March 2021 Economic Affairs

Sakshi Education

Ex-RBI Deputy Governor Gopinath to head panel on bank licences
RBI established a five-member Standing External Advisory Committee (SEAC), led by former Reserve Bank of India Deputy Governor Shyamala Gopinath, to evaluate applications from Universal Bank and Small Finance Bank (SFB).

The Standing External Advisory Committee (SEAC) will be composed of prominent individuals with experience in the banking, financial sector and other related fields

The committee will serve for three years.

The committee’s secretary support will be provided by the Regulatory Department of the Reserve Bank of India.

Applications from Universal Bank and SFB will first be evaluated by the Reserve Bank of India (RBI) to ensure that the applicant has the ostensible qualifications, and then SEAC will evaluate the application.

Small Financial Bank (SFB):Small financial banks are financial institutions that provide financial services to unserviced and unbanked areas of the country.

Registered as a public limited company under the 2013 Companies Act.
Centre readies draft plan for district-wise export promotion
After determining the products and services with export potential, the government has prepared draft regional export promotion plans for 451 districts

The government’s goal is to achieve double-digit export growth from 500 districts within 3-5 years.

Require states, with the assistance of the Directorate-General of Foreign Trade (DGFT), to compile an annual "export ranking index" for districts related to export competitiveness.

Although foreign trade accounts for 45% of India’s GDP, most of the export promotion work is promoted by the center.

The district-specific approach requires states to identify potential export sectors and logistics bottlenecks that need to be resolved.

In the initial stage, products and services with export potential in each districts have been identified, and the State and District Export Promotion Committees institutional mechanisms are being established, and an action plan has been formulated to increase exports in each districts .

With the exception of West Bengal, the District Export Promotion Committees in all states have been notified.
Fitch Ratings revises India's growth estimate to 12.8% for next fiscal
American credit rating agency, Fitch, has published its ‘Global Economic Outlook (GEO)’. Fitch has revised GDP growth estimate of India to 12.8% for the fiscal year 2021-2022 from the previous 11%.

Ratings were revised in the backdrop of loose fiscal stance, stronger carryover effect, and better virus containment.

Ratings agency finds that level of India’s GDP will remain well below its pre-pandemic forecast trajectory.

It also projects that GDP growth will ease to 5.8% in Fiscal Year 2023. In its report, fitch also highlights that India’s recovery from “lockdown-induced recession” in second quarter of 2020 has been swifter than expected.

GDP has surpassed its pre-pandemic level in fourth quarter of the fiscal 2020-2021. As per the report, High-frequency indicators point for a strong start to 2021. Manufacturing Purchasing Managers’ Index PMI remained elevated in February, 2021.

Report also highlights that, pickup in mobility and a rise in services PMI point to further gains in the services sector. Fitch also notes that, it doesn’t expect Reserve Bank of India (RBI) to cut its policy rate now because of brighter short-term growth outlook and limited decline in inflation.
Parliament passes Finance Bill 2021
Parliament has passed the “Finance Bill 2021” on March 23, 2021. Bill seeks to bring financial proposals of central government in effect for the financial year 2021-22.

Bill was passed by lower house of the Parliament with several amendments. It proposes for some changes in proposals which were made in union budget 2021 with the objective of boosting the ease of doing business and easing compliance burden.

The bill provides 10-year income-tax exemption to National Bank in order to Finance the Infrastructure and Development. It also provides for 5-year tax exemption to the private sector development finance institutions.

The exemption is extendable to another five years. Bill amends the Finance Act, Income Tax Act, 1961; Securities Contracts (Regulation) Act, 1956; Central Sales Tax Act, 1956; Life Insurance Corporation Act, 1956 and SEBI Act, 1992.

According to the bill, senior citizens who gets pension and interest income have exempted from filing tax returns. However, no changes have been made in the income tax rate.
Nirmala Sitharaman launches Central Scrutiny Centre and IEPFA mobile App
Union Minister for Finance & Corporate Affairs, Smt. Nirmala Sitharaman, has launched Central Scrutiny Centre (CSC) and Investor Education and Protection Fund Authority (IEPFA) Mobile App. These tech-enabled initiatives were developed by Ministry of Corporate Affairs to strengthen vision of “Digitally Empowered India”.

These two initiatives will help in creating a new corporate and investor friendly ecosystem. The ministry of corporate affairs will bring in more tech-enabled services to attain ease of doing business and ease of living for people.

According to Finance Minister, Ministry of Corporate affairs has been engaged in digitisation, automation and improvement in order to extend support to society, economy, corporates and professionals.

She also added that, around 1.38 lakhs companies have been incorporated as opposed to 1.16 lakhs companies last year by Central Registration Centre as of February 2021. Thus, registration has increased by over 17%.

Central Scrutiny Centre would help in scrutinize certain Straight Through Process (STP) Forms filed by corporates on MCA21 registry. It would flag companies for more in-depth scrutiny.

This scrutiny centre was established with the objective of ensuring that data quality remains uncompromised and free from any flaws. CSC would primarily scrutinise filings made by users under the straight through processes and identify data quality issues and irregularities.

This Mobile App was launched with the aim of achieving goal of financial literacy and spreading awareness, education & protection among investors in rural as well as urban areas. The app will push for Ease of Living. It has been developed for citizen engagement and information dissemination in order to promote awareness among investors.

The app comprises of facility to track status and progress of IEPF claim refund process. It also provides a mechanism for investors and common citizens in order to report on suspected fraudulent schemes.
RTGS facility could be extended beyond Indian shores: RBI Governor
Governor of Reserve Bank of India, Shaktikanta Das, while speaking at 7th edition of India Economic Conclave has called for effective regulation which should help innovation in fintech space.

According to RBI Governor, Real-Time Gross Settlement (RTGS) has multi-currency capabilities. So, there is scope to explore if it can be expanded beyond India. He also underlined the huge role which technology and innovation played in serving consumers better and faster.

According to him, during the covid-19 pandemic, RBI processed 274 crore digital transactions in order to provide direct benefit transfer to people. To boost the digital payments, RBI also allowed transfer of funds through Real-Time Gross Settlement (RTGS).
Rajya Sabha passes bill to establish a Development Finance Institution for long-term infra projects
The Rajya Sabha cleared the legislation to establish the National Bank for Financing Infrastructure and Development (NBFID), which was announced in the Budget speech by Finance Minister as the principal development financial institution (DFIs) for infrastructure financing.

Opposition members argued unsuccessfully for sending the Bill to a select committee, saying that in its present form, there was no scope for “external oversight or surveillance”.

Finance Minister, however, said all safeguards had been provided for and an audited report would be placed in Parliament every year.

Opposition leader Jairam Ramesh opened the debate, saying the concept of DFIs had already been tried, tested and rejected.

The first such institution was set up in 1948. In 1991, Manmohan Singh, as Finance Minister, had set up the Narsimham committee, which came to the conclusion that the era of the DFIs was over.

Thirty years after Dr. Manmohan Singh’s Budget, the clock has turned back and we are going back to the DFI era.

He said that despite the government having a 26% stake in this bank, the Bill did not provide for an oversight mechanism.

The other lacuna was the protection provided to management for the decisions it takes as an “act of good faith”. “What is an act of good faith? Who will determine an act of good faith

Finance Minister said the NBFID was the need of the hour and the need of the next 25 years.

The infrastructure that it planned to fund was not only roads but also social infrastructure like schools and hospitals.

It would be a professionally run body, with only the government appointing the Chairperson.

The Bill had safeguards, including the provision that the NBFID had to furnish to the Centre and the RBI a copy of its balance-sheet and accounts.
India's foreign-exchange reserves become world’s fourth-largest
India's foreign exchange trading has become the world's fourth largest foreign exchange. India's foreign exchange reserves surpass Russia, becoming the world's fourth largest foreign exchange reserves.

India’s reserves are sufficient to cover approximately 18 months of imports, thanks to the scarce current account surplus, funds flowing into the local stock market and the increase in foreign direct investment.

As of March 5, India’s foreign currency holdings had decreased by US$4.3 billion to US$580.3 billion.

China has the largest foreign exchange reserves, followed by Japan and Switzerland on the International Monetary Fund (IMF) table.
US becomes India's second biggest oil supplier, Saudi plunges to fourth spot
The United States has surpassed Saudi Arabia to become India's second largest oil supplier. This shift came after refineries increased their purchases of cheaper U.S. crude oil to record levels to offset OPEC+ production cuts.

The shift in supply was triggered by lower crude oil demand in the United States. It coincided that Saudi Arabia voluntarily cut its output by 1 million barrels per day in accordance with an agreement between the Organization of Petroleum Exporting Countries and its allies (OPEC+) to maintain a low output.

India’s oil imports from the United States, the world’s largest oil producer, increased to 48%, reaching a record 545,300 barrels per day (barrels/day) in February 2021, accounting for 14% of India’s total imports in February.

On the other hand, since January 2021, India’s imports from Saudi Arabia have decreased by 42%, falling to a 10-year low of 445,200 barrels per day.

As a result, Saudi Arabia, which has always been one of India’s two largest oil suppliers, fell to fourth place for the first time since 2006.

India is the world's third largest oil importer and consumer. The country has repeatedly called on major oil producers to ease supply constraints and help the global economy recover. India also pointed to Saudi Arabia's voluntary cuts to promote the rise of global oil prices.

According to data, Iraq is still India's largest oil seller. Even though oil purchases fell by 23% from a five-month low to 867,500 bpd, they maintained their highest position.

Iraq has also cut its annual oil supply to Indian refineries by 20% in 2021 to fulfill its obligations under the OPEC production agreement.
‘Tackle CNG vehicle cost, bring it under GST’
India needs to bring CNG under the GST regime and tackle challenges such as high vehicle cost and limited boot space for the growth of the natural gas vehicle market, according to a report by Nomura Research Institute Consulting & Solutions India.

The report on ‘natural gas vehicle (NGV) market’ stated that the CNG vehicle market has seen compounded annual growth rate of 7% to 33.76 lakh units in March 2020 from March 2016, mainly driven by passenger vehicles (cars and taxis).

The demand for such vehicles, however, is concentrated in Maharashtra (30%), Gujarat (29%), Delhi (23%), Uttar Pradesh (9%), and Haryana (5%).

India has large domestic reserves of natural gas as compared to crude oil.

India has explored about 5 trillion cubic metres of recoverable reserves, of which less than 0.5% is used as fuel in the current CNG fleet,” it said.

High vehicle volume and favourable conditions in the Indian automotive market presented an opportunity to promote NGVs.
Modi govt lists assets for monetisation: from stadiums, stations to telecom towers, pipelines to roads
The target of raising around Rs 2.5 lakh crore through asset sales, the government has lined up plans to monetise assets including roads, electricity transmission, oil and gas pipelines, and telecom towers, sports stadia, among others.

The assets shortlisted come under the purview of eight ministries.

Alongside these core sector assets, the plan includes awarding 150 passenger trains to private players; divestment of the equity stake of Airports Authority of India in the joint ventures that operate the Delhi, Mumbai, Bangalore and Hyderabad airports; and leasing out stadiums such as the Jawaharlal Nehru Stadium in the national capital.

The Niti Aayog is in the process of preparing a National Monetisation Pipeline for FY21-24 and has asked ministries to identify and share information on the assets to be included in the pipeline.

A Core Group of Secretaries for Asset Monetisation met last month to discuss the shortlist of assets identified for monetisation in 2021-22.

While the government has been planning asset sale for over two years now, Finance Minister presented the broad contours of the Asset Monetisation Pipeline in the Budget for 2021-22.

Subsequently, the Prime Minister put his weight behind the private sector and sought to link privatisation and monetisation of assets with the government’s need to spend in welfare and development projects.

Such a concerted push also comes in the backdrop of sliding tax revenues and a patchy record in meeting the disinvestment targets set in each of the last five years.

According to sources, the Ministry of Railways targets raising Rs 90,000 crore through asset monetisation in 2021-22 with plans to award 150 passenger trains to private players during the year.

It also hopes to issue RFPs (Requests for Proposal) and RFQs (Requests for Qualification) to redevelop 50 railway stations by March-end.

While the Ministry of Road Transport and Highways plans to monetise 7,200 kms of roads through various means including infrastructure investment trust (InvIT), Toll-Operate-Transfer (TOT) and securitisation, the government plans to monetise transmission assets of PGCIL in two lots. In the first lot, it plans to monetise assets valued at over Rs 7,000 crore in 2021-22.

Besides, the government plans to monetise assets of MTNL, BSNL and Bharatnet. The Department of Telecommunications is learnt to have informed the core group that it has already undertaken the monetisation of tower assets of BSNL and optical fibre under Bharatnet.

The committee, however, raised concerns over the slow progress on monetisation of telecom and non-core assets (land parcels) of BSNL.

With a Rs 20,000 crore target, the Ministry of Youth Affairs and Sports plans to monetise the sports stadia under its purview.

While the ministry plans to initiate an exercise to identify assets, the committee asked it to expedite the appointment of transaction advisor for Jawaharlal Nehru Stadium project.

The stadiums are likely to be leased out to the private sector by way of an operation and maintenance contract.

As for sale of assets under the Ministry of Civil Aviation in 2021-22, the government is considering to sell Airports Authority of India stake in the joint venture of Delhi, Mumbai, Bangalore and Hyderabad airports.

This is besides the 13 AAI airports that it willlmonetise through the OMDA based model (Operation, Management, Development Agreement).

Also, the Ministry of Shipping Ports and Waterways has identified over 30 berths that it plans to monetise through PPP mode.

Other than these, eight ministries and several others may be included to undertake the asset monetisation exercise. Some potential ministries that may be included are the Ministry of Coal, Ministry of Mines, Ministry of Tourism and the Ministry of Housing and Urban Affairs.
New DFI must curb reliance on foreign funds, says K.V. Kamath
Making a case for an upgrade in India’s sovereign rating, former New Development Bank president K.V. Kamath recently said the new development finance institution (DFI) cleared by the Union Cabinet must be careful about preventing ‘excessive reliance’ on foreign funds.

With all the efforts that the government is making, the sovereign rating itself would need to move up.

I don’t think that they can hold India’s rating where it is; wherever you look at, this rating is misplaced by at least a notch, if not more.

The Economic Survey 2020-21 had also argued India’s sovereign ratings did not reflect its fundamentals.

Never in the history of sovereign credit ratings has the fifth-largest economy in the world been rated at the lowest rung of the investment-grade (BBB-/Baa3),” it had noted, adding that it also damages foreign portfolio investment flows.

Speaking at a programme titled ‘Shaping Development Finance Institutions: New Opportunities and Policy Options’ hosted by the India International Centre and RIS, Mr. Kamath said the new DFI should be able to borrow from abroad at sovereign rates but called for careful consideration before foreign capital was pursued.

“The institution will have to carefully assess if you are going to use external borrowing for rupee needs, what the total cost is and if it’s still attractive to a borrower.”

He stressed even global development banks’ soft loans were ‘not really soft’ and ‘excessive reliance on international funds’ would not be prudent.
Govt, RBI likely to retain inflation band for next 5 years
The government is expected to retain the medium-term inflation target at 4 per cent, with inflation band at 2-6 per cent, for the next five years

Under India’s flexible inflation targeting (FIT) approach, the central bank is expected to work to maintain retail inflation at 4%, with an upper tolerance limit of 6% and a lower limit of 2%.

The government may reset the rate at 5% to provide the central bank more leeway to cut policy rates and support growth in the pandemic-struck economy.

Inflation targeted based on monetary policy system wherein the central bank (RBI) of a country has a specific target inflation rate for the medium-term and publicizes this rate.

The Central Government has notified 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016, to March 31, 2021, with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
WCD Ministry signs agreement with Invest India in New Delhi to enhance cooperation
Union Ministry of Women and Child Development signed an agreement with Invest India in New Delhi to enhance cooperation. The aim of the Memorandum of Understanding (MoU) is to enhance co-operation in the thematic areas of Nutrition, Child Protection and Development, Women Empowerment and convergent capacity building in mission mode.

It was signed by joint Secretary in the Ministry Aditi Das Raut and Vice President, Invest India, Hindol Sengupta. To formulate, design and conduct strategic research for the Ministry, DRISHTI under Invest India will conduct input and output analysis research, and other research as per requirement including coordinating with research agencies for primary, secondary and tertiary research.
AckoDrive partners with IDFC FIRST Bank to issue free FASTags
AckoDrive, a one-stop solution for first-hand car buying, has announced a partnership with IDFC FIRST Bank to issue free FASTags. With AckoDrive getting a FASTag is hassle free and convenient. Unlike FASTags issued by others, AckoDrive's digital platform requires no issuance fee, no paperwork or security deposit. Any private car owner can purchase a FASTag from AckoDrive's platform by submitting a few personal and vehicle details and by adding the initial wallet money of Rs. 100 to recharge the FASTag. These FASTagscan also be used for contactless payments for fuel purchase at HPCL pumps. During the purchase, AckoDrive will automatically create a FASTag wallet for the car owner with IDFC FIRST bank. It can be easily recharged through the AckoDrive platform itself, along with other regular options.

ACKO Technology and Services P Ltd. is holding company of ACKO General Insurance Limited and AckoDrive - a new product from ACKO Technologies and Services P Ltd. It acts as a virtual car dealer. It gives a one-stop solution for the best first-hand car buying experience, right from car discovery to delivery at the best price. It offers the best deals along with the option to test drive the car before deciding on the product. The service is available in selected cities – Delhi NCR, Mumbai, Bangalore, Pune. There are cars available from 36 brands from economic level to premier level.
Yes Bank launches 'Yes Essence' services for women
Yes Bank on Monday announced the launch of women-centric 'Yes Essence' services that will offer preferentially-priced loans and healthcare benefits, among other services. It has been launched on the occasion of the International Women's Day.

'Yes Essence' is a holistic banking proposition for women across customer segments -- homemakers, salaried professionals, entrepreneurs and senior citizens -- which covers lifestyle, wellness, education, protection and investment, the lender said.

Yes Bank will celebrate the launch of this proposition with women customers throughout the bank's network of branches across India from March 8-10, 2021, it said in a release.

The bank will offer a bouquet of solutions, including complimentary healthcare benefits, preferential pricing on loans, fee waiver on demat and trading account, wealth management, offers on upskilling through partnerships, attractive lifestyle and shopping offers.

"The holistic proposition has been thoughtfully curated to empower women in the very roles that they have chosen for themselves - extending opportunities for selfenrichment, right from finance to healthcare," RajanPental, Global Head of Retail Banking at Yes Bank said.

The service with exclusive privileges aims to empower women and support them in the pursuit of their dreams and aspirations while also making their banking experience a rewarding one, he said.
Ujjivan Small Finance Bank launches Women savings account
Ujjivan Small Finance Bank has announced the launch of a "Women Savings Account" on Monday catering to the financial needs of women. 'Garima Savings Account', as the product has been named, will offer multiple customised benefits to women, including up to a maximum of 7% rate of interest on the savings account.

Through this product, Ujjivan SFB aims to serve the financially aware and economically active women of the mass market and become a companion in their day-to-day banking needs.

Garima Savings Account offers a higher cash deposit and free unlimited withdrawal at any Ujjivan SFB branch with no additional charges for non-home branch transactions. Customers would also enjoy unlimited free NEFT and RTGS transactions through internet banking and mobile banking, the bank said in a statement.
KVGB rolls out loan scheme for women entrepreneurs
Karnataka Vikas Grameena Bank (KVGB) has launched ‘Vikas She Plus’, a loan scheme for women to take up new ventures or for expanding/modifying the existing enterprises. This scheme provides loan up to a maximum of ?2 lakh with a repayment period of 60 months.

Quoting S Ravindran, Chairman of KVGB, a press release said that the bank has a target of reaching out to 5,000 women entrepreneurs under the ‘Vikas She Plus’ scheme across nine districts of its jurisdiction by this fiscal-end.

The bank has disbursed loans amounting to ?22 crore to about 2,500 women beneficiaries on the day of launch itself, he said.

Ravindran said that the bank had launched ‘Vikas GruhaSnehi’, a tailor-made product for the construction/renovation of kitchens last year. It had disbursed nearly ?10 crore under the scheme.

He said the bank, which has 627 branches, will open 10 more branches before March 31.
Railways Minister Piyush Goyal flags off 3000 HP Cape Gauge Locomotive for export to Mozambique
Minister of Railways Piyush Goyal today flagged off 3000 HP Cape Gauge Locomotive indigenously developed by Banaras Locomotive Works, Varanasi through video conferencing along with Minister of Transport and Communications of Mozambique JanfarAbdulai.

Union Minister of Skill Development and Entrepreneurship Dr.Mahendra Nath Pandey and other dignitaries were present at the event site.

The export of locomotives to Mozambique shall boost the Indo-African relationship and pilot the economic empowerment through export.

Indian Railways is exporting first batch of 2 locomotives as part of total order of 6 locomotives of 3000 HP cape gauge locomotive and 90 stainless steel passenger coaches to Mozambique.

These locomotives are developed indigenously by Banaras Locomotive Works under Make-in-India, they are being exported through Indian Railways’ PSU, Rites Limited.

In spirit of Atmanirbhar Bharat, these Cape Gauge Diesel Locos have been designed in India, Made in India and financed by India.

Mr Goyal said, under Prime Minister Narendra Modi's visionary leadership and his commitment to further strengthen African-Indian relations, we will work as Mozambique's trusted partner.

He said, with significant innovation, re-modelling and upgradation, Indian Railways wishes to become the preferred supplier for Mozambique and countries around the world for all their requirements.

The Minister said, India is willing to support further development of rail network in Mozambique.

He said, by 2030, Indian Railways plan to become a net-zero Railway and power the entire electricity requirements by renewable energy.

Mr Goyal said, Indian Railways will be the first large railway in the world to become 100 per cent electric traction driven.

Minister of Skill Development and Entrepreneurship Dr.Mahendra Nath Pandey said, good quality products manufactured by Indian Railways symbolises the mantra of Aatmanirbhar Bharat given by Prime Minister Modi.

He said, indigenously developed locomotives by BLW are an epitome of skilled workforce. He added that the vision is to make India a skill capital.

Minister of Transport and Communications of Mozambique JanfarAbdulai thanked the Government of India for the cooperation in the area of transportation.
Nitin Gadkari inaugurates two Technology Centres, three Extension Centres of MSME
Union Minister of Micro, Small and Medium Enterprises, Nitin Gadkari inaugurated the two Technology Centres and three Extension Centres of MSME virtually.

The Technology Centres which were inaugurated, have been set up at Visakhapatnam and Bhopal and the Extension Centres at Srinagar, Jaipur and Nagaur.

The MSME has rolled out the Technology Centres Systems Programme to develop the competitiveness ecosystems of MSME in the country.

These Technology Centres will train more than 16 thousand students annually and have infrastructure for training and production.

Mr Gadkari also launched the 7 Udyam Express Mobile Vans with a view to provide assistance to MSME in remote areas and also make aware the youth of rural areas about government’s schemes.

On this occasion, Mr Gadkari said that if the country has to overcome three biggest problems of poverty, starvation and unemployment, then we have to create jobs.

He emphasised on conversion of knowledge into wealth.

The Minister also stressed on a district-wise development plan to realise the dream of making an Aatmanirbhar Bharat.

He said, the technological centres should have coordination, cooperation and communication with the local industries.

The MSME Minister laid more emphasis on performance audit of all the technological and extension centres. He called upon all concerned to make the system result-oriented, transparent and corruption-free.

Speaking on the occasion, Minister of State for MSME, Pratap Chandra Sarangi said, nearly 2.50 lakh students are getting training at these centres and the tool room works from normal designing to the area of robotics.

Talking about the mobile Udyam Express, he said, these mobile vans will go to the villages and make people aware about all aspects of entrepreneurship along with imparting training to them.

Sebi forms expert group to examine feasibility of SPACs
Capital market regulator Sebi has formed a group of experts to examine the feasibility of introducing Special Purpose Acquisition Companies (SPACs) like structures in India, sources said on Thursday.

The group, formed under Sebi's Primary Market Advisory Committee (PMAC), has been asked to submit its report at the earliest, the sources added. "Sebi wants to explore the potential of SPACs while at the same time building adequate checks and balances in regulatory framework to take care of the associated risks," said a source privy to the development.

SPACs are formed to raise capital in an initial public offering (IPO) with the purpose of using the proceeds to identify and merge with a target company. SPACs are usually formed by private equity funds or financial institutions, with expertise in a particular industry or business sector, with investment for initial working capital and issue related expenses.

Such companies have recently become popular in the US. There has been increasing demand that SPACs should be allowed in India as well.

According to market experts, while SPACs have several advantages, they also raise various regulatory concerns.

For public shareholders, SPACs give the advantage of investing along with the sponsors in the SPAC like private equity type transactions. The advantage for the sponsor is that it allows rapid deployment of capital to take advantage of opportunities.

It also helps the target company acquired by the SPAC going public during periods of market instability or volatility in traditional IPO markets. SPACs also face several challenges. According to experts, SPACs have distinct trading cycles unlike an IPO.

They also need to deal with uncertainty risk like divergent interests of sponsors, investors and the target company. In the Indian context, some of the challenges are that merger through scheme of arrangement could be time consuming. Similarly, the process of liquidation could take considerable time, which might reduce the attractiveness of SPAC over IPO.

There are regulatory concerns and issues as well in the SPAC proposal. "As per the Companies Act, 2013, a company is required to commence business within one year of incorporation. This may not suit a SPAC which may not have business for nearly two years," said a company secretary. Other regulatory concerns could be the stage at which retail participation should be allowed.

Sebi regulations also would need amendment to allow listing of a SPAC which could initially be a non-operating company. The other concern is regarding change in control post amalgamation, which again might require amendments to takeover regulations, said a market expert.
India ‘out of recession’, GDP grows 0.4%
India’s economy returned to growth terrain in the third quarter of 2020-21, with a 0.4% rise in the GDP, even as the National Statistical Office estimated the economy to contract 8% during the full fiscal.

The NSO had earlier estimated a 7.7% contraction for FY21.

The GDP shrunk in the first two quarters by 24.4% and 7.3% respectively, following the COVID-19 pandemic and the lockdown.

Agriculture continued to grow strongly, with a 3.9% rise in GVA in Q3, even as manufacturing and construction resurged after two bad quarters.

India’s economy resurfaced to growth territory in the third quarter of fiscal year (FY) 2020-21, clocking a 0.4% rise in the gross domestic product (GDP), as per data from the National Statistical Office (NSO).

The NSO has also revised its advance national income estimates for FY21 to project an 8% decline in GDP, compared with the 4% growth seen in FY20. The NSO had earlier estimated a 7.7% shrinkage for FY21.

The Finance Ministry termed the 0.4% real GDP growth in Q3 as a return to ‘the pre-pandemic times of positive growth rates’ and a reflection of a ‘further strengthening of V-shaped recovery that began in Q2’.

India’s farm sector remained resilient, clocking a 3.9% growth in Gross Value Added (GVA) to the economy in the October-to-December quarter, after recording a 3.3% and 3% rise in the first two quarters, respectively.

For the full year FY21, the NSO expects only two sectors to record positive growth in GVA — agriculture (3%) and electricity, gas, water & other utilities (1.8%).

Overall GVA is expected to contract 6.5% in the year, led by an 18% dip in trade, hotels and other services, a 10.3% decline in construction, and an about 9% fall in mining and manufacturing GVA.

In Q3, manufacturing, construction and financial, real estate and professional services staged a return to growth for the first time in the year after two bad quarters.

Manufacturing GVA grew 1.6% after dipping 35.9% and 1.5% in the first two quarters. Construction saw the sharpest recovery – with GVA rising 6% after falling 49.4% and 7.2%.

Services including trade, hotels, transport and communication remained in trouble, with GVA declining 7.7%, though it was better than the -47.6% and the -15.3% reading in Q1 and Q2.

The Finance Ministry said the resurgence in manufacturing and construction augured well for them to drive growth in FY22 and added that services, which account for more than 50% of India’s GVA and the biggest source for pushing consumption, had done remarkably better in Q3.

Real GVA in services has also improved from a contraction of 21.4% in Q1 to a negligible contraction of 1% in Q3.

“Given the uncertainties around investments and exports, recovery prospects- hinge critically on uptick in private consumption- one would expect support from public policy.
RBI says banks reluctant to lend to big business
The Reserve Bank of India (RBI) has expressed concern over the contraction in credit offtake by large industries and infrastructure and pointed out that there’s reluctance on the part of bankers to lend to large industries.

The central bank also raised concern over the sharp deceleration in credit growth in the home loan segment and the adverse effect it may have on sectors like steel, cement and construction.

The recent decline in credit growth was mainly due to large industries, the central bank said in its study on ‘Sectoral deployment of bank credit’.

Owing to the stressed assets in large industries, there was a general reluctance on the part of bankers to lend to these industries, with the problem getting compounded by the pandemic.

Although credit growth to large industries turned negative in November 2020, the silver lining has been the robust growth of credit to medium industries.

Credit to micro and small industries registered a moderate increase between November 2019 and November 2020.

Credit to medium industries registered a robust growth of 19.1 per cent in January 2021 as compared to 2.8 per cent a year ago and credit to micro & small industries registered a growth of 0.9 per cent in January 2021 as compared to 0.5 per cent a year ago.

The RBI said there are signs of a turnaround, as evidenced by a spurt in property purchases in the recent period mainly on the back of support extended by the Government to this sector.

As the economy gathers momentum in 2021 and beyond, housing loans are expected to pick up.
Rising polymer raw material prices hit MSME plastic units
50,000 units in the plastics processing sector are believed to be operating below 50% of their rated capacity due to a sharp rise in raw material prices, said heads of All India plastic industry associations.

They added that if the crisis prolonged, about 20,000 MSME plastic units would be forced to close down.

Industry bodies said large petrochemical companies, including PSUs, had exponentially increased raw material prices by 40-155% in the last 8-10 months.

The associations have urged the Centre to direct Indian Oil, GAIL, OPAL, Haldia Petrochemicals and MRPL to streamline supply of raw materials at fair prices.

Several industry associations have urged the government to ban the export of the raw materials for one year and allow import of raw materials not produced in the country.

The industry is facing acute shortage of polymers, the main raw material for plastic goods production, which has varied applications.

The increase in raw material costs and its acute shortage in market is leading to escalation in project costs and is adversely impacting the cost competitiveness of MSMEs.