General Awareness : Economy - January, 2014

(General Awareness For Bank's Exams) Economy

January -2014

FDI in high-speed trains, other projects  

  • The government is likely to allow Foreign Direct Investment in high-speed trains and other projects including development of rail lines between project sites and existing network.

  • Besides, proposing 100 per cent FDI through automatic route in the cash-starved railway sector, the Department of Industrial Policy and Promotion (DIPP) has also proposed to de-licence and de-reserve few areas of the sector.

  • However, FDI will not be allowed in train operations and safety. At present, there is a complete ban on any kind of foreign direct investment (FDI) in the railways sector except mass rapid transport systems.

  • According to the proposal, foreign investment would also be allowed in suburban corridor, high speed train systems and dedicated freight line projects implemented in PPP mode.

  • It has also suggested widening the definition of ‘infrastructure’ by including railway line and railway sidings.

  • As per the proposal, foreign companies would be allowed to pick up 100 per cent stake in the special purpose vehicle (SPV) that will construct and maintain rail lines connecting ports, mines and industrial hubs with the existing rail network.

  • First-to-last mile connectivity would mean smooth movement of raw materials from mines to ports.

  • The move will help in attracting more and more FDI besides development of infrastructure for industrial purposes.

  • Indian Railways has been facing a cash problem. Industrial development and exports have been suffering on account of poor infrastructure which hampers output and raises the cost of production.

  • Welcoming the development, experts said the government should come out with clear rules for Public-Private-Partnership (PPP) projects.

Sebi’s focus areas for 2014 

  • Looking to safeguard the interest of small investors and overall market place, Sebi has identified a greater oversight mechanism on insider trading and a stronger risk management framework as among key focus areas for 2014.

  • Sebi is currently in the process of overhauling its nearly two decade old insider trading norms, pursuant to which those indulging in unlawful insider trading activities would be dealt with severely.

  • Many new categories of persons, including public servants, regulatory officials, judiciary and government officials dealing with unpublished price-sensitive information are being brought under the purview of insider trading.

  • At the same time, new norms would also seek to clearly differentiate between 'innocent mistakes' and genuine transactions of company executives from the unlawful and serious trading offences.

  • Often, comparisons have been made between regulatory action against insider trading in India and the US, where some high-profile cases including that of former banker Rajat Gupta has come to light in recent months.

India's average economic growth 7.7 % 

  • A report card titled '10 Years of Progress and Growth' highlighting achievements of the government led by Prime Minister Manmohan Singh said that average GDP growth rate during the period of UPA government (2004-05 to 2013-14) has been 7.7 per cent despite two global slowdown in this period.

  • India's average economic growth rose to 7.7 per cent in the 10-year regime of the UPA government as compared to 6.2 per cent recorded in the previous decade, report says.

  • Agriculture growth rate has been rising consistently and the sector expanded by 2.5 per cent and 3.7 per cent during the 10th and 11th Five Year Plans, respectively, and expected to touch 4 per cent in the ongoing 12th Plan period.

  • It further said the country's GDP at the current price has increased almost three times to Rs 100.28 lakh crore during the last nine years from Rs 32.42 lakh crore in 2004-05.

  • Similarly, per capita income has risen almost three-fold during the period. The per capita income has gone up to Rs 68,747 in 2012 from Rs 24,143 in 2004, the report card said.

  • Referring to large projects, it said the UPA government has expedited and cleared as many 293 projects involving investment of Rs 5.7 lakh crore in 2013.

  • It said that in the last two years, 80,000 micro enterprises have been supported by Prime Minister's Employment Generation Programme, creating job opportunities for 9.23 lakh people.

Vodafone to buy Tata Tele Services  

  • Vodafone is in early talks with the Tata Group to buy its controlling stake in Tata Tele Services to create India's largest telco by subscribers.

  • The right of first refusal (RoFR) to the Tatas' 59.45% stake in Tata Tele Services rests with its Japanese partner NTT Do-CoMo, which owns a little over onefourth of the telecom company.

  • But if the Japanese company refuses to buy out the Tatas, the Indian partner has the right to exercise its 'drag along' rights and force NTT DoCoMo to sell its shares to the buyer of its choice, said two persons familiar with the development.

  • If the transaction happens, the Vodafone-Tata Tele Services combine, as per November 2013 figures, will become the country's No. 1 player in terms of subscribers with 248 million customers, overtaking Airtel's 196 million users.

Norms relaxed for participation of NBFCs in Insurance JVs

Reserve Bank of India (RBI) on 28 November 2013 relaxed norms for participation of Non-Banking Finance Companies (NBFCs) in the insurance joint ventures by allowing them to hold more than 50 percent in such companies. The notification of Reserve Bank of India has stated that - it has been decided that in cases where IRDA issues calls for capital infusion into the Insurance joint venture company, the RBI may, on a case to case basis, consider need based relaxation of the 50 percent group limit. The relaxation will be subject to compliance by the NBFC with all regulatory conditions. In the operation of Insurance Company, the IRDA often requires an insurance company to expand its capital taking into account the stipulations of the Insurance Act and the solvency requirements of the insurance company. The restriction of a group limit of the NBFC to 50 percent of the equity of the insurance joint venture company prescribed in the above mentioned circular may act as a constraint for the insurance company in meeting the requirement of IRDA.

RMS for Trade Facilitation in Export Sector Introduced

Union Finance Minister P.Chidambaram was on 13 November 2013 inaugurated the IT based Risk Management System (RMS) for the Customs clearance of export goods at New Delhi. Government has introduced RMS to enhance trade facilitation in export sector and to check smuggling of drugs, weapons and other illegal substances harmful to the country. RMS will also enable the Excise and Customs Department to enhance the level of facilitation and speed up the process of cargo clearance. The single window system of RMS will contribute to reduce in dwell time, by achieving the desired objective of reducing the transaction cost in order to make the business internationally competitive. The launch of RMS in exports covers 11 Customs stations at Bangalore, Chennai, Delhi, Hyderabad, Mumbai, Pune and Tutocorin. It would be extended to all EDI Customs stations by year end. Benefits are expected to accrue to the trade in terms of faster clearances and reduced transaction costs thereby enhancing the global competitiveness of our export goods.

Medium Manufacturing Enterprises to be included under Priority Sector

The Reserve Bank of India (RBI) on 26 November 2013 allowed banks to treat loans given to medium manufacturing enterprises after 13 November 2013 as priority sector advance. RBI stated that the step has been taken to provide enhanced liquidity support to the medium and small enterprises. The RBI also allowed incremental bank loans to medium services enterprises extended after 13 November 2013 to up to 100 million rupees and raised the loan limit given to micro and small service enterprises to 100 million rupees from 50 million rupees that will be treated as priority sector advance. This facility will remain open till 31 March 2014. Under priority sector advance, most banks have to lend 40 percent of their loans to agriculture, micro and small enterprises, poor people for housing, students for education and other low income groups and weaker sectors.

NIC got approval of 75 % Innovation Fund Corpus

The National Innovation Council (NInC) on 20 November 2013 got approval of 75 percent of the 500 crore rupees initial corpus of the upcoming India Innovation Fund (IIIF), which is an Indian model of innovation. IIIF will have contributions from Ministry of Finance, public sector banks (PSBs) and multilateral agencies and is being mobilized by NInC. The main objective of IIIF is to finance Enterprises focusing on the bottom of the pyramid that is, firms delivering goods and services to the poorest of the country. Multilateral agency, PSBs and financial institutions already gave commitment of 375 crore rupees and additional commitments to council, which mentioned in NInC annual “Report of the People 2013”. The launch date not yet decided though it is in its final stage of launching the fund. Minimum 50 percent of advances from the fund would be to micro, small and medium enterprises (MSMEs) in the first close. The fund will not invest more than 15 percent of the corpus in any single company to ensure spread of investment. The fund intends to partner with public R&D programmes and laboratories to support the commercialization and deployment of socially relevant technologies and solutions.

The fund would be registered with Securities and Exchange of India (SEBI). A pipeline of the potential investment prospects has been identified. A specialised core teamis also expected to be in place before the first closure. It is expected that the fund would be operational by the beginning of 2014. The fund may increase eventual size of 5000 crore rupees in the long term.

About National Innovation Council (NInC)

The National Innovation Council (NInC) was set up by the Prime Minister under chairmanship of Sam Pitroda, an adviser to PM on public information infrastructure and innovations (PIII). NInC will provide mutually reinforcing policies, recommendations and methodologies to implement and boost innovation performance in the country. The task of the National Innovation Council include formulating Roadmap for innovation for 2010-2020 and creating framework for evolving an Indian model of innovation, with focus on inclusive growth, encouraging central and state governments , universities and R&D institutions to innovate and to encourage the multi displinary and globally competitive approaches for innovations and others. The Council will also promote the setting up of State and Sector Innovation Councils to help implement strategies for innovation in Stated and Specified sectors.

Provision for Higher Sugar Export announced

The Union Government of India on 15 November 2013 announced the provision of higher sugar export with domestic production becoming surplus.

The condition of export of sugar has been relaxed by doubling the limit of the overseas shipment that sellers can register. The export of sugar has been doubled to 50000 tonnes from 25000 tonnes per application for registration was announced by the Directorate General of Foreign Trade. The sugar production of India is projected at 25 million tonnes in 2013-14, which is two million tonnes more than the domestic demand.

Third-party payment for Export and Import Transactions allowed

The Reserve Bank of India (RBI) on 8 November 2013 has allowed third party payment for the export and import transactions. The procedure relating to payments for exports or imports was liberalized taking into account the evolving international trade procedure. Banks are allowed to receive the payments for export of goods/software from the third party. The order of RBI also permits the banks to make payments to the third party for imports of goods. The third party refers to an entity other than the buyer or the seller. The procedure was liberalised taking into account the evolving international trade practices. However , banks would have to follow certain conditions in case of export transaction:

  • Firm irrevocable order backed by a tripartite agreement should be in place

  • Third party payment should come from a Financial Action Task Force (FATF) compliant country and through the banking channel only

  • The exporter should declare the third party remittance in the Export Declaration Form;

  • It would be responsibility of the Exporter to realize and repatriate the export proceeds from such third party named in the EDF

  • Reporting of outstandings, if any, in the XOS would continue to be shown against the name of the exporter. However, instead of the name of the overseas buyer from where the proceeds have to be realised, the name of the declared third party should appear in the XOS

  • In case of shipments being made to a country in Group II of Restricted Cover Countries, (e.g. Sudan, Somalia, etc.), payments for the same may be received from an Open Cover Country

The banks have been allowed to make payments for import transactions to a third party for import of goods , subject to conditions as under:

  • Firm irrevocable purchase order / tripartite agreement should be in place

  • Third party payment should be made to a Financial Action Task Force (FATF) compliant country and through the banking channel only

  • The Invoice should contain a narration that the related payment has to be made to the (named) third party

  • Bill of Entry should mention the name of the shipper as also the narration that the related payment has to be made to the (named) third party

  • Importer should comply with the related extant instructions relating to imports including those on advance payment being made for import of goods

  • The amount of an import transaction eligible for third party payment should not exceed USD 100,000. This limit will be revised as and when considered expedient

FCNR deposit rates of Indian Bank 

  • Indian Bank has revised interest rates on FCNR (B) term deposits with effect from January 1.

  • For FCNR (B) deposits, in dollar, the revised interest rate has been fixed at 2.58 per cent for deposits of one year and above but less than two years (2.58 per cent existing); 2.50 per cent for two years and above but less than 3 years (2.39 per cent); 3.87 per cent for three years and above but less than 4 years (3.66 per cent); 4.33 per cent for four years and above but less than 5 years (4.06 per cent) and 4.80 per cent for deposits of five years only (4.51 per cent)

Largest corporate learning centre 

  • Tata Consultancy Services (TCS), country's largest software services firm, will set up the world's largest corporate learning and development centre in Thiruvananthapuram with a total capacity to train 50,000 professionals every year.

  • Prime Minister Manmohan Singh laid the foundation stone for the facility.

  • The learning facility will be built over area of 6.1 million square feet and will have the capacity to train 15,000 professionals at one time and 50,000 professionals annually, TCS said in a statement.

  • Located on a 97-acre property in the Technopark area of the city, the campus will also have residential accommodation for professionals and faculty at the centre.

  • The TCS Learning Campus will be the new benchmark for corporate learning worldwide and this iconic facility will produce world class professionals to meet the future needs of the IT industry.

  • The project will provide direct employment to over 2,000 skilled and unskilled local people for a period of 4 years.

FDI in e-commerce  

  • Expediting its efforts to further relax foreign direct investment (FDI) policy regime, the government has circulated discussion paper on FDI in e-commerce among stakeholders, aiming to usher in the reform before the Lok Sabha elections.

  • While debating as to whether FDI in e-commerce should be allowed at all, the discussion paper has sought views on the FDI cap in the sector and listed out the merits and demerits of the move.

  • Presenting both 51 per cent or 100 per cent cap scenario on the FDI in the sector, the paper has raised sticky questions including whether the "existing retail stores get displaced due to e-commerce".

  • At present, 100 per cent FDI is allowed in business-to-business e-commerce, while business-to-consumer is prohibited.

  • The government allowed 51 per cent FDI in the multi-brand retail trading (MBRT) in September 2012, with riders including mandatory investment of a minimum 50 per cent towards back-end infrastructure and compulsory 30 per cent sourcing from SMEs.

  • Another important issue raised in the paper is geographical restriction for e-commerce, as applicable in the FDI policy for MBRT. According to the policy for MBRT, states have been empowered to take decision on notification of towns and cities with population of more than 10 lakh as per 2011 census.

  • At present, 12 states including Andhra Pradesh, Assam, Delhi, Haryana, J&K, Maharashtra, Manipur, Rajasthan, and Uttarakhand allow FDI in multi-brand retail stores.

Usage of Bitcoin

  • The Reserve Bank of India (RBI) has cautioned users, holders and traders of virtual currencies (VC) like Bitcoin, Litecoin, BBQcoin and Dogecoin and is examining the legal and regulatory framework of VCs. In a press release, RBI stated that Bitcoin and other VCs are exposed to potential financial, operational, legal, customer protection and securityrelated risks.

  • According to RBI , the creation, trading or usage of VC including Bitcoin, as a medium for payment, are not authorised by any central bank or monetary authority. No regulatory approvals, registration or authorisation is stated to have been obtained by the entities concerned for carrying on such activities.

  • Bitcoin was created to solve the mathematical solution to double-counting but it grew into an alternate currency system altogether; its value has skyrocketed as more and more people, investors and enthusiasts jumped onto the bandwagon and started transacting in the virtual currency.

RBI panel  

  • A committee on comprehensive financial services for small businesses and low-income households, set up by the Reserve Bank of India (RBI), has suggested that each low-income household and small business should be provided with convenient access to formally regulated lenders who have the ability to assess and meet their credit needs and offer a full-range of suitable credit products at an affordable price.

  • The committee, headed by Nachiket Mor, Central Board Member of the RBI, submitted its report and has set January 1, 2016, as the deadline for achieving this.

  • By that date, each district and every significant sector (and sub-sector) of the economy would have a credit to GDP ratio of at least 10 per cent. This ratio would increase every year by 10 per cent.

  • The committee was hopeful that by January 1, 2016, each district would have a total deposits and investments to GDP ratio of at least 15 per cent.

  • On priority sector, the committee recommended adjusted priority sector lending target of 50 per cent against the current requirement of 40 per cent with sectoral and regional weightage based on the level of difficulty in lending. It also recommended risks and liquidity transfers through markets. ``In view of the fact that banks may choose to focus their priority sector strategies on different customer segments and asset classes,’’ the committee recommended the regulator to provide specific guidance on differential provisioning norms at the level of each asset class.

ONGC Videsh-Oil India’s Videocon stake 

  • ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) have completed the acquisition of Videocon Group's 10 per cent stake in a giant Mozambique gas field for USD 2.475 billion.

  • OVL, the overseas arm of state-run explorer Oil & Natural Gas Corp, and OIL agreed in June last year to jointly buy Videocon's 10 per cent interest in the Rovuma Area 1 for USD 2.475 billion.

  • Additionally, OVL bought US energy major Anadarko Petroleum's 10 per cent stake in the same block for USD 2.64 billion.

  • Payments to Videocon to close the deal were made yesterday, the companies said in separate, almost identical statements. OVL will pay Anadarko before February-end.

  • OVL raised about USD 1.5 billion in one-year bridge loans from foreign lenders, while OIL borrowed USD 900 million to fund their respective share of payments to Videocon.

  • The 10 per cent stake will be split in a 60:40 ratio between OVL and OIL. The two firms had signed definitive agreements with Videocon Mauritius Energy on June 25 to acquire the stake in the gas field.

  • The partners in Area 1 include Anadarko, the operator of the project, ENH (the national oil company of Mozambique), Mitsui, BPRL (a unit of Bharat Petroleum Corp Ltd) and Thailand's PTT Exploration and Production.

Fed tapering  

  • World stock markets were muted amid concern an improved U.S. economy might prompt the Federal Reserve to reduce its stimulus faster than previously expected.

  • Crude rose as expectations of greater heating oil demand in chilly North America offset signs of weak gasoline demand.

  • A survey that showed U.S. employment increased in December prompted concern the Fed might accelerate the process of winding down bond buying that has supported stock prices. The Fed has been buying $85 billion of bonds a month in a strategy dubbed quantitative easing, or QE, but said in December it will trim that by $10 billion to $75 billion beginning this month.

  • In Europe, France’s CAC 40 gained 0.1 to 4,264.02 while Germany’s DAX dropped 0.1 per cent to 9,491.49. Britain’s FTSE 100 was steady at 6,720.99.

  • Tokyo’s Nikkei 225 shed 1.5 per cent to 15,880.3 and China’s benchmark Shanghai Composite Index fell 0.8 per cent to 2,027.62. Hong Kong’s Hang Seng dropped 0.9 per cent to 22,787.33.

  • Elsewhere in Asia, Taiwan’s Taiex was down 0.5 per cent and Seoul’s Kospi fell 0.7 per cent. Sydney’s S&P/ASX 200 added 0.2 per cent to 5,324.40.

  • In the United States, payroll processor ADP said companies added 238,000 jobs in the U.S. in December, up slightly from 229,000 in the previous month. November’s figures were also revised higher.

100% FDI limit in pharma 

  • The government decided to retain 100% foreign direct investments (FDI) for existing pharmaceutical companies setting aside the speculation that the limit, if not curbed could eventually encourage a hike in cost of medicines.

  • FDI in the pharmaceutical sector jumped by 86.5% to $1.08 billion during April-October period of the current fiscal amid concerns over continuous mergers and acquisitions of domestic drug makers by multinationals.

  • In the past one year, a number of multinational companies have tried to acquire Indian pharmaceutical companies leading to fears that these companies will stop producing essential and generic drugs in the country that will result in increase in the cost of medicines.

  • India had allowed 100% FDI in the pharma sector through the automatic approval route in 2002.

  • In its proposal, the Department of Industrial Policy and Promotion (DIPP) had said that the acquisition of Indian pharma companies will severely impact availability and affordability of generic medicines in the country and recommended a reduction in the FDI cap to 49% from 100% in rare or critical pharma verticals. In September 2013, the government cleared the US based Mylan’s FDI proposal.

Global food prices drop 

  • Global food prices fell 1.6 per cent in 2013 as large supplies pushed down international prices of commodities such as oils, sugar and cereals, according to United Nations food agency FAO.

  • "Over the full 2013 year, the Index averaged 209.9 points, down 1.6 per cent, from 2012, but still the third highest annual value on record." as per the Food and Agriculture Organisation (FAO) price index.

  • The FAO price index measures monthly price changes for a basket of cereals, oilseeds, dairy products, meat and sugar.

India slips in business optimism 

  • India has slipped to eighth rank from the top spot in terms of business optimism, with 69% of the corporates having a positive outlook on the economy and growth of operations in 2014, says a survey.

  • India has ranked eighth in the list which was topped by United Arab Emirates and Philippines, where 90% of businesses said they are optimistic about growth and the economy, followed by Peru at 84%, according to Grant Thornton's International Business Report (IBR).

  • IBR is a survey of both listed and privately held businesses. The data was drawn from interviews with 3,500 senior executives across industry sectors and was conducted between November and December 2013.

  • With strong sentiment for change in the recent state elections and decisive actions by the RBI/government in last few months, it's easy to see how medium to large businesses in India are more optimistic about the outlook for the economy in the coming months, Chandiok added.

  • Moreover, the appointment of Raghuram Rajan as the governor of Reserve Bank of India seems to have steadied the economy and provided the much-needed confidence to Indian businesses, the report said.

  • According to the report, 90% of Indian businesses believe their revenues would rise in 2014 while 76% are most optimistic for increasing profitability this year. Around 35% of businesses are also hoping to witness a jump in exports.

  • Research and Development (R&D) initiatives are also likely to get a boost this year with 46% businesses betting big on R&D. About 65% businesses foresee a rise in employment in 2014.

RBI buying dollars in spot market & selling it in forward market to stabilise rupee 

  • The Reserve Bank of India, under Governor Raghuram Rajan, seems to have changed its strategy when it comes to defending the fragile rupee and managing liquidity.

  • The central bank, which earlier used to sell dollars in the local markets, is now increasingly buying the US currency in the spot market and selling it in the forward market. The revised strategy seems to be having a bearing on the non-deliverable forwards, or NDF, market.

  • The move, experts say, is aimed at not only stabilising the local currency but also managing liquidity, as there was a surge in inflows after banks were allowed to swap Foreign Currency (Non-Resident) Accounts (Banks), or FCNR (B), proceeds for a premium.

Sebi tightens norms  

  • Tightening norms for issue of participatory notes (P-Notes) by overseas investors, Sebi has barred "unregulated" foreign funds from dealing in offshore derivative instruments even if their investment managers are appropriately regulated by their concerned regulators.

  • The guidelines, which are part of the newly notified Foreign Portfolio Investor (FPI) Regulations, have come into force with immediate effect. They provide for stricter oversight of P-Notes, the preferred route for overseas high net worth individuals (HNIs) and hedge funds for investing in the Indian market.

  • Earlier, according to the draft regulations by the Securities and Exchange Board of India, it had been proposed that only 'Category-III,' or high-risk foreign investors, would be barred from issuing P-Notes.

  • However, the gazette notification that brought the FPI guidelines into force also prohibits certain entities under 'Category-II,' or medium-risk investors, from issuing P-Notes.

  • P-Notes, or offshore derivative instruments, are mostly used by overseas HNIs, hedge funds and other foreign institutions to invest in Indian markets through registered foreign institutional investors (FIIs), while saving on time and costs associated with direct registrations.

  • The new FPI regime has classified foreign investors into three groups based on their risk profile and would eventually replace existing categories such as FIIs, their sub-accounts and qualified foreign investors.

  • Category-I FPIs, entities with the lowest risk, would include foreign governments and government-related foreign investors.

  • Category-II FPIs would include appropriately regulated broad-based funds, university funds, university-related endowments and pension funds, among others.

  • Category-III FPIs would include all others not eligible under the first two categories.

All-time high food grain production expected this year 

  • Agriculture Minister Sharad Pawar said that the country's foodgrain production this year is likely to surpass the previous record of 259.29 million tonnes achieved in the 2011-12 crop year.

  • The data regarding sowing of rabi (winter) crops like wheat is very encouraging according to reports.

  • The country had a record foodgrain production of 259.29 million tonnes in 2011-12 crop year (July-June). However, the output fell marginally to 255.36 million tonnes in the next year due to drought in some parts.

  • This year, good monsoon has improved sowing of both kharif (summer) and rabi (winter) crops, thereby boosting prospects of record foodgrains production.

E-auctioning of iron ore 

  • The Goa government has set in motion the process to e-auction around 15 million metric tonne of iron ore currently stacked at jetties, leases, stock-yards and beneficiation plants across the state’s mining belt.

  • Director of Mines and Geology Prasanna Acharya has issued the notification for e-auctioning, which is scheduled to take place next month.

  • The Supreme Court while hearing a petition in the Goa illegal mining case had allowed online auctioning of the ore, and money collected from the process would be deposited in a separate account till the case is disposed of.

  • The Department issued the notice inviting applications from prospective bidders to participate in e-auctioning of extracted ore in Goa.

  • As per the estimates by state government, approximately 15 million metric tonne of ore is lying unused at jetties, leases, stockyards and beneficiation plants.

  • As per the notification, the companies participating in the auctioning process get themselves registered with the Indian Bureau of Mines (IBM).

India's growth will be over 6% in 2014-15: World Bank 

  • The World Bank has projected India's economy will grow over 6 per cent in 2014-15 and 7.1 per cent by 2016-17 as global demand recovers and domestic investment increases.

  • In China, growth is estimated to stay flat in 2014 at 7.7 per cent, slowing to 7.5 per cent for the next two years, reflecting deleveraging and less reliance on policy-induced investment.

  • Global GDP growth may firm up to 3.2 per cent this year from 2.4 per cent in 2013, stabilising at 3.4 per cent and 3.5 per cent in 2015 and 2016, respectively, the World Bank said in its Global Economic Prospects (GEP) report released

Incentives for raw sugar production 

  • India will consider providing incentives for production of raw sugar up to 4 million tonnes for exports in the next cabinet meeting, Food Minister K V Thomas said, as part of efforts by the world's second-biggest producer to stop adding to massive mounds of the refined grade which are piling up because of low prices.

  • A group ministers under the chairmanship of Farm Minister Sharad Pawar revived the proposal to be placed before the cabinet, but haven't decided about the quantum of incentives yet.

  • Indian mills traditionally produce white sugar but a global glut has made exports difficult. A rise in sugar refining capacity in Asia and Africa has now given an opportunity to export raws. Exports of raws from India, the world's biggest consumer of sugar, will eat into the share of top suppliers Brazil and Thailand. Extra supplies could also put further pressure on benchmark prices in New York, which are hovering around a 3-1/2-year low in an oversupplied world market.

RBI reference rate 

  • The Reserve Bank of India fixed the reference rate of rupee against U.S. dollar at 61.3518 and the euro at 83.5223 as against 61.5325 and 83.8395.

  • In a press release issued by RBI, the exchange rates for the pound and yen against the rupee were quoted at 100.2120 and 58.78 per 100 yen, based on reference rates for the dollar and cross-currency quotes at noon.

  • The reference rate is based on the noon rates of select banks here and the SDR-Rupee rate would be based on this rate.

Banks to Charge customers on actual usage of SMS alerts

The Reserve Bank of India (RBI) on 26 November 2013 directed the banks to charge customers for the transaction SMS alerts on the basis of usage, instead of imposing a fixed fee. The RBI in its notification issued to all
banks has asked the banks to charge customers based on actual usage of SMS alerts, considering the technology available with banks to considering the technology available with banks and the telecom service

The notification has been done to ensure reasonableness and equity in the charges levied by banks for sending SMS alerts to customers. In its second quarter review of monetary policy 2013-14, the RBI had advised
banks to charge for SMS alerts on usage basis. Earlier, the Reserve Bank of India had set the guidelines for banks to send online alerts to the customers for all types of transactions, irrespective of the amount in March

Sale of 5 kg LPG cylinders extended to petrol pumps

The Government of India on 4 November 2013 decided to extend the sale of the non-subsidized 5 kg cooking gas (LPG) cylinders at petrol pumps across the country. The proposal to extend the scope of the scheme was approved by M. Veerappa Moily, the Union Minister of Petroleum and Natural Gas.Earlier, the scheme was in operation in Mumbai, Kolkata, Chennai and Bengaluru. The scheme was launched on 5 October 2013 by
Moily in Bangalore for sale in selected company owned and company operated petrol pumps in the four cities. The cylinders will be sold at market rates. The scheme will be delayed in poll bounding states like Delhi, Madhya Pradesh and Chhattisgarh. The scheme has allowed to sale the 5 kg LPG cylinders with just proof of Identity through Petrol Stations to students, IT professional, BPO employees and people with odd duty timings. As per the decision, the sale of the cylinders would be done with or without regulator for the first time. The cylinders will be charged 1000 rupees and the regulator will be available at 250 rupees. Whereas, the cost of refills of the LPG will be as per to the non-domestic rates applicable in the market. A 5 kg is sold at about 340 to 350 rupees.

Refinance window for the MSME extended to 5000 crore

The Reserve Bank of India on 18 November 2013 opened a 5000 crore rupees refinance window for MSME sector, for a period of one year to ease the liquidity. The view of easing the liquidity stress to the Micro and Small Enterprises sector was taken by the RBI to provide refinance to the small Industrial Development Bank of India. Basically the Micro and Small Enterprises sector is employment intensive and contributes significantly to exports. At present, the slowdown in the economy has resulted in the liquidity tightness in the MSEs in the manufacturing and services sector raising the need of liquidity support. The availability of the refinance facility will be till 13 November 2014.

Women SHGs to get Banks loans at 7 percent

The Reserve Bank of India (RBI) on 19 November 2013 directed Public Sector Banks (PSBs) to provide loans to women self-help groups (SHGs) at 7 per cent per annum to avail the benefit of interest rate subvention scheme under the Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) scheme.

Salient features of RBI Notification

  1. All women SHGs will be eligible for interest subvention to avail the credit upto 3 lakh Rupees at 7 per cent per annum.

  2. PSBs will be subvented to the extent of difference between the Weighted Average Interest charged and 7 per cent subject to the maximum limit of 5.5 per cent, for the FY-2014.

  3. This subvention will be available to all the PSBs on the condition that they make SHG credit available at 7 per cent in the 150 districts.

  4. The Regional Rural Banks (RRBs) will be subvented to the extent of difference between the lending rates and 7 per cent for the FY-2014 on the condition they make SHG credit available at 7 per cent.

  5. SHGs will be given an additional 3 per cent subvention on prompt repayment of loan.

Swarnajayanti Gram Swarozgar Yojana-Aajeevika (SGSY) is an initiative by the government to provide sustainable income to poor people living in rural areas of the country.

About Interest Rate subvention concept

Interest Rate subvention is a subsidy of interest given by Government to certain sectors like Textiles, Agriculture etc. For eg. Textile Company borrows from Bank at 10 percent and Government gives subvention of 2 percent. Hence net bank takes interest from textiles companies 8 percent. Other sectors have to pay 10 percent to the bank.

Foreign banks subsidiaries permitted to acquire domestic PSBs

The Reserve Bank of India (RBI) on 6 November 2013 permitted the Wholly Owned Subsidiaries (WOS) of the foreign banks to acquire the domestic private sector banks. RBI also permitted the banks to set up
branches anywhere in the country. As per the permission given by RBI, the foreign banks will have to seek permission of RBI to open branches in certain sensitive locations. The foreign bank subsidiaries have also
been allowed to list on the local stock exchanges. Although, they will not be allowed to hold more than 74 percent in the private banks they may acquire. The order of the RBI also stated that the foreign banks that
commenced banking business in India before August 2010 will be given an opportunity to convert into a wholly owned subsidiary.

Key features of the Framework

  • Banks with complex structures, also the banks which do not provide adequate disclosure in their home jurisdiction, as well as the banks which are not widely held and banks from jurisdictions having legislation giving a preferential claim to depositors of home country in a winding up proceedings, would be mandated entry into India only in the WOS mode.

  • Foreign banks in whose case the above conditions do not apply can opt for a branch or WOS form of presence.

  • A foreign bank opting for branch form of presence shall convert into a WOS as and when the above conditions become applicable to it or it becomes systemically important on account of its balance sheet size in India.

  • Foreign banks, which commenced banking business in India before August 2010 shall have the option to continue their banking business through the branch mode. However, they will be incentivised to convert into
    WOS because of the attractiveness of the near national treatment afforded to WOS.

  • To prevent domination by foreign banks, restrictions would be placed on further entry of new WOSs of foreign banks/ capital infusion, when the capital and reserves of the WOSs and foreign bank branches in India exceed 20 per cent of the capital and reserves of the banking system.

  • The initial minimum paid-up voting equity capital for a WOS shall be ‘ 5 billion for new entrants. Existing branches of foreign banks desiring to convert into WOS shall have a minimum net worth of 5 billion.

  • The parent of the WOS would be required to issue a letter of comfort to the RBI for meeting the liabilities of the WOS.

Corporate Governance

(i) Not less than two-third of the directors should be non executive directors;

(ii) A minimum of one-third of the directors should be independent of the management of the subsidiary in India, its parent or associates

(iii) Not less than fifty percent of the directors should be Indian nationals /NRIs/PIOs subject to the condition that not less than 1/3rd of the directors are Indian nationals resident in India

  • The branch expansion guidelines as applicable to domestic scheduled commercial banks would generally be applicable to WOSs of foreign banks except that they will require prior approval of RBI for opening branches at certain locations that are sensitive from the perspective of national security.

  • Priority Sector lending requirement would be 40 per cent for WOS like domestic scheduled commercial banks with adequate transition period for existing foreign bank branches converting into WOS.

  • On arm’s length basis, WOS would be permitted to use parental guarantee/ credit rating only for the purpose of providing custodial services and for their international operations. However, WOS should not provide counter guarantee to its parent for such support.

  • WOSs may, at their option, dilute their stake to 74 per cent or less in accordance with the existing FDI policy. In the event of dilution, they will have to list themselves.

Definition of Infrastructure lending Sub Category widened

Reserve Bank of India on 25 November 2013 widened the definition of infrastructure lending sub category in a bid to expedite Projects. In a notification issued by RBI, it has stated that new sub-sectors that have been added in the list will include hotels with project cost of more than 200 crore rupees bring built anywhere in India and of any star rating. The list will also include convention centres with project cost of more than 300 crore rupees. RBI also stated that the new sub-sectors will get classified as ‘infrastructure’ for the purpose of lending by banks and select All India Term-Lending and Refinancing Institutions. Various sub-sectors under the categories such as Transport, Energy,Water & Sanitation, Communication, Social and Commercial Infrastructure come under infrastructure lending. Hotel and convention centre come under ‘Social and Commercial
Infrastructure’ category for this kind of lending.

Bharatiya Mahila Bank launched

Prime Minister Dr. Manmohan Singh and UPA Chairperson, Sonia Gandhi Jointly inaugurated India’s first all-women bank, Bharatiya Mahila Bank in Mumbai on 19 November 2013,marking the birth anniversary of former Prime Minister Indira Gandhi. The main objectives of the bank will be to focus on the banking needs of women and to promote their economic empowerment. The bank will commence operations with an initial capital of one thousand crore rupees.

The Union Government on 12 November 2013 appointed Usha Ananthasubramanian as the first chairperson and managing director of public sector Bharatiya Mahila Bank (BMB).

About Bharatiya Mahila Bank

1. The Mahila bank aims to service women and women-run businesses, support women’s self-help groups and their livelihoods and promote further financial inclusion.

2. An only-for-women bank first time in India.

3. Bhartiya Mahila Bank will be a universal bank and will provide every banking service and facility that is provided by comparable Public and Private sector banks. It will establish branches all over the country and, in due course, some branches in abroad.

4. The Union Cabinet cleared the proposal for setting up of all women bank on August 2013.

5. The Reserve Bank of India gave its in-principal approval for the  Bharatiya Mahila Bank in June 2013 and the banking company was set up.

6. The Union government approved 1000 crore Rupees seed capital for the women focused public sector bank announced by Union finance minister P. Chidambaram in his 2013-14 budget speech.

Continuation of Agriculture Export Plan of APEDA approved

The Cabinet Committee on Economic Affairs (CCEA) on 25 November 2013 approved the continuation of the Agriculture Export Promotion Plan Scheme of the Agricultural and Processed Food Products Export Development Authority (APEDA) during 12th Plan Period (2012-13 to 2016-17). It was a proposal of the Ministry of Commerce and Industry for APEDA with four components namely infrastructure development, transport assistance, market development and quality development. The CCEA meeting was chaired by Prime Minister of India, Manmohan Singh. The outlay of the scheme will be 1100 crore rupees during the 12th Plan

Poll outcome could impact growth prospects 

  • Global ratings agency Moody’s said India’s economic recovery is likely to be slow in the second half of 2014, but the outcome of general elections could have an impact on the growth prospects.

  • Without specifically mentioning about India, Moody’s Investors Service also said that sovereign ratings in South and Southeast Asia will be largely stable in 2014.

  • This, the agency said, reflects its expectation that global growth prospects will improve while global risks will decline.

  • General elections are scheduled to be completed by May-end.

  • The World Bank has projected that India’s economy will grow at over 6 per cent in 2014-15 and 7.1 per cent by 2016-17 as global demands recovers and domestic investment increases.

  • India’s economic growth slipped to a decade’s low of 5 per cent in 2012-13.

  • Growth in the first half of 2013-14 is 4.6 per cent, but the government expects the growth for the entire fiscal ending March 2014 to be at 5 per cent. A further pick up is also expected in the coming months.

  • Moody’s further said the structure of India’s government debt — which is owed mostly domestically, in domestic currency, at relatively low real rates, and at relatively long tenors — has mitigated stress on the government’s fiscal position.

RBI to ease liquidity 

  • The Reserve Bank of India (RBI) has decided to ease the liquidity conditions by purchasing Rs 10,000 crore of government securities under Open Market Operations (OMOs) on January 22. This would be the first OMO auction since the last two months.

  • Lately, the liquidity conditions had tightened in absence of government spending. For current financial year, the government aims to contain fiscal deficit at 4.8% as strongly emphasized by the finance minister, P Chidambaram, recently. This may lead to cuts in planned expenditure as was the case last financial year when the government managed to keep fiscal deficit was at 4.9% of gross domestic product.

  • According to RBI, there has been a build-up of government’s cash balances which may not be utilized in order to meet the fiscal deficit target for this financial year too. This would, in turn, impact credit growth.

  • The government’s cash balance with RBI shot up to around Rs 51,000 crore in December owing to advance tax collections. The central bank has been conducting 7-days, 14-days and 28-days term repo auctions in order to address the liquidity crunch.

  • The central bank has projected credit growth of 15% and deposit growth of 14% for the current financial year. So far, banks have been able to clock 9.4% of growth in advances and 11.1% in deposits since the start of this financial year.

  • Liberalising the export-import payment norms, the Reserve Bank has extended the time limit to complete such transactions to nine months from six months earlier.

India Inc beats Street hollow 

  • Several heavyweights like L&T and HDFC are yet to come out with their third quarter report card, but the Street is already on fire as Tata Consultancy, Reliance Industries, Infosys and Bajaj Auto, which are some of the firms that announced their results in the week gone by, surprised the Street on the positive in the third quarter.

  • Brokerages are all gung-ho about the results, and have upgraded their target prices on these stocks.

  • Experts say RIL is likely to rally up to 3% after the oil and gas major reported profit after tax at Rs 5,510 crore.

  • The Street was expecting a drop in Reliance Industries' profit due to worries over falling gas production and refining & petchem margins.

  • Experts are seeing the stock crossing Rs 1,000 level in the medium term.

  • Talking of TCS, it beat analyst expectations with an astonishing 50.3 per cent jump in third-quarter profit, though sales at home played spoilsport once again.

  • The country's largest IT services exporter reported a profit after tax of Rs 5,333 crore for the third quarter.

  • Credit Suisse has raised its target for a 12-month period to 2,750 from earlier 2,650.

  • Among other brokerage firms that have raised their target price on the stock are CLSA, BofA-ML, Jefferies, Nomura, CItigroup and JPMOrgan. This upping of the TP was post Q3 results.

CBM gas production 

  • Reliance Industries Ltd (RIL) plans to start production of natural gas from coal seams, called coal-bed methane (CBM), in Madhya Pradesh from 2015-16.

  • In a presentation to analysts post Q3 earnings announcement, RIL said first gas from its Sohagpur CBM blocks in Madhya Pradesh is "targeted by FY16."

  • It plans to produce 3.5 million standard cubic meters per day of gas from the two Sohagpur blocks.

  • RIL holds 3 CBM blocks -- Sohagpur (East) and Sohagpur (West) in Madhya Pradesh and Sonhat in Chattisgarh. RIL has drilled over 40 crore holes on the 500 square kilometer

  • The process for acquiring land for well sites, market assessment & infrastructure for evacuation and transportation of gas has commenced.

  • The pipeline will have a capacity to transport 4.3 million standard cubic metres per day (mmscmd) of gas, including 0.875 mmscmd capacity that will be available for any third party for open access on non-discriminatory basis.

  • The pipeline will travel from Shahdol to JaysingNagar-Beohari- Gurh and culminate at Phulpur.

China grows 7.7 per cent in 2013 

  • China's economy grew 7.7 per cent in 2013, the lowest in 14 years, with tapering growth in the last quarter underlining the challenges faced by the world's second-largest economy as it grapples with rebalancing and reviving a slowing down economy.

  • This marks the slowest growth since 1999, when China grew 7.6 per cent. The previous decade saw record double-digit growth, with the country defying the global slowdown to grow 10.4 per cent in 2010 as it unveiled a massive $ 586 billion stimulus.

  • Growth slowed in the fourth quarter to 7.7 per cent, down from 7.8 per cent in the previous quarter. This brought annual growth to 7.7 per cent, down from last year's 7.8 per cent.

  • Ma Jiantang, head of the National Bureau of Statistics (NBS), attributed the slower growth to a “complex and severe situation” at home and abroad, as he announced last year's data.

  • Data showed the government had made modest progress in its goal of transforming the State-led investment model and boosting domestic consumption, services and innovation industries.

RBI standardises gold loan norms 

  • The Reserve Bank of India (RBI), on Monday, said that it had been decided to prescribe a loan-to-value (LTV) ratio of not exceeding 75 per cent for banks’ lending against gold jewellery, including bullet-repayment loans against pledge of gold jewellery.

  • “Therefore, henceforth loans sanctioned by banks should not exceed 75 per cent of the value of gold ornaments and jewellery,” the RBI said in a notification to all banks.

  • Further, it has been decided that gold jewellery accepted as security / collateral will have to be valued at the average of the closing price of 22 carat gold for the preceding 30 days as quoted by the India Bullion and Jewellers Association Ltd. [Formerly known as the Bombay Bullion Association Ltd. (BBA)].

  • The central bank reiterated that banks should continue to observe necessary and usual safeguards, and also have a suitable policy for lending against gold jewellery with the approval of their boards of directors.

MCX-SX starts Interest Rate Futures 

  • The MCX Stock Exchange (MCX-SX), on Monday, started live trading in cash-settled Interest Rate Futures (IRF) in its Currency Derivatives Segment, which witnessed a turnover of Rs.928.39 crore.

  • “Among the first to trade on the product were IDBI Bank and ICICI Securities Primary Dealership Ltd from the institutional side and the East India Securities Ltd from the intermediary side.

  • The product witnessed turnover of Rs.928.39 crore on the exchange, with total traded volume at 45,642 lots. At the end of trading day, the Open Interest (OI) position stood at 10,690 lots,” MCX-SX said in a release.

Banks in India seek refuge 

  • Mortgage lender Housing Development Finance Corp Ltd loved by global investors for its steady profit growth, faces an intensifying battle for business and market share as banks aggressively push home loans.

  • With India's economic flu hitting corporate lending, banks have cranked up efforts to tap into the country's housing loan demand, which has proven to be brick-hard by comparison.

  • Demand for homes, and loans, has been stoked by a persisting housing shortage as long-term demographic changes - urbanisation, rising incomes, more nuclear families - transform how and where people live in Asia's third-biggest economy.

  • With their eyes on the prize, banks such as state-run Bank of India (BOI) (BOI.NS) and ICICI Bank (ICBK.NS), the biggest private sector lender, are swarming the market with discounts and special offers, willing to even live with narrower margins.

Airline fare war

  • Consumers flying between now and April 15 — typically a lean period for airlines — can save on bookings made till midnight on January 23. Hours after SpiceJet announced a three-day super sale of air tickets, offering a 50% discount to spot fares, Air India, IndiGo, GoAir followed suit, with Jet Airways expected to do the same.

  • Amber Dubey, partner and head for aerospace and defence at KPMG, said the offer would help stimulate demand in a lean quarter.

  • Among the offers, SpiceJet has offered 50% off on limited seats on all direct flights when booked at least 30 days prior to travel. Meanwhile, GoAir has also slashed prices by 40-50% with the discount depending on whether bookings are made 30 days or 60 days prior to travel.

Pause in interest rates 

  • WPI headline inflation for December was down to 6.2% from 7.5% in November, and core inflation was marginally up at 2.8% from 2.7% in November. CPI inflation for December printed 9.9%, down from 11.2%, and core-CPI (excluding food and fuel) was at 7.9%, marginally down from 8%.

  • A machine responding to these inflation data, based on the rules laid down in the RBI Governor’s December Policy Reaction Function (PRF), would have raised rates:

  • if the expected softening of food inflation does not materialise and translate into a significant reduction in headline inflation,

  • if inflation excluding food and fuel does not fall (presumably both for WPI and CPI), the Reserve Bank will act, including on off-policy dates if warranted.

  • But the actual decision might be more complicated.

  • In addition, estimates of conceptual constructs like a neutral rate or potential output gap remains subject to measurement and model errors.

  • At the heart of the decision, once again, will be the role of interest rates both in reviving investment and in anchoring inflation expectations. Growth concerns remain, particularly given the stress in banking sector assets. Overlaid on these concerns will be the view on inflation trajectory in 2014, given the long lags for monetary transmission.

  • Earlier, it seemed likely that the repo rate, at 7.75%, would allow RBI to pause for the rest of FY14 and then take a call in April or after, depending on how recovery shaped out in FY15.

WEF Annual Meeting 

  • While the rich and famous from across the world have assembled at Davos for their annual talk-fest and networking for business, many top Indian business leaders like Mukesh Ambani and Rahul Bajaj have given this year's WEF Annual Meeting a miss.

  • Others who have been here earlier but could not make it to the ongoing meeting include Anand Mahindra, Kumar Mangalam Birla and Chanda Kochhar.

  • Among these, people like Bajaj, Mahindra and Kochhar have been very active in WEF meetings and used to speak on a host of issues very vocally, although leaders like Ambani and Birla have always kept a low profile.

  • But what is not missing is a highly informal atmosphere which corporate and political leaders from India are enjoying here in this Swiss ski resort town -- which generally remains a rarity amid watchful public eye back in India.

  • Despite these dropouts, Indian delegation still runs into about 125 business and political leaders, which makes India's presence fourth largest after the US, UK and the host country Switzerland.

  • Those present here include Tata group chief Cyrus Mistry, top executives of TCS and a host of other IT firms such as Infosys, Tech Mahindra and iGate, Bharti group's Sunil Mittal, Ravi Ruia and Prashant Ruia of Essar group, bankers Uday Kotak and Rana Kapoor, as also a host of CEOs from many medium-to- large Indian companies.

  • Among the Indian-origin global business leaders, PepsiCo's Indra Nooyi and ArcelorMittal's Lakshmi Mittal are also present.

  • In addition, Finance Minister P Chidambaram is here along with his cabinet colleagues like Anand Sharma and Kamal Nath, as also Planning Commission Deputy Chairman Montek Singh Ahluwalia, Economic Affairs Secretary Arvind Mayaram and Maharashtra Chief Minister Prithvi Raj Chavan.

Old currency notes to be removed from Indian economy 

  • The Reserve Bank of India (RBI), the country's central bank, says it will withdraw all currency notes printed prior to 2005 from 31 March.

  • The move is being seen as an attempt to curb the circulation of "black money" - cash that has not been declared or taxed.

  • According to some estimates, India's underground economy accounts for 50% of its gross domestic product (GDP).

  • The RBI said consumers will be able to exchange old notes at retail banks.

  • The bank added that the notes issued before 2005 "will continue to be legal tender".

  • This would mean that banks are required to exchange the notes for their customers as well as for non-customers.

  • However, it said that after 1 July anyone who is not a bank's existing customer will have to furnish proof of identity and residence if they are looking to change more than 10 notes of 500 and 1,000 rupees denomination.

  • The central bank said that notes issued prior to 2005 can be identified easily as they do not have the year of printing marked on them.

ATM transactions  

  • While India Banks’ Association (IBA) is voicing solidarity over raising ATM service fees post Bengaluru ATM assault case, Finance Ministry is of different opinion. Secretary, Financial Service, said that he would like ATM services to be free’.

  • Interestingly, ever since the proposal was raised, no bank has officially approached the government for approval to raise ATM fees. The Reserve Bank of India (RBI) is the final authority to take the call on the matter.

  • Presently, banks charge no fees for ATM service to their own respective customers. Also, RBI has regulated that in a month a bank customer may avail ATM service including cash withdrawal and balance inquiry from any other bank for free.

  • Thus, with RBI and now Finance Ministry both voicing their non-conformity with the proposed move of IBA, customers may breathe a sigh of relief. Chances of levying ATM fee by banks on their customers are lowered with high authorities sounding against it.

Asia no longer seen as engine of global growth 

  • Emerging Asian economies will contribute less to global growth this year than earlier expected, even as their major trading partners in the West show signs of recovery, according to Reuters poll .

  • From China to India, Indonesia, Taiwan and Thailand, more than 225 economists polled and have collectively downgraded or left unchanged growth estimates for nine of the top 13 economies in Asia outside of Japan.

  • At a time when developed economies are expected to beat last year's growth rates, the results imply that Asia, the recent engine of world growth, may see its contribution diminish.

  • After stunning the world by clocking over 10 per cent growth on average for the last three decades, China started last year to wean itself off credit and investments and changed track toincrease domestic consumption.

  • As a result, its growth rate has steadily dipped. Data this month showed the economy grew 7.7% in the last quarter of 2013.

  • Economists predict a 7.4% average growth rate this year, which would be the slowest expansion since 1990, and a further cooling to 7.2 per cent next year.

  • Infrastructure bottlenecks are seen by analysts as the key reason Asia is unable to benefit from weak food prices globally. Louis Philippe Cup 

  • Jyoti Randhawa, one of India's top professional golfers, will represent city-based Dec-Ellora Laqshya Mumbai team in the Rs 1.2 crore prize money Louis Philippe Cup tournament to be held in Mumbai from February 17-22.

  • Jeev Milkha Singh, Anirban Lahiri, Gaganjeet Bhullar, Siddikur Rehyman, SSP Chowrasia, Rashid Khan and Himmat Rai, among others, are competing in the third edition of the event, featuring nine teams and offering Rs 36 lakh to the winning outfit and Rs 24 lakh to the losing finalist.

  • Incidentally, this is the first time Jeev would be playing in the metropolis as part of the Shubhkamna Delhi outfit.

  • The teams are Navratna Ahmedabad, Puravankara Bangalore, TAKE Chennai, DLF Gurgaon, Jaypee Greens Greater Noida, AVT Kolkata, Dev-Ellora Laqshya Mumbai, Krrish Colombo and Shubhkamna Delhi.

  • The tournament is sanctioned by the Professional Golf Tour of India (PGTI) and conceived and promoted by RN Golf Management (RNGM).

India regains No. 1 ranking in ODIs 

  • India regained its No. 1 ranking in the ICC ODI list after Australia lost its fourth One- Day International against England by 57 runs thereby dropping to the second place in the 13-team table.

  • As per the latest ICC table, India is back on top with 117 points while Australia is second with 116 points.

  • India lost its No. 1 spot in the ODI rankings recently , when it lost to New Zealand in the second ODI. But in order to maintain its top rank, India must win the third ODI against the Black Caps — failing which it will again lose its top position.

Restrictions on gold imports  

  • The restrictions on gold imports will be reviewed by March-end, according to Finance Minister P. Chidambaram .

  • To contain the rising gold imports, the government had increased customs duty on the yellow metal three times in 2013. The levy currently stands at 10 per cent.

  • Mr. Chidambaram said there has been about 1-3 tonnes of gold smuggled into the country every month following the restrictions imposed on shipment in 2013.

  • Gold smuggling has increased, but the restrictions on gold import were absolutely necessary because it is these restrictions, which have brought down gold import, which in April and May had crossed 300 tonnes.

RBI hikes repo rate and keeps CRR unchanged  

  • In an unexpected move, the Reserve Bank of India RBI raised the repo rate---its key lending rate—by 0.25 percentage points to 8%, raising fears of yet another rise in home loan EMIs.

  • The surprise hike in the benchmark lending rate came in despite lower inflation rates in December. The central bank cut its growth forecast to less than 5% for 2013-14, but placed its bets firmly on the turnaround in the broader economy in the next financial year.

  • The central bank, however, made it clear that any action on interest rate movements will be determined by future price data.

  • Equity markets reacted sharply with the benchmark Sensex falling by over 100 points shortly after the RBI’s rate hike announcement.

  • Higher borrowing costs will likely hit consumers squeezed by high prices, flat salary hikes and costly mortgage financing rates.

  • The RBI’s latest move, however, will likely draw strong reactions from business leaders who have been clamouring for an interest rate cut arguing that costly borrowing and high raw material costs have crimped expansion and hiring plans.

  • India’s wholesale inflation rate eased to a five-month low of 6.16% in December on plunging vegetable prices, giving some reason to smile for the UPA government battling to help the economy fight through a period of low growth and high prices ahead of national elections.

India Inclusive Innovation Fund  

  • The National Innovation Council (NInC) and the Ministry of Micro, Small and Medium Enterprises announced the creation of the India Inclusive Innovation Fund.

  • The fund seeks to combine innovation and the dynamism of enterprise to solve the problems of citizens at the bottom of the economic pyramid in India.

  • The fund, launched by Sam Pitroda, head of the NInC, is an autonomous Rs 500-crore fund, with the Union Government contributing 20 per cent. The balance will come from public sector banks, financial institutions, insurance companies, multilateral/bilateral development agencies, Indian & global corporates.

  • The fund’s life is for nine years, extendable by up to two years (subject to approval of contributors) and it will focus on healthcare, food and nutrition, agriculture, education, energy, financial inclusion, environment, technology as an enabler, among others.

Export duty on iron ore pellets  

  • Considering the increase in the average speed of packing machines, the government has revised the capacity of production and consequently increased the duty applicable to pan masala and tobacco products including gutka, chewing tobacco, unmanufactured tobacco and filter khaini packed in pouches with the aid of packaging machines etc. under the compounded levy scheme.

  • Beside above, considering the domestic requirement of iron ore pellets, the government has decided to impose an export duty of 5% on iron ore pellets.

  • Iron ore fines and lumps are leviable to an export duty of 30%. Iron ore pellets are however exempt from export duty. In 2012-13, exports of iron ore pellets were negligible.

  • However, in April-November 2013, exports of iron ore pellets have risen sharply, causing an apprehension about shortage of iron ore in the country. Iron ore is a critical raw material required for production of steel.

RBI rate hike to check inflation  

  • The Reserve Bank's hiking the key lending rate by 0.25 per cent is a reflection of its "strong commitment" to check inflation, according to Prime Minister's Economic Advisory Council (PMEAC) Chairman C Rangarajan .

  • It is a reflection of the strong commitment of Reserve Bank to the price stability as the chief objective of the monetary policy. The decision also reflects certain change in terms of the indicators being monitoring.

  • While the Wholesale Price Inflation (WPI) remains near the comfort zone, the Consumer Price Inflation (CPI) is not. Therefore the decision to increase the interest rate is once again reflection of the shift in terms of the focus from wholesale price inflation to retail inflation.

  • Retail or CPI inflation in December had moderated to a three month low of 9.87 per cent, while the wholesale or WPI was at 5-month low of 6.16 per cent.

Asia forex bounces  

  • The South Korean won led a relief rally among emerging Asian currencies as a huge interest rate hike by Turkey's central bank calmed emerging markets after several days of turmoil.

  • Turkey followed India by tightening policy at a midnight meeting of its central bank, with the massive hike in the overnight lending rate of 425 basis points taking rates all the way to 12 per cent.

  • The won also benefited from stronger-than-expected industrial output growth and a record current account surplus. The won's strength lifted the Taiwan dollar.

  • Malaysia's ringgit advanced on buying by offshore hedge funds and demand against the Singapore dollar.

  • Asian shares also rallied after Turkey's move, reflecting a broad rise in risk-appetite which provided some respite for the battered Turkish lira.

  • Malaysia's central bank is expected to keep its interest rate unchanged at 3.00 percent later in the day.

  • The recent selloff in emerging market assets drove Asian currencies sharply lower as investors fretted over the twin concerns of a cutback in U.S. stimulus and slowing growth in China.

  • The Fed is expected to announce another $10 billion cut in its monthly bond-purchase programme when it concludes a two-day policy meeting later in the day.

  • The won rose as offshore funds scrambled to cover short positions and on demand from exporters such as shipbuilders, traders said.

  • South Korea's industrial output jumped in December and its current account surplus grew to a record last year, suggesting the economy carried strong momentum into 2014 with sufficient buffers to weather the latest global market turmoil.

FPI and uniform tax rate 

  • In a major boost for overseas entities, the government has said that foreign portfolio investors (FPIs) will attract uniform tax rate across categories.

  • FPIs bring together all the three investment categories — foreign institutional investors (FIIs), their sub-accounts and qualified foreign investors (QFIs).

  • Besides, the tax rate for FPIs would be the same as that extended to FIIs. The new system would be especially beneficial for QFIs, who were subjected to higher tax rate earlier.

  • The Central Board of Direct Taxes has notified that the new class of investors, FPIs, would be treated as FIIs under the Income Tax Act, 1961.

  • Besides, the new class would be given a permanent registration, as against the current practice of granting approvals for one year or five years to the overseas entities seeking to invest in Indian markets.

  • Such registration would be permanent unless suspended or cancelled by SEBI or surrendered by the FPI.

  • Category I FPIs, classified as entities with lowest risk, would include foreign governments and government related foreign investors.

  • Category II would cover appropriately regulated broad based funds, appropriately regulated entities, broad-based funds whose investment manager is appropriately regulated, university funds and pension funds, among others. Those who are not eligible to be in the first and second set of classifications would be considered under Category III.

No round tripping in Mauritius 

  • Mauritius, which is the single biggest source of foreign direct investment into India, does not encourage round tripping

  • When funds flow from one country and through several other countries, it is very difficult for anybody to identify the original source of the money; but the original fault would be with a system that allows money to get out without controls.

  • India and Mauritius had agreed on the contours of a ‘framework’ that would allow the ‘exchange of information’ between tax authorities in the two countries. Till a few years ago, investments to India accounted for about half of outbound investments from that country, but now it was only about 24 per cent. Meanwhile, investments flowing into the African continent had risen to about one-third of the investments from Mauritius.

FDI ranking of India 

  • India's FDI ranking has slipped by one notch to 16th position in 2013 among the top 20 global economies receiving foreign direct investment.

  • The foreign direct investment (FDI) into India grew by 17 per cent last year to USD 28 billion despite unexpected capital outflows in the middle of the year, according to a United Nations report.

  • In 2012, the country was positioned 15th in the list.

  • It said that foreign inflows across the world rose to levels not seen since the start of the global economic crisis in 2008.

  • However, uneven levels of growth, fragility and unpredictability in a number of economies and risks related to the tapering of quantitative easing could dampen the FDI recovery.

  • FDI flows to developing economies reached a new high of 759 billion dollars, accounting for 52 per cent, during the year.

  • Developed countries, however, remained at an historical low (39 per cent) for the second consecutive year.

  • FDI inflows to developed countries increased by 12 per cent to USD 576 billion, with such investment to the European Union increasing, while flows to the United States continued their decline. The US received USD 159 billion in FDI flows last year.

  • The BRICS Brazil, Russian Federation, India, China and South Africa continued to be strong performers in attracting FDI. Their current share of global FDI flows at 22 per cent is twice that of their pre-crisis level.


  • When the Reserve Bank of India tacitly acknowledge the existence of dogecoin, a digital currency that was initially started as a joke, the central bank couldn’t have imagined that the dogecoin community would put together a fund-raising effort aimed at helping Indian athletes reach the Sochi Winter Olympics.

  • The Dogecoin Foundation, a non-profit organisation started by dogecoin creators Jackson Palmer and Billy Markus, has just done that, however. According to several media reports, Indian athletes Himanshu Thakur and Nadeem Iqbal require funding to defray the costs of competing at the Sochi Winter Olympics.

  • The dogecoin community took to the challenge, and raised the roughly $6,000 required to help the athletes.

  • Virtual currencies such as bitcoin and dogecoin have received little clarity with regards to regulation from the Government and the RBI.

  • The I-T department and Enforcement Directorate have conducted raids against several bitcoin operators despite the current lack of regulation.


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