Economy Current Affairs
November 3rd week 2015 current affairs
Category : Economy Current Affairs
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1) RBI sets direct agri-lending target at 11.57%

  • Reserve Bank of India (RBI) on 19th November said banks should lend at least 11.57% of their fund directly to non-corporate farmers in fiscal 2015-16. The number is the system-wide average of the last three years, as computed by the RBI. 
  • From next year, such three year averages will be notified by the regulator at the beginning of every year. If a bank fails to meet this target, the lender will have to pay penalty, usually investing in bonds by Nabard or of Rural Infrastructure Development Fund (RIDF), at a lower rate.
2) 7th Pay Commission submits report to Government
  • 7th Central Pay Commission has recommended 23.55 hike in pay and allowances of government employees. Minimum basic pay of 18 thousand and maximum of Rs 2.5 lakh per month have been suggested by the Commission. 
  • According to the Commission chairperson Justice AK Mathur the pay revision will come into effect from January next year. He said the Commission has also recommended abolition of grade pay and pay band structure. He said the rate of annual increment for employees will be three percent. 
  • Under the recommendation, the pay will go up by 16 percent, allowances by 63 percent and pension by 24 percent. The commission has also recommended increase in military service pay besides revised pension formula for civil employees including Central Armed Police Forces and Defense Personnel retiring before 1st January 2016. It also recommended abolition of 52 allowances and introduction of a Health Insurance Scheme.
  • Finance Minister Arun Jaitley said that the pay revision will impact 47 lakh serving employee and 52 lakh pensioners. He said it will cost public exchequer over one lakh crore rupees annually. 
  • The Minister said implementation of Pay Commission will impact fiscal deficit by 0.65 percent. Mr. Jaitley said a committee headed by Expenditure Secretary will be set up to go through the report for its implementation. 
  • The Pay Commission was set up in February last year to revise remuneration of central government employees and pensioners. Its recommendations will also have a bearing on the salaries of the state government staff. The Commission also recommended One Rank One Pension for central government staffers, para military as well as armed forces personnel.
3) Kelkar panel suggests new ways to fund PPP projects
  • The Vijay Kelkar committee, which was reviewing the public-private partnership model of infrastructure development, has made recommendations to improve the financing of such projects. 
  • The committee has analysed the risks involved and the existing framework of risk-sharing between the project developer and the government and given its recommendations.
  • The mandate was to revive the past public-private partnership, review it and redesign it by introducing best international practices, and improve capacity building. According to Khelkar the committee has looked into all aspects. 
  • Both Kelkar and officials in the Finance Ministry remained tight-lipped on the key recommendations. Shaktikanta Das, Secretary, Department of Economic Affairs, while acknowledging that PPP projects are facing problems due to financing, contractual and capacity issues, declined to give any timeline for implementation. Das said the report will be put in the public domain soon.
4) RBI nod must for investors picking up more than 5% stake in a private bank
  • In a bid to have greater scrutiny over banking ownership, the Reserve Bank of India on 19th November said that new investors who buy over 5 per cent shares or convertible debt of a private sector bank will have to get the central bank’s approval. 
  • Existing promoters will also have to take the RBI’s approval if they intend to increase their holding to beyond 10 per cent in the bank. The RBI also said that all shareholders having 5 per cent or more of the paid-up share capital of a bank would have to give an annual declaration on their ‘fit and proper’ status. 
  • The major shareholders will have to furnish an annual declaration within one month of the close of financial year. If in the bank’s assessment any major shareholder is not ‘fit and proper’, it will have to immediately furnish the requisite information to the Reserve Bank.
  • An existing major shareholder, who already has the approval of the Reserve Bank to have a major shareholding in a bank, will not be required to obtain prior approval for fresh incremental acquisition of shares if the proposed aggregate holding is up to 10 per cent. However, the major shareholder will have to furnish the details of the source of funds for such incremental acquisition and obtain ‘no objection’ from the concerned bank.

5) ADB pledges $120 million loan to finance India, Bangladesh electricity link

  • The Asian Development Bank has pledged 120 million dollar loan to finance increased transmission capacity of cross-border electricity link between Bangladesh and India. ADB Country Director Kazuhiko Higuchi and Senior Secretary of Bangladesh Finance Ministry Mohammad Mejbahuddin signed the loan agreement for the SACEC Second Bangladesh-India Grid Inter connectivity project. 
  • The interconnection project is part of efforts under the South Asia Sub-regional Economic Co-operation (SASEC) Programme to promote regional prosperity through improved cross-border links in trade, power, road and rail links. 
  • The project will double the capacity of the existing inter-connectivity link connecting power grid of western Bangladesh at Bheramara and the grid of eastern India at Bahrampur from 500 MW to 1000 MW. The networks were first connected in 2013 under a previous project financed by ADB.
6) Govt lays out roadmap for phasing out tax exemptions for corporate
  • The Centre on20th November put out a roadmap to end exemptions and deductions as part of its effort to make the tax rates competitive. 
  • In Budget 2015-16, Finance Minister Arun Jaitley had set for himself the target of reducing the corporate tax rate to 25 per cent over the next four years from the current 30 per cent. This was to go hand-in-hand with a phasing out of exemptions and deductions, making the tax laws simpler. Jaitley had said then: The revenue foregone due to exemptions and tax incentives for corporates in 2014-15 was around Rs. 62,400 crore. 
  • In what it called a “step towards simplification of tax laws which is expected to bring about transparency and clarity,” the Central Board of Direct Taxes (CBDT), in a statement on 20th November, said all profit-linked, investment-linked and area-based deductions for both corporate and non-corporate taxpayers would be phased out.
  • The new plan includes reducing the maximum allowed depreciation rate, from 100 per cent on some assets to 60 per cent from April 1, 2017. 
  • The new rate will apply to all assets, new or old. Similarly, the government wants to end weighted deductions, which amount to as much as 150 per cent in the case of capital expenditure on warehousing facility for farm produce and fertilisers, or on Research and Development spending. 
  • That is, firms are allowed tax-breaks worth Rs. 150 even if they have spent only Rs. 100.
  • While the sunset date for an incentive will not be extended, in the case of sectors where no terminal date has been specified, the sunset date would be March 31, 2017.
  • A key worry for corporates would be whether they will pay more or less. At present, though the tax rate is 30 per cent, post deductions/exemptions the effective rate would be 22-23 per cent. 
  • According to a CII statement issued earlier, at the proposed 25 per cent, the effective rate would be around 29 per cent sans the sops plus the surcharge and education cess.
The phase-out plan:
  1. Highest rate of depreciation to be lowered to 60% against 100% now
  2. No weighted deduction to be allowed from April 1, 2017
  3. Deduction rate cut for expenditure incurred on scientific research
  4. Sunset date of March 31, 2017, specified for tax incentives in certain infra sectors
7) Area under wheat falls by 36 per cent during the Rabi season compared to year-ago period
  • Area under wheat has fallen by 36 per cent to nearly 79 lakh hectares during the Rabi season so far compared to around 107 lakh hectares in the year-ago period. The Agriculture Ministry said in a release that as per preliminary reports received from the fields, total area sown under Rabi crops stands at 242-lakh hectare, which was around 277-lakh hectares. Area sown under pulses stood at nearly 74-lakh hectare as compared to around 77-lakh at the same time last year. 
  • The release said that area under oilseeds has also dipped to around 50-lakh hectares from 60-lakh hectares. Area under coarse cereals has, however, increased to over 38 lakh hectares from 31 lakh hectares in the year-ago period.
8) 16 approvals cleared under TS-iPASS
  • The Telangana State Government has approved 16 proposals for investment under TS-iPass, it also included plans of MRF in Medak district with an investment of Rs. 900 crore. The total investment is about Rs.1,571 crore. These were cleared by the State Government on 21st November under the Telangana State Industrial Project Approval and Self Certification System (TS-iPASS). 
  • An employment potential of over 1,800 would be created with the proposed investments in Medak, Ranga Reddy and Mahabubnagar districts. 
  • Minister for Industries Jupally Krishna Rao stated that he had handed over some of the approval letters to the persons concerned as part of the fourth phase of clearances under TS-iPASS. The investments include in six solar power projects with an installed generation capacity of 47.3 MW. 
  • SEI Sriram Power Private Ltd, Kranthi Edifice Private Ltd, Sparkman Solar Energy Private Ltd, Shining Sun Power Private Ltd, GMR Hyderabad International Airport and Haldiram Snacks Private Ltd would invest over Rs. 310 crore for the purpose.
  • Expansion of the existing manufacturing facility of MRF Ltd has been in the air for over a year now and it has been firmed up with the clearance given by the State Government on Saturday. It would enable employment generation of 500 persons by the company.
  • Another major investment cleared was a circuit-breakers manufacturing unit by Schneider Electric India Private Ltd with Rs. 150 crore.


9) Centre notifies implementation of OROP for ex-servicemen

  • The Centre has issued notification for implementation of One Rank One Pension (OROP) for ex-servicemen. It will benefit over 25 lakh veterans and war widows. Under the OROP scheme notified last evening, the pension will be re-fixed every five years. 
  • For all pensioners, pension will be re-fixed on the basis of the average of minimum and maximum pension of personnel retiring in 2013 in the same rank and with the same length of service. In case of past pensioners, it will be re-fixed on the basis of pension of retirees of 2013 and the benefit will be from 1st July 2014.As per the notification, arrears will be paid in four equal half yearly installments. However, all the family pensioners, including those in receipt of Special and Liberalized family pensioners and Gallantry award winners will be paid arrears in one installment. 
  • The government has also decided to appoint a Judicial Committee to look into anomalies, if any, arising out of implementation of OROP. The Committee will submit its report in six months. 
  • The OROP for the ex-servicemen was announced on 5th of September this year, but notification could not be issued due to model code of conduct in view of Bihar assembly elections.
10) Exports of top 5 sectors dip 31% in September
  • Slump in global demand has impacted Indian exports as well. According to Commerce Ministry data, exports of top five sectors fell by about 31 per cent to 13.6 billion dollars in September. Petroleum exports were most affected falling by over 60%, engineering exports fell by 23%. Textiles, gems & jewellery also recorded negative growth during September. Only pharmaceuticals sector managed to registered a growth of 9 per cent. 
  • Contracting for the 10th month in a row, India`s merchandise exports dipped 24 per cent in September to 21.84 billion dollars.
11) Boeing, Tata form JV to make aerostructures
  • US aviation major Boeing Company and Tata Advanced Systems have announced a joint venture (JV) that will manufacture aero structures for aircraft and collaborate on integrated systems development opportunities in India. 
  • The JV will initially create a manufacturing centre of excellence to produce aero structures for the AH-64 Apache helicopter and to compete for additional manufacturing work packages across Boeing platforms, both commercial and defence. 
  • Boeing and Tata Advanced Systems intend to grow the JV partnership in the future, with a focus on opportunities to collaborate on development and selling of integrated systems. 
  • This agreement to establish a JV will propel the growth of the Indian aerospace sector by leveraging the world-class competencies of TASL and its supplier eco-system, as well as provide access to India’s world-class manufacturing capability, skilled talent and competitive cost structures 
  • The US company has over the last 12 months, doubled their sourcing from India. TASL is one of the select few in the private sector in India undertaking manufacturing and assembly of both aircraft and helicopters. The resulting scale and expertise at which the company now operates makes it well-positioned for large-scale systems integration work in India’s aerospace and defence sector
12) Centre to continue with 90:10 funding pattern to NE states
  • The Union Minster of State for Finance Jayant Sinha said that the Central Government has “largely resolved” to continue with the 90 to 10 ratio funding pattern for 17 Core Centrally Sponsored Schemes (CSS) and would follow the 80 to 20 ratio pattern for non-core CSS schemes for the North-Eastern States.
  • The funding pattern would be retained based on the recommendations of the Shivraj Singh Committee formed to study the funding pattern for North-eastern States.
13) Centre eases FDI norms in 15 major sectors
  • Current Affirs The Government has liberalised Foreign Direct Investment, FDI norms in 15 major sectors of the economy to further boost the investment environment and to bring in more foreign investment in the country. 
  • These sectors include mining, civil aviation, defence, broadcasting, construction, manufacturing and private sector banking. 
  • The reforms are aimed at further easing, rationalising and simplifying the FDI process and to put more and more FDI proposals on automatic route instead of Government route. 
  • According to Finance Minister Arun Jaitley, FDI caps have been enhanced and some outdated conditionalities have been done away with or eased. One of the most important reforms is in the construction sector and added that 32 investment points have been impacted by the FDI reforms. 
  • The Finance Minister said India has been one of the largest investment destinations in the recent past and FDI inflows in last one year increased by 40 per cent. 
  • Under the liberalised norms, the Commerce and Industry Ministry has relaxed FDI policy in single-brand retail and allowed companies to sell products through e-commerce. 
  • Besides, 100 per cent FDI has been allowed in plantation of rubber, coffee, cardamom, palm oil tree and olive oil tree The government has also raised the approval limit of Foreign Investment Promotion Board from three thousand crore to five thousand crore rupees.
  1. 100% FDI under automatic route is permitted in construction sector for operation and management.
  2. FPI`s have been allowed to invest upto 74 %in private banks.
  3. 100% FDI is allowed in plantation of rubber, coffee, cardamom, palm oil tree and olive oil tree.
  4. 100 % FDI has been allowed in DTH, CABLE Network and Mobile TV and 49 % FDI has been approved in FM radio.
  5. 100% Automatic route FDI allowed in Up-linking of Non-`News & Current Affairs` TV Channels.
  6. In order to relax FDI policy in single-brand retail, government has allowed companies to sell products through e-commerce.
  7. Government has allowed foreign investment up to 49% under automatic route in regional air services sector.
  8. FDI policy on Limited Liability Partnerships (LLP) has been amended to provide that investments in LLPs will not require Government approval.
  9. The government has also proposed to increase FIPB limit to Rs 5,000 crore from current Rs 3,000 crore.
  10. Opening up new sectors for foreign players is part of the ambitious `Make in India` initiative of the government. FDI is also essential to implement the `ease of doing business` in the country.
14) India inks $273 million loan pact with ADB for funding rural roads
  • Centre on 10th November signed 273 Million dollar loan agreement with Asian Development Bank in New Delhi for improving rural roads in Assam, Chhattisgarh, Madhya Pradesh, Odisha and West Bengal. Finance Ministry in a release said, the loan will help in constructing over six thousand kilometers of all-weather rural roads in these states and will benefit over 4200 rural habitations. 
  • This is the third and last tranche, of 800 million dollar financing facility under the Rural Connectivity Investment Programme. The Ministry said, the program has supported the Government’s objectives under the Pradhan Mantri Gram Sadak Yojana. 
  • The enhanced connectivity will improve access of rural communities to markets, district headquarters, health and education facilities, and other centers of economic activity.
15) Timeline for service tax refund
  • Seeking to fast-track service tax refund to exporters, the Central Board of Excise and Customs (CBEC) on 10th November fixed a timeline for 80 per cent payment of the total amount claimed. 
  • The move will speed up sanction of the refund accumulated CENVAT credit to exporters of the services, it added. It is also clarified that the decision to grant provisional payment is an administrative order and not a quasi-judicial order and should not be subjected to review. 
  • This payment of 80 per cent of the refund shall be purely provisional based on the documents above and without prejudice to the department`s right to check the correctness of the claim in terms of the relevant notification, it said. 
  • On the CBEC move, Nasscom said the circular has reiterated granting 80 per cent upfront refund within a week and the balance 20 per cent on scrutiny of applications.
16) Disabled, BCs, minorities should have 1st claim on central funds: CMs’ sub group
  • Chief Minister`s sub-group on centrally-sponsored schemes (CSS) has suggested that MGNREGA and social inclusion schemes, particularly for the disabled, backward castes and minorities, should have the first claim on central funds. 
  • The panel in its report submitted to the Prime Minister last month, has also recommended that the number of CSS should be reduced to 30 and flexi-funds can go up to 25 per cent, from the existing 10 per cent. 
  • According to the report, the Centre has retained 50 of the 66 ongoing schemes in current year`s budget and the remaining are either being taken into the central sector or reformulated as new umbrella schemes or have been transferred to states. The panel has said the focus of CSS should be on those 
  • It has also proposed that in schemes such as ASHA, Aanganwadi, Sarva Shikha Abhiyan with remuneration or salary components and the funding pattern should not be modified to the disadvantage of the states until the completion of the 12th Plan.
17)Panel on tax laws gets one-year extension
  • The Finance Ministry has extended the tenure of the high-level committee to interact with trade and industry on taxation policies by one year. The panel’s mandate is to engage with investors and assure them of a stable and transparent tax regime. 
  • The tenure of the Committee which was till November 25, 2015, is now further extended for one year, said an official statement on 12th November. The committee was set up in November 2014 following an announcement in Union Budget 2014-15 to identify grey areas in taxation policy. 
  • The committee is headed by Ashok Lahiri, former Chief Economic Adviser to the Finance Ministry, and its members include Siddharth Pradhan, former Member, Settlement Commission, and Gautam Ray, former Director General (Audits), Customs and Central Excise. 
  • The panel will continue to interact with trade and industry on a regular basis and recommend measures to the Central Board of Direct Taxes and the Central Board of Excise and Customs such as issuing clarificatory instructions and circulars. 
  • The Ministry said the two Boards are expected to take appropriate action within two months of the recommendations being made.
18) FM Arun Jaitley to chair six member panel to oversee NIIF`s activities
  • The government has constituted a six member Governing Council under the chairmanship of Finance Minister Arun Jaitley to oversee the activities of the National Investment and Infrastructure Fund (NIIF). The mandate of the Council is to approve guidelines for Investment of Trust property Corpus of NIIF and parameters for appointment and performance of investment managers and advisors. 
  • Earlier, the Union Cabinet had approved creation of twenty thousand crore rupees National Investment and Infrastructure Fund (NIIF) to attract investment from both domestic and international sources. 
  • The fund aims at maximising economic impact mainly through infrastructure development in commercially viable projects including stalled projects.