News highlights : 20 September 2016

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Mormugao

CURRENT AFFAIRS SEP 20, 2016

01. China facing possible debt crisis: BIS, bank watchdog

China’s banking sector could be facing an imminent debt crisis, a global central bank watchdog has warned, fuelling fresh fears of a blowout in the world’s second largest economy which could hit the global financial system. The Bank for International Settlements (BIS) — dubbed the central bank of central banks — said a gauge of Chinese debt had hit a record high in the first quarter of the year. China’s credit-to-GDP gap reached 30.1 per cent in the first quarter of 2016, its highest level ever and far above the 10 per cent level thought to present a risk to a country’s banking system, the Switzerland-based bank said in a quarterly report released. The BIS gave China a red signal: a warning that it could face a financial crisis in the next three years. China’s total debt hit 168.48 trillion yuan ($25 trillion) at the end of last year, equivalent to 249 per cent of national GDP, the China Academy of Social Sciences, a top government think tank, has estimated.

02. Final guidelines on payments banks soon :

The Reserve Bank of India (RBI) is soon set to bring out final operational guidelines for payments banks, more than a year after the regulator granted in-principle approval to 11 players for setting up such banks. This comes about close to two years after the final licensing guidelines had been issued in November 2014, which detailed the requirements and eligibility on the operational front. Three people familiar with the development told Business Standard that the banking regulator has made it clear that the final guidelines on operations would be out soon. This was also communicated to the players at a closed-door conference in Pune about a week ago. "RBI thinks the payments banks are a completely new set of banks and completely different from the ones that exist in the country," said a the person who was present at the meeting. "Therefore, we need far more detailed guidelines with respect to capital adequacy ratio, statutory liquidity requirements branches, etc." However, RBI hasn't given a timeline on when the guidelines are expected. But the in-principal approvals were handed out in September last year and the players had been given 18 months to begin operations.

03. GSTN under examination; Centre to hold majority stake :

The composition of Goods and Services Tax Network (GSTN), a private company tasked to create Information Technology infrastructure for GST, is under examination to give to the Centre majority stake in it. The government of India presently has 24.5 per cent stake in GSTN while state governments together hold another 24.5 per cent. The balance 51 per cent equity is with non-government financial institutions, like HDFC Bank, ICICI Bank and LIC Housing Finance. The development comes after apprehensions were raised against GSTN by many stake holders including association of Indian Revenue Service (Customs and Central Excise) officers. It had said since GSTN is funded by the central and state governments, there is no justification in entrusting its management to private individuals with heavy salary and allowance. “The central government is examining GSTN and may hold majority stake. This move has addressed our concern that such a valuable asset should not be controlled by private entities,” a spokesperson of the IRS association said. The association said that the model Goods and Services Tax (GST) law and rules are being framed. “Over 60,000 officers from the central and state governments are being trained by IRS officers, awareness to trade and industry is also being created,” the spokesperson said. The Centre has also notified GST Council, to be headed by Finance Minister Arun Jaitley, which will decide on the tax rate, exempted goods and the threshold under the new taxation regime. The government is planning to introduce GST legislations — Central GST (CGST) and Integrated GST (IGST) — in Winter Session of Parliament in November.

04. India to clock 8% growth over next few years: S&P

Backed by broadening of domestic consumption base, S&P Global Ratings today projected India to clock a "steroid-free" growth of 8 per cent over the next few years. In its 'APAC Economic Snapshots--September 2016' report, S&P said India's structural reform agenda has maintained strong momentum and should propel growth higher. "For India, we are still forecasting GDP growth at about 8 per cent over the next few years. Moreover, this is relatively high quality, "steroid-free" growth backed by a broadening consumption base," S&P said. Country's structural reform agenda has maintained strong momentum, most recently with the GST passage, and should propel growth higher, it added. "Inflation remains a risk, given the large weights on food, fuel, and other volatile items in the Reserve Bank of India's target basket," S&P said. The latest gross domestic production (GDP) figures showed that India's growth slowed to 7.1 per cent in the April-June quarter, from 7.9 per cent in January-March period

05. Enhance credit absorption capacity of weaker sections, RBI tells financial intermediaries:

The Reserve Bank of India wants financial intermediaries such as banks and non-banking finance companies to focus on a ‘3x3x3’ matrix so that small and marginal farmers, micro and small enterprises, and low-income earners in the unorganized sector are financially included. Speaking at a BRICS workshop on financial inclusion, organised by the Indian Banks’ Association, SS Mundra, RBI Deputy Governor, said the credit-absorption capacity of small and marginal farmers needs to be enhanced. Currently, farmers’ land holdings are fragmented and there should be some mechanism towards consolidation so that their credit absorption capacity goes up. Since micro and small enterprises (MSEs) have little or no credit history, financial intermediaries have to make efforts to initiate people into the formal credit system, said Mundra. When it comes to low salary earners in the unorganised sector, the Deputy Governor felt that their skills need to be enhanced so that their earning capacity increases. As small and marginal farmers generate adequate surplus, it is important that they be educated on investments. Given that the MSEs generate low surplus, there is a need for greater financial literacy and awareness

06. Narendra Modi govt does well with its inland waterway move, but infrastructure is a challenge :

The facts are clear in their verdict: in terms of fuel efficiency, a litre of fuel can move 24 tonne km (TKM) by road, 85 TKM by rail and 105 TKM by inland water transport (IWT). And a single unit of horsepower can move about 150 kg on road, 500 kg by rail and 4,000 kg by IWT. Yet coastal shipping and inland waterways account for a mere 6% of the country’s transport modal mix, as against 24% in China and 32% in neighbouring Bangladesh. This is a pity considering that India has a coastline of 7,500 km and inland waterways of more than 14,500 km. To set right this skewed ratio, the Union government has unveiled a host of steps in recent times, with the overall objective of increasing the modal share of coastal shipping and inland waterways to 10% by 2020. The recent decision to double the discount given for vessel-related charges to roll-on-roll-off (Ro-Ro) ships—that ferry cars and trucks along the coast—to 80% from 40% was one such move. It came after a shipper shut operations citing high marine charges, having transported a batch of Hyundai cars on special category Pure-Car-Truck-Carrier (PCTC) vessels—800 Hyundai cars had been moved on the coastal route from Chennai to Pipavav Port in Gujarat in February. The shipper recovered only 40% of the cost.

07. Scientists use stem cells to grow 3D lung-in-a-dish:

A team of researchers has created three-dimensional lung “organoids” — laboratory-grown lung-like tissue — to study diseases, including idiopathic pulmonary fibrosis. The three dimensional drug has been created by coating tiny gel beads with lung-derived stem cells and allowing them to self-assemble into the shape of air sacs found in human lungs. “While we haven’t built a fully functional lung, we have been able to take lung cells and place them in the correct geometrical spacing and pattern to mimic a human lung,” said Brigitte Gomperts, Associate Professor, at the University of California, at Los Angeles in the US. Idiopathic pulmonary fibrosis is a chronic lung disease characterised by scarring of the lungs. The scarring makes the lungs thick and stiff, which over time results in progressively worsening shortness of breath and lack of oxygen to the brain and vital organs.

08. Mormugao, Indian Navy's most advanced guided missile destroyer, launched in Mumbai:

An indigenously built warship equipped with a range of high-tech missiles was launched on 17th Sept 2016 with Navy chief Admiral Sunil Lanba saying the stealth destroyer can be compared with the best vessels in the world. Christened ' Mormugao ', the vessel has been built by government-run Mazgaon Dock Shipbuilders Ltd (MDL) and belongs to Visakhapatnam class of ships being constructed under Project 15B. The Project 15B missile destroyers are modern warships equipped with the latest weapons package in continuation of the lineage of the highly successful Delhi and Kolkata Class ships. Admiral Lanba's wife Reena launched the bedecked ship at a function at MDL here at 11.58am and it was released into the Arabian Sea for the first time. The vessel will undergo certain testings required by Indian Navy and would be subsequently known as INS Mormugao. Four more such destroyers would be built and delivered by MDL during 2020-2024, the PSU said in a statement

09. India to see gradual growth, RBI to be on easing path: Morgan Stanley :

Emerging market growth is expected to improve to 4.7 per cent in 2017 from 4 per cent this year as more economies, including India, will transition towards gradual recovery, says a Morgan Stanley report. According to Morgan Stanley Investment Management, emerging market growth outlook is likely to remain subdued on aggregate, but countries are expected do see “diverging” paths. “Growth in India and Indonesia will be sustained or pick up from the current levels while growth in China and Korea is expected to decelerate,” Morgan Stanley said, adding that macro-stability risks are benign in India and Indonesia, but debt/GDP continues to rise in China and Korea. On India, the report noted that while private investment growth continued to weaken in the second quarter, the overall recovery trend has continued to broaden out. Moreover, export growth is improving alongside a pick-up in private consumption, public capex and FDI. Meanwhile, growth in the third quarter appears to be picking up, with PMIs both for manufacturing and services sectors having moved to multiple-month highs, it added. “We expect aggregate emerging market growth to improve from 4.0 per cent this year to 4.7 per cent in 2017 as more economies will transition towards the gradual recovery stage, the report stated.

10. Telcos deposit Rs 14,653 crore for spectrum auction :

Leading telecom operators have deposited Rs 14,653 crore as earnest money for the country's largest ever spectrum auction from October 1, with Reliance Jio alone submitting Rs 6,500 crore. As per the information released by the Department of Telecom, with Rs 6,500, the Mukesh Ambani-led firm is eligible for placing bids in any of the 22 telecom circles in the country and in any spectrum band. Vodafone India has submitted EMD of Rs 2,740 crore, Idea Cellular Rs 2,000 crore and Bharti Airtel Rs 1,980 crore. These companies too are eligible for bidding in any circle. Earnest Money Deposit (EMD) is indicative of a company's strategy to bid in specific circles and spectrum bands. It gives them eligibility points with regard to those circles. Reliance Jio, as per the information, is only company which has potential to buy spectrum in premium 700 Mhz at floor price in most of the circles as a pan-India bidder for 700 Mhz spectrum needs to have EMD of Rs 5,610 crore. This is the first time that government will auction the 700 Mhz band, considered to be the most premium as the estimated cost of providing service through it is about one-third of 3G under the 2100 Mhz band.