Inflation Indexed Bonds (IIBs) to be launched

The RBI (Reserve Bank of India) decided to launch Inflation Indexed Bonds (IIBs). The first tranche of the IIBs 2013-2014 for 1000 to 2000 crore rupees will be issued on 4 June 2013. The maturity period of these bonds will be 10 years. The total issue size will be 12000 to 15000 crore rupees in 2013 to 14. The RBI will do on monthly basis to attract household savings of up to 15000 crore rupees so as to discourage investments in gold.

After the first tranche, bonds will be issued on the last Tuesday of every month. While the first series of the bonds will be open for all class of investors, the second series issue - beginning October - will be reserved exclusively for retail investors.

WPI Inflation eased to 4.89 Percent

As per official data released on 14 May 2013, WPI Inflation eased to 4.89 percent in April 2013. Declining price of food items, including fruits and vegetables caused a three and a half year low. Inflation based on the Wholesale Price Index (WPI) stood at 5.96 percent in March 2013. In April, 2012, it was 7.50 percent. This is the lowest level of inflation since November, 2009 when it was 4.78 percent.

The major data are given as following:

• WPI inflation in the manufactured items category declined to 3.41 percent in April from 4.07 percent in March.

• Also, inflation in food articles category, which has a 14.34 percent share in the WPI basket, came down to 6.08 percent. Inflation in this category was at 8.73 percent in March 2013.

• The easing in food inflation was helped by a sharp drop in prices of vegetables. Inflation in vegetables stood at (-) 9.05 percent in April 2013, against (-)0.95 percent in March 2013.

• The inflation in fruits declined to 0.71 percent during April 2013 as compared to 4.71 percent in March 2013. However, the rate of price rise in onion was high at 91.69 percent for the month of April, as against inflation rate of 94.85 percent in the previous month.

• Inflation for February was revised upwards to 7.28 percent from 6.84 percent as per provisional estimates. The retail inflation, as measured by consumer price index, came down to single digit at 9.39 percent in April after many months, indicating that inflationary expectation is on declining trend.

• Inflation in wheat eased to 13.89 percent in April, as against 19.87 percent in the previous month. Potatoes too saw decline to (-)2.42 percent, from 20.06 percent in March. Inflation rate in rice and cereals eased to 17.09 percent and 15.63 percent, respectively, in April 2013.

• Pulses prices declined marginally to 10.28 percent during the month. While the inflation rate in egg, meat and fish category stood at 10.44 percent, for milk it was 4.04 percent. For the fuel and power category, it was lower at 8.84 percent in April as compared to 10.18 percent in March 2013.

CCEA approved the Same Scale of Allocation to APL Families

The Cabinet Committee on Economic Affairs (CCEA) on 16 May 2013 approved the continuation of the same scale of allocation to APL families during 2013-14 (at the rate of 15-35 kg monthly per family) under the Targeted Public Distribution System (TPDS). As on 1 April, 2013, the total stocks of rice and wheat in the Central Pool is 596.75 lakh tonnes comprising 354.68 lakh tonnes of rice and 242.07 lakh tonnes of wheat. The procurement during the year is expected to be 401.3 lakh tonnes for rice and 441.21 lakh tonnes for wheat. Thus it is expected that there will be sufficient stock of foodgrains in the Central Pool.

The CCEA has accordingly approved additional allocation of 41.89 lakh tonnes of wheat and 19.84 lakh tonnes of rice at APL issue prices to States/Union Territories (UTs) for ensuring a minimum allocation of 15 kg per APL family per month in 22 States/UTs and 35 kg per family per month in 13 States/UTs. They are Manipur, Assam, Meghalaya, Tripura, Nagaland, Arunachal Pradesh, Mizoram, Sikkim, Uttarakhand, Jammu and Kashmir, Himachal Pradesh, Lakshdweep and Andaman & Nicobar Islands. The Government of India has been making allocation of foodgrains to the accepted number of APL families at the rate of 15 kg per family per month in 22 States/ UTs and at the rate of 35 kg per family per month in 13 States/UTs under TPDS since June 2011.

RBI directed Banks to follow Clean Note Policy

The Reserve Bank of India (RBI) directed banks to follow the Clean Note Policy strictly and issue clean currency notes to public. RBI issued a notification that also asked the banks to do away the process of stapling the currency notes and to secure the note packets with paper bands. In its notification to the banks, the RBI also directed to sort notes into re-issuable and non-issuable notes and to withdraw soiled notes from circulation in the market. Banks have also been asked to stop writing of any kind on watermark window of bank notes as it disfigures the watermark impression and recognition becomes difficult. As per RBI, on an average 20 percent of notes is disposed off after getting soiled every year and in the fiscal year 2012-13 that ended on 31 March 2013 the number of such soiled currency bills stood at over 13 billion units.

IMF approved 1.3 bn Dollars loan for Cyprus

The International Monetary Fund on 15 May 2013 approved a three-year, 1.3 billion dollars loan for supporting Cyprus’ attempts to stabilize its financial sector and to bring the Government’s deficit under control and restore economic growth. The IMF loan to Cyprus is basically a part of a rescue package of 10 billion euros (12.9 billion dollars) counterfeit in March 2013 with the eurozone’s bailout fund. The loan was approved by IMF’s executive board which also includes an immediate disbursement of 110.7 million dollars.

Counting the IMF disbursement, Cyprus has received about 2.7 billion dollars in the third week of May 2013 from its international lenders. The Luxembourg-based European Stability Mechanism, which is a eurozone bailout fund, on 13 May 2013, announced that it had approved its first bailout tranche for Cyprus and transferred an initial 2 billion euros (2.6 billion dollars). The rest of the tranche — up to 1 billion euros — will be transferred by 30 June 2013.

The loans approved by the European Stability Mechanism help to maintain financial stability in the euro area and buy time for Cyprus. It is important here to note that in the eurozone’s long-running fiscal crisis, Cyprus followed Greece, Ireland and Portugal to become the fourth eurozone country since 2010 to agree to a full bailout.

Exports in India grew up by 1.6 percent in April 2013

Exports in the month of April 2013 recorded a growth of 1.6 percent and stood at 24.16 billion US Dollar as against 23.7 billion US dollar in April 2012.

The surge in gold imports pushed the trade deficits to 17.7 billion US dollar.

This is the fourth consecutive month that exports have witnessed growth. Imports of gold and silver in April 2013 doubled by 138 percent to 7.5 billion US dollar from 3.1 billion US dollar in April 2012. The merchandize imports rose by 10.9 percent to 41.95 billion US dollar bringing up the trade deficit by more than 72 percent from March. Widening of trade deficit attributed to the high gold imports. The targeted exports for the current fiscal 2013-14 set by the Union Government is 325 billion US dollar.

CCEA approved Exchange Trade Fund for PSU stocks

The Cabinet Committee on Economic Affairs (CCEA) cleared the government proposal to set up an exchange traded fund backed by a basket of PSU stocks, commonly referred as CPSEETF. The basic idea behind setting up of fund is that among other benefits, PSU divestments could be carried out in a much less disturbing manner for the market and can also incentivize retail investors. An empowered group of ministers would take this forward. The government plans to float such a fund so that, The CPSEETF will comprise a basket of shares of different PSUs which would track an index, but will trade like a stock on the exchange. ICICI Securities is the adviser to the ETF and Goldman Sachs is learnt to be the fund manager. The release on CPSEETF noted that each stock would have a fixed weightage in the basket and the ETF will give discount to investors. It is important here to note that the Selling a mutual fund at a discount to its NAV is a new concept in the Indian market, and would require some rule change by the market regulator SEBI.

Stronger Powers proposed to SEBI for tackling Ponzi Schemes

The Union Government in Month of May 2013 has proposed Stronger Powers to (Securities and Exchange Board of India) SEBI enabling it to carry out search and seizure operations and for attachment of assets. With this a Special power has also been proposed to SEBI with which it can seek information on telephone call data records, from any persons or entities in respect to any securities transaction being examined by it.
It is worth mentioning here that Proposals to make required amendments in the SEBI Act and other relevant regulations have been finalised after detailed consultations with the market regulator and are being presented before the Union Cabinet for its approval.

A Cabinet note in this regard has also been circulated by the Department of Economic Affairs to other departments in the Finance Ministry, as also to the Corporate Affairs, Home, Law and Telecom ministries, Reserve Bank of India, Planning Commission and Prime Minister’s Office for their comments and feedback on the proposals. The Government is planning to introduce the Securities Laws (Amendment) Bill, 2013 in Parliament to carry out the proposed changes for grant of stronger powers to SEBI. The Government has come up with the decision of accepting most of the proposals made by SEBI in this regard and the amendments would be carried out after the Cabinet approves them and the required amendment Bill is passed by Parliament.

What is Ponzi Schemes?

A Ponzi scheme is basically a fraudulent investment operation that pays returns to its investors from their own money or the money paid by following investors, rather than from profit earned by the individual or organization running the operation. The Ponzi scheme generally tempts new investors by offering higher returns than other investments, in the form of short-term returns that are either abnormally high or unusually consistent.

India is the largest Producer and Consumer of Chickpeas in World

Food & Agriculture Organization (FAO) in its latest report for 2011 claimed that India is the largest consumer and producer of Chickpeas in the world. The second advance estimates for 2012-13 marked a record production of Chickpea is 8567.8 thousand tonnes. Production details of Chickpeas in India as compared to the World Chickpea producing nation:

Country Production (000 tonnes)

• India 8221.10

• Australia 513.34

• Myanmar 466.74

• Turkey 487.48

• Ethiopia 322.84

Systematic and concentrated research on Chickpeas is undertaken by Indian Council of Agricultural Research (ICAR) through its on-going plan projects under Indian Institute of Pulses Research (IIPR), Kanpur and All India Coordinated Research Project on Chickpea. In past three years, thirteen types of high yielding varieties of chickpeas have been released in India.

Creation of basic and strategic research for development of location specific climate supporting high yielding chickpea varieties and improved production and protection technologies are the major steps included in the research program. Several Crop development schemes like Food Security Mission (NFSM-Pulses), Rashtriya Krishi Vikas Yojana (RKVY) and others are implemented by the Government of India in order to increase the production and productivity of Pulses including Chickpeas. Special Plan to achieve more than 19 million tonnes of pulse production during 2012-13 has also been initiated.

BSE launched broad-based Islamic Equity Index

The Bombay Stock Exchange (BSE) on 30 April 2013 launched an Islamic equity index based on the wide-measure S&P BSE 500 index. It will provide a new benchmark for Islamic investors in one of the world’s largest stock exchanges. The new index includes the largest 500 companies in the BSE, out of more than 5000 listed. These companies fulfill Islamic finance principles such as bans on investing in alcohol, tobacco and gambling-related businesses.

The BSE had launched the country’s first Islamic index in 2010 after tracking the 50 largest and most liquid stocks. India’s Islamic banking industry has made slow progress because banking rules need lenders to declare the rates of interest they charge customers. This condition it at odds with Islamic banks which base their products on profit rates instead. In this regard to satisfy the needs of Muslims in India, the industry is trying to develop investment products.

SC upheld 51 Percent FDI in Multi-brand Retail

The Supreme Court of India on 1 May 2013 upheld the constitutional validity of Government’s decision allowing 51 percent foreign direct Investment in the multi-brand retail sector.
A bench of Justices R M Lodha, Madan B Lokur and Kurian Joseph gave the ruling. The bench observed that there was no harm in giving the policy a chance. It saw merit in the policy that it would eliminate middlemen and help provide farmers a better price for their produce. It dismissed the petition filed against the 51 percent FDI in multi-brand retail. As per the court, the policy will affect the lives of only 13.3% of the country’s population living in 53 cities.

CCEA approved Proposal to set-up 2 Major Ports

The Cabinet Committee on Economic Affairs (CCEA) on 9 May 2013 approved the proposal of the Ministry of Shipping for setting up of two major ports in the country. The two ports will be set up through a Public Private Partnership Mode in West Bengal and Andhra Pradesh each. As per the proposal approved the port will be developed at Sagar Island in West Bengal after obtaining environmental clearances and following exact procedures for development of the project. The cabinet also agreed for appointment of the transaction advisers and legal consultants and finalization of the project structure in consultation with the State Government of West Bengal and the Planning Commission. In case of Andhra Pradesh, the Cabinet identified Dugarajapatnam location for development of the port and looked forward to find out the techno-economic feasibility report for commissioning of the port.

Benefits of setting-up the two Ports Sagar Port in West Bengal: At present Kolkata has facilities of two ports namely Kolkata Docks at Kolkata and Haldia Dock Complex at Haldia. Both these ports being reverine face limitations of draught due to the morphological changes (change in river platform) in Hooghly because of siltation. Development of Sagar Port will provide a deep draught port for handling the large size vessels by doing away the heavy maintenance dredging activity.

Port of Andhra Pradesh: It will facilitate the economic development of Andhra Pradesh as the rapid industrialization across Visakhapatnam Port has created a necessity of a new port in the state.

21 New Textile Parks Launched

The Union Minister for Commerce, Industry and Textiles, Anand Sharma on 23 April 2013, launched 21 New Textile Parks approved under Scheme for Integrated Textile Parks (SITP). With the launch of these new textile parks, the total number of parks reaches 61 because 40 parks were already sanctioned.

The Scheme for Integrated Textiles Parks (SITP)

• The Scheme for Integrated Textiles Parks (SITP) plays a vital and instrumental role in the development of wide range of models for green field clusters from a 1000 acre FDI driven integrated cluster, to a 100 acre powerloom cluster and a 20 acre handloom cluster.

• Under this scheme, a total number of 61 parks have been sanctioned. 40 projects out of these began in 11th Five Year Plan and another 21 projects are scheduled to be implemented in 12th Five Year Plan.

• Out of these 21 parks, six are in Maharashtra, four in Rajasthan, two each in Andhra Pradesh and Tamil Nadu and one each in Uttar Pradesh, West Bengal, Tripura, Karnataka, Gujarat, Himachal Pradesh and Jammu & Kashmir.

• Out of 40 parks which were sanctioned earlier under this scheme, 25 Textile Parks are operational already.

• Most of the parks under this will be completed during 2013-14 financial year.

• The estimated employment generation is more than 10 lakh people with total estimated investment of 27562 crore Rupees.

• It is important to note that in 2013-14 Union Budget, the Union Finance Minister had announced an additional amount of up to 10 crore Rupees per park for establishment of the apparel manufacturing units for the projects under the SITP scheme.

On the occasion of launch, Anand Sharma also released a coffee table book on SITPs. This coffee table book encapsulates the broad features of various ITPs set up all over India. The book gives an insight into the physical and pictorial status of each ongoing Park approved under SITP.

RBI imposed Restrictions on Gold Import by Banks

The RBI on 12 May 2013 imposed restrictions on gold import by banks in order to moderate the demand of gold for domestic use. The RBI decided to restrict the import of gold on consignment basis by banks, only to meet the genuine needs of exporters of gold jewellery. The RBI stated that the decision is based on the recommendations of the Working Group on Gold that had suggested aligning gold import regulations with the rest of the imports for creating a level playing field between gold imports and other imports. The restrictions have come into effect immediately.

325-billion Dollars Export Target Set for 2013-14

The Union Government announced an export target of 325 billion dollars for the current financial year 2013-14 to support the slowdown in the global markets. It is due to the global slowdown in developed regions like that of US and Europe, the exports of India went down for the first time in three years with a dip of 1.8 per cent to 300.6 billion Dollars in 2012-13, making the trade deficit to a record high level of 191 billion dollars. It is important here to note that, the Government had set an export target of 360-billion dollars for the financial year 2012-13. According to the provisional figures, export registered an increase of 0.8 per cent for the month of January 2013 after a permanent fall during May, June, July, August, September, October, November and December 2012.

Food Grains Output for 2013 Exceeded its Target

The Union Government of India on 3 May 2013 revised the production estimates of the foodgrains upwards by 5.22 million tonnes for 2012-13, over earlier expectation of 254.24 million tonnes due to the higher output of wheat, rice and coarse cereals. With this revision the total cereal output estimation has gone up to 255.36 million tonnes. The wheat and rice production pegged at 93.62 million tonnes and 104.22 million tonnes respectively. The earlier estimate set for the foodgrains for the year was 254.24 million tonnes. The third advance estimate that was officially released on 3 May 2013 estimated that the total foodgrain production for the year will be lower by 3.96 million tonnes from the previous year 2011-12 ecord production of 259.24 million tonnes. As the total output for wheat and rice in 2011-12 were 94.98 million tonnes and 105.31 million tonnes respectively. While for 2012-13 it is estimated to be 93.62 million tonnes and 104.22 million tonnes respectively.

States that Lacked in Production Due to Environmental Issues

Delayed monsoon and drought in different parts of states like Maharashtra, Gujarat, Karnataka, Andhra Pradesh, Tamil Nadu and Rajasthan had an impact on the production of pulses and coarse cereal during Kharif season.

Backward Region Grant Fund Entitlement for Uttar Pradesh Hiked

The Union Government of India on 15 May 2013 announced increment in the Backward Region Grant Fund (BRGF), entitled to Uttar Pradesh. The fund has gone up to 818.17 crore rupees for 2013-14 from initial 667 crore rupees. To release the funds for Uttar Pradesh, the Union Ministry of Panchayati Raj has directed the state Government to submit its annual plan by 25 June 2013. 35 districts of Uttar Pradesh are entitled for the BRGF Scheme. In 2012-13, Uttar Pradesh failed to get its share of BRGF grants as the Government ordered a probe into the alleged irregularities that was committed during the Mayawati regime and it stopped the work which was being carried on in the BRGF beneficiary districts.

IMG approved 10% Equity Sale in Coal India Limited

An Inter-Ministerial Group (IMG) on 10 May 2013 approved 10 percent equity sale of Coal India Limited. This equity sale is likely to fetch, about 17000 crore rupees to the Union Government. Union Governments holds over 90 percent stake in Coal India at present. The Inter-Ministerial Group was headed by Ravi Mathur, the Disinvestment Secretary and it is guiding the process of disinvestment of Governments Equity in CIL. The CIL with a cash balance of 60000 crore rupees is the biggest disinvestment for the Government in the current fiscal year 2013-14 and Union Government is in the plan to generate 40000 crore rupees with sales of PSUs stakes in the current fiscal.

SEBI approved Kerala’s Start-up Village Angel Fund of 10 million Dollars

Market regulator SEBI in May 2013 had approved an angel fund of 10 million Dollars to address the problem of resource crisis for start-up companies across the country. The fund could go up to 20 million dollars with an over-allotment option that would focus on telecom and internet firms. The Fund is supposed to start investing once the initial close of 2 million Dollars is achieved. Consultancy KPMG is the advisor and ILFS is trustee of the fund based at Start-up Village which is the country’s first telecom incubator.

About Village Angel Fund

• The angel fund will be investing not only in the most promising start-ups located in Start-up Village but also in similar enterprises across the country.

• Infosys co-founder and Start-up Village chief mentor Kris Gopalakrishnan, MobME, the country’s first campus telecom start-up, Ravi Pillai, founder of the.16000-crore Rupees Bahrain-based RP Group and other leading angel investors in India will be part of the fund.

• The Village angel fund will act like a shot in the arm for Start-up Village, which would become the first incubator in India to have its own in-house fund.

• The fund will help the internet-telecom incubator to get the most conducive ecosystem for product start-ups.

NSE Launched Debt Trading Platform

National Stock Exchange, the Leading bourse on 11 May 2013 launched the country’s first dedicated debt trading platform. The new Platform launched is awaiting the market regulator SEBI’s guidelines for allowing participation of mutual funds, insurance companies and pension funds. NSE had recently received approval from SEBI to launch the debt segment.

Function of the Debt Trading Platform

• The debt trading platform is supposed to provide retail investors an opportunity to invest in corporate bonds on a liquid and transparent exchange platform.

• Banks and primary dealers are the first to enter and they will provide enough liquidity in the debt segment.

• The mutual funds, insurance companies and pension funds are also expected to participate after guidelines for the same are issued.

The Debt Trading exchange platform is an innovation, which has been launched after intensive feedback from market participants. It is similar to RBI’s NDS-OM, where Government securities are traded on a transparent platform India’s Services Growth hit 18-month low

As per the survey undertake by HSBC, in the month of May 2013, India’s services sector grew at its slowest pace in one and half years during the month of April 2013 as costs for raw materials, petrol and labour increased considerably. It is important here to note that the pace of hiring by private sector companies was also slowest in seven months, as per a monthly HSBC India survey of services sector managers.

Highlights of the Report

• The HSBC India Composite Output Index fell to 50.5 in April from 51.4 in March.

• The latest reading indicated that activity increased marginally and at the slowest pace since October 2011.

• The seasonally adjusted HSBC Business Activity Index declined to 50.7 in April from 51.4 in the previous month.

• Input prices saw further increase in April 2013— the trend continued for the 49th consecutive month — and cost of raw material, petrol and labour were higher, HSBC noted.

• The rates of increase in average selling prices were slower at both manufacturers and service providers.

• Despite the fact that new businesses placed at services and manufacturing firms in India increased last month, the rates of expansion eased.

• The manufacturers cited power cuts while service providers mentioned extreme weather and challenging market conditions for such a trend.

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