Goods and Services Tax (GST)

GST is a unified taxation system which would end multiple taxation across the states and create a level playing field for businesses throughout the country, much like the developed nations. It is a multi-stage destination-based tax which will be collected at every stage, starting from procuring the raw material to selling the final product. The credit of taxes paid at the previous stage(s) will be available for set-off at the next stage of supply. Being destination or a consumption based, the GST will also end multiple taxes levied by Centre and the State Governments like Central Excise, Service Tax, VAT, Central Sales Tax, Octroi, Entry Tax, Luxury Tax and Entertainment Tax etc.  This will lower the overall tax burden on the consumer and will benefit the industry through better cash flows and working capital management. Currently, 17 State and Central levies are being applied on goods as they move from one State to the other.

BENEFITS

Different estimates peg the net advantage to the Gross Domestic Product, up to two percentage points.  The GST regime is also expected to result in better tax compliance, thereby increasing its revenue and narrowing the Budget deficit. All the imported goods will be charged Integrated Goods & Services Tax (IGST) which is equivalent to the Central GST + State GST. This will bring equality with taxation on local products.

Mainly, there will be three types of taxes under the GST regime: Central Goods and Services Tax (CGST), State (or Union Territory) Goods and Services Tax (SGST) and Integrated Goods and Services Tax (IGST). Tax levied by the Centre on intra-State supply of goods or services would be called the CGST and that to be levied by the States and Union Territories(UTs) would be called the SGST respectively. The IGST would be levied and collected by the Centre on inter-State supply of goods and services. Four supplementary legislations approving these taxes, namely the Central GST Bill, the Integrated GST Bill, The GST (Compensation to States) Bill, and the Union Territory GST Bill were passed by the Lok Sabha in May this year, making the realisation of 1^st July, 2017 deadline a reality.

All the matters related to the GST are dealt upon by the GST Council headed by the Union Finance Minister while all the State Finance Ministers are its Members. The GST Council also has a provision to adjudicate disputes arising out of its recommendation or implementation thereof.

TAX RATES

The GST Council has fixed four broad tax slabs under the new GST system - 5 per cent, 12 per cent, 18 per cent and 28 per cent. On top of the highest slab, there is a cess on luxury and demerit goods to compensate the States for revenue loss in the first five years of GST implementation. Most of the goods and services have been listed under the four slabs, but a few like gold and rough diamonds have exclusive tax rates. Also, some items have been exempted from taxation. The essential items have been kept in the lowest tax bracket, whereas luxury goods and tobacco products will invite higher tax.

17-YEAR-LONG WAIT

Many countries in the world switched to a unified taxation system very early. France was the first country to do so in 1954 and many others followed, some by implementing GST and others by using a different form of Value Added Tax (VAT). In India, the discussion on GST started in the year 2000, in the NDA Government led by the former Prime Minister, Shri Atal Bihari Vajpayee. Finally, after 17 years of consensus building, 101^st Constitution Amendment Bill was passed by Parliament in 2016. The States had apprehension of reduction in their revenue and their desire to keep some lucrative goods out of the GST baskets like alcohol, petroleum and real estate among others.

IMPACT ON CONSUMERS

From agarbattis (incense sticks) to luxury cars - all these goods will be taxed under different slabs. Movie tickets costing less than Rs 100 have been kept in the 18% GST slab while those over Rs 100 will attract 28% tax under GST. Tobacco products have been kept under a higher tax bracket. Industries such as textiles and, gems and jewellery are subject to a GST rate of 5%

The Government has shown its strong determination and stuck to implementing the GST with effect from 1^st July, 2017. The road ahead would require a lot of resolve by the implementing agencies like the Goods and Services Network, states and the industry.    To sail through initial hiccups and successfully steer the ship of the economy, the Government needs to show the same determination and courage. A bold initiative like GST taken for the welfare of the country must lead to a grand success.

Public Debt Management Agency (PDMA)

A Public Debt Management Agency (PDMA) will be set-up which will bring both India’s external borrowings and domestic debt under one roof. Presenting the General Budget 2015-16 in the Lok Sabha on 28-02-2015, the Union Finance Minister Shri Arun Jaitley stated that deepening of the Indian Bond market is one vital factor in promoting investment in India. The process of bringing the Indian Bond Market at the same level as India’s world class equity market is proposed to be initiated by setting-up PDMA. 

Task Force to Establish a Sector Neutral Financial Redressal Agency to be Set Up

The Union Finance Minister Shri Arun Jaitley has proposed to create a task force to establish a sector neutral financial redressal agency that will address grievances against all financial service providers. Presenting the General Budget 2015-16 in the Lok Sabha on 28-02-2015, Shri Jaitley stated that a properly functioning capital market requires proper consumer protection. 

The Finance Minister also informed that the work assigned to the Task Forces on the Financial Data Management Centre, the Financial Sector Appellate Tribunal, the Resolution Corporation, and the Public Debt Management Agency are progressing satisfactorily. 

The Government has also received a large number of suggestions regarding the Indian Financial Code (IFC) which are currently being reviewed by the Justice SriKrishna Committee. The Finance Minister hoped that he would be able to introduce the IFC in Parliament for consideration in due course. 

Five New Ultra-Mega Power Projects to be Set Up

The Government proposes to set-up 5 new Ultra Mega Power Projects, each of 4000 MWs in the plug-and-play mode. Presenting the General Budget 2015-16 in the Lok Sabha on 28-02-2015, the Union Finance Minister Shri Arun Jaitley stated that all clearances and linkages will be in place before the project is awarded by a transparent auction system. This shall unlock investments to the extent of Rs. 1 lakh crore. Shri Jaitley said the Government would also consider similar plug-and-play projects in other infrastructure projects such as roads, ports, rail lines , airports etc. The Finance Minister announced that the second unit of Kudankulam Nuclear Power Station will be commissioned in 2015-2016. 

National Investment and Infrastructure Fund

The Union Finance Minister Shri Arun Jaitley has announced the setting up of a National Investment and Infrastructure Fund (NIIF). Presenting the General Budget 2015-16 in the Lok Sabha on 28-02-2015, the Finance Minister stated that an annual flow of Rs.20,000 crore will be ensured for the NIIF. This will enable the Trust to raise debt, and in turn, invest as equity, in infrastructure finance companies such as IRFC and NHB. The infrastructure finance companies can then leverage this extra equity, manifold. 

ATAL Innovation Mission (AIM)

The Union Finance Minister Shri Arun Jaitley has stated his intentions to establish the ATAL Innovation Mission(AIM) in NITI. Presenting the General Budget 2015-16 in the Lok Sabha on 28-02-2015, the Finance Minister stated that AIM will be an Innovation Promotion Platform involving academics, entrepreneurs and researchers and draw upon national and international experiences to foster a culture of innovation, R&D and scientific research in India. Shri Jaitley said that the platform will also promote a network of world-class innovation hubs and Grand Challenges for India. Initially a sum of Rs.150 crore wail be earmarked for this purpose. 

Self Employment and Talent Utilisation (SETU)

Government has announced the setting up of a Self- Employment and Talent Utilisation (SETU) mechanism. Presenting the General Budget 2015-16 in the Lok Sabha here today, the Union Finance Minister Shri Arun Jaitley stated that SETU will be a Techno-Financial, Incubation and Facilitation Programme to support all aspects of start up businesses, and other self-employment activities, particularly in technology-driven areas. An amount of Rs.1000 crore is being set up initially in NITI Aayog for SETU. 

Shri Jaitley stated that “we are now seeing a growing interest in start-ups. Experimenting in cutting edge technologies, creating value out of ideas and initiatives and converting them into scalable enterprises and businesses is at the core of our strategy for engaging our youth and for inclusive and sustainable growth of the country.” He said concerns such as a more liberal system of raising global capital, incubation facilities in our Centres of Excellence, funding for seed capital and growth, and ease of Doing Business etc need to be addressed to create lakh of jobs and hundreds of billion dollars in value. The Minister said, with this objective in mind, SETU is being set up. 

Amendments to the National Bank for Agriculture and Rural Development (NABARD) Act, 1981

The Union Cabinet gave its approval to the amendments to the National Bank for Agriculture and Rural Development (NABARD) Act 1981.

The following amendments to the NABARD Act 1981 are proposed:-

1.      Raising the authorized capital of NABARD to Rs. 20,000 crore from Rs. 5,000 crore.

2.      The meaning of cooperative society is proposed to be enlarged to include multistate cooperative societies registered under any Central law or any other Central or State law relating to cooperative societies.

3.      Change of ownership to facilitate the transfer of the remaining share capital of NABARD from the Reserve Bank to the Central Government.

4.      Increasing the scope of operations of NABARD under short term funding purposes and other changes.

The following benefits are projected by this amendment:-

1.  By increasing the authorized capital of NABARD to Rs 20,000 crore from Rs 5,000 crore, the ability of NABARD to mobilize resources from the market will be enhanced thereby new credit products, new credit linkages and new clients will be developed.

2.  The amendments allow NABARD to lend to new institutions, mainly Societies covered under multistate cooperative societies act and other central laws, producer organizations or such class of financial institutions which are approved by the Central Government. This is likely to benefit a larger segment of the financially excluded farmers in the country.

3.  The amendments allow combination of credit, creation of short term operations fund and swapping of debt of farmers.

4.  The decision of the Government to transfer the balance one percent shares to the Govt. of India from Reserve Bank of India (RBI) in NABARD shall be carried out, which will provide for increased public accountability, as the Government will acquire the equity held by RBI.

5.  NABARD will combine the post of Chairman and the post of Managing Director, into one, therefore Chairman and Managing Director, under the provisions of the NABARD Act relating to these two posts. This shall ensure a distinct line of command.

Background

        NABARD was established on 12 July 1982 to provide sharp focus to agriculture credit and rural development. NABARD adopted, as its mission, the promotion of sustainable and equitable development of agriculture and rural prosperity through effective credit support, related services, institution development and other innovative initiatives.

Cabinet likely to approve 12th Five Year Plan (2012-17)

The union cabinet  approve the 12th Five Year Plan (2012-17) that seeks an average annual economic growth of 8.2 percent and identifies infrastructure, health and education as thrust areas.

The growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier in view of the current slowdown in the economy and adverse international situation.

During the 11th Plan period, the average annual growth was 7.9 percent. A full Planning Commission chaired by Prime Minister Manmohan Singh September 15 endorsed the document which has fixed the total plan size at Rs.47.7 lakh crore.

The 12th Plan seeks to achieve 4 percent agriculture sector growth during the five-year period "critical to achieve inclusive growth".

Highlights of 12th Five Year Plan (2012-17):

• Average growth target has been set at 8.2 percent
• Areas of main thrust are-infrastructure, health and education
• Growth rate has been lowered to 8.2 percent from the 9.0 percent projected earlier in view adverse domestic and global situation.
• During the 11th Plan period, the average annual growth was 7.9 percent
•  A full Planning Commission chaired by Prime Minister Manmohan Singh on September 15 endorsed the document which has fixed the total plan size at Rs.47.7 lakh crore
• The 12th Plan seeks to achieve 4 percent agriculture sector growth during the five-year period
• Agriculture in the current plan period grew at 3.3 percent, compared to 2.4 percent during the 10th plan period. The growth target for manufacturing sector has been pegged at 10 percent
• On poverty alleviation, the commission plans to bring down the poverty ratio by 10 percent. At present, the poverty is around 30 per cent of the population.
•  According to commission Deputy Chairperson Montek Singh Ahluwalia, health and education sectors are major thrust areas and the outlays for these in the plan have been raised.
• The outlay on health would include increased spending in related areas of drinking water and sanitation.
• The commission had accepted Finance Minister P. Chidambaram's suggestion that direct cash transfer of subsidies in food, fertilizers and petroleum be made by the end of the 12th Plan period
• After the cabinet clearance, the plan for its final approval would be placed before the National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister

Agriculture

Agriculture in the current plan period has grown at 3.3 percent, compared to 2.4 percent during the 10th plan period. The growth target for manufacturing sector has been pegged at 10 percent.

Infrastructure

The document stresses the importance of infrastructure development, especially in the power sector, and removal of bottlenecks for high growth and inclusiveness. It also sets targets for various economic and social sectors relating to poverty alleviation, infant mortality, enrolment ratio and job creation.

Poverty

On poverty alleviation, the commission plans to bring down the poverty ratio by 10 percent. At present, the poverty is around 30 per cent of the population.

Health and Education

According to commission Deputy Chairperson Montek Singh Ahluwalia, health and education sectors are major thrust areas and the outlays for these in the plan have been raised.

The outlay on health would include increased spending in related areas of drinking water and sanitation.

The commission had accepted Finance Minister P. Chidambaram's suggestion that direct cash transfer of subsidies in food, fertilizers and petroleum be made by the end of the 12th Plan period.

Direct cash transfers would bring down the government's subsidy burden as the money would go directly to the "genuine" beneficiaries and "plug leakages" in the implementation of these schemes.

After the cabinet clearance, the plan for its final approval would be placed before the National Development Council (NDC), which has all chief ministers and cabinet ministers as members and is headed by the Prime Minister.

INDIAN ECONOMY-HIGHLIGHTS

1. The Economy of India is the eleventh largest in the world by nominal GDP and the fourth largest by purchasing power parity (PPP).
2. Agriculture including allied activities accounted for 13.9 per cent of GDP, it is the predominant occupation in India, accounting for about 52% of employment.
3.  India is the largest producer and consumer of black tea in the world.
4.  India ranks first in the world in milk production.
5.  India ranks among the top three countries in egg production in the world.
6. India is the fourth largest producer of natural rubber (NR) in the world. India is the sixth largest producer of coffee after Brazil, Vietnam, Colombia, Indonesia, and Ethiopia.
7.  India is the third largest producer and consumer of fertilizers in the world after China and the USA.
8. Oil and gas constitute around 45 per cent  of total energy consumption of India.
9. India is at the fifth position globally after Germany, Spain and USA in Wind Power production.
10. India ranks a low 134 among 187 countries in Human Development Index 2011.
11. India currently accounts for 1.5% of world trade as of 2010 according to the World Trade Statistics of the WTO.
12. India is the second largest producer of quality cement in the world.
13. The Indian Paper Industry is among the top 15 global players today, with an output of more than 11 millions tones annually.
14. The Textiles sector is the second largest provider of employment after agriculture.
15. India is the second largest producer of cotton (4.13 mn. metric tones), accounting for 16 per cent of global production.
16. India is the largest producer and second largest exporter of jute goods in the world.
17. India is the second largest producer of silk and contributes about 18% to the total world raw silk production.
18. India is the seventh largest producer of wool and contributes 1.8% to total world production.
19. Indian Chemical Industry is 12^th largest in the world and 3^rd largest in Asia.
20. India is the fourth largest producer of crude steel in the world after China, Japan, and the USA.
21. India is the largest sponge iron producer in the world.
22. India is the world's second fastest growing auto market and boasts of the sixth largest automobile industry after China, the US, Germany, Japan and Brazil.
23. India is the largest cutting and polishing industry for diamond in the world.
24. India is the 16^th largest country in the world in terms of Gross Shipping tonnage by nationality of owner.
25. India has the largest postal network in the world with 1,55,015 post offices.
26. India is the world's fastest growing Wireless market.
27. India is the second largest producer of fruits and vegetables in the world.
28. India is the largest overseas exporter of cashew nuts and spices.
29. India is the second largest two-wheeler manufacturer in the world.
30. India is the second tractor manufacturer in the world.
31. India is fifth largest commercial vehicle manufacturer in the world.
32. India is the second largest producer of quality cement in the world.
33. India is world's largest producer of mica blocs and splittings.
34. India ranks third among global chromite producers.
35. India ranks third in the production of coal, lignite, barites.
36. India ranks sixth in the production of bauxite and manganese ore.
37. India ranks tenth in the production of aluminium.
38. India produces 89 minerals of which 4 are fuel minerals, 11 metallic, 52 non-metallic and 22 minor minerals.
39. India's power market is the fifth largest in the world.
40. Indian retail industry is ranked among the ten largest retail markets in the world.
41. India has the world's biggest movie industry producing around 1000 movies each year.
42. India's per capita energy consumption is 439 kg of oil equivalent.
43. India's per capita emissions is 1.52 CO₂ tons of CO₂.
44. India ranks among top five countries in terms of GHG absolute emissions.
45. India's share in global exports and imports is 1.5 per cent and 2.2 per cent respectively in  2010 (1.4 and 2.1 per cent as per WTO).
46. UAE is India's largest trading partner followed by China and USA.
47. The top four items in India's manufactured exports are engineering goods, gems and jewellery, chemicals and related products, and textiles.
48. In the top 100 imports of the world, India has only 6 items with a share of 5 per cent and above in 2010.
49.  India's trade deficit as a per cent of GDP at 5.7 percent in 2010, is 3^rd highest in the world after Hong Kong and UK.
50. Among its top 15 trading partners, India had bilateral trade surplus with five countries, namely the UAE, USA, Singapore, the UK, and Hong Kong.
51. Gujarat and Maharashtra, account for 46 per cent of total exports from India.
52. China is the largest source with an 11.7 per cent share in India's total imports followed by the UAE and Switzerland.
53. UAE is the top destination for India's exports followed by the USA and China.
54. India is the 5^th largest exporter and importer of commercial services preceded by the EU, and US, China and Japan with the same ranks both in exports and imports of commercial services.
55. India is the fourth largest foreign exchange reserve holder in the world, after China, Japan and Russia.

Source: (Compiled from Economic Survey of India and India Year Book)

Foreign Tourist Arrivals in India Registered 2.1 Percent growth in July 2012

Foreign Tourist Arrivals (FTAs) in India during the Month of July 2012 stood at 5.25 lakh as compared to 5.14 lakh in July 2011 and 4.67 lakh in July 2010. This translated into FTAs growth of 2.1 percent in July 2012 over July 2011 as compared to a growth of 10.1 percent registered in July 2011 over July 2010. FTAs during the period January-July 2012 were 37.62 lakh with a growth of 6.6 percent, as compared to the FTAs of 35.29 lakh with a growth of 10.7 percent during January-July 2011 over the corresponding period of 2010.

Foreign Exchange Earnings (FEE) in the month of July 2012 stood at 8389 crore rupees as compared to 7116 crore rupees in July 2011 and 5444 crore rupees in July 2010. The FEE recorded a 17.9 percent growth in July 2012 over July 2011. FEE from tourism in rupee terms during January-July 2012 stood at 52149 crore rupees with a growth of 23.3 percent, as compared to the FEE of 42279 crore rupees during January-July 2011.
Tourism Ministry presents estimates of Foreign Tourist Arrivals (FTAs) and Foreign Exchange Earnings (FEE) from tourism every month on the basis of data received from major airports in the country.

India’s Industrial Output declined to 1.8 Percent in June 2012

India’s industrial output plunged to 1.8 per cent in June 2012 compared to 9.5 per cent growth registered during June 2011. For the first quarter, the index of industrial production (IIP) declined 0.1 per cent against 6.9 per cent growth in the same quarter of fiscal 2011-12. The figure released by the Central Statistics Office of the Ministry of Statistics and Programme Implementation on 9 August 2012.
Manufacturing sector at -3.2 per cent and mining sector at 0.6 per cent largely hurt the overall IIP growth in June 2012. Manufacturing sector had recorded 11.1 per cent growth and mining sector output declined by 1.4 per cent in June 2011.
The capital goods category recorded a decline of 27.9 per cent in output in June 2012, while, the category had seen a 38.9 percent growth in the same month in 2011.
Basic goods output grew 4.1 per cent in June against 7.8 per cent growth in the June 2011. Growth of Intermediate goods remained unchanged at 1.6 per cent.
Consumer durables witnessed a growth of 9.1 per cent. However, consumer non-durables declined 1 per cent in June against a growth of 4.3 per cent in the same month last year.
Power sector registered a marginal 8.8 per cent growth in June 2012, higher than 8 per cent growth recorded in the same month in 2011.
The weak number of IIP could force Reserve Bank of India to cut policy rates at the next mid-quarter monetary policy review meeting slated for mid-September. Thus far the central bank has been counting on tight monetary policy to keep inflation in check. RBI had left the key policy rates unchanged in its mid-quarterly monetary policy review in July 2012.

Index of Industrial Production (IIP)
(Index of Industrial Production IIP) is compiled using data received form 16 source agencies including Department of Industrial Policy & Promotion (DIPP); Indian Bureau of Mines; Central Electricity Authority; Joint Plant Committee; Ministry of Petroleum & Natural Gas; Office of Textile Commissioner; Department of Chemicals & Petrochemicals; Directorate of Sugar; Department of Fertilizers; Directorate of Vanaspati, Vegetable Oils & Fats; Tea Board; Office of Jute Commissioner; Office of Coal Controller; Railway Board; Office of Salt Commissioner and Coffee Board.

Union Government approved Relaxation in Policies Related to Transfer of Government Land

The Union Government of India on 2 August 2012 approved relaxation in policies relating to transfer of government land. The objective of the policy is to speed up private-public partnership in the country and to fast-track pending infrastructure projects. The decision will ensure that infrastructure projects are not held up for procedural delays.
A ban was imposed in 2011 on transfer of government-owned land to any entity except in cases where land was to be transferred from one government department to another.This ban however excluded the cases where the land was to be transferred from one government department to another. The policy has also been relaxed for all land transfers from ministries to statutory authorities or PSUs (Public Sector Units).
Besides, the government allowed use and development of railway land by Rail Land Development Authority (RLDA), as per the provisions of Railways Amendment Act, 2005.

Indian Economy Key Sector IT-BPO

The year 2011-12 was marked by growing global uncertainties. Global recovery has stalled, growth prospects have dimmed and downside risks have escalated. By contrast, the Indian IT-BPO Industry (including hardware) continued to exhibit resilience. It weathered uncertainties in global business environment and reached a significant milestone in the year 2011-12 by aggregating revenue of US $ 101 billion, a growth of about 14.7 per cent over the previous year. Thus, the year 2011-12 is a landmark year for the IT-BPO Industry.

The Indian software and services export including BPO exports is estimated at US $ 68.7 billion in 2011-12, an increase of 16.4 per cent. The IT services exports is estimated to be US $ 39.8 billion, showing a growth of 18.8 per cent. BPO exports are estimated to grow to US $ 15.9 billion in 2011-12, a year-on-year growth of about 12 per cent. IT services contributed 58 per cent of total IT-BPO exports in 2011-12, followed by BPO at 23 per cent and Software products/engineering services at 19 per cent.

USA continues to drive IT-BPO exports growth. Growth is being driven by higher demand for IT services and support. Continental Europe and UK, the second largest markets for Indian IT-BPO exports are seeing their share decline in the last three years. Indian service providers have been aggressively growing business in the Asia-Pacific (APAC) market. Aimed at reducing their geographic dependency and spread currency risk, APAC is growing fastest at nearly 18 per cent; its share in total IT-BPO exports is expected to increase to nearly 8 per cent.

The IT-BPO market is being driven by demand across all key consumer segments. Notwithstanding the growth witnessed in the IT-BPO domestic segment, it accounts for a little over 21 per cent of overall industry revenues. India continued its dominant position as the leading sourcing market as compared to other emerging economies. Its share is global sourcing stood at 58 per cent in 2011.

The IT-BPO sector has become one of the key sectors for the Indian economy because of its economic impact. The sector is responsible for creating significant employment opportunities in the economy. Direct employment within the IT-BPO sector reached 2.77 million, with over 2,30,000 jobs being added in 2011-12.

The spectacular growth performance in the IT-BPO industry in the last decade has helped the industry contribute substantially to India's GDP. In 2011-12, this sector’s contribution to GDP is estimated to be 7.5 per cent. The IT-BPO industry has played a key role in putting India on the world-map. This segment has enormous potential to grow in the year to come. By 2012-13, this would have developed to a potential to touch US $ 100 billion in revenues as compared to US $ 87.7 billion in 2011-12, a growth of about 14 per cent.

Union Commerce Ministry unveiled New Trade Policy to boost India's Export

The Union Government of India on 5 June 2012 announced a new trade policy aimed at achieving 20 per cent increase in exports to 360 billion dollar in the fiscal year 2012-13. India's exports grew by 21 per cent and touched 303.7 billion dollar in 2011-12, while the trade deficit during the same period expanded to 185 billion dollar.
The government also announced to come out with new guidelines to restore Special Economic Zones (SEZ) and Export Oriented Unit (EOU) schemes to further boost the shipments.
As the part of the new trade policy, the Union Commerce Ministry had added seven new markets to the focus market scheme (FMS) and an equal number of new markets to the special FMS. Countries like Algeria, Aruba, Austria, Cambodia, Myanmar, the Netherland Antilles and Ukraine have been added to FMS; while countries including Belize, Chile, El Salvador, Guatemala, Honduras, Morocco and Uruguay have been added to special FMS. The FMS and SFMS scheme will help India to explore new markets and promote the product diversification.

The highlights of the new trade policy are as follows:
•    Government set the export target for 2012-13 at 20 per cent
•    2 per cent interest subsidy scheme extended till March 2013
•    Government to announce new guidelines to promote SEZs
•    Incentives for exports from north-eastern states
•    Shipments from Delhi, Mumbai through post, courier or e-commerce to get export benefits
•    Foreign Trade Policy document to be more user friendly
•    13 shows abroad to promote Brand India
•    Single revolving bank guarantee for different export deals
•    Seven new markets added to Focus Market Scheme
•    Market linked focus product scheme extended till March'13 for apparel export to USA and EU

Crisil lowers GDP growth to 6.5 %

Rating agency Crisil, on June 02 joined global banks to scale GDP (gross domestic product) growth for this fiscal down by 50 basis points to 6.5 per cent citing rising downside risks from muted investment demand, continuing policy logjam, and limited fiscal and monetary space to stimulate the economy, apart from continuing recession in the eurozone area.

The agency also attached a caveat that its new growth projection saying this is contingent on a normal monsoon forecast and no further worsening of the eurozone crisis.

Despite a massive drop in crude prices to the tune of nearly 18 per cent, and a massive drop in global commodity prices, the agency also upped its inflation guidance to 7 per cent from 6.5 per cent. The agency also upped its fiscal deficit target to 5.8 per cent.

“We have lowered the GDP growth forecast for 2012-13 to 6.5 per cent from its March 2012 estimate of 7 per cent. The forecast has been scaled down in view of the rising downside risks from recession in the eurozone, muted domestic investment demand, policy logjam, and limited fiscal and monetary space to stimulate the economy,” Crisil Research sad in a note.

The agency further argued that “unlike the swift V-shaped recovery from 6.8 per cent growth in the worst phase of the global financial crisis in 2008-09, economic growth will remain flat in 2012-13, the level of 6.5 per cent achieved in 2011-12. This will make 2012-13 the second consecutive year of lowest growth in the past decade ” Crisil Managing Director and Chief Executive Roopa Kudva said.

“Sub-normal monsoons and a further worsening of the situation in the eurozone can create downside risks to our tepid growth forecast of 2012-13,” warned Kudva.

The Crisil growth downgrade is the first from a domestic agency after the 2011-12 growth numbers were announced last Thursday and comes a couple of days after all the global financial majors such as Goldman Sachs, Morgan Stanley, StanChart, Citi, CLSA and HSBC lowered the growth prospects to 5.7-6.4 per cent for the current fiscal.

In their reports to clients worldwide, most of them blamed policy inaction by the government as the major road block to the economy, which had expanded by 8.4 per cent for two consecutive years in 2009-10 and 2010-11, before plunging to 6.5 per cent in 2011-12.

While Standard Chartered lowered its outlook to 6.2 per cent from 7.1 per cent, Morgan Stanley scaled down growth projection to as low a 5.7 per cent from 6.3 per cent for the current fiscal stating “a stagflation type environment is emerging.” In the stagflation situation, while inflation rises, there is stagnation or lowering of economic expansion. It said the banking system stress remained a concern.

However, Crisil said it saw industry growth improving to 5 per cent over a very weak base of 3.4 per cent growth last fiscal, while its revised downwards the services sector growth to 8.1 per cent, reflecting the sluggish growth prospects in IT/ITeS arising from the weak performance of the eurozone, and slower-than-earlier-expected growth in domestic services due to moderation in private consumption. Under the assumption of normal monsoons, agriculture is expected to grow at the trend rate of 3 per cent.

Raising its inflation guidance to 7 per cent from 6.5 per cent, Crisil said, “although lower economic growth will reduce demand-side pressures on inflation and lower global crude and commodity prices will have a moderating impact, these are likely to be offset by other pressure points.”

“These include the weak rupee and continuing high levels of food inflation. Additionally, an upward revision in diesel, electricity, and minimum support prices of crops can heighten inflationary pressures depending on government decisions on these issues.”

Moving up the rupee outlook to 50 from the earlier forecast of 48-49 by March 2013, Crisil chief economist Dharmakirti Joshi, said, “if the European situation improves towards the beginning of 2013, portfolio inflows into the domestic market will increase due to improved risk appetite, and resultant improved dollar supply will create a push the rupee up.”

Mr. Joshi also hedged his hope on some easing in the current account deficit this fiscal due to softer commodity and crude prices, which will also support the rupee.

On the fiscal deficit, it said it would settle at 5.8 per cent of GDP in 2012-13 versus its earlier estimate of 5.5 per cent and the government's budget estimate of 5.1 per cent.

“With slower GDP growth, government revenue growth will be lower than previously anticipated, thereby pushing up the fiscal deficit. This will increase the government's borrowing requirement and push the yields higher than our earlier projection.”

“Accordingly, we expect the 10-year G-Sec yield around 8-8.2 per cent by March 2013 as against 7.5-7.8 per cent forecast earlier,” Mr. Joshi said.

India’s Fiscal Deficit eased to 5.7 in the Fiscal Year 2011-12

According to the figures released by Controller General of Accounts (CGA) on 31 May 2012, India’s fiscal deficit eased to 5.7 per cent of GDP, lower than 5.9 per cent projected in the revised estimates in the Budget.
Fiscal deficit, the difference between the government's total receipts and expenditure, capped at 5.09 trillion rupees in 2011-12. While the tax revenue receipts curbed to 6.31 trillion rupees against the projected figure of 6.42 trillion rupees, government’s expenditure both non-plan expenditure and plan expenditure also went down at 8.84 trillion rupees and 4.13 trillion rupees respectively. The revenue deficit was at 4.3% of GDP.
The government is working hard to curtail the broadening fiscal deficit and aiming to bring it down to 5.1 per cent in the fiscal year 2012-13. In order to meet its fiscal deficit target the finance ministry is eyeing to cut the subsidy bill to below 2 per cent of GDP in the fiscal year 2012-13and 1.75 per cent in the subsequent years. The slowing economy is making it difficult for the government to achieve its fiscal deficit target.
The gross domestic product (GDP) data released by the Central Statistical Organisation (CSO), had capped the GDP growth rate rate of India in 2011-12 at 6.5 per cent, as against the earlier estimate of 6.9 per cent.

Growth Rate of Eight Core Infrastructure Industries dipped to 2.2% in April 2012

As per the official data released on 31 May 2012, the growth rate of eight core infrastructure industries dipped to 2.2 per cent in April 2012 from 4.2 per cent in April 2011. The eight core sectors — crude oil, petroleum refinery products, coal, electricity, cement and finished steel has a weight of 37.9 per cent in the Index of Industrial Production (IIP). The dip in the growth of the core sector industries was attributed to poor performance by sectors such as natural gas, crude oil and fertilizers.
The overall infrastructure sector growth for March 2012 was revised downwards to 2.2 per cent as compared to a healthier 6.5 per cent expansion witnessed in the same month last year. Also, the cumulative growth of infrastructure industries was found to have slipped to 4.4 per cent, which is significantly lower than the 6.6 per cent increase seen in 2010-11.
As per the data released by the CSO, natural gas and crude oil output during April 2012 fell by 11.3 per cent and 1.3 per cent, respectively. Petroleum refinery products and fertiliser production also witnessed negative growth rates, contracting by 2.8 per cent and 9.3 per cent in April 2012. Slowdown in electricity generation was also witnessed in April. Electricity generation grew at a lower pace of 4.6 per cent during the month as compared to 6.4 per cent in April 2011.
However, three sectors- coal, steel and cement were noted to have fared better as compared to 2011. While coal production went up by 3.8 per cent in April 2012 as compared to an increase of 2.7 per cent witnessed in April 2011, the output of steel and cement grew by a healthy 5.8 per cent and 8.6 per cent during April 2012 as compared to negative growth rates of (-) 2.9 per cent and (-) 0.1 per cent witnessed by the two sectors in the corresponding period of 2011.

Competition Commission of India constituteded Eminent Persons Advisory Group

The Competition Commission of India (CCI) formed an Eminent Persons Advisory Group (EPAG) on 7 May 2012.  The group is constituted to provide CCI inputs and advice on issues impacting markets and competition, among others.
The group comprise Infosys founder N.R. Narayana Murthy, former Comptroller and Auditor General V.N. Kaul, former Deputy Governor of Reserve Bank of India Rakesh Mohan, Biocon Chairman and MD Kiran Mazumdar-Shaw, former Director, of IIM-Ahmedabad Bakul Dholakia, former Chairman of CERC S.L Rao, former Vice-Chancellor of NLSIU, Bangalore N.L Mitra.
The group will hold its maiden meeting on July 2012. The Group will have interaction/meetings with the Commission two to three times a year.

Agriculture Development Bank

National Bank for Agriculture and Rural Development (NABARD) was established on 12 July 1982 by an Act of the Parliament for providing and regulating credit and other facilities for the promotion and development of agriculture, small scale industries, cottage and village industries, handicrafts and other rural crafts and other allied economic activities in rural areas with a view to promoting integrated rural development and securing prosperity of rural areas, and for matters connected therewith or incidental thereto.

NABARD provides refinance assistance under Sec.21 (i) of NABARD Act, 1981 for Short Term Seasonal Agricultural Operations (STSAO) purposes for a period not exceeding 8 months to Cooperatives, Regional Rural Banks (RRBs) and any other financial institutions approved by Reserve Bank of India. Further, in terms of Govt. of India’s instruction the Short Term refinance to Cooperative Banks, RRBs is being provided by NABARD at concessional rate of interest in order to enable them to provide crop loans upto Rs. 3 lakh for a period of one year to farmers at 7% p.a.