(Current Affairs) Economy & Energy | February: 2015

Economy

Mallya resigns from Mangalore Chemicals Board (MCFL)

  • In a surprise move the UB Group Chairman Vijay Mallya has resigned from the Board of Directors of Mangalore Chemicals and Fertilizers Ltd (MCFL) with immediate effect.
  • What prompted this move is still not known. The company has intimated this development to the stock exchanges. Soon after the announcement MCFL stock prices rose sharply on the stock markets.
  • The prices moved from Rs. 80 range to around Rs. 92. The volume was as high as nine lakh shares in early morning trade.
  • MCFL is amidst a takeover battle between Deepak Petrochemicals and Fertilizers and Zuari Agro Chemicals and Fertilizers. Mr. Mallya had sided with Zuari to ward off the takeover bid of Deepak Fertilizers.
  • Recently, Deepak’s bid to acquire 26 per cent addition stake had failed and Dr Mallya had retained control over the company.
  • Currently Deepak holds 32 per cent stake in the company, Zuari 16 per cent, UB Group 22 per cent and the rest by public shareholders.

Nifty touches record high

  • A benchmark index of Indian equities markets was trading 208.40 points or 0.73 percent up as fast moving consumer goods (FMCG) stocks surged.
  • All the sectors were trading in green and good buying was observed in FMCG, banking and healthcare sectors.
  • The 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE), which opened at 28,616.93 points, was trading at 28,651.11 points (at 09.27 a.m.) in the early session, up 208.40 points or 0.73 percent from the previous day’s close at 28,442.71 points.
  • The Sensex has touched a high of 28,808.78 points and a low of 28,587.75 points in the trade so far.
  • The S&P FMCG index gained by 200.87 points, bankex went up by 105.17 points and healthcare index moved up by 67.73 points.

Reliance Industries signs agreement with Mexican company for oil and gas

  • Reliance Industries has signed an agreement with Mexican state-owned company, Petroleos Mexicanos (PEMEX) for cooperation in upstream oil and gas production as well as in refining business.

  • As per the Memorandum of Understanding (MoU) “RIL will cooperate with PEMEX for assessment of potential upstream oil and gas business opportunities in Mexico and jointly evaluate value added opportunities in international markets,” a company statement said.

  • RIL and PEMEX will also share expertise and skills in the relevant areas of oil and gas industry, including for deep—water oil and gas exploration and production.

  • “The MoU envisages sharing of RIL’s pioneering expertise in deep-water development and best practices in East Coast of India and RIL’s experience in shale gas in United States,” it said.

  • RIL will also provide technical support and share experience with PEMEX for refining value maximisation and other technical optimisation strategies.

  • “RIL’s cooperation with PEMEX is in line with its growth strategy to explore opportunities to expand its international asset base in regimes having internationally attractive competitive terms.

  • “The company hopes to leverage its organisational capabilities and expertise to create long-term value for Exploration and Production Business and for RIL on the whole,” it added.

Govt. relaxed FDI policy for investors in construction sector

  • To help attract foreign funds in construction of townships, hospitals and hotels, the government relaxed the FDI policy for this sector by easing exit norms and reducing built-up area and capital needs.
  • The revised norms relating to construction development sector has been notified by the Department of Industrial Policy and Promotion (DIPP). India allows 100 per cent FDI in the sector through the automatic route.
  • The new policy has done away with the three-year lock-in period for repatriation of investment.
  • “The investor will be permitted to exit on completion of the project or after development of trunk infrastructure, that is, roads, water supply, street lighting, drainage and sewerage,” a DIPP circular said.
  • It is to be noted here, the official statement issued after the October 29 Cabinet meeting had mentioned that the investor can exit on completion of the project or “after three years from the date of final investment,” subject to development of trunk infrastructure.
  • Under the new policy, the minimum floor area requirement has been reduced to 20,000 square metres from 50,000 square metres earlier.
  • It also brought down the minimum capital requirement to $5 million from $10 million. In case of development of serviced plots, the condition of minimum land of 10 hectares has been completely removed.

RBI comfortable on Current Account Deficit: Khan

  • The Reserve Bank of India (RBI) Deputy Governor H.R. Khan said that the central bank is reasonably comfortable with the present Current Account Deficit (CAD) position of the country.

  • The central bank is “reasonably comfortable from the current account point of view because of prices of oil,” which is hovering at five-year lows, said Mr. Khan while talking to reporters on the sidelines of ‘National Payments Excellence Awards 2014’ function here.

  • The Government recently scrapped the 80:20 rule on gold imports, mandating traders to export 20 per cent of all gold imported into the country. He said that a view has been taken in this regard after considering the CAD position into account.

  • Mr. Khan also said that the RBI is having concerns on e-commerce transactions and would issue guidelines to regulate these transactions.

  • National Payments Corporation of India (NPCI), the umbrella organization for all retail payments system in the country, has institutionalized ‘National Payments Excellence Awards 2014’ to recognize outstanding achievements in operating various payment systems.

RBI keeps policy rates unchanged

  • As is widely expected, the Reserve Bank of India (RBI) has kept the key policy rates unchanged.

  • On the basis of an assessment of the current and evolving macro-economic situation, the RBI has decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 8.0 per cent.

  • It has also kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL). And, it has said that it will continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate, and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions. Also, it has decided to continue with daily one-day term repos and reverse repos to smooth liquidity.

  • As a result of these decisions, the reverse repo rate under the LAF will remain unchanged at 7.0 per cent, and the marginal standing facility (MSF) rate and the bank rate at 9.0 per cent

  • “The headline inflation has been receding steadily, and current readings are below the January 2015 target of 8 per cent as well as the January 2016 target of 6 per cent,’’ the RBI said. “The inflation reading for November, which will become available by mid-December, is expected to show a further softening.

Shome panel: Tax cash withdrawal beyond limit in a day

  • A high-level official panel proposed levying of banking transaction tax on withdrawal of cash beyond a specified limit in a day to check black money, and was not in favour of the tax amnesty scheme.
  • A report by the Parthasarathi Shome Committee, appointed by the previous UPA government, suggested taxing farmers with large land holdings in addition to a host of measures to widen the net.
  • “Taxpayers keep waiting for amnesty schemes to be announced and take advantage of these schemes to build their capital.
  • “Amnesty schemes also cause inequity among taxpayers, and there is no proof that they improve taxpayer behaviour among evaders.
  • They, therefore, should not be encouraged through amnesties,” said the report of the Tax Administration and Reform Commission (TARC). It was the third report in the series.
  • Highlighting that there is no instrument at present that captures details of cash withdrawals from bank accounts, it said such information would help the Income Tax department widen its information base on the use of black money.
  • Making a case for banking cash transaction tax (BCTT), it said: “...IT Act should be suitably revised to include in its ambit cash withdrawals exceeding specified amounts in a day from bank accounts other than savings accounts.

Lower oil prices will boost global economy: Christine Lagarde

  • The recent decline in oil prices will help boost global economy, IMF chief Christine Lagarde has said, as global oil prices have tumbled to multi-year low.
  • “It is good news for the global economy,” Ms. Lagarde said at The Wall Street Journal CEO Council annual meeting.
  • For the United States, low energy prices would help accelerate the economic growth to a 3.5 per cent next year from the October forecast of 3. 1 per cent, she said, adding that Europe is also expected to benefit from lower oil prices.
  • Ms. Lagarde, however, noted that the Eurozone also faces a risk of the “new mediocre,” and described it as an economy marked by slow growth, low inflation and high unemployment.
  • But at the same time, she asserted that reluctant political leaders need to adopt more job-friendly labour market reforms, aggressive and innovative monetary policy and other structural reforms.
  • “Where they are at the moment they need to use all available tools. They have to get on with it and do it,” Ms. Lagarde said.
  • During the meeting, the International Monetary Fund Managing Director was highly critical of Japan for being slow on implementation of fiscal and labour market reforms.
  • On Russia, Ms. Lagarde said lower prices are adding to their fragility and their vulnerability.

53% of Indians connected to internet every hour, beat global average

  • Fifty-three per cent of Indians are connected to the internet every waking hour, which is higher than the global average of 51 per cent, a new international study has found.

  • “The continuous online connectivity is becoming a phenomenon in India with 53 per cent of respondents in the country saying they are connected to the internet every waking hour,” said the study conducted by the London-based AT Kearney Global Research.

  • “That is higher than 51 per cent global average, 36 per cent in China and 39 per cent in Japan,” said the study titled “Connected Consumers Are Not Created Equal: A Global Perspective.”

  • The study covered 10 countries involving 10,000 respondents in July 2014.

  • The results of the study found that continuous connectivity is having a big impact on online retail in the country with social networks becoming a major influencing factor.

  • “97 per cent of the respondents from India said they have a Facebook account with 77 per cent saying they logged in to the social network daily,” said the study.

  • According to the study, there are three key motivations for Indian people to be continuously connected to internet.

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