UNIT 1

While India’s economy is still trying to recover, government projections of

India’s GDP point to another setback.
As per government projections, INDIA'S GDP IS ESTIMATED TO
CONTRACT BY A RECORD 7.7 PER CENT DURING 2020-21 as the
COVID-19 pandemic severely hit the key manufacturing and services segments.
Amid overall decline in economic activities, some respite was provided by the
agriculture sector and utility services like power and gas supply, which have been
projected to post positive growth during the current fiscal ending March 2021.
"Real GDP or GDP at Constant Prices (2011-12) in the year 2020-21 is likely to
attain a level of Rs 134.40 lakh crore, as against the Provisional Estimate of GDP
for the year 2019-20 of Rs 145.66 lakh crore...
"The growth in real GDP during 2020-21 is estimated at -7.7 per cent as compared
to the growth rate of 4.2 per cent in 2019-20," said the first advanced estimates
of national income released by the National Statistical Office (NSO).
The contraction in the Gross Domestic Product (GDP), however, would not be as
steep as projected by certain international agencies like the IMF and World Bank.
NSO also estimates the Real Gross Value Added (GVA) at basic prices at Rs
123.39 lakh crore in 2020-21, as against Rs 133.01 lakh crore in 2019-20,
showing a contraction of 7.2 percent. GVA does not factor in net taxes.
GVA in the key manufacturing sector is likely to see a contraction of 9.4 per cent
during 2020-21 as compared to a flat growth of 0.03 per cent in the year ago
period.
'Mining and quarrying', and 'trade, hotels, transport, communication and services
related to broadcasting' GVAs are likely to contract by 12.4 per cent and 21.4 per
cent, respectively.
The construction sector too is projected to contract by 12.6 per cent, 'public
adminstration, defence and other services' by 3.7 per cent, and 'financial, real
estate, and professional services' by 0.8 per cent, as per the data.
On the other hand, 'agriculture, forestry and fishing' sector has been projected to
grow at 3.4 per cent during the fiscal. The sector had posted a growth of 4 per
cent in 2019-20.
Similarly, 'electricity, gas, water supply and other utility services' is likely to post
a growth of 2.7 per cent during the year ending March 2021. This compares with
4.1 per cent expansion during 2019-20.
The economy contracted by a massive 23.9 per cent in the first quarter and 7.5
per cent in the second quarter on account of the COVID-19 pandemic.
The government has been stressing that economic activities are picking up post
gradual unlocking of the economy and stimulus packages, and the country would
witness a V-shaped growth.
The country's monetary authority, the RBI, had said the second half of the fiscal
is expected to show some positive growth. RBI has forecasted real GDP growth
at (-) 7.5 per cent in 2020-21, which is an improvement over its previous
projection of 9.5 per cent contraction.
The World Bank in its latest Global Economic Prospects estimated India's
economy to contract by 9.6 per cent in the fiscal year 2020-21, reflecting a sharp
drop in household spending and private investment. The growth is expected to
recover to 5.4 per cent in 2021, it said.
According to the International Monetary Fund (IMF), India's economy is
projected to contract by 10.3 per cent this year and likely to bounce back with an
impressive expansion of 8.8 per cent next year.
Moody's Investors Service had recently upped the growth forecast to (-) 10.6 per
cent, from its earlier estimate of (-) 11.5 per cent, saying the latest stimulus
prioritises manufacturing and job creation and shifts focus to longer-term growth.
NSO said in wake of the pandemic, the data challenges in the case of other
underlying macroeconomic indicators like the IIP and CPI used in the estimation
of National Accounts aggregates, will also have implications on these estimates.
Further, the projected indices may significantly vary from the actual indices
which in turn will depend on the pandemic-led economic situation prevalent
during those months and specific measures, if any, taken by the government, it
said.
"Estimates are therefore likely to undergo sharp revisions for the aforesaid causes
in due course, as per the release calendar," it added.
The per capita net national income (NNI) at current prices is estimated at Rs
1,26,968, showing a contraction of 5.4 per cent, as compared to Rs 1,34,226
during 2019-20 with a growth rate of 6.1 per cent.
Gross Fixed Capital Formation (GFCF) at current prices is estimated at Rs 47.23
lakh crore in 2020-21 as against Rs 54.72 lakh crore in 2019-20.
At constant (2011-12) prices, the GFCF is estimated at Rs 37.07 lakh crore in
2020-21 as against Rs 43.34 lakh crore in 2019-20.

DTVSV DIRECT TAX VIVAD SE VISWAS Scheme was announced in

Budget 2020 as “No Dispute but Trust Scheme-Vivad se Vishwas Scheme” to
settle pending disputes relating to direct taxes. It is an attempt to release 9.32
trillion (as on 30th Nov 2019) blocked in approximately 483000 appeals pending
at various appellate forums. The Scheme got assent from Hon’ble President on
17th March 2020 and became Direct Tax Vivad se Vishwas Act, 2020.
PURPOSE OF THE SCHEME
The main purpose of the scheme is to –
1) Reduce pending litigation
2) Generate revenues for the Govt.
3) Get relief from pending dispute by paying disputed tax and get waiver from
payment of interest and penalty and also get immunity from prosecution.
ELIGIBILITY OF THE SCHEME
1) The Appeals, Writ Petition, SLP and Arbitration filed by Tax Payer or Deptt
before 31 Jan 2020 or Appellable Orders i.e. Orders for which time limit for filing
appeal has not expired on 31st Jan 2020.
2) Cases pending before Dispute Resolution Panel (DRP) or the cases where DRP
has issued direction on or before 31 Jan 2020 but Order has not yet been passed.
3) Cases where assesse has filed revision application u/s 264 on or before 31st
Jan 2020.
4) Dispute where payment has already been made shall also be eligible.
FEATURES AND CERTAIN TERMS

1. The tax payer can enter into scheme where there is disputed tax/ TDS/TCS. In
case there is no disputed tax taxpayer can opt for the scheme for pending appeals
relating to disputed penalty, interest and fees. Disputed tax also includes tax on
enhancement notice issued by Commissioner Appeals.
2. Where pending dispute relates to reduction of Loss, Depreciation and MAT
Credit, the tax payer has option-
(a) Pay tax on reduced amount.
(b) Not to carry forward the said amount
3. Certain Terms-
(a) Disputed Tax= Tax+ Surchage+ Cess against which appeal is pending.
(b) Tax Arrears= Disputed Tax+ Penalty+ Interest (Charged or Chargeable).
4. If there is any rectification pending in relation to disputed tax, the tax shall be
calculated after giving effect to rectification order passed, if any.]
REFUND
1. If excess payment is made before filing the declaration, refund shall be issued
without interest.
2. If tax is paid after availing benefit of Scheme and later tax payer decides to
take refund of tax, refund will not be granted
PAYMENT TERMS

1. If case is filed by assesse-

PARTICULARS DISPUTED TAX DISPUTED PENALTY, INTEREST

AND FEES
If payment is made on or before 31st Dec 2020 100%
Search Case-125%
Additional 10%
If additional 10% exceeds interest and penalty, excess shall be ignorned
Additional 5%
If additional 5% exceeds interest and penalty, excess shall be ignorned

2. If case is filed by income tax department-50% of above rates.

3. In case the issue is decided in favour of tax payer by higher appellate forum-
50% of above rates.
4. If due to lack of jurisdiction, ITAT has quashed Astt Order and deptt is in
appeal with HC and there is no disputed tax because there is no asstt Order- Enter
into Scheme and pay 50% of disputed tax that would be restored if the deptt was
to win the appeal in HC.
CLARIFICATIONS MADE IN CIRCULAR
1. Settlement of penalty appeal without settling quantum appeal is not possible.
2. For one pending appeal all issues are required to be settled and if one of the
issues makes the declaration invalid, no declaration can be filed. Picking and
choosing of issues are not allowed. Eg: In case disputes tax includes qualifying
tax arrears and non-qualifying tax arrears i.e. if it includes dispute relating to
undisclosed foreign assets then declaration cannot be filed.
3. If Writ has been filed against notice u/s 148 and no assessment order has been
passed, no declaration can be filed because there is no determination of income
against said notice.

4. Waiver application filed requesting waiving of interest u/s 234A, 234B and
234C are not covered under the Scheme because Waiver applications are not
appeal.
5. For Eg: If for A.Y.2015-16 assessment was completed u/s 143(3) and appeal
is pending with Tribunal and later for same A.Y. order is passed u/s 147/143(3)
and appeal is pending with CIT then tax payer has an option either to settle both
appeals or any of the appeal. If he chooses to settle both appeal then aggregate of
both tax payable shall be filed in Form-1.
6. In case ITAT has passed Order giving relief on 2 issues and confirming
addition on 3 issues, then tax payer has option either to file declaration for 3 issues
or 5 issues. If he files declaration for 3 issues then deptt would be free to file
appeal against 2 issues.
7. Where tax determined by DA is not acceptable to taxpayer-
(a) Can appeal withdrawn be reinstituted- Withdrawal of appeal is required after
receiving certificate of tax payable.
(b) Can appeal be filed against amount determined as payable by DA in
Certificate- No
8. If payment is not made due to financial difficulties after filing declaration or
declarant violates any conditions of the Act, then declaration shall be null and
void and appeal withdrawn shall be revived.
9. Result of this VSV cannot be applied to same issues pending before AO.

Conclusion:
The beauty of the Scheme is that you have to pay only disputed tax and get relief
from penalty, interest and prosecution. Normally penalty and interest surpasses
tax and it becomes very difficult for taxpayer to pay the full amount. The Scheme
is therefore beneficial for those tax payer who do not wish to litigate or where
amount of tax involved is very less than tax interest and penalty. But if there is
high amount of tax involved and tax payer faces liquidity crunch, it may not be
possible to opt the Scheme. Also the Scheme is not beneficial if there are high
chances to win the case.

****
India's Economy Is Likely To Rebound With A Double Digit 11 Per Cent
Growth In The Next Financial Year As It Makes A 'V-Shaped' Recovery after
witnessing a pandemic-led carnage, the Pre-Budget Economic Survey said on
Friday.
The Gross Domestic Product (GDP) is projected to contract by a record 7.7 per
cent in the current fiscal ending March 31, 2021.India witnessed its last annual
contraction of 5.2 per cent in fiscal year 1979-80
The Economic Survey 2020-21 said the agriculture .. The Economic Survey
2020-21 said the agriculture sector is the only silver lining while services,
manufacturing and construction were most hit by the lockdown that was imposed
to curb the outbreak of the COVID-19 pandemic.
"After an estimated 7.7 per cent pandemic-driven contraction in 2020-21, India's
real GDP is projected to record a growth of 11.0 per cent in 2021-22 and nominal
GDP by 15.4 per cent. These conservative estimates reflect upside potential that
can manifest due to the continued normalisation in economic activities as the
rollout of COVID-19 vaccines gathers traction," the survey said.The growth will
further be supported by supply-side push from reforms and easing of regulations,
push for .. he growth will further be supported by supply-side push from reforms
and easing of regulations, push for infrastructural investments, boost to
manufacturing sector through the Productivity Linked Incentive Schemes,
recovery of pent-up demand for services sector, increase in discretionary
consumption subsequent to roll-out of the vaccine and pick up in credit given
adequate liquidity and low interest rates, it said.

The survey tabled in Parliament by Finance Minister Nirmala Sitharaman said

there is likely to be a fiscal slippage during the year based on the available trends
for April to November 2020.
India is expected to witness current account surplus during the current financial
year after a gap of 17 years, it said.
India has recorded a current account surplus of 3.1 per cent of GDP in the first
half of the year largely supported by strong services exports.
"Given the trend in imports of both goods and services, it is expected that India
will end with an annual current account surplus of at least 2 per cent of GDP –
after a period of 17 years," it said.
The contraction of 7.7 per cent in the current fiscal is on account of disruption in
normal activities due to the pandemic.
However, India is expected to be the fastest growing economy in the next two
years, the survey said.
Earlier in the week, the International Monetary Fund projected an impressive 11.5
per cent growth rate for India in 2021, making the country the only major
economy of the world to register a double-digit growth this year amid the
pandemic.
As per the advanced estimates of national income released by the National
Statistical Office (NSO), India's GDP is estimated to contract by a record 7.7 per
cent during 2020-21 as the COVID-19 pandemic severely hit the key
manufacturing and services segments.
Other global agencies too have projected contraction in the country's economic
growth for the fiscal 2020-21.

While presenting his second budget for the 2021-22 fiscal Friday, Haryana
Chief Manohar Lal Khattar, who also holds the finance portfolio, identified
agriculture, health and infrastructure development as key priority areas.
The focus on agriculture comes at a time when farmers from the state are
protesting against the three central agri laws demanding their repeal and are now
allowing the ministers and the legislators of the ruling BJP-JJP alliance, including
Khattar and Deputy chief minister Dushyant Chautala, to hold social and political
functions even in their respective constituencies.
The allocation for health sector has been increased at a time with Khattar,
citing Covid-19 pandemic, saying that “focusing on health is of paramount
importance in these times of unprecedented public health crisis”.
Key highlights of budget:
Agriculture
* A special campaign – “Har Khet Swasth Khet” – to focus on soil health and
facilitating cropping choices based on soil quality. This is an effort to provide an
end to end solution to farming – from soil health, crop choices, inputs, processing
and marketing. Farmers are being encouraged to sow crops based on the soil
health. The programme for collection and testing of soil samples of every acre
will be launched vigorously from April 2021 covering the whole state in 3-4
years.
* To increase awareness among the farmers as well as science students regarding
importance of soil health management, an initiative has been taken by the
government to impart training to science students for testing soils and water
samples to provide these services to farmers as entrepreneurs.
* A new portal will be established for participation of farmers in the scheme for
treatment of alkaline and saline soil. The Government proposes to target 1 lakh
acres of land for reclamation in 2021-22.
* Govt will form 1000 Farmer Produce Organizations by March 2022. To
promote entrepreneurship, a Crop Cluster Development Programme is under
implementation.
* The state government has notified a revamped Pradhan Mantri Fasal Bima
Yojana (PMFBY) by making the scheme optional for all farmers from Kharif
2020.
* A comprehensive management plan has been prepared for the management of
crop residue on site and at other locations. Steps have been initiated to install 100
compressed bio-gas and bio-mass plants for utilization of crop residue in
association with the Union Ministry of Petroleum and Natural Gas.
* The government will provide subsidy of Rs 7000 per acre as an incentive to
farmers for diversification from paddy to alternate crops. The target is to reduce
area under paddy cultivation by 2 lakh acres during 2021-22.
* Government to promote zero budget farming and organic/natural farming. It is
targeted to cover an area of one lakh acres of cropped area under this initiative in
the coming three years.
* Government to launch a new scheme, Kisan Mitra Yojana, to facilitate farmers
through multiple services like cash withdrawal, cash deposit, balance enquiry, pin
change, new pin generation, mini statement, cheque book
request, Aadhaar number updation, loan request, mobile number updation and
registration of problems and feedback etc. The scheme envisages installing 1000
farmer’s ATMs in partnership with banks.
* Government to procure about 81.00 LMT of wheat and 7 LMT of mustard in
Rabi season 2021 and about 60 LMT of paddy and 7 LMT of Bajra during 2021-
22.
* Government to create additional storage capacity for agriculture produce, to add
over 6.60 lakh MT storage capacity this year.
* Government to establish the India International Horticulture Market (IHM) at
Ganaur, Sonepat district in an area of 545 acre. The total cost of the project is Rs.
2400 crore out of which Rs. 1600 crore will be arranged from the NABARD
under RIDF/NIDA and the balance Rs. 800 crore will be provided by the state
government.
* Haryana Agro Industries Corporation Ltd. to set up 2000 retail stores/outlets
across the 22 districts to set up a network for non-perishable packaged consumer
goods etc. including Vita products within the State.
* Haryana is one of the 18 states that has implemented e-NAM in 81 APMCs.
The remaining 32 Mandis will be integrated with e-NAM soon. In order to
improve the efficiency of market yards in handling agricultural produce and
reduce the post harvest losses, facilities such as crop dryers, silo storages,
grading, loading/unloading, weighing, stitching, sorting and packaging are being
planned in all the major Mandis of the State. Closed Circuit TV cameras are being
installed in all warehouses of Haryana in a phased manner.
* A special drive is being conducted to provide ‘Pashudhan Kisan Credit Cards’
to livestock farmers by different banks in the state.
* Government has decided to expand the ‘Pandit Deen Dayal Upadhayay
Samuhik Pashudhan Beema Yojana’ for the livestock and has decided to go in
for livestock insurance.
* Government will establish three bio safety Level-II laboratories with Rapid and
RT-PCR diagnostics of Avian Influenza and other poultry diseases in Hisar,
Sonepat and Panchkula to provide better diagnostic services in the state.
* Government will ensure computerization of all 1020 government veterinary
hospitals and connect them with IT network by providing all necessary
infrastructure linked with Fiber to the Home (FTTH) village level fiber net
* Rs. 50 crore has been allocated to strengthen gaushalas.
* With an objective to double the income of fish farmers, the government will
develop an additional 1090 hectares saline affected area and 5000 hectares fresh
water area under ‘Pradhan Mantri Matsya Sampada Yojana Scheme’ (PMMSY)
Scheme during 2021-22 to 2024-25.
* Under the ‘Pradhan Mantri Matsya Sampada Yojana Scheme’ (PMMSY), ten
small fish feed mill plant units would be established during 2021-22 to 2024-25
Social Welfare
* Old Age Samman allowance raised to Rs 2,500 per month from April 1, from
existing Rs 2,250.
* Mukhya mantri Vivah Shagun Yojana simplified so that beneficiaries get the
benefit before marriage or on the wedding day itself.
* An amount of Rs 22,000 will now be provided to Scheduled Caste individuals
to meet the expenditure for defending their cases related to property, agriculture
land, rent and reservation etc. in the courts under the Legal Aid Scheme. This is
double of earlier Rs 11,000.
Education
* 4,000 playway schools to be opened with focus on strengthening health,
nutritional needs of children and augur their overall development in terms of
inculcating moral values.
In the first phase, 1,135 Anganwadi centres running from school premises or
departmental buildings will be upgraded into play schools and made operational
from March 2021. In the second phase, 2,865 Anganwadi Centres will be
upgraded into play schools in financial year 2021-2022.
500 crèches will be made operational in two phases. In the first phase, 182 crèches
were sanctioned and 30 already made operational with modern facilities in 2020-
21. Remaining crèches will be started in 2021-22 by upgrading existing
Anganwadi centres after assessing the footfall of working women in different
districts.

Consumer Price Index (CPI), India’s benchmark inflation measure, grew at 6.9%
in the month of July. Headline INFLATION has been growing at more than 6%,
the upper limit of RBI’s tolerance level, since December 2019. March was the
only exception. India’s other inflation measure, Wholesale Price Index (WPI),
has been contracting since April 2020. (See Chart 1)

To be sure, this is not the first instance of divergence between the two inflation
measures. A 2015 Mint story by this author pointed out that there have been four
such instances since 1982-83. The divergence between the CPI and WPI is not
surprising as they differ in composition. Food items have a share of almost 40%
in the CPI basket. This is just 24% for WPI. Therefore food price hikes generate
stronger tailwinds for CPI. But the food components of CPI and WPI actually
move very closely with each other.
... that isn’t entirely explained by the weightage to food.
Difference in the weightage of food items is not the only reason for divergence
in CPI and WPI. A comparison of non-food components of CPI and WPI brings
out this fact clearly. (Chart 3)
This too is understandable. WPI is focused on capturing producer costs, while
CPI is representative of the average consumer basket of an Indian household. The
CPI basket is decided after the National Statistical Office’s consumption
expenditure surveys. CPI has components such as housing and recreation. WPI
has crude petroleum and engineering goods.
Inflation expectations of households are still high ...
Inflation expectations of households have come down compared to what they
were six-seven years ago. But they continue to be significantly above RBI’s upper
band of 6%. RBI data also shows that trajectory of current and future inflation
expectation for households has been almost identical in India. (See Chart 4)
What does one make of the fact that households’ inflation expectations have
remained at 6% plus levels over the last four years? Does it mean that the Indian
economy has been facing persistent excess demand?
... But this does not mean there is excess demand.
Policy moves required
At a macro level, inflation indices are not constructed for the sake of it. They are
of fundamental importance in accessing the state of an economy at any given
point of time. A rise in inflation is inferred as an indication of emerging supply
side constraints. Deflation, on the other hand, suggests a collapse in demand.
These situations require different policy interventions. A demand shock is needed
when inflation starts rising. This could be in the form of an interest rate hike, or
rationing. A deflationary economy will need a stimulus. This could be given via
direct cash transfers, or a cut in interest rates, which would then lower the cost of
consumption and investment, the two key constituents of aggregate demand. It is
this theoretical framework which guides India’s monetary policy framework.
The RBI is mandated to use policy rates to achieve a balance between growth rate
and inflation.
RBI’s inflation targeting framework looks at various parameters such as
aggregate demand, monetary transmission (link between policy rates and retail
lending rates), and inflation expectations. There a debate on the choice of the
nominal anchor when the inflation targeting framework was being adopted.
The Expert Committee to Revise and Strengthen the Monetary Policy Framework
chaired by the then deputy governor Urjit Patel — it laid the basis of the inflation
targeting framework — opted for headline CPI. But interest rates, which are what
RBI uses to balance inflation and growth, can hardly be expected to influence
food prices. Food items have a 40% share in the CPI basket. This issue was raised
to object to the choice of CPI as the nominal anchor. The committee justified the
choice on the grounds that it “closely reflected the cost of living and influences
inflation expectations relative to other available metrics”.
The economy had been losing growth momentum even before the pandemic
disrupted economic activity. The GDP growth rate fell from 8.3% in 2016-17 to
7%, 6.1% and 4.2% in 2017-18, 2018-19 and 2019-20. Private consumption,
which accounts for more than half of India’s GDP, grew at 5.3% in 2019-20, the
slowest since 2009-10. The economy has been facing deficient rather than excess
demand.
This is corroborated by a comparison of the manufacturing component of WPI
with capacity utilisation levels. The latter is considered to be a good proxy of
demand in the economy. The former can be considered as a good proxy of market
conditions facing manufacturing firms in India. When demand is weak, producers
are expected to suffer a dent in their margins. A market with strong demand sees
the burden of increased prices being shifted to consumers. Both capacity
utilisation levels and WPI manufacturing have been falling for quite some time.
This suggests that the Indian economy has been facing a deficient demand. The
lockdown must have made matters worse on this front. (See Chart 5)

... and that is the challenge facing RBI. This is the centrality of economic policy
challenge in India. At a time when the economy is in a contraction phase and
producers are perhaps sitting with unprecedented levels of idle capacity,
households expect inflation to grow in double digits in the future.
The purpose of this discussion is to highlight a problem in interpreting headline
inflation numbers as a metric of overall demand-supply conditions in the
economy. One interesting question is worth asking. What if, there were a
comprehensive food security programme in India, which would also provide
fixed quantities of vegetables, edible oil and pulses along with rice and wheat? If
food price worries were not to affect inflation expectations, maybe they would
better capture the dynamics in the non-food economy, which accounts for more
than 80% of the Gross Value Added.

The Mukesh Ambani-Helmed Reliance Industries (RIL) Is Now India’s First

$150-Billion Company In Terms Of Market Capitalisation. Share market
experts tracking the company for decades say that RIL’s market-cap could still
double from the current levels, in around three years.On Friday, when RIL scaled
the $150-billion milestone, its share price had gained 6.23 per cent to close at
₹1,759. It took RIL’s market capitalisation to ₹11.15-lakh crore, which comes to
around $150 billion considering an exchange rate of 76.18 for the rupee against
the dollar.RIL’s market-cap now is higher than that of Total SA, Royal Dutch
Shell and BP among the top global energy players. But it is still lower than that
of Exxon Mobil, Chevron and Saudi Aramco.
Investments in Jio
However, the recent jump in RIL’s valuation has been on the back of a slew of
investments into its telecoms venture Jio. The telecom company is an arm of RIL,
which is likely to be hived off and listed separately, market analysts said.
In the past 58 days, RIL has managed to attract ₹1.68-lakh crore as investments
into Jio from marquee names, including Facebook and PIF, General Atlantic,
Silver Lake, Vista Equity Partners, KKR, Mubadala Investment Company, Abu
Dhabi Investment Authority, TPG and L Catterton.
“Jio alone could scale a market-cap of around $200 billion in coming 3 to 5
years,” said Deven Choksey, MD, KR Choksey Investment Managers.
“Jio is more than a telecom company. You cannot restrict yourself to calling it
just a mobile phone network service provider,” Choksey said. The other two
verticals of RIL, which is oil & chemicals and the retail business, will carve out
around $100 billion in market-cap, he felt. “Overall, RIL’s valuation may rise to
around ₹25-lakh crore in next few years,” he said.
The only risk of a hit to RIL’s valuation now is the global scenario. If the
valuation of top global companies takes a massive hit due to worsening financial
conditions, it could also affect RIL, analysts say.
In just 59 trading sessions, the share price of RIL has doubled. It rose from a low
of ₹867 on March 23 to touch a high of ₹1,788 on Friday. The Ambani family-
led promoters own a 50.29 per cent stake in RIL. It is speculated that Jio may list
on the US stock exchange first, sometime next year.

Rajya Sabha on Tuesday passed Banking Regulation Amendment Bill, 2020

to bring the cooperative banks under the supervision of the Reserve Bank of India.
In the wake of deteriorating condition of cooperative banks in the country, the
central government amended the Banking Regulation Act, 1949. The Bill amends
the Banking Regulation Act, 1949. The Act regulates the functioning of banks
and provides details on various aspects such as licensing, management, and
operations of banks. The Bill replaces the Banking Regulation (Amendment)
Ordinance, 2020 promulgated on June 26, 2020. Exclusions: The Act does not
apply to certain co-operative societies such as primary agricultural credit societies
and co-operative land mortgage banks. The Bill amends this to state that the Act
will not apply to: (i) primary agricultural credit societies and (ii) co-operative
societies whose principal business is long term financing for agricultural
development. Further, these societies must not use the words 'bank', 'banker' or
'banking' in their name or in connection with their business, or act as an entity
that clears cheques. Power to make a scheme for reconstruction or amalgamation
without imposing moratorium: Under the Act, RBI may, after placing a bank
under moratorium, prepare a scheme for reconstruction or amalgamation of the
bank to secure its proper management, or in the interest of depositors, general
public or the banking system. Banks placed under moratorium do not face any
legal action for up to six months. Further, banks cannot make any payment or
discharge any liabilities during the moratorium. The Bill allows RBI to initiate a
scheme for reconstruction or amalgamation without imposing a moratorium. If a
moratorium is imposed, in addition to the existing restrictions, the Bill adds that
banks cannot grant any loans or make investments in any credit instruments
during the moratorium. Issuance of shares and securities by co-operative banks:
The Bill provides that a co-operative bank may issue equity, preference, or special
shares on face value or at a premium to its members or to any other person
residing within its area of operation. Further, it may issue unsecured debentures
or bonds or similar securities with maturity of ten or more years to such persons.
Such issuance will be subject to the prior approval of the RBI, and any other
conditions as may be specified by RBI. The Bill states that no person will be
entitled to demand payment towards surrender of shares issued to him by a co-
operative bank. Further, a co-operative bank cannot withdraw or reduce its share
capital, except as specified by the RBI. Qualifications for management: The Bill
applies certain provisions of the Act to co-operative banks in relation its
management. Under the Bill, co-operative banks cannot employ as Chairman,
someone who is insolvent or has been convicted of a crime involving moral
turpitude, among other restrictions. RBI may remove the Chairman if he is not fit
and proper and appoint a suitable person if the bank does not do so. Further, the
Board of Directors must have at least 51% of members with special knowledge
or experience in areas such as accountancy, banking, economics or law. RBI may
direct a bank to reconstitute its Board if it does not conform to the requirements.
If the bank does not comply, RBI may remove individual directors and appoint
suitable persons.
Power to exempt cooperative banks: The Bill states that RBI may exempt a
cooperative bank or a class of cooperative banks from certain provisions of the
Act through notification. These provisions relate to restrictions of certain types
of employment, qualifications of the Board of Directors and, appointment of a
chairman. The time period and conditions for the exemption will be specified by
RBI.
Supersession of Board of Directors: The Act states that RBI may supersede the
Board of Directors of a multi-state co-operative bank for up to five years under
certain conditions. These conditions include cases where it is in the public interest
for RBI to supersede the Board, and to protect depositors. The Bill adds that in
case of a co-operative bank registered with the Registrar of Co-operative
Societies of a state, RBI may supersede the Board of Directors after consultation
with the concerned state government, seeking their comments within such period
as specified by it.
Certain provisions omitted: The Bill omits certain provisions from the Act. One
of them relates to a restriction on a co-operative bank from making loans or
advances on the security of its own shares. Further, it prohibits the grant of
unsecured loans or advances to its directors, and to private companies where the
bank's directors or chairman is an interested party. The Act also specifies
conditions when unsecured loans or advances may be granted and specifies the
manner in which the loans may be reported to RBI. The Bill omits this provision
from the Act.

Prime Minister Narendra Modi's call for an "Aatmanirbhar Bharat" (self-

reliant India) is an important initiative, the International Monetary Fund
(IMF) said.

"The economic package under this self-reliant India initiative, which was
announced in the aftermath of the coronavirus shock, has supported the Indian
economy and mitigated significant downside risks, so we do see that initiative as
having been important," Gerry Rice, Director, Communications Department,
IMF, told reporters at his fortnightly news conference here.
Looking ahead, as the prime minister has said, for India to play a more important
part in the global economy, pursuing policies that stimulate by improving the
efficiency and competitiveness of the economy is critical, he said, responding to
a question on Modi's call for an "Aatmanirbhar Bharat".
"To achieve the stated 'Make For The World' goal in India, the priority is to
remain focussed on policies that can help further integrate India in the global
value chain, including through trade, investment and technology," Rice said.
Responding to another question, he said the IMF's joint study with the NITI
Aayog and the Ministry of Finance shows that to achieve a high performance in
health-related sustainable development goals, India would need to gradually
increase its total spending in the healthcare sector from the current 3.7 per cent
of the GDP.

THE RS 4,633-CRORE INDIAN RAILWAY FINANCE CORPORATION

(IRFC) INITIAL PUBLIC OFFER (IPO) HAS BEEN SUBSCRIBED 3.49
TIMES ON THE FINAL DAY OF THE THREE-DAY BIDDING
PROCESS.
The Rs 4,633-crore Indian Railway Finance Corporation (IRFC) initial public
offer (IPO) has been subscribed 3.49 times on the final day of the three-day
bidding process. According to the subscription data available on the exchanges,
the issue received bids for 435 crore equity shares as against the offered size of
over 124 crore equity shares. The portion set aside for qualified institutional
buyers has received 3.78 times subscription while non-institutional investors have
seen subscription of 2.66 times. Retail category saw 3.53 times application while
the employees subscribed their reserved portion a massive 43.73 times. AR
Ramachandran, Co-founder & Trainer, Tips2Trade, told Financial Express
Online that IRFC IPO has unexpectedly seen a very positive response due to
strong subscription from the retail and QIB investors.
“With markets at all-time highs, allotted investors should book profits on a listing
day and await a correction to add fresh buys at a later stage,” Ramachandran
advised investors. Up to 35 per cent of the total issue size was reserved for retail
investors, the quotas for qualified institutional bidders and non-individual
investors were fixed at 50 per cent and 15 per cent, respectively. Most of the
brokerages had recommended to ‘subscribe’ to the issue for the listing gains as
the firm is the dedicated market borrowing arm of the Indian Railways.
Today, IRFC’s grey market premium fell to Rs 0.80-0.90 from Rs 1.3 yesterday.
Through the initial public offer, the President of India, the promoter of IRFC,
planned to offload 13.6 per cent stake in the company, bringing the promoter
shareholding to 86.4 per cent post-issue. IRFC’s valuation stood at PB of 1x.
Aditya Kondawar, Founder and COO, JST Investments told Financial Express
Online that the IPO may list with a small premium on the listing day given its Rs
1.2-1.3 grey market premium. “We gave an ‘avoid’ rating for the long-term due
to the margins being decided by the Ministry of Railways and for the short term
due to low grey market premium,” he added.

The Reserve Bank of India (RBI) projected 9.5 per cent contraction in
India’s GDP for the current financial year in the third bimonthly monetary policy
review announced Friday. It also expects headline retail inflation to ease from the
current levels in the third and fourth quarters.
The six-member monetary policy committee (MPC) of the central bank held the
repo rate at 4 per cent amid confidence that the modest recovery experienced in
September could strengthen in the second half of the current fiscal.
The MPC voted unanimously to keep the policy repo rate unchanged at 4 per cent.
It also decided to continue with the accommodative stance of monetary policy,
RBI Governor Shaktikanta Das said.
“MPC also decided to continue with the accommodative stance of monetary
policy as long as necessary at least through the current financial year and into the
next year to revive growth on a durable basis and mitigate the impact of Covid-
19 while ensuring inflation remain within the target going forward,” he said.

Except new external member Jayanth Varma, all the members voted on extended
accommodative stance formulation.
Das said the GDP growth may break out of contraction and turn positive in the
fourth quarter.
The central bank projected GDP contraction of 5.6 per cent in the third quarter
and 0.5 per cent growth in the fourth quarter. Real GDP growth for the first
quarter of the next fiscal is seen at 20.6 per cent.
Sounding optimistic about recovery prospects, Das said the Indian economy is
entering into a decisive phase in the fight against the pandemic. “Relative to pre-
COVID levels, several high frequency indicators are pointing to the easing of
contractions in various sectors of the economy and the emergence of impulses of
growth,” he said.
“By all indications, the deep contractions of Q1:2020-21 are behind us; silver
linings are visible in the flattening of the active caseload curve across the country.
Barring the incidence of a second wave, India stands poised to shrug off the
deathly grip of the virus and renew its tryst with its pre-COVID growth
trajectory,” Das added.
This is the first time the central bank has projected GDP and inflation figures
since the nationwide lockdown was imposed in March to curb the spread of the
novel coronavirus pandemic.
While RBI had refrained from giving specific numbers on growth, it expected the
GDP to be in the negative territory for FY21. The 23.9 per cent GDP growth
contraction in the first quarter of this fiscal prompted rating agencies and other
forecasters to project double digit growth contraction for the entire year.
Das said the central bank has decided to look through the spike in inflation as
transient. It expects retail inflation to ease in the third and fourth quarter.

“Our projections indicate that inflation would ease closer to the target by
Q4:2020-21.”

Average consumer price index (CPI)-based inflation was over 6 per cent for the
January-March and April-June quarter. In July, CPI inflation was 6.73 per cent
and 6.69 per cent in August. September inflation data, which will be released next
week, is also expected to stay above 6 per cent.The RBI Act mandates the central
bank to provide an explanation to the lawmakers if it fails to keep average
inflation in the 2-6 per cent range for three consecutive quarters.
While the status quo is on expected lines as inflation was above the central bank’s
target range, the extremely dovish stance cheered bond street with the yield on
the 10-year government bond falling by 9 basis points in intraday trade.
‘Whatever it takes’
In his comments, Das said, “In this environment, the focus must now shift from
containment to revival. Undeterred by the pandemic, the rural economy looks
resilient. Kharif sowing has already surpassed last year’s acreage as well as the
normal sown area.”
He said early estimates suggest food grains production is set to cross another
record in 2020-21. He also said job creation under the Mahatma Gandhi National
Rural Employment Guarantee Act has provided incomes and employment in rural
areas.
Das added that the mood of the nation has changed from despair to confidence
and hope.
“Meanwhile, migrant labour is returning to work in urban areas, and factories and
construction activity are coming back to life. This is also reflected in rising levels
of energy consumption and population mobility. In cities, traffic intensity is rising
rapidly; online commerce is booming; and people are getting back to offices,” he
said.
According to Das, recovery is likely to predominantly be a three-speed, with
individual sectors showing varying paces, depending on sector-specific realities.
With the Indian Premier League (IPL) ongoing in the UAE, the RBI governor
used cricketing terminology to describe how recovery would shape up in some of
the sectors.
“Sectors that would ‘open their accounts’ the earliest are expected to be those that
have shown resilience in the face of the pandemic and are also labour-intensive,”
he said, citing example of agriculture and allied activities, fast moving consumer
goods, two wheelers, passenger vehicles and tractors, drugs and pharmaceuticals,
and also electricity generation, especially renewables in these categories.
“The second category of sectors to ‘strike form’ would comprise sectors where
activity is normalising gradually. The third category of sectors would include the
ones which face the ‘slog overs’, but they can rescue the innings. These are
sectors that are most severely affected by social distancing and are contact-
intensive,” he added.
Observing that the highlight of the policy was the signal “whatever it takes” to
align risk-free government bond yields with the fundamentals of the economy,
HDFC Bank chief economist Abheek Barua said the monetary policy was as
“aggressively accommodative as possible without cutting the policy rate”.
“…there is a significant probability of a rate cut in February, if not in December
itself as inflation, as we expect, moderates,” Barua said.

“Such loans shall attract a risk weight of 35 per cent where LTV is less than or
equal to 80 per cent, and a risk weight of 50 per cent where LTV is more than 80
per cent but less than or equal to 90 percent. This measure is expected to give a
fillip to bank lending to the real estate sector,” the RBI said.

According to bankers, the move will provide a boost to the high value housing
loan where lenders can assign a lower risk weight, which means less capital
requirement, for even high value loans if the borrowers put in more funds and opt
for a lower loan amount.

Shares of HDFC, the country’s largest mortgage lender, were up 2 per cent, while
stocks like LIC Housing Finance and PNB Housing Finance were up 7 per cent
and 3.65 per cent, respectively.
TLTRO move
In a move to boost lending, the banking regulator also opened on tap targeted
long-term repo operations (TLTRO) with tenors of up to three years for a total
amount of up to Rs 1 lakh crore at a floating rate linked to the policy repo rate.
The scheme will be available up to 31 March 2021.

What’s more important is that for the first time, banks will be allowed to extend
loans from these funds which are made available to them by RBI at a low cost.

Until now, banks were only allowed to invest in instruments like commercial
paper and corporate bonds. Not so high-rated non-banking financial companies,
which so far were deprived of bank funds, now expect the situation to reverse.

“Aligning risk-weights for individual housing loans to Loan to Value (LTVs) will
help home lenders, in turn, also driving demand for the stressed real-estate sector.
Macro outlook for FY21 looks muted with a decline forecast in GDP by 9.5%,
but buoyancy in rural demand and sector specific improvement could lead to a
gradual recovery,” said Naveen Kulkarni, Chief Investment Officer, Axis
Securities.

FALLING FOR A 'AATMANIRBHAR BHARAT' (SELF-RELIANT

INDIA) BY PRIME MINISTER MR NARENDRA MODI IS A
SIGNIFICANT INITIATIVE, THE INTERNATIONAL MONETARY
FUND (IMF) said on Thursday.

alling for a 'Aatmanirbhar Bharat' (self-reliant India) by Prime Minister Mr

Narendra Modi is a significant initiative, the International Monetary Fund (IMF)
said on Thursday. Mr Gerry Rice, Director, Communications Department, IMF,
said, "The economic package under this self-reliant India initiative, which was
announced in the aftermath of the coronavirus shock, has supported the Indian
economy and mitigated significant downside risks, so we do see that initiative as
having been important".

Looking ahead, as the Prime Minister said, for India to play a greater role in the
global economy, it is important to follow policies that stimulate the economy by
improving productivity and competitiveness, he said, referring to a query on
Modi's call for a 'Aatmanirbhar Bharat.'

Mr Rice said, "To achieve the stated 'Make For The World' goal in India, the
priority is to remain focussed on policies that can help further integrate India in
the global value chain, including through trade, investment and technology".

In response to another issue, the IMF's joint study with NITI Aayog and the
Ministry of Finance showed that India would have to steadily increase its overall
investment in the healthcare sector from the current 3.7% of GDP to achieve a
high performance in health-related sustainable development objectives.

Mr Rice stated, "More generally, beyond the health sector, comprehensive

structural reforms are needed to achieve more inclusive and sustainable medium-
term growth. We have talked about those reforms before -- infrastructure, land
reforms, product market and labour market reforms, increasing female labour
force participation, access to finance and better jobs".

THE UNIFIED PAYMENTS INTERFACE recorded 207.16 crore transactions

worth Rs 3.86 lakh crore in the month of October, according to information
released by National Payments Corporation of India. A year ago, in October 2019,
the payments platform had crossed 100 crore monthly transactions for the first
time. The value of monthly transactions at the time stood at Rs 1.91 lakh crore,
half of the most

recent number. According to NPCI data, there are 189 banks and 20 third party
applications live with UPI. The list of banks includes universal banks, cooperative
banks, small finance banks and payments banks. Among remitter banks, State
Bank of India reported the largest transaction volumes in September at 51 crore,
according to available data.

The rapid rise in transactions had also resulted in a rise in failed transactions. In
September, SBI recorded 7.1% failed transactions owing to customer side issues
such as entering the wrong pin and 5.31% failed transactions owing to technical
problems on the UPI platform or bank network. Lenders like Canara Bank saw a
much larger, 16.54% failure rate owing to customer side issues and 5.94% faile

5.94% failed transactions owing to UPI related issues. The data on transaction
failures is released by NPCI with a one month lag. NPCI had launched the UPI
in 2016, months before the government announced its decision to demonetise Rs
500 and Rs 1,000 currency notes. The platform has led to a rapid rise in adoption
of digital payments across India.

Fitch Solutions Country Risk And Industry Research On Friday Said The
Government’s Decision To Extend The Production-Linked Incentive (PLI)
Scheme To The Automobile Industry Would Provide Significant Benefits To
The Sector Over The Next Five Years.

It, however, noted that some of the operational risks present in the country would
still remain a challenge for many investors despite the incentive.

“We believe that this policy provides significant upside potential for India’s autos
manufacturing industry over 2020-2025, especially in the field of electric vehicles
(EVs) and the associated supply chains,” Fitch Solutions Country Risk and
Industry Research said in a statement.

Citing Federation of Automobile Dealers Associations (FADA), it noted that the

domestic automotive industry is set to receive a large portion of this incentive
fund over the five-year period around Rs 570 billion.

“However, we note that the elevated operational risks present in the country will
remain a challenge for many investors. Our operational risk team believes that
businesses operating in the country will continue to face additional structural risks
stemming from legal risks, security gaps, excessive bureaucracy and patchy
utility infrastructure, all of which currently increase the costs of operating in
India, particularly compared with China,” Fitch Solutions Country Risk and
Industry Research said.

This means that while these incentives have the potential to provide a significant
boost to the country’s automotive industry, it will continue to fall short in
realising its full potential given the limited progress in tackling the structural
challenges in the country, it added.

On November 11, the Cabinet approved PLI for 10 more sectors, including auto
and pharmaceuticals, with an outlay of about Rs 1,45,980 crore over a period of
five years.

Under another PLI scheme, an outlay of Rs 51,311 crore has already been
approved.
As Per The State-Run ITI And Industry Platform Ipv6 Forum, With Over
50 Percent Share In Next-Generation IP Addresses, India Now Seems To
Have The Ability To Build Its Own Protected Internet. This could be possible
by setting up a root server locally for less than 10 crore.

In 2010 and 2012, the DoT published the first and second roadmap to roll out
IPv6 addresses in the country. This is unlike the old IPv4 regime with a threshold
of 3 billion IP addresses, can offer several trillion distinctive internet addresses.

“The work on IPv6 started in 2006. India was last to implement IPv6 roadmap. It
now has over 50 per cent market share in IPv6 address and leads the world in
terms of subscribers”. ITI Chairman and Managing Director RM Agarwal told
PTI.

As Deputy Director General, Network Technology at the Department of Telecom,

he was responsible for leading the introduction of IPv6 adoption in the nation
within his portfolio (DoT).

The Internet operates by linking websites, users, etc. with Internet Protocol (IP)
addresses. Earlier IPv4 variants of IP addresses, which are small in number and
not adequate to satisfy the rising demand for data services, were in use.

“There are only about 3 billion IPv4 addresses which are already exhausted
whereas under IPv6 there are several trillions of IP addresses. Reliance Jio
contributed in taking India to the leadership position. Each of Reliance Jio
customers are connected through IPv6 address. We can now have
our Aatmanirbhar secure internet. India can now set up its own root server with
less than ₹10 crore,” IPv6 Forum chairman Satya N Gupta said.

“The Internet will stop working if any of the root servers are switched off. With
an indigenous root server, India can continue to communicate within its own
jurisdiction. Government, industry and other stakeholders can jointly manage it.
We want technocrats in India to develop IPv6 servers,” Gupta said.

“The National Internet Exchange of India (Nixi) already has expertise in IPv6.
The company can develop native technologies on IPv6 and export them as well.
Theoretically, every country will have its own root server,” Gupta said.

“We were supported by other countries when we were in the first phase. Now it
is our job to help others. IPv6 is pivotal for Digital India. To support 5G and
related technologies like machine-to-machine, internet of things etc we need
IPv6,” Agarwal said.

The U.S.-based agency said it expects India's nominal GDP growth

to rise to closer to 17% in fiscal 2021, higher than 14.4% projected
in the Budget
Rating agency Moody's on Wednesday India's fiscal deficit
projections are higher than expected and slower consolidation will
constrain its fiscal strength over the medium term.
The U.S.-based agency said it expects India's nominal GDP growth to
rise to closer to 17% in fiscal 2021, higher than 14.4% projected in the
Budget.
Moody's Vice President and Senior Credit Officer William Foster said
while the headline deficit projections are larger than the agency expected,
they reflect both credible budgetary assumptions and greater
transparency than in past budgets.
“The budget's focus on higher capital spending, financial sector reform
and asset sales will help stimulate growth, but implementation risks
remain and slower fiscal consolidation will constrain fiscal strength over
the medium term," Mr. Foster added.
As per the glide path for fiscal consolidation announced in Budget, the
government plans to bring down the fiscal deficit to 4.5% of gross
domestic product (GDP) by 2025-26 fiscal.
It said greater transparency on off-balance-sheet food subsidy
expenditure and more conservative revenue assumptions have
contributed to the government's higher deficit number for fiscal 2020.
India has budgeted a fiscal deficit of 9.5% of GDP for the current fiscal
ending March.
 "We believe the final number could be lower, based on stronger revenue
generation during the fourth quarter of fiscal 2020 (ending March 31,
2021)," Moody's said in a note.
The fiscal deficit for 2021-22 fiscal beginning April 1 has been pegged
at 6.8%.
In the note titled 'India's budget to drive broad economic growth, but
fiscal consolidation prospects remain weak', Moody's said "the
government's relatively conservative nominal GDP growth assumption
of 14.4% for fiscal 2021 creates potential for stronger fiscal outcomes
than it currently forecasts. We expect India's nominal GDP growth to rise
to closer to 17% in fiscal 2021 (ending March 31, 2022)".
Moody's said the financial sector will undergo some credit positive
reform under the new budget. Banks will benefit from the establishment
of an asset reconstruction company to resolve legacy problem loans, and
public sector banks additionally from a ₹20,000 crore capital infusion.
Tax incentives and other measures to increase consumption are credit
positive for non-financial companies, with stronger demand in the
housing and automobile sectors to carry over to other sectors such as
steel, it added.
Moody's believes ₹1.75 lakh crore disinvestment target is achievable,
based on its expectation of strengthening economic conditions and
relatively supportive financial markets, but it will be subject to significant
implementation risk.

THE INITIAL PUBLIC OFFERING (IPO) OF LIC MAY HIT THE

MARKET IN THE FOURTH QUARTER OF NEXT FINANCIAL YEAR,
and the government has introduced amendments to the Life Insurance
Corporation Act 1956 to facilitate this, Economic Affairs Secretary Tarun
Bajaj said on Wednesday.
As many as 27 amendments have been pushed through the Finance Bill 2021
tabled by finance minister Nirmala Sitharaman on Monday along with the Union
Budget 2021-22.
"Probably in the third or fourth quarter of next financial year, depending on how
soon the valuation comes," he told PTI in an interview.
On Monday, the finance minister announced that the IPO of Life Insurance
Corporation (LIC) will take place in the next financial year.
Disinvestment target of FY'22 achievable; LIC IPO to bring in Rs 1 lakh crore:
CEA
Asserting that the disinvestment target of Rs 1.75 lakh crore for 2021-22 was
"imminently achievable", chief economic adviser (CEA) K V Subramanian on
Saturday said the proposed initial public offering (IPO) by LIC itself could garner
Rs 1 lakh crore for the government.

Currently, the government owns a 100 per cent stake in LIC. Once listed, LIC is
likely to become the country's biggest company by market capitalisation with an
estimated valuation of Rs 8-10 lakh crore.
DIPAM, which manages government's equity in state-owned companies, has
already selected actuarial firm Milliman Advisors for ascertaining the embedded
value of LIC, ahead of the initial public offer. While Deloitte and SBI Caps have
been appointed as pre-IPO transaction advisors.
The government on Monday budgeted Rs 1.75 lakh crore from stake sale in public
sector companies and financial institutions, including 2 PSU banks and one
insurance company, in the next fiscal year beginning April 1.
The amount is lower than the record budgeted Rs 2.10 lakh crore to be raised
from CPSE disinvestment in the current fiscal.
However, Covid-19 pandemic impacted the government's CPSE stake sale
programme, and the target has been lowered to Rs 32,000 crore in the Revised
Estimates.
So far this fiscal, the government has mopped up Rs 19,499 crore from CPSE
stake sale and share buyback.

MORATORIUM INTEREST WAIVER ISSUE.

The Reserve Bank of India (RBI) has asked all lending institutions to implement
the government’s scheme to grant ex-gratia payment of difference between
compound interest and simple interest for six months to borrowers till August 31.

The RBI notification has come four days after the government first notified the
details following a Supreme Court’s interim directive.

What is the issue all about?

When COVID-19 struck the economy, the RBI, in March, announced loan
moratorium to all term loans to help borrowers tide over the tough days. This
wasn’t a loan waiver but an EMI deferral scheme, which meant borrowers needed
to pay back the deferred EMIs later. Banks duly implemented the EMI deferral
scheme but said compound interest will be charged on the outstanding loan
amount, thus adding to the repayment burden of the borrowers significantly at
later stages of the loan cycle.Compound interest refers to interest calculated on
principal and the interest accumulated.

What is the scheme?

Following prolonged arguments in the Supreme Court (SC) with respect to banks
charging interest on the moratorium loans, the government and the apex court
finally reached a consensus that the issue can be settled by waiving the compound
interest charged. The government’s scheme essentially says that banks will credit
the difference between simple interest and compound interest (from March 1 to
August 31) in eligible borrower accounts. It is not yet clear whether this amount
will be adjusted against the loan amount or will be credited to the borrower
account separately. What is clear is that the central government will compensate
banks. For this, they need to apply before a specified time.

Who are all eligible for this scheme?

All loans up to Rs 2 crore that are taken from banks, NBFCs (non-banking finance
companies) and state co-operative banks are eligible. This include borrowers of
housing finance companies and microfinance companies.

Which loans are eligible?

MSME, education, housing, consumer durables, credit card dues, automobile

loans, personal loans and consumption loans. But there is one condition. The
loans, to be eligible for the scheme, shouldn’t be a non-performing asset (NPA)
as on February 29, 2020. It doesn’t matter whether the borrower availed the
moratorium for full six months, or partly availed (say for the first three months)
or not availed at all.

Why for all?

The reason is simple. If the scheme was extended only for, say those who availed
moratorium, it would be seen as partial treatment to those who continued to make
the payments during this period. Banks will have to calculate the amount to be
credited based on the rate of interest prevailing as on February 29. This amount—
the difference between compound interest and simple interest—needs to be
credited to the borrowers’ accounts on or before November 5, 2020.

The RBI’s concern that the banking system shouldn’t penalised for charging
interest on loans, for what was essentially an EMI deferral scheme, has been
addressed. The SC observed that interest-on-interest amounts to penal action on
the borrower. That part is also addressed, with the government, not banks, taking
up the burden.

Banks get this amount back from the government. State Bank of India (SBI) has
been mandated to collect the claims and make the payments. Banks need to set
up grievance cells to settle any disputes on such claims.

What has happened now is a mutually agreed settlement between the Centre and
the apex court, with respect to the interest-waiver issue — a last-minute face
saver. The case, postponed multiple times, wouldn’t have reached a practical
solution in any other manner. The RBI had earlier informed the court that if banks
are forced to waive the entire interest burden on moratorium, loans would cost
banks around Rs 2 lakh crore.

This would have meant a massive financial hit on the industry. A fiscally
constrained government would not have been in a position to take up this burden.
On the other hand, the estimated burden on government on payment of compound
interest will cost the exchequer only about Rs 7,500 crore.

With the government taking up the burden of compound interest payment and
RBI notifying the scheme, the prolonged uncertainty over the interest waiver
issue, which resulted in confusion among borrowers and banks, comes to an
end.Where does the burden go ultimately?
As an earlier Moneycontrol column pointed out, the buck stops at the taxpayer
for what originally started as a COVID-relief exercise from the RBI. It means
money will have to come from the pockets of the average taxpayers. Now, it has
eventually become a taxpayer-funded interest-waiver exercise

India’s Foreign-Exchange Reserves Surpassed Russia’s To Become The

World’s Fourth Largest, as the South Asian nation’s central bank continues to
hoard dollars to cushion the economy against any sudden outflows.
Reserves for both countries have mostly flattened out this year after months of
rapid increase. India pulled ahead as Russian holdings declined at a faster rate in
recent weeks.

India’s foreign currency holdings fell by $4.3 billion to $580.3 billion as of March
5, the Reserve Bank of India said on Friday, edging out Russia’s $580.1 billion
pile. China has the largest reserves, followed by Japan and Switzerland on the
International Monetary Fund table.
India’s reserves, enough to cover roughly 18 months of imports, have been
bolstered by a rare current-account surplus, rising inflows into the local stock
market and foreign direct investment.
Analysts say a strong reserves position gives foreign investors and credit rating
companies added comfort that the government can meet its debt obligations
despite a deteriorating fiscal outlook and the economy heading for its first full-
year contraction in more than four decades.
“India’s various reserves adequacy metrics have improved significantly,
particularly in the last few years,” Kaushik Das, chief India economist at
Deutsche Bank, said before the latest data were released. “The healthy FX
reserves position should give enough comfort to RBI for dealing with any
potential external shock-driven capital-stop or outflows in the period ahead.”
The RBI bought a net $88 billion in the spot forex market last year, central bank
data show. That helped make the rupee the worst performer among Asia’s major
currencies last year and earned India a place on a U.S. Treasury watchlist for
currency manipulation.
A recent RBI report recommended further strengthening of foreign-exchange
reserves, citing swings in the rupee around the time of the global taper tantrum in
2013. Governor Shaktikanta Das has said that emerging market central banks
need to build reserves to prevent any external shocks, irrespective of being put on
watch by the U.S.

Petrol And Diesel Prices Have Begun To Pinch Consumers Harder With Oil
Marketing Companies (Omcs) Reserving The Weekend For Effecting The
Steepest Hike In Last Several Months.

Accordingly, the price of petrol and diesel were raised by 39 paisa and 37 paisa
per litre respectively in Delhi on Saturday. With this increase, petrol is now priced
at Rs 90.58 and diesel Rs 80.97 per litre (s) in the national capital.

At this price in Delhi, petrol has breached Rs 90 per litre-mark across all metros
and around all major cities of the country. In fact, retail price of petrol has crossed
Rs 100 a litre-mark in several cities among Maharashtra, Madhya Pradesh and
Rajasthan. These states also have one of the highest level of local levies on
petroleum products in the country.

In the last 12 days (since February 9), the price has gone up by Rs 3.63 per litre
for petrol while the diesel rate has risen by Rs 3.84 a litre.

Across the country as well the surge in fuel prices ranged from 35-40 paisa per
litre depending on the level of local taxes on the two petroleum products.

In Mumbai, petrol prices is just Rs 3 per litre short (Rs 97 a litre) of touching
three digit mark of Rs 100 per litre for the very first time ever. Diesel prices in
the city is closing on on Rs 90 a litre (Rs 88.06 a litre).

In all other metros, petrol is over Rs 90 a litre mark while diesel is well over Rs
80 a litre. Premium petrol has crossed Rs 100 per litre mark in several cities of
Rajasthan, Madhya Pradesh and Maharashtra a few days back.

The increase on Saturday has followed the firm global oil prices (both product
and crude). Interestingly, the crude price has softened marginally over last few
days after crossing $ 65 a barrel mark earlier this week. It is around $ 63 a barrel
now.

Since fuel prices are benchmarked to a 15-day rolling average of global refined
products' prices and dollar exchange rate, pump prices can be expected to remain
northbound over the next few days even if crude hovers at the current level or
falls.

The petrol and diesel prices have increased 24 times in 2021 with the two auto
fuels increasing by Rs 6.87 and Rs 7.10 per litre respectively so far this year.

Oil companies executives said that petrol and diesel prices may increase further
in coming days as retail prices may have to be balanced in line with global
developments to prevent OMCs from making loss on sale of auto fuels.

The retail prices of automobile fuels have been skyrocketing and have reached
record highs ever since the NDA came to power in 2014. Due to mismanagement
by the NDA, petrol is now sold at Rs 100 per litre while international crude prices
are just above $60. In comparison, during 2012-2013, petrol was sold at Rs 66.06
and diesel at Rs 48.63 per litre as against a crude oil price of $108. Prime Minister
Narendra Modi terms it as a failure on part of the UPA. This is a travesty of the
truth.
In 2018, the petrol price in India was the highest in South Asia despite crude oil
prices being at $56.43. Even while having the advantage of low crude oil prices
of $46.17 per barrel in 2016 and $47.56 in 2017, petrol prices were as high as Rs
60 and Rs 62 per litre respectively. Despite crude oil price peaking at $105.82 in
2014, the administered pricing mechanism introduced by UPA II ensured low
petrol and diesel prices in the country, while the NDA government has utilised
low oil prices to achieve fiscal targets instead of shielding the consumers from
volatile international oil prices through a price stabilisation fund.
Following the report of the Expert Group on Viable and Sustainable System of
Pricing of Petroleum Products, petrol price was freed and linked to the import
price of crude oil and was market-determined. Domestic prices of petrol and
diesel are revised by oil marketing companies based on the changes in
international prices. But instead of passing on the benefit of low crude price to
consumers, fuel is being brutally taxed by the present regime. Today, India has
one of the highest rates of taxes on both petrol and diesel. The central government
and several state governments have significantly increased the duties on petrol
and diesel as a way to boost revenues. The excise duty levied by the Centre is the
biggest component of the price of petrol.
During UPA 2, it was the government that was subsidising fuel prices. Now, it’s
the retail customers paying for the government. LPG cylinder prices have gone
up sharply — the biggest hike in six years. State-run oil marketing companies in
February 2020 had sharply hiked the prices on non-subsidised LPG cylinders.
The launch of the Direct Benefit Transfers for LPG (DBTL) Scheme in 2013
began a new era of providing subsidy directly to consumers. Increasing the
number of subsidised LPG cylinders for domestic consumers, completing the
Dabhol-Bengaluru natural gas pipeline project, laying the foundation stone of 9
MMTPA Rajasthan Refinery project, making substantial progress on projects
under implementation, introducing transparency and consumer-friendly measures
like LPG connection portability, commencing the sale of 5 kg LPG cylinders from
retail outlets, are some of the important decisions and achievements of UPA-I and
UPA-II. But during the NDA regime, the exploration of oil by both the public and
private sector has come to a grinding halt. The import of oil has galloped.
To absorb the shock of high global crude oil prices, UPA II spent Rs 5.73 lakh
crore on oil subsidies (including kerosene and LPG), while the NDA in its first
term until 2019 earned Rs 11 lakh crore through various taxes and duties on oil
and spending a meagre Rs 1.80 lakh crore on oil subsidies (2019 budget
estimates).
In the area of exploration and production (E&P), UPA-I and UPA-II cleared 31
exploration blocks from defence and other angles to pave the way for exploration
work in those blocks. The government also cleared 95 pending resolutions of
management committees of exploration blocks to expedite E&P activities.
Similarly, further exploration was allowed in the mining lease areas of
exploration blocks where discoveries had been made.
UPA-II also made attempts to evolve a policy to increase indigenous production
of oil and gas in the country to bring down imports to zero by 2030. UPA-I and
UPA-II also took effective steps to double the refining capacity of the Paradip
Refinery and the MRPL in Mangalore and Cochin as well as other refineries in
the country. The Barmer Refinery in Rajasthan was also sanctioned to take
advantage of crude availability in the region. The UPA-I and UPA-II regimes also
constructed three caverns with huge Strategic Storage Reserves (SPR)
at Visakhapatnam, Mangalore and Padur in Udupi. These capacities (5.33 million
tonnes) have not been optimally utilised.
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It was the UPA-II government that started a push towards natural gas by building
a network of pipelines of about 17,500 km and laid down a road map to expand
this to around 31,757 km with a total design capacity of 721 million standard
cubic meters per day (MMSCMD) by 2017, reaching 815 MMSCMD by 2029-
30. India could see the share of natural gas in its energy basket rise to 30 per cent
if we invest in gas exploration, incentivise companies through viable gas pricing
and develop gas infrastructure and supply.
In January, Goldman Sachs estimated Brent crude oil price will reach $65 by the
middle of 2021, as demand gets a boost from the roll-out of COVID-19 vaccines,
and a limited increase in supply from the OPEC countries. With global crude
prices shooting up, there is a high chance that fuel prices will increase across the
world.
The prime minister has hinted that the petroleum sector may be brought under
GST. But a half-baked GST has already disrupted the economy. Unless GST is
reformed, including petrol is likely to create havoc in all sectors. Even as the war
against COVID-19 is not yet over, the consistent hiking of the prices of petrol
and diesel by the Modi government is only adding to the woes of the people.
\

Parliament on Thursday passed a bill to set up the National Bank for Financing
Infrastructure and Development (NaBFID) to fund infrastructure projects in
India.
The Rajya Sabha passed the National Bank for Financing Infrastructure and
Development (NaBFID) Bill 2021 by voice vote on Thursday. The bill was
passed in the Lok Sabha on March 23, 2021.
The bill seeks to establish the National Bank for Financing Infrastructure and
Development to support the development of long-term non-recourse
infrastructure financing in India including development of the bonds and
derivatives markets necessary for infrastructure financing and to carry on the
business of financing infrastructure and for matters connected therewith or
incidental thereto.
The DFI (Development Finance Institution), called the National Bank for
Financing Infrastructure and Development (NaBFID), will be answerable to
Parliament.
Replying on the bill in the House, Finance Minister Nirmala Sitharaman
explained that the five years’ tax break to the DFI or NaBFID is given so that
more funds flow to it.

The Reserve Bank of India (RBI) has held policy rates at 4 per cent in today's
monetary policy committee announcement. However, markets are closely
watching its stance on liquidity after the Centre's big borrowing plan announced
during the Budget this week. As coronavirus hit India hard, the RBI had allowed
a huge liquidity boost in the banking system. It carried out liquidity management
operations, which left banks with huge fund surplus. Though the central bank has
assured about restoring operations to normal gradually, bond markets will be
looking for assurance in today's announcement.The Reserve Bank of India’s
(RBI) Monetary Policy Committee (MPC) kept its repo rate unchanged at 4 per
cent while maintaining an ‘accommodative stance’ as long as necessary at least
through the current financial year to the next year, RBI Governor Shaktikanta Das
announced on Friday.

The RBI governor announced that the decision was taken unanimously and added
that the reverse repo rate too was kept unchanged at 3.35 per cent.

The central bank had slashed the repo rate by 115 basis points since late March
2020 to support growth. This is the fourth time in a row that the MPC decided to
keep the policy rate unchanged.

The RBI had last revised its policy rate on May 22 in an off-policy cycle to perk
up demand by cutting interest rates to a historic low.

The central bank also sees FY22 GDP growth at 10.5 per cent. The RBI
governor said that the inflation has eased below the level of 6 per cent.
The outlook on growth has also improved significantly. He also said that the
MPC judged that need for the hour is to continue supporting the growth. He added
that the signs of recovery have strengthened further and list of normalising sectors
is expanding.

This is the first MPC meeting after the presentation of the Union Budget 2021-
22. The six-member MPC headed by RBI Governor Shaktikanta Das meets every
two months to analyze the state of the Indian economy and inflation and address
the monetary issues in the country. This month, it began the 3-day bi-monthly
meeting on Wednesday, February 3.

Das said that the CPI projection is revised to 5.2 per cent for Q4 FY21 and CPI
inflation is pegged at 5-5.2 per cent in H1 FY22.

The RBI Governor said “capacity utilisation in the manufacturing sector

improved to 63.3 per cent in Q2 vs 47.3 per cent in Q1. FDI and FPI investments
have surged in recent months, reposing faith in the Indian economy.”

Speaking on non-banking financial companies (NBFCs), Das said that the funds
from banks though the TLTRO scheme will now available to NBFCs. He also
said that the cash reserve ratio (CRR) will be restored in two phases to 3.5 per
cent from March 27 and 4 per cent from May 22, 2021.

The RBI governor also said that the CRR normalisation will open up space for a
variety of market operations.

The Indian central bank chief announced that the retail investors can now open
gilt accounts with the RBI. Das also said that the retail investors can now access
the primary and secondary government bond market. He also said that the resident
individuals will be able to make remittances to IFSCs for the NRIs.

Shaktikanta Das announced an integrated ombudsman scheme for customer

grievance redressal, which will be rolled out by June 2021.

Concluding his address, Das said that the Indian economy is poised to move only
in one direction, that is upward.

Separately, in a press conference post the monetary policy announcement,

Shaktikanta Das said that the central bank is awaiting a formal proposal from the
government on the proposed Asset Reconstruction Company (ARC) for the
management of NPAs. The government had proposed the creation of an ARC
during the recent Budget 2021-22. “Government and RBI have discussed the idea
of a bad bank. We will examine the formal proposal on the ARC once it is made,”
he said.

During his virtual meet with journalists, the RBI governor also spoke about
Punjab and Maharashtra Co-operative (PMC) Bank and said that three bids for
the crisis-ridden lender have been received and evaluation is underway.