(Current Affairs) Economy & Energy | May: 2015


Good response for residential properties at SBI’s e-auction

  • State Bank of India (SBI), successfully completed the e-auction of around Rs.1,200-crore worth of stressed assets with a good number of bids for residential properties, said a senior official.
  • The bank had put on auction a mix of offices/shops/apartments/factory buildings and others numbering 300 properties.
  • Mr. Malhotra said the number of hits was large on the two websites where the properties were auctioned and the speed got slowed down.
  • “We had extended the auction time to compensate for the slow speed,” he said.
  • According to him, the bank had saved sizable outgo in terms of advertisement spend for auctioning the stressed assets.
  • As per the norms, advertisements should be given in two newspapers for every property auction but this time, the bank had consolidated all the properties to be auctioned and hence saved good sum, he said.
  • Agreeing that not all the 300 properties got sold, he said based on the feedback and the data collated, the bank would decide on going for next round of e-auction.
  • He said the banking major had taken a first step in this arena and could be the trend setter for others.

Facebook buys The Find

  • Facebook has waded further into e-commerce with the acquisition of shopping search engine TheFind.com. Terms of the deal were not disclosed.
  • Members of TheFind team are joining Facebook, where they plan to put their technology to work making ads at the leading social network ‘more relevant’, according to the post.
  • The acquisition will result in TheFind.com shutting down in the next few weeks.
  • Facebook has been playing catch-up regarding searching for information at the social network and becoming a middle-man of sorts for online commerce. “Together, we believe we can make the Facebook ads experience even more relevant and better for consumers,’’ the social network said in statement.
  • TheFind — “Everything you need when shopping to quickly decide what to buy and where to buy it’’ — will shutter the Silicon Valley base it has operated from since launching in 2006 and move team members to Facebook’s campus in Menlo Park, California.

Britain applies to join Chinese-led Asian bank

  • Britain has applied to join a proposed Chinese-led Asian regional bank that Washington worries will undercut institutions such as the World Bank.
  • The British Treasury said it will join talks this month on the Asian Infrastructure Investment Bank’s structure and governance arrangements.
  • China proposed the bank in 2013 and has pledged to put up most of its initial $50 billion in capital. Twenty-one other governments including the Philippines, Thailand, New Zealand and Vietnam have said they want to join.
  • The United States has expressed concern the bank will allow looser lending standards for the environment, labour rights and financial transparency, undercutting the World Bank and International Monetary Fund.
  • The British Treasury said it would try to ensure the Asian bank “embodies the best standards.”

Work on GST rollout on track, says Shaktikanta Das

  • The Narendra Modi government is working on full throttle to implement the Goods and Services Tax (GST), a key indirect tax reform, from April 1, 2016, said Union Revenue Secretary Shaktikanta Das.
  • He also pointed out that several committees and sub-committees, comprising Centre and State finance and taxation officers were working on aspects such as business processes and reporting systems. A special purpose vehicle was working on the IT backbone for the rollout, he added.
  • “Doubts have been raised about the implementation timeline. I want to confirm that work related to implementation is very much on,” Mr. Das said at an interactive session, organised by the Confederation of Indian Industry (CII).
  • Mr. Das said all States and political formations were on board. He was hopeful that the bill on GST would go through in the current session of Parliament.
  • Mr. Das also said that there would not be much revenue loss due to transition to GST.
  • Mr. Das said the government had agreed to compensate States for GST loss for the first five years on a differing basis. He also pointed out that the manufacturing States would lose more than the consumption States. That was why a one per cent origin-based tax had been included with a sunset clause of two years, he pointed out.
  • He also said that GST would be tax buoyant while terming the 42 per cent devolution of Centre’s net taxes to the States as a big bang reform.
  • Mr. Das also said the plan to reduce corporate tax rates was done to make India competitive with other ASEAN countries as an investment destination.

LIC to invest Rs.1.50 lakh crore in Railways

  • The Life Insurance Corporation of India (LIC) will provide Rs.1.50 lakh crore in the next five years to the Railways for funding projects.
  • The move is in line with Railway Minister Suresh Prabhu’s plan to look for funds outside of budgetary support and tap low-cost long-term funds. The Railways will need Rs.8.50 lakh crore in the next five years for various projects.
  • “There would be a five-year moratorium on interest and loan repayment, and the rest of the terms would be negotiated while signing the finance assistance agreement,” a press statement said.
  • As per the memorandum of understanding signed between the two parties, the LIC will make available the funds to the Railways and its entities from 2015-16.
  • According to the latest Railway budget, its total Plan budget is Rs.1 lakh crore for 2015-16.

RBI issues new norms for sale of bad loans

  • In a boost to banks, which are facing rising asset quality issues, the Reserve Bank of India, allowed such lenders to reverse the excess provision on sale of bad loans to their profit and loss account, provided the transaction took place before February 26, 2014.

  • The central bank had on the February 3 monetary policy day had said that it would issue the final guidelines on this front after banks requested it to include the provision to those sales took place before February 26, 2014, as well.

  • The move is aimed at incentivising banks to recover appropriate value in respect of NPAs (non-performing assets).

  • Almost all banks, including private sector players, have been reporting higher NPAs and lower profits as they have to make more provisions for bad loans, which crossed 5.5 per cent as at the end of December. Together with restructured loans, the total pain on the system is close to 12 per cent.

  • The new guidelines extending the sale period prior to February, 2014, will help banks report better numbers and, thus, take a little pain off their back. From April 1, banks will have to make full provision — 5 per cent of the bad asset — if they have restructured the loan, and the entire amount if the asset in corporate debt restructuring (CDR) turns bad.

  • The apex bank said the new guidelines will be applicable if only the excess is for a value higher than the bank’s net book value (NBV).

  • Further, the notification said, “The quantum of excess provision reversed to profit and loss account will be limited to the extent to which cash received exceeds the NBV of the NPAs sold.”

  • It also made it mandatory for banks to report the quantum of such excess provision reversed to the profit and loss account in the financial statements of the bank under ‘notes to accounts.’ Bad loans in public sector banks more than tripled to about Rs.2.17 lakh crore in three years to March, 2014.

  • The move is aimed at incentivizing banks to recover appropriate value in respect of NPAs.

IMF raises India growth forecast to 7.2 % this fiscal

  • The International Monetary Fund (IMF) has forecast India will grow 7.5 per cent in 2015-16, up from 7.2 per cent in the current year, a projection less optimistic than that of the Modi government.

  • In the Union budget 2015, the government estimated growth of up to 8.5 per cent in 2015-16.

  • The Indian economy is the bright spot in the global landscape, becoming one of the fastest-growing big emerging market economies in the world, the IMF said in an official statement.

  • The report stressed the urgency of certain key reforms, including the bottlenecks in the energy, mining and power sectors; infrastructure gaps, land acquisition processes and environmental clearances.

  • In its annual assessment of the Indian economy in the mandatory Article IV annual report, the IMF said that India’s vulnerabilities have receded more than those of most emerging markets and sentiment has been revived.

  • “The Indian economy is reviving, helped by positive policy actions that have improved confidence and lower global oil prices…To continue on this trend, India needs to revitalise the investment cycle and accelerate structural reforms,” according to the statement.

  • “New investment project announcements have started to pick up, particularly in the power and transport sectors,” said IMF Mission Chief for India Paul Cashin. He also noted that bolstering financial sector health and further financial inclusion would support growth going forward.

  • Mr. Cashin said that while India is well placed to cope with external shocks, there are possible risks on the horizon, both external and domestic.

  • These include spillovers from weak global growth and potential global financial market volatility that could be disruptive, including from any unexpected developments as the United States begins to raise its interest rates.

  • On the domestic front, the weaknesses in corporate balance sheets, especially in light of the increase in corporate leverage of the past few years, and worsening bank asset quality bear watching, as they could weigh on growth.

  • The IMF report also said that India’s economic profile recently got a lift as the country improved the way it measures economic output.

  • “The revised national accounts series incorporates numerous conceptual and methodological improvements that make them more consistent with international best practices,” it said adding that the report itself was prepared before the revisions were released by the Central Statistics Office.

  • Mr. Cashin also gave thumbs up to the Modi government’s recent move to introduce a flexible inflation-targeting framework. “It will help deliver low and stable inflation, and diminish the prospect of renewed bouts of high inflation,” he said.

  • Among the reforms the report recommended are steps in the agriculture sector for efficient procurement, distribution, and storage of food in the public system. Greater flexibility in labour markets and improvements in education for meeting the rising shortages of skilled labour were among the key reforms suggested.

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