(Current Affairs For SSC Exams) Economic October: 2014

October-2014

ECONOMY

RBI’s monetary policy statement

The key take-away from the Reserve Bank of India’s fourth bi-monthly monetary policy statement, released on 30 September is the central bank’s projections on the economy’s revival, a key element on the agenda of the Modi government. The RBI did not raise its growth projection for 2014-15, retaining it at the pre-elections level of 5.5 per cent, thereby, refusing to buy into the sharp surge in business sentiment and consumer confidence that its own surveys are capturing.

Microsoft announced its 'Windows 10' Operating System

Microsoft Corp. announced its 'Windows 10' Operating System to replace the largely unpopular Windows 8, skipping a number to mark a leap toward unifying the way people work on tablets, phones and traditional computers.
Microsoft is restoring some of the more traditional ways of doing things and promises that Windows 10 will be familiar for users regardless of which version of Windows they are now using. For instance, the start menu in Windows 10 will appear similar to what’s found in Windows 7.
RBI Going beyond interest rate changes
Entirely in line with expectations, the Reserve Bank of India in its fourth bi-monthly monetary policy review did not change the policy repo rate, which remains at 8 per cent.
The main determinant of monetary policy has been to get a handle on inflation. This has been very well articulated by the RBI Governor both through the policy statements and outside. In fact, this time the Governor had amply made it clear that a rate cut was out of the question given the inflation scenario. The RBI has not only explained why a rate cut was not possible this time but has also more than hinted as to why there might not be any change for quite sometime.

Oil PSUs set for a big change

Under-recoveries (losses incurred on selling regulated fuels like diesel, LPG and kerosene below their cost prices) on petroleum products are exected to decline by over 50 per cent over the next 2 years from 2013-14 levels due to decline in crude oil prices as well as ongoing efforts to move towards market-linked diesel prices. This will have a significant positive impact on the profitability of oil PSUs and the exchequer as well.
CRISIL Research believes that international crude oil prices and thereby petroleum product prices will slip by 8-10 per cent over the next two years to about $100 per barrel in 2015 from an average of $109 per barrel in 2013, barring any major geo-political events, fuelled by supply glut, waning demand growth and increased use of cleaner fuels.
While crude oil output from Iraq, Iran and North America will increase, global demand is expected to be impacted by weak consumption. The tepid consumption growth will be on account of better efficiencies and a shift towards natural gas in developed regions like North America and Europe, as well as relatively slower increase in demand from developing countries such as China and Indonesia because of reduction in subsidies and slower economic growth.

Railways decided to allow PPP in sale of tickets

With a view to expand the facilities for purchase of tickets, the Indian Railways have decided to allow public-private partnership in the establishment and operation of computerised Passenger Reservation System-cum-Unreserved Ticketing System terminals.
At present, only authorised travel agents are allowed to sell e-tickets while all the PRS counters across the country are operated by the Commercial Department of the Ministry. These new reservation centres, as per the proposal cleared by the Railway Board, would be called Yatri Ticket SuvidhaKendras.
Sources said Director (Finance), Railway Board, has issued a circular to all zonal general managers to work out the modalities for implementing the scheme. A circular has also been issued to the Centre for Railway Information Systems to make necessary modification in the software.
However, only authorised agents providing railway ticketing services of the Indian Railways for at least five years would be able to become a part of the scheme.Clarification on tax treatment under Basel-III sought
Bankers have sought clarity from the Finance Ministry regarding taxation of additional tier-I bonds through which they are expected to raise capital to meet

Basel-III norms.

Clarity on taxation would help investors in putting money into such instrument without hesitation.
Banks have requested the Ministry to clarify tax treatment issues with regard to additional tier-I bonds in a meeting held recently.
bankers in the meeting said that investors want to know whether these instruments would be treated as bonds or equity for taxation purposes.
Under the Basel-III norms, additional tier-I bonds come with loss absorbency features meaning that in case of stress, banks can write off such investments or convert them into common equity if approved by the RBI.
This would help banks to conserve capital at the time of stress or loss.
Additional Tier-I bonds, which qualify as core capital or equity capital, is one of the means of raising capital by the public sector banks which would require Rs.2.40 lakh crore by March 2019.

Govt. clears 19 defence sector projects

The government, said it had cleared 19 long-pending defence sector projects, including that of Reliance Aerospace Technologies, Bharat Forge, Mahindra Telephonic Integrated Systems, Tata Advanced Materials and Punj Lloyd.
“Giving a big boost to ‘Make In India’, the Licensing Committee chaired by Secretary, Department of Industrial Policy & Promotion (DIPP), last week cleared 19 proposals for grant of industrial licence,” the Commerce and Industry Ministry said in a statement.
“It is expected that clearance of these 33 applications and the deregulation of the defence product list excluding a large number of components from the purview of industrial licensing will provide a major impetus to advanced manufacturing in defence sector,” the statement said.
Many of the 19 proposals have been pending with the government for the last several years. As per the liberalised policy, the FDI cap in defence has raised from 26 per cent to 49 per cent.
It also permitted portfolio investments of up to 24 per cent of the total equity of the investee/joint venture company under automatic route and doing away with requirement of 51 per cent equity ownership by a single Indian investor/company.

Retail inflation slips 7.73 % to 6.46 %

Providing respite to common man ahead of Diwali, falling food prices pulled down September retail inflation to 6.46 per cent, the lowest since the new series of Consumer Price Index was released in January, 2012, although experts do not see a rate cut by the Reserve Bank any time soon.
Although retail inflation, which has been on decline since July, is below the RBI target of 8 per cent by January, 2015, experts said the central bank is expected to reduce interest in the next fiscal (2015-16) only.
The overall food inflation as measured by CPI fell to 7.67 per cent from 9.35 per cent in the previous month and 11.75 per cent in September, 2013.
Retail inflation was at 7.73 per cent in August, revised downward from the earlier estimate of 7.8 per cent.
As per the government data released, CPI inflation in the vegetable basket in September fell to 8.59 per cent from 15.15 per cent in the previous month.
Inflation in fruits slowed to 22.4 per cent from 24.27 per cent in August. The price rise in protein rich items like eggs, fish and meat was slower in September against August.
“...while the RBI has become more proactive in providing liquidity to the banking system, it seems that lowering the policy interest rate will likely take place only in 2015,” said Barclays Research.ICRA Senior Economist Aditi Nayar said CPI at a series-low 6.5 per cent in September provides some optimism in light of the near-stagnation in industrial output in July-August, 2014.
In its last monetary policy, RBI had maintained status quo on interest rate citing worries on the inflation front despite industry demanding reduction.
6% rise in indirect tax collections
Indirect tax collections inched up by 5.8 per cent in the April-September period of this fiscal.
Indirect tax collections, comprising excise, customs and service tax, stood at Rs.2.42 lakh crore in the first six months of 2014-15 as against Rs.2.29 lakh crore in the corresponding period a year ago, the Finance Ministry said in a statement.
The growth at 5.8 per cent is far less than 25 per cent annual increase envisaged in the budget for 2014-15. Excise collections contracted marginally by 0.6 per cent during six-month period to over Rs.75,021 crore.
Customs mop up rose by 5.5 per cent to over Rs.89,324 crore during period under reference against Rs.84,643 crore in the same period a year ago.
Service tax collections, which have become a new focus area for revenue officials, grew by 13.1 per cent to Rs.77,466 crore, the statement said.
With an aim to widen the service tax net, the government had introduced the concept of negative list of taxation. As per it, all services except those in the negative list are taxable.
The indirect tax collections target for 2014-15 stands at Rs.6.24 lakh crore. Indirect tax collections in September grew by 12.3 per cent to Rs.48,012 crore. Excise duty mop up in September contracted by 0.4 per cent to Rs.14,288 crore.

Wholesale Price Inflation drops to 5-year low of 2.38% in September

Wholesale Price Inflation dropped to a near five year low in September to 2.38 per cent, helped by moderation in food and fuel prices. The favourable base effect of last year has also benefited the WPI.
The WPI based inflation was at 3.74 per cent in August 2014 and 7.05 per cent in September 2013.
As per data released by the government, food inflation fell to a nearly 33-month low of 3.52 per cent. The sharp drop in WPI inflation, which fell for the fourth month in a row, comes close on the heels of retail inflation declining to a record low of 6.46 per cent in September.
Wholesale inflation in onion contracted to 58.12 per cent in September as compared to a contraction of 44.7 per cent in the previous month. While inflation in vegetable basket as a whole shrunk to 14.98 per cent in September, rate of price rise in potato was at 90.23 per cent from 61.61 per cent in the previous month.
The WPI inflation in the fuel and power segment, which includes LPG, petrol and diesel, declined to 1.33 per cent as compared to price rise of 4.54 per cent in August.
Commenting on the data, industry body CII Director General Chandrajit Banerjee said, “Going forward, the downslide in global commodity prices led by fuel together with improved monsoon conditions and favourable policy interventions should help contain inflation and prevent prices from resuming its inflationary tendency anytime soon.”

Partially freeze and subsequently close KYC non-compliant accounts: RBI

Customers, who have not complied with KYC requirements despite repeated reminders, may face trouble with RBI asking banks to partially freeze and subsequently close such accounts.
“As regards non-compliance of KYC (Know Your Customer) requirements by the customers despite repeated reminders by banks, it has been decided that banks should impose ‘partial freezing’ on such KYC non-compliant in a phased manner,” the Reserve Bank said in a notification.
While imposing ‘partial freezing’, RBI said banks are advised to ensure that the option is exercised after giving due notice of three months initially to the customers and followed by a reminder for further period of three months.
“Thereafter, banks may impose ‘partial freezing’ by allowing all credits and disallowing all debits with the freedom to close the accounts.
“If the accounts are still KYC non-compliant after six months of imposing initial ‘partial freezing’ banks may disallow all debits and credits from/to the accounts, rendering them inoperative,” it said.

Revised GST Bill in Winter Session: ArunJaitley

Finance Minister ArunJaitley said the revised Constitution Amendment Bill to roll out GST would be introduced in the forthcoming Winter Session of Parliament.
He also said the first “tranche” of compensation to states for their revenue loss arising due to phasing out of Central Sales Tax (CST) may also be taken up in the Winter Session.
“Confident of introducing revised GST Constitution Amendment Bill in the Winter Session. Targeting Winter Session for transfer of first tranche of CST compensation (to states),” Mr. Jaitley told reporters.
The government proposes to implement the Goods and Services Tax (GST) from April 1, 2016, and the new Finance Commission may be set up ahead of its schedule to look into the issues related with the new indirect tax regime.
The UPA government in 2011 introduced a Constitution Amendment Bill in the LokSabha to pave the way for the introduction of GST.
The states have sought a 5-year compensation mechanism from the Centre and demanded that it be included in the Bill.
Lack of consensus on compensation to states on revenue loss has delayed implementation of GST. The GST aims at subsuming most of the indirect taxes at the central as well as state level.
As part of the roll out of GST, the CST is being phased out and has been reduced to two per cent from four per cent.
The Centre collects CST and distributes it among states.
Kashmir Finance Minister and Chairman of the Empowered Group of State Finance Ministers Abdul Rahim Rather had said Rs 13,000 crore has been pending as CST compensation with Centre as on March 2010.
The government had earlier said the Finance Commission can be involved in the exercise of compensating states for revenue losses following implementation of the GST.

Government clears 20 FDI proposals worth Rs 988.3 crore

The Finance Ministry has cleared 20 FDI proposals including 6 in the pharma sector envisaging a total inflow of Rs 988.3 crore.
The proposals of Fresenius Kabi Oncology for Rs 119 crore and Amneal Pharmaceuticals Company’s for up to Rs 205 crore have been approved by the Foreign Investment Promotion Board (FIPB), a multi-department panel headed by Finance Secretary.
Indusind Bank’s proposal seeking increase in foreign investment in the bank to 74 per cent has also been cleared. The amount of fund flow would depend on when the actual transaction takes place in case of the bank.
The bank, according to a release today, sought “a specific request to grant post-facto approval for increase in foreign holding from 68.51 per cent to 72.07 per cent on June 30, 2014”.
These proposals were approved at the FIPB meeting held on September 16, it said. Tamil Nadu-based Equitas Holdings Pvt Ltd, with the largest proposed investment in the lot, would bring foreign capital of Rs 325 crore.