Economy Current Affairs
June 2011 Economy
Category : Economy Current Affairs
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June 2011

 According to data released for the first time by the Reserve Bank of India in June 2011, foreign direct investment (FDI) by Indian firms jumped more than two-folds in financial year 2010-11 to $43.9 billion from about $18 billion in 2009-10. Indian overseas investment policies were liberalised over the years to promote exports and strengthen economic linkages with other countries. Outward FDI comprises investments in equity, loans and guarantees issued by Indian firms to their joint ventures or wholly owned subsidiaries (WoS). The biggest outward investment from India during May 2011 was by Gammon India Ltd, which pumped over $ 1.83 billion into its Panama-based joint venture, Campo Puma Orient SA. The Panamanian JV is engaged in the fields of agriculture, forestry, hunting and fishing. In the same month Tata Steel invested $514.57 million in its Singapore-based subsidiary Tata Steel Asia Holdings PTE. 

The Government of India and Asian Development Bank (ADB) signed a $132 million loan agreement for strengthening Bihar’s power sector. The major portion of the ADB loan ($130.3 million) planned to be used to finance infrastructure such as transmission lines.The remaining ($1.9 million) is planned be used for strengthening the internal capacity of the Bihar State Electricity Board (BSEB).The project is expected to be completed by 31 December 2015. There is a provision for providing/transmitting additional 472,579 megawatt-hours (MWh) to consumers annually by the end of 2015 and reduce system losses by 3% by 2016 in seven districts of Bihar.
The Reserve Bank of India (RBI) hiked the repo rate on 16 June 2011, by 25 basis points; to 7.5 per cent from 7.25 per cent with immediate effect. As a result, the reverse repo rate stood automatically adjusted to 6.5 per cent and the marginal standing facility (MSF) rate to 8.5 per cent with immediate effect. It implied an increase in the cost of borrowing, EMIs for home, auto and personal loans. Other key rates and ratios remained unchanged. Economic growth outlook remained unchanged at about 8% in the 2011-12 fiscal.According to the first mid-quarter review of RBI’s Monetary Policy, 2011-12, this initiative was taken to maintain an interest rate environment that moderates inflation and checks inflationary expectations.

 Former finance secretary Ashok Chawla was selected by the Ministry of Corporate Affairs for the post of chairman of India`s anti-trust watchdog Competition Commission (CCI). The ministry sent Chawla`s name for ACC (Appointments Committee of Cabinet) approval. Chawla succeeded Dhanendra Kumar, who retired on 5 June 2011.CCI was established in 2003 to replace the erstwhile Monopolies and Restrictive Trade Practices Commission and Dhanendra Kumar was appointed as its first chairman in February, 2009. Unlike sector regulators, under India`s new competition laws, the CCI will have the authority to punish companies for exploiting consumers, prevent a company from taking over another by withholding permission. 

Committee on Small Savings headed by RBI Deputy Governor Shyamala Gopinath on 7 June 2011 suggested raising interest rates on Post Office savings bank deposits to 4 per cent. The committee recommended linking returns on other small savings schemes with interest rates on government securities. It went on to suggest that Kisan Vikas Patra (KVP) be withdrawn and the annual investme.nt limit for the popular Public Provident Fund (PPF) be raised to Rs.1 lakh from Rs.70000 at present.The committee recommended that interest rates for Post Office savings deposits be raised to 4 per cent from 3.5 per cent at present, in line with the Reserve Bank`s decision to hike rates on savings bank deposits. 
A committee on natural resources allocation on 6 June 2011 called for the creation of a national coal market to ensure greater transparency in the allocation of the dry fuel and reduce the demand-supply mismatch.The committee pointed out the drawbacks of the existing allocation mechanism for the dry fuel. The committee headed by former Finance Secretary Ashok Chawla recommended establishing a national coal market by creating a platform for commercial trading of coal by suppliers and buyers. The committee suggested use of experience gained through the e-auction platform to create a common one for all buyers and suppliers, including the captive allotees that are permitted to sell. The committee highlighted that introduction of both captive mining and e-auctions were right steps taken in the direction of moving toward market-based allocation. 
State-run NMDC on 6 June 2011 agreed to team up with Australia`s Minemakers Ltd to develop a phosphate mine in Wonarah in northern Australia. India`s largest iron ore miner’s decision to sign a memorandum of understanding with Minemakers is part of its strategy to focus on food and energy security by acquiring phosphate and coal mines. NMDC had signed an MoU with Nagarjuna Fertilisers for mining rock phosphate and potash in early 2011.As part of the MoU, NMDC and Minemakers decided to undertake a joint feasibility study into development of the Wonarah deposit. After completing the feasibility study, NMDC proposed to acquire 50% equity in the project and participate in the development of the project. 

 The Reserve Bank of India (RBI) on 3 June 2011 permitted urban cooperative banks (UCBs) to give loans to self help groups (SHGs). RBI’s initiative is expected to promote financial inclusion in the country.The measure was adopted with a view to further expanding the outreach of UCBs and opening an additional channel for promoting financial inclusion. 

The Gross Domestic Product (GDP) data was released on 31 May 2011 by the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation. According to the data, the country`s GDP (gross domestic product) growth slipped to 7.8 per cent in the fourth quarter (January-March) of 2010-11. The slowdown was believed to be the result of inflationary pressures and the impact of a consequent on-going tight money policy and a poor showing by the manufacturing sector. Robust farm sector growth coupled with better showing by construction and financial services propped up the overall GDP growth for the entire 2010-11 fiscal year to 8.5 per cent from 8 per cent in the previous fiscal. The fourth quarter growth of 2010-11 was way lower than the 9.4 per cent expansion in the same three-month period of 2009-10.vThe Indian government on 28 May 2011 announced the setting up of a panel to examine tightening of laws to curb the growth of black money as well as to suggest ways to declare illegally generated wealth as national asset. The committee to be headed by the chairman of the Central Board of Direct Taxes (CBDT) will also include the director, Enforcement Directorate(ED), Director-General, Directorate of Revenue Intelligence (DRI), Director-General (Currency), and other top tax and revenue department officials. The commissioner of income tax (Investigations) of the CBDT would be its member secretary. The committee will examine ways to strengthen laws to curb the generation of black money in the country, its illegal transfer abroad and its recovery