Inflation Indexed Bonds (IIBs) to be launched

The RBI (Reserve Bank of India) decided to launch Inflation Indexed Bonds (IIBs). The first tranche of the IIBs 2013-2014 for 1000 to 2000 crore rupees will be issued on 4 June 2013. The maturity period of these bonds will be 10 years. The total issue size will be 12000 to 15000 crore rupees in 2013 to 14. The RBI will do on monthly basis to attract household savings of up to 15000 crore rupees so as to discourage investments in gold.

After the first tranche, bonds will be issued on the last Tuesday of every month. While the first series of the bonds will be open for all class of investors, the second series issue - beginning October - will be reserved exclusively for retail investors.

WPI Inflation eased to 4.89 Percent

As per official data released on 14 May 2013, WPI Inflation eased to 4.89 percent in April 2013. Declining price of food items, including fruits and vegetables caused a three and a half year low. Inflation based on the Wholesale Price Index (WPI) stood at 5.96 percent in March 2013. In April, 2012, it was 7.50 percent. This is the lowest level of inflation since November, 2009 when it was 4.78 percent.

The major data are given as following:

• WPI inflation in the manufactured items category declined to 3.41 percent in April from 4.07 percent in March.

• Also, inflation in food articles category, which has a 14.34 percent share in the WPI basket, came down to 6.08 percent. Inflation in this category was at 8.73 percent in March 2013.

• The easing in food inflation was helped by a sharp drop in prices of vegetables. Inflation in vegetables stood at (-) 9.05 percent in April 2013, against (-)0.95 percent in March 2013.

• The inflation in fruits declined to 0.71 percent during April 2013 as compared to 4.71 percent in March 2013. However, the rate of price rise in onion was high at 91.69 percent for the month of April, as against inflation rate of 94.85 percent in the previous month.

• Inflation for February was revised upwards to 7.28 percent from 6.84 percent as per provisional estimates. The retail inflation, as measured by consumer price index, came down to single digit at 9.39 percent in April after many months, indicating that inflationary expectation is on declining trend.

• Inflation in wheat eased to 13.89 percent in April, as against 19.87 percent in the previous month. Potatoes too saw decline to (-)2.42 percent, from 20.06 percent in March. Inflation rate in rice and cereals eased to 17.09 percent and 15.63 percent, respectively, in April 2013.

• Pulses prices declined marginally to 10.28 percent during the month. While the inflation rate in egg, meat and fish category stood at 10.44 percent, for milk it was 4.04 percent. For the fuel and power category, it was lower at 8.84 percent in April as compared to 10.18 percent in March 2013.

CCEA approved the Same Scale of Allocation to APL Families

The Cabinet Committee on Economic Affairs (CCEA) on 16 May 2013 approved the continuation of the same scale of allocation to APL families during 2013-14 (at the rate of 15-35 kg monthly per family) under the Targeted Public Distribution System (TPDS). As on 1 April, 2013, the total stocks of rice and wheat in the Central Pool is 596.75 lakh tonnes comprising 354.68 lakh tonnes of rice and 242.07 lakh tonnes of wheat. The procurement during the year is expected to be 401.3 lakh tonnes for rice and 441.21 lakh tonnes for wheat. Thus it is expected that there will be sufficient stock of foodgrains in the Central Pool.

The CCEA has accordingly approved additional allocation of 41.89 lakh tonnes of wheat and 19.84 lakh tonnes of rice at APL issue prices to States/Union Territories (UTs) for ensuring a minimum allocation of 15 kg per APL family per month in 22 States/UTs and 35 kg per family per month in 13 States/UTs. They are Manipur, Assam, Meghalaya, Tripura, Nagaland, Arunachal Pradesh, Mizoram, Sikkim, Uttarakhand, Jammu and Kashmir, Himachal Pradesh, Lakshdweep and Andaman & Nicobar Islands. The Government of India has been making allocation of foodgrains to the accepted number of APL families at the rate of 15 kg per family per month in 22 States/ UTs and at the rate of 35 kg per family per month in 13 States/UTs under TPDS since June 2011.

RBI directed Banks to follow Clean Note Policy

The Reserve Bank of India (RBI) directed banks to follow the Clean Note Policy strictly and issue clean currency notes to public. RBI issued a notification that also asked the banks to do away the process of stapling the currency notes and to secure the note packets with paper bands. In its notification to the banks, the RBI also directed to sort notes into re-issuable and non-issuable notes and to withdraw soiled notes from circulation in the market. Banks have also been asked to stop writing of any kind on watermark window of bank notes as it disfigures the watermark impression and recognition becomes difficult. As per RBI, on an average 20 percent of notes is disposed off after getting soiled every year and in the fiscal year 2012-13 that ended on 31 March 2013 the number of such soiled currency bills stood at over 13 billion units.

IMF approved 1.3 bn Dollars loan for Cyprus

The International Monetary Fund on 15 May 2013 approved a three-year, 1.3 billion dollars loan for supporting Cyprus’ attempts to stabilize its financial sector and to bring the Government’s deficit under control and restore economic growth. The IMF loan to Cyprus is basically a part of a rescue package of 10 billion euros (12.9 billion dollars) counterfeit in March 2013 with the eurozone’s bailout fund. The loan was approved by IMF’s executive board which also includes an immediate disbursement of 110.7 million dollars.

Counting the IMF disbursement, Cyprus has received about 2.7 billion dollars in the third week of May 2013 from its international lenders. The Luxembourg-based European Stability Mechanism, which is a eurozone bailout fund, on 13 May 2013, announced that it had approved its first bailout tranche for Cyprus and transferred an initial 2 billion euros (2.6 billion dollars). The rest of the tranche — up to 1 billion euros — will be transferred by 30 June 2013.

The loans approved by the European Stability Mechanism help to maintain financial stability in the euro area and buy time for Cyprus. It is important here to note that in the eurozone’s long-running fiscal crisis, Cyprus followed Greece, Ireland and Portugal to become the fourth eurozone country since 2010 to agree to a full bailout.

Exports in India grew up by 1.6 percent in April 2013

Exports in the month of April 2013 recorded a growth of 1.6 percent and stood at 24.16 billion US Dollar as against 23.7 billion US dollar in April 2012.
The surge in gold imports pushed the trade deficits to 17.7 billion US dollar.

This is the fourth consecutive month that exports have witnessed growth. Imports of gold and silver in April 2013 doubled by 138 percent to 7.5 billion US dollar from 3.1 billion US dollar in April 2012. The merchandize imports rose by 10.9 percent to 41.95 billion US dollar bringing up the trade deficit by more than 72 percent from March. Widening of trade deficit attributed to the high gold imports. The targeted exports for the current fiscal 2013-14 set by the Union Government is 325 billion US dollar.

CCEA approved Exchange Trade Fund for PSU stocks

The Cabinet Committee on Economic Affairs (CCEA) cleared the government proposal to set up an exchange traded fund backed by a basket of PSU stocks, commonly referred as CPSEETF. The basic idea behind setting up of fund is that among other benefits, PSU divestments could be carried out in a much less disturbing manner for the market and can also incentivize retail investors. An empowered group of ministers would take this forward. The government plans to float such a fund so that, The CPSEETF will comprise a basket of shares of different PSUs which would track an index, but will trade like a stock on the exchange. ICICI Securities is the adviser to the ETF and Goldman Sachs is learnt to be the fund manager. The release on CPSEETF noted that each stock would have a fixed weightage in the basket and the ETF will give discount to investors. It is important here to note that the Selling a mutual fund at a discount to its NAV is a new concept in the Indian market, and would require some rule change by the market regulator SEBI.

Stronger Powers proposed to SEBI for tackling Ponzi Schemes

The Union Government in Month of May 2013 has proposed Stronger Powers to (Securities and Exchange Board of India) SEBI enabling it to carry out search and seizure operations and for attachment of assets. With this a Special power has also been proposed to SEBI with which it can seek information on telephone call data records, from any persons or entities in respect to any securities transaction being examined by it.
It is worth mentioning here that Proposals to make required amendments in the SEBI Act and other relevant regulations have been finalised after detailed consultations with the market regulator and are being presented before the Union Cabinet for its approval.

A Cabinet note in this regard has also been circulated by the Department of Economic Affairs to other departments in the Finance Ministry, as also to the Corporate Affairs, Home, Law and Telecom ministries, Reserve Bank of India, Planning Commission and Prime Minister’s Office for their comments and feedback on the proposals. The Government is planning to introduce the Securities Laws (Amendment) Bill, 2013 in Parliament to carry out the proposed changes for grant of stronger powers to SEBI. The Government has come up with the decision of accepting most of the proposals made by SEBI in this regard and the amendments would be carried out after the Cabinet approves them and the required amendment Bill is passed by Parliament.

What is Ponzi Schemes?

A Ponzi scheme is basically a fraudulent investment operation that pays returns to its investors from their own money or the money paid by following investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme generally tempts new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.