February 2013

Indian Economy Would Dominate the Economy of the World by 2030

US intelligence community in its report called Global Trends 2030: Alternative Worlds which was released on 10 December 2012 declared that India would straddle international commerce and will also dominate the economy of the whole world by 2030. This would happen with decelerating Chinese economy as well as declining West. Key points of the report:

India’s chance of powering would begin only after 2015 as China’s fortunes would start diminishing.

•  By the year 2030, Asia (mainly India) would return back to its position of being the powerhouse of the world, like it was before 1500.
• Pakistan might not exist at all.
• India will rush forward after 2020 as China would begin decelerating, primarily on certain demographic trends.
• China is indeed ahead of India, but the gap between India and China would start zeroing in by 2030. The economic growth rate of India will surge while that of China will slow down.
• In 2030, India might be rising as the economic powerhouse just like China is today. The current economic growth rate of China, 8-10 percent would become just a memory for the country.
• Overall size of the working-age population in China would increase in 2016 and decrease from 994 million to 961 million in 2030. Contrarily, working age population of India would most probably rise until around 2050.
• The demographic opportunities of India will rise between 2015 to 2050. China’s opportunities’ window is from 1990 to 2025. Contrarily, US’s opportunity was best between 1970 to 2015.
• Median age of India which is at present 26 will increase to 32 by 2030, which would still be the least among top 10 economies of world.

The report also mentioned that anytime after 2030, India instead of China would be having the largest middle-class consumption, which would be even larger than US and Europe combined. However, India might face trapping in the status of middle-income group in case the resources constraint, especially food, water and energy are not resolved. More investment would be required in science and technology sector in order to keep the pace of economy in the value chain. It was however made clear that the journey of economic development of both India as well as China will not be smooth. But if the difficulties were handled well, India as well as China would be dominating the world in 2030.

About Global Trends 2030: Alternative Worlds

The latest National Intelligence Council’s (NIC) Global Trends Report was released on 10 December 2012 by the Office of the Director of National Intelligence. This report is called Global Trends 2030: Alternative Worlds. Global Trends project offers expertise beyond government on certain factors like demography, environment, globalisation. The documents are prepared by Global Trends to assist the makers of policies in long-term planning on major issues which hold worldwide importance. First Global Trends Report was released back in 1997.New global trends report is being published after every four years after the U.S. presidential elections. For the production of Global Trends 2030, a range of analytical tools, in-depth research as well as detailed modeling was employed.

February 2013

UN Slashed World Growth Forecast to 2.4 %

United Nations on 18 December 2012 slashed its global growth predictions to 2.4 percent for 2013 and 3.2 percent for the following year and warned of a lasting employment crisis for western countries. The UN’s World Economic Situation and Prospects 2013 report warned that the Debt crises in Europe and the United States and a slowdown in China could all throw the world economy into recession. Earlier in the t month of June 2012 UN had predicted a growth forecast 2.7 percent for 2013 and 3.9 percent for the year after. As per the Report, With existing policies and growth trends, it is going to take at least another five years for Europe and the United States to make up for the job losses caused by the Great Recession of year 2008-2009. The report also predicted growth in South Asia averaging 5 percent in 2013, up from 4.4 percent in 2012, led by a moderate recovery in India.

Rollout of Direct Benefits Transfers started on 1 January 2013

National Committee on Direct Cash Transfers in its meet with the Prime Minister of India Dr. Manmohan Singh decided to roll-out, the Direct Cash Benefits from 1 January 2013 in 43 identified districts of the country. The decision was taken to ensure that the benefits could be transferred electronically into the bank accounts of the individuals, without making delays and diversions of any type. A high level meet was conducted on 13 December 2012 with the District Collectors of thee identified areas and fine tuned information related to steps that need to be taken in case of Direct Benefits Transfer.

    Direct Benefits Transfer and it covers:

• Transfer of cash benefits like pensions, scholarships, NREGA wages and others directly through the Government in the Bank or Post Office Accounts of identified beneficiaries under the Direct Benefits Transfer (DBT) programme. The program would also device necessary system so that the transfers can be done in a phased, time-bound manner for Direct Benefits Transfer.

• Direct Benefits Transfer would not act as a substitute for delivery of public services and it would continue to be in place via normal delivery channels.

• The Direct Benefits Transfer would not allow replacement of food through cash managed under Public Distribution System. The Government will be committed towards legislation of the National Food Security Act.

Rollout on 1.1.2013 mean in practice

The Rollout that would began on 1.1.2013 in 43 districts of 16 different states under 26 different schemes, which have been identified for first round of Direct Benefits Transfer. All these districts were selected on the basis of its coverage of bank accounts and Aadhaar.

BSE launched SME Platform Index

The Bombay Stock Exchange (BSE) on 14 December 2012 launched an SME index which primarily aims at tracking the current primary market conditions in the Indian capital market and measuring the growth in investors’ wealth over a period. The index is going to be constituted by small and medium enterprises (SMEs) which are listed on the BSE SME platform. Presently, there are 11 companies which are listed on the SME platform and this index is going to have features similar to the BSE IPO index. Through SME index the authorities can recognize the viability of the company and based on the report, people can invest in these companies, which will not only help the organisations to grow their businesses but also suppose to create employment. Small and Medium Enterprises (SMEs) in India constitute an important segment of Indian economy. Currently, the contribution of SMEs alone is greater than 7 per cent to GDP and 45 per cent to industrial production. Small and Medium Enterprises (SMEs) is also the second largest provider of employment after agriculture. SMEs also contribute to 40% of total exports directly and a significant amount of exports indirectly through large trading houses or third parties. With the SME platform, companies did not have to rely on loans from banks, as they can raise funds through the market and play an important role in contributing to the economic growth of the country. Out of the 11 companies listed so far, 10 are trading above their issue prices, while one is below its IPO price.

Retail Inflation Increased to 9.90 Percent in November 2012

Consumer Price Index (CPI) data released on 12 December 2012 showed that the retail inflation increased for the second successive month to 9.90 percent in November 2012 mainly because of the increase in price of food products like edible oil, sugar, vegetables as well as clothing. In October 2012, the retail inflation was 9.75 percent and in September 2012, it was 9.73 percent. Maximum increase in the price in the month of November 2012 was in oil as well as fats segment, amounting to the annual inflation of 17.67 percent. Apart from oil, the price of sugar also increased by 16.97 percent and pulses on the other hand because costlier by 14.19 percent on yearly basis. The prices of vegetables increased by 14.74 percent in November 2012, while the price of egg, fish and meat increased by 11.33 percent. Also, there was an increase in the price of footwear and clothing at 11.08 percent in November 2012. In the urban areas, retail inflation increased to 9.69 percent in November 2012 in comparison to 9.46 percent in October 2012. However, in rural areas there was a very slight decrease in inflation to 9.97 percent in November 2012 from 9.98 percent in October 2012. The rural, urban and combined All India provisional General (all groups) CPI numbers for the month of November 2012 are 126.9, 123.4 and 125.4, respectively. It is important to note that the Reserve Bank will keep an increase in retail inflation in mind while taking review about the mid-quarter policy in the third week of December 2012. In October 2012, raising concerns over rising inflation, Reserve Bank had kept the standard interest rates unchanged.

February 2013

SEBI allowed 12 more Alternative Investment Funds

Indian Market regulator Security and Exchange Board of India (SEBI) allowed 12 entities to set up Alternative Investment Funds (AIFs), a newly created class of pooled-in investment vehicles for real estate, private equity and hedge funds, in the last two months of October and November 2012. The 12 Alternative Investment Funds AIFs that were registered with SEBI since October 2010 included India Realty Fund, Dar Mentorcap Film Fund, Capaleph Indian Millennium Small & Medium Enterprises Fund and Capaleph Indian Millennium Private Equity Fund. SEBI in last few years had already allowed nine AIFs to set up shops in the country. As on 31 August 2012, a total of 20 applications were pending with SEBI for registration as AIFs. As per the new SEBI guidelines, AIFs can operate broadly in three categories. The SEBI rules is applicable to all AIFs which also includes those operating as private equity funds, real estate funds and hedge funds.

• The Category-I AIFs are those funds that get incentives from the government, SEBI or other regulators. It includes Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds.

• The Category-II AIFs are those funds which can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements. These AIFs include PE funds, debt funds or fund of funds.

• The Category-III AIFs are those trading with a view to make short-term returns and include hedge funds, among others.

Core Sectors of Indian Economy Grew By 6.5 %

Eight core sectors of the Indian Economy grew by 6.5 percent, the eight-month high in October 2012-2013 in comparison to 0.4 percent in same time period last year, the official data revealed on 30 November 2012. The sectors which weight approximately 38 percent in Index of Industrial Production (IIP) increased by seven-month high in September by 5 percent and 2.3 percent in August. However, the growth of core sector is not dependent on the data of industrial production. For instance, inspite of the higher growth in core sector, the industrial production contracted around 0.4 percent in September. A lot of things are dependent on the capital goods segment which showed consistent contraction. The official data revealed that the eight main industries of the Indian economy- steel, electricity, coal, crude, cement, natural gas, refinery products and fertilisers grew 3.7 percent in initial seven months of 2012-2013 fiscal year against 4.3 percent in the same period in 2011-2012 fiscal year.

Output of the coal showed regular growth with 10.9 percent. However, on the monthly basis, it was lower when compared with 21.4 percent in September. Refinery products, steel as well as cement contributed towards the strong economic growth with 20.3 percent, 5.9 percent and 6.8 percent respectively. Natural gas as well as crude oil remained in contractionary zone. Crude oil witnessed a fall in the growth consecutively for fifth month at 0.4 percent in comparison to 1.7 percent in September. Production of natural gas on the other hand, decreased by 14.9 percent. In September as well, it decreased 14.8 percent. Production of natural gas has continued to contract for more than a year now. Initially, in February 2012, all these sectors grew at a faster speed of 6.9 percent. The production of cement decreased from 13.8 percent in September to 6.8 percent. Generation of electricity, on the other hand increased by 5.2 percent after this segment saw a decrease in previous three months. Fertilisers indicated positive growth of 2 percent after 5.7 percent growth in September.

FII Investment in India surpassed more than 24000 crore

Foreign Institutional Investors (FIIs) in the month of December had pumped in more than 24000 crore rupees in the Indian stock market which is said to be the highest in 10 months timeline taking total FII inflow for the year 2012 to over 24 billion dollars. As per the SEBI Data, In December, 2012 Foreign Institutional Investors (FIIs) were gross buyers of shares worth Rs 71595 crore rupees while they sold equities amounting to 47412 crore rupees. This translates into a net inflow of 24183 crore rupees or around.4.42 billion dollar. Earlier in the month of February FIIs had infused 25212 crore rupees in stocks, which is counted to be second highest investment in Year 2012 since their entry into Indian capital markets in 1992. If we take the latest inflows into count, FII investment in that case in the country’s equity market reached 127455 crore rupees ($24 billion) for the year 2012 with just one more trading session left. Foreign investors are pouring money into the Indian stocks in hopes of cut in interest rates by the RBI. FIIs continued their positive standpoint on the Indian equities as the lack of investment options make the country an attractive destination. In addition to equities, FIIs invested 1178 crore rupees in the debt market the month taking the year’s tally to 34462 crore rupees. As on 28 December 2012 the number of registered FIIs in the country stood at 1759 and total numbers of sub-accounts were 6358 during the same period.

About Foreign Institutional Investors

Foreign Institutional investors are those organizations which sum up huge amount of money and invest that amount in securities, real property and other investment assets. Some Foreign Institutional investors are also operating companies that decide to invest their profits to some degree in these types of assets. The most common types of typical investors includes banks, insurance companies, retirement or pension funds, hedge funds, investment advisors and mutual funds. They act as highly specialized investors on behalf of others which are considered as their economic role.

Foreign Investments through P-Notes Increased to 8-Month Highest

Foreign investments in the Indian markets through P-notes or PNs (Participatory Notes) increased to 8-month high of around 1.75 lakh crore Rupees or 32 billion dollar in October 2012. This happened because different reform measures attracted the overseas investors towards the Indian markets. Market regulator SEBI (Securities and Exchange Board of India) revealed in its data that the overall value of P-Note investments in India (debt, equity or derivatives) by October 2012 end increased to highest since February 2012, when the total value of investments like these were 1.83 lakh crore Rupees. Apart from this, the overall value of P-notes issued with the derivatives as basics stood at 95536 crore Rupees by October 2012 end.

What are P-Notes or PNs?

P-Notes or PNs or Participatory Notes are used by the HNIs or High Networth Individuals, foreign institutions as well as hedge funds. P-Notes allow them to invest their money in Indian markets via registered FIIs or Foreign Institutional Investors. This saves them cost as well as time related to direct registrations. So basically, PNs are the tools or instruments which are issued by the registered FIIs to the overseas investors who are willing to invest in stock market of India without registering with market regulator SEBI.

RBI signed Currency Swap Agreement with Bank of Japan

The Reserve Bank of India on 4 December 2012 signed a three year Bilateral Swap Arrangement (BSA) with the Bank of Japan for swapping of the local currencies to address short-term liquidity problems. The BSA will be effective from 5 December 2012. The main idea behind the arrangement is to address short-term liquidity difficulties and supplement the existing international financial arrangements, as one of the efforts in strengthening mutual cooperation between Japan and India. The Bilateral Swap Agreement (BSA) is going to enable both the countries to swap their local currencies either Japanese yen or Indian rupee against US dollar for an amount up to 15 billion dollars. Earlier for a period of three years from June 2008 to June 2011 both the countries signed a similar agreement for an amount of 3 billion dollar. The enhancement of the BSA is going to strengthen economic and financial cooperation between the two countries and accordingly to financial market stability. The BSA is activated when an IMF-support programme already exists or is expected to be established in the near future.

More Incentives Announced to Exporters Hit By Global Meltdown

The union government on 26 December 2012 announced more incentives for the exporters who were hit hard because of global meltdown. An extension of 2 percent interest subsidiary would be provided for another year till March 2014. Additionally, the Commerce and Industry Minister Anand Sharma decided an introduction of pilot scheme of 2 percent interest subsidiary for those project exports that took place through Exim Bank. Any incremental export which would be done in the time duration of January to March 2013 would also be granted incentive. The ministry announced that the incentives would enable to push the exports in last quarter of 2012-2013 fiscal year. The objective of these incentives was stabilisation of the situation as well as shift from the negative territory to the positive one. Another objective of the incentives was keeping trade deficit under the control. Exports during the period of April-November 2012 shrunk by 5.95 percent to 189.2 billion. If the situation continues, it would be very difficult for India to achieve export target of 360 billion dollar in 2012-2013 fiscal year.

Setting up of CCI approved

The Union government of India on 13 December 2012 approved the setting up of a Cabinet Committee on Investment (CCI), to fast track investment clearances for mega projects. The decision was taken in the Union Cabinet meeting held under the chairmanship of Prime Minister Manmohan Singh. Prime Minister will head the CCI and he will also nominate the members of the committee. The CCI will expedite projects offering single window clearance for projects costing 1000 crore rupees or more by setting timelines for the concerned ministries.

The Union Cabinet also cleared the Land Acquisition Bill. Under the new bill consent of 80 percent land owners is mandatory for private acquisition of land where as for Public-Private-Partnership 70 per cent consent is required. The award of compensation will also be as per the new bill. The Cabinet also approved cutting the 1800-MHz band 2G spectrum auction reserve base price by 30 per cent for four circles that did not attract bidders in November. The circles are Delhi, Mumbai, Karnataka and Rajasthan. The Cabinet Committee on Economic Affairs also cleared a new urea investment policy.

February 2013

The Minimum Support Price of Wheat was Increased to 1350 Rupees per Quintal

The Union government of India on 26 December 2012 raised the Minimum Support Price, MSP of wheat by 65 rupees per quintal to 1350 rupees per quintal. The decision was taken in a Cabinet meeting this morning in New Delhi Chaired by the Prime Minister, Manmohan Singh. The government also decided to export additional 25 lakh tonnes of wheat from its go-downs. The CCEA approved the disinvestment of 12.5 per cent paid up equity capital to the Rashtriya Chemicals and Fertilizers. Current government holding is about 92.5 per cent. This will make the company compliant with the SEBI norms that 10 per cent float should be there. CCEA approved the proposal to export an additional 25 lakh tonnes of wheat. Earlier, we had approved export of 20 lakh tonnes of wheat of that a little over 17 lakh tonnes have been contracted.

The Union government of India on 26 December 2012 raised the Minimum Support Price, MSP of wheat by 65 rupees per quintal to 1350 rupees per quintal. The decision was taken in a Cabinet meeting this morning in New Delhi Chaired by the Prime Minister, Manmohan Singh. The government also decided to export additional 25 lakh tonnes of wheat from its go-downs. The CCEA approved the disinvestment of 12.5 per cent paid up equity capital to the Rashtriya Chemicals and Fertilizers. Current government holding is about 92.5 per cent. This will make the company compliant with the SEBI norms that 10 per cent float should be there. CCEA approved the proposal to export an additional 25 lakh tonnes of wheat. Earlier, we had approved export of 20 lakh tonnes of wheat of that a little over 17 lakh tonnes have been contracted.

Indirect Tax Collection Increased at 16.8 Percent to 2.92 Lakh Crore Rupees in April-November 2012

The Finance Ministry announced that indirect tax collection increased at the rate of 16.8 percent to 2.92 lakh crore Rupees in the period of April-November 2012 in comparison to the yearly growth target of 27 percent. It was announced that in first 8 months of 2011-2012 fiscal year, accumulation of the indirect taxes which include excise, services tax as well as customs, was 2.50 lakh crore Rupees. Excise amounted to 108470 crore Rupees during April to November 2012, while accumulation from service taxes and customs was 78774 crore Rupees and 104864 crore Rupees respectively. In 2011-2012 fiscal year, the government had proposals of collecting 5.05 lakh crore Rupees in all, from customs, service taxes and excise, which would bring an expected growth of 27 percent from last year’s collection. Targeted collection through customs for 2012-2013 was determined at 1.87 lakh crore Rupees. The targeted collection was 1.93 lakh crore Rupees through excise and 1.24 lakh crore Rupees through service tax. In the third week of December 2012, the government found it difficult for achieving customs, corporate tax as well as excise target as it was projected in Budget. This happened because there were unresponsive corporate profits. During November 2012, indirect tax accumulation increased by 17.2 percent to 36081 crore Rupees in comparison to 30790 crore Rupees.

Union Government of India lowered the Growth Projection for Current Fiscal to 5.7 Percent

The Union Government of India on 17 December 2012 lowered down the growth projection for the current financial year 2012-13 from 7.6 percent that was estimated earlier to 5.7-5.9 percent. It also pitched for the supportive monetary and fiscal policies for improving the confidence of the investors. The projection was showcased in the Mid-Year Economic Analysis tabled in Indian Parliament.

India’s Foreign Trade in November 2012: Exports valued at 22299.63 Million Dollars

As per the data released by Union Ministry of Commerce and Industry on11 December 2012, exports and imports during November 2012 were valued at 22299.63 and 41586.90 million US dollars respectively. The trade deficit for April - November 2012-13 was estimated at 129500.18 million US dollars which was higher than the deficit of 122638.35 million US dollars during April -November 2011-12.

EXPORTS (including re-exports)

Exports during November, 2012 were valued at 22299.63 million US dollars (122148.03 crore rupees) which was 4.17 per cent lower in Dollar terms (3.22 per cent higher in Rupee terms) than the level of 23269.71 million US dollars (118341.35 crore rupees) during November 2011. Cumulative value of exports for the period April-November 2012 -13 was 189222.20 million US dollars (1030488.22 crore rupees) as against 201185.40 million US dollars ( 933049.70 crore rupees) registering a negative growth of 5.95 per cent in Dollar terms and growth of 10.44 per cent in Rupee terms over the same period in 2011.

IMPORTS

Imports during November 2012 were valued at 41586.90 million US dollars (227795.59 crore rupees) representing a growth of 6.35 per cent in Dollar terms and 14.55 per cent in Rupee terms over the level of imports valued at 39102.48 million US dollars (198861.13 crore rupees) in November 2011. Cumulative value of imports for the period April-November 2012-13 was 318722.38 million US dollars (1734998.17 crore rupees) as against 323823.75 million US dollars (1503492.73 crore rupees) registering a negative growth of 1.58 per cent in Dollar terms and growth of 15.40 per cent in Rupee terms over the same period in 2011.

CRUDE OIL AND NON-OIL IMPORTS:

Oil imports during November 2012 were valued at 14522.1 million US dollars which was 16.77 per cent higher than oil imports valued at 12436.6 million US dollars in the corresponding period in 2011. Oil imports during April-November 2012-13 were valued at 110091.1 million US dollars which was 10.84 per cent higher than the oil imports of 99324.2 million US dollars in the corresponding period in 2011. Non-oil imports during November 2012 were estimated at 27064.8 million US dollars which was 1.50 per cent higher than non-oil imports of 26665.9 million US dollars in November 2011. Non-oil imports during April - November, 2012-13 were valued at 208631.3 million US dollars which was 7.07 per cent lower than the level of such imports valued at 224499.5 million US dollars in April – November 2011-12.