RBI in order to put intense pressure on businessmen,

whose companies default in future, has intensified

willful defaulter rules. Now if a company is unable to
repay then that could lead to other group units and
management being termed willful defaulters.
The modified guidelines nevertheless will not be of
much benefit to banks in recovering from present
borrowers like Kingfisher Airlines as they apply only
prospectively and not to cases where guarantees were
taken prior to this circular.
RBI sets upper age limit for private bank CEOs at 70
RBI has been decided that the upper age limit for MD &
CEO and other WTDs (Whole-Time Directors) of banks
in the private sector should be 70 years, i.e.- beyond
which no person should remain in the post. Within the
overall limit of 70 years, individual banks boards are
free to fix a lower retirement age for the WTDs,
counting the MD & CEO, as an internal policy.
BSNL and MTNL to be merged by July 2015 In its
presentation to Prime Minister Narendra Modi, the
Department of Telecommunications(DoT), Ministry of
Communications and Information Technology, has set a
cutoff date: July 31, 2015, for closing the much debated
merger of stressed state-run telecom companies, BSNL
(Bharat Sanchar Nigam Ltd) and MTNL (Mahanagar
Telephone Nigam Ltd).
Mahanagar Telephone Mauritius Limited (MTML) in
Mauritius is a wholly owned subsidiary of MTNL. It
proves mobile and international long distance services.
MTML is the 2nd operator in Mauritius. In January
2004, MTML obtained necessary licenses to operate in
Mauritius.
The decline in position of India by 11 places to 71st, set
against the gains of the ASEAN 5 nations, indicates that
the competitiveness divide South and Southeast Asia is
becoming more noticeable. Indias downslide in the
competitiveness rankings started in 2009, when its
economy was still rising at 8.5% (it even grew by 10.3%
in 2010)
PM of India, Narendra Modi launched the ambitious
Pradhan Mantri Jan Dhan Yojana which aims to
achieve comprehensive financial inclusion. The
ambitious scheme aims to achieve the gargantuan task of
enrolling over 7.5 crore (75 million) households and to
open their accounts. In its current phase, the scheme
targets to provide universal access to banking facilities
starting with Basic Banking Accounts with overdraft
facility of Rs.5000 after six months and RuPay Debit
card with inbuilt accident insurance cover of Rs. 1 lakh
and RuPay Kisan Card. The scheme will add micro
insurance & pension etc. in the next phase.
With a view to provide online marketing platform to
handloom weavers to boost the handloom sector,
empower the weavers and boost manufacturing in the
country, Ministry of Textiles, through DC
(Handlooms), has inked a Memorandum of
Understanding (MoU) with online retailer Flipkart
India Pvt. Ltd. Through this exclusive pact, Flipkart will
provide weavers in India online marketing platform,
infrastructural support in data analytics and customer
acquisition to assist them get remunerative prices for
their products and expand their business. The weavers
will sell their products under their brand name and
emerge as an entrepreneur selling his products directly to
buyers across the country through the online platform.
Flipkart will also provide DATA analytics and market
intelligence which will help the weavers focus only on
producing better saleable product ranges. It will help
them plan their production and inventory and scale up
their business, thus significantly booting manufacturing
in rural India and encourage entrepreneurship.
India has opposed a recent ruling passed by the World
Trade Organization (WTO) in a case related to
imposition of penal duties by the US on steel exports
by Indian companies. India has filed an appeal against
the ruling. Though the report of the dispute panel
favored India in its stance that the US determination of
Countervailing Duties (CVD)a levy to neutralize
Government subsidies on high grade iron ore violated
WTO norms but the international body rejected a
number of objections raised by India on specific
technical issues related to how penal duties are to be
estimated. The US imposes the CVD on the ground
that iron ore sourced by Indian steelmakers from
public sector NMDC is supplied at subsidized rate
because it is government-owned. India rejects this claim
and argues that NMDC always sells at the prevailing
market prices which are determined by their exports to
Japan and South Korea.
Prime Minister Narendra Modi announced a scheme on
behalf of the Member of Parliament- Sansad Aadarsh
Gram Yojana. He called upon the Members of
Parliament (MPs) to select any one of the villages
having population of 3 to 5 thousand in their
constituency. They must fix parameters according to the
time, space and situation of that locality. It will include
the conditions of health, cleanliness, atmosphere,
greenery, cordiality etc. On the basis of those
parameters, each of the MPs should make one village of
his or her constituency a Model Village by 2016.
PM Narendra Modi announced a new financial scheme
named Pradhan Mantri Jan Dhan Yojana to help the
poor open bank accounts which will come bundled with
a debit card and life insurance cover.
Key features of Pradhan Mantri Jan Dhan Yojana:
Rs.5,000 overdraft facility for Aadhar-linked
accounts
RuPay Debit Card with inbuilt Rs.1 lakh
accident insurance
Minimum monthly remuneration of Rs.5,000 to
business correspondents who will provide the
last link between the account holders and the
bank.
The Governor of Reserve Bank of India, Mr.
Raghuram Rajan, vociferously supported Direct Cash
Transfers (DCT) to the poor, saying this would help
curb corruption by breaking the cycle of dependence.
The DCT system involves the payment of subsidies
directly into the bank accounts of beneficiaries,
exscinding the intermediaries.
As per RBIs third bi-monthly monetary policy
statement for 2014-15 the central bank has not made any
change in Repo rate which is currently at 8%. The
Reverse Repo rate has also been left unchanged at 7%
and the Cash Reserve Ratio (CRR) is also the same at
4%. The only major change is in Statutory Liquidity
Ratio (SLR) which has been slashed by 50 basis points
(bps) to 22% from previous 22.50%.
Special 301 Report: Section 3(D) of the Indian Patent
Act opposed by the US.
Key issues in the report include:
1. Concerns over the provision of Section 3(d) of
the Patent Act which relates to non-patentability
of inventions involving chemical forms that do
not show increased efficacy
2. Issue of Compulsory License by the Controller
General of Patent, Designs and Trademarks
under section 84 of the Patents Act.
Section 3(d) of the Indian Patent Act 1970 (as
amended in 2005) prohibits grant of patent to inventions
involving new forms of a known substance unless it
differs significantly in properties with regard to efficacy.
Thus preventing ever-greening of patents. The US
pharma companies are opposed to this Act.
The Special 301 process is a unilateral step taken by
the US under their Trade Act, 1974 to put pressure on
countries to enhance Intellectual Property Rights (IPR)
protection beyond the TRIPS pact. It is an extra
territorial application of the domestic law of a country
and is not reasonable under the overall WTO regime.
The RBI will revert to the Multiple Price method for
bond auctions on August 1, 2014, a year after it adopted
the present method of Uniform Price.
Bond auctions could be classified as either Uniform
Price-based or Multiple Price-based.
In the Uniform Price-based, all successful
bidders are required to pay for the allotted
quantity of securities at the same rate, the
auction cut-off one, irrespective of what theyd
quoted.
In a Multiple price auction, the successful
bidders are required to pay for the allotted
quantity at the respective price or yield at which
they bid.
The Reserve Bank of India (RBI) has cancelled the
certificate of registration of six Non-Banking
Financial Companies (NBFCs) based in Delhi. Now,
these companies would not be able to do business as
non-banking financial institution.
These companies are:
GE Strategic Investments India (GESII)
Profound Exports Private Limited
Two Brothers Holding Limited
Swank Services Private Limited
Praxis Consulting and Information Services
Private Limited
Credible Microfinance Ltd
The Reserve Bank of India will designate at least six
banks as Systemically Important Banks (SIBs), for the
domestic financial market which will need to have
higher capital than other banks to prevent the financial
system from collapsing in the event of a crisis. The list
may include State Bank of India, Punjab National
Bank, Citibank, Standard Chartered Bank, ICICI
Bank and HDFC Bank. Banks classified under SIB
category will have to set aside more capital per loan than
their peers. Size, interconnectedness, lack of readily
available substitutes or financial institution infrastructure
and complexity will determine the systemic importance
of banks as determined by Basel global standards. Based
on the category it is relegated, a bank will have has to set
aside 0.2% to 0.8% of the loan as capital buffer.
Upholding its earlier stance, India will not support a
pact on Trade Facilitation Agreement (TFA) at the
World Trade Organization (WTO) till its concerns
related to subsidies given for food procurement and food
aid is suitably addressed. WTO members are expected to
sign the protocol for an agreement on trade facilitation
by July 31, 2014 as per the consensus reached by WTO
trade ministers in a meeting in Bali in December 2013.
What is the Trade Facilitation Agreement (TFA)?
The Trade Facilitation Agreement (TFA) targets to
steadfast any drive of goods amongst nations by cutting
down administrative compulsions. The Trade
Facilitation Agreement (TFA), being pushed by several
developed nations, will place commitments on all WTO
members to modify their border infrastructure and
procedures to facilitate movement of goods.
What is the problem with Trade Facilitation
Agreement (TFA)?
The difficulty with Trade Facilitation Agreement (TFA)
runs in a clause that says farm subsidies cannot be
more than 10% of the value of agricultural
production. If the limit is violated, other participants
can contest it and also go on to levy trade sanctions on
the nation. The developing nations would have a
difficulty with the solutions offered by the developed
nations as without the subsidies the food security of the
developing nations could be genuinely damaged.
Why is India opposed to Trade Facilitation
Agreement (TFA)?
Indias Food Security Act, by law is now obligatory on
the government and provides that the government will
deliver food to the weaker sections of the society at very
low prices. Apart from offering subsidies to the
consumers, via the PDS (Public Distribution System), it
also offers subsidies to the producers of food grains.
Thus, Government purchases food grains from farmers
at a MSP (Minimum Support Price), and subsidizes
inputs like Electricity, Fertilizer, etc.
Problem-1: The 10% cap on subsidies will not be
feasible for India to accomplish. Also, the 10% cap is
computed based on 1986-88 prices when the prices of
food grains were much lower. Thus, the cap has to be
revised on the basis of present prices of food-grains.
Problem-2: For offering subsidized food, India will
have to open up its own stock stores to international
supervision. Also, India will be unable to add protein/
heavy grains viz. say, lentils, etc. even if it wishes to,
owing to riders in the peace clause.
Problem-3: It appears biased as US offers farm
subsidies to its farmers to the tune of more than $20
billion per year. While the WTO is binding the
developing nations to protocols, the issue of subsidies by
developed nations like US appears to be kept off the
table.
What does India want?
India now wants a permanent solution to the issue of
public stock holding of food-grains. G33 members
including China have supported Indias stand on the
ability to subsidize agricultural production and distribute
it to the poor at low cost. India settled to the TFA in Bali
only under the condition that interim relief would be
offered to the developing countries. India held that till
2017 no legal action/ sanction(s) would be imposed on
the developing countries, by which time a solution
would be chalked out amongst the nations.

Nevertheless, this interim relief would not be applicable
if such subsidies would lead to trade distortions i.e. the
prices of imports and exports cannot be affected by this.
Recently, India clarified in a WTO meeting on trade
facilitation that it may not be able to support Trade
Facilitation Agreement (TFA) at present as there was
not much progress on the issue of addressing concerns
related to subsidies given for public procurement of
food-grains and food aid.
The Bali Ministerial declaration had provided just a
short-term relief to developing nations against action by
other countries in case it surpassed the current cap on
agriculture subsidies (10% of total production). It is
worth recalling that in 2013 India decided not to agree to
the Peace Clause for agriculture subsidies that the
World Trade Organization (WTO) Director-General
Roberto Azevedo had proposed for Bali talks. India will
not agree to any deal until it is clear that the proposed
interim solution will be available till a permanent
solution to the issue of Indias Minimum Support
Prices (MSP) transgressing the WTO norms has been
found and agreed to. India fears that fears that the
temporary solution might be difficult to implement as it
is riddled with numerous conditions including
submission of various data related to production and
subsidies.
What was the Peace Clause offered by the WTO?
India wants to implement its Food Security Scheme by
providing food entitlements at subsidized rates to 2/3rd
of its population. To realize this, the government will
have to procure a huge quantity of grains from farmers.
The government procures grains at certain MSPs.
However, WTO norms under the Agreement on
Agriculture may hamper the plan as the rules set a
subsidy cap of 10% of the value of production for
developing countries. India is already inching closer to
that limit. If India breaches that limit it would create
dispute and may be dragged to the WTO Disputes
Settlement Body. The Peace Clause proposed by the
WTO general-secretary offers an interim solution by
allowing the developing countries to offer subsidies to
farmers that are currently prohibited under WTO norms.
The clause will restrict other WTO members from
seeking penalties and facilitating the government to
procure grains at MSPs and sell them at subsidized rates
through Public Distribution System (PDS).
What is the problem with the Peace Clause?
There is catch in this Peace Clause: While developing
countries can provide WTO-prohibited subsidies to
farmers without inviting any dispute under the
Agreement on Agriculture, developed countries will
have the right to drag these countries to the WTO
Disputes Settlement Body, under the Agreement on
Subsidies and Countervailing Measures. This would
render the peace clause null-and-void. There is also lack
of clarity on when the proposed Peace Clause will expire
and in case there arrives no solution or agreement at the
eleventh Ministerial conference, the protection from the
Peace Clause will end and its extension will be have to
be renegotiated a contingency India doesnt want.
Why WTO has a problem with high subsidies offered
by developing nations?
WTO contends that:-
1. If developing nations continue giving prices
which are higher than the market prices, to their
farmers, it might damage the poor farmers in
other parts of the world.
2. The deal could add $1 trillion to global GDP
(Gross Domestic Product) and 21 million jobs,
by removing the red tapes.
3. The developed world wants the issue of food
security to be dis-associated from the TFA.
What is Minimum Support Price?
The Minimum Support Price (MSP) Scheme is a
scheme of the Government of India (GOI) to safeguard
the interests of the farmers. Under this Scheme the GOI
declares the minimum support Prices of various
agricultural produces and assures the farmers that their
agricultural produce will be purchased at the MSP,
thereby preventing its distress sale. The Food
Corporation of India (FCI) acts as the Nodal Agency
of the GOI.
Indias largest software services exporter, Tata
Consultancy Services (TCS) became the first Indian
company to achieve a market capitalization of Rs 5
lakh crore. In terms of market capitalization, TCS is
followed by Oil and Natural Gas Corporation (ONGC) at
Rs 3.5 lakh crore and Reliance Industries at Rs 3.3 lakh
crore.
The market capitalization of TCS is bigger than the
combined market capital of next four biggest Indian IT
firms , viz. Infosys (Rs 1.90 lakh crore), Wipro ( Rs
1.39 lakh crore) and HCL Tech (Rs 1.07 lakh crore) and
Tech Mahindra (Rs 45000 crore) which together make
up market value approximately Rs 4.88 lakh crore. TCS
is also currently the countrys most valued company in
terms of market valuation.
The Reserve Bank of India (RBI) issued draft
guidelines for setting up of small banks, which will have
a local feel and will provide small-ticket loans to farmers
and businesses.
As per RBI guidelines:
1. The minimum capital requirement for such
banks will be Rs 100 crore as against Rs 500
crore required for normal commercial banks.
2. Small Banks will provide a whole range of basic
banking services such as deposits and supply of
credit, but their area of operation will be limited.
3. Payments Banks will provide very basic and
limited number of products such as acceptance
of demand deposits and remittances of funds.
4. Payments banks will have an extensive network
of access points mainly in remote areas, either
through their own branch network or through
Business Correspondents (BCs) or through
networks provided by others.
5. Foreign investments in these new category
banks would be as per the FDI policy.
6. RBI has allowed existing non-bank pre-payment
instrument issuers, Non-Banking Finance
Companies (NBFCs), corporate BCs, mobile
telephone companies, super-market chains,
firms, real sector cooperatives and public sector
entities to apply for the license to set up
payments bank.
7. To set up small banks, resident individuals with
10 years of experience in banking and finance,
companies and Societies will be eligible as
promoters.
8. Existing NBFCs, Micro Finance Institutions
(MFIs), and Local Area Banks (LABs) can also
choose for conversion into small banks.
BRICS group of nations inked a pact to set up a new
$100 billion development bank and emergency reserve
fund. The agreement to create the bank was signed
during the 6th BRICS Summit being held in
Fortaleza, Brazil. To begin with, the bank will start
operating with $50 billion in initial capital with the five
BRICS contributing $10 billion each.
According to the pact, the capital of the bank will be
divided equally among the five participating nations and
the headquarters of the same will be in Shanghai,
China.
The chairmanship of the bank will be rotational and its
first President will come from India for the first 6
years. Regional office in Johannesburg, South Africa.
Capital contribution from BRICS nations
China: $41 billion
Brazil, Russia and India: $18 billion each
South Africa: $5 billion
Future benefits of BRICS Development Bank:
The creation of the $100 billion development
bank will help the developing countries to:
Effectively deal with short term liquidity
pressures
Encourage further BRICS cooperation
Complement existing international arrangements
Consolidate the global financial safety net
The Union government is establishing a National
Centre for Research & Development in Bulk Drug
(NCRDBD) at National Institute of Pharmaceutical
Education and Research (NIPER), Hyderabad, to fill
the significant void in R&D in bulk drugs. The condition
looks more complicated taking into account the fact that
more than 60% share in imports of intermediate for
Active Pharmaceutical Ingredients (APIs) is imported
from China.
In an unprecedented move, the Central Board of Direct
Taxes (CBDT)set up a six-member panel to examine the
efficacy of the existing primary litigation mechanism
in the Income Tax (IT) Department. The step has been
taken in the wake of an estimated Rs 4 lakh crore of tax
revenue locked up in litigation
The business leaders of G20 countries held a meeting
named Business 20 (B20) Australia Summit in
Sydney. They issued a blueprint for G20 leaders to boost
economic and job growth and make global economy
more resilient to deal with any future impacts. The
summit was chaired by Richard Goyder, Managing
Director and CEO of Wesfarmers.
The Business 20 (B20) is a forum through which the
private sector brings forth policy recommendations for
the annual summit of the G20 leaders. The forum is the
concourse of business leaders from across G20 member
nations to reflect the key role of the private sector as the
main driver of strong, sustainable and balanced growth.
The Indian Railways has registered a 9.48 % increase in
its total approximate earnings on originating basis during
April 1, 2014 to June 30, 2014 at Rs. 36674.17 crore
compared to Rs. 33499.53 crore during the same period
last year.
The Bombay Stock Exchange (BSE) has set up an
advisory group on REITs (Real Estate Investment
Trusts), which seeks to attract long-term funds to the
investment-deficient realty sector from both foreign as
well as domestic investors. The BSE has decided to
make an 11-member advisory group of experts from real
estate, securities market participants like merchant
bankers, legal professionals and consultants in real estate
to orderly help develop the REITs and to make it popular
among investors and advise them newly proposed
framework on REITs.
From 2016-17 FY, it will be mandatory for Indian
corporate sector to migrate to International Financial
Reporting Standards (IFRS) from the current
indigenous Indian Accounting Standards.
The Reserve Bank of India (RBI) gave relief to
diamantaires in Mumbai and Surat as it relaxed the
rules of suppliers and buyers credit for importing
rough, cut and polished diamonds to up to 180 days
from 90 days with immediate effect. According to RBI
notification, the Clean Credit i.e. credit given by a
foreign supplier to its Indian customer/buyer, without
any letter of credit/letter of undertaking/fixed deposits
from any Indian financial institution for import of rough,
cut and polished diamond, may be permitted for a period
not exceeding 180 days from the date of shipment.
Union Finance Minister Mr. Arun Jaitley presented
Union Budget 2014-15. The highlights:
For individuals
No change in the Tax slab on personal income
Income tax exemption limit increased by Rs
50,000 to Rs 2.5 lakh and for senior citizens to
Rs 3 lakh
Exemption limit for investment in financial
instruments under 80C increased to Rs 1.5 lakh
from Rs 1 lakh.
Investment limit in PPF increased to Rs 1.5 lakh
from Rs 1 lak
Deduction limit on interest on loan for self-
occupied house enhanced to Rs 2 lakh from Rs
1.5 lakh.
Reintroduction of Kisan Vikas Patra, National
Savings Certificate with insurance cover to be
launched
Long term capital gain tax for mutual funds
doubled to 20%; lock-in period increased to 3
years
Mandatory wage ceiling of subscription to EPS
(Employee Pension Scheme) enhanced from Rs
6,500 to Rs 15,000
Minimum pension raised to Rs 1,000 per month
LCD, LED TV become less expensive
Cigarettes, pan masala, tobacco, aerated drinks
become costlier
New projects and programs
5 IIMs to be opened in HP, Punjab, Bihar,
Odisha and Rajasthan
5 IITs in Jammu, Chhattisgarh, Goa, Andhra
Pradesh and Kerala
4 more AIIMS like institutions in Andhra
Pradesh, West Bengal, Vidarbha in Maharashtra
and Poorvanchal in Uttar Pradesh
Kisan TV for farmers, Arun Prabha TV for
northeast
National Rural Internet and Technology Mission
for services in villages and schools, training in
IT skills proposed
Digital India programme will be launched to
ensure broad band connectivity at village level
Ultra-Modern Super Critical Coal Based
Thermal Power Technology has been proposed
Jal Marg Vikas a project on the river Ganga for
inland waterways between Allahabad and
Haldia; Rs 4,200 crore will be allocated for the
same.
Uniform Account Number service will be
launched by EPFO for contributing members.
Project Neeranchal will be launched to give
fillip to watershed development in the country
with an initial outlay of Rs. 2142 crores.
Beti Bachao, Beti Padhao Yojana to spread
awareness and help in improving the efficiency
of delivery of welfare services meant for
women.
Achieving Health For All objective through
Free Drug Service and Free Diagnosis Service
Two National Institutes of Ageing to be
established at AIIMS, New Delhi and Madras
Medical College, Chennai.
Key allocations
Rs 100 crore allocated to support about 600 new
and existing Community Radio Stations
Swachh Bharat Abhiyan to cover every
household with sanitation facility by the year
2019
Rs 100 crore for metro projects in Lucknow and
Ahmedabad
Namami Gange the Integrated Ganga
Conservation Mission has been allocated Rs
2,037 crore
Rs 150 crore set aside for enhancing safety of
women in large cities
Rs. 7,060 crore allocated for the project of
developing 100 Smart Cities.
Rs 11,200 crore for PSU banks capitalization
Rs 500 crore allocated for rehabilitation of
displaced Kashmiri migrants
Pradhan Mantri Krishi Sinchayee Yojna has
been provided Rs 1000 crore.
Rs. 50,548 crore under the SC Plan and Rs.
32,387 crore under TSP
Economic Measures
Composite cap of foreign investment to be
increased to 49% in Defense and Insurance
sectors.
Requirement of the construction area and capital
conditions for FDI decreased to 20,000 square
meters and $5 million respectively for
development of smart cities.
Manufacturing can sell its products through
retail including e-commerce platforms.
Requirement to inject Rs.2,40,000 crore as
equity by 2018 in our banks to be in consonance
with Basel-III norms PSUs will invest through
capital investment a total sum of Rs. 2,47,941
crores.
Rs 4,000 cr allocated to increase flow of cheaper
credit for affordable housing to the urban
poor/EWS/LIG segment.
Government supports consolidation of PSU
banks
Providing greater autonomy to PSU banks while
making them accountable is under consideration
Some key fiscal information
Government expects Rs 9.77 lakh crore revenue
crore from taxes
Plan expenditure pegged at Rs 5.75 lakh crore
and non-plan at Rs 12.19 lakh crore.
Fiscal deficit target maintained at 4.1% of GDP
for current fiscal and 3.6% for FY 2016
Disinvestment target fixed at Rs 58,425 crore
Gross borrowings pegged at Rs 6 lakh crore
Configuration of GST to be finalized this fiscal
Government to examine DTC proposal.
Administrative reforms
Panel to examine all fresh tax demands for
indirect transfer of assets in wake of
retrospective tax amendments of 2012
Setting up of Expenditure Management
Commission; will look into food and fertilizer
subsides
Legislative and administrative amendments to
clear up pending tax demands of more than Rs. 4
lakh crore under dispute and litigation.
Formulation of New Urea Policy
MGNREGA would provide more productive,
asset creating wage employment with linkages
to agriculture and allied activities
A panel will look into and recommend how
unclaimed amounts with PPF, Post Office,
saving schemes etc. can be utilized to protect
and further financial interests of the senior
citizens
Slum development to be included in the list of
Corporate Social Responsibility
Panel to look into the financial architecture for
MSME Sector, remove impediments and create
new norms and structures regarding the same.
To provide support to mainstreaming PPPPs
(People Public Private Partnership) called
4PIndia, an institution will be established with
a corpus of Rs. 500 crores.
As per the latest estimates by PricewaterhouseCoopers
(PwC), India will become the third largest economy
in the world by 2030. According to the London-based
accountancy giant, the rapid rise of the Indian economy
with its young workforce would thrust it up from being
the 10th largest economy in 2013 to the 3rd largest by
2030, pushing the UK back into 6th place.
In a move that would empower the State governments to
carry out de-hoarding operations, the Cabinet Committee
on Economic Affairs (CCEA) approved the inclusion of
onion and potato under the purview of stock holding
limits under the Essential Commodities Act, 1955.
The Reserve Bank of India has eased norms for overseas
investment by Indian corporates by enhancing their
borrowing limit. The apex bank has decided to reinstate
the limit of Overseas Direct Investments (ODI)/
Financial Commitment (FC) to be undertaken by an
Indian Party under the automatic route to the limit
prevailing, as per the extant FEMA provisions, prior to
August 14, 2013. However, any financial commitment
over $1 billion (or its equivalent) in a financial year
would require prior nod of the RBI even when the total
FC of the Indian Party is within the eligible limit under
the automatic route (i.e., within 400% of the net worth as
per the last audited balance sheet).
What is TFA and controversy surrounding it?
Trade facilitation agreement (TFA) is a trade protocol
aiming to give a spur and do away with the stumbling
blocks in doing international trade between various
countries.
The deadline to sign the agreement is July 31 and the
deal has to come into force fully by 2015.
It is being believed, especially by the proponents of the
agreement that deal could add $1 trillion to global GDP
and also can generate 21 million jobs by slashing red
tape and streamlining customs.
The developing country especially India and South
Africa wants that before pushing for this TFA thing why
WTO don't discuss and allay our concern on food
subsidy which is a lifeline for lakhs of BPL people in
these countries.
What was agreed upon in Bali summit?
Last year in Indonesia, during Ninth Ministerial
Conference, largely three issues were taken into account.
They were Package for Least Development Countries
(LCDs), Trade facilitation and agriculture.
In the meeting, the 160-member WTO had reaffirmed
their commitment for duty free and quota free market
access for LCDs.
Reactions on the issue:
Michael Froman, US trade representative told Reuter,
"India clearly and forcefully expressed its concern that
work proceeds on all fronts, including food stockpiling,
and received assurances that all G20 members are
committed to the full implementation of all Bali
agreements on the agreed timetables".
"India is quite influential, so let's hope that they're going
to back down in some way," Peter Gallagher, an expert
on free trade told Reuters.
When asked about the issue, an Indian official told
Business Standard, "The way things are moving, there is
no way we can agree to the trade facilitation agreement
being pushed by the developed nations at WTO within
the prescribed deadline. Food security has always been
India's main concern and this time we are not going to
concede".
According to the Indian Express report, Commerce
secretary Rajeev Kher through a statement said that it
will be really difficult for India to sign the TFA till
WTO members are ready to discuss a permanent
solution of food subsidies and stockpiling of food grains.
India's concern
India is maintaining its bullheaded approach because of
two issues, food subsidies and stockpiling of food grains.
India at present is running a massive food procurement
programmes by providing minimum supporting price to
the farmers and giving subsidized food to lakhs of BPL
families through its public distribution system (PDS).
The new WTO agreement limits the value of food
subsidies at 10 percent of the total food grain production.
India is flexing muscle on the issue because subsidies
have been calculated by WTO taking 1986 as base year
into account which will largely affect food procurement
programme through MSP.
India is raising its concerns by saying that while US is
providing 120 billion as agriculture subsidy then why
India can't give even one tenth (USD 12 billion) to their
farmers.
India which is home to about 25 percent of the worlds
hungry has a viewpoint that it is a Government's
responsibility and duty to ensure availability of proper
food to its people.
Moreover, India's food programme is largely domestic
so it doesn't distort global food trade. The Indian sources
say that once the TFA will be implemented it will be
difficult to bargain on the food subsidy thing and that is
why India has this brazen attitude.
What is India's strategy?
India wants that its concerns on food security issues
must be addressed by adopting some concrete
framework in the direction.
India might delay on the signing of the agreement and
buy out time till December of this year.




ARTICLE WORTH READING
Indian Express Opinion Tuesday 16th 2014
How not to draft regulation
The September 9 ruling of the Gujarat High Court has
raised questions about RBI regulations on willful
default. While India needs to do much more to
strengthen the rights of creditors, this should be
grounded in the foundations of liberal democracy. Our
well-justified outrage about the misbehavior of some
borrowers does not warrant losing sight of constitutional
principles.
Say there are two persons, P and Q. You have a
contractual dispute with P. When P becomes unhappy
with you, the law requires Q to punish you. That is, the
coercive power of the state, which forces Q to punish
you, is being placed at the disposal of a non-state actor,
P, without checks or balances. Such an arrangement
would raise many questions.
The RBIs approach to willful default is similar. If a
bank, P determines that your default is willful, all other
banks are forced to punish you. P gives you a bad name,
and then all other banks, Q, are forced by RBI
regulations to hang you. The formal processes of
enforcement are missing. Non-state actors dont have the
appropriate skills or incentives when it comes to justice.
There is no mechanism for judicial review either. The
RBIs regulations on willful defaulters violate principles
of the rule of law.
A khap panchayat engineering a village-wide boycott
against someone it deems to be an offender is not the
rule of law. If a law has been broken, the case should go
through the due process of a chargesheet and a judge,
and then the state should punish the guilty. Giving any
one bank the power to inflict a boycott by all banks is a
throwback to the age of khap panchayats. The September
9 Gujarat High Court ruling expressed some of these
problems. But the trouble with the RBIs regulation on
willful default runs much deeper. India does have a
problem with promoters who borrow and then fail to
repay.
But our outrage with their behavior does not justify
abandoning the foundations of liberal democracy. We
must not indulge in knee-jerk responses. The way
forward involves solving the deeper problems of
corporate bankruptcy while being anchored in sound
legal philosophy.
We must question the tag, willful. Debt is a contract,
and default is a violation of the contract. The intent of
the person who violates the contract is impossible to
assess and irrelevant for the purpose of enforcement.
What we need is a bankruptcy code, which kicks in
when firms default. The establishment of the T.K.
Viswanathan Committee by the ministry of finance is a
key initiative in economic policy reform. This
bankruptcy code must be grounded in the rule of
continued