Indian Economy - Current Affairs for April, 2016

Close to 13 percent jump has been reported in budgetary allocation for health research in 2016, according to the government. Total budget allocated for the department of health and family welfare for financial year 2016-2017 is INR 40657.57 crore while INR 1144.80 crore had been allocated to the department of health research. The 12.44 percent increase in allocation over the financial year 2015-2016 was discussed, as the budgetary allocation for health research stood at INR 1018.17 crore in 2015-2016.

RBI came out with a master direction for merger of private sector banks and between NBFCs and banks. Another master direction indicated that a compilation which consolidates instructions on rules and regulations framed by the RBI under numerous acts including banking issues and foreign exchange transactions.

• Scope of the master direction on the merger will cover the amalgamation of 2 banking companies and amalgamation of NBFC with banking company.
• In these cases, the voluntary amalgamation will become effective following approval from RBI.
• According to the direction, the decision of the amalgamation shall be approved by respective boards by a 2/3rd majority and not just members present and voting.

RBI has allowed infrastructure Debt Fund to raise resources through bonds and commercial papers of less than 5 year maturity. Currently, IDF-NBFC was created for raising funds for primarily fund infrastructure projects. RBI has capped the average exposure limit for IDF-NBFC at 50 percent and maximum at 75% of the total capital fund apart from limits on issuance to only PPPs successfully operational at least for a year.

Central Board of Direct Taxes has proposed foreign tax credit rules to assist corporates. For providing relief to corporates with income abroad, simplified Foreign Tax Credit rules were introduced. These have been formulated to help companies claim credit for taxes paid overseas.

• CBDT said tax credit can be availed by entities paying taxes in the nation including those with Double Taxation Avoidance Agreement.
• Foreign tax credit will be determined by conversion of currency of payment of foreign tax at telegraphic transfer buying are on dates when the tax has been paid or deducted

Shri Piyush Goyal, Union Minister of State (IC) for Power, Coal and New and Renewable Energy released Report of the Technical Committee on Large Scale Integration of Renewable Energy, Need for Balancing, Deviation Settlement Mechanism (DSM) and associated issues on April 18.

• Shri Goyal also launched Ancillary Services Operations in India.
• The Ministry is set to take ‘one nation, one grid, one price 24X7’ on mission mode
• India has set an ambitious target of achieving 175 GW of renewable generation capacity. In order to integrate such high penetration of renewable energy and address the concerns of the stakeholders in renewable energy
• A high level Technical Committee was constituted with members from Ministry of Power, Central Electricity Regulatory Commission (CERC), Central Electricity Authority (CEA), renewable rich states like Gujarat, Rajasthan, Tamil Nadu, West Bengal, Power Utilities like PGCIL, Power System operation Corporation Ltd. (POSOCO), NTPC, State Generating companies and Private generating companies and Institutions like India Meteorological department (IMD), National Institute of Wind Energy (NIWE), National Institute of Solar Energy (NISE), GIZ, Ernst & Young (E&Y), etc. The committee had extensive deliberations and has recommended 15 point action plan.

Wholesale inflation for India for the month of March came in at -0.85 percent Y-O-Y continuing the tryst with negative territory as against -0.91 percent in February. This number measured by WPI index was fired by Y-O-Y increase in primary articles, steep fall in fuel and power group and less change in manufactured products.

• WPI basket weightage for primary articles, fuel and power and manufactured products stood at 20 percent, 15 percent and 65 percent respectively.

Uttar Pradesh has topped PPP project investments with the highest share of 15 percent followed by Maharashtra and Gujarat. UP has the highest share of 22 percent in terms of value of total PPP investment projects under constriction across India followed by Maharashtra (11 percent), Haryana (8.5 percent), Gujarat (6 percent) and Madhya Pradesh (4.5 percent)

• Most PPP investment projects have been terminated in Maharashtra (13 percent) followed by Chhattisgarh (10 percent), Gujarat (9 percent), Kerala (7 percent) and MP (7 percent).

Terming GDP calculation as an imprecise science, CII has pegged the economic growth of the country at 8 percent for the current fiscal, higher than 7.6% pegged by the RBI. GDP growth of 8 percent is expected in 2016-2017says CII President Naushad Forbes. The basis for this economic prediction includes strong macroeconomic fundamentals and good business sentiments as well as downward trend in interest rates. CII’s new president also highlighted the need for focusing on regulatory mechanisms.

A host of measures have been introduced to smoothen liquidity supply so banks can follow productive sectors for lending and have an accommodative stance going ahead

• Weak private investment in face of low capacity utilisation has spurred the need for a reduction in policy rate by 0.25 percent and introduced a host of measures to smoothen liquidity supply
• RBI’s repo rate or the rate at which it lends to the financial system has come down to 6.5 percent- this cut is in line with expectations as the stock market has reacted, however the BSE Sensex was down 300 points
• A host of measures were also taken on the liquidity front with the narrowing of the policy rate corridor to 0.50 percent from earlier 1 percentage point.

India’s coffee exports rose by 13.39% in 2015-2016 with coffee exports jumping by 13.39% to as high as 3,19,7333 tonnes in the 2015-2016 fiscal over the previous year. There has been slight increase in shipment of instant coffee and other varieties.

• India has shipped 281987 tonnes of coffee in the previous fiscal according to the Coffee Board
• Instant coffee exports rose to 97,000 tonnes from 94,000 tonnes in the same period
• In value terms, total exports rose to INR 5204 crore in the previous fiscal from INR 4877 crore in 2014-2015.
• The board also indicated high value exports in markets like Japan, US, Canada and Australia.

Among the larger States, Uttar Pradesh has seen the most massive growth in enterprises and employment generation over the past 10 years, outperforming Gujarat, Punjab and Maharashtra.

UP has seen a 67.4% in the number of economic establishments in the state between 2005 and 2013 compared to national average of 41.8 percent. It fared better than Gujarat, TN, Karnataka, Maharashtra and West Bengal.

UP has been placed third in terms of employment growth over a decade ahead of other states like Gujarat, TN, Karnataka, Maharashtra and West Bengal.

• Urban India performed better seeing a growth of 47% in the number of establishments and 42% growth in employment over the last decade. Rural India saw the growth of 38.4 and 34.8 percent. UP bucked the trend
• A third of the 36 states and UTs saw numerous establishments in rural areas grow faster than urban centres, with UP leading in this respect.

RBI bought as much as USD 1 billion (100 million) to prevent rupee from strengthening too much after the currency hit three-month highs as investors poured funds into emerging markets, and despite the buying, the rupee struck a three month high of 66.1700 per dollar on 31st March and was on course to post a gain of 3.2 percent in March - its biggest monthly gain in 2 1/2 years.

• The rupee's appreciation reflects a broad move into high yield emerging markets by investors, as central banks for major economies - notably the Bank of Japan and European Central Bank - have adopted a more dovish stance.
• Traders said they expect the rupee could appreciate further, after foreign investments into Indian debt and equity surged to a one-year high of USD 3.3 billion in March, reversing outflows from earlier this year.

Finance Ministry has calculated that India’s total external debt has risen to USD 480 billion towards the close of December as compared to March in 2015. Total external debt stock at December end recorded a rise of USD 4.9 billion over level at end March. Government external debt stood at USD 90.7 billion in December 2015 while non government debt equaled USD 389.5 billion.

• Effective external debt policy has helped in controlling rising external debt and maintaining comfortable external debt position.
• Long as well as short term debt will be focused on by the policy
• It will also study raising sovereign loans on concessional terms with longer maturities, regulating ECBs, and rationalising interest rates on Non-Resident Indian deposits.