(Current Affairs) Economy & Energy | January: 2017

Economy

Economist believe demonetisation has reduced economic momentum

  • The Centre’s decision to withdraw high value banknotes couldn’t have come at a worse time for the recovering Indian economy as the cash crunch that resulted from the sudden demonetisation crimped all-round demand.
  • Starting 2016 on a relatively weak base with gross value added (GVA) growth at 6.9 per cent and GDP growth at 7.2 per cent in December 2015 — economic momentum recovered towards the middle of the year.
  • GDP growth in March accelerated to 7.9 per cent and GVA growth rose to 7.4 per cent.
  • Although the upsurge hit a hurdle in June, with GDP growth for the second quarter of FY17 falling to its slowest rate in six quarters at 7.1 per cent.
  • A good monsoon and an imminent pick-up in demand seemed to have placed the economy in a sweet spot for higher growth, investments and, possibly, job creation.
  • The Centre's move to withdraw high value currency notes in November altered that script, though the government is confident that deferred consumption will still spur growth once the initial shock of the move is absorbed.
  • On the infrastructure side, the main sticking point — non-performing assets — remains a problem independent of the effect of demonetisation, with banks not willing to lend for such projects.
  • The index of industrial production on average contracted by 0.1 per cent over the January-to-October period, with private investment faring very poorly and any growth in the index being mostly driven by consumption.
  • The index reached its lowest level in the year in July, when it contracted 2.55 per cent. The best performance was in the preceding month, when the index grew 2.18 per cent.
  • Retail inflation slowed significantly over the year, while the contraction in wholesale prices reversed.
  • This meant that the growth rates of the Consumer Price Index and the Wholesale Price Index converged — coming the closest to each other in November, when the CPI grew at 3.6 per cent and the WPI at 3.15 per cent.
  • Growth in gross value added has been slowing since the fourth quarter of the previous financial year (quarter ended March 2016), when it was 7.4 per cent.
  • GVA growth for the second quarter of this financial year was 7.1 per cent, which is the lowest it has been since the quarter ended December 2015.
  • That was before the demonetisation announcement, which economists said would dampen growth in the last two quarters of the fiscal.
  • The current account deficit has contracted sharply over the last two years, with the amount touching $3.4 billion in September 2016, down from $10.9 billion in September 2014.
  • The CAD touched a more than two-year low in the quarters ended March and June, coming in at just $300 million.

Finance ministry told banks to review the lending rates

  • Lending rates may fall sharply from the beginning of January as the finance ministry has told banks to review interest rates as huge sums of cash have been deposited in the banks in the wake of demonetisation.
  • According to bankers, at a meeting with the finance ministry officials, the latter suggested lenders should review the marginal cost of funds-based lending rate (MCLR) and pass the benefit to customers.
  • MCLR is the benchmark rate to which all the loan rates are linked.

Last date for Direct Tax Dispute Resolution Scheme extended to January 31

  • The Centre extended the last date for availing the Direct Tax Dispute Resolution Scheme to January 31, 2017 from the earlier deadline of December 31, 2016.
  • The scheme, announced by Finance Minister Arun Jaitley in the 2016-17 Budget and begun on June 1, is aimed at releasing about Rs. 5.16 lakh crore, which is locked in about 2.6 lakh pending direct tax cases.
  • Extension of the scheme is welcome as the stakeholders, post December 31, would be able to better focus on this.
  • It will be helpful if a campaign for enhancing awareness on this is undertaken to get better response.

Statutory body to standarise data from all financial sector regulators

  • A committee has recommended the creation of a statutory body that will standardise data from all financial sector regulators in a single database and provide analytical insights based on the data.
  • The report of the committee to study the financial data management legal framework in India, suggests the passage of a Bill in Parliament — the Financial Data Management Centre Bill 2016.
  • Data Centre to take measures to standardise data from regulators in consultation with the regulators, enable financial service providers to submit data in a standardised electronic format, analyse the data and maintain a financial system database.
  • The powers of the Financial Data Management Centre (FDMC) will include the establishment, operation and maintenance of the financial system database along with collecting financial regulatory data and providing access to it.
  • The body will also provide analytical support to the Financial Stability and Development Council (FSDC) on issues relating to financial stability.
  • In 2015, when the FSDC first suggested the creation of such a body, the Reserve Bank had objected to sharing company-specific data with the body as it was not statutory in nature, and sharing such data would be a breach of confidentiality.
  • Even the Department of Legal Affairs said that the “majority of the financial sector regulators being statutory in nature, it is not clear from the proposal how the non-statutory FDMC will collect data from such regulators.”
  • Department of Economic Affairs re-examined the issue and obtained the Finance Minister’s approval to establish a statutory FDMC, following which a committee was formed to recommend the way forward.

The government said that it had met the 1.5-crore target for LPG

  • The government said that it had met the 1.5-crore target for LPG connections to be added in this financial year under the Pradhan Mantri Ujjwala Yojana therefore increased LPG coverage across the country to 70 % as of December 1.
  • “Target of 1.5 crore connections fixed for the current financial year for PMUY has been achieved within a span of less than eight months and the scheme is being implemented now across 35 States/UTs.
  • It is also noteworthy that with the implementation of PMUY, the national LPG coverage has increased from 61 per cent (as on January 1, 2016) to 70 per cent (as on December 1, 2016).
  • The top five States with the highest number of connections are Uttar Pradesh (46 lakh), West Bengal (19 lakh), Bihar (19 lakh), Madhya Pradesh (17 lakh) and Rajasthan (14 lakh).
  • “The households belonging to SC/ST constitute the large chunk of beneficiaries with 35 per cent of the connections being released to them.”
  • The statement also said 14 States/UTs with LPG coverage less than the national average, such as J&K, Uttarakhand, Himachal Pradesh and all North-East States, have been identified as priority States for implementing PMUY.

Mining sector will face difficulties next year

  • The mining sector is bracing itself for a dark new year, with two difficult deadlines set under laws governing forest conservation, forest dwellers’ rights and the mines and mineral development and regulation law of 2015.
  • Industry body FICCI has written to the Mines Ministry to request an extension of the December 31, 2016 (for forest clearances in mineral-rich Odisha) and January 11, 2017 deadlines to provide ‘a lease of life’ to these mines.
  • For existing mining leases in Odisha, the problem arises from the forest conservation law which came into effect on October, 25, 1980 and environment ministry guidelines on mines in areas designated as forest under the law.
  • While the forest land within mines was labelled as forest in government records from 1980, such areas were recorded as non-forest or hal land while processing approvals for the use of forest land under the law.
  • Forest Advisory Committee (FAC) or Regional Empowered Committee are yet to be approved by the Ministry of Environment, Forests and Climate Change.
  • FAC imposed two additional stipulations for miners to comply with — obtaining a certificate under the Forest Rights Act (FRA) to get a Stage-I forest act approval and proposing a suitable scheme for compensatory afforestation on an equivalent degraded forest patch.
  • Getting a FRA certificate from a Collector alone takes at least three months. Hence, securing that as well as stage-I and stage-2 clearances under the Forest Act is virtually impossible before the end of December, according to FICCI.

Helpline to address all queries related to digital payments

  • NITI Aayog, along with telecom services providers and National Association of Software and Services Companies, is working on a helpline to address all queries related to digital payments, the Aayog’s Vice Chairman Aravind Panagariya said.
  • Mr. Panagariya, was speaking after the fourth meeting of the Chief Minister’s Committee to push digital payments.
  • The panel will submit its Interim Report within a week, AP CM Chandrababu Naidu, the Convener of the Committee, said.

International Solar Alliance got approval from cabinet

  • The Union Cabinet gave its ex-post facto approval to the proposal of the Ministry of New & Renewable Energy for the ratification of the International Solar Alliance’s framework agreement by India.
  • The ISA was unveiled jointly by Prime Minister Narendra Modi and French President Francois Hollande in 2015 at Paris on the sidelines of the COP 21 meeting of the UN Framework Convention on Climate Change.

Committee on Digital Payments says Aadhaar should be used as KYC

  • Union Budget 2017-18 should allow merchants as well as government departments to levy a handling charge for cash payments above a certain limit, the Committee on Digital Payments said.
  • It also recommended a reduction in the mandatory threshold for quoting PAN card numbers for cash transactions from Rs. 50,000 and Rs. 2,00,000, applicable in different cases currently.
  • The committee, headed by former Finance Secretary Ratan P Watal, proposed that Aadhaar be used as an alternate for KYC for people who don’t have a PAN.
  • The cash handling charge so collected should be exclusively used to fund new infrastructure for acceptance of digital payments.
  • Centre should reduce the threshold for quoting of PAN, which is currently mandated for banking transactions above Rs. 50,000 and merchant transactions of more than Rs. 2 lakh, the panel suggested.
  • To create parity between cash and digital payments, the panel proposed that eKYC requirements in digital payments should be in consonance with KYC norms for transacting in cash.
  • A recommendation has also been made to make Aadhaar numbers compulsory in Income Tax returns, although the committee has stressed such an amendment must only be made after seeking the Attorney General’s opinion.
  • The panel also recommended that when government acts as a merchant, it should bear the cost of electronic payments and not pass them on to consumers.
  • Pushing for adoption of digital payments for all government transactions, it has also proposed that utility bills and payments to government above a certain threshold be made only in digital mode.
  • Transitioning to digital payments was estimated to bring about a significant reduction in costs incurred on account of inefficiencies associated with cash and other paper based payments.

Centre approved re-designation of the DMIC Project Implementation Trust Fund

  • The Centre has approved the re-designation of the Delhi-Mumbai Industrial Corridor Project Implementation Trust Fund as National Industrial Corridor Development & Implementation Trust (NICDIT).
  • National Industrial Corridor Development & Implementation Trust (NICDIT) will be the apex body to oversee development of all industrial corridors across the country.
  • NICDIT will implement all the five proposed industrial corridors, together covering 15 States. The Delhi-Mumbai Industrial Corridor, the first of the planned corridors, is under development.
  • The Chennai-Bengaluru Industrial Corridor, Bengaluru-Mumbai Economic Corridor, Amritsar-Kolkata Industrial Corridor and the Vizag-Chennai Industrial Corridor are in various stages of planning.
  • Alkesh Kumar Sharma, the CEO of the DMIC Development Corporation (DMICDC), will take additional charge as the Member Secretary and CEO of the new NICDIT.

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