tag:blogger.com,1999:blog-58057989502893532982024-02-18T17:38:28.556-08:00Issues on Global and Indian EconomyOur site (www.ecofin-surge.co.in) covers issues of interest on the Indian economy, Indian economic policy, Indian Financial markets and Global economic prospects. It also provides statistical data on the Indian economy and global economic indicators.Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.comBlogger87125tag:blogger.com,1999:blog-5805798950289353298.post-69924648803061440642021-08-20T20:04:00.000-07:002021-08-20T20:06:40.694-07:00Assessing Effects of the COVID-19 Pandemic on Country-wise Macroeconomic Performances<p> </p><p class="MsoNormal"><span style="background: white; color: #505050; font-family: "NexusSansWebPro","serif";">In an endeavor to fill the void in
availability of comprehensive and yet all inclusive indicators for judging
relative country performances on the economic front, we have introduced an
indicator which allows a parsimonious representation of a variety of different
facets of economic performance and its comparison across countries and is thus
most useful in providing guidance to the relative stages of economic recovery
around the globe.<o:p></o:p></span></p>
<p class="MsoNormal"><span style="background: white; color: #505050; font-family: "NexusSansWebPro","serif";">Forward looking monthly economic indicators
like, even the Purchasing Managers Indices (PMIs), estimated either officially
by the government or agencies, become subject to a much greater degree of
uncertainty during economic and financial crises. Survey based leading
indicators like PMIs are crucial but they do not and cannot cover the entire
spectrum of the actual economic variables. Alternatively, considering a range
of official monthly indicators leave open important questions of addressing
incommensurability among them, and also implicit weighting and aggregation
methods for arriving at a comprehensive picture of macroeconomic performance.
The need for a single measure, to compare all aspects of macroeconomic
performance, is accentuated by the fact that policies pursuing different
macroeconomic goals of growth and stability usually involve certain tradeoffs.
In the wake of global crises it becomes even more important to consider tools
for frequently comparing country-wise performances to evaluate and learn from
experiences.</span><span style="color: #505050; font-family: "NexusSansWebPro","serif";"><br style="-webkit-text-stroke-width: 0px; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;" />
<br style="-webkit-text-stroke-width: 0px; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;" />
<span style="background: white;"><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;">We take the composite indicators approach that
consists in merging several available official monthly indicators of economic
wellbeing and financial sector conditions, into a single metric. In the
backdrop of the unprecedented crisis brought about by the COVID-19 outbreak, monthly
rankings of 21 countries with comparable data on chosen variables reveal the
severity of crisis across countries, the changing effects on economic wellbeing.
The Rank Mobility Indices clearly show the adverse effect of the pandemic on
emerging market economies, in the early stages of the pandemic, particularly
when world trade and production lines had been impaired and also confirms that
high levels of government debt can be debilitating specially under unprecedented
circumstances like this pandemic when the private sector has been forced to
downsize all over the globe.</span></span><br style="-webkit-text-stroke-width: 0px; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;" />
<br style="-webkit-text-stroke-width: 0px; box-sizing: border-box; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;" />
<span style="background: white;"><span style="-webkit-text-stroke-width: 0px; float: none; font-variant-caps: normal; font-variant-ligatures: normal; orphans: 2; text-align: start; text-decoration-color: initial; text-decoration-style: initial; text-decoration-thickness: initial; widows: 2; word-spacing: 0px;">As a composite indicator, the CPS is expected to
reveal, more comprehensibly, than a plethora of indicators, the relative
position of an economy at any point in time and provides us with a tool for
continuous evaluation of relative economic performances of countries over time
in crisis as also under normal circumstances. The TOPSIS ranking methodology is
robust such that the choice of variables also can be modified according to the
ready availability of coincident indicators or high frequency ones and/or to
suit specific evaluation needs. CPS based rankings and the RMIs would help in
assessing relative positions and provide readily a comprehensible picture of
the global economy overall. We hope these monthly rankings would help policy
makers, investors, and analysts to identify the short-term inter-temporal
changes in country performances and offer some timely actionable intelligence
over and above those provided by individual macro-financial indicators of
countries.</span><o:p></o:p></span></span></p>
<p class="MsoNormal"><span style="background: white; color: #505050; font-family: "NexusSansWebPro","serif";">The paper is available at <a href="https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905699">https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3905699</a>
</span></p>Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-14881660313338005832020-05-09T09:23:00.000-07:002020-05-09T09:24:43.603-07:00Stimulus Packages to Tackle the Slowdown in the Economy<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="margin-right: 0.4in; text-indent: 0.3in;">
<span style="font-family: "georgia" , "times new roman" , serif;"><b>Relief
Measures to Tackle the Covid19 Crisis</b></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">THE
GLOBAL ECONOMY is facing an unprecedented crisis from the spread of
Covid-19 throughout almost the entire world. The RBI noted that
global economic activity has come to a near standstill as COVID-19
related lockdowns and social distancing are imposed across a widening
swathe of affected countries. Expectations of a shallow recovery in
2020 from 2019’s decade low in global growth have been dashed. The
outlook is now heavily contingent upon the intensity, spread and
duration of the pandemic. There is a rising probability that large
parts of the global economy will slip into recession. Even as
scientists and doctors fight the battle with the unprecedented
calamity, fiscal and monetary will have to take care of saving
livelihoods and incomes. Below we outline some of the initial
measures undertaken by some major central banks and
governments.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">UNITED
STATES</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">Fed
funds rate at 0-0.25%. FOMC announced emergency rate cuts on March 3
and March 15, lowering the policy rate by -150 bps in total. The Fed
funds rate range has returned to the lowest level after the global
financial crisis in 2007/08.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">Donald
Trump signed the largest stimulus package in US history on Friday, a
$2 trillion bill intended to rescue the coronavirus-battered economy.
The package provides roughly $500 billion in loans and other
assistance for major companies</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
bill sets aside $350 billion for small business loans up to $10
million, with priority given to women-owned businesses, new
businesses and those run by anyone “socially and economically
disadvantaged.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
bill also sets aside $100 billion for hospitals and health providers
as they struggle to meet the challenge of COVID-19 amid widespread
shortages of personal protective equipment and depleted staffs.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
bill also includes a substantial additional $600 per week on top of
existing state benefits to help the jobless navigate the crisis.
Nearly one in five Americans had lost work as of mid-March — a
number that’s likely going up.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
stimulus will include direct cash payments of $1,200 for adults and
$500 for children in a move likely to include up to 94% of all tax
filers.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
Fed has also revived the Term Asset-Backed Securities Loan Facility
that focuses on small businesses and households. It provides direct
funding to those willing to invest in financial instrument
securitisations</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;">•
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">On
March 22, the U.S. Fed announced the Primary Market Corporate Credit
Facility and a Secondary Market Corporate Credit Facility, that will
support access to credit for large employers via the purchase of
corporate debt.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">EUROPE</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">At
the March meeting, ECB left the deposit rate unchanged at -0.5%. </span></span></span>
</div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">On
March 18, the European Central Bank announced its Pandemic Emergency
Purchase Programme. The significance of the PEPP is not just its
massive corpus of €750 billion, but the fact that it has extended
the list of eligible securities to all commercial paper of financial
and non-financial companies. Thus, the European Central Bank would,
in effect, be a direct lender to companies to meet their working
capital needs.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">The
ECB has relaxed capital requirements for the sector — providing an
estimated €120bn of capital relief that could fund €1.8tn of new
loans. T</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">ECB
launched new LTROs until June 2020 to fund banks’ liquidity needs.
It also improved TLTRO-III by relaxing loan eligibility and
increasing incentive rate, effective June 2020. </span></span></span>
</div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">he
ECB also said banks “should not pay dividends for the financial
years 2019 and 2020 until at least 1 October 2020”. It added that
they should “refrain from share buybacks aimed at remunerating
shareholders”. The freeze on distributing capital to
investors was to “boost banks’ capacity by about 30 billion Euros
to absorb losses and support lending to households, small businesses
and corporates during the pandemic. </span></span></span>
</div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">UNITED
KINGDOM</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">Bank
of England Policymakers lowered the Bank rate by -65 bps in two
emergency cuts this month, taking the policy rate to 0.1%, the lowest
level on record.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">Boosting
the size of asset purchase by +200B pound, BOE has pledged to buy a
total of 645 billion pound.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">BOE
also introduced a COVID-19 Corporate Financing Facility (CCFF) under
which the central bank can directly purchases commercial paper issued
by credit-worthy non-financial corporate who make “a material
contribution to the UK economy” </span></span></span>
</div>
<div align="justify" style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.25in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-size: small;"><br /></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">JAPAN</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">Japan
compiled a record $1.1 trillion economic stimulus package in April
that focused on cash payouts to households and loans to small
businesses hurt by the pandemic.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-size: small;"><br /></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">INDIA</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">In
India, fiscal policy makers have taken the first step of ensuring
that the basic needs of most-vulnerable sections of the population
are met during the lock-down:</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-size: small;"><br /></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>1. Pradhan
Mantri Gareeb Kalyan Anna Yojana: </b></span><span style="font-size: xx-small;">800
million poor people in the country to get 5 kg of rice/wheat per
month free of cost, in addition to the 5 kg they already get.
Additionally, each household to get 1 kg of preferred </span><span style="font-size: xx-small;"><i>dal </i></span><span style="font-size: xx-small;">for
free for the next three months</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>2. Cash
transfer scheme: </b></span><span style="font-size: xx-small;">Nine
sub-parts</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>Farmers</b></span><span style="font-size: xx-small;">:
First instalment of the PM-KISAN payment of Rs 2,000 to be
frontloaded; move to benefit 87 million</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>MGNREGS</b></span><span style="font-size: xx-small;">:
Wage increased from Rs 182 to Rs 202 per day. Wage increase to
benefit 50 million families, as there will be about 2000 increase in
their income</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>Poor widows,
aged, and divyang</b></span><span style="font-size: xx-small;">:
Ex-gratia of Rs 1,000 for the next three months, in two instalments.
30 million people to benefit. transfers to be done through direct
benefits transfer (DBT)</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>Women with Jan
Dhan Yojana accounts</b></span><span style="font-size: xx-small;">:
200 million to benefit from Rs 500 ex-gratia for the next 3 months</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">·</span></span></span><span style="font-size: small; font-variant: normal;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">
</span></span></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><b><span style="background: #ffffff;">Beneficiaries
of the Ujjwala scheme</span></b></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">:
80 million households benefitted from the gas cylinders provided
under the scheme. These beneficiaries will get free cylinders for
three months in view of the disruption the <a href="https://www.business-standard.com/about/what-is-coronavirus">coronavirus </a>lockdown
will cause.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>Women in
self-help groups</b></span><span style="font-size: xx-small;">:
6.3 million SHGs get up to Rs 10 lakh collateral-free loans under the
Deen Dayal Upadhyaya National Rural Mission scheme. The cap has been
doubled to Rs 20 lakh. The move will benefit 70 million households</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;"><b>Organised
sector workers</b></span><span style="font-size: xx-small;">: Two
parts to this. First, the Government of India will pay the EPF
contribution of both employee and employer for the next three months.
This will be for all those establishments which have up to 100
employees, 90 per cent of whom earn less than Rs 15,000 a month</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">·</span><span style="font-variant: normal;"><span style="font-size: xx-small;">
</span></span><span style="font-size: xx-small;">And second, in
what will benefit 8 million employees and 400,000 establishments, the
EPFO regulation will be amended to allow the withdrawal of up to 75
per cent of their corpus as non-refundable advance, or three months'
salary, whichever is less</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">·</span></span></span><span style="font-size: small; font-variant: normal;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">
</span></span></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><b><span style="background: #ffffff;">Construction
workers</span></b></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">:
States to be directed to utilise the Rs 31,000 crore welfare fund for
building and construction workers for the benefit of 35 million
workers in the midst of the </span></span></span><span style="font-size: small;"><a href="https://www.business-standard.com/about/what-is-coronavirus"><span style="text-decoration: none;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">coronavirus </span></span></span></span></a><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">crisis</span></span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-left: 0.19in; margin-right: 0.09in; margin-top: 0.06in; text-indent: -0.25in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">·</span></span></span><span style="font-size: small; font-variant: normal;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">
</span></span></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><b><span style="background: #ffffff;">District
medical fund</span></b></span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">:
State govts to be urged to utilise this fund for medical screening,
medical testing and providing health care services in the wake of
the </span></span></span><span style="font-size: small;"><a href="https://www.business-standard.com/about/what-is-coronavirus"><span style="text-decoration: none;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">coronavirus </span></span></span></span></a><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;"><span style="background: #ffffff;">crisis</span></span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="font-size: small;"><br /></span></div>
<div style="margin-right: 0.09in;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;">The
government is giving shape to a stimulus package that will
be followed by a raft of reforms meant to help India capture
opportunities. Business leaders and experts have sought a ₹10
trillion package to tide over a severe liquidity crisis caused by the
lockdown imposed to battle covid-19 and provide funds to the poor for
a recovery in demand for goods and services.</span></span></div>
<span style="font-size: small;"><br /></span>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<span style="background: #ffffff; font-size: small;"><span style="font-family: "georgia" , "times new roman" , serif;"><span style="font-size: xx-small;">The
Reserve Bank’s actions are to be regarded as a comprehensive
package with force multipliers. The developmental and regulatory
policies can be broadly delineated under four categories: (1)
measures to expand liquidity in the system sizeably to ensure that
financial markets and institutions are able to function normally in
the face of COVID-19 related dislocations; (2) steps to reinforce
monetary transmission so that bank credit flows on easier terms are
sustained to all those who have been affected by the pandemic; (3)
efforts to ease financial stress caused by COVID-19 disruptions by
relaxing repayment pressures and improving access to working capital;
and (4) endeavor to improve the functioning of markets in view of the
high volatility experienced with the onset and spread of the
pandemic. </span></span></span>
</div>
<div style="margin-right: 0.09in;">
<span style="font-size: small;"></span><br />
<span style="font-size: small;"></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<br />
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">MPC
has agreed to reduce the policy repo rate by 75 basis points to 4.4
per cent. Policy rate corridor widened from 50 basis points to 65
bps. The fixed rate reverse repo rate, which sets the floor of the
liquidity adjustment facility (LAF) corridor, was reduced by 90 basis
points to 4.0 per cent, thus creating an asymmetrical corridor. The
purpose of this measure relating to reverse repo rate is to make it
relatively unattractive for banks to passively deposit funds with the
Reserve Bank and instead, to use these funds for on-lending to
productive sectors of the economy. On April 15, the amount
absorbed under reverse repo operations was ₹6.9 lakh crore. In
order to encourage banks to deploy these surplus funds in investments
and loans in productive sectors of the economy, it has been decided
to reduce the fixed rate reverse repo rate under the liquidity
adjustment facility (LAF) by 25 basis points from 4.0 per cent to
3.75 per cent with immediate effect. The policy repo rate remains
unchanged at 4.40 per cent, and the marginal standing facility rate
and the Bank Rate remain unchanged at 4.65 per cent. </span></span></span>
</div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<br />
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="background: #ffffff;"><span style="font-size: xx-small;">As
announced on March 27, the RBI undertook three auctions of targeted
long term repo operations (TLTRO), injecting cumulatively ₹75,041
crore to ease liquidity constraints in the banking system and
de-stress financial markets. Another TLTRO auction of ₹25,000 crore
will be conducted on April 17. In response to these auctions,
financial conditions have eased considerably, as reflected in the
spreads on money and bond market instruments. Moreover, activity in
the corporate bond market has picked up appreciably, with several
corporates making new issuances. There are also indications that
redemption pressures faced by mutual funds have moderated.</span> <span style="font-size: xx-small;">It
has been decided to conduct TLTRO 2.0 for an aggregate amount of
₹50,000 crore, to begin with, in tranches of appropriate sizes. The
funds availed by banks under TLTRO 2.0 should be invested in
investment grade bonds, commercial paper, and non-convertible
debentures of NBFCs, with at least 50 per cent of the total amount
availed going to small and mid-sized NBFCs and MFIs. it has been
decided to provide special refinance facilities for a total amount of
₹50,000 crore to NABARD, SIDBI and NHB to enable them to meet
sectoral credit needs. </span></span></span>
</div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<br />
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">It
has now been decided to increase the WMA limit of states by 60 per
cent over and above the level as on March 31, 2020 to provide greater
comfort to the states for undertaking COVID-19 containment and
mitigation efforts, and to plan their market borrowing programmes
better. The increased limit will be available till September 30,
2020.</span></span></span></div>
<div style="line-height: 0.21in; margin-bottom: 0in; margin-right: 0.09in; margin-top: 0.06in;">
<br />
<span style="font-family: "georgia" , "times new roman" , serif; font-size: small;"><span style="font-size: xx-small;"><span style="background: #ffffff;">Consistent
with the globally coordinated action committed to by the Basel
Committee on Banking Supervision to alleviate the impact of Covid-19
on the global banking system, additional regulatory measures are
being announced. </span></span></span></div>
<div style="margin-right: 0.09in;">
<span style="font-size: small;"><br /></span>
<span style="font-size: small;"><br /></span></div>
<div style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-58319605917375103192019-08-19T21:20:00.000-07:002019-08-19T21:20:39.137-07:00Highlights from the Economic Survey, 2019 & the Union Budget, 2019-20<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="background: white; margin-left: -18.0pt; text-align: justify;">
<b> Following are some Highlights from the Economic
Survey<span lang="EN-US">, 2019:</span></b><span lang="EN-US" style="font-size: 10.0pt;"><o:p></o:p></span></div>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">State of the Economy in 2018-19: A Macro
View</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">India is still the fastest growing
major economy in 2018-19.<o:p></o:p></span></li>
</ul>
<div class="MsoListParagraph" style="mso-list: l14 level1 lfo1; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 10pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: #333333; font-size: 9.0pt;">India needs to grow at 8% per year to be $5 trillion economy by
FY25.</span><span lang="EN-US" style="background: white; font-family: Arial, sans-serif; font-size: 8.5pt;"> </span><span lang="EN-US" style="font-family: Arial, sans-serif; font-size: 8.5pt;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Growth of GDP moderated to 6.8 per cent
in 2018-19 from 7.2 per cent in 2017-18. </span><span style="font-size: 9.0pt; mso-ansi-language: EN-IN;">Economic Survey predicts 7% growth rate for
this fiscal.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Inflation contained at 3.4 per cent in
2018-19.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Non-Performing Assets as percentage of
Gross Advances reduced to 10.1 per cent at end December 2018 from 11.5 per
cent at end March 2018.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Investment growth recovering since
2017-18: Growth in fixed investment picked up from 8.3 per cent in 2016-17
to 9.3 per cent next year and further to 10.0 per cent in 2018-19.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Current account deficit manageable at
2.1 percent of GDP.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Fiscal deficit of Central Government
declined from 3.5 percent of GDP in 2017-18 to 3.4 percent in 2018-19.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l14 level1 lfo1; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Prospects of pickup in growth in
2019-20 on the back of further increase in private investment and
acceleration in consumption.<o:p></o:p></span></li>
</ul>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">Fiscal Developments</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l6 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">FY 2018-19 ended with fiscal deficit at
3.4 per cent of GDP and debt to GDP ratio of 44.5 per cent (Provisional).<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l6 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">As per cent of GDP, total Central
Government expenditure fell by 0.3 percentage points in 2018-19 PA over
2017-18: 0.4 percentage point reduction in revenue expenditure and 0.1
percentage point increase in capital expenditure.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l6 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">States’ own tax and non-tax revenue
displays robust growth in 2017-18 RE and envisaged to be maintained in
2018-19 BE.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l6 level1 lfo2; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The revised fiscal glide path envisages
achieving fiscal deficit of 3 per cent of GDP by FY 2020-21 and Central
Government debt to 40 per cent of GDP by 2024-25.<o:p></o:p></span></li>
</ul>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="font-size: 11pt;">Money Management and Financial
Intermediation</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l8 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Insolvency and Bankruptcy
Code led to recovery and resolution of significant amount of distressed
assets and improved business culture.</span><span lang="EN-US" style="font-size: 9.0pt;"> </span><span lang="EN-US" style="color: black; font-size: 9.0pt;">Till March 31, 2019, the CIRP yielded a resolution of 94
cases involving claims worth</span><span lang="EN-US" style="background: white; color: #545454; font-size: 9.0pt;">INR</span><span lang="EN-US" style="color: black; font-size: 9.0pt;">1, 73,359 crore.</span><span lang="EN-US" style="font-size: 9.0pt;"> </span><span lang="EN-US" style="color: black; font-size: 9.0pt;">As on 28 Feb 2019, 6079 cases
involving </span><span lang="EN-US" style="background: white; color: #545454; font-size: 9.0pt;">INR</span><span lang="EN-US" style="color: black; font-size: 9.0pt;">2.84 lakh crores have been withdrawn.</span><span lang="EN-US" style="font-size: 9.0pt;"> </span><span lang="EN-US" style="color: black; font-size: 9.0pt;">As per RBI reports, </span><span lang="EN-US" style="background: white; color: #545454; font-size: 9.0pt;">INR</span><span lang="EN-US" style="color: black; font-size: 9.0pt;">50,000 crore received by
banks from previously non-performing accounts. Additional </span><span lang="EN-US" style="background: white; color: #545454; font-size: 9.0pt;">INR</span><span lang="EN-US" style="color: black; font-size: 9.0pt;">50,000 crore
"upgraded" from non-standard to standard assets.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l8 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Benchmark policy rate first
hiked by 50 bps and later reduced by 75 bps last year.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l8 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Liquidity conditions remained
systematically tight since September 2018 thus impacting the yields on
government papers.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l8 level1 lfo3; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Financial flows remained
constrained because of decline in the equity finance raised from capital
markets and stress in the NBFC sector.Capital mobilized through public
equity issuance declined by 81 per cent in 2018-19.</span><span lang="EN-US" style="font-size: 9.0pt;"> </span><span lang="EN-US" style="color: black; font-size: 9.0pt;">Credit growth rate y-o-y of the NBFCs
declined from 30 per cent in March 2018 to 9 per cent in March 2019.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
</ul>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">Prices and Inflation</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l4 level1 lfo4; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Headline inflation based on
CPI-C continuing on its declining trend for fifth straight financial year
remained below 4.0 per cent in the last two years.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l4 level1 lfo4; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Food inflation based on
Consumer Food Price Index (CFPI) also continuing on its declining trend
for fifth financial year has remained below 2.0 per cent for the last two
consecutive years.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l4 level1 lfo4; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">CPI-C based core inflation
(CPI excluding the food and fuel group) has now started declining since
March 2019 after increment during FY 2018-19 as compared to FY 2017-18.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l4 level1 lfo4; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">Miscellaneous, housing and
fuel and light groups are the main contributors of headline inflation
based on CPI-C during FY 2018-19 and the importance of services in shaping
up headline inflation has increased.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l4 level1 lfo4; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="color: black; font-size: 9.0pt;">CPI rural inflation
declined during FY 2018-19 over FY 2017-18. However, CPI urban inflation
increased marginally during FY 2018-19. Many States witnessed fall in CPI
inflation during FY 2018-19.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
</ul>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">External Sector</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l0 level1 lfo5; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">As per WTO, World trade growth slowed
down to 3 per cent in 2018 from 4.6 per cent in 2017. Reasons: Introduction
of new and retaliatory tariff measures; Heightened US-China trade tensions;
Weaker global economic growth; Volatility in financial markets.<o:p></o:p></span></li>
</ul>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">In Indian rupee terms growth rate of
exports increased owing to depreciation of the rupee while that of imports
declined in 2018-19. <o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Net capital inflows moderated in
April-December of 2018-19 despite robust foreign direct investment (FDI)
inflows, outweighed by withdrawals under portfolio investment.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">India’s <strong>External Debt</strong> was
US$ 521.1 billion at end-December 2018, 1.6 per cent lower than its level
at end-March 2018.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The key external debt indicators
reflect that India’s external debt is not unsustainable.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The <strong>total
liabilities-to-GDP ratio</strong>, inclusive of both debt and non-debt
components, has declined from 43 per cent in 2015 to about 38 per cent at
end of 2018.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The share of foreign direct investment
has risen and that of net portfolio investment fallen in total
liabilities, reflecting a transition to more stable sources of funding the
current account deficit.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l7 level1 lfo6; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The Indian Rupee traded in the range of 65-68 per US$
in 2017-18 but depreciated to a range of 70-74 in 2018-19.<o:p></o:p></span></li>
</ul>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l17 level1 lfo7; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The income
terms of trade, a metric that measures the purchasing power to import, has
been on a rising trend, possibly because the growth of crude prices has
still not exceeded the growth of India’s export prices.<o:p></o:p></span></li>
</ul>
<ul style="margin-top: 0cm;" type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l5 level1 lfo8; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The
exchange rate in 2018-19 has been more volatile than in the previous year,
mainly due to volatility in crude prices, but not much due to net
portfolio flows.<o:p></o:p></span></li>
</ul>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l13 level1 lfo9; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Composition of India’s exports and
import basket in 2018-19(P):<o:p></o:p></span></li>
<ul type="circle">
<li class="MsoNormal" style="color: #333333; mso-list: l13 level2 lfo9; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="font-size: 9.0pt;">Exports</span></strong><span lang="EN-US" style="font-size: 9.0pt;"> (including re-exports): INR23,
07,663 Cr.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l13 level2 lfo9; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="font-size: 9.0pt;">Imports</span></strong><span lang="EN-US" style="font-size: 9.0pt;">: INR35, 94,373 Cr.<o:p></o:p></span></li>
</ul>
</ul>
<ul type="disc">
<ul type="circle">
<li class="MsoNormal" style="color: #333333; mso-list: l12 level2 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="font-size: 9.0pt;">Top export items</span></strong><span lang="EN-US" style="font-size: 9.0pt;"> continue to be Petroleum
products, precious stones, drug formulations, gold and other precious
metals.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l12 level2 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="font-size: 9.0pt;">Top import items</span></strong><span lang="EN-US" style="font-size: 9.0pt;"> continue to be Crude petroleum,
pearl, precious, semi-precious stones and gold.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l12 level2 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="font-size: 9.0pt;">India’s main trading partners</span></strong><span lang="EN-US" style="font-size: 9.0pt;"> continue to be the US, China,
Hong Kong, the UAE and Saudi Arabia.<o:p></o:p></span></li>
</ul>
<li class="MsoNormal" style="color: #333333; mso-list: l12 level1 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">India has signed 28 bilateral /
multilateral trade agreements with various country/group of countries. In
2018-19,<o:p></o:p></span></li>
<ul type="circle">
<li class="MsoNormal" style="color: #333333; mso-list: l12 level2 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Exports to these countries stood at
US$121.7 billion accounting for 36.9 per cent of India’s total exports.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l12 level2 lfo10; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Imports from these countries stood at
US$266.9 billion accounting for 52.0 per cent of India’s total imports.<o:p></o:p></span></li>
</ul>
</ul>
<div style="background: white; margin-bottom: 5.0pt; margin-left: -18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<br /></div>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">Agriculture </span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l16 level1 lfo11; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Agriculture sector in India typically goes
through cyclical movement in terms of its growth.<o:p></o:p></span></li>
<ul type="circle">
<li class="MsoNormal" style="color: #333333; mso-list: l16 level2 lfo11; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">GVA in agriculture improved from a
negative 0.2 per cent in 2014-15 to 6.3 per cent in 2016-17 but
decelerated to 2.9 per cent in 2018-19.<o:p></o:p></span></li>
</ul>
<li class="MsoNormal" style="color: #333333; mso-list: l16 level1 lfo11; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">GCF in agriculture as percentage of GVA
marginally declined to 15.2 per cent in 2017-18 as compared to 15.6 per
cent in 2016-17.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l16 level1 lfo11; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The public sector GCF in agriculture as
a percentage of GVA increased to 2.7 per cent in 2016-17 from 2.1 per cent
in 2013-14.<o:p></o:p></span></li>
</ul>
<div style="background: white; margin-bottom: 5.0pt; margin-left: -18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<br /></div>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="color: #333333; font-size: 11.0pt;">Industry and Infrastructure</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Overall Index of Eight Core Industries
registered a growth rate of 4.3 percent in 2018-19.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="background: white; font-size: 9.0pt;">Rail freight and
passenger traffic grew by 5.33 per cent and 0.64 per cent respectively in
2018-19 as compared to 2017-18.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="background: white; font-size: 9.0pt;">Total telephone
connections in India touched 118.34 crore in 2018-19</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="background: white; font-size: 9.0pt;">The installed capacity
of electricity has increased to 3, 56,100 MW in 2019 from 3, 44,002 MW in
2018.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
</ul>
<div class="MsoListParagraph" style="mso-list: l2 level1 lfo12; tab-stops: list 36.0pt; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="color: #333333; font-family: Symbol; font-size: 10.0pt; mso-bidi-font-family: Symbol; mso-bidi-font-size: 9.0pt; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; color: #333333; font-size: 9.0pt;">Policy should enable MSMEs to grow, create
greater profits for their owners and contribute to job creation and
productivity in the economy. <o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="background: white; font-size: 9.0pt;">Public Private Partnerships
are quintessential for addressing infrastructure gaps.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l2 level1 lfo12; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="background: white; font-size: 9.0pt;">Institutional
mechanism is needed to deal with time-bound resolution of disputes in
infrastructure sector.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></li>
</ul>
<div style="margin-right: 21.35pt; text-align: justify;">
<strong><span lang="EN-US" style="font-size: 11pt;">Services Sector</span></strong><span lang="EN-US" style="color: #333333;"><o:p></o:p></span></div>
<ul type="disc">
<li class="MsoNormal" style="color: #333333; mso-list: l3 level1 lfo13; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">Services sector (excluding
construction) has a share of 54.3 per cent in India’s GVA and contributed
more than half of GVA growth in 2018-19.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l3 level1 lfo13; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 36.0pt; text-align: justify;"><span lang="EN-US" style="font-size: 9.0pt;">The services sector growth declined
marginally to 7.5 per cent in 2018-19 from 8.1 per cent in 2017-18.<o:p></o:p></span></li>
<ul type="circle">
<li class="MsoNormal" style="color: #333333; mso-list: l3 level2 lfo13; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="color: black; font-size: 9.0pt;">Accelerated
sub-sectors: </span></strong><span lang="EN-US" style="color: black; font-size: 9.0pt;">F</span><span lang="EN-US" style="font-size: 9.0pt;">inancial
services, real estate and professional services.<o:p></o:p></span></li>
<li class="MsoNormal" style="color: #333333; mso-list: l3 level2 lfo13; mso-margin-bottom-alt: auto; mso-margin-top-alt: auto; tab-stops: list 72.0pt; text-align: justify;"><strong><span lang="EN-US" style="color: black; font-size: 9.0pt;">Decelerated
sub-sectors: </span></strong><span lang="EN-US" style="color: black; font-size: 9.0pt;">H</span><span lang="EN-US" style="font-size: 9.0pt;">otels,
transport, communication and broadcasting services.<o:p></o:p></span></li>
</ul>
</ul>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 7.1pt; mso-add-space: auto;">
<b>Following are some Highlights from the Union
Budget<span lang="EN-US">, 2019-20:</span></b><b><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 7.1pt; mso-add-space: auto;">
<br /></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 7.1pt; mso-add-space: auto;">
<b><span lang="EN-US" style="background: white; font-size: 9pt;">Taxes<o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l11 level1 lfo15; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Tax rate reduced to 25% for companies with annual
turnover up to Rs. 400 crore. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l11 level1 lfo15; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt;">To
discourage the practice of making business payments in cash the government
proposes to levy TDS of 2% on cash withdrawal exceeding Rs 1 crore in a year
from a bank account.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l11 level1 lfo15; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">No change in income tax slabs. However, surcharge
has been increased for those earning 2-5 crore and those earning 5 crore and
above. The effective tax rate for these categories will increase by around 3%
and 7%, respectively. The surcharge increases the effective tax rate for
most FPIs, set up as Trusts or AOPs, by almost 7 per cent. 30-40% of about
9,400 FPIs registered in Indiawill be affected.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l11 level1 lfo15; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Those who don’t have PAN can file tax returns
using Aadhaar. The two are effectively made interchangeable.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l11 level1 lfo15; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Additional deduction up to Rs. 1.5 lakh for
interest paid on loans borrowed up to 31st March, 2020 for purchase of house
valued up to Rs. 45 lakh. Overall benefit of around Rs. 7 lakh over loan
period of 15 years. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l11 level1 lfo15; text-align: justify; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt;">Listed
companies shall also be liable to pay additional tax at 20 percent in case of
buyback of shares, as is the case currently for unlisted companies.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<strong><span lang="EN-US" style="font-size: 9.0pt;">Boost to
Electric Vehicles</span><span lang="EN-US"><o:p></o:p></span></strong></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l10 level1 lfo14; text-indent: 0cm;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt;">Additional income tax deduction of Rs. 1.5
lakh on interest paid on electric vehicle loans. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l10 level1 lfo14; text-indent: 0cm;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Customs duty
exempted on certain parts of electric vehicles. </span><span lang="EN-US" style="font-size: 9pt;"><br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoNormal">
<strong><span lang="EN-US" style="font-size: 9pt;">Relief
for Start-ups<o:p></o:p></span></strong></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Capital gains exemptions from sale of residential
house for investment in start-ups extended till FY21. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Angel tax issue resolved as start-ups and
investors filing requisite declarations and providing information in their
returns not to be subjected to any kind of scrutiny in respect of valuations of
share premiums. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Funds raised by start-ups to not require scrutiny
from Income Tax Department </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">E-verification mechanism for establishing
identity of the investor and source of funds. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;"> No
scrutiny of valuation of shares issued to Category-II Alternative Investment
Funds. </span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 14.2pt; mso-add-space: auto; mso-list: l1 level1 lfo16; text-indent: 3.8pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Relaxation of conditions for carry forward and
set off of losses. </span><span lang="EN-US" style="font-size: 9pt;"><br />
</span><span lang="EN-US" style="font-family: Arial, sans-serif; font-size: 8.5pt;"><br />
</span><strong><span lang="EN-US" style="font-size: 9pt;">Securities
Transaction Tax (STT)</span></strong></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 14.2pt; mso-add-space: auto; mso-list: l1 level1 lfo16; text-indent: 3.8pt;">
<!--[if !supportLists]--><strong><span lang="EN-US" style="font-family: Symbol; font-size: 9pt; font-weight: normal;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span></strong><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">STT restricted only to the difference between
settlement and strike price in case of exercise of options. </span><span lang="EN-US" style="font-size: 9pt;"><br />
<b><br />
<strong>Customs Duty<o:p></o:p></strong></b></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Basic Customs Duty increased on cashew kernels,
PVC, tiles, auto parts, marble slabs, optical fibre cable, CCTV camera
etc. </span><span lang="EN-US" style="font-size: 9pt;"><br />
<span style="background: white;">· Exemptions from Custom Duty on certain
electronic items now manufactured in India withdrawn. </span></span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Exemptions from Custom Duty on certain electronic
items now manufactured in India withdrawn. </span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-bidi-font-weight: bold; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Customs duty reduced on certain raw materials
such as: </span><span lang="EN-US" style="font-size: 9pt;"><br />
<span style="background: white;">o Inputs for artificial kidney and disposable
sterilised dialyser and fuels for nuclear power plants etc. </span><br />
<span style="background: white;">o Capital goods required for manufacture of
specified electronic goods. </span></span><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Defence equipment not manufactured in India
exempted from basic customs duty.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Increase in Special Additional Excise Duty and
Road and Infrastructure Cess each by Rs. 1 per litre on petrol and diesel.</span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="mso-list: l1 level1 lfo16; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9.0pt; mso-bidi-font-family: Symbol; mso-fareast-font-family: Symbol;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Custom duty on gold and other precious metals
increased. </span><span lang="EN-US" style="font-size: 9pt;"><br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></span><span lang="EN-US" style="font-size: 9.0pt;"><o:p></o:p></span></div>
<div style="background: white; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: -18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<strong><span lang="EN-US" style="font-size: 9pt;"> Banking and Finance</span></strong><strong><span lang="EN-US" style="font-size: 9pt;"><o:p></o:p></span></strong></div>
<div style="background: white; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: -18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<br /></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Rs. 70,000 crore proposed to be provided to PSBs
to boost credit. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">For buying “high-rated pooled assets of
financially sound NBFCs” that amounts to Rs 1 lakh crore in FY20, the
government will offer partial credit guarantee to PSBs, of six months for one
time for first loss of up to 10 per cent.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Repealing of creating a debenture redemption
reserve (DRR) for NBFCs to raise capital in public issues.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Interest income on bad or doubtful debts made by NBFCs
to be taxed on receipt basis instead of accrual basis to provide a level
playing field to NBFCs since for scheduled banks, public financial
institutions, state financial corporations, state industrial investment
corporations, etc., interest on bad or doubtful debts is charged to tax on
receipt basis.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Rs 350 crore earmarked by the government for
interest subvention of GST-registered MSMEs for fresh and incremental loans.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">The Finance Minister also proposed bringing the
housing finance companies (HFCs) directly under the RBI to strengthen the
central bank’s regulatory authority over all NBFCs. Currently, HFCs are
regulated by the National Housing Bank, an RBI subsidiary. <o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Speed up the enactment of appropriate
legislations to create an International Financial Services Centre (IFSC)
authority. IFSC enables bringing back the financial services and transactions
that are currently carried out in offshore financial centers by Indian
corporate entities and overseas branches and subsidiaries of financial institutions
(FIs) to India The government proposed to provide several direct tax
incentives to an IFSC. This would include 100 % profit-linked deduction under
section 80-LA in any ten-year block within a fifteen-year period, exemption
from dividend distribution tax from current and accumulated income to companies
and mutual funds,exemptions on capital gain to Category-III AIF and interest
payment on loan taken from non-residents.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">To reduce the Net-owned fund Requirement from Rs
5,000 crore to Rs 1,000 crore for foreign re-insurers.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">The government is setting an enhanced target of
Rs 1,05,000 crore for disinvestment during FY20 and will continue with
disinvestment of PSUs in the non-financial space as well.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l15 level1 lfo17; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Government to reinitiate the process of strategic
disinvestment of Air India, and to offer more CPSEs for strategic participation
by the private sector.<br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--><o:p></o:p></span></div>
<div style="background: white; margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: -18.0pt; margin-right: 0cm; margin-top: 0cm; text-align: justify;">
<strong><span lang="EN-US" style="font-size: 9pt;"> Social and Rural Sectors</span></strong><b><span lang="EN-US" style="font-size: 9pt;"><o:p></o:p></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">To streamline multiple labour laws into a set of
four labour codes.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">To expand self help groups to all districts; one
woman in every SHG to get loan upto Rs 1 lakh under Mudra Yojana.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="background: white; font-size: 9pt;">Pension benefits will be offered to 3 crore
shopowners with annual turnover of less than Rs 1.5 crore.<o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">Scheme of Fund for Upgradation and Regeneration of
Traditional Industries. (SFURTI) </span><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">Common Facility Centres (CFCs) to be setup to
facilitate cluster based development for making traditional industries more
productive, profitable and capable for generating sustained employment
opportunities. </span><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">100 new clusters to be setup during 2019-20 with
special focus on Bamboo, Honey and Khadi, enabling 50,000 artisans to join the
economic value chain. </span><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">10,000 new Farmer Producer Organizations to be
formed, to ensure economies of scale for farmers. </span><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-left: 21.3pt; mso-add-space: auto; mso-list: l9 level1 lfo18; text-indent: -18.0pt;">
<!--[if !supportLists]--><span lang="EN-US" style="font-family: Symbol; font-size: 9pt;">·<span style="font-family: "Times New Roman"; font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">Government to work with State Governments to allow
farmers to benefit from e-NAM. </span><span lang="EN-US" style="background: white; font-size: 9pt;"><o:p></o:p></span></div>
<span lang="EN-US" style="font-family: "Times New Roman","serif"; font-size: 9.0pt; mso-ansi-language: EN-US; mso-bidi-font-weight: bold; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">Zero Budget Farming in
few states where farmers are already being trained to be replicated in other
states.</span></div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-25305339868170516242019-05-12T06:45:00.000-07:002019-05-12T06:45:03.784-07:00Alarm Bells for the Indian Economy<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Even as the world’s largest democracy is taken up
with the choice of the next Government, issues of a major slowdown in the
Indian economy can probably no longer be ignored.<span style="mso-spacerun: yes;"> </span>Both macro data like household savings and
micro data like sector and company volumes showed Indian households may have
cut consumption due to slow income growth, analysts said. The decline in demand
stems from —an income growth slump in urban and rural areas that has forced
people to curb spending, falling money supply in the economy since 2016, and
rising uncertainty over the future of the economy. Demand side indicators of
private consumption, capital spending and exports have all been slowing over
several quarters. Immediate signs of distress are visible in the FMCG and auto
sectors, both major drivers and indicators of India’s growth. Brokerages have started
to issue warnings of a serious demand slowdown in consumer segments.</span> <span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Volume
growth at leading FMCG companies that derive more than a third of sales from
rural areas has dropped to a six-quarter low. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">The slowdown is clearly visible not just in the
sales projection of consumer goods companies but the major automakers for the
month of April. Car sales grew 2.7 per cent in 2018-19, the worst performance
in five financial years, data released by the Society of Indian Automobile
Manufacturers (Siam) showed. Maruti Suzuki India (MSI) and Hyundai Motor India
reported a decline in their domestic sales in April with 18.7 per cent fall and
10.1 per cent degrowth, respectively. MSI’s volumes dropped 17.2 per cent in
April, the sharpest decline since August 2012. The sector is partially affected
by the fact that customer response to price changes due to new regulatory norms
pertaining to emissions is unknown. Similarly, the cumulative sales of the top
six two-wheeler manufacturers declined to nearly 1.58 million units last month,
from 1.88 million units during the same period a year ago. The story isn’t
different for tractor sales also, where the fourth quarter saw a contraction of
5.78 per cent, with sales registering the weakest growth in three years. These
three together indicates urban, semi-urban and rural demand. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">India’s factory output entered negative territory in
March after a gap of 21 months, contracting 0.1 per cent to signal a slowdown
in consumption, as well as investment. Manufacturing, with 78 per cent
weightage in the IIP, contracted 0.4 per cent in March, while mining and
electricity grew 0.8 per cent and 2.2 per cent, respectively. The growth rate
of India's factory production was flat in February 2019 as it inched up by just
0.1 per cent from 6.9 per cent reported for the corresponding month of 2018, as
manufacturing output slipped 0.3 per cent. The Nikkei India Manufacturing PMI
declined from 52.6 in March to 51.8 in April. This was weaker than the average
for the 14-year survey history. A softer increase in new orders created a
domino effect in the Indian manufacturing industry, restricting growth of
output, employment, input buying and business sentiment, according to the PMI
report. India's service sector activity slipped to a seven-month low in
April as the Nikkei India Services PMI dropped to 51 in April from 52 in
March, underscoring that the sector is losing momentum. Finally, even the
Finance Ministry's monthly report acknowledges—India's economy slowed down
slightly in the last fiscal due to declining growth in private consumption,
slow increase in fixed investment and muted exports though it is still fastest
growing major economy. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">However, the fastest growing tag, in a situation
where China is striving for policy driven slowdown to sustainable levels, will
not cover up the realities on the ground for long. The World Bank's lower
middle income range for countries is defined as per capita GNI of between $996
and $3,895. As per 2017 figures, the income of an average Indian was in the
vicinity of $1,795, which placed the country well below the halfway mark, data
from Bloomberg shows. During the same period, the comparable figure for China
stood at $8,690, which put it well above the halfway mark in the upper middle
income range — defined as GNI per capita between $3,89. Oxfam's Global Inequality
Report 2018 showed that 73 per cent of the wealth generated in India in
2017-2018 went to the richest 1 per cent of the Indian population, while the
poorest 50 per cent saw a marginal increase of 1 per cent in their wealth over
the same period. All in all whom so ever takes charge of the Indian economy
after the 23<sup>rd</sup> of May has a serious task ahead of them in completely
rethinking polices and implementation thereof, particularly those related to
investment, meaningful job creation and rural distress, and all so probably at
the cost of fiscal slippage.<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 9.0pt; line-height: 115%;"><a href="https://www.firstpost.com/business/eight-indicators-tell-us-what-is-going-wrong-in-indian-economy-right-now-and-why-bad-days-await-next-government-6579061.html">https://www.firstpost.com/business/eight-indicators-tell-us-what-is-going-wrong-in-indian-economy-right-now-and-why-bad-days-await-next-government-6579061.html</a></span><span style="font-family: "Times New Roman","serif"; font-size: 9.0pt; line-height: 115%;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 9.0pt; line-height: 115%;"><a href="https://economictimes.indiatimes.com/news/economy/indicators/indias-consumption-story-losing-the-plot/articleshow/69210037.cms">https://economictimes.indiatimes.com/news/economy/indicators/indias-consumption-story-losing-the-plot/articleshow/69210037.cms</a><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-size: 9.0pt; line-height: 115%;"><a href="https://economictimes.indiatimes.com/news/economy/indicators/slow-down-in-fy19-on-demand-investment-exports-finmin-report/articleshow/69150151.cms">https://economictimes.indiatimes.com/news/economy/indicators/slow-down-in-fy19-on-demand-investment-exports-finmin-report/articleshow/69150151.cms</a></span><span style="font-family: "Times New Roman","serif"; font-size: 9.0pt; line-height: 115%;"><o:p></o:p></span></div>
<br /></div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-51933081985532873472019-02-11T20:37:00.000-08:002019-02-11T20:37:12.467-08:00RBI’s February Rate Cut—Surprising or not so.....<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">In
an interesting move, unexpected by many, in the February 2019 policy review the
RBI decided to change the stance of monetary policy from calibrated tightening
to neutral and to reduce the policy repo rate by 25 basis points to 6.25
percent with a 4:2 majority vote. </span><span lang="EN-US" style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-US;">Consequently, </span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">the reverse repo rate under the LAF </span><span lang="EN-US" style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%; mso-ansi-language: EN-US;">stands adjusted to 6.0</span><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">%, and the
marginal standing facility (MSF) rate and the Bank Rate to 6.5%. Repo is the
rate at which RBI lends to commercial banks, whereas reverse repo is the
short-term borrowing rate at which the central bank borrows from other banks.
The marginal cost of funds-based lending rate (MCLR) is the minimum interest
rate below which a bank is not permitted to lend, barring a few exceptional
cases permitted by RBI. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">This
is the first rate cut announced by the MPC since August 2017 and marks a
reversal in the rate cycle. Over the course of 2018, the MPC had raised rates
twice by a total of 50 basis points to 6.5 percent. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">In
October, RBI had changed the policy stance to ‘calibrated tightening’ from
neutral fearing that elevated core inflation poses upside risks to headline
inflation. The shift in stance of monetary policy from calibrated tightening to
neutral provides flexibility and the room to address the challenges to sustain
growth of the Indian economy, as long as the inflation outlook remains benign,
according to the latest policy announcement. The decisions of the MPC in this
regard will be data driven and in consonance with the primary objective of
monetary policy to maintain price stability. <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">The
rate cut was not anticipated by a majority because it was against the RBI
policy if inflation management and came at a time when there was no major
downturn in growth, at least according to official data. Though headline
inflation has softened considerably, the rate cut was a surprise given that the
softening was mostly on account of the volatile food and fuel items, which
showed a deflationary trend and expectations mostly in line with global cues as
also seasonal factors. Any abatement in global trade tensions and already
dovish US policy could well change inflationary expectations. Further, as per
government statements the Indian economy is recording stellar performance which
dilutes the need for a rate cut, particularly at a time when an expansionary
budget had just been unveiled. The change of stance which implies from hawkish
to neutral was expected, however, the dovish rate action caught analysts
unawares, as it puts the central bank’s credibility at stake with doubts
already hovering on the fiscal roadmap of the government.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">The
move, however, is not so surprising if one goes by a combination of factors mentioned
by the RBI in its assessment and outlook, such as the slowdown in both external
and domestic demand, weaker flows from institutional investors, borrowing costs
remaining elevated, as well as a jobs report and higher frequency indicators
showing signs of an economic slowdown. The statement on developmental and
regulatory policies also reflects growth orientation. The highlight is the
enhancement of the limit of collateral-free agriculture loan to Rs.1.60 lakh, to
bring more farmers within the formal credit system. Neither is it surprising
when one considers that in an election year, with the government unable to
announce any measures for Industry in its February Budget presentation, the
long standing demand for a rate cut should be met, given the change at the helm
of RBI.<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">With
the inflationary Interim budget and monetary policy being announced in tandem
in the election year it will be interesting to see the stance and rate
decisions in the subsequent monetary policies as inflation dynamics play out, particularly
as core inflation, which is now a global benchmark has remained sticky, still
hovering around near.6 percent.<o:p></o:p></span></div>
<br /></div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-73987624322873641292019-02-05T22:54:00.000-08:002019-02-05T22:54:44.361-08:00Highlights of the Interim Budget 2019<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">This year’s Union Budget in February as per
convention is an interim one awaiting results of elections to be held in May. A
national Interim Budget refers to the budget of a government that is going
through a transition period. The Interim Budget spans the transition time
between the two governments in an election year so that the government can
continue to function. An Interim Budget usually is an account of income
and expenditure and doesn't list out new schemes or doesn't unveil any policy
measures. However, the ruling party at the Centre took this opportunity to reach
out to a large electorate ahead of the Lok Sabha polls and presented a few new
measures in form of tax rebates and benefits for the economically weaker
sections. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Following are the key highlights from the
announcements made in the Interim Budget 2019-20:<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
FY20 fiscal deficit target set at 3.4 percent<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Expenditure target for FY20 set at Rs 27.84 lakh crore<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Capital expenditure for FY20 set at Rs 3.36 lakh crore<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
FY19 fiscal deficit pegged at 3.4 percent of GDP; current account deficit at
2.5 percent of GDP<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
FY20 gilt repayment pegged at Rs 2.36 lakh crore<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Railway
capital expenditure raised to Rs 64,586 crore in FY20 from Rs 53,060 crore in
FY19<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Defence
budget for FY20 raised to Rs 3 lakh crore<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Taxation </span></i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Tax benefit of Rs 18,500 crore given to three crore middle-class tax payers<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Full tax rebate for income up to Rs 5 lakh per annum<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Income
tax rebate for income up to Rs 6.5 lakh (Rs 5 lakh + Rs 1.5 lakh under 80C of
the Income Tax Act)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Standard deduction for salaried persons raised to Rs 50,000 from Rs 40,000<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Tax-free
Gratuity limit increased from Rs 10 lakh to Rs 30 lakh <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
TDS limit on bank and post-office savings hiked from Rs 10,000 to Rs 40,000 <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-TDS
threshold on rental income raised from Rs 1.8 lakh to Rs 2.4 l lakh<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
No tax on notional rent on second self-occupied house<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Benefit of rollover of capital tax gains under Section 54 to be increased from investment
in one residential house to two, for capital gains up to 2 crore rupees <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Vision
to create a tech enabled taxpayer friendly tax department <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Benefits
under Sec 80(i)BA being extended for one more year for all housing projects
approved till end of 2019-2020 <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Businesses
with less than Rs. 5 crore annual turnover, comprising over 90% of GST payers,
will be allowed to file quarterly returns <o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Agricultural sector </span></i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Farmers
with less than two hectares to be offered Rs 6,000 per year as direct transfer.
Around 12 crore farmers to benefit from the scheme. This scheme will cost the
government around Rs 75,000 crore (around 0.36% of the GDP (2019-20 Budget
estimate).<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-To
provide Rs 750 crore in FY19 to support animal husbandry and fishing<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Farmers
struck by natural calamities will now receive 2-5 percent interest subvention
under insurance scheme<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Two percent interest subsidy to be given to farmers involved in animal
husbandry activities via kisaan credit card scheme. An additional three percent
subsidy will be paid on timely payment of loans<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Decision
taken to increase MSP (minimum support price) by 1.5 times the production cost
for all 22 crops<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Micro, Medium and Small Enterprises
(MSMEs) </span></i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-2% interest rebate for MSMEs registered under GST
for loans up to INR 1 crore<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Requirement of sourcing by government enterprises from SMEs increased up to 25%,
of which, at least 3% to be sourced from women-led SMEs<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Government
E-procurement Marketplace (GeM) platform extended to Central Public Sector
Enterprises<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Social security </span></i><span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Mega
scheme has been announced for workers in the unorganised sector with a monthly
income upto Rs 15,000. The scheme will provide them with an assured monthly
pension of Rs 3,000. The scheme is contributory and the government will make a
matching contribution<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Rs
60,000 crore allocated for MNREGA for FY20<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-Employees'
State Insurance eligibility cover limit has been raised to Rs 21,000 per month
from Rs 15,000 per month<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">-
Workers who suffer grievous injuries will now receive Rs 6 lakh from Rs 2.5
lakh through Employee Provident Fund Organisation (EPFO)<o:p></o:p></span></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">Income
Tax rebates are provided for in place of increasing the non-Tax bracket as the government
has made an explicit target to increase the number of tax filers in the
country. In the Budget speech, it was pointed out that the number of returns
filed has increased from 3.79 crore to 6.85 crore, a growth of 80% growth since
2014.</span> </div>
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<span style="font-family: "Times New Roman","serif"; font-size: 10.0pt; line-height: 115%;">The
Interim Budget announcements when implemented are likely to stimulate demand
and boost economic growth, with a slew of benrfits for the middle class,
farmers and workers in the unorganised sector, leading to more disposable
income in their hands. The overall announcements are positive for consumption
and investment, while being slightly negative for inflation, fiscal consolidation
and bond markets. Analysts are also worried about how the revenue side
estimates will actually pan out. The full budget, which is likely in July 2019,
would have more details on spending and revenue mobilization.<o:p></o:p></span></div>
<br />
<div class="MsoNormal" style="margin-bottom: .0001pt; margin-bottom: 0cm;">
<br /></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-37762785462512464232019-01-28T18:40:00.000-08:002019-01-28T19:00:08.265-08:00<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="body" style="background: white; margin-bottom: 15.0pt; margin-left: 0cm; margin-right: 0cm; margin-top: 0cm;">
<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="color: #3b3a39; font-family: Georgia, Times New Roman, serif; font-size: 10.5pt;">Highlights of RBI’s Fifth Bi-monthly Monetary
Policy Statement, 2018-19<o:p></o:p></span></b></div>
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<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"></a></div>
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="background: white; color: #454545; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Policy
Measures<o:p></o:p></span></i></b></div>
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<ul><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a>
<li><span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: 10pt; text-indent: -18pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-variant-east-asian: normal; font-variant-numeric: normal; line-height: normal;"> </span></span></span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">The Monetary Policy Committee (MPC) decided to keep
the policy repo rate under the liquidity adjustment facility (LAF) </span><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">unchanged at 6.50</span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">%.</span></span></li>
<li><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;"> Consequently, </span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">the reverse repo rate under the LAF </span><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">remains at </span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">6.25%, and the
marginal standing facility (MSF) rate and the Bank Rate at 6.75%.</span></span></li>
</ul>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: 10.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;">
</span></span></span><!--[endif]--><span style="color: #3b3a39; font-size: 10.0pt;">The decision of the MPC is consistent with a neutral
stance of monetary policy in consonance with the objective of achieving the
medium-term target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. <o:p></o:p></span></span><br />
<span style="color: #3b3a39; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="color: #3b3a39; font-size: 10.0pt;"> </span></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="background: white; color: black; font-size: 10.0pt;">Assessment<o:p></o:p></span></i></b></span></div>
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<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"></a><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298" imageanchor="1" style="clear: right; float: right; margin-bottom: 1em; margin-left: 1em;"><span style="font-family: Georgia, Times New Roman, serif;"><img alt="*" border="0" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" style="cursor: move;" width="11" /></span></a><span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US">Global economic activity </span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">has
shown increasing signs of weakness on rising trade tensions. Among advanced
economies (AEs), economic activity appears to be slowing in the US in Q4:2018,
after a buoyant Q3. The Euro area growth lost pace in Q3, impacted by weaker
trade growth and new vehicle emission standards. The Japanese economy
contracted in Q3 on subdued external and domestic demand. Economic activity
also decelerated in major emerging market economies (EMEs) in Q3. In China, growth
slowed down on weak domestic demand. The ongoing trade tensions and the
possible cooling of the housing market pose major risks to growth in China. The
Russian economy lost some traction, pulled down largely by a weak agriculture
harvest, though the growth was buttressed by strong performance of the energy
sector. The Brazilian economy seems to be recovering gradually from the
economic disruption in the first half of the year. <o:p></o:p></span></span></div>
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<span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Crude oil
prices have declined sharply, reflecting higher supplies and easing of
geo-political tensions. The inflation scenario has remained broadly unchanged
in the US and the Euro area. In many key EMEs, however, inflation has risen,
though the recent retreat in energy prices, tightening of policy stances by
central banks and stabilising of currencies may have a salutary impact, going
forward.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"><span style="mso-spacerun: yes;"> </span></span><span class="SubtitleChar"><span lang="EN-US">Global financial markets</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> <span style="mso-bidi-font-style: italic;">have
been driven mainly by rising policy rates in the US, volatile crude oil prices
and expectations of a slowdown compared with earlier projections. Among AEs,
equity markets in the US witnessed a selloff on the weakening outlook for
corporate earnings caused by rising borrowing costs, while the European stock
markets declined on political uncertainties. The Japanese stock market also
shed gains on global cues and the gradual strengthening of the yen. EM stock
markets have corrected on shrinking global liquidity, weak economic data in
some key EMEs, and lingering trade tensions. The 10-year yield in the US, which
surged on robust economic data at the beginning of October, softened
subsequently on the unchanged Fed stance. Among other AEs, bond yields in the
Euro area and Japan softened on weak economic sentiment and idiosyncratic
factors. In most EMEs, bond yields have softened in recent weeks on falling
crude oil prices and steadying currencies. In currency markets, the US dollar,
which was strengthening on a widening growth differential with its peers, eased
in the second half of November. The euro has weakened on Brexit and budget
concerns in Italy, while the yen appreciated on safe haven buying in November.
EME currencies have been trading with an appreciating bias, supported by a
sharp decline in crude oil prices and conservative domestic monetary policy
stances.<o:p></o:p></span></span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US">In India</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> GDP </span><span style="color: black; font-size: 10.0pt;">growth slowed down to 7.1 per cent
year-on-year (y-o-y) in Q2:2018-19, after four consecutive quarters of
acceleration, weighed down by moderation in private consumption and a large
drag from net exports. Private consumption slowed down possibly on account of
moderation in rural demand, subdued growth in kharif output, depressed prices
of agricultural commodities and sluggish growth in rural wages. However, growth
in government final consumption expenditure (GFCE) strengthened, buoyed by
higher spending by the central government. Gross fixed capital formation (GFCF)
expanded by double-digits for the third consecutive quarter, driven mainly by
the public sector’s thrust on national highways and rural infrastructure, which
was also reflected in robust growth in cement production and steel consumption.
Growth of imports accelerated at a much faster pace than that of exports,
resulting in net exports pulling down aggregate demand.<o:p></o:p></span></span></div>
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<span style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">On the supply
side, growth of gross value added (GVA) at basic prices decelerated to 6.9 per
cent in Q2, reflecting moderation in agricultural and industrial activities.
Slowdown in agricultural GVA was largely the outcome of tepid growth in kharif
production. Within industry, growth in manufacturing decelerated due to lower
profitability of manufacturing firms, pulled down largely by a rise in input
costs, while that in mining and quarrying turned negative, caused by a
contraction in output of crude oil and natural gas. Growth in electricity, gas,
water supply and other utility services strengthened. Services sector growth
remained unchanged at the previous quarter’s level. Of its constituents, growth
in construction activity decelerated sequentially, but it was much higher on a
y-o-y basis. Growth in public administration and defence services accelerated
sharply.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="color: black; font-size: 10.0pt;">The purchasing managers’ index
(PMI) for manufacturing touched an eleven-month high of 54.0 in November,
supported by an expansion in output, and domestic and export orders. According
to the assessment of the Reserve Bank’s Industrial Outlook Survey (IOS), the
overall business sentiment in Q3 remained stable, with sustained optimism about
production and exports.</span><span style="color: black; font-size: 10.0pt;"><o:p></o:p></span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US"> Retail inflation</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">, </span><span style="color: black; font-size: 10.0pt;">declined from 3.7
per cent in September to 3.3 per cent in October. A large fall in food prices
pushed food group into deflation and more than offset the increase in inflation
in items excluding food and fuel. Adjusting for the estimated impact of an
increase in HRA for central government employees, headline inflation was 3.1
per cent in October. Within the food and beverages group, deflation in
vegetables, pulses and sugar deepened in October. Inflation, however, showed an
uptick in meat and fish, and non-alcoholic beverages. Inflation in the fuel and
light group remained elevated, driven by LPG prices in October, tracking
international petroleum product prices. However, electricity prices softened in
October. Inflation in rural fuel items also moderated. CPI inflation excluding
food and fuel accelerated to 6.1 per cent in October; adjusted for the
estimated HRA impact, it was 5.9 per cent. Transport and communication
registered a marked increase, pulled up by higher petroleum product prices,
transportation fares and prices of automobiles. A broad-based increase was also
observed in health, household goods and services, and personal care and
effects. However, inflation moderated significantly in clothing and footwear,
as also housing on waning of the HRA impact of central government employees.<o:p></o:p></span></span></div>
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<span style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Inflation
expectations of households, measured by the November 2018 round of the Reserve
Bank’s survey, softened by 40 basis points for the three-month ahead horizon
over the last round reflecting decline in food and petroleum product prices,
while they remained unchanged for the twelve-month ahead horizon. Producers’
assessment for input prices inflation eased marginally in Q3 as reported by
manufacturing firms polled by the Reserve Bank’s IOS. Domestic farm and
industrial input costs remained high. Rural wage growth remained muted in Q2,
while staff cost growth in the manufacturing sector remained elevated.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US">Liquidity </span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">needs arising from the growth
in currency and the Reserve Bank’s forex operations were met through a mixture
of tools based on an assessment of the evolving liquidity conditions. The
Reserve Bank injected durable liquidity amounting to Rs. 360 billion in October
and Rs. 500 billion in November through open market purchase operations,
bringing total durable liquidity injection to Rs. 1.36 trillion for 2018-19.
Liquidity injected under the LAF, on an average daily net basis, was Rs. 560
billion in October, Rs. 806 billion in November. The WACR traded below the repo
rate on an average by 5 basis points in October and 9 basis points in November.
There was large currency expansion in October and especially during the festive
season in November. Currency in circulation, however, contracted in each of the
last three weeks in November. <o:p></o:p></span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US">Merchandise exports</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> rebounded in October 2018,
after moderating in the previous month, driven mainly by petroleum products,
engineering goods, chemicals, electronics, readymade garments, and gems and
jewellery. </span><span class="SubtitleChar"><span lang="EN-US">Imports</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> also grew at a faster pace in
October relative to the previous month, contributed mainly by petroleum
products and electronic goods. Consequently, the </span><span class="SubtitleChar"><span lang="EN-US">trade deficit</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> widened in October, sequentially,
as also in comparison with the level a year ago. Provisional data suggest a
modest improvement in net exports of services in Q2:2018-19, which augurs well
for the </span><span class="SubtitleChar"><span lang="EN-US">current account
balance</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">. On
the financing side, </span><span class="SubtitleChar"><span lang="EN-US">net FDI</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> flows moderated in April-September
2018. </span><span class="SubtitleChar"><span lang="EN-US">Portfolio flows</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> turned positive in November on
account of a sharp decline in oil prices, indications of a less hawkish stance
by the US Fed and a softer US dollar. However, during the year, there were net
portfolio outflows of US$14.8 billion (up to November 30). Non-resident
deposits increased markedly in H1:2018-19 on a net basis over their level a
year ago. India’s </span><span class="SubtitleChar"><span lang="EN-US">foreign
exchange reserves</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> were at US$393.7 billion on November 30, 2018.<o:p></o:p></span></span><br />
<span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;"><br /></span></div>
<div style="background: white; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Outlook<o:p></o:p></span></i></b></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"> </span><i><span lang="EN-US" style="color: #4f81bd; letter-spacing: 0.75pt;">GDP growth outlook for 2018-19 </span></i><span lang="EN-US" style="color: black; font-size: 10.0pt;">has been projected at 7.4 per cent
(7.2-7.3 per cent in H2) as in the October policy, and for H1:2019-20 at 7.5
per cent, with risks somewhat to the downside. Although Q2 growth was lower
than that projected in the October policy, GDP growth in H1 has been broadly along
the line in the April policy when for the year as a whole GDP growth was
projected at 7.4 per cent. Going forward, lower rabi sowing may adversely
affect agriculture and hence rural demand. Financial market volatility, slowing
global demand and rising trade tensions pose negative risk to exports. However,
on the positive side, the decline in crude oil prices is expected to boost
India’s growth prospects by improving corporate earnings and raising private
consumption through higher disposable incomes. Increased capacity utilisation
in the manufacturing sector also portends well for new capacity additions.
There has been significant acceleration in investment activity and high
frequency indicators suggest that it is likely to be sustained. Credit offtake
from the banking sector has continued to strengthen even as global financial
conditions have tightened. FDI flows could also increase with the improving
prospects of the external sector. The demand outlook as reported by firms
polled in the Reserve Bank’s IOS has improved in Q4.<span style="mso-spacerun: yes;"> </span><o:p></o:p></span></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span class="SubtitleChar"><span lang="EN-US">Headline inflation</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> </span><span class="SubtitleChar"><span lang="EN-US">outlook</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> is driven primarily by several factors. First,
despite a significant scaling down of inflation projections in the October
policy primarily due to moderation in food inflation, subsequent readings have continued
to surprise on the downside with the food group slipping into
deflation. The broad-based weakening of food prices imparts downward bias
to the headline inflation trajectory, going forward. Secondly, in contrast to
the food group, there has been a broad-based increase in inflation in non-food
groups. Thirdly, international crude oil prices have declined sharply since the
last policy; the price of Indian crude basket collapsed to below US$60 a barrel
by end-November after touching US$85 a barrel in early October. However,
selling prices, as reported by firms polled in the Reserve Bank’s latest IOS,
are expected to edge up further in Q4 on the back of increased demand.
Fourthly, global financial markets have continued to be volatile with EME
currencies showing a somewhat appreciating bias in the last one month. Finally,
the effect of the 7th Central Pay Commission’s HRA increase has continued to
wane along expected lines. Taking all these factors into consideration and
assuming a normal monsoon in 2019, inflation is projected at 2.7-3.2 per cent
in H2:2018-19 and 3.8-4.2 per cent in H1:2019-20, with risks tilted to the
upside.<o:p></o:p></span></span></div>
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<span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Several uncertainties still
cloud the inflation outlook. First, inflation projections incorporate benign
food prices based on the realised outcomes of food inflation in recent months.
The prices of several food items are at unusually low levels and there is a
risk of sudden reversal, especially of volatile perishable items. Second,
uncertainty continues about the exact impact of MSP on inflation, going
forward. Third, the medium-term outlook for crude oil prices is still uncertain
due to global demand conditions, geo-political tensions and decision of OPEC
which could impinge on supplies. Fourth, global financial markets continue to
be volatile. Fifth, though households’ near-term inflation expectations have
moderated in the latest round of the Reserve Bank’s survey, one-year ahead
expectations remain elevated and unchanged. Sixth, fiscal slippages, if any, at
the centre/state levels, will influence the inflation outlook, heighten market
volatility and crowd out private investment. Finally, the staggered impact of
HRA revision by State Governments may push up headline inflation.<o:p></o:p></span></div>
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<span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;"><br /></span></div>
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<span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;"><br /></span></div>
<div style="background: white; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Developmental and Regulatory Policies<o:p></o:p></span></i></b></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="color: black; font-size: 9.0pt;">External Benchmarking of New Floating Rate Loans by Banks<o:p></o:p></span></b></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span style="font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">It is proposed that all new floating rate personal
or retail loans (housing, auto, etc.) and floating rate loans to Micro and
Small Enterprises extended by banks from April 1, 2019 shall be
benchmarked to one of the following:</span><b><span lang="EN-US" style="color: black; font-size: 9.0pt;"><o:p></o:p></span></b></span></div>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">- Reserve Bank of India
policy repo rate, or<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">- Government of India 91
days Treasury Bill yield produced by the Financial Benchmarks India Private Ltd
(FBIL), or<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">- Government of India 182
days Treasury Bill yield produced by the FBIL, or<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">- Any other benchmark market
interest rate produced by the FBIL.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;">The spread over the
benchmark rate — to be decided wholly at banks’ discretion at the inception of
the loan — should remain unchanged through the life of the loan, unless the
borrower’s credit assessment undergoes a substantial change and as agreed upon
in the loan contract. Banks are free to offer such external benchmark linked
loans to other types of borrowers as well. In order to ensure transparency,
standardisation, and ease of understanding of loan products by borrowers, a
bank must adopt a uniform external benchmark within a loan category.<o:p></o:p></span></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><b><span lang="EN-US" style="font-size: 9.0pt;">Aligning
Statutory Liquidity Ratio with Liquidity Coverage Ratio</span></b><span style="font-size: 9.0pt; mso-ansi-language: EN-IN; mso-bidi-font-weight: bold;"><o:p></o:p></span></span></div>
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<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">As per the
existing roadmap, scheduled commercial banks have to reach the minimum Liquidity
Coverage Ratio (LCR) of 100 per cent by January 1, 2019. Presently, Statutory
Liquidity Ratio (SLR) is 19.5 per cent of Net Demand and Time Liabilities
(NDTL). Further, the assets allowed to be reckoned as Level 1 High Quality
Liquid Assets (HQLAs) for the purpose of computing the LCR of banks, inter
alia, include (a) Government securities in excess of the minimum SLR
requirement; and (b) within the mandatory SLR requirement, Government
securities to the extent allowed by RBI under (i) Marginal Standing Facility
(MSF) [presently 2 per cent of the bank's NDTL] and (ii) Facility to Avail
Liquidity for Liquidity Coverage Ratio (FALLCR) [presently 13 per cent of the
bank's NDTL]. In order to align the SLR with the LCR requirement, it is
proposed to reduce the SLR by 25 basis points every calendar quarter until the
SLR reaches 18 per cent of NDTL. <o:p></o:p></span></div>
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<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Financial Markets<o:p></o:p></span></i></b></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<!--[if !supportLists]--><b><span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt;">Access
for Non-Residents to the Interest Rate Derivatives Market<o:p></o:p></span></b></div>
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<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">The
draft directions in this regard propose allowing non-residents to hedge their
rupee interest rate risk flexibly using any available IRD instrument.
Non-residents will also be permitted to participate in the Overnight Indexed
Swap (OIS) market for non-hedging purposes, subject to a macro-prudential limit
on exposure of all non-residents in terms of the interest rate risk undertaken.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="font-size: 9.0pt;">Measures
to Improve Liquidity Management by Banks<o:p></o:p></span></b></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="background: white; color: black; font-size: 9.0pt;"> </span><span lang="EN-US" style="font-size: 9.0pt; mso-bidi-font-weight: bold;">In order to enable banks to forecast their liquidity requirements with a
greater degree of precision, it has been decided that the Reserve Bank will
provide information on daily CRR balance of the banking system to market
participants on the very next day. Accordingly, the daily Money Market
Operations press release will contain the CRR figure for the previous day.<o:p></o:p></span></span></div>
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<div class="separator" style="clear: both; text-align: center;">
<span style="font-family: Georgia, Times New Roman, serif;"></span></div>
<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="font-size: 9.0pt;">Rationalisation
of Borrowing and Lending Regulations under FEMA, 1999<o:p></o:p></span></b></span></div>
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<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">As part of the
ongoing efforts at rationalising multiple regulations framed over a period of
time under FEMA, 1999, it is proposed to consolidate the regulations governing
all types of borrowing and lending transactions between a person resident in
India and a person resident outside India in both foreign currency and INR, in
consultation with the Government. The proposed regulations, viz., Foreign
Exchange Management (Borrowing or Lending) Regulations, 2018 shall subsume the
existing ones and rationalise the extant framework for external commercial
borrowings and Rupee denominated bonds with a view to improving the ease of
doing business. <o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-family: Georgia, Times New Roman, serif; font-size: 10.0pt;">Customer Education, Protection
and Financial Inclusion<o:p></o:p></span></i></b></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="font-size: 9.0pt;">Ombudsman
Scheme for Digital Transactions<o:p></o:p></span></b></span></div>
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<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">With the digital
mode for financial transactions gaining traction in the country, there is an
emerging need for a dedicated, cost-free and expeditious grievance redressal
mechanism for strengthening consumer confidence in this channel. It has
therefore been decided to implement an ‘Ombudsman Scheme for Digital
Transactions’ covering services provided by entities falling under Reserve
Bank’s regulatory jurisdiction.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
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<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="font-size: 9.0pt;">Framework
for Limiting Customer Liability in respect of Unauthorised Electronic Payment
Transactions <o:p></o:p></span></b></span></div>
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<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">The Reserve Bank
has issued instructions on limiting customer liability in respect of
unauthorised electronic transactions involving banks and credit card issuing
non-banking financial companies (NBFCs). As a measure of consumer protection,
it has been decided to bring all customers up to the same level with regard to
electronic transactions made by them and extend the benefit of limiting
customer liability for unauthorised electronic transactions involving Prepaid
Payment Instruments (PPIs) issued by other entities not covered by the extant
guidelines.<o:p></o:p></span></div>
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<span style="font-family: Georgia, Times New Roman, serif;"><br /></span></div>
<div class="MsoListParagraphCxSpMiddle" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 57.3pt; margin-right: 29.15pt; margin-top: 0cm; mso-add-space: auto; mso-list: l4 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Georgia, Times New Roman, serif;"><span lang="EN-US" style="font-size: 9.0pt;"><span style="mso-list: Ignore;"><span style="font-size: 7pt; font-stretch: normal; font-style: normal; font-variant: normal; font-weight: normal; line-height: normal;"> </span></span></span><!--[endif]--><b><span lang="EN-US" style="font-size: 9.0pt;">Expert
Committee on Micro, Small and Medium Enterprises<o:p></o:p></span></b></span></div>
<div class="MsoListParagraphCxSpLast" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 57.3pt; margin-right: 29.15pt; margin-top: 0cm; mso-add-space: auto;">
<span lang="EN-US" style="font-family: Georgia, Times New Roman, serif; font-size: 9.0pt; mso-bidi-font-weight: bold;">An Expert
Committee will be constituted by the Reserve Bank of India to identify causes
and propose long-term solutions for the economic and financial sustainability
of the MSME sector. <o:p></o:p></span></div>
<br /></div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-14211030158765626432018-09-24T00:17:00.000-07:002018-09-24T00:17:51.050-07:00Highlights of RBI’s Third Bi-monthly Monetary Policy Statement, 2018-19<div dir="ltr" style="text-align: left;" trbidi="on">
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<b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="color: #3b3a39; font-size: 10.5pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Following
are the <a href="https://www.blogger.com/null" name="OLE_LINK1">Highlights of RBI’s Third Bi-monthly Monetary
Policy Statement, 2018-19:</a><o:p></o:p></span></span></b></div>
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<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="background: white; color: #454545; font-size: 10.0pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Policy
Measures<o:p></o:p></span></span></i></b></div>
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<ul>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">The Monetary Policy Committee (MPC) decided to
increase the policy repo rate under the liquidity adjustment facility (LAF) </span><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">by 25 basis points to 6.50</span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">%.</span></span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">Consequently, </span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">the reverse repo rate under the LAF </span><span lang="EN-US" style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">stands adjusted to </span><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;">6.25%, and the
marginal standing facility (MSF) rate and the Bank Rate to 6.75%.</span></span></li>
<li><span style="color: #3b3a39; font-size: 10pt; text-indent: -18pt;"><span style="font-family: "georgia" , "times new roman" , serif;">The decision of the MPC is consistent with a neutral
stance of monetary policy in consonance with the objective of achieving the
medium-term target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. </span></span></li>
</ul>
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<span style="font-family: "georgia" , "times new roman" , serif;"><b style="mso-bidi-font-weight: normal;"><span lang="EN-US" style="color: #3b3a39; font-size: 10.0pt;"> </span></b><b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="background: white; color: black; font-size: 10.0pt;">Assessment<o:p></o:p></span></i></b></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US">Global economic activity</span></span><span lang="EN-US" style="background: white; color: black; font-size: 9pt;"> </span><span lang="EN-US" style="color: black; font-size: 10.0pt;">has
continued to maintain steam; however, global growth has become uneven and risks
to the outlook have increased with rising trade tensions. Among AEs, the US
economy rebounded strongly in Q2, after modest growth in Q1, on the back of
rising personal consumption expenditures and exports. In the Euro Area, weak
growth in Q1 continued in Q2 due to subdued consumer demand, weighed down by
political uncertainty and a strong currency. In Japan, recent data on retail
sales, consumer confidence and business sentiment point to moderation in
growth.</span><span lang="EN-US" style="background: white; color: black; font-size: 9pt;"> </span><span lang="EN-US" style="color: black; font-size: 10.0pt;">Economic activity in major EMEs has slowed somewhat on volatile
and elevated oil prices, mounting trade tensions and tightening of financial
conditions. The Chinese economy lost some pace in Q2, pulled down by efforts to
contain debt. The Russian economy picked up in Q1; recent data on employment,
industrial production and exports indicate that the economy has gained further
momentum. South Africa’s economy contracted in Q1; though consumer sentiment
has improved, high unemployment and weak exports pose challenges. In Brazil,
economic activity suffered a setback in Q1 on nation-wide strikes; more recent
data suggest that growth remained muted as industrial production contracted in
May and the manufacturing PMI declined.</span><span style="color: black; font-size: 10.0pt;"><o:p></o:p></span></span></div>
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<span lang="EN-US" style="color: black; font-size: 10.0pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Global trade lost some traction
due to intensification of trade wars and uncertainty stemming from Brexit
negotiations. Crude oil prices, which remained volatile and elevated in
May-June on a delicate demand-supply balance, eased modestly in the second half
of July on higher supply from OPEC and non-OPEC producers. Base metal prices
have fallen on the general risk-off sentiment triggered by fears of an
intensification of trade wars. Gold prices have softened on a stronger dollar.
Inflation remained firm in the US, reflecting higher oil prices and stronger
aggregate demand. Inflation has edged up also in some other major advanced and
emerging economies, driven, in part, by rising energy prices and pass-through
effects from currency depreciations.<o:p></o:p></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US">Global financial markets</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> have continued to be driven
mainly by monetary policy stances in major AEs and geopolitical tensions.
Equity markets in AEs have declined on trade tensions and uncertainty relating
to Brexit negotiations. Investors’ appetite for EME assets has waned on
increases in interest rates by the US Fed. The 10-year sovereign yield in the
US has moderated somewhat from its peak on May 17 on safe-haven demand, spurred
by escalating trade conflicts. Yields have softened in other key AEs as well.
In most EMEs, however, movements in yields have varied reflecting domestic
macroeconomic fundamentals and tightening global liquidity. Capital flows to
EMEs declined in anticipation of monetary policy tightening in AEs. In currency
markets, the US dollar appreciated, supported by strong economic data. The euro
strengthened in June on receding political uncertainty and taper talk by the
central bank. However, the currency has traded soft thereafter on mixed
economic data and the rising US dollar. EME currencies, in general, have
depreciated against the US dollar over the last month.<o:p></o:p></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US">In India</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> IIP strengthened in April-May 2018 on a
y-o-y basis. This was driven mainly by a significant turnaround in the
production of capital goods and consumer durables. Growth in the
infrastructure/construction sector accelerated sharply, reflecting the
government’s thrust on national highways and rural housing, while the growth of
consumer non-durables decelerated significantly. The output of eight core
industries accelerated in June due to higher production in petroleum refinery
products, steel, coal and cement. Capacity utilisation in the manufacturing
sector remains robust. The assessment based on the Reserve Bank’s business
expectations index (BEI) for Q1:2018-19 remained optimistic notwithstanding
some softening in production, order books and exports. The July manufacturing
PMI remained in expansion zone, although it eased from its level a month ago
with slower growth in output, new orders and employment.</span><span style="color: black; font-size: 10.0pt;"><o:p></o:p></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US"> Retail inflation</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">, measured by year-on-year
change in the CPI</span><span lang="EN-US" style="color: black; font-size: 9pt;"> </span><span style="color: black; font-size: 9pt;">r</span><span style="color: black; font-size: 10.0pt;">ose from 4.9 per
cent in May to 5 per cent in June, driven by an uptick in inflation in fuel and
in items other than food and fuel even as food inflation remained muted due to
lower than usual seasonal uptick in prices of fruits and vegetables in summer months.
Low inflation continued in cereals, meat, milk, oil, spices and non-alcoholic
beverages, and pulses and sugar prices remained in deflation. Fuel and light
group inflation rose sharply, pulled up by LPG and kerosene, while electricity
inflation remained low. The pass-through of global crude oil prices impacted
inflation in domestic petroleum products as well as transport services.
Inflation also picked up modestly in respect of education and health. The June
round of the Reserve Bank’s survey of households reported a further uptick of
20 basis points in inflation expectations for both three-month and one-year
ahead horizons as compared with the last round. Manufacturing firms polled in
the Reserve Bank’s industrial outlook survey reported higher input costs and
selling prices in Q1:2018-19. The manufacturing PMI showed that input prices
eased slightly in July, although they remained high. Input costs for companies
polled in Services PMI in June also stayed elevated. Farm and non-farm input
costs rose significantly. Notwithstanding some pick-up in February and March
2018, rural wage growth remained moderate, while wage growth in the organised
sector remained firm.<o:p></o:p></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US">The liquidity in the system</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> remained generally in surplus
mode during June-July 2018. In June, the Reserve Bank absorbed surplus
liquidity of around Rs.140 billion on a daily net average basis under the LAF
even as the system migrated from net surplus to a net deficit mode in the
second half of the month due to advance tax outflows. Interest rates in the
overnight call money market firmed up in June reflecting the increase in the
repo rate on June 6, 2018. The weighted average call rate (WACR) traded, on an
average, 12 basis points below the repo rate – the same as in May. Systemic
liquidity moved back into surplus mode in early July with increased government
spending but turned into deficit from July 10 onwards; on a daily net average
basis, the Reserve Bank injected liquidity under the LAF of Rs.107 billion in
July. The WACR in July, on an average, traded 9 basis points below the policy
rate. Based on an assessment of prevailing liquidity conditions and of durable
liquidity needs going forward, the Reserve Bank conducted two open OMO purchase
auctions of Rs.100 billion each on June 21 and July 19, 2018.<o:p></o:p></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif;"><span class="SubtitleChar"><span lang="EN-US">Merchandise exports</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> growth picked up in May and
June 2018 on a y-o-y basis, aided by engineering goods, petroleum products,
drugs and pharmaceuticals, and chemicals. During the same period, </span><span class="SubtitleChar"><span lang="EN-US">merchandise import</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> growth also accelerated
largely due to an increase in crude oil prices. Among non-oil imports, gold
imports declined due to lower volume, while imports of machinery, coal,
electronic goods, chemicals, and iron and steel increased sharply. Double-digit
import growth in May and June pushed up the </span><span class="SubtitleChar"><span lang="EN-US">trade deficit</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;">. While </span><span class="SubtitleChar"><span lang="EN-US">net FDI</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> inflows improved significantly
in the first two months of 2018-19, with the tightening of liquidity conditions
in AEs, growing geopolitical concerns and with the escalation of protectionist
sentiment, </span><span class="SubtitleChar"><span lang="EN-US">net FPI</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> outflows from the domestic
capital market have continued, <i>albeit</i> at an increasingly
slower rate. India’s </span><span class="SubtitleChar"><span lang="EN-US">foreign
exchange reserves</span></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> were at US$404.2 billion on July 27, 2018.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-left: 29.15pt; text-indent: 21.3pt;">
<br /></div>
<div style="background: white; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Outlook<o:p></o:p></span></span></i></b></div>
<div class="MsoNormal" style="margin-left: 29.15pt; text-indent: 21.3pt;">
<span style="font-family: "georgia" , "times new roman" , serif;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"> </span><i><span lang="EN-US" style="color: #4f81bd; letter-spacing: 0.75pt;">GDP growth outlook for 2018-19 </span></i><span lang="EN-US" style="color: black; font-size: 10.0pt;">is retained at 7.4 per cent as in the
April policy. GDP growth is projected in the range of 7.5-7.6 per cent in H1
and 7.3-7.4 per cent in H2, with risks evenly balanced.</span><span lang="EN-US" style="background: white; color: black; font-size: 9pt;"> </span><span lang="EN-US" style="color: black; font-size: 10.0pt;">Various
indicators suggest that economic activity has continued to be strong. The progress
of the monsoon so far and a sharper than the usual increase in MSPs of <i>kharif </i>crops
are expected to boost rural demand by raising farmers’ income. Robust corporate
earnings, especially of fast moving consumer goods (FMCG) companies, also
reflect buoyant rural demand. Investment activity remains firm even as there
has been some tightening of financing conditions in the recent period.
Increased FDI flows in recent months and continued buoyant domestic capital
market conditions bode well for investment activity. The Reserve Bank’s IOS
indicates that activity in the manufacturing sector is expected to remain
robust in Q2, though there may be some moderation in pace. Rising trade
tensions may, however, have an adverse impact on India’s exports.<o:p></o:p></span></span></div>
<div class="MsoNormal" style="margin-left: 29.15pt; text-indent: 21.3pt;">
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<div class="MsoNormal" style="margin-left: 29.15pt; text-indent: 21.3pt;">
<span style="font-family: "georgia" , "times new roman" , serif;"><span style="color: #3d85c6;"><i><span class="SubtitleChar"><span lang="EN-US">Headline inflation</span></span><span lang="EN-US" style="font-size: 10pt;"> </span><span class="SubtitleChar"><span lang="EN-US">outlook</span></span></i></span><span lang="EN-US" style="color: black; font-size: 10.0pt;"> is driven primarily by several factors. First,
the central government has decided to fix the MSPs of at least 150 per cent of
the cost of production for all <i>kharif</i> crops for the sowing
season of 2018-19. This increase in MSPs, which is much larger than the average
increase seen in the past few years, will have a direct impact on food
inflation and second round effects on headline inflation. A part of the increase
in MSPs based on historical trends was already included in the June baseline
projections. However, there is a considerable uncertainty and the exact impact
would depend on the nature and scale of the government’s procurement
operations. Second, the overall performance of the monsoon so far augurs well
for food inflation in the medium-term. Third, crude oil prices have moderated
slightly, but remain at elevated levels. Fourth, the central government has
reduced GST rates on several goods and services. This will have some direct
moderating impact on inflation, provided there is a pass-through of reduced GST
rates to retail consumers. Fifth, inflation in items excluding food and fuel
has been broad-based and has risen significantly in recent months, reflecting greater
pass-through of rising input costs and improving demand conditions. Finally,
financial markets continue to be volatile. Based on an assessment of the
above-mentioned factors, inflation is projected at 4.6 per cent in Q2 and 4.8
per cent in H2 of 2018-19, with risks evenly balanced. Excluding the HRA
impact, CPI inflation is projected at 4.4 per cent in Q2 and 4.7-4.8 per cent
in H2.</span></span></div>
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<div style="background: white; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Developmental and Regulatory Policies<o:p></o:p></span></span></i></b></div>
<div class="MsoListParagraphCxSpFirst" style="margin-bottom: .0001pt; margin-bottom: 0cm; margin-left: 38.1pt; margin-right: 29.15pt; margin-top: 0cm; mso-add-space: auto; mso-list: l1 level1 lfo2; text-indent: -18.0pt;">
</div>
<ul style="text-align: left;">
<li><span style="font-family: "georgia" , "times new roman" , serif;"><b style="text-indent: -18pt;"><span lang="EN-US" style="font-size: 9.0pt;">Extension
of MSF to Scheduled Primary (Urban) Cooperative Banks, and extension of LAF and
MSF to Scheduled State Cooperative Banks</span></b><span lang="EN-US" style="font-size: 9pt; text-indent: -18pt;">, complying with the
eligibility criteria prescribed for LAF / MSF, as part of the Reserve Bank’s
continuous efforts in improving the transmission of monetary policy to money
market rates.</span></span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><b style="text-indent: -18pt;"><span lang="EN-US" style="font-size: 9.0pt;">Investment
in Non-SLR Securities by Primary (Urban) Cooperative Banks. </span></b><span lang="EN-US" style="font-size: 9pt; text-indent: -18pt;">In order to bring
further efficiency in price discovery mechanism and as a step towards
harmonization of regulations they will be permitted to undertake eligible
transactions for acquisition / sale of non-SLR investment in secondary market
with mutual funds, pension / provident funds, and insurance companies. This is
in addition to undertaking eligible transactions with Scheduled Commercial
Banks and Primary Dealers. </span> </span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><b style="text-align: justify; text-indent: -18pt;"><span lang="EN-US" style="font-size: 9.0pt;">Co-origination
of loans by Banks and Non-Banking Financial Companies (NBFCs) for lending to
the pri</span><span lang="EN-US"><span style="font-size: x-small;">ority sector </span></span></b><span style="font-size: x-small;">to provide the much-needed competitive edge for
credit to the priority sector. All SCBs (excluding Regional Rural Banks and
Small Finance Banks) may co-originate loans with NBFCs - NBFC-ND-SIs, for the
creation of eligible priority sector assets. The co-origination arrangement
should entail joint contribution of credit by both lenders at the facility level.
It should also involve sharing of risks and rewards between the banks and the
NBFCs for ensuring appropriate alignment of respective business objectives, as
per their mutual agreement.</span></span></li>
</ul>
<br />
<div style="background: white; text-align: justify;">
<span style="font-family: "georgia" , "times new roman" , serif;"><br /></span></div>
<div style="background: white; text-align: justify;">
<b style="mso-bidi-font-weight: normal;"><i style="mso-bidi-font-style: normal;"><span lang="EN-US" style="color: black; font-size: 10.0pt;"><span style="font-family: "georgia" , "times new roman" , serif;">Financial Markets<o:p></o:p></span></span></i></b></div>
<div style="background: white; margin-left: 36.0pt; mso-list: l2 level1 lfo3; text-align: justify; text-indent: -18.0pt;">
</div>
<ul>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><b style="text-indent: -18pt;"><span lang="EN-US" style="background-attachment: initial; background-clip: initial; background-image: initial; background-origin: initial; background-position: initial; background-repeat: initial; background-size: initial; font-size: 9pt;">Review of Foreign Exchange Derivative facilities
for Residents (Regulation FEMA-25)</span></b><b style="text-indent: -18pt;"><span lang="EN-US" style="font-size: 9.0pt;">: </span></b><span lang="EN-US" style="font-size: 9pt; text-indent: -18pt;"> It is now proposed to undertake a
comprehensive review of FEMA 25, in consultation with the Government of India,
to, inter alia, reduce the administrative requirements for undertaking
derivative transactions, allow dynamic hedging, and allow Indian multinationals
to hedge the currency risks of their global subsidiaries from India.</span></span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif;"><b style="text-indent: -18pt;"><span lang="EN-US" style="font-size: 9.0pt;">Comprehensive
Review of Market Timings</span></b><span lang="EN-US" style="font-size: 9pt; text-indent: -18pt;">: It is necessary that timings across products and
funding markets complement each other and avoid unanticipated frictions. It is,
therefore, proposed, to set up an internal group to comprehensively review
timings of various markets and the necessary payment infrastructure for
supporting the recommended revisions to market timings. </span></span></li>
<li><span lang="EN-US" style="font-size: 9pt; text-indent: -18pt;"><span style="font-family: "georgia" , "times new roman" , serif;"><b>Review of
SGL/ CSGL Guidelines: </b>In order to facilitate greater participation in the
G-Secs markets and to provide market participants further operational ease in
opening and operating of Subsidiary General Ledger (SGL) and Constituent
Subsidiary General Ledger (CSGL) Accounts, it has been decided to review
comprehensively the SGL/CSGL Guidelines. </span></span></li>
</ul>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-64049814150122644982018-03-21T10:00:00.002-07:002018-03-21T10:00:26.903-07:00Highlights of RBI’s Sixth Bi-monthly Monetary Policy Statement, 2017-18:<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="line-height: 100%; margin-bottom: 0.17in; text-indent: 0.39in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: #454545;"><i><b><span style="background: #ffffff;">Policy
Measures</span></b></i></span></span></span></div>
<ul>
<li>
<div style="line-height: 100%; margin-bottom: 0.17in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
Monetary Policy Committee (MPC) decided to keep the policy repo rate
under the liquidity adjustment facility (LAF) unchanged at 6.00%.</span></span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: #3b3a39;">Consequently,
</span><span style="color: #3b3a39;"><span lang="en-IN">the reverse repo
rate under the LAF remains unchanged at 5.75%, and the marginal
standing facility (MSF) rate and the Bank Rate are at 6.25%.</span></span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
decision of the MPC is consistent with a neutral stance of monetary
policy in consonance with the objective of achieving the medium-term
target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. </span></span></span></span></div>
</li>
</ul>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #3b3a39;"> </span><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><i><b><span style="background: #ffffff;">Assessment</span></b></i></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Global
economic activity</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">has
gained further pace with growth impulses becoming more synchronised
across regions. Among AEs, the Euro area expanded at a robust pace,
supported by consumption and investment.</span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">The
US economy lost some momentum with growth slowing down in Q4 of 2017
even as manufacturing activity touched a multi-month high in
December. The Japanese economy continued to grow as manufacturing
activity gathered pace in January on strong external demand. Economic
activity accelerated in EMEs) in the final quarter of 2017. The
Chinese economy grew above the official target, driven by strong
domestic consumption and robust exports. However, some downside risks
to growth remain, especially from easing fixed asset investment and
surging debt levels. In Russia, strong private consumption, rising
oil prices and high exports are supporting economic activity,
although weak investment and economic sanctions are weighing on its
growth prospects. In Brazil, data on household spending and
unemployment were positive in Q4. However, recovery remains
vulnerable to political uncertainty, which has dampened consumer
confidence. South Africa continues to face challenges on both
domestic and external fronts, including high unemployment and
declining factory activity.</span></span></span></div>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Global
trade continued to expand, underpinned by strong investment and
robust manufacturing activity. Crude oil prices touched a three-year
high as production cuts by the OPEC coupled with falling inventories
weighed on the global demand-supply balance. Bullion prices touched a
multi-month high on a weak US dollar. Inflation remained
contained in most AEs and was divergent in key EMEs due to
country-specific factors.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Global
financial markets</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
have become volatile in recent days due to uncertainty over the pace
of normalisation of the US Fed monetary policy. The volatility index
(VIX) has climbed to its highest level since Brexit. Equity markets
have witnessed a sharp correction, both in AEs and EMEs. Bond yields
in the US have hardened sharply, adding to the upward pressures seen
during January, with concomitant rise in bond yields in other AEs and
EMEs. Forex markets have become volatile as well. Until this episode
of recent volatility, global financial markets were buoyed by
investor appetite for risk, corporate tax cuts by the US, and stable
economic conditions. Equity markets had gained significantly in
January, driven by robust Chinese growth, uptick in commodity prices,
and positive corporate sentiment in general. In currency markets, the
US dollar had touched a multi-month low on February 1 on fiscal risks
and improving growth prospects in other AEs.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">In
India</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
as per the first advance estimates released by the CSO is estimated
to decelerate to 6.1 per cent in 2017-18 from 7.1 per cent in 2016-17
due mainly to slowdown in agriculture and allied activities, mining
and quarrying, manufacturing, and public administration and defence
services.</span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Manufacturing
output boosted the growth of IIP in November. After a period of
prolonged weakness, cement production registered robust growth in
November-December, which along with continuing healthy growth in
steel production led to acceleration of infrastructure goods
production in November. The manufacturing purchasing managers’
index (PMI) expanded for the sixth consecutive month in January led
by new orders. Assessment of overall business sentiment in the Indian
manufacturing sector improved in Q3 as reflected in the Reserve
Bank’s Industrial Outlook Survey (IOS). However, core sector growth
decelerated in December due to contraction/deceleration in production
of coal, crude oil, steel and electricity. Acreage in the case of
wheat, oilseeds and coarse cereals was lower than last year and there
was a higher shortfall in area sown for </span></span></span><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><i>rabi</i></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"> crops
as of end-January.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="letter-spacing: 0.8pt;"> <span style="font-family: Cambria, serif;"><span style="font-size: small;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Retail
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">,
measured by year-on-year change in the CPI, increased for the sixth
consecutive month in December on account of a strong unfavourable
base effect. After rising abruptly in November, food prices reversed
partly in December, reflecting mainly the seasonal
moderation, </span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><i>albeit</i></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">muted,
in prices of vegetables along with continuing decline in prices of
pulses. Cereals inflation moderated with prices remaining steady in
December. However, inflation in some components of food – eggs;
meat and fish; oils and fats; and milk – increased. Fuel and light
group inflation, which showed a sharp increase in November, softened
somewhat in December, driven by moderation in electricity, LPG and
kerosene inflation.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"> <span style="font-family: Times New Roman, serif;"><span style="font-size: small;">CPI
inflation excluding food and fuel, increased further in November and
December, largely on account of increase in housing inflation
following the implementation of higher HRA for government employees
under the 7th CPC award. Inflation also picked up in health and
personal care and effects. Reflecting incomplete pass-through to
domestic petroleum product prices, inflation in transport and
communication remained muted in December. Inflation also slowed down
in clothing and footwear, household goods and services, recreation,
and education. Organised sector wage growth remained firm, while the
rural wage growth decelerated.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">The
liquidity in the system</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
continues to be in surplus mode, but it is moving steadily towards
neutrality. The weighted average call rate (WACR) traded 12 bps below
the repo rate during December-January as against 15 bps below the
repo rate in November. On some days in December and January, the
system turned into deficit due to slow down in government spending
and large tax collections, which necessitated injection of liquidity
by the Reserve Bank. For December as a whole, however, the Reserve
Bank absorbed Rs. 316 billion (on a net daily average basis). For
January, on the whole, the Reserve Bank absorbed Rs. 353 billion.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Merchandise
exports</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
bounced back in November and December. While petroleum products,
engineering goods and chemicals accounted for three-fourths of this
growth, exports of readymade garments contracted. During the same
period, </span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">merchandise
import</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
growth accelerated sequentially with over one-third of the growth
emanating from petroleum (crude and products) due largely to high
international prices. Gold imports increased – both in value and
volume terms – in December, after declining in the preceding three
months. Pearls and precious stones, electronic goods and coal were
major contributors to non-oil non-gold import growth. With import
growth exceeding export growth, the </span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">trade
deficit</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
for December was US$ 14.9 billion. Even though the </span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">current
account deficit</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
narrowed sharply in Q2 of 2017-18 on a sequential basis, it was
higher than its level a year ago, mainly due to widening of the trade
deficit. While </span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">net
FDI</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
inflows moderated in April-October 2017 from their level a year ago,
</span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">net
FPI</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
inflows were buoyant in 2017-18 (up to February 1). India’s </span></span></span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">foreign
exchange reserves</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
were at US$ 421.9 billion on February 2, 2018.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
</div>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><i><b>Outlook</b></i></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"> </span><span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">GVA
growth for 2017-18</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
is projected at 6.6 per cent. Beyond the current year, the growth
outlook will be influenced by several factors. First, GST
implementation is stabilising, which augurs well for economic
activity. Second, there are early signs of revival in investment
activity as reflected in improving credit offtake, large resource
mobilisation from the primary capital market, and improving capital
goods production and imports. Third, the process of recapitalisation
of public sector banks has got underway. Large distressed borrowers
are being referenced for resolution under the Insolvency and
Bankruptcy Code (IBC). This should improve credit flows further and
create demand for fresh investment. Fourth, although export growth is
expected to improve further on account of improving global demand,
elevated commodity prices, especially of oil, may act as a drag on
aggregate demand. </span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: Cambria, serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Headline
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
averaged 4.6 per cent in Q3, driven primarily by an unusual pick-up
in food prices in November. Though prices eased in December, the
winter seasonal food price moderation was less than usual. Domestic
pump prices of petrol and diesel rose sharply in January, reflecting
lagged pass-through of the past increases in international crude oil
prices. Considering these factors, inflation is now estimated at 5.1
per cent in Q4, including the HRA impact.</span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><i><b>Developmental
and Regulatory Policies</b></i></span></span></span></div>
<ul style="list-style-image: url(data:image/png;">
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Relief
for MSME Borrowers: (for which the aggregate exposure of banks and
NBFCs does not exceed ₹ 250 million as on January 31, 2018), MSMEs
who have registered under GST, be allowed by banks and NBFCs to pay
the amounts overdue as on September 1, 2017 and payments due between
September 1, 2017 and January 31, 2018, within 180 days from their
original due date, as a measure to support their transition to a
formalised business environment. </span></span></span>
</div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Remove
the currently applicable loan limits of Rs. 50 million and Rs. 100
million per borrower to Micro, Small and Medium Enterprises,
(Services) respectively, for classification under priority sector.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">It
has been decided that the sub-target of 8 percent of Adjusted Net
Bank Credit (ANBC) or Credit Equivalent Amount of Off-Balance Sheet
Exposure (CEOBE), whichever is higher, will be made applicable for
lending to the small and marginal farmers for foreign banks with 20
branches and above from FY 2018-19. Further, the sub-target for bank
lending to the Micro Enterprises in the country of 7.50 percent of
ANBC or CEOBE, whichever is higher, will also be made applicable for
foreign banks with 20 branches and above from FY 2018-19.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">It
has been decided to harmonize the methodology of determining
benchmark rates by linking the Base Rate to the MCLR with effect
from April 1, 2018. </span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">With
a view to harmonizing regulations across different types of
collateral and also to encourage wider participation, especially for
corporate debt repos, the repo directions are proposed to be
streamlined and simplified. </span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">It
is now proposed to allow non-residents hedging their INR currency
risk arising out of their current and capital account transactions
to dynamically hedge their currency and interest rate exposures
onshore using any of the permitted instruments.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">It
is now proposed to merge position limits across all foreign
currency-INR pairs and provide a single limit of USD 100 million per
user (both resident and non-resident) across all exchange traded
currency derivatives, in all exchanges combined. </span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">It
is proposed that (i) FBIL would assume the responsibility for
standardising the valuation of Government securities (issued by both
the Centre and States) currently being done by FIMMDA; and, (ii)
FBIL would also assume the responsibility for computation and
dissemination of the daily “Reference Rate” for Spot USD/INR and
other major currencies against the Rupee, which is currently being
done by the Reserve Bank.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">With
a view to providing customers of NBFCs with a cost-free and
expeditious grievance redress mechanism, it has been decided to
introduce an Ombudsman Scheme for NBFCs. The scheme will cover all
deposit taking NBFCs and those with customer interface having
asset-size of Rupees One Billion and above. </span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Standardize
the note printing processes, procurement of raw materials, quality
assurance processes, security, etc.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #3b3a39;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><b><span style="color: black;">With
a view to promote a less cash economy it has been decided to
discontinue the incentives for installation of Cash Recycler
Machines (CRMs) and Automated Teller Machines (ATMs).</span></b></span></span></span></div>
</li>
</ul>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-81729468581534393472018-03-21T09:47:00.002-07:002018-03-21T09:47:43.224-07:00Highlights of the Union Budget for 2018-19<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><b>Introductory
Remarks</b></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Budget
2018-19 reflects the Government’s firm commitment to substantially
boost investment in Agriculture, Social Sector, Digital Payments,
Infrastructure and Employment Generation on the one hand and
simultaneously stick to the path of fiscal rectitude by aiming for a
reduction of fiscal deficit by 0.2% of GDP over RE 2017-18. </span></span></span>
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><b>Fiscal
situation</b></span></span></span></div>
<ul>
<li>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><span lang="en-US">Fiscal
deficit target for 2018-19 at 3.3% of GDP to accommodate higher
demand for expenditure against the earlier target of 3%. Revised
deficit target for the year ending in March 2018 is 3.5% of GDP from
the targeted 3.2%. </span></span><span style="color: black;">Revenue
deficit shot up to 2.6% of GDP in 2017-18 from the budget estimate
of 1.9% of GDP (as receiving GST revenue for 11 months in 2017-18
led to a shortfall of Rs.50,000 crore).</span></span></span></div>
</li>
<li>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Aims
to reduce its debt-to-GDP ratio to 48.8% in 2018-19, 46.7% in
2019-20 and 44.6% in 2020-21. Nominal GDP for BE 2018-2019 has been
projected at Rs. 18722302 crore assuming 11.5% growth over the
estimated GDP of Rs. 16784679 crore for 2017-18 (RE).</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Revenue
receipts budgeted at Rs. 1725738 crores for 2018-19 against a BE of
Rs. 1515771 and RE of Rs. 1505428 crore for 2017-18. Centre’s tax
revenues at Rs. 1480649 crore in BE 2018-19 against a BE of Rs.
1227014 crore and RE of Rs.1269454 crore in 2017-18.</span> <span style="color: black;">Non-
tax revenues at Rs. 245089 crore in BE 2018-19 against a BE of Rs.
288757 crore and RE of Rs. 235974 crore in 2017-18.</span></span></span></div>
</li>
<li>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Total
expenditure is </span><span style="color: black;">budgeted at Rs. </span><span style="color: black;">2442213
crore for 2018-19 as against </span><span style="color: black;">a BE of
</span><span style="color: black;">Rs. 2146735 crore and RE of Rs. 2217750
crore in 2017-18.</span></span></span></div>
</li>
<li>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">BE
of Expenditure for 2018-19 show an increase of Rs. 2,24,463 crore
over the RE 2017-18. Increases have occurred for higher
—compensation to States and UTs for revenue loss on roll out of
GST; payment of interest under Market loans; food subsidy under
National Food Security Act; Defence, Civil and pensions payable to
erstwhile employees of Department of Telecommunications, absorbed in
Bharat Sanchar Nigam Limited; outlays provided for investment in
Indian Railways, School Education and Literacy, Higher Education
Financing Agency, Atomic Energy Industries and Construction of
roads; capital expenditure of Defence Services; higher requirement
by Central Armed Police Forces; provision made for Pradhan Mantri
Swasthya Suraksha Yojana.</span></span></span></div>
</li>
<li>
<div lang="en-IN" style="line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Borrowings
and Other Liabilities estimated at Rs. 624276 crore in BE of 2018-19
as against a BE of Rs. 546531 crore and RE of Rs. 594849 crore in
2017-18.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Total
resources going to States including the devolution of State’s
share in taxes, Grants/Loans, and releases under Centrally Sponsored
Schemes in BE (2018-19) is Rs.12,69,435 crore, with a jump of Rs.
1,53,558 crore over RE (2017-18) and Rs. 2,83,760 crore more than
the Actuals (2016-17).</span></span></span></div>
</li>
</ul>
<ul>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Disinvestment
target for this year set at ₹80,000 crore.</span></span></span></div>
</li>
</ul>
<div style="line-height: 100%; margin-bottom: 0in; margin-left: 0.5in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><b>Tax
proposals</b></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in;">
<br />
</div>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><b>Personal
income tax</b></span></span></span></div>
<ul>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">No
changes in personal income tax slabs.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Salaried
tax-payers to get a standard deduction of Rs. 40,000 in lieu of
transport allowance and "other medical expenses".</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">All
senior citizens will now be able to claim benefit of a deduction of
Rs. 50,000 for any medical insurance.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">For
critical illnesses, the deduction has been increased to Rs.
1,00,000.</span></span></span></div>
</li>
<li>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Govt.
will contribute 12% of the wages of new employees in EPF in all
sectors for next 3 years. Women’s contribution to EPF reduced to
8% for first 3 years<br />
</span></span></span>
</div>
</li>
</ul>
<div style="line-height: 100%; margin-bottom: 0in;">
</div>
<ul>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="color: black;">₹<span style="font-family: Times New Roman, serif;"><span style="font-size: small;">2,000-crore
fund for development of agri markets.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Free
power connections to 4 crore homes under Saubhagya Yojana. Rs. 16000
crore under this scheme</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Eight
crore free gas connections for poor women through Ujjwala Yojana.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Govt.
to implement minimum support price for all crops; It is hiked to 1.5
times of production costs.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">New
flagship National Health Protection Scheme, providing a health
insurance cover of ₹5 lakh per family per year announced.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Automatic
revision of emoluments parliamentarians every five years, pegged to
inflation.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">develop
and upgrade existing 22,000 rural haats into Gramin Agricultural
Markets (GrAMs). In these GrAMs, physical infrastructure will be
strengthened using MGNREGA and other Government Schemes. These
GrAMs, electronically linked to e-NAM and exempted from regulations
of APMCs, will provide farmers facility to make direct sale to
consumers and bulk purchasers.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Organic
farming in large clusters, preferably of 1000 hectares each, will be
encouraged.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Allocation
of Ministry of Food Processing is being doubled from `715 crore in
RE 2017-18 to `1400 crore in BE 2018-19.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Rs.
500 crore ‘‘Operation Greens’’ to promote Farmer Producers
Organizations (FPOs), agri-logistics, processing facilities and
professional management. </span></span></span>
</div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Export
of agricommodities to be liberalized. state-of-the-art testing
facilities in 42 Mega Food Parks to be set up.</span></span></span></div>
</li>
<li>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">Volume
of institutional credit for agriculture sector raised to Rs. 11
trillion for the year 2018-19 from Rs. 10 trllion in 2017-18. </span></span></span>
</div>
</li>
</ul>
<div style="line-height: 100%; margin-bottom: 0in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;">BUDGET
GLOSSARY</span></span></div>
<div style="line-height: 100%; margin-bottom: 0in;">
<a href="https://mofapp.nic.in/budgetmicrosite/images/union-budget-2018-brochure.pdf"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">https://mofapp.nic.in/budgetmicrosite/images/union-budget-2018-brochure.pdf</span></span></a><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
</span></span></span>
</div>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-67990224928047325492017-11-29T23:01:00.001-08:002017-11-29T23:13:21.946-08:00Moody’s upgrades India’s sovereign bond rating after 14 years<div dir="ltr" style="text-align: left;" trbidi="on">
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<br />
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
—<span style="font-size: small;"><span style="font-family: "times new roman" , serif;"><b>the
rationale</b></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-size: small;"><span style="font-family: "times new roman" , serif;"><b>
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</b></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-size: small;"><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">Moody's
Investors Service has upgraded the </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><i><span style="background: #ffffff;">Government
of India</span></i></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">'s
local and foreign currency issuer ratings to Baa2 from Baa3 and
changed the outlook on the rating to stable from positive. Moody's
has also raised India's long-term foreign-currency bond ceiling to
Baa1 from Baa2, and the long-term foreign-currency bank deposit
ceiling to Baa2 from Baa3. The short-term foreign-currency bond
ceiling remains unchanged at P-2, and the short-term foreign-currency
bank deposit ceiling has been raised to P-2 from P-3. The long-term
local currency deposit and bond ceilings remain unchanged at A1.
According to the Moody’s PR on 14 November 2017, a rating committee
was called to discuss the rating of the India, Government of. The
main points raised during the discussion were: The issuer's economic
fundamentals, including its economic strength, have not materially
changed. The issuer's institutional strength/ framework have not
materially changed. The issuer's fiscal or financial strength,
including its debt profile, has not materially changed. The issuer's
susceptibility to event risks has not materially changed. </span></span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">The
decision to upgrade the ratings is underpinned by the expectation
that continued progress on economic and institutional reforms will,
over time, enhance India's high growth potential and its large and
stable financing base for government debt, and will likely contribute
to a gradual decline in the general government debt burden over the
medium term. In the meantime, while India's high debt burden remains
a constraint on the country's credit profile, Moody's believes that
the reforms put in place have reduced the risk of a sharp increase in
debt, even in potential downside scenarios. While a number of
important reforms remain at the design phase, Moody's believes that
those implemented to date will advance the government's objective of
improving the business climate, enhancing productivity, stimulating
foreign and domestic investment, and ultimately fostering strong and
sustainable growth. Measures include the Goods and Services Tax
(GST) which among other things, is expected to promote productivity
by removing barriers to interstate trade; improvements to the
monetary policy framework; measures to address the overhang of
non-performing loans (NPLs) in the banking system; and others which
work towards fostering stronger institutions and a more formal
economy. </span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">Moody's
expects real GDP growth to moderate to 6.7% in the fiscal year ending
in March 2018 (FY2017-18). However, as disruption fades, assisted by
recent government measures to support SMEs and exporters with GST
compliance, real GDP growth is expected to rise to 7.5% in FY2018-19.
Longer term, India's growth potential is significantly higher than
most other Baa-rated sovereigns. While India's high debt burden
remains a constraint on the country's credit profile, Moody's
estimates that the reforms put in place have reduced the risk of a
sharp increase in debt, even in potential downside scenarios.</span></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-size: small;"><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">The
upgrade comes within five years of India being classified as one of
the "fragile five" economies, struggling with high twin
deficits in fiscal and current accounts. Since then a
combination of policy decisions and external factors has worked in
favour of an upgrade. The Finance Ministry has held on to the targets
for fiscal deficit, while the current account has been bolstered by a
period of low oil prices followed by a resurgence of global trade.
India’s position in the World Bank’s </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><i><span style="background: #ffffff;">Ease
of Doing Business</span></i></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">
rankings jumped up by a record 30 notches to the 100th spot recently
with relevant policy easing. The upgrade has been termed overdue by
some as India was earlier in the same risk category as a number of
economies with far worse macro-economic performance. Indeed a
</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><i><span style="background: #ffffff;">Bloomberg
Economics</span></i></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">
model had predicted an upgrade based on the divergence between actual
ratings and CDS implied credit ratings. </span></span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
—<span style="font-size: small;"><span style="font-family: "times new roman" , serif;"><b>the
benefits </b></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">The
sovereign rating is an indicator of the government’s ability to
meet its financial obligations. Sovereign credit ratings give
investors insight into the level of risk associated with investing in
a particular country and also include political risks. An upgrade
thus lowers the cost of borrowing for the sovereign as it is
associated with lower risk. In Moody’s rating, scale, bonds rated
Baa3 and above are considered to be investment grade, meaning, these
bonds are likely to meet the payment obligations better. India was at
the lowest rung of the investment grade until it received this
upgrade. The Indian government, it may be noted, does not fund its
deficits via offshore commercial bond markets. External debt as a
percentage of the Central Government’s total liabilities was at
6.2% in 2015-16. The entire public debt of India is funded via the
domestic Rupee (INR) bond market. Foreign investor participation in
the bond market, though increasing is very little, and tightly
regulated through quotas. However, there are certain other
benefits to be derived from a sovereign upgrade.<br />
</span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">Sovereign
ratings also act as the benchmark for other issuers of debt in the
country. Effectively, sovereign upgrades or downgrades can affect
borrowing costs for companies, individuals and any entity looking to
raise money overseas. Moody’s upgraded some Indian corporate
entities, mostly public sector companies along with the sovereign
upgrade. This would result in reduction in cost of borrowing for
Indian companies looking to raise financing from offshore bond
markets. In fact, Reliance recorded the tightest ever spread for
an Indian issue over US Treasuries in the offshore market soon
after the upgrade.<br />
</span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">The
sovereign rating is an important indicator of the country’s
financial and fiscal health. Foreign investors looking to commit
money to direct investments, portfolio investments or local bond
markets will all tend to look to the sovereign rating for a quick
assessment of the country’s prospects. A ratings upgrade gives
out a positive view on policy and builds incremental confidence in
foreign investors. A higher rating can increase the range of
investors, for example, drawing in global Pension and Life Insurance
firms that have minimum ratings criteria for investing. Incrementally
higher foreign flows tend to bid up INR too, making investments in a
host of other Indian financial assets like equities and real estate
more attractive to foreign investors. </span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
—<span style="font-size: small;"><span style="font-family: "times new roman" , serif;"><b>and
the caveats</b></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">Moody’s
mentions that a material deterioration in fiscal metrics and the
outlook for general government fiscal consolidation would put
negative pressure on the rating. The rating could also face downward
pressure if the health of the banking system deteriorated
significantly or external vulnerability increased sharply. The
upgrade has come in at a time when a gamut of short and long-term
indicators has started to worsen. Given the emerging signs of
quickening inflation and a widening current account and fiscal
deficit a lot of policy balancing is in order.</span></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
S&P
Global Ratings and Fitch Ratings, who now rate India a notch below
Moody’s, hold the view that for an upgrade, India would have to
address its weak fiscal balance sheet and weak fiscal performance.
S&P Global Ratings, while acknowledging India’s stronger growth
prospects and the country’s achievements on the reforms agenda,
noted that its ratings were constrained by India’s low wealth
levels, measured by GDP per capita. This and the income inequality
hidden behind it, is indeed a macro-economic indicator which, on its
own, needs far greater policy attention and careful planning than it
has received so far.</span></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-size: small;"><span style="color: black;"><span style="font-family: "times new roman" , serif;"><i><span style="background: #ffffff;">Sources
</span></i></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="background: #ffffff;">include:</span></span></span></span></div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="color: blue;"><u><a href="https://www.moodys.com/research/Moodys-upgrades-Indias-government-bond-rating-to-Baa2-from-Baa3--PR_374998"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">https://www.moodys.com/research/Moodys-upgrades-Indias-government-bond-rating-to-Baa2-from-Baa3--PR_374998</span></span></a></u></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span>
</div>
<div class="western" lang="en-IN" style="line-height: 115%; margin-bottom: 0.14in;">
<span style="color: blue;"><u><a href="https://economictimes.indiatimes.com/markets/stocks/news/moodys-upgrade-is-just-a-milestone-in-indias-development-journey/articleshow/61719739.cms"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">https://economictimes.indiatimes.com/markets/stocks/news/moodys-upgrade-is-just-a-milestone-in-indias-development-journey/articleshow/61719739.cms</span></span></a></u></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span>
</div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-9519362046747177722017-11-02T00:50:00.003-07:002017-11-02T00:50:24.016-07:00Government’s Rs. 2.11 trillion bank recapitalisation— Sufficient to cover stressed assets but no quick fix <div dir="ltr" style="text-align: left;" trbidi="on">
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<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">The
government, the largest shareholder will recapitalise the banks it
owns by infusing an unprecedented amount of Rs. 2.11 trillion (US$32
billion), of which Rs. 1.35 trillion will be through recapitalisation
bonds. Infusion of capital would help to fast-track the
resolution of non-performing assets (NPAs) and take Indian PSBs
closer to global capital adequacy norms. The move is expected help
economic recovery with the revival of flow of credit to business and
industry, and particularly foster medium and small industries growth
and employment generation. </span></span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">Public
sector banks require capital mainly because of a sharp rise in NPAs
in the last decade due to delays in repayments from sectors like
power, steel and infrastructure. The gross NPA ratio reached 9.7
per cent in FY17, up from 7.8 per cent in FY16. Including loans that
have been restructured the ratio of stressed loans rises to 12% of
total banking sector loans. Weak credit discipline in banks,
right from the appraisal to sanction stage, was recognised, by the
RBI, as one of the main bank specific factors in the build-up of
stressed assets. Swift, time-bound resolution or liquidation of
stressed assets was recognised as critical for de-clogging bank
balance sheets and for efficient reallocation of capital and a
multi-pronged approach taken.</span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">
</span></span></span><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;"> The
Asset Quality Review (AQR) exercise undertaken in 2015-16 was a
critical step in recognising the aggregate stock of NPAs across the
banking system. Setting up of CRILC (Central Repository of
Information on Large Credits) by the RBI in 2014, gave access to an
aggregate view of borrower-wise and bank-wise exposures, to
supervisors as well as lenders, to track the incipient stress in a
particular account in a timely manner. The decision to do away
with the regulatory forbearance regarding asset classification on
restructuring of loans and advances effective April, 2015, was a
significant step from the perspective of aligning the regulatory
norms with international best practices. The system of ‘Prompt
Corrective Action’ (PCA) ensures timely supervisory action in case
banks breach certain risk-related trigger points. The enactment of
the Insolvency and Bankruptcy Code, 2016 (IBC) puts a time limit
of 180 days (extendable by a further 90 days) within which creditors
have to agree to a resolution plan, failing which the adjudicating
authority under the law will pass a liquidation order on the
insolvent company
(</span></span></span><a href="https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1044"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">https://www.rbi.org.in/Scripts/BS_SpeechesView.aspx?Id=1044</span></span></a><span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: small;">).
</span></span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">The
necessity for capital infusion had also been emphasised by various
rating agencies such as Moody’s, CRISIL and Fitch, as well by RBI
insiders. Moody’s estimated that the external capital requirements
for the 11 rated PSBs, over the next two years would be around Rs.
700-950 billion, factoring in the two main drivers of their capital
needs—the need to comply with Basel III requirements, and for
conservative recognition and provisioning of their asset quality
problems.</span><span style="color: #3b3a39;"><span style="background: #ffffff;">
</span></span><span style="color: black;">Such an amount is much higher
than the remaining Rs.200 billion previously budgeted by the
government for capital infusion until March 2019. </span>Under Basel
III norms, being implemented in phases between April 2013 and March
2019, banks need to have a core capital ratio of 8% and a total
capital adequacy ratio of 11.5% against 9% now. Capital adequacy is a
measure of a bank’s financial strength expressed as a ratio of
capital to risk-weighted assets (CRAR).<span style="color: black;"> A
number of single factor sensitivity stress tests, based on March 2017
data were carried out, by the RBI, on SCBs to assess their
vulnerabilities and resilience under various scenarios. SCBs’
resilience with respect to credit, interest rate, and liquidity risks
as also due to drop in equity prices was studied. A severe credit
shock is likely to impact capital adequacy and profitability of a
significant number of banks. Under a severe shock of 3 standard
deviations (that is, if the average GNPA ratio of 59 select SCBs
moves up to 15.6 per cent from 9.6 per cent), the system level CRAR
and Tier-1 CRAR will decline to 10.4 per cent and 7.9 per cent
respectively. At the individual bank-level, the stress test
results show that 25 banks having a share of 44.4 per cent of SCBs’
total assets might fail to maintain the required CRAR under the shock
of a large 3 standard deviations increase in GNPAs. PSBs were found
to be severely impacted with the CRAR of 22 PSBs likely to go down
below 9 per cent.</span> </span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">The
government is yet to disclose details on the structure and pricing of
the Rs. 1.35 trillion recap bonds, as well as how it will raise the
rest of the cash. It is expected that banks will subscribe to
these bonds and hold it on their books as their investment. The funds
which will go to the government will be reinvested as equity in the
same banks. The programme is expected to have minor impact on
its target to shrink the fiscal deficit to 3.2% of GDP in FY18,
because the government will probably classify the bonds as
off-balance sheet items as per permissible accounting norms. However,
the government still has to bear the interest cost; to service the
debt it will need to at least bear a cost of Rs. 80-90 billion,
according to various unofficial estimates. Apart from the recap
bonds, Rs. 0.18 trillion will come from the budget, in line with
earlier provisioning under the </span><span style="color: black;"><i>Indradhanush</i></span><span style="color: black;">
scheme, leaving Rs. 0.58 trillion to be raised from the market.
Front-loading of bonds is expected to increase the equity prices of
PSBs. Rating agencies have called the government’s Rs. 2.11
trillion PSU bank recapitalisation plan significantly credit
positive. Post the announcement, the 30-share BSE Sensex gained
387.96 points to open on 32,995.28 and the 50-share NSE Nifty gained
113.45 points to open on 10,321.15. Both the indices extended gains
with Sensex breaching the 33,000-mark to touch the peak of 33,117.33
and Nifty scaling a fresh high of 10,340.55. PSU Banks were leading
the rally in early trade with the Nifty PSU Bank sub-index jumping
22.76 per cent Most public sector banks’ shares have surged more
than 20% since the announcement by the MoF. </span></span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;">However,
apart from the modalities of the plan, questions that arise relate to
its actual effect on the bond market, on governance issues of banks
and its actual impact on the economy. The bond market faces a
formidable supply load, even in the face of excess liquidity now
being managed by RBI. Such large scale financing, though executed
over two years and possibly held on books, could nevertheless, hamper
the ability of the biggest subscribers, the PSBs, to invest in bonds
and may push up yields eventually when liquidity dries up. A
series of banking reforms are to accompany the capital infusion,
however, doubts definitely arise about moral hazards of such
bail-outs as past experience of the 1990s has demonstrated that banks
have not been able to shore up their lending practices so as to stem
further build-up of toxic assets. Further, at this stage there are
uncertainties about the appetite of borrowers with large
overcapacities on GST implementation, and hence capital freed up for
lending may not have immediate takers and not have much of the
desired effect on economic revival. Again banks too may prioritize
asset resolution and provisioning over expansion. Hence, the measure
announced should not be seen as a one-shot solution to the banking
sector’s and the economy’s current aliments, but rather as an
important part of an integrated process, which still needs much
careful planning and monitoring at each stage.</span></span></span></div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<br />
<br />
</div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-35961460590686206572017-10-27T09:32:00.001-07:002017-10-27T09:33:39.720-07:00Highlights of RBI’s Fourth Bi-monthly Monetary Policy Statement, 2017-18:<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #454545;"><i><b><span style="background: #ffffff;">Policy
Measures</span></b></i></span></span></span></div>
<ul>
<li>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.17in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
Monetary Policy Committee (MPC) decided to keep the policy repo rate
under the liquidity adjustment facility (LAF) unchanged at 6.00%.</span></span></span></span></div>
</li>
<li>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;">Consequently,
</span><span style="color: #3b3a39;"><span lang="en-IN">the reverse repo
rate under the LAF remains unchanged at 5.75%, and the marginal
standing facility (MSF) rate and the Bank Rate are at 6.25%.</span></span></span></span></div>
</li>
<li>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
decision of the MPC is consistent with a neutral stance of monetary
policy in consonance with the objective of achieving the medium-term
target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. </span></span></span></span></div>
</li>
</ul>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #3b3a39;"> </span><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i><b><span style="background: #ffffff;">Assessment</span></b></i></span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Global
economic activity</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">has
strengthened further and become broad-based. Among advanced economies
(AEs), the US has continued to expand with revised Q2 GDP growing at
its strongest pace in more than two years, supported by robust
consumer spending and business fixed investment. Euro area
economic recovery gained further traction, underpinned by domestic
demand. While private consumption benefited from employment gains,
investment rose on the back of favourable financing conditions.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
Japanese economy continued on a path of healthy expansion despite a
downward revision in growth since March 2017 on weaker than expected
capital expenditure.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Strong
growth in Q2 in China was powered by retail sales, and imports grew
at a rapid pace, suggesting robust domestic demand.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
Brazilian economy expanded for two consecutive quarters in Q2 on
improving terms of trade, even as the impact of recession persists on
the labour market. Economic activity in Russia recovered further,
supported by strengthening global demand, firming up of oil prices
and accommodative monetary policy. Although South Africa has emerged
out of recession in Q2, the economy faces economic and political
challenges.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
latest assessment by the WTO indicates a significant improvement in
global trade in 2017, backed by a resurgence of Asian trade flows and
rising imports by North America. Crude oil </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">prices</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
hit a two-year high in September on account of the combined effect of
a pick-up in demand, tightening supplies due to production cuts by
the OPEC and declining crude oil inventories in the US. Bullion
prices touched a year’s high in early September on account of
safe-haven demand due to geo-political tensions. Weak non-oil
commodity prices and low wage growth kept inflation pressures low in
most AEs and subdued in several EMEs, largely reflecting
country-specific factors.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Global
financial markets</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
have been driven mainly by the changing course of monetary policy in
AEs, generally improving economic prospects and oscillating
geo-political factors. Equity markets in most AEs have continued to
rise.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
EMEs, equities generally gained on improved global risk appetite,
supported by upbeat economic data and expectations of a slower pace
of monetary tightening in major AEs. While bond yields in major AEs
moved sideways, they showed wider variation in EMEs. The euro
surged to a two and a half year high against the US dollar towards
end-August on positive economic data. Most AE and EME currencies
showed divergent movements.</span></span></span></div>
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<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
India</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
GVA growth slowed significantly in Q1 of 2017-18, cushioned partly by
the extensive front-loading of expenditure by the central government.
GVA growth in agriculture and allied activities slackened in the
usual first quarter moderation. Industrial sector GVA growth fell
sequentially as well as on a y-o-y basis. The manufacturing sector –
the dominant component of industrial GVA – grew by 1.2 per cent,
the lowest in the last 20 quarters. The mining sector contracted,</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">services
sector performance, however, improved markedly, construction, as
well as, financial, real estate & professional services,
picked up pace.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Of
the constituents of aggregate demand, growth in private consumption
expenditure was at a six-quarter low in Q1 of 2017-18. Gross fixed
capital formation exhibited a modest recovery in Q1 in contrast to a
contraction in the preceding quarter.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
uneven spatial distribution of the monsoon was reflected in the first
advance estimates of </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">kharif
production</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">,
which were below the level of the previous year. </span></span></span>
</div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">IIP</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
recovered marginally in July 2017 from the contraction in June on the
back of a recovery in mining, quarrying and electricity generation.
However, manufacturing remained weak. In terms of the use-based
classification, contraction in capital goods, intermediate goods and
consumer durables pulled down overall IIP growth. In August, however,
the output of core industries posted robust growth on the back of an
uptick in coal production and electricity generation. </span></span></span></div>
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<span style="color: #4f81bd;"><span style="letter-spacing: 0.8pt;"> <span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Retail
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">,
measured by year-on-year change in the CPI, edged up sequentially in
July</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">and
August to reach a five month high. After a decline in prices in June,
food inflation rebounded in the following two months, driven mainly
by a sharp rise in vegetable prices. Cereals inflation remained
benign, while deflation in pulses continued for the ninth successive
month. Fuel group inflation remained broadly unchanged in August.
Petroleum product prices tracked the hardening of international crude
oil prices.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">CPI
inflation excluding food and fuel also increased sharply in July and
further in August, reversing from its trough in June. </span></span></span>
</div>
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<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">A
large </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">liquidity
</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">overhang,
fuelled mainly by the front-loading of government spend, which
necessitated frequent recourse to ways and means advances and
overdrafts over the greater part of this period, imparted a downside
bias to overnight money market rates in H1 of 2017-18. Surplus
</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">liquidity
in the system</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
persisted through Q2 even as the build-up in government cash balances
since mid-September 2017 due to advance tax outflows reduced the size
of the surplus liquidity significantly in the second half of the
month. Active liquidity operations narrowed the spread between
the WACR and the policy rate from 31 bps in April to 13 bps in
September. The RBI conducted OMO sales on six occasions during Q2 to
absorb Rs. 600 billion of surplus liquidity on a durable basis. Net
average absorption of liquidity under the LAF declined from Rs. 3
trillion in July to Rs. 1.6 trillion in the second half of September.
The weighted average CMR, which on an average, traded below the repo
rate by 18 bps during July, firmed up by 5 bps in September on
account of higher demand for liquidity around mid-September in
response to advance tax outflows.</span></span></span></div>
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<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Reflecting
improving global demand, </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">merchandise
export</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
growth picked up in August 2017 after decelerating in the preceding
three months. Engineering goods, petroleum products and chemicals
were the major contributors to export growth in August 2017; growth
in exports of readymade garments and drugs & pharmaceuticals too
returned to positive territory.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Import
growth</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
remained in double-digits for the eighth successive month in August
and was fairly broad-based. While the surge in imports of crude oil
and coal largely reflected a rise in international prices, imports of
machinery, machine tools, iron and steel also picked up. Gold import
volume has declined sequentially since June.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
sharper increase in imports relative to exports resulted in a
widening of the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">CAD
in Q1 of 2017-18</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">,
even as net services exports and remittances picked up. </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Net
FDI</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
at US$10.6 billion in April-July 2017 was 24% higher than during the
same period of last year. While the debt segment of the domestic
capital market attracted </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">FPI</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
of US$14.4 billion, there were significant outflows in the equity
segment in August-September on account of geo-political uncertainties
and expected normalisation of Fed asset purchases. India’s </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">foreign
exchange reserves</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
were at US$399.7 billion on September 29, 2017.</span></span></span></div>
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</div>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i><b>Outlook</b></i></span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"> <span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">projection
of real GVA growth for 2017-18</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
has been revised down to 6.7 per cent from the August 2017 projection
of 7.3 per cent, with risks evenly balanced. The loss of
momentum in Q1 of 2017-18 and the first advance estimates of kharif
foodgrains production are early setbacks that impart a downside to
the outlook. The implementation of the GST so far also appears to
have had an adverse impact, rendering prospects for the manufacturing
sector uncertain in the short term. This may further delay the
revival of investment activity, which is already hampered by stressed
balance sheets of banks and corporates.</span></span></span></div>
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</div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Headline
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
was projected at 3 per cent in Q2 and 4.0-4.5 per cent in the second
half of 2017-18. Actual inflation outcomes so far have been broadly
in line with projections, though the extent of the rise in inflation
excluding food and fuel has been somewhat higher than
expected. Taking into account domestic and international
factors, including food prices, price revisions pending the GST, the
house rent allowance by the Centre and international crude prices,
inflation is expected to rise from its current level and range
between 4.2-4.6 per cent in the second half of this year.</span></span></span></div>
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<br /></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><b>Developmental
and Regulatory Policies</b></span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">The
RBI also set out various developmental and regulatory policy measures
for further improving monetary transmission; strengthening banking
regulation and supervision; broadening and deepening financial
markets; and, extending the reach of financial services by enhancing
the efficacy of the payment and settlement systems:</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><b>Measures
to Improve Monetary Policy Transmission</b></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">:
Arbitrariness in calculating the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">base
rate/MCLR</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
and spreads charged over them has undermined the integrity of the
interest rate setting process. The base rate/MCLR regime is also not
in sync with global practices on pricing of bank loans. A Study Group
has, therefore, recommended a switchover to an external benchmark in
a time-bound manner.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><b>Banking
Regulation and Supervision: </b></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">As
a part of the transition to a LCR of 100% by January 1, 2019, the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">SLR
will be reduced</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
by 50 bps, from 20.0% to 19.50% of banks’ NDTL, from the fortnight
commencing October 14, 2017. The ceiling on SLR securities under
‘Held to Maturity’ (HTM) will also be reduced from 20.25% to
19.50% of banks’ NDTL in a phased manner, i.e., 20.00% by December
31, 2017 and 19.50% by March 31, 2018.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">High-level
Task Force on </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Public
Credit Registry</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
(PCR) will propose a state-of-the-art information system, allowing
for existing systems to be strengthened and integrated, and suggest a
modular, prioritized roadmap for developing a transparent,
comprehensive and near-real-time PCR for India. </span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">It
has been decided to require banks to make it mandatory for corporate
borrowers having aggregate fund-based and non-fund based exposure of
Rs. 50 million and above from any bank to obtain Legal Entity
Identifier (LEI) registration and capture the same in the Central
Repository of Information on Large Credits (CRILC). This will
facilitate assessment of aggregate borrowing by corporate groups, and
monitoring of the financial profile of an entity/group.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
regulatory norms have been eased in order to </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">enable
all co-operative banks to open current accounts</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
and maintain CRR with the Reserve Bank. All the regional offices of
the Reserve Bank have been advised to issue no objection certificates
for opening current accounts for all licensed co-operative banks
other than those under all-inclusive directions.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">P2P
platform has been notified as an NBFC</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
under section 45I (f) (iii) of the Reserve Bank of India Act, 1934 as
per the gazette notification published on September 18, 2017.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"> <span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Banks
to put in place explicit mechanisms for meeting the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">needs
of senior citizens and differently abled persons</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
for availing banking facilities in branches.</span></span></span></div>
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<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><b>Financial
Markets: </b></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
Reserve Bank shall put in place a framework for authorisation of
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">electronic
trading platforms </span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">(ETP)
for financial market instruments regulated by the Reserve Bank. </span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">A
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Foreign
Exchange Trading Platform</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
is proposed for improving the pricing outcome for the “retail user”
(to be defined in terms of transaction size) under which client
pricing is directly determined in the market by providing customers
with access to an inter-bank electronic trading platform where
bid/offers from clients and Authorised Dealer banks can be matched
anonymously and automatically.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Non-resident
importers and exporters (</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">NRIE</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">)
entering into rupee invoiced trade transactions with residents will
be permitted </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">to
hedge their INR exposures</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
through their centralised treasury/group entities. This is expected
to facilitate internationalisation of the rupee by encouraging rupee
invoicing of trade transactions while also encouraging non-residents
to hedge INR risks onshore.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">A
detailed </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">review
of current regulations on FPI debt investment</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
shall be undertaken to facilitate the process of investment and
hedging by FPIs, keeping in mind macro-prudential considerations.
Regulatory changes to be finalised in consultation with the
Government of India and the SEBI will be effective from April 2018.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Smoother
settlement of short sale transactions</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
is necessary for orderly functioning of the market. Towards this end,
it has been decided that (i) a short seller need not borrow
securities for ‘notional short sales’, wherein it is required to
borrow the security even when the security is held in the
held-for-trading/available-for-sale/held-to-maturity portfolios of
banks; and, (ii) OTC G-sec transactions by FPIs may be contracted for
settlement on a T+1 or T+2 basis. </span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"> <span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">In
order to further develop </span></span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">liquidity
in the State Development Loan (SDL) market</span></span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">,
spread the issuance of SDLs, move towards market-based pricing that
is sensitive to individual state’s fiscal risk metrics, and reduce
uncertainties in announcement of auction results, the following
measures are being proposed:</span></span></span></span></div>
<ul>
<li>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><span lang="en-IN">Consolidation
of state government debt will be undertaken to improve liquidity in
SDLs through reissuances and buybacks, so as to even out redemption
pressures and elongate residual maturity.</span></span></span></span></div>
</li>
<li>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><span lang="en-IN">SDL
auctions will be conducted on a weekly basis and the auction results
will be announced latest by 3.00 PM on the same day.</span></span></span></span></div>
</li>
<li>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><span lang="en-IN">High
frequency data relating to finances of state governments available
with the Reserve Bank will be disclosed on its website.</span></span></span></span></div>
</li>
</ul>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">The
Union Budget 2016-17 announced that the Reserve Bank will facilitate
</span></span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">retail
participation in the primary and secondary markets through stock
exchanges</span></span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">.
Accordingly, after consultation with the SEBI, it is proposed that:</span></span></span></span></div>
<ul>
<li>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><span lang="en-IN">specified
stock exchanges, in addition to scheduled banks and primary dealers,
will be permitted to act as aggregators/facilitators for retail
investor bids in the non-competitive segment for the auction of
dated securities and treasury bills of the Government of India.</span></span></span></span></div>
</li>
</ul>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><b>Payment
and Settlement: </b></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">In
line with the Vision for </span></span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">Payment
and Settlement Systems</span></span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span lang="en-IN">
in the country, a revised framework will pave the way for bringing
inter-operability into usage of PPIs. </span></span></span></span>
</div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-71030544218304727472017-09-19T08:25:00.002-07:002017-09-19T08:25:29.464-07:00Highlights of RBI’s Third Bi-monthly Monetary Policy Statement, 2017-18:<div dir="ltr" style="text-align: left;" trbidi="on">
<style type="text/css">p { margin-bottom: 0.1in; line-height: 120%; }</style>
<br />
<div style="line-height: 100%; margin-bottom: 0.17in; text-indent: 0.39in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #454545;"><i><b><span style="background: #ffffff;">Policy
Measures</span></b></i></span></span></span></div>
<ul>
<li>
<div style="line-height: 100%; margin-bottom: 0.17in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
Monetary Policy Committee (MPC) decided to reduce the policy repo
rate under the liquidity adjustment facility (LAF) from 6.25% to
6.00% with immediate effect.</span></span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;">Consequently,
</span><span style="color: #3b3a39;"><span lang="en-IN">the reverse repo
rate under the LAF stands adjusted to 5.75%, and the marginal
standing facility (MSF) rate and the Bank Rate to 6.25%.</span></span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;">Inflation
excluding food and fuel, which has hitherto been sticky, has fallen
significantly over past three months. These factors along with the
normal and well distributed rainfall and the smooth rollout of the
GST opened up some space for Monetary Policy accommodation.
Accordingly, the MPC decided by a vote of 4 to 2 to reduce the
policy rate by 25 basis points.</span></span></span></div>
</li>
<li>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
decision of the MPC is consistent with a neutral stance of monetary
policy in consonance with the objective of achieving the medium-term
target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. </span></span></span></span></div>
</li>
</ul>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #3b3a39;"> </span><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i><b><span style="background: #ffffff;">Assessment</span></b></i></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Impulses
of growth have spread across the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">global
economy</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>albeit</i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> still
lacking the strength of a self-sustaining recovery. Among the AEs,
the US has expanded at a faster pace in Q2 after a weak Q1, supported
mostly by steadily improving labour market conditions. In the Euro
area, the recovery has broadened across constituent economies on the
back of falling unemployment and a pickup in private consumption.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> In
Japan, a modest but steady expansion has been taking hold,
underpinned mostly by strengthening exports. Among EMEs, growth has
regained some lost ground in China in Q2. The Russian economy
has emerged out of two years of recession.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
Brazil, a fragile recovery remains vulnerable to political
uncertainty and a still depressed labour market. South Africa is in a
technical recession as economic activity in continues to be beset by
structural and institutional bottlenecks.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
modest firming up of global demand and stable commodity prices have
supported global trade volumes, reflected in rising exports and
imports in key economies. In the second half of July, crude prices
have risen modestly out of bearish territory on account of inventory
drawdown in the US, but the supply overhang persists. Chinese demand
has fuelled a recent rally in metal prices. However, inflation is
well below target in most AEs and is subdued across most EMEs.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">International
financial markets</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
have been resilient to political uncertainties and volatility has
declined. Equity markets in most AEs have registered gains, with
indices crossing previous highs in the US.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
EMEs, equities have gained on surging global risk appetite.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> Bond
yields in major AEs have hardened on expectations of monetary policy
normalization, while in EMEs fixed-income markets have been generally
insulated from the bond sell-off in AEs. In the currency markets, the
US dollar weakened further and fell to a multi-month low in July. The
euro, which has remained bullish, rallied further on upbeat economic
data.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> EME
currencies largely remained stable and have traded with an
appreciating bias.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
India</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
a normal and well-distributed south-west monsoon for the second
consecutive year has brightened the prospects of agricultural and
allied activities and rural demand. Meanwhile, procurement
operations in respect of rice and wheat during the </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>rabi </i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">marketing
season have been stepped up to record levels.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Industrial
performance</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
has weakened in April-May 2017, mainly reflecting a broad-based loss
of momentum in manufacturing. The output of consumer
non-durables accelerated and underlined the resilience of rural
demand. It was overwhelmed, however, by contraction in consumer
durables – indicative of still sluggish urban demand – and in
capital goods, which points to continuing retrenchment of capital
formation in the economy. The weakness in the capex cycle was also
evident in the number of new investment announcements falling to a
12-year low in Q1, the lack of traction in the implementation of
stalled projects, deceleration in the output of infrastructure goods,
and the ongoing deleveraging in the corporate sector. The output of
core industries was also dragged down by contraction in electricity,
coal and fertiliser production in June, owing to excess inventory and
tepid demand.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
78th round of the Reserve Bank’s </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>industrial
outlook survey</i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
revealed a waning of optimism in Q2 about demand conditions across
parameters, and especially on capacity utilisation, profit margins
and employment. The manufacturing PMI moderated sequentially to a
four-month low in June and in July, the PMI declined into the
contraction zone with a decrease in new orders and a deterioration in
business conditions, reflecting </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>inter
alia</i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> the
roll out of the GST.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">In
June, </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">retail
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
measured by year-on-year changes in the CPI plunged to its lowest
reading in the series based to 2011-12. This was mainly the outcome
of large favourable base effects which are slated to dissipate and
reverse from August. Prices of food and beverages, which went
into deflation in May 2017 for the first time in the new CPI series,
sank further in June as prices of pulses, vegetables, spices and eggs
recorded year-on-year declines and inflation moderated across most
other sub-groups. . Fuel inflation declined for the second month
in succession as international prices of LPG fell and price increases
moderated in other categories.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Excluding
food and fuel, CPI inflation moderated for the third month in
succession in June, falling to 4%.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Surplus
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">liquidity
conditions</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
persisted in the system, exacerbated by front-loading of budgetary
spending by the Government. Surplus liquidity of Rs. 1 trillion
was absorbed through issuance of treasury bills (TBs) under the MSS
and Rs. 1.3 trillion through CMBs on a cumulative basis so far this
financial year. Enduring surplus conditions warranted outright open
market sales of Rs.100 billion each on two occasions in June and
July.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Apart
from these operations, net average absorption of liquidity under the
LAF was at Rs. 3.1 trillion in June and Rs. 3.0 trillion in July.
Reflecting this active liquidity management, the weighted average CMR
firmed up and traded about 17 bps below the repo rate on average
during June and July.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Merchandise
export</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
growth weakened in May and June from the April peak as the value of
shipments across commodity groups either slowed or declined. By
contrast, </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">import
growth</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
remained in double digits, primarily due to a surge in oil imports
and stockpiling of gold imports ahead of the implementation of the
GST.</span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="background: #ffffff;">
</span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">As
import growth continued to outpace export growth, the </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">trade
deficit</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
at US$40.1 billion in Q1 was more than double its level a year ago. </span></span></span>
</div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Net
FDI</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
doubled in April-May 2017 over its level a year ago, flowing mainly
into manufacturing, retail and wholesale trade and business services.
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">FPIs</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
made net purchases of US$15.2 billion in domestic debt and equity
markets so far (up to July 31), remaining bullish on the outlook for
the Indian economy. The level of </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">foreign
exchange reserves</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
was US$392.9 billion as on July 28, 2017.</span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i><b>Outlook</b></i></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
</span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">projection
of real GVA growth for 2017-18</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
has been retained at the June 2017 projection of 7.3 per cent, with
risks evenly balanced. Business sentiment in the manufacturing sector
reflects expectations of moderation of activity in Q2 of 2017-18 from
the preceding quarter. Moreover, high levels of stress in twin
balance sheets – banks and corporations – are likely to deter new
investment. With the real estate sector coming under the regulatory
umbrella, new project launches may involve extended gestations and,
along with the anticipated consolidation in the sector, may restrain
growth, with spillovers to construction and ancillary activities.
Also, given the limits on raising market borrowings and taxes by
States, farm loan waivers are likely to compel a cutback on capital
expenditure, with adverse implications for the already damped capex
cycle. At the same time, upsides to the baseline projections emanate
from the rising probability of another good </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>kharif</i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> harvest,
the boost to rural demand from the higher budgetary allocation to
housing in rural areas, the significant step-up in the budgetary
allocation for roads and bridges, and the growth-enhancing effects of
the GST, </span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><i>viz</i></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">.,
the shifting of trade from unorganised to organised segments; the
reduction of tax cascades; cost, efficiency and competitiveness
gains; and synergies in domestic supply chains. External demand
conditions are gradually improving and should support the domestic
economy.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
second bi-monthly statement projected quarterly average </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">headline
inflation</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
in the range of 2.0-3.5 per cent in the first half of the year and
3.5-4.5 per cent in the second half. The actual outcome for Q1 has
tracked projections. Looking ahead, as base effects fade, the
evolving momentum of inflation would be determined by (a) the impact
on the CPI of the implementation of house rent allowances (HRA) under
the 7th central pay commission (CPC); (b) the impact of the price
revisions withheld ahead of the GST; and (c) the disentangling of the
structural and transitory factors shaping food inflation. The
inflation trajectory has been updated taking into account all these
factors and incorporates the first round impact of the implementation
of the HRA award by the Centre.</span></span></span><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
</span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Excluding
the HRA impact, which will affect the CPI cumulatively, headline
inflation would be a little above 4% by Q4, as against 4.5% inclusive
of the HRA in the June statement. However,</span></span></span><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
t</span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">here
are several factors contributing to uncertainty on both sides around
this baseline inflation trajectory.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><b>Developmental
and Regulatory Policies</b></span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">The
RBI also set out measures to improve policy transmission and
financial intermediation in the economy:</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
experience with the MCLR system introduced in April 2016 for
improving </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">monetary
policy transmission</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
has not been entirely satisfactory, even though it has been an
advance over the Base Rate system. Given a large part of the
floating rate loan portfolio of banks is still anchored on the Base
Rate, the RBI will be exploring various options in the near future to
make the Base Rate more responsive to changes in cost of funds of
banks.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Final
guidelines set out for </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Tri-party
Repo</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
aimed to pave the way for a vibrant corporate bond borrowing and
lending market, providing better liquidity and price discovery,
reducing market cost of capital and allowing access to non-bank
finance for a greater number of borrowers in the economy.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Task
force to evaluate the existing public and private infrastructure for
credit information, assess any data gaps, study the best
international practices and provide a road map for the development of
a comprehensive near real-time public </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">credit
registry</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
for India.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Guidelines
on Liquidity Coverage Ratio (LCR) have been revised such that
reserves held by banks incorporated in India with a foreign central
bank, in excess of the reserve requirement in the host country,
should be treated as </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">High
Quality Liquid Assets</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
(HQLAs), subject to certain conditions.</span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">The
circular to operationalize the scheme of </span></span></span><span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">simplified
hedging facility</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"> has
been finalized. The scheme aims to simplify the process for hedging
exchange rate risk by reducing documentation requirements and
avoiding prescriptive stipulations regarding products, purpose and
hedging flexibility. </span></span></span>
</div>
<div style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #4f81bd;"><span style="font-family: "cambria" , serif;"><span style="font-size: small;"><span style="letter-spacing: 0.8pt;"><span lang="en-US"><i><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">Separate
limit of Interest Rate Futures (IRFs) for FPIs</span></span></i></span></span></span></span></span><span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: small;">
to be introduced to ensure FPIs’ access to futures remains
uninterrupted during the phase when FPI limits on Government
securities are under auction. It is proposed to allocate FPIs a
separate limit of Rs. 5,000 crore for long position in IRFs. The
limits prescribed for investment by FPIs in Government securities
will then be exclusively available for acquiring such securities. </span></span></span></div>
<div style="line-height: 100%; margin-bottom: 0in; margin-right: 0.4in; text-indent: 0.3in;">
<br /></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-36734510170004847452017-05-15T09:38:00.001-07:002017-05-15T09:38:43.370-07:00Some Pointers to India’s Revised IIP and WPI <div dir="ltr" style="text-align: left;" trbidi="on">
<style type="text/css">p { margin-bottom: 0.1in; direction: ltr; line-height: 120%; text-align: left; }</style>
<br />
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><span style="background: #ffffff;">In
recent times, IIP, the high-frequency indicator of factory output,
has been showing far more muted and volatile growth than the
manufacturing component of GDP. The WPI (wholesale price index)
measure of inflation has also shown unusual divergence from the CPI
(consumer price index), differing not only in magnitude but also in
direction. </span></span>The composition of the basket of goods is
decided, in the case of the IIP, which tracks production, based on
traded volumes of goods in the base year. In the case of WPI, it is
based on the volume of goods consumed in the base year. Weights
are also assigned to individual items as well as the groups, based on
the net traded value (the total transactions in a product) in the
base year. <span style="color: black;"><span style="background: #ffffff;">
</span></span>The government has released the new series of WPI and
IIP under which the base year for calculating the macroeconomic
indicators has been revised to 2011-12, from the 2004-05 earlier.<span style="color: black;"><span style="background: #ffffff;">
The new series is expected to capture the deep structural change in
the Indian economy and better reflect contemporary market realities.
The revisions are based on the recommendations of a working group
headed by Saumitra Chaudhuri (then Member of the Prime Minister’s
Economic Advisory Council constituted by Manmohan Singh as well as
Member, Planning Commission). </span></span> </span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><span style="background: #ffffff;">The
new IIP now measures output for the basket of goods produced in base
year 2011-12 instead of 2004-05. It has been updated by introducing
149 new items into manufacturing, while removing 124 obsolete ones.
The number of items in the basket of goods is now 809 (in 407 item
groups) against 620 items (in 399 item groups) in the old series. The
index is now more broad-based, includes renewable energy, and
introduces a new sub-group — infrastructure and construction,
reflecting the growing importance of the infrastructure and
construction sector in the economy. This will significantly trim the
weight of consumer products in the IIP and add to the weight of
industrial goods. The capital goods, data will capture ‘work in
progress’, on the recommendation of the Chaudhuri working group,
which had noted that in the case of heavy machinery and other capital
goods, the production may take several months and is reported only in
the month when it is completed, causing high volatility in reported
data. The decision to count work in progress is expected to smooth
out the wild swings in this sub-index.</span></span> <span style="color: black;"><span style="background: #ffffff;">The
</span></span>switch to<span style="color: black;"><span style="background: #ffffff;">
a new base year and basket of goods are expected to reduce the
dissonance with GDP data; however, divergences will remain as IIP by
definition measures production in the organised sector, while GDP
tracks value added and also covers the unorganised sector.</span></span></span></span></div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><span style="background: #ffffff;">The
revised WPI basket has 697 items against 676 earlier. The updating of
base year to 2011-12 from 2004-05 has led to 199 new items being
added to and 146 deleted from the basket. So far, the WPI was
calculated as producer price plus indirect taxes minus trade
discount. A major alteration is the exclusion of indirect taxes while
compiling WPI. This exclusion removes the impact of fiscal policy on
prices and brings it closer to a producer price index (PPI) in line
with global best practices. This would also ensure that no further
changes are required during the soon-to-be introduced GST regime. The
dissemination of a new food index should be of considerable utility
to households, agriculturists and policymakers. Both the IIP and WPI
items will now be reviewed on an annual basis by a technical review
committee.</span></span></span></span></div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: small;"><span style="color: black;"><span style="background: #ffffff;">Though
the new series of GDP, IIP, WPI and CPI are expected to better
reflect the true trends in the economy academicians have expressed
severe doubts on the quality of data given the nature of ground staff
employed in gathering data and the approximations made from small
samples lacking use of modern sources in the era of big data.</span></span></span></span></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-7677491798082856232017-05-09T21:44:00.001-07:002017-05-09T22:06:56.752-07:00Budget 2017-18 highlights<div dir="ltr" style="text-align: left;" trbidi="on">
<div style="text-align: left;">
<a href="http://www.thehindubusinessline.com/economy/budget/budget-201718-highlights/article9514520.ece#.WRKaRH9JXhs.blogger">Budget 2017-18 highlights</a>: </div>
<div class="MsoNormal" style="text-indent: 1.0cm;">
<b><span lang="EN-US" style="background: white; color: #454545;"><span style="font-family: Times, Times New Roman, serif;">Following are
the Highlights of the Union Budget for 2017-18<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Introductory Remarks<o:p></o:p></span></span></b></div>
<div class="MsoNormal">
<span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Budget
2017-18 contains 3 major reforms: advancement of date of presentation, merger
of railway budget with general budget, abolition of Plan and non-Plan
expenditure.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Pace
of remonetization will soon reach comfortable levels; effect of demonetization
not expected to spill over into next year. Surplus liquidity in banking system
will raise access to credit, leading to multiplier effect on economic activity.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Agenda
for 2017-18 is “Transform, Energise and Clean India” through 10 themes:<o:p></o:p></span></span></div>
<div class="MsoNormal">
<span style="font-family: Times, Times New Roman, serif;"><i><span lang="EN-US" style="font-size: 10pt;">Farmers</span></i><span lang="EN-US" style="font-size: 10pt;"> : committed to double the income in 5
years; <i>Rural Population</i> : providing employment & basic
infrastructure; <i>Youth</i> : energising them through education, skills and jobs; <i>The
Poor and the Underprivileged</i> : strengthening the systems of social
security, health care and affordable housing;
<i>Infrastructure</i>: for
efficiency, productivity and quality of life;
<i>Financial Sector</i> : growth
& stability by stronger institutions;
<i>Digital Economy</i>: for speed,
accountability and transparency; <i>Public Service</i> : effective governance
and efficient service delivery through people’s participation; <i>Prudent
Fiscal Management</i>: to ensure optimal deployment of resources and preserve
fiscal stability; <i>Tax Administration</i>: honouring the honest.<o:p></o:p></span></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Fiscal situation<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt;">Total expenditure is Rs. 21, 46,735 crore.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Plan, non-plan expenditure to be abolished; focus will be on </span><span lang="EN-US" style="color: red; font-size: 10.0pt;">capital expenditure</span><span lang="EN-US" style="font-size: 10pt;">, which will be </span><span lang="EN-US" style="color: red; font-size: 10.0pt;">25.4 %.</span><span lang="EN-US" style="font-size: 10pt;"><o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Rs. 3,000 crore under the Department of Economic Affairs for implementing the
Budget announcements.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The defence sector gets an allocation of Rs.
2.74,114 crore.<b><o:p></o:p></b></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Expenditure for science and technology is Rs. 37,435 crore.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Total resources transferred to States and Union Territories is Rs
4.11 lakh crore.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Revenue deficit is 1.9 %<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt;">Fiscal deficit of 2017-18 pegged at 3.2% of the GDP.</span><span lang="EN-US" style="font-size: 10pt;"> Will remain committed to
achieving 3% in the next year.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Net market borrowing of Government restricted to Rs. 3.48 lakh
crores after buyback in 2017-18, compared with Rs. 4.25 lakh crores of the
previous year.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Food subsidy estimated at 1.45 lakh crore rupees in 2017-18 versus
1.35 lakh crore rupees revised estimate for 2016-17.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Fuel subsidy seen at 25,000 crore rupees in 2017-18 versus 27,500crore
rupees revised estimate for 2016-17.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;"> Fertiliser subsidy seen unchanged in 2017-18 at 70,000 crore
rupees.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;"> Federal government's pension liabilities seen at 1.31 lakh
crore rupees in 2017-18 versus 1.28 lakh crore rupees revised estimate for
2016-17.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;"> Budget allocation to health seen at 48,900 crore rupees in
2017-18 versus revised estimate of 39,900 crore rupees in 2016-17.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="background: white; line-height: 15.0pt; mso-list: l4 level1 lfo3; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt;">Interest payments at Rs. 523078 crore in 2017-18 against Rs.
483069 crore in 2016-17. <o:p></o:p></span></span></div>
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<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Tax proposals<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 115%; mso-list: l8 level1 lfo5; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">India’s tax to GDP ratio is not favourable and
there are several anomalies: Out of 13.14 lakh registered companies, only 5.97
lakh firms have filed returns for 2016-17; individuals numbering 1.95 crore
showed an income between Rs. 2.5 lakh to Rs. 5 lakh; out of 76 lakh individual
assessees declaring income more than Rs. 5 lakh, 56 lakh are salaried; only
1.72 lakh people showed income of more than Rs. 50 lakh a year; between
November 8 to December 30, deposits ranging from Rs. 2 lakh and Rs. 80 lakh
were made in 1.09 crore accounts.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Proportion of direct tax to indirect tax is not
optimal.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Under the corporate tax, in order to make MSME
companies more viable, there is a proposal to reduce tax for small companies
with a turnover of up to Rs 50 crore to 25%. About 67 lakh companies fall in
this category. 96% of companies to get this benefit.</span><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;"> <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The government proposes to reduce basic customs
duty for LNG to 2.5% from 5%.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; margin-bottom: 10.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US"><img alt="*" height="13" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="13" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Proposal to have a carry-forward of MAT for 15
years.</span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; margin-bottom: 10.0pt; mso-add-space: auto; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US"><img alt="*" height="13" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="13" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Holding period for long-term capital gains tax on
immovable property reduced from 3 to 2 years; base year indexation shifted from
1.4.1981 to 1.4.2001</span><span lang="EN-US" style="font-size: 10.0pt; line-height: 115%;">.</span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Capital gains tax to be exempted for persons
holding land from which land was pooled for creation of the state capital of
Andhra Pradesh.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The limit of cash donation by charitable trusts
is reduced to Rs 2,000 from Rs 10,000.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Actual revenue loss on tax proposals Rs 22,700 crore;
gain from additional resource mobilisation is Rs 2,700 crore <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Net revenue loss in direct tax could be Rs. 20,000
crore.<o:p></o:p></span></span></div>
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<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Personal income tax<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 115%; mso-list: l5 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Existing rate of tax for individuals between
Rs. 2.5- Rs 5 lakh is reduced to 5% from
10%.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l5 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">All other categories of tax payers in subsequent
brackets will get a benefit of Rs 12,500.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l5 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">10 % surcharge on individual income above Rs. 50
lakh and up to Rs 1 crore to make up for Rs 15,000 crore loss due to cut in
personal I-T rate. <b><o:p></o:p></b></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l5 level1 lfo2; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">15 surcharge on individual income above Rs. 1
crore to remain.<b><o:p></o:p></b></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Rate of growth of advance tax in Personal I-T is
34.8% in the last three quarters of this financial year. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l0 level1 lfo1; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The Income Tax Act to be amended to ensure that
no transaction above Rs 3 lakh is permitted in cash.<o:p></o:p></span></span></div>
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<div class="MsoListParagraphCxSpLast">
<span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt;"><br />
<!--[if !supportLineBreakNewLine]--><br />
<!--[endif]--></span><span lang="EN-US" style="font-size: 9pt;"><o:p></o:p></span></span></div>
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<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Infrastructure
and Railways <o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">A total
allocation of Rs. 39,61,354 crore has been made for infrastructure.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">For
transportation sector as a whole, including rail, roads, shipping, provision of
Rs. 2,41,387 crore has been made in 2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Total allocation
for Railways is Rs. 1,31,000 crore.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">No service
charge on tickets booked online through IRCTC.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Corpus of Rs.
1 lakh crore for five years for passenger safety.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Railways to
partner with logistics players for front-end and back-end solutions for select
commodities.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Railways will
offer competitive ticket booking facility.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">New Metro rail
policy will be announced with new modes of financing.</span><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;"> <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Rs. 64,900 crore
allocated for highways. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">A DigiGaon
initiative will be launched to provide tele-medicine, education and skills
through digital technology.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l1 level1 lfo6; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Trade
Infrastructure for Export Scheme (TIES) will be launched in 2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 115%; mso-list: l6 level1 lfo7; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">A strategic
policy for crude reserves will be set up.<o:p></o:p></span></span></div>
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<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Agriculture, Poverty and Health<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">A sum of Rs. 10 lakh crore is allocated as agricultural
credit.</span><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"> Farmers to also benefit from 60 days interest waiver announced on
31 Dec 2016.</span><span lang="EN-US" style="background: white; color: #333333; font-size: 10.0pt; line-height: 115%;"> </span><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Agriculture sector is expected to grow at 4.6%.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Long Term Irrigation Fund already set up in
NABARD to be augmented by 100% taking the total corpus to Rs. 40,000 crores. A
dedicated micro irrigation fund will be set up for NABARD with Rs 5,000 crore
initial corpus.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">National Agricultural Market (e-NAM) to be
expanded from 250 markets to 585 APMCs. Assistance up to Rs. 75 lakhs will be
provided to every e-NAM.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Dairy processing infrastructure fund wlll be
initially created with a corpus of Rs. 2000 crore.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Over Rs 3 lakh crore will be spent for rural
India. MGNREGA to double farmers' income.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">MGNREGA allocation to at Rs. 48,000 crores in
2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Technology will be used in a big way to ensure
MGNREGA works.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">During 2017-18, five lakh farm ponds will be be
taken up under the MGNREGA.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The government targets to bring 1 crore
households out of poverty by 2019.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The government proposes to complete 1 crore
houses for those without homes.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Affordable housing will be given infrastructure
status.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Will allocate Rs. 19,000 crore for <i>Pradhan Mantri Gram Sadak Yojana</i> in
2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The country well on way to achieve 100% rural
electrification by March 2018.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Swachh Bharat mission has made tremendous
progress; sanitation coverage has gone up from 42% in Oct 13 to 60% now.</span><span lang="EN-US" style="font-size: 10.0pt; line-height: 115%;"> <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10.0pt; line-height: 115%;">Allocation of Rs. 4000
crores for Skill Acquisition and
Knowledge Awareness for Livelihood Promotion programme (SANKALP) to provide
market relevant training to 3.5 crore youth.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="font-size: 10.0pt; line-height: 115%;">Allocation of Rs. 500 crores to provide support services for
empowering rural women with opportunities for skill development, employment,
digital literacy, health and nutrition.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpLast" style="line-height: 115%; mso-list: l7 level1 lfo8; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"><img alt="*" height="11" src="file:///C:/Users/SUCHIS~1/AppData/Local/Temp/msohtmlclip1/01/clip_image001.gif" width="11" /><span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;">
</span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Total allocation for Rural, Agriculture and Allied
sectors is Rs. 187223 crores.<o:p></o:p></span></span></div>
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<b><span lang="EN-US" style="font-size: 10pt;"><span style="font-family: Times, Times New Roman, serif;">Financial sector<o:p></o:p></span></span></b></div>
<div class="MsoListParagraphCxSpFirst" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">FDI policy
reforms - more than 90% of FDI inflows are now automated.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="color: red; font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="color: red; font-size: 10.0pt; line-height: 115%;">Foreign
Investment Promotion Board will be abolished.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">An expert
committee for creation of an operational and legal framework to integrate spot
market and derivatives market in the agricultural sector, for commodities
trading. e- NAM to be an integral part of the framework.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">A new ETF with
diversified CPSE stocks and other Government holdings will be launched in
2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Shares of
Railway PSE like IRCTC will be listed on stock exchanges. <o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Bill on
resolution of financial firms will be introduced in this session of Parliament.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Revised
mechanism to ensure time-bound listing of CPSEs.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Computer
emergency response team for financial sector will be formed.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Rs 10,000
crore for recapitalisation of banks will be providedin 2017-18.<i><o:p></o:p></i></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><i><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Pradhan Mantri Mudra Yojana</span></i><span lang="EN-US" style="font-size: 10pt; line-height: 115%;"> lending
target fixed at Rs 2.44 lakh crore for 2017-18.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Digital India
The government will introduce two schemes to promote BHIM App - referral bonus
for the users and cash back for the traders.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Negotiable
Instruments Act might be amended.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l2 level1 lfo4; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">For big-time
offences - including economic offenders fleeing India, the government will
introduce legislative change or introduce law to confiscate the assets of these
people within the country.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; margin-bottom: 10.0pt; mso-add-space: auto; mso-list: l3 level1 lfo9; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">No transaction
above Rs. 3 lakh would be permitted in cash subject to certain exceptions.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; margin-bottom: 10.0pt; mso-add-space: auto; mso-list: l3 level1 lfo9; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">A Mission will
be set up with a target of 2,500 crore digital transactions for 2017-18 through
UPI, USSD, Aadhar Pay, IMPS and debit cards.<o:p></o:p></span></span></div>
<div class="MsoListParagraphCxSpMiddle" style="line-height: 115%; mso-list: l3 level1 lfo9; text-indent: -18.0pt;">
<!--[if !supportLists]--><span style="font-family: Times, Times New Roman, serif;"><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">Ø<span style="font-size: 7pt; font-stretch: normal; font-variant-numeric: normal; line-height: normal;"> </span></span><!--[endif]--><span lang="EN-US" style="font-size: 10pt; line-height: 115%;">The maximum
amount of cash donation for a political party will be Rs. 2,000 from any one
source. Political parties will be entitled to receive donations by cheque or
digital mode from donors. An amendment is being proposed to the RBI Act to
enable issuance of electoral bonds .A donor can purchase these bonds from banks
or post offices through cheque or digital transactions. They can be redeemed
only by registered political parties.<o:p></o:p></span></span></div>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-17627496011483642392017-04-27T08:23:00.001-07:002017-04-27T08:26:22.535-07:00Highlights of RBI’s First Bi-monthly Monetary Policy Statement, 2017-18<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0.17in; text-indent: 0.39in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #454545;"><i><b><span style="background: #ffffff;">Policy
Measures</span></b></i></span></span></span></div>
<ul>
<li>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.17in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
Monetary Policy Committee (MPC) decided to keep the policy repo rate
under the liquidity adjustment facility (LAF) unchanged at 6.25%.</span></span></span></span></div>
</li>
<li>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;">With
a view to ensuring finer alignment of the weighted average call rate
(WACR), the operating target of monetary policy, with the repo rate
it has been decided to further narrow the policy rate corridor
around the policy repo rate to +/-25bps from +/- 50bps with
immediate effect. Consequently, </span><span style="color: #3b3a39;"><span lang="en-IN">the
reverse repo rate under the LAF is at 6.0%, and the marginal
standing facility (MSF) rate and the Bank Rate are at 6.50%.</span></span></span></span></div>
</li>
<li>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: #3b3a39;"><span lang="en-IN">The
decision of the MPC is consistent with a neutral stance of monetary
policy in consonance with the objective of achieving the medium-term
target for consumer price index (CPI) inflation of 4% within a band
of +/- 2%, while supporting growth. </span></span></span></span></div>
</li>
</ul>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: #3b3a39;"> </span><span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i><span style="background: #ffffff;">Assessment</span></i></span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">Indicators
of global growth suggest signs of stronger activity in most AEs and
easing of recessionary conditions in commodity exporting large
emerging market economies (EMEs). For EMEs, the outlook is gradually
improving, with indications that the slowdown characterising 2016
could be bottoming out.</span><span style="color: black;"><span style="background: #ffffff;">
</span></span><span style="color: black;">Inflation is edging up in AEs to
or above target levels on the back of slowly diminishing slack,
tighter labour markets and rising commodity prices. Among EMEs, there
is a generalised softening of inflation pressures. </span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">International
financial markets have been impacted by policy announcements in major
AEs, geo-political events and country-specific factors. Equity
markets in AEs were driven up by reflation trade, stronger incoming
data and currency movements. Equity markets in EMEs had a mixed
performance, reflecting domestic factors amidst a cautious return of
investor appetite and capital flows.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">The
CSO released its second advance estimates for 2016-17 on February 28,
placing India’s real GVA growth at 6.7% for the year, down from 7%
in the first advance estimates released on January 6. Agriculture
expanded robustly; in the industrial sector, there was a significant
loss of momentum across all categories, barring electricity
generation; and the services sector also slowed, pulled down by most
categories of services.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">Several
indicators are pointing to a modest improvement in the macroeconomic
outlook. Foodgrains production has touched an all-time high.
Industrial output, measured by the index of industrial production
(IIP), recovered in January from a contraction in the previous month,
helped by a broad-based turnaround in manufacturing as well as mining
and quarrying.</span><span style="color: black;"><span style="background: #ffffff;">
</span></span><span style="color: black;">The manufacturing purchasing
managers’ index (PMI) remained in expansion mode in February and
rose to a five month high in March on the back of growth of new
orders and output. The 77th round of the Reserve Bank’s
industrial outlook survey indicates that overall business sentiment
is expected to improve in Q1 of 2017-18 on the back of a sharp pick
up in both domestic and external demand. Coincident indicators such
as exports and non-oil non-gold imports are indicative of a brighter
outlook for industry, although the sizable under-utilisation of
capacity in several industries could operate as a drag on investment.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="color: black;"> <span style="font-family: "times new roman" , serif;"><span style="font-size: small;">After
moderating continuously over the last six months to a historic low,
retail inflation measured by year-on-year changes in the CPI turned
up in February to 3.7%. While food prices bottomed out at the
preceding month’s level, base effects pushed up inflation in this
category. Fuel inflation increased as the continuous hardening
of international prices lifted domestic prices of petroleum. Kerosene
prices have also been increasing since July with the programmed
reduction of the subsidy. Both three months ahead and a year
ahead households’ inflation expectations, reversed in the latest
round of the Reserve Bank’s survey. The 77th round of the
Reserve Bank’s industrial outlook survey indicates that pricing
power is returning to corporates as profit margins get squeezed by
input costs. Excluding food and fuel, inflation moderated in February
by 20 basis points to 4.8%, essentially on transient and specific
factors in items like clothing and gold.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">With
progressive remonetisation, the surplus liquidity in the banking
system declined from a peak of Rs.7,956 billion on January 4, 2017 to
an average of Rs. 6,014 billion in February and further down to Rs.
4,806 billion in March. Currency in circulation expanded during this
period. Its impact on the liquidity overhang was, however, partly
offset by a significant decline in cash balances of the Government up
to mid-March which released liquidity into the system. Thereafter,
the build-up of Government cash balances on account of advance tax
payments and balance sheet adjustment by banks reduced surplus
liquidity to Rs. 3,141 billion by end-March. Issuances of cash
management bills (CMBs) under the MSS ceased in mid-January and
existing issues matured, with the consequent release of liquidity
being absorbed primarily through variable rate reverse repo auctions
of varying tenors. Accordingly, the average net absorption by the
Reserve Bank increased from Rs. 2,002 billion in January to Rs. 4,483
billion in March. The weighted average call money rate (WACR)
remained within the LAF corridor. The maturing of CMBs and reduced
issuance of Treasury bills leading up to end-March has also
contributed to Treasury bill rates being substantially below the
policy rate.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">Merchandise
exports rose strongly in February 2017 from a subdued profile in the
preceding months. Growth impulses were broad-based. The surge
in imports in January and February 2017 largely reflected the effect
of the hardening of commodity prices such as crude oil and coal. With
imports outpacing exports, the trade deficit widened in January and
February from its level a year ago, though it was lower on a
cumulative basis for the period April-February 2016-17. Balance of
payments data for Q3 indicate that the current account deficit for
the first three quarters of the financial year narrowed to 0.7% of
GDP, half of its level a year ago. For the year as a whole, the
current account deficit is likely to remain muted at less than 1% of
GDP. </span></span></span>
</div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">Foreign
direct investment (FDI) has dominated net capital inflows during
April-December, with manufacturing, communication and financial
services being the preferred sectors. FPI flows turned positive in
February and welled up into a surge in March, especially in debt
markets. This reversal appears to have been driven by stable domestic
inflation, better than expected domestic growth, encouraging
corporate earnings, clarity on FPI taxation, pro-reform budget
proposals and state election results. The level of foreign exchange
reserves was US$369.9 billion on March 31, 2017.</span></span></span></div>
<div align="justify" lang="en-US" style="line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><i>Outlook</i></span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">GVA
growth is projected to strengthen to 7.4% in 2017-18 from 6.7% in
2016-17, with risks evenly balanced. The pace of remonetisation will
continue to trigger a rebound in discretionary consumer spending.</span><span style="color: black;"><span style="background: #ffffff;">
</span></span><span style="color: black;">Significant improvement in
transmission of past policy rate reductions into banks’ lending
rates post demonetisation should help encourage both consumption and
investment demand of healthy corporations. Various proposals in the
Union Budget should stimulate capital expenditure, rural demand, and
social and physical infrastructure all of which would invigorate
economic activity. The imminent materialisation of structural reforms
in the form of the roll-out of the GST, the institution of the
Insolvency and Bankruptcy Code, and the abolition of the Foreign
Investment Promotion Board will boost investor confidence and bring
in efficiency gains. The upsurge in IPOs in the primary capital
market augurs well for investment and growth. External demand should
support domestic growth. Downside risks to the projected growth path
stem from the outturn of the south west monsoon; ebbing consumer
optimism on the outlook for income, the general economic situation
and employment as polled in the March 2017 round of the Reserve
Bank’s consumer confidence survey; and, commodity prices, other
than crude, hardening further.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">Headline
CPI inflation is set to undershoot the target of 5.0% for Q4 of
2016-17 in view of the sub-4% readings for January and February. For
2017-18, inflation is projected to average 4.5% in the first half of
the year and 5% in the second half. Aggregate demand pressures could
build up, with implications for the inflation trajectory.</span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;"><b>Developmental
and Regulatory Policies</b></span></span></span></div>
<div lang="en-US" style="line-height: 100%; margin-bottom: 0.21in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: small;"><span style="color: black;">The
RBI also sets out new measures for further refining the liquidity
management framework (Management of Surplus Liquidity, Narrowing of
the Monetary Policy Rate Corridor, Substitution of Collateral under
the LAF Term Repos); strengthening the banking regulation and
supervision (Revised Prompt Corrective Action (PCA) Framework for
Banks, Raising the Minimum Level of Net Owned Funds for ARCs, Partial
Credit Enhancement, Banking Outlets</span> <span style="color: black;">in
underserved areas, banks’ participation in Real Estate Investment
Trust (REITS) and Infrastructure Investment Trusts, Countercyclical
Capital Buffer); broadening and deepening financial markets (Draft
Guidelines on Simplified Hedging Facility for Forex Exposure,
Introduction of Tri-party Repo, Introduction of Additional Settlement
Batches for NEFT, Merchant Discount Rate rationalization, Issuance
and Operation of Pre-paid Payment Instruments); and extending the
reach of financial services by enhancing the efficacy of the payment
and settlement systems (Pilot Project on Financial Literacy).</span></span></span></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-57898002736625077442017-02-02T07:17:00.002-08:002017-02-02T07:17:24.340-08:00The Global Economy: A Rough Ride into 2017<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: Times New Roman, serif;"><span style="font-size: medium;">Year
2016 ended on a rather low note for the global economy with low
output and employment growth, stagnant global trade, subdued
investment, and heightened policy uncertainty marking another
difficult year. Global growth in 2016 is estimated at a post-crisis
low of 2.3 per cent by the World Bank, while the IMF estimate is at a
slightly higher 3.1 per cent (See:
<a href="http://www.ecofin-surge.co.in/index.html">http://www.ecofin-surge.co.in/index.html</a>
or <a href="http://www.slideshare.net/EcofinSurge/gr-prjctns-32631011">http://www.slideshare.net/EcofinSurge/gr-prjctns-32631011</a>).
World trade growth for 2016 is estimated by World Bank to have fallen
from 2.8 per cent in 2015 to 2.5 per cent, while the IMF estimate for
2016 is at an even lower 1.9 per cent. In the second half of the year
growth did rebound in the US after a weak first half of 2016. Output
remains below potential in a number of other advanced economies,
notably in the Euro area, though growth figures were somewhat
stronger than previously forecast in some economies, such as Spain
and the UK, where domestic demand held up better than expected in the
aftermath of the </span></span><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><i>Brexit</i></span></span><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;">
vote. The growth rate in China was slightly stronger than expected,
supported by continued policy stimulus, though deep concerns remain
over imbalances caused by the country’s reliance on credit and its
high savings rate. But activity was weaker than expected in some
Latin American countries currently in recession, such as Argentina
and Brazil, as well as in Turkey, which faced a sharp contraction in
tourism revenues. Activity in Russia was slightly better than
expected, in part reflecting firmer oil prices. </span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: medium;">While
slowing investment growth is partly a correction from high pre-crisis
growth rates in some EMDEs, it also reflects a range of obstacles
holding back investment, including terms-of-trade shocks for oil
exporters, slowing foreign direct investment inflows, as well as
private debt burdens and political risks. Commodity prices have
stabilized and are projected to increase moderately during 2017-19,
providing support for commodity-exporting EMDEs. The rise in US
yields since early November has led to a notable tightening of
financing conditions for EMDEs, in some cases resulting in
significant currency depreciation and portfolio outflows.<span style="color: #2c2825;"><span style="background: #ffffff;">
</span></span>High corporate debt, declining profitability, weak bank
balance sheets, and thin policy buffers in several economies add to
concerns. Fiscal stimulus, if implemented in key economies, could
result in stronger growth. Monetary policy has so far remained mostly
accommodative across the globe; however fiscal space remains
inadequate in several economies, both advanced and emerging, because
of already high public debts. </span></span>
</div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<span style="font-family: Times New Roman, serif;"><span style="font-size: medium;">Risks
to the global growth outlook are assessed to be skewed to the
downside. A projected stabilization in energy and commodity prices
may provide a small tailwind for resource rich economies in 2017, but
the medium-term trend continues to be dominated by weak investment
growth.<span style="color: black;"><span style="background: #ffffff;">
</span></span>Adding to the inertia is a wait-and-watch attitude
among corporates and governments. Going into 2017, businesses have to
prepare for more disruptions from geopolitical tensions, policy
uncertainty, and financial market volatility. Lingering uncertainty
about the course of US economic policy could have a significantly
negative effect on global growth prospects as the new US government’s
policies take shape. Accelerating inflation and a soaring US dollar
are among the risks to the economic balance. Even more alarming is
the fact that recent political developments highlight a fraying
consensus about the benefits of cross-border economic integration.
Major policy shifts along these lines are seen to lead to potential
widening of global imbalances coupled with sharp exchange rate
movements and in response could further intensify protectionist
pressures. Increased restrictions on global trade and migration would
hurt productivity and incomes, and take a toll on market sentiment as
well, leading to a vicious circle of growth debilitating outcomes.</span></span></div>
<div style="line-height: 115%; margin-bottom: 0.14in;">
<br /><br />
</div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-88310302182073457972017-01-22T08:11:00.001-08:002017-01-22T08:11:50.417-08:00RBI’s fifth bi-monthly monetary policy statement, 2016-17<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; text-indent: 0.39in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #454545;"><i><span style="background: #ffffff;">Policy
Measures</span></i></span></span></span></div>
<ul height="7" width="7">
<li><div lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #3b3a39;">Repo
rate unchanged at 6.25%, consequently, the Reverse repo rate
remains at 5.75% and the MSF rate at 6.75%. All the six members of
the RBI panel voted in favour of status quo in policy.</span></span></span></div>
</li>
<li><div lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #3b3a39;">Cash
reserve ratio or CRR unchanged at 4%. RBI withdraws the temporary
100% hike in the CRR in the fortnight beginning 10 December.</span></span></span></div>
</li>
<li><div lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #3b3a39;">Foreign
exchange reserve rose to all-time high of $364 billion on December
2.</span></span></span></div>
</li>
<li><div lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;">RBI
injected</span></span></span><span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"> </span></span></span><span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;">
liquidity worth </span></span></span><span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;">Rs.</span></span></span><span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"> </span></span></span><span style="color: #3b3a39;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;">1
trillion through OMO purchases this fiscal.</span></span></span></div>
</li>
</ul>
<div lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in; margin-top: 0.19in;">
<span style="color: #3b3a39;"> </span><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><i><span style="background: #ffffff;">Assessment</span></i></span></span></span></div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;">Global
growth picked up modestly in the second half of 2016, after weakening
in the first half. Activity in AEs improved, led by a rebound in the
US. In the EMEs, growth has moderated, but policy stimulus in China
and some easing of stress in the larger commodity exporters shored up
momentum. World trade is beginning to emerge out of a trough that
bottomed out in July-August and shows signs of stabilising. Inflation
has ticked up in some AEs, though well below target, and is easing in
several EMEs. Expectations of reflationary fiscal policies in the US,
Japan and China, and the waning of downward pressures on EMEs in
recession are tempered by still-prevalent political risks in the euro
area and the UK, emerging geo-political risks and the spectre of
financial market volatility.</span></span></span></div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;">International
financial markets were strongly impacted by the result of the US
presidential election and incoming data that raised the probability
of the Federal Reserve tightening monetary policy. As bouts of
volatility fuelled a risk-off surge into US equities and out of fixed
income markets, a risk-on stampede pulled out capital flows from
EMEs, plunging their currencies and equity markets to recent lows
even as bond yields hardened in tandem with US yields. The surge of
the US dollar from late October intensified after the election
results and triggered sizable depreciations in currencies around the
world. Commodity prices firmed up across the board from mid-November
on an improvement in the outlook for demand following the US election
results, barring gold which lost its safe haven glitter to the
ascendant US dollar. Crude prices have firmed after the OPEC’s
decision to cut output.</span></span></span></div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;">GVA
in Q2 of 2016-17 turned out to be lower than projected on account of
a deeper than expected slowdown in industrial activity. Manufacturing
slowed down both sequentially and on an annual basis, with weak
demand conditions and the firming up of input costs dragging down the
profitability of corporations. Gross fixed capital formation
contracted for the third consecutive quarter. Although government
final consumption expenditure slowed sequentially, it supported
private final consumption expenditure, the mainstay of aggregate
demand. The contribution of net exports to aggregate demand remained
positive, but on account of a sharper contraction in imports relative
to exports. CPI eased more than expected for the third consecutive
month in October, driven down by a sharper than anticipated deflation
in the prices of vegetables. Underlying this softer reading, however,
was an upturn in momentum as prices rose month-on-month across the
board.</span> </span></span>
</div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;">Liquidity
conditions have undergone large shifts in Q3 so far. Surplus
conditions in October and early November were overwhelmed by the
impact of the withdrawal of notes from November 9. Currency in
circulation plunged by ₹7.4 trillion up to December 2;
consequently, net of replacements, deposits surged into the banking
system, leading to a massive increase in its excess reserves. The RBI
scaled up its liquidity operations through variable rate reverse repo
auctions of a wide range of tenors from overnight to 91 days,
absorbing liquidity (net) of ₹5.2 trillion. From the fortnight
beginning November 26, an incremental CRR of 100 per cent was applied
on the increase in net demand and time liabilities (NDTL) between
September 16, 2016 and November 11, 2016 as a temporary measure to
drain excess liquidity from the system. Liquidity management was
bolstered by an increase in the limit on securities under the market
stabilisation scheme (MSS) from ₹0.3 trillion to ₹6 trillion on
November 29.</span> </span></span></div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><i>Outlook</i></span></span></span></div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;">Growth
forecast cut to 7.1%, from 7.6% for this fiscal. Downside risks in
the near term could travel through two major channels: (a) short-run
disruptions in economic activity in cash-intensive sectors such as
retail trade, hotels & restaurants and transportation, and in the
unorganised sector; (b) aggregate demand compression associated with
adverse wealth effects. </span></span></span>
</div>
<div align="justify" lang="en-US" style="background: #ffffff; line-height: 100%; margin-bottom: 0.19in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #3b3a39;">Inflation
target remains 5% for March 2017. Demonetisation to lower prices of
perishables, could reduce inflation by 10-15 basis points by
December; however, crude price volatility, surge in financial market
turbulence could put March-end inflation target at risk. </span></span></span>
</div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in; text-indent: 0.39in;">
<span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #3b3a39;">The
decision of the MPC is consistent with an accommodative stance of
monetary policy in consonance with the objective of achieving
consumer price index (CPI) inflation at 5 per cent by Q4 of 2016-17
and the medium-term target of 4 per cent within a band of +/- 2 per
cent, while supporting growth. The RBI’s cautious approach
comes amidst a volatile global environment, which saw the rupee sink
to a record low last month as part of a sell-off in emerging market
assets. Pressure on the RBI to act has grown since November 8 when a
drastic plan to abolish Rs 500 and Rs 1,000 notes was put in place,
removing 86 percent of the currency in circulation in a bid to crack
down on black money.</span></span></span></div>
<div class="western" lang="en-US" style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-35806807048799452422016-08-23T09:14:00.002-07:002017-01-22T08:00:27.752-08:00Highlights of RBI’s Third Bi-monthly Monetary Policy Statement, 2016-17<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #454545;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><i><b><span style="background: #ffffff;">Policy
Measures</span></b></i></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #454545;"><span style="background: #ffffff;">*
Repo rate unchanged at 6.50 per cent, Reverse Repo at 6%, Bank rate
and MSF rate </span></span><span style="color: #454545;"><span style="background: #ffffff;">at
7%</span></span></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: #454545;"><span style="background: #ffffff;">*
Cash reserve ratio or CRR unchanged at 4%</span></span></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #454545;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;">*Continue
to provide liquidity as required but progressively lower the average
ex ante liquidity deficit in the system from one per cent of NDTL to
a position closer to neutrality</span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: black;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><i><b><span style="background: #ffffff;">Assessment</span></b></i></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><span style="background: #ffffff;">Since
the second bi-monthly statement of June 2016, several developments
have clouded the outlook for the global economy. Q2 growth has been
slower than anticipated across AEs, with the </span></span><span style="color: black;"><i><span style="background: #ffffff;">Brexit</span></i></span><span style="color: black;"><span style="background: #ffffff;">
vote increasing uncertainty. Among EMEs, activity remains varied. GDP
growth stabilised in China in Q2. Recessionary conditions are
gradually diminishing in Brazil and Russia, but the near-term outlook
is still fragile. In India, monsoon related developments engender
greater confidence about the near-term outlook for value added in
agriculture. Barring the contraction in natural gas and crude oil on
account of structural bottlenecks, the core sector has been resilient
as of 2016-17 so far, and should support industrial activity going
forward. There are some signs of green shoots in manufacturing too,
with PMIs and the Reserve Bank’s industrial outlook survey
indicating a pick-up in new orders, both domestic and external. High
frequency indicators of service sector activity are still, however,
emitting mixed signals, although a larger number of indicators are in
acceleration mode in Q1 of 2016-17. Merchandise export growth moved
into positive territory in June after eighteen months, with a
reasonably widespread upturn. While lower crude oil prices continued
to compress the POL import bill, non-oil non-gold imports
continued to shrink. Successive downgrades of global growth
projections by multilateral agencies and the continuing sluggishness
in world trade points to further slackening of external demand going
forward. The recent sharper-than-anticipated increase in food
prices has pushed up the projected trajectory of inflation. CPI
inflation rose to a 22-month high in June, with a sharp pick-up in
momentum overwhelming favourable base effects. The rise was mainly
driven by food, with vegetable and sugar inflation higher than the
usual. </span></span></span></span></span>
</div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><span style="background: #ffffff;">International
financial markets did not anticipate the </span></span><span style="color: black;"><i><span style="background: #ffffff;">Brexit</span></i></span><span style="color: black;"><span style="background: #ffffff;">
vote and equities plunged worldwide, currency volatility increased
and investors herded into safe havens. Since then, however, equity
markets have regained lost ground. Currencies, barring the pound
sterling, have stabilized. While the pace of FDI inflows to India
slowed in the first two months of 2016-17, net portfolio flows were
stronger after the </span></span><span style="color: black;"><i><span style="background: #ffffff;">Brexi</span></i></span><span style="color: black;"><span style="background: #ffffff;">t
vote, notwithstanding considerable volatility characterising these
flows. The level of foreign exchange reserves rose to US$365.7
billion by August 5, 2016.</span></span></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><span style="background: #ffffff;">Liquidity
conditions eased significantly during June and July on the back of
increased spending by the Government which more than offset the
reduction in market liquidity because of higher-than-usual currency
demand. The injection of durable liquidity through purchases under
OMOs, amounting to Rs. 805 billion so far, also helped in easing
liquidity conditions, bringing the system-level </span></span><span style="color: black;"><i><span style="background: #ffffff;">ex
ante</span></i></span><span style="color: black;"><span style="background: #ffffff;">
liquidity deficit to close to neutrality (without seasonal
adjustment). Accordingly, the average daily liquidity operation
switched from net injection of liquidity of Rs. 370 billion in June
to net absorption of Rs. 141 billion in July and Rs. 405 billion in
August (up to August 8). The Reserve Bank conducted variable rate
repos and reverse repos of varying tenors in order to manage evolving
liquidity conditions, with a more active use of reverse repos to
manage the surplus liquidity. Reflecting the easy liquidity
conditions, the weighted average call rate (WACR) and money market
weighted average rate remained on average 15 basis points below the
policy repo rate since June. </span></span></span></span></span>
</div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<br /></div>
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<span style="color: black;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><i><span style="background: #ffffff;">Policy
Stance and Rationale</span></i></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<br />
</div>
<ul>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #454545;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><i><span style="background: #ffffff;">A
normal monsoon and the 7th Pay Commission award likely to boost
growth</span></i></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><span style="color: #454545;"><i><span style="background: #ffffff;">Implementation
of GST should raise returns </span></i></span><span style="color: #454545;">to
investment and thus business</span></span></span></span></div>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><span style="color: #454545;"><i><span style="background: #ffffff;">sentiment
and eventually investment</span></i></span></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #454545;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><i><span style="background: #ffffff;">Impact
of direct effect of house rent allowances under the 7th CPC’s
award need to be watched</span></i></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #454545;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><i><span style="background: #ffffff;">Growth
forecast retained at 7.6% for the current fiscal</span></i></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><span style="background: #ffffff;"><span style="color: #454545;"><i>Inflation
target kept unchanged at 5% by March 2017 with upward bias</i></span></span></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><span style="background: #ffffff;"><span style="color: #454545;"><i>Easy
liquidity conditions are already prompting banks to modestly
transmit past policy rate cuts through their MCLRs</i></span></span></span></span></span></div>
</li>
<li><div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: Times New Roman, serif;"><span style="font-size: medium;"><span style="background: #ffffff;"><span style="color: #454545;"><i>Monetary
policy to remain accommodative and will continue to emphasise the
adequate provision of liquidity</i></span></span></span></span></span></div>
</li>
</ul>
<div align="justify" style="line-height: 100%; margin-bottom: 0in;">
<span style="color: #20124d;"><span style="font-family: "times new roman" , serif;"><span style="font-size: medium;"><span style="color: black;"><span style="background: #ffffff;">The
refinements to the liquidity management framework effected in April
2016 were intended to smooth the supply of durable liquidity over the
year using asset purchases and sales as needed, and progressively
lower the average </span></span><span style="color: black;"><i><span style="background: #ffffff;">ex
ante </span></i></span><span style="color: black;"><span style="background: #ffffff;">liquidity
deficit in the system to a position closer to neutrality. The Reserve
Bank intends to continue with this strategy, with the intention of
closing the underlying liquidity deficit over time so that the system
moves to a position of structural balance. </span></span></span></span></span></div>
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<br /></div>
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<br /></div>
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<br /></div>
</div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-1178988352391708742016-04-27T23:09:00.002-07:002017-01-22T07:52:29.820-08:00The Global Economy in the New Year: A Round Up<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "times" , "times new roman" , serif;"><span style="font-size: small;"><br /><br /><span style="color: #0c343d;">At the start the of the new year, the global economic and financial market conditions deteriorated drastically, and were dominated by a series of events such as a renewed fall in oil prices, fresh turmoil in China’s financial market, a looming European banking crisis, and policy variations by some of the world’s key monetary authorities. Some of these events, which could have boosted sentiments significantly, actually failed to do so. Cheaper energy and commodity prices, which enhance consumers’ disposable income and lower companies’ input costs, are hurting energy companies’ profits and now seen as a threat to lender banks.<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote1sym">1</a> The International Monetary Fund (IMF) notes that though a decline in oil prices driven by higher oil supply should have supported global demand given a higher propensity to spend in oil importers relative to oil exporters, several factors have dampened the positive impact of lower oil prices.<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote2sym">2</a> Given the lack of structured fiscal consolidation policies that are consistent with growth, private investment and consumption have stagnated in many parts of the globe. Risk perceptions have also changed with the gloomy growth prospects. The US Federal Reserve (Fed) decided to raise its key policy rate in mid-December, in what was considered to be a watershed moment for the global economic revival. However, the consequent intensification of capital flow reversal and rise in the US dollar is deepening problems of several emerging market economies (EMEs) that were already slowing at this juncture. On the other hand, the monetary authorities in Europe and recently in Japan have taken recourse to negative interest rates to avoid deflation. While the lack of monetary policy action at this juncture could further slow domestic demand, lower interest rates have begun to hurt global financial market sentiments. Banks in Europe are under pressure to clean up their balance sheets ridden with non-performing loans since the 2007-08 crisis, and policy induced negative interest rates are hurting banks’ profitability and asset quality, as demand has failed to pick up commensurately. Financial instability risks have again come to the fore with banking sector and emerging market vulnerabilities rising, and have led to sudden strong market reactions as seen by the declines in equity and bond prices worldwide at the start of 2016.</span></span><span style="font-size: small;"><span style="color: #0c343d;"><br /><br />The global economic outlook has been made worse by productivity slowdown, policy gridlock, a widening geopolitical rift and increasing leverage in EMEs with tighter liquidity conditions. Downside risks have intensified again amid heightened uncertainty about EME growth prospects, further fallouts of China’s rebalancing, volatility in financial and commodity markets, and a rise in geopolitical tensions. Projections for global growth have been revised even lower in 2016.<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote3sym">3</a> The severe financial market turbulence in the first six weeks of 2016, intensified by the fears about a sharper and prolonged slowdown in the world economy, has led to calls for changes in the policy environment from different quarters. Moody's Investors Service has warned that investors may start to price in the possibility of lower economic growth and returns, which could become partly self-fulfilling via negative wealth effects and tighter financing conditions. The impact on the global economy would be amplified if losses on trading portfolios and financial assets more generally led banks to tighten credit standards. The OECD points out that sole reliance on monetary policy has proven insufficient to boost demand and produce satisfactory growth, while fiscal policy is contractionary in several major economies and structural reform momentum has slowed. An increasing number of economic analysts are now calling for a stronger fiscal policy response, as a commitment to raising public investment would boost demand and help support future growth. The OECD has noted that with governments in many countries currently able to borrow for long periods at very low interest rates, there is room for fiscal expansion to strengthen demand in a manner consistent with fiscal sustainability. </span><br /><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote1anc">1</a><br /> <span style="font-size: x-small;">The price of oil, which was trending lower in the last few months of 2015, dropped below US$30 a barrel in January; the markets are oversupplied at a time when demand is faltering because of the slowdown in key importers such as China, as well as exploration of alternate energy sources in some countries. <br /> <a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote2anc">2</a><br /> Fiscal strain in many oil exporters has reduced their ability to smooth the shock, leading to a sizable reduction in their domestic demand. The oil price decline has had a notable impact on investment and employment in oil and gas extraction, also subtracting from global aggregate demand. Finally, the pickup in consumption in oil importers has so far been somewhat weaker than evidenced from past episodes of oil price declines. The impact of the fall in commodity prices has not only hit oil producers in emerging economies but also US shale producers, with firms borrowing heavily from both banks and markets against oil reserves and projected revenue. <br /> <a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote3anc">3</a><br /> The IMF in January had already lowered its earlier projections for 2016, for global and US growth by 0.2 per cent to 3.4 and 2.6 per cent, respectively, for emerging Asia by 0.1 per cent to 6.3 per cent, and for Latin America by 1.1 per cent to -0.3 per cent as Brazil’s outlook was lowered by a sharp 2.5 per cent to -3.5 per cent. The IMF forecasts the Russian economy will shrink 1 per cent this year, after contracting 3.7 per cent in 2015. The Organisation for Economic Co-operation and Development (OECD) has in February lowered forecasts for 2016 global growth further, as well as for individual economies, with the largest impacts expected in the US, the euro area and major economies reliant on commodity exports, like Brazil. Growth in the US is expected to decelerate to 2 per cent in 2016 from 2.5 per cent last year, with the dollar’s strength weighing on exports and manufacturing activity and lower oil prices curtailing investment in mining and related industries. The euro area is projected to grow at 1.4 per cent, with German growth at 1.3 per cent, both lower than 1.5 per cent in 2015. While China is expected to continue to grow at 6.5 per cent, India is expected record a robust grow of 7.4 per cent. Brazil’s economy, which is experiencing a deep recession, is expected to shrink by 4 per cent this year.</span></span></span></div>
Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-26930264616971813532016-04-27T09:26:00.000-07:002016-04-27T23:12:04.246-07:00Union Budget 2016-17: Striking the Right Chords<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #0c343d;"><span style="font-family: Times,"Times New Roman",serif;"><span style="font-size: small;">The government’s Union Budget for the fiscal 2016-17 has a number of announcements, which could, if implemented effectively, augment the real and financial sectors of the economy. Stability has been maintained in tax rates and structures, with some benefits to smaller individual and corporate tax payers, and an orientation towards domestic manufacturing, as well as rationalisation and simplification. The budget with a much needed emphasis on the agricultural and social sectors is a step forward in addressing some of the supply-side issues in agriculture and in skilled manpower,<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote1sym">1</a> at the same time this would also help in demand generation from the rural sector and weaker sections of the economy. A consolidated set of proposals for the housing sector should help the sector clear some inventory and augment demand for downstream sectors. The infrastructure sector not only has a high allocation but also high priority accorded to public-private partnerships, including introduction of a bill for dispute resolution, renegotiation of concession agreements, and a new credit rating system which gives emphasis to various in-built credit enhancement structures aimed at alleviating problems of mispriced loans. Financial sector reforms proposed earlier have been taken forward in the budget and are mostly aimed at broadening the product and investor base, as well as providing transparency, dispute resolution and exit routes. The scope of foreign investment has been further broadened,<a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote2sym">2</a> while retail participation in government securities market, deepening of the corporate debt market and introducing more products in the commodity derivatives market has been envisaged. A specialised resolution mechanism to deal with bankruptcy situations in banks, insurance companies and financial sector entities has been proposed. Various steps announced for stressed assets and strengthening asset reconstruction companies (ARCs), which includes permissions for 100 per cent FDI and sponsor ownership on ARCs, would also help to unclog investment bottlenecks. The fiscal deficit target is being adhered to; this lends credibility to country’s fiscal consolidation efforts and improves the prospects for better sovereign ratings. This would help capital flows and the depreciating currency, and also allow for more expansionary monetary policy to counter sluggishness in private sector demand. [More...] [For a Summary of Measures see Sample issue of EUpDates below...]</span></span></span></div>
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<span style="font-size: x-small;"><a href="https://www.blogger.com/blogger.g?blogID=5805798950289353298#sdfootnote1anc">1</a></span></div>
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<span style="font-size: x-small;"> This includes proposals for irrigation, electrification, e-marketing of produce along with amendments to the Agricultural Produce Market Committee (APMC) Acts, agricultural credit and interest subvention, crop insurance, increased warehousing facilities amongst others. There are also measures for affordable healthcare and health insurance, skill, education and entrepreneurship development and job creation.</span></div>
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<span style="font-size: x-small;"> FDI to be allowed in insurance and pension sectors up to 49 per cent under the automatic route, 100 per cent in ARCs under the automatic route and 100 per cent through the FIPB route in marketing of food products produced and manufactured in India. FPIs are allowed to invest up to 100 per cent of each tranche in securities receipts issued by ARCs subject to sectoral caps. Investment limit for foreign entities on Indian stock exchanges is to be enhanced from 5 to 15 per cent on par with domestic institutions. Limit for investment by FPIs in central public sector enterprises (other than banks) listed in stock exchanges to be increased to 49 per cent from 24 per cent. Basket of eligible FDI instruments is to be expanded to include hybrid instruments subject to certain conditions. </span></div>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-74862574229590316492013-03-16T11:20:00.001-07:002013-03-16T11:26:16.050-07:00A Responsible Budget within a Restricted Space albeit some Worries on the Expenditure-Revenue Math<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="color: #073763; font-family: 'Times New Roman', serif; font-size: 10pt;">The Indian Union Budget for fiscal year 2013-14 has been termed as
a responsible budget under difficult circumstances, but a disappointment to
those who were expecting extraordinary measures to jump-start the economy.
Fiscal deficit in the current financial year has been contained to 5.2 per cent
of GDP; this averts any immediate crisis in terms of a sovereign rating
downgrade, but has led to a decade low quarterly GDP of 4.5% in the final
quarter of 2012, with plan expenditure meant for developmental projects slashed
by over rupees 90 thousand crore. With very little room for fiscal stimulus,
the Budget has concentrated on infrastructure development and inclusive growth,
the most demanding issues at present. Pressing issues like stimulating domestic
savings and channeling those to the capital market have also been addressed
within the Budget. Some tax responsibility has also been shifted to those who
are better equipped to pay.<o:p></o:p></span></div>
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<span style="color: #073763; font-family: 'Times New Roman', serif; font-size: 10pt;">The Budget included several measures to spur investment both in
markets and by corporations, including an incentive on investments in plant and
machinery exceeding Rs.100 crore and extending tax breaks for small
companies that grow larger, and an expansion of tax-free bonds for
infrastructure and broadening of the scope of the newly introduced RGESS.
Emphasis was given to foreign investment, with investor registration norms also
being simplified.<o:p></o:p></span></div>
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<span style="color: #073763; font-family: 'Times New Roman', serif; font-size: 10pt;">However, while there is no opacity in the figures, all agree that
the revenue projections are overstated in some areas; slippages are expected in
tax revenues and the disinvestment target that hinges on stock market
sentiment. Non-plan expenditure could also overshoot the target on account of
subsidies and any disruption in oil prices.<o:p></o:p></span></div>
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<span style="color: #073763; font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;">Following are some highlights of the
Budget:<o:p></o:p></span></div>
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<span style="color: #073763;"><b><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;">The Budget estimates</span><span style="white-space: pre-wrap;"></span></b><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;"> *</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><span style="font-size: 10pt; line-height: 115%; text-decoration: none;"><span style="white-space: pre-wrap;">Fiscal deficit at 5.2% of GDP in</span></span></span><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;"><span style="white-space: pre-wrap;"> current FY and at 4.8% of GDP in 2013-14 *Net market borrowing at
4.84 trillion rupees in 2013-14 *Major subsidies bill at Rs.2.48 trillion (up from Rs.1.82 trillion) *Petroleum subsidy at Rs.650 billion 2013-14 as against revised Rs.968.8 billion for 2012-13 *Food subsidies at Rs.900 billion against revised Rs.850 billion in 2012-13 *Total budget expenditure at Rs.16.65 trillion, with Plan expenditure pegged at Rs.5.55 trillion *Direct tax proposals to yield Rs.133 billion, indirect tax proposal Rs.47 billion.</span></span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><br />
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</span><b><span style="white-space: pre-wrap;"><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;">The Budget allocates</span></span><span style="white-space: pre-wrap;"></span></b><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;"> *Rs.2.03 trillion, including Rs.867.4 billion capital expenditure
to Defence in 2013-14 *Rs.801.9 billion to rural development *Rs.270.5 billion
for agriculture *Rs.140 billion capital infusion in state-run banks in 2013-14
*Rs 100 billion for incremental cost for National Food Security Bill over and
above food subsidy</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><br />
<br />
</span><b><span style="white-space: pre-wrap;"><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;">The Budget proposes </span></span><span style="white-space: pre-wrap;"></span></b><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;">*No revision of personal income tax slabs; relief in first bracket
through tax credit of Rs.2000 for earnings up to Rs.0.5 million to benefit 1.8
crore people *Home loans upto Rs.2.5 million to be allowed an additional
deduction of Rs 1 lakh. *Surcharge of 10% on income exceeding Rs.10 million a
year; only 42,800 people have declared such income *No change in basic customs
duty rate of 10% and service tax rate of 12% *Surcharge of 5% to 10% on
domestic companies whose taxable income exceeds Rs.100 million *Capital allowance
of 15% to companies on investments of more than Rs.1 billion *STT on equity
futures to be reduced to 0.01% from 0.017 % *CTT on non-agriculture futures
contracts to be introduced at 0.01% * Zero customs duty for electrical plants
and machinery *TDS at the rate of 1% on the value of the transfer of immovable
properties where consideration exceeds Rs.5 million; agricultural land to be
exempted *a 20% final withholding tax on profits distributed by unlisted
companies to shareholders through buyback of shares *to raise import duty on
certain luxury items (cars) and certain other items to boost domestic
manufacturing *</span><span style="font-family: 'Times New Roman', serif; font-size: 13.5pt; line-height: 115%;"><span style="font-size: 10pt; line-height: 115%; text-decoration: none;"><span style="white-space: pre-wrap;">to issue
inflation-indexed bonds</span></span></span><span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;"><span style="white-space: pre-wrap;"> *to move to revenue-sharing from profit-sharing policy in oil and gas sector *to allow FIIs to use investments in corporate, government bonds as collateral to meet margin requirements *to allow insurance, provident funds to trade directly in debt segments of stock exchanges *to allow FIIs to hedge forex exposure through exchange-traded derivatives *to treat foreign investors with stake of 10% or less as FIIs; any stake more than 10% will be treated as FDI *to make mutual fund equity schemes eligible for RGESS.</span></span></span><span style="background: white; color: #3f3f3f; font-family: "Times New Roman","serif"; font-size: 9.0pt; line-height: 115%; mso-fareast-font-family: "Times New Roman";"><o:p></o:p></span><br />
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<span style="font-family: 'Times New Roman', serif; font-size: 10pt; line-height: 115%;"><span style="background-color: #cfe2f3; white-space: pre-wrap;"><b>Get detailed highlights with our March-2013 issue of E-Updates.</b></span></span></div>
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-61630128426423515262013-01-31T04:02:00.002-08:002013-02-02T09:36:36.320-08:00RBI takes pro-growth measures on decelerating growth as inflation expectations moderate<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="color: #073763;"><span style="font-family: 'Times New Roman', serif;">The RBI, which had clearly indicated an interest rate reduction
at the start of 2013, took growth enhancing measures after a period of 9 months
in its third quarter review of monetary policy stating that it is now critical
to arrest the loss of growth momentum. The policy repo rate and the Cash
Reserve Ratio (CRR) have each been reduced by 0.25 percentage points to 7.75
per cent and 4 per cent respectively; the latter will inject approximately
Rs.180 billion into the banking system. These measures ease borrowing costs
and are expected to prompt banks to lower their lending interest rates, a transmission
process which has already been started by some banks led by SBI, </span><st1:country-region style="font-family: 'Times New Roman', serif;" w:st="on"><st1:place w:st="on">India</st1:place></st1:country-region><span style="font-family: 'Times New Roman', serif;">’s largest
lender. The challenge is now on banks to
manage their deposit and lending rates in a manner that stimulates lending as without
affecting their net interest margins.</span></span><br />
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<span style="color: #073763;"><span class="apple-style-span"><span style="font-family: "Times New Roman","serif";">RBI’s supportive monetary policy was constrained due to the
preponderance of non-monetary factors behind the current slowdown along with risks emanating from high inflation, and the widening current account and fiscal
deficits. The central bank’s step at this juncture is justified by a number of
economic data, which has also prompted the central bank to lower the growth
forecast to 5.5 per cent and the inflation forecast to 6.8 per cent for
end-March. GDP growth in the first half (H1) of 2012-13 was 5.4 per cent
compared with growth of 7.3 per cent in H1 of 2011-12. The manufacturing sector
witnessed sharp moderation in growth to just 1 per cent during April- November
2012. Capital goods industries such as machinery and equipment, electrical
machinery and computing machinery registered a sharp contraction in output of
over 11 per cent during the same period. Industrial growth is expected to stay
below its trend due to supply and infrastructure bottlenecks and slack in
external demand. With investment activity remaining subdued, the prospects of a
quick recovery in industrial growth appear weak. Real fixed investment too has
been trending down and could lead to irreparable damage if not arrested in
time. The prolonged slowdown in industrial activity is reflected in the
services sector growth too. Growth in GDP at market prices decelerated sharply
to 2.8 per cent in Q2 of 2012-13 from 6.9 per cent in the corresponding period
of 2011-12, the lowest in the previous 13 quarters, primarily reflecting net
exports and most importantly weakening private consumption demand, while
government consumption is expected to moderate in coming quarters due to fiscal
consolidation efforts. On the other hand, the most important factor, so far
restraining any interest rate cuts by the RBI, which is headline inflation
measured by the WPI index has been moderating recently.</span></span><span class="apple-converted-space"><span style="font-family: "Times New Roman","serif";"> <o:p></o:p></span></span></span></div>
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<span class="apple-converted-space"><span style="font-family: "Times New Roman","serif";"><span style="color: #073763;">Even as the timing for this rate cut is right as the external
environment is slightly less hostile compared to the first half of 2012, with <st1:country-region w:st="on"><st1:place w:st="on">China</st1:place></st1:country-region> and some other
emerging economies and the <st1:country-region w:st="on"><st1:place w:st="on">US</st1:place></st1:country-region>
showing strong growth, while Euro area financial markets look more robust, RBI’s
guidance for its future stance on interest rate easing understandably depends
on a number of factors. These include global economic risks, such as progress
on the fiscal front for the US and the Euro zone and the growth fallout of
fiscal austerity, as well as domestic problems such as the containment of the
widening CAD and the high fiscal deficit. Future policy will therefore be conditioned
by the evolving growth-inflation dynamic and the management of risks from twin
deficits.</span><span style="color: #351c75;"><o:p></o:p></span></span></span></div>
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<span class="apple-converted-space"><span style="color: #ff6600; font-family: "Times New Roman","serif"; font-size: 10.0pt;">Get the detailed highlights with the February 9 issue of <b><i>E-UpDates</i></b>—Ecofin’s
monthly statistical bulletin. <o:p></o:p></span></span><br />
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0tag:blogger.com,1999:blog-5805798950289353298.post-49453537484682834522012-10-15T23:38:00.002-07:002012-10-16T10:24:27.781-07:00Indian government unveils policy basket to counter staggering growth and downgrade risks<div dir="ltr" style="text-align: left;" trbidi="on">
<span style="color: #073763;"><st1:country -region="-region" style="text-align: justify;" w:st="on"><span style="font-size: 10.0pt;">India</span></st1:country><span style="font-size: 10pt; text-align: justify;">’s slowing growth turned from a threat to reality with
<st1:country -region="-region" w:st="on"><st1:place w:st="on">India</st1:place></st1:country>
recording the worst first quarter growth in a decade, with no significant
improvement in available second quarter numbers for industrial output. <a href="http://www.slideshare.net/EcofinSurge/gr-prjctns-11462331"><b>Growth forecasts</b></a>
have thus been lowered by every agency making such projections; the lowest
being that by IMF at below 5% for the year 2012. Even as threats of rating
downgrades were dismissed by some as of no consequence, the fact remains that
our financial markets are driven by FII sentiments and many of these entities
are barred from investing in junk rated countries. The Indian government has
now responded with a basket of measures which not only boosts market sentiment,
but if implemented could go a long way in boosting longer term capital inflows
and tackling domestic issues such as supply-constraint driven inflation and the
clearing of infrastructure bottlenecks.
In a string of bold initiatives to revive economic growth, the central
government, first announced Rs 5 per litre increase in the regulated diesel
prices and a cap on subsided cooking gas usage. It later withdrew customs and excise
duties on non-subsidised LPG cylinders, a move that will help bring their
prices down. The government followed up these measures with a liberalisation of
foreign holding caps in the aviation, multi-brand retail, non-news broadcast
media and power exchanges. Multinational retailers can invest up to 51% to open
stores in states and UTs which agree to implement the decision. Minimum amount
to be brought in by the foreign investor would be USD 100 million and outlets
may be set up only in cities with a population of more than 10 lakh. At least
50% of FDI should be invested in 'back-end infrastructure' within three years
of the first tranche. FDI in multi-brand retail, once strongly in motion, is
expected to bring about significant improvements in agricultural warehousing
and supply-chains.</span></span><br />
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<span style="color: #073763; font-size: 10.0pt;">The government also announced a plan to divest its stake in five
companies. The rate of withholding tax on overseas borrowings has been reduced
to 5% from 20%. The lower rate will be applicable for overseas borrowings made
after <st1:date day="1" month="7" w:st="on" year="2012">July 1, 2012</st1:date>
and before <st1:date day="1" month="7" w:st="on" year="2015">July 1, 2015</st1:date>.
Borrowings under a loan agreement or by way of issue of long-term
infrastructure bonds that comply with External Commercial Borrowings
regulations as administered by the RBI would be eligible for benefits of the
concessional tax regime. The RGESS an initiative intended to support first-time
equity investors not only expects to promote a ‘equity culture’ in India and
discourage investments in gold, but also aims to revive the mutual fund
industry, which has now been included in the scheme along with exchange traded
funds. <o:p></o:p></span></div>
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<div class="body" style="line-height: 12.0pt; margin-bottom: .0001pt; margin: 0in;">
<span style="color: #073763; font-size: 10.0pt;">The government set in motion a second wave of reforms,
approving proposals allowing foreign investors to own up to 49% in insurance
firms and pension funds. Signaling the government's intent to continue with
reforms to boost economic growth and investor sentiment, the Cabinet cleared
all amendments to the insurance bill. The cabinet also cleared the Pensions
Bill and allowed FDI in Pension Funds. It also took the cap in the pension
sector to 49 per cent following the insurance sector. The proposed changes to
both the bills will now have to be cleared by both houses of the Parliament
before they can come into effect. Till now, 26 per cent FDI was allowed in the
insurance sector while the pensions business was closed to foreign investment. Looking
to better serve the interests of all stakeholders, the government approved
amendments to Companies Bill 2011, including changes related to spending on CSR
activities. The proposed legislation will bring the law on the subject of
corporate functioning and regulation in tune with the global best practices so
that there is further improvement in corporate governance in the country
through enhanced accountability and transparency. A provision has been
introduced to make expenditure on Corporate Social Responsibility (CSR)
mandatory. Giving a reform boost to commodity markets, the government approved
the FCRA Bill that seeks to provide more powers to the regulator Forward
Markets Commission (FMC) and allow a new category of products and to facilitate
entry of institutional investors. <o:p></o:p></span><br />
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<div class="MsoFootnoteText" style="text-align: justify;">
<span style="font-size: 10.0pt;"><span style="color: #073763;">A segment within the government has been leaning towards cash transfers
to poor households as the way out to deal with an unwieldy subsidy bill
estimated at Rs 2.5 trillion (on three major subsidies—food, fuel and
fertilizer). The government is set to step up its push for cash transfer of
subsidies with two pilot projects validating the assumption that it would lead
to significant savings for the government while enhancing benefits for users.</span><o:p></o:p></span></div>
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<span style="font-size: 10.0pt;"><br /></span></div>
<div class="MsoFootnoteText" style="text-align: justify;">
<span style="background-color: #6fa8dc; color: #351c75;">Get regular updates on Growth, Inflation and other Indian & Global Macro-Financial indicators/data with</span><span style="background-color: #6fa8dc;"><span style="color: #351c75;"> </span><b style="color: #351c75;"><a href="http://www.ecofin-surge.co.in/publications.html">E-UpDates</a></b><span style="color: #351c75;">—A Monthl</span></span><span style="background-color: #6fa8dc; color: #351c75;">y Statistical Bulletin by Ecofin-Surge.</span><br />
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Surge Research Supporthttp://www.blogger.com/profile/00670201207427065265noreply@blogger.com0