News highlights : 11 September 2016

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Nitin gadkari

01. South-East Asian nations to set up fund to prepare for health:

India along with 10 other member countries of WHO's South-East Asian Regional Committee has decided to set up a dedicated fund aimed at building preparedness for health emergencies in the region. Taking part in the 69th session of WHO Regional Committee Meeting at Colombo, they also passed a resolution for promoting physical activity and expanding health work forces across the region. "To date, post-disaster funding through South-East Asia Regional Health Emergency Fund has done an excellent job in helping countries respond to health emergencies once those have occurred, as we saw most recently in Nepal and SriLanka. "The new funding stream will allow countries to invest in infrastructure and human resources that will enhance preparedness," said Poonam Khetrapal Singh, Regional Director of WHO South-East Asia. In the recent years, earthquakes, cyclones and floods have caused health emergencies in south-east Asian region and it has also been threatened by a range of emerging diseases, including SARS, MERS CoV, pandemic influenza and Zika virus.

02. FDI: Manufacturing remains unattractive

The recently published Annual Report of Reserve Bank of India profiles the trends of foreign direct investment (FDI) flows into India. These offer some insights about the allocation of such investments these last few years. How and where capital resources are distributed in an economy is instructive for many reasons. Amongst other things, it tells us which sectors are more profitable or yield relatively higher returns to capital. Illustratively, the allocations of investments across the tradeable and non-tradeable segments shed light upon the relative attractiveness of these two aggregates. In turn, if non-tradeable goods’ prices are higher relative to those of tradeables, an internal appreciation of the real exchange rate, it carries significance for macroeconomic policies. At the balance of payments level, there are potential implications about future foreign currency earnings or liabilities from current investments. The most important is the employment link: to the extent the tradeable sector, typically manufacturing-exports, is demonstrably capable of large-scale absorption of surplus, unskilled labour, where FDI tends to flow indicates prospects for mass-scale job creation.

03. CBEC to be rechristened as CBIT under GST regime :

Apex indirect tax body CBEC will be renamed as the Central Board of Indirect Tax (CBIT) once the new national tax framework kicks in from April 1 next year, as per the draft dealing in GST organisational structure prepared by the Centre. Headed by a secretary-level officer, CBIT will implement the rules, including exemptions and threshold, to be set by the GST Council, which is chaired by Union Finance Minister and has state finance ministers as its members. The government plans to implement the new indirect tax regime goods and services tax (GST) from April 1, 2017. GST will subsume central excise, service tax and other local levies, including VAT and octroi. A revenue department official said the organisational structure of GST is being worked out and CBEC will be renamed. To give effect to this, the Centre is reworking the composition of the Central Board of Excise and Customs (CBEC) to make it more comprehensive. CBIT will consist of six members, who will look after Customs, policy and IT, central excise and legal issues, training and litigation. Besides, an additional secretary of the department of revenue, who will be secretary to the GST Council, will be a CBIT member for Central GST (CGST) and Integrated GST (IGST) related matters.

04. After bank, BRICS nations now mull rating agency :

After setting up the New Development Bank on the lines of the World Bank, the heads of BRICS countries are likely to resolve next month to set up a credit rating agency, with the aim of ending the dominance of the likes of Standard & Poor’s, Moody’s and Fitch. The five countries — Brazil, Russia, India, China and South Africa — which account for a fifth of the world GDP and are generally growing at a much faster pace than the global economy — are also considering developing robust arbitration mechanisms within themselves to counter the current system dominated by the advanced nations. “These two plans are among the deliverables for the 8th BRICS summit in Goa on October 15-16,” an official told FE. Deprived of fair representation in global institutional mechanisms such as the World Bank and the International Monetary Fund, the BRICS nations set up the New Development Bank (NDB) earlier this year. While currently the five countries hold equal stakes in the new multilateral financing agency, in future, other emerging countries might be roped in to make it a truly global development bank. As the bloc tries to expand cooperation between the five countries, a Memorandum of Cooperation for instituting a BRICS credit rating agency is likely to be signed at the Goa summit. The think-tanks and experts of BRICS have recently held wide-ranging deliberations on setting up the rating agency after the finance ministers of the bloc called for a dialogue on the subject in April.

05. MUDRA lends over Rs 42,000 crore in 5 months, sees pickup in H2 :

Prime Minister Narendra Modi's pet project, Micro Units Development & Refinance Agency (MUDRA), has disbursed over Rs 42,000 crore in the five months of this financial year. This is one fourth of its annual target of Rs 1,80,000 crore. The lending agency's disbursals nearly doubled in the last two months to about Rs 27,000 crore from the Rs 15,000 crore it disbursed in the first quarter of the current fiscal year. "Monsoons have been very good and we anticipate credit to pick up in the second half," Jiji Mammen, MD of MUDRA, said. "Also, with the upcoming festive and harvest season, things should look much better." Mudra has so far disbursed loans over Rs 1.3 lakh crore to 35 million borrowers. 35% of the total loans sanctioned last year were disbursed by MFIs. Among 45% of total loans disbursed by PSUs, 20% was disbursed by SBI alone while 23% was disbursed by private banks. Of the planned disbursement of Rs 1.8 lakh crore this fiscal year, public sector banks would disburse Rs 77,700 crore, followed by Rs 21,000 crore by private and foreign banks, Rs 15,000 crore by regional rural banks andRs 64,240 by MFIs. MUDRA was established as a subsidiary of Small Industries Development Bank of India by Modi in April this year.

06. Assocham delegation visits Silicon Valley to spur business :

A delegation of leaders and experts in business, education and economic development recently visited Silicon Valley for scouting business opportunities for Indian tech companies, a top industry body said. The Associated Chambers of Commerce and Industry of India (Assocham) delegation visited the Silicon Valley from August 31 to September 8, a statement from the industry body said. “The Assocham delegation visited various technology companies and universities including Google, Facebook, Stanford University and Singularity University to interact with various officials, think-tanks and industrial houses with a focus on marketing, investment and joint ventures in India,” the statement said. Discussions were held on a series of issues, ranging from exponential thinking and possibilities that can transform workplace practices to collaboration of academia, non-profits and industry to make huge strides in sectors like education, finance and livelihood, it said. The delegation was headed by Assocham President Sunil Kanoria.

07. Nitin Gadkari pushes for leapfrogging into methanol economy :

Can India kick its habit of depending on costly import of petroleum products by getting hooked onto a new form of industrial alcohol called methanol? The government’s key think tank the National Institute for Transforming India or the NITI Aayog is seriously exploring deploying methanol as a possible way to achieve energy independence for India. A radical idea, it believes, also offers a solution to climate change. Is wood alcohol the solution to India’s huge oil import bill as Transport Minister Nitin Gadkari vows to eliminate petroleum imports? India’s influential Transport Minister speaking at an event to brainstorm on methanol economy as a substitute for oil and gas vowed ‘we want to create a country where import bill for petroleum is zero!’ Today India annually spends Rs 4.5 lakh crore on importing petroleum products. Gadkari feels ‘methane is a cost effective import substitution’. It is also a great way of generating ‘wealth from waste’ asserts Gadkari who never misses an opportunity to drive home the point on how he made Rs 18 crore by selling municipal waste water in Nagpur from which methane was one of the by-products.

08. States get more freedom to spend funds under CSS :

Government has issued fresh flexi-fund guidelines that will give more freedom to states in spending money under the Centrally Sponsored Schemes (CSS) to meet local developmental requirements. Under the new norms, flexi-funds in each CSS has been increased from the current 10 per cent to 25 per cent for states and 30 per cent for Union Territories. The flexi-fund component, the Finance Ministry said, will provide “flexibility” to states to meet local needs and requirements and pilot innovation to improve efficiency. States can use the fund to undertake mitigation or restoration activities in case of natural calamities, or to satisfy local requirements in areas affected by internal security disturbances. “States may, if they so desire, set aside 25 per cent of any CSS as flexi-fund to be spent on any sub-scheme or component or innovation that is in line with the overall aim and objective of the approved Scheme,” the guidelines said.

09. Centre working on an alternative to direct transfer of fertiliser subsidy to farmers :

Moving away from its initial plan for direct cash benefit transfer (DBT) of fertiliser subsidy to farmers, the government is now considering a two pronged approach — while the subsidy payment will continue at the producer level, farmers will be identified using a mix of their Aadhaar number, soil health card and land records. This is aimed at better identification of beneficiaries and providing them with the right mix and quantity of nutrients. The sales of fertiliser will be made through point of sale machines to prevent leakages and ensure that actual sales are made, in a way akin to DBT in kind, like in the case of food subsidy. “The fertiliser subsidy will not be in the lines of direct benefit transfer in cooking gas at the retail level. Instead, the idea is to identify the farmer and his land and allocate the right amount and kind of fertiliser depending on his land record and soil fertility,” said an official familiar with the development.

10. EPFO subscribers may get 8.6% interest rate this fiscal :

Over 4 crore EPFO subscribers may get a lower interest rate of 8.6 per cent on their PF deposits for the current financial year as the Labour Ministry is expected to toe the Finance Ministry line to cut the rate. The Employees Provident Fund Organisation (EPFO) had provided 8.8 per cent interest rate on EPF deposits for 2015-16 despite Finance Ministry’s ratification for 8.7 per cent. “Finance Ministry has been nudging Labour Ministry to keep interest rate on EPF in line with other small savings schemes administered by it. There is a broad consensus between the two ministries to fix 8.6 per cent interest for this fiscal,” a source privy to the development said. The source further said that EPFO has not worked out the income projection for the current fiscal. The Central Board of Trustees (CBT), EPFO’s apex decision making body, takes a call on interest rate on the basis of income projection. The board fixes the interest rate for a financial year and it is approved by its advisory body Finance, Audit and Investment Committee (FAIC). As per the practice, Finance Ministry gives concurrence to the rate of interest fixed by CBT considering the income projections of a year. After its ratification, the interest rate is notified and credited into the account of subscribers.