ECONOMY AFFAIRS DECEMBER 2016
- Himachal Pradesh becomes sixth in India to attain 100% Aadhaar saturation
The Himachal Pradesh has achieved 100 percent Aadhar saturation on the basis of population of year 2015. With this, Himachal Pradesh has become the sixth State/UT in the Country. Earlier, Delhi, Telangana, Haryana, Punjab and Chandigarh have achieved this milestone.
In this small hill state Aadhaar numbers have been generated for 72, 52,880 residents. In order to maintain this achievement in future, special arrangements have been made under which services of Anganwadi workers and health services will be taken to cover different age groups. - Mauritius top source of FDI in India
Mauritius accounted for 20.8 per cent of foreign direct investment (FDI) in India followed by the US, UK, Singapore and Japan till March 2016, the Reserve Bank of India (RBI) said while releasing the Census on Foreign Liabilities and Assets of Indian Direct Investment Companies for 2015-16.
The destination for Overseas Direct Investment (ODI) of Indian companies was largely Singapore, Mauritius, the Netherlands and the US.
The ratio of outward to inward direct investment, at market value, increased marginally from 28.5 per cent to 28.7 per cent over this period.
According to the data, total sales, including exports of overseas subsidiaries increased 22.5 per cent to Rs 3,30,110 crore in 2015-16. The total value of their purchase, including imports, increased by 44.7 per cent to Rs 3,15,070 crore in 2015-16. Their purchase-to-sale ratio was 95.4 per cent.
In the 2015-16 round of this census, of the 18,549 reporting companies, 17,008 companies had FDI/ODI in their balance sheet in March 2016. Of these, 649 companies had bi-directional direct investment, 14,383 companies received only FDI and 1,976 had only ODI. - India's economy surpasses that of United Kingdom
Owing to Britain's recent Brexit-related problems and India's rapid economic growth, India has managed to overtake its erstwhile colonial master United Kingdom in terms of the size of the economy - the first time after nearly 150 years.
This dramatic shift has been driven by India's rapid economic growth over the past 25 years as well downslide in the value of the pound over the last 12 months, a report published in Forbes magazine said. Interestingly, economic think-tank Centre for Economics and Business Research (CEBR) had, in December 2011, forecasted that India would become the "fifth largest by 2020" but India has crossed this significant milestone much sooner.
On October 8, 2016, International Monetary Fund (IMF) too had predicted India to surpass Europeans by the end of the fiscal. - On Nov 8, RBI had only Rs 4.94 lakh cr in 2,000 rupee notes: RTI
On the day Prime Minister Narendra Modi announced scrapping of Rs 1,000 and Rs 500 notes, the Reserve Bank of India (RBI) had only Rs 4.94 lakh crore in 2,000-rupee notes, which was approximately one-fourth of over Rs 20 lakh crore it had in demonetised currency notes.
A Right to Information (RTI) response from RBI to Mumbai-based activist Anil Galgali says on November 8, it had Rs 9.13 lakh crore in 1,000 rupee notes while Rs 11.38 lakh crore in 500 rupee notes.
Surprisingly, RBI withheld information about distribution of currency notes to banks between November 9 and November 19, citing section 8(1)(g) of the RTI Act which allows a public authority to withhold information disclosure of which would endanger the life or physical safety of any person. - Farmers to get 60 days more to repay crop loans due in Nov-Dec
Centre has decided to provide additional grace period of 60 days to farmers, whose crop loan dues fall between 1st of November and 31st December, 2016. Agriculture Ministry said, the decision was taken in view of the constraints faced by the farming community in repayment of loans due to demonetization of high value notes.
The Ministry said, if such farmers repay the loan within 60 days with effect from the date on which the repayment was due, they will be eligible for prompt repayment incentive for 2016-17.
The prompt payee farmers in effect avail short term crop loans at 4 per cent per annum. This prompt repayment incentive however does not accrue to those farmers who repay after one year of availing such loans. The Government provides crop loans at subvented rates of interest at 7 per cent per annum, with a view to provide stimulation to the rural sector and farming community.
An added incentive of 3 per cent per annum is provided to the farmers for prompt repayment of loans within due date and upto a maximum period of one year. - RBI to issue new Rs 500 note with inset letter in new series
The Reserve Bank of India, RBI will shortly issue 500 rupee banknotes in Mahatma Gandhi New series with the inset letter E having star mark in the number panel.
The banknote will bear the signature of RBI Governor Dr Urjit Patel, year of printing 2016 and Swachh Bahrat Logo. In a statement, RBI said, packets containing these notes will have 100 pieces as usual but not in serial order.
Star banknotes in 500 rupees denomination are being issued for the first time. It said, all 500 banknotes under Mahatma Gandhi New series issued from 8th of last month onwards will continue to be legal tender. RBI said, star banknotes in the denomination of 10, 20, 50 and 100 are already in circulation. - Govt announces Rs 207 crore project for protection of Majuli Island
Minister of State for Development of North Eastern Region Dr. Jitendra Singh has announced to provide 207 crore rupees for protection and development of the world heritage island Majuli located along river Brahmaputra in Assam. According to Minister, the amount will be spent primarily for safeguarding the land loss due to erosion and to protect the 80 kilometer length of the bank line on the right bank of river Brahmaputra along Majuli island.
Largest river island of the world, Majuli district, covers an area of around 340 miles. Nearly 1 lakh 60 thousand people reside at the Majuli river island which is one of the prime tourist destinations of North East. - Indian Railways goes digital
From now on railway passengers will be able to use their mobile phones to book tickets through a simple text-messaging-based-SMS facility or a menu-based USSD dialing service.
This is a simple process and involves two steps, sending the travel information (date of journey, number of passengers, train number) and getting a transaction id and paying for the ticket.
Firstly an individual has to Register himself at www.irctc.co.in with his mobile number. It should be noted that the Mobile number should be registered with bank account. And the Same mobile number must be registered with IRCTC account. To book a railway ticket through SMS a 4-digit MMID code needed for payment process. - Centre launches e-hub for farming sector
The agriculture ministry on 21st December launched an ICAR data centre -connecting 274 specialised institutions and universities -which will act as an information hub for the farm sector and eventually link the rural population with high speed internet network. The centre will cater to research institutions by providing consultancy, project management, training and other value-added services. - GST Council approves most of draft model Bill
The Goods and Services Tax (GST) Council cleared most of the draft model GST Bill on 22nd December.
This leaves mainly the contentious issue of administrative turf between the Centre and states for 23rd December. Some state finance ministers did not rule out the Centre resorting to voting for resolving the issue of control over assesses under the proposed regime.
While the Centre is pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assesses between itself and the states, using a computer programme, states want sole control over assesses up to Rs 1.5 crore of annual turnover. - GST Council keeps dual control for next time
The tricky issue of division of administrative turf over assessees between the Centre and states has not taken up by the GST Council during its two day meeting that ended on 23rd December. All other provisions of the draft model GST Bill and compensation Bill were cleared.
The meeting scheduled on January 3rd and 4th will take up the Integrated GST (IGST) Bill. A state finance minister said states were clear there should be no dual control over assessees with up to Rs 1.5 crore annual turnover. This means that states want sole control till this limit, and share powers with the Centre over this threshold.
On the other hand, the Centre has been pushing for a cross-empowerment model of randomly choosing and dividing five per cent of the assessees between itself and the states, using a computer programme.
The issue of IGST also involves the territorial limits of states. This could also turn out to be a vexed issue, if not resolved quickly. The Centre also wants to take 12 nautical miles beyond coasts as Union territory and tax any item sold there. Coastal states are averse to this. - Govt directs cooperatives to open bank accounts for milk producers
The Centre has asked dairy major Amul to open bank accounts for all milk producers by 30th of December and other cooperatives by 30th of January 2017 to ensure smooth payment to farmers post-demonetisation. Gujarat Co-operative Milk Marketing Federation sells milk and other dairy products under Amul brand.
The Ministry said, instructions have been issued to all the agencies like National Dairy Development Board, Mother Dairy, Delhi Milk Scheme and all state Dairy co-operative federations for ensuring direct payment to milk producers bank account at the earliest.
There are 1.70 lakh Dairy Co-operative Societies at village level having 1.6 crore milk producers affiliated with 218 milk unions. - 'Coal Mitra' portal launched to facilitate flexibility in utilization of domestic coal
Power Minister Piyush Goyal has launched 'Coal Mitra' Web Portal to facilitate Flexibility in Utilization of Domestic Coal. This will allow government has also allowed Coal Swapping between PSUs and Private firms.
This move is aimed at optimum utilisation by private as well as public power companies of the coal. The portal will enhance transparency in coal swapping and help reduce operational and logistic costs, bringing tariffs down. Govt to soon launch helpline number 14444 to promote digital payments
A nationwide toll-free helpline number '14444' will be launched soon to educate people and provide support related to cashless mode of transactions. NASSCOM President R. Chandrashekar said government has sought the IT body's help in providing support on a mass scale to people. He said, Nasscom is providing call centre support to the project.
Mr. Chandrashekar said the service is expected to be operational within a week. He said, it is to help people at the first level to zero-in on the option most suitable for them that depends on person whether he has feature phone or not, Aadhaar number or not etc.
To educate people on digital transactions, Ministry of Electronics and IT on launched free-to-air channel DigiShala which will be available on Doordarshan's DTH platform and 'Cashless India' website to educate people about digital transactions- Foreign investors pull out over Rs 17,000 crore from debt markets
Foreign investors pulled out over 17,000 crore rupees from debt markets till now in December. However, FPIs pumped in a net 138 crore rupees in equity markets in the month until now. The latest outflows comes following net withdrawal of more than 27,000 crore rupees from debt markets and another 22,500 crore rupees from equities in the preceding two months, October and November. - Rs 12.4 lakh crore of old notes deposited in banks till Dec 10
Reserve Bank of India (RBI) Deputy Governor R Gandhi on 13th December said Rs 12.4 lakh crore of old notes scrapped have been deposited in banks till December 10. According to RBI Deputy Governor S.S. Mundra, the central bank has suspended an employee in Bengaluru, who was arrested on charges of colluding with bank officials in changing notes.
The employee was a “junior functionary” of the central bank and investigating agency reported that “he was recorded to be present in a bank branch where some suspected transaction was happening,” Mundra said.
Banks have issued Rs 4.61 lakh crore to public since November 8-9 through automated teller machines and bank counters, of which 20.1 billion pieces belong to the small denomination of Rs 10, Rs 20, Rs 50 and Rs 100. The rest, 1.7 billion notes have been issued in the Rs 500 and Rs 2,000 denomination. - Current account deficit narrows with import plunge in Q2
With a sharp drop in imports, the country’s current account deficit (CAD) declined to $3.4 billion (0.6 per cent of the gross domestic product) for the financial year’s second quarter ended September, from $8.5 billion (1.7 per cent of GDP) in July-September 2015.
However, on a sequential basis, CAD was higher in Q2 than the $0.3-billion figure (0.1 per cent of GDP) in April-June, according to Reserve Bank of India (RBI) data. The contraction over a year was primarily due to a lower trade deficit ($25.6 billion), brought about by a larger decline in merchandise imports, relative to exports.
RBI said for the six months ended September, first half of this financial year, the CAD had narrowed to 0.3 per cent of GDP from 1.5 per cent in H1 of 2015-16, with the contraction in the trade deficit. - Retail inflation at two-year low of 3.6%
Retail inflation eased significantly in November, with the Consumer Price Index (CPI) growing just 3.63 per cent, its slowest rate in two years, due to a sharp slowdown in food inflation.
Growth in the CPI was 4.2 per cent in October, and has been steadily slowing since July, when it was 6 per cent. The Reserve Bank of India had, in its latest policy review kept interest rates unchanged citing concerns over the possibility of firming oil prices fuelling higher inflation.
Inflation in the pan, tobacco and intoxicants category eased to 6.3 per cent in November from seven per cent in October. Inflation in the clothing and footwear category slowed to five per cent in November from 5.24 per cent in October.
The fuel and light category saw inflation slowing marginally, at 2.8 per cent in November compared with 2.9 per cent in October. The housing segment, similarly, saw inflation slowing to 5.04 per cent from 5.15 per cent over the same period. - Bottom 50% wage earners in India get only 17% of total money: ILO
Wage growth across the world has decelerated since 2012, falling from 2.5 per cent to 1.7 per cent in 2015, its lowest level in four years, says a new ILO report.
If China, where wage growth was faster than elsewhere, is not included, growth in global wages dropped from 1.6 per cent to 0.9 per cent, according to the ILO’s Global Wage Report 2016-2017, which is being published every two years since 2008.
On the growing wage inequalities, the report said in India the top 10 per cent wage earners get nearly 43 per cent of the total wages, while the bottom 50 per cent get only 17 per cent of total wages, adding that wage inequality was particularly higher in emerging economies, such as South Africa, India and Brazil.
Since 2006, average wages had more than doubled in China, rose by about 60 per cent in India, and by between 20 and 40 per cent in most other countries in the G20 group. But in the last four years, real wage growth declined from 6.6 per cent in 2012 to 2.5 per cent in 2015. - Lucky Grahak Yojana, Digi Dhan Vyapar Yojana announced to promote digital payments
Government on 15th December announced Lucky Grahak Yojana to encourage consumers and Digi Dhan Vyapar Yojana to encourage merchants for transition to digital payments.
According to the CEO of NITI Aayog Amitabh Kant, National Payment Council of India will announce 15,000 winners of 1000 rupees each for next 100 days, starting from this Christmas. 7000 weekly awards and maximum award of 50 thousand rupees each for merchants will be given, under Digi Dhan Vyapar Yojana. Mega awards under the two schemes which will be announced on the birthday of Dr B.R. Ambedkar on 14th April. The estimated expenditure of the schemes to incentivize Digital Payments is 340 crore rupees. - The Pradhan Mantri Garib Kalyan Yojana comes into effect today
The Pradhan Mantri Garib Kalyan Yojana (PMGKY) comes into effect on 16th December. The scheme will continue till 31st of March next year. Money generated from disclosure of unaccounted cash will be used for this scheme. Declarations under new black money disclosure scheme will be kept confidential. - India removes Cyprus from tax blacklist
Cyprus has been formally removed from India’s tax blacklist and will now not be considered as ‘non-cooperative’ jurisdiction for income tax purposes. The Central Board of Direct Taxes (CBDT) has issued a notification, rescinding its executive order blacklisting the island nation from November 1, 2013.
Cyprus, a popular tax haven, was the only country to have been blacklisted by India as a non-cooperative jurisdiction due to lack of effective exchange of information. - Govt clarifies status of Political Parties under Income Tax Act, 1961
Govt. clarifies exemptions under sec 13A of IT Act applies to only registered political parties subject to certain conditions, which includes keeping and maintaining books of accounts and other documents along with the name and address of such person who has made such contribution in excess of Rs. 20000.
All accounts of political party to be audited by a Chartered Accountant and all political parties has to submit a report to the Election Commission about the donations received within a time frame prescribed.
Post demonetisation, no political party can accept donations in 500 and 1000 rupee notes since they were rendered illegal tenders. Any party doing so and any discrepancy in the books or records of political parties amounts to violation law, and they are as liable to be questioned by the Income Tax authorities as is anyone else. - India crosses $300 billion FDI milestone
India crossed the $300 billion foreign direct investment (FDI) milestone between April 2000 and September 2016, firmly establishing its credentials as a safe investment destination in the world.
India received $101.76 billion roughly 30 percent of total FDIs from Mauritius between April 2000 and September 2016; apparently because the investors wanted to take advantage of India's double taxation avoidance treaty with the island nation. The cumulative FDI inflows during the period amounted to $310.26 billion.
The inflow in the first half of the current financial year was $21.62 billion, according to data compiled by the Department of Industrial Policy and Promotion. The other big investors have been from Singapore, the US, UK and the Netherlands.
India's services sector topped the table, receiving 18 per cent of the cumulative equity FDI inflows followed by construction development, computer software & hardware, telecommunication and automobile. - RBI to introduce new 20 & 50 rupee notes
The Reserve Bank of India, RBI will soon issue new notes of twenty and Fifty rupees denomination in the Mahatma Gandhi Series-2005 and all old notes issued by the Bank will continue to be legal tender.
In a statement, the RBI has said that the 50 rupees bank notes will be without inset letter in both the number panels and bear signature of RBI Governor Dr. Urjit R Patel.
While, the 20 rupees note will be with inset letter ‘L’ in both the number panels and bear signature of Dr Patel. The year 2016 will be printed on the reverse of both the notes. - GDP data show rising discrepancies
Discrepancies rose by Rs 41,205 crore whereas GDP expanded by a little over Rs 2 lakh crore in the second quarter year-on-year. In the first quarter, the respective figures were Rs 25,471 crore and Rs 1.93 lakh crore. GDP rose 7.3 per cent in the second quarter, slightly higher than 7.1 per cent in the first quarter.
Discrepancies in the national accounts arise because data on the demand side is not actual data but it is derived from certain ratios. The actual data is supply-side – agriculture, industry and services. Adding indirect product taxes and subtracting give GDP data. Discrepancies emerge on the demand side and not on the supply side of the data.
The actual data come 18 months down the line from the close of a financial year. The problem could be rectified to an extent after the Central Statistics Office comes out with a supply use table (SUT). However, there is a lag of release in this table. The office has released SUT till 2014-15 and the work on 2014-15 is under progress. - Govt approves setting up of Higher Education Financing Agency
The government has approved setting up of a Higher Education Financing Agency. It will fund the requisite infrastructure for promoting research facilities in the centrally-aided institutions of higher learning.
Government will provide an equity of 1,000 crore rupees. Human Resource Development Minister Prakash Javadekar said this in reply to a question in the Lok Sabha on 5th December. He added that the process of finalising the bank for this purpose is underway. With the devolution of more funds to the States as recommended by 14th Finance Commission, the States are also in a position to allocate proper funds to the institutions of higher learning, he said. - Public Financial Management System to save interest costs of Government
The Public Financial Management System (PFMS) after implemented on full scale will help Union Government to save a significant amount on interest costs. It will allow the government to monitor and access the more than Rs.1 lakh crore of idle funds lying with it under various heads.
Once government accesses these funds through PFMS, it does not need to borrow that amount. Government is planning to roll out this platform from next financial year i.e. April 2016 along with Goods and Services Tax (GST). It will be integrated with IT network of the GST.
Public Financial Management System : PFMS is an electronic fund tracking mechanism compiles, collates and makes available in real-time, information regarding all government schemes.
Besides, it will significantly provide government real-time information on resource availability and utilisation across schemes. In addition it allow government expenditure to adopt a Just-in- Time (JIT) approach, with payments made only when they are needed. - Panasonic to set up unit, R&D Centre in India
Panasonic Corporation plans to produce refrigerators in India and strengthen its R&D function. The company said it would set up a unit in Haryana at an investment of Rs.115 crore to produce refrigerators. The factory, with annual capacity of five lakh units, will start production in November 2017. Panasonic will also establish an R&D centre in India. The company will also set up a design division in Bangalore in April in partnership with Tata Elxsi. - RBI keeps key policy rates unchanged
Reserve Bank of India after its bi-monthly meeting on 7th December kept its key short-term lending rate, or repo rate, unchanged at 6.25 percent. The Reserve Bank's 6-member Monetary Policy Committee unanimously decided to maintain status quo.
The Reverse repo rate, the Marginal Standing Facility, and the Bank Rate were also kept unchanged. In its monetary policy review, the central bank also lowered its GDP growth forecast to 7.1 per cent for this fiscal, from the earlier 7.6 percent, due to short-term disruption in economic activities from demonetisation.
Headline inflation is projected at 5 per cent by the fourth quarter of 2016-17, with risks tilted to the upside, but lower than in the October policy review. The Reserve Bank also withdraw the 100 per cent incremental Cash Reserve Ratio from December 10. The move will allow banks to retain the deposits coming to them due to demonetisation. - Cabinet gives ex-post facto approval to MoUs in different sectors
Union Cabinet has provided its ex-post facto approval to the MoU between India and Vietnam on Cooperation in the area of Information Technology. The MoU will remain in effect for a period of five years and will be renewable by mutual written consent between the two countries.
The Cabinet provided its ex-post facto approval to the MoU between India and Afghanistan on cooperation in the peaceful uses of outer space. It envisages cooperation for application of space technologies in education, agriculture, weather forecasting, telecommunications, rural health, sanitation, urban development, and any other areas mutually agreed upon.
It also provided its nod to the MoU between India and Thailand in controlling narcotic drugs, psychotropic substances and drug abuse. It will facilitate effective institutional interaction between India and Thailand and once in force, it would help in addressing the issue of transnational narcotics trafficking.
The Cabinet also provided its ex-post facto approval to two MoUs between India and (UK) for Cooperation in the area of Intellectual Property (IP) and Ease of Doing Business in India. The MoUs was signed in November, 2016 and they provides an opportunity for collaboration in training programmes, collaborated research in IPR and UK’s technical assistance and best practices to enhance further implementation of reforms. - RBI relaxes norms for AFA to speed up small value online transactions
To speed up small value online transactions, the RBI has relaxed norms for Additional Factor of Authentication, AFA for payments up to 2,000 rupees. The RBI said, only authorised card networks will provide such payment authentication solutions with participation of card issuing and acquiring banks.
The RBI said, in this model, the card issuing banks will offer the payment authentication solutions of the respective card networks to their customers on an optional basis. Customers opting for this facility will go through a one-time registration process requiring entry of card details and AFA by the issuing bank.
It further said that thereafter, the registered customers will not be required to re-enter the card details for every transaction at merchant locations that offer this solution and thereby save time and effort.
The card details already registered would be the first factor while the credentials used to login to the solution would be the additional factor of authentication. RBI said, in the interest of customer awareness and protection, the banks and authorised card networks offering such solutions will bear the full liability in the event of any security breach or compromise in the authorised card network. - Govt announces several incentives on payments through digital modes
Government announced several incentives on payments made through digital modes. According to the Union Finance Minister Arun Jaitley, Petroleum companies will offer a discount of 0.75 percent on diesel and petrol to consumers who pay through digital means.
0.5 percent discount will be given to people who will buy monthly seasonal tickets in the Suburban railway networks through digital payment mode. It will be effective from 1st of next month and will start with the Mumbai suburban railways.
Passengers will get 10 lakh rupees free accident insurance cover on booking of Railway ticket through online mode. Payments through digital mode for railways catering, accommodation, retiring room will also attract 5 percent discount.
Purchasing of new insurance policy of PSUs online will be cheaper as people will be get 10 percent discount on General Insurance and 8 percent discount on life Insurance policies. A discount of 10 per cent will be available to users for payment of toll at Toll Plazas on National Highways using RFID card and Fast Tags.
Mr. Jaitley also said, to expand digital payment infrastructure in rural areas, the Government through NABARD will extend financial support to eligible banks for deployment of two Point of Sale (PoS) devices each in 1 Lakh villages with population of less than 10,000.
Mr. Jaitley also said, Public sector banks are advised that merchant should not be required to pay more than 100 rupees per month as monthly rental for PoS terminals, Micro ATMs and mobile POS from the merchants to bring small merchant on board the digital payment eco system. - NABARD to provide two PoS devices in villages of 10,000 population
National Bank for Agriculture and Rural Development has announced that it will provide two Point of Sale (PoS) devices in villages having population of 10,000. In a statement, NABARD Chairman Harsh Kumar Bhanwala said that over one lakh villages in tier 5 and 6 areas have been selected for the purpose. Mr. Bhanwala said the project likely to cost about 120 crore rupees will encourage people in rural areas to move towards digital transactions.
NABARD will also help in the procurement of EMV chip and PIN-based RuPay Kisan Cards for almost 4.3 crore Kisan Credit Card holders at an approximate expenditure cost of 108 crore rupees. Mr. Bhanwala said that post demonetisation; these two initiatives will have a positive impact in easing the transition to digital transactions.
NABARD has played a pivotal role in adoption of banking technology among regional rural banks and rural cooperative banks. Over the last few years it has brought nearly the entire cooperative banking system onto Core Banking Solution platform, a pre-requisite for moving towards cashless banking services. - Cabinet approves reforms to boost employment generation
Union Cabinet approves reforms to boost employment generation and export in textile sector; decides to keep Fertilizer subsidy rate unchanged for Oct-Mar 2016-17; also approves MoU between India & Thailand on Cooperation in controlling narcotic drugs & psychotropic substances.
Cabinet also approved expansion of mandate of the Delhi Mumbai Industrial Corridor Project Implementation Fund.
Cabinet has given approval to Election Commission's proposal for purchase of voting machines, at a total cost of around Rs 1,000 crores during 2017 to 2019.
This would facilitate phasing out of obsolete electronic voting machines procured during 2000-2005. - Govt decides to print plastic currency notes
Government on 9th December informed Parliament that a decision has been taken to print plastic currency notes and procurement of material has started.
The central bank for long has been planning to launch plastic currency note after field trials. In February 2014, the government had informed Parliament that one billion plastic notes of Rs 10 denomination would be introduced in a field trial in five cities selected for their geographical and climatic diversity. The selected cities were Kochi, Mysore, Jaipur, Shimla and Bhubaneswar.
Plastic notes have an average life span of about five years and are difficult to imitate. Also, currency notes made of plastic are cleaner than paper ones. Such notes were first introduced in Australia to safeguard against counterfeiting. - Factory output contracts 1.9% in October
The Index of Industrial Production (IIP), a measure of factory output, contracted by 1.9 per cent in October. Analysts reckon that an unfavorable base effect and the many holidays in October may account for the disappointing performance.
The contraction in October contrasted with the growth of 9.9 per cent in October 2015. In September 2016, the IIP had recorded a print of 0.7 per cent. And for the April-October 2016 period, the IIP contracted 0.3 per cent as against a growth of 4.8 percent in the same period in 2015. - Panel to study security risks amid Centre’s digital push
The Committee of Chief Ministers tasked with promoting digital payments, has decided to set up a panel to examine security concerns that could arise in such transactions and recommend measures to address them.
The 13-member CMs’ Committee, at its second meeting on 9th December, also recommended that Aadhaar-enabled payment transactions should be kept free for users. The Unique Identification Authority of India would shortly roll out a common Android-based Aadhaar Enabled Payment System (AEPS) application that has been developed in collaboration with Tata Consultancy Services (TCS), to ease the cashless payments process for merchants.
The committee on security for digital payments will be headed by IT Secretary Aruna Sundararajan and Telecom Secretary J.S. Deepak.
Further, it was decided that the Reserve Bank of India (RBI) should allow authentication through iris scanner and One Time Password (OTP) for AEPS. Additionally, there would be no charge on AEPS transactions.
The Maharashtra government informed the committee that it will introduce an Aadhaar Bill in the legislative assembly to give legal status to the use of Aadhaar number for various purposes.
To popularise digital transactions, the committee has proposed a detailed review of the Merchant Discount Rate (MDR) regime, inter-linking of various digital payments platforms such as USSD (mobile short codes that can be used to make payments) with UPI, self-boarding by small merchants and a common application for UPI, among others. - India to get Rafale fighter jets in 3-yr time: IAF chief
Indian Air Force chief Arup Raha said, India will get the first tranche of Rafale fighter jets from France in the next three years. According to Raha within three years time India will have the first few Rafale aircraft delivered and within five and a half years will have two full squadrons of aircrafts in operation. The fighter jets, capable of carrying nuclear weapons and equipped with latest missiles, will tremendously increase the force's capability. The Air Force Chief said, besides Rafale, India is going to produce Light Combat Aircraft Tejas in large numbers. - Central government's tax collections increased
The government's revenue collection in April to November saw indirect tax-mop up growing at an impressive 26.2 per cent while that of direct tax came in at 15.12 per cent. Total direct and indirect tax collections at the end of November stood at Rs 9.64 lakh crore, 59 per cent of the Rs 16.26 lakh crore target for 2016-17. The government is eyeing 12.64 per cent growth in direct tax at Rs 8.47 lakh crore for the current fiscal and 10.8 per cent in indirect tax at Rs 7.79 lakh crore.
Direct tax mop-up touched Rs 4.12 lakh crore and indirect tax revenue stood at Rs 5.52 lakh crore during April-November, led by robust collections in personal income tax and excise duty, respectively.
Direct tax revenue includes corporate and personal income tax. Indirect tax takes into account mobilization from excise, service tax and Customs duty. - Draft GST law proposes compensation cess
The draft GST (Goods and Services Tax) law has suggested the levy of a compensation cess, which will be credited to the GST Compensation Fund. After five years, the unutilised cess would be transferred to the Consolidated Fund of India and then devolve to States based on the formula of the Fourteenth Finance Commission.
To ensure that the lower tax incidence under the GST is passed on to consumers, the draft model Central GST law has also called for anti-profiteering measures. The draft model law also proposes to cap the Central and State GST rates at 14 per cent each, while the Integrated GST is set to be limited at 28 per cent.
The draft law has suggested setting up an authority to examine whether input tax credits availed of, or the reduction in the price due to lower rate, have actually resulted in a commensurate reduction in the price of the goods or services supplied. It has also called for the authority to penalise defaulters.
E-commerce companies will also be expected to deduct a one per cent tax at source each from their suppliers for Central GST and State GST. The provision will, however, not apply to aggregators. - 5-member Chief Ministers’ panel to review demonetisation impact
The Centre has decided to set up a sub-committee of Chief Ministers to review the ground- level situation following its decision to demonetise high value currency and suggest possible ways to ease problems.
Andhra Pradesh Chief Minister N Chandrababu Naidu has been asked to chair the committee. Bihar Chief Minister Nitish Kumar, Tripura Chief Minister Manik Sarkar, along with Madhya Pradesh Chief Minister Shivraj Singh Chouhan, and Puducherry Chief Minister V. Narayanasamy are likely to be members of the panel.
Earlier, the Finance Ministry had also set up a committee of officials, from which teams have been asked to visit various towns and villages across the country and review the impact of the withdrawal of high level currency notes. - Jaitley introduces income tax amendment Bill In Lok Sabha
Finance Minister Arun Jaitley on 28th November introduced the Taxation Laws (Second Amendment) Bill, 2016 in the Lok Sabha. The Bill seeks to impose a higher rate of tax and penalty in respect of undisclosed incomes. The amendment has proposed to tax at 50 per cent the unaccounted demonetised cash that is disclosed voluntarily till December 30.
After the date a steep up to 85 per cent tax and penalty will be levied on undisclosed wealth that is discovered by authorities. The Bill proposes a Pradhan Mantri Garib Kalyan Yojana 2016 wherein the unaccounted, now banned 500 and 1000 rupee notes, deposited in banks between November 10 and December 30, will be taxed at 30 per cent plus a 10 per cent penalty. A 33 per cent surcharge on the tax will take the total levy to 50 per cent.
The Bill proposes to amend Section 115BBE of the Income Tax Act to provide for a steep 60 per cent tax and a 25 per cent surcharge on it (total 75 per cent) for black money holders who choose to disclose after PMGKY ends.
Another section inserted provides for an additional 10 per cent penalty on being established that the undeclared wealth is unaccounted or black money, taking the total incidence of levies to 85 per cent. - World Bank gives $470-m loan for North-East power network revamp
The government has secured a loan of $470 million from the World Bank to help six north-eastern states — Assam, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura — augment their power transmission and distribution networks and help provide last-mile electricity connections.
The existing power network infrastructure in the six participating states is old and has not been adequately maintained. This makes it prone to high technical and non-technical losses, and leads to frequent interruptions and outages in power supply.
Power Grid, which has also signed the agreement, would implement the north-eastern region power system improvement project and it will provide technical and managerial support for improving intra-state transmission and distribution systems in these states.
Once commissioned, the assets created under the project will be owned, operated and maintained by the state power utilities and departments.
The loan, from the International Bank for Reconstruction and Development (IBRD), has a 5-year grace period, and a final maturity of 24.5 years. - CRR increased to 100%, in specific period
The RBI has decided to increase the cash reserve ratio (CRR) to 100 per cent on deposits received between September 16 and November 11
The CRR requirement for banks have temporarily risen by Rs. 3.2 lakh crore following the RBI announcing a temporary hike in cash reserve ratio (CRR) on 26th November. The current CRR is 4 per cent or about Rs. 4.1 lakh crore.
The RBI has asked banks to set aside 100 per cent of the deposits accrued between September 16 and November 11 as incremental CRR. This will be reviewed in a fortnight. It has done this to address the surplus liquidity in the banking system emerging from the government’s demonetisation scheme. - Govt removes excise duty on manufacturing of POS machines
Government has removed excise duty on goods for manufacturing of Point of Sale machines till 31st of March 2017. A notification to this effect was tabled by Finance Minister Arun Jaitley in the Lok Sabha on 28th November.
The POS machines are hand-held devices which are used by merchants to accept payments for goods sold through credit and debit cards. There has been increase in demand for POS machines on account of cash crunch following demonitisation of high value currency notes by the government with effect from mid-night of November 8. - Lok Sabha passes Income tax amendment bill
The Lok Sabha on 29th November passed the Taxation Laws (Second Amendment) Bill 2016 without discussion amidst uproar by opposition over demonetization issue. The bill seeks to impose a higher rate of tax and penalty in respect of undisclosed incomes.
It proposes to levy a 30 per cent tax, a penalty of 10 per cent and 33per cent surcharge of tax on the deposit of undisclosed income thus making an individual to pay 50 per cent in the form of tax.
The rest 25 percent of the undisclosed income will remain parked for four years in a Deposit scheme known as Pradhan Mantri Garib Kalyan Scheme- 2016. The fund deposited in the scheme will be used for poverty alleviation programmes.
Those found to be involved in conversion of black money into white through other means will have to pay sixty per cent tax and penalty totaling to 85 per cent of the undisclosed income. - Bharatiya Mahila Bank merger with SBI cleared
Paving the way for consolidation in the banking sector, the Competition Commission of India has approved the amalgamation of Bharatiya Mahila Bank into State Bank of India (SBI).
Both the banks offer various banking products to their retail and corporate customers. However, while SBI has made deep inroads into the interiors of the country, Bharatiya Mahila Bank has only token presence with four to five branches in each State. - Gross NPAs of PSBs jump Rs.80, 000 cr. in July-September
Public sector banks have seen an increase of almost Rs.80, 000 crore in gross non-performing assets (NPAs) in the three months ended September 2016. As on September 30, gross NPAs of public sector banks rose to Rs.6, 30,323 crore as against Rs. 5, 50,346 crore by June end. This works out to an increase of Rs.79, 977 crore on quarter on quarter basis.
The government has taken sector-specific measures (infrastructure, power, road textiles, and steel etc-) where incidence of non-performing assets is high. - Fitch lowers GDP forecast to 6.9%
The cash crunch caused by demonetisation and its impact on consumers and farmers could result in the Indian economy’s growth slowing down to 6.9 per cent this financial year, Fitch Ratings said on 29th November, scaling down its earlier GDP growth estimate of 7.4 per cent.
The ratings agency also revised downwards its GDP growth forecast for 2017-18 to 7.7 per cent from 8 per cent. However, the report says although the medium-term effect of the currency withdrawal on GDP growth is uncertain, it is unlikely to be large, adding that the informal sector should recover soon.
People who operate in the informal sector will still be able to use the new high-denomination bills and other options (such as gold) to store their wealth. There are no new incentives for people to avoid cash transactions. The informal sector could soon go back to business as usual. - Cabinet approves Rs 2,000 cr for displaced families from PoK
Union Cabinet has approved two thousand crore rupees development package for onetime settlement of 36,384 displaced families from Pakistan occupied areas of Jammu and Kashmir and Chhamb. It follows announcement of Prime Minister’s Development Package for Jammu and Kashmir in November last year.
An official release said, 5.5 lakh rupees cash benefit per family will be disbursed to enable them to earn an income and subsist their livelihood. The amount will be released to the State government for disbursal to eligible families through Direct Benefit Transfer.
The Cabinet also gave its approval to notify inclusion, amendments in the Central List of Other Backward Classes in Assam, Bihar, Himachal Pradesh, Jharkhand, Maharashtra, Madhya Pradesh, Jammu and Kashmir and Uttarakhand. - Cabinet approved Right of Persons with Disabilities Bill 2014
The Cabinet has approved amendments in the Rights of Persons with Disabilities Bill, 2014 to repeal the existing Persons with Disabilities (Equal opportunities, Protection of Rights and Full Participation) Act, 1995 during the current winter Session of Parliament.
The amendments were necessitated as the existing Act of 1995 is not fully in conformity with United Nations Convention on the Rights of Persons with Disabilities (UNCRPD) to which India is signatory.
Under the proposed amendments, responsibility has been cast upon the appropriate governments to take effective measures to ensure that the persons with disabilities enjoy their rights equally with others. Under it, disability has been defined and the types of disabilities have been increased from existing 7 to 21. The Central Government will have the power to add more types of disabilities. - Centre forms committee to promote cashless society, digital economy
Centre has set up a 13 member committee on promotion of cashless society and digital economy. The committee headed by Andhra Pradesh Chief Minister Chandrababu Naidu will identify best global practices for economy based on digital payment and examine possibility of adopting them in the country.
The Chief Ministers of Odisha, Madhya Pradesh, Maharashtra, Sikkim and Puducherry and Vice Chairman of NITI Aayog are the members of the committee. Former Chairman of UIDAI Nandan Nilekani is among the five special invitees.
It will identify and outline measures for rapid expansion and adoption of the system of digital payments Debit and Credit cards, E-wallets and internet banking and will broadly indicate the road map to be implemented in one year. - GDP growth recorded at 7.3% in second quarter of current fiscal
The Indian economy grew 7.3 percent in the second quarter of the current fiscal, up from 7.1 per cent growth posted in the first quarter. The improvement was mainly on improved performance of the manufacturing, services and trade sectors.
GDP had grown by 7.6 per cent in the second quarter of the previous fiscal. According to official data, the sectors which registered growth of over 7 per cent in the July to September quarter are public administration, defense and other services, financial, insurance, real estate and professional services, manufacturing and trade, hotels, transport and communication, and services related to broadcasting. - RBI issues final guidelines on ‘large exposure’ of banks
The Reserve Bank of India on 1st December announced the final guidelines on its ‘large exposures’ framework. These guidelines are aimed at significant tightening of norms pertaining to concentrated risks of banks, especially in relation to large borrowers. The guidelines come into effect from March 31, 2019.
According to the guidelines, a large exposure is defined as any exposure to a counter-party or group of counter-parties which is equal to 10 per cent of the bank’s eligible capital base (defined as tier-I capital).
Currently, the RBI’s prudential exposure norms mandate that a bank exposure to a single borrower should capped at 15 per cent of their net worth while their group exposure is restricted to 40 per cent of their net worth. This will now be capped at 20 per cent of tier-I capital for a single entity and 25 per cent of tier-I capital for group exposure.
In exceptional cases, bank boards are can allow an extra 5 per cent (of the eligible capital base) exposure to a single borrower. There must be a board approved policy in this regard.
The guidelines are intended to reduce concentrated risk of banks as well as reduce dependence of large corporate on banks for their funding needs and gradually move them to the corporate bond market. - Govt unveils special bonds to soak demonetised funds
The government on 2nd December created provisions to issue special bonds worth up to Rs 6 lakh crore to absorb the temporary surplus with banks created by nationwide deposits of demonetised currency, which crossed Rs 8 lakh crore in the fourth week of November.
The RBI will sell the bonds, called Market Stabilisation Scheme (MSS), to banks on behalf of the government. Although the MSS is an existing programme, the current limit was only Rs 30,000 crore, which has been hiked to Rs 6 lakh crore. Money raised by sale of these bonds cannot be used by the government and does not add to the fiscal deficit.
The first tranche of the MSS bonds on 2nd December drew Rs 20,000 crore at a cut-off yield of 6.16%. Armed with the new instrument to soak funds, the RBI might relax its rules of the cash reserve ratio (CRR) requirement, under which it has impounded Rs 3.2 lakh crore of bank deposits.
On 30th November, when the RBI announces the monetary policy committee's decision on interest rates, it is also expected to provide a timeline for reducing CRR.
The cost of impounding these funds is first borne by the RBI, which borrowed under the reverse repo facility in exchange for bonds. On November 25, the amount parked with the RBI under reverse repo crossed Rs 5.2 lakh crore. Since the central bank was on the verge of running out of government bonds, it passed the cost onto banks by asking them to lock funds up to Rs 3.25 lakh crore in the form of cash reserves with the central bank, which would not earn any interest. - 27 bank officials suspended involved in violating RBI’s instructions
Twenty seven bank officials involved in carrying out irregular transactions and violating RBI’s instructions have been suspended post demonetisation. Six officials have also been transferred to non-sensitive posts. It said, Banks have done commendable work by putting in long hours of untiring effort in managing banking transactions. However, there were some cases of irregularities committed by officials involved in carrying out transactions.
The Ministry said, all efforts are on to facilitate genuine transactions, illegalities will not be tolerated and appropriate action will be taken against individuals involved in irregular and unauthorised activities. - Suresh Prabhu lays foundation stone for Rolling Stock Component factory
Railway Minister Suresh Prabhu laid the foundation stone for the Rolling Stock Component factory, estimated to cost nearly Rs 300 crore, in Maharashtra’s Ratnagiri district on 3rd December.
The centralised Railway Rolling Stock Components factory can discharge the works of overhaul and rehabilitation of safety sub-assemblies of railway rolling stock. Indian Railways will accrue the vital benefits like improvement in reliability of wagons and coaches, increased availability and higher rolling stock and reliability from the facility.
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