June 2019 Economic Affairs

Sakshi Education

US becomes India's largest merchandise trade partner
The US overtook China to once again become India's top goods trading partner in 2018-19. India’s trade surplus with the US declined to $16.8 billion from $21.2 billion in 2018-19.

The decline in India’s trade surplus with the US comes amid a year-long trade war. Also, India’s dependence on Chinese imports declined to $70 billion from $76 billion a year ago.
RBI panel on MSMEs suggested Rs 20 lakh collateral-free loan under Mudra Scheme
Reserve Bank of India (RBI) expert committee on Micro, Small and Medium Enterprises (MSMEs) headed by the former Securities and Exchange Board of India (SEBI) Chairman U K Sinha, has recommended doubling the capital on collateral-free loans from the current Rs. 10 lakh to Rs. 20 lakh, for borrowers falling under the Micro Units Development and Refinance Agency (MUDRA), self-help groups, and MSMEs.

According to the 2006 definition, manufacturing units with investment below Rs. 25 lakh were termed micro, those between Rs. 25 lakh and Rs. 5 crore termed small, and from Rs. 5 crore to Rs. 10 crore medium.

For service units, the corresponding amounts were up to Rs. 10 lakh for micro, Rs .10 lakh-2 crore for small, and Rs. 2 crore-5 crore for medium enterprises.

The Pradhan Mantri Mudra Yojana (PMMY) was launched on April 8, 2015 by Prime Minister Narendra Modi. The loans are given to non-corporate, non-farm small and micro enterprises.

In 2018-19, about 60 million loans worth Rs 3 trillion were sanctioned under Mudra.

Under the scheme, collateral-free loan of up to Rs. 10 lakh falls under three categories - Shishu, Kishore and Tarun. Shishu accounts for loans of up to 50,000, while 50,001 to 5 lakh are disbursed under Kishore. The third category is for loans of Rs. 5-10 lakh.
RBI launches CMS for filing online complaints against banks, NBFCs
The Reserve Bank of India has launched an application on its website for lodging complaints against banks and NBFCs with a view to improve customer experience in timely redressal of grievances.

RBI Governor Shaktikanta Das launched the Complaint Management System (CMS) is a software application.

That it aims to facilitate RBI's grievance redressal process.

Application also improves transparency by keeping the complainants informed through auto-generated acknowledgements and enabling them to track the status of their complaints and file appeals online against the decisions of the Ombudsmen, where applicable.

The RBI also plans to introduce a dedicated Interactive Voice Response (IVR) system for tracking the status of complaints.

The RBI Governor stressed that sustaining the confidence of consumers in banks and other financial service providers (FSPs) through prompt and effective grievance redressal, together with empowering customers through education is pivotal for maintaining trust in the banking system.
World Bank approved loan to Jharkhand
The Government of India, the Government of Jharkhand and the World Bank, signed a $147 Million Loan Agreement.

It will provide basic urban services to the people of Jharkhand and help improve the management capacity of the urban local bodies.

The Jharkhand Municipal Development Project will focus on improving the municipal sector’s capacity.

It will invest in services like water supply.
RBI panel suggested Rs.5000 crore fund for MSMEs
An RBI committee has suggested a Rs.5,000 crore stressed asset fund for domestic micro, small and medium enterprises (MSMEs).

The committee to study the problems faced by MSMEs was chaired by U.K. Sinha, former chairman of the Securities and Exchange Board of India.

India’s 63.38 million MSMEs contribute significantly to the country’s economic growth.
To ensure autonomy, RBI union moots collegium for selection of governors
RBI's employees association has called for a collegium of experts to select a new governor and deputy governors so as to ensure the autonomy of RBI.

As per Section 8 of the Reserve Bank of India Act of 1934, the governor and deputy governors are appointed by the government.

Acharya, the youngest ever deputy governor, resigned from his position a few weeks back.
RBI has asked the public to continue to accept the coins of various denominations
The Reserve Bank of India (RBI) has asked the public to continue to accept the coins of various denominations pumped into circulation regularly. The RBI puts into circulation coins minted by the central government.

The coins have distinctive features which are being introduced from time to time with various themes like economic, social and cultural, in order to meet the transaction needs of public.

Currently, coins of 50 paise, 1/-, 2/-, 5/- and 10/- denomination of various sizes, theme and design are in circulation.

Because of the continous complaints about non-acceptance of coins by bank branches, RBI has asked all banks not to turn away customers who come to exchange coins at their branches.
India signs USD 400M loan agreement with World Bank to eliminate TB
India has signed a loan agreement worth 400 million dollar with the World Bank to help treat and eliminate Tuberculosis from the country.

In India, around five lakh people died every year due to Tuberculosis.

The World Bank supported program will cover nine States and it will support the government's National Strategic Plan to end TB in India by 2025.

The Program will provide financial incentives to private sector care providers for reporting cases of TB and ensuring that their patients complete the treatment regimen.

It will also provide Direct Benefit Transfers to patients for acquiring the critical nutrition needed during treatment.

The Program will also strengthen the detection, treatment and monitoring of Drug-Resistant Tuberculosis and will track progress in the detection of additional drug resistance.
SEBI tightens norms for Mutual Funds (MF) investments
Securities and Exchange Board of India tightened norms on investments by Mutual Funds (MFs).

It came as a reaction to a series of credit-related events that put investor money at risk.

MFs will now be mandated to invest in only listed non-convertible debentures.

Ajay Tyagi is the chairman of SEBI.
Government cut interest rate on small saving schemes
The government has reduced interest rate on small savings schemes, including the National Savings Certificate and Public Provident Fund, by 0.1% for the July-September quarter.

PPF and NSC will fetch an annual interest rate of 7.9% from the existing rate of 8%, while Kisan Vikas Patra will yield 7.6%.

The Sukanya Samriddhi Account will fetch a lower return of 8.4% from 8.5%.
World Bank and Kerala government signed agreement
The Government of India, the Government of Kerala and the World Bank signed a Loan Agreement of USD 250 million for the First Resilient Kerala Program.

This will enhance the State's resilience against the impacts of natural disasters and climate change.

It will focus on strengthening the state's institutional and financial capacity to protect the assets and livelihoods of the poor.
RBI's 13th Annual Conference
RBI's 13th Annual Conference was held on 28 June 2019.

The theme of the conference is 'Statistics for the Future - Select Issues'.

RBI Governor Shaktikanta Das has cautioned against cherry-picking of data by experts, saying correlations can conveniently be used to establish "spurious causality" to achieve desired results.
Lok Sabha passed the Homeopathy Central Council (Amendment) Bill, 2019
Shripad Yesso Naik, Minister of State, Ministry of AYUSH presented the Homeopathy Central Council (Amendment) Bill, 2019 in the Lok Sabha.

It passed the Bill on 27 June.

Once Rajya Sabha passes the Bill, it will replace the ordinance issued in the same regard by the previous government.

This was the second bill to be passed in Lok Sabha, in the second term of NDA government, after the Special Economic Zone (Amendment) Bill 2019.
UNCTAD World Investment Report 2019
According to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report 2019, India received foreign direct investments (FDI) worth USD 42 billion in 2018.

India attracted over 77% of the total foreign direct investments that came to the South Asian region.

The global FDI slipped by 13% in 2018, to US$1.3 trillion from $1.5 trillion in 2017, the third consecutive annual decline.

India’s rank as a source country for FDI dropped one place to the 10th position as it was overtaken by Spain.

Investment in India rose by 6% to USD 42 billion.

Among others in the South Asian region, FDI flows to Bangladesh and Sri Lanka rose to a record level, to USD 3.6 billion and USD 1.6 billion, respectively, while Pakistan witnessed a 27% decline in investment to USD 2.4 billion.
New income tax rules from June 17
The new income tax guidelines kicked in from June 17, 2019, and apply to all cases for compounding received on or after this date.

Offences forming category 'A' include failure to pay tax deducted at source under Chapter XVII-B or tax payable under Section 115-0.

The category 'B' offences include willful attempt to evade tax and failure to produce accounts and documents.
India can boost exports of 350 products to US, China amid trade war
The trade war between the US and China offers an opportunity to India for boosting exports of as many 350 products such as chemicals and granite to these countries.

The ongoing trade war between the US and China an opportunity to India for boosting exports around 350 products such as chemicals and granite to these countries.

Both the US and China are imposing heavy import duties resulted in trade war kind of situation.

Around 151 domestic products includes diesel, X-ray tubes to displace the US exports to China.

Around 203 Indian goods like rubber and graphite electrodes have the advantage to displace Chinese exports to the US.

The Indian products can tap chinese market include copper ores, rubber, paper, paperboard, equipment for transmission voice/data in a wired network, tunes and pipes.

The Federation of Indian Export Organisations President Ganesh Kumar Gupta the trade war between the US and China is benefitting India.
PM Narendra Modi is likely to meet chief executives of Indian banks on 21 June
Prime Minister Narendra Modi is likely to meet chief executives of Indian banks on June 21. He is to discuss a blueprint for the banking sector for the next five years in terms of growth and consolidation amid a slowing economy and a crisis in the shadow banking sector.

The Finance Ministry held discussions with bank chiefs on improving lending to micro, small and medium enterprises, agriculture and other productive sectors of the economy, and also on ease of doing business. The Ministry has also held discussions with banks on the ongoing crisis in non-banking financial sectors as NBFCs are facing liquidity crunch following the debt default by IL&FS.

The country’s GDP growth has been slowed to 5.8% in the January-March 2019 quarter. It might drag down the full-year growth to a 5-year low of 6.8%. This has impacted the productive sectors of the economy.
RBI to infuse Rs. 12,500 liquidity
The RBI will infuse Rs.12,500 crore of liquidity into the system through purchase of government bonds.

The Central bank would purchase five government bonds under open market operations (OMOs) on June 20, 2019.

On June 11, the RBI had infused Rs.15,000 crore into the system through OMO purchase of six government bonds.
Libra: Facebook's cryptocurrency
Facebook is leaping into the world of cryptocurrency with its own digital money, designed to let people save, send or spend money as easily as firing off text messages.

‘Libra’, described as a new global currency was unveiled in a new initiative in payments for the world’s biggest social network.

Libra Association debuted with 28 members including Mastercard, Visa, and Women's World Banking.
World Bank agreed a loan agreement of USD 518 million to Pakistan for reforms
The World Bank has agreed a loan agreement of $518 million to Pakistan for reforms to enhance tax revenues and reduce compliance cost to provide better services to the public.

The bank approved $400 million loan for the Federal Board of Revenue (FBR) to increase its tax to gross domestic product ratio from 13% to 17% and enhance the number of income tax return filers, among other reforms.

The other $118 million will go to revenue mobilization and public resource management project of the country's northwest Khyber Pakhtunkhwa province to increase its capacity for revenue collection and the management of the province's resources.

The project aims to simplify the tax regime and strengthen the tax and customs administration. It will also support the FBR with technology and digital infrastructure and technical skills.

This will enable more effective use of taxpayer information and more targeted compliance as there are only 18 lakh people file income tax returns.
RBI sets up a committee to review the current framework for the MSME sector
The Reserve Bank of India had set up an eight-member expert committee under the leadership of former chairman of SEBI, UK Sinha on 18 June 2019. The aim is to review the current framework for the MSME sector.

The expert committee was set up to:
- suggest a long-term solutions for the economic and financial sustainability of the micro, small and medium enterprises
- to study the impact of the recent economic reforms on the sector
- to identify the structural problems affecting its growth
- to submit the report analysis by the end of June
- Upon reviewing the existing MSME focused policies and their impact, the committee will propose measures for leveraging technology in accelerating growth of the sector apart from recommending the global best practices.
- The setting up the expert committee was announced by RBI at the December 2018 monetary policy announcement.
Bangladesh has emerged as fastest growing economy among 45 countries of Asia-Pacific region
Bangladesh has emerged as the fastest growing economy among the 45 countries of the Asia-Pacific region according to Asian Development Bank (ADB).

In the financial year 2018-19 Bangladesh attained growth rate of 7.9 % which is its fastest rate since 1974. The bank predicted that the growth will be 8% in the next financial year.

The ADB country director handed over the report to the Prime Minister of Bangladesh Sheikh Hasina last evening.

Higher public sector investment, stronger consumption demand, revival in exports, improved power supply and higher growth in private sector credit were the key factors of the high growth performance of Bangladesh.
Government to revamp Pradhan Mantri Mudra Yojana Scheme
The finance ministry plans to revamp Pradhan Mantri Mudra Yojna (PMMY), to ensure better access to credit for small firms, boost entrepreneurship and promote financial inclusion.

Under the scheme, collateral-free loan of up to Rs.10 lakh falls under three categories—Shishu, Kishore and Tarun.

Shishu accounts for loans of up to Rs.50,000, while Rs.50,001 to Rs.5 lakh are disbursed under Kishore.
IndusInd Bank to merge with BFIL
IndusInd Bank announced 4 July, 2019 as the effective date of the merger with Bharat Financial Inclusion Ltd (BFIL).

M R Rao, current CEO of BFIL, will become the CEO of IndusInd Financial Inclusion Ltd (IFIL).

The Business Correspondent network of BFIL will operate under IFIL.
President Ram Nath Kovind announced farmer income support
President Ram Nath Kovind announced that the government was working towards a 25-trillion farm productivity spend and 900-billion annual spend on farmers’ income support.

Fixing problems in the rural economy and giving relief to farmers was the top priority of the Narendra Modi government during its second term.

25 trillion will be invested to improve agriculture productivity.
Canara Bank updated rules for cash deposits
From July 1, 2019, Canara Bank customers can deposit cash of up to Rs 50,000 for free only thrice a month.

From the fourth transaction or for cash deposits of over Rs 50,000, there will be a service charge of Rs 1 per thousand, with a minimum of Rs 50 and a maximum of Rs 5,000 plus GST.

For current account/overdraft/open cash credit account holders a minimum Rs. 100 will be charged.
GST Council simplifies rules for registration
The GST Council has simplified rules for registration and Aadhaar will now be used by businesses for registration under GST.

In the earlier system, people had to give various documents and now, several advantages will occur to the business by using Aadhaar.

35th meeting of the Council in New Delhi.

Finance Ministers of Karnataka, Mizoram and Telangana were unable to attend the meeting due to their prior commitments.

GST Council approved imposing a penalty of up to 10 per cent on entities not passing on benefits of GST rate cuts to consumers.

The council has also extended the date for filing annual returns under the Goods and Services Tax regime by two months to 30th of August.

It has also given in principle approval to electronic invoicing system and e-ticketing in multiplexes.

Now it is mandatory for the multiplexes to issue electronic tickets.

The GST Council has extended date for filing annual returns under GST by two months to 30th August.

The council has also extended the tenure of National Anti-Profiteering Authority by two more years.

The anti-profiteering authority deals with complaints by consumers against companies for not passing on GST rate cut benefits.

The proposal to reduce GST rate on electric vehicles to 5 per cent from the current 12 per cent and the GST rate on electric charger to 12 per cent from 18 per cent has been sent to fitment committee.
Index to measure fiscal performance launched
Confederation of Indian Industry (CII) has launched a Fiscal Performance Index (FPI) to assess state and central budgets.

The Index incorporates qualitative assessments of revenue expenditure, capital expenditure, revenues, fiscal prudence and the level of public debt arrive at a more holistic picture of fiscal performance than the fiscal deficit to GDP ratio.
'Benchmarking India's Payment Systems' report
The report on 'Benchmarking India’s Payment Systems' was released by RBI on 4 June 2019.

The report says India has a strong regulatory system and retail payment systems but more efforts are needed to bring down the volume of the paper clearing.

The country is 'strong' in areas like having necessary laws and cash in circulation per capita.
The G20 Summit ended with the issual of joint statement on trade and the digital economy
In the G20 Summit, the Finance Ministers and Central Bank Governors from the Group of 20 economies issued a joint statement on trade and the digital economy. The meeting was held in Tsukuba, Japan on 8 and 9 June 2019.

The G20 Summit was focused on the ways to promote trade and cooperation among the G20 countries in order to harness the potential of the digital economy.

The Finance Ministers discussed new tax rules on global IT giants as well as the impact of aging populations on the economy as the corporate sector make huge profits through cross-border data transfers.

Global growth is being stable and is expected to pick up moderately by late 2019 and into 2020.

However, growth remains low and risks remain tilted to the downside as trade and geopolitical tensions have been intensified.

The Ministers confirmed their commitment to refraining from competitive currency devaluations in order to gain an unfair trade advantage.

They also agreed on guiding principles for using artificial intelligence which is created on the 36-member OECD and an additional six countries. They also planned to highlight divisions over trade issues such as reform of the World Trade Organization.
India’s automobiles major Mahindra won gold award in South Africa
India's automobile major Mahindra won the Gold Award for fairing on various indicators.

The automobile giant, which has more than 60 dealers in South Africa, secured the top position out of the 29 vehicle brands surveyed for the awards.
RBI allows banks to offer cheque book for no-frills accounts
The RBI has allowed banks to offer cheque book facility and other services to the no-frills account holders.

But they could not ask such account holders to maintain any minimum balance for such services.

As per the norms of no-frills account, account holders are not required to maintain minimum balance and can get certain minimum facilities for free.
New GST return system to be introduced
The GST Council has decided to introduce a new GST return system to facilitate taxpayers.

A plan has been worked out to ease the transition to the new return system.

There are 3 main components to the new return - one main return

(FORM GST RET-1) and two annexures (FORM GST ANX-1 and FORM GST ANX-2).

A prototype of the offline tool has already been shared on the common portal.
RBI constituted a committee to review ATM pricing
The RBI has constituted a 6-member committee to review the entire gamut of ATM charges and fees.

Chief Executive of Indian Banks’ Association VGKannan will chair the committee.

The committee will review existing patterns of costs, charges and interchange fees for ATM transactions.

It is to submit its report within two months from the date of its first meeting.
RBI sets up 6 member panel to examine the ATM charges and fees
The Reserve Bank of India (RBI) has set up a high-level six-member committee under IBA Chief Executive V G Kannan.

The committee will examine ATM charges and fees by banks amid demands for reviewing the levies. There have been persistent demands to change automated teller machines (ATM) charges and fees as its uses are growing significantly.

Head of the Panel: IBA Chief Executive V G Kannan

The members are Dilip Asbe (CEO, NPCI), Giri Kumar Nair (CGM, SBI), S Sampath Kumar (Group Head, Liability Products, HDFC Bank), K Srinivas (Director, Confederation of ATM Industry), Sanjeev Patel (CEO, Tata Communications Payment Solutions).

The panel will review the existing structures and patterns of costs, charges and interchange fees for ATM transactions. The committee is to review the overall patterns of usage of ATMs by cardholders and assess the impact, if any, on charges and interchange fees.

Also, the panel will be assessing the entire range of costs in respect of the ATM ecosystem and make recommendations on the optimal charge/interchange fee structure and pattern.
India's FDI Inflows during the five fiscal years of the Modi Govt hit to $42 billions
India turned out to be the sub region’s largest recipient receiving foreign direct investments worth $42 billion in 2018.

The investment in India billion with strong inflows in manufacturing, communication and financial services.

According to the report, FDI inflows have increased by 3.5% to $54 billion.

India attracted over 77% of the total foreign direct investments ultimately landed up to the South Asian region.

The growth in India in cross-border merger and acquisitions (M&As) reached $33 billion in 2018 from $23 billion a year ago.

Bangladesh and Sri Lanka rose to a record level, to $3.6 billion and USD 1.6 billion, respectively, while Pakistan witnessed a 27% decline in investment to USD 2.4 billion, the report read.

Several countries adopted policy measures to promote and facilitate investment with India

To amend the model concession agreement on public-private partnerships in the port sector.

The report highlighted that of the 5,400 special economic zones (SEZs) in the world, more than 4,000 are in developing countries in Asia.

China topped the list at 2,543 followed by Philippines (528),

India with 373, Turkey - 102, Thailand - 74 Korea 47, Malaysia - 45.
Indian Overseas Bank (IOB) launches ‘Bank on Wheels’ facility
Indian Overseas Bank (IOB) launched ‘Bank on Wheels’ facility in 14 of its lead districts in Tamil Nadu and Kerala.

The mobile van facility will enable the public, especially senior citizens, conveniently get door-step banking facility available at identified locations of the lead districts.

A dedicated banking correspondent will accompany the vehicle with a micro-ATM inside the van.
RBI to cut Repo rate by 25BPS on weak growth
The RBI’s monetary policy committee (MPC) will cut the key policy rate by 25 basis points (bps) as inflation cooled and economic growth slowed to a five-year low,

Basis point (BPS) refers to a common unit of measure for interest rates and other percentages in finance.One BPS is equal to 1/100th of 1%, or 0.01%, or 0.0001, and is used to denote the percentage change in a financial instrument.
ONGC became Indias most profitable public sector company
Oil and Natural Gas Corp (ONGC), India's top oil and gas producer, has toppled Indian Oil Corp (IOC) to regain the crown of being the country's most profitable public sector company.

Oil and Natural Gas Corp (ONGC) reported a 34% jump in its 2018- 19 fiscal net profit to Rs.26,716 crore.

Whereas, IOC registered a net profit of Rs.17.274 crore for the fiscal year ended March 31, 2019.

ONGC, in the previous two financial years, had lost the most profitable PSU tag to IOC. With its refining margins under pressure due to falling oil prices, IOC had also lost the title of being India's largest company by turnover tag to billionaire Mukesh Ambani-led Reliance Industries in FY19.

Reliance has been India's most profitable company for the fourth year in a row.
India will be 5th largest economy in 2019
India is forecast to become the world's fifth largest economy in 2019, reaching a total GDP size exceeding $3 trillion, and overtaking its former colonial ruler, the United Kingdom.

By 2025, Indian GDP is also forecast to surpass Japan, which will make India the second-largest economy in the Asia-Pacific region.
India-China Trade to Cross $100 Billion
India's Ambassador in Beijing has inaugurated an Indian oleoresin extraction firm's 3rd manufacturing facility in the country to expand its business in the Chinese food market.

Economic and commercial engagement between India and China constitutes a major component of the bilateral relations with bilateral trade, which crossed $95 billion last year, is set to cross USD 100 billion this year (2019).
RBI cuts repo rate by 25 bps to 5.75%
RBI Monetary Police Committee unanimously cut repo rate,the rate at which it lends to banks by 25 basis points from 6% to 5.75%.

The bank also changed the monetary policy stance from neutral to accommodative.

This is the third straight interest-rate cut under RBI Governor Shaktikanta Das, who also heads the Monetary Policy Committee (MPC).
Tamil Nadu government, World bank signed agreement
Tamil Nadu Government(GoTN) and the World Bank signed a $287-million loan agreement for the Tamil Nadu Health System Reform Programme (TNHSRP).

The main aim is to improve the quality of healthcare and to reduce the burden of non- communicable diseases (NCDs).

Tamil Nadu is also dealing with a growing burden of NCDs as they account for nearly 69 percent of deaths in the State.
RBI removes NEFT, RTGS payment charges
RBI has removed charges for payments via NEFT and RTGS.This means that payments via NEFT and RTGS would become either free or charges would be low.

RBI levies minimum charges on banks for transactions routed through its Real Time Gross Settlement System (RTGS) meant for large- value instantaneous fund transfers and the National Electronic Funds Transfer System for other fund transfers.