December 2019 Economic Affairs

Sakshi Education

FPIs flock to Indian capital market despite decline in GDP growth rate in 2019
In spite of a decline in the GDP growth rate, Foreign Portfolio Investors (FPIs) seem to have flocked to the Indian capital market in a big way in 2019 with a net inflow of over 1.3 lakh crore rupees, including 97,250 crore rupees in equities, the highest in last six years.

As the year draws to a close, the debt market has seen a net inflow of nearly 27,000 crore rupees by FPIs, while a further amount of 9,000 crore rupees found its way to the hybrid instruments, shows the capital market data compiled by depositories.

Experts believe the positive trend may continue in 2020 as well, but downside risks might arise in the form of the US-China trade war and any further deterioration in the domestic credit market conditions.
Number of active GST taxpayers crosses 1 crore
A range of measures to go after tax defaulters and simplifying the GST filing process was discussed by the Group of Ministers headed by Bihar Deputy Chief Minister Sushil Modi in Bengaluru.

Briefing media persons in Bengaluru, Sushil Modi informed that the number of active GST taxpayers has gone up to one crore twenty-one lakh of which 66.79 lakh are new registrations, since the launch of GST.

Only 15 per cent of the new taxpayers have paid taxes.

States have started physical verification of the new taxpayers by visiting their premises.

A new return system will be launched from April 1st next year which will be user-friendly and simpler with a very few fields to fill.
Bank of Baroda partners with Gujarat Government to provide MSME Loans
The flow of credit in the Micro, Small and Medium Enterprises (MSMEs), Bank of Baroda signed a Memorandum of Understanding (MoU) with the Gujarat government.

The credit will be provided to the MSME sector for greenfield projects, startups, women entrepreneurs, and entrepreneurs from backward areas under the Gujarat Single Window Clearance Act 2017 & Ordinance Number 1 of 2019 dated October 24, 2019.

The customers can register their request on the link available on the Gujarat government’s single window portal from where Bank of Baroda will initiate further action after receiving the details.

The MoU with the Gujarat government is a step forward for MSME entrepreneurs. The state government is committed to supporting the MSME sector in the state for economic development, and this is a significant initiative taken by the government whereby exemption provided to the entrepreneurs from certain approvals and inspections before the establishment of units. This MoU would speed up the process of credit offtake as well as industrial development.
Rupee depreciates by nine paise against dollar
The rupee depreciated by nine paise to close at 71 rupees and 27 paise against the US dollar on 24 December, 2019.

The domestic unit weakened amid heavy selling in domestic equities and steady rise in crude oil prices.
Centre approved Rs 453 crore loan to Tamil Nadu
The Centre approved a Rs 453-crore loan at a subsidised interest rate of 5% to the Tamil Nadu government for setting up three fishing harbours.

The funds will be released from the Fisheries and Aquaculture Infrastructure Development Fund (FIDF) that has a corpus of Rs 7,522 crore.

An agreement was signed between the Union fisheries Ministry, Tamil Nadu government and NABARD.
CBDT extends advance tax payment deadline for northeastern region to Dec 31
The Central Board of Direct Taxes (CBDT) has extended the date for payment of third installment of Advance Tax for financial year 2019-20 to 31st December, 2019 for the North Eastern Region. Earlier, the deadline was 15th of December.

The decision to this effect was taken in view of the recent disturbance in the region.

Advance tax payments, under the direct taxes category, are made four times in a financial year.
Mandatory to link PAN-Aadhaar by Dec 31: Income Tax Department
The Income Tax Department has said that it will be mandatory to link Permanent Account Number (PAN) with Aadhaar by the end of this month (December, 2019).

This will facilitate to reap seamless benefits of income tax services.

The deadline for linking PAN with Aadhaar was extended till the 31st of December, by Central Board of Direct Taxes (CBDT) through an order issued in September this year.

Earlier, the deadline was 30th of September.

In order to link a PAN with Aadhaar online, the assesse is required to log in to the e-filing portal.

The Income Tax Department also provides an SMS-based facility to enable the linking.

Aadhaar is issued by the Unique Identification Authority of India (UIDAI) to a resident of India and PAN is a 10-digit alphanumeric number allotted by the I-T Department to a person, firm or entity.
Fifth EAC meeting of 15th Finance Commission held in New Delhi
The fifth meeting of the Economic Advisory Council (EAC) of the Fifteenth Finance Commission was held in New Delhi. Future revenue is the most critical issue for the Finance Commission. Tax regime needs predictability and certainty.

In the meeting, possible macro assumptions related to real growth, inflation, ongoing structural reforms, tax revenue including GST, adherence to Fiscal Responsibility and Budget Management Act and fiscal transparency were discussed.

Further, Advisory Council was informed about submission of the 2020-21 report and Commission’s next course of actions pertaining to preparation of the report for 2021-26 period.

Recently, the fifteenth Finance Commission submitted its report for the period 2020-21 to President Ram Nath Kovind.
RBI operationalises NEFT 24X7
The Reserve Bank has informed that about 11.4 lakh transactions were settled in the first eight hours after the round the clock operation of National Electronic Funds Transfer - NEFT system came into force from 12:00 am today.

The RBI said, making NEFT available 24x7 is part of its vision of empowering every Indian with access to a bouquet of e-payment options.

Meanwhile, in order to give further impetus to digital retail payments, RBI has asked banks not to levy any charges from account holders for funds transfers done through NEFT system which are initiated online from January 1, 2020. Online transactions include internet banking and through mobile apps of banks.
GST Council to meet in Delhi today (18 Dec)
Finance Minister Nirmala Sitharaman will chair the GST Council meeting in New Delhi today (18 December, 2019). The meeting is likely to review the taxation structure for enhancing the revenue collections.

GST revenue collection witnessed an impressive recovery with a positive growth of six percent last month as compared to the collections of the same month last year (2018).

The gross GST revenue collected in November is one lakh three thousand 492 crore rupees.

Ahead of the meeting, Centre had released the GST compensation of 35 thousand 298 crore rupees to States and Union Territories.

Mrs Sitharaman has said that each state and the centre’s revenue department will have to take a lot of efforts to improve GST collection.
Revenue toll collection through FASTags substantially increased from Rs 7 to 85 cr: Nitin Gadkari
Road and Transport Minister Nitin Gadkari has said that the revenue toll collections through FASTags has substantially increased from seven crore to 85 crore rupees.

Nitin Gadkari said, the new system will provide seamless traffic and reduce air pollution and save fuel. He said, till now one crore FASTags have been issued.

The government has implemented the new electronic toll collection - FASTag from 15th of this month.
GST Council fixes 28% uniform tax rate for lottery
The Goods and Services Tax or GST Council has fixed a uniform tax rate of 28 per cent on both state-run and private lottery. It also decided to rationalise the GST rate on woven and non-woven bags to 18 per cent.

The decisions were taken at the 38th meeting of the Council, chaired by Finance Minister Nirmala Sitharaman in New Delhi.

Briefing reporters after the meeting Revenue Secretary Ajay Bhushan Pandey said the rates on the lottery and woven and non-woven bags will be effective from the 1st of March next year.

The GST Council also decided to exempt upfront amount payable for long term lease of industrial and financial infrastructure plots by an entity having 20 per cent or more ownership of Central or State Government.

The council also approved various amendments to laws which will be introduced in Union Budget 2020.
Western Railway recovers over Rs 93 crore from ticketless travellers
The Western Railway has recovered fines to the tune of 93.96 crore rupees from over 19.19 lakh ticketless travellers in the last eight months.

According to chief public relations officer of Western railway Ravinder Bhakar the fines recovered from April to November end are 9.46 per cent higher than the amount recorded in the corresponding period last year.

In November alone the Western Railway recovered 10.59 crore rupees in 2.14 lakh cases of ticketless travel, including those of unbooked luggage.
GeM partnered with UCO Bank, BoM
The government e-marketplace on 16th December, 2019 has signed two agreements with Bank of Maharashtra and UCO Bank to offer services like transfer of funds through GeM pool accounts and earnest money deposit (EMD) to the registered users on the portal.
ADB’s 490 million dollars loan to upgrade Indian state's roads
Asian Development Bank, ADB and Government of India signed a 490 million dollars loan for public-private partnership, PPP project to upgrade about one thousand six hundred kilometers of state highways and major district roads from single-lane to two-lane widths in Madhya Pradesh.

An additional 286 million dollars investment will be mobilized through private sector participation under the PPP modality.

Additional Secretary (Fund Bank and ADB) in Department of Economic Affairs in Finance Ministry Sameer Kumar Khare and Country Director of ADB’s India Resident Mission Kenichi Yokoyama signed the loan agreement.

Mr Khare said, state highways and major district roads provide a crucial link between rural roads and national highways and up-gradation of these roads under the project will improve rural and peri-urban connectivity in the state and improve access to markets and better services.

Mr Yokoyama said that the project continues ADB’s engagement with the state’s road sector since 2002 and it will open a new partnership by introducing PPP through the hybrid-annuity model, thereby leveraging government financing and improving the sustainability of capital investments.

The Hybrid-Annuity Model is a mix of engineering, procurement, construction, and build-operate-transfer. This passes the responsibility of design, implementation, and operation and maintenance obligations to the private sector while attracting some private sector financing.

Under this model, the government will release 60 per cent of the total project cost during construction, to be paid to the concessionaire in tranches linked to completion milestones. The remaining 40 per cent is arranged by the concessionaire in the form of equity and commercial debt.

Once the project is completed, the government will repay the concessionaire’s financial investment over 10 years.

The project will upgrade 750 kilometers of state highways and 850 kilometers of major district roads to two-lane and all-weather standards with road safety features.

It will also develop an e-maintenance system, which can record defects or required maintenance, along with a training program to develop capacity on contract implementation and project finance in the Madhya Pradesh Road Development Corporation.
HDFC Bank crossed $100 billion capitalisation
HDFC Bank has become the 3rd Indian firm to cross $100 billion mark in market capitalisation on 19 Dec 2019.

It has joined the league of Reliance Industries Ltd, which has a market cap of $140.74 billion, and TCS with a market cap of $114.60 billion.

Among the world’s most valued banks and financial companies which have a market cap of over $100 billion, HDFC Bank is ranked at 26th position.
RBI to buy, sell govt bonds worth Rs 10,000 crore on Monday (23rd December)
The Reserve Bank of India (RBI) on Monday (23rd December, 2019) will simultaneously purchase and sell government securities worth 10,000 crore rupees under a special Open Market Operation (OMO).

Such exercises are done by the central bank when the proceeds from the sale of short-term securities are used to buy long-term government securities or bonds in a bid to bring down interest rates on long-term securities.

The eligible participants should submit their bids/offers in electronic format on the RBI's Core Banking Solution (E-Kuber) system between 10.30 a.m. and 12.00 noon on 23rd December, 2019.
Government plans to take khadi turnover to Rs 2 trillion in next 5 years
Union minister Nitin Gadkari takes plans to take khadi and village industries turnover to Rs 2 trillion in the next five years from Rs 75,000 crore at present.

The industry to expand its share in global trade to about 10 percent, Micro, Small & Medium Enterprises (MSMEs) Minister Gadkari urged players to grab the opportunity to expand in the wake of China that accounts for 17 percent of the global trade business battling increased cost and difficulties.

The turnover of khadi and village industries is Rs 75,000 crore at present. Steps are on to take it to Rs 2 trillion in five years.

China is a good record in the trade business and accounts for 17 percent of the global exports.

Our share is barely 2.6 percent. We have an opportunity to take it to 8 to 10 percent, especially when China is facing difficulties at present besides the increase in costs.
GST Council decides to consider changes in rates once a year; No hike in GST rates till revenue collection stabilises
GST Council has decided to consider changes in rates once a year, and not in each and every meeting. There is no possibility of change in GST rates till revenue collection stabilises.

Sushil Modi said any change in slabs and tax rates - hike or cut - in the near future is unlikely.

Addressing the annual convention of FICCI on the theme 'India: Roadmap to a Five Trillion Dollar Economy' in New Delhi.

He said no state or the Centre is ready to raise tax rates.
Government working on more steps including rationalisation of income tax rates to revive economy
The government is working on more steps including rationalisation of income tax rates to revive the economy.

The intent of the government is to further simplify taxation systems, including removal of exemption.

The government has taken several measures during August and September to boost the economy.

The Finance Minister assured the people that there will be no harassment of tax payers.

Public sector banks have disbursed nearly five lakh crore rupees in the last two months to boost consumption in the hinterland.

On the goods and services tax, Ms Sitharaman said, the rate structure will have to be decided by the GST council.
TCS introduced new insurance benefits
TCS has become one of the first Tata Group companies to announce changes in its health insurance policy in order to provide benefits to LGBT employees.

The change in health insurance policy would now benefit all lesbian, gay, bisexual and transgender or LGBT employees in the company.

The new insurance policy will cover up to 50% cost of sex or gender reassignment surgery.
NSE launches interest rate options on 10-yr govt bonds
National Stock Exchange launched interest rate options on ten-year Government bonds. The exchange recorded a turnover of 5,926 contracts on the first day of its launch.

The exchange has added one more instrument to the fixed income derivatives asset class.

Interest rate options will provide institutional investors the ability to manage risk through a non-linear product.

Interest rate options are based on the underlying ten-year government bonds, which are 7.26 per cent 2029 bond and 6.45 per cent 2029 bond.
SBI announces reduction in one-year MCLR by 10 basis points
Country`s largest lender State Bank of India has announced the reduction in its Marginal Cost of Fund Based Lending Rate (MCLR) by 10 basis points across all one-year products. It will be effective.

This is the eighth consecutive cut in MCLR by the lender this fiscal. The new one-year MCLR has been cut to 7.90 per cent from 8 per cent.
Walmart to train 50,000 MSME entrepreneurs
Walmart will train 50,000 entrepreneurs from the micro, small & medium enterprises (MSME) sector.

25 institute hubs will be opened in India in next five years which would train the MSME entrepreneurs.

The institutes will be opened under the ‘Walmart Vriddhi Supplier Development Programe‘ across the nation.

The first Walmart Vriddhi training hub is scheduled to be opened in March 2020.
IBC (Second Amendment) Bill, 2019 introduced in Lok Sabha
The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 has been introduced in the Lok Sabha by Finance Minister Nirmala Sitharaman.

The amendment is for streamlining corporate insolvency resolution process and to protect last-mile funding to promote investment in sectors that are financially distressed. Union Cabinet gave its approval to the amendments last Wednesday.
Mobile Number Portability (MNP) process to be faster
The Mobile Number Portability (MNP) process is going to be fast and simple from December 16. Telecom regulator TRAI issued a public notice in this regard, yesterday.

Under the new rules, it would take only 3 days to port from one network to another in the same circle while Porting for another circle will be executed within 5 working days. Earlier MNP used to take a week to be completed. As per TRAI, there is no change in the porting timelines for corporate mobile connections.
SBI announces reduction in one-year MCLR by 10 basis points
State Bank of India (SBI) has announced the reduction in its marginal cost of fund based lending rate (MCLR) by 10 basis points across all one-year products.

This is the eighth consecutive cut in MCLR by the lender this fiscal. The new one-year MCLR has been cut to 7.90 per cent from 8 per cent.
Finance Minister rejects allegation of discrimination with non-BJP ruled states over GST compensation
Finance Minister Nirmala Sitharaman has rejected the allegation of discrimination with non-BJP ruled states over the issue of GST compensation.

No states have been given the compensation since August and Centre will honour the commitment made to the states with regard to GST compensation.

This while replying to a discussion on Appropriation (No 3) Bill, 2019 in the Rajya Sabha.

IGST dues pertaining to 2017-18 were discussed in the GST council and a Group of Ministers has been formed to look into the issue.

The Centre has released 9,783 crore rupees to the states which are more than the total GST cess collection received till 31st October.

After the Minister’s reply, the Rajya Sabha returned the Appropriation (No 3) Bill, 2019 to Lok Sabha.

The Bill is related to issuing of additional government expenditure of over 21,246 crore rupees in the current fiscal.

It is the first batch of Supplementary Demands for Grants for 2019-20.

Several members including Jairam Ramesh of Congress, KK Ragesh of CPI (M), Manish Gupta of TMC and others participated in the discussion.
Economic census launched in national capital
The Seventh Economic Census was launched in the National Capital Territory of Delhi.

The Ministry of Statistics and Programme Implementation has tied up with Common Service Centre to carry out the economic census.

Director General (Social Statistics) of Central Statistics Office Mr. A K Sadhu said, for the first time the entire census is being conducted on a digital platform by the use of an application which will ensure high accuracy and data security.

Delhi is the 26th State where the survey has been launched. The process is already on in 20 States and five Union Territories.

In Delhi, the entire process will take around three months where enumerators will survey around 45 lakh establishments and households.

The process of the economic census was first held in 1978. This is the Seventh Census which will provide disaggregated information on various operational and structural aspects of all establishments in the country.

Over 1.5 lakh trained enumerators have been deployed for the pan-India survey who will be visiting 35 crore establishments and households to carry out the Census.

The census will provide valuable insights into the geographical spread, clusters of economic activities, ownership pattern and persons engaged of the establishments engaged in economic activity.

In the Seventh Census, an IT-based digital platform is being used for data capture, validation, report generation and dissemination.
IBC (Second Amendment) Bill, 2019 introduced in Lok Sabha
The Insolvency and Bankruptcy Code (Second Amendment) Bill, 2019 has been introduced in the Lok Sabha.

It was introduced by Finance Minister Nirmala Sitharaman during the pre-lunch session.

The amendment is for streamlining corporate insolvency resolution process and to protect last-mile funding to promote investment in sectors that are financially distressed.

Union Cabinet gave its approval to the amendments.
GST revenue collection crosses Rs 1 lakh crore in November
GST revenue collection crossed the Rs 1 lakh crore mark after a gap of three months in November with the revenue growing by 6 per cent to Rs 1.03 lakh crore in the month.

The GST collection was Rs 95,380 crore in October while it was Rs 97,637 crore November 2018.

Of gross Rs 1,03,492 crore in November, CGST is Rs 19,592 crore, SGST is Rs 27,144 crore, IGST is Rs 49,028 crore (including Rs 20,948 crore collected on imports) and Cess is Rs 7,727 crore (including Rs 869 crore collected on imports), an official statement said.

After two months of negative growth, the GST revenue witnessed recovery with a growth of 6 per cent in November 2019 over the November 2018 collections, it said.
MSME sector has contributed over 29 percent of GDP
Ministry of Micro, Small and Medium Enterprises reported that Micro, Small and Medium Enterprises sector has contributed over 29% of Gross domestic product (GDP) and over 49% of Indian exports.

The report was submitted by the Union MSME Minister Nitin Gadkari.
Government's measure:
- The Indian government has taken many initiatives to enhance the competitiveness of MSMEs.
- Government has introduced various schemes like Micro and Small Enterprises–Cluster Development Programme, Credit Linked Capital Subsidy and Technology Upgradation Scheme (CLCS-TUS), Procurement and Marketing Support and support for MSMEs to participate in international exhibitions and trade fairs.
- It has also conducted many conferences, summits, workshops, etc, to enhance the sector.
The 15th Finance Commission submitted the report for 2020-21 FY
The 15th Finance Commission submitted the report of the Commission for the financial year 2020-21 for further action.

It was submitted by Chairman Shri N.K. Singh, members S/Shri Ajay Narayan Jha, Ashok Lahiri, Ramesh Chand, Anoop Singh and Secretary Shri Arvind Mehta of the commission.

The final report for the period 1 April 2021 to 31 March 2026 will be submitted by 30 October 2020.
IFC to invest USE 200 million to support MSME
International Finance Corporation (IFC), an arm of World Bank Group, has anchored an investment round of $200 million in Mahindra and Mahindra Financial Services.

Among the investment, IFC has invested $75 million from its own account and is mobilizing another $125 million as parallel loans.
Aim:
- The investment aims to create a dedicated pool of financing for the Ministry of Micro, Small and Medium Enterprises (MSMEs) in low-income states.
IFC's investment:
- Among the total of $200 million, a sum of $100 million will be earmarked for women-owned micro, small and medium enterprises (MSMEs). This amount will be supported by blended finance from the IFC-Goldman Sachs' Women Entrepreneurs Opportunity Facility.
- In the financial year 2018-19, IFC lends more than $19 billion in long-term financing for developing countries to boost the private sector to end extreme poverty.
Rates remained unchanged in RBIs 5th Monetary Policy
Reserve Bank of India (RBI), the apex body, released the fifth bi-monthly monetary policy statement for 2019-20. The policy was prepared by the Monetary Policy Committee (MPC)-led by Governor Shaktikanta Das. Both the RBI and government are working in coordination to achieve growth.
Monetary Policy for 2019-20:
- The repo rate remains the same as 5.15%. It was not changed due to inflation pressure.
- The regulator did not reduce the MPC rate but wait for maximum impact.
- RBI stated the initial discussions to launch its own digital currency.
- RBI is discussion to find out the directions in the case of HDFC Bank's technical glitch
- RBI lowered its real GDP growth forecast for 2019-20 from 6.1% in the October policy to 5%.
- The next meeting of the MPC is scheduled for 4-6 February 2020.