Current Affairs: Economy Issues: 06 - 13 Feb 2010 by Dialogue India

CAG Weekly
(Current Affairs & GK)
By Om Prakash (goldy sir)

Economy Issues

Contents:

• Core group to be set up for tackling price rise
• Ceiling raised for FIPB clearance

Brief Description:

Core group to be set up for tackling price rise

• The government decided to set up a high-profile Standing Core Group to suggest measures to deal with price rise and propose steps for improving public distribution system, procurement of foodgrains and production of agriculture produce.
• The Group will comprise the Union Finance Minister, the Union Agriculture Minister, Chief Ministers of Andhra Pradesh, Assam, Punjab, Haryana, Bihar, West Bengal, Gujarat, Madhya Pradesh, Chhattisgarh and Tamil Nadu; Deputy Chairman of Planning Commission and the Chairman of Prime Minister's Economic Advisory Council.
• The Group will suggest measures for increasing agricultural production and productivity including long-term policies for sustained agricultural growth; to reduce the gap between farm gate prices and retail prices and for better implementation of and amendment of the Essential Commodities Act.

Ceiling raised for FIPB clearance

• In a significant move aimed at expediting flow of foreign investment into the country, the Union Cabinet liberalised the foreign direct investment (FDI) policy further by allowing the Foreign Investment Promotion Board (FIPB) to clear proposals from overseas entities worth up to Rs. 1,200 crore, against the existing limit of Rs. 600 crore.
• proposals involving total foreign equity inflow of more than Rs. 1,200 crore would be placed for consideration of the Cabinet Committee on Economic Affairs (CCEA).

GDP growth pegged at 7.2 %

• The Government pegged economic growth at 7.2 per cent in 2009-10, which was short of the optimistic projections of the Reserve Bank of India (RBI), Prime Minister Manmohan Singh and the Finance Ministry, although it was higher than 6.7 per cent recorded a year ago.
• Interestingly, according to advance Gross Domestic Product (GDP) estimates released by the Central Statistical Organisation, farm output is estimated to contract by 0.2 per cent and services to record a moderate growth. Manufacturing is estimated to grow by a robust 8.9 per cent this fiscal.
• According to the CSO, farm and allied activities are expected to shrink by 0.2 per cent this fiscal against 1.6 per cent growth a year ago. The estimated growth this fiscal is estimated to be driven by robust expansion of the manufacturing sector against 3.2 per cent in 2008-09.

RBI to introduce new base rate in place of PLR for banks from April 2010

• The RBI is reportedly coming out with guidelines on the concept of 'base rate' for lending by banks. This will be the rate below which a bank will not be permitted to lend.
• At the same time banks are also being given freedom to price loans below Rs. 2 lakhs so that they can compete with MFIs in lending to the financial excluded.
• Some of the highlights of the move include:
• Each bank to set its own base rate which will be linked to cost of funds
• Deposits cost, cost of maintaining CRR and SLR and operating expenses to be factored in for arriving at the base rate
• Banks can now compete with microfinance companies for small loans
• Floating rate loans will automatically come down when cost of funds for a bank declines
• Credit pricing set to become more transparent

Black economy

• Black money has long been regarded the bane of our development process. It results in

1. huge wastage of resources,
2. lowers the rate of growth,
3. leads to criminalization in society
4. breakdown of institutions,
5. undermines the capacity of Indian businesses to face the challenge of globalization,
6. jeopardizes our security,
7. Leads to poor governance.

Divestment figures touch decent figures; government aims high

• The 2009-10 Budget had estimated that disinvestment proceeds would fetch around Rs 1,120 crore.
• The recent follow-on public offer (FPO) of National Thermal Power Corporation (NTPC) is expected to bring the government at least Rs 8,300 crore.
• The other two remaining FPOs in the fiscal — Rural Electrification Corporation and NMDC — are likely to bring in another Rs 20,000 crore.

S.R. Mani Ayer passes away

• S.R. Mani Ayer, a veteran in the advertising field, passed away after a brief illness.

Strong criticism about carry trade

• Foreign exchange carry trades — where speculators borrow in a low interest rate currency and then lend or invest in another currency for profit — are increasingly being seen to pose a major risk to international financial stability.
• It is common knowledge that the Yen carry trade and more recently, the dollar carry trade have helped speculators create asset bubbles, especially in the developing world.

On French auctions

• The ongoing NTPC follow on public offering is reportedly being offered on French auction basis to investors.
• In this method, the firm announces a minimum (reserve) price. Investors place sealed bids for quantity and price. When the bids are in, the firm negotiates a minimum and maximum price with the market regulator. Any bid above the maximum price is eliminated as a virtual market order.
• The bidders who bid between the minimum and maximum price are awarded shares on a pro rata basis, each paying the minimum price. In the event that demand for the stock is too high, the IPO may be changed to fixed-price offering.

Parikh panel recommends flat tax on diesel cars

• The Kirit Parikh Committee proposal for imposing a flat tax of Rs. 81,000 on diesel cars, including sedans and gas guzzlers SUVs and MUVs, may be worrying the big names in the industry, but environmentalists who have campaigned against 'dieselisation' of personal transport say the plan is too little and too late.

OVL consortium bags 40 per cent stake in Venezuelan block

• ONGC Videsh Limited (OVL)-led consortium announced that it had bagged 40 per cent stake in a $19-billion project to develop a major crude oil block in Venezuela.
• OVL, Indian Oil Corporation (IOC) and Oil India Limited (OIL) along with Spain's Repsol YPF SA and Malaysia's Petroliam Nasional Bdh won rights to develop the Carabobo-1 block in Venezuela's Orinoco Belt, according to a statement issued here.

GST set to be levied at 16%, goods may cost less

• The long-awaited reform of India's indirect taxes system is set to get a fillip, with a broad consensus forming within the finance ministry on a rate of 16% for the proposed Goods and Services Tax (GST) for both Centre and states combined.
• To be levied on all companies and traders with annual turnover of Rs 10 lakh and above, this would provide a tax base of 40-45 lakh assessees and ensure that neither the Centre nor states suffer any revenue loss. 
• Sources said rates for both the Centre and states on GST could be 8% each.

Centre wants alcohol, petro products under GST  

• The law ministry is believed to have sent a detailed response on the suggestions sought by the department of revenue towards finalisation of draft Constitutional amendment of the indirect tax reforms. 
• The proposed GST was initially scheduled to be implemented from April 1, 2010. However, lack of consensus between states and the Centre on a uniform tax structure and their inability to carry out necessary legislative amendments led to its postponement by another six months. 

Relook at OVL's Qatar exit plan'

• The Cabinet Secretariat has sought a fresh round of inter-ministerial consultations for seeking Cabinet approval to have a relook at ONGC Videsh Ltd's earlier decision to relinquish an offshore acreage in Qatar that the company had won in March 2005. 
• ONGC Videsh had in 2008 taken a decision to relinquish the prospect, Najwat Najem, located in the Arabian Gulf.
• The decision was taken after the company found that the reserves in the block were not enough to be commercially viable. The company had also decided to give up the rig it had acquired for drilling in the acreage.  
• An empowered committee of secretaries had on June 24, 2009 made its recommendations and cleared the ONGC proposal to give up the acreage. The Cabinet Secretariat, however, has now returned the oil ministry note for seeking Cabinet approval. It has asked the ministry to seek comments from other pertinent ministries before seeking Cabinet's approval on the ground that the secretaries panel did not have authority to decide issues of acquisition or relinquishment.  
  

Pre-consultation paper on 4G spectrum issued

• While the country awaits the auction of spectrum for the full-fledged launch of 3G mobile services, the Telecom Regulatory Authority of India (TRAI) issued a pre-consultation paper on 4G (fourth generation) telecom services which will provide ultra-broadband Internet access.
• The new 4G networks will allow users to stream mobile multimedia, such as TV broadcasts and online games, at up to 10 times the speed of 3G (third-generation) networks.
• 4G mobile networks have already been commercially launched in Sweden and Norway,Operators in other countries like the U.S., Korea and Japan are gearing up to launch 4G mobile wireless broadband services.
• The 3G services in India are now likely to be available only in 2011...if the auction of 3G spectrum is held in August or September 2010. India will thus be lagging behind a large number of countries in the world.

Courtesy:- Dialogue India and Career Plus