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Indian Economy 2011-12

Written By Winston Bensford on Friday, March 30, 2012 | 5:18 PM


ECONOMIC GROWTH RATE FOR 2010

In the year 2009-10. secondary  sector  stood  at  7.2%  and that of the service sector is 9.3% during 2010-11.
the per capita income grew by a slower 6.4 per cent to Rs.35993 in 2010-11 as compared to Rs.33843 in 2009-10.
January  2012  revised  the  economic growth  rate  for  2010-2011  financial year to 8.4 percent in comparison to the previous estimate of 8.5 percent. Indian  economy  grew  8.4%  in  2010-11. lower than the previous estimate of 8.5%, on the back of strong farm sector and services sector growth. economy,  Asia’s  third-largest  slowed in  recent  quarters  due  to  the  impact of the global slowdown, high inflation and  high  interest  rates.  Policymakers estimated  growth  in  2011-12  to  be close to 7%. 8.4% expansion in the gross domestic product (GDP) during 2010- 11 was achieved due to high growth in transport, storage and communication (14.7%),  financing,  insurance,  real estate  and  business  services  (10.4%), trade, hotels and restaurants (9%) and construction (8%). At constant prices, the primary sector- agriculture, forestry and fishing, showed a high growth of

7%during 2010-11 as against 1% during 2010-11.
 


GROSS DOMESTIC PRODUCT 

Gross Domestic Product (GDP) at factor cost at constant (2004-05) prices in 2010-11 was estimated at Rs. 4885954 crore as against Rs. 4507637 crore in 2009-10 registering a growth of 8.4 per cent during the year which is same as in the year 2009-10. At current prices, GDP in 2010-11 was estimated at Rs. 7157412 crore as against Rs. 6091485 crore in 2009-10, showing an increase of 17.5 per cent during the year.

GROSS NATIONAL INCOME

registered  a  growth  of  7.9  per  cent in  2010-11  over  2009-10.  India's  per capita  income  grew  by  15.6  per  cent to  Rs.53331  in  2010-11,  crossing  the Rs.50000-mark  for  the  first  time.  In real  terms  based  on  2004-05  prices,


In  Terms  of  Foreign  Fund  flows January 2012 is the Best Month since November 2010
As per data published by the market regulator SEBI on 27 January 2012, net FII buying crossed the $2-billion mark in  January  2012  making  January  the best  month  in  terms  of  foreign  fund flows  since  November  2010.  FIIs  had recorded a net outflow of $358 million in 2011. Inflows in January 2012 is in sharp contrast to over $1 billion outflow in January 2011. also helped strengthen the Indian rupee which closed above the 49-level after nearly 10 weeks. January’s inflow figure, however  was  less  than  a  third  of  the monthly inflow record set in October
2010.          when $6.4 billion was pumped in by foreign fund managers. In October 2010 the figures were further pumped through  the  hugely  successful  Coal India IPO. SEBI’s data showed a net FII inflow  of  $1779  million.  Institutional 
trading  data  on  the  BSE  showed  net inflow figure on 27 january at Rs 1240 crore, which translates to $252 million. the $2 billion mark.


MOBILE PHONE  COMPANIES TO SHARE 2G SPECTRUM ONLY

of  the  communications  ministry,  the Telecom Commission decided to allow mobile  phone  companies  to  share
spectrum.

limited this facility to 2G airwaves alone.
 Second  generation  (2G)  spectrum is  largely  used  for  oering  vanilla voice  services.  companies cannot therefore share 3G spectrums. Incumbents such as Bharti Airtel,  Vodafone,  Aircel  and  Idea Cellular took the government to court, after  the  telecom  department  asked these  companies  to  terminate  their 3G  roaming  deals.  had  hoped  the  Commission’s  policy changes had hoped that policy changes permitting  the  sharing  of  airwaves, would put an end to this controversy. customers across the country riding on bilateral roaming agreements that allow these firms to use each other’s airwaves and oer high-end data services even in  regions  where  they  do  not  have 3G  spectrum.  decided to introduce slew of riders to govern spectrum sharing.


Only   those     operators   that   have  airwaves  in  a  particular  region can  share  it.  Spectrum  can be  shared  only  between  two spectrum holders. A non-licensee or  licensee  who  has  not  been assigned spectrum as yet cannot be party to spectrum trading.Two  companies  can  share airwaves only if their combined holdings do not exceed the limits prescribed  in  the  M&A  norms. recently approved sector regulator TRAI’s  recommendation  that during  mergers,  the  combined entity be allowed to have up to 25%   of the total airwaves in the region.
Spectrum  sharing   deals  will  also have  to  be  renewed  every  five years.
When  operators share spectrum, both  companies  will  have  to pay  usage  charges  on  the  total airwaves  held  jointly.  Currently, operators share between 2% and 6% of their annual revenues based on the quantity of airwaves they hold.
Tetelcos sharing  spectrum must  pay  the  government  the commercial value of the airwaves it  is  using.  It  essentially  means, an operator that has 4.4 MHz of airwaves,  and  is  sharing  radio frequencies  with  another  telco that has the same amount, must pay current prices for additional 4.4 units of spectrum it is using.


GROWTH RATE OF EIGHT CORE INDUSTRIES FELL TO 3.1% IN DECEMBER 2011 FROM 6.3% IN DECEMBER 2010

According to the data released by the Commerce and Industry Ministry on 30 January 2012, the growth rate of eight  core  industries  slowed  down  to 3.1  per  cent  in  December  2011  from 6.3 per cent in December 2010. eight  sectors  had  recorded  a  6.8  per cent  growth  in  November  2011.  decline in core sector activity was due to a fall in the production of crude oil and natural gas. have a combined weight of 37.9 per cent in the Index of Industrial Production (IIP).  performance in December 2011 due to a fall in output include crude oil, natural gas,  petroleum  refinery  products  and steel,  while  those  which  fared  better include  coal,  fertiliser,  cement  and electricity.  sectors  during  April-December  2011 was 4.4 per cent against 5.7 per cent during  the  corresponding  period  in 2010. 

C R SUNDARAMURTI COMMITTEE RECOMMENDATION

Government-appointed  C  R Sundaramurti  Committee  submitted its  report  to  finance  minister  Pranab Mukherjee.  complete  overhaul  of  government accounting norms in order to enforce transparency and better monitor public spending.  classification  structure  will  provide  a foundation  for  a  more  robust  public financial management which could be used for enforcing more transparency and  eectiveness  of  Public  delivery channels  of  the  government.  accounting classification of receipts and disbursements is prescribed under the Constitution and is maintained by the Controller General of Accounts (CGA) on the advice of the Comptroller and Auditor General of India (CAG).


RECOMMENDATIONS 

recommended  rationalisation  and reorganisation of the existing account classification of list of major and minor heads of accounts (LMMHA) of centre and  states.  a  multidimensional  classification framework  which  has  seven  mutually exclusive  segments  with  their  own individual hierarchical structures.
classification  codes  which  are  being perceived  as  a  milestone  in  the  area of accounting reforms were proposed to  be  implemented  with  eect  from financial year 2013-2014. classification  structure  provides  for capturing expenditure on special thrust area  of  government  policy  objectives such  as  development  of  women, schedule castes, schedule tribes, below poverty line population.
that the recommendations/suggestions framed by it would help  in the eective management  tools.  It  would  help national and sub-national governments for  better  planning,  allocation  and application  of  resources,  and  more eective  monitoring  of  public spending.
standardisation  of  coding  of  all  such entities  which  are  recipient  of  public fund, as channels of public delivery. measure is likely to facilitate tracking of flow of funds under a government
programme or scheme from one level of  governance  to  another  level  of administrative entities.


 PFRDA CHANGED THE INCENTIVE STRUCTURE TO BOOST NPS

Pension System, or NPS led the Pension Fund  Regulatory  and  Development Authority  (PFRDA)  to  change  the incentive structure for the distributors from a fixed sum to a percentage of the investment amount. So far the points of presence or the distributors used to get a flat Rs 20 as initial subscription charge and Rs 20 for any subsequent investment.  PFRDA’s measure is poised to serve two purpose- bringing about a  more  equitable  incentive  structure and  incentivizing  the  distributors  to push  NPS.lay  down  criteria  for  pension  fund managers and grant licences to anyone who qualifies. managers overseeing assets of Rs 10000 crore.
NPS was primarily targeted at the unorganized sector, which does not have any form of social security. However, so far only about 1 million people out of a workforce of about 400 million in the unorganized  sector  have  joined  NPS. Floated for civil servants in 2004, the NPS was opened to all citizens in May 2009 to provide a pension option to 360 million informal sector workers bereft of any old-age income security.

G.N. BAJPAI COMMITTEE RECOMMENDATION

of  the  recommendation  of  the  G.N. Bajpai committee constituted by PFRDA to review NPS,  fixed the incentive at 0.25% of the subscription amount.
committee had suggested 0.50% of the investment,  subject  to  a  minimum  of Rs 20 and maximum of Rs 50000. As per  PFRDA’s  measures  announceds, a distributor will get a flat Rs 100 on initial  subscription  and  0.25%  of  the initial subscription amount. Every year on subsequent investments, the point of presence will be entitled to 0.25% of that amount. of presence can charge is Rs 20 and the maximum Rs 25000. Bajpai committee had observed that the earlier structure of the pension system was amounting to  the  poor  subsidizing  the  rich—a person investing Rs 6000 and a person investing Rs 1 lakh were both paying Rs 20. Also the fixed sum was acting as a deterrent to sell NPS amid better commissions-yielding products such as insurance policies. 

CRR DECREASED TO 5.5   PER CENT
24 January 2012 cut the cash reserve ratio (CRR) by 50 basis points from 6 per cent to 5.5 per cent with eect from 28 January 2012. RBI thus released Rs 32000  crore  to  banks  through  a  half percentage point cut in the cash reserve ratio. Home loans and other loans to individuals and businesses will become cheaper with the cut in CRR.also kept the repo rate unchanged at 8.50 per cent for the second consecutive time after raising it 13 times between March  2010  and  October  2011.  It lowered its growth forecast to 7% from 7.6% earlier. reduction in CRR since January 2009 when it had released funds to stimulate demand  in  the  wake  of  the  Lehman Brothers crisis. As a consequence, for the first time in over two months, the rupee touched the 49-mark against the
dollar  in  intra-day  trade.  bank  decided  to  reverse  a  two-year policy of interest rate hikes because of decelerating growth although inflation continued to remain a concern. RBI was prompted to ease liquidity because of a structural shortfall which was forcing banks  to  borrow  anywhere  between Rs 1.25 lakh to Rs 1.5 lakh from RBI in January. an attempt to strike a balance between risks to growth and inflation.

GEMS & JEWELLERY EXPORTS DIPPED 15% 

According to the report  by Gems and  Jewellery  Export  Promotion Council  (GJEPC)  released  in  January

2012.           gems  and  jewellery  exports  fell into the negative zone - down 15% year- on-year to $3 billion in December 2011.

attributed
to poor demand from  Europe  and the  US.  include  the  UAE  &  Hong  Kong.  exports had stood at $3.5 billion in the December 2010. the overseas shipments in May 2011 had logged in 33% growth,

touching  the  peak  in  2011-12  fiscal. During the April-December period of 2011-12,  gems  and  jewellery  exports grew  11.65  per  cent  to  $32.1  billion, compared  to  the  the  April-December period of 2010-11.
However,  despite  the  drop  in December, the country’s gem and jewelry exports  still  grew  in  the  second  half, reaching $32.1 billion – 11.65% higher than in the corresponding half of 2010. To  reduce  dependence  on  traditional markets,  the  exporters  are  exploring new markets like Latin America, Africa and Russia. India mainly imports gold and rough diamonds in large quantities and re-exports value-added items like jewellery.


CENTRE FOR MONITORING INDIAN ECONOMY’S REVIEW

Centre for Monitoring Indian Economy  (CMIE)  estimated Corporate  India’s  sales  to grow  21.6%  in  2011-12. However,  profits  are expected to fall by 7.2% in  the  financial  year 2011-12.  Excluding petroleum  product companies,  India  Inc is  expected  to  see  a 19% growth  in  sales in March 2012 quarter. As per the review,  sales of  the  manufacturing sector  are  expected  to  have expanded by 20.7% and that of the  non-financial  services  sector  by 18.2.  Income  of  the  financial  service have grown by a strong 32% due to high interest rates and healthy credit growth. CMIE however expects corporate sales to  drop  to  16.8%  in  the  March  2012 quarter due to a sharp drop in expansion


of  petroleum  products.  Profits  fell  13.2% in the first half of 2011-12 due to steep rise in raw material and fuel prices,  high  interest  rates  and  delay in payment of cash subsidy to the oil marketing  companies  (OMCs)  by  the government. Also, a sharp depreciation in rupee since September 2011 brought mark-to-market (MTM) losses to firms and thus further pulled down profits.
In  a  situation  where  high  input costs  and  interest  rates  continue  to haunt Indian companies, the corporate aairs  ministry  provided  some  relief by  allowing  capitalisation  of  MTM losses  on  long-term  loans  taken  for the acquisition of fixed asset till March

2020.           available only till March 2012 and only to  companies  which  had  opted  for  it in 2008-09. In spite of this, corporate India is expected to report substantial amount of forex losses in the December 2011  quarter  since  major  chunk  of the forex liabilities of corporate India are  short-term,  CMIE  noted.  Forex, however, expected to rise by 9.9% in the January-March  quarter  riding  on  the back of robust 40.2% rise in net profits of the banking industry. in the banking industry was attributed to lower provisions and low base.

TOURISM SECTOR COMMITTEE TO EXTEND VISA

Inter-ministerial  coordination committee for tourism sector Headed by Principal Secretary to the PM Pulok Chatterjee in its meeting on 19 January 2012 decided to extend Visa-on-Arrival facility to Goa, Hyderabad, Kochi and Bangaluru airports to help double the foreign tourist arrivals. Currently, Visa- on-Arrival is extended to 11 countries including Japan, Philippines, Singapore,New Zealand, Vietnam and Finland.Visa-on-Arrival  facility is now available at four international airports at Delhi, Mumbai, Kolkata and Chennai. were  6.29  million  foreign  tourists  in 2011.  out of whom 12761 had availed the scheme. Upgraded road connectivity to all major tourist circuits, including Gangtok  and  Leh,  eco  tourism  and reaching  out  to  schools  to  promote tourism related vocational schools were amongst  the  decisions  taken  by  the committee.

It  was  also  decided  that  a  sub- committee  consisting  of  Member Secretary,  Planning  Commission, Culture  Secretary,  Secretary (Environment  and  Forests), Secretary  (Rural  Development)  and Secretary(Tourism)  will  identify  the potential of tourism in rural, eco and cultural  sectors  in  the  country  and submit  its  report  within  four  weeks. It  was  observed  that    tourism  ought to be seen as development, should be pro-poor  and  focus  on  employment creation. Emphasis was on the need to give tourism a major fillip during the 12th Plan so as to more than double the number of foreign tourists arriving in India and further encourage domestic tourism.  A  co-ordination  committee consisting  of  Joint  Secretaries  of MHA,  MEA  and  Tourism  Ministry was  constituted  to  resolve  day-to- day  visa  related  complaints.  Ministry  of  Environment  and  Forest were asked to finalise its eco-tourism policy  at  the  earliest  possible  after analysing the feedback it received from dierent quarters. In order to facilitate connectivity,  which  is  crucial  for tourism, it was decided that Ministry of Defence (Border Road Organisation) will expedite ongoing work at Gangtok and  Leh  roads  which  are  tentatively scheduled to be completed by 2014 and 2015 respectively.

HIGHLIGHTS OF THE MEETING

                •              extend   Visa-on-Arrival   facility  to  Goa,  Hyderabad,  Kochi  and Bangaluru airports
                •              sub-committee    to   identify the  potential  of  tourism  in  rural,eco  and  cultural  sectors  in  the country
                •              co-ordination       committee  consisting of Joint Secretaries of MHA, MEA and Tourism Ministry constituted to resolve day-to-day visa related complaints
                •              Ministry   of  Environment and  Forest  asked  to  finalise  its  eco- tourism policy
                •              Culture  Ministry asked  to  adopt a  pro-active  tourism  policy which should promote museums, cultural and heritage sites
                •              Ministry  of   Defence  (Border Road Organisation) will expedite ongoing  work  at  Gangtok  and Leh roads


TRAI ORDERED TO BLOCK BULK INTERNATIONAL SMS

of India on 20 January 2012 asked telecom companies to block bulk international SMS. TRAI’s move is aimed at giving mobile subscribers further relief from pesky  messages.  on unsolicited telemarketing calls and SMS were not being properly followed, the TRAI stated that there were several incidences of promotional SMS being routed through the servers located at international destinations and delivered to customers registered for not receiving telemarketing calls. TRAI observed that generally such SMSes originated from locations  within  Germany,  Sweden, Nauru, Fiji, Cambodia, Bosnia, Albania, Grenada, the United Kingdom, Jersey, Sint Maarten, Tonga, Vanuatu, Namibia, Panama,  and  Antigua  and  Barbuda. which  are  alphanumeric  or  starting with +91 or numbers with international codes.  all  telecom  companies  to  ensure  that no  international  SMS  containing  an alphabet header or alphanumeric header or +91 as the originating country code is delivered through their networks. Also, if any source or number from outside the country generates more than 200 SMSes an hour with a similar signature, these  could  not  be  delivered  through the network. 

RBI PERMITTED BANKS TO ALLOW HEDGING IN COMMODITIES
 January  2012  allowed  banks  to  grant permission  to  listed  and  unlisted companies  to  hedge  price  risk  in commodities  other  than  precious metals in international exchanges. move is aimed at helping the companies limit  losses  from  volatility.  Currently, banks  need  RBI’s  approval  to  give permission to companies to hedge.banks were asked to submit an annual report to the RBI as on 31 March every year giving the names of the corporates to whom they have granted permission for commodity hedging and the name of  the  commodity  hedged.  Before permitting the corporates to undertake hedge transactions, the companies are required to submit a brief description of  the  hedging  strategy  proposed, including,  instruments  proposed  to be used for hedging, the names of the commodity  exchanges  and  brokersthrough whom the risk is proposed to be hedged and the credit lines proposed As  per  data  released  by  the
to be availed. 
TELECOM REGULATOR'S CONSUMER PRICE INDEX

DOWN BY 0.44 %

average  tenure  of  exposure  and/or total turnover in a year, together with expected  peak  positions  thereof  and the  basis  of  calculation  can  also  be included.

INDIAN RUPEE ROSE BY 6.6%

 month high and shares climbed on 18 January 2012 as a result of revival of US dollar flows and also because of the undervalued  shares  which  lost  more than 35% in US dollar terms in 2011. to the dollar. It is up 6% in 2012 and 6.6% from its life low of 54.30 touched on 15 December 2011. inflows from FIIs, both debt & equity. Also,  emerging  markets  are  currently poised to cut interest rates after China’s 8.9%  economic  growth  in  the  fourth quarter, the slowest in 10 quarters.rupee could gain further since demand for  dollars  may  subside  following  the doubling  of  duty  on  precious  metals imports.
worst  performer  in  Asia  in  2011,  is presently turning out to be the best in 2012 due to measures by the Reserve Bank of India. to  be  doing  well  despite  imports  still outstripping  exports  which  many  say could return to haunt the currency. benchmark Sensex rose 1.7%, the least among major markets with Hong Kong, Shanghai, Korea and Singapore gaining more. It has risen 6% since January 2, making it the best-performing index in Asia.


vegetables, pulled down the Consumer Price  Index  (CPI)  by  0.44  per  cent month-on-month  in  December
2011.           five  major  groups-food,  beverages and  tobacco;  fuel  and  light;  housing; clothing,  bedding  and  footwear;  and miscellaneous  items.attributed to cheaper vegetables which saw a dip of 15.01 per cent month-on- month to 98.5 points. also fell by 3.78 per cent to 122.2 points. at 113.9 points in December compared to 114.4 points in November. At the all- India level, the CPI for food, beverages and tobacco declined by 1.31 per cent to 112.8 points in December from 114.3 points in November.
spices went down by 0.64 per cent to 123.9  points.  Indices  for  cereals  and pulses  on  the  other  hand  remained stable at 107.2 points and 102.5 points. However, CPI for clothing, bedding and footwear stood higher at 122.2 points on  an  all-India  basis,  against  121.5 points in November. Prices in the 'fuel and light' segment also rose by 0.33 per cent in December vis-a-vis the previous month, with the index inching up to 120 points from 119.6 points in November.

RS.20 CRORE FOR A NATIONALLICENCE

of  India  (TRAI)  on  16  January  2012 proposed  a  fee  of  Rs.20  crore  for  a national-level  unified  licence  under


DRAFT GUIDELINES FOR THE NEW UNIFIED LICENSING

levels of unified licence — at national level,  service  area  level  and  district level. unified licence is to be Rs.20 crore for national level, Rs.2 crore for each Metro and Acategory, Rs.1 crore for each B category, Rs.50 lakh for each C category service areas levels and Rs.15 lakh for each district level unified licence. Telecom  service  providers  at present  hold  Unified  Access  Service Licence (UASL), which authorises them to provide mobile, fixed line, Internet and  long-distance  calls  and  other telcom services.
with 4.4 Mhz spectrum bundled with it.  TRAI  however,  recommended that  the  new  licence  regime  will  not have  spectrum  bundled  with  it  and the operators will have to bid for the spectrum separately.
no restriction on the number of players in a service area. Licence shall be issued on  non  exclusive  basis,  without  any restriction on the number of entrants in a licence area.
TRAI proposed that the applicant company will have to pay one time non- refundable entry fee before signing the license agreement.
 ations  (DoT)  also  issued  standalone


licences  separately,  like  the  one  for oering  Internet  services  that  are generally known by the nature of the service being oered.

IMPORT DUTY ON GOLD & SILVER

doubled the import duty on gold and silver  by  changing  the  customs  and excise  duty  structure  on  precious metals.  the government to arrest the widening current  account  deficit.  Ministry  by  adopting  this  stand  has moved to a model where customs and excise will be charged on the value of the metal instead of a flat charge, and will vary with varying prices of the metal in the market. Following the government’s decision, gold will now attract an import duty on 2 per cent of its value on each day as against the earlier flat levy of Rs 300 per 10 grams. Silver will be charged

6  per cent of its value on each day from the earlier Rs 1,500 per kilogram. Excise on gold will be charged at 1.5 per cent of its value on each day as against Rs 200 per 10 grams, and for silver it will be 4 per cent as against Rs 1000 per kg. Platinum and diamond would also cost more.

INDIA'S EXPORTS RECORDED A GROWTH OF 6.7 %

India's exports recorded a subdued growth of 6.7 per cent year-on-year in December  2011  on  account  of  poor demand  in  Europe  and  the  US.  growth  in  exports  in  December  2011 though  not  robust  was  higher  than November  2011.  Overseas  shipments in Novemeber 2011 had grown by just 3.8 per cent. month  under  review  was  not  robust,


it was higher than in November, when overseas shipments grew by just 3.8 per cent. Imports on the other hand grew at a faster pace of 19.8 per cent year-on- year to $37.8 billion in December 2011 thereby translating into a trade deficit of  $12.8  billion.  During  the  April- December  period  of  2011,  exports aggregated to $217.6 billion, a year-on- year growth of 25.8 per cent as a result of the export growth witnessed in the early months of 2011. From a peak of 82 per cent in July, export growth slipped to 44.25 per cent in August, 36.36 per cent in September and 10.8 per cent in October 2011.

RULES TO DIRECT INVESTMENT IN STOCKS BY FOREIGN INVESTORS

Market  regulator  SEBI  on  13 January 2012 unveiled rules for direct investment  in  stocks  by  foreign investors, including individuals. SEBI's guideline  was  issued  seeking  to  put curbs on opaque structures to prevent routing  of  funds  by  resident  Indians. 2012 decided to allow foreign resident investors to invest directly in the Indian equities  market,  in  a  move  aimed  at boosting  capital  inflows,  reducing market  volatility  and  deepening  the markets. SEBI’s guidelines were issued following  this  announcement  by  the government.
SEBI  noted  that  qualified  foreign investor  (QFIs)  can  buy  up  to  5%  of the  paid-up  capital  of  a  company, with  the  overall  limit  capped  at  10% in a company. Entities having opaque structures, where details of the ultimate beneficiary are not accessible or where the  beneficial  owners  are  ring  fenced from  each  other,  will  not  be  allowed to  open  demat  account  as  qualified


foreign investor, or QFI. mentioned that the investors will need to take delivery of shares they purchase on the local bourses. Sebi specified that QFI’s will have to invest in demat form through  Sebi-registered  depository participants  (DPs)  who  will  have  to fulfill the Know Your Customer (KYC) norms. QFIs were barred from issuing oshore  derivatives  instruments  or participatory notes and will also have to  give  a  declaration  to  this  eect  to the DP. not  mention  whether  these  investors can trade in India’s futures and options segment. DPs will have to ensure that the same set of end beneficial owners is not allowed to open more than one demat  account  as  QFI.  Also,  Foreign investors, who wish to invest directly in Indian shares, will also have to obtain a separate permanent account number or PAN.
equity shares only on the basis of taking and giving delivery of shares purchased or sold and it shall not issue oshore derivatives  instruments/  participatory notes. a daily basis, QFI wise, ISIN wise and company  wise  buy/  sell  information and  any  other  transaction  or  any related information to their respective depositories on the day of transaction. details of paid up equity capital of all the listed companies to the depositories once  in  six  months,  periodically  and also  provide  information  regarding change in paid up equity capital in any listed company immediately.

RBI ISSUED GUIDELINES ON COMPENSATION IN PRIVATE

&  FOREIGN BANKS

13  January  2012  issued  guidelines  on
compensation of wholetime directors, chief executive ocers and other risk takers in private and foreign banks. central bank’s directions are aimed at preventing  greed  from  destabilising the institution. provisions to clawback pay if transactions fail years after origination.based on the recommendations of the International Financial Stability Board did not prescribe any quantitative limit on absolute pay. deal with the structure of pay which in the past favoured excessive risk-taking. guaranteed  bonus  has  been  banned. Risk management sta will have more of fixed component than the rest. 
THE RBI GUIDELINES
capping the variable component of the compensation at 70% of the fixed pay in a year. especially of large financial institutions, were one of the important factors which contributed to the recent global financial crisis. It was observed that employees were too often rewarded for increasing the short-term profit without adequate recognition of the risks and long-term consequences  that  their  activities posed to the organisations.As per the guidelines issued, banks are permitted to exclude the Employees Stock Option Plan from variable pay. would have to be deferred over a period of three years. Compensation payable under  deferral  arrangements  should vest no faster than on a pro-rata basis. In the event of negative contributions, bank board would have the option to clawback this deferred compensation. Banks will now be permitted to oer joining bonus only in case of new hires and will be limited to first year. will not be allowed to grant severance


pay  other  than  accrued  benefits  like gratuity  and  pension,  except  in  cases where it is mandatory by any statute. Foreign banks operating in India will be required to submit a declaration to RBI annually from their head oces to the eect that their compensation structure in India, including that of CEO’s, is in conformity with the FSB principles and standards.  Private  sector  and  foreign banks  are  also  required  to  obtain regulatory approvals for remuneration of CEOs and wholetime directors.

INDUSTRIAL PRODUCTION BOUNCED BACK WITH A GROWTH OF 5.9 PER CENT IN NOVEMBER 2011

As  per  the  Index  of  Industrial Production  (IIP)  data,  industrial production  bounced  back  with  a growth  of  5.9  per  cent  in  November

2011.           marking  a  ?ve-month  high  in
 
a  reversal  from  the  negative  trend
witnessed in October 2011.


of  Industrial  Production  in  2011  was noted to be very volatile. With this, the IIP growth during the April-November period of 201112 stood at 3.8 per cent as  compared  to  8.4  per  cent  in  the same period of 2010-11. production  had  registered  a  6.4% expansion in November 2010. Output had grown 7.8 percent in the 2010/11 fiscal year that ended in March, slower than 10.5 percent clocked in the 2009- 10 fiscal. Growth in the manufacturing sector, constituting over 75 per cent of the index, went up by 6.6 per cent in November as compared to of 6.5 per cent in November 2010. Electricity also saw a robust growth of 14.6 per cent during the month under review as compared to 4.6 per cent in November 2011. Production of consumer goods witnessed a healthy 13.1 per cent increase as compared to a mere 0.7 per cent growth in November

2010.           Infrastructure  sector  output,
which contributes nearly 38 percent to

industrial production, grew 6.8 percent in November 2011.


PMO DIRECTED CASHPSUS TO INVEST AROUND

`.1.76 LAKH CRORE FOR

STIMULUS




is permitted in this segment of retailing which  was  opened  to  foreign  players almost six years ago.
Removal of the investment cap will help  global  fashion  brands,  especially from Italy and France, to venture alone


currency  bank  deposit  increasing from  NP  (not  prime)  to  Prime  (P-3). Upgradation  suggested  acceptable ability to repay short-term obligations. Prime falls under the investment grade, while not prime is a speculative grade.


January 2012 directed cash-rich public sector  undertakings  (PSUs)  to  invest around  Rs.1.76  lakh  crore,  including Rs.1.41 lakh crore domestically to act as a stimulus in the next fiscal (2012- 13).  At  a  meeting  chaired  by  Prime Minister's  Principal  Secretary  Pulok Chatterjee,  17  companies  with  cash and bank balances in excess of Rs.1000 crore  were  identified  to  undertake these  investments  primarily  in  the infrastructure  sector.  invest Rs.1.41 lakh crore domestically in 2012-13 and Rs.35009 crore overseas. the  PSU  investment  could  provide stimulus  to  the  economy  and  asked the  companies  to  draw  up  credible investment programmes and implement those with an objective to achieve the maximum  benefit  for  the  companies themselves  as  well  as  the  national economy.  Among  the  companies, ONGC  is  projected  to  invest  the maximum amount of Rs.53526 crore- Rs.33,065 crore in the domestic market and  Rs.20,461  crore  overseas.  NTPC will invest Rs.20,995 crore domestically and Power Grid Corporation of India is to invest Rs.20000 crore.

DEPARTMENT OF INDUSTRIAL POLICY AND PROMOTION NOTIFIED

100.         FDI IN SINGLERETAIL

Policy  and  Promotion  (DIPP)  ON  10 January 2012 notified the rules allowing
100.             foreign direct investment (FDI) in single-brand retail. Currently 51% FDI


in the growing Indian market. Shares of  retail  giants  Kishore  Biyani-led Future  Group  firm  Pantaloon  Retail (India) surged by 10% to an early high of  Rs  161.40,  while  Provogue  (India) zoomed up by 14.22% to Rs 28.10 on the  BSE  following  the  announcement by the government. In a similar fashion, Koutons Retail gained 12.52%, Shopper's Stop rose by 9.38%, Tata Group retail venture Trent Ltd advanced by 5.50% and  Vishal  Retail  jumped  by  4.98%.  brand retail was taken by Cabinet on 24  November  2011  along  with  the decision to open the gates for overseas investment  in  multi-brand  retail.  government was however forced to put FDI in multi-brand retail on hold in the face of opposition by several political parties, including UPA ally Trinamool Congress.
In  respect  of  proposals  involving FDI  beyond  51%,  the  mandatory sourcing  of  at  least  30%  would  have to  be  done  from  the  domestic  small and  cottage  industries  which  have  a maximum  investment  in  plant  and machinery of USD 1 million (about Rs

5  crore).

MOODY’S UPGRADED SHORTCEILING ON FOREIGN CURRENCY BANK DEPOSIT FROM NP TO PRIME

on 10 January 2012 that rating agency Moody’s Investor Services upgrade the short-term country ceiling on foreign


from foreign institutional investors and flows from non-resident Indians will also accelerate. In December 2011, Moody’s upgraded  the  credit  rating  of  Indian government’s  bonds  from  speculative to investment grade. had  also  upgraded  the  long-term government  bond  denominated  in domestic currency from Ba1 to Baa3. foreign currency bank deposit was also upgraded from Ba1 to Baa3. was  expected  to  encourage  FIIs  to increase their exposure in gilts and help companies raise funds from abroad at competitive rates.

FDI INTO INDIA WENT UP BY 56%

Foreign  direct  investment  (FDI) into  India  went  up  by  56%  to  $2.53 billion  in  November  2011,  indicating an improvement in investor sentiment. In  September  and  October  2011,  the inflows were down by 16.5% and 50% year-on-year  respectively.During  the April-November  period,  the  FDI  was up  by  62.81%  from  $14.02  billion  in
2010. Cumulative ?ows for the April- November  period  stood  at  of  $22.83 billion,  surpassing  $19.43  billion achieved  in  the  full  financial  year 2010-11.  $1.62  billion  overseas  investment in  November  2010.  In  2010-11,  FDI into equity  had dipped 25% to $19.43 billion, from $25.6 billion in 2009-10. In 2008-09, FDI stood at $27.3 billion. Analysts  opined  that  if  the  upward trend in FDI continued, the FDI in the current financial year 2011-12 will cross $30 billion. positive eect on rupee in the foreign exchange market. in  the  stock  market  from  the  foreign institutional investors and rising trade deficit had led the rupee to decline by about 15% since August 2011. Sectors which  attracted  the  maximum  funds include services, construction activities, power,computers  and  hardware, telecom  and  housing  and  real  estate. Mauritius, Singapore, the US, the UK, the Netherlands, Japan, Germany and the UAE are major sources of FDI for India.  short-term foreign currency rating from speculative to investment grade.

UNION GOVERNMENT TO INCENTIVISE UNLISTED PSUS TO HELP THEM COME UP WITH INITIAL SHARE OFFERINGS

to  incentivise  the  unlisted  PSUs  to help them come up with initial share oerings in the stock market in 2012-13.Currently, there are about 50 PSUs which  are  listed  and  their  shares  are actively  traded  in  the  stock  market. government-owned  firms  which  are eligible but unlisted for various reasons. unlisted  PSUs  with  no  accumulated losses and having earned net profit in three  preceding  years  should  come out with initial public oerings (IPOs) even  as  the  state  holding  would  not come below 51%. One of the options to  incentivise  the  PSUs  for  IPOs  is to  put  this  task  in  the  memorandum of  understanding  (MoU)  which  an individual  enterprise  signs  with  its administrative ministry. Under the MoU system, annual targets are set for the PSUs and CEOs get personal appraisal points if the tasks are achieved.
While  about  50  PSUs  including Hindustan Aeronautics Ltd and Heavy Engineering  Corporation  Ltd  which can  be  listed  on  stock  exchanges  did not opt for the same.had  set  a  target  of  raising  Rs  40,000 crore through stake sale in PSUs in the current  fiscal.  In  the  three  remaining months  befor  the  fiscal  year  2011-12 comes to end, the Finance Ministry is working on several methods including share buyback by cash-rich PSUs. Ministry  has  been  able  to  receive  Rs 1145  crore  through  disinvestment  in Power Finance Corporation. 

21 COMMODITY EXCHANGES IN INDIA ROSE 66%

As  per  the  Forward  Markets Commission  data  released  on  9 January 2012 that the turnover of the 21  commodity  exchanges  in  India increased  by  66%  to  Rs  137.22  lakh crore till December 2011 in the current fiscal (2011-12). exchanges had stood at Rs 82.70 lakh crore in December 2010. trade was seen in gold, silver, guar seed, crude oil, soya oil and chana. According to  FMC  data,  the  turnover  in  the bullion segment rose more than two- fold to Rs 80.36 lakh crore during the April-December  period  of  the  2011- 12 fiscal from Rs 37.54 lakh crore in the corresponding period in 2010. maximum turnover of . 12,40,500 crore was posted by MCX inDecember 2011 followed by NCDEX (Rs 179490 crore), NMCE  (Rs  27826  crore),  ICEX  (Rs 23,655 crore) and ACE (. 12,713 crore).


ADB LOAN TO FINANCE ROAD PROJECTS IN NAXAL HIT AREAS CLEARED

2012 cleared an external loan to finance part of the programme launched by the Ministry of Rural Development in left wing  extremism-aected  villages.  clearance is for a loan of $500 million from  the  Asian  Development  Bank (ADB)  to  speed  up  construction  of rural  roads.  Union  Ministry  of  Rural Development (MoRD) issued directions for  negotiating  and  early  signing  of the loan, which his Ministry to gather resources to give thrust to the Pradhan Mantri Gram Sadak Yojana (PMGSY). loan of $800 million was petitioned with a fresh proposal for rural connectivity investment programme to construct or upgrade 7000 km of roads connecting eligible  habitations  in  Maoist-aected States of Bihar, Chhattisgarh, Madhya Pradesh, Odisha, West Bengal, besides Assam  where  too  the  PMGSY  has progressed with little to cheer.
in the backdrop of the MoRD's multi- winged  programmes  in  the  left  wing extremism-aected areas, under which Central forces assist execution of welfare and development schemes to wean the local people from the path of naxalism. and  assistance  to  the  local  people, particularly  tribals,  to  reduce  poverty and  ensure  economic  growth  of  the region. Rural connectivity is considered pivotal to the success of this stratagem. As  per  the  programme  proposed  by the  MoRD,  the  Union  government will  supplement  with  a  contribution of  $127.6  million,  in  addition  to  the $5000  million  to  finance  the  project that includes setting up of training and research  centres  pertaining  to  rural roads.  to have covered all habitations with a population of 500 people (250 people in the case of tribal and hilly areas) by
2007.           Provision  of  rural  connectivity to habitations of 500 people in general areas and 250 people in tribal areas need to be worked upon on pririty basis.

IRDA INTRODUCED UNIFORM ASSETMANAGEMENT NORMS FOR INSURERS

Insurance  regulator  IRDA  on  4 January  2012  introduced  uniform asset-liability  management  norms  for market players to ensure their solvency. Insurance Regulatory and Development Authority  (IRDA)  announced  a broadly-defined uniform framework for reporting  asset  liability  management activities adopted by life and non-life insurance  companies.  also  asked  firms  to  undertake  stress tests to ascertain their ability to meet financial obligations in the event of a crisis. IRDA has issued these guidelines to bring about uniformity in the ALM norms being followed by both life and non-life insurance companies.

IRDA GUIDELINES

ALM  (asset  liability  management) policy to be approved by the board of the insurer. Such board-approved policy is to be submitted to the IRDA within 90  days.  While  approving  the  ALM policy, the board is to take into account the  asset-liability  relationships,  the insurer's overall risk tolerance, risk and return  needs,  solvency  positions  and liquidity requirements. also make it mandatory for the board


to  frequently  review  the  ALM  policy of the insurer. Any change in the policy must be reported to the regulator.
Under  the  uniform  framework, insurers have to put in place an eective mechanism to monitor and manage their asset-liability  positions.  is  to  ensure  that  their  investment activities  and  assets  positions  are  in sync with their liabilities, risk profiles and solvency positions.
into eect from 1 April 2012, make it mandatory for insurance companies to prepare an ALM policy as well as get it approved by the Insurance Regulatory and Development Authority (IRDA) by end of March 2012.
to  develop  and  implement  controls and  reporting  systems  for  the  ALM policies that are appropriate for their businesses  and  to  the  risk  to  which they are exposed. put  in  place  eective  procedures  for monitoring and managing their asset- liability positions to ensure that their investment activities and asset positions are  appropriate  to  their  liability,  risk profiles and solvency positions. 

BENEFITS OF ALM POLICY

(ALM)  norms  are  critical  for  the sound management of the finances of the insurers that invest to meet their future  cash  flow  needs  and  capital requirements.  enable  the  insurers  to  understand the  risks  they  are  exposed  to  and develop ALM policies to manage them eectively.  measure the interest rate risk faced by insurers.


NO FLOATING INTEREST RATES ON SMALL SAVINGS SCHEMES

2012 clarified that the rates applicable on small savings instruments schemes would be announced on April 1 each year and the rate would remain valid till  the  maturity  of  the  scheme.  Ministry stated that barring the Public Provident  Fund  (PPF),  the  rates  of interest  on  all  small  savings  schemes will remain fixed throughout the tenure of investment. To clear the confusion over the returns on investment in small savings schemes, the Finance Ministry pointed out that the rate prevailing at the  time  of  investments  will  remain fixed and unchanged till the maturity of the investment. Any revisions in interest rates  in  the  subsequent  years  would only be applicable to the investments made in the relevant period. However, the rate of interest for the 15-year PPF scheme would not remain fixed for the entire  period  as  the  interest  accruals in  the  PPF  account  each  year  would vary,  depending  on  the  interest  rate announced for that particular year. For PPF, the interest rate fixed every year will be applicable to all PPF accounts. interest rates on small savings deposits schemes  of  various  maturities  with eect from 1 December 2011 to chanel the outflow of funds from small savings schemes administered by the National Small  Savings  Fund  (NSSF)  in  view of  the  investor  preference  for  bank term  deposits.  the Finance Ministry came in the face of  fears  that  the  revision  of  interest rates  on  small  savings  schemes  from

1   December  2011,  are  ?oating  rates and that the rates will undergo change


in sync with fluctuations in yields on government securities. It had also hiked the interest rates on PPF deposits from

8  per cent to 8.6 per cent while raising the ceiling on annual contributions to the fund to Rs.1 lakh from Rs.70000. Interest  rates  on  Post  Oce  Savings Accounts rose to 4 per cent from 3.5 per cent. Similarly, interest rates on deposits of various maturities of one year, two years  and  five  years  too  were  raised from December. Patra  (KVP)  has  been  discontinued from November 30, 2011. period of Monthly Investment Schemes (MIS) and National Savings Certificates (NSCs) been reduced from six years to five years. 

RBI DECIDED TO EASE LIQUIDITY BY BUYING BACK GILTS

January  2011  decided  to  conduct  an open  market  operation  (OMO)  to inject  more  liquidity  into  the  system. of government bonds via open market operations on 6 January 2012, including the  10-year  paper  which  till  recently was the benchmark paper. bank  has  decided  to  ease  liquidity by  buying  back  gilts  for  an  amount of  R10,000  crore  in  the  backdrop  of banks  accessing  the  Reserve  Bank  of India  (RBI)’s  borrowing  window  for more than R1 lakh crore each day. RBI announced  an  auction  for  R10,000 crore worth of bonds, otherwise known as  open  market  operation  (OMO). the market trading hours. the Reserve Bank of India decided to conduct open market operations consistent with the stance of the monetary policy and based on the current assessment of prevailing and  evolving  liquidity  conditions.

Banks have been borrowing in excess of R 1 lakh crore a day from the RBI's liquidity  adjustment  facility  (LAF)  or repo  window.  the  system  in  recent  weeks  has  been way beyond the limit of 1% of the net liabilities of the system, or around Rs 55000 crore. 

SEBI ALLOWED AUCTIONING OF SECURITIES

on 3 January 2012 allowed auctioning of securities through stock exchanges and  introduced  a  new  method  for institutional  placement  of  stocks. government's  divesment  programme as well as help promoters of companies to sell a part of their holdings. As per the auctioning route, a special window can be used by promoter stakeholders to sell at least 1% of the paid-up capital of a company. It is similar to the block- deal  mechanism  for  secondary  stock market  transactions,  but  with  lesser restrictions.  be only used by promoters of top 100 companies  based  on  average  market capitalisation for sale of their stakes. 

INSTITUTIONAL PLACEMENT PROGRAMME

Under the institutional placement programme  (IPP),  shares  can  be  sold only to qualified institutional buyers. Exchanges will provide a separate window for the oer for sale of shares which  will  co-exist  with  the  normal trading  hours.  promoter  or  promoter group of companies however will not be allowed to bid for the shares.  Allotment will be done either on price priority or clearing price basis proportionately and


would be overseen by the exchanges. SEBI’s measure is considered to be very progressive step towards creating an organised and eective mechanism that will not only facilitate fund raising but also assist companies to comply with the  listing  norms  in  a  non-disruptive manner.
every IPP issuance. No single investor shall receive allotment for more than

25.                 of the o?er size.
For the purpose of compliance with public holding norms, SEBI had earlier directed all such promoter shareholders to dilute their equity stake to 75% or below  by  June  2013  through  public oering of shares. also  barred  from  using  the  qualified institutional placement ( QIP) route for diluting  promoters'  shares.  However, the new institutional placement route can  be  used  for  either  fresh  issue  of shares  or  dilution  by  the  promoters through an oer for sale.
increase  public  holding  by  10%  and could  be  oered  to  only  qualified institutional  buyers  with  25%  being reserved for mutual funds and insurance companies.
Under the IPP, companies will have to announce the ratio of buy-back, as is done in the case of rights issues and fix  a  record  date  for  determination of  entitlements  as  per  shareholding on  record  date.  Besides  improving eciency, the revised buy-back process is  expected  to  give  a  fair  deal  to  all shareholders.

REPORT ON BILL TO AMEND FORWARD CONTRACTS REGULATION ACT 1952

Committee  submitted  its  report  on  a


bill  to  amend  the  Forward  Contracts Regulation  Act  1952.  Parliamentary Standing  Committee  on  consumer aairs,  food  and  public  distribution, chaired by Congress MP Vilas Baburao Muttemwar,  submitted  its  report  on the  FCRA  (Amendment)  Bill  2010  to Parliament on 22 December 2011.current  department-related  standing committee  (DRSC),  set  up  in  2009, was  asked  by  the  Lok  Sabha  speaker in December 2010 to prepare a report on  the  bill  and  submit  it  to  the  Lok Sabha  Secretariat.  its report recommended a doubling of the maximum penalty for trading rule violations to Rs 50 lakh.  committee report suggested raising the upper limit on penalties for oences like insider trading to Rs 50 lakh from Rs 25 lakh stipulated in the Forward Contracts Regulation  Act  (FCRA)  Amendment Bill  2010.  Insider  trading  involves using  unpublished  price  sensitive information for personal gain. seeks to empower commodity futures market  regulator  Forward  Markets Commission on par with its securities markets counterpart. It is seen as the single-most  important  reform  in  the eight-year-old  commodity  exchange market.

THE REPORT


derivatives market as trading lot sizes will be lower than in futures contracts,
where the minimum traded quantity for

most farm products is 10 tonne.
investing in an option also tends to minimise losses as only the premium to buy (call option) or sell (put option) is  forgone  in  the  event  of  prices moving  adversely.  a  futures  position taken by a trader is on the other hand marked  to  market  daily.  Marking  to market involves daily settlement of the dierence  between  the  prior  agreed price  and  the  daily  futures  price.  It can thus lead to huge losses alongside supernormal profits.

IMPLEMENTATION OF LEVY ON RAILWAY FREIGHT SERVICE DEFERRED

railway  freight  service  was  put  o once  again  in  the  backdrop  of  high inflation.  come into force from 1 April instead of 1 January as announced earlier. levy on transport of goods by rail was deferred  for  the  sixth  time.  Finance Minister  Pranab  Mukherjee  in  the 2010-11  Union  Budget  had  brought transport  of  goods  by  railway  under the service tax net from 1 April 2010. However, the proposal was vehemently opposed  by  Railway  Ministry  fearing

(RIL)  $1.529  billion  investment  plan for developing four satellite fields in the flagging KG-D6 block. RIL’s investment plan  will  boost  falling  output  in  the Krishna-Godavari Basin KG-D6 block. by the three partners in the block- RIL, UK's  BP  Plc  and  Niko  Resources  of Canada and the representative of DGH. which  includes  ocials  from  the  Oil Ministry  and  its  technical  arm,  the Directorate  General  of  Hydrocarbons (DGH), met for the third time in three months on 3 January to finally approve the proposal. is the final approval an operator needs before  beginning  work,  put  a  cap  on the  cost  of  developing  the  four  fields that surround the currently producing Dhirubhai-1 and 3 (D-1 & D-3) fields in the KG-D6 block. by more than 15%. two  previous  meetings  in  November and December 2011 refused to approve the  field  development  plan  (FDP)  for the  Dhirubhai-2,  6,  19  and  22  (D-2, D-6,  D-19  and  D-22)  fields  after  the government  representative  raised certain  objections.  RIL  agreed  to  cap spending  on  the  four  fields  at  $1.529 billion, plus or minus 15%.

EXPORT DUTY RAISED ON


adverse  impact  on  goods  movement, forcing  the  government  to  defer  it


IRON ORE EXPORTS TO 30 %


options be introduced for the benefit




repeatedly. Railway Ministry is of the


opinion that any levy on freight service



of  stakeholders.  clause was one of the reasons why the bill in its earlier avatar during the UPA I  regime  faced  resistance.  had opposed the bill then especially the Left parties argued that options would increase  speculation  in  commodities. actually  make  it  easier  for  farmers and smaller users to participate in the


would  adversely  impact  the  industry. Movement of coal and cement among others  goods  would  become  costlier with the imposition of service tax.

GOVERNMENT APPROVED RIL’S $1.529 BILLION INVESTMENT PLAN

2012  approved  Reliance  Industries'


ad valorem duty (export duty) on iron ore exports to 30 per cent from 20 per cent. finances of cash-strapped government by  around  Rs  8500-9000  crore.  Federation of Indian Mineral Industries, the  apex  body  of  miners  however complained that Indian ore would no longer  be  competitive  internationally.

the  profit  margin  of  Sesa  Goa  Ltd., India's  largest  iron-ore  exporter  by volume. Steel Minister Virbhadra Singh always  wanted  more  restrictions  on exports. Based on his ministry’s inputs, Finance  Minister  Pranab  Mukherjee had earlier imposed a 20 per cent duty on  exporting  the  domestically  mined mineral.
Shipments  from  the  South  Asian country decreased 28% between April and  November  to  40  million  tons, according to the Federation of Indian Mineral  Industries.  Volumes  were hit  by  a  mining  ban  in  the  southern state of Karnataka, a freeze on sale of old  stocks  in  western  Goa  state  and transport  bottlenecks  in  the  eastern state  of  Orissa.  India  exported  97.64 million tons iron ore in 2012. Prior to the export tax change, industry ocials had  estimated  exports  in  2011-12  to be between 60 million and 65 million tons because of mining-related issues. As  a  result  of  high  export  tax  and railway freight, India's iron-ore exports is not likely to exceed 50 million tons in  2011-12.  in  early  2011  banned  mining  in  the major  iron-ore  producing  districts  of Karnataka to prevent illegal mining and environmental damage. In Goa, moves to  reduce  environmental  impact  and illegal mining aected production. two states account for around 70% of India's iron-ore exports.

CIL APPROVED THE SWITCHING OVER TO GROSS CALORIC VALUEMECHANISM

State-owned  Coal  India  (CIL) announced  on  2  January  2012  that its board approved in a meeting held on  30  December  2011  the  switching


over  to  internationally-accepted Gross  Caloric  Value-based  pricing mechanism. on  the  recommendations  of  the Integrated  Energy  Policy  Committee and  the  Expert  Committee  on  Road Map for coal sector reforms. approved switching over of non-coking coal  pricing  from  Useful  Heat  Value based grading system to Gross Caloric Value  (GCV)  based  classification with eect from 1 January 2012. GCV measures the amount of heat released by carbon and hydrogen in coal when it  is  heated  and  is  an  internationally accepted  pricing  mechanism.  the UHV  mechanism  was  followed  in India Howeverbecause of the high-ash content in Indian coal. into account  the heat trapped in ash. In Indian coal, GCV is 25% higher than UHV.  that the pricing of coal on GCV-based mechanism was not likely to lead to any significant change in pricing. system  will  incentivise  improvement in quality, resulting in better quality of coal to consumers and commensurate revenue realisation for coal firms. 

RBI STUDY SOUGHT CAP  ON BORROWINGS BY NBFC’S FROM BANKS

Reserve Bank of India (RBI) raised red  flags  over  the  high  dependability of  non-banking  finance  companies (NBFCs)  on  the  banking  system because  the  apex  bank  feels  that the  higher  dependence  would  mean systemic  vulnerability  in  the  context that NBFCs are involved in higher risk activities vis-à-vis the banking system. from the banking system tend to raise concerns about their liquidity position. More  so,  if  such  reliance  happens  to


increase further. exposure to NBFCs-D (deposit taking) was  observed  to  have  considerably increased over the years. to be further accentuated in case the banks’ own liquidity position becomes tight at the time of crisis or even at crisis like situation. sheets of NBFCs (both the categories i.e. deposit taking and non-deposit taking and systemically important companies) revealed  that  more  than  68  per  cent of  the  consolidated  balance  sheet constitutes  borrowings.  30  per  cent resources of the total 68% are borrowed from banks and financial institutions as at the end of March 2011. Borrowings by way of debentures issued by the NBFCs constituted around 33 per cent and of which a sizeable portion is subscribed by the banking system. 

INDIA’S EXPORTS RECORDED SLOWEST IN TWO YEARS

As per the to Commerce Ministry data released on 2 January 2012, India’s exports recorded their slowest pace of growth in 1two years at 3.8 per cent in November 2011 as a result of the global slowdown.  Moderation  in  demand in  developed  markets  also  impacted export. since  October  2009,  when  exported had  contracted  by  6.6  per  cent.  commerce ministry had overestimated exports  by  over  $9  billion  due  to software upgrade and punching errors that prompted a revision of data revision for the previous eight months. on engineering exports was inflated by around $15 billion, while export of gems and jewellery and petroleum products was underestimated by $12 billion.

EXPORT

Exports grew 3.87% to $22.3 billion in November, 2011, compared to $21.49 billion  in  November  2010.  exports

for the current fiscal is expected to be around  $280  billion,  below  the  $300 billion target for 2011-12 due to global economic  slowdown.  overseas  shipments  had  amounted to  $21.48  billion  in  November  2010. According to export body Fieo Director General Ajay Sahai, further decine in export  will  push  export  growth  ina  negetive zone. From 82 per cent in July, export growth slipped to 44.25 per cent in August, 36.36 per cent in September and  10.8  per  cent  in  October.  In  the eight-month  April-November  period, exports aggregated to $192.69 billion, a  year-on-year  growth  of  24.55  per cent. Experts opined that the country's exports growth during the entire fiscal would stand at about 20 per cent.

IMPORT

Imports  were  up  24.5%  at $35.92  billion  in  November  2011.  In November,  2010,  imports  aggregated $28.84  billion.  Oil  imports  grew  by 32.28 per cent to USD 10.3 billion in November 2011 while non-oil imports rose by 21.69 per cent to $25.6 billion vis-a-vis the year-ago period. Between April  and  November  oil  imports stood  at  $94.1billion,  an  increase  of 42.67% compared to $65.97 billion in November 2011. Non-oil imports, a key gauge of economic activity, rose 25.46%
to  $  215.41  billion  during  the  April- November period. 

TRADE DEFICIT

Imports  grew  at  a  faster  rate  of 24.5  per  cent  year-on-year  to  $35.9 billion in November 2011 which in the process translated into a trade deficit of $13.6 billion. Between April-November exports  grew  33.2%  to  $192.7  billion while  imports  also  rose  30.2%  to  $ 309.53 billion. the  eight  months  of  the  fiscal  year therefore stood at $116.8 billion. 

PMI RELEASED BY HSBC

Index  (  PMI)  -  a  headline  index designed  to  measure  the  overall performance  of  the  manufacturing sector  -  registered  54.2  in  December, up  from  51.0  in  November.  was  released  by  the  banking  major HSBC  on  2  January  2012.  indicated  the  strongest  improvement in business conditions since June 2011. New orders from overseas clients also grew at a faster pace than November 2011.the second consecutive expansion after shrinking for four months. India’s manufacturing activity was at a a six- month  high  in  December  2011  on account of an increase in factory output and  new  orders  from  domestic  and international firms. India  Manufacturing  PMI  jumped  to 54.2 from 51.0 in November, its biggest monthly rise since April, 2009.that separates growth from contraction for  33  months  now.  Purchasing Managers’ Index dipped to 50.4 in September 2011.Data  released  by  the  government had showed a 5.1 per cent contraction in  the  IIP  numbers  in  October  2011, its  slowest  since  March,  2009.  successive  rate  hikes  by  the  RBI  and weak  macroeconomic  conditions domestically and globally were blamed for  the  contraction.  industrial output data showed factory output  plunged  5.1%  in  October, raising  worries  about  the  health  of the  manufacturing  sector.  the  first  fall  in  industrial  output  in nearly  two  years.  Manufacturing sector  employment  also  increased slightly during December 2011, ending a period of job losses that had set in during August 2011. Costs went up on higher prices of raw materials and fuel on the input front, adding with higher demand.  allowed  manufacturing  companies  to increase output prices at an accelerated pace to pass on the costs.
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