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March 2011 Economy
Author : shanu
Category : Economy Current Affairs
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March 2011 Economy

March 2011 Economy

 The flagship Technology Upgradation Fund Scheme (TUFS) of the Union Textiles Ministry is all set to be resumed after being suspended on June 29 last year for want of funds. The Cabinet Committee on Economic Affairs (CCEA) on 29 March approved the Ministry`s proposal for provision of Rs.1, 972 crore for new projects during the remaining months of the current Plan period. In addition, the panel cleared an additional Rs.5,432 crore for the scheme to meet the liabilities towards the projects that have been already sanctioned. With this, the allocation for the scheme for the XI Plan has been enhanced to Rs. 15,404 crore from Rs.8,000 crore, a rise of Rs.7,404 crore. The restructured TUFS provides for higher capital subsidy along with interest reimbursement for installation of first handlooms. Five per cent interest reimbursement and 10 per cent capital subsidy would be provided on brand new shuttleless looms, while 5 per cent interest reimbursement would only be provided for second-hand looms and that too only those up to 10-year vintage. 

In a significant development, the Centre on 31 March announced allowing 100 per cent Foreign Direct Investment (FDI) in the agriculture sector, including seeds, plantation, horticulture and cultivation of vegetables. According to a circular by the Department of Industrial Policy and Promotion released on “Consolidated FDI Policy — Circular 1 of 2011”, 100 per cent FDI has been now allowed in development and production of seeds and planting material, floriculture, horticulture, and cultivation of vegetables and mushrooms under controlled conditions. The policy will come into effect from April 1. Besides, animal husbandry (including of breeding of dogs), pisciculture, aquaculture under controlled conditions and services related to agro and allied sectors have been brought under the 100 per cent FDI norm. Similarly, the tea sector has also been brought under the 100 per cent FDI norm. 
Andhra Pradesh tops the list of functional Special Economic Zones (SEZs) in the country. This was stated by Union minister of state for commerce and industry Jyotiraditya Scindia in the Rajya Sabha. AP has 32 operational SEZs, followed by Tamil Nadu (22) and Karnataka (20) of the 130 SEZs in the country whose collective exports stand at Rs 2.2 lakh crore. Scindia said the total physical exports from the SEZs in the first three quarters of the current financial year 2010-11 was to the tune of Rs 2,23,132 crore. 
The Centre on 22 March introduced a Constitution Amendment Bill in the Lok Sabha to facilitate implementation of the Goods and Services Tax (GST), a tax regime that would subsume levies such as excise, service tax and sales tax. The Bill, introduced by Finance Minister Pranab Mukherjee, seeks to amend the Constitution with a view to conferring simultaneous powers on the Centre and the States to levy taxes on goods and services. It will also subsume State VAT/sales tax, entertainment tax (unless levied by the local bodies), luxury tax, taxes on lottery, betting and gambling as also tax on advertisements, cesses and surcharges levied by States. 
However, crude petroleum, diesel, petrol, aviation turbine fuel, natural gas and alcohol for human consumption have been kept out of the GST ambit. The Bill provides for creation of a GST Council to be headed by Union Finance Minister. The council will be empowered to recommend tax rates and exemption and threshold limits for goods and services. Besides, the Bill proposes a GST Dispute Settlement Authority to deal with grievances of the Centre and the States with regard to GST. The chairperson of the authority will be a retired judge of the Supreme Court or the Chief Justice of a High Court, who would be appointed by the President on the recommendation of the Chief Justice of India. 

 The home-grown Tata brand has been ranked as the first Indian brand to be in the top 50 club of global brands as per the latest Brand Finance`s Global 500 2007 report. The group has operations in more than 80 countries across six continents, and its companies export products and services to 85 countries. The total revenue of Tata companies stood at $67.4 billion in 2009-10, with 57 per cent of this coming from business outside India. 

The Central Government on 24 March constituted the Financial Sector Legislative Reforms Commission (FSLRC) under the chairmanship of former Justice B. N. Srikrishna to rewrite and harmonise financial sector legislations, rules and regulations. Apart from Justice Srikrishna as the head, other members of the 11-member commission include former PFRDA Chairman D. Swarup, former Axis Bank chief P. J. Nayak and PMEAC member M. Govinda Rao. 
The Central Government said it would create a Rs.2, 500-crore corpus for technology modernisation of the micro, small and medium units by next year. At present, only textiles sector is availing these benefits under the Technology Upgradation Fund Scheme (TUFS) wherein the units get 5 per cent subsidy on loans, for upgrading technology, from the government. The MSMEs account for 45 per cent of the country`s manufacturing output and 40 per cent of exports. The sector employs 50 million people in 26 million units producing over 6,000 products. 
Nippon Life Insurance Company on 14 March signed a ‘definitive agreement` to acquire a 26 per cent stake in Reliance Life Insurance, one of India`s largest private life insurers. 
Maruti Suzuki India on 15 March rolled out ten millionth car. The historic ten-millionth car, a metallic breeze blue coloured WagonR VXi (Chassis No 243899) rolled out from the company`s Gurgaon plant. With this landmark achievement, Maruti Suzuki becomes the only Indian car company that makes its entry into the select club of automobile manufacturers across the globe which has crossed this milestone. 

 Goldman Sachs Asset Management on 16 March announced that it has agreed to acquire Benchmark Asset Management Company, an asset management company in India. 

SBI official say-State Bank of India is on a mission to expand rural banking and is setting up ‘mini kiosks`, which offer limited banking services in villages having a population of over 2,000 persons. These kiosks are being set up on the Private Public Partnership (PPP) model with an aim of building a robust network through private partnership. In urban areas, SBI has launched ‘One Rupee Bank,` scheme through which customers can open an account, deposit money etc using the kiosk. The Andhra Pradesh Government had allotted 1,381 villages to SBI, in which kiosks were to be set up by March 2012 as part of a major policy thrust towards financial inclusion by the Centre. The SBI has already covered 300 villages in 20 districts. In Guntur district, a rural kiosk was inaugurated at Didugu village in Tadepalli mandal. ‘One Rupee Bank,` branch concept and ‘Bank on Bike,` schemes which have been launched in Medak district have become hugely popular. 
In its pursuit to contain price rise in the economy the Reserve Bank of India (RBI) on 17 March hiked the short-term indicative rates by 25 basis points. Since last March, this is the eighth time the RBI increased the rates and this move of the central bank would increase the borrowing cost of customers. The central bank has increased the repo rate by 25 basis points from 6.5 per cent to 6.75 per cent and the reverse repo rate by 25 basis points from 5.5 per cent to 5.75 per cent with immediate effect. Repo rate is the rate at which banks borrow money from the central bank and reverse repo is the rate at which banks park their funds with the central bank. 
The Centre on 17 March announced relaxation in norms for according the Maharatna status to Central public sector enterprises, a step that help many CPSEs acquire this tag, which gives a company more financial autonomy. At present, four CPSEs (ONGC, Indian Oil Corp, SAIL and NTPC) have been given the Maharatna status. As per the new guidelines issued by the Department of Public Enterprises, a company qualifying for the Maharatna status should have an average annual turnover of Rs.20,000 crore in the last three years, as against Rs.25,000 crore prescribed earlier. Similarly, a CPSE with an average annual net worth of Rs.10,000 crore and net profit of Rs.2,500 crore for three years in a row will qualify for the status. Earlier, companies required average annual net worth of Rs.15,000 crore and net profit of Rs.5,000 crore for three consecutive years were eligible for the tag. 
The Reserve Bank of India (RBI) on March 7 constituted a working group under the Chairmanship of Usha Thorat, Director, Centre for Advanced Financial Research and Learning (CAFRAL), to examine a range of emerging issues pertaining to regulation of the NBFCs (non-banking financial companies) sector. While examining a range of emerging issues pertaining to the regulation of the sector, the working group will focus on the definition and classification of NBFCs, addressing regulatory gaps and regulatory arbitrage, maintaining standards of governance in the sector and appropriate approach to NBFC supervision. 
Finnish Firm Neste Oil on March 8 opened the world`s biggest renewable diesel plant in Singapore , taking advantage of massive palm oil production in nearby Malaysia and Indonesia. Clean diesel produced from the euro 550 million ($769 million) plant using feedstock such as palm oil and animal fat will be marketed in Europe, Canada and the U.S., which already have legislation in place supporting biofuels. With an annual capacity of 800,000 tonnes, the Singapore facility is the biggest renewable diesel plant in the world. The plant produces Neste Oil`s patented NExBTL renewable diesel. 
The BML Munjal-led Hero Group on March 8 said it would of Japan`s Honda Motor Co in their joint-venture Hero Honda Motors Ltd (HHML) for over Rs.3,841 crore. 
Tata Consultancy Services (TCS), a separate business unit iON, an integrated information technology solution for SMBs. The iON solution, which carries TCS brand and provides on-demand business solutions using the cloud computing technology, will deliver IT in the third generation service model to SMBs. Using the pay-per-use business model, iON will help SMBs leverage world-class technology solutions as a key business differentiator. 
The Essar Group will take over Zimbabwe`s state-owned Zisco Steel in a $750-million deal to revive production at the defunct firm that was once one of Africa`s largest producers. 
The Bombay Stock Exchange plans to launch its small and medium enterprises exchange platform by the second-half of 2011 after getting approval from the capital market regulator Securities and Exchange Board of India. 
Finance minister Pranab Mukherjee on 28 February presented to Parliament India`s budget for the coming financial year beginning in April. 
Following are the highlights of the budget: 
 
TAXES
Standard rate of excise duty held at 10 percent; no change in CENVAT rates
Personal income tax exemption limit raised to Rs 180,000 from Rs 160,000 for individual tax payers
For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to Rs 2.50 lakh.
Citizens over 80 years to have exemption limit of Rs 5 lakh.
A new revised income tax return form `Sugam` to be introduced for small tax papers.
To raise minimum alternate tax to 18.5 percent from 18 percent
Direct tax proposals to cause 115 billion rupees in revenue loss
Service tax rate kept at 10 percent
Customs and excise proposals to result in net revenue gain of 73 billion rupees
Basic customs duty on agricultural machinery reduced to 4.5 per cent from 5 per cent.
SUBSIDIES
Subsidy bill in 2011-12 seen at 1.44 trillion rupees
Food subsidy bill in 2011-12 seen at 605.7 billion rupees
Revised food subsidy bill for 2010-11 at 606 billion rupees
FISCAL DEFICIT
Fiscal deficit seen at 5.1 percent of GDP in 2010-11
Fiscal deficit seen at 4.6 percent of GDP in 2011-12
Fiscal deficit seen at 3.5 percent of GDP in 2013-14
SPENDING
Total expenditure in 2011-12 seen at 12.58 trillion rupees
Plan expenditure seen at 4.41 trillion rupees in 2011-12, up 18.3 percent
REVENUE
Gross tax receipts seen at 9.32 trillion rupees in 2011-12
Non-tax revenue seen at 1.25 trillion rupees in 2011-12
Corporate tax receipts seen at 3.6 trillion rupees in 2011-12
Tax-to-GDP ratio seen at 10.4 percent in 2011-12; seen at 10.8 percent in 2012-13
Customs revenue seen at 1.52 trillion rupees in 2011-12
Service tax receipts seen at 820 billion rupees in 2011-12
Revenue gain from indirect tax proposals seen at 113 billion rupees in 2011-12
Service tax proposals to result in net revenue gain of 40 billion rupees in 2011-12
GROWTH, INFLATION EXPECTATIONS ( Inflation remains principal concern )
Economy expected to grow at 9 percent in 2012, plus or minus 0.25 percent
Inflation seen lower in the financial year 2011-12
DISINVESTMENT
Disinvestment in 2011-12 seen at 400 billion rupees
Government committed to retaining 51 percent stake in public sector enterprises.
POLICY REFORMS
To create infrastructure debt funds
FDI policy being liberalised.
To boost infrastructure development with tax-free bonds of 300 billion rupees
Food security bill to be introduced this year
To permit SEBI registered mutual funds to access subscriptions from foreign investments
Raised foreign institutional investor limit in 5-year corporate bonds for investment in infrastructure by $20 billion
Setting up independent debt management office; Public debt bill to be introduced in parliament soon
Bills on insurance, pension funds, banking to be introduced.
Constitution Amendment Bill for introduction of GST regime in this session.
New Companies Bill to be introduced in current session
SECTOR SPENDING
To allocate more than 1.64 trillion rupees to defence sector in 2011-12 ( 11% hike in defence allocation )
Corpus of rural infrastructure development fund raised to 180 billion rupees in 2011-12
To provide 201.5 billion rupees capital infusion in state-run banks in 2011-12
To allocate 520.5 billion rupees for the education sector. Rs.21,000 crore for Sarva Shiksha Abhiyan.
To raise health sector allocation to 267.6 billion rupees (20% hike in health budget )
Rs.500 crore more for national skill development fund.
Rs.54 crore each for AMU (Aligarh Muslim University) centres at Murshidabad and Mallapuram.
Rs.58,000 crore for Bharat Nirman; increase of Rs.10,000 crore.
Mahatma Gandhi National Rural Employment Guarantee Scheme wage rates linked to consumer price index; will rise from existing Rs.100 per day.
Increased outlay on social sector schemes. ( Social sector allocation up by 17%)
Infrastructure critical for development; 23 percent higher allocation in 2011-12. ( Rs 2,14,000 cr allocated for infrastructure sector )
AGRICULTURE ( Farm loans at 4 per cent )
Removal of supply bottlenecks in the food sector will be in focus in 2011-12
Agriculture growth key to development: Green Revolution waiting to happen in eastern region.
To raise target of credit flow to agriculture sector to 4.75 trillion rupees
Gives 3 percent interest subsidy to farmers in 2011-12
Cold storage chains to be given infrastructure status
Capitalisation of National Bank for Agriculture and Rural Development (NABARD) of 30 billion rupees in a phased manner
To provide 3 billion rupees for 60,000 hectares under palm oil plantation
Actively considering new fertiliser policy for urea
Food storage capacity to be augmented - 15 more mega food parks to be set up in 2011-12; of 30 sanctioned in previous fiscal, 15 set up.
Comprehensive policy on further developing PPP (public-private-partnership) mode.
ON THE STATE OF THE ECONOMY
"Fiscal consolidation has been impressive. This year has also seen significant progress in those critical institutional reforms that will pave the way for double digit growth in the near future."
Food inflation remains a concern
Current account deficit situation poses some concern
Economy back to pre-crisis trajectory.
Development needs to be more inclusive growth.
Others
Govt to move towards direct transfer of cash subsidy for kerosene, LPG and fertilisers.
Financial Sector Legislative Reforms Commission, to be headed by former Supreme Court judge B Srikrishna, to complete its work in 24 months; to overhaul financial regulations.
Five-fold strategy against black money; 13 new double taxation avoidance agreements; foreign tax division of CTBT strengthened; strength of Enforcement Directorate increased three-fold.
Bill to be introduced to review Indian Stamp Act.
New coins carrying new rupee symbol to be issued.
Anganwadi workers salary raised from Rs.1,500 to Rs.3,000.
Mortgage risk guarantee fund to be created for economically weaker sections.
Housing loan limit for priority sector lending raised to Rs.25 lakhs.
The Centre has decided to set up a six-member committee headed by T.V. Mohandas Pai of Infosys to study and recommend the criteria for selecting private partners for the setting up of 20 new Indian Institutes of Information Technology.
Tata Motors on 1 March showcased concept small car ‘Pixel`, based on the Rs.1 lakh car Nano, for the European market at the ongoing 81st Geneva Motor Show.
The Andhra Pradesh government made a giant leap in the industrial map of the country, when Chief Minister N. Kiran Kumar Reddy cleared industrial investment worth Rs. 25,672 crore on a single day last week at the State Investment Promotion Board meeting in Hyderabad. He cleared 25 units with an employment potential of 41,406 that is expected to bring revenue to the Government through the Value Added Tax (VAT) of Rs. 878.30 crore annually. These include Bharat Dynamics Limited and Bharat Electronics Limited units at Anantapur for manufacturing missiles, NTPC-BHEL power plant equipment project at Mannavaram near Srikalahasti in Chittoor district.
 

 

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