News highlights : 22 September 2016

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Arun jaitley

CURRENT AFFAIRS SEP 22, 2016

01. Railway budget scrapped, merged with general budget:

There will be no separate railway budget from the next financial year. The Union Cabinet on 21ST Sept 2016 gave its nod to merge the railway budget with the general budget from next year, putting an end to a practice that started in 1924. "Rail budget and general budget will be amalgamated from now, there will only be one budget," finance minister Arun Jaitley said after the Cabinet meeting. "However, the functional autonomy of railways will be maintained," Jaitley said. The decision to merge the railway budget with the general budget is significant as in recent years, particularly since coalition governments post-1996, political heavy weights have used the railway budget to hand out goodies and for their own image building. With the railway portfolio often held by regional biggies, the budget reflected political priorities of the incumbent. The railway bureaucracy has also dug in its heels in the past.

02. Marine exports likely to rise 20% to $5.6 billion in 2016-17: Govt

With increasing focus on quality control, value addition and infrastructure, marine product exports from India are projected to increase by about 20 per cent to USD 5.6 billion in 2016-17. The Marine Products Export Development Authority (MPEDA) expects the industry will reverse the decline from last fiscal when total seafood exports stood at USD 4.7 billion. “Marine product exports from India are projected to increase nearly 20 per cent to USD 5.6 billion in 2016-17, particularly with strides in aquaculture diversification, quality control, value addition and improved production infrastructure,” the Commerce Ministry said in a statement. It said the efforts for the sector will be demonstrated at the upcoming biennial India International Seafood Show (IISS) in Vishakhapatnam. During the three-day function, starting from September 23, technology, sustainable practices followed in capture and culture fisheries in India to ensure quality of seafood produced for both domestic and export market would also be highlighted. The US and South East Asia are major importers of Indian seafood. “The show will also focus on new technologies, production infrastructure and value-added products,” it added. International and domestic exhibitors will showcase their products and services to a potential global market and explore leads and partnerships. Of the 290 stalls booked at the exhibition, more than 70 are of foreign companies.

03. India posts current account deficit of 0.1 per cent of GDP in April-June :

India posted a current account deficit of $300 million, or 0.1 percent of gross domestic product, in the April-June quarter, contrasting with expectations for a surplus of nearly $4 billion. The deficit was much narrower than a deficit of $6.1 billion, or 1.2 percent of GDP, in the same quarter a year ago, according to the data released by the Reserve Bank of India on 21st Sept 2016. Meanwhile, the balance of payments posted a surplus of $7.0 billion for the April-June quarter, down from an $11.4 billion surplus a year ago, the RBI data showed. It was India’s third consecutive balance of payment surplus.

04. Mergers no quick fix for banking sector issues: Assocham

Government should focus on making the banking system stronger and give them independence to find their own solutions instead of stressing on mergers, industry body Assocham said in a report released. “Mergers or consolidation of the public sector banks is certainly no answer to the present crisis, which can only be resolved by professionalising these banks with the government keeping an arm’s length,” Assocham President Sunil Kanoria said while presenting the report. The body has brought out the paper on ‘Convergence, Not Consolidation Answer for Public Sector Banks’ which suggests that there are no quick fixes for grave problems in the public sector banking. Instead of merging of the PSBs, the focus should be to make them stronger and larger,” Kanoria said. At present, public sector banks are grappling with bad loans situation running at about Rs 4.76 lakh crore (2015-16) in the form of gross NPAs. “If size of the banks had a relationship with the health of the financial sector, the Chinese banks would have been the healthiest lot. But the biggest concern before the global financial community today is the health of the Chinese banks,” said D S Rawat, Secretary General Assocham. “Rather than going with the scripted mechanism, give banks the autonomy, empower their boards, let them make their own decisions. Find a case by case solution than to have a scripted solution,” he added.

05. India less prone to banking crises; risks higher for China: BIS

India is less vulnerable to banking distress among the major economies while neighbouring China faces higher risks, according to the Bank for International Settlements (BIS). Data compiled by BIS of more than 40 economies show that credit-to-GDP gap was among the least for India in the first quarter of this year. The metric, seen as a reliable early warning indicator of impending financial crises, captures the build-up of excessive credit in the system. In the first quarter of 2016, India’s credit-to-GDP gap stood at -2.9, also the lowest among the BRIC group of nations, as per BIS data. The same stood at -3.0 in the three months ended December 2015. Indicating increased risks in the country’s banking system, China saw credit-to-GDP gap jump to 30.1 in the January-March 2016 period from 28.4 seen in the preceding quarter. The metric for Brazil and Russia stood at 4.6 and 3.7, respectively, in the March 2016 quarter. Among other major economies, the credit-to-GDP gap of United States was -9.9, United Kingdom (-27.0), Germany (-6.1), France (-0.6) and Switzerland (7.2) in the first quarter of this year. BIS is the world’s oldest international financial organisation, and has 60 member central banks, including RBI, representing countries that together make up for about 95 per cent of the world GDP, as per its website.

06. Incentives, exemption cannot go forever: Arun Jaitley

Asking the industry to improve business model to take advantage of emerging opportunities, Finance Minister Arun Jaitley said they cannot indefinitely depend upon incentives and exemption. “At the end of the day, India indefinitely cannot survive and sustain merely on incentives and exemption. We are now in the process of GST implementation. I am asked the question what do you think the rate will be? My answer always is more the exemptions, higher will be the rate because when you exempt some people, you charge others higher rate,” he said. He further said that exemption distorts rate and there is need for fair rate.

07. AAI mulling over connecting 22 airports under Regional Connectivity Scheme:

The Airports Authority of India (AAI) is mulling over connecting about 22 airports under the Regional Connectivity Scheme (RCS) in the first phase. Dr Guruprasad Mohapatra, the chairman of Airports Authority of India, expressed hope of making airfares affordable to encourage flying among the masses. He said another 30 airports can be made ready for operations under the scheme by making some investments. He was also of the opinion that very less population of the Indian middle class, who have high aspirations, travel by air. “There are little more than 400 commercial aircrafts as compared to other countries that have 3to 4k aircrafts. Approximately in a country of 100 crore people, only eight crore people travel by air annually and it’s a small number.So, the government’s idea is to promote flying among masses in safe and affordable manner and that is the Unique Selling Proposition (USP) of our regional connectivity.” said Mohapatra. He further said the AAI would spend Rs. 17,500 crore as capital expenditure over a period till 2019-20 of which significant amount is for strengthening air navigation services (ANS) capabilities. The money would also be spent on building airport terminals and expanding runways at many existing airports. The AAI is also planning to build 50 no-frills airports across the country.

08. Govt extends stock limits on pulses, edible oils by 1 year :

The government extended stockholding limits on traders of pulses, edible oils and oilseeds by one year till September 30, 2017, to check hoarding and control price rise. A decision in this regard was taken in the Cabinet meeting, chaired by Prime Minister Narendra Modi. Stockholding limits on traders of pulses, edible oils and oilseeds expires this month-end. “The Union Cabinet has approved extension of stock limit on pulses, oil seeds and oils for a further period of one year up to September 30, 2017,” Food Minister Ram Vilas Paswan told PTI after the meeting. By and large, all the state governments have supported the imposition of stock limits. This step will ensure smooth supply of commodities and will enable the states to act against hoarding, he said. Paswan also said the state governments can issue control orders with the concurrence of the central government on importers, millers, wholesalers and retailers as needed. Stockholding limits are imposed under the Essential Commodities Act in order to check hoarding and black marketing. The country is dependent on import of pulses and edible oils as the domestic production is lower than the demand. Pulses prices in retail markets are still ruling high due to shortfall in the domestic production in past two years because of droughts.

09.Income Tax department raids roadside eateries, small businesses to make IDS a success :

The income tax department is leaving no stone unturned in its bid to make the income declaration scheme (IDS) a success. With less than 10 days to go before the September 30 deadline, small businesses and roadside eateries-—many of which have never seen an IT officer before — are the latest to feel the heat. In Mumbai alone, about 50 — including a well-known vada pav centre in Thane, a dosa centre in Ghatkopar, a sandwich centre in Andheri and a jalebiwallah in south Mumbai — were raided and the owners asked to declare their black money under IDS. Also, about 100 raids or surveys were conducted in Ahmedabad and eateries and well-known shops in New Delhi and Kolkata. The raids are based on information collected by the tax department in the last six months. According to a tax official ET spoke to, about 1 lakh small businessmen and shopkeepers have been identified by the government as possible evaders. It is also understood that the government has given targets for each city. As in Mumbai and New Delhi, tax departments are said to have been given a target of Rs 2,500 crore. ET could not independently confirm these figures from tax officials. Experts said raids and surveys have increased in the past week. "In my 25 years of experience, I have not heard of any raids or surveys on these eateries. They seized cash from the shops, many shopkeepers were taken by surprise as they have never dealt with tax officials ever," said a chartered accountant who is advising some of those raided in Mumbai. As much as Rs 2 crore may have been seized, according to some estimates.

10. US Federal Reserve keeps key rate unchanged but hints of coming hike :

The Federal Reserve is keeping its key interest rate unchanged but signalling that it will likely raise rates before year’s end. The Fed said in a statement ending its latest policy meeting that the US job market has continued to strengthen and economic activity has picked up. But it noted that business investment remains soft and inflation too low and that it wants to see further improvement in the job market. The central bank characterised the near-term risks to its economic outlook as ”roughly balanced.” It was the first time it has used that wording since late last year, when it most recently raised rates. Most analysts have said they think the Fed will next raise rates in December. In its statement, the Fed said its policy committee concluded that ”the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” For the first time in nearly two years and for the first time since Janet Yellen became Fed chair in February 2015, there were three dissents to the Fed’s statement. All wanted the Fed to raise its key rate at this meeting.