(Current Affairs) Economy & Energy | September: 2014

Economy

RBI Committee for Indices on Labour to Improve Decision-Making

  • Seeking to address data gap problems, a Reserve Bank of India panel, made a case for compilation of separate indices on producer price, labour force, urban wages and household indebtedness with a view to improving monetary policy formulation.

  • To address major data gaps in monetary policy-making, the committee recommends the compilation of various indicators, such as producer price index, services sector output and price index, labour force survey, urban wages, retail sales, construction activity survey, and surveys of household indebtedness through co-ordination with the relevant government agencies.

  • The panel, headed by RBI Executive Director Deepak Mohanty, said: “with increasing integration with the global economy and the growing complexity of the economic structure, information needs have increased considerably and data gaps are being experienced in various domains of central banking.

Highlights of the Budget:-

  • Arun Jaitley retains fiscal deficit target at 4.1%, outlines roadmap-

  • Government will retain the fiscal deficit (Total expenditure- Toal government non debt creating revenue) target for 2014-15 at 4.1 per cent of GDP and brought down to 3.6 per cent in 2015-16 and 3 per cent by 2016-17. There are many challenges to lowering fiscal deficit like low frowth, High interest rate, subsidy burden etc.

  • The CAD, which is the difference between inflows and outflows of foreign exchange, was brought down to 1.7 per cent of GDP in 2013-14, from a record 4.7 per cent in the previous year, because of actions taken by Government, RBI and Sebi.

Strong Emphasis on Rural Development

  • Agriculture credit availability will be Rs. 8 lakh crore. Farmers who make prompt repayment will be given loan at 4 per cent interest.
  • rural infrastructure development fund of Rs. 5,000 crore will be available.
  • rovision has been made for developing agricultural warehouses at a cost of Rs. 5,000 crore.
  • The National Rural Livelihood Mission will be extended to 100 more districts.
  • Soil health cards will be provided to farmers and a new urea policy will be developed.
  • 1000 crore for “Pradhan mantri krishi sinchayee yojana” for assured irrigation.
  • Shyam Prasad Mukharji Rurban Mission for integrated product based infrastructure.
  • Deen Dayal upadhayaya gram jyoti yojana for rural power.

11 per cent jump in Home Ministry’s budget

  • The Home Ministry was allocated Rs. 65,745 crore in the 2014-15 Budget announced on Thursday, a 11 per cent jump over last year’s outlay.

  • It is also proposed to set up ‘Crisis Management Centres’ in all the districts of National Capital Territory of Delhi this year in all government and private hospitals. The funding will be provided from the Nirbhaya Fund setup after 16th december 2012 incident in Delhi.

  • CRPF which is involved in anti-Naxal operations besides maintaining security situation in Jammu and Kashmir and the Northeastern region has been allocated Rs. 12,169.51 crore comparison to Rs. 11,373.72 crore it received last year.

  • The BSF, which guards Indo-Pak and Indo-Bangladesh borders ; Assam Rifles, which plays a key role in anti-insurgency operations in the Northeast and guards the Indo-Myanmar border ; The ITBP, which guards the icy heights along the Sino-Indian border etc. have all seen a rise in their allocation.

  • A sum of Rs. 11.37 crore has been allocated for developing traffic and communication networks and model traffic systems in NCR, Rs. 11.50 crore for installation of traffic signals in the national capital and Rs 110 crore for construction of fortified police stations in Naxal-affected states.

Govt to Review DTC bill in its Present Form

  • Draft DTC Bill prepared by the then Finance Minister Pranab Mukherjee in 2010 which proposed the slabs at Rs 2-5 lakh (10 per cent) , Rs 5-10 lakh (20 per cent) and Rs 10 lakh and above (30 per cent). Here the corporate tax was proposed at 30 per cent.
  • The Standing Committee on Finance headed by Senior BJP leader Yashwant Sinha suggested raising the income tax exemption limit to Rs 3 lakh as against Rs 2 lakh proposed in the DTC Bill, 2010.
  • The Standing Committee in its recommendation suggested the slabs in the brackets of Rs 3-10 lakh, Rs 10-20 lakh and Rs 20 lakh and above. On corporate tax, it recommended that the rate be retained at 30 per cent.

Govt proposes over Rs. 2,000 cr for Ganga Conservation Mission

  • An integrated programme for the conservation of river Ganga called “Namami Gange” with an outlay of Rs 2,037 crores has been proposed.
  • To harness the enthusiasm of the NRI community towards the conservation of the river Ganga, an ‘NRI Fund for Ganga’ will be set up which will finance special projects.
  • A sum of Rs. 100 crore has been set aside for Ghat development and beautification of the river front at Kedarnath, Haridwar, Kanpur, Varanasi, Allahabad, Patna and Delhi.
  • The budget also contains the first ever effort to link the rivers across the country with the Finance Minister setting aside a sum of Rs. 100 crore in the current budget to expedite the preparation of Detailed Project Reports.

Govt to continue Aadhaar, provides Rs. 2k cr in 2014-15

  • A sum of Rs 2,039.64 crore has been provided for 2014-15 to execute the task of implementing Unique Identification as entrusted to Unique Identification Authority of India (UIDAI).
  • UIDAI was mandated to collect biometrics of 600 million residents in the country and rest of the population was to be covered under the National Population Register (NPR) project.
  • Cabinet Committee on UIDAI decided that all residents would be issue National Multi-purpose Identity Cards under NPR and UIDAI would generate Unique identification number for the entire population. Both UIDAI and NPR were to share the biometric data collected by them for issuing NMIC and generating unique identification number.
  • The NPR is a comprehensive identity database maintained by the Registrar General and Census Commissioner of India under the Home Ministry.

FDI limit in insurance, defence hiked to 49%

  • Government proposed hiking the foreign direct investment limit in insurance and defence sectors to 49 per cent, with full Indian management and control, through the FIPB (Foreign Investment Promotion Board) route.
  • Government also proposed Rs. 5,000 crore hike in defence allocation over the previous interim budget.
  • Mr. Jaitley also announced that Rs. 1,000 crore were being earmarked for strategic railway projects in border areas.

Rs. 37,880 crore to be Pumped into Nation’s Road Network

  • Union Budget 2014 has given importance to fast-tracking highways and improving the road infrastructure.
  • Proposal of investment in National Highways Authority of India and State roads of an amount of Rs. 37,880 crore which includes Rs. 3,000 crore for the North East.
  • Mr. Jaitley also proposed setting up of an institution, called 3P India, with a corpus of Rs. 500 crore to provide support to mainstreaming PPPs.
  • Mr. Jaitley proposed to develop an additional 15,000 km of gas pipeline systems in the country using appropriate PPP models.

IIP grows to 19-month high of 4.7% in May

  • IIP grew at 4.7 per cent in May, a 19-month high.
  • The growth is mainly on the back of recovery in the output of manufacturing, mining and electricity production and capital goods.
  • Manufacturing, which constitutes over 75 per cent of the index, grew 4.8 per cent in May against 3.2 per cent decline in output a year ago.

RBI Governor Launches Indian Bank’s mobile Branches

  • Indian Bank has, as part of the urban financial inclusion initiative, launched two mobile branches with ATM facility in Chennai.
  • Under the financial inclusion initiative, Indian Bank has provided banking services to 5,098 villages, of which 4,934 villages have been covered through smart card enabled business correspondent model.
  • Bank already operates eight mobile branches providing banking services in 70 villages.

Nabard Launches Rupay Kisan Cards

  • National Bank for Agriculture and Rural Development (Nabard) today rolled out RuPay Kisan Card and RuPay Debit Card, it is in the nature of ATM cum Debit Card, is being issued by any cooperative bank in the state of Haryana.
  • RuPay cards by cooperative banks will enable them to improve their customer service and bring it on par with any other bank to farmers and other customers.

Government to take on GAAR implementation soon: Revenue Secretary

  • Revenue Secretary Shaktikanta Das on Saturday said the government would shortly take a view on whether controversial tax law GAAR should be implemented from the scheduled date of April, 2015.
  • The Government had earlier proposed imposing the General Anti-Avoidance Rules (GAAR) from April 1, 2015, for those claiming tax benefit of over Rs. 3 crore. The rules are aimed at minimising tax avoidance for investments made by entities based in tax havens.
  • As per the existing proposal, investments made after March 2013 will be covered under GAAR with effect from assessment year 2016-17.

BSE forms 11-member advisory group on REITs

  • The Bombay Stock Exchange (BSE) has launched an advisory group on REITs (real estate investment trusts), which are aimed at attracting long-term funds to the cash-strapped realty sector from both foreign as well as domestic investors.

  • REITs can bring in USD 10 billion of foreign funds into the sector by the end of this fiscal.

  • REITs were originally announced in FY 2014 Budget, but at that time the government did not offer any tax sops to attract investors. But Arun Jaitley had announced tax incentives like exemption from long-term capital gains tax to popularise REITs.

Rs. 2923 cr fine on telcos for violating issuance norms

  • The Government has imposed a penalty of about Rs 2,923 crore on telecom operators in the past seven years for issuing mobile connections without proper verifications.
  • TERM cells have imposed penalty on non—compliant consumer application form (CAF) and filing of complaints/FIR against forged cases.
  • Major deficiencies in issuing mobile connections were related to missing CAF, missing photo or document proof, subscriber’s acquisition based on forged or fake documents, pre—activated mobile connections, more than 9 connections to an individual in one service area etc.
  • James Rodriguez of Colombia won the Golden boot award for most number(6) of goals in the tournament.

WPI Inflation Eases to 5.4 % in June

  • Annual wholesale price index-based (WPI) inflation eased to 5.4 per cent in June, it was 6 per cent in May.
  • Retail inflation fell to 30-month low of 7.31 per cent in June, mainly on account of lower prices of food items, including vegetables, cereals and meat.
  • The retail inflation, measured on consumer price index (CPI), was 8.28 per cent in May. Its lowest was 7.65 per cent in January, 2012, the month the government started releasing the data in percentage terms.
  • According to the data, the corresponding provisional inflation rates for rural and urban areas for June are: 7.72 per cent and 6.82 per cent compared to 8.86 per cent and 7.55 per cent in May, respectively.
  • The moderation in inflation together with the rebound in industrial production, as per the recently released data, provides a positive signal that the structural bottlenecks afflicting the economy could be gradually showing signs of receding.
  • Prices of vegetables, though on a downward trend, continued to remain elevated despite a series of steps from new Government for a crack-down on high food inflation. These include restrictions on exports of key kitchen commodities.

Govt slaps $579 m additional penalty on Reliance Industries

  • The government has slapped an additional penalty of $579 million on Reliance Industries for producing less than targeted natural gas from its KG-D6 block.
  • With this, the total penalty on RIL for missing the target in four fiscal years beginning April 1, 2010 now stands at a cumulative $2.376 billion.
  • The Production Sharing Contract (PSC) allows RIL and its partners BP Plc and Niko Resources to deduct all capital and operating expenses from the sale of gas before sharing profit with the government.
  • The creation of excess or unutilised infrastructure impacts the government’s profit share and this is sought to be corrected by disallowing part of the expenses incurred.
  • Gas output from the Dhirubhai-1 and 3 gas field in the eastern offshore KG-D6 block was supposed to be 80 million standard cubic meters per day but actual production was only 35.33 mmscmd in 2011-12, 20.88 mmscmd in 2012-13 and 9.77 mmscmd in 2013-14.

RBI eases reserve norms for banks issuing infra bonds

  • The objective of these instructions is to mitigate the Asset-Liability Management (ALM) problems faced by banks in extending project loans to infrastructure and core industries sectors, and also to ease the raising of long term resources for project loans to infrastructure and affordable housing sectors

  • The RBI said that apart from what is technically defined as infrastructure, affordable housing is another segment of the economy which requires long-term funding.

  • India is looking at investing $1 trillion in infrastructure development by 2017, half of which is expected to come from the private sector.

  • Finance Minister during budget speech also said that banks will be encouraged to extend long term loans to infrastructure sector with flexible structuring to absorb potential adverse contingencies, sometimes known as the 5/25 structure.

  • Under the 5/25 structure, bank may fix longer amortisation period for loans to projects in infrastructure and core industries sectors, say 25 years, with periodic refinancing, say every five years. This ensures that banks Asset and Liability is properly managed.

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