(Current Affairs) Economy & Energy | April: 2017

Economy

OECD threw its weight behind India’s rating upgrade

  • Internationally influential think-tank, OECD threw its weight behind India saying the country is worthy of a credit rating upgrade, but cautioned Indian policy makers against taking measures only with an aim to get a better rating.

  • The OECD also said the Indian government needed to do “much more”, in terms of promoting India through road shows.

  • The government needs to be a “good salesman” — by informing global investors and rating agencies about the reforms it had already undertaken “in the best interest of the country” as well as their positive impact on the economy.

  • India’s (sovereign) credit rating has remained unchanged for the past several years at ‘BBB (-)’ — or the lowest investment grade, which is only a grade above “junk” status for government/sovereign bonds.

  • Leading international credit rating firms such as Standard & Poor’s, Moody’s and Fitch rate government/sovereign bonds on the basis of lending risks — or, in other words, their estimation of the borrower’s ability to repay its debt and the likelihood of them defaulting.

  • According to the Indian government’s Economic Survey 2016-17, “India’s ratings have remained stuck at the much lower level of BBB-, despite the country’s dramatic improvement in growth and macro-economic stability since 2014.”

Govt to hold fresh auctions this year

  • The government will hold fresh spectrum auctions between July and December this year and the exercise will be an annual affair from now, Telecom Secretary JS Deepak said.

  • The Centre is also working to ensure that India embraces 5G telecom networks in tandem with the rest of the world, unlike 3G and 4G technologies whose rollout was far slower, he said.

  • This year’s auctions are likely to be held between July and December and the department of telecom is soon going to send a request to telecom regulator TRAI for its recommendations on the spectrum to be sold, the price and newer spectrum bands that could be offered.

  • Before July, the department will frame a policy for the use of various spectrum bands, including high frequency bands.

  • “We are putting up new bands that can be used for other applications including 5G. Someone may now want 500 Mhz as well. And if they don’t want it, it’s okay, we will keep it,” he said.

  • While limited spectrum was offered in auctions till 2015, since last year, the government has started putting all the available spectrum on sale in line with a Supreme Court judgement, the secretary said.

  • While South Korea is expected to be the first country to rollout 5G network services in time for the 2018 Winter Olympics, Mr. Deepak said India is keen to be an early mover.

  • The department is also framing a policy on the use of higher frequency spectrum for different purposes, including 5G services and is expected to unveil it in the next three months.

Australia wants India to become major buyer of its cotton

  • Australia, the fifth-largest exporter of cotton, is looking at India to emerge as a consistent and major buyer of the commodity.

  • An eight-member delegation representing the Australian Cotton Shippers’ Association held meetings in Ludhiana, Mumbai, and Coimbatore between February 27 and March 3.

  • Australia has close to 1,200 cotton growers and can supply even small quantities to India. China purchased more than 30% of Australia’s cotton production last year. However, this was lower than its usual purchase.

  • Indian textile mills can use Australian cotton as a blend to produce high-value garments. The area under cotton production was increasing in Australia, Mr. McIntyre said.

  • Australia’s output was limited until last year. India is the largest producer and consumer of cotton globally.
     

Services sector saw expansion in Feb

  • The services sector expanded in February recovering from demonetisation-related disruption, according to a private survey.

  • The Nikkei India Services Purchasing Managers’ Index (PMI) rose to 50.7 in February from 49.4 in January. A reading above 50 denotes an expansion in business activity while one below 50 implies a contraction.

  • The upturn in services activity follows news from the sister PMI survey showing factory production growing for the second straight month in February.

  • With demand conditions strengthening in India, new business inflows rose in both sectors, leading to the first increases in private sector new work and output since October 2016. Nevertheless, growth rates were mild at best and far from their historical averages.

  • The Nikkei India Services Business Activity Index signalled growth in February as businesses recovered from the demonetisation-related disruptions seen in each of the previous three months,” according to the report.

  • The index fell to 46.7 in November, the month demonetisation was announced, the lowest it had been in almost three years. The index posted a tad higher reading of 46.8 in December but was still firmly depicting a contraction in business activity.

  • This improvement in business activity and order inflows was mostly driven by the ‘Financial Intermediation’ and ‘Other Services’ category, according to the report with most of the other major heads seeing a decline.

  • However, the report noted that the rate of contraction softened in all cases.

  • Looking at employment levels in the services sector, IHS Markit said the rate of job losses in February was only fractional. However, staffing levels decreased in the manufacturing sector, in comparison, it noted.

e-commerce faces too many policy challenges

  • Exporters face restrictions in the form of poor incentives and debilitating fees, made worse by surging global competition.

  • India had woken up to huge potential of e-commerce exports when the Centre decided to provide incentives in the Foreign Trade Policy 2015-20 to promote exports of goods hosted on a website and dispatched through courier or postal mode.

  • However, exporters have now identified several ‘restrictions’ under the FTP and related norms as ‘challenges’ that are preventing them from maximising the potential of e-commerce exports.

  • The payment for goods purchased on e-commerce platform shall be done through international credit or debit cards and as per the Reserve Bank of India norms.

  • There are more than 25,000 Indian companies, small and medium firms and entrepreneurs present on the American multinational e-commerce company eBay alone, exporting their items directly to the consumers across the world.

  • It is estimated that there are more than two lakh such Indian business-to-consumer (B2C) exporters making use of their own websites or other e-commerce platforms and social media sites.

  • There is intense competition in the e-commerce exports space, and several countries are actively promoting e-commerce exports.

  • For instance, the U.K. government’s Department for International Trade (DIT) has an ‘E-Exporting Programme’ to help U.K. companies sell their products or services overseas through e-commerce.

  • India’s e-commerce retail exporters are also facing major competition from their counterparts in China and South Asia. According to the World Trade Organisation, in 2015.
    e-commerce in goods and services was worth about $22 trillion globally, and has grown the fastest in emerging economies.

  • As per India’s FTP 2015-20, the incentives for e-commerce exports are under the Merchandise Export from India Scheme (MEIS).

  • The rewards are in the form of freely transferable duty credit scrips (that gives duty benefits for imports of inputs / import of goods including capital goods / domestic procurement of inputs and goods including capital goods, etc).

  • The list of items for incentives should be expanded to include jewellery, which is among the biggest finished product exports from India, as well as health & beauty items, auto spare parts and musical instruments.

  • A major disincentive is that currently, when a buyer sends an item back to an e-commerce exporter, import duty is charged.

  • However, in the case of exports other than through the e-commerce route, customs duties are exempted on return of exported goods.

  • Another difficulty being faced by e-commerce exporters is that such exports through India Post or via the commercial courier mode are ticked as “samples” or “gifts” and not as ‘Commercial Shipment’.

  • Sellers need to sign and attach multiple physical documents and pay a commercial clearance charge of Rs. 1,000 to Rs. 1200 for every shipment.

  • A single-product shipment via private courier requires seven copies of invoices (self-declaration), while India Post requires three copies of invoices (self-declaration).

Centre gives nod to sell three SAIL plants

  • The Centre has approved outright sale of state-owned SAIL’s three special steel units, including the Salem and Alloy Steel plants.

  • SAIL has now sought advisers, including legal and merchant bankers, to carry out the strategic sale along with transfer of management control in the three steel plants Alloy Steels Plant, Salem Steel Plant and Visvesvaraya Iron and Steel Plant.

  • The ‘Maharatna’ PSU is scouting for transaction advisers from professional consulting firms, investment bankers and financial institutions to provide advisory services and manage the disinvestment process.

  • The transaction adviser will advise SAIL on the modalities and timing of the strategic disinvestment of the three steel plants and prepare a detailed operational scheme to successfully implement the process, indicating tentative timelines for each activity.

  • The firm will also finalise the process of strategic sale as to whether it will be done through bidding or auction and assist SAIL in fixing the range of the fair reserve price, considering the valuation of the divesting plants.

  • The government has budgeted to raise Rs. 15,000 crore from strategic disinvestment in 2017-18.

  • The Centre currently holds 75% stake in SAIL, which is the largest steel producer in India.

Centre is considering proposals to amend the definition of ‘start-up’

  • The Centre is considering proposals to amend the definition of ‘start-up’ in the policy and looking to review applications seeking benefits of start-up policy which were rejected.

  • Provision in the Start-up India policy which states that for the purpose of claiming the benefits of the government schemes, ‘start-up’ means an entity, incorporated or registered in India:
    (a) not prior to five years, (b) with annual turnover not exceeding Rs. 25 crore in any preceding financial year and (c) working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property.

  • He said the government would retain the criterion of “innovation” as it is deliberately kept in the policy to differentiate between a traditional firm and a start-up.

  • However, he added the government would consider suggestions on making the definition of start-up more broad-based.

  • Entrepreneurs from the biotechnology and medical devices sectors have informed the government of the need for relaxation of the five-year time period to eight or ten years.

  • He said there were also suggestions that instead of ‘turnover,’ the policy should consider the number of employees in a firm or investment in plant and machinery.

  • As per the Department of Industrial Policy & Promotion, out of the 1662 applications received so far, only 146 applications can be considered for tax benefits as only these start-ups have been incorporated after April 1, 2016.

  • The study also mooted the establishment of a single window clearance for obtaining approvals and licences from all departments, adding that the frequency of filing under labour and tax laws should be reduced.

FM asked ministries to gear up for speedier implementation of different schemes

  • With Parliament likely to pass Union Budget 2017-18 before the beginning of the new financial year, Finance Minister Arun Jaitley asked ministries to gear up for speedier implementation of different schemes under their watch.

  • The Finance Minister stressed on the challenges ahead for the government as a whole to ensure that expenditure on schemes and projects starts from the beginning of the financial year to leverage the early passing of the Budget.

  • The Finance Minister was addressing financial advisers of different central ministries and departments at a conference in the national capital. The GFRs are rules and orders dealing with matters involving public finances.

  • General Financial Rules were issued for the first time in 1947 bringing together in one place all existing orders and instructions pertaining to financial matters.

  • These have subsequently been modified and issued as GFRs 1963 and GFRs 2005.

India has conveyed its concerns over the ongoing H-1B visa issue to US

  • India has conveyed its concerns over the ongoing H-1B visa processing issue to “senior level” officials in the U.S. administration.

  • “I think our concerns at a very senior level have already been conveyed to the government of USA. I would not like to get into the details except that Indian IT companies are giving good value addition to U.S. companies,” Govt said.

Centre has initiated talks with FMCG companies to sell their products online

  • The Centre has initiated talks with FMCG companies to sell their products online in rural areas through common service centres (CSCs) as it looks to increase the business for such centres.

  • While a deal has already been worked out with Baba Ramdev's Patanjali Ayurveda, negotiations are underway with the likes of Procter and Gamble and Crompton Greaves, an official said.

  • There are more than 2.5 lakh CSCs across the country which enable people, particularly in rural areas, to access government services online.

  • These services include ration card, birth certificate, train tickets and online form submission, among other things.

  • Going beyond delivery of public services through such centres, the Centre is now opening up to tie-ups with private companies for their products to be sold through CSCs to increase profits for Village Level Entrepreneurs (VLEs).

  • For example, CSC also has a tie up with Videocon d2h and Reliance Jio to sell their connections.

  • The move will help VLEs who run CSCs to earn commission on the products sold while also enabling access for customers in rural areas to these products.

  • Currently, by offering these online services, these centres together earn commission of more than Rs. 2 crore a day. The Centre is eyeing to ramp this up to Rs. 10 crore a day.

World Gold Council expects a revival in demand for the yellow metal

  • The World Gold Council (WGC) expects a revival in demand for the yellow metal in India in the current calendar year after 2016 ended on a dismal note on account of a surge in gold price coupled with factors like an increase in excise duty and demonetisation.

  • The global body expects Indian gold demand to be about 650-750 tonnes in 2017. Demand was just a little more than 600 tonnes in the last calendar year.

  • Incidentally, the year 2016 saw gold demand in India falling to its lowest level since 2009 as government policies along with weak rural sentiment kept consumers away.

  • While the gold trade body said that the outlook for 2017 was “cautious”, it added that demand was likely to improve going forward.

  • It added earlier attempts by the authorities to clamp down on gold had failed as gold is too intimately ingrained in the Indian society.

  • The global body further stated that while demonetisation did dent economic growth, it was helping large jewellery retailers and consumers in terms of transparency and quality.

  • Interestingly, WGC, conducted a consumer research in the first quarter of 2016 in which 63% of respondents in India agreed with the statement “I trust gold more than the currencies of countries”.

India sees opportunity to enhance bilateral cooperation with U.S. in energy sector

  • President Donald Trump have already set in motion a series of measures that will deregulate American oil, gas and coal sectors and India sees an opportunity to enhance bilateral cooperation in these areas in the coming years.

  • Thirty percent of all increase in world’s energy demand from now to 2040 will be from India, and energy cooperation will be an increasingly key component of bilateral relations, Petroleum Minister Dharmendra Pradhan said.

  • This was the first ministerial level interaction between India and U.S. under the new administration.

  • India will start importing Liquefied Natural Gas from the U.S. in 2018 under contracts signed during the previous Obama administration. Right pricing will enable India to ramp up imports from the U.S.

  • The Trump administration’s focus is on making American oil and gas sector competitive in the world market and it does not want environmental concerns holding back the sector.

  • By deregulating oil and gas, and rolling back incentives available to non–conventional energy industry, the Trump administration is hoping to create a boom in the U.S. oil and gas market.

  • Three Indian public sector companies, GAIL, Oil India and IOC and Reliance have invested in U.S. shale gas production.

  • The Obama administration’s focus was on pushing renewable energy cooperation with India, but Trump administration’s focus is different said an Indian official.

PFRDA hopeful Centre may raise equity cap for pensions

  • The pension fund regulator is hopeful of the Centre soon agreeing to its suggestion for allowing up to 50% of the funds contributed by government subscribers under the National Pension System to be invested into equities.

  • Presently, the ceiling on investments in equity markets from contributions made by government subscribers is 15%. In contrast, up to 50% of the contributions by non-government subscribers is permitted to be invested in equities.

  • This will be a “big change. Lot of money can start flowing into equities once the ceiling is raised from 15 to 50%,” Mr. Contractor said.

  • Contributions from non-government subscribers account for 15% of the corpus which is managed by seven pension fund managers (PFMs).

  • The consolidated investment in equities is 13%, he said adding two more fund managers are to be appointed shortly.

  • Among other suggestions is one to permit auto enrolment aimed at increasing pension coverage in the informal sector.

The Central Board of Direct Taxes is considering making PAN mandatory for TAN

  • The Central Board of Direct Taxes is considering making PAN mandatory as a requirement for allotting Tax Deduction Account Numbers (TAN) to companies that deduct tax at source, according to a report by the CAG.

  • The Department is considering tightening the KYC norms for TAN issuance in light of the CAG’s discovery that the procedure for allotting TAN does not require any documents as proof of identity or address, not even a PAN.

  • More than one lakh notices amounting to a total demand of Rs. 4,180 crore were not addressed due to inadequate information about the assessee.

  • For issue of TAN, application is made in Form 49B and submitted to TIN-FC. However, no documents as proof of identity and address are required to be attached while submitting the Form 49B.

  • This inability to deliver the notices to the correct addresses resulted in the tax department being unable to recover a demand of Rs. 4,180 crore raised in the period 2007-08 to 2011-12.

  • The CBDT had in December 2016 agreed to consider making PAN mandatory for the issuance of TAN, according to the CAG report.

India's commercial ties US could be restrained under Trump

  • The new U.S. trade policy unveiled by Donald Trump administration earlier this month could turn India’s commercial ties with its second-biggest trading partner more contentious.

  • The Trump administration’s drive to reduce American trade deficit will bring India into sharp focus. India is the ninth biggest trading partner of the U.S. and India had a trade surplus of about $26 billion with the U.S., in goods trade alone last year.

  • Mr. Trump’s campaign with its four-point agenda — “defending national sovereignty over trade policy, strict enforcement of U.S. trade laws, using leverage to open foreign markets and negotiating new and better trade deals.

  • India does not allow poultry imports from the U.S. and it lost the case at WTO at two stages. Now, the U.S., is seeking punitive measures against India.

  • There will be a push for dairy products and beef too, as the document is a signal to the farming community in the U.S. that the Trump administration would stand by it.

  • The document rejected multilateralism as the favoured trade route for the U.S. but this is more in the context of FTAs such as NAFTA and TPP, which the U.S. has already withdrawn from.

  • The emphasis on sovereignty essentially means the U.S. would not abide by WTO decisions that are not in its favour, according to Ms. Joshi. “Not that this is something new.

  • The U.S. has a very a poor record of enforcing WTO decisions that are against it anyway. This administration is saying it upfront.

The Centre has granted tax exemption for oil payments to Iran

  • The Centre has granted tax exemption for oil payments to Iran, a move also aimed at boosting India’s trade with that country. The decision comes a little over a year after the lifting of international sanctions on Tehran.

  • IndusInd Bank has come forward to facilitate all Iran-related transactions.

  • Central Board of Direct Taxes, said the National Iranian Oil Company’s (NIOC) income received in India in Indian Rupees for sale of crude oil to an entity in India shall be exempt from (withholding) tax from August 16, 2016 onward.

  • The related conditions include: (i) such income should stem from a pact/arrangement entered into by the Centre or approved by it; (ii) the foreign company (NIOC) and the arrangement/ pact are notified by the Centre and that (iii) the foreign company (NIOC) is not engaged in any activity, other than receipt of such income, in India.

  • This will benefit Indian exports as payment in free foreign exchange with Iran has not yet stabilised though a few banks have come forward.

  • The continuance of free foreign exchange mechanism and RPM will provide wider choice to Indian exporters and Iranian importers particularly when Iranian currency is facing huge volatility.

  • Previously, following economic sanctions on Iran over its nuclear activities, both the nations had agreed in 2012 that 45% of India’s oil import payments to Iran would be paid in rupees and deposited in UCO Bank as that bank hardly had an exposure to the U.S. or the European Union.

  • In turn, Iran was to utilise that amount to pay for its imports from India. It is learnt that the balance in the rupee account may not be sufficient to cover three months of India’s exports to Iran.

  • In FY’16, India-Iran trade was $9 billion of which $6.3 billion were imports from Iran (of which $4.5 billion was the oil import bill) while India’s exports were only $2.7 billion.
    Of the $7 billion worth imports from Iran in April-December FY’17, oil imports were $5.85 billion.

Airtel payment bank has opened more than one lakh saving bank accounts

  • Airtel Payments Bank, offered by telecom major Bharti Airtel, announced that more than one lakh savings accounts were opened in 100 villages across the state of Tamil Nadu.

  • Through the initiative, these villages in the southern state would have access to banking services along with the option of making digital payments, a company statement said.

  • A network of more than 16,000 neighbourhood Airtel stores offer banking services to consumers.

  • By introducing the service, Airtel Payments Bank will not charge any processing fee from its customers and merchant partners for digital transactions.

  • The payments bank, which was the first such bank to go live, has committed an investment of Rs. 3,000 crore and plans to build digital payments with more than five million merchants.

  • Payment Banks can accept deposits from individuals and small businesses up to a maximum of Rs. 1 lakh per account.

BRICS to consider a proposal for investment policymaking to boost investment

  • BRICS nations will soon consider a proposal to frame ‘guiding principles’ for investment policymaking to boost investment flows into BRICS as well as take steps to promote e-commerce among the five leading emerging economies.

  • In addition, the BRICS Contact Group on Economic and Trade Issues (CGETI) meeting – will also discuss measures for closer cooperation among the BRICS countries for developing their respective national single window for trade facilitation.

  • China, the current BRICS chair, wants to push ‘investment facilitation’ and ‘e-commerce’–related issues, the sources said. India was part of that meeting. China has also been at the forefront of a proposal for a global pact on ‘investment facilitation and promotion’ at the World Trade Organisation (WTO)-level.

  • India is also making efforts to ensure that the proposal on a global investment pact gains traction before the WTO Ministerial Conference (MC) meeting. The MC meeting is the WTO’s highest decision-taking body.

  • China, driving this year’s BRICS agenda, now wants the BRICS nations to separately adopt these principles and enter into an ‘investment facilitation’ agreement.

  • India had recently rejected a proposal by the European Union and Canada at the WTO-level for a global investment pact that incorporates the contentious Investor-State Dispute Settlement (ISDS) mechanism.

  • The ISDS mechanism allows firms to drag governments to international arbitration without waiting to exhaust the available local remedies and seek huge compensation.

  • China has been leading the discussions on e-commerce at the global level. In November 2016, the WTO said China had proposed that discussions at WTO should focus on the promotion and facilitation of cross-border trade in goods enabled by the Internet.

  • Incidentally, there is a proposal for setting up a common payment gateway to promote e-commerce among BRICS.

DIPP wants start-ups to become Fast Track firms

  • To enable faster exit for start-ups and to bring the winding up process in line with global best practices, the DIPP has written to the Ministry of Corporate Affairs (MCA) to notify start-ups as ‘Fast Track firms.’

  • Once this is notified, start-ups shall be able to wind up their business within a period of 90 days from making an application for the same,” according to a government report on start-ups.

  • The DIPP is the nodal Central government body for the Start-up India initiative, while the MCA is the concerned authority for notifications on winding up of companies.

  • Fast Track firms will be start-ups with simple debt structures or those meeting certain criteria that will be specified.

  • The ‘Bharat Navodaya: Start-Up India Reform Report’, released on March 6, had recommended expediting the company winding up process in India, “which is currently long-drawn and requires substantial documentation.”

  • It pointed out that winding up in the U.K. can be initiated by downloading a simple form and calling for a shareholders meeting.

  • In Singapore, a simple online application is needed to be made by a director or Company Secretary following which, the process is quite straightforward. Most economic zones in UAE allow for winding down of the business in two to three days.

  • The report said expediting the company winding up process in India would require the notification of Sections 304-323 of the Companies Act, 2013, relating to voluntary winding up.

Truck and bus drivers will soon have to undergo training in fuel efficient driving

  • Truck and bus drivers will soon have to undergo training in fuel efficient driving at the time of applying for a new or renewed driving license.

  • Beginning April 2018, the Road Transport and Highways Ministry has proposed a training programme for drivers of heavy commercial vehicles to help them save fuel while driving which would include classroom lessons and driving performance tests.

  • The drivers will be required to attach the training certificate at the time of applying for a license for driving heavy goods vehicle or heavy passenger motor vehicle.

  • According to the proposal, a driving performance test will be conducted first to evaluate fuel efficiency “in terms of kilometre or litre by using suitable set up and test procedure.”

  • Additionally, the applicant will have to undergo classroom training on importance of fuel efficiency “consisting of discussion on drawbacks or shortcomings or negative points as well as encouraging or worthy or positive or good habits noted or observed during initial driving test.”

  • After the classroom or on-site training is complete, there will be another driving performance test to evaluate the improvement in fuel efficiency.

  • The driving test will be conducted on a five-kilometre-long road with at least three speed breakers, according to the proposed notification. Following the test, a certificate will be issued by the driving school.

Fresh DGCA norms for pilots taking naps

  • The Directorate General of Civil Aviation (DGCA) issued fresh guidelines for airlines to address communication lag while pilots are taking controlled rest during the flight.

  • The aviation regulator said the guidelines have been issued “in the wake of two incidents of radio communication failure involving Jet Airways and Air India aircraft in the European airspace”.

  • Both the London-bound planes had to be escorted by air force jets after they lost contact with the air traffic control.

  • The DGCA has asked airlines to maintain speaker volume “at an appropriate level” and not to switch it off or keep it at minimum level during the flight.

IDSA seeks action to stop unauthorised sale in e-commerce firms

  • The Indian Direct Selling Association (IDSA) has written to leading e-commerce firms, including Amazon, Flipkart and Paytm, seeking action to stop unauthorised sale of products from member companies such as Amway, Oriflame, Avon Beauty Products, Herbalife International, Modicare and Tupperware, on their platforms.

  • since e-commerce is booming, direct selling companies cannot turn a blind eye to the online retail channel.

  • According to a recent IDSA and PHD Chamber survey, active direct sellers in India stood at over 40.31 lakh in 2015-16.

  • The gross sales by the Indian direct selling industry stood at Rs. 83,085 million in 2015-16 and are pegged to grow to Rs. 2,58,261 million by 2024-25.

  • The association has reached out to Amazon, Flipkart, Snapdeal, ShopClues and Paytm. While the first letter was sent out in November last year, a subsequent reminder was sent to the online marketplaces in January.

  • However, till now, ShopClues is the only firm to have responded positively. “They had told us that they will look into the matter and try to close the gaps. They had said they will ask sellers to furnish an authorisation letter before sale of such products.

  • As per the relevant clause of the guideline, any person who sells or offers for sale, including on an e-commerce platform/marketplace, any product or service of a direct selling entity, must have prior written consent from the direct selling entity to undertake such a sale.

Demonetisation will start showing positive results on the banks

  • Demonetisation will start showing positive results on the banks’ bottomlines in the coming years as operating costs decline, said Arun Tiwari, chairman and managing director of the public-sector Union Bank of India.

  • The operating costs of banks would come down as banks’ customers are being forced to go digital, he said.

  • He pointed out that every manual cash transaction costs the banks about Rs. 65 (in terms of manpower used and stationery).

  • ATMs reduced this to Rs. 18, and online transaction to Rs. 10. But, a mobile phone transaction would further cut the cost down to Rs. 2.

  • He said demonetisation had “temporarily reduced” lending by banks as there was a fall in demand, mainly for personal and vehicle loans. But, he said, this was not business being lost but demand being postponed.

  • He noted that in the aftermath of demonetisation bank deposits had piled up. If the economy grew at a faster pace, this would not be a problem as there would be more takers for loans.

  • If not, the banks would have to invest the excess money in government securities.He said that bad loans (non-performing assets, NPAs) and capital adequacy norms were the two major challenges of the banking industry.

  • The NPA volumes were large, but the rate of growth of NPAs was coming down. A large number of infrastructure companies were operating far below their capacities and hence were not able to repay their loans.

Centre is looking to ease FDI norms in Multi-brand Retail

  • In a bid to ease Foreign Direct Investment (FDI) norms related to Multi-brand Retail Trading (MBRT), the Centre is looking at ways to get around the BJP’s 2014 Election Manifesto that categorically ruled out FDI in the ‘politically sensitive’ sector.

  • While the Centre is considering various options including allowing FDI in MBRT of certain non-food items such as health and wellness products, with a rider that they should be locally manufactured, the final call would be a “political” one.

  • Despite a proposal from the Food Processing Industries Ministry to allow FDI in MBRT of non-food items, the Centre’s current difficulty related to the sensitivity involved in circumventing the BJP’s manifesto.

  • The manifesto promised that “barring the multi-brand retail sector, FDI will be allowed in sectors wherever needed for job and asset creation, infrastructure and acquisition of niche technology and specialised expertise.”

  • This assurance to prohibit FDI in MBRT was to allay the fears of local traders, many of whom form the BJP’s core constituency, that allowing foreign investment in the sector would lead to small retailers losing their source of livelihood.

  • However, ever since the BJP-led coalition came to power at the Centre, the ban on FDI in MBRT has only been a de facto one, as the consolidated FDI policy still retains the decision taken by the previous UPA government, which was to allow 51% FDI in MBRT through the approval route.

  • The policy stipulates many conditions including on a specified level of minimum investment and local sourcing.

  • This is not being implemented because several states through their respective Shops & Establishment Act, do not currently allow foreign-owned and controlled firms to open multi-brand retail outlets in their territory.

  • In order to generate employment in food processing and to attract the latest technologies in the sector, the NDA government, allowed 100% FDI under the government approval route for trading, including e-commerce, in respect of food products manufactured and/or produced in India.

  • BJP had itself averred in its poll manifesto that the party would strengthen the retail sector through modernisation, use of information technology, as well as through stronger credit and market linkages.

Public sector banks able to recover fraction of loans to Vijay Mallya

  • Public sector banks have been able to recover only a fraction of the more than Rs. 8,000-crore loan outstanding against embattled businessman Vijay Mallya, the Parliament heard.

  • Banks had reported Rs. 8,191 crore as loan outstanding against Mr. Mallya as on December 31, 2016, Minister of State for Finance Santosh Kumar Gangwar said in a written reply in the Rajya Sabha.
    “As reported by PSBs, amount of Rs. 155 crore has been recovered by conducting online mega auction by selling from seized properties ... of Vijay Mallya.”

Centre is working on a ‘compliance report” of its flagship ‘Make In India’

  • The Centre is working on a ‘compliance report” of its flagship ‘Make In India’ (MII) initiative that attempts to transform India into a global design and manufacturing hub as well as generate large-scale employment.

  • The objective of the exercise, among other things, is to find out whether the government departments and agencies implementing the MII programme are meeting the deadlines envisaged in the ‘MII Action Plan’ of December 2014.

  • The MII initiative covers 25 focus sectors ranging from automobiles to wellness.

  • The ‘MII Action Plan’ had set short-term (one year) and medium-term (three years) targets “to boost investments in the 25 sectors” and to “raise the contribution of the manufacturing sector to 25% of the GDP by 2020.”

  • At a national workshop held in December 2014 on these 25 sectors, an Action Plan was finalised with the help of Secretaries to the Indian Government as well as industry leaders.

  • Data from the Reserve Bank of India and the Central Statistics Office are also being looked into in this regard, they said, adding that inputs are being sought from the State governments as well.

  • Recently, the Parliamentary Standing Committee on Commerce wanted an assessment to be done on how the MII initiative has helped the country’s micro, small and medium enterprises.

  • It recommended that dedicated steps should be taken to ensure that FDI promotes the MSME sector, and sought to know the factors behind the Foreign Portfolio Investments turning negative and its impact on the Indian industry.

  • The panel also wanted to learn if the MII initiative has seized the opportunity of demographic dividend in the country.

  • FDI inflows in India’s manufacturing sector grew by 82% year-on-year to $16.13 billion during April-November 2016,” according to the IBEF, a trust formed by the Commerce Ministry to promote of the ‘Made in India’ label overseas.

Phone service providers to reverify through Aadhaar

  • The Department of Telecommunications issued a notification, directing all phone service providers to reverify details for all existing subscribers through Aadhaar-based e-KYC (Know Your Customer) process.

  • This follows a Supreme Court order last month in which it had approved the government’s plan to record the identification details of mobile subscribers through an e-KYC mechanism linked to Aadhaar.

  • The move will impact more than 100 crore mobile phone subscribers in the country, 90% of whom are prepaid card users.

  • The process is likely to cost about Rs. 2,500 crore which will be borne by the service providers, according to industry body COAI. Mobile connections used for data services will be verified using the alternate number.

  • The department’s decision comes two days after Union Finance Minister Arun Jaitley moved an amendment to the Finance Bill 2017 to make Aadhaar mandatory for individuals to apply for a PAN and for filing ITR this year.

  • Centre made it mandatory for beneficiaries to quote their Aadhaar number to avail themselves of benefits under the Pradhan Mantri Kaushal Vikas Yojana for skill development, and the Self Employment Scheme for Rehabilitation of Manual Scavengers.

  • The Centre had identified 31 schemes in which the Aadhaar could be made mandatory.

  • Notifications have been issued in recent months by departments to make Aadhaar compulsory for getting subsidised grains under the NFSA, jobs under the MGNREGA and pension benefits under the Employees’ Pension Scheme.

  • It added that any subscriber acquired through proof of identity or proof of address documents during the period of reverification will also need to be reverified.

  • In January this year, the Telecom Regulatory Authority of India (TRAI) had recommended the use of Aadhaar-based e-KYC for verification of existing mobile subscribers.

  • It had, however, proposed that this process should be optional to the service providers as well as mobile subscribers.

Competition Commission of India has imposed a penalty of Rs. 591 crore upon CIL

  • Competition Commission of India (CCI) has imposed a penalty ofRs. 591.01 crore upon Coal India Limited (CIL) on finding that CIL and its subsidiaries violated the Competition Act by imposing unfair and discriminatory conditions in Fuel Supply Agreements (FSAs).

  • Apart from ordering CIL and its subsidiaries to “cease and desist” from anti-competitive practices, the CCI also directed modification of the FSAs, a government statement said.

  • It added that CIL had also been directed to ensure uniformity between old and new power producers as well as between private and PSU power producers.

  • The order follows the Competition Appellate Tribunal remanding the matter back while setting aside the CCI’s original order in which a penalty of Rs. 1,773.05 crore was imposed on the coal major.

Recapitalisation alone is not enough says Y.V. Reddy

  • Former RBI Governor Y.V. Reddy said that the issue of NPA, most of which are with public sector banks, needed more than just recapitalisation, and that the public sector banks were key to the modernisation of India’s financial sector.

  • “The common thread between fiscal policy, monetary policy, and financial sector policy is public sector banks,” Mr. Reddy said.

  • “The future of the financial system and indeed modernisation of the financial sector of India depends on how we overcome the intractable problem of the public sector banks.”

  • The former RBI Governor and chairman of the 14th Finance Commission said that the effectiveness of monetary policy depended not only on the actions of the monetary authority but also on other related policies and the efficiency of transmitting institutions.

  • With over 70% of the banks and overwhelming proportion of the financial sector in the public sector, there are issues of incentives and accountability and political interference.

  • The fact that the overwhelming proportion of the non-performing assets are with the public sector banks shows that the reform will have to go beyond simply recapitalising the banks.

  • The former RBI governor added that a professional approach and a capacity to evaluate lending proposals could not be expected from public sector institutions that are bailed out from time to time with taxpayers’ money.

Consumer interest is imp. in policy and not revenue maximization says TRAI

  • Telecom Regulatory Authority of India has said that consumer interest should be at the centre of public policy and not revenue maximization for the government.

  • The Telecom Commission, which is the highest decision making body in the Department of Telecommunications, had in February written to TRAI asking it to review existing tariff rules to ensure financial growth of the sector.

  • The commission had reasoned that promotional offers by a new player is leading into fall in revenues of other telcos, and hence resulting in fall in government’s earning.

  • The regulator, in the letter, argued that it is a well known fact that low tariff help in penetration of telecom services in the rural and remote areas of the country where the teledensity still stands at 53.27% as compared to urban teledensity of 170.15%.

  • It further stated that affordable telecom service and consumer interest are some of the key elements of National Telecom Policy, 2012.

Paper meals coupon provided by employers to go digital

  • As part of Centre’s push towards digital payments and transactions, the paper meals coupon provided by employers as perquisites to their staff will become digital from January next year.

  • RBI has issued Master Directions on the issuance and operation of prepaid payment instruments (PPI) in the country to provide a framework for regulation, authorisation and supervision of entities operating payment systems in the country.

  • Master Directions consolidate instructions on rules and regulations framed by the RBI under various Acts including banking issues and foreign exchange transactions.

  • According to the new Master Directions, all paper meal vouchers like the Sodexo and Ticket Restaurant will have to be issued in electronic form like cards which are reloadable.

  • The proposed directions also suggest that the prepaid meal instruments in paper voucher form shall not be accepted beyond December 31, 2017.

  • Apart from the deadline of December 31, the RBI also said the PPI issuers should obtain and maintain the details of employees from the employers and the minimum validity of the prepaid meal instruments shall be one year from loading.

  • Sodexo, which is one of the largest paper meal voucher providers in the country, said it was in line with the government’s move to power digital payment.

  • Sodexo is the largest player in the paper meal space with over 11,000 clients that includes about 25 lakh daily users.

  • The company has even partnered with payment technology solutions company like First Data and Pine Labs to create a propriety payment terminal that will accept Sodexo meal cards.

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