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ECONOMY ISSUES
Exports up by 52 % in First Half Even as exports continued to maintain a robust growth, registering a 36.3 per cent growth at $24.80 billion in September despite downturn in the U.S. and eurozone, signs of deceleration have already started to set in. Total exports for the current fiscal might reach $290-300 billion, Commerce Secretary Rahul Khullar said. Exports slowed down in September when compared to the 44.2 per cent growth recorded in August. The U.S. and Europe are the two biggest markets for Indian merchandise, accounting for about 30 per cent of total shipments. Imports in September grew 17.2 per cent at $34.60 billion vis-a-vis the same period last year, leaving a trade deficit of $9.80 billion. During April-September, exports expanded by 52.1 per cent to $160 billion and imports by 32.4 per cent to $233.50 billion, leaving a trade gap of $73.50 billion. During the first half of this fiscal, the sectors that registered healthy growth in exports include engineering (103 per cent), petroleum and oil lubricants (53 per cent), gems and jewellery (23 per cent), ready-made garments (32 per cent), marine products (48 per cent) and drugs (33 per cent). Exports were growing in new markets such as Africa, Latin America and Asia, which had helped India maintain the export growth momentum. The Federation of Indian Exporters Association said the trade deficit was huge and might touch $150 billion by the end of 201112 which was a matter of concern. During April-September 2011-12, PoL imports grew by 42 per cent to $70.4 billion year-on-year. The sectors that reported a steep increase in imports include gold and silver (80 per cent), vegetable oil (60 per cent) and electronics (33 per cent). RBI Eased FDI Procedures The Reserve Bank of India (RBI) a nn ou n ced that transfer of shares between Indians and non-resident Indians (NRIs) would not require its permission in several key areas such as financial services. RBI initiated measures to ease foreign direct investment (FDI) procedures with an objective to woo global investors. The central bank Amended the Foreign Exchange Management Regulations. It mentioned that prior permission would not be necessary where the company whose shares were being transferred was engaged in any financial service. The RBI permission had also been done away with for transfer of shares between residents and non-residents in cases where the Foreign Investment Promotion Board (FIPB) had already given its clearances and the SEBI guidelines were met. The steps had been taken as a measure to further liberalise and rationalise the procedures and policies governing foreign direct investment in India.FDI inflows shot up by 95 per cent to $17.37 billion between April and August 2011. The government and the RBI want to maintain robust foreign exchange reserves as volatility in the stock market has led to outflows. Direct Tax Collection Rs 284081 Crore The gross direct tax collection jumped 20.28 per cent during the AprilOctober period of 2011-12 to Rs 284081 crore due to an increase in corporate tax mop-up, according to the Finance Ministrys statement. The figure was Rs 236176 crore in the same period in 2010-11. The gross tax collection in the first seven months of 2011-12 fiscal is only about 48.5 per cent of the Rs 5.85 lakh crore target for the entire fiscal.Net direct tax collection for the seven-month period(April-October) of the fiscal 2011-12 stood at Rs.218850 crore and it marked an increase of a mere 7.1 per cent as compared to the previous fiscal 2010-11 owing to the huge outgo
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on refunds. Although the direct revenue garnered during the AprilOctober 2011 was higher than the Rs.236176 crore collected during the same period of 2010-11, the percentage-wise shortfall in collection has been attributed to the ongoing economic slowdown. However, the gross corporate tax collection was a robust 20.35 per cent higher at Rs.189872 crore during April-October 2011-12 as against Rs.157767 crore mopped up in the same period in 2010. Gross personal income tax collection was up by 20.17 per cent at Rs.93769 crore. The mopup by way of wealth tax grew by 10.6 per cent to Rs.418 crore from Rs.378 crore in the same period last fiscal. However, owing to the absence of boom in the stock market during the current fiscal year, collection through securities transaction tax (STT) declined by 17.9 per cent to Rs.2958 crore during April-October period in 2011 as against a mop-up of Rs.3602 crore in the same period in 2010. Industrial Growth Slows Down to 4.1 % Confirming the onset of a slowdown in the wake of a dismal global scenario and direct impact of high inflation and interest rates at home, industrial growth remained tepid at 4.1 per cent in August, 2011, as compared to 4.5 per cent in the same month last year. The IIP (Index of Industrial Production) data released here on Wednesday revealed a continued deceleration in output growth even as the August performance was a wee bit better than in July which stands revised upwards to 3.8 per cent from 3.3 per cent estimated earlier. In particular, it was the manufacturing sector with a weight of over 75 per cent in the index which pulled down the overall IIP growth in August. Factory output during the month rose by a mere 4.5 per cent this year as
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compared to 4.7 per cent last year. As a result, manufacturing growth during April-August 2011 stood at 5.6 per cent, way lower than the 8.7 per cent expansion posted during the same period last year. The IIP data disappointed Finance Minister Pranab Mukherjee as the low industrial growth may impact the overall economic growth during the second quarter (July-September).India Inc., on its part, has been making out a case for pause in rate hike by the Reserve Bank of India. However, with food and headline inflation hovering near 10 per cent with no signs of relenting, that seems a remote possibility. FICCI noted that investment demand had been impacted during the last few months by RBIs monetary tightening measures. As per the IIP data, the mining sector was the worst performer in August with output declining by 3.4 per cent as compared to a growth of 5.9 per cent in the corresponding month of the previous year. Electricity generation, however, showed a smart turnaround, growing by 9.5 per cent as against a mere one per cent growth in August last year. Growth in capital goods output also slowed to 3.9 per cent during the month from 4.7 per cent in the same month of 2010. Contributing to the slide was the consumer durables segment, which grew by a mere 4.6 per cent in August this year as compared to an expansion of 8.1 per cent in the previous year. As a result, overall growth in consumer goods output slowed down to 3.7 per cent during the month as compared to 4.6 per cent in August 2010. OVL Signs Pact with PetroVietnam Oil and Natural Gas Corporation Videsh Ltd. (OVL), the overseas arm of ONGC, inked an

agreement with Vietnams national oil company PetroVietnam to jointly explore for oil and gas in South China sea in Vietnam, India and third countries. OVL and Vietnam Oil and Gas Group (PetroVietnam) signed an agreement of cooperation in the presence of visiting President of the Socialist Republic of Vietnam, Truong Tan Sang, and Prime Minister Manmohan Singh, ONGC said in an official statement here. The agreement is intended for developing long-term cooperation in the oil and gas industry and shall be in force for three years. Under the agreement the two entities will cooperate on oil and gas exploration, refining, transportation and supply projects in Vietnam, India and third countries. Now, FDI in Beekeeping The government allowed 100 per cent FDI in beekeeping, also known as apiculture, to attract foreign investment in the agriculture sector.Foreign direct investment (FDI) has been allowed up to 100 per cent under the automatic route in apiculture under controlled conditions, according to the revised Consolidated FDI Policy of 2011, released by the Department of Industrial Policy and Promotion (DIPP).However, certain conditions will apply. The companies can undertake production of honey by beekeeping, except in forest/wild, in designated spaces with control of temperatures and climatic factors like humidity and artificial feeding during lean seasons, the policy paper said. The government is bringing more farm areas under the 100 per cent FDI route to encourage investment in the sector. It has already permitted 100 per cent FDI in agricultural areas such as plantation, horticulture, seeds and cultivation of vegetables and mushrooms. The FDI has been allowed in animal husbandry,

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pisciculture and aquaculture along with in agro and allied sectors. Disclosure of Names of Distributors of All Mutual Funds mandatory SEBI ordered all mutual funds to disclose names of distributors, who receive commission in excess of Rs 1 crore annually, on their respective websites, in order to improve transparency. Fund houses, according to a Sebi circular, will have to disclose names of distributors who have their presence in more than 20 locations or those who have received over Rs 1 crore commission in a year. They would also have to disclose the amount of commission paid to distributors. The disclosure, which would also be uploaded on the MF industry body AMFIs website, was made mandatory from 10 November 2011. Experts are of the opinion that the move is aimed at tracking the payouts to big distributors like global and domestic banks and large independent financial advisors.. E-payment System Launched Finance Minister Pranab Mukherjee on 31 October 2011 inaugurated a fully secure government e-payment system that will enable the Central government to directly credit dues into the accounts of beneficiaries. Developed by the Controller General of Accounts (CGA) the GePG is a portal which enables successful delivery of payment services from Pay & Accounts Offices (PAOs) for online payment into beneficiaries accounts in a seamless manner under a secure environment. The Government e-Payment Gateway (GePG) will use digitally signed electronic advice (e-advice). The GePG has been designed to serve as middleware between COMPACT

(computerised payment and accounts) application at PAOs and the core banking solution (CBS) of the agency banks/Reserve Bank of India, to facilitate paperless transaction. It will thus reduce the overall transaction cost and promoting green banking. The system will usher in transparency and expedite direct payments from Central paying units with respect to subsidies to users and consumers of fertiliser, kerosene and cooking gas. Its efficiency and ease-of-use for all Ministries and departments will lead to an increased adoption of other eservices for online payment transactions. The e-payment system will save both time and effort in effecting payments and also facilitate the elimination of physical cheques and their manual processing. Under the traditional system of government transactions, payments to employees and vendors are made through cheque, cash and demand draft or by Electronic Clearing Service (ECS) in a few Ministries. Ministries in the past few years used the RBIs facilities of Real Time Gross Settlement and National Electronic Funds Transfer to make payments through the banking channel. Besides revolutionizing payments to individual beneficiaries, the governments epayment gateway (GePG) - linking 1.3 lakh agencies down to the level of panchayats - has been developed to capture all data on receipt, payments, borrowings and deficit real time. It will also help the Centre in more effectively channelizing plan expenditure on development schemes. The government spends nearly Rs 4 lakh crore every year on 140 centrally sponsored plan schemes and over 800 central sector schemes along with state schemes and additional central assistance. The new payment gateway will help monitor the entire disbursement.

8 Core Infrastructure Industries Growth Slowed Down Data released by the commerce and industry ministry showed that the 8 core infrastructure industries growth slowed down to 2.3 per cent for September 2011 as against 3.3 per cent in September 2010. The slowdown was attributed to rising cost of credit and inputs and weak demand. The core sector spanning coal, crude oil, natural gas, petroleum refinery products, fertilisers, steel, registered growth slower than the 3.7% growth in August. During the first half of the current fiscal (AprilSeptember 2011), key industries expanded by 4.9 per cent as against 5.6 per cent during the corresponding period in 2010-11 fiscal. Growth in the countrys eight key infrastructure sectors slowed in September, dragged down by decline in coal, natural gas and fertiliser output, raising fresh concerns about the state of the industrial segment, which was hit by rising interest rates and input costs. The index of eight core sector industries having a combined weight of 37.90 per cent in the index of industrial production (IIP) stood at 131.50 in September 2011, showing a growth rate of 2.3 per cent year-onyear. Inflation measured on the consumer price index for industrial workers (CPI-IW) touched the doubledigit mark at 10.06% for September 2011. Indias Exports Grew by Over 36 % Indias exports grew by over 36 per cent on an annual basis to 24.8 billion dollars in September, 2011, demonstrating impressive year-onyear expansion despite a slowdown in the US and Europe. In September 2010, the countrys outbound shipments were valued at 18.2 billion
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dollars. Indias imports also registered growth in September, rising by 17.2 per cent in comparison to the corresponding period of the previous year leaving a trade deficit of 9.7 billion dollars. 21 New Textiles Parks approved Union Ministry of Commerce, Industry and Textiles sanctioned 21 new Textiles Parks under the Scheme for Integrated Textiles Parks with a project cost of 2100 crores rupees to be implemented over a period of 36 months. The approval came in the 4th week of October 2011. Among these 21 new Textiles Parks, 6 were sanctioned in Maharashtra, 4 in Rajasthan, 2 each in Tamil Nadu and Andhra Pradesh, 1 each in Uttar Pradesh, Gujarat, Tripura, Himachal Pradesh, Karnataka, Jammu & Kashmir and West Bengal. Minister for Commerce, Industry and Textiles Anand Sharma as Chairman of the Project Approval Committee under the Scheme accorded approval. Earlier, Inter Ministerial Project Scrutiny Committee which examined 55 proposals for new Textiles Parks in the country gave its recommendations for the setting-up new textiles parks. Proposals received were scrutinised by an inter ministerial Project Scrutiny Committee on the basis of project cost, land size, net worth of investors, employment generation and value chain to be developed by the industry. Government also sought to ensure balanced regional development, promote textiles industry in North Eastern States and in States where the industry is in a nascent stage of development and promote textiles parks in cooperative & handloom sectors. Textiles Parks are to be set up under the Scheme for Integrated Textiles Parks for development of common infrastructure and the Technology
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Upgradation Funds Scheme (TUFS) .Government enhanced the allocation under TUFS from Rs. 8000 crores to 15404 crores rupees under the 11th Five Year Plan. The new Textiles Parks would leverage an investment of over 9000 crores rupees and provide employment to 4 lac textiles workers. Government would finance common infrastructure with a subsidy upto Rs. 40 crores per Textiles park. Textiles Ministry would be seeking a higher allocation under the 12th Five Year Plan. Of the 40 textiles parks sanctioned under the 11th Five Year Plan, 24 Textiles Parks have started operations and have attracted investments of 18880 crores rupees, with a Government subsidy of 1420 crores rupees. About Textiles Parks The product mix in these parks would include apparels and garments parks, hosiery parks, silk parks, processing parks, technical textiles including medical textiles, carpet parks, powerloom parks. The focus of Government has been to ensure value addition through aggregation to best utilize Indias raw material surplus in cotton and cotton yarn for enhanced labor employment and export earnings. The Scheme for Integrated Textiles Parks seeks green field investments in textiles sector on a public private partnership basis with the objective of setting up world class infrastructure for Textiles industry. Agriculture Ministry Proposed a Hike of Rs 115 Per Quintal in MSP of Wheat The Agriculture Ministry on 20 October 2011 proposed a hike of Rs 115 per quintal in the minimum support price (MSP) of wheat to Rs 1285 per quintal to cover rising farm input cost and encourage farmers to increase acreage. The ministry circulated a

CCEA note among various ministries recommending Rs 1285 per quintal as MSP for wheat for the 2012-13 marketing year begining 1 April 2012. Wheats support price for 2011-12 was Rs 1170 per quintal, including a bonus of Rs 50 per quintal. The government announced the support price for more than 20 crops just before the sowing season. The government buys wheat and paddy from farmers at the MSP to ensure assured returns to growers. The MSP also acts as benchmark price for the market. The Ministry recommended a significant hike in wheat MSP in view of rising input cost of labour, electricity, diesel and fertilisers. Since the UPA government came into power in 2004, the MSP of wheat has been raised from Rs 630 per quintal to Rs 1170 per quintal. Countrys wheat production touched an all-time of 85.93 million tonnes in the 2010-11 crop year. According to experts, higher support price played a big role in the record wheat output. RBI Eased Property Transaction Norms for NRIs The Reserve Bank of India (RBI) permitted Indians who have nonresident accounts in the country to hold them in any currency which is fully convertible. The move is expected to help NRIs/Persons of Indian Origin as it will give them more options in the holding of accounts, and lessen the risk from fluctuations in major currencies. The RBI specified that any citizen who was earlier residing in a foreign country can own or transfer property or other assets in that nation if it was acquired during the time of his residence there, in another relaxation. Telcos Violated Licence Conditions A probe by telecom regulator TRAI established that 3G roaming

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agreements between telcos violated licence conditions. Mobile phone companies had earlier explained to the regulator that the telecom department, prior to the 3G auctions, had clearly specified that roaming policy is applicable to licences and not specific to spectrum bands. In their defence, telcos had also provided copies of the clarifications provided by the department on this issue before the 3G auctions. The clarifications quote the DoTs response to operators queries on this issue as stating that roaming will be permitted. The GSM operators had informed TRAI that 3G roaming agreements would augment the customer experience by allowing users to access high-speed data services on a pan-India basis, while also ensuring better utilisation of national resources and increased revenues to the government. Besides, they also added that these deals would help improve broadband internet coverage. If the government acts on the recommendations of the TERM Cell of the DoT, these mobile phone companies will have to shell out fines to the tune of 50 crore for every circle where they have entered into 3G roaming agreements. SEBI Approved Share Sale Guidelines for Insurance Firms SEBI approved share sale guidelines for insurance firms. The norms once cleared by the government will ensure the entry of the insurance industry to revive the dormant primary market as the novelty value of the sector could attract more investors. IRDA had earlier specified that insurers that have completed 10 years of operations are eligible to go for share sale. Prior to filing of the draft

document for making public offer with SEBI, the insurer is required to take a formal approval from IRDA.SEBI withdrew a major irritant for life insurance companies waiting to hit the capital market with initial public offers. While clearing IPO guidelines of life insurance companies, the regulator removed the three-year profitability clause that is applicable for all companies as a precondition for tapping the capital markets. However, insurance companies will have to go for additional disclosures as required by the Insurance Regulatory Development Authority (IRDA) over and above the disclosure norms set by SEBI. The move to remove the three-year profitability clause is expected to bring some relief to the majority of life insurance companies, as most of them are yet to underwrite any profits. According to the draft guidelines, insurance companies, which have completed 10 years of operations, will be allowed to tap the capital market and the valuation would have to be based on the embedded value to be calculated by a method designed by the Institute of Actuaries of India. Insurers planning IPOs will have to disclose their economic capital as well as the embedded value to the regulator. Coromandel Fertilisers Plans Greenfield Plant Coromandel Fertilisers, part of the Rs.17,000-crore Murugappa Group, has announced plans for setting up a greenfield single super phosphate plant in Punjab with an estimated investment of Rs.116 crore.The plant has been finalised in the light of the ballooning prices of phosphate fertilisers and the 800 tonne per day (tpd) plant, including 400 tpd granulator plant is expected to be ready within two years, Coromandel Fertilisers Chairman A. Vellayan said.

Speaking to reporters here on Wednesday, Mr. Vellayan said plans were under way to invest another Rs.350 crore to develop third train of production line at the companys Kakinada plant with an aim to enhancing production from 32 lakh tonnes to 40 lakh tonnes by the end of 2013-14. The board had approved rewarding its shareholders with an issue of unsecured redeemable bonus debentures of the face value of Rs.15 to mark its golden jubilee. Coromandel, which provides advisory and products services to farmers through its retail chain, planned to expand the business by providing farm mechanisation solutions. There is a big market for mechanisation owing to acute problems faced on account of labour, Mr. Vellayan said. Accordingly, the company had embarked on a pilot project for import of products and providing mechanisation solutions to farmers, charging a fee of between Rs.4,500 and Rs.5,000 per acre. Fresh Capital to be Infused in SBI Union Finance Minister P r a n a b Mukher jee voiced the F ina nc e M i n i s t r y s decision to to recapitalise State Bank of India (SBI). Funds would be provided to the PSU lender to enable it to achieve compliance with capital adequacy ratio (CAR) norms. Fresh capital is to be infused in SBI. The government will inject Rs 3,000-4000 crore into SBI during the current fiscal 2011-12 to help it achieve an 8 per cent capital adequacy ratio (CAR). Recapitalisation of banks is a continuing process and the
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government will continue to provide funds to PSU lenders through the Budget to ensure that they can meet solvency requirements. According to estimates, SBI needs about Rs 20000 crore of fresh capital to maintain the pace of growth without sacrificing solvency margin norms. The government holds a 59 per cent stake in the countrys largest bank, SBI. Niryat Bandhu Scheme The Director General of Foreign Trade (DGFT) announced introduction of a new Niryat Bandhu scheme for international business mentoring for young turks in international business enterprises. The officer (Niryat Bandhu) would function in the mentoring arena and would be a handholding experiment for the young turks in international business enterprises. Under the scheme, officers of DGFT will be investing time and knowledge to mentor the interested individuals who want to conduct the business in a legal way. The DGFT also announced that it became Indias first digital signature enabled department. According to the new Foreign Trade Policy (FTP) unveiled, a higher level of encrypted 2048 bit Digital Signature has been introduced. Digital certificate provides a high level of security for online communication such that only intended recipient can read it. It provides authentication, privacy, non-repudiation and integrity in the virtual world. Also, import of radioimmunoassay kits was classified in the restricted category as per ITC HS-Import Schedule. Since the import item is intended for the diagnosis of disease/disorders in humans and animals, the import policy regime for this item was liberalised to free subject to prior permission of Atomic Energy Regulatory Board. The procedure for transfer or sale of
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imported firearms was also simplified. For sale/transfer of imported firearms prior permission from DGFT is not required after 10 years of import. Further, this condition of 10 years would not apply if importer attains 60 years of age. Local police licensing authorities or District Magistrates can give permission of sale/ transfer directly. Even for Shooters category, sale/transfer of imported weapons would not require approval from DGFT. For the first time in the history of foreign trade formulation, the draft text for amendment of HBP v1 was uploaded on the website of DGFT seeking suggestions on the draft. New Policy for Acquisition of Overseas Raw Material All central public sector enterprises (CPSEs) were elegated with more powers for acquisition of raw material assets abroad. The Union Cabinet approved a new policy for acquisition of overseas raw material assets which would be applicable to CPSEs in agriculture, mining, manufacturing and power sectors with a three year track record of making net profits. With an intention to address the issue of acquisition of raw materials before global raw material assets were no longer available or were available at exorbitant prices, the government vested the CPSEs with the responsibility to acquire raw material assets abroad. Maharatna and Navratna entities were vested with enhanced power to acquire raw material assets worth Rs.5000 crore and Rs.3000 crore respectively from Rs.1000 crore without having to consult the government. The government also set up a Coordinating Committee of Secretaries (CCoS) under the Cabinet Secretary to expedite proposals which require approval of various ministries and involve government funds. The government maintained that it would

consider constituting a dedicated Sovereign Wealth Fund to go with the new policy to protect the long-term economic interests of the country. 100 % FDI for New Ventures in the Pharmaceutical Sector India decided to continue with 100 percent Foreign Direct Investment (FDI) for new ventures in the pharmaceutical sector. The decision was taken at a high-level meeting chaired by Prime Minister Manmohan Singh to discuss the FDI policy in drugs and pharmaceutical sector held in New Delhi. The move will facilitate addition of manufacturing capacities, technology acquisition and development of the pharmaceutical sector in the country. However, in case of existing ventures in the pharmaceutical sector, FDI will be allowed for a period of six months after approval from the Foreign Investment Promotion Board (FIPB). It was also decided that the Competition Commission of India (CCI) will be strengthened for effective oversight on mergers and acquisitions to ensure that there is a balance between public health concerns and attracting FDI in the pharmaceutical sector. Global Ratings firm Moodys Downgraded SBIs Credit Rating The credit rating of the State Bank of India was downgraded by the Global ratings firm Moodys. The ratings agency took SBIs grading to D+ from C-.SBI had a shortage of capital to cushion bad loans or contingencies and thus started weakening asset quality. High interest rates in a slowing economy results in shorthand for loans that do not yield interest. This led Moodys to adopt a negative view on SBIs

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creditworthiness. As a result, the borrowing companies suffer. Rating downgrades usually are caution signals to bond investors. The Banking customers do not have encounter risk. After the downgrade, SBI shares slipped 4% to Rs 1,787 on the Bombay Stock Exchange and the Sensex dropped 1.77% or 302 points to 15,685.As of June 2011, the Capital Adequacy Ratio (CAR) of the SBI stood at 11.6 %. CAR is a measure of the back-up money a bank has to withstand loan uncertainties. Tier-I capital stood at 7.6 % which was a little below the 8 % desired by the government. Tier-I capital broadly refers to shareholder equity. Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 Approved The Union Cabinet of India approved the introduction of the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011 in the winter session of Parliament. The Bill seeks to amend the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act and Recovery of Debts due to Banks & Financial Institutions (RDBF) Act so as to strengthen the regulatory and institutional framework related to recovery of debts due to banks and financial institutions through the Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Bill, 2011.The proposed amendments would enable banks to improve their operational efficiency, deploy more funds for credit disbursement to retail investors, home loan borrowers, etc. without fearing for recovery, thus bringing about equity. Further, mandatory registration of subsisting security interest (equitable mortgages) would promote innovation in credit information.

The suggested amendments would strengthen the ability of banks to recover debts due from the borrowers, enhance the ability of the banks to extend credit to both corporate and retail borrowers, reduce the cost of funds for banks and their customers and reduce the level of nonperforming assets. The banks and financial institutions (FIs) were facing numerous problems in recovery of defaulted loans on account of delays in disposal of recovery proceedings. The Government, therefore, enacted the RDBF Act in 1993 and SARFAESI Act in 2002 for the purpose of expeditious recovery of non-performing assets (NPAs) of the banks and FIs. Although these two acts have helped in reducing the NPAs, banks have sent certain suggestions for further strengthening of the secured creditor rights. Deccline in Services Sector and Employment Levels Survey showed that activity in the services sector shrank and overall economic activity was found to be stagnating. Employment levels fell for the second successive month in September 2011. HSBC Purchasing Managers Index, which is based on a survey of 350 private sector executives showed that the seasonally adjusted Service Sector Business Activity Index fell to 49.8 from 53.8 in August 2011. Any reading of less than 50 indicates contraction, while economic activity is seen to be growing if the index is over 50. This is the first time since April 2009 that the services sector, that accounts for more than half the Indian economy slipped into negative terrain. The decline in services sector activity was attributed to lower demand for off shoring and IT and IT-enabled services from the US and Europe, where several economies are grappling with debt problems.

The decline in this sector impacted financial services as banking activity slowed down on account of higher interest rates and investors are wary of parking their funds in stock markets. Due to the sharper-thanexpected global slowdown and the impact of high interest rates on the domestic economy, the overall growth was observed to be slowing down at a faster clip than anticipated earlier. The overall trend is in line with expectations that the Indian economy will grow at less than 8% during 2011-12. The economy expanded 8.5% in 2010 prompting the government to predict 9% growth in 2011. However, as the global economic situation deteriorated and higher interest rates slowed down the growth momentum the government lowered its forecasts. MFINs Initiative in Reviving Microfinance Sector The micro finance sector has started witnessing some positive developments after the Reserve Bank of India (RBI) allowed the continuance of priority sector lending (PSL) status for bank loans to micro finance institutions in May this year providing a clear sense of direction to the sector. The regulatory framework outlined in the draft micro finance bill released to the public in July, which is likely to be introduced during the winter session of Parliament, would help faster recovery of the sector, according to Alok Prasad, Chief Executive, Micro Finance Institutions Network (MFIN).Only in Andhra Pradesh there was no activity in lending and repayment and in other States there was significant recovery, following a number of measures announced by the Malegam Committee. There would be consolidation in the industry through mergers as smaller
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microfinance institutions were finding it difficult to go alone due to regulatory caps on margins and the prevailing high interest rates. MFIN has formulated and implemented a welldefined code of conduct for its members numbering 49 through an intensive process of consultation with them and other stake holders. New Electronics Policy Aims to Create 2.8 Crore Jobs Communications and IT Minister Kapil Sibal unveiled the draft National Policy on Electronics, 2011, aimed at achieving a turnover of $400 billion for the sector by 2020, which involved investment of about $100 billion, besides creating employment for 2.8 crore people. The final policy is likely to come by December this year.At the current rate of growth, the domestic production can cater to a demand of only $100 billion in 2020 as against demand of $400 billion and the rest would have to be met by importsa demand-supply gap of nearly $300 billion. Unless the situation is corrected, it is likely that by 2020 the electronics import may far exceed oil imports, Mr. Sibal said after unveiling the draft.The National Policy of Electronics-2011 envisions creating a globally competitive electronics systems design and manufacturing (ESDM) industry, including nanoelectronics, to meet the countrys needs and serve the international market. This is a quantum jump from production level of about $20 billion in 2009. This inter alia, includes achieving a turnover of $55 billion of chip design and embedded software industry, and $80 billion of exports, he pointed out. Mr. Sibal also said the policy was also aimed at making India the hub of
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electronic manufacturing. The policy proposes setting up of over 200 electronic manufacturing clusters (EMCs) and providing assistance for setting up of greenfield EMCs and upgradation of brownfield EMCsI have talked to chief ministers and ministers regarding finding a place for setting up such clusters, he added. The Minister further said another important objective of the policy was to augment post-graduate education and produce about 2,500 PhDs annually by 2020. For this, we need tie-ups with universities and educational institutions like IITs and IIScs to promote such kind of thing, Mr. Sibal added. Rs. 2,000 Crore in Carbon Credits for RPower Anil Ambani-owned Reliance Power said it would earn Rs.2,000 crore by trading carbon credits from its Tilaiya ultra mega power project (UMPP) in Jharkhand in the first ten years of its operations .In a statement issued here, it said the Tilaiya project had got approval for carbon credits from the United Nations Framework Convention on Climate Change (UNFCCC).The Clean Development Mechanism Executive Board (CDMEB) of the UNFCCC allows the Tilaiya project to be commissioned during the XII Plan to earn Certified Emission Reductions (CERs). The CERs can be traded and sold and translate into direct revenues for companies such as Reliance Power. The Tilaiya project will generate 21.3 million carbon credits during the initial ten years and they are valued at over Rs.2,000 crore, the statement says. Jharkhand Integrated Power Ltd., the special purpose vehicle for the Tilaiya project, has

entered into a 25-year power purchase agreement with off-takers for its entire capacity. The project would supply power to 18 off-takers in ten States. RPower has an installed capacity of 1,200 MW at its Rosa thermal power project in Uttar Pradesh. The company is also executing two more UMPPs at Sasan (Madhya Pradesh) and Krishnapatnam (Andhra Pradesh). Cairn Lanka Strikes gas in Mannar Basin Cairn Lanka has stuck gas in the first well in the Mannar basin in Sri Lanka. The company, a wholly-owned subsidiary of Cairn India, has notified the Sri Lankan government of a gas discovery in the Mannar basin. Cairn had spud the well in early August and this is the first hydrocarbon find in Sri Lanka .The CLPL-Dorado-91H/1z well is located in the block SL 200701-001, Mannar Basin, Sri Lanka. Cairn Lanka (Pvt.) Ltd. is the operator and has a 100 per cent participating interest in the block.A gross 25m hydrocarbon column in a sandstone between the depths of 3043.83068.7m MD has been interpreted from log and MDT data to be predominantly gas bearing with some additional liquid hydrocarbon potential. Further drilling will be required to establish the commerciality of the discovery, Cairn India said. Role of Fiscal Policy in Economic Recovery The United States recovery from the ongoing economic crisis was much less robust than what the Federal Reserve had hoped it would be and recent revisions of government economic data showed the recession as having been even deeper, and the

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recovery weaker, than previously estimated, according to Ben Bernanke, Chairman of the Fed. In a speech that sought to shift more responsibility for driving the recovery to fiscal policy rather than retain the focus on monetary policy under the Fed Mr. Bernanke added that recent bouts of elevated volatility and risk aversion in financial markets were

partly in reaction to fiscal concerns in the U.S. and abroad. By way of policy response the Fed Chairman noted that four key steps in terms of fiscal reform were needed. First, he said, it was necessary to achieve long-run fiscal sustainability; second, the federal government ought to avoid fiscal actions that could impede the ongoing economic

recovery; third, fiscal policy should aim to promote long-term growth and economic opportunity; and finally, there was a need to improve the process for making long-term budget decisions so as to create greater predictability and clarity, while avoiding disruptions to the financial markets and the economy.

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