Economy I

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ISSUES IN INDIAN ECONOMY

1. SWAVALAMBAN SCHEME The scheme was launched on 26.09.2010 by the Central Government to encourage the workers of unorganized sector to voluntarily save for their retirement. The Government (GOI) will contribute a sum of Rs. 1,000 to each eligible NPS subscriber who contributes a minimum of Rs. 1,000 and maximum Rs. 12,000 per annum under the Swavalamban Scheme. Workers of unorganized sector from any part of the country can join this Scheme. The Interim Pension Fund Regulatory and Development Authority (PFRDA) has been mandated to implement it all over the country. 2. UNIVERSAL HEALTH INSURANCE SCHEME
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all. The head of the family or one earning member in the family is insured. The Central Government bears 50 per cent of the premium of Rs. 200 per year per person. 5. MICRO FINANCE & ITS REGULATION IN INDIA
C IA H S RO AC N I AD C L E EM Y
The Universal Health Insurance Scheme (UHIS) launched by the Government of India w.e.f. 14.7.2003 for persons and families below the poverty line with element of subsidy from the Government. The scheme has also been extended to unorganized sector workers such as MNREGA workers, street vendors, beedi & domestic workers, etc. However, the Planning Commission had constituted a High Level Expert Group(HLEG) on Universal Health Coverage (UHC) to, inter alia, develop a blue print and investment plan for achieving Health for All by 2020. 3. JANASHREE BIMA YOJANA * Section 25 Companies (not-for-profit) All the Khadi artisans are covered under centralized scheme known as Khadi Karigar Janashree Bima Yojana. This scheme was launched on 15th August, 2003. At the initiative of Khadi & Village Industries Commission (KVIC), benefits of Janashree Bima Yojana have been extended to Khadi Karigars at a subsidized premium of only Rs. 12.50 per annum. The balance premium is shared by Khadi Institution and KVIC and Rs.50 is paid from social security funds. 4. AAM AADMI BIMA YOJANA 6. TPDS The scheme is to cover rural landless households which has no insurance cover at
Microfinance is an economic development tool whose objective is to assist the poor to work their way out of poverty. It covers a range of services which include, in addition to the provision of credit, many other services such as savings, insurance, money transfers, counseling, etc. A microfinance institution acquires permission to lend through registration. Each legal structure has different formation requirements and privileges. Microfinance institutionsin India are registered as one of the following entities: * Non Government Organizations engaged in microfinance (NGO-MFIs), comprised of Societies and Trusts * Cooperatives registered under the conventional state-level cooperative acts, the national level multi-state cooperative legislation Act (MSCA 2002 ), or under the new state-level mutually aided cooperative acts (MACS Act) * For-profit Non-Banking Financial Companies (NBFCs)
In 1997 the system of PDS was changed to a new system called Targeted Public Distribution System (TPDS). The basic objective of TPDS is to provide foodgrains to the poor families on subsidised prices. The TPDS has a hidden objective of income redistribution by providing food cheaper to the poor than to the non-poor. This means that effective and transparent functioning of TPDS is an important tool of poverty eradication through increased calorie intake among the poorer families.
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KRISHI VIGYAN KENDRA
8. GREEN GDP The green gross domestic product (green GDP) is an index of economic growth with the environmental consequences of that growth factored in. Green GDP monetizes the loss of biodiversity, and accounts for costs caused by climate change. Some environmental experts prefer physical indicators (such as waste per capita or carbon dioxide emissions per year), which may be aggregated to indices such as the Sustainable Development Index. 9. NEW ECONOMIC POLICY 1991 The New Economic Policy announced on July 24th 1991 by the Congress Government included structural adjustment measures including the devaluation of rupee, increase in interest rates, reduction in public investment and expenditure, reduction in public sector food and fertilizer subsidies, increase in imports and foreign investment in capital intensive and hightech activities. New Economic Policy of 1991 includes globalization, liberalization and privatization (Disinvestment) 10. INTEGRATED ENERGY POLICY 20312032 12. LIQUIDITY MANAGEMENT BY RBI An Integrated Energy Policy ahs been designed to ensure energy supply from alternate sources at least costs and produce an environment that will ensure optimal use while meeting energy need for rapidly growing economy. The policy also addresses energy efficiency by 20% per unit of GDP over next ten years. Several initiatives have been taken up by which power generation plants being mandated to improve efficiency from 30-34% to 38-40%, specific energy consumption norms have been notified for industries. From long term prospective and keeping in mind the need to maximally develop domestic
Indian council of Agriculture Research set up KVK (Agriculture Science Centers) as innovative institution for imparting vocational training to practicing farmers and field level extension functuionaries. The first KVK was established at Pondichery in 1974. Authority of the KVKs is vested in the ICAR having its headquarter at Krishi Bhawan, New Delhi. The Council is a society registered under the Societies Registration Act 1860 of India. India has 553 KVKs under the perview of ICAR.
supply options, the policy provides adequate emphasis on renewable and nuclear sources of energy. Solar mission for generating 20 GW by 2020 have been launched. Several agreements with countries for supply of uranium and power reactors have been initiated. A National Energy Fund set up to finance energy R&D. The other forms of renewable energy including Hydrogen and Fuel Cell have also been provided the necessary thrust. 11. DTC The New Direct Tax Code (DTC) is said to replace the existing Income Tax Act of 1961 in India. The direct tax code seeks to consolidate and amend the law relating to all direct taxes, namely, income-tax, dividend distribution tax, fringe benefit tax and wealth-tax so as to establish an economically efficient, effective and equitable direct tax system which will facilitate voluntary compliance and help increase the taxGDP ratio. Another objective is to reduce the scope for disputes and minimize litigation. DTC removes most of the categories of exempted income. Unit Linked Insurance Plans (ULIPs), Equity Mutual Funds (ELSS), Term deposits, NSC (National Savings certificates), Long term infrastructures bonds, house loan principal repayment, stamp duty and registration fees on purchase of house property will lose tax benefits.
The Reserve Bank of India (RBI) and its attempt at managing liquidity, inflation and growth is done through its monetary policy. There are five main policy tools that RBI uses.
Cash reserve ratio (CRR) is the percentage of a banks time and demand liabilities that needs to be kept as cash with RBI. RBI can vary the percentage up to a limit. A high percentage means banks have less to lend and hence, curbs liquidity and a low CRR does the opposite. RBI can use the CRR to tighten or ease liquidity by increasing or decreasing it as the situation demands.
Open market operations refers to buying and selling of government securities by RBI to regulate the short-term money supply. If RBI wants to induce liquidity or more funds in the system, it will buy government securities and inject funds into the system, and if it wants to
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curb the amount of money out there it will sell these to the banks thereby reducing the amount of cash that banks have. Statutory Liquidity Ratio-Banks are required to invest a percentage of their time and demand liabilities in government approved securities, this is referred to as the SLR.
SLR
or contract the amount of money in the banking system. Purchases inject money into the banking system and stimulate growth while sales of securities do the opposite. The Reserve Bank of India considers Open Market Operation, or OMO, as its principal tool to manage liquidity. An OMO serves two primary goalsit infuses liquidity in the banking system without requiring the central bank to change its monetary policy and it checks yields on government bonds, the benchmark for overall credit market, from swinging wildly. OMO becomes even more important in a country like India where the central bank is also the manager of government debt. An OMO carried out during times of high inflation, such as in India now, adds to the price rise. An OMO as a tool is more effective in an economy where there is a spectre of deflation like in the United States and some western economies.
ii) Gold valued at a price not exceeding the current market price, iii) Unencumbered approved securities (G Secs or Gilts come under this) valued at a price as specified by the RBI from time to time. The maximum limit of SLR is 40% and minimum limit of SLR is 24%. Its 24% now. This restriction is imposed by RBI on banks to make funds available to customers on demand as soon as possible. Gold and G Secs (or Gilts) are included along with cash because they are highly liquid and safe assets. The RBI can increase the SLR to contain inflation, suck liquidity in the market, to tighten the measure to safeguard the customers money. 14. INFLATION & ITS TYPES
REPO RATE & REVERSE REPO RATE
SLR is Statutory Liquidity Ratio. Its the percentage of Demand and Time Maturities that banks need to have in any or combination of the following forms: i) Cash
Inflation is commonly understood as a situation of substantial and rapid general increase in the price level and consequent fall the value of money over a period of time. Inflation means persistent rise in the general level of prices. Inflation is a long term operating dynamic process. By and large, inflation is also a monetary phenomenon. It is usually characterized by an overflow of money and credit. Types of Inflation.
The rate at which the RBI lends money to commercial banks is called repo rate. It is an instrument ofmonetary policy. Whenever banks have any shortage of funds they can borrow from the RBI.
On different grounds, economists have classified inflation into various types. According to the rate inflation there are four types of inflation. Moderate Inflation Running Inflation Galloping Inflation Hyper Inflation
Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. Banks are always happy to lend money to the RBI since their money are in safe hands with a good interest.
An increase in reverse repo rate can prompt banks to park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system. 13. OMO
Moderate inflation is a mild and tolerable form of inflation. It occurs when prices are rising slowly. When the rate of inflation is less than 10 per cent annually, or it is a single digit annual inflation rate, it is considered to be moderate inflation in the present day economy. When the movement of price accelerates rapidly, running inflation emerges. Running inflation may record more than 100 per cent rise
The buying and selling of government securities in the open market in order to expand
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in prices over a decade. Thus, when prices rise by more than 10 per cent a year, running inflation occurs. When prices are rising at double or triple digit rates of 20,100 or 200 per cent a year, the situation may be described as galloping inflation. Galloping inflation is really a serious problem. It causes economic distortions and disturbances. In the case of hyper inflation prices rise is very severe. It is over 1000 per cent per year. There is at least a 50 per cent price rise in a month, so that in a year it rises to about 130 per cent times. Hyper inflation is a monetary disease. 15. ROLE OF SEBI
our investments. On the other hand ther is not any life cover in mutual funds. The only option we are left is purchasing a new insurance policy. The other important point to be focused involves that even if the costs of the investments in ULIPs is more compared to Mutual funds, the ULIPs offer better products which are suited for long term investments, whereas mutual fund products can only be used for sole purposes or short term returns. Mutual Funds and ULIPs both are subject to market risks; if something unfortunate happen to investor, family or nominee will receive only fund value. On the other hand ULIPs will give your family guaranteed sum assured in case of death of the policy holder. As these investments are the most preferred investment options to invest. even a small drawback somewhere makes a strong impression in our minds. So in the case of ULIPs vs Mutual funds if we notice, ULIPs are more preferable even if both stand at the same level. Somewhere when we equate both the investment options ULIPs are more beneficial as well as flexible as per our requirements. 17. INDICATIVE PLANNING
SEBI is regulator to control Indian capital market. Since its establishment in 1992, it is doing hard work for protecting the interests of Indian investors. SEBI gets education from past cheating with naive investors of India. Now, SEBI is more strict with those who commit frauds in capital market. SEBI has power to make new rules for controlling stock exchange in India. SEBI has power to provide license to dealers and brokers of capital market. If SEBI sees that any financial product is of capital nature, then SEBI can also control to that product and its dealers. SEBI sees whether merge or acquisition is for development of business or to harm capital market. 16. MUTUAL FUNDS & ULIPS ULIPs and mutual fund are similar type of investment but not same. Mutual funds are more into investments; whereas ULIPs are into investments as well as insurance. The basic difference evolves regarding its regulation. The ULIPs are regulated by the IRDA, whereas mutual funds are regulated by the SEBI. The main focus of mutual funds is on low costs while the main focus for the ULIPs lies in the better performance and the distribution of its products. The other aspect includes flexibility, in this case a ULIP allows us to increase our life cover and at the same time are premiums rates remain the same. This is achieved by reducing 18. NDC
Indicative planning which involves the establishment of sectoral targets which are not compulsory for the private sector and are embedded in macroeconomic projections that pertain to a period of several years. Indicative planning has been widely practiced in developing countries during the post war period. This form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market and mixed-market economies and thus increase economic performance. When utilizing indicative planning, the state employs influence, subsidies, grants, and taxes [to affect the economy], but does not compel. Indicative planning is contrasted with directive or mandatory planning, where a state (or other economic unit) sets quotas and mandatory output requirements.
The National Development Council (NDC) or the Rashtriya Vikas Parishad is the apex body for decision making and deliberations on development matters in India, presided over by
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21. 19. SEZ DUTY ENTITLEMENT SCHEME Designated areas in countries that possess special economic regulations that are different from other areas in the same country. Moreover, these regulations tend to contain measures that are conducive to foreign direct investment. Conducting business in a SEZ usually means that a company will receive tax incentives and the opportunity to pay lower tariffs. The objectives of SEZs can be clearly explained as the following:- (a) Generation of additional economic activity; (b) Promotion of exports of goods and services; (c) Promotion of investment from domestic and foreign sources; (d) Creation of employment opportunities; (e) Development of infrastructure facilities. The major incentives and facilities available to SEZ developers include: Exemption from customs/excise duties for development of SEZs for authorized operations approved by the BOA. 22. Income Tax exemption on income derived from the business of development of the SEZ in a block of 10 years in 15 years under Section 80-IAB of the Income Tax Act. Exemption from minimum alternate tax under Section 115 JB of the Income Tax Act. Exemption from dividend distribution tax under Section 115O of the Income Tax Act. Exemption from Central Sales Tax (CST). Exemption from Service Tax 20. NMIZs Central government intend to establish National Manufacturing and Investment Zones (NMIZs) to push the manufacturing share in the
the Prime Minister. It was set up on August 6, 1952 to strengthen and mobilize the effort and resources of the nation in support of the Plan, to promote common economic policies in all vital spheres, and to ensure the balanced and rapid development of all parts of the country. The Council comprises the Prime Minister, the Union Cabinet Ministers, Chief Ministers of all States or their substitutes, representatives of the union territories and the members of the Commissions. It is an extra-constitutional and non-statutory body. Its status is advisory to planning commission but not binding.
GDP. The proposed National Manufacturing Policy for these NMIZs would act as the key enablers in driving the growth of the sector in India. Main objectives of NMIZs are: (i) To promote investments in the manufacturing sector and make the country a hub for both domestic and international markets; (ii) To increase the sectoral share of manufacturing in GDP to 25% by 2022. (iii) To double the current employment level in the sector; and (iv) To enhance global competitiveness of the sector. PASSBOOK
The Duty Entitlement Passboook Scheme is a part of Duty Remission Scheme. It is a scheme which is offered by the Indian government to encourage exports from the country. DEPB means Duty Entitlement Pass Book to neutralise the incidence of basic and special customs duty on import content of export product. This is provided by way of grant of duty credit against the export product at specified rates. The DEPB Scheme which was notified on 1/4/1997 consisted of (a) Post-export DEPB and (b) Pre-export DEPB. The pre-export DEPB scheme was abolished w.e.f. 1/4/2000. Under the post-export DEPB, which is issued after exports, the exporter is given a duty entitlement Pass Book at a pre-determined credit on the FOB value. The DEPB allows import of any items except the items which are otherwise restricted for imports. CAPITAL ACCOUNT CONVERTIBILITY
Capital account convertibility implies the freedom to convert domestic financial assets into overseas financial assets at market determined rates. It can also imply conversion of overseas financial assets into domestic financial assets. Broadly, it would mean freedom for firms and residents to freely buy into overseas assets such as equity, bonds, property and acquire ownership of overseas firms besides, free repatriation of proceeds by foreign investors. Once a country eases capital controls, typically, there is a surge of capital flows.The inflow of capital can help augment domestic resources and boost growth. For global investors, capital account convertibility helps them to seek higher returns
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by sharing risks. It also offers countries better access to global markets, besides resulting in the emergence of deeper and more liquid markets. Capital account convertibility is also stated to bring with it greater discipline on the part of governments in terms of reducing excess borrowings and rendering fiscal discipline. 23. ECBs
(RBI permission required) but in practice, no one appears to be interested in exercising this right. 25. IMF
26. WORLD BANK GROUP 24. ADRs & GDRs American Depositary Receipt (ADR): A security issued by a non-U.S. company, but is traded on U.S. stock exchanges. ADRs are issued to offer investment routes that avoid the expensive and cumbersome laws that apply sometimes to non-citizens buying shares on local exchanges. ADRs are listed on the NYSE, AMEX, or NASDAQ. Global Depository Receipt (GDR): Similar to the ADR described above, except the GDR is usually listed on stock exchanges outside the US, such as Luxembourg or London. Dividends are usually paid in U.S. dollars ADRS and GDRs are shares without voting rights. The ratio of one depository receipt to the number of shares is fixed per scrip but the quoted prices may not have strict correlation with the ratio. Any foreigner may purchase these depository receipts whereas shares in India can be purchased on Indian Stock Exchanges only by Non-Resident Indians, Persons of Indian Origin or Foreign Institutional Investors. The purchaser has a theoretical right to exchange the receipt without voting rights for the shares with voting rights 27. ADB
An external commercial borrowing (ECB) is an instrument used in India to facilitate the access to foreign money by Indian corporations and PSUs (public sector undertakings). ECBs includecommercial bank loans, buyers credit, suppliers credit, securitised instruments such as floating rate notes and fixed rate bonds etc., credit from official export credit agencies and commercial borrowings from the private sector window of multilateral financial Institutions such as International Finance Corporation (Washington), ADB, AFIC, CDC, etc. ECBs cannot be used for investment in stock market or speculation in real estate. The DEA (Department of Economic Affairs), Ministry of Finance, Government of India along with Reserve Bank of India, monitors and regulates ECB guidelines and policies.
The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world. As the Second World War ends, the job of rebuilding national economies begins. The IMF is charged with overseeing the international monetary system to ensure exchange rate stability and encouraging members to eliminate exchange restrictions that hinder trade. The IMF oversees the international monetary system and monitors the financial and economic policies of its members. It keeps track of economic developments on a national, regional, and global basis, consulting regularly with member countries and providing them with macroeconomic and financial policy advice.
The World Bank Group consists of five organizations: The International Bank for Reconstruction and Development (IBRD)lends to governments of middle-income and creditworthy low-income countries. The International Development Association (IDA) provides interest-free loanscalled credits and grants to governments of the poorest countries. The International Finance Corporation (IFC) provides loans, equity and technical assistance to stimulate private sector investment in developing countries.
The Multilateral Investment Guarantee Agency (MIGA) provides guarantees against losses caused by non-commercial risks to investors in developing countries. The International Centre for Settlement of Investment Disputes (ICSID) provides international facilities for conciliation and arbitration of investment disputes.
The Asian Development Bank ( ADB ) is a regional development bank established on 22
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August 1966 to facilitate economic development of countries in Asia. The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) and non-regional developed countries. The ADB offers hard loans from ordinary capital resources (OCR) on commercial terms, and the Asian Development Fund (ADF) affiliated with the ADB extends soft loans from special fund resources with concessional conditions. The headquarter is at Manila.
determine the relative value ofcurrencies, estimating the amount of adjustment needed on the exchange rate between countries in order for the exchange to be equivalent to (or on par with) each currencys purchasing power.[1] It asks how much money would be needed to purchase the same goods and services in two countries, and uses that to calculate an implicit foreign exchange rate. Using that PPP rate, an amount of money thus has the same purchasing power in different countries. 31. HDI
28. DEPRECIATION & DEVALUATION A devaluation is when a country makes a conscious decision to lower its exchange rate in a fixed or semi fixed exchange rate. Therefore, technically a devaluation is only possible if a country is a member of some fixed exchange rate policy. When there is a fall in the value of a currency in a floating exchange rate. This is not due to a governments decision, but due to supply and demand side factors. Although if the government sold a lot of pounds they could help the depreciation. 29. REER & NEER The indices of Nominal Effective Exchange Rate (NEER) and Real Effective Exchange Rate (REER) are used as indicators of external competitiveness. NEER is the weighted average of bilateral nominal exchange rates of the home currency in terms of foreign currencies. Conceptually, the REER, defined as a weighted average of nominal exchange rates adjusted for relative price differential between the domestic and foreign countries, relates to the purchasing power parity (PPP) hypothesis. 32. GNI The Reserve Bank of India (RBI) has been constructing five-country and thirty six-country indices of NEER and REER as part of its communication policy and to aid researchers and analysts. Theses indices are published in the Banks monthly Bulletin. The NEER is the weighted geometric average of the bilateral nominal exchange rates of the home currency in terms of foreign currencies. The REER is the weighted average of NEER adjusted by the ratio of domestic price to foreign prices. 30. PURCHASING POWER PARITY 33. NAMA Purchasing power parity (PPP) is an economic theory and a technique used to
The Human Development Index (HDI) is a composite statistic used to rank countries by level of human development, and distinguishing very high human development, high human development, medium human development, and low human development countries. HDI was devised and launched by Pakistani economist Mahbub ul Haq, followed by Indian economist Amartya Sen in 1990. The HDI is a comparative measure of life expectancy, literacy, education, and standards of living of a country. It is a standard means of measuring well-being, especially child welfare. It is also used to distinguish whether the country is a developed, a developing or an underdeveloped country, and also to measure the impact of economic policies on quality of life. The HDI formula result, is a number from 0 to 1, (1 is the best outcome possible).
The Gross national income (GNI) consists of: the personal consumption expenditures, the gross private investment, the government consumption expenditures, the net income from assets abroad (net income receipts), and the gross exports of goods and services, after deducting two components: the gross imports of goods and services, and the indirect business taxes. The GNI is similar to the gross national product (GNP), except that in measuring the GNP one does not deduct the indirect business taxes.
The Non-Agricultural Market Access ( NAMA ) negotiations of the World Trade Organization are based on the Doha Declaration of 2001 that calls for a reduction or elimination in tariffs, particularly on exportable goods of interest to developing countries.
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NAMA covers manufacturing products, fuels and mining products, fish and fish products, and forestry products. These products are not covered by the Agreement on Agriculture or the negotiations on services. The WTO considers the NAMA negotiations important because NAMA products account for almost 90% of the worlds merchandise exports. 34. GATS
requirements and procedures including, inter alia , end product criteria; processes and production methods; testing, inspection, certification and approval procedures; quarantine treatments including relevant requirements associated with the transport of animals or plants, or with the materials necessary for their survival during transport; packaging and labelling requirements directly related to food safety. 36. 12TH PLAN APPROACH PAPER
The GATS applies in principle to all service sectors, with two exceptions. Article I(3) of the GATS excludes services supplied in the exercise of governmental authority. 35. SANITARY & CONDITIONS PHYTOSANITARY Sanitary or phytosanitary measure Any measure applied: (a) to protect animal or plant life or health within the territory of the Member from risks arising from the entry, establishment or spread of pests, diseases, disease-carrying organisms or disease-causing organisms; (b) to protect human or animal life or health within the territory of the Member from risks arising from additives, contaminants, toxins or disease-causing organisms in foods, beverages or feedstuffs; (c) to protect human life or health within the territory of the Member from risks arising from diseases carried by animals, plants or products thereof, or from the entry, establishment or spread of pests; or (d) to prevent or limit other damage within the territory of the Member from the entry, establishment or spread of pests. Sanitary or phytosanitary measures include all relevant laws, decrees, regulations, 37. ANNUAL BUDGET ACCOUNT vs VOTE 38. FISCAL DEFICIT
The creation of the GATS was one of the landmark achievements of the Uruguay Round, whose results entered into force in January 1995. The GATS was inspired by essentially the same objectives as its counterpart in merchandise trade, the General Agreement on Tariffs and Trade (GATT): creating a credible and reliable system of international trade rules; ensuring fair and equitable treatment of all participants (principle of non-discrimination); stimulating economic activity through guaranteed policy bindings; and promoting trade and development through progressive liberalization.
The 12th Plan (2012-17) which seeks to push forth the second generation economic reforms, improving governance and raise annual economic growth rate to 9 per cent during impending five-year period. The Approach paper, approved by the Cabinet provides a broad framework of the government policy to be pursued in the five-year plan period to achieve the desired growth rate of 9 per cent was cleared by the Planning Commission. The NDC, the highest policy-making body of the country, is headed by the Prime Minister and its members include Union Ministers, members of Planning Commission, and Chief Ministers of all states. Apart from giving more emphasis on inclusive growth, for the first time the Approach Paper has a chapter on governance and corruption. ON
The Annual Financial Statement, laid before both the Houses of Parliament constitutes the Budget of the Union Government. This statement takes into account a period of one financial year. The financial year commences in India on 1st April each year. The statement embodies the estimated receipts and expenditure of the Government of India for the financial year. Vote-on-account literally means a vote on the accounts of the government. Usually, the annual budget is presented by the end of February after which it is discussed details of the budget are scrutinized by a Parliamentary committee and it is finally passed by mid-May.
The fiscal deficit is the difference between the governments total expenditure and its total receipts (excluding borrowing). The elements of the fiscal deficit are (a) the revenue deficit, which
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is the difference between the governments current (or revenue) expenditure and total current receipts (that is, excluding borrowing) and (b) capital expenditure. The fiscal deficit can be financed by borrowing from the Reserve Bank of India (which is also called deficit financing or money creation) and market borrowing (from the money market, that is mainly from banks). 39. GEOGRAPHICAL INDICATION
in XBRL taxonomies, which capture the definition of individual reporting concepts as well as the relationships between concepts and other semantic meaning 41. P-NOTES
A geographical indication is a sign used on goods that have a specific geographical origin and possess qualities, reputation or characteristics that are essentially attributable to that place of origin. Most commonly, a geographical indication includes the name of the place of origin of the goods. Agricultural products typically have qualities that derive from their place of production and are influenced by specific local factors, such as climate and soil. Whether a sign is recognized as a geographical indication is a matter of national law. Geographical indications may be used for a wide variety of products, whether natural, agricultural or manufactured. An appellation of origin is a special kind of geographical indication. It generally consists of a geographical name or a traditional designation used on products which have a specific quality or characteristics that are essentially due to the geographical environment in which they are produced. The concept of a geographical indication encompasses appellations of origin. 40. XBRL 42. RURAL BUSINESS HUBS 43. GRADING OF IPOs XBRL ( Extensible Business Reporting Language) is a freely available, open, and global standard for exchanging business information. XBRL allows the expression of semantic meaning commonly required in business reporting. The language is XML-based and uses the XML syntax and related XML technologies such as XML Schema, XLink, XPath, and Namespaces. One use of XBRL is to define and exchange financial information, such as a financial statement. The XBRL Specification is developed and published by XBRL International, Inc. XBRL is a standards-based way to communicate and exchange business information between business systems. These communications are defined by metadata set out IPO grade 2: Below-average fundamentals IPO grade 3: Average fundamentals IPO grade 5: Strong fundamentals IPO grade 4: Above-average fundamentals
Financial instruments used by investors or hedge funds that are not registered with the Securities and Exchange Board of India to invest in Indian securities. Indian-based brokerages buy India-based securities and then issue participatory notes to foreign investors. Any dividends or capital gains collected from the underlying securities go back to the investors. It is also referred to as P-Notes.
Scheme of Rural Business Hubs (RBHs) was launched to promote Rural Non-Farming Enterprises (RNFE) which utilise local skills and/or resources and promote rural employment. The Scheme works on a 4P (PublicPrivate-Panchayat-Partnership) model and is applicable in all the BRGF districts and all the districts in the North Eastern Region. Setting up of RBHs is primarily done through convergence of resources from various ongoing schemes. Assistance under the RBH scheme is available for professional support services, training/skill development and for purchase of minor equipment.
IPO grading is the grade assigned by a Credit Rating Agency registered with SEBI, to the initial public offering (IPO) of equity shares or any other security which may be converted into or exchanged with equity shares at a later date. The grade represents a relative assessment of the fundamentals of that issue in relation to the other listed equity securities inIndia. Such grading is generally assigned on a five-point point scale with a higher score indicating stronger fundamentals and vice versa as below. IPO grade 1: Poor fundamentals
IPO grading has been introduced as an endeavor to make additional information available for the investors in order to facilitate
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their assessment of equity issues offered through an IPO. 44. INTEGRATED SCHEME OF OILSEEDS, PULSES OIL PALM & MAIZE In order to provide flexibility to the States in implementation based on regionally differentiated approach, to promote crop diversification and to provide focused approach to the programmes, the schemes of Oilseeds Production Programme, Oil Palm Development Programme, National Pulses Development Project and Accelerated Maize Development Programme of Ninth Plan have been merged into one Centrally Sponsored Integrated Scheme of Oilseeds, Pulses, Oil Palm and Maize (IPOPOM)- External website that opens in a new window during the 10th Five Year Plan which is being implemented with effect from 1st April, 2004. The ISOPOM has the following special features:
To provide flexibility and autonomy to the States in planning and executing programmes for agriculture To ensure the preparation of Agriculture Plans for the districts and states To achieve the goal of reducing the yield gaps in important crops To maximize returns to the farmers To address the agriculture and allied sectors in an integrated manner NATIONAL FOOD SECURITY MISSION
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Flexibility to the States to utilize the funds for the scheme/crop of their choice. Annual action plan to be formulated by the State Governments for consideration and approval of the Government of India. Flexibility to the States for introducing innovative measures or any special component to the extent of 10 per cent of financial allocation. NFSM will have three components i. Involvement of private sector by the State Governments for the implementation of the programme with a financial cap of 15 per cent. Flexibility for inter component diversion of funds upto 20 per cent for non-seed components only and 47. PFRDA BILL 2011 45. RKVY
Government of India has launched this Centrally Sponsored Scheme, National Food Security Mission in August 2007. The major objective of this scheme is to increase production and productivity of wheat, rice and pulses on a sustainable basis so as to ensure food security of the country. The approach is to bridge the yield gap in respect of these crops through dissemination of improved technologies and farm management practices.
National Food Security Mission Rice (NFSM-Rice)
ii. National Food Security Mission Wheat (NFSM-Wheat) iii. National Food Security Mission Pulses (NFSM-Pulses)
The PFRDA Bill, 2011, seeks to give statutory status to the interim PFRDA, define its powers and duties, and set the broad contours of the NPS (New Pension System).
Highlights of the Bill
The RKVY ( National Agriculture Development Programme) aims at achieving 4% annual growth in the agriculture sector during the XI Plan period, by ensuring a holistic development of Agriculture and allied sectors. Objective of the programe: To incentivize the states that increase their investment in Agriculture and allied sectors
The Pension Fund Regulatory and Development Authority Bill, 2011 seeks to give statutory powers to the interim authority set up in 2003. It also alters the name of the New Pension System to National Pension System (NPS). NPS is a defined contribution scheme for all central government employees who joined after January 2004. It is implemented through a combination of
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retailers, pension fund managers, and a record keeper. This scheme is different from the earlier defined benefit scheme. Under the NPS, every subscriber will have an individual pension account, which will be portable across job changes. The subscribers will choose fund managers and schemes to manage their pension wealth. They will also have the option of switching schemes and fund managers. The NPS was extended to all general citizens through central government notification in May 2009.
chain management, Internet marketing, online transaction processing, electronic data interchange(EDI), inventory management systems, and automated data collection systems. Modern electronic commerce typically uses the World Wide Web at least at one point in the transactions life-cycle, although it may encompass a wider range of technologies such as e-mail, mobile devices and telephones as well. 51. DIGITAL SIGNATURE
48. HEDGE FUNDs A hedge fund is a fund that can take both long and short positions, use arbitrage, buy and sell undervalued securities, trade options or bonds, and invest in almost any opportunity in any market where it foresees impressive gains at reduced risk. Hedge fund strategies vary enormously many hedge against downturns in the markets especially important today with volatility and anticipation of corrections in overheated stock markets. The primary aim of most hedge funds is to reduce volatility and risk while attempting to preserve capital and deliver positive returns under all market conditions. 49. ROUND TRIPPING 52. GREEN ECONOMY Round-tripping, also known as round-trip transactions or Lazy Susans, is defined as a form of barter that involves a company selling an unused asset to another company while at the same time agreeing to buy back the same or similar assets at about the same price. Round trips are characteristic of the New Economy companies. They played a crucial part in temporarily inflating the market capitalization of energy traders such as Enron, CMS Energy, Reliant Energy, and Dynegy. In international scenarios, round tripping is used for tax evasion and money laundering as well . 50. E-COMMERCE Electronic commerce, commonly known as ecommerce or e-comm, is the buying and selling of products or services over electronic systems such as the Internet and other computer networks. Electronic commerce draws on such technologies as electronic funds transfer, supply 53. SOVERIGN CREDIT RATING
A digital signature is a mathematical scheme for demonstrating the authenticity of a digital message or document. A valid digital signature gives a recipient reason to believe that the message was created by a known sender, and that it was not altered in transit. Digital signatures are commonly used for software distribution, financial transactions, and in other cases where it is important to detect forgery or tampering.
Green Economy Initiative was launched by UNEP in 2008. A green economy is one that results in improved human well-being and social equity, while significantly reducing environmental risks and ecological scarcities. In its simplest expression, a green economy can be thought of as one which is low carbon, resource efficient and socially inclusive. A green economy is one whose growth in income and employment is driven by public and private investments that reduce carbon emissions and pollution, enhance energy and resource efficiency, and prevent the loss of biodiversity and ecosystem services. These investments need to be catalyzed and supported by targeted public expenditure, policy reforms and regulation changes. This development path should maintain, enhance and, where necessary, rebuild natural capital as a critical economic asset and source of public benefits, especially for poor people whose livelihoods and security depend strongly on nature.
Sovereign credit ratings give investors insight into the level of risk associated with investing in a particular country and also include political risks. At the request of the country, a credit rating agency will evaluate the countrys
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economic and political environment to determine a representative credit rating. Obtaining a good sovereign credit rating is usually essential for developing countries in order to access funding in international bond markets. 54. E-VOTING ( GUIDELINES BY SEBI)
Industries Ltd. (RIL) and the Petroleum Ministry. The Committee would carry out a review of the existing PSCs, including in respect of the current profit-sharing mechanism with the pretax investment multiple (PTIM), as the base parameter and recommend necessary modification for the future PSCs It will also explore various contract models with a view to minimising monitoring of expenditure of the contractor without compromising, firstly, on the hydrocarbons output across time and, secondly, on the governments take; suggest a suitable mechanism for managing the contract implementation of PSCs which is being handled at present by the representation of regulator/government nominee appointed to the Management Committee and come out with suitable governmental mechanisms to monitor and to audit Government of India (GOI) share of profit petroleum. 57. SMALL INDUSTRIES DEVELOPMENT BANK OF INDIA AMENDMENT BILL, 2012
55. NEW TELECOM POLICY 2012 National Telecom Policy 2012 that aims to abolish roaming charges thus allowing mobile phone subscribers to use same number across country without having to pay extra charges. The NTP 2012 envisages increasing penetration of telecom services in rural area from current level of around 39 to 70 per cent by 2017 and 100 per cent by the year 2020. Under the new policy broadband speed has been increased to minimum of 2 megabit per second (mbps). With the new policy getting approved, telecom licences have been delinked from spectrum which was earlier bundled with the licences. The NTP 2012 will allow operators to provide services based on any technology by using airwaves and will not restrict them to use it for particular service using any specific frequency band. At present, there are frequencies which are specifically used for providing GSM or CDMA services as per the permit given to the companies. 56. RANGRAJAN COMMITTEE TO REVIEW EXISTING PRODUCTION SHARING CONTRACTS The government announced the constitution of a committee under the chairmanship of C. Rangarajan, Chairman, Prime Ministers Economic Advisory Council, to review the existing production sharing contracts (PSCs) in light of the recent spat between Reliance 58.
Sebi has decided to make it mandatory for top 500 listed companies to facilitate e-voting, making it easier for shareholders to participate in key decisions without being physically present in meetings. Listed companies may choose any one of the agency which is currently providing the e-voting platform. Besides, in order to enhance the quality of financial reporting done by listed entities, it would create a Qualified Audit Report review Committee represented by accounting regulator ICAI and stock exchanges.
SIDBI was set up for the purpose of promoting, financing and development of industrial concerns in the small-scale sector. Since its inception, the SIDBI is operating as a principal financial institution for the development of industrial concerns in the smallscale sector. According to the SIDBI (Amendment) Bill, SIDBI has been empowered to confiscate the mortgaged property or right to transfer by way of lease or sale in case enterprise makes a default in repayment of any loan or advances. The bill envisages not only widening of the scope of industrial concerns, it also aims at conferring more powers upon the board of directors of bank to decide investment limit for these industrial concerns. The SIDBI (Amendment) Bill 2012 proposes to enable SIDBI to accept repayment of foreign currency loans in foreign currency and maintaining foreign currency loan accounts as required under any law or accounting standards. DGHs POLICY ON EXPLOITATION OF SHALE GAS
In the wake of the CAGs strictures against the Directorate General of Hydrocarbons (DGH) and the Petroleum Ministry on violations in the KG-D6 contract the DGH has now drafted a safe
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but encouraging policy on exploitation of shale gas. Shale gas is seen as the new hope for fuelling Indias burgeoning appetite for hydrocarbons. The draft policy does not permit cost recovery and hence profit sharing the two features that came under criticism by the CAG in its audit report. Instead, it banks on production-linked payment (PLP) as the Centres share from the discovery. The PLP quoted at the time of the bidding for blocks assumes significance as it would carry the maximum 60 per cent weight for deciding the award of the block. The total investment quoted for completing the promised minimum work programme would get 40 per cent weightage.
during 1997-98 to provide an equal platform to both Public and Private sector companies in exploration and production of hydrocarbons with Directorate General of Hydrocarbons (DGH) as a nodal agency for its implementation. It was introduced to boost the production of oil and natural gas and providing level playing field for both public and private players. 61. TRAI TO ACT LIKE A CIVIL COURT
As a fiscal incentive, the contractor will be exempt from PLP payment for the first five years from the start of commercial production or from the date of entering the development and production phase, whichever is earlier. It implies that the maximum period of PLP exemption would be 10 years from the date of signing of the contract and will not be extended under any circumstance since it is an incentive for faster development. 59. TDSAT 62. WHITE LABELLED ATMs The Telecom Disputes Settlement & Appellate Tribunal has been set up under Section 14 of the Telecom Regulatory Authority of India Act, 1997 by TRAI (Amendment) Act, 2000 to adjudicate disputes and dispose of appeals with a view to protect the interests of service providers and consumers of the telecom sector and to promote and ensure orderly growth of the telecom sector. The functions of the appellate tribunal are to adjudicate any dispute between a licensor and licensee, between two or more service providers, between a service provider and a group of consumers, and to hear and dispose of appeals against any decision or order of TRAI, the appellate tribunal consists of Chairperson and two Members. The Appellate Tribunal came into existence on 29th May, 2000 and started hearing cases from January 2001. 60. NEW EXPLORATION POLICY LICENSING 63. NBFCs New Exploration Licensing Policy (NELP) was conceptualised by the Government of India,
The apex decision-making body of the communications ministry has cleared the proposal to grant more powers to the Telecom Regulatory Authority of India (TRAI) and enable the watchdog to act like acivil court. This puts TRAI on par with the Securities and Exchange Board of India and the Competition Commission of India and permits the telecom regulator to summon persons, examine them on oath, demand documents and evidence on affidavits and, in appropriate cases, call for expert assistance in conducting inquiries.
The Reserve Bank of India (RBI) had released draft guidelines for introduction of white label ATMs with a view to expand banking services in the country. White label ATMs (WLAs) are those ATMs set up, owned and operated by non-banking companies, which would like to run it as a business enterprise and earn profits. These WLAs do not display any bank logos or labels and hence they are called aswhite label ATMs and they will serve all banks customers, as these WLAs will be interconnected with the entire ATM network in the country.
A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/ stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property.
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A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company). 64. CORPORATE DEBT STRUCTURING
banks to use text messages, unstructured supplementary services sata (USSD) and interactive voice response (IVR) to provide banking services to its customers. The access service providers can also optionally facilitate the bank to use WAP. The response time for delivery of message for mobile banking services generated by the customer or the bank will be within the prescribed time frame of up to 10 seconds for SMS, IVR, WAP and STK and up to 2 seconds for USSD. For mobile banking, the service providers will need to meet the quality of service standards laid by Trai for mobile telephone services. 68. ENFORCEMENT OF SECURITY INTEREST & RECOVERY OF DEBT BILL, 2011
65. CMIE CMIE, or the Centre for Monitoring Indian Economy, is a leading business information company. Established in 1976, it straddles the entire information food chain- from primary data collection through analysis and forecasting. It provides service to the entire spectrum of business information consumers that includes government, financial markets, business enterprise etc. CMIE has built Indias largest database on the financial performance of indivoidual companies; it conducts largest survey to estimate household incomes, pattern of spending and saving; it runs a unique monitoring of new investment projects on hand and it has created integrated database of the Indian economy. 66. IRDA 69. The Insurance Regulatory and Development Authority (IRDA) is a national agency run by the Government of India. IRDA is based in Hyderabad and was formed by an act of Indian Parliament called as IRDA Act of 1999. IRDA was formed to protect the interests of the policyholders, to regulate, promote and ensure orderly growth of the insurance industry and for matters connected therewith or incidental thereto. Indian insurance industry is regulated by the terms and conditions of the IRDA. 67. TRAI REGULATIONS FOR MOBILE BANKING The new TARI guidelines stipulate that the access service providers need to facilitate the
The reorganization of a companys outstanding obligations, often achieved by reducing the burden of the debts on the company by decreasing the rates paid and increasing the time the company has to pay the obligation back. This allows a company to increase its ability to meet the obligations. Also, some of the debt may be forgiven by creditors in exchange for an equity position in the company.
The Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 was introduced by the Minister of Finance, Mr. Pranab Mukherjee in the Lok Sabha on December 12, 2011. This Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and the Recovery of Debts Due to Banks and Financial Institutions Act, 1993. The Bill proposes to include multi-state cooperative banks in the definition of banks in the existing Act. MINES & MINERALS DEVELOPMENT & REGULATION BILL 2011
The new MMDR Bill, 2011, aims at achieving a balance between better legislation and tribal rights by introducing the following steps in new mining policy: States may call for applications in notified areas of known mineralization for prospecting, based on technical knowledge, value addition, end-use proposed ore -linkage etc and to invite financial bid; States may grant direct mining concessions through bidding based on a prospecting report and feasibility study in notified areas where data of minerals is adequate for the purpose; National Mining Regulatory Authority for major minerals - State Governments may set up similar Authority at State level for minor minerals; Imposition of a Central cess and a State
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70. MCX-SX The government has notified MCX Stock Exchange, a part of Jignesh Shah-led group that also owns countrys largest commodity bourse MCX, as a recognized stock exchange, where trading would not be deemed as speculative transactions. MCX Stock Exchange (MCX-SX) was first granted recognition by SEBI in September 2008, but it was allowed to conduct trading only in the currency derivatives segment. After the approval MCX-SX would be able to offer additional asset classes such as equity and equity F&O (Futures and Options), interest rate futures and wholesale debt segments. 73. MCX-SX is likely to become the third major national-level full-fledged stock exchange after BSE and NSE. 71. DRAFT RED HERRING PROSPECTUS Red Herring Prospectus is a prospectus which does not have details of either price or number of shares being offered or the amount of issue. This means that in case the price is not disclosed, the number of shares and the upper and lower price bands are disclosed. On the other hand, an issuer can state the issue size and the number of shares later. An RHP for and FPO can be filed with the Registrar of Companies (RoC) without the price band and the issuer, in such a case will notify the floor price or a price band by way of an advertisement one day prior to the opening of the issue. In the case of bookbuilt issues, it is a process of price discovery and the price cannot be determined until the bidding process is completed. Hence, such details are not shown in the Red Herring prospectus filed with the RoC in terms of the provisions of the Companies Act. 74. NOFN FOR CONNECTIVITY
cess, and setting up of Mineral Funds at National and State Level for capacity creation; For the purpose of sharing the benefits of mining with persons or families having occupation or traditional rights in mining areas and for local area infrastructure: creation of an amount equal to royalty in case of mineral other than coal, and 26% of net profits, in the case of coal, has been proposed to be credited each year to district Level Mineral Foundation; Sustainable and scientific mining through provision for a Sustainable Development Framework; Establishment of Special Courts at the State level for speedier disposal of the cases of illegal mining.
72.
ROLE OF SPICE PARKS IN PROMOTION OF SPICE EXPORT
Spice Board of India, the nodal organization of Ministry of Commerce, Govt. of India, in an effort to promote exports of spices from India has established spice parks. A full line processing facility with inbuilt facilities for pre-cleaning, grading, colour sorting, grinding and packing are provided. The Spice processing facilities available at Spice Park are at par with the international standards. The Board will also be allotting individual slots for exporters on lease basis for developing their own processing plants in the Parks. Thus spice parks will help in promoting spice quality and quantity, which will in turn increase the spice export. SEBIS REGULATION FOR ALTERNATIVE INVESTMENT FUNDS
An AIF is defined as any fund established or incorporated in India which is a privately pooled investment vehicle which collects funds from investors, whether Indian or foreign, for investing it in accordance with a defined investment policy for the benefit of its investors. The regulator has classified private pool of capital into three broad categories such as venture capital, private equity and hedge funds. The new regulations have replaced the former venture capital funds norms. However, the existing venture capital funds will continue to be regulated by the earlier norms till the existing fund or scheme managed by the fund is wound up. SEBI has also mandated that sponsors should contribute at least 2.5% of the initial corpus. BROADBAND
National Optical Fibre Network (NOFN) will be used to provide broadband connectivity to village-level bodies Panchayats which will help in offering governance, banking and health services online. The objective of the scheme is to extend the existing optical fibre network which is available up to district/block headquarter level to the gram panchayat level initially by utilising the Universal Service Obligation Fund (USOF)
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The project cost is expected to be of the order of Rs 20,000 crore 75. FINANCIAL STABILITY REPORT BY RBI
The Reserve Bank of India has released the Financial Stability Report (FSR) against the backdrop of worrisome global and domestic macroeconomic developments. Highlights: a) The financial system of the country remains robust despite increase in risks to stability primarily due to global risks and domestic macroeconomic conditions. b) Risks to domestic growth are accentuated by fiscal and external sector imbalances. Inflationary pressures have moderated but inflation risks remain. c) Foreign exchange and equity markets have corrected and continue to experience heightened volatility. d) Banks remain resilient to credit, market and liquidity risks and would be able to withstand macroeconomic shocks, given their comfortable capital adequacy positions. e) Asset quality concerns, however, persist and liquidity pressures have intensified. Credit and deposit growth in the banking sector have decelerated while banks reliance on borrowed funds has increased. f) Distress dependencies between banks have risen. The analysis of the network of the Indian banking system reveals that the systemic importance of the most connected banks has increased, warranting a closer monitoring of the banks. g) Banks in India will migrate to Basel III from a position of relative strength but there could be challenges in the form of higher cost of capital. h) The new Principles for Financial Market Infrastructure, issued by the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO), propose stringent risk management requirements, which could necessitate a relook at the risk management practices of domestic central counterparties. 76. DGFT
Commerce and Industry of the Government of India responsible for administering laws regarding foreign trade and foreign investment in India. DGFT plays a very important role in the development of trading relations with various other nations and thus help in improving not only the economic growth but also provides a certain impetus needed in the trade industry.
77. GOPINATH COMMITTEE RECOMMENDATIONS ON SMALL SAVINGS SCHEME
78. The Directorate General of Foreign Trade (DGFT) is the agency of the Ministry of
Committee on Small Savings headed by RBI Deputy Governor Shyamala Gopinath suggested raising interest rates on Post Office savings bank deposits to 4 per cent. The committee recommended linking returns on other small savings schemes with interest rates on government securities. It went on to suggest that Kisan Vikas Patra (KVP) be withdrawn and the annual investme.nt limit for the popular Public Provident Fund (PPF) be raised to Rs.1 lakh from Rs.70000 at present. The committee recommended that interest rates for Post Office savings deposits be raised to 4 per cent from 3.5 per cent at present. On its recommendations the government has raised interest rates on post office-operated small savings like Monthly Income Scheme (MIS) and Public Provident Fund (PPF) by up to 0.5%, making them more attractive to investors. Interest rate on PPF has been increased by 0.2% to 8.8%. The panel had also suggested that the interest rates on small savings schemes should be revised annually. The revision in the interest rates will help in maintaining the attractiveness of the small savings schemes vis-a-vis fixed deposit schemes operated by banks. Pursuant to the recommendations of the Gopinath Committee, the government had also introduced the National Savings Scheme (NSC) with a 10-year maturity to attract long-term funds. It will now yield a return of 8.9%. GUIDELINES FOR PUBLIC FINANCIAL INSTITUTIONS BY MCA
The Ministry of Corporate Affairs has prescribed conditions for an institution to be declared as a Public Financial Institution under Section 4A of the Act. These guidelines are: a) A company or corporation should be established under a special Act or the companies Act being Central Act;
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79. CREDIT DEFAULT SWAPS CDS are a financial instrument for swapping the risk of debt default. Credit default swaps may be used for emerging market bonds, mortgage backed securities, corporate bonds and local government bond The buyer of a credit default swap pays a premium for effectively insuring against a debt default. He receives a lump sum payment if the debt instrument is defaulted. The seller of a credit default swap receives monthly payments from the buyer. If the debt instrument defaults they have to pay the agreed amount to the buyer of the credit default swap. 80. GREEN TRIBUNAL SUSPENDS ENVIRONMENTAL CLEARANCE FOR POSCO 82. FICCI PROPOSED NKFH The National Green Tribunal has suspended the environment clearance granted to Poscos mega steel project in Orissa. The tribunal comprising Justice C V Ramulu and Devendra Kumar Agarwal held that the clearance given to Poscos mega steel project in Jagatsinghpur district of Orissa will remain suspended till the environment ministry reviews it afresh. The tribunal pointed out that memorandum of understanding between the Orissa government and Posco states that the project is for production of 12 million tonnes of steel per annum (MTPA) but the environment impact assessment (EIA) report 83. MRRT
b) Main business of the company should be industrial/infrastructural financing; c) The company must be in existence for at least 3 years and their financial statement should show that their income from industrial/ infrastructural financing exceeds 50% of their income; d) The net-worth of the company should be Rs. one thousand crore; e) Company is registered as Infrastructure Finance Company (IFC) with RBI or as an Housing Finance Company (HFC) with National Housing Bank; f) In the case of CPSUs/SPSUs, no restriction shall apply with respect to financing specific sector(s) and net-worth.
has been prepared only for 4 MTPA steel productions in the first phase. 81. OPENING OF LLP TO FOREIGN INVESTMENTS
The government has approved foreign direct investment policy in LLP. Initally Foreign direct investment in LLPs will be allowed only in those sectors where 100% foreign ownership is permitted for example sectors like information technology, manufacturing, power, roads etc. LLPs with foreign investments will not be allowed in agricultural or plantation activity, print media and real estate business or downstream investments. The government has also imposed stringent conditions to prevent its misuse. An Indian company having foreign direct investment will be permitted to make downstream investment in LLPs only if both the company as well as the LLP are operating in sectors where 100% FDI is allowed, through the automatic route and there are no FDI-linked performancerelated conditions. Foreign participation in the LLPs will be allowed only by way of cash considerations, received by inward remittance through normal banking channels.
Industry body Federation of Indian Chambers of Commerce and Industry (FICCI) proposed setting up of National Knowledge Functional Hub (NKFH). FCCI proposed the setting up of this body to engage higher educational institutions with the industry in order to produce quality engineering graduates and meet increasing requirement of skilled hands in the market. NKFH aims at facilitating industry-academia connect in tier-II and tier-III institutions which are the source of bulk engineering graduates for the capital goods industry. FCCI recommended adoption of two to three institutions in its vicinity by capital goods company for sustained interaction and collaboration under the proposed initiative. Also the institutes should put forth proposals for collaborating with companies of their choice.
The Minerals Resource Rent Tax (MRRT) is a proposed tax on profits generated from the
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exploitation of non-renewable resources in Australia. It is the replacement for the proposed Resource Super Profit Tax (RSPT). The tax, levied on 30% of the super profits from the mining of iron ore and coal in Australia, is proposed to be introduced from 1 July 2012. A company will only have to pay the tax when its annual profits reach $75 million, a measure designed so as not to burden small business. Around 320 companies will potentially be affected by the changes. 84. NOTIFICATION OF NEGATIVE LIST OF TRADE BY PAKISTAN TO INDIA
has approximately 16,000 members in more than 100 chapters in over 80 countries. IABC members hold positions in a variety of communication professions, including: public relations, media relations, corporate communications, employee communications, public affairs, investor relations, government relations, marketing communication, community relations, writing, editing, advertising, graphic design, human resources and teaching. IABCs headquarters are located in San Francisco, California, United States. IABC was founded in 1970 from a merger of the American Association of Industrial Editors and the International Council of Industrial Editors. Its initial focus was on internal communication. 87. DOHA ROUND OF WTO
The Pakistan government today issued a notification for switching over to a negative list regime for trade with India, under which the import of only 1,209 Indian products will be barred. Major items included in the list of items importable through Wagah are livestock, vegetables and newsprint in rolls or sheets. Manufacturers can import raw materials, except basic materials that are locally manufactured, and packing material needed for pharmaceutical products once they are approved by the Director General of Health, officials said. The import of vaccines will be allowed only from Indian plants that have been approved by the World Health Organisation. 85. BIOMETRIC PAN CARDS GOI is introducing biometric smart Permanent Account Number (PAN) cards to reduce chances of duplication and to ensure better tax compliance. The biometric PAN card would use iris scan for identification. This means that you might now have to provide your fingerprint or iris / retina impression. Biometrics is a way of ensuring privacy and security against identity theft. It also offers the facility of not lugging around many documents, or remembering umpteens of passwords, or entering personal identification numbers to access any sensitive personal information. 88. DEPRECIATION OF RUPEE Biometrics cards will help in identification and authentication quickly, thereby freeing people from undergoing too many security checks. 86. IABC LAUNCHED The International Association of Business Communicators (IABC) is a leading association for business communication professionals. IABC
The Doha Development Round is the current trade-negotiation round of the World Trade Organization (WTO) which commenced in November 2001. Its objective is to lower trade barriers around the world, which will help facilitate the increase of global trade. As of 2008, talks have stalled over a divide on major issues, such as agriculture, industrial tariffs and nontariff barriers, services, and trade remedies.The most significant differences are between developed nations led by the European Union (EU), the United States (USA), and Japan and the major developing countries led and represented mainly by Brazil, China, India, South Korea, and South Africa. There is also considerable contention against and between the EU and the USA over their maintenance of agricultural subsidiesseen to operate effectively as trade barriers.
It is a known fact that Indian stock market is dominated by overseas investors. When the economy is performing well and stock market is performing better than other countries, overseas investors in form of FIIs will become heavy investors. This will increase the demand for rupee and will result in higher value for rupee. On the other hand, when these investors are pulling money out of Indian stock market, rupee will be depreciated. Indian markets are in a bad shape for the last 1 year. The sentiments after the US downgrade and the European crisis etc. resulted in overseas investors selling in India and buying dollars.
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89.
DEDICATED FREIGHT CORRIDOR
In the first phase, the Western Corridor will connect the Jawaharlal Nehru Port to New Delhi via Vadodara, Ahmedabad, Palanpur, Jaipur,and Rewari and further on to Tughlakabad and Dadri. The Eastern Corridor is expected to connect Ludhiana to Sonnagar via Ambala, Saharanpur, Khurja, Shahjahanpur, Lucknow, Allahabad, and Mughalsarai. 90. PMI 93. TRADE PROTECTIONISM o Tariffs - import taxes. Purchasing Managers Index PMI is an indicator of the economic health of the manufacturing sector. The PMI index is based on five major indicators: new orders, inventory levels, production, supplier deliveries and the employment environment. 91. AVIATION CRISIS Aviation sector has been severely hit by financial crisis. The huge losses incurred on account of high taxes on fuel and rising operational costs. However, cut-throat competition prevents airlines from raising ticket prices. Indian aviation is overtaxed. The 12.36% service tax on air tickets and services that airlines purchase such as landing and air navigation contravenes global norms and handicaps the Indian industry. Even more damaging is Indias equally unique tax burden on aviation turbine fuel. Domestic fuel uplift is subject to an 8.24% excise duty and state taxes that are as high as 30%. Globally, fuel accounts for about 34% of an airlines cost structure. This is destroying the competitiveness of Indian airlines. 92. 94. CVDs DEREGULATION OF PRICE OF DIESEL & ITS IMPACT ON AUTOMOBILE INDUSTRY 95. BITA Deregulation of price of diesel means removing the control of government from the
The Dedicated Freight Corridor is a project for new railway lines exclusively for carrying freight isolated from normal Indian Railway traffic and passenger trains. Conceived in 20042005, planning began in 2006, and in 2007 initial proposals have been drawn up. The entire DFC project will include 2,700km or so of exclusive freight lines (new construction), and about 5,000km of feeder lines that will include some new construction and many existing lines that will be upgraded.
prices of diesel and leaving it to the market. After deregulation price of diesel will be controlled by international scenario of demand and supply. As government provides subsidy to diesel as it is the lifeline of transportation sector but the subsidy is used by effluent people. The ratio of diesel cars has increased tremendously after the deregulation of the price of petrol as people are switching to more economical fuel. Automobile industry will get affected as the demand of diesel cars will decrease because in comparison to petrol cars, cost of fuel (diesel) was the only plus point.
Trade Protectionism represents any attempt by a government to impose restrictions on trade in goods and services between countries:
o Quotas - quantitative limits on the level of imports allowed. o Voluntary Export Restraint Arrangements where two countries make an agreement to limit the volume of their exports to one another over an agreed period of time. o Embargoes - a total ban on imported goods. o Intellectual property laws (patents and copyrights). o Export subsidies - a payment to encourage domestic production by lowering their costs. o Import licensing - governments grants importers the license to import goods. o Exchange controls - limiting the amount of foreign exchange that can move between countries.
Counter Veiling Duty is the additional import duty imposed to offset the effect of concessions and subsidies granted by an exporting country to its exporters. Imposition of a countervailing duty is an attempt to bring the imported price to its true market price, and thus provides a level playing field to the importing countrys producers.
Bilateral Investment and Trade agreement is an agreement between two countries to ensure, among other things, that (1) investors of either
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country are allowed to hire top management personnel of any nationality, (2) have the right to make investment related transfers, (3) assets belonging to one countrys investors in the other country can only be expropriated in accordance with the international law, and (4) investors will have access to binding international arbitration in dispute settlement. 96. BASEL-3 NORMS
98.
ROLE OF NABARD IN AGRIGULTURAL FINANCE
99. ISHUP 97. TWIN DEFICITS & WAYS TO FIX INDIAS INFLATION India is going through fiscal and current account deficit along with high rate of inflation. Fiscal deficit is the government spending more than it earns in tax revenue. The other concern is about Indias current account deficit. This occurs because India imports more than exports. Softening of global crude oil prices and moderation of gold imports may slightly lower current account deficit (CAD) in 2012-13, but risks remain, especially with slowing global growth and trade and low price elasticity of import demand. RBI has called on the government to cut expenditure as revenue is also expected to slow. RBI will be able to cut borrowing rates rapidly only if the government reins in expenditure. This is because the government borrowing that equals the fiscal deficit does not leave any headroom for lending to high growth sectors to stimulate economic growth. In the context of food inflation, improving the storage and delivery in public distribution is crucial to reduce loss of food grains. Reforms in tax laws such as Goods and Services Tax (GST) and Direct Taxes Code have to be expedited. On the expenditure front, identification of priorities is the top-most priority. Spending of public funds for stimulating growth and tackling inflation should be on asset creation in vital sectors such as infrastructure, agriculture, power generation and distribution, roadways, railway capacity and telecommunication. 100. RAJIV RIN YOJANA
Basel III is a comprehensive set of reform measures, developed by the Basel Committee on Banking Supervision, to strengthen the regulation, supervision and risk management of the banking sector. It aims to: improve the banking sectors ability to absorb shocks arising from financial and economic stress; improve risk management and governance and strengthen banks transparency and disclosures.
NABARD facilitates credit flow for agriculture and rural development. It strengthens rural credit delivery system through institutional development measures. Supervises rural financial institutions (rural co-operative banks and RRBs) and Promotes and supports policies, practices and innovations conducive to agriculture and rural development. It further mobilizes resources from urban areas to facilitate credit flow for rural development. It promotes financial inclusion through the largest microfinance movement of the world.
Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) has been conceived for providing interest subsidy on housing urban poor to make the housing affordable and within the repaying capacity of EWS/LIG. EWS is defined as households having an average monthly income up to Rs.5000 and the economic parameter of LIG is defined as households having an average monthly income between Rs.5001 up to Rs.10, 000. The scheme encourages poor sections to avail of loan facilities through Commercial Banks/ HUDCO for the purposes of construction of houses and avail 5% subsidy in interest payment for loans upto Rs. 1 lakh. The total interest subsidy requirements for the construction of 3.10 lakhs houses for EWS/LIG segments financed during the next 4 years (2008-12) is projected at Rs. 1100 crores. Under the scheme, preference (subject to beneficiaries being from EWS/LIG segments) will be given to Scheduled Caste, Schedule Tribe, Minorities, Person with disabilities and women beneficiaries in accordance with their proportion in the total population of city/urban agglomerate during the 2001 census.
Based on the recommendations made by a committee set up by this Ministry, it is proposed that the existing scheme of ISHUP be revised with increase in the upper ceiling of the loan for current Rs.1 lakh with interest subsidy of 5% to Rs. 3.0 lakh for the Economically Weaker Section households and Rs. 5.0 lakh for the Lower Income Group beneficiaries. Both these loans would be granted with 5% interest subsidy. NPV subsidy under this scheme for a 20 year loan period would work out to be Rs.1,10,000
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for EWS and Rs.1,84,000 for LIG. Keeping a target of reaching out to 2.37 lakh beneficiaries the financial implication under this new (being proposed) scheme called Rajiv Rin Yojana (RRY), would be Rs.2900 Crores. This would not only provide necessary credit to acquire the house but also give the necessary impetus to the housing sector. 101. BROWN LABEL ATMs Brown label ATM are those Automated Teller Machines where hardware and the lease of the ATM machine is owned by a service provider, but cash management and connectivity to banking networks is provided by a sponsor bank whose brand is used on the ATM. 102. NCCD
A National Calamity Contingent Duty (NCCD) of customs has been imposed on pan masala, chewing tobacco and cigarettes. It varies from 10% to 45%. NCCD of customs of 1% was imposed on motor cars, multi utility vehicles and two wheelers and NCCD of Rs 50 per ton was imposed on domestic crude oil. There are different rates of duty for goods imported from certain countries in terms of bilateral or other agreement with such countries which are called preferential rate of duties the duty may be percentage of the value of the goods or at specified rate. 103.PMEACs Review of the Economy 2012- 13 The Prime Ministers Economic Advisory Council (PMEAC) on February 22, 2012 projected a 7.5-8 per cent growth for the next fiscal. It also called for phasing out of subsidies, including upward adjustment of petrol and diesel prices and deregulation of urea prices. Releasing the Review of the Economy 2011-12, PMEAC Chairman C. Rangarajan said the country could even achieve higher economic growth, provided the global environment was favourable. He said the growth rate was likely to be 7.1 per cent in 2011-12, marginally higher than the 6.9 per cent growth projected by the Central Statistical Organisation (CSO). The economy recorded a growth of 8.4 per cent in 2010-11, which, according to the CSO estimates, is expected to moderate to 6.7 per cent in the current fiscal. Referring to inflation, which has remained at a higher level in 2011, he said it would moderate
to 6.5 per cent by March-end and 5-6 per cent in the next fiscal. While the retail inflation based on the Consumer Price Index was 7.65 per cent in January, the Wholesale Price Index (WPI) inflation was 6.55 per cent. The PMEAC also called for upward aligning of diesel and petrol prices to the global market in a phased manner and also raising excise and service taxes to the pre-crisis level of 12 per cent. It pitched strongly for deregulation of urea prices. Dr. Rangaranjan said the high fiscal deficit, which is expected to overshoot the target of 4.6 per cent of GDP this fiscal, was a matter of concern and the government must try to contain and improve efficacy of subsidies. The partial reforms in the fertilizer subsidy regime of introducing nutrient-based subsidisation would not be effective unless the price of urea was decontrolled or at least raised substantially. The government expects that its subsidy bill would increase by Rs.1 lakh crore to Rs.2.34 lakh crore, mainly on account of higher outlay towards fertiliser, food and oil. 104. No floating interest rates on small savings schemes
The Union government on January 4, 2012 clarified that, barring the Public Provident Fund (PPF), the rates of interest on all small savings schemes will remain fixed throughout the tenure of investment. In an official statement, the Finance Ministry said that the interest rates applicable on small savings instruments schemes would be announced on April 1 each year and that the rate would remain valid till the maturity of the scheme. In the case of the 15-year PPF scheme, however, the rate of interest would not remain fixed for the entire period as the interest accruals in the PPF account each year would vary, depending on the interest rate announced for that particular year. It may be recalled that to stem the outflow of funds from small savings schemes administered by the National Small Savings Fund (NSSF) in view of the investor preference for bank term deposits, which fetched higher returns, the government hiked the interest rates on small savings deposits schemes of various maturities with effect from December 1, 2011. Alongside, it also hiked the interest rates on PPF deposits from 8 per cent to 8.6 per cent while raising the ceiling on annual contributions to the fund to Rs.1 lakh from Rs.70,000.
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However, to clear the confusion over the returns on investment in small savings schemes, the Finance Ministry pointed out that the rate prevailing at the time of investments will remain fixed and unchanged till the maturity of the investment. Any revisions in interest rates in the subsequent years, it said, would only be applicable to the investments made in the relevant period. 105. Funds to Improve Drinking Water Quality Government on October 13, 2011 approved more devolution of powers to panchayats in the management of National Rural Drinking Water Programme (NRDWP) and carving out of a special fund to monitor quality of drinking water. The Union Cabinet approved partial modification of fund allocation for NRDWP to promote substantive devolution of functions, funds and functionaries to panchayats to enable them to take up management of this scheme in their areas.
106. Green Revolution to Eastern India In the approach paper to 12th Five Year Plan, Planning Commission has identified it as national priority to fully extend green revolution to all the low productivity areas of eastern region where there is good potential to harness ample natural resources in order to achieve food security and agricultural sustainability. Need has been highlighted for increased investment in infrastructure, particularly in power, logistics and marketing to supplement the efforts under the programme of Bringing Green Revolution in Eastern India (BGREI) started since 2010-11 as a part of on-going Rashtriya Krishi Vikas Yojana (RKVY) that aims to increase the productivity of rice based cropping system through crop husbandry. As on January 20, 2012, Rs. 332.87 crore have been released to seven States for extending green revolution to east India in the current financial year (2011-12). The programme targets improvement in the rice based cropping system in the selected States. Highlights of Green Revolution to Eastern India Union Budget 2011-12 has allocated additional Rs.400 crores under Rashtriya Krishi Vikas Yojana for extending green revolution to the Eastern Region of the country comprising of Assam, Bihar, Jharkhand, Eastern UP, Chhattisgarh, Orissa and West Bengal, in continuation to the allocation made during 2010-11. States prepared the strategy plan prioritising the key areas in terms of technology promotion for addressing the main constraints that were impeding the agriculture productivity despite there being a good potential for development. It made specific recommendations for improving the rice productivity in the Eastern States through development of appropriate infrastructure with a view to stabilize rice based cropping system in the Eastern states. The agricultural productivity in this region is comparatively low in spite of the adequate availability of natural resources required for higher production. The scheme is aimed at increasing crop productivity of the region by intensive
It also gave the nod for creation of a component of Water Quality Monitoring and Surveillance and allocated three per cent of NRDWP funds for this purpose. However, the allocation of funds for natural calamities has been reduced from 5 per cent to 2 per cent. The funds allocated for support activities, excluding the water quality monitoring and surveillance activity, will remain at five per cent of the funds. A Management Devolution Index has been incorporated in the Rural population managing rural drinking water supply schemes for interstate allocation of NRDWP funds. These changes shall help in meeting the requirements of comprehensive drinking water quality testing, surveillance and monitoring of drinking water sources and setting up support organisations like Block Resource Centres. This will also strengthen District Water and Sanitation Missions (DWSMs) and Water and Sanitation Support Organisations (WSSOs), which aim to facilitate proper planning, implementation, management and operation of rural drinking water supply schemes with the participation of the target population. Under the NRDWP, all states are required to test their public drinking water sources in rural areas once a year for chemical contamination and twice a year for bacteriological contamination.
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cultivation through promotion of recommended agricultural technologies and package of practices. 107. RBI reviews priority sector lending norms Foreign banks with more than 20 branches in India will have to channel 40 per cent of their lending to the priority sector, which includes agriculture and small and medium businesses, in five years, the Reserve Bank of India (RBI) said on July 20, 2012. The proportion of such advances is being raised from 32 per cent, in line with the recommendations of a panel headed by M.V. Nair, former chairman and managing director of Union Bank of India, which suggested that overseas banks with more than 20 branches should be treated on par with domestic lenders when it comes to meeting their priority sector obligations.
well as to set up new units with state-of-the-art technology. TUFS has been the growth engine of the man-made fibre industry. Small and medium entrepreneurs in the industry have been availing the benefits of TUFS to modernize their units by replacing old machineries with new and imported equipment. There will be more allocation under the 12th plan than under the 11th plan, so those in textiles sector must feel assured that the government is conscious about their needs. The Planning Commission in March 2012 has given in-principle approval for extension of the TUFS for the textile sector in the 12th five-year Plan (2012-17). The scheme in its revised version has got a poor response due to sectoral slowdown but the Union textile ministry is upbeat about it once the industrial scene improves.
The Nair panel had suggested that such banks be given a time frame of five years, starting April 1, 2013, to adhere to the norms, and the targets be increased in a phased manner in the interim. The proportion of priority sector lending for foreign banks with fewer than 20 branches will stay at 32 per cent. Foreign banks will need to submit a plan for achieving the targets over a specific timeframe to be approved by RBI. Overseas banks with more than 20 branches in India include Standard Chartered Plc, HSBC Holdings Plc and Citibank NA. Besides agriculture and allied activities and small businesses, the sector includes housing loans for the poor, student loans and loans to other low-income groups. In the revised norms, the targets for both direct and indirect agricultural lending have been kept unchanged at 13.5 per cent and 4.5 per cent, respectively, of bank credit. The Nair panel originally had recommended eliminating the distinction between direct and indirect agricultural lending and introducing a special category of small and marginal farmers. 108. TUFS extensions for 12th Plan The Union government on July 21, 2012 has decided to extend the Technology Upgradation Fund Scheme (TUFS) to the 12th Five Year Plan starting this year. The TUF scheme aims at making funds available to the textile industry for technology upgradation of existing units as
The scheme was originally introduced in 1999 for five years and was subsequently extended up to March 2007. TUFS was suspended in June 2010 and reintroduced in April 2011, with Rs 1,972 crore for the year up to March 31, 2012, but it did not evoke good response due to recessionary conditions and textile players keeping their expansion plans. But the demand has been for hardly a tenth of the amount sanctioned. In 2012, textile ministry has received proposals of Rs 200 crore for allocation and all of it will be honored. The textile ministry has asked for an outlay of Rs 13,000 crore for TUFS in the 12th five-year plan. 109. ADB estimates 70% GDP growth in India Projecting a moderate increase in growth rate for India to 7 per cent in 2012-13, the Asian Development Bank (ADB) April 11, 2012 said strong economic performance would depend on the countrys ability to push reforms agenda and address issues constraining investments. The Gross Domestic Product (GDP) growth should edge up to 7.0 per cent in FY2012-13 and 7.5 per cent in FY2013-14, after falling to 6.9 per cent in FY2011-12 from 8.4 per cent the year before, said the ADBs flagship annual publication Asian Development Outlook (ADO). However the government has projected a growth rate of 7.6 per cent for the current fiscal. An expected easing in monetary policy after a long period of persistent inflation and rate hikes might help stimulate investment over the coming
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year, but its impact is likely to be limited until obstacles like land purchase and environmental regulations, which are currently deterring both domestic and foreign investors, are addressed. A number of bills and measures to improve Indias investment environment have been introduced in Parliament, but they are making little progress amidst lack of sufficient consensus for immediate reforms, said ADO. It further pointed out that the recent rise in the pace of road construction and clearances for power projects is a positive signal, but, more is needed to substantially increase levels of investment.
off-balance sheet items. The new norms, the RBI said, will be effective from April 1, 2012, for off-balance sheet items already contracted. For the new contracts, it said, the norms will apply with immediate effect. The risk weight to each off-balance sheet items which will include interest rate contracts, foreign exchange contracts, credit default swaps and other permissible contracts will be assigned according to a pre-specified formula. 111. FDI norms eased for MSEs
As regards 2011-12, the ADO said, the slide in growth reflected falling exports, weaker consumer spending and a slump in investment. Industrial growth dropped to a decade low of 3.9 per cent, although services remained robust, contributing nearly 80 per cent of overall GDP growth for the year. 110. Tighter norms for NBFCs The Reserve Bank of India on December 26, 2011 tightened the prudential norms for the nonbanking financial companies (NBFCs) under which they will have to account for risks towards off-balance sheet items while computing capital adequacy requirement. These off-balance sheet items, against which NBFCs will have to make provisions, will include interest rate contracts, foreign exchange contracts, credit default swaps and other market related contracts permitted by the RBI. Off-balance sheet exposures of NBFCs have increased with the increased participation in currency options and futures and interest rate futures. It is therefore necessary that NBFCs move over to modern techniques of risk measurement to strengthen their capital framework, the RBI said in a notification. The decision to expected to improve solvency of the NBFCs though it might put additional financial burden on them. NBFCs will have to assign adequate weights to both on and off-balance sheets items while maintaining the mandatory CRAR (Capital to Risk Asset Ratio). The central bank said that henceforth the NBFCs will need to calculate the total risk weighted off-balance sheet credit exposure as the sum of the risk-weighted amount of the market related and non-market related
To help cash-strapped micro and small enterprises attract higher overseas investment, the Centre, in September 2011, liberalised the FDI norms for the sector replacing the current 24 per cent ceiling on foreign holding with the sectoral caps. These industries will now be guided like other large enterprises as far as FDI is concerned. The resent policy on FDI in MSE permits FDI subject only to the sectoral equity caps, entry routes and other relevant regulations. However, if non-medium and small enterprises manufacture any of the 21 items, including pickles, aluminium utensils, reserved for MSEs, any FDI above 24 per cent will require the Foreign Investment Promotion Boards approval. The new norms replace notes of 1997 which stipulated that for foreign collaboration, maximum equity participation for small scale units was 24 per cent. As per the old note, proposals for inducting foreign equity of more than 24 per cent was subject to the condition that the firm would get itself de-registered as small-scale unit.
Increase FDI inflow: The move will bring in more FDI into the MSE sector which is starved of funds. The new Press Note 6 follows enactment of the Micro, Small and Medium Enterprises Development Act, 2006, which removed ceiling for equity participation, both domestic and foreign, in these units. The Act defined micro and small enterprises solely on the basis of investment in plant and machinery for units engaged in manufacturing and equipment for those engaged in services.The FDI norms will also help them modernise as overseas investment will bring modern technology with it. As per the 2006 Act, in manufacturing sector micro units are those where investment in plant
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and machinery does not exceed Rs 25 lakh, while small enterprises are defined as those investing between Rs 25 lakh and Rs 5 crore. 112. Cabinet defers FCRA Bill The Union Cabinet on July 19, 2012 deferred the approval to the Forward Contract Regulation Act (FCRA) Amendment Bill. The government deferred consideration of a bill that seeks to amend an existing Act to give more powers to commodity markets regulator FMC due to opposition from UPA constituent Trinamool Congress. The bill is essential for the development of commodities futures market as it aims to strengthen the regulator FMC by providing financial autonomy, facilitate the entry of institutional investors and introduce new products for trading such as options and indices. The bill was introduced in the Lok Sabha in December 2010 and referred to the Parliamentary Standing Committee, which submitted its report on December 22, 2011. The Food and Consumer Affairs Ministry has accepted most of the recommendations of the Parliamentary panel. The panel had suggested increasing the penalty structure to discourage any violation of provisions of Forward Contract Regulation Act (FCRA).
Central Public Sector Undertaking, any company in which the government has a stake of more than 50 per cent. Currently, there is no overarching legislation governing public procurement by the central government and central public sector enterprises and such purchases are governed by the General Financial Rules, 2005. The draft Bill also provides for a jail term ranging from six months to five years for public servants found guilty of accepting bribes from bidders of government contracts. The Bill has been framed according to the recommendations of a committee headed by former bureaucrat Vinod Dhall. The average increase in royalty for coal would be about 17.31 per cent and for lignite, it is expected to be about 14.53 per cent. Jharkhand, Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Tamil Nadu, Odisha, Nagaland, Meghalaya, Maharashtra, Chhattisgarh, Assam and Arunachal Pradesh are major coal- and lignite-producing states. Currently, these states earn a royalty of around Rs 5,950 crore annually from coal and lignite exploration. Cabinet also clears proposal to set up a special purpose vehicle for setting up an IT network for GST 114. Prevention of Money Laundering (Amendment) Bill, 2011 The Prevention of Money Laundering (Amendment) Bill, 2011 was introduced in the Lok Sabha on December 27, 2011. This Bill seeks to amend the Prevention of Money Laundering Act, 2002. The Bills proposes to introduce the concept of corresponding law to link the provisions of Indian law with the laws of foreign countries and provide for transfer of the proceeds of the foreign predicate offence in any manner in India. It also adds the concept of reporting entity which would include a banking company, financial institution, intermediary or a person carrying on a designated business or profession. The Bill enlarges the definition of offence of money laundering to including activities like concealment, acquisition, possession and use of proceeds of crime as criminal activities and remove the existing limit of Rs 5 lakh as fine under the existing Act. According to the statement of objects and reasons, the Bill has provisions for attachment and confiscation of the proceeds of crime even if there is no conviction so long as it is proved that offence of
The Parliamentary panel had recommended greater autonomy to FMC, which regulates both spot and futures commodity exchanges. Currently, there are five national and 16 regional commodity bourses in the country. Their annual turnover stood at Rs181.26 lakh crore during the 2011-12 fiscal. 113. Centre approves public procurement Bill The Union Cabinet on April 12, 2012 approved a legislation that seeks to cleanse the system of procurement woes for public entities in the country. The Cabinet also cleared a proposal to switch from the current mixed structure to ad valorem royalty on coal and lignite. The Public Procurement Bill, 2012 was introduced by the Ministry of Finance in the Lok Sabha on May 14, 2012. This Bill seeks to regulate and ensure transparency in the procurement process. The draft Public Procurement Bill, 2011, seeks to regulate any government purchase of more than Rs 50 lakh through a transparent bidding process. A procuring entity could be a Ministry or Department of the central government, any
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money laundering has taken place and property in question is involved in money laundering. It will confer power to the director to call for records of transactions or any additional information that may be required for the purpose of prevention of money laundering and also to make enquiries for non-compliance of reporting obligations cast upon them. The amendment was necessitated in view of India being an important member of Financial Action Task Force and also chairing its Asia Pacific group. Therefore, it was important to make the existing PMLA in tune with the practice being followed world over. The Prevention of Money laundering Act, 2002 was enacted to prevent money laundering and to provide for confiscation of property derived from, or involved in, money laundering. The Bill also proposes to provide for appeal against the orders of the appellate tribunal regarding money laundering directly to the Supreme Court instead of the High Court as per the existing laws. 115. Cabinet approves hike in IMF quota
116. 12th Plan Approach Paper Paving the way for formulating the 12th Five-Year Plan (2012-13 to 2016-17) document, the National Development Council (NDC) on October 23, 2011 approved the approach paper to the Plan that pegs economic growth target at an average annual rate of nine per cent. However, certain modifications will be made when the Plan document is prepared to incorporate suggestions made by states on issues like giving them more flexibility in running centrally sponsored schemes (CSS). The Approach Paper for the 12th Plan (201217) which seeks to push forth the second generation economic reforms, improving governance and raise annual economic growth rate to 9 per cent during impending five-year period was approved by the government in September 2011. The NDC, the highest policymaking body of the country, is headed by the Prime Minister and its members include Union Ministers, members of Planning Commission, and Chief Ministers of all states. Apart from giving more emphasis on inclusive growth, for the first time the Approach Paper has a chapter on governance and corruption. It suggests that measures should be taken to set up new institutions like the Lokpal and Lokayukta, indicating that corruption at various levels of administration is weakening the confidence of citizens in the quality of governance it claimed that the system provides ample opportunity to some to manipulate the state of affairs in their favour. Highlighting and anticipating intense conflict over land and water, which are prerequisite to development, the paper argues in favour of evolving institutional mechanism to deal with such issues. Macro factors
The Union Cabinet on October 25, 2011 approved a proposal to increase Indias contribution to the International Monetary Fund (IMF) to make it the eighth largest shareholder in the multilateral lending agency. Pointing out on Cabinet approval for hike in the countrys quota in the IMF following its Fourteenth General Review of Quotas, Information and Broadcasting Minister Ambika Soni said that Indias quota share at the IMF will increase from 2.44 per cent to 2.75 per cent, making it the eighth largest quota holding country at the IMF. Significantly, while Indias gain in terms of quota share is the seventh largest in the 14th round of quota review, in absolute terms it will mean an increase from SDR (special drawing rights) 5,821.5 million to SDR 13,114.4 million. When the 14th round of quota review came into force it would result in a major realignment of quota shares among members and thereby reflect the global realities better. In keeping with the demand of emerging nations, including India, for a greater say in the IMF following their increased economic clout after the global meltdown in 2008, all the BRIC (Brazil, Russia, India and China) nations will now figure among the 10 largest quota shareholders in the IMF.
Broad targets in approach paper to 12th Plan (2012-13 to 2016-17) are: Economy: 9 per cent average annual growth Agriculture: 4 per cent average annual growth Industry: 9.6 per cent average annual growth Services: 10 per cent average annual growth Investment rate: 38.7 per cent of GDP (up from estimated 36.4% in 11th Plan)
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Savings rate: 36.2 per cent of GDP (up from estimated 34 per cent in 11th Plan) WPI: Average 4.5-5 per cent (down from 6 per cent expected in 11th Plan) Fiscal deficit: 3.25 per cent of GDP (average annual) 117. National Electricity Fund The Cabinet Committee on Economic Affairs on December 14, 2011 approved setting up of a National Electricity Fund to give interest subsidy of Rs 8,466 crore for 14 years to power distribution projects. The scheme will be operational within 12 months. The fund will provide interest subsidy on loans to be disbursed to power distribution companies in the public and private sectors, to improve the distribution network for areas not covered under the Rajiv Gandhi Gramin Vidyutikaran Yojana (RGGVY) and the Restructured Accelerated Power Development and Reforms Programme (RAPDRP) project areas. The nodal agency for the fund will be Rural Electrification Corporation (REC). Among the eligibility conditions are formulation of business plan for turnaround of utilities, reorganisation of State Electricity Boards, release of subsidy, submission of audited annual accounts and timely filing of tariff petition. The financial implication of the fund would be an interest subsidy at Rs 8,466 crore, over 14 years, for loan disbursement of about Rs 25,000 crore for distribution schemes sanctioned during 2012-13 and 2013-14. The average aggregate technical and commercial (AT&C) loss during 2007-08 stood at 29.24 per cent and the XIII finance commission had reported that the projected aggregate losses of state transmission and distribution utilities at 2008 tariffs would be at Rs 1,16,089 crore by 2014-15. The implementation of the scheme would result in reduction of AT&C losses, reduction of gap between average cost of supply and average revenue on subsidy received basis, improving return on equity among others. 118. Separate NBFC category for MFIs
Malegam had recommended setting up of a special category of NBFCs operating in the micro finance sector. The panel had suggested a minimum net worth of 15 crore for an entity to qualify as an NBFC-MFI. RBI said in a notification that it has been decided to create a separate category of NBFCs (Non Banking Financial Company-Micro Finance Institution (NBFC-MFI). For NBFC-MFIs should have a minimum net worth of Rs five crore, while for those operating in the North-Eastern states the slab has been kept at Rs two crore. All new NBFC-MFIs shall maintain a capital adequacy ratio consisting of Tier I and Tier II Capital which shall not be less than 15 per cent of its aggregate qualifying assets. The RBI has given time till April 1, 2012 to the existing MFIs, whose asset size is less than Rs 100 crore to comply with the capital adequacy requirement of 15 per cent. Regarding loan disbursal and repayment by such institutions, RBI said that Qualifying asset shall mean loan disbursed to a borrower with a rural household annual income not exceeding Rs 60,000 or urban and semi-urban household income not exceeding Rs 1,20,000. Also the tenure of the loan not to be less than 24 months for loan amount in excess of Rs 15,000 with prepayment without penalty and the loan has to be extended without collateral.The RBI has directed the NBFC-MFIs not to resort to any coercive methods and it would be repayable on weekly, fortnightly or monthly installments. 119. Draft National PPP policy 2011
The Reserve Bank of India on December 2, 2011 approved creation of a separate category of non-banking financial companies for the MFI sector and specified that such institutions need to have a minimum net owned fund of Rs 5 crore. An RBI-appointed panel headed by Y H
The Union Government on September 27, 2011 came out with a draft National Public Private Partnership (PPP) policy with a view to improving transparency and promote infrastructure sector projects. In pursuance of governments commitment to improve the level and quality of economic and social infrastructure service, the Policy proposes to expand the scope of the PPP scheme. The development follows the announcement made by then Finance Minister, Pranab Mukherjee, in the budget 201112. The 26-page draft policy seeks to put in place the broad principles for pursuing a project on PPP basis. Besides, it will also provide a framework for identifying, structuring, awarding and managing PPP projects. It also seeks to address the issues concerning definition of various terms and also processes
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so that a clear and consistent position can be adopted by stake holders, including centre, states and private investors. The Policy will also ensure that a value-for-money rationale is adopted with optimal risk allocation in project structuring with life cycle approach. At the same time, it will develop governance structures to facilitate competitiveness, fairness and transparency in procurement and attaining appropriate public oversight and monitoring of PPP projects. The move of the government is also in sync with Prime Minister Manmohan Singhs wish to bring more transparency in the PPP projects which are mainly undertaken to provide public service by private players. It aims to develop governance structures to facilitate competitiveness, fairness and transparency in procurement and attaining appropriate public oversight and monitoring of PPP projects. The government aims to bring more transparency in the PPP projects which are mainly undertaken to provide public service by private players. The government is envisaging an investment of USD 1 trillion in infrastructure sector during the 12th Five-Year Plan (2012-17), up from USD 500 million in the current Plan. 120. Centre reconstitutes NMCC
121. Human Development Index 2011 India ranks 134 out of 187 countries in the Human Development Index in the 2011 global human development report released by the United Nations Development Programme (UNDP) on November 3, 2011. Having been ranked 119 out of 169 countries in 2010, the nations position remained unchanged as per the measurement techniques utilised. A steady progress in the countrys Human Development Index (HDI) value could be gauged from the 1.51 per cent growth achieved over the 1980-2011 time period. The nations Inequality adjusted HDI (IHDI) fell from 0.392 in 2010 to 0.365 in 2011. Indias Gender Inequality Index value is 0.617 and it ranks 129 out of 146 countries in this measure. The Multidimensional Poverty Index value is 0.283 for the country. UNDPs 2011 Human Development Report finds that income distribution has worsened in most regions of the world. Assessing national average achievements in health, education and income, the report places Norway, Australia and the Netherlands at the top of the 2011 ranking. Congo, Niger and Burundi represent the bottom three. The rest of the top ten list comprises the United States, New Zealand, Canada, Ireland, Liechtenstein, Germany and Sweden. As its title Sustainability and Equity: A Better Future for All indicates, the report also highlights possible detrimental effects of environmental degradation on equitable development. In this context, different environmental challenges scenarios project an 8 per cent to 15 per cent decrease of the global development index by 2050 compared to baseline assumptions that do not take into account possible adverse effects of global warming. 122. SEBI norms for KYC registration agency Securities and Exchange Board of India on December 2, 2011has come out with the much awaited regulations for uniform Know Your Client KYC Registration Agency (KRA). The move would benefit investors as it would save them the trouble of repeating the KYC process while investing in various financial products. The regulator has allowed stock exchanges, depositories or any other Self Regulatory Organisation (SRO) to form wholly-owned subsidiaries that could be registered as a KRA. A KRA will make life simpler for investors who have to go through the entire KYC procedures each time they want to register with a new broker or a fund house.
The Union Government on September 26, 2011 announced the reconstitution of the National Manufacturing Competitiveness Council (NMCC) under the chairmanship of V. Krishnamurthy. The Council will now comprise the Planning Commission Member (Industry), Department of Industrial Policy and Promotion Secretary, Finance Secretary, Heavy Industry Secretary, Micro, Small and Medium Enterprises Secretary and the Director-General of the Council for Scientific and Industrial Research from the government side. The presidents of the Confederation of Indian Industry (CII), Federation of Indian Chambers of Commerce and Industry (FICCI) and Associated Chambers of Commerce and Industry of India (Assocham) will represent the apex industry organisations in the 28-member body. Chief Economic Advisor Kaushik Basu and Indian Council for Research in International Economic Relations Isher Judge Ahluwalia are the two economists in the reconstituted body.
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The role of a KRA will be to complete the KYC procedures for a client and make it available to all capital market intermediaries that avail of its services. If there is more than one KRA inter-operability will have to be put in place so as to avoid any kind of duplicacy. The KRA will have to maintain a net worth of at least R25 crore on a continuous basis.The certificates of initial registration of KRA will granted under sub-regulation shall be valid for a period of five years from the date of ts issue to the applicant. KRA shall be responsible for storing, safeguarding and retrieving the KYC documents and it shall retain the original KYC documents of the client, in both physical and electronic form.SEBI has also directed that KRAs shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines and instructions issued by the board or the central government and for redressal of clients grievances. The compliance officer shall immediately and independently report to the SEBI board any non-compliance observed by him. 123. 100 % FDI in single brand retail notified
by partnering with Indian partners. The new policy would allow them to buy out the domestic partners. The government said the move, which comes into effect immediately, would enhance competitiveness of Indian enterprises through access to global design, technologies and management practices. The riders proposed in the notification state that products by the global chains should be of single brand only and be sold under the same brand internationally. 124. Uniform ALM Norms introduced
The Union government on January 10, 2012 notified 100 per cent foreign direct investment (FDI) in single brand retail, opening the decks for setting up shop by global retail chains such as Adidas, Louis Vuitton, Armani and Gucci to have full ownership of their India operations. However, the notification comes with some riders to protect the interests of domestic small and medium scale units. The notification issued by the Department of Industrial Policy and Promotion (DIPP) states that in respect of proposals involving FDI beyond 51 per cent, the mandatory sourcing of at least 30 per cent would have to be done from the domestic small and cottage industries artisans and craftsmen, which have a maximum investment in plant and machinery of $1 million (about Rs.5 crore). This step will provide stimulus to domestic manufacturing value addition and help in technical up-gradation of local small industry. At present, for single-brand retailers, 51 per cent FDI is permitted. The removal of investment cap would help global fashion brands, especially from Italy, the U.S. and Europe, strengthen their interest in the growing Indian market. Many big names have already set up their operations in the country
Insurance regulator Insurance Regulatory and Development Authority (IRDA) on January 4, 2012 introduced uniform asset-liability management norms for market players to ensure their solvency and asked firms to undertake stress tests to ascertain their ability to meet financial obligations in the event of a crisis. The Asset-Liability Management (ALM) norms are critical for the sound management of the finances of the insurers that invest to meet their future cash flow needs and capital requirements. The guidelines, scheduled to come into effect from April 1, 2012, make it mandatory for insurance companies to prepare an ALM policy and have it approved by the IRDA by March-end. IRDA has asked the insurance companies to determine their ability to meet financial liabilities after taking into account factors like a 30 per cent fall in equity values and a one percentage point decline in yields on fixed investments, among others. IRDA has issued these guidelines to bring about uniformity in the ALM norms being followed by both life and non-life insurance companies. The insurers would have to put in place effective procedures for monitoring and managing their asset-liability positions to ensure that their investment activities and asset positions are appropriate to their liability, risk profiles and solvency positions. The ALM policy should enable the insurers to understand the risks they are exposed to and develop ALM policies to manage them effectively. In addition, the ALM can be used to measure the interest rate risk faced by insurers. The guidelines now require the insurers to conduct stress test and provide IRDA the details along with the financial condition report (FCR).
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125. Social Security Schemes for Landless Agricultural Labourers With a view to providing social security to unorganised workers, including landless agricultural labourers, on January 27, 2012 the government has enacted the Unorganised Workers Social Security Act, 2008. The Act provides for constitution of National Social Security Board to recommend social security schemes viz. life and disability cover, health maternity benefits, old age protection and any other benefit as may be determined by the Government for unorganized workers.
The Government has taken the following initiatives for unorganised workers, including landless agricultural workers. The Aam Admi Bima Yojana providing for death and disability cover to rural landless households between the age group of the 18 to 59 years, with effect from October 2, 2007. The Rashtriya Bima Yojana for BPL families (a unit of five) in unorganized sector on October 1, 2007. The scheme providing for smart card based cashless health insurance cover of Rs. 30,000/- per family per annum on a family floater basis became operational from April 1, 2008. Indira Gandhi National Old Age Pension Scheme provides for old age pension of Rs. 200/- per month to persons above the age of 60 years and for the persons above the age of 80 years the amount of pension has been raised to Rs. 500/- per month. 126. Floor size of portfolio for managers raised The Securities and Exchange Board of India (SEBI) on January 28, 2012 decided to enhance the minimum investment amount per client managed by portfolio managers to Rs.25 lakh from Rs.5 lakh at present by amending the SEBI (Portfolio Managers) Regulations, 1993. The proposed amendment will ensure segregation of holdings in individual demat accounts in respect of unlisted securities. It will be applicable on a prospective basis for new clients and for fresh investments by existing clients. 127. India ranks 125th in EPI The regulator also decided to exempt insurance companies and mutual funds, which are broad-based investment vehicles
representing the interests of the public at large, from the provisions of SEBI (Issue of Capital and Disclosure Requirements) Regulations, relating to sale and lock-in of their prepreferential shareholding in the issuer company. At present, SEBI (ICDR) Regulations preclude companies from issuing preferential allotment to entities which have sold any of their holdings during the six months prior to the relevant date. Further, the allottees in the preferential allotment are required to lock-in their entire prepreferential holdings for six months from the date of the allotment. The lock-in on shares allotted in the preferential issue, however, will remain unchanged. The board, in order to provide for fair valuation of securities/assets of mutual fund schemes, also approved changes in the SEBI (Mutual Fund) Regulations, 1996, which ask the asset management companies (AMCs) to ensure a fair treatment to all investors. In case debt and money market securities are not traded on a particular valuation day, then the valuation through the amortisation basis shall be restricted to securities having residual maturity of up to 60 days (at present 91 days), provided such valuation shall be reflective of the realisable value/fair value of the securities, said SEBI. While amending the mutual fund regulations relating to its advertisement code, SEBI said that AMCs would be responsible for the accuracy, truthfulness and fairness of the advertisement.
India ranks a lowly 125th in addressing pollution control and natural resource management challenges with Switzerland taking the top spot, according to the 2012 Environmental Performance Index (EPI) released in January 2012. India faces significant pollution control and natural resource management challenges and its lagging results suggest the need for redoubled policy efforts across the board. China ranks 116th in the Index produced by researchers at Yale and Columbia Universities in collaboration with the World Economic Forum, reflecting the strain rapid economic growth imposes on the environment in emerging economies. Brazil ranks 30th, however, suggesting that a concerted focus on sustainability as a policy priority will pay
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dividends - and that the level and pace of development is just one of many factors affecting environmental performance, according to the index released in Davos. The United States places 49th in the 2012 EPI significantly behind other industrialised nations, including France (6th), the United Kingdom (9th), Germany (11th), and Japan (23rd). In addition, the US places 77th in the Trend EPI rankings, a Pilot Index that shows which countries are improving and by how much on an issue-by-issue basis over the period 2000-2010, suggesting that little progress has been made on environmental challenges over the last ten years.
2011, seeks to apportion blame on Indias economic situation for a low regional average. Robust domestic demand will sustain this increase, but the economic slowdown in India, where growth declined from 9 per cent in 2010 to about 7.6 per cent in 2011, brings down the regional average. Double-dip recessions in Europe and the U.S. would have a significant impact on economic activity across South Asia, UN economists said as Europe and the U.S. are key export markets for South Asia and a main source of tourism revenues. In a pessimistic scenario, GDP in South Asia would dwindle by about two percentage points to 5.7 per cent in 2012 and 5.8 per cent in 2013. South Asias economies are also particularly vulnerable to volatile commodity prices. 129. Anti-dumping on China extended for 5-yr In the backdrop of widening trade gap with China, India on January 13, 2012 extended for five years anti- dumping duty on import of four Chinese products, including silk fabrics and a sweetener. The duty is imposed to protect the domestic industry from cheap imports. Import of certain type of silk fabrics from China will attract anti-dumping duty of $1.82 to USD 7.59 per metre, a notification of the Revenue Department said. The duty was first imposed on the fabrics in December 2006 till December 2011. India had a trade deficit of USD 16 billion against China during 2010-11. It has already crossed USD 20 billion in the first seven months of the current fiscal. The Directorate General of Anti-Dumping (DGAD) had carried a suo motu sunset review probe in December 2010 to examine whether cessation of the duty would lead to continuation of dumping and injury to the domestic players. Following the review, the DGAD had recommended continuation and enhancement of the anti-dumping duty. The anti-dumping duty imposed shall be levied for a period of five years (unless revoked, superseded or amended earlier). It further said the duty on import of certain type of nylon filament yarn from China, Chinese Taipei, Malaysia, Thailand and Korea will be imposed at USD 0.20 to USD 1.51 per kilogram for another five years.
Latvia, Norway, Luxembourg, and Costa Rica round out the top five positions in the 2012 EPI, which ranks 132 countries based on 22 indicators across ten major policy categories including air and water pollution, climate change, biodiversity, and forest management. Occupying the bottom five positions in the EPI ranking are South Africa, Kazakhstan, Uzbekistan, Turkmenistan, and Iraq - all countries grappling with deteriorating environmental circumstances in the context of significant economic development pressures and other challenges. 128. UN predicts 7.7 % growth in India A United Nations report on global economic prospects has projected Indias economy to grow at a pace a tad lower than 8 per cent in 2012 and 2013 in view of the sharp increase in downside risks stemming from the problems in Europe and the U.S. In its report on World Economic Situation and Prospects 2012, released on January 18, 2012, it said that Indias economy is forecast to expand at a pace similar to 2011 in the following two years at 7.7 per cent in 2012 and 7.9 per cent in 2013. For the current fiscal, even as the official estimate for GDP growth stands scaled down to 7 per cent from the earlier projection of 8.5 per cent in view of the slowdown, expectations in various quarters vary and appear pegged at slightly higher levels of 7.5-7.7 per cent. The UN report, while noting that South Asias economies India, Pakistan, Nepal, Iran, Bangladesh and Sri Lanka are expected to grow by 6.7 per cent in 2012 and 6.9 per cent in 2013, accelerating slightly from 6.5 per cent in
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Notifications for extension of anti-dumping duty on imports of cellophane transparent film and saccharin from China for five years have also been issued. Saccharin is a non-nutritive sweetener and considered to be low calorie substitute for cane sugar. India has so far initiated about 150 antidumping cases against China, which account for over half of such actions taken by the country against foreign nations. 130. Sixth Economic Census
131. CEIB: Nodal Agency to Share Black Money Info Adding to a host of measures to curb black money, a high-powered committee in July 2011 recommended the apex economic snoop agency - Central Economic Intelligence Bureau - be made the nodal agency for sharing information on illegal wealth with departments like ED, IT and DRI. The 140-page report of the committee, constituted by the government to review the role, functioning and structure of CEIB, was submitted to Finance Minister. The committee was constituted in March 2011with retired officials of the both direct and indirect taxes along with economic experts on the panel. The committee has recommended that the CEIB be made and empowered as the national repository of all economic crimes, instances of money laundering and tax evasion and database for multifarious economic offences investigated by agencies like the Enforcement Directorate, Income Tax department, the Directorate of Revenue Intelligence and the Directorate of Central Excise Intelligence. The committee has also recommended that the CEIB should be empowered to issue advisories to various state economic intelligence units and other central agencies which work for the enforcement and detection of violation of economic laws in the country, in certain important cases. The report recommends that in view of the growing complexity and sophistication of economic offences collaboration across the spectrum of the agencies engaged in enforcement of economic laws ought to be the central tenet of governments strategy for combating serious economic offences and organized tax evasion. It has therefore recommended setting-up a collaborative hub and spoke structure of partnerships between the CEIB and enforcement and regulatory agencies at central and state levels with the CEIB as the nodal agency at its centre, maintaining comprehensive national database of specified types of economic offences investigated by the agencies. The committee also recommended steps for bringing in better synergy between the intelligence gathering wings of the Finance Ministry and those outside it, like the Intelligence Bureau (IB) and the Research and Analysis Wing (RAW) among others. 132. RBI guidelines for Basel III capital implementation In order to prescribe measures to guarantee better quality capital for banks and toughen risk
The Sixth Economic Census is conducted on All India basis covering all the States and UTs in the country. It is scheduled to be conducted during April-Nov2012. The Economic Census is known to be one of the most complex and massive administrative exercises in which all establishments whether households or nonhouseholds, big or small, in the Private or Public sector are enumerated. It is a Central Sector Scheme, with 100 per cent Central Assistance and is to be conducted in all the States and Union Territories of the country, in collaboration with State/UT Governments. The Scheme proposes to provide up-to-date information on operational and other characteristics. Objectives To provide detailed information on operational and other variables, activity wise, of all the establishments (excluding crop production, plantation, public administration, defence and compulsory social security) of the country including their distribution at all- India, State, district, village/ward levels for comprehensive analysis of the structure of the economy (macro, micro, regional levels) and for benchmark purposes; To provide updated Directory of Establishments employing 10 or more workers up to the village/ward level for local level planning purposes and use the same as an input for the development of National Business Register, which would be useful for estimation of District Domestic Product; To provide an up to date frame from which samples could be drawn for collecting detailed information.
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management process, the Reserve Bank of India on May 3, 2012 issued guidelines for Basel III capital implementation. In a statement, the central bank said that Basel III capital norms will be effective from January 1, 2013 and be fully implemented as on March 31, 2018. The Reserve Bank of India further said that banks must report FY13 capital ratio under Basel II, III norms. The capital requirements for the implementation of Basel III guidelines may be lower during the initial periods and higher during the later years. As a matter of prudence, it has been decided that scheduled commercial banks (excluding LABs and RRBs) operating in India shall maintain a minimum total capital (MTC) of 9 per cent of total risk weighted assets (RWAs) as against a MTC of 8 per cent of RWAs as prescribed in Basel III rules text of the BCBS ( Basel Committee on Banking Supervision), RBI said. The central bank also said that Basel III will push capital needs by Rs 1.5 lakh crore. This six year roadmap by RBI will make banks safer and avoid crisis like 2008.
Capital Requirements:
of shares and dilution of equity as a result of which PSUs will be able to complete the buyout deals within days as compared to the normal disinvestment process through public offers which can take months. In its bid to garner the required funds through equity buy-back, the Department of Disinvestment had identified nearly two dozen cash-rich PSUs which account for a total cash reserve totalling nearly Rs.2-lakh crore. Some of these blue chip companies are: SAIL, NMDC, NTPC, Coal India, Oil India, MMTC, Neyveli Lignite Corporation, NHPC, BHEL and GAIL (India). In all probability, Coal India, which has a cash reserve of about Rs.45,000 crore, is likely to be the first in line for the buy-back route. There are likely to be many more, as is clear from the movement of share prices on the bourses. Despite a falling market, there were a number of PSUs which gained up to 5 per cent. Among these were: MMTC, Coal India, NMDC, SCI, MTNL, HMT, STC, Hindustan Copper, Engineers India, and NHPC. 134. RBI allows commodity hedging
- Taking overall capital requirements to 11.5 per cent of risk weighted assets - Banks to set aside additional capital buffers - Failing requirements banks wont be able to pay dividend, bonuses - Investment limit in other business MF or insurance capped at 10 per cent of cap funds 133. Cabinet clears PSU share buy-back In an innovative mechanism devised to partly make up for the shortfall in the Rs.40,000crore disinvestment target set for the current fiscal, the Union Cabinet on March 31, 2012 approved buy-back of the Centres equity by cash-rich public sector undertakings (PSUs). With the enabling provision for quick dilution of the Centres stake in blue chip companies through buy-back by the cash-rich PSUs themselves getting the Cabinets nod at its meeting chaired by Prime Minister Manmohan Singh, the way is now paved for the government to inch a tad closer to the till-now elusive disinvestment target. To facilitate quick transaction, market regulator Securities and Exchange Board of India (SEBI) has already relaxed the norms for buyback
The Reserve Bank on January 17, 2012 allowed all authorised banks to grant permission to companies to hedge the price risk of of all commodities, barring gold, silver and platinum, in the international commodity markets. The Reserve Bank said in a circular that it has now been decided to permit all AD Category-I banks to grant permission to companies to hedge the price risk in respect of any commodity (except gold, silver, platinum) in the international commodity exchanges/markets as specified under the delegated route. The circular further said such banks can now grant permission to unlisted companies to hedge the price risk on imports and exports for all the commodities, barring the three, in international markets. It said before permitting corporates to undertake hedge transactions, banks will have to ask for a brief description of the hedging strategy proposed, including the business activity and nature of risk and instruments proposed to be used for hedging. Besides, they will have to furnish information like names of the commodity exchanges and brokers through whom the risk
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is proposed to be hedged and the credit lines proposed to be availed and the name and address of the regulatory authority in the country concerned may also be given. Banks have also been asked to secure a copy of the management policy of the companies covering risk identification and their measurements, guidelines and procedures to be followed with respect to revaluation and monitoring of positions, and names and designations of officials authorised to undertake transactions and limits. 135. Sundaramurti Committee on Govt. accounting norms
governments for better planning, allocation and application of resources, and more effective monitoring of public spending. The panel has also carried out standardisation of coding of all such entities which are recipient of public fund, as channels of public delivery. This would facilitate tracking of flow of funds under a government programme or scheme from one level of governance to another level of administrative entities. 136. Cap NBFCs bank borrowings for financial stability A cap on borrowing by non-banking financial companies (NBFCs) from banks may strengthen the financial system. According to a study by the Reserve Bank of India, non-deposit taking NBFCs would lead to more systemic risks, owing to their reliance on banks for funding needs. As a policy, when NBFCs are discouraged from raising public deposits, these become non-deposit taking, while increasingly substituting public deposits with borrowings from the banking system, the working paper said. Hence, there seems to be scope to fix a separate ceiling for ND (nondeposit taking) NBFCs to borrow from the banking system. Non-banking financial companies heavily depend on banks for meeting their funding needs, as many of these are not allowed to raise deposits. However, by borrowing through banks, these indirectly use public deposits, on a much larger scale than by raising deposits on their own. The study also said due to high inter-connectedness, the vulnerability of the financial system may increase due to high inter-dependability. The RBI working paper said there is a possibility that chains of inter-connectedness can make the system more vulnerable to shocks in any market, or at any single larger institution. While both banks and NBFCs would be impacted if either of these sectors are hit, the impact on NBFCs would be much greater. Also, with tighter capital adequacy norms, banks may lend less or may completely stop lending to the sector in extreme cases. Apart from suggesting a cap on the borrowing limit of ND-NBFCs from banks, the working paper also suggested NBFCs should diversify their sources of funds. NBFCs future growth depends, to a large extent, on the success these achieve in diversification of sources of funds.
A government-appointed committee has recommended a complete overhaul of government accounting norms with a view to enforcing transparency and better monitoring of public spending. In its report submitted to then Finance Minister Pranab Mukherjee, the C R Sundaramurti Committee has suggested rationalisation and reorganisation of the existing account classification of list of major and minor heads of accounts (LMMHA) of centre and states. The finance ministry said that the proposed accounting classification structure will provide a foundation for a more robust public financial management which could be used for enforcing more transparency and effectiveness of Public delivery channels of the government. These heads indicate the accounting classification of receipts and disbursements and is prescribed under the Constitution and is maintained by the Controller General of Accounts (CGA) on the advice of the Comptroller and Auditor General of India (CAG). The panel has proposed a multidimensional classification framework which has seven mutually exclusive segments with their own individual hierarchical structures. The revised accounting classification codes which are being perceived as a milestone in the area of accounting reforms are proposed to be implemented with effect from FY 2013-2014. The proposed classification structure provides for capturing expenditure on special thrust area of government policy objectives such as development of women, schedule castes, schedule tribes, below poverty line population. It would prove to be a very effective management tools to national and sub-national
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137. 49% FDI cap in insurance rejected The Parliamentary Standing Committee on Finance in December 2011 has rejected all key proposals, including raising foreign direct investment (FDI) to 49 per cent, in the Insurance Laws Bill (Amendment) 2008. In its report, the panel headed by BJP leader and former finance minister Yashwant Sinha said that alternate route of tapping the market for raising capital required should be pursued as any further hike in FDI may not be in the interest of insurance sector and common man too does not stand to gain through insurance, particularly as a means of social security. Since the finance ministry could not adequately justify the FDI hike to 49 per cent from 26 per cent, the house panel said that growing needs of the industry could be met by formulating rules enabling companies to tap the domestic market.
The Amendment Bill, introduced in the Rajya Sabha in December 2008, sought to bring about improvement and revision of laws pertaining to the insurance sector in the changed scenario of private sector participation and was subsequently referred to the standing committee. The report said while opening up the insurance sector to foreign investment in 1999, the house was given an assurance that the statutory prescriptions as also the foreign investment regulations would ensure that the cap of 26 per cent on foreign equity participation in insurance companies would not, in any way, be breached. The panel observed that a number of amendment proposals contained in the Bill are riddled with infirmities, which the finance ministry has sought to rectify at the behest of the Committee so as to enable them to serve the intended purpose. 138. Chawla panel report on natural resources A group of ministers (GoM) headed by then Finance Minister Pranab Mukherjee has accepted most of the recommendations of a committee set up to suggest ways of preventing corruption and increasing transparency while allocating natural resources. The GoM was set up to prevent corruption in various spheres of government functioning.
The GoM has in its recent meeting recommended acceptance of a number of recommendations made by the expert committee on allocation of natural resources, headed by former finance secretary Ashok Chawla, the ministry of personnel, public grievances and pensions said on October 15, 2011. The committee, which was constituted by the government on recommendations of the GoM in January 2011, was asked to recommend measures to enhance transparency, efficiency and sustainability in utilisation of natural resources. The committee submitted its report on May 31, 2011 on sectors such as coal, minerals, petroleum, natural gas, spectrum, forests, water and land. The recommendations that have been accepted by the GoM include: Standardising and recording minutes of meetings particularly those in which allocation decisions are made Expedite creation of a national data repository for petroleum exploration All future telecom licenses should be unified licenses and spectrum de-linked from the license Build capacity of state forest departments to improve accessibility of information and reduce time taken for environmental clearances Enact comprehensive national legislation on water related issues Inventorise land available with central government ministries and departments and sale of such land should take place through competitive and transparent e-auctions. 139. Financial Sector Legislative Reforms Commission constituted
The Central Government on March 22, 2011 constituted the Financial Sector Legislative Reforms Commission (FSLRC) under the chairmanship of former Justice B. N. Srikrishna to rewrite and harmonise financial sector legislations, rules and regulations. The commission has been set up in pursuance of then Finance Minister Pranab Mukherjees budget announcement in 2011 which was made with a view to rewriting and streamlining the financial sector laws, rules and regulations to bring them in harmony with the requirements of the countrys fast growing financial sector.
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Apart from Justice Srikrishna as the head, other members of the 11-member commission include former PFRDA Chairman D. Swarup, former Axis Bank chief P. J. Nayak and PMEAC member M. Govinda Rao. The commission is to submit its report to the Finance Minister within 24 months. As for the terms of reference, the commission will examine the architecture of the legislative and regulatory system governing the financial sector in the country and also look at the most appropriate means of oversight over regulators and their autonomy from the government. Alongside, it will also examine if legislation should mandate statement of principles of legislative intent behind every piece of subordinate legislation to make the purposive intent of the legislation clear and transparent to users of the law and to the courts. The commission will examine the feasibility of whether public feedback for draft subordinate legislation should be made mandatory, with exception for emergency measures and also examine the interplay of exchange controls under FEMA and FDI policy with other regulatory regimes within the financial sector. According to the statement, there are over 60 Acts and multiple rules and regulations dealing with the financial sector and many of them have become archaic. 140. Vision Document for Power Generation
The Ministry of New and Renewable Energy has prepared in February 2011 a Strategic Plan for accelerated development of renewable energy sources for various applications including power generation, covering the period up to 2022. The Strategic Plan covers grid-interactive power generation from the main renewable energy sources - solar, wind, biomass and small hydro power, besides off-grid/ decentralised renewable energy applications/ programmes such as biogas, remote village electrification, biomass gasifiers, solar photovoltaic/ thermal systems, micro-hydel, waste-to-energy, etc. It, inter-alia, makes an assessment of the existing situation and external factors impacting growth, strengths and weaknesses of the sector and potential strategies to address the same. The Strategic Plan document has laid down specific goals and targets for the six years period 2011-17 and long-term Aspirational Goals for the
ten years period up to 2022 for various renewable energy programmes/ applications including power generation. With regard to renewable power generation, the document estimates that about 50,000 MW new capacity would be added during the XII and XIII plan periods leading to total renewable power generation capacity of about 73,000 MW by 2022. This capacity will comprise of 20,000 MW from solar power under the National Solar Mission and the remaining 30,000 MW from other renewable energy sources mainly wind, small hydro and biomass power. The contribution of renewable power by 2022 to the then likely total installed capacity and electricity mix has been estimated to be around 18 per cent and 7.3 per cent respectively, which could change depending on actual achievements of conventional power capacity. Various steps have been taken by the Government to increase power generation through renewable energy sources in the future and the same are continuing. 141. Damodaran Panel suggestions on Customer Service in Banks The Reserve Bank of India panel on August 3, 2011 recommended an increased deposit insurance cover of Rs.5 lakh so as to encourage individuals to keep all their deposits in banks. A possibility may be explored to enable full insurance cover for bank deposits by making necessary amendments in the relevant Acts, said the report on Customer Service in Banks chaired by M. Damodaran, former Chairman of the Securities and Exchange Board of India (SEBI). Highlights of the panels recommendation: Banks should not impose exorbitant penal rates towards foreclosure of home loans. Measures to stop practices of discriminating between new and old customers with identical risk profiles on the basis of interest rate offers, must also be initiated. All home loan customers should permit a switchover between fixed to floating or vice versa at least once during the loan tenure at an appropriate and reasonable fee. The title deeds should be returned to the customers within 15 days after the loan closure. Banks should ensure through government subsidy or insurance that educational loans are properly priced so that no bright student would be denied an educational loan.
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The Board Approved Policy for educational loans should indicate the minimum percentage in value or number of such loans which will be disbursed to students from rural areas. There should be prioritised service to senior citizens, physically handicapped persons by effective crowd/people management available at all branches. Automatic updation of the customers to the senior citizen category based on the date of birth would be introduced.
Banks should ensure proper currency exchange facilities and also the quality of notes in circulation in rural areas. Branches should be made functioning at a time convenient to the customers (agricultural labourers, workers and artisans), that is, morning hours and late evening hours. The banks approach to develop Client First Attitude by its employees needs to be documented. 142. Malegam panel caps MFI interest at 24% 143. 12th Plan Vision for MSME Growth The Reserve Bank of India sub-committee on micro finance institutions (MFIs), headed by YH Malegam, has recommended a 24 per cent ceiling on the rate of interest that can be charged on individual loans. It has also proposed the creation of a new category, NBFC-MFI (NBFCs operating in the microfinance sector), that will be accorded priority lending status for loans. The sub-committee, set up in October 2010 by RBI to study the issues dogging the microfinance sector, submitted its report on January 18, 2012. The report has recommended an average margin cap of 10 per cent for those having a loan portfolio of R100 crore and 12 per cent for smaller ones. The sub-committee has maintained that only those will qualify who predominantly offer services to low-income borrowers for small loan amounts and for short tenures on an unsecured basis, mainly for income-generating activities, should be included in the proposed NBFC-MFI category. Finance, including credit. Infrastructure. Technology. Marketing & Procurement. Skill Development & Training. Institutional Structure The lenders should hold not less than 90 per cent of their total assets (other than cash and bank balances and money market instruments) in the form of qualifying assets. Their annual family income should not be more than Rs. 50,000 and the ceiling for a single borrower should be Rs. 25,000.
Also, at least 75 per cent of the loans given by the MFI should be for income-generating purposes. In the interest of transparency, the report has proposed that an MFI can levy only three charges processing fee, interest and insurance charge. Other than this the subcommittee has also recommended steps to mitigate the problems of multiple-lending, over borrowing, ghost borrowers and coercive methods of recovery. It has suggested that a borrower can be a member of only one self help group (SHG) and not more than two MFIs can lend to a single borrower. It has also recommended the setting up of a Credit Information Bureau.
The Report of the Working Group on Micro, Small & Medium Enterprises (MSMEs) Growth for 12th Five Year Plan (2012-2017) feels facilitation from the government is required to minimize transaction costs of technology up gradation, market penetration, modernization of infrastructure etc. The Report stated that the PMs Task Force has already taken significant initiatives in this regards. The Working Group decided to give the recommendations on following thematic verticals:
The Approach Paper of the Planning Commission for the 12th Plan period mentions MSME Sector as the foundation for the overall manufacturing sector. Nurturing competitive MSMEs would help in absorbing new technologies and improving productivity in manufacturing sector, with stimulation of the growth of dynamic clusters as a key to such an approach. The Approach Paper also stresses on need for skilled human resources for competitive enterprises and linking Skill Development and training initiatives with industry requirements. It also stresses the importance of penetration of information and communication technology, which can enhance the overall competitiveness of the sector as well as the quality of governance. Further, it also recognizes the important role of innovation in spurring growth and unleashing potential of enterprises.
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Thrust on frugal innovation will result in generation of affordable and accessible products and services of global standards. The National Manufacturing Policy envisages increasing the sectoral share of Manufacturing in GDP to 25 per cent over the next decade and generating additional 100 million jobs in manufacturing sector through an annual average growth rate of 12-14 per cent in manufacturing sector. MSME sector is the major base of manufacturing sector in India with its contribution of over 45 per cent in overall industrial output. To achieve the ambitious targets, the Group looks forward to enhance the growth rate of the MSME sector substantially from the existing level of 12 13 per cent growth rate per annum. 144. New Duty Drawback Scheme notified
The DEPB scheme was based on the assumption that the exporter used duty-paid imported inputs. Duty drawback neutralises levies paid on inputs. The revenue outgo towards the DEPB scheme has increased over the years and was Rs 8,700 crore last year. 145. Planning Commission Cuts Poverty Line to 28 per Day Planning Commission on March 19, 2012 further reduced the poverty line to Rs. 28.65 per capita daily consumption in cities and Rs. 22.42 in rural areas, scaling down Indias poverty ratio to 29.8 per cent in 2009-10. An individual above a monthly consumption of Rs.859.6 in urban and Rs. 672.8 in rural areas is not considered poor, as per the controversial formula. Furthermore, the Plan panel has kept the poverty threshold even lower than it submitted to the Supreme Court in 2011, which created an outcry among the civil society. The Plan panel had said in its affidavit before the apex court that the poverty line at June 2011 price level can be placed provisionally at Rs. 965 (32 per day) per capita per month in urban areas and Rs. 781 (26 per day) in rural areas. The civil society had questioned this definition stating it was very low. As per estimates, the number of poor in India has declined to 34.47 crore in 200910 from 40.72 crore in 2004-05 estimated on the basis of controversial Tendulkar Committee methodology. The methodology recommended by the Committee includes spending on health and education, besides the calorie intake. Among religious groups, Sikhs have lowest poverty ratio in rural areas at 11.9 per cent, whereas in urban areas, Christians have the lowest proportion of poor at 12.9 per cent. Poverty ratio is the highest for Muslims, at 33.9 per cent, in urban areas. Further, poverty in rural areas declined at a faster pace than in urban cities between 2004-05 and 2009-10. 146. BSE-GREENEX launched
Exporters will get lower tax refunds from October 1, 2011 as the Union finance ministry in September 2011 announced a new Duty Drawback Scheme, ending the 14-year-old Duty Entitlement Passbook Scheme (DEPB). To provide a smooth transition from the popular tax credit scheme to the drawback scheme, the ministry said the drawback rate would have a floor rate of 5.5 per cent of the value of export consignments for most items. The decision to neutralise the input tax paid on duties, may primarily affect companies in the engineering sector, including automobiles and the auto component industry, chemicals, textiles, pharmaceuticals and the marine sector, which were major exporters, getting the benefit of the DEPB scheme. The finance ministry has softened the blow, as the new duty drawback rates will mean a moderate reduction of one to three per cent in the existing DEPB rates. The lower reduction has been provided only for the current financial year and the rates may be rationalised next year. There are 2,130 items on the DEPB list, of which 1,030 are also covered in the drawback schedule. The remaining 1,100 items would now be incorporated in the new drawback schedule, taking its total count to about 4,000 items from the present 2,835. With the DEPB facility, exporters got credit for customs duty paid on inputs used in making export goods. Under duty drawback, they receive duty-free scrips which can be used to pay import duties.
Asias oldest exchange, Bombay Stock Exchange on February 22, 2012 launched a new index called BSE GREENEX, measuring the performance of companies in terms of carbon emissions. The index model developed by BSE in collaboration with the premier B-school Indian Institute of Management, Ahmedabad (IIM-A). IIM-A will enable investors take more informed
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investment decisions about companies in the energy intensive sectors, amongst others. A model has been created in collaboration with BSE, where BSE-100 companies were evaluated on the basis of green house emissions in the last four financial years from 2007-08 till 2010-11. The companies were tested in different combinations of carbon emission intensity, market capitalisation, and turnover. The top ranking companies from each sector like power, steel, cement have made it to the new index called BSE-GREENEX currently comprising less than 30 companies. As part of this joint venture project, IIM-A evaluated the firms on carbon side based on the information put by them in public domain (annual reports), while BSEs main role was to detail on financial side of these companies and provide technical backup for it.
(Institute of Chartered Accountants of India) and stock exchanges. The committee would process qualified annual audit reports filed by the listed entities with stock exchanges and reports where accounting irregularities have been pointed out by Financial Reporting Review Board of the Institute of Chartered Accountants of India (ICAI-FRRB). Further, the regulator said it has modified the minimum subscription requirements for infrastructure companies coming out with IPOs. The minimum subscription shall not be less than 90 per cent of the offer, subject to allotment of minimum 25 per cent or 10 per cent, as the case may be, of the securities offered to the public. 148. Indias Green IT spend to reach $70 b With Green IT and sustainable development becoming top priorities for businesses in the country, Indias spending on green IT and sustainability initiatives is set to double to $70 billion in 2015, research firm Gartner said. In a report, Hype Cycle for Green IT and Sustainability in India, 2011, analysts said Green IT and sustainability initiatives have already found their way into the IT roadmap of many industries in India. Although still buzzwords for many, they will soon emerge as top priorities for businesses, investors and technology professionals across industries and policymakers in India. The report pegged spending on green IT and sustainability initiatives at $35 billion in 2010. Indias information and communication technology (ICT) industry will be an early adopter of green IT and sustainability solutions, as India is one of the fastest-growing markets in terms of IT hardware and communications infrastructure consumption. In addition, the banking and financial services, hospitality, manufacturing (such as automobiles), pharmaceuticals and other industries that have significant exposure to export markets, will also make an early jump on to the green IT and sustainability bandwagon in India. However, the unique challenges faced by India, such as unreliable power infrastructure, the growing urban-rural divide and increasing population migration to urban areas will also provide businesses with the opportunity to
Like the best performing stocks of companies make it to the Sensex-30 and the existing ones have to exit for non-performance, BSEGREENEX will too witness firms coming and going. The concept is all about screening companies doing good on carbon side, as the concern for climate change is growing among the stakeholders. 147. E-Voting mandatory Market regulator Securities and Exchange Board of India (SEBI) on June 26, 2012 decided to make it mandatory for top 500 listed companies to facilitate e-voting, making it easier for shareholders to participate in key decisions without being physically present in the meetings. In line with the budget proposal to make it mandatory for top-listed companies to provide for electronic voting facilities, it has been decided to implement the said proposal by making electronic voting mandatory in respect of those businesses to be transacted through postal ballot. SEBI said the decision would be implemented in a phased manner, beginning with top 500 listed companies at BSE and NSE based on market capitalisation. Listed companies may choose any one of the agency which is currently providing the evoting platform. It has to be noted that e-Voting is not yet suggested for AGMs, EGMs and CCMs.Besides, the SEBI said that in order to enhance the quality of financial reporting done by listed entities it would create a Qualified Audit Report review Committee (QARC) represented by accounting regulator ICAI
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innovate and test new cost-effective approaches and green technology solutions. 149. CBEC draft services to 22 cuts tax exempted
General of Accounts (CGA), Department of Expenditure, and Ministry of Finance. The Government e-Payment Gateway (GePG) is a portal which enables the successful delivery of payment services from Pay & Accounts Offices (PAOs) for online payment into beneficiaries accounts in a seamless manner under a secured environment. It claims that the system will also bring transparency and expedite direct payments from central paying units relating to subsidies to the users and consumers of fertilizer, kerosene and cooking gas which is a declared objective of the government. The government feels that this will increase the adoption of other e-services due to its efficiency and ease-of-use for all Central Government Ministries and Departments for online payment transactions. This would help the Government credit payments directly to beneficiaries including existing and retired Government employees, contractors and other entities that receive payments from the government, without involving conventional payment instruments such as cheques and demand drafts, and thus save time and constraints of manual deposit. It will certainly make the system more transparent as the mid-level agency would not be needed. Also, the government will save on interest payments as payments would be on time. Once the payment system is fully operational, lakhs of individuals and entities engaged with the government will have their dues credited into their bank accounts directly by the ministries and departments concerned. 151. 26 % FDI in pension sector allowed The Union Cabinet on November 16, 2011 agreed to partially open the gates to foreign direct investment (FDI) in the pension sector to the extent of 26 per cent, as is now available in the area of insurance, but decided not to mention any sectoral cap in the proposed legislation. In its approval to amendments in the PFRDA Bill, 2011, the Cabinet, however, turned down the Parliamentary Standing Committees suggestion of providing a guarantee on assured returns on pension fund schemes. The provision with regard to the FDI cap for the pension sector is
The shift to a negative list will mean that all services except those mentioned in the list will be taxed, providing clarity on services that will be taxed and widening the service tax base. Services are currently taxed at 10 per cent rate. The negative list also includes services like funeral, burial and mortuary agencies, interest paid on deposits by bank, services provided by independent journalists, dividend on investments, and transport of passenger in public transport. The major sectors that remain excluded from services tax are financial sector, education, social welfare services, health and certain notified services provided by the government. All stakeholders have by and large supported the negative list concept and believe these developments are in the right direction. It is good that efforts are being made to move towards a negative list for service tax. The services sector constitutes more than 50 per cent of GDP but service taxes are only 4-5 per cent of GDP. This is good step from the fiscal front but bad for the industry. The incidence of indirect taxes is already very high in the country. 150. New e-payment system launched The Union Government has launched an epayment system, which would facilitate direct credit of dues from the Government of India into the account of beneficiaries using digitally signed electronic advice (e-advice) through the Government e-Payment Gateway (GePG). The system has been developed by the Controller
The governments indirect taxes body has released a revised concept paper on taxation of services on the basis of a negative list, making some additions and deletion to the first paper put out in August 2011. A lesser 22 services will be under the negative list, or exempt from tax, as against 27 proposed in the earlier draft. The revised concept paper proposes to exempt from tax health related services, those relating to agriculture, horticulture and animal husbandry and passenger travel by non-AC second-class trains, metro and monorails.
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proposed to be incorporated in the regulations once the Pension Fund Regulatory and Development Authority Bill, 2011, is enacted. The Cabinets approval of some of the amendments proposed, the PFRDA Bill, seeks to open the pension sector to private sector and foreign investment. The proposed legislation introduced in the Lok Sabha on March 24, 2011 was subsequently referred to the Standing Committee chaired by BJP leader and former Finance Minister Yashwant Sinha for scrutiny. In its suggestions, the committee had wanted the government not only to specify the FDI cap in the legislation itself but also provide for a minimum guaranteed return to pension subscribers. While rejecting these proposed provisions, the Cabinet also turned down the committees suggestion on providing greater flexibility to subscribers on withdrawal of funds from their accounts. Essentially, the PFRDA Bill provides for the setting up of a statutory authority to undertake promotional, developmental and regulatory functions with regard to pension funds. 152. Health insurance portability
With effect from the October 1, 2011, mediclaim insurance policyholders have been eligible to switch from one insurer to another and carry forward the no claim bonus entitlement. Policyholders will have the right to purchase a health insurance policy from another insurer from among the products that insurer is marketing. The right is limited to transfer of the period in the existing policy which will be accounted towards the time-bound exclusions of the new policy. Health insurance portability was initially supposed to come into force from July 1. However, the Insurance Regulatory and Development Authority ( IRDA) had deferred the date to October 1. However, health insurance portability is limited to non-life insurers, which allows policy switch with respect to all individual policies, including family floater policies. Even individual members, including the family members covered under group health insurance policy of a nonlife insurer, will be able to migrate from a group health policy to an individual policy or a family floater with the same insurer.
Highlights of the Report
covering pre-existing diseases, along with bonus accrued to them from their past insurers. Policyholders, however, will be able to carry over the waiting period with respect to pre-existing ailments. The waiting period for most pre-existing conditions is four years. The policyholder will have to approach the different insurer 45 days before his policy expires, to enable the new company to consider his application. The acquiring insurer will verify the claims history from the common database which will have two years of claims data. Based on the data, the acquirer will decide whether to accept the proposal, and the price at which it will do so. 153. India Human Development Report 2011 Despite impressive growth, Gujarat has not been able to reduce malnourishment levels, while Uttar Pradesh and Bihar, among the most backward in the country, have done better in improving the lot of their marginalized Dalits and tribals. The India Human Development Report 2011, prepared by the Institute of Applied Manpower research, a Planning Commission body and was released by Deputy Chairman of Planning Commission Montek Singh Ahluwalia and Rural Development Minister Jairam Ramesh on October 21, 2011. The India Human Development Report 2011 gives the latest data and statistics about Human Development Indicators (HDI) in India.
The Human Development Report 2011 stated that inter-State inequalities have narrowed over the years, but health, nutrition and sanitation are still a big concern. The India Human Development Report 2011focuses on income, education, health, literacy, nutrition and sanitation in the country. As per the report, the human development index (HDI) for India has improved through the last decade but malnourishment levels continue to remain high in some states. High rates of child malnutrition were a major concern for the country. Gujarat was among the worst performers, with 69.7 per cent kids up to 5 being anemic and 44.6 per cent suffering from malnutrition, proving that high growth was no guarantor of improvement in health. Overall, the human development index (HDI) for the country has improved through the last decade, with the inequality gap between states narrowing down. According to the Report,
According to the new guidelines, consumers will get credit for the time already spent for
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Indias HDI gained in the last decade-it increased by 21 per cent from 0.387 in 1999-2000 to 0.467 in 2007-08-and the differences and inequality between the states reduced over time. The report said that the country had witnessed an improvement in spreading education but its record on sanitation and nutrition remained dismal. 154. MDGs to be achieved by 2015 With three important targets on poverty, slums and water having been met, a new United Nations report stresses the need for a true global partnership to achieve the remaining Millennium Development Goals (MDGs) by the 2015 deadline. The 2012 MDG Report offers the most comprehensive picture yet on global progress towards the Goals, Secretary-General Ban Kimoon said as he launched the on July 2, 2012. The eight MDGs, agreed by world leaders at UN summit in 2000, set specific targets on poverty alleviation, education, gender equality, child and maternal health, environmental stability, HIV/AIDS reduction, and a Global Partnership for Development. The report states that meeting the remaining targets, while challenging, is possible but only if governments do not waiver from their commitments made over a decade ago.
155. Panel to review methodology
poverty
line
After facing flak for fixing the poverty line at R28.65 per capita daily consumption in cities, the Planning Commission on May 24 2012 constituted an expert group, headed by noted economist C Rangarajan, to review the Tendulkar Committee methodology for estimating poverty. The expert group is expected to give its report in 7-9 months. The commissions estimates, based on the Tendulkar Committee methodology, that people consuming more than R28.65 per daily in cities and R22.42 in rural areas are not poor, had triggered a controversy and rocked Parliament. The members of expert group, which would suggest alternative methods of estimating poverty are Mahendra Dev, director, Indira Gandhi Institute of Development Research, K Sundaram, Mahesh Vyas from Centre for Monitoring Indian Economy and former advisor (perspective planning) Planning Commission, KL Datta. Based on Tendulkar Committee methodology has come down from 37.2 per cent in 2004-05 to 29.8 per cent in 2009-10 and the number of poor people in the country has reduced from 40.7 crore in 2004-05 to 35.5 crore in 2009-10. The commission unveiled these estimates in March 2012 based on the Tendulkar Committees methodology, which factored in the spent on health and education, besides calorie intake. The Tendulkar Committee, which submitted its report in 2009, incorporated adequacy of expenditure from the normative and nutritional viewpoint. It said that while moving away from the calorie norms, the proposed poverty lines have been validated by checking the adequacy of actual private expenditure per capita near the poverty lines on food, education and health by comparing them with normative expenditures consistent with nutritional, educational and health outcomes. 156. 13th Finance Commission report
The 2012 report says that, for the first time since poverty trends began to be monitored, both the number of people living in extreme poverty and the poverty rates have fallen in every developing region, including sub-Saharan Africa, where rates are highest. Preliminary estimates indicate that in 2010, the share of people living on less than a $1.25 a day dropped to less than half of its 1990 value. This means that MDG 1 cutting the extreme poverty rate to half its 1990 level has been achieved at the global level, well ahead of 2015. The report notes that the target of halving the proportion of people without access to improved sources of drinking water by 2010 has been achieved. The proportion of people using improved water sources rose from 76 per cent in 1990 to 89 per cent in 2010. In addition, the share of urban residents in the developing world living in slums has declined from 39 per cent in 2000 to 33 per cent in 2012.
The 13 th Finance Commission was constituted in 2007 headed by Vijay kelkar for the period 2010-15. The government said it has accepted recommendations of the 13th Finance Commission, which called for greater share of states in central tax proceeds, despite strains on
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its finances. The Finance Commission is a Constitutional body set up every five years to make recommendations relating to the distribution of the net proceeds of taxes between the Union and the States. In addition, any other matter may be referred to the Commission by the President in the interests of sound finance.
Key recommendations:
157. Thorat panel norms on NBFC governing A committee set up by the Reserve Bank of India in August 2011 recommended that the provisioning and asset classification norms of non-banking finance companies (NBFCs) be brought in line with these for commercial banks. Like banks, the liquidity ratio may be introduced for all registered NBFCs, the panel also suggested.Headed by former RBI Deputy Governor Usha Thorat, it also prescribed that Tier-I capital of systemically important NBFCs should be at 12 per cent within three years of registration. Currently, the total capital adequacy ratio, which includes Tier-I and Tier-II capital, for NBFCs is stipulated at 15 per cent. The panel also suggested NBFCs not accessing public funds may be exempted from registration, provided their assets were below Rs 1,000 crore. While the minimum capital requirement has been suggested to be retained at the present level of Rs 2 crore till the Reserve Bank of India Act is amended, the panel suggested RBI insist on a minimum asset size of Rs 50 crore for registering any new NBFC. Existing NBFCs below this limit may deregister or be asked to seek a fresh certificate of registration at the end of two years. Key recommendations
Rs 3.19 lakh crore will be additional grant payment to states during the five-year period 2010-11 to 2014-15. States and local bodies be given shares in central tax proceeds, the burden of which will be Rs 87,000 crore. The indicative ceiling on overall transfers to States on revenue account may be set at 39.5 per cent of gross revenue receipts of the Centre. New disclosures have been specified for the Budget/MTFP including on tax expenditure, public-private partnership liabilities and the details of variables underlying receipts and expenditure projections. A total non-Plan revenue grant of Rs 51,800 crore is recommended over the award period for eight States. A performance grant of Rs 1500 crore is recommended for three special category States that have graduated from a non-Plan revenue deficit situation. An amount of Rs 19,930 crore has been recommended as grant for maintenance of roads and bridges for four years (2011-12 to 2014-15). An amount of Rs 24,068 crore has been recommended as grant for elementary education. An amount of Rs 27,945 crore has been recommended for State-specific needs. Amounts of Rs 5,000 crore each as forest, renewable energy and water sectormanagement grants have been recommended. A total sum of Rs 3,18,581 crore has been recommended for the award period as grantsin-aid to States. 158. Export-Import Bank (Amendment) Bill, 2011 of
Increase in share of states to 32 per cent of central tax proceeds from the current 30.5 per cent.
Tier I capital of NBFCs to be at 12 per cent Provisioning norms for NBFCs would be similar to those for banks. Liquidity ratio to be introduced for 30 days Risk weights for NBFCs, not sponsored by banks may be raised to 150 per cent for capital market exposures and 125 per cent for commercial real estates NBFCs may be given be given benefits under SARFAESI Act Risk weights for NBFC not sponsored by banks may be raised to 150 per cent for capital market exposure and 125 per cent for real estate exposure Provisioning norms similar to banks have to be brought in a phased manner Asset classification norms similar to banks should be brought in a phased manner India
The Export-Import Bank of India (Amendment) Bill, 2011 was introduced in the
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Key highlights
Lok Sabha on December 8, 2011 by then Minister of Finance, Pranab Mukherjee. The Bill was passed by the Lok Sabha on December 21, 2011 and by the Rajya Sabha on December 27, 2011. The Exim Bank had issued 180 Lines of Credit (LOCs) to 53 countries worth $6.3 billion till March 31, 2011 and will be issuing loans worth $5 billion to Africa as promised by Prime Minister Dr Manmohan Singh during his trip to Ethiopia. Rejecting criticism that rate of lending loans was less than that of growth rate of exports, Minister of State for Finance said that the growth rate of lending has been 24 per cent whereas the growth rate of Indian exports has been 21 per cent between 2001-02 and 2010-11. The Minister agreed that the percentage of loans to be granted to small enterprises was 2.6 per cent of total loans issued and there was need to increase it. On the non-performing assets of the bank, it was only 1.4 per cent of the loans worth Rs 46,000 crore issued by the bank.
however, would have a role in deciding the total budgetary allocation, including non-Plan expenditure, at a conceptual level. At the central level, the Planning Commission may be responsible, for the sake of convenience and domain knowledge, for guiding the overall development priorities of the government, the setting of outcome targets and the review of the performance of departments. The ministry of finance may be responsible for guiding the fiscal policy, preparation of the Budget and financial decisions, said the committee. Plan expenditure is spent on government programmes and flagship schemes, while non-Plan expenditure includes defence expenditure, subsidies and devolution to states. Currently, the Plan Commission looks at only Plan expenditure, while the finance ministry decides non-Plan expenditure, without reference to the panel. The committee said the Planning Commission should be responsible for consolidation of the Five-Year Plan over all services, based on inputs from the finance ministry. The finance ministry, on its part, should be made responsible for preparation of the annual Budget, based on inputs of the Commission. The panel recommended a shift in budgeting approach from a one-year horizon to a multi-year horizon and from input-based budgeting to outputs and outcomes. It favoured the current classification of revenue and capital expenditure and recommended adjusting the revenue deficit to the extent of grants for creating assets, but only for fiscal responsibility budget management compliance. 160. Panel on Black Money submits report The 60-page draft report, prepared under the chairmanship of former Central Board of Direct Taxes chief M C Joshi, was finalized on January 30, 2012. The high-level committee appointed by the government in June 2011 to study the generation and curbing of black money. While refraining from putting an exact figure on the size of Indias black economy, the committee has said that the most serious consequence of the growth of black money is to undermine the stability and responsibility of political, legal and economic institutions that might otherwise serve to facilitate the economic development process.
The Bill amends the Export-Import (EXIM) Bank of India Act, 1981. The Act establishes the EXIM Bank as a corporation that promotes international trade by financing exporters and importers.
The Bill proposes to increase the authorized capital of the EXIM Bank from Rs 2,000 crore to Rs 10,000 crore. The amendment was proposed to enable the bank to meet the capital requirements arising from the significant business growth in recent years.
The Bill also proposes the appointment of two whole-time directors by the central government to the board of the EXIM Bank. Currently, the board consists of only the chairman and the managing director.
159. Rangarajan panel to abolish distinction between plan, non-plan spends In a move that may reduce the role of the Planning Commission to merely that of an advisory body, a high-level expert committee headed by Prime Ministers Economic Advisory Council Chairman C Rangarajan, in its report Efficient Management of Public Expenditure proposed in September 2011 the distinction between Plan and non-Plan expenditure be abolished for both the Centre and the states. The budgetary Plan allocation, currently decided by the Planning Commission, would be the responsibility of the finance ministry. The panel,
Among the key recommendations:
Arguing that corruption cannot be treated as less diabolical than money-laundering or
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commercial production and sale of illicit narcotics, the panel has proposed that punishment under the Prevention of Corruption Act for different offences should be brought at par with offences under the Narcotic Drugs and Psychotropic Substances Act, or at least PMLA or Customs Act. There is thus a need to harmonize punishments under these laws. Change the maximum punishment under PCA from the present 3, 5 and 7 years to 2, 7 and 10 years rigorous imprisonment. An all- India judicial service as well as a National Tax Tribunal are needed.
Besides the Lok Pal and Lokayuktas, all social sector programmes at the Centre or state level should be under social audit at the district/field level and then at the headquarters level. No system to monitor money transfers made to and received from abroad. The committee has recommended that there should be financial reporting of overseas transactions for better regulation, and such data should be reported to both the Income Tax department and FIU (Financial Intelligence Unit). And that RBI should help put such a reporting mechanism in place.
Journey of the Law
and introduce new ideas such as corporate social responsibility (CSR), class action suits and a fixed term for independent directors. The Bill also proposes to tighten laws for raising money from the public besides prohibiting any insider trading by company directors or key managerial personnel by treating such activities as a criminal offence. It will also make mandatory for companies to earmark 2 per cent of their average profit of the preceding three years for CSR activities and make a disclosure to shareholders about the policy adopted in the process. The Bill, which will replace the decades old Act, has already been vetted by the Parliamentary Standing Committee of Finance and also by various ministries concerned. The Bill was originally introduced in Lok Sabha in 2008, but lapsed because of change of government. It was reintroduced in August 2009.
2004
Ministry readies concept paper on revised company law
2005 2008
J J Irani committee submits its report on concept paper, new law
Cabinet approves new Bill, lapses due to dissolution of Lok Sabha Re-introduced as Companies Bill 2009, goes to parliamentary panel for scrutiny Parliamentary panel submits report on Bill
2009 2010 2011
Just as the USA Patriot Act under which global financial transactions above a threshold limit, by or with Americans, get reported to law enforcement agencies, India should also insist on entities operating in India to report all global transactions above a threshold limit. For this purpose, appropriate law, rules or contractual/ licensing arrangement with these entities may be framed and implemented. 161. Cabinet approves Companies Bill, 2011
Cabinet approves Companies Bill 2011
162. RBIs Monetary and Credit Policy 2012-13 Reserve Bank of India Governor D Subbarao announced the Annual Monetary Policy for 201213 on April 17, 2012. The Reserve Bank cut the benchmark interest rate for first time in three years by 0.5 per cent to provide relief to borrowers and revive the sagging economic growth. Unveiling the annual credit policy, the RBI reduced the short-term lending (Repo) rates to eight per cent from 8.5 per cent.Bank rate is cut to nine per cent from 9.5 per cent. Besides, the RBI has directed the banks not to insist on a minimum balance on saving bank accounts, and not to levy charges on prepayment of loans. In its macro-economic assessment, the RBI projected the economic growth rate of 7.3 per cent and expects inflation to be 6.5 per cent by March, 2013. The industry and the stock market,
The Union Cabinet on November 22, 2011 approved the Companies Bill, 2011, a move that will help improve efficiency and increase accountability of the corporate sector. The Standing Committee on Finance submitted its 57th Report on The Companies Bill, 2011 on June 26, 2012. The Chairman of the Committee was Yashwant Sinha. The Bill was introduced in the Lok Sabha on December 14, 2011. It seeks to replace the Companies Act, 1956.
Once passed, the new Act will update the company law in line with the best global practices
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which was expecting 0.25 per cent cut in the RBI interest rates, welcomed surprise decision. Besides reducing interest rate, the RBI has also done away with pre-payment charges on home loan taken on floating rate of interest and tightened the norms for bank lending to gold finance companies. It kept the Cash Reserve Ratio (CRR), the amount which banks are required to keep in cash with the central bank, at 4.75 per cent.
Highlights
Short term lending rate (repo) lowered by 0.50 per cent to 8 per cent Cash reserve ratio (CRR) retained at 4.75 per cent GDP growth for 2012-13 projected at 7.3 per cent March-end, 2012-13 inflation expected at 6.5 per cent Bank rate cut by 0.50 per cent to 9 per cent Deposit growth pegged at 16 per cent, credit growth at 17 per cent Upside risk to fiscal deficit target of 5.1 per cent Govt borrowing may decrease credit flow to pvt sector Liquidity conditions moving towards comfort zone To issue final guidelines on Basel III by May 2012 Tightens norms for lending against gold by NBFCs Next mid-quarterly monetary review on June 18. 163. Micro Finance Institutions (Development and Regulation) Bill, 2012 The Micro Finance Institutions (Development and Regulation) Bill, 2012 was introduced in the Lok Sabha on May 22, 2012. The Bill aims to provide for the development and regulation of micro finance institutions. The Bill provides for regulatory and administrative powers to the Reserve Bank of India, which is also the banking regulator. Until now, the microfinance sector had largely gone without a regulator, and was primarily self-regulated under the aegis of the national Micro Finance Institutions Network (MFIN).
The central bank will specify maximum limit of margins and interest rates which can be charged by microfinance institutions (MFIs). It will also rules on fair and reasonable methods of recovery of loans by MFIs. The microfinance industry was hit badly in late 2010, after the Andhra Pradesh state government passed an ordinance, that later became law, to regulate MFIs, interest rates and their operations. The new Bill will supersede all such state laws. The RBI can now inspect accounts of MFIs and take necessary cease-and-desist orders if any MFI is found in violation. It can also impose monetary penalty for non-compliance with provisions. MFis have also been prohibited from closing or restructuring their activities without the RBIs permission. Under the new Bill, the banking regulator will also make provisions to set up a Micro Finance Development Fund, which will be used to provide providing loans/grants on seed capital. The Bill also proposes to set up a Microfinance Development Council at the centre, state and district levels; while the central council will advised the central government on policymaking, the state-level councils will report to the central government. District Microfinance Committees will monitor indebtedness, method of recovery used by MFIs and review the growth and development of MFIs in the district. 164. Panel proposes 49% FDI in brownfield pharma projects A special group set up by the Department of Economic Affairs on July 24, 2012 suggested the government consider allowing up to 49 per cent foreign direct investment (FDI) for brownfield investments in the pharmaceutical sector under the automatic route. A brownfield investment means acquiring stake in an existing company. Investments of more than 49 per cent would be referred to the Foreign Investment Promotion Board (FIPB). The panel said a final decision on the matter would be taken by the Prime Ministers Office (PMO). The group, set up on May 29, 2012 to streamline approvals for brownfield foreign direct investment in the sector through FIPB. If the PMO approves the recommendations of the special group, the FDI policy could be substantially relaxed. Earlier, a ministerial group headed by Prime Minister Manmohan Singh had put foreign brownfield investments in the sector under the approval route to address the health
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ministrys concern on a series of acquisitions in the sector. The special group has also recommended after the foreign investment, the company maintain its production of essential medicines for a certain period of time. Besides, foreign entities acquiring companies in India may be required to invest five per cent of their sales on research and development. The recommendations of the special group come in the wake of the PMO seeking a progress report on implementation of changes in the FDI policy in the pharmaceutical sector. Differences between various departments had led to delay in finalising a policy on mergers and acquisitions in the sector.
Fifty products in engineering, pharmaceuticals and chemicals would get special bonus of additional 1 per cent of export value between October and March in the current financial year. The commerce minister was confident of meeting the $300 billion target for exports set for 2011-12. Exports are estimated to have risen 52 per cent to $160 billion in the first half of the current financial year on the back of robust performance from engineering goods and petroleum products. 166. Mines and Minerals (Development and Regulation) Bill, 2011 The Mines and Minerals (Development and Regulation) Bill, 2011 was introduced in the Lok Sabha on December 12, 2011. On February 2, 2012 the new Mines Bill has been referred to a parliamentary standing committee. It seeks to consolidate and amend the law relating to the scientific development and regulation of mines and minerals. The Mines and Mineral Development and Regulation (MMDR) Bill provides for coal miners to share 26% of their net profits with project-affected people, while the burden on non-coal miners will be equivalent to royalty.
The FIPB clearance is a stop-gap arrangement till the government amends the relevant provision of the Competition Act. Foreign companies would soon be required to seek the Competition Commission of India (CCI)s permission for brownfield pharmaceutical investment. Though the commerce ministry wants FIPB to continue clearing FDI proposals in the sector, the PMO wants CCI to take over the job. 165. Rs 900 crore relief package The government on October 13, 2011 announced a Rs 900-crore package for exporters to help them tide over the slowdown in developed markets and rising input costs. RBI has already announced interest subsidy of 2 per cent on rupee export credit for handicrafts, handlooms, carpets and small and medium exporters. Along with the interest subsidy the total relief package for exporters stands at nearly Rs 1,700 crore.
Key highlights of Bill
States may call for applications in notified areas of known mineralization for prospecting based on technical knowledge, value addition, end-use proposed ore -linkage etc. and to invite financial bid; States may grant of direct mining concessions through bidding based on a prospecting report and feasibility study in notified areas where data of minerals is adequate for the purpose; State Government may set up a minimum floor price for competitive bidding; Special provisions for allowing mining of small deposits in cluster, where cooperatives can apply; National Mining Regulatory Authority for major minerals - State Governments may set up similar Authority at State level for minor minerals; Imposition of a Central cess and a State cess, and setting up of Mineral Funds at National and State Level for capacity creation;
Sectors which would benefit from the government move include engineering goods, pharmaceuticals and chemicals, apparels and others. Commerce minister Anand Sharma unveiled a special focus market scheme, which would help diversify the countrys exports to new markets. Under the scheme, an additional 1 per cent duty credit would be provided to exporters, who ship their goods to markets in Latin America, Africa and CIS countries. The total number of countries in the scheme is 43 and includes new entrants Cuba and Mexico. The commerce ministry has undertaken a series of measures to open up new markets to counter the slowdown in the countrys traditional markets like US and EU.
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For the purpose of sharing the benefits of mining with persons or families having occupation, usufruct or traditional rights in mining areas, and for local area infrastructure, creation an amount equal to royalty in case of mineral other than coal, and 26% of net profits, in the case of coal, has been proposed to be credited each year to district Level Mineral Foundation; Sustainable and scientific mining through provision for a Sustainable Development Framework;
compared to 8.3 per cent in the corresponding period of the previous year. The Survey points out that inflation as measured by the wholesale price index (WPI) was high during most of the current fiscal year, though by year end there has been a clear slowdown in price rise. The growth rate of investment in the economy is estimated to have registered a significant decline during the current year. But despite the low growth figure of 6.9 per cent, India remains one of the fastest growing economies of the world as all major countries including the fast growing emerging economies are seeing a significant slowdown. The Economic Survey expects the growth rate of real GDP to pick up to 7.6 per cent in 2012-13 and faster beyond that. The main reason for a gradual recovery is the decline in overall investment rate. As fiscal consolidation gets back to track, savings and capital formation should begin to rise; moreover, with the easing of inflationary pressures in the months to come, there could be a reduction in policy rates by RBI, which should encourage investment activity and have a positive impact on growth. Preliminary calculations suggest that the growth rate of GDP in 2013-14 will be 8.6 per cent. 168. Union Budget 2012-13
Consultation with local community before notifying an area for grant of concession, and for approval of Mine Closure Plans; Enhanced penalties for violation of provisions of the Act, including debarment of person convicted of illegal mining for future grants and termination of all mineral concessions held by such person; and Establishment of Special Courts at the State level for speedier disposal of the cases of illegal mining. 167. Economic Survey 2011-12 Indian economy is estimated to grow by 6.9 per cent in 2011-12 mainly due to weakening industrial growth. This indicates a slowdown compared not just to the previous two years, when the economy grew by 8.4 per cent, but also from 2003 to 2011, except 2008-9 economic downturn, when the growth rate was 6.7 per cent. The Economic Survey 2011-12, presented by then Finance Minister, Pranab Mukherjee in the Lok Sabha on March 15, 2012 predicts 7.6 per cent GDP growth in 2012-13 and 8.6 per cent in 2013-14. With agriculture and services continuing to perform well, the slowdown can be attributed almost entirely to weakening industrial growth. The services sector continues to be a star performer as its share in GDP has climbed from 58 per cent in 2010-11 to 59 per cent in 2011-12 with a growth rate of 9.4 per cent. Similarly, agriculture and allied sectors are estimated to achieve a growth rate of 2.5 per cent in 2011-12 with foodgrains production likely to cross 250.42 million tonnes owing to increase in the production of rice in some States. The industrial sector has performed poorly, retreating to a 27 per cent share of the GDP. Overall growth during April-December 2011 reached 3.6 per cent
The Union Budget 2012-13 presented by then Finance Minister Pranab Mukherjee in Lok Sabha on March 16, 1012 identifies five objectives to be addressed effectively in the ensuing fiscal year. They include focus on domestic demand driven growth recovery; create conditions for rapid revival of high growth in private investment; address supply bottlenecks in agriculture, energy and transport sectors particularly in coal, power, national highways , railways and civil aviation; intervene decisively to address the problem of malnutrition especially in the 200 high-burden districts and expedite coordinated implementation of decisions being taken to improve delivery systems, governance, and transparency; and address the problem of black money and corruption in public life. The Government will endeavor to restrict the expenditure on central subsidies under 2 per cent of GDP in 2012-13 and over the next three years, it would be further brought down to 1.75 per cent of GDP. That based on recommendations of the Task Force headed by Nandan Nilekani, a
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mobile-based Fertilizer Management System has been designed to provide end-to-end information on movement of fertilizers and subsidies which will be rolled out nation-wide during 2012. Transfer of subsidy to the retailer and eventually to the farmers will be implemented in subsequent phases which will benefit 12 crore farmer families.
Union Budget 2012-13 Highlights
farmers Interest subvention of 1 per cent on housing loans upto Rs. 15 lakh extended for one more year National Mission on Food Processing to be started in cooperation with State Governments Multi-sectoral programme to address maternal and child malnutrition in 200 high burden districts Rural drinking water and sanitation gets 27 per cent rise in allocation to Rs. 14,000 crore National Urban Health Mission is being launched Widow pension and disability pension raised from Rs. 200 to Rs. 300 per month Defence services get Rs. 193407 crore; any further requirement to be met Income tax exemption limit raised from Rs.1,80,000 to Rs.2,00,000; upper limit of 20 per cent tax slab raised from Rs.8 lakh to Rs.10 lakh Turnover limit for compulsory tax audit for SMEs raised from Rs.60 lakh to Rs.1 crore All services to attract service tax except those in the negative list Total expenditure budgeted at Rs. 14,90,925 crore; plan expenditure at Rs. 5,21,025 crore 18 per cent higher than 201112 budget; non plan expenditure at Rs. 9,69,900 crore Fiscal deficit targeted at 5.1 per cent of GDP, as against 5.9 per cent in revised estimates for 2011-12 Central Government debt at 45.5 per cent of GDP as compared to Thirteenth Finance Commission target of 50.5 per cent. 169. Railway Budget 2012-13
Central subsidies to be kept under 2 per cent of GDP; to be further brought down to 1.75 per cent of GDP over the next 3 years. Rs. 30,000 crore to be raised through disinvestment Rs. 15,888 crore to be provided for capitalization of public sector banks and financial institutions Swabhimaan: remaining habitations to be covered; to be extended to more habitations; ultra small branches to be set up in Swabhimaan habitations Investment in 12th Plan in infrastructure to go upto Rs. 50,00,000 crore; half of this is expected from private sector Allocation of Road Transport and Highways Ministry enhanced by 14 per cent to Rs. 25,360 crore Financial package of Rs. 3,884 crore for waiver of loans to handloom weavers and their cooperative societies; mega handloom clusters in Andhra, Jharkhand; weaver service centres in Mizoram, Nagaland and Jharkhand ; powerloom mega cluster in Maharashtra; Rs. 500 crore pilot schemes for geo-textiles in North-Eastern region Allocation to agriculture enhanced; RKVY gets Rs. 9,217 crore; BGREI gets Rs. 1,000 crore; Rs.2242 crore project to improve dairy productivity; Rs. 500 crore for coastal aquaculture Various other agricultural activities merged into 5 missions Target for agricultural credit raised to Rs. 5,75,000 crore Interest subvention for short-term crop loans to farmers at 7 per cent interest continues; additional 3 per cent for prompt paying
GDP growth to be 7.6 per cent (+ 0.25 percent) during 2012-13
Then Union Railway Minister Dinesh Trivedi presented his maiden Railway Budget in Parliament on March 14, 2012 seeks to raise investment in modernization and upgradation of rail infrastructure. Presenting the Railway Budget 2012-13, minister proposed a Budget with highest ever plan outlay of Rs. 60,100 crore which provides Rs. 6,872 crore for new railway lines and significant funds for passengers safety, security and amenities.
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The Railway Minister has focused on five Institution of Rail Khel Ratna Award for 10 important fields, which are: Safety; rail sports-persons every year. Consolidation; Decongestion & Capacity New coaching terminal at Naihati, the birth Augmentation; Modernization; and to bring place of Rishi Bankim Chandra down the Operating Ratio from 95 per cent to Chattopadhyay commemorating him on 175th 84.9 per cent in 2012-13. Birth Anniversary.
Highlights of Railway Budget 2012-13
Passenger fares increased marginally. 50 per cent concession in fare in AC-2, AC-3, Chair Car & Sleeper classes to patients suffering from Aplastic Anaemia and Sickle Cell Anaemia. Extending the facility of travel by Rajdhani and Shatabdi trains to Arjuna Awardees. Travel distance under Izzat Scheme to increase from 100 kms to 150 kms. Introduction of satellite based real time train information system (SIMRAN) to provide train running information to passengers through SMS, internet, etc. Introduction of Rail Bandhu on-board magazines on Rajdhanis, Shatabdis and Duronto trains. 75 new Express trains to be introduced. 725 km new lines, 700 km doubling, 800 km gauge conversion and 1,100 km electrification targeted in 2012-13. Rs 6,872 cr provided for new lines, Rs 3,393 cr for doubling, Rs 1,950 cr for gauge conversation, Rs 828 cr for electrification. A wagon factory to be set up at Sitapali (Ganjam District of Odisha). Setting up of a factory at Shyamnagar in West Bengal to manufacture next generation technology propulsion system for use in high power electric locomotives. Creating Missions as recommended by Pitroda Committee to implement the modernization programme. Setting up of Railway Tariff Regulatory Authority to be considered. National High Speed Rail Authority to be set up. Pre-feasibility studies on six high speed corridors already completed; study on Delhi-Jaipur-AjmerJodhpur to be taken up in 2012-13. Introduction of a Green Train to run through the pristine forests of North Bengal. Three Safety Villages to be set up at Bengaluru, Kharagpur and Lucknow for skill development for disaster management.
Project to connect Agartala with Akhaura in Bangladesh to be taken up in 2012-13. Passenger growth targeted at 5.4 per cent. A New Board Member (Safety/Research) to be inducted in the Railway Board. 170. National Manufacturing Policy 2011
The major objectives of the NMP are:
The Union Cabinet on October 25, 2011 gave its approval to the long-awaited ambitious National Manufacturing Policy (NMP), which seeks to set up mega industrial zones, create 100 million jobs by 2022 and put India at par with manufacturing powers like China and Japan. The NMP seeks to enhance the share of manufacturing in the GDP to 25 per cent within a decade and create 100 million jobs in manufacturing as part of the inclusive growth agenda of the UPA. The NMP will ensure compliance of labour and environmental laws while introducing procedural simplifications and rationalisation so that the regulatory burden on the industry is reduced. The interventions proposed are generally sector neutral, location neutral and technology neutral, except the attempt to incentivise green technology for sustainable development. The basic thrust is to provide an enabling environment for tapping the potential of the private sector and the entrepreneurial skills of the younger population. No subsidy is proposed for individual units or areas.
to increase the sectoral share of manufacturing in GDP to at least 25 per cent, create 100 million jobs by 2022 and enhance global competitiveness of the sector. The NMP aims at creating large integrated industrial townships - National Investment and Manufacturing Zones (NIMZs). The land for these zones will preferably be waste infertile land, which is not suitable for cultivation; not in the vicinity of any ecologically fragile area and with reasonable access to basic resources. Currently, the contribution of the manufacturing
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sector is just over 16 per cent of Indias GDP. With a view to accelerating the growth of the manufacturing sector, the manufacturing policy proposes to create an enabling environment suitable for the sector to flourish in India. 171. Draft National Competition Policy 2011 Government had constituted a Committee for drafting the National Competition Policy with a view to achieve highest sustainable levels of economic growth, entrepreneurship, employment, higher standards of living for citizens, protect economic rights for just, equitable, inclusive and sustainable economic and social development, promote economic democracy and support good governance by restricting rent seeking practices. The Committee was constituted under the Chairmanship of Dhanendra Kumar, Former Chairperson of Competition Commission of India.
The salient features of the policy proposed by the Committee are as follows: -
in economy, protecting consumers interests and maximising social welfare, help in reducing inflationary pressures, accelerate inclusive growth, development of entrepreneurs and new employment opportunities and strengthen infrastructure; To review all existing and new Acts/ regulations/ policies to correct where anticompetitive outcomes are noticed, and to proactively promote competition principles; To provide for Institutional separation between policy making, operations and regulatory wings of the Government; To provide for fair Market regulation procedures, whether by public authorities, regulatory bodies or through self-regulatory mechanisms; To provide for Competitive neutrality, in order to establish a level playing field; To provide for Fair pricing and inclusionary behaviour, particularly of public utilities; To provide for Public policies and programmes to work towards promotion of competition in the market place; Establishment of a National Competition Policy Council for the oversight mechanism.
To aim at creation of a framework of policies and regulations that will inform other policies to facilitate competitive outcomes in the market, with a view to promoting efficiency
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CURRENT AFFAIRS SERIES 6

ISSUES IN INDIAN ECONOMY

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