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.:: August 2013 Economic Affairs ::.

India, on 20 August, raised the issue of heavy trade imbalance


with China and sought immediate steps to facilitate Indian
exports of pharmaceutical and agricultural products, buffalo
meat and information technology (IT) services. Raising the issue
with Chinese Minister of Commerce, Gao Hucheng, during his meeting in Brunei,
Commerce and Industry Minister Anand Sharma drew the attention of the Chinese
Minister to Indias pending request for facilitating Indian exports of IT services,
buffalo meat, pharma and agricultural products. Mr. Sharma is in Brunei to attend
the Regional Comprehensive Economic Partnership Agreement, East Asian
Economic Ministers and the ASEAN-India Ministerial meeting.
Both the sides agreed that the working group on trade and economic co-operation
should meet in September along with another working group on trade in services
and trade statistics with a view to implementing the decision taken by the
leadership of the two countries. They also discussed about the possibility for the
next meeting of the Joint Economic Group (JEG) likely to be scheduled for late
October in Beijing. Gao assured Sharma that China would make every effort to
facilitate imports from India for bridging trade imbalance. Sharma also sought
Chinese investment in manufacturing in the National Manufacturing Investment
Zones. It was decided that they would finalise the details about investments in
various sectors during their next meeting in October.
The Reserve Bank of India (RBI) on 20 August 2013 further
relaxed the Statutory Liquidity Ratio (SLR) to provide more
funds to banks for lending. This was in view of the losses suffered by
banks in their investment portfolio. Revising its earlier limit, asking banks to
reduce their hold-to-maturity bond holdings gradually to 23 per cent of deposits,
RBI has now allowed banks to retain those holdings at 24.5 percent. To further
ease rupee volatility, RBI will conduct open market operations of long dated
government securities worth Rs. 8000 crore on 23 August 2013. RBI stated that
depending on evolving market conditions, it will thereafter decide on the amount
and frequency of OMOs (Open Market operations). SLR stands for Statutory
Liquidity Ratio. This term is used by bankers and indicates the minimum
percentage of deposits that the bank has to maintain in form of gold, cash or other
approved securities. In other words, it is ratio of cash and some other approved
securities to liabilities (deposits). It regulates the credit growth in India.
The Union Cabinet on 13th August, approved the proposal for
setting up

of the Tax Administration Reform Commission (TARC). The


Commission

NTHLY EM
YEARLY EM

will consist of a Chairman, two full time members and four part-time
members, of which at least two part-time members will be from the private
sector. The Chairman will be an eminent person having wide experience of
tax administration and policy making. Full-time members of the Commission
will be one member each with a background in revenue service pertaining to
Income Tax and Central Excise and Customs respectively.
The term of the Commission will be 18 months. The Commission will review
the application of tax policies and tax laws in India in the context of global
best practices and recommend measures to strengthen the capacity of the
tax system in India that would reflect best global practices. The Commission
will help in removing ambiguity in application of tax policy and tax laws,
thereby establishing a stable tax regime and a non-adversarial tax
administration. The Commission will facilitate an efficient tax administrative
system that would enhance the tax base as well as tax payer base.
The Loan

and Project

Agreements

for World

Bank (IDA)

assistance of US US $100 million for Low Income Housing


Finance Project were signed between Government of India,
National Housing Bank (NHB) and the World Bank in New Delhi
on 14th August. The Loan Agreement was signed by Nilaya Mitash, Joint
Secretary, Department of Economic Affairs, Ministry of Finance on behalf of
Government of India and Mr. Michael Haney, Operations Advisor of World Bank
(India) on behalf of the World Bank. The Objective of the project is to provide
access to sustainable housing finance for low income households, to purchase,
build or upgrade their dwellings.
Financing under the project aims to create incentives for lenders to focus on lower
income households through a net all-in reduction of the lenders cost of funds of
approximately 200-300 basis points. The project also aims to deliver on its stated
objective of reaching a higher proportion of lower income households while maintaining
portfolio quality standards. The project expects to develop prudent lending standards to
serve the more vulnerable, lower income households, expand the coverage of credit
bureaus to include informal income borrowers, develop consumer information and
disclosure norms for the projects target groups, enhance the appraisal capacity of the
lenders, as well as pilot new policies and products to overcome the challenges of
dwelling informality. It is a financial

intermediary loan for an implementation period of 5 years. NHB


is the

implementing agency.
The Minister of State in the Ministry of Commerce and Industry Dr. E. M. Sudarsana
Natchiappan on 14th August, in a written reply in Rajya Sabha informed that, in-

principle approval for National Investment and Manufacturing


Zones (NIMZs) in Chittoor, Medak and Prakasam districts has
been accorded as requested by the Government of Andhra
Pradesh. The state
governments have to develop the zones before any private investment can take

place in the same.


Weighed down by a weak rupee, the Reserve Bank of
India (RBI) on 30th July chose to keep all key interest
rates unchanged and asked the government to take
urgent steps to reign in the high current account deficit.
Lowering the GDP growth projection for the current fiscal to 5.5 % from
5.7 %, the central bank said the external sector is the "biggest threat" to

economic stability.

It also said that the recent liquidity tightening measures, taken to support the
rupee, will be rolled back in a calibrated manner as stability is restored to the
foreign exchange market, enabling it to revert to the policy of supporting growth
with continuing vigil on inflation. The RBI will endeavour to keep inflation, which is
under threat from a depreciating rupee, at 5 % by March end.
"The policy stance is guided by the need for continuous vigil and preparedness to
pro-actively respond to risks to the economy from external developments,
especially those stemming from global financial markets," RBI Governor D. Subba
Rao said in what would be his last policy announcement unveiled here.

Accordingly, the repo rate or the rate at which RBI lends to the system,
has been retained at 7 .25 % and the cash reserve ratio, the amount of
deposits banks park with RBI, has been kept unchanged at 4 %. Giving
the policy guidance, the governor said, "Monetary policy going forward
will be shaped by the consideration of supporting growth, anchoring
inflation expectations and maintaining external sector stability."
The Cabinet Committee on Economic Affairs (CCEA), in
accordance with the Government of Indias disinvestment
policy on 2 August, has approved the disinvestment of 10
percent paid-up equity in the Indian Oil Corporation Limited
(IOCL), out of its equity capital holding of 78.92 percent. The
disinvestment will be through Offer for Sale (OFS) method in the domestic
market according to the SEBI rules and regulations. After this disinvestment
the Government of India shareholding in the company would come down to
68.92 percent.
The paid up equity capital of the company, as on 31st March, 2013 was Rs. 2,428
crore. The Government of India holds 7 8.92 per cent of the paid up capital in IOCL.

The IOCL is a "Maharatna" Public Sector Undertaking under


the
administrative control of the Ministry of Petroleum and Natural
Gas. It
is the highest ranked Indian corporate in the prestigious Fortune `Global 500`
listing with a ranking of 83 for the year 2012. IOCL is primarily engaged in refining,
transportation and marketing of petroleum products and petrochemicals with an
installed refining capacity of 54.2 million metric tonnes.
The Ministry of Steel under Government of India has become
the first
Central Ministry to be awarded ISO 9001:2008, Quality
Management
System certification. The certification involves laying down the work processes,

manage and control them with the aim of continuous improvement. The Bureau
of Indian Standards has conferred the Ministry with the certification
for

three years; w.e.f. 25.06.2013 to 24.06.2016.Ministry is the first


amongst Central Government Ministries to have received the certificate. ISO 9001
is quality management system which codifies quality standards in every area of
organizations functioning. Many Governments around the World have made ISO
9001 a mandatory requirement. ISO certification will result in transparent
performance of the Ministry and quick delivery of results to the beneficiaries.
The Cabinet Committee on Economic Affairs (CCEA) on 2 August has
approved creation of the Special National Investment Fund for the
specific objective of meeting the minimum public shareholding of 10

percent requirement in the following six Central Public Sector


Enterprises (CPSEs). (i) Andrew Yule & Company Ltd. (ii) Fertilizers & Chemicals

(Travancore) Ltd. (iii) Hindustan Photo Films Manufacturing Co. Ltd.(iv) HMT Ltd.
(v) ITI Ltd. (vi) Scooters India Ltd. Since these Companies were not financially
sound, it was found difficult to meet the minimum public shareholding by following
SEBI approved methods. However, Government was keen to comply with the
requirement in all Government Companies. The Department of Disinvestment
discussed the matter with SEBI and has proposed to meet the minimum public
shareholding in the above six Companies.
The Minister for Micro, Small and Medium Enterprises, K. H.
Muniyappa inaugurated the Indian School for Entrepreneurs and
Enterprise Development iSEED in New Delhi on 1 August. Speaking at
the inauguration the Minister stated that in the present competitive world, Innovation
driven Entrepreneurship is critical for the growth of the Indian economy. Worldwide, the
micro small and medium enterprises (MSMEs) primarily driven by first generation
entrepreneurs have been accepted as the engine of economic growth and for
promoting equitable development. The MSME sector is a nursery of entrepreneurship,
often driven by individual creativity and innovation. To enable Indian youth in
entrepreneurship and innovation, the Minister emphasized that the MSME ministry is
conducting Skill Development Programmes for the entire value chain of manufacturing.
10 Tool Rooms under the Ministry are providing both long and short term training for
more than one lakh persons the Minister highlighted.

Tariq Anwar, Minister of State for Agriculture and Food Processing Industries in a
written reply to a question in the Lok Sabha on 6 August, stated that, as per the
Provisional

Estimates

released

by

CSO

on

31st

May,

2013,

Agriculure sector is estimated to grow at 1.9% in 2012-13 at 200405 prices and the contribution of agriculture to the GDP is likely to
decline to 13.7 % in 2012-13. The decline in growth rate and contribution of
agriculture to GDP is on account of structural changes due to a shift from a traditional
agrarian economy to a service dominated one. In order to bring reforms in agricultural
marketing, the Ministry framed a model APMC Act in 2003 and circulated to States/UTs
for adoption. Government has launched several schemes to increase the growth rate of
agriculture and boost farm production in terms of its contribution to the GDP such as
Rashtriya Krishi Vikas Yojana (RKVY), National Food Security Mission (NFSM),
Development and Strengthening of Infrastructure facilities for Production and
Distribution of Quality Seed, National Horticulture Mission(NHM), Rainfed Area
Development Programme (RADP), Integrated Scheme of Oilseeds, Pulses, Oil Palm
and Maize (ISOPOM), Gramin Bhandaran Yojana etc. In addition, Government has
substantially improved the availability of farm credit; implemented a massive
programme of debt waiver; introduced better crop insurance schemes; increased
Minimum Support Price (MSP), improved marketing infrastructure, etc.

The Cabinet Committee on Economic Affairs (CCEA) on 8


August 2013 approved the export of additional 2 million
tonnes wheat from its godowns. The additional wheat would be
traded through public sector trading firms. The proposal for additional export
of wheat was proposed by the Union Food Ministry. The decision was taken
for clearing the surplus stock and to ease the storage crunch. The additional
export is allowed as there is a huge stock of 40 million tonnes of wheat.
Microsoft, on 6 August, launched its Office 365 for full-time and
part-time university students in India with a subscription offer.
The Office 365 University includes the complete set of Office applications
and can be
installed on two PCs or Macs. Microsoft has priced it at Rs.4,199 for a four-year

subscription and is available for students studying in accredited colleges and

universities.
The Parliament has passed the historic Companies Bill 2012,
moved by
Sachin Pilot, Minister of Corporate Affairs. The Bill was passed by the
Rajya Sabha on 8 August, which had already been passed by the Lok Sabha
many months ago (in December 2012). Pilot has termed it as a historic day for the
country as it will usher in a new era in the Corporate Governance. The new
Companies Bill, on its enactment, will allow the country to have
a modern legislation for growth and regulation of corporate
sector in India. The existing statute for regulation of companies in the country,
viz. the Companies Act, 1956 had been under consideration for quite long for
comprehensive revision in view of the changing economic and commercial
environment nationally as well as internationally. The new law will facilitate
business-friendly corporate regulation, improve corporate governance norms,
enhance accountability on the part of corporates/ auditors, raise levels of
transparency and protect interests of investors, particularly small investors. The
salient features of the new Companies law are: Business friendly
corporate Regulation/ pro-business initiatives; e-Governance Initiatives; Good
Corporate Governance and CSR; Enhanced Disclosure norms; Enhanced
accountability of Management; Stricter enforcement; Audit accountability;
Protection for minority shareholders; Investor protection and activism; Better
framework for insolvency regulation; and Institutional structure.
The Department of Heavy Industry, Ministry of Heavy Industries
and Public Enterprises has prepared the Indian Electrical
Equipment Industry Mission Plan 2012-22 with the objective to
make

the

rapid

equipment

development

industry

possible

of

the
and

domestic
to

electrical

enhance

its

competitiveness, which was launched on 24.07.2013. Giving this


information in written reply to a question in the Lok Sabha on 8 August, Praful
Patel, Minister of Heavy Industries and Public Enterprises, said that in this Mission
Plan, five areas have been identified for strategic and policy interventions, both by
the government and the industry. These are (i). industry competitiveness, (ii).
technology upgradation, (iii). skills development, (iv). exports and (v). conversion
of latent demand.

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