(Current Affairs) Economy & Energy | October: 2016


First quarter saw decline in GDP growth

  • India’s Gross Domestic Product (GDP) growth slowed to 7.1 per cent in the first quarter of this financial year, with private consumption still the mainstay of the expansion.
  • GDP growth stood at 7.9 per cent in the fourth quarter (January-March) of the previous financial year and at 7.5 per cent in Q1 of 2015-16.
  • The slowdown in the first quarter of this year was mainly driven by a slowdown in mining, construction and agriculture sectors.
  • The construction sector grew at only 1.5 per cent in Q1 of 2016-17 compared with 5.6 per cent in the same quarter of the previous year.
  • The mining sector saw a contraction of 0.4 per cent in Q1 of 2016-17 compared with a strong growth of 8.5 per cent in April-June last year.
  • In agriculture, the effect of a better monsoon will be reflected more in the next quarter rather than in April-June.
  • The sector grew at 1.8 per cent in the period under review compared with 2.6 in the same quarter of the previous year.
  • Another concern is to do with the imbalance between private consumption and capital formation, with the former being the main bolster for growth.
  • Private consumption expenditure grew 6.8 per cent in the first quarter, slightly slower than the 6.9 per cent in the year earlier period.

Union Cabinet approval for permanent residency status to all foreign investors

  • The Union Cabinet approved a scheme to grant permanent residency status (PRS) to all foreign investors, except those from Pakistan, subject to the relevant conditions.
  • The PRS will be granted for a period of 10 years with multiple entry, the Centre added.
  • In order to avail this scheme, the foreign investor will have to invest a minimum of Rs.10 crore to be brought within 18 months or Rs.25 crore to be brought within 36 months
  • The Cabinet also gave its ex-post facto approval for the FDI policy amendments which opened up FDI norms for almost all sectors including food manufacturing, defence, broadcasting, pharmaceuticals, civil aviation etc.
  • The Cabinet also gave its approval to create a Project Development Fund (PDF) with a corpus of Rs.500 Crore “for catalysing Indian economic presence in Cambodia, Laos, Myanmar and Vietnam”.
  • The Cabinet Committee on Economic Affairs approved a Rs.1,145 crore project at Mormugao Port for the redevelopment of berths on public private partnership (PPP) mode.

Scheme to promote electric and hybrid vehicles will help save fuel

  • The Centre’s scheme to promote electric and hybrid vehicles in the country will help save fuel worth Rs.60,000 crore.
  • The environment is one of the biggest concerns for the (auto) sector. Govt has therefore allocated Rs. 14,000 crore for the FAME scheme for promoting hybrid and electric mobility which will save Rs.60,000 crore fuel.
  • In April 2015, to promote eco-friendly vehicles, the government unveiled the FAME India, offering incentives on electric and hybrid vehicles of up to Rs.29,000 for bikes and Rs.1.38 lakh for cars.
  • The scheme is part of the National Electric Mobility Mission Plan

Chief Economic Advisor says India will grow between 8-10%

  • Despite registering the slowest growth rate in the last six quarters in April-June period, India has the potential to sustain 8 to 10 per cent growth rate during the next two to three years, said Arvind Subramanian, Chief Economic Advisor.
  • If we continue to do all the things the government is doing and if world economy picks up a little bit as it did in 2000, then the growth rate would even clock double-digit in next two to three years.
  • “Where would this growth come from? China has been growing at 10.5 per cent for last 25 years. India, since mid-1970 or 1980, has been growing at 6 per cent, which is not bad.
  • Till 1980, we were growing at 3 per cent which is called Hindu rate of growth. After that we have grown at significantly higher rate. But, it is well below the growth rate of China.
  • According to the renowned economist, in the long run, the country’s economic development will depend its political stability.
  • For India, on the other hand, the process of normalisation is going to involve much faster growth because we are underperforming.
  • Dr. Subramanian batted for one price for one product in the market and expanding the scope of the direct benefit transfer model for achieving faster growth.

Indian manufacturing activity rose to a 13-month-high

  • Indian manufacturing activity rose to a 13-month-high in August, driven by a pickup in both foreign and domestic demand, according to a private sector survey.
  • The Nikkei India Manufacturing Purchasing Managers’ Index came in at 52.6 in August, up from 51.8 in July.
  • A reading over 50 implies expansion, while one below 50 suggests a contraction.
  • Higher consumption in August, along with an expected increase over the next few months, is likely to bolster GDP growth in the next quarter, analysts said.
  • The expansion comes at a time when the first quarter of this financial year saw a 9.1 per cent growth in manufacturing.
  • Apart from this, new business inflows grew at their fastest pace since December 2014, according to the report.

India will tread a cautious middle path on excess capacity in steel

  • India will tread a cautious middle path when a simmering battle over global ramifications of excess capacity in steel takes centre-stage at the G-20 Summit in China.
  • The U.S. has already mounted pressure on China to drastically reduce its steel capacity, claiming that the ‘dumping’ of the commodity in various countries has been hurting steel producers across the world.
  • India will, however, play a low-profile role in the discussions on the topic as it is aware of the growing needs of its user industries — which currently depend on a mix of imported and locally-made steel to meet their requirements.
  • The U.S. at the G20 Summit will seek discussions on the reasons for excess capacity in steel as well as reforms & regulations in the global steel industry, including in China.
  • For India, it will be a ‘Catch-22’ as it is not only the third largest steel producing nation, but was also among the top 10 steel importers in 2015.
  • This means, the interests of local producers and user industries will have to be kept in mind while taking a stance, the sources said.
  • Besides, the Centre wants more foreign investment in India, including in the steel sector, as part of the ‘Make In India’ initiative aimed at boosting local manufacturing and exports.
  • It was also decided that the G20 steelmaking economies will participate in the OECD Steel Committee meeting slated for September 8-9, 2016 to tackle the issue.
  • To counter a surge in cheap imports of steel, which was hurting local steel makers, India had taken measures including anti-dumping duty, safeguard duty and Minimum Import Price.
  • India had also brought out an order banning the manufacture and distribution of stainless steel products that do not comply with the the ‘Bureau of Indian Standards’ mark.

Maharashtra ranked highest in broad measure of Ease of Doing Business

  • Maharashtra ranked highest according to a broad measure of Ease of Doing Business (EDB) in Indian states announced at the Lee Kuan Yew School of Public Policy here.
  • The new gauge has given 21 major states entirely different ranks when compared with the only other previous measure of this sort, the World Bank’s Ease of Doing Business Index.
  • The latest measure produced by the Asian Competitiveness Institute (ACI) extends the definition of ease of doing business beyond the core measure of business friendliness that the Bank had focussed on for successive years.
  • The EDB report, which was shared, ranked Maharashtra, Gujarat, Delhi, Goa and Andhra Pradesh as the top five states respectively, whereas these states were ranked 8, 1, 15, 19 and 2 by the Bank.
  • The ACI’s EDB Index includes 81 indicators that include Business Friendliness (40 per cent weight), Attractiveness to Investors (40 per cent) and Competitive Policies (20 per cent).
  • It also balances “hard data” from each state with the results of surveys undertaken amongst investors, government officials and academic experts in this area.
  • Except Maharashtra and Gujarat, ranked 1 and 2 respectively, the ranks of all other states in the study improved through this simulation.

Govt to come up with scheme to provide mobile phone access to over 55,000 villages

  • The government will soon unveil a new scheme to provide mobile phone access to over 55,000 villages, particularly those in border states and in the Himalayan region, to push forward its flagship Digital India programme.
  • The USOF, which is maintained by the government, was formed to help fund projects to boost connectivity in rural areas.
  • The money for this fund comes through a ‘Universal Access Levy,’ charged from the telecom operators as a percentage of various licenses fees being paid by them.
  • Under the scheme, the villages have been divided into Himalayan regions such as Jammu and Kashmir, Uttrakhand and Himachal Pradesh; and the second set will be those states which share borders with other nations..
  • Another scheme — funded by the USOF — to connect Left wing extremism (LWE)-affected areas in ten identified states in on the “verge of completion.” “Together, these will help take forward the Digital India drive.
  • As on date, the total available fund in USOF is more than Rs.47,411.56 crore.
  • The total collection since the scheme was started in 2002-03 stands at about Rs.78,587.31 crore, while total amount disbursed for various initiatives to boost rural connectivity is about Rs.31,175.75 crore, according to government data.
  • As per official data about 4,700 villages in Himalayan States (Jammu & Kashmir, Himachal Pradesh and Uttarakhand), and 2,138 villages in Border States (Rajasthan, Gujarat, Punjab and Haryana) are not yet connected.
  • The Centre is also in middle of executing the Bharat Net project which aims to connect all of India’s households, particularly in rural areas, through broadband by 2017.

Urjit Patel to take charge of RBI Governor

  • Urjit Patel, the new Governor of RBI has his immediate task cut out – finishing the ‘unfinished agenda’ of his predecessor on completing ‘deep surgery’ of banks and winning the war on inflation.
  • Dr. Patel scripted a new framework for fighting price rise, which earned him the informal title of ‘inflation warrior.’
  • However, it is the ‘deep surgery’ ordered by Dr. Rajan to clean the balance sheets of banks that may pose greater challenges for Dr. Patel.
  • A number of corporate leaders and bankers who have previously worked with Dr. Patel said he was expected to show “much better understanding” of the problems companies and banks are facing due to the central bank’s AQR directive.
  • As compared to September 2013, both domestic and external conditions are comparatively favourable.
  • The rupee has stabilised though there could be a period of volatility once the foreign currency deposits (that were raised in 2013 to stabilise the rupee) start to flow out later this month.
  • The outflows could be a ‘non-event’, Dr. Rajan had said and his belief is mainly due to the healthy foreign exchange reserves which are at $366.78 billion as compared with $274.8 billion three years ago.

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