CAD representing the di fference between exports and imports after considering cash remi ttances and payment

had ri sen to $38.7 bi l l ion or 4.6 per cent of the GDP (gross domestic product) during the fi rst hal f of the
current fi scal . Of thi s, a major contribution was by way of gold imports, amounting to $20.25 bi l l ion. Suppose gold
imports had been one hal f of the actual level , that would have meant that our foreign exchange reserves would
have increased by $10.5 bi l l ion,
the major contributors to a widening CAD - they were a decl ine in exports, which sl ipped by 7.4 per cent during the
Apri l -September thi s fi scal , coupled wi th a ri se in imports by about 4.3 per cent during the six-month period. -
the gap in export and import, he said, was partly made up by an increase in services exports of 4.2 per cent and,
consequently, surplus in services which amounted to $29.6 bi l l ion and remi ttances of $32.9 bi l l ion. the widening
CAD was financed wi thout drawing on country's foreign exchange reserves, mainly because of adequate inflows of
FDI ($12.8 bi l l ion) and FII ($1.7 bi l l ion). The net resul t i s that we have not drawn on the foreign exchange
reserves and, in fact, there i s a marginal accretion of $0.4 bi l l ion to the reserves,Whi le the CAD i s indeed
worrying, I think i t i s wi thin our capaci ty to finance the CAD, thanks to FDI, FII and ECB.
the fi scal defici t in 2010-11 was at a lower 4.6 per cent of GDP, as compared wi th 5.9 per cent in 2011-12 and a
proj ected 5.3 per cent in 2012-13, which i s l ikely to be exceeded.
The RBIs report on Indias balance of payments during the second quarter (July-September 2012) pegs the current
account defici t as a percentage of GDP at an unprecedented 5.4 per cent, up from 4.2 per cent a year ago. The
widening merchandi se trade defici t the fal l in exports being greater than the fal l in imports compared to
the previous year i s one obvious reason. Growth in private transfers, notably remi ttances, has been weak,
increasing by just 2.9 per cent in the second quarter of 2012-13.In the past, these and earnings from software
exports have cushioned the trade defici t. Thei r marginal growth has once again exposed the external sector to a
dangerous dependence on short-term inflows from foreign insti tutional investors and portfol io managers who can
exi t just as easi ly as they have been coming in the big jump in Indias external debt to $365.20 bi l l ion as at end-
September, up by nearly $20 bi l l ion from a quarter earl ier. The Finance Mini stry report attributes the increase to
higher non-resident Indian (NRI) deposi ts, short-term debt and external commercial borrowings. In the past, the
authori ties have actual ly di scouraged these forms of financing, in fact providing di sincentives. More recently
however, won over by expediency, a short-sighted government has veered to the other extreme, for instance
assuring NRIs of high returns and reducing the wi thholding tax on external borrowings. The sharp ri se in short-
term foreign currency debt i s an ominous development. Bunched up repayments wi l l pose a serious threat to
macroeconomic stabi l i ty in the future
Reserve Bank of India (RBI), in i ts bid to curb investments in gold bars and j ewel lery, has come out wi th a draft
report suggesting revi sion in gold loan rules and introduction of new gold-backed products, which would bring down
Indias gold import bi l ls. working group consti tuted for studying gold and goal loans by Non-Banking Finance
Companies (NBFCs), under the chai rmanship of KUB Rao
key recommendations include -->having banks design innovative financial instruments to provide real returns to
investors; conversion of both rural and urban demand for gold into investment in gold-backed financial instruments
through dematerial i sation of gold, and introduction of tax incentives on instruments that could impound idle gold.
To prevent the mushrooming of gold loan fi rms, the panel has recommended that activi ties of gold loan NBFCs be
moni tored continuously and the interconnectedness of gold loan NBFCs wi th the formal financial system be
reduced gradual ly. It has also suggested measures to review the current guidel ines pertaining to gold loan NBFCs
rai sing resources through NCDs.(non convertible debentures)
increasing the import duty on gold wi l l not solve the problem- i t wi l l create a new monster l ike smuggl ing and
the hawala trade-wi l l affect the gem and j ewel lery industry-Gold i s a protector of assets, an important attribute
during economic uncertainty when weal th preservation i s paramount. It also has a key role to play in hedging
against currency ri sk and inflation, both prevalent economic i ssues facing India today,gold demand especial ly i s
largely price inelastic, so just by making gold l i ttle expensive through rai sing import duty would not curb demand-
focus should be on measures to reduce the impact of gold imports on current account rather than curbing imports.
The RBI has been proposing moneti sation of the idle gold reserves in the hands of large population. Some of the
measures l ike uti l i sing the gold lying wi th the Exchange Traded Funds (ETFs) and setting up of Bul l ion Corporation
may work wel l in addressing thi s cri si s.
Fiscal deficit- the problem l ies not in expendi tures - the problem seems to l ie on the receipts side - the
governments fi scal fai lure stems from i ts inabi l i ty to real i se an adequate share of the receipts i t claims in
the budget i t wi l l garner . Receipts (excluding borrowing) are of two types: revenues receipts (in the form of tax
and non-tax revenues) and non-debt capi tal receipts. So a revenue shortfal l was one reason why the defici t
tended to overshoot target. the shortfal l i s even greater in the case of non-debt capi tal receipts, which would
include receipts from activi ties such as sale of spectrum, di sinvestment or privati sation. In sum, what the
government considers i ts fai lure on the fi scal front in terms of sl ippages relative to target are not because of
unexpected expendi tures such as increased subsidies or compensation for under-recoveries by the oi l
companies, but because the governments strategy of avoiding the taxation route to garner addi tional revenues
and relying more on non-debt capi tal receipts to reduce i ts defici t or borrowing requi rement i s not working. But
there are no signs of change here. Taxation i s seen as di sincentivi sing private investment, as the GAAR epi sode
amply i l lustrates. thi s year the government i s sti l l far short of i ts hugely enhanced target of mobi l i sing Rs.
30,000 crore from Mi scel laneous Capi tal Receipts through di sinvestment or privati sation. Nor has i ts ini tial effort
to use the opportuni ty provided by the cancel lation by the Supreme Court of 2G spectrum al located at ridiculously
low prices, to garner addi tional revenues by resel l ing them at much higher prices, been successful . So, i f the
government i s indeed serious about i ts defici t reduction target i t would attempt a fi resale of state assets over
the coming two months. Al ready much of the nations si lver i s being pol i shed for sale. The government may even
heed the reported recommendation of the Kelkar Commi ttee on fi scal consol idation to combine stake sales in
publ ic sector enterpri ses wi th efforts to unlock the value of surplus land wi th them. But even thi s may not be
adequate to achieve defici t reduction targets. India taxes income at three rates 10 per cent, 20 per cent and 30
per cent. These rates were fixed in 1997 .Finance Mini ster had cal led for a debate on the need of inheri tance tax
in India, wondering i f the country had paid enough attention to accumulation of weal th in the hands of a few.
economic advi sor C. Rangarajan add a surcharge for income above particular level . I bel ieve as we go along, we
need to rai se more revenues and the people wi th larger incomes must be wi l l ing to contribute more, Earl ier thi s
week, the U.S. Congress voted for rai sing taxes on rich Americans, as part of resolutions of cri si s over the so-cal
led fi scal cl i ff. The U.S. legi slation rai ses taxes on individual earning more than $400,000 per year, and on
couple earning more than $450,000. to bring down the fi scal defici t over next few years we need to act on expendi
ture side and as wel l as revenue side. On the expendi ture side, we must focus on how to prune the subsidies and
reduce them as a proportion of GDP,
SEBI for stronger share buy-back norms - proposed signi ficant changes to the exi sting framework for buyback of
shares by companies from the open market that requi re the process to be completed in three months and
minimum repurchase to be 50 per cent of the target. At present, the period of share buyback i s 12 months. i t i s
proposed that companies complete the buy back in three months. To ensure that only serious companies launch
the buyback programme, i t i s further proposed that these companies be mandated to put 25 per cent of the
maximum amount proposed for buy back in an escrow account, companies, which are unable to buyback al l the
targeted shares (or proposed amount), should be barred from coming up wi th another repurchase offer for one
year. companies should di sclose the number of shares purchased and the amount uti l i sed to the exchanges on a
dai ly basi s. SEBI said despi te the intention di sclosed by companies to thei r shareholders at the time of making
buyback offer, the buyback offer was not used as an opportuni ty for enhancing the book value of the shares of the
company.General ly, buybacks are intended to return surplus cash to the shareholders, to provide support for
share price during periods of temporary weakness and to increase the underlying share value
14th Finance Commi ssion -under the chai rmanship of former RBI Governor Y. V. Reddy. The five-member panel i s
to submi t i ts report by October 31, 2014.Apart from i ts recommendations on the sharing of tax proceeds between
the Centre and the States which wi l l apply for a five-year period beginning Apri l 1, 2015, the Commi ssion has been
asked to suggest steps for pricing of publ ic uti l i ties such as electrici ty and water in an independent manner and
also look into i ssues l ike di sinvestment, GST compensation, sale of non-priori ty PSUs and subsidies.would look
into the need for insulating the pricing of publ ic uti l i ty services l ike drinking water, i rrigation, power and publ ic
transport from pol icy fluctuations through statutory provi sions,
National Pol icy on Biofuels announced in 2008, the Government of India mandated phased implementation of a
programme of ethanol blending wi th petrol.The annual requi rement i s estimated to be about 1,000 mi l l ion l i
tres for a pan-India rol l -out of 5 per cent blended petrol ,Whi le getting started at 5 per cent has been such a slog
for India, countries l ike the Uni ted States now have establ i shed doping programmes that involve up to 20 per
cent ethanol . India stands to save a huge amount of foreign exchange through the blending programme, provided i
t gets ethanol at a viable price.Indias ethanol source i s sugarcane.ethanol derived from food crops such as corn,
which could have an adverse impact on prices, as i t happens in the U.S. example of Brazi l , 51 per cent of whose
fuel market i s made up by sugar-based ethanol , making i t the leading biofuel exporter and the second biggest
producer after the U.S. Meanwhi le, sufficient lead time should be given to the auto industry to carry out engine
and other modi fications to make vehicles compatible wi th sti l l higher levels of blended fuel .
Rangarajan Committee - has suggested mandating a price of domestically-produced natural gas at an average of
international hub prices and cost of imported LNG instead of the present mechanism of market discovery. first taking
an average of the U.S., Europe and Japanese hub or market price and then averaging i t out wi th the netback price of
imported l iquefied natural gas (LNG) to give the sale price of domestical ly-produced gas. C. Rangarajan, Chai rman,
Economic Advi sory Counci l to the Prime Mini ster - Arms length price - The arms length price thus computed as
the average of the two price estimates would apply equal ly to al l sectors, i t said.
Priority sector lending-One of the key areas for manipulation i s the agricul ture loan portfol io. Gold loans, under
certain stipulations, come under farm loans. Even a car loan can be considered as a farm loan, based on certain
parameters. And, several banks have turned such options into bri l l iant opportuni ties to adhere to the priori ty
lending norms.A car loan for a single operator comes under priori ty lending. The idea i s to help a car driver to
own a car for hi s l ivel ihood. Even a mul tiple transport operator can channel i ze the loan by making arrangements
for taking the loans in the names of individual drivers. Whi le the documents indicate individual loans, the
beneficiary could be the large operator. If a particular bank exceeds the priori ty lending l imi t, the remaining
could be taken over by the other. Simi larly, gold loans di sbursed by non-banking finance companies are taken over
by certain banks, wi th due documentation to certi fy that they are al l farm loans, di stributed to the needy
farming communi ty.As per RBI rules, i f there i s any shortfal l in priori ty sector lending from the above targets
and sub targets, the concerned bank should deposi t an amount equivalent to the shortfal l in certain schemes.
Priori ty sector lending by banks has been identi fied as one which has encountered increased number of fraud
SEBI), to further tighten corporate governance norms- suggested measures such as rational i sing CEO pay packets,
better compl iance for the benefi t of smal l investors, making whi stle blower mechani sms a compulsory requi
rement and di sclosing the same, implementation of an orderly succession planning among others. SEBI has sought
greater powers for minori ty shareholders and wants companies to bring in diversi ty of thought, experience,
knowledge, understanding, perspective, gender and age in the board of companies. Incentives to the top
management should be based on remuneration that al igns wi th the long-term interest of the company,proposed
mandatory di sclosure of ratio of remuneration paid to di rectors and thei r median staff salary , also suggested hefty
penal ties for non-compl iance of the revi sed corporate governance norms. i t i s necessary to bring back the
confidence of investors back to the capi tal market, for channel i sing savings into investment, which i s the need
of the hour; Though some of these proposals are al ready provided for in the Companies Bi l l , 2012,
Fi rst Ci v i l Ai r Serv i ce between Kargi l an d Jammu - Omar Abdul lah launched the fi rst ever civi l aviation
service between Kargi l and Jammu - Kargi l i s one the worlds coldest towns, frozen under a minus 20 degree
Celsius temperature. - The Indian Ai r Force has been operating an AN-32 ai rcraft three times a week in the Jammu-
Kargi l sector and once a week between Srinagar and Kargi l . It carries 40 to 45 passengers. However, the service has
been highly erratic, - Yet i t i s a cheaper service. Mantra Ai rl ines has fixed a stupendous Rs. 10,000 per passenger
in the JammuKargi l sector - construction of Z-Morh and Zoj i la tunnels and the four-laning of the 420-km Srinagar-
Leh National Highway, along wi th the regular ai r service, would transform the condi tions in Kargi l di strict and
open new vi stas of growth and development in the enti re Ladakh sub divi sion.
ECB rules- decided to enhance the ECB l imi t for NBFC-IFCs under the automatic route from 50 per cent of thei r
owned funds to 75 per cent of thei r owned funds, including the outstanding ECBs, the RBI said. However, NBFC-
IFCs desi rous of avai l ing themselves of ECBs beyond 75 per cent of thei r owned funds would requi re the approval
of the RBI and would, therefore, be considered under the approval route. expected to help such infrastructure
finance companies rai se overseas funds at attractive rates. The Planning Commi ssion envi sages the need for
investment of $1 tri l l ion to bui ld the countrys infrastructure during the Five Year Plan which began thi s fi scal .
Credi t Defaul t Swaps (CDS) for corporate bonds.- Reserve Bank of India (RBI) has i ssued revi sed guidel ines -
besides l i sted corporate bonds, CDS shal l be permi tted on unl i sted but rated corporate bonds even for i ssues
other than infrastructure companies. Now, CDS wi l l be permi tted on securi ties wi th original maturi ty up to one
year l ike Commercial Papers, Certi ficates of Deposi t and non-convertible debentures wi th original maturi ty less
than one year as reference / del iverable obl igations, i t added. the obj ective of introducing CDS on corporate bonds
was to provide market participants a tool to transfer and manage credi t ri sk in an effective manner through redi
stribution of ri sk- CDS, as a ri sk management product, offers the participants the opportuni ty to hive off credi t ri sk
and also to assume credi t ri sk which otherwi se may not be possible. Since Credi t Defaul t Swaps have benefi ts such
as enhancing investment and borrowing opportuni ties and reducing transaction costs whi le al lowing ri sk transfers,
such products would increase investors interest in corporate bonds and would be beneficial to the development of
the corporate bond market
TRIPS-developing countries disadvantage-The l inking of TRIPS wi th trade was a strategic ploy played on hapless
developing countries by the advanced countries. The background to the Uruguay Round i s wel l documented. So are
later rounds of WTO mini sterial leading up to Doha in 2001. The attempt of the advanced countries was to enforce
TRIPS as condi tion precedent to market access. Even as the Doha Development Round i s moribund, the larger
question has been haunting trade theori sts: How sustainable i s the TRIPS regime? Signi ficantly, the TRIPS regime
vi sual i sed in the WTO appl ies only to developing countries, the assumption being that the advanced countries
have sound systems in place. the impact of patents in the larger developmental context than in mere trade. Unl
ike many economi sts, who are apologi sts of the WTO, she i s not dreamy-eyed about trade. She doubts the role of
trade as a tool to achieve development. As she explains, The concept of trade i s a market-dependent beast;
consequently, tradabi l i ty i s contingent on variables and di sadvantages that general ly characteri se any market
place. Hence, the developmental promi ses from trade are l imi ted to and commensurate wi th the market. the
same developed countries are denying developing countries the tools that they resorted to in l inking industrial
progress through a flexible patent regime. Dont these countries need the choice, the pol icy space and the
time to evolve a system which does not compromi se national obj ectives? TRIPS i s a strai t-jacket which i s rigid
and lacks flexibi l i ty. Thereby they create di stortions and tensions across the globe. the experiences of India and
Brazi l in evolving a patent system and thei r confl icts wi th the WTO regime. She narrates the sad story of India
gradual ly succumbing to WTO pressure and abandoning the heal thy national system i t had legi slated way back in
1970s based on Rajagopala Ayyangar Report. Drug industry Protection for process as di stingui shed from products
led to the growth of domestic drug industry and, along wi th drug price control , ensured adequate and reasonably
priced supply of drugs. These benefi ts are lost under the TRIPS and the two countries have paid a heavy price in the
process. Ragavan excels in describing the need for enforcement machinery to offer protection and how developing
countries are yet to evolve them. Thi s leads to confl icts wi th big corporations, especial ly drug giants. Ragavan
excels in describing the need for enforcement machinery to offer protection and how developing countries are yet
to evolve them. Thi s leads to confl icts wi th big corporations, especial ly drug giants. how in Doha the developing
countries won the l imi ted battle over the i ssue. Her accounts of Indias battles wi th Novarti s, Roche and Bayer over
l i fe-saving drugs are valuable. These are continuing struggles and developing countries tend to get weaker in
holding up and/or defending thei r national interests. patents in biotechnology, plant genetics, biodiversi ty and plant
protection. These are newer areas which bri stle wi th legal , ethical , moral and pol i tical i ssues. She narrates how
there i s no common ground between the U.S. and the EU and the obj ectives of bio control vary. There are i ssues
concerning patentabi l i ty of l iving organi sms (bacteria), genes, et al .
Npa in banks- 1) Political interference-overdraft for a special case-In March 1976, P.C. Sethi , Mini ster in the Indi ra
Gandhi government, cal led T.R. Tul i , Chai rman and Managing Di rector of Punjab National Bank (PNB),
to help Associated Journals by advancing money
a cheque for Rs.10 lakh
to enable i t to take del ivery of imported machinery
The Shah Commi ssion concluded: There can be no doubt that the deci sion to al low a temporary overdraft in thi s
case wi thout securi ty
Under the Rules of the National i sed Banks (Management and Mi scel laneous Provi sions) Scheme, 1970, the head of
a national i sed bank should be appointed by the Union government after consul ting the Reserve Bank of India.
Prime Mini ster as the thi rd member of the appointments commi ttee, she mentioned that Tul i s name should also
be considered for the post.
Cash transfer --> Pros->can be a useful system to supplement other ways of making India a less unequal society .
Cons-may hurt girls and kids - cash transfer i s not the only i ssue but also how much, and for whom, and also,
instead of what? - di rect access to food often helps reaching nutri tion to chi ldren and gi rls. But when the subsidy
i s given as cash di rectly i t may benefi t adul ts and boys more due to biased social priori ties in Indian society. - the
transi tion delays in cash transfer could cause extreme hardship to people, many of whom lead a hand-to-mouth
exi stence.
Convenient accounting of subsidies-Finance Mini stry plans to book in next financial year, 2014-15, the expendi
ture that wi l l be incurred on subsidies during the remaining months of the current fi scal (January-March). -
Pushing thi s years expendi ture to the next fi scal s accounts wi l l keep the fi scal defici t for 2013-14 wi thin the
target of 4.8 per cent of gross domestic product (GDP) - convenient accounting wi l l arti ficial ly l imi t the fi scal
defici t thi s year - but make i t a headache for the next Finance Mini ster who wi l l have to rai se the resources
needed to foot the bi l l for the fuel , food and ferti l i zer subsidies for January-March, 2013. - The Budget
Estimates (BE) for 2013-14 for these subsidies i s Rs.2.21 lakh crore. - has not so far rai sed before Parl iament a
demand for addi tional grants for these subsidies. - at the end of November, 2013, the fi scal defici t was al ready 94
per cent of the BE for 2013-14. - The UPA Government has not been able to garner through di sinvestments the
Rs.40,000 crore proj ected in the Union Budget. - tax col lections are growing at a rate less than the target of 19
per cent. - the Indias fi scal defici t for 2013-14 breach the 4.8-per cent target. International rating agencies have
warned that a sl ip-up wi l l trigger a rating downgrade for India. - Subsidies for food, ferti l i zer and fuel , as
provided in the Budget, have been or wi l l be di sbursed during the current financial year to the FCI, ferti l i zer
companies and oi l marketing companies.
Cooperative farming - farmers to divide tasks among themselves to cut operational cost.
GM food crops-agricul tural scienti st M.S. Swaminathan said the government should hasten cautiously,-
apprehensions of various sections of the society vi s--vi s envi ronment, heal th etc., should be al layed and a
National Bio Regulatory Authori ty should be set up to go into various aspects of the i ssue.-It must deal wi th the i
ssue case-bycase. Bio safety experts should carry out gene pol lution tests and the ri sks and the benefi ts should
be careful ly measured.- technology had been by and large accepted in i tems such as cotton, i t was viewed wi th a
great deal of apprehension when i t came to edible i tems. When asked whether the farming communi ty would
accept the GM system of agricul ture, he said that farmers were mainly concerned about yield and income stabi l i
ty.-the use of farm lands for non-agricul tural purposes should be control led.-productivi ty should be increased and
i t can be done only through an Evergreen Revolution.-Food Securi ty Act cannot be implemented wi thout the help
of farmers.-Food production strategy should change. At present, the country produces 260 mi l l ion tons of food
grains, 260 mi l l ion tons of frui ts and vegetables and 140 mi l l ion tons of mi lk.-wheat production has gone up from
seven-mi l l ion tons in 1947 to 95 mi l l ion tons now, the requi rement would be about 150 mi l l ion tons in a few
years. In another twenty years, 200 mi l l ion tons of rice would be needed.- in hi l ly areas l ike the Ni lgi ri s, horticul
ture should be encouraged.-keeping di seases such as rust at bay- mechani sation should be promoted to tackle the
growing labour shortage and water harvesting should be given a thrust.
Divestment target - the R s 40,000 crore target it had set f rom selling of f stak e in state-owned f irms in the
current f iscal, - government has so far garnered only about Rs 3,000 crore - Unl ikely to meet the ambi tious di
sinvestment target, i t i s counting on higher dividends from PSUs and banks to keep i ts fi scal defici t under check
NBFCs should play a bigger and a pivotal role in lending to the priori ty sector - NBFCs can play a role in lending to
the sectors where banks are not interested or hesi tant.
Cyber warriors - Firms globally are grappling with a shortage of over a million cyber security prof essionals as
they try to monitor and secure network s - an unprecedented growth in mal icious traffic - overal l vulnerabi l i ty
and threat levels reached thei r highest in 2013 - India faces shortage of about 4 lakh trained cyber securi ty
professionals. - hackers are increasing attacks on the core of the Internet servers of web hosting providers, name
servers and data centres to spread exploi ts. - Android and Java are top securi ty targets - Android also has a large
instal l base - attractive target for hackers. - an open platform wi th innumerable i terations and hence i s easier to
exploi t - The primary chal lenges are greater attack surface, prol i feration and sophi stication of the attack model
and complexi ty of threats and fragmented solutions.
Kasturirangan report - Western Ghats Ecology Expert Panel (WGEEP) - wi l l pave the way for exploi tation of
ecological ly-sensi tive Western Ghats by mafia groups. - are undemocratic and anti -envi ronmental - gives an opportuni
ty for mafias to exploi t - sabotage the Gadgi l report - Madhav Gadgi l report - was meant to promote sustainable
development
Nachiket panel recommendations - report on inclusive growth - comprehensive financial services for smal l
businesses and low income households - i s a wide ranging, ambi tious and forward looking, the execution chal
lenges are large. - seeks a dramatic change in the archi tecture for del ivery of financial services / products to the
bottom of the pyramid (BOP) segments. - the moot question i s whether there i s a need for an al ternative banking
framework for financial inclusion - considering that the country al ready has the infrastructure to resolve thi s i
ssue. - The wide range of new insti tutions recommended make for a good theoretical construct. But a more
practical approach would have been to leverage the exi sting insti tutional framework, in the rural areas the
regional rural banks (RRBs) can do much more wi th improved governance and stronger leadership. In the urban
markets, both urban cooperative banks (UCBs) and business correspondents (BCs) have the potential of deepening
thei r presence. The SEWA bank model i s a good example of what can be achieved by a focused approach -
considering the current state of financial inclusion in the country, an al ternate banking framework which addresses
the unique i ssues faced by the under-banked and unbanked population, would be a welcome change and would
supplement exi sting infrastructure - several radical ideas on an al ternate banking framework, the viabi l i ty and
adaptabi l i ty of these ideas wi l l need to be evaluated - targets set are indeed brave, particularly in the context of
the innate conservati sm of the RBI. The report suggests that each Indian above the age of eighteen wi l l have a
bank account by January 2016. - seen posi tively as i t puts greater pressure on the Government and other
stakeholders to translate the recommendations into action. - Aadhaar process i s adequate to enable every Indian
to get a bank account by January 1, 2016 - From the standpoint of NBFCs, the report i s extremely posi tive, laying
down a road map for those insti tutions which can move ahead and become National consumer banks. For the
NBFC- MFIs just a few of the pol icy changes recommended such as al lowing them to become BCs of banks has the
potential to dramatical ly improve the del ivery of financial services to the poor. - It i s noteworthy that NBFC-MFIs
have a branch network of 10,000 branches, largely rural , along wi th trained staff which i s wel l connected wi th
BOP segment cl ients.
Packaged drinking water - cannot be produced, sold without BIS mark - The Food Safety and Standards Authori ty of
India (FSSAI), the highest regulatory body in the country, after the enactment of the Food Safety and Standards
(FSS) Act, 2006, the FSSAI was the competent authori ty to ensure avai labi l i ty of safe and wholesome food for
human consumption. The FSSAI also said the question rai sed by the complainant would not fal l wi thin the ambi t
of the National Green Tribunal Act, 2010. Mere supply of drinking water by the State not per se attract the provi
sions of the FSS Act and the National Green Tribunal Act - As per Food Safety and Standards Regulations 2011, no
person shal l manufacture, sel l or exhibi t for sale packaged drinking water under the BIS certi fication mark.
Use CPI as nominal inflation anchor - RBI panel proposed making retai l inflation the focus of monetary pol icy - i t
was premature to use the Consumer Price Index (CPI) as anchor since the data had imperfections. - CPI has lot of
imperfections. It requi res a whole lot of sophi stication which we have not achieved yet on determining CPI... So i t i
s, in my opinion, a l i ttle premature to consider CPI as the anchor of our inflation target - CPI has (a) very large
element of food. We know food inflation cannot be curbed purely through monetary pol icy...So, there are other
structural i ssues that need to be addressed, i f we need to control food inflation, - We dont have as yet achieved
that level of stabi l i ty in the prices where we can curb certain volati l i ties or volati l i ty in certain periods
through a very speci fic targeting,
NPAs - Stop repeated loan restructuring of corporates - should stop ever-greening - emphasi sed that the NPA si
tuation i s horrendous and requi res urgent attention. - If there i s strong case for restructuring, then go ahead and
do i t. But do not go on doing i t repeatedly, - i t i s the di rect responsibi l i ty of the Reserve Bank to recti fy the
problem - NPAs of publ ic sector banks rose by 28.5 per cent from Rs 1.83 lakh crore in March, 2013 to Rs 2.36 lakh
crore in September - NPAs of publ ic sector banks rose by 28.5 per cent from Rs 1.83 lakh crore in March, 2013 to
Rs 2.36 lakh crore in September - According to the information provided by Finance Mini stry, top 30 loan defaul
ters of publ ic sector banks (PSBs) account for more than a thi rd of the total gross NPAs of the state-run lenders. -
The ratio of top 30 NPAs as a percentage of gross NPAs, in respect of publ ic sector banks, as on September 2013 i s
35.5 per cent and for al l banks i t i s 38.8 per cent,
Department of Industrial Pol icy and Promotion (DIPP), under the Mini stry of Commerce and Industry
government wi l l continue wi th the pol icy of al lowing 100 per cent foreign di rect investment in exi sting
pharmaceutical fi rms.
DI PP h ad earl i er proposed st ri ct n orms t o t i gh t en t h e FDI pol i cy f or t h e sect or ami d con cern t h at
t akeov ers of I n di an compan i es by mu l t i n at i on al s h av e l ed t o n on -av ai l abi l i t y of af f ordabl e dru
gs i n t h e cou n t ry . It had asked for a reduction in the FDI cap to 49 per cent from 100 per cent in rare or cri
tical pharma verticals.
the manufacturing sector -
India aims to rai se manufacturing (sectors) share of GDP from 16 per cent to 25 per cent and create 100 mi l l ion
ski l led jobs
As part of Indias national manufacturing pol icy (NMP), the country i s seeking to boost the sectors growth
The target i s to create 100 mi l l ion jobs by 2022.
the World Trade Organi sation (WTO) reached a landmark agreement in Bal i that i s expected to help boost global
trade by USD 1 tri l l ion.
The agreement has also taken into account concerns of countries l ike India on protecting i ts food securi ty scheme
to provide subsidi sed grains to the poor.
report of the Reserve Bank of India (RBI) - on Comprehensive Financial Services for Smal l Business and Low Income
Households - appointed Commi ttee chai rperson Nachiket Mor - key question i s whether some of i ts key
recommendations can be implemented at al l and that too in the timeframe suggested. Key recommendations -
providing a universal bank account to al l Indians above the age of 18 years. to be achieved by January 1, 2016 - To
enable thi s, a vertical ly di fferentiated banking system wi th payments banks for deposi ts and payments and
wholesale banks for credi t outreach.
These banks need to have Rs.50 crore by way of capi tal , which i s a tenth of what i s appl icable for new banks that
are to be l icensed.
The Aadhaar wi l l be the prime driver towards rapid expansion
For credible moni toring, the commi ttee has laid down certain norms even at the di strict level such as deposi ts
and advances as a percentage of gross domestic product (GDP).
The commi ttee proposes an adjusted 50 per cent priori ty sector lending target wi th adjustments for sectors and
regions based on di fficul ty in lending
It advocates fewer NBFCs and substantial regulatory convergence for them wi th banks on non-performing assets
and the extension of securi ti sation laws to certain NBFCs.
A state-level regulatory commi ssion wi l l consol idate supervi sion of al l non-governmental organi sations and
money service businesses.
Justified ambition but not realistic
Not only the accelerated timeframe but the apparent glossing over the huge costs in creating infrastructure and
staff expenses i s a point of contention.
The idea of setting up di fferentiated banks i s not new but setting up a few of them at the present juncture might
pose practical problems. Even the reduced capi tal requi rements might be a barrier.
There i s also a question of recrui ting trained and retaining trained manpower, especial ly in areas which are not
covered by any financial insti tution.
Previous attempts at creating di fferentiated banks such as the regional rural banks and local area banks fai led
because thei r operating costs rose to the levels prevai l ing in commercial banks. Technology might, of course,
reduce costs but i t i s not certain that i ts benefi ts can be assimi lated so soon, as indicated.
Piggy backing on the Aadhaar to open bank accounts seems a good idea. However, the Aadhaar has to overcome gl i
tches and win legi slative approval .
in 2014,- renminbi (RMB), South Korean won (KRW) and New Taiwan dol lar (TWD) riding out the storm better
the Indian rupee (INR), Indonesian rupiah (IDR), Thai baht (THB) and Malaysian ringgi t (MYR) wi l l under-perform
the region
The rupee has staged an impressive turnaround from i ts al l time low level of 68.80 on August 28 last year,
largely driven by a slew of emergency measures and the tightening of monetary pol icy
the reserves data show that RBI has bui l t up forex reserves by $ 20 bi l l ion since September 2013, but a bigger
buffer would helpful to mi tigate aggressive depreciation pressures on the currency
Reserve Bank of India - t h i rd qu art er rev i ew of m on et ary pol i cy - h i ki n g t h e pol i cy repo rat e by 0.25
percen t ag e poi n t s t o 8 per cen t . Al l ot h er rat es t h e ban k rat e, t h e rev erse repo an d t h e m arg i n al st an
di n g f aci l i t y rat es st an d adj u st ed u pwards. Howev er, ex cl u di n g f ood an d f u el pri ces, CPI i n f l at i on
h as rem ai n ed st u bborn l y h i g h wh i l e core WPI i n f l at i on h as ri sen , al t h ou g h on l y m arg i n al l y . beh i n
d i t s l og i c h as been t h e CPI i n f l at i on wh i ch rem ai n s cl ose t o 10 per cen t an d i s t h e pri m e cau se f or t h
e h arden i n g i n f l at i on ex pect at i on s am on g con su m ers
Urj i t Pat el com m i t t ees report rel ease - su g g est ed t h at pri ce st abi l i t y sh ou l d be t h e pri m ary obj ect i v
e of m on et ary pol i cy an d t owards t h at en d CPI i n f l at i on sh ou l d be brou g h t bel ow 8 per cen t by Jan u
ary 2015 an d bel ow 6 per cen t by t h e f ol l owi n g y ear. Form al i n f l at i on t arg et i n g h as n ot been adopt ed
y et , bu t cl earl y t h e cen t ral ban ks i n creased rel i an ce on t h e CPI i s ev i den t i n i t s h i ki n g t h e repo rat e
t o f i rm l y n u dg e t h e econ om y t owards t h e recom m en ded pat h of pri ce st abi l i t y . Un l ess i n f l at i on i s
brou g h t down t h ere can n ot be a rev i v al i n ei t h er con su m pt i on or i n v estm en t .
CAD - The government had rai sed the customs duty on gold in phases from 4 per cent to 10 per cent in 2013 to
check CAD - Besides, the RBI had enforced 80:20 rule to ensure that at least 20 per cent of the imports are
exported before the exporters are al lowed to import fresh quanti ties. - The CAD, which i s the di fference between
inflow and outflow of foreign currency, was at a record high of 4.8 per cent or USD 88.2 bi l l ion in 2012-13.
BRICS economies - grappling with midlife crisis - BR I CS nations f ailed to implement second-generation structural
ref orms that are more micro-based and boost productivity growth - The economi st said in the World Economic
Forum blog that China grew at a rate of over 10 per cent for 30 years but i ts growth rate has now slowed to around
7 per cent, and i t may fal l further. - Talking about India, he said the country grew rapidly earl ier thi s decade but
i ts growth rate slumped to 5 per cent in 2013 and may only modestly pick up thi s year - The other BRICS are even
worse: in 2013 growth was 2.5 per cent in Brazi l , 1.3 per cent in Russia and 1.9 per cent in South Africa. Three
of the five BRICS (Brazi l , India and South Africa) are now part of what investors consider the Fragi le Five emerging
market economies (the other two being Turkey and Indonesia). These fragi le emerging markets share weaknesses,
such as large current account defici ts, large fi scal defici ts, fal l ing growth, ri sing inflation and pol i tical and pol icy
uncertainty, and they al l face parl iamentary or presidential elections thi s year. major reasons behind the problems
- the countries fai led to implement second-generation structural reforms that are more micro-based and boost
productivi ty growth. Secondly, they moved towards a growth regime based on state capi tal i sm, wherein there i s
an excessive role of state-owned enti ties in the economy. Thi rd, the commodi ty super-cycle i s probably over
for a variety of reasons and thi s hurts the BRICS that are commodi ty exporters: Russia, Brazi l and South Africa.
Given the slowdown of China, after years of high prices, commodi ty prices may fal l further, hurting the growth of
the commodi ty oriented BRICS. Fourth, in the boom years for BRICS and for emerging markets, macro pol icies
became too loose, leading to overheating. Deterioration of macro pol icies was serious in Brazi l , India and South
Africa but even in China credi t fuel led investment has led to a surge in publ ic debt that wi l l burden the official
and shadow-banking system, The fi fth reason, which ai ls the BRICS economies (speci fical ly China and Russia. i s
the absence of demographic dividend as the population i s ageing for a number of reasons. Lower population growth i
s associated wi th lower potential growth, Sixth, many BRICS may end up in the middle-income trap, fai l ing to
progress to a higher traj ectory, -Sol id insti tutions, good governance and appropriate macro pol icies, mobi l i sation
of savings, capi tal and labour inputs can l i ft an economy from a low per-capi ta income to middle-income status,
but transi tioning into a developed market i s much more di fficul t, -optimi stic about prospects of BRICS for future
growth - Fi rst, they are al l large economies wi th large populations and markets, and three out of five sti l l benefi
t from a demographic dividend - Second, in spi te of the delays in the last decade, most may eventual ly shed a
model of state capi tal i sm and implement structural reforms that increase potential growth - thi rdly the macro
weaknesses that some of them faced are solvable - some secular forces are sti l l in BRICS favour such as urbani
sation, industrial i sation and the catch up from low per capi ta income, among others.
Borg Energy- a solar power solutions provider and a subsidiary of US-based Borg Inc - plans to invest $ 45 mi l l ion
(Rs. 279 crore) in India on proj ects including a rural electri fication programme during 2014.
Bond prices ri sen - i s reflective of a sense of uncertainty that has gripped the markets ahead of Tuesdays pol icy
action by the Reserve Bank of India. - The destructive di sease comment of Dr. Rajan on inflation came a day after
an RBI panel advocated a shi ft towards a CPI (consumer price index)-centric monetary pol icy, and recommended a
roadmap for achieving thi s. The Governors comment, read in tandem wi th the panel s recommendations,
suggests the possibi l i ty of a pol icy rate hike, turning investors and the market al ike edgy. Economic Affai rs
Secretary Arivind Mayaram - i t i s premature to use CPI as nominal inflation anchor - CPI has lot of imperfections. It
requi res a whole lot of sophi stication, which we have not achieved yet on determining CPI. - These comments and
counters have yet again rai sed questions whether the monetary and fi scal managers are working at cross purpose.
Al l these, nevertheless, have landed the markets in a fresh uncertainty.
Recommendations on General Anti -Avoidance Rules (GAAR)-The government has accepted most of the
recommendations on General Anti -Avoidance Rules (GAAR) suggested by the panel chai red by Part h asart h y Sh
ome. The Central Government i s yet to decide on the retrospective taxation i ssue, since India fol lowed the
sourcebased taxation rule, i t was imperative that transfer of shares of a company abroad wi th assets in India be
taxed, l ike what happened in the Vodafone and IBM cases. But giving a retrospective effect wi l l send wrong
signals to investors and cause uncertainty. It should be in the rarest of rare cases,-government was working on a
resolution which would be appl icable to al l companies facing thi s problem. He said that the government was also
planning to include Control led Foreign Companies (CFCs) wi thin the Di rect Taxes Code (DTC) where Indian
subsidiaries were operating abroad in low-tax juri sdictions. Also, thinly capi tal i sed companies, having more debt
than equi ty, would be brought under GAAR. GAAR would not be used as a tax generation tool , but to prevent
erosion of the tax base by avoidance.
Fiscal Management - Chhatti sgarh ranks as the best performing state in most of the key fi scal parameters,
according to a Reserve Bank of India (RBI) study,- Chhatti sgarh has done reasonably wel l in spending i ts money in
developmental sector, one of the key parameters to judge States overal l performance. Chhatti sgarh's development
expendi ture as per cent of Gross State Domestic Product (GSDP) i s highest in the country. In Chhatti sgarh,
development expendi ture i s 20.7 per cent of GSDP, whereas average of al l states put together i s 11.4 per cent. On
thi s parameter, Bihar i s second (16.8), Madhya Pradesh and Goa thi rd (15.7) and Jharkhand i s fourth (14.7).
Interestingly, ti l l last financial year (2012-13) Bihars development expendi ture was highest in the country. social
sector expendi ture - includes education, heal th, SC/ST development, women and chi ld development, Chhatti sgarh
holds the fi rst posi tion. Social sector expendi ture, in Chhatti sgarh as per cent of GSDP i s 14 per cent whereas
Bihar (11.3) i s second, Madhya Pradesh (9.7) and Uttar Pradesh (9.7) are thi rd and Jharkhand (9.2) i s fourth. In a di
fferent study, National Sample Survey Office (NSSO) has indicated that Chhatti sgarh i s the poorest State of the
country where nearly 40% people l ive below the poverty l ine.
Dogecoin - a digi tal currency that was ini tial ly started as a joke, - The Dogecoin Foundation, a non-profi t organi
sation started by dogecoin creators Jackson Palmer and Bi l ly Markus, the dogecoin communi ty would put together a
fundrai sing effort aimed at helping Indian athletes reach the Sochi Winter Olympics. rai sed the roughly $6,000
requi red to help the athletes. Vi rtual currencies such as bi tcoin and dogecoin have received l i ttle clari ty wi th
regards to regulation from the Government and the RBI. The I-T department and Enforcement Di rectorate have
conducted raids against several bi tcoin operators despi te the current lack of regulation.
IMF chief Chri stine Lagarde- structural reforms are needed in emerging market economies also. They would have to
do away wi th bottlenecks and protective barriers to unleash the potential they have, the key news today was that
advanced economies were growing at rates sl ightly better than expected whi le growth of emerging economies had
been slower than what was previously thought. More interestingly, the debate has begun on new ri sks, such as
how tapering takes place, at what speed and how i t i s communicated and what would be the spi l lover effects
especial ly on emerging economies. Thi s i s a new ri sk on the hori zon and needs to be watched,Noting that another
emerging ri sk i s deflation, Ms. Lagarde said monetary pol icies have to be re-formulated after some time. Debating
what should be on top of the agenda for global economy in the year ahead, other panel i sts said that nearly seven
years after the cri si s surfaced in 2007, the mood was general ly posi tive today.
Disinvestment- proposal to sel l the 13 per cent stake held by the Speci fied Undertaking of the Uni t Trust of India
(SUUTI) in Axi s Bank reveals the anxiety of the Government to step up the pace of di sinvestment process. the
Rs.40,000 crore targeted from di sinvestment appears a di stant dream. So far, the Centre has managed to garner a
measly Rs.1,325 crore alone through the di sinvestment. The move to sel l equi ty stake in IOC to a ONGC and OIL
shows a sense of desperation. The CAD number has indeed calmed the nerves of an embattled government. What i s
buried inside the better CAD number though i s a deep malai se weakening demand in the economy. Headl ine
inflation (measured by wholesale price index)- the IIP (index of industrial production) number continues to cause
serious concern. Factory output growth (IIP index) decl ined by 2.1 per cent in November. Thi s decl ine must be seen
in the context of a negative base in the year-ago period.- the IIP (index of industrial production) number continues
to cause serious concern. Factory output growth (IIP index) decl ined by 2.1 per cent in November. Thi s decl ine
must be seen in the context of a negative base in the year-ago period.
Iran - Iran i s exploring new ways of expanding i ts trade basket wi th India - Apart from oi l , apples, touri sm and
software education are high on Irans trade agenda
BRICS bank - asking Rel iance-supported think-tank Observer Research Foundation (ORF) to draft strategy papers for
Indias posi tion in the G20 on the BRICS (Brazi l , Russia, India China, South Africa) Development Bank. The structure,
location of i ts headquarters, membership, authori sed capi tal stock and di stribution of voting rights across member
countries of the BRICS Development Bank wi l l be taken up at the next BRICS Mini sterial summi t due to take place
in Brazi l . At the Durban Summi t in March 2013, the BRICS countries had decided to set up a Development Bank for
funding infrastructure proj ects. The BRICS Development Bank wi l l also create a Contingency Reserve Arrangement
worth $100 bi l l ion that member countries wi l l be able to tap should they have to counteract financial shocks in
future such as the one caused by the Lehman Brothers col lapse. ORF strategy paper wi th the Finance Mini stry
proposes four options for Indias posi tion on the structure and ownership model for the BRICS Development Banks.
Two of these include al lowing private sector companies to own part of i t alongside owner countries. Private
sector companies owning a part of a mul ti lateral international body alongside sovereign countries would be odd
though not completely unheard of, - The option wi l l open avenues for investing in real development proj ects for
private companies, - the downside of al lowing private enti ties or individual investors and giving them voting
rights rai ses the ri sk of these players voting for personal or private gain.
new natural gas pricing guidel ines - The Petroleum and Natural Gas Mini stry - under the Rangarajan formula that
wi l l lead to almost doubl ing of prices for al l domestical ly produced gas including conventional , shale, coal bed
methane (CBM) - Domestic Natural Gas Pricing Guidel ines, 2014 - gas from Apri l wi l l be priced at an average price
of l iquefied natural gas (LNG) imports into India and benchmark global gas rates. Thi s formula wi l l be appl icable
ti l l March 31, 2019. The new rates, which wi l l change every quarter, based on the 12-month average of global
rates and LNG import price wi th a lag of one quarter. exi sting fields - MA in the KG D6 block - R-Series and satel l i te
in the KG Basin block - North East Coast block NEC-25. - D1&D3 gas fields in KG-D6 - i f i t i s proved that the
company hoarded gas or del iberately suppressed production at the main D1&D3 fields in the Eastern offshore KG-D6
block since 2010-11.
Eu ropean Cen t ral Ban k-Draghi , the President of European Central Bank, said that Europe i s on the road to
recovery but governments must remain commi tted to structural reforms.Noting that growth remains fragi le and
uneven, he said recovery which started wi th exports i s now moving to consumption.Even whi le appreciating
Greece, Portugal , Spain and Italy for implementing some structural reforms, Mr. Draghi said they cannot relax
thei r efforts whi le other countries too must make progress on thi s front-Fi scal consol idation must not be unravel
led-The upcoming stress tests would further improve confidence in the banking system by increasing transparency-
the aim i s to have one supervi sor and one regulator for al l banks in Europe in the future.
International Monetary Fund (IMF) - i s sl ightly more optimi stic about the global and U.S. economies thi s year-
the global lending organi sation forecasts that the world economy wi l l grow 3.7 per cent in 2014, and that the U.S.
economy wi l l grow 2.8 per cent.
India and Paki stan - Paki stan i s di scussing on non-di scriminatory access (NDA). In a way, he has vi rtual ly ruled out
grant of MFN tag to India. New Delhi has granted thi s status to Islamabad in 1996. Regarding the M word, let
us just say that we have shi fted i t one letter down to N and now we are di scussing NDA. The idea of course i s
(that) instead of getting caught or rather stranded in nomenclature, we should work sincerely towards proving
substantial market access to each other whatever nomenclature we use,- However, ti l l now India has not yet clari
fied i ts stand on NDA =Paki stan had mi ssed the deadl ine of granting MFN status to India. It was to grant in
December 2012 by el iminating the negative l i st of 1,209 i tems. - The bi lateral trade between the countries stood
at $2.60 bi l l ion in 2012-13
india-Paki stan - to find ways of establ i shing reciprocal Non-Di scriminatory Market Access (NDMA) by February-
end. Thi s includes i ssuing bank l icences to al low banks to function in each others country. - Mr. Khan said hi s
elected government had requested India to replace the term Most Favoured Nation (MFN) wi th NDMA. There
are minori ties on both sides who do not desi re peace between the two countries, - For thi s, India needs to open up
to Paki stan 614 i tems. Paki stan, on the other hand, needs to open up to India two l i sts compri sing 936 and 1209
i tems
India-China trade - record $ 31 bn deficit in 2013 - en t ry gat e at Nat h u La wh i ch al l ow t h e I n di an t raders'
v eh i cl es en t er Ch i n a - wi th two-way trade decl ining last year by 1.5 per cent on account of a sharp decl ine in
Indian exports, - Indian exports to China last year total led $ 17.03 bi l l ion - a 9.4 per cent fal l from last year -
out of $ 65.47 total bi lateral trade, - Bi lateral trade reached a record $ 74 bi l l ion in 2011, when China became
Indias largest trading partner. Trade decl ined to $ 66.5 bi l l ion the fol lowing year, on account of the global
slowdown and a 20 per cent drop in Indian exports. The fal l in exports was largely due to curbs on the export of i
ron ore, which had emerged as Indias single biggest export to resource-hungry China.
SEBI- taken several steps wi th respect to requi rements and protection of investors-These measures include e-IPO,
cal l auction on the opening day of an IPO, di sclosure requi rements, expansion of investor grievance redressal
mechani sm, certain obl igations on merchant bankers, and simpl i fied adverti sement code as wel l as product label l
ing for mutual funds.- label l ing of products, but we want sustainable growth in the market and to generate trust in
the market-BSE Managing Di rector & CEO Ashi sh Kumar Chauhan-NSE Managing Di rector & CEO Chi tra Ramkri shna-
for deepening and widening the investor base one has to focus on growth of financial products such as Exchange
Trades Funds, derivatives and fixed income products.-the government i s launching the CPSE ETF as a product wi th
the right composi tion and returns. It wi l l be a very good product for both retai l and insti tutional investors.-
there are three game changers for the markets to sustain and accelerate growth: bringing in pension funds,
encouraging funds l ike ETFs and fi l l ing the gaps by bringing in mi ssing products in the derivatives segment.