources for audit.

5% stake disinvested in SAIL
Five per stake sale in Steel Authority of India (SAIL) by the government, the first leg of this financial year’s disinvestment programme, received an encouraging response from investors on 5th December. The Rs 1,700-crore offer for sale (OFS) was subscribed more than two times, while the portion reserved for retail investors — those investing up to Rs 2 lakh — was subscribed nearly three times.

According to investment banking sources, Life Insurance Corporation of India invested as much as Rs. 700 crore, about 40 per cent of the issue. Other prominent investors included State Bank of India (Rs. 150-200 crore), United India Insurance (Rs. 15 crore) and ICICI Bank (Rs. 100 crore). The issue also saw participation from Hong Kong-based fund Segantil Capital Management ($15 million) and New-York based Geosphere Capital Management ($5 million).

According to stock exchange data, SAIL’s 206-million share sale received total bids of about 420 million, twice the shares on offer. The 10 per cent, or 20.6 million shares, quota for small investors recorded 53.3 million bids. This is the government’s first disinvestment programme that has a retail quota.

To meet its disinvestment target for FY15, the government will have to raise another Rs. 57,000 crore by March. Market players said big-ticket share sales in Coal India and Oil and Natural Gas Corporation (ONGC), in which the government would divest 10 per cent and five per cent stake, respectively, held the key.

Panel to revive Air India
By the end of this month, the government will constitute an expert committee, comprising senior personnel with experience in the aviation industry, to set a road map for the cash-strapped public-sector carrier, Air India. The committee of four or five experts will be asked to give by March-April a report outlining measures to help the carrier realise its full potential.

Separately, Air India is seeking a mid-term review of its turnaround plan, after several of the initial estimates regarding fuel price, exchange rate and market growth turned out to be wrong.
The panel is being constituted according to objectives outlined in the draft civil aviation policy, unveiled by Minister Pusapati Ashok Gajapati Raju last month. While privatisation of Air India will not take place immediately, the minister had said he did not rule out the option for the state carrier in future.

Air India's losses widened to Rs 5,389 crore in 2013-14, primarily due to high operational costs. It also missed the target of Rs 1,040 crore in operational profit. The net loss was Rs 5,100 crore in 2012-13 and Rs 7,100 crore in 2011-12.

Four schemes for textile growth
Government has launched four schemes, including a technology mission, for promotion and growth of technical textiles. Technical textiles are materials manufactured primarily for their technical performance and functional properties rather than aesthetic and decorative purpose.

In addition, the ministry has approved setting up of integrated textiles parks under which it provides assistance for creation of infrastructure in the parks to the extent of 40 per cent limited to Rs. 40 crore.