(Current Affairs) Economy & Energy | February: 2016


India want a permanent solution on public stoc kholding

  • India wanted an agreement on a Special Safeguard Mechanism (SSM) and on a permanent solution on public stockholding for food security purposes.
  • SSM is a trade remedy which is important for developing countries as it will allow them to temporarily hike duties to counter sudden import surges and price falls of farm products due to the heavily subsidised agricultural imports from developed countries, it said.
  • India asked the G33 countries to stand united, and collectively send out a message that the Nairobi Ministerial Declaration should be balanced and cover all the elements of the Doha Development Agenda.

China urged G-20 member countries to pursue structural reforms

  • China, the host for the 2016 G20 meet and holder of the rotating presidency, urged member countries to pursue structural reforms to spur global economic growth even as the Asian giant’s economy slows. Macro-economic expansionary policies such as monetary easing remain a ‘temporary response’ to the global financial crisis of 2008.
  • G20 leaders had met at Antalya last month and resolved to persist with collective action to lift actual and potential growth of their economies and boost job creation.
  • The G20 summit mechanism for economic co-operation had evolved in the aftermath of the 2008 financial crisis.
  • Due to growing divergence in economic performance and policy priorities among major economies, we are seeing increasing difficulties in macro-economic policy co-ordination. The world economy calls for a new impetus.
  • China has questioned the significant rise in protectionist measures adopted by countries in trade and investment and the lack of movement on the World Trade Organisation’s (WTO) Doha Development round of talks.
  • G20 nations account for 80 per cent of global trade volumes.
  • China has proposed a new assessment system that focuses on aggregate impacts of the structural reform measures undertaken by G20 countries instead of focusing on the progress of implementation. This, it has argued, would provide a more objective and effective evaluation of reforms.

DBT for cotton growers

  • The Ministry of Textiles plans to implement direct transfer of funds to cotton farmers’ accounts, on an experimental basis, if the price of cotton drops below the Minimum Support Price (MSP).
  • The Cotton Corporation of India (CCI) will get into MSP operations as and when required in the cotton-growing states.
  • During the last cotton season, the industry paid higher prices for cotton, especially textile mills in Telangana and Andhra Pradesh though these are cotton-producing states.
  • China has a system for direct payment of benefits to farmers and the Chinese spinning mills have benefited from it.

Rupee slips past 67 a dollar

  • Heightened uncertainties over an impending Fed rate hike dragged the Indian rupee past the 67-mark, a 27-month low against the greenback amid strong overseas sentiment.
  • The domestic unit resumed sharply lower at 67.09 a dollar from weekend’s close of 66.88 at the Interbank Foreign Exchange market on the back of frantic dollar demand and weakened further to 67.12 in mid-afternoon trade before ending at 67.09, revealing a fall of 21 paise, or 0.31 per cent.

Asset quality situation of banks assessed

  • The country’s top bankers met Reserve Bank of India (RBI) governor, Raghuram Rajan, to appraise the RBI about their asset quality situation in the view of the deadline set by the central bank to clean up the lenders’ balance sheets.
  • During the monetary policy meeting, Mr Rajan said by March 2017 the banks’ balance sheet will be cleaned up. This means banks will have to make provisioning for bad loans.
  • Whenever they fall short RBI inspectors will rigorously comb the bank books to unearth hidden stress that were yet to be provided. Banks need to set aside capital for provisioning towards stressed assets.
  • Stressed assets as a percentage of gross advances moved up to 11.1 per cent as on March 2015.

India gets U.S. Civil societies support on WTO

  • India's demand that the World Trade Organization take steps, on a priority basis, to safeguard the interests of poor farmers as well as the food security programmes in developing countries has received support within the U.S

  • Several prominent U.S.-based civil society organisations including World Food Program USA, Oxfam America and ActionAid USA have asked Washington to agree to support the developing countries' demands on food security and poor farmer issues

  • The developed world, including the US, is learnt to be keen on introducing 'new' is-sues (such as e-commerce, global value chains, labour, competition and environment) of their interest during the Nairobi meet, instead of taking forward the ongoing Doha Round negotiations, which has a ‘development' agenda

  • India is one of the leadingdeveloping countries wanting the Nairobi meet to take up on priority negotiations on an effective Special Safeguard Mechanism (or SSM, a trade remedy allowing developing countries to temporarily increase duties to counter sudden import surges or price falls of farm items, thereby protecting poor farmers), and a permanent solution to the issue of public food stock-holding in developing countries for food security purposes.

  • India has also sought a drastic reduction of 'trade distorting' farm subsidies of the developed countries.

FICCI and ASSOCHAM for implementation of GST

  • Trade lobbies, including CII, FICCI, Assocham, PHD Chambers, and traders body, the Confederation of All India Traders (CAIT), have for the first time issued a joint appeal to the political fraternity “to give safe passage to the Constitution Amendment (122nd) Bill.

  • An earlier attempt by India Inc in May to persuade parliamentarians to pass the GST Bill during the Monsoon Session went in vain.

  • The industry, through an online petition had urged “all political parties to have a collaborative and consultative process in the Parliament and allow the Parliament to function, to debate and legislate.” The initiative has since then received support of over 63,000 people, including top industrialists.

  • The government and industry is keen that the bill is approved in the ongoing winter session of Parliament so as to meet the rollout date of April 1, 2016.

  • The bill was cleared by Lok Sabha in May and now is stuck in Rajya Sabha, where the ruling NDA is in a minority.

Centre to promote cashless transactions

  • Income tax rebate is one of the incentives being considered by the government to encourage people to move away from cash transactions and curb black money flows, a senior official said on condition of anonymity. The move may eventually use cashless transaction records to build a credit history for the poor and help them access loans.

  • one of the ideas being examined is that if an income tax rebate could be offered to those who make a substantial part of their annual payments in the cashless mode. Since bank statements are already submitted at the time of filing tax returns, it would easy to gauge the quantum of cash withdrawals made from their accounts.

  • Of the many solutions to tame black money, cashless transaction is one of the very important solutions, PrimeMinister, Narendra Modi, said, stressing that people should make cashless transactions a habit.. “This is a very big opportunity and we should promote this.

India rejects ‘artificial deadlines’ for WTO deal

  • India has said it will neither agree to ‘artificial deadlines’ to conclude theWorld Trade Organisation’s(WTO) Doha Round negotiations aimed at liberalising global trade, nor concur with rich nations’ attempts to expand the ambit of the talks by introducing “new” issues without completely fulfilling the Round’s ‘development’ dimension.

  • The Doha Round talks had begun in 2001 and has since missed several deadlines for concluding it, due to persist-ing differences between the developed and developing world on a host of issues related to trade liberalisation and granting market opening commitments.

  • These include the reduction of ‘huge and trade distort-ing’ agribusiness subsidies in developed countries, an effective Special Safeguard Mechanism (a trade remedy allow-ing developing countries to temporarily hike duties on farm products to counter sudden import surges and price falls, thereby protecting the interests of poor farmers),and a permanent solution to the issue of public food stock-holding in developing countries for the purpose of food security

Fitch Ratings affirms India’s sovereign rating at ‘BBB-’, outlook ‘stable’

  • Fitch Ratings affirmed India’s sovereign rating at ‘BBB-’, the lowest in-vestment grade and just a notch above ‘junk’ status, and kept the outlook Stable.
  • The affirmation balances strong GDP growth outlook and favourable external finances with the high government debt burden and difficult-but-improving business environment.
  • It forecast real GDP growth to accelerate to 7.5 per cent in the current financial year, followed by 8 per cent in 2016-17.
  • The pick-up in growth, it said, will be largely driven by sup-port from the government’s “beefed-up capex spending and gradual implementation of a broad-based structural reform agenda”.
  • India moved up four places in the World Bank’s Ease of Doing Business rankings, but is still the worst-performing of all ‘BBB’ range sovereign state 130th out of 189 countries, the rating agency pointed out
  • It also cautioned that the centre-plus-states’ debt bur-den could rise to 68.8 per cent of GDP, one of the highest of ‘BBB’ range sovereigns and far of the ‘BBB’ category median of 42.8 per cent of GDP. The increase largely results from state government staking part of the power distribution companies’ debt on-to their own balance sheets, following the Government’s Uday initiative

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