01.10.2012
Credit Growth:
Why
interest rates need to fall ?
Ø As John Kenneth Galbraith points out in The
Economics of Innocent Fraud: “If
in recession the interest rate is lowered by the central bank, the member banks
are counted on to pass the lower rate along to their customers, thus
encouraging them to borrow. Producers will thus produce goods and services, buy
the plant and machinery they can afford now and from which they can make money,
and consumption paid for by cheaper loans will expand..The difficulty is that
this highly plausible, wholly agreeable process exists only in well-established
economic belief and not in real life… Business firms borrow when they can make
money and not because interest rates are low.”
Ø India leading player in PPP for infrastructure
Ø Private sector financed 36% of infrastructure in 11th
FYP and estimated to finance 50 % in 12 FYP. But returns are not encouraging.
That will drive away future investment
Ø Airline, retail, telecom- bleeding
Ø Cutting interest rate will make FD less lucrative and push
common man investment in stock market
Ø Appreciating rupee will spruce up the returns of foreign
investors-Let us say a foreign investor gets $1million to invest in Indian
stocks when one dollar is worth Rs 55. He converts the dollars into rupees and
invests Rs 5.5 crore ($1 million x Rs 55) in the Indian market. He invests for
a period of one year and makes a return of 10 percent. His investment is now
worth Rs 6.05 crore. One dollar is now worth Rs 50. When he converts the
investors ends up with $1.21 million, or a return of 21 percent in dollar terms
Ø An immediate impact of the appreciating rupee is that it brings
down the oil bill. Oil is sold internationally in dollars. Let us say the
Indian basket of crude oil is selling at $108 per barrel (one barrel equals 159
litres). If one dollar is worth Rs 55.4 then India has to pay Rs 5,983.2 for a
barrel of oil. If one dollar is worth Rs 52.8, then India has to pay Rs 5,702.4
per barrel. So as the rupee appreciates the oil bill comes down.
Ø The oil marketing companies (OMCs) sell diesel, kerosene and
cooking gas at a price which is lower than the cost price and thus incur huge
losses. The government compensates the OMCs for these losses to prevent them
from going bankrupt. This money is provided out of the annual budget of the
government under the oil subsidy account. But as the rupee appreciates and the
losses come down, the oil subsidy also comes down. This means that the
expenditure of the government comes down as well, thus lowering the fiscal
deficit. Fiscal deficit is the difference between what the government earns and
what it spends.
Ø Rising stock markets> fiscal deficit>>
Ø Rising share market will also help government in dis-investment
plan of Rs. 30k crore this year.
Why we need infrastructure:
Ø Basic
fundamental driving force of all other sectors- highway, electricity, ports,
airports, rail links, waterways, air-links, telecommunication
Ø 12th
FYP one trillion dollar estimated to investment
GAAR- General Anti
Avoidance Rules:
The Parthasarathi Shome panel, looking into the taxation issues
relating to GAAR (General anti-Avoidance Rules), today submitted its final
report to Finance Minister P Chidambaram.
Ø In a previous draft report, the panel had recommended that the
GAAR rules be deferred for three years.
Ø government should retain the provisions of the CBDT circular,
which was issued in 2000, on acceptance of Tax Residence Certificate (TRC)
issued by the Mauritius.
Ø suggested the government should issue a circular to clarify GAAR
provisions along with illustrations
Ø GAAR be applicable only if the monetary threshold of tax benefit
is Rs 3 crore and more
CAG Activism:
Ø Only
parliament can pull CAG
Ø PIL-
CAG has no mandate to comment of government policy choices and calculate loss /
gains on basis of that.
Ø Court-
CAG can look into efficacy and impact of decision made by Government
CSIR- Council of
Scientific and Industrial Research
Ø Directorate
General- Dr. Brahmachari
takes charge as Director General CSIR
Ø 70TH
Foundation day on 26.09.2012
Ø Constituted
in 1942 by the resolution of then central legislative assembly, it is an
autonomous body registered under registration of society act 1860.
Architecture of Cash
Transfer:
Ø Why?
To cut down wastage, leakage, duplication and enhance efficiency
Ø National
Ministerial Committee- under PM with membership of all concerned ministries-
highest decision making body
Ø National
executive committee- with all secretaries of all concerned ministries-
Coordination, timeline and sort out hitches
Ø Implementation
mission and committee- Ground Work,
Technology Committee, Financial Inclusion Committee, Electronic Benefit
Transfer
Assam Floods:
Ø
The
first wave offloods in Assam from end-June to mid-July
affected more than 24 lakh people in all 27 districts of the state, took 125
lives and devastated 2.55 lakh hectares of farmlands.
Ø The second wave of floods over the past two
weeks have affected 18 lakh people, so far, in 17 districts, killed nearly 30
and inundated two lakh hectares of farmlands.
Ø Brahamputra
carries largest amount of sediment > 800 million ton/ year and in absence of
dredging – river bed swallowed> reduced the carrying capacity of water
Floods impact:
Ø Prices
has increased due to shortage of vial supplies
Ø Rainfall
31% more than normal has added to woos
Ø Airport
– at the edge of Guhawti- in danger Lokmanya Gopinath Bordoloi
Ø Train
services affected
Ø National
park in danger
ICVL: International Coal
venture limited
Ø Venture
of 5 state run company
Ø Can
make investment up to Rs. 1500 cr (for exceeding amount need to take permission
from secretary)
Ø Govt.
need to provide/ delegate more power to management of ICVL
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