Current Affairs – November 2012 Economic Affairs
- The Minister of State for Finance, Namo Narain Meena in a written reply to a question in the Rajya Sabha on 29 November that ,the Government is considering to develop a Producer Price Index (PPI)which will reflect price movement at the producer’s level as proposed by Governor, RBI. The Office of the Economic Adviser, Department of Industrial Policy and Promotion has already constituted a Working Group under the Chairmanship of Dr. Saumitra Chaudhury, Member, Planning Commission on 19th March, 2012 to consider issues relating to the compilation of Producers Price Index together with the revision of base of the current series of Wholesale Price Index.
- Maldives cancelled its Biggest Foreign Investment Project with GMR Group
Maldives cancelled its biggest foreign investment project with Indian firm GMR Group to develop its international airport. The total value of the project was 511 million dollar. The deal with the GMR was signed during former President Mohamed Nasheed’s administration. Prior to this, a competitive bidding process was conducted by the World Bank’s International Finance Corporation (IFC). The project was implemented through a joint venture company comprising GMR Infrastructure Limited and Malaysia Airports Holding Berhad.
However the contract was termed invalid by the new regime as it included a 25 dollars airport development charge per outgoing passenger. This was not authorised by the Parliament of Maldives.
- PSU banks report Rs 6,457 crore fraud cases in 2012
Fraud cases involving an amount of Rs 6,457 crore have been reported by public sector banks in 2012, Finance Minister P Chidambaram said in a written reply to the Rajya Sabha on 29 November. This was much more than Rs 3,850 crore reported in 2011, he said. Chidambaram was replying to a question about scams that took place in banks. Indian Overseas Bank reported fraud cases involving an amount Rs 758 crore so far in 2012, followed by Punjab National Bank which reported cases involving Rs 728 crore. On measures taken to prevent/frauds, he said, “RBI is sensitising banks from time to time about common fraud prone areas through issuance of modus operandi circulars on various types of frauds.”
- The Reserve Bank of India and the State Bank of Vietnam (SBV) concluded a Memorandum of Understanding (MoU) to promote greater co-operation and sharing of supervisory information between the two supervisors. The MoU was signed at SBV Headquarters, Hanoi, Vietnam, by G. Jaganmohan Rao, Chief General Manager-In-Charge, Department of Banking Supervision, Reserve Bank of India and Nguyen Huu Nghia, Chief Inspector, Banking Supervision Agency, SBV. The occasion was graced by Dang Thanh Binh, Deputy Governor, SBV and Shri Ranjit Rae, Indian Ambassador to Hanoi.
- The Cabinet Committee on Economic Affairs on 22 November, noted the acquisition of 50% equity shares by NMDC Limited, a Navratna PSU, in Legacy Iron Ore Limited (Legacy), which is a listed entity in Australian Stock Exchange at a total investment of Rs.99.63 crore under the delegated powers available to the Board of NMDC Ltd. The acquisition process has been completed and NMDC has now a majority shareholder on the Board of M/s Legacy. The total investment of NMDC in Legacy towards acquisition of its 50% share is Rs. 99.63 crore. NMDC has sourced the above funds from its internal accruals.This is the first overseas acquisition of iron ore resources by an Indian Public Sector Company. This initiative will encourage further acquisition of strategic raw materials overseas by other PSUs for long term mineral security for domestic industry. Legacy Iron ore Ltd (legacy) is a Perth-based Australian exploration company with focus on iron ore, gold, manganese and base metals. Incorporated in April, 2007 Legacy was listed on the Australian stock exchange (ASX) in July 2008. Legacy has six exploration stage projects in Western Australia.
- The Central Government, on 23 November, cleared the National Pharmaceutical Pricing Policy that will bring 348 essential drugs under price control, leading to reduction in prices.official sources said that the National Pharmaceutical Pricing policy has been approved by the Cabinet with an objective to put in place a regulatory framework for pricing of drugs to ensure their availability at reasonable prices. At present, the government through the National Pharmaceutical Pricing Authority (NPPA) controls prices of 74 bulk drugs and their formulations.The source said the government had also considered providing sufficient opportunity for innovation and competition to support the growth of the pharma industry.
- Finance Minister P Chidambaram disclosed that the Amendments to GAAR, the controversial law against tax avoidance through foreign investments, have been finalized. He says, “I have finalised the amendments to the Chapter 10A of the Income Tax Act. Now it will go to the PMO and then we should be ready with the amendments and then the GAAR rules will reflect the amended Chapter 10A”. Chapter 10A of the Income Tax Act deals with taxation of investments.GAAR (General Anti-Avoidance Rules), which was proposed in 2012-13 budget with a view to preventing tax evasion, evoked sharp reactions from foreign as well as domestic investors who feared that unbridled powers to taxmen would result in harassment of investors. The government later appointed a committee headed by tax expert Parthasarthi Shome to look into their concerns.
- The Cabinet Committee on Infrastructure on 22 November, approved the Project for Development of Single Point Mooring (SPM) and allied facilities for the import of crude oil off Veera (outside Kandla creek) in Gulf of Kutch at Kandla Port on Build, Operate and Transfer (BOT) basis for a period of 30 years at an estimated cost of Rs. 621.53 crore. Kandla Port is strategically placed to function as the gateway to Western and Northern India particularly for import of crude oil. Several refineries in the North-Western India require support facilities like SPMs. The expansion of existing refineries in the Northern and Western Regions are expected to create additional demand for SPM facilities for ports on the West Coast. Kandla Port proposes to capture this incremental demand, and this project has been conceived accordingly. The SPM project will enable the Kandla Port Trust to enhance its capacity by 12 MTPA taking the total cargo handling capacity of the Port to 104 MTPA and this will also augment the energy security of the country.
- The Cabinet Committee on Economic Affairs on 22 November has approved disinvestment of 9.50% equity of NTPC Ltd., out of its holding of 84.50% through an offer for sale of Shares through Stock Exchanges as per SEBI Rules and Regulations. After this disinvestment Government of India’s shareholding in the company would come down to 75%. The paid up equity capital of the company, as on 31st March, 2012 is Rs. 8245.46 crore. The President of India holds 84.50% of the paid up capital in NTPC Ltd. NTPC is a listed Maharatna Central Public Sector Enterprise.NTPC Ltd. is a Public Sector Enterprise under the administrative control of the Ministry of Power. NTPC is primarily engaged in business of power generation through coal based and gas based sources.
- The Reserve Bank of India, in its notification released directed banks not to provide loans to its customers for purchase of all types of gold, which includes primary gold, jewellery, bullion, gold coins, units of Gold Exchange Traded Funds (ETF) and units of gold mutual funds. The order was directed for discouraging people from getting involved in speculative activities. The notification from the Reserve Bank of India also directed the banks not to grant advances against gold bullion to traders or dealers, as such advances would be utilised with the purpose of offering finance for gold purchase at auctions and speculative holding of stocks and bullion. This notification allowed the banks to provide finances to the jewelers for their general working capital requirements. The decision of RBI came up in response to the suggestion of the working Group constituted after the announcement if the Monetary Policy Statement of April 2012. The working group suggested that the banks are not permitted to finance purchase of any type of gold other than the working capital. This decision of RBI came up in response to the significant growth in the imports of the gold in past few years that has created pressure on the current account deficit. The Gold imports of India in 2011-12 stood up at 60 billion dollar.
- A world-class Media City will come up in Hyderabad to promote animation and gaming, Andhra Pradesh’s Minister for Information Technology Ponnala Lakshmaiah said on 15 November. The state government has allotted 30 acres of land for the project, which is expected to provide an entertainment technology-based eco-system.”Gaming and animation is a key sector which is coming up and to utilize the opportunity, the chief minister has given a go-ahead for a world-class Media City in Hyderabad,” Lakshmaiah said while addressing eIndia 2012, billed as India’s largest information and communication technology event. The minister pointed out that Hyderabad is the largest film producing centre in the country. Last year out of 289 films made in India, 180 were produced in Hyderabad, he said.The Media City initiative is aimed at tapping the huge animation and gaming market, both domestic and international. The IT minister had last month said the proposed Media City at Raidurg near Hitec City would be on the lines of international media cities in Manchester, Montreal, and Dubai. A state delegation led by the minister visited Dubai, Manchester and London from Nov 5 to 11 to gain first-hand knowledge of media cities. In Dubai, the four-member delegation visited Dubai Media City, Dubai Studio City and International Media Production Zone. The global market size for animation and gaming is expected to be $80 billion and $40 billion respectively during the current year. The market for animation and gaming development (combined) in India is estimated at $1 billion. The US and the Europe remain the biggest markets for outsourcing animation and gaming related activities. Talking about the IT and ITES as a whole, Lakshmaiah pointed out that Hyderabad ranks third globally in terms of cost of operations after Qinding in China and Subaya in Malaysia. “There is no secret why over 18 million sq ft has been taken on lease by various companies operating in Hyderabad,” he said. The minister said despite the apprehensions voiced in some quarters over the growth of IT sector, 150 new units were registered during 2011-12. The city accounts for 12 percent of the total office space in India. Hyderabad is home to 1,200 IT companies including all top 500 global firms like Microsoft, Google, Facebook, Amazon, Deloitte, Accenture and IBM. The state has about 300,000 IT professionals and the sector is also providing 12 lakh indirect jobs. An Information Technology Investment Region (ITIR) has also been approved in Hyderabad, which will create an employment for 15 lakh people over the next 25 years. The ITIR will be coming up with an investment of Rs.2,300 crore in external infrastructure. It will have 50,000 acres of IT and ITES area. Three hardware clusters are also proposed in Andhra Pradesh and they would be the first under the new policy of the central government.
- The President of India Pranab Mukherjee inaugurated the 32nd edition of the India International Trade Fair on 14 November at Pragati Maidan,New Delhi. Addressing the function, the President said the fair has been an excellent platform for micro, small and micro enterprises (MSMEs) to showcase their products and penetrate both domestic and international markets at attractive prices. President stressed that MSMEs are a source of rural empowerment, which is one of the key objectives of Government’s agenda of inclusive growth. The theme of the IITF this year is “Skilling India”. At the 32nd IITF, the focus state and country are Andaman Nicobar Islands and South Africa respectively. The partner state and the country are Uttarakhand and the Republic of Belarus respectively.
- ICICI Bank MD and CEO Chanda Kochhar has been named as the most powerful woman in business in India for the second consecutive year by Fortune Magazine. Mallika Srinivasan of TAFE and Aruna Jayanthi of Capgemini India follow Kochhar in the second and third place, respectively.In the Fortune list of 50 most powerful businesswomen, there are six new entrants. The six new entrants this year includes Prabha Parameswaran, MD, Colgate-Palmolive India; Aisha De Sequeira, MD, Morgan Stanley India Investment Banking; Debjani Ghosh, MD, Sales & Marketing Group, Intel South Asia; Abanti Sankaranarayanan, Country Head, Diageo India; Anjali Bansal, Managing Partner, Spencer Stuart and Asha Gupta, MD, Tupperware India.
- The government on 15 November said it would finalise the Rs 15,000 crore-capital infusion plans for public sector banks in the next few weeks to help them enhance their capital base and increase lending capacity. The top three banks which require capital are Indian Overseas Bank, Central Bank of India and the Bank of Maharashtra. In 2010-11, the government pumped in Rs 20,157 crore for infusion in public sector banks to maintain tier I capital at 8 per cent and increase the government equity in some banks to 58 per cent. In the following fiscal, public sector banks got Rs 12,000 crore for improving their capital adequacy ratio. The implementation of the capital adequacy guidelines based on the Basel III capital regulations will begin from January 1, 2013. The guideline envisages banks to maintain a minimum total capital (MTC) of 9 per cent against 8 per cent prescribed by the Basel Committee of total risk weighted assets.
- The government plans to put on auction the circles that went without bids in the just concluded sale of 2G mobile phone spectrum, by March 31, Telecom Minister Kapil Sibal said 16 November. The “intent” is to have the auction of spectrum in four circles, including Delhi and Mumbai, before the end of the fiscal, Sibal told a news conference here. Finance Minister P Chidambaram said the government “was not celebrating” the flopping of the auction and will continue to move forward. An Empowered Group of Ministers (EGoM) “will be meeting soon” to decide on the next course of action, he said. The auction, which lasted just two days, got total bids worth Rs 9,407.64 crore, just one-third of the minimum Rs 28,000 crore the government was expecting. The auction was a far cry from the 35-day bidding for the 3G spectrum in 2010 that got Rs 67,719 crore. Sibal said besides Rs 9,407.64 crore from the auction, the government will also get Rs 7,936 crore by way of one-time fee to be levied on existing telecom operators holding spectrum more than a prescribed limit. “There will be substantial net gain,” Chidambaram said.
- A meeting of the Executive Committee on Direct Cash Transfers was held on 9 November by the Principal Secretary to the Prime Minister along with the Cabinet Secretary. The purpose of the meeting was to move forward and operationalise Direct Cash Transfers for which many steps need to be taken. Based on the extensive discussions that took place and the issues raised by the participants, the following decisions were taken in the meeting.
- All departments engaged in transferring benefits to individual beneficiaries will quickly move to an electronic Direct Cash Transfer system, based on an Aadhaar Payment Bridge/ Platform.
- They will identify the schemes to move to this system and also prepare a roadmap with timelines so that the rollout is smooth and fast.
The roadmap for each scheme will broadly have the following timelines:
- 51 districts – from 1 January 2013
- 18 states – from 1 April 2013
- 16 states – from 1 April 2014 or earlier.
- The list of schemes, roadmaps, and timelines will be sent to the Planning Commission and PMO by 20 November 2012
- UIDAI will set up a dedicated cell of technical experts in UIDAI to facilitate Aaadhaar enabled Direct Cash Transfers and help individual Ministries.
- Department of Financial Services will go for universal Financial Inclusion through individual Bank Accounts for all in line with the roadmap.
The Prime Minister will be holding the first meeting of the National Committee on Direct Cash Transfers on 26 November 2012 where the roadmap and timelines will be presented.
- The Unique Identification Authority of India (UIDAI) has launched its ‘Public Data Portal’ (data.uidai.gov.in) for the Aadhaar project in line with the National Data Sharing & Accessibility Policy (NSDAP) 2012. The portal will enable the public to access several anonymised datasets generated in the UIDAI ecosystem. The public data portal is in consonance with the larger vision of the Government of India to make data available through data.gov.in. The UIDAI has also been sharing information about the latest developments of the project in the public domain through it’s website www.uidai.gov.in
- The Cabinet Committee on Economic Affairs has approved to divest 10 percent equity in Hindustan Aeronautics Limited (HAL) out of its holding of 100 percent through an Initial Public Offer (IPO) in the domestic market as per the Securities and Exchange Board of India (SEBI) Rules and Regulations. Five percent discount on the issue price will be allowed for retail investors as well as to eligible employees of HAL applying under the employees reservation portion. The paid up equity capital of the company, as on 31st March, 2012 is Rs.120.50 crore. Currently, the company is unlisted. After the divestment of 10 percent, Government of India’s shareholding in the company would come down to 90 percent. HAL is a Schedule ‘A’, Navratna Central Public Sector Enterprise under the administrative control of the Ministry of Defence. It is engaged in the designing and development of Fixed Wing Aircraft, Rotary Wing Aircraft and their systems/accessories/avionics, manufacturing of Aircraft (Fighter, Trainers and Transport), Helicopter and associated aero engines, accessories and avionics for both military and civil applications.
- Mr. Jim Yong Kim, President of the World Bank Group on 8 November, has announced theappointment of an independent panel of experts to conduct a review of the World Bank’s Doing Business report. Mr. Arun Maira, Member of The Planning Commission, Govt. of India, has been appointed as one of the ten international experts to this panel. Mr. Trevor Manuel,Minister in charge of the National Planning Commission of South Africa, would chair the panel.The other members include experts from China, Brazil, Germany, UK, and Korea. Dr. Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission, welcomed the appointment of Mr. Maira to this Panel to review this important report which has become a measure of a country’s ability to compete and attract investments. TheDoing Business report, now in its tenth year of publication, measures and analyzes regulations that apply to small and medium size local businesses in 185 economies. India (which ranks 132nd out of 185 countries in the 2013 edition of this report) needs to improve its regulatory framework to create a favourable business environment.
- The Union Government of India on 6 November 2012 decided to digitise Cable TV network in thirty eight cities, spread over 15 States, by 31 March 2013 in the second phase of digitisation.Earlier, the digitization was completed in Delhi, Mumbai and Kolkata on the 31October 2012, while in Chennai the deadline was extended till the 9 November 2012 by the Madras High Court.
- India Signs Agreements with World Bank for US$ 320 Million AID for “Assam State Roads Project”. The Loan and Project Agreements for World Bank (IBRD) assistance of US$ 320 million for Assam State Roads Project were signed between Government of India and the Government of Assam respectively and the World Bank in New Delhi on 5 November. The Objective of the project is to enhance the road connectivity in Assam by assisting the Public Works Road Department to improve and effectively manage its road network. The project will have three components: 1) Road Improvement. 2) Road Sector Modernization and Performance 3). Road Safety Management.The project will be implemented over a period of six years.
- The GAIL Gas Limited and the Rajasthan State Petroleum Corporation Limited (RSPCL) signed an agreement of Joint Venture on 5 November 2012 to lay down the natural gas supply pipeline in the state. Both the bodies will together formulate a long-term plan on commercial, domestic as well as industrial consumption of the gas. The agreement was signed by GAIL Gas Limited Chief Executive Officer J. Vasan and Ajitabh Sharma Managing Director of RSPCL in presence of C.K. Mathew, State Chief Secretary. The joint venture would help in supply of pollution free LPG, CNG and LNG to consumers of different categories and would also be responsible for development of the CNG stations on the road sides of the state and national highways. The project would also supply the gas required by the industrial units that is coming up on the Delhi-Mumbai industrial corridor.
- The Union Government body, Cabinet Committee on Economic Affairs (CCEA) on 1 November 2012 lifted the export ban on milk products, especially on whole milk powder (WMP), dairy whitener, infant milk foods and other milk products till March 2013. In February 2011 to meet the domestic supply of Milk Products the Union government had imposed ban on export of all kinds of milk products that is skimmed milk powder (SMP), whole milk powder (WMP), dairy whitener, infant milk foods, casein and casein products. However the ban was withdrawn in for Casein in April 2012 and for Skimmed Milk Powder (SMP) in June 2012.
- The decision of withdrawing the export ban was taken in to consideration by CCEA after acknowledging the flush season of milk that started in October which had improved the supply of milk within the country. As per the Government Statistics, there is a stock of 1.12 lakh tonnes of milk powder in the country. As much as 300 lakh kilos of milk per day were procured in the country in September 2012 while sales were to the tune of only 260 lakh kilos per day.
- Out of the approximate 125 million internet user base in India, the female population accounts for almost 40%, according to a joint study by apex industry body ASSOCHAM and ComScore. The study has observed that one out of every 10 Indians is online thereby making it about 10% online user penetration in India. Among the BRIC Nations, India has been the fastest growing market adding over 18 million internet users and growing at an annual rate of 41%. India is also among the top 3 fastest growing markets worldwide in the last 12 months. China added over 14 million users to reach 336 million internet users by the end of July 2012. Russia and India show similar trends in online usage patterns along with similarities in e-Commerce and payment types.
- The Loan and Project Agreements for World Bank (IBRD) assistance of US$ 320 million for Assam State Roads Project were signed between Government of India and the Government of Assam respectively and the World Bank in New Delhi on 5 November. The Loan Agreement was signed by Prabodh Saxena (Joint Secretary, Department of Economic Affairs) on behalf of Government of India and Mr. Onno Ruhl, Country Director, World Bank (India) on behalf of the World Bank. The Project Agreement was signed by Mohan Chandra Boro, Commissioner & Special Secretary, Public Works Road Department on behalf of the Government of Assam. The Objective of the project is to enhance the road connectivity in Assam by assisting the Public Works Road Department to improve and effectively manage its road network. The project will have three components: 1. Road Improvement 2. Road Sector Modernization and Performance 3. Road Safety Management. The project will be implemented over a period of six years.
- Kapil Sibal, Union Minister for IT & Telecom, called on President Ilham Aliyev of Azerbaijan, in Baku on 4 November. Kapil Sibal delivered greeting from the President and Prime Minister of India to the head of state of Azerbaijan. Sibal who is participating at the 7th Meeting of the Internet Governance Forum thanked President Ilham Aliyev for its organization at the highest level in Baku. Sibal said that there are big opportunities for the expansion of cooperation between the countries in the field of Information and Communication Technology. The President of Azerbaijan said he was interested in the expansion of cooperation between Azerbaijan and India in different fields, including Information and Communication Technology sector. President Ilham Aliyev stressed on the establishment of relations between the countries in many areas and also noted the importance of mutual visits for further development of these relations.
- The City of Hyderabad was named as World Third best city to visit in 2013 by Travel guide book Lonely Planet published. Hyderabad the capital city of Andhra Pradesh was described as “elegant and blossoming” by the Lonely Planet.The top 10 cities according to Lonely Planet to visit in 2013 are San Francisco, Amsterdam, Hyderabad, Derry/Londonderry, Beijing, Christchurch, Hobart, Montreal, Addis Ababa and Puerto Iguazu.Earlier in 2011, New York Times rated Hyderabad among the 41 top destinations to visit in the world.
- Planning Commission has given investment clearance for the scheme “Khuga Multipurpose Project (Medium Revised) of Manipur”. The Project is estimated to cost Rs. 433.91 Crore (2011 Price Level). The project shall be completed in the financial year 2012-13 and Plan accounts would be closed by 31st March 2013.