RBI announces 50 bps Rate Cut; FM welcomes

The Union Finance Minister Shri Arun Jaitley said that the Government welcomes the Reserve Bank of India (RBI)’s decision to reduce the repo rate to 6.75 percent from 7.25 percent. The Finance Minister was responding to the Monetary Policy announcement made by the Reserve Bank of India today.

The Finance Minister said that constant vigilance is warranted on the inflation front, this action signals that inflationary pressures have moderated significantly and are within the RBI’s comfort zone. He said that the Government is committed to meet its fiscal deficit target to consolidate the gains achieved in reducing the inflation.

The Finance Minister Shri Jaitley further said that this action also signals that the RBI is able to provide policy support to the real economy and help its recovery. He said that the Government looks forward to the transmission of these cuts to the rest of the economy and will work to facilitate this transmission, including by reviewing the framework of small savings. Shri Jaitley said that the rate cut, combined with actions taken and planned by the Government, will help boost confidence and investment, and help realize the economy’s medium-term potential growth rate.

The Finance Minister Shri Jaitley further said that Indian corporates would now be able to raise External Commercial Borrowings (ECB) through rupee denominated offshore bonds with no end use restrictions. He concluded that this would provide additional source of raising resources which would be fully hedged as they are denominated in rupees.

Shri Shaktikanta Das, Secretary, Department of Economic Affairs (DEA), Ministry of Finance said that the Medium Term Framework for FPI investment in Government Securities would bring in predictability for foreign investors. He said that the limits would be increased from existing 3.8% to 5% of the outstanding stock of Government Securities by March 2018 implying increase by about Rs 1,20,000 crore from the existing limit of Rs 1,53,500 crore.

Shri Das said that in the current financial year, Rs.26,000crore would flow in the Government Securities. He said that the increase in FPI limits would bring in greater foreign participation with predictability and would result in higher liquidity in the Indian Government Securities market. He said that for State Development Loans, FPI limits have been fixed for the first time at 2% of the outstanding stock that would amount to about Rs 50,000 crore by March 2018 and Rs.7,000 crore would flow in State Government Securities during the Current Financial Year. This would bring higher liquidity in these State Government bonds.

The Chief Economic Adviser Dr Arvind Subramanian said that the transmission of rate cut is partly by the banks and partly by the market rates coming down. He reiterated that the Government looks forward to the transmission of these cuts to the rest of the economy and will work to facilitate this transmission, including by reviewing the framework of small savings. He said that the Government would review the GDP rate target for the current Financial year after the figures of second quarter are available.

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US India Business Council concludes Food Processing & Food Security Mission

August 28, 2015, New Delhi- The U.S.-India Business Council (USIBC) concluded a Food and Agriculture Executive Mission to India. The two-day mission in New Delhi focused on ways to increase investment in food processing and improve food security in India, and ways that industry in both the U.S and India can work with the central and state governments to achieve mutually beneficially solutions in the food and agriculture sector.

In meetings with U.S. and Indian Government officials, Council members discussed ways to partner with the Indian government to advance Prime Minister Narendra Modi's "Make in India" initiative, which calls for greater foreign investment in production and manufacturing in India. The committee also discussed policies that the Government of India could pursue that would enhance foreign investment in the food processing sector, food safety and security, foster innovation, boost the competitiveness of local industry, and increase the speed at which new products are introduced to market.

"The Council's Food and Agriculture member-companies represent every aspect of the farm-to-market supply chain, which affirms the U.S. industry's position as a collaborator with shared interests in advancing India's agriculture economy and food industry," said Siraj Chaudhry, Chairman of Cargill Foods India and Mission Co-Lead. "Through this mission, and through our work in both the U.S. and India, our efforts are focused on enhancing bilateral commercial relations and engaging in a regular dialogue on the topic of agricultural productivity and food security in India."

Council members were able to connect with government and corporate leaders and reinforce industry's position as a collaborator with shared interests in advancing India's agriculture economy and food processing industry. The delegates held meetings with the Minister of Food Processing Industries, Harsimrat Kaur Badal and the Secretary of the Department of Industrial Policy & Promotion, Amitabh Kant. The delegation also had productive discussions with the Food Safety and Standards Authority of India (FSSAI), presenting FSSAI CEO, Y.S. Malik with a plan for a capacity building program to make the agency more efficient and effective in its mission.

Following the mission, Shilpa Divekar Nirula, CEO, Monsanto India Region and Mission Co-Lead commented, "As India charts its growth journey, agriculture has tremendous potential of being transformed into a vibrant sector contributing to millions of our farmers and to the economy. This is an opportune time to recognize the needs of our farmers and synergize Central and State Government initiatives with public and private sector investments towards addressing those needs. Policy impetus and a predictable operating environment for participants will encourage solutions focused on enhancing agronomic practices, managing farm risk, leveraging information technology for capacity building and integrating the value chain thereby contributing to making agriculture productive, efficient, remunerative and sustainable for our farmers"

The mission also featured the first of what may become an annual event- the USIBC - Small Farmers Agribusiness Consortium (SFAC) "Dialogue on Strategies to promote Value Addition in Agriculture". The event, sponsored by YES BANK and Blumberg Grain, focused on ways that U.S. and Indian government and industry can work together to improve the food processing industry in India and featured a discussion on how Indian states have partnered with Industry to promote food processing on a smaller scale.

Following the dialogue, Mr. Rana Kapoor, Managing Director, CEO and Co-Founder of YES BANK said, "India's economy is predominantly agrarian, with agriculture and allied sectors contributing 18.2% to our GDP (FY 2013-14). Growth in high value agriculture, increased farm productivity and enhanced investments will further boost the sector's contribution. YES BANK and USIBC believe that an efficient agri-marketing infrastructure is vital to facilitate effective price discovery and transaction functions of the rural economy. The Government's proposal to set up a Unified National Market for agri commodities, in close coordination with NITI Aayog and State Governments will promote seamless movement of produce from farm to fork, accelerate growth of the sector and ensure food and nutritional security for all Indians."

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Pradhan Mantri Krishi Sinchayee Yoiana

The Cabinet Committee on Economic Affairs (CCEA), chaired by the Prime Minister Shri Narendra Modi, has given its approval to a new scheme the “Pradhan Mantri Krishi Sinchayee Yojana” (PMKSY). It will have an outlay of Rs. 50,000 crore over a period of five years (2015-16 to 2019-20). The allocation for the current financial year is Rs. 5300 crore.

The major objective of the PMKSY is to achieve convergence of investments in irrigation at the field level, expand cultivable area under assured irrigation (Har Khet ko pani), improve on-farm water use efficiency to reduce wastage of water, enhance the adoption of precision-irrigation and other water saving technologies (More crop per drop), enhance recharge of aquifers and introduce sustainable water conservation practices by exploring the feasibility of reusing treated municipal based water for peri-urban agriculture and attract greater private investment in precision irrigation system. The scheme also aims at bringing concerned Ministries/Departments/Agencies/Research and Financial Institutions engaged in creation/use/recycling/potential recycling of water, brought under a common platform, so that a comprehensive and holistic view of the entire "water cycle" is taken into account and proper water budgeting is done for all sectors namely, household, agriculture and industries.

The programme architecture of PMKSY aims at a 'decentralized State level planning and execution' structure, in order to allow States to draw up a District Irrigation Plan (DIP) and a State Irrigation Plan (SIP). DIP will have holistic developmental perspective of the district outlining medium to long term developmental plans integrating three components namely, water sources, distribution network and water use application of the district to be prepared at two levels - the block and the district. All structures created under the schemes will be geotagged.

The programme will be supervised and monitored at the national level by an Inter-Ministerial National Steering Committee (NSC) under the Chairmanship of the Prime Minister with Union Ministers of all concerned Ministries. A National Executive Committee (NEC) is to be constituted under the Chairmanship of the Vice Chairman, NITI Aayog to oversee programme implementation, allocation of resources, inter ministerial coordination, monitoring and performance assessment, addressing administrative issues etc. At the state level the scheme is to be administered by a State Level Sanctioning Committee (SLSC) to be Chaired by the Chief Secretary of the respective States. The committee will have all authority to sanction the project and also monitor the progress of the scheme. At the district level their shall be a district level implementation committee for ensuring last mile coordination a the field level.

It is expected that PMKSY will provide convergence to existing schemes of water management, thus bringing efficiency to the use of water.

Background:

In the last one year, the Government of India has taken several farmer friendly initiatives. These, amongst other things, include the following:


• A new scheme has been introduced to issue a Soil Health Card to every farmer. Soil Health Management in the country is being promoted through setting up of soil and fertilizer testing laboratories. 34 lakh soil samples has been collected and analysis is continuing.


• A new scheme for promoting organic farming "Pramparagat Krishi Vikas Yojana" has been launched to promote organic farming.


• A dedicated Kisan Channel has been started by Doordarshan to address various issues concerning farmers.


• Government is also encouraging formation of Farmer Producer organizations.


• Assistance to farmers, as input subsidy, has been increased by 50 percent in case of natural calamities.


• Norms have been relaxed to provide assistance from previous norm of crop loss of more than 50 percent to 33 percent to farmers afflicted by natural calamities.


• Minimum Support Price (MSP) for various Kharif crops has been increased. Bonus of Rs.200 per quintal has been announced for pulses. Area coverage under pulses has increased over the last year.


Taking it further, today the Cabinet Committee on Economic Affairs, chaired by the Prime Minister has given its approval to two new schemes in agriculture sector. These are the PMKSY and Promotion of National Agriculture Market.

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NITI Aayog: What makes its Significant?

Recently, NITI Aayog or National Institution for Transforming India Aayog has been constituted by Prime Minister Narendra Modi disbanding 65 year old Planning Commission of India.

As per the structure, the Prime Minister will the Chairman as used to be Planning Commission. Lets have a look on the other officials of the NITI Aayog.

Arvind Panagariya has been appointed as Vice Chairman. The institution has total seven union ministers in the panel and the chief ministers of states and Lt. Governors are in Governing Council.

Well, this is the fist time any such institution has given privilege to chief ministers, comparing to the working model of planning commission, this was not possible even to hear the chief ministers concerns.

However, they used to meet the vice chairman of planning commission, but the allocation were subject as per the five year plans and other criteria in force.

So, NITI Aayog is scoring more comparing the model of functioning of planning commission. The seven union minister in the panel of NITI Aayog are - Rajnath Singh, Arun Jaitley, Suresh Prabhu and Radha Mohan Singh were Ex-Officio Members. Where as, Nitin Gadkari, Smriti Zubin Irani and Thawar Chand Gehlot are Special Invitees.

Bibek Debroy and V. K. Saraswat were full time members and Sindhushree Khullar is Chief Executive Officer of NITI Aayog.

Indian economy need an institution which plan allocations of resources and execute plans adopting a growth model. Whenever we talk about Indian economy, it is obvious that we go for a mixed economy model neither capitalist nor fully welfare.

In this aspect, the Gandhian model of economic growth will be a good fit for our economy. On the contrary, the planning commission was not seen adopting these models in last 65 years.

Rural development is the core model of Gandhian principles on Indian economy. That does not mean discourage modern or big industries.

It seems, NITI Aayog will draw a line between protection and promotion of rural development through industrialisation. And, keeping the growth momentum of large scale industries.

This makes NITI Aayog a significant institution that could bring a big change in the planning and resources allocation keeping the growth model in mind.

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India’s Path to High Economic Growth is Achievable by the end of 2020, says Frost & Sullivan

India’s Path to High Economic Growth is Achievable by the end of 2020, says Frost & Sullivan

Mumbai, Maharashtra, India

Frost & Sullivan presents a brief survey of the Indian Economy, its passage through 2014. From a policy perspective, the year 2014 can be divided into two distinctive phases demarcated by the change of guard at the Center in May-end. On the domestic front, a lethargic atmosphere of legislative, administrative, and bureaucratic paralysis gave way to a pro-active public culture of accomplishment and accountability. Internationally, foreign relations with the US, a key trade partner that had plummeted to rock-bottom after the poorly-handled diplomatic incident of an Indian Foreign Service officer in January, soared culminating in the US President accepting the invitation to be the chief guest at the 65th Republic Day celebrations in 2015. Meanwhile, the Prime Minister’s excursions abroad managed to not only capture the world’s attention but created a pipeline of foreign capital worth billions of dollars into domestic manufacturing. Mr. Modi, in the process, has smoothly transitioned from the Bharatiya Janata Party’s star campaigner and orator to India’s internationally-acclaimed brand ambassador even as he cemented his reputation as an effective statesman at home.


On the economic front, there have been equally positive developments, albeit largely due to exogenous factors. Within a year, the price of crude oil in the Indian basket has fallen by over 40 per cent from US $108.72 per barrel to US$60.58 per barrel in December easing off pressures on the twin deficits. With a continuing downward price trend, monthly oil imports have started falling since October and eased pressures off the trade deficit. It has also made the ambitious-looking fiscal deficit target of 4.1 percent of GDP more achievable due to an estimated fuel subsidy savings of almost US $1.7 billion aided by policy measures resulting in food subsidy savings and lower spending on welfare programs through greater efficiency.

Meanwhile, the easing of global commodity prices has reduced inflationary pressures; the consumer price inflation has nearly halved from 9.9 percent in December last year to 5.5 percent in October while the wholesale price index inflation has softened to 1.8 percent from 5.1 percent during the same period. Most importantly, the economy seems to have bottomed out with GDP growing at above 5 percent for three consecutive quarters. Indications of green shoots rising from better consumer and business sentiments signal even better times to come in future. It is quite likely that in a few years’ time, 2014 will be marked as the landmark year when things began to take a definite turn for the better for India.


Structural reforms addressing inefficiencies in the fields of energy, agriculture, labor market, taxation, and welfare schemes, will further unshackle the potential of the Indian economy. In particular, Prime Minister Modi’s focus on fast-tracking infrastructure development and energy security will ensure that roads, solar energy, smart cities, and other infrastructure segments see a larger inflow of investments. The uptrend in investor interest is also palpable amongst foreign investors with significant commitments from countries such as Japan and China across a wide range of established and emerging industries. While speed is of the essence for the Government to capitalize on its goodwill, years of bureaucratic neglect cannot be reversed overnight and it will take time for the Government to work through the backlog and bring in a coherent friendly framework for investors.


In the final analysis, India is not completely out of woods and it is imperative that the reform agenda is consistently followed. The Modi wave is leading to tectonic changes in the Indian political economy and the rise of new alliances is unlikely to be a smooth one. Against this background, the ruling coalition’s minority in the Upper House will hinder legislative reforms - the Insurance (Amendment) Bill and the Apprentices (Amendment) Bill were examples of this resistance in 2014. This will require the Government to seriously negotiate and adopt a non-confrontational approach with an opposition battling to save its turf.

If the developments of the past year and those currently in flux are a reflection of a changed reality that is here to stay, India’s growth is likely to rise to a high single-digit trajectory at the minimum by 2020. To this end, immediate reforms covering dispute resolution of pending highway projects, new gas-pricing policy, fuel shortages, timely project approvals, and better project monitoring of Government schemes have the potential to add around 150 basis points to growth taking it past 8 percent. The next Budget, due in February, is most likely to be the platform to start off the next set of more-difficult-to-handle reforms and give a better idea of the Government’s future roadmap of action. Other areas of reform in the medium term include the liberalization of the Labor Act, revision of the Companies Act, and review of the Land Acquisition Act. Beyond 2017 – the year when the ruling coalition is expected to reach a majority in the Upper House - the pace of reforms will pick up and a double digit growth by the end of the decade will become increasingly achievable. Combined with an inflation rate of around 5 percent, the end of the decade could see India rising to become a US$4.5 trillion economy.

The study was undertaken by the Innovation and Knowledge Center (IKC) which is the fundamental research hub of Frost & Sullivan’s consulting and strategy consulting business in the Middle East, North Africa, and South Asia. It consolidates all forms of research including technical, application-related, economic, financial, and market under a single umbrella. In addition to creating comparative studies for states such as the attractiveness index, the economic research arm of IKC has a portfolio of products which can aid a market player to understand the impact of various macroeconomic forces and make the best of them in a business environment. Some of these enablers are country profiles, multi-country comparative studies, PESTLE analysis, impact analysis of global economic and political developments, investment trackers, and economic pulse monitors.

To know more about this Market Insight or the Practice please get in touch with our Corporate Communications Team, send an email to Ravinder Kaur/Priya George at ravinder.kaur@frost.com / priyag@frost.com with your full name, company name, title, telephone number, company e-mail address, company website, city, state and country.

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Russian Delegation calls on Union Minister for Chemicals and Fertilizers

Russian Delegation calls on Union Minister for Chemicals and Fertilizers

A Russian delegation led by Mr. Rustam Minnikhanov called on Union Minister for Chemicals and Fertilizers, Shri Ananth Kumar here Tuesday. Shri Ananth Kumar said that a Joint Working Group will be formed within a week comprising representatives of all three streams of his ministry, namely, Department of Fertilizers, Department of Chemicals and Petrochemicals and Department of Pharmaceuticals and representatives of Republic of Tatarstan (a subject of the Russian Federation). 


The Joint Working Group will cull out issues concerning promotion of trade, strengthening of bilateral relations and exploring possibilities for training and research work for the personnel working in this field. 

Earlier welcoming the delegation the Minister said that it is a very meaningful visit and will pave a way for strengthening trade relations in respect of fertilizers, chemicals and pharmaceuticals between India and Republic of Tatarstan. 


India looks forward to long-term agreement for import of potash, phosphate and natural gas of which Russia has huge reserves. India has set up a couple of joint ventures in various countries for sourcing finished fertilizers as well as raw materials. 

A couple of joint venture projects for setting up urea-ammonia plants and raw materials are planned, the Minister said. 

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FM to Relaunch Kisan Vikas Patra

FM to Relaunch Kisan Vikas Patra (KVP); Available to the Investors in the Denomination of Rs. 1000, 5000, 10,000 and 50,000, with no Upper Ceiling on Investment; Investment made in the KVP will Double in 100 Months

The Union Finance Minister Shri Arun Jaitley will re-launch the Kisan Vikas Patra (KVP) here tomorrow in the presence of Shri Ravi Shankar Prasad, Union Minister of Communication and IT and Shri Jayant Sinha, Minister of State for Finance among others. Increasing savings rate in the economy was one of the priorities of the new Government on assuming charge. In view of the popular demand and to revitalize Small Savings, the Finance Minister in para 27 of his Budget Speech announced that “Kisan Vikas Patra (KVP) a very popular instrument among small savers will be reintroduced The instrument will encourage people, who may have banked and unbanked savings to invest”. Accordingly, it is decided to reintroduce Kisan Vikas Patras (KVPs). KYC norms regarding all National Savings Schemes (NSS) are now applicable in post offices and banks w.e.f. January, 2012.

The re-launched Kisan Vikas Patra (KVP) will be available to the investors in the denomination of Rs. 1000, 5000, 10,000 and 50,000, with no upper ceiling on investment. The certificates can be issued in single or joint names and can be transferred from one person to any other person / persons, multiple times. The facility of transfer from one post office to another anywhere in India and of nomination will be available. The certificate can also be pledged as security to avail loans from the banks and in other case where security is required to be deposited. Initially the certificates will be sold through post offices, but the same will soon be made available to the investing public through designated branches of nationalised banks.

Kisan Vikas Patras have unique liquidity feature, where an investor can, if he so desires, encash his certificates after the lock-in period of 2 years and 6 months and thereafter in any block of six months on pre-determined maturity value. The investment made in the certificate will double in 100 months.

Reintroduction of Kisan Vikas Patra (KVP) is a welcome step not only in the direction of providing safe and secure investment avenues to the small investors but will also help in augmenting the savings rate in the country. The scheme will also safeguard small investors from fraudulent schemes. With a maturity period of 8 years 4 months, the collections under the scheme will be available with the Govt. for a fairly long period to be utilized in financing developmental plans of the Centre and State Governments and will also help in enhancing domestic household financial savings in the country.

Kisan Vikas Patra (KVP) – a certificate savings scheme was launched by the Government on 1st April, 1988. The scheme provided facility of unlimited investment by way of purchase of certificates from post offices in various denominations. The maturity period of the scheme when launched was 5 ½ years and the money invested doubled on maturity. The scheme was very popular among the investors and the percentage share of gross collections secured in KVP was in the range of 9 % to 29 % against the total collections received under all National Savings Schemes in the country. Gross collections under the scheme in the year 2010-11 were Rs. 21631.16 crores which was 9 % of the total gross collections during the year. In the year of its closure, the scheme secured gross collections of Rs. 7575.95 crores (April 2011 to November 2011).

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Money comes when business environment is right?

Investment is the vital force that is essential to give big push to business. In countries like India, there are many factors those could be considered as big challenges for a business environment.

Gaining the confidence of investors is the prime aim that one country should look first. When it comes to foreign investment in business, in one country, the social, economic and political situations should be right.

Money comes when business environment is right, is the right tag that says there is need to make business environment more friendly for investors.

Why not to have a look on the business environment we have in the country. The major problems that India has been facing need the prime attention of the government since the economy has been reeling under the slowdown.

Money matters much in business so as in business environment. If the inflow is right, then business environment is right, and finally money matters business environment.

The NDA government has completed 100 days in office and report card as per the media has been in favor of the government for doing the best.

That says the investors both domestic and foreign having confidence on the current business environment.

The business environment has also been affecting the stock market at most, and for few weeks the market have been rallying, gaining confidence of the investors.

Business environment needs good leadership and best external relations with other countries.

India has been a investment hub and may be the first choice for foreign investors, only attention is required to make the business environment proper and conducive.

The border tension with neighbor countries like Pakistan and China, have been there affecting the business environment in India.

Money the capital in business, is the vital force. Investment is the vital force that is essential to give big push to business. In countries like India, there are many factors those could be considered as big hurdles.

Gaining the confidence of investors is the prime aim that one country should look first. When it comes to foreign investment in business, in one country, the social, economic and political situations should be right.

Money comes when business environment is right, is the right tag that says there is need to make business environment more friendly for investors.

Why not to have a look on the business environment we have in the country. The major problems that India has been facing need the prime attention of the government since the economy has been reeling under the slowdown.

Money matters much in business so as in business environment. If the inflow is right, then business environment is right, and finally money matters business environment.

The NDA government has completed 100 days in office and report card as per the media has been in favor of the government for doing the best.

That says the investors both domestic and foreign having confidence on the current business environment.

The business environment has also been affecting the stock market at most, and for few weeks the market have been rallying, gaining confidence of the investors.

Business environment needs good leadership and best external relations with other countries.

India has been a investment hub and may be the first choice for foreign investors, only attention is required to make the business environment proper and conducive.

The border tension with neighbor countries like Pakistan and China, have been there affecting the business environment in India.

The visit of Prime Minister to US would be another milestone in building the best business environment in India.

All the top business leaders would be meeting and trying the possibility to invest in India.

In order to make the investments from Japan hassles free Prime Minister had assured for a special team from his office to look after the investment flows into the country and giving the facility to the investors.

That was one the best steps to keep the confidence of prospective investors, those are ready to invest in India.

Currently, there is stable government, which would bring more economic reforms to keep protect the interest of the common men and business people.

If there would be a good business environment, money in flow would enough to keep the growth rate of Indian economy. 

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Inflation Indexed National Saving Securities- Cumulative (IINSS-C)

The Government of India, in consultation with Reserve Bank of India, has decided to launch Inflation Indexed National Savings Securities-Cumulative (IINSS-C) for retail investors in the second half of December 2013.

These securities are being launched in the backdrop of announcement made in the Union Budget 2013-14 to introduce instruments that will protect savings from inflation, especially the savings of the poor and middle classes.

The distribution/ sale of IINSS-C would be through banks. The eligible investors would include individuals, Hindu Undivided Family (HUF), Charitable Institutions registered under section 25 of the Indian Companies Act and Universities incorporated by Central, State or Provincial Act or declared to be a university under section 3 of the University Grants Commission Act, 1956 (3 of 1956).

Interest rate on these securities would be linked to final combined Consumer Price Index [CPI (Base: 2010=100)]. Interest rate would comprise two parts, i.e. fixed rate (1.5% per annum) and inflation rate based on CPI and the same will be compounded in the principal on half-yearly basis and paid at the time of maturity. Early redemptions will be allowed after one year from date of issue for senior citizens (i.e. above 65 years of age) and 3 years for all others, subject to penalty charges at the rate of 50% of the last coupon payable for early redemption. Early redemptions, however, can be made only on coupon dates.

Other details of the scheme would be announced by the Reserve Bank of India. The issuance of non-cumulative Inflation Indexed National Saving Securities for retail investors will be examined in due course.

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Is Politics on Bills Mounting Pressure on Economy?

 

What exactly the health of Indian economy? Can you gauge the dept of the crisis that the Indian economy has been going through now?

These questions are obvious and meaningful, if any one asking you about the economy and its condition. The current circumstances are creating panic over downgrade economy, that really going through a bad patch.

The situation was bit quite different and healthy (personal opinion of the writer) as of 1991, where the road to economic reforms was exactly started. Now the situation has repeated the history, but the situation is dealing with different crisis.

It is not wrong to say that the stock markets were tumbled due the more domestic reasons than the euro debt crisis.  The governments has pushed many bills in to the lower house and those could be aiming the 2014 general elections.

But the bills like Food Security, Pension Bill, Land Acquisition Bill might not be in favor of the capitalist form of economy.  Bill might have affected adversely to the economy. And no doubt that in future these bill would help the people of India.

 Considering the current economic crisis the politics over the bill and introducing those in haste could be bring more shocks to the economy, which is already on a bad condition.  

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RBI hikes Short Term Rates

The Reserve Bank of India (RBI) has initiated its actions to stabilize the rupees, which has been at its lowest value against US dollar in the currency market.

The RBI has hiked the short term rates on Monday to check the devaluation of rupees.

On Monday, the rupee was at around 59.89, and lately the rupee was slipped to its lowest of around 60 rupees.

The aim of the apex bank is to boost the value of rupees against US dollar by chacking the liquidity in the economy.

The latest move by the RBI would discourage the banks to borrow fund and that would ultimately control the liquidity and credit market.

However, the stock markets in India tumbled on Tuesday following the hike the short-term rate. Both BSE Sensex and NSE Nifty were traded in red at morning trade on Tuesday.

The banks may increase the deposit rates to attract more customers and that would help the banks not to draw more from the apex bank for the purpose of credit.

The RBI would also sell the bonds in the open market operation worth 12,000 crore rupees to check liquidity.


On the other hand, following on its economic reforms, the UPA government may further liberalize the FDI norms in some selective sectors to boost the inflow of foreign fund into the country.

Experts believed that the inflow of foreign fund was must to check the devaluation of rupees and Indian economy – that has been under pressure due to the global slowdown.

The Governor of RBI D Subbarao called on the Finance Minister P Chidambaram and discussed about the strategy to strengthen Indian rupees.

The fall in the value of the rupees has been weighing high on the economy.

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Indian Economy is on Slowest Growth Path

The Indian economy has been on slow pace in the fiscal year 2012-13. The GDP rate is at 5 per cent, once the figure was achieved in last decade. There were days when it had been speculated that the country would achieve the double digit growth rate. Now the scenario has been just reverse to that, the growth rate is at 5 percent rather achieving 10 per cent.

The headline inflation and the key interest rates have hampered the growth rate. Adding insult to injuries, the sectors and industrial index were never upto the market in boosting the economy. The IIP was seen in negative and zero, manufacturing sector was seen helpless in heightening Indian economy.

The year 2012 was full of macroeconomic problems for the economy. And the economy was battling against the high inflation rate, which once was touched to double digit.

The slow growth rate would be a big challenge for the UPA coalition government to tackle. However, the headline inflation was seen moderating in the April 2013, which made the Reserve Bank of India to cut the interest rates, ultimately the impact was loud and clear on the equity market in India.

The stock market was achieved the psychological mark of 20,000 and retained the confidence of the rattle investors, those were in concern due to slow growth rate and de-railing economic reforms in India.

The major concern for the UPA government is that it has limited time to revive the economy or act fast on the economy reforms. In 2014, the nation would witness the mega polls. The government would try to revive the economy before it approaches to the voters and it will also try to have some good ranks to its report card.

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Inflation dips below 5%

The headline inflation plunged below 5 % in April 2013. According to government data released on Tuesday, the wholesale price index (WPI)-based inflation was recorded at 4.89 per cent in April. The inflation was at 5.69 per cent in the month of March.

The inflation is below five per cent, for the first time the figures were seen below five after November 2009. The moderation in the inflation could prompt the apex bank to cut further key interest rates.

In economics, inflation is referred to rising prices and fall in the value of money (in exchange).

Recently, the Reserve Bank of India had cut the key interest rates following moderation in the inflation. A further cut would help the stock markets to gain more confidence.

The equity market in India has been seen strong as the BSE Sensex was zoomed to the highest of 20,000 mark, after many choppy sessions.

The inflow of the fund into the stock market by the foreign institutional investors (FIIs) was high in the first week of the May 2013. For the same period, the FIIs had poured Rs. 26,000 crore rupees into the Indian equity market.

The easing inflation could be a bit of relief for the consumers as they witnessed a moderate cut in the petrol price by the government of India.

Considering all the above cases, it could be projected the Indian economy has been on the track gain from the economic slowdown.

However, some negative forces like the uncertain political activities, border tension with China, devaluation of rupees in the international forex market and low industrial growth rate could pose threat to Indian economy and may derail it from the path of recovery.

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Indian Govt. Clears 17 FDI Proposals

In a significant development in the Foreign Direct Investment Arena, the government of India has given green signal to 17 foreign direct investment (FDI) proposals worth Rs.262.52 crore considering the recommendations of the Foreign Investment Promotion Board (FIPB) on Tuesday.

The move will boost the market sentiments in India, which has been green this month. The stock markets were advanced due the rate cut by the Reserve Bank of India (RBI) and right market conditions in May.

However, the political issues might affect the trading but the with the UPA government continuing its economic reforms to bring back the economy from the clutches of the slowdown, are certainly to gain the confidence of the investors both domestic and foreign investors.

According to media reports, the investments have been pouring into India, in the first week of May as the FIIs have pumped around Rs.26000 crores in Indian equity markets. That shows that the foreign investors have faith on the stock market and ultimately the economy is on the back to track of good growth rate.

The growth rate of five percent is however low, but in the conditions of the slowdown; the rate could be justified since in 2008 recession Indian economy had sustained the growth rate, whereas other economies in the world have tumbled to recession.

The more and more inflow of fund will give boost the liquidity in the market as well as in the economy.

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Government Considering to Rise FDI Cap

The Finance minister told that the government has been planning to rise the limit cap on the Foreign Direct Investment (FDI) in sectors including defense and insurance sector. 

A committee has already been set up by the government to review the FDI sectoral caps, Chidambaram, said "Let the report (of the FDI committee) come and I feel many caps deserve to be either relaxed or removed.

On raising FDI cap in the defense sector he said "I am sympathetic to it and the committee will have to decide if the cap needs to be reviewed, There were many caps imposed at different points in time. We have set up a committee to go into the nature of each cap and ask a question: Has the cap served a purpose? Does it continue to serve a purpose? If it does, let the cap continue. If it does not, then the cap should either be relaxed or removed" he added.

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Post Budget Analysis: Reforms to Continue

The much awaited budget was presented and the highlights of budget have been buzzing around everywhere. The big question is - will the government  continue the economic reforms, after presenting a normal budget for the fiscal year of 2013-14.


The government would continue the economic reforms are the economy has been reeling under the clutches of global down. In the budget, the government has set a target to lower the fiscal deficit from the existing figure of 5.3%.


The economic reforms could only revive the economy from shirking further into deep trouble. There are many countries in the world have around 7% GDP growth rate despite the worse global slowdown.

India economy to grow at 5 to 6 per cent due as global slowdown weigh high on it. The stock markets in India reacted to heavily to the budget and fell to low, but later due to some measures declared in the budget, managed to keep the sentiments up.

The FDI will be bring more fund into the country and would help boost the economy as well as the stock markets. That is possible if the current trend of economic reforms would continue further in India.

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Plan Outlay for Health up by 13.9 Per Cent; Allocation on Gender Budgeting Gone up to 5.96 of Total Budget

Government continues to strive for the improvement in the standard living and health status of the population. The Survey noted that the Government increased its plan outlay for health by 13.9% to Rs.30,4777 crores in 2012-13.

Under the NHRM over 1.4 lakhs Health Human Resources have been added (upto September, 2012) and under infrastructure strengthening 10,473 sub centres, 714 primary Health Centres and 245 community Health centres have been newly constructed. A sum of Rs.520 crore have been released to open 132 ANM schools and 137 general nursing and mid wifery schools in districts where there are no such schools. Opening of six Nursing colleges at the sites of AIIMS like institution at a total cost of Rs 120 crore is also under consideration.

Survey noted that due to Janini Suraksha Yojana, the number of institutional delivery have increased from 1.08 crores during 2005-06 to 1.75 crores during 2011-12. In 2012-13, Indira Gandhi Matritva Sahyog Yogna (IGMSY), a budgetary outlay of Rs.520 crores is target to cover 12.5 lakhs pregnant and lactating women. The Surveys notes that allocation of gender budgeting as a percentage of total budget have gone up from 2.8 % in 2005-06 to 5.96 in 2012-13.

A proposal for strengthening and restructuring of the ICDS scheme within an overall budget allocation of Rs.1,23,580 crores during the XIIth Plan has been approved. Under Sabla Programme against an allocation of Rs.750 crores for 2012-13, Rs.496 crores has been released. In 2012-13 under Indira Gandhi Matritva Sahyog Yogna (IGMSY), a budgetary outlay of Rs.520 crores is outlayed to cover 12.5 lakhs pregnant and lactating women . The Survey points out that Janini Suraksha Yojana (JSY), Janini Shishu Suraksha Yojana (JSSK) and Indira Gandhi Matritva Sahyog Yojana (IGMSY) have many overlapping features and the same beneficiaries. This calls for a careful exercise in identifying overlapping schemes and weeding out or converging them.

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Summary of Economic Survey 2012-13

Indian economy is likely to grow between 6.1% to 6.7% in 2013-14 as the downturn is more or less over and the economy is looking up. Following the slowdown induced by the global financial crisis in 2008-09, the Indian economy responded strongly to fiscal and monetary stimulus and achieved a growth rate of 8.6 per cent and 9.3 per cent respectively in 2009-10 and 2010-11, but due to a combination of both external and domestic factors, the economy decelerated growing at 6.2% and an estimated 5% in 2011-12 and 2012-13 respectively. The Economic Survey 2012-13, presented by the Finance Minister Shri P. Chidambaram in the Lok Sabha predicts that the global economy is also likely to recover in 2013 and various government measures will help in improving the Indian economy’s outlook for 2013-14. While India’s recent slowdown is partly rooted in external causes, domestic causes are also important. The slowdown in the rate of growth of services in 2011-12 at 8.2%, and particularly in 2012-13 to 6.6 percent from the double-digit growth of the previous six years, contributed significantly to slowdown in the overall growth of the economy, while some slowdown could also be attributed to the lower growth in agriculture and industrial activities. But despite the slowdown, the services sector has shown more resilience to worsening external conditions than agriculture and industry. For improved agricultural growth, the survey underlines the need for stable and consistent policies where markets play an appropriate role, private investment in infrastructure is stepped up, food price, food stock management and food distribution improves, and a predictable trade policy is adopted for agriculture. FDI in retail allowed by the government can pave the way for investment in new technology and marketing of agricultural produce in India. Fast agricultural growth remains vital for jobs, incomes and food security.

The survey points out that the priority for the Government will be to fight high inflation by reducing the fiscal impetus to demand as well as by focusing on incentivizing food production through measures other than price supports. But unlike the previous year, when food inflation was mainly driven by higher protein food prices, this year the pressure has been coming mainly from cereals. On the Balance of Payments and External Position, the survey highlights that with net exports declining, India’s balance of payments has come under pressure. Moreover, in the current fiscal, foreign exchange reserves have fluctuated between US$ 286 billion and US$ 295.6 billion, while the rupee remained volatile in the range of Rs 53.02 to Rs 54.78 per US dollar during October 2012 to January 2013.

The survey had a special chapter focusing on jobs. The future holds promise for India provided we can seize the “demographic dividend” as nearly half the additions to the Indian labour force over the period 2011-30 will be in the age group 30-49. India is creating jobs in industry but mainly in low productivity construction and not enough formal jobs in manufacturing, which typically are higher productivity. The high productivity service sector is also not creating enough jobs. As the number of people looking for jobs rises, both because of the population dividend and because share of agriculture shrinks, these vulnerabilities will become important. Because good jobs are both the pathway to growth as well as the best form of inclusion, India has to think of ways of enabling their creation.

The survey calls for a widening of the tax base, and prioritization of expenditure as key ingredients of a credible medium term fiscal consolidation plan. This along with demand compression and augmented agricultural production should lead to lower inflation, giving the RBI the requisite flexibility to reduce policy rates. Lower interest rates could provide an additional fillip to investment activity for the industry and services sectors, especially if some of the regulatory, bureaucratic, and financial impediments to investment are eased. On financial sector reform, it takes note of the high level of gross NPAs (non-performing assets) of the banking sector which increased from 2.36 percent of the total credit advanced in March 2011 to 3.57 percent of total credit advanced in September 2012. The survey suggests that revival of growth will help contain NPAs, but more attention will have to be paid to whether projects are adequately capitalized up front given the risks. Expenditure on social services also increased considerably in the 12th Plan, with the education sector accounting for the largest share, followed by health. In the 11th Plan period nearly 7 lakh crore rupees has been spent on the 15 major flagship programmes. A number of legislative steps have also been taken to secure the rights of people, like the RTI, MGNREGA, the Forest Rights Act, AND THE Right to Education. However, the survey notes that there are pressing governance issues like programme leakages and funds not reaching the targeted beneficiaries that need to be addressed. Direct Benefit Transfer (DBT) with the help of the Unique Identification Number (Aadhaar) can help plug some of these leakages. With the 12th Plan’s focus on ‘environmental sustainability’, India is on the right track. However, the challenge for India is to make the key drivers and enablers of growth-be it infrastructure, the transportation sector, housing, or sustainable agriculture-grow sustainably.

Dr. Raghuram G. Rajan, Chief Economic Adviser, Ministry of Finance writes in an introduction to the Survey that these are difficult times, but India has navigated such times before, and with good policies it will come through stronger. Slowdown is a wake-up call for increasing the pace of actions and reforms. The way out lies in shifting national spending from consumption to investment, removing the bottlenecks to investment, growth, and job creation, in part through structural reforms, combating inflation both through monetary and supply side measures, reducing the costs for borrowers of raising finances and increasing the opportunities for savers to get strong real investment returns.

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Economic Survey 2012-13 tabled in Parliament

The Union Finance Minister P. Chidambaram presented the Economic Survey 2012-13 in Lok Sabha on Wednesday. According to the survey, the Indian economy would grow at 6.1 – 6.7% in the next fiscal year 2013-14, and the inflation could remain at 6.2-6.6%. In January 2013 the headline inflation was at 6.67 per cent.

The survey says "the slowdown is a wake-up call for increasing the pace of actions and reforms." There could be more economic reforms from the government to boost the economy during the slowdown. The survey has also suggested lower the fiscal deficit and curb on imports to strengthen the economy.

The fiscal deficit would remain at 5.3 per cent as the government projected for the fiscal year 2012-13 and would aim to reduce it to 4.8 pct of GDP in 2013-14. There is target to bring down the fiscal deficit to 3 per cent by 2016-17.

The industrial output would be 3 per cent for the fiscal year 2012-13.

There is need to have lots of fiscal consolidation since the economy has been reeling under the global downturn.

Considering the fiscal deficit, the survey suggested for room for accommodative monetary policy with expected fiscal consolidation.

It also suggested to cut down the subsidies to ease the burden on the economy, which could also help to check the widening fiscal deficit.

The finance minister will table the Union Budget for 2013-14 in the Parliament on Thursday in Parliament.

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Economy to grow at 5.5% in 2012-2013: Montek Singh Ahluwalia

Planning Commission Deputy Chairman Mr. Montek Singh Ahluwalia has said that the Indian economy will grow at a rate of 5 to 5.5% in 2012-2013 fiscal year.

As per media reports, in an interview to PTI, Montek Singh Ahluwalia said "It (GDP growth rate) would be somewhere between 5 and 5.5 per cent. If everything worked perfectly, I would not rule out seven per cent next year (2013-14)."

As per his words economy would give signs of recovery if the strength of recovery continues. Couple of days back, India President Pranab Mukhaerjee at the inauguration ceremony of 20th International Engineering and Technology Fair (IETF), said "Though our economic growth has recently declined somewhat, I am confident that we will be able to bring the deceleration to a halt and revert to the eight per cent growth levels that we attained many times in the past."

Due to subdued interest from Investors and some global factors, in 2011-2012 fiscal year, economy has come down to 6.2 from 9.3 percent in 2010-2011.

While talking to Reuters in an interview Social activist and Leader of Aam Admi Party, Arvind Kejriwal said that the figures are just meant for few people in India as a common man is always living the miserable life whether GDP increases or decrease.

Prime Minster's Economic Advisory Council C. Rangarajan also predicted the economy to bounce back to 6.5-7 in current fiscal year and predicted of more recovery in subsequent years.

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