Regulator SEBI permitted seven Alternative Investment Funds (AIFs) to start Operation in India

Market regulator Securities and Exchange Board of India (SEBI) in August 2012 permitted seven Alternative Investment Funds (AIFs) to start operation in India under a newly formulated route that enable pooling of funds for investments in areas such as real estate, private equity and hedge funds. Six AIFs registered with the regulator in August 2012, while one was granted registration back on 23 July 2012. SEBI had published its guidelines with regard to AIF in May 2012.
The seven AIFs that registered with SEBI include IFCI Syncamore India Infrastructure Fund, Utthishta Yekum Fund, Indiaquotient Investment Trust, Forefront Alternate Investment Trust, Excedo Realty Fund, Sabre Partners Trust and KKR India Alternate Credit Opportunities Fund.
Funds established or incorporated in India for the purpose of pooling in of capital from Indian and foreign investors for investing would have to follow a pre-decided policy. SEBI decided to allow promoters of listed companies can offload 10 per cent of equity to AIFs such as such as SME Funds, Infrastructure Funds, PE funds and Venture Capital Funds registered with the market regulator to attain minimum 25 per cent public holding.
AIFs, as per SEBI guidelines can operate broadly in three categories and it is mandatory for them to get registered with the regulator. The SEBI rules apply to all AIFs, including those operating as private equity funds, real estate funds and hedge funds, among others.
AIF Categories
The Category I AIFs are those where funds stand a chance of getting certain incentives or concessions from the government, SEBI or other regulators in India and include Social Venture Funds, Infrastructure Funds, Venture Capital Funds and SME Funds.
The Category II AIFs are those funds which can invest anywhere in any combination but are prohibited from raising debt, except for meeting their day-to-day operational requirements. These AIFs include PE funds, debt funds or fund of funds, as also all others falling outside the ambit of Category I and Category III.
The Category III AIFs are those trading with an objective to make short term returns and include hedge funds, among others.

Poverty - Types and Indicators

Poverty can be of different types like absolute poverty and relative poverty. There may be many other classifications like urban poverty, rural poverty, primary poverty, secondary poverty and many more. Whatever be the type of poverty, the basic reason has always been lack of adequate income. Here comes the role of unemployment behind poverty.

Lack of employment opportunities and the consequential income disparity bring about mass poverty in most of the developing and underdeveloped economies of the world.

Absolute Poverty

Poverty is usually measured as either absolute or relative poverty (the later being actually an index of income inequality). Absolute poverty refers to a set standard which is consistent over time and between countries.

The World Bank defines extreme poverty as living on less than US $1.25 (PPP) per day, and moderate poverty as less than $ 2 a day (but note that a person or family with access to subsistence resources, e.g. subsistence farmers, may have low cash income without a correspondingly low standard of living - they are not living on their cash income but using it as a top up). It estimates that in 2001, 1.1 billion people had consumption level below 1$ a day and 2.7$ billion lived on less than $2 a day.

Relative Poverty

Relative poverty views poverty as socially defined and dependent on social context, hence relative poverty is a measure of income inequality. Usually, relative poverty is measured as the percentage of population with income less than some fixed proportion of median income. There are several other income inequality metrics, for example for Gini coefficient or the Theil Index.

Relative poverty measures are used as official poverty rates in several developed countries. As such these poverty statistics  measure inequality rather than material deprivation or hardship. The measurements are usually based on a person's yearly income and frequently take no account of total wealth. The main poverty line used in the OECD and the European Union is based on 'economic distance' a level of income is set at 60% of the medial household income. 

Multidimensional Poverty Index

The multidimensional Poverty Index (MPI) was developed in 2010 ny Oxford Poverty and Human Development Initiative and the United Nations Development Program. The MPI is an index of acute multidimensional povety. It reflects deprivations in very rudimentary services and core human functioning for people across 104 countries. Although deeply constrained by data limitations, MPI reveals a different pattern of poverty than income poverty, as it illuminates a different set of deprivations.

The MPI has three dimensions - health, education, and standard of living. These are measured using ten indicators. Each dimension and each indicator within a dimension is equally weighted.

These 10 indicators are used to calculate the MPI:

Education (each indicator is weighted equally at 1/6)

• Years of Schooling - Deprived if no household member has completed five years of schooling.
• Child Enrollment - Deprived if any school aged child is not attending school in years 1 to 8.

Health (each indicator is weighted equally at 1/6)

• Child Mortality - Deprived if any child has died in the family
• Nutrition - Deprived if any adult or child for whom there is nutritional information is malnourished.

Standard of Living (each indicator is weighted equally at 1/18)

• Electricity - Deprived if the household has no electricity.
• Sanitation - Deprived if they do not have an improved toilet or if their toiled is shared (MDG Definition).
• Drinking Water - Deprived if the household does not have access to clean drinking water or clean water is more than 30 minutes walk from home (MDG Definition).
• Floor - Deprived if the household has dirt, sand or dung floor.
• Cooking Fuel - Deprived if they cook with wood, charcoal or dung.
• Assets - Deprived if the household does not own more than one of radio, TV, telephone, bike or motorbike.

A person is considered poor if they are deprived in at least 30% of the weighted indicators. The intensity of poverty denoted the proportion of indicators in which they are deprived.

Inter-ministerial group recommended Linking Patented Drug Prices to Per-capita Income

An inter-ministerial group formed in 2007 and entrusted with the responsibility of regulating prices of patented medicines recommended using a per capita income-linked reference pricing mechanism. The proposal by the group is expected to reduce prices of several patented dugs by up to one-third. However it will hit the profitability of foreign companies.
The committee suggested fixing the price of patented drugs by comparing the price at which these drugs are procured by governments in the UK, Canada, France, Australia and New Zealand. The committee recommended that the retail price is to be fixed by adjusting it to the per capita income of the country. The new mechanism is to be applicable for patented drugs that don’t have any therapeutic equivalents in the market.
For patented drugs that have similar alternatives in the market, the price is to be fixed in such a manner that it should not lead to an overall increase in the treatment cost. If the global launch of the patented drug takes place in India, the retail price will have to be based on the cost of developing the drugs and other factors. Prices of patented drugs are currently unregulated. Patented drugs account for 1% of the $13-billion domestic market. This share is expected to grow to 5% of the estimated $50-60 billion drug market by 2020.
The Indian Pharmaceutical Alliance, the representative body of big Indian drugmakers, supported the reference-based system. The Organisation of Pharmaceutical Producers of India (OPPI), the lobby body of multinationals however stated that the cross-country per capita income-linked proposal is fundamentally flawed.
The Indian government is of the opinion that if patented drugs are not regulated, these would remain unaffordable for most Indians. A WHO study stated that as many as 79% of Indian patients pay for their healthcare expenditure from their own pockets. However it must also be noted that if the government fixes the prices of these drugs at excessively low levels, companies may stop selling drugs in the market.
Historical Backdrop
India had adopted a new product patent regime in 2005 after it became a signatory to TRIPS, an international intellectual property protection agreement, providing 20 years of marketing exclusivity to the patent holder. Global innovator companies such as GSK, Bayer AG, Novartis, Merck & Co and Bristol Myers Squibb who started launching their drugs in India continue to remain jittery about the government’s policies aimed at reducing healthcare costs. They complain that India’s implementation of intellectual property rights has been unsatisfactory.

Contribution of MSMEs to GDP

Based on the data of Gross Domestic Product (GDP) published by Central Statistical Office, Ministry of Statistics and Programme Implementation, the contribution of Micro and Small Enterprises (MSEs) to GDP and total industrial production was estimated to be 8.72% and 44.86% respectively during the year 2008-09. The estimated contribution of Micro, Small and Medium Enterprises (MSMEs) in total exports of the country for the year 2007-08 (latest available), based on data obtained from Export Promotion Councils, was 30.80%.

Enterprise-wise data collected on Micro, Small and Medium Enterprises (MSMEs) during the Fourth All India Census of MSMEs: 2006-07 and Economic Census 2005, Central Statistics Office, Ministry of Statistics & Programme Implementation for activities excluded from Fourth All India Census of MSMEs 2006-2007 namely wholesale/retail trade, legal, educational & social services, hotel & restaurants, transports and storage & warehousing (except cold storage) indicate that out of 361.76 lakh MSMEs, entrepreneurs belonging to Other Backward Classes owned 151.73 lakh MSMEs (41.94%) while Scheduled Castes and Scheduled Tribes entrepreneurs owned 28.34 lakh (7.83%) and 20.84 lakh (5.76%) MSMEs respectively. The socially backward classes of the society together owned 200.91 lakh MSMEs (51.54%). The women entrepreneurs also owned 38.50 lakh MSMEs (10.64%). The above data suggests that the MSMEs helped in achieving inclusive growth.

Economic Outlook 2012-13 Highlights

Dr. C. Rangarajan, Chairman, Economic Advisory Council to the Prime Minister released the document ‘Economic Outlook 2012-13’ at  in New Delhi 0n August 17.

 Following are the highlights of the document:

Ø  Economy to grow at 6.7 per cent in 2012/13

o    Farm sector GDP projected to grow at 0.5 per cent in 2012/13 due to the impact of weak monsoon on agriculture and the current reservoir storage position in 2012/13.

o    Manufacturing sector projected to grow at 4.5 per cent. Electricity, automotive, steel and cement sector have shown improvement in the period of April-June. Because of the benefits of the low base, manufacturing sector will show improved performance in the second half of this year.

o    Mining sector for the year as a whole expected to grow at 4.4 per cent due to growth in the coal and lignite sector, and some recovery in iron ore.

o    Electricity generation expected to continue to grow at an average pace of around 8 per cent.

o    Construction expected to show some improvement compared to last year as evidenced by the recent increase in the output of steel and cement.

o    In Services sector, some improvement expected particularly in the large transport, trade and communications sector.

Ø Global Situation: There is a dark mood in the advanced economies; especially in Europe. The slower growth in the US and in the EU will have an adverse impact on the expansion of these markets for India’s exports, both of goods and services.

Ø Structural Factors:

o    Gross Domestic Fixed Capital Formation as a proportion of GDP has fallen from its highest level of 32.9% in 2007/08 to 30.4 % in 2010/11 and to 29.5 per cent in 2011/12. Projected to be 30.0% in 2012/13.

o   Domestic saving rate has declined from 32.0% in 2010/11 to 30.4% in 2011/12 and projected to be at 31.7% in 2012/13.

Ø  External Sector:

o   Current Account Deficit was $78.2 billion (4.2% of GDP) in 2011/12 and projected at 67.1 billion (3.6% of GDP) in 2012/13.

§  The merchandise trade deficitwas$189.8 billion (10.2 per cent of GDP) in 2011/12 and projected at $181.1 billion (9.7 per centof GDP) in 2012/13.

§  Overall the net balance on invisibles was $111.6 billion(6.0% of GDP) in 2011/12 is expected to grow at $114 billion (6.1% of GDP) in 2012/13.

o   Capital flows were $67.8 billion (3.7% of GDP) in 2011/12 and projected at $73.2 billion (3.9% of GDP) in 2012/13. This would be adequate to service the projected CAD of $67 billion for the year as a whole.

o   Accretion to reserves projected at $4 billion in 2012/13

Ø Inflation:

o  Deficient SW monsoon likely to have an adverse impact on the prices of primary food items, especially on those where the ability of government stocks to play a moderating role is not there.Inflation rate expected to be within the range of 6.5 to 7.0 per cent at the end of 2012-13.

Ø  Expanding fiscal imbalance continues to be a major area of policy concern.

o  The fiscal deficit for the Centre was 5.89% of GDP in RE 2011/12 and is estimated at 5.06% in BE 2012/13.

o  In some contrast to the Centre’s finances, the fiscal health of the States is better. 

o  The consolidated fiscal deficit of the Centre and the State governments for 2011/12 (RE) was 8.2 per cent of GDP. The consolidate deficit based on Budget Estimates for 2012/13 is estimated to be 7.2 per cent.

o  The containment of the fiscal imbalance at the Centre rests on our managementofthe subsidy bill, especially that on refined petroleum products and by increasing the Tax-GDP ratio.

o  Introduction of the General Sales Tax on Goods & Services (GST) would be a very important milestone in the path of tax reform. It requires considerable negotiations, bargaining and preparatory work in relation to both the structure and operation of the tax.

Ø    Reforms in Agriculture sector:

Reforms in Agriculture sectorneed focused attention on liberalizing tenancy arrangements, reforming domestic markets for agricultural produce and, reducing input subsidies.

Ø    Measures to accelerate the Economic growth:

o  Integrated decision-making on high-impact infrastructure projects

For Projects costing in excess of a minimum threshold, say Rs 5,000 crore, a Cabinet Committee comprising of ministers in charge of concerned departments should take an integrated view. The Cabinet Committee on Infrastructure could be recast as the Cabinet Committee for Sustainable Development of Infrastructure for this purpose, and its composition as well as powers under the rules of business modified accordingly.

o  Permitting FDI in multi-brand retail

For channelling transfer of capital and technology, FDI in multi-brand retail up to 49 per cent may be allowed to attract investment in this sector. Such of the states as are receptive to the idea may implement this.

o  FDI and other reforms in the Aviation sector

    FDI in civil aviation may now be allowed to the existing extent of 49 per cent for foreign airlines as well.

o  Containing petroleum products subsidies

Given the huge subsidy projection for the current financial year, priority consideration may be given to (i) a suitable increase in the price of diesel in one or more steps, and (ii) a cap on the level of consumption of subsidised domestic LPG close to what is currently being consumed by poorer households, i.e., 4 cylinders.

We need to focus further on the following issues:

o    Policy predictability: There is need to specifically focus and address the apprehensions that have been occasioned by perceptions of arbitrary actions on tax and other fronts.

o    Clearing payments: Outstanding payments for infrastructure projects need to be cleared on time.

o    Promoting savings:Given the declining trend in domestic saving rate, we need to make financial products more attractive.

o    Containing inflation:

§   Taming inflation is critical for sustained growth. Need to take steps to contain high inflation in primary food which is mostly linked to the antiquated system of marketing and absence of modern handling and storage facilities for perishable products.

o    Improving the CAD:

§   Some amelioration through price reform in case of diesel could serve to contain demand.

§   To contain the import of gold, an improvement in the return as well as the regulatory regime in which mutual funds and life insurance products are sold areof utmost importance.

§   Significant improvement required in the approach of government to a number of issues to make IT-related export business much more competitive.

Click here to see Economic Outlook

Mutual Fund

A mutual fund is a trust that pools the saving of a number of investors who share a common financial goal. The money thus collected is then invested in capital market instruments such as shares, debentures and other securities. The income earned through these investments and the capital appreciation realized are shared by its unit holders in proportion to the number of units owned by them.

The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and the Reserve Bank of India. The History of mutual fund in India can be broadly divided into four distinct phases:

First Phase (1964-87)

Unit Trust of India (UTI) was established in 1963 by an act of parliament, it was set up by the Reserve Bank of India and functioned under the regulatory and administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 Unit had 6700 crore of assets under management.

Second Phase (1987-93)

1987 marked the entry of non-UTI, public sector mutual fund setup by the public sector banks and life insurance corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI mutual fund was the first non-UTI mutual fund established in June 1987 followed by CanBank Mutual Fund (December 1987), Punjab National Bank Mutual Fund (August 1989), Indian Bank Mutual Fund (Novemeber 1989), Bank of India (June 1990), Bank of Baroda Mutual Fund (October 1992). LIC established its Mutual Fund in June 1989 while GIC set up its Mutual Fund in December 1990.

Third Phase (1993-2003)

With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was a year in which the first Mutual Fund regulation came into being, under which all mutual funds except UTI were to be registered and governed. The erstwhile Kothari Poneer (now Merged with Franklin Templeton) was the first private sector Mutual fund registered in July 1993.

The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised Mutual Fund Regulation in 1996. The industry now function under the SEBI (Mutual Fund) Regulation 1996.

Fourth Phase (Since February 2003)

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the specified undertaking of the Unit Trust of India with assets under management of 29,835 crore as at the end of Jan 2003, representing broadly the assets of US 64 scheme, assured return and certain other schemes. The specified undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, sponsored by SBI, PNB, BoB and LIC. It is registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile UTI had in Mach 2000 more than 76,000 crore of assets under management with the setting up of UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among the different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

Bombay Stock Exchange (BSE) of India

The oldest stock market in Asia, BSE stands for Bombay Stock Exchange and was initially known as "The Native Share and Shock Brokers Association". Incorporated in 1875, BSE became the first exchange in India to be certified by the administration. It attained a permanent authorization from the Indian Government in 1956 under Securities Contracts (Regulation) Act, 1956.

Over the year, the exchange company has played an essential part in hte expansion of Indian investment market. At present the association is functioning as incorporated body integrated under stipulations of Companies Act, 1956.

While BSE is now synonymous with Dalal Street, it was not always so. The first venues of the earliest stock brokers meetings in the 1850s were in rather natural environs - under banyan trees - in front of the Town Hall, where Horniaman Circle is now situated.

A decade later, the brokers moved their venue to another set of foliage, this time under banyan trees at the junction of Meadows Streets and what is now called Mahatma Gandhi Road.

As number of brokers increased, they had to shift from place to place, but they always overflowed to the streets. At last, in 1874, the brokers found a permanent place, and one that they could, quite literally, call their own, the new place was, aptly, called Dalal Street (Brokers Street).

In 2002, name "The Stock Exchange, Mumbai" was changed to Bombay Stock Exchange. Subsequently on August 19, 2005 the Exchange turned into a corporate entity from an association of persons (AoP). And renamed as Bombay Stock Exchange Limited.

BSE which had introduced the securities trading in India, replaced its own outcry system of trading in 1995, with the totally automated trading through the BSE Online Trading (BOLT) system. The BOLT network was expanded nationwide in 1997.

Recommendation of the K.C. Chakrabarty Committee on Recapitalisation of RRBs

The Government of India had constituted a committee in September 2009 (Chairman Dr K. C. Chakrabarty) to study the current levels of capital-to-risk-waited asset ratio (CRAR) of RRBs and to suggest a road map for achieving a CRAR of 9% by March 2012. The committee was also required to suggest the acquired capital structure for RRBs given their business level, so that their CRAR is sustainable and provides for future growth and compliance with regulatory requirements. The committee submitted its report to the Government of India on April 30, 2010.

The following are the main recommendations of the committee on reacpitalisation of RRBs:

• The Committee carried out an assessment of capital requirement for all 82 RRBs to enable them to have CRAR of at least 7% as on March 31, 2011 and at least 9% from March 31, 2012 onward. The recapitalisation requirement would be Rs. 2200 crore for 40 out of 82 RRBs. This amount may be released in two installments i.e., Rs. 1338 crore in 2010-11 and Rs. 863 crore 2011-12. The remaining 42 RRBs will not acquire any capital and will be able to maintain CRR of at least 9% as on March 31, 2012 and thereafter on their own.
• The committee noted that some of the weak RRBs, particularly in North-Eastern and Eastern regions, might not be able to fully meet all the projected business parameters despite generally achieving acceptable growth. The committee, therefore suggest that an additional amount of Rs. 700 crore may be kept to meet such contingencies and need based additional capitalisation provided to such RRBs once their draft balance sheets are prepared.
• The recapitalisation of Rs. 2200 crore to 40 RRBs should be one time measure, and released subject to signing of memorandum of understanding (MoU) by the chairman of the RRB and on achieving the performance parameters specified in MoU. As per section 5 of the RRB Act, the authorized capital of RRB is Rs. 5 Crore. As a result recapitalisation amount are kept as share capital deposit. The committee has recommended that the accumulated losses on March 31, 2010 may be written off against the available share capital deposits and the balance amount of share capital deposit may be appropriated as paid-up capital further, in view of expanding business of the RRB, the committee recommended to increase in the authorized capital RRBs to Rs. 500 crore.
• In order to build public confidence, in due course, RRB with higher net worth may be allowed to access capital from the market.
• For improving the functioning of the RRB, change of sponsor banks may be considered, where ever required.
• RRB with a net worth of Rs. 100 crore or more as on March 2009 may be permitted to pay dividend on April 1, 2013 onward. RRBs to be recapitalised in the current phase may be allowed to pay dividend only after achieving a sustainable CRAR of at least 9%.
• RBI may prescribe "Fit and Proper" criteria for chairman of RRB. The sponsor may depute officer conforming to such criteria as Chairman on a tenure basis and wherever needed, such officers may be recruited by them from open market and the deputed to RRBs. The compensation of chairman may be de-linked from existing salary structure of commercial banks and be more market oriented and a system of incentives and disincentives linked to performance benchmarks approved by the board may be built in the compensation package.
• The board as a body as well as individual board members may be made accountable for the banks performance and individual board need to be assigned specific responsibilities as per their expertise.
• Wherever required, sponsor banks may recruit suitable person from the market, including staff of the RRB in their own service and then depute them as general managers in RRBs.

MCA-21 E-Governance Project- an Effort to Facilitate Business in India

As a regulator and enabler for corporate growth in the country, the Ministry of Corporate Affairs has been working on two key initiatives, to reform the legislative framework and to embark on e-Governance initiatives that will facilitate service delivery in a user friendly, efficient and economic manner.

            To facilitate business in India a pioneering e-Governance initiative ‘MCA21’ was launched by the Ministry in January 2007. The initiative has been successful in achieving its aim of providing speed and certainty in the delivery of MCA services to its stakeholders. This project has adopted a service oriented approach in the design and delivery of Government services, whereby stakeholders have easy and secure access to MCA services, through the infrastructure setup for the purpose, at any time and from any place and in a manner that best suits them. The system has brought a fine balance between stakeholder facilitation and control, through a blend of well-defined goals and performance metrics.

           

            Although, MCA 21 has been progressing at a constant velocity to provide better services to the citizens and corporate alike, year 2012 has been the one standing out in terms of rolling out newer initiatives. These initiatives have benefited citizens, corporate and government agencies alike. 

Online Payments Using NEFT

MCA 21 has been allowing three modes of payment by the companies, Credit cards, Netbanking (5 designated banks) and Paper challans; all these modes had limitations for the companies with bank accounts in banks other than the 5 designated banks and physical visits to the branches of the designated banks for filing challans.

By introduction of National Electronic Funds Transfer mode of payment, companies having bank account in any bank can make e-payments by using the NEFT method.

Key benefits of NEFT:

·         Reduces the Payee’s effort (branch visit is not required)

·         Reduces the time for funds transfer (2-5 hours)

·         Reduces the dependency on the limited number of banks

Initiatives Taken by the Government for Unearthing and Curbing Black Money: A Fact Sheet

Initiatives taken by the Investigation Division of Central Board of Direct Taxes (CBDT) for unearthing black money :

I.                   The Government of India has commissioned a study on unaccounted income/ wealth both inside and outside the country bringing out the nature of activities engendering money laundering and its ramifications on national security. The study is being conducted by three national institutes viz. National Council of Applied Economic Research (NCAER), National Institute of Public Finance & Policy (NIPFP) and National Institute of Financial Management (NIFM), with inputs from various ministries/departments. The study will be completed by the end of 2012.

II.                A  Directorate of Criminal Investigation (DCI) has been created as an attached office of the Central Board of Direct Taxes (CBDT) to track financial transactions relating to illegal / criminal activities, including illicit cross-border transactions, from the direct tax angle and bring such activities to justice. Creation of DCI is also in line with FATF recommendations to exclusively deal with tax crimes, including direct taxes.

III.             CBDT is coordinating with the Election Commission of India (ECI) for controlling political expenditure and verification of affidavits filed by candidates of political parties.

IV.            In order to strengthen the existing laws relating to black money, the Government constituted a Committee under the Chairman, CBDT to examine the measures to strengthen the existing legal and administrative framework to deal with the menace of generation of black money through illegal means including, inter alia,

a) Declaring wealth generated illegally as national asset;

b) Enacting / amending laws to confiscate and recover such assets; and

c) Providing for exemplary punishment against its perpetrators.

The Committee submitted its report to the Government on 29^th March 2012. The report has been sent to different Ministries / Organisations and State Governments for necessary action.

V.               Information received under DTAA – Information from Germany & France has been investigated. Tax evasion of more than Rs.600 crore detected and taxes of Rs.200 crore has already been realized. Prosecution proceedings have been launched in 17 cases pertaining to LGT Bank accounts. Assessment proceedings have been initiated in cases relating to HSBC accounts. Further information from outside the country is awaited in several cases. Information received from different countries under the automatic exchange of information arrangement is appropriately utilized for the purpose of investigation and assessment.

VI.            Search & Seizure, Surveys – In the last three financial years, the Investigation wing of the CBDT has detected undisclosed income of over Rs.32,000 crore besides seizing undisclosed assets valued at over Rs.2,600 crore. The Income Tax Department (ITD) has further detected undisclosed income of Rs.17,325 crore in surveys conducted at business premises.

VII.         Tax Prosecutions – Out of 1,548 prosecution cases disposed of during the last three financial years, the ITD has obtained conviction in 97 cases besides fiscal compounding in 771 cases of admitted tax evasion, leading to a success rate of 56.1 percent.

RBI permitted Banks to lend to Telecom Companies for the Upcoming Auction for Spectrum

The Reserve Bank of India (RBI) permitted banks to lend to telecom companies for the upcoming auction for spectrum, subject to conditions such as mortgaging the spectrum to the lenders. The RBI had laid down a few pre-conditions for financing of telecom firms for the auction of airwaves to protect banks against potential defaults.
The Union cabinet on 3 August 2012 approved a proposal that allows telecom companies bidding for airwaves to mortgage spectrum to raise funds from banks. The government set a reserve or base price of Rs 14000 crore for the auction.
That banks were revising their lending rates in specific maturities without lowering the base rate concerned the RBI. This activity of the banks resulted in the transmission of monetary policy signals by the central bank to be ineffective. The base rate is supposed to be responsive to changes in monetary conditions.
The RBI had formed a committee to assess the monetary policy transmission mechanism and also loan products offering fixed interest rate. The RBI want banks to enact changes in lending rates through their respective benchmark base rates for floating-rate loans.

India’s Stand on ILO Conventions Briefed to the Parliamentary Consultative Committee of M/O Labour & Employment

The Consultative Committee members of the Ministry of Labour & Employment have urged the Government to ensure due patronage to the traditional skill while going for the ratification of Conventions adopted by the International Labour Organisation (IlO) on Labour issues, especially in the arena of Child Labour. The members have also called for expediting the cause of providing a minimum pension of Rs. 1000 per month to the EPF beneficiaries as well as to ensure proper registration of workers in the unorganized sectors particularly the construction workers.

The meeting of Consultative Committee of Labour & Employment Ministry which held yesterday evening was convened for providing in insight to the members of the various conventions of ILO as ratified by the Government of India on time to time. Speaking on the occasion, Union Labour & Employment Minister Shri Mallikarjun Kharge who chaired the meeting, said India, a Founding Member of the ILO, has been a permanent member of the ILO Governing Body since 1922. ILO has now expanded its membership to 185 nations. The first ILO Office in India started in 1928. The decades of productive partnership between the ILO and its constituents has mutual trust and respect as underlying principles and is grounded in building sustained institutional capacities and strengthening capacities of partners. It has a two-directional focus for socio-economic development: overall strategies and ground-level approaches.

The Minister said the approach of India with regard to International Labour Standards has always been positive. The ILO instruments have provided guidelines and useful framework for the evolution of legislative and administrative measures for the protection and advancement of the interest of labour. It has always been the practice in India that we ratify a Convention when we are fully satisfied that our laws and practices are in conformity with the relevant ILO Convention. The ILO has so far adopted 189 Conventions and 201 Recommendations. Out of 189 ILO Conventions, India has so far ratified 43 Conventions which includes 4 (four) core or fundamental human rights Conventions.

He said we have ratified 4 core conventions and 3 priority/governance conventions. The 4 core conventions ratified by us are Forced Labour Convention (No.29), Abolition of Forced Labour Convention (No.105), Equal Remuneration Convention (No.100) and Discrimination (Employment Occupation) Convention (No.111), and the 3 priority conventions ratified are Labour Inspection Convention (No.81), Employment Policy Convention (No.122) and Tripartite Consultations (International Labour Standards) (No.144). Even where for certain reasons where we may not be in a position to ratify a Convention, we have generally voted in favour of the Convention reserving its position as far as its future ratification is concerned.

The journey of ILO over the last more than nine decades has been eventful and full of important milestones. However, the primary function of ILO is standard setting and their application. Many of the ILO Conventions are outdated and need to be revised as identified by Cartier Working Party. Even the core conventions have failed to achieve universal ratification due to lack of flexibility. Our concern is that ILO should undertake in-depth analysis to put in place a standards strategy which encourages steps like progressive ratification of a Convention. The choice of topics for future standard setting should be widened according to the requirements of all ILO member states having diverse socio-economic conditions. In the years to come, ILO must maintain its leadership in the subjects related to labour since it has the unique advantage of tripartite structure, transparency and the ability to obtain inputs from real economy, Shri Kharge added.

Shri Kharge said the challenges being faced by the Member states on Ratification and promotion of fundamental and governance ILO Conventions are due to non-conformity with national laws and lack of technical assistance. He said India’s stand is that the process of ratification of these conventions should be a gradual one and adequate time should be given to the Member States for creating favourable conditions for ratification, taking into account the socio-economic realities of each Member state. The link-up of the four Governance Conventions to the Social Justice Declaration should be more of promotional in nature. We should adopt a more pragmatic and realistic approach for ratification and promotion of these conventions through creating awareness, building capacities of the constituents, advocacy, training and technical cooperation.

A power point presentation on the preparedness and attention paid by the Government at the ILO meetings was also presented during the meeting.

Inflow of FDI

According to the UNCTAD’s World investment Report, 2012, Foreign Direct Investment (FDI) inflows of US $ 684399 million were received in developing economies of the World during 2011, of which India received 4.6%.  FDI inflows, in respect of some of the developing economies, including India, during 2011, are as under:-

DEVELOPING ECONOMIES	2011 US $ (MILLION)
China	123985
Hong Kong, China	83156
Brazil	66660
Singapore	64003
British Virgin Islands	53717
India	31554
Mexico	19554
Indonesia	18906
Chile	17299

            According to the UNCTAD’s World Investment Report, 2012, Foreign Direct Investment (FDI) inflows of US $ 31554 million have been received in India during 2011, as against FDI inflows of US $ 24159 received during 2010.

India’s Fiscal Deficit reached 37 Percent of the Budget Estimate

According to the latest data released by the Controller General of Accounts (CGA) on 1 August 2012, India's fiscal deficit in the first quarter (April-June) of the fiscal year 2012-13 stood at 1.90 lakh crore rupees which was 37 percent of the entire budget estimate.

The Union Government in the budget 2012 had pegged the fiscal deficit for the financial year 2012-13 at 5.13 lakh crore, or 5.1 percent of total GDP. Fiscal deficit during the corresponding period of fiscal year 2011-12 was 39 percent of the budget estimates amounting 1.63 lakh crore rupees.

The revenue receipts, however, increased in the first three months of fiscal year 2012-13. The revenue receipt during the given period stood at 1.18 lakh crore rupees, which was 12.7 percent of the budget estimates. Total expenditure of the government stood at 3.12 lakh crore rupees, or 21 percent of the budget estimates.

Securities and Exchange Board of India inaugurated their local office in Jaipur

Securities and Exchange Board of India (SEBI) inaugurated their local office here. Jaipur is known as the Pink City. It is the largest city in Rajasthan State.

Securities and Exchange Board of India(SEBI) inaugurated their local office in Jaipur on 4 August 2012. It was inaugurated by Rajeev Kumar Agarwal, the member of SEBI. The office will be responsible to look after all the regulatory aspects of investor protection, investor education and all the other responsibilities within Rajasthan state.

India’s NSE became the World’s Largest Bourse in Equity Segment as per WFE’s Global Ranking

As per the latest global ranking compiled and published by the World Federation of Exchanges (WFE) in August 2012, the National Stock Exchange of India (NSE) become the world’s largest bourse in terms of the number of trades in equity segment for the first six months of 2012. A total of 735474 trades took place in the equity segment of NSE in the January-June period of 2012, making it the world’s largest exchange on this parameter. NSE was followed by NYSE Euronext and Nasdaq OMX at the second and the third positions.
Industry experts attributed the recent position of NSE acquired by the bourse to growing investor base, use of latest technology and new products. NSE's platform is connected to two lakh trading terminals in more than 2000 towns and cities across the country.
NSE is the second largest exchange globally after Korea Exchange for index options. Eurex was the third largest exchange worldwide in terms of total number of index options traded during the first six months of 2012.
BSE recorded a total of 187824 trades during this period in its equity segment. The total number of listed companies is much larger in case of the BSE, the exchange however lags behind NSE significantly in terms of volume and value of trades.
The latest data published by WFE indicated that investors from tier-three cities contributed more than 45 per cent of total cash market retail turnover in the financial year 2011- 12. The tier-three cities account for more than half of the total retail investor base on NSE platform.

Bombay Stock Exchange Sensitive Index

The BSE Sensex or Bombay Stock Exchange Sensitive Index is a value-weighted index composed of 30 stocks with the base April 1979 = 100. It consists of the 30 largest and most actively traded stocks, representative of various sectors, on the Bombay Stock Exchange. These companies account for around one-fifth of the market capitalization of the BSE. 

  

Companies in the Sensex 

Name	Sector
ACC	Cement
Bajaj Auto	Automobiles (2/3 wheelers)
BHEL	Capital Goods
Bharti Airtel	Telecom and Retail
Cipla	Pharma
Dr. Reddy’s Laboratories	Pharma
Grasim Industries	Diversified
Gujarat Ambuja Cements	Cement
HDFC	Finance
HDFC Bank	Finance
Hero Honda Motors	Automobile (2 wheelers)
Hindalco Industries	Metal, Metal Products & Mining
Hindustan Lever Limited	FMCG
ICICI Bank	Banking & Finance
Infosys	Information Technology
ITC Limited	FMCG
Larsen & Toubro	Capital Goods & Construction.
Maruti Udyog	Automobiles
NTPC	Power
ONGC	Oil & Gas
Ranbaxy Laboratories	Pharma
Reliance Communications	Telecom
Reliance Energy	Power
Reliance Industries	Diversified
Satyam Computer Services	Information Technology
State Bank of India	Banking & Finance
Tata Consultancy Services	Information Technology
Tata Motors	Automobiles
Tata Steel	Metal, Metal Products & Mining
Wipro	Information Technology

Rural development ministry plans big push to MNREGA to tackle drought

The rural development ministry is preparing for a big push to its flagship employment generation programme as drought has depressed demand for farm labour. The ministry has written to state governments asking them to identify development projects under the Mahatma Gandhi National Rural Employment Guarantee Act (MNREGA) to ensure there's enough work available for those in need.

Rural development minister Jairam Ramesh has already written to state chief ministers affected by deficient rainfall, asking them to prepare a list of new projects that could be incorporated in the MNREGA programme.

Ramesh is now touring drought-hit states of Maharashtra, Karnataka, Gujarat and Rajasthan with agriculture minister Sharad Pawar to assess the water scarcity situation.

While the all-India rainfall deficiency average at 21%, some states like Karnataka, Maharashtra, Gujarat and Rajasthan have been worse off with deficiencies as high as 64% and 78%.

The Centre wants to expedite the implementation of new projects under MNREGA to generate enough jobs as demand for employment goes up, mainly from agricultural workers.

Although allocation for NREGA was curtailed to Rs 33,000 crore this budget from Rs 40,000 crore in 2011-12, states have surplus left over from the previous year.

MNREGA has provided 5.50 crore families or nearly one in four rural households with over 250 crore person-days of work under the programme.

Delay in payments and leakages have, however, dented the scheme's initial popularity, which many attributed as one of the reasons for UPA's return to power in 2009.

Banks may move to screen-based rate for MIBOR

Banks are likely to move to actual dealt rates on a trading platform to determine overnight interbank lending rates, as regulators worldwide push for more transparent systems in the wake of the Libor scandal, officials close to the plan said.

Some Indian bankers fear that the current polling system used to determine the Mumbai interbank offered rate (MIBOR) could be similarly vulnerable to manipulation.

"Traders are closely looking at whether it will be desirable to use traded data as a benchmark."

The moves in India parallel similar efforts by regulators from London to Singapore to reform the way benchmarks for interbank borrowing rates are fixed following the investigations into the rigging of the London interbank offered rate (Libor).

Libor and other similar benchmarks are used to price trillions of dollars worth of loans and derivative contracts.

In India, Reuters and the National Stock Exchange conduct separate polling, asking banks for their assessments MIBOR, which is used as a benchmark for interest rate swaps, overnight call money, collaterised borrowing and lending obligations (CBLO), floating rate bonds and short-term corporate loans.

The debt and money market body Fixed Income Money Market and Derivatives Association ( FIMMDA) is expected to make the final decision on a new system in a month, after sounding out banks and CCIL.

Private sector bank--YES Bank, one of the lenders currently participating in polling for MIBOR, would welcome a switch.

Pakistan allows National Bank of Pakistan & United Bank to open branches in India

Pakistan's central bank has allowed two banks to open branches in India as part of efforts to normalise economic and trade relations between the two countries.

State Bank of Pakistan (SBP) Governor Yasin Anwar told the media that the National Bank of Pakistan and the United Bank Ltd had been given the "green signal" to operate in India.

In a major decision, India  allowed investment from Pakistan paving way for Islamabad to normalise bilateral economic ties by implementing much-delayed Most Favoured Nation (MFN) status for New Delhi.

India's move to allow Pakistani investments has been welcomed by businessmen on both sides of the border.

Earlier this year, Pakistan switched over to a negative list regime for trade with India, paving the way for giving the Most Favoured Nation-status to the neighbouring country.

However, recent reports have indicated that Pakistan has decided to link progress in normalising trade relations to the resolution of other issues, like the Kashmir issue and the Sir Creek border dispute.

Trade between India and Pakistan is worth a little more than $2 billion dollars and the two sides have agreed to increase it to $6 billion dollars by 2014.