Indian Economy - Current Affairs for August, 2016

As per a FICCI survey, India’s economy is likely to expand by 7.8 percent during the current financial year.

• There has been marginal improvement in growth estimate for 2016-2017
• RBI also pegged the growth rate at 7.6 percent in 2016-2017
• FICCI’s Economic Outlook survey put median GDP growth forecast of 7.8 percent for the current fiscal year. Further, the estimated median GVA (gross value added) growth for Q1 FY17 has been put at 7.6 percent.
• The survey was conducted during July-August among leading economists belonging to the industry, banking and financial services sector.
• The trade body also said the median growth forecast for IIP has been put at 3.5 percent for the year 2016-17, with a minimum and maximum range of 2 percent and 4.3 percent, respectively. Median inflation forecast for 2016-17 has noted a marginal increase in comparison to the previous round.
• The median forecast for Wholesale Price Index based inflation rate for 2016-17 has been put at 2.4 percent while for Consumer Price Index it is 5.2 percent.

Bengaluru is host to the largest share of technology driven start-ups followed by Delhi-NCR and Mumbai while Hyderabad and Chennai are quite popular among techies who are budding entrepreneurs.

• Study was conducted in association with Thought Arbitrage.
• It found that technology driven startups growth was such that India moved up to third position with the US occupying the top position with more than 47,000 and UK with over 4,500.
• India’s tech startups number around 4200 up to 2015.
• In terms of total number of start ups, comprising tech and non tech areas, India figured among the five largest hosts in the world along with China.
• Number of startups in both India and China were 10,000 each.
• US is at world number one position among the overall list of 83,000 budding entrepreneurs.
• Of the Indian startups, riding on the technology, the IT hub Bengaluru was host to 26 percent.
• NCR had 23 percent and Mumbai 17 percent.
• In the catching up category Hyderabad had around 8 percent and Chennai and Pune at 6 percent each.
• Disruptive innovation in technology and process is creating new Indian startups and foreign investors including some of the well known venture capital funds showing interest in these startups.
• Synergizing Start Up India with Make in India and Digital India has the potential to expand Indian eco system for the new entrepreneurs.
• Paper suggested tax exemption for research and experimentation to encourage ideas without fear of failure.
• Courses on creation of small businesses need to be encouraged in the learning campus too.

India has become one of the fastest growing and developing economies in the world.

• Enriched with numerous minerals, there has been a growing need to balance mining activities with protection of the ecology.
• Ministry of Mines, Government of India has focused on Sustainable Development Framework for the Indian Mining Sector as a guiding principle for Indian mining industry encompassing well being and inclusive growth with environmental protection.
• Ministry of Mines has developed a credible system of evaluation of mining footprints first launched at Odisha’s Sukinda Chromite mine.
• Ministry through the Indian Bureau of Mines has developed a template for the scheme of Star Rating of Mines.
• The aim is to bring the mines to a minimum standard of star rating in the shortest time to adopt sustainable practice.
• A two layered system providing self-evaluation templates to be filled in by the mine operator followed by validation through Indian Bureau of Mines. Templates have been notified vide notification dated 23.05.2016. The star rating will be based on the following parameters:
Scientific and systematic mining to mitigate environmental impact, addressing the social impact of resettlement and rehab of mining affected people
Local community engagement and development of social economic nature for the local community
Progressive and final mine closure to ensure for restoration of mined out land in better conditions than the original and international standards for mining operations and reporting
• A web enabled online system for evaluation of measures has been developed by the National Institute of Smart Governance Hyderabad.
• Schema of Star rating will be a vital step for the compliance of ecological protection and social responsibility by the mining sector.
• PIB has listed the following benefits of this system:
• Comprehensive mitigation of environmental impacts on land, air and water by mining activities.
• Collation of various technical, environmental and social data of the mining sector at one platform by IBM, which would be utilised to enable better management and monitoring of the compliance of various conditions laid down by statutory authorities for mining.
• Formulation of Comprehensive Regional Plans’- a robust Environment &Social Management framework.
• Availability of the information on mining as well as the conservation activities in public domain to enable greater transparency to enable effective participation of stakeholder and speedy resolution of conflicts.
• Reduced delays in obtaining various clearances (environmental, forest, mining plan, etc.) for mines. Self-certification to be allowed for the approvals for scheme of mining.
• Mine monitoring and high standards adoption for evaluation.

Regulator Insurance Regulatory and Development Authority of India on 18th August 2016 proposed outsourcing norms for insurance companies under which service of individuals can be taken for medical examination, claim investigation and recovery.

• Every insurer should also have in place a comprehensive board approved outsourcing policy
• In considering or renewing an outsourcing arrangement insurer should subject the agency to due diligence according to the proposed proposed IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2016.
• The insurer shall satisfy itself that the outsourcing agency’s security policies, procedures and controls will enable the insurer to protect confidentiality and security of policyholder information,” according to the draft.
• Meanwhile, in other banking and insurance news, SBI market share rose from 17 to 23 percent.
• Board of State Bank of India approved a swap ratio for merger of three listed associate banks and Bharathiya Mahila Bank
• Deal involves allowing 28 SBI shares of INR 1 each for every 10 shares in the State Bank of Bikaner and Jaipur (INR 10 each) and 22 shares of SBI for every 10 shares held in State Bank of Mysore and State Bank of Travancore.
• The other two associate banks, that is, State Bank of Hyderabad and State Bank of Patiala, are unlisted entities, which are fully owned by the SBI.
• For Bharathiya Mahila Bank, which is also an unlisted entity but owned by the government, SBI fixed the swap ratio at 4.42 crore shares of SBI for every 100 crore share of BMB.
• Barring State Bank of Mysore shareholders, the share allotment ratio is broadly even for all the holders. In our view, even if the allotment ratio is favourable / unfavourable for shareholders of associate banks, it is unlikely to make any difference since SBI holds 75-90% in these banks
• The merged entity will have a business of around Rs.40 lakh crore, and SBI will aspire to be in the top 50 global banks, going ahead.
• Meanwhile India Post Payments Bank has received the certificate of incorporation from the Registrar of Companies, paving the way for the postal department’s bank to begin operations in 2017 as announced.
• This will be the first public sector undertaking under the Department of Posts.
• The Department of Posts is expected to complete the roll out of its branches all over the country by September 2017. The government said this could be the fastest roll out for a bank anywhere in the world.
• The Union Cabinet, chaired by Prime Minister Narendra Modi, had in January approved the proposal to set up IPPB with total project cost of Rs.800 crore.
• The new bank is expected to commence operations by March 2017 and will set up 650 branches and 5000 ATMs across the country.

India has been ranked 66th in the list of world’s most innovative economies.

• It has moved 15 places from the year 2015 as per a new UN report that calls for more more transparent policies if the country aims to be a global innovator.
• In a report by the UN World Intellectual Property Organisation, India moved up from 81 to 66 in the overall global rankings.
• Global Innovation Index 2016 released by the WIPO, Cornell University and INSEAD business school has ranked India among the top 50 economies overall in two pillars namely market sophistication (33) and knowledge and technology outputs (43).
• India maintained a stable or improved ranking across all pillars with the most significant improvement in human capital and research up by 40 spots and business sophistication up 59 spots.
• Within human capital and research, India’s data coverage increased with respect of graduates in science and engineering stream ranked eighth overall this year.
• India’s ranking in the business sophistication pillar is impacted by substantial improvement in knowledge workers up 46 spots and knowledge absorption up 33 spots
• India also improved in ranking of firms offering formal training by as much as 56 spots to reach rank 42.
• India improved access across all indicators within the knowledge absorption pillar and metamorphosed it into a solid ranking in the Global Innovation Index’s newly incorporated research talent in business enterprise where it is ranked 31st.
• India ranked 117th in business environment and 118th in education , indicating it can improve the ease of starting business and pupil teacher ratio.

FRBM disclosure statements should be transparent and complete, according to the Comptroller and Auditor General. Centre should take steps to ensure that FRBM disclosure statements are transparent and complete with respect to all aspects.

• In its first report relating to review of the Fiscal Responsibility and Management Act, CAG said the government should carry out suitable amendments to the Act as well as Rules to address inconsistency.
• Government will strengthen the process of making underlying assumptions for projection of receipt and expenditure in various fiscal policy statements to insulate them from frequently changing and integrating the projections in the disclosure statements tabled for the Parliament in 2014-2015.
• Report said a refund of INR 1.17 lakh crore (including interest on refund of taxes) was made from gross direct tax collection in 2014-2015 but was not disclosed in government accounts.
• CAG also regretted that 12th Finance Commission recommendations pertaining to inclusion of 8 additional statements in the Union government accounts for more transparency were not implemented despite in-principle acceptance.

RBI eased priority sector norms to boost cash flow to MSMEs including factoring transactions under priority sector lending with the aim to increase cash flow to small and medium sized enterprises.

• For increasing liquidity support for the MSME sector, the decision has been taken to factor transactions with on recourse basis eligible for priority sector classification by banks which are carrying out the business of factoring on a departmental basis.
• Factoring refers to a kind of financial transaction and debtor finance in which the business sells its invoices to a third party referred to as factor, at a discount.
• Companies often factor receivable assets to meet immediate cash requirements.
• Factoring transactions occurring through TReDS shall also be eligible for classification under priority sector lending upon operationalisation of the platform.
• TReDS is an exchange based trading platform to facilitate financing bills by small entities to corporate and other buyers including the government department and PSUs.

There will be no separate railway budget from the next financial year, putting an end to a practice that began in 1924, with the finance ministry acquiescing to the proposal to merge the transporter’s annual exercise with the general budget.

• Finance ministry has constituted a 5 member committee of officers to work out the modalities for the exercise which will end the annual budget speech being followed by the rail budget.
• Move to discard the British era practice of a separate rail budget by the Modi government was after a 2 member committee comprising Niti Aayog member Bibek Debroy and Kishore Desai recommended the exercise to be scrapped.
• Finance minister Arun Jaitley has been asked to merge the rail budget with the general budget in the long term interest of the national transporter as well as the economy of the nation.
• Once the rail budget is merged with the general budget, Indian Railways will be like any other government department receiving budgetary support under the supervision of the finance minister.
• Once the overall funds are allocated, railways will then segregate them for various reasons with sources suggesting that the model will be akin to the one of the postal department.

Parliamentary panel has asked the government to evolve mechanisms for e-waste management rules to be implemented

• Referring to the CPCB estimate that India generated 16.4 lakh MT of e-waste in 2014, the committee noted that merely notifying rules is not enough without strong and effective implementation
• Committee of Subordinate Legislation chaired by Dilipkumar Mansukhlal Gandhi tabled its 15th report on e-waste management in the LS
• Committee expressed serious concern over handling of environmentally sensitive issue of e-waste management
• As per the provisions of the E-waste (management and handling) Rules 2016 the environment ministry amended the rules by notifying e-waste management rules 2016 in March.
• Committee has notified that there has been an exponential increase in the generation of e-waste across the world including India
• According to CPCB estimates, 1,46,800 MT of e-waste was generated in India in 2005; it rose to 8,00,000 MT in 2012 and 16.4 lakh MT by 2014

Cabinet gave approval for the signing and ratification of an agreement between India and Croatia on economic cooperation

• An earlier agreement had been signed in 1994 to develop bilateral trade and economic relations
• Average bilateral trade growth was 17.44 percent during the past three years and stood at USD 205.04 million in 2014-2015

Cabinet provided ex-post facto approval for the amendment of Sections 64, 65 and 115 of the Factories Act 1948 via the Factories (Amendment) Bill, 2016 in Parliament.

• Amendments relate to increase in over time hours from 50 hours per quarter to 100 hours (Section 64) and 75 hours per quarter to 125 hours (Section 65)

Cabinet Committee on Economic Affairs approved the one time grant of INR 900 crores over three years for R&D projects for the development of Advanced Ultra Super Critical Technology for thermal power plants

• Estimated cost of the project is INR 1554 crore
• INR 900 crore will be provided as plan gross budgetary support to BHEL for implementation of the research and development project
• Project was proposed by a consortium of three government entities: BHEL, NTPC and IGCAR

Cabinet has approved a proposal to amend rules for foreign investment in non banking finance companies

• Amendments in existing FEMA regulations on NBFCs will enable flow of foreign investment in other financial services on automatic route provided such services are regulated by financial sector authorities like SEBI, RBI and PFRDA
• Foreign investment in other financial services that are not under regulators or government agency can be made by the approval route
• Minimum capitalisation norms under FDI policy have been eliminated as most regulators have fixed maximum capitalisation norms
• Present regulations on NBFCS holds that FDI will be permitted only for 18 specified NBFC activities

A bill to provide tax incentives to the garment sector and enable the government to raise customs duty on marble and granite from 10 to 40 percent was approved by the LS after FM Arun Jaitley said these measures would help in creating jobs and protecting the domestic industry from import surge

• The Bill also seeks to expand the definition of demerger with a view to facilitate splitting or modification of PSY companies
• Changes in income tax act will give effect to conditions attached to transfer of shares by the government

A Parliamentary committee suggested the removal of 2.5 percent duty on import of coking coal and scrapping of clean energy cess of INR 400 a tonne as measures stand in the way of competitiveness of domestic steel firms

• Standing Committee on Coal and Steel chaired by Rakesh Singh pointed that expenditure by Indian steel companies on research and development remained 0.05-0.5 percent of their sales turnover lower than 1-2 percent by those in China, South Korea and Japan.
• Committee also found at rate of per KWH in power in India, domestic steel producers are at a disadvantage of INR 800-900 per tonne as compared to steel producers in China, Japan and South Korea
• Certain levies and duties in the form of District Mineral Fund, National Mineral Expansion Trust, import on raw material such as coking coal and levy on clean energy cess are imposed on Indian steel producers.
• Investments in R&D, works of companies like SAIL and TATA Steel were lauded. Committee recommended that Indian steel companies should benchmark R&D spending with internationally prevalent best practices in the sector

TRAI’s new portal has provided information on call drops, network coverage and call quality of telecom operators across India

• This is a transparency portal where consumers will get information on all parameters of Quality of Service or QoS
• The information is available on the URL http://analytics.trai.gov.in.
• Consumers in a particular location can see the number of towers across the area, the call drop rate and the performance of ISPs on different parameters in the area
• This will bring about transparency in the network performance
• Portal also provides information on network performance
• It provides information on network utilisation trends, BTS density and call drop trends
• Data is being received digitally and electronically from service providers so there is less delay
• It is now being put up in visual form on the portal to provide a clear idea on quality of service parameters for service providers

Government has allowed employees working in IT and ITeS special economic zones/SEZ to work from home or a place outside the zone provided that they meet certain conditions and demands of the industry

• Government has extended this flexibility subject to conditions such that the person would be a regular SEZ employee and authorised by the unit to undertake work pertaining to it
• Work performed by the home based employee should be as per services approved by the SEZ unit and the work is related to a project of the unit
• This comes in wake of reports that exports from IT and ITeS SEZ clocked marginal growth of 0.77% to INR 4.76 lakh crore in 2015-2016
• Government is looking to revive investor interest in such export hubs
• SEZ units should provide laptop/desktop and secured connectivity to establish a connection between employee and work related to the project of the SEZ unit

Government noted that 17 lakh tonnes of e-waste was generated in 2014 and it notified rules in March in 2016 regarding better management of this waste

• A survey by Central Pollution Control Board in 2005 found the generation of e-waste in the country was assessed at 1.46 lakh tonnes and estimated to exceed 8 lakh tonne by 2012
• As per the UN University report, 17 lakh tonnes of e-waste was generated in 2014
• Currently, there are 151 registered e-waste dismantlers and recyclers in the private sector in 13 states having the combined capacity of 4.46 lakh metric tonne per annum
• Power Ministry has also comprehensively reviewed the e-waste (Management & Handling) Rules 2011 and notified e-waste (management) rules in March 2016

According to the Power Ministry, 55 percent of total rural households and 92.67 percent of urban households use electricity as a main source of lighting as per census 2011

• Power Minister Piyush Goyal also said the government aims to install feeder metres in every feeder to provide accurate figures pertaining to the demand and supply of electricity
• Based on 2011 census, 16,78,26,730 total households were using electricity of which 9,28,08,038 were in the rural areas and 7,88,65,937 were in urban areas
• Government aims to provide 24/7 electricity by 2022

Gujarat Industries Power Company has entered into a PPA with Solar Energy Corporation of India for solar power projects in Gujarat

• Last month, GIPCL said it has received letters of intent (LoIs) from Solar Energy Corporation of India (SECI) for execution of a solar power project in Gujarat.
• GIPCL had emerged as a successful bidder in the e-reverse auction for 40 MW solar power project in Gujarat Solar Park.

To prevent illegal and unauthorised pooling of funds by firms, RBI launched a website called sachet.rbi.org.in which alerts people regarding entities allowed to collect deposits.

• Portal will facilitate filing, tracking of complaints besides providing information about whether any particular entity is permitted to accept deposits and registered with the regulatory authority for the same.
• Sachet means the Hindi word for later and will help regulators to assist members of the public.

Leading stock exchange BSE on 3rd August 2016 signed an agreement with Indian Institute of Technology Kanpur for collaboration in areas including cyber security.

• Leading stock exchange BSE will be assisted in testing vulnerabilities in IT system and network and help form guidelines and audit security operations.
• Key highlights of the MoU include cooperation for cyber security research in financial marks developing an environment to deal with cyber security challenges and tools to strengthen cyber security and advise BSE in cyber related issues.

GoI has imposed a penalty of INR 2313 crore on telecom operators for violation of subscriber verification norms till May 31, telecom Minister Manoj Sinha has informed the Parliament.

• For non compliant CAFs, TERM cells have taken actions which include imposition of penalty on non compliant CAFs and filing of FIRs against allegedly forged cases as per guidelines issued from time to time.
• As per data state run BSNL tops the chart with INR 583.09 crore followed by Reliance Communications (INR 377.51 crore), Tata Teleservices (INR 328.15 crore), Airtel (INR 300.34 crore).
• Other top companies caught in the net include Vodafone, Idea Cellular, Aircel and MTS.

An Indian government body has suggested the provisional anti-dumping duty on imports of hot rolled steel products to reduce overseas purchase of alloy and shield local mills.

• Directorate General of Anti Dumping recommended the duties on steel products from China, Japan, South Korea, Russia, Brazil and Indonesia.
• Indian steelmakers such as SAIL, TATA Steel and JSW Steel have lobbied for protectionist measures to block cheap overseas purchases undercutting local mills and squeezing margins.

India’s trade deficit with China jumped to USD 53 billion in 2015-2016 from USD 48.48 billion in the previous fiscal.

• Increasing trade deficit with China will be attributed to the relative demands for imports in India and China for each other’s goods.
• Efforts are on to increase overall exports by diversifying trade basket with emphasis on manufactured goods, services, resolution of market access issues and other non tariff barriers.
• Major imports from China include telecom instruments, computer hardware and peripheral, fertiliser, electronic component, project goods, chemical and drug intermediaries.
• Exports to China include ore, slag, ash, iron and steel, tin, raw hides, leather, plastics and cotton.
• Bilateral trade between the countries stood at USD 70.73 billion in 2015-2016, from USD 72.34 billion in the earlier fiscal.

While releasing on tap universal banking license and excluding large industrial houses as eligible entities from the purview, RBI said investment in banks up to 10 percent is permitted.

• According to Guidelines for on tao Licensing of Universal Banks in the private sector, the initial minimum paid up voting equity capital for a bank should be INR 500 crore and thereafter, the bank should have minimum net worth of INR 500 crore at all times.
• Individuals and professionals that are residents at senior level and existing non banking financial companies that are controlled by residents and have a successful track record for atlas 10 years in banking and finance at senior level and NBFCs controlled by residents with a good track record of 10 years can apply for the license.
• Entities/groups in the private sector owned and controlled by entities and a successful track record for 10 years with total assets of INR 5000 crore or more such that non financial business of the group does not account for more than 40 percent or so in terms of total assets/gross income are also eligible promoters.
• Applicants have to meet the Fit and Proper criteria.
• Promoter/promoting entity/promoter group should have good track record of sound financial, credentials, integrity an at least 10 years of successful track record; foreign shareholding in the bank will be as per existing FDI.
• Currently, the aggregate foreign investment limit is 74 percent and the licensing window will b open on tap and applications could be submitted to RBI at any time.
• Applications will be referred to Standing External Advisory Committee to be set up by RBI is 10 months from the date when in principle approval was granted and lapse automatically.

Two textile parks have been approved for Uttarakhand and the state government has to now decide where they will be set up.

• In these parks, the weavers will be provided hi-tech infrastructure facilities, modern technology raw materials and training.
• The parks aim to improve the condition of weavers in remote areas and hilly areas along the Sino Indian border.
• This park will also help skilled youth get new work opportunities

An inter-ministerial panel mandated to recommend a roadmap to double farmer’s income by 2020 is set to be released in September. Highlighting measures to boost farm output and farmers income, more funds have been allocated under numerous schemes such as PMKSY and hence there are no provisions for a separate and distinct agriculture budget.

• As regards e-NAM or electronic national agriculture market, 23 mandis in 8 states have been integrated and a total 200 mandis will be brought to online platform by September.
• By 2020, the move is to double farmer’s income. An inter-ministerial committee was set up in April to study and recommend the doubling of income for farmers.
• Broad mandate of the panel is to examine the current income level of farmers/agri labourers and measure the historical rate of the growth of current income level as well as assess the required growth rate to double the income of farmers.
• The panel will recommend various strategies to be adopted to attain the target and also suggest an institutional mechanism to review and monitor the implementation of the realised goal.
• Committee is a dynamic one and will be making recommendations from 2016 Kharif itself.
• Ministry has held that to double farmers income from 2016-2017 to 2021-2022 in real terms, the desired compound annual growth rate will be much higher than attained so far
• Government is also aiming to reorient the agricultural sector by shifting from pure production based to income based considerations for farmers.

FDI in India grew by 7 percent to USD 10.55 billion during Q1 of 2016-2017. Foreign investment inflows were at USD 9.88 billion in January-March 2015 according to Department of Industrial Policy and Promotion.

• Sectors which attracted maximum FDI during this period included computer hardware and software, services, telecommunications, power, pharmaceuticals and trading business.
• In terms of nations, India received the maximum overseas inflows from the US, Singapore, Japan, Mauritius and the Netherlands.
• Further liberalisation of the foreign investment policies for services sector in the budget means more inflows will come.
• Government has recently relaxed FDI norms in 8 sectors namely defence, civil aviation, food processing, private security agencies and pharmaceuticals.
• Foreign investment is critical for India which needs USD 1 trillion for overhauling infrastructure such as ports, airports and highways for boosting growth.
• Strong inflow of foreign investments will help improve the country’s BOP situation and strengthen the rupee value against other global currencies including the US dollar.