Business & Economy

FM announces tax bonanza for corporates, exchequer to take Rs 1.45 lakh crore hit

In a major bonanza for corporates as part of measures to promote growth and investment, Finance Minister Nirmala Sitharaman on Friday slashed the corporate tax rate to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies, besides other fiscal reliefs.

File photo of Nirmala Sitharaman
File photo of Nirmala Sitharaman
In a major bonanza for corporates as part of measures to promote growth and investment, Finance Minister Nirmala Sitharaman on Friday slashed the corporate tax rate to 22 per cent for domestic companies and 15 per cent for new domestic manufacturing companies, besides other fiscal reliefs.
The effective tax rate for these companies would now be 25.17 per cent, inclusive of surcharge and cess. Also, such companies shall not be required to pay Minimum Alternate Tax (MAT).
The total revenue foregone for the reduction in corporate tax rate and other relief is estimated at Rs 1,45,000 crore. This is the biggest announcement so far by the Modi 2.0 government to fight the slowdown, which dragged down the GDP growth to a six-year low of 5 per cent in the April-June quarter of the current fiscal.
The government has brought in the Taxation Laws (Amendment) Ordinance 2019 to effect lower tax for corporates.
A company, which does not opt for the concessional tax regime and avails the tax exemptions, would continue to pay tax at the pre-amended rate. However, these companies can opt for the concessional tax regime after expiry of their tax holiday/exemption period.
"After the exercise of the option they shall be liable to pay tax at the rate of 22 per cent and option once exercised cannot be subsequently withdrawn. Further, in order to provide relief to companies which continue to avail exemptions/incentives, the rate of Minimum Alternate Tax has been reduced from existing 18.5 per cent to 15 per cent," a Finance Ministry statement said.
In order to stabilise the flow of funds into the capital market, the government has said that the enhanced surcharge introduced by the Finance (No.2) Act, 2019 will not apply on capital gains arising on sale of equity share in a company or a unit of an equity oriented fund or a unit of a business trust liable for securities transaction tax.
"The enhanced surcharge shall also not apply to capital gains arising on sale of any security, including derivatives, in the hands of Foreign Portfolio Investors (FPIs). In order to provide relief to listed companies, which have already made a public announcement of buy-back before July 5, 2019, it is provided that tax on a buy-back of shares in case of such companies shall not be charged," the statement said.
The sharp tax rate cut has been announced even as revenue collection on account of both direct and indirect taxes are far below expectations.

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ADB President meets Modi, pledges $12 billion for new flagship initiatives

Asian Development Bank President Takehiko Nakao met Prime Minister Narendra Modi in New Delhi on Thursday and pledged $ 12 billion in support of the government's new flagship initiatives over the next three years.
ADB President Takehiko Nakao meeting Prime Minister Narendra Modi in New Delhi on August 29, 2019.
ADB President Takehiko Nakao meeting Prime Minister Narendra Modi in New Delhi on August 29, 2019.
Asian Development Bank (ADB) President Takehiko Nakao met Prime Minister Narendra Modi here today and pledged $ 12 billion in support of the government's new flagship initiatives over the next three years.
This was the third meeting between Modi and Nakao since Modi assumed the office of Prime Minister in 2014.
Nakao also met with Finance Minister Nirmala Sitharaman, Minister of Road Transport and Highways and Micro, Small, and Medium Enterprises (MSME) Nitin Gadkari, and Minister of Railways and Commerce and Industry Piyush Goyal.
A press release from the bank said Modi and Nakao discussed how to further enhance the partnership in areas such as the promotion of new technologies and innovation, renewable energy, solar-pump irrigation, electric vehicle and battery, fintech, sustainable tourism, and the recycling of plastics.
Nakao commended the government’s vision to make India a $5 trillion economy during Modi’s second term, which began in May this year, and reaffirmed ADB’s commitment to helping bolster the country’s inclusive growth and rapid economic transformation to achieve this vision.
“India is one of the fastest-growing economies in Asia and the Pacific, maintaining a growth rate of about 7.5% on average in the last 5 years. ADB expects the country’s growth in 2019 at 7.0% and in 2020 at 7.2%, despite downside risks in the global economy,” said Nakao at his meetings with the Indian leadership. “The government needs to maintain prudent macroeconomic management, sustain its reform efforts, enhance industrial competitiveness and job creation, and rejuvenate the rural economy.”
Nakao also commended the government’s key reforms, such as the introduction of goods and services tax to make India a single market, the implementation of Insolvency and Bankruptcy Code 2016, capital infusion for banks, the improvement of business regulation, and its further opening to foreign direct investment, which are yielding results. He encouraged the government to sustain the momentum of reforms in areas such as labor laws, land acquisition, and consolidating various welfare schemes.
ADB’s sovereign lending to India in 2018 reached a record $3.0 billion, in transport, urban, irrigation, skills development, and intermediary finance for public-private partnerships. 
Nakao said he appreciated the country’s speedier implementation of projects. He emphasized the bank’s commitment to catalyzing private sector investments and announced a $100 million investment in the National Investment and Infrastructure Fund. In May 2019, ADB made its single largest non-sovereign loan to date by committing $750 million to the Indian Railways Finance Corporation to support the electrification of existing railways tracks.
Nakao said ADB stood ready to commit more than $12 billion lending in the next three years, 2020–2022, averaging annually over $3 billion for sovereign operations and $1 billion for nonsovereign operations.
ADB’s sovereign and non-sovereign operations will focus on the government’s major initiatives, including (i) the Jal Jeevan Mission (extending drinking water for all, water conservation, and more crop per drop); (ii) the East Coast Economic Corridor program; (iii) promoting competitiveness of micro, small, and medium-sized enterprises by connecting to global value chains; (iv) supporting national road safety programs; and (v) constructing a rapid rail transit system to connect Delhi with neighboring satellite cities, starting from Delhi to Meerut. ADB will also expand assistance in secondary education and the universal health system, the release said.
Nakao lauded the government’s “Act East” policy, particularly its thrust to integrate the northeastern region with neighbouring economies, including countries in Southeast Asia. India also actively participates in the South Asia Subregional Economic Cooperation (SASEC) program—a partnership initiated in 2001 by ADB now including Bangladesh, Bhutan, India, Maldives, Myanmar, Nepal, and Sri Lanka. India is hosting the first SASEC Finance Ministers’ meeting in March 2020.
Nakao will travel to Kolkata, where he will attend the launch of an ADB publication tomorrow that showcases ADB’s 20-year partnership with the Kolkata Municipal Corporation. The partnership has been helping improve the city’s water supply, sewerage, and drainage systems, while also building resilience through the introduction of early flood warning system.
India is an ADB’s founding member since 1966 and is now its biggest borrower. ADB has committed $39.7 billion in sovereign lending and $5.7 billion in nonsovereign lending and investment by June 2019.
"ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific while sustaining its efforts to eradicate extreme poverty. In 2018, it made commitments of new loans and grants amounting to $21.5 billion. Established in 1966, it is owned by 67 members—48 from the region," the release added.

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Making India 5-trillion-dollar economy challenging but can be achieved: Modi

Prime Minister Narendra Modi said on Saturday that the goal to make India a five-trillion-dollar economy is challenging but can be achieved and asked the states to recognise their core competence and work towards raising GDP targets.
Prime Minister Narendra Modi chairing the fifth meeting of the Governing Council of NITI Aayog, in New Delhi on June 15, 2019.
Prime Minister Narendra Modi chairing the fifth meeting of the Governing Council of NITI Aayog, in New Delhi on June 15, 2019.
Prime Minister Narendra Modi said on Saturday that the goal to make India a five-trillion-dollar economy is challenging but can be achieved and asked the states to recognise their core competence and work towards raising GDP targets.
In his opening remarks at the fifth meeting of the Governing Council of NITI Aayog, the Prime Minister said that empowerment and ease of living have to be provided to each and every Indian.
"The goal to make India a five-trillion-dollar economy by 2024 is challenging but can surely be achieved. The states should recognise their core competence and work towards raising GDP targets right from the district level," he said.
He noted that the export sector was an important element in the progress of developing countries and said both the Centre and the states should work towards growth in exports, in order to raise per capita incomes.
"There is immense untapped export potential in several states, including the north eastern states. A thrust on export promotion at the state level will provide a boost to both income and employment," he said.
Describing Swachh Bharat Abhiyan and Pradhan Mantri Awaas Yojana as illustrations of what the Centre and the states can accomplish together, the Prime Minister urged the states to focus on collective responsibility for achieving short-term and long-term goals.
"Empowerment and ease of living have to be provided to each and every Indian. Everyone at this platform has a common goal of achieving a New India by 2022," he said.
The meeting was attended by the Governor of Jammu and Kashmir, Chief Ministers, Lieutenant Governor of Andaman and Nicobar Islands, and other delegates.

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Modi inaugurates Global Trade Show in run-up to Vibrant Gujarat Summit

Prime Minister Narendra Modi inaugurated the Global Trade Show at the Mahatma Mandir Exhibition-cum-Convention Centre in Gandhinagar on Thursday ahead of the 9th edition of the Vibrant Gujarat Summit that he will open at the same venue on Friday.
Modi inaugurates Vibrant Gujarat Global Trade Show
Prime Minister Narendra Modi inaugurated the Global Trade Show at the Mahatma Mandir Exhibition-cum-Convention Centre here today ahead of the 9th edition of the Vibrant Gujarat Summit that he will open at the same venue tomorrow.
Mr. Modi will address the inaugural session of the summit aimed at giving a fillip to investments in Gujarat.
At the Global Trade Show, Mr. Modi went around the various pavilions and evinced keen interest in the stalls set up by Indian Space Research Organization (ISRO), Defence Research & Development Organization (DRDO) and Khadi weavers, among others.
The stalls bring to the fore the Prime Minister's "vision of Make in India with an apt tagline- From Charkha to Chandrayaan," an official press release said.
He was accompanied by Gujarat Chief Minister Vijay Rupani and other dignitaries. 
The Global Trade Show is spread over an area of 200,000 sq. mts, with more than 25 industrial and business sectors showcasing their ideas, products and designs under one roof.
A series of events and programs have been organized alongside the summit. 
One of the major attractions today is the Ahmedabad Shopping Festival– 2019 which will be inaugurated by the Prime Minister later this evening. 
The mascot of the Vibrant Gujarat Ahmedabad Shopping Festival will be unveiled by Mr. Modi on this occasion. 
"Ahmedabad Shopping Festival 2019 is the first event of its kind in India and provides an opportunity for the enterprises from the city to showcase their products," it said.
In addition to the flagship events organized as part of Vibrant Gujarat, the 9th edition of the Summit will also witness the launch of a completely new set of forums aimed at diversifying the nature of knowledge sharing at the Summit, and intensifying the level of networking between participants.
Vibrant Gujarat Summit was conceptualized in 2003 by Mr. Modi, who was then the Chief Minister of Gujarat, to re-establish the state as a preferred investment destination. The Summit will provide a platform for brainstorming on agendas of global socio-economic development, knowledge sharing and forging effective partnerships.
Vibrant Gujarat 2019 will include a roundtable for opportunities in  Science, Technology, Engineering and Mathematics (STEM) Education & Research in India. It will be attended by eminent educationists and key policy makers to prepare the “Roadmap for opportunities in STEM Education & Research in India”.
There will be an international conference on STEM,  an exhibition on Futuristic Technologies and Space Exploration which offers a vision of the future of space travel, a seminar on Port Led Development & Strategies to establish India as the Trans-shipment Hub of Asia, a seminar on Make in India to showcase the Success Stories of Make in India program and key interventions by the Government, and a seminar on Opportunities for Industry in Defence & Aerospace to sensitize participants about opportunities in defence and aeronautics in Gujarat, and to deliberate on a way forward for India and Gujarat to emerge as a manufacturing hub for defence and aeronautics.
"Since its inception in 2003, Vibrant Gujarat Summit has played the role as a catalyst spurring several other states to come forward with such summits to promote trade and investments there," the release added.

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Movies, monitors, video games to cost less; GST Council leaves cement at 28%

Computer monitors, TV screens, video games, lithium-ion power banks, retreaded tyres, wheelchairs and cinema tickets are among products and services set to get cheaper as they have been removed from the highest 28 per cent bracket under the GST regime, Finance Minister Arun Jaitley announced on Saturday.
GST on monitors, TV Screens & movie tickets reduced
Computer monitors, TV screens, video games, lithium-ion power banks, retreaded tyres, wheelchairs and cinema tickets are among products and services set to get cheaper as they have been removed from the highest 28 per cent bracket under the Goods and Services Tax (GST) regime, Finance Minister Arun Jaitley announced on Saturday.
Among the items consumed by the common man, only cement continues to remain, along with luxury and 'sin' goods, in the 28 per cent bracket as the GST Council brought down the rates of all other categories of goods in a further rationalisation of rates that left only 28 items in the highest tax slab.
A total of 17 items and six services have been reduced which will result in a revenue impact of Rs 5,500 crore for the full fiscal, Jaitley said, briefing reporters here after the 31st meeting of the Council. 
"There are 28 items left in the 28 per cent bracket if we include 'luxury and sin items', and items used by economically well-off sections of the society, only one item of common man's usage - cement - remains in the bracket," Jaitley said.
Second-hand tyres, video games, monitors and television screens up to 32 inches, and lithium battery power banks will now attract 18 per cent GST.
The GST on wheelchair accessories has been brought down to 5 per cent from the existing 28, which will also allow the payment of input tax credit that is not possible with zero tax," Jaitley said. 
Airconditioners and dishwashers have been left untouched at the highest rate because these are not items of common use in India, he said. 
Nearly 1,250 goods and services have been categorised under the four tax slabs of 5, 12, 18 and 28 per cent under the GST regime.
Cutting the rates on cement and automobile parts would mean a combined revenue loss of Rs 33,000 crore, which the Council felt is "too steep" to be considered at this juncture, Jaitley said. 
While the GST on third party motor vehicle insurance has been cut from 18 to 12 oer cent, cinema tickets up to Rs 100 have also been granted a similar reduction. Movie tickets costing more that Rs 100 have been brought down from 28 to 18 per cent. 
"It's a mass entertainment medium and its revenue impact is about Rs 900 crore," the Finance Minister said on the reduced tax on movie tickets. 
GST on solar power generating plants and renewable energy items have also been reduced, he added.
This major tax rationalisation ahead of the 2019 general elections comes after Prime Minister Narendra Modi recently promised to bring 99 per cent the goods under the 18 percent or lower GST slab.

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Government to stick to expenditure, fiscal deficit targets

Virtually ruling out any immediate cut in fuel prices, Finance Minister Arun Jaitley said after a review meeting with Prime Minister Narendra Modi that the government would stick to its capital expenditure targets for achieving a higher trajectory of growth while maintaining the budgeted 3.3 per cent fiscal deficit target in the current year.
Virtually ruling out any immediate cut in fuel prices, Finance Minister Arun Jaitley said after a review meeting with Prime Minister Narendra Modi that the government would stick to its capital expenditure targets for achieving a higher trajectory of growth while maintaining the budgeted 3.3 per cent fiscal deficit target in the current year.
"The government is confident and committed to strictly maintaining the 3.3 per cent fiscal deficit target. As far as capital expenditure is concerned for maintaining the high trajectory growth, we will end the year without any cuts and will maintain 100 per cent capital expenditure, necessary for high trajectory growth," he told reporters after a three-hour meeting at the Prime Minister's official residence.
The Finance Minister parried reporters' questions whether the issue of petroleum prices, which have hit the roof, and whether the possibility of a cut in prices were discussed, saying it was essentially an internal discussion relating to the departments of the Finance Ministry. 
The government has been maintaining that it was difficult to cut the excise duty on imported crude because it has to maintain expenditure on various social welfare schemes announced in the budget.
Saturday's meeting came a day after the Prime Minister discussed with Jaitley and Finance Ministry officials the current economic situation after which the Finance Minister announced five measures to curb the widening current account deficit besides a policy to limit non-essential imports and to encourage exports.
Jaitley said the primary focus of Friday's meeting was the current account deficit and how to narrow it down.
"Today, the Economic Affair Department, Revenue Department, Expenditure Department and Department of Investment and Public Asset Management made detailed presentations before the Prime Minister. After the presentations, the Prime Minister expressed satisfaction with respect to broad parameters in relation to the economy and macroeconomic data so far emerging this year.
"We are confident of achieving higher growth rate than was projected in the budget. Inflation is broadly under control and in direct tax collections, we are moving ahead of schedule. Despite the stiff target, we are now seeing the impact of anti-black money measures we have taken: demonetisation and GST. There is a phenomenal increase in the base of the number of people filing tax returns," he said. 
The Finance Minister said the CBDT is clear that it would be able to collect in excess of the budgeted tax. 
"In regard to GST and indirect taxes, the GST is settling down and with the pickup in consumption, it will show on the GST collections in future months. Between the indirect and direct taxes, we will comfortably meet the target, if not surpass it. As far as non-tax revenue is concerned, the entire programme of divestment and strategic sales for this year, just as we exceeded the target last year, we are confident of not only meeting the disinvestment target, but exceeding it.
"On the basis of all these analyses, we are optimistic of our growth and tax collections. As far as the fiscal deficit is concerned, we will be able to stick to 3.3 per cent," Jaitley said.

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Modi says New India is rising on pillar of economic opportunity for all

Prime Minister Narendra Modi said on Tuesday that a "New India" was rising, an India that stands on the pillars of economic opportunity for all, knowledge economy, holistic development, and futuristic, resilient and digital infrastructure.
India has emerged bright spot in global economy: Modi
Prime Minister Narendra Modi today said a "New India" was rising, an India that stands on the pillars of economic opportunity for all, knowledge economy, holistic development, and futuristic, resilient and digital infrastructure. 
"The Indian story of economic resurgence closely mirrors that of many other parts of Asia. Now, the continent finds itself at the centre of global economic activity.  It has become the main growth engine of the world. In fact, we are now living through what many have termed the ‘Asian Century’," he said in his address at the opening ceremony of the Third Annual Meeting of the Asian Infrastructure Investment Bank (AIIB) here.
"We look forward to our continued engagement with our development partners including AIIB," he said.
Mr. Modi said AIIB, which started its financing operations in January 2016, has 87 members and a committed capital stock of $ 100 billion and is poised to play a critical rule in Asia.
"As developing countries, we share similar challenges. One of them is to find resources for provision of infrastructure. I am happy that the theme of this year’s Meeting is “Mobilizing Finance for Infrastructure: Innovation and Collaboration”. Investments by AIIB in sustainable infrastructure can impact the lives of billions of people," he said.
Mr. Modi said Asia still faced wide ranging disparities in access to education, healthcare, financial services and formal employment opportunities. Regional multi-lateralism through institutions such as AIIB can play a central role in helping to raise resources, he felt.
"Sectors such as energy and power, transportation, telecom, rural infrastructure, agriculture development, water supply and sanitation, environment protection, urban development, and logistics require long term funds. The interest rates on these funds need to be affordable and sustainable.
"In a short period, AIIB has approved 25 projects in a dozen countries with a total financing of over 4 billion US Dollars. This is a good beginning.
"With committed capital of 100 billion dollars and huge need for infrastructure in member countries, I take this opportunity to call upon AIIB to expand from financing 4 billion dollars, to 40 billion dollars by 2020 and 100 billion dollars by 2025. This would require simpler processing, and faster approval. It would also need high quality projects and robust project proposals," he said.
The Prime Minister said AIIB and India were both strongly committed to making economic growth more inclusive and sustainable.
"In India, we are applying novel Public Private Partnership models, Infrastructure Debt Funds, and Infrastructure Investment Trusts to fund infrastructure. India is trying to develop brownfield assets as a separate asset class for infrastructure investment. Such assets, having passed the stages of land acquisition and environment and forest clearances, are relatively de-risked. Hence, for such assets, institutional investment from pension, insurance and sovereign wealth funds are likely to be more forthcoming.
"Another initiative, is the National Investment and Infrastructure Fund. This aims to channel investments from both domestic and international sources into infrastructure. This Fund has received a boost with AIIB committing 200 million US dollars for investment," he said.
Mr. Modi said India is one of the most investor-friendly economies in the world. "Investors look for growth and macro-economic stability. They want political stability and a supportive regulatory framework to ensure protection of their investment. From the point of larger scale of operations and higher value addition, an investor is also attracted by a large domestic market size, availability of skilled labour and good physical infrastructure. On each of these parameters, India is well placed and has performed very well," he said.
He went on to list India's achievements on this score. "India has emerged as a bright spot in the global economy which is driving global growth as well. With a size of 2.8 trillion US dollars, it is the seventh largest in the world. It is the third largest in terms of purchasing power parity. In the fourth quarter of 2017, we grew at 7.7 per cent. In 2018, we are projected to grow at 7.4 per cent," he said.
"Our macro-economic fundamentals are strong with stable prices, a robust external sector and a fiscal situation firmly in control. Despite  rising oil prices, inflation is within the mandated range. The Government is firmly committed to the path of fiscal consolidation. Government debt as percentage of GDP is consistently declining. India has achieved a rating upgrade after a long wait. 
"The external sector remains robust. Our foreign exchange reserves of more than 400 billion US dollars provide us enough cushion. Global confidence in India’s economy is rising. Total FDI flows have increased steadily – more than 222 billion US dollars have been received in the last four years. As per UNCTAD’s World Investment Report, India continues to be one of the top FDI destinations in the world," he said.
"From the point of a foreign investor, India counts as an extremely low risk political economy. The Government has taken a number of steps to boost investment.  We have simplified rules and regulations for businesses and undertaken bold reforms. We have provided investors an environment which is efficient, transparent, reliable and predictable.
"We have liberalized the FDI regime. Today, most sectors are on automatic approval route.
"The Goods and Services Tax is one of the most significant systemic reforms that our country has undergone. It works on the One Nation - One Tax principle. It reduces tax cascading, increases transparency, and adds to logistics efficiency. All of this makes it easier for the investor to do business in India.
"These and other changes have been noticed by the global fraternity. India has jumped 42 places in three years to enter the top hundred in the World Bank’s Ease of Doing Business Report 2018.
"The size and growth of the Indian market hold much potential. India’s per capita income has doubled in the last ten years. We have over 300 million middle class consumers. This number is expected to double in the next ten years. The size and scale of requirement in India gives the added advantage of economies of scale for investors. For example, the housing programme in India targets ten million houses in urban areas. This would be more than the total requirement of a lot of countries taken together. Therefore the use of new technology in house construction would have added advantage, if tried in India. 
"Another example of scale would be the Renewable Energy Programme in India. We have set a target to construct capacity of 175 giga watt of renewable energy by the year 2022. Of this, the solar energy capacity will amount to  100 giga watt. And we are well on course to exceed these targets. We have added more capacity to renewable energy than conventional energy in 2017. We are also making collaborative efforts to mainstream solar energy in the form of an International Solar Alliance. The founding conference of the Alliance was held in New Delhi earlier this year. The Alliance aims at a solar capacity of 1000 Giga Watt with an investment of one trillion US dollars by 2030.
"India is working on e-mobility. The challenge before us is of technology, particularly with respect to storage. We will be hosting a global mobility conference this year. I hope that this will help us in moving forward," he said.
"In India, we are upgrading connectivity at all levels. The Bharatmala scheme is aimed at improving road connectivity by constructing national corridors and highways. The Sagarmala project has been undertaken for boosting port connectivity, port modernization and port-linked industries. Dedicated Freight Corridors are being developed to mitigate the congestion of our railway network. The Jal Marg Vikas project would augment capacity of navigation on National Waterways for internal trade carried through inland water transport. Our UDAN scheme works towards regional airport development and improved air connectivity. An area which I believe still remains untapped and needs attention is the possibility of utilising India’s large coastline for transportation and freight movement.
"While we talk about the conventional concept of infrastructure, I must mention some of the modern day infrastructure on which India has worked. Bharat Net is targeted at providing last mile internet connectivity in the country. India has  over 460 million internet users and 1.2 billion mobile phones in use. We are promoting the use of digital payments. Our United Payments Interface system or UPI along with BHIM App and RuPay Card has shown the true potential of digital economy in India. Through the UMANG App, more than 100 public services have been made available to the citizens through their mobile phone. Our Digital India Mission aims to bridge the rural-urban digital divide.
"Agriculture is the lifeline of the Indian economy. We are promoting investments in warehouses and cold chains, food processing, crop insurance and allied activities. We are promoting micro-irrigation to ensure optimal use of water with increased productivity. I would like AIIB to look into potential investment opportunities in this field and associate with us.
"We aim to provide every poor and homeless household a house with toilet, water and electricity by the year 2022. We are also looking at various strategies for effective waste management.
"We have also recently launched Ayushman Bharat, our National Health Protection Mission. This will provide a benefit cover of over 7000 dollars annually to more than 100 million poor and vulnerable families. The resulting expansion of health care facilities will lead to the creation of a large number of jobs. This will also promote the production of high quality medicines, consumables and other medical technology equipment. Jobs will also be created for ancillary activities including call centres, research and evaluation and IEC activities. The entire healthcare industry will receive a boost.
"Moreover, with the Government assuring healthcare benefits, the savings of a family, can now be better used for other consumption and investment. This increased disposable income in the hands of a poor family would lead to increased demand in the economy. I see great untapped potential in this for investors," he added.
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Modi says India poised to join five trillion dollar economy club in few years

Prime Minister Narendra Modi said on Sunday that India was poised to join the five trillion dollar economy club in the next few years, thanks to the continous efforts made by his Government in areas such as economic reforms and infrastructure development in the last three and a half years.
Focus of our Budget is on outcome: Modi
Prime Minister Narendra Modi today said India was poised to join the five trillion dollar economy club in the next few years, thanks to the continous efforts made by his Government in areas such as economic reforms and infrastructure development in the last three and a half years.
"I remember the big headlines there were when India joined the trillion dollar club some years. But after that, some years were lost to various scam. There was a totally different atmosphere in the country then. At that time, there was talk, not of trillion dollar economy but of the 'fragile five'," he said in his inaugural adddress at "Magnetic Maharashtra: Convergence 2018", a global investors' conference.
"In the last three and a half years, due to the continous efforts of the government, we are now talking of joining  the five trillion dollar club. The world's big agencies are saying that India will in the next few years join the five trillion dollar club," he said.
Mr. Modi praised the development and growth efforts in Maharashtra and expressed happiness that the state government had set itself the target of becoming the first trillion dollar economy state in the country.
"It is not difficult to meet any target in the land of Shivaji Maharaj. I am hopeful that, with his blessings, Maharashtra government will achieve this goal," he said.
"I believe that the country's development is possible when the states also develop. Maharashtra's development is an indication of India's growing strength and it is now able to set itself such ambitious targets. It is a living example of the new thinking, the new climate in India," he said.
Mr. Modi said the Magnetic Maharashtra summit was a good example of cooperative federalism. He said all Indian states were in a healthy competition and were organising such events to attract investment in diverse areas, based on their local strengths, advantages and other factors. "This trend started in Gujarat, its effect is now seen all over the country," he said.
Mr. Modi praised the Devendra Fadnavis government in Mahrashtra for the steps taken by it to develop the state and improve its investment climate. He said Maharashtra's efforts were a major factor in the improvement in India's ranking in the World Bank Ease of Doing Business report.
He said the massive changes being seen in the country were possible only when, through policy reforms, a new work culture is developed in governance and when hurdles in implementation of programmes are debottlenecked, inter-departmental cooperation is increased, and decisions are taken in a given time-frame.
He said Maharashtra topped the country in expenditure on infrastructure projects last year and was first in Frost and Sullivan's rankings on overall development. He said that last year the state accounted for nearly half of FDI received by India. Out of the MoUs signed for Rs. 4 lakh crore of investment during the Make in India Week here in February 2016, work had already begun on projects worth nearly Rs. 2 lakh crore, he said.
According to him, the infrastructure projects being implemented in Maharashtra have attracted the interest of the entire world. The Delhi Mumbai Industrial Corridor project is listed among the 100 Most Innovative Projects in the world. The new Navi Mumbai International Airport and the Mumbai Trans-Harbour Link will bring about a big change in the lives of crores of people of this region. Also, the Metro rail projects being implemented in Mumbai, Navi Mumbai, Pune, Nagpur, 350 km of network, will create new possibilites for development and investment, he said.
He also made mention of the Maharashtra Samrudhi Corridor, which will take rural areas, the agriculture sector and agro-based industries to new heights. The development of 700 kms of Super Communication Expressway, development of 24 nodes on the route on the lines of Smart cities, will create job opportunities for 20 to 25 lakh people, he said.
"This confidence in India has not come by accident. Behind it there is a vision of creating a people-friendly, development-friendly and an investmen-friendly climate, there are efforts behind this. We are sorting out the smallest of issues, overcoming the smallest of challenges, we are solving major problems. We are taking governance to a level where there would be the least involvement of the government," he said.
"The country makes progress when there is a holistic vision, when it is inclusive and comprehensive. We are moving ahead on a path where things are policy-driven and governance is performance-driven, where the government is accountable, democracy is participative. We are creating a transparent ecosystem in the country for building a New India, which will be the least dependent on Government systems. For this, rules are being simplified, processes are being made easier, laws are being changed where necessary, and, where necessary, obsolete laws are being repealed.
"Some of you may be aware that, in the past three years, we have repealed more than 1400 obsolete laws. In the new laws that are being framed, we are ensuring that they do not complicate things but simplify them. We are keeping the human interface with government to the minimum. In areas such as labour laws and tax compliance, we are using technology to make processes easier," he said.
"We believe potential plus policy plus planning plus performance leads to progress," he said.
"It is the result of such thinking that in the speed of laying new roads and railway lines, electrification of railway lines, building of houses, handling of traffic at ports, addition of solar energy capacity, we are two to three times faster than before. I can cite several more such examples," he said.
"On the one hand, we have stressed on optimum utilisation of resources and, on the other hand, we are focusing on resource-based development policies. We are laying importance on development policies-based Budget. The reforms we have carried out in the Budget, the thinking behind the Budget, they have created a new work culture in the country, transformed the socio-economic scene in the country," he said.
"The Railway Budget is now a part of the General Budget. There used to be an artificial wall between Plan and Non-Plan in the Budget, that we have removed. We have advanced the date of presentation of the Budget by  a month, this ensures that the allocated funds reach the Departments in time, they have more time for implementation of programmes," he said.
Mr. Modi said such structural changes and policy interventions had helped the country's farmers, the poor, the Dalits and backward classes and the neglected sections. 
"Our Budget is not limited to outlay, our Budget is not limited to only output, the focus of our Budget is on outcomes," he said.
"We were already working on Housing for All by 2022, Power for All by 2019. In this year's Budget, we have speeded up work on Clean Fuel for All, Health for All. We have increased the target to providing LPG connections to 8 crore households from 5 crore households under the Ujjwala scheme.  There are about 25 crore families in India.
"These figures show the direction in which we are moving. Jan Dhan Mission, Skill India, Digital India, Mudra, Stand-Up India, Start-Up India, these schemes are empowering the nation's poor, middle and lower middle classes, youth and women," he said.
Mr. Modi said the new healthcare mission announced in the Budget is attracting the attention of the world. "We will provide a Rs. 5 lakh cover for about 10 crore families, that is about 50 crore people. We will also set up 1.5 lakh wellness centres across the country. It will create affodable health care institutions, with more doctors, paramedical staff. This will impact all other sectors connected with healthcare," he said.
He also mentioned the initiatives to strengthen the education sector, the MSME sector, self-employment schemes and in the agriculture and rural infrastructure sectors.
"All these are improving the ease of living in the ountry, empowering people, bringing about socio-economic development," he said, adding that all sections had to work together to meet the aspirations of the people, build a New India and reap the country's demographic dividend.
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Modi says India poised for swift take-off, hits out at critics of reforms

Prime Minister Narendra Modi said on Saturday the jump in India’s global ranking in the World Bank’s Ease of Doing Business Report meant that the country was poised for a “swift take-off” and lashed out as those questioning the achievement, saying that they never did anything themselves and were now questioning those who are trying to do something.
Prime Minister  Narendra Modi with World Bank CEO Kristalina Georgieva at an event on India's Business Reforms, in New Delhi on November 4, 2017.
Prime Minister Narendra Modi with World Bank CEO Kristalina Georgieva at an event on India's Business Reforms, in New Delhi on November 4, 2017.
Prime Minister Narendra Modi today said the jump in India’s global ranking in  the World Bank’s Ease of Doing Business Report meant that the country was poised for a “swift take-off” and lashed out as those questioning the achievement, saying that they never did anything themselves and were now questioning those who are trying to do something.
He was speaking at a conference on “India’s Business Reforms” organised here by the Department of Industrial Policy and Promotions (DIPP), four days after the World Bank released its report which showed that India had moved into the top 100 in the global rankings on the back of sustained business reforms over the past several years.
In an obvious reference to the Congress, Mr. Modi said that if the party had carried out many of the reforms during its tenure in government, it could have claimed credit for the improvement in the rankings, which were launched by the World Bank in 2004, the year the Congress-led UPA government’s ten-year reign began.
“I am a Prime Minister who has not even seen the building of the World Bank, while earlier people who used to run the World Bank were sitting here,” he said.
“Instead of raising questions about the rankings, they should cooperate with us so that the country can be taken to higher levels. They should resolve to work together with us to build a New India,” he said.
Mr. Modi said India had been identified in the report as one of the top performers and reached a position from where it would now be easier to improve further. “Our efforts have gathered momentum. In management terms, we have achieved critical mass for a swift takeoff,” he said 
Last year, the  report had ranked India at 130, from which it has moved up 30 places this year to 100. India is the only large country this year to have achieved such a significant shift. The report also recognized India as one of the top 10 improvers in this year’s assessment, having implemented reforms in 8 of the 10 Doing Business indicators. 
“I am very happy to be here today. I sense a well-deserved mood of celebration here. The World Bank has recognized the stupendous work done by us towards improving Ease of Doing Business. We are now among the top hundred countries in the Doing Business rankings. In a short time of three years we have improved forty-two ranks,” Mr. Modi said.
He also expressed happiness at the presence of World Bank CEO Kristalina Georgieva at the event, saying that it showed the bank’s commitment to encourage nations to undertake reforms which benefit society and economy. 
“Over the last three years, I have been constantly telling the domestic and foreign investor community that we in India are making sincere efforts to improve ‘ease of doing business’. And Friends! India has Walked the Talk,” he said.
“This improvement is important: because it is an indicator of Good Governance in the Country; because it is a measure of the quality of our public policies; because it is a benchmark of transparency of processes; because, ease of doing business, also leads to ease of life; and, ultimately, it reflects the way people live, work and transact in a society,” he said.
“But all this is for the benefit of concerned stakeholders. For me, the World Bank report shows that quantum change is possible through commitment and hard work. Continued efforts can help us improve even further,” he said. He said there was more work to be done. “I want to bring some change in in the lives of the 100 crore people of my country. I assure you that we will not leave any stone unturned in meeting the expectations of the world from India,” he said.
Mr. Modi noted, for example, that the World Bank report had not taken into account the implementation of the Goods and Service Tax (GST) which, he said, was the biggest tax reform in the Indian economy and impacts many aspects of doing business. “With GST, we are moving towards a modern tax regime, which is transparent, stable and predictable,” he said.
He recalled that the Government would study the working of the new system for three months and that the GST Council was addressing the various issues that had cropped in the implementation of the new regime. He said many issues would be sorted out the coming meeting of the GST Council and all necessary improvements made even after that.
“There are many other reforms which have already happened, but need gestation and stabilization time, before they are taken into account by the World Bank. There are a few other reforms where our team and the World Bank team need to find common ground. All this, combined with our conviction to do even better, gives me the confidence that India will occupy a place of pride in the World Bank report next year and in the years thereafter. 
“I compliment the World Bank for engaging with countries to improve ease of doing business across the world. I also compliment them for the theme of this year’s report – ‘Reforming to create jobs’. There can be no denying that business is a major force in our lives. It is an engine for growth, employment generation, wealth creation and delivery of goods and services that make our lives comfortable,” he said.
Mr. Modi said India was a young country and job creation was an opportunity as well as a challenge. “Therefore, to leverage the energy of our youth, we are positioning India as a Start-up nation and a global manufacturing hub. For this purpose, we have launched various initiatives, such as Make in India and Start-up India,” he said.
He said that, through these initiatives, combined with the new eco-system of a formal economy and a unified tax regime, the Government was trying to create a New India. “An India where opportunities are created and harnessed to the advantage of the needy. We are particularly keen to develop India into a knowledge based, skill supported and technology driven society. A good beginning has been made through the Digital India and Skill India initiatives,” he said..
Mr. Modi said India was swiftly changing for the better and went on to list some more global recognitions which indicate this.
“We have moved up thirty two places in the last two years in the Global Competitiveness Index of the World Economic Forum. This is highest for any country. We have also moved up 21 places on the Global Innovation Index of WIPO in two years. We have moved 19 places on the Logistics Performance Index of 2016 of World Bank. We are among the top FDI destinations listed by UNCTAD,” he said.
“Our mantra is reform, perform and transform. We want to do better and better. I am happy to note that for the first time, the World Bank is helping us in this exercise at the sub-National level too. In a federal democracy like India, it is often not easy to take on board every stakeholder while undertaking reforms. However, over the last three years, there has been a sea change in the response of Governments, both at Central and State level. State Governments are finding innovative ways to create a business friendly environment. While often competing with each other in implementing business reforms, they are also helping each other in implementing them. This is an exciting universe in which competitiveness and cooperation co-exist,” he said.
The Prime Minister said the agenda for boosting growth and employment required many structural changes, many tough decisions and many new regulations. Besides this, the mind-set of the bureaucracy required change to enable them to work fearlessly and honestly. He said that, over the last three years, his Government had done a lot on these fronts and resolved a number of regulatory and policy issues facing businesses and companies. 
“Alongwith manufacturing, we are also pushing for faster progress in infrastructure sectors. Therefore, we are continuously working to improve our investment climate. In the last three and a half years we have undertaken bold Foreign Direct Investment reforms in twenty one sectors, covering eighty seven areas of policy,” he said.
He said these reforms had touched significant sectors like Defence, Railways, Construction Development, Insurance, Pension, Civil Aviation and Pharmaceuticals. More than ninety percent of the FDI approvals have been put on the automatic route. “We are now among the most open economies for FDI,” he said.
Mr. Modi said this had resulted in increased FDI inflow, which year after year is making new records. “The FDI inflows of 55.6 billion US dollars for the year ending March, 2016 were an all-time high. The following year, India registered an FDI inflow of 60.08 billion US dollars, thereby scaling an even higher peak. As a result, the total FDI received in the country has gone up by 67% in a short span of three years,” he said. “During the current financial year till August, total FDI of 30.38 billion US dollars has been received, which represents an increase of 30% as compared to the corresponding period last year. In August, 2017, India received a total FDI of 9.64 billion US dollars, which is the highest ever FDI received in any month,” he said.
“Over the last three years, we have systemically and critically evaluated business regulations. We have tried to understand the pain points of businesses with regard to interface with government. We engaged with businesses on a regular basis, understood their concerns and sought to modify regulation to address their concerns. 
“I have often emphasized that technology must be used to transform governance. Use of technology should minimize physical interface and assist time bound decision-making. I am glad to see that a number of Government Departments and State Governments are deploying technology to improve governance and deliver services. 
“Alongwith the tools of technology we also need a complete change of mind-set while dealing with business. Total re-engineering is required both at the level of Mind and Machine. The past mindset of excessive control has to be replaced by the concept of minimum government, maximum governance. This is our goal and my Government is determined to achieve this objective. 
“With this objective, an extensive exercise was undertaken to redesign laws and re-engineer government processes to make business environment simpler and more conducive. An attempt has been made to align the Indian regulatory environment to international best practices. Though, we were putting in efforts to improve India’s rank in the Doing Business Report, reforms undertaken by the Government are far more extensive. To give you one example; we have abolished more than 1200 archaic laws and Acts which were only complicating Governance. They have been deleted from the statute book. Similarly, thousands of important reforms have been carried out by the states as well. These additional efforts are not part of the World Bank’s requirement,” he said.
Mr. Modi said all Ministries of the Central Government, Public Sector Undertakings, State Governments as well as regulators should identify international best practices, consult their stakeholders and align their regulations and processes with international best practices. “I have no doubt that people working in these agencies are second to none in the world in respect of their capability and commitment to public service,” he said.
He said the Ease of Doing Business rankings were also rankings of Ease of Living Life. The improvement in India’s rankings means that life had become easier for the common man, the middle class, he said. He said India had managed to improve its ranking because the Government had, over the last three years, undertaken various reforms to reduce the difficulties being faced by people on various fronts.
“I must make a special mention of the fact that while Ease of Doing Business is important for all businesses, it is critical for small businesses including small manufacturers. This sector provides the bulk of employment in the country and to make them more competitive, we have to reduce the cost of doing business. The work on Ease of Doing Business must address the issues of these small businesses and manufacturers. 
“Once again, let me congratulate the team working on various aspects of ease of doing business for their commitment and dedication. I am sure that together we will write a new chapter in India’s history and transform India so that the dreams and aspirations of our people take wing. 
“I would like to thank the World Bank again for their guidance in our efforts to improve ease of Doing Business. I am told that the experience of bringing about decisive changes in a large country like India without affecting the growth process may become an example for many other nations. There is always scope to learn from others. If required, we will be happy to share our experience with other countries,” he added.

Jaitley says SASEC initiative will help member-countries access trade gateways

Finance Minister Arun Jaitley said on Monday the South Asia Sub-regonal Economic Cooperation (SASEC) initiative, supported by an Operational Plan and now guided by a vision, would help member-countries to optimally utilize their resources and facilitate access to trade gateways and linkages with global markets.
Arun Jaitley launches SASEC Vision Document
Finance Minister Arun Jaitley today said the South Asia Sub-regonal Economic Cooperation (SASEC) initiative, supported by an Operational Plan and now guided by a vision, would help member-countries to optimally utilize their resources and facilitate access to trade gateways and linkages with global markets.
"Improved connectivity and infrastructure development could substantially spur economic growth in the region," he said at a meeting of Finance Ministers of the SASEC countries here.
"Enhanced cooperation among the member countries would also give an impetus to small and medium enterprises in the region. Collaboration in knowledge sharing would facilitate innovation and research," he said.
Mr. Jaitley said that, in the last 16 years, the SASEC initiative had made a significant progress in developing regional cooperation and integration. 
"I am happy to know that the SASEC member countries have come forward to identify opportunities and synergies, which would help us better harness our immense potential in all fields. 
"Today, we welcome Myanmar, the newest member of the SASEC. With Myanmar joining this initiative, SASEC will facilitate a credible link between South Asia and South East Asia," he said.
Mr. Jaitley said that, following the Leaders' Retreat hosted by India in Goa in October 2016, BIMSTEC was pursuing a vigorous Agenda for Action to enhance connectivity, trade and commerce and people-to-people contacts in the region and promote socio-economic development which are their shared objectives. 
"We are also part of a number of other regional initiatives such as Indian Ocean Rim- Association of Regional Cooperation (IOR-ARC), BCIM, SAARC, Mekong-Ganga Initiative that have significance in South Asia. Our neighbours are also part of one or more such regional groupings," he said.
He said the SASEC vision, complemented by the Operational Plan, would help the member countries overcome the problems and challenges associated with unemployment, macroeconomic and structural vulnerabilities, access and integration, and limited investment and growth.
Mr. Jaitley said India was following a policy of ‘Act East’ to improve connectivity and relations with countries of South East Asia and East Asia. 
"Our policy will definitely receive a fillip with Myanmar’s participation in SASEC. Improved access to gateway ports particularly in Bangladesh and Myanmar may help unleash the latent potential of agro and forest based industries in India’s North East region," he said.
The Finance Minister said India’s “Sagar mala” initiative along the coastal States also aimed to promote port-led direct and indirect development and provide infrastructure to and from ports quickly, efficiently and cost-effectively. 
"The 'Bharat mala' programme of India aims at developing robust and credible road links in the border areas to provide last-mile connectivity to major border points and trade routes connecting our neighbours," he said.
Mr. Jaitley said power trade in the sub-region also presented a significant opportunity with gains and savings for the member countries, and may collectively help them move towards their energy security goals. "We have developed a power transmission link with Bangladesh through which we are supplying 500 MW of electricity to Bangladesh. We are also engaged with Bangladesh to develop transmission link to the eastern part of the country," he said.
He said power trade between India and Bhutan had a long history. "With Nepal, we are building new cross-border power transmission lines to help in the distribution of electricity from power projects being developed in Nepal. I am confident we will be able to fully harness the hydropower potentials of the region and act as a bridge connecting power surplus and power deficient regions," he said.
"We need to stand together in times of crisis. India has always played a pro-active role to support the neighbours. In the face of the recent earthquake in Nepal or tsunami in Sri Lanka or cyclone in Bangladesh in last decade, it has always a matter of great happiness for us to lend a helping hand to rebuild and rehabilitate affected people. Last year, during the visit of Hon’ble Prime Minister of Nepal to India, both countries signed a credit line agreement of USD 750 million for post-earthquake reconstruction.
"We have undertaken a number of initiatives bilaterally. India-Bangladesh standard operating procedure on coastal shipping, Bilateral Protocol on Inland Water Transit and Trade (PIWTT), India-Nepal MoU for project management consultancy services for upgradation/ improvement of road infrastructure in Terai of Nepal, India-Sri Lanka agreements on developing Trincomalee as a petroleum hub, on building and improving railway network in the island country are some of the recent examples of bilateral cooperation.
"The SASEC Vision has set the stage for an increased cooperation among us going forward. I am sure the combined strength of the Group would lead to a greater synergy and help us transform the economic landscape of the region. I wish the initiative a great success," he added.

RBI modifies rules yet again on deposit of banned notes

Two days after specifying that deposits exceeding Rs. 5000 in demonetised Rs. 500 and Rs. 1000 bank notes can only be made once before December 30, 2016, the Reserve Bank of India on Wednesday modified the rules once again, saying that the restrictions would not apply to those with KYC-compliant accounts.
RBI logo
Two days after specifying that deposits exceeding Rs. 5000 in demonetised Rs. 500 and Rs. 1000 bank notes can only be made once before December 30, 2016, the Reserve Bank of India (RBI) today modified the rules once again, rsaying that the restrictions would not apply to those with KYC-compliant accounts.
In a notification sent to all banks on December 19, the RBI had said that, on a review of the provisions dealing with credit of the value of specified bank notes (SBNs) into bank accounts, it had been decided to place certain restrictions on deposits of SBNs into bank accounts while encouraging the deposits of the same under the Taxation and Investment Regime for the Pradhan Mantri Garib Kalyan Yojana, 2016.
"Tenders of SBNs in excess of Rs. 5000 into a bank account will be received for credit only once during the remaining period till December 30, 2016. The credit in such cases shall be afforded only after questioning tenderer, on record, in the presence of at least two officials of the bank, as to why this could not be deposited earlier and receiving a satisfactory explanation. The explanation should be kept on record to facilitate an audit trail at a later stage. An appropriate flag also should be raised in CBS to that effect so that no more tenders are allowed.
"Tenders of SBNs up to Rs. 5000 in value received across the counter will allowed to be credited to bank accounts in the normal course until December 30, 2016. Even when tenders smaller than Rs. 5000 are made in an account and such tenders taken together on cumulative basis exceed Rs. 5000 they may be subject to the procedure to be followed in case of tenders above Rs. 5000, with no more tenders being allowed thereafter until December 30, 2016," the earlier notification had said.
In the latest notification sent today to all banks, these provisions would not apply to fully KYC compliant accounts.
"Please refer to our circular DCM (Plg) No. 1859/10.27.00/2016-17 dated December 19, 2016. On a review of the above, we advise that the provisions of the above circular at sub para (i) and (ii) will not apply to fully KYC compliant accounts," the notification said.
The Ministry of Finance had, explaining the December 19 decision, said on that date that more than five weeks had elapsed since the November 8 announcement on demonetisation. 
"It is expected that, by now, most of the people would have deposited such old notes in their possession," it had said.
"Further, an opportunity has been given to the public to make the payments towards tax, penalty, cess/surcharge and deposit under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) 2016 with the old bank notes of Rs.500 and Rs.1000 denomination upto 30th December, 2016," it had said.
The decision had attracted a lot of criticism from Opposition parties as well as people at large in view of the fact that Prime Minister Narendra Modi and Finance Minister Arun Jaitley had said that there was no reason for people to rush to the banks to deposit their old notes because they had time till December 30 to do so.
The demonetisation has led to a huge shortage of cash in hand for people across the country and has severely affected businesses. There continue to be long queues outside banks and ATM kiosks all over the country, which have been running out of cash every day.

Swamy writes to Modi seeking removal of Raghuram Rajan as RBI Governor

Senior BJP leader and nominted Rajya Sabha member Subramanian Swamy wrote to Prime Minister Narendra Modi on Tuesday seeking the immediate removal of Reserve Bank of India Governor Raghuram Rajan from his position for various reasons, including that he was "mentally not fully Indian".
Raghuram G. Rajan
Raghuram G. Rajan
Senior Bharatiya Janata Party (BJP) leader and nominted Rajya Sabha member Subramanian Swamy wrote to Prime Minister Narendra Modi on Tuesday seeking the immediate removal of Reserve Bank of India (RBI) Governor Raghuram Rajan from his position for various reasons, including that he was "mentally not fully Indian".
"I write this letter to strongly recommend that you consider terminating the appointment of the Governor, Reserve Bank of India, Dr. Raghuram Rajan, effective immediately or in any case when his term ends in September, 2016," Dr. Swamy said in his letter, dated May 16.
"The reason why I recommend this is that I am shocked by the wilful and apparently deliberate attempt by Dr. Rajan to wreck the Indian economy. For example, the concept of containing inflation by rising interest rates is disastrous. When the Wholesale Price Index (WPI) started to decline due to induced recession in the small and medium industry, he shifted the target from WPI to the Consumer Price Index (CPI) which has not however declined because of retail prices. On the contrary it has risen. Had Dr. Raghuram Rajan stuck to WPI, interest rates would have been much lower today, and given huge relief to small and medium industries. Instead they are squeezed futher and consequent increasing unemployment," he wrote.
Dr. Swamy said that, as a result, the estimated non-performing assets (NPA) in public sector banks had doubled to Rs. 3.5 lakh crore.
"These actions of Dr. Rajan lead me to believe that he is acting more as a disrupter of the Indian economy than the person who wants the Indian economy to improve. Moreover, he is in this country on a Green Card provided by the US Government and therefore mentally not fully Indian. Otherwise, why would he renew his Green Card as RBI Governor by making the mandatory annual visit to the US to keep the Green Card current?" he asked.
Subramanian Swamy
Subramanian Swamy
Dr. Swamy said the BJP had come to power under Mr. Modi's "inspiring leadership" in which thousands and thousands of educated persons contributed.
"I cannot see why someone appointed by the UPA Government who is apparently working against Indian economic interests should be kept in this post when we have so many nationalist minded experts available in this country for the RBI Governorship.
"I therefore urge you to terminate the appointment of Dr. Raghuram Rajan in the national interest," he added.
Dr. Rajan, 53, a well-known economist, was appointed on August 22, 2013 as the Governor of RBI for a three-year term. He assumed office on September 4, 2013, succeeding Dr. D. Subbarao on his retirement.
He had earlier served as Chief Economic Adviser in the Ministry of Finance and as Honorary Economic Adviser to the Prime Minister with the rank and status of Secretary to the Government of India.
Dr Rajan had earlier served as the Eric J. Gleacher Distinguished Service Professor of Finance at the University of Chicago’s Booth School of Business. Before that, between 2003 and 2007, Dr. Rajan was the Economic Counselor and Director of Research at the International Monetary Fund (IMF). 
Later, he chaired the Indian government’s Committee on Financial Sector Reforms, which submitted its report in September 2008.
His papers have been published in all the top economics and finance journals, and he has served on the editorial boards of the American Economic Review and the Journal of Finance. 
Dr Rajan had earlier served as a senior advisor to BDT Capital, Booz and Co, and on the international advisory board of Bank Itau-Unibanco. 
In January 2003, the American Finance Association awarded Dr. Rajan the inaugural Fischer Black Prize, given every two years to the financial economist under age 40 who has made the most significant contribution to the theory and practice of finance.

Modi urges global business community to invest in India's maritime sector

Prime Minister Narendra Modi said on Thursday that it was his Government's endeavour to revive and restore India's position of eminence in the maritime sector in the world and called upon the global business community to partner with it to give shape to its process of port-led development.
Prime Minister Narendra Modi addressing at the Maritime India Summit, in Mumbai on April 14, 2016.
Prime Minister Narendra Modi addressing at the Maritime India Summit, in Mumbai on April 14, 2016.
Prime Minister Narendra Modi today said it was his Government's endeavour to revive and restore India's position of eminence in the maritime sector in the world and called upon the global business community to partner with it to give shape to its process of port-led development. 
"Building upon our glorious maritime tradition, we are working hard to achieve new heights in this area," he said in his inaugural address at the Maritime India Summit, 2016 here.
Mr. Modi said that, since his Government took over, among other things, it had laid emphasis on building futuristic infrastructure. This included building next generation infrastructure in many sectors with ports, shipping and maritime infrastructure being prominent among them, he said.
"In the very early days of our Government, we announced the Sagarmala programme. This is aimed at leveraging our long coastline and natural maritime advantages. It also focuses on promoting port-led development, energizing the coastal economy and infrastructure development in these areas. We particularly want to modernize our ports and integrate them with Special Economic Zones, Port based Smart Cities, Industrial Parks, Warehouses, Logistics Parks and Transport Corridors," he said.
Mr. Modi told the gathering that India's vast coastline of 7500 kilometres offered a huge investment opportunity.
"Apart from the length of the coastline, India's maritime potential also lies in its strategic location on all major shipping highways. In addition, we have an expansive and productive hinterland, through which flows a network of mighty rivers. Our maritime agenda will complement this ambitious infrastructure plan for the hinterland which is going on in parallel," he said.
"I am sure, the long coastline of India along with diverse coastal regions and hard working coastal communities can become an engine of growth of India," he said.
Mr. Modi listed the various initiatives taken by the Government to enable the growth of the port and related sectors, including steps to make India a global manufacturing hub and improve the ease of doing business.
"We have greatly liberalized the licensing regimes. This also includes the defence sector and ship building therein. We have taken almost sixty per cent of the defence items out of the licensing process. Most of the FDI sectors are now put on automatic approval route," he said.
Mr. Modi said shipyards were being given infrastructure status, at par with the ports. Rebate of service tax on coastal shipping has been increased to seventy per cent and customs duty and central excise exemption has been granted on inputs used in shipbuilding, he said.
He said a scheme of financial assistance to promote ship building had been approved; customs and central excise duties had been exempted on bunker fuel for Indian flagged container ships; and tax issues of sea farers had been resolved.
He said a new company by the name of Indian Port Rail Corporation had been established to focus on the last mile connectivity to ports. The Government had enacted a legislation for declaring 111 waterways as National Waterways. It had also taken up skill development activities aggressively.
"The results of our initial efforts are clearly visible: FDI inflows have gone up by 44 per cent since this government took over. In fact, the year 2015-16 has seen the highest ever FDI inflow into India. India’s highest ever quantity of cargo handled by major ports was in 2015. The port efficiency parameters have shown very good improvement. India’s fastest average turnaround time in ports was in 2015," he said.
Mr. Modi said that, in the last two years, India's major ports had  added 165 million tonne capacity with record additions each year. He said 94 million tonne capacity was added by these ports in 2015-16 alone which is the highest ever. The traffic in major ports had shown a healthy growth of more than four per cent in the last two years, despite global slowdown, he said.
He said the performance of the major ports in the last two years had been remarkable. Operating profit margins, which were declining, have increased, he said.
"In 2015-16 alone, the operating profit of the twelve major ports has increased by nearly 6.7 billion rupees. During 2015-16, Kandla Port in Gujarat breached the one hundred million traffic landmark and displayed twenty per cent improvement in efficiency.        Jawaharlal Nehru Port Trust registered a net profit of ten billion rupees helped by a twelve per cent increase in efficiency. 
"Our flagship companies like the Shipping Corporation, Dredging Corporation and the Cochin Shipyard have registered higher profits as compared to the previous year. However, this is just the beginning. We want to do more. We are enhancing our own capacities of execution and implementation. The National Perspective Plan of the Sagarmala Programme has been released today.  
"During the last two years, major ports have awarded 56 new projects involving an investment of more than 250 billion rupees. This will create an additional port capacity of 317 million tonnes per annum.  Our vision is to increase port capacity from 1400 million tonnes to 3000 million tonnes by 2025. We want to mobilize an investment of one lakh crore, or one trillion rupees, in the port sector to enable this growth. Five new ports are planned to meet the increasing demand of the Exim trade which will rise in proportion with the fast-growing Indian economy. New ports are also being developed by several coastal States of India," he said.
Mr. Modi said the multiple measures to promote coastal shipping, coupled with the anticipated rise in domestic production of coal, were expected to enhance coastal transportation of coal by at least four fold by 2025. 
"We are engaging with our immediate and regional neighbours to promote shipping and maritime security. Recently India has signed a Coastal Shipping Agreement with Bangladesh which will be mutually beneficial. India is also engaged in the development of Chahbahar Port in Iran. A special purpose vehicle by the name India Ports Global Limited has been established to take up Maritime Projects overseas," he said.
He noed that the Ministry of Shipping was showcasing about 250 projects with investment opportunity in the Maritime Sector. These projects include various infrastructure development opportunities in 12 major ports, projects in eight maritime states and other agencies. Of these, over 100 projects have been identified under the Sagarmala Programme. 
"With more than 14,000 kilometers of navigable inland waterways in the country, there is tremendous potential for development in this sector. My Government is committed to integration in infrastructure. We are also committed to creating an enabling environment for investors and to facilitate investments with an open mind," he said.
The Prime Minister said all this was being done to benefit the common man and provide employment to the youth. This was particularly being done to empower coastal communities, he said.
"Approximately eighteen percent of India’s population lives in 72 coastal districts. It comprises twelve percent of India’s landmass. Therefore, there is a need for holistic and sustainable development of coastal regions and communities. Development of coastal communities especially fishermen requires an integrated approach. As part of the Sagarmala programme, we will adopt a comprehensive approach with focus on capacity building and training, upgrading of technology and for improving physical and social infrastructure. This will be done in collaboration with the coastal states," he said.
Mr. Modi said these initiatives would create employment opportunities of approximately ten million jobs over the next ten years. This includes four million direct and six million indirect jobs. 
"To broaden livelihood opportunities further, we are planning to deploy modern and sophisticated fishing vessels. This would enable them to harness resources in India’s Exclusive Economic Zone. In addition, we are also focusing on value addition in fisheries, aquaculture and cold chain development.
"The Port Sector in India is a good mix of Private and Public Ports, with both contributing to the growth of the sector. The PPP model of development has been quite successful in this sector and has helped in bringing latest technology and best practices. Private Ports have been growing at a very healthy pace and have nearly doubled their capacity in the last 5 years. They handle around 45 per cent of the total cargo. Most of these ports are new, with modern facilities and can match the best international ports in terms of performance and infrastructure," he said.
"India has had a glorious maritime history. We are on the path of shaping an even better maritime future. The maritime sector not only creates and facilitates economic activities; it also connects countries and civilizations. Moreover, it is the cleanest and cheapest carrier of global trade. Investing in maritime sector is not only investing in one’s own future; but in the future of the planet and that of coming generations. However, in this sector, no country can achieve the desired results in isolation. Nations have to collaborate to realize this potential and to overcome challenges in this sector. The objective of this Summit is to provide a platform and forum for such cooperation.
"To conclude, I would like to say that: This is the right time to come to India. It is even better to come through the sea route. The Indian ship is well equipped for a long haul. Don’t miss it. Missing it means missing a pleasant journey and a great destination.
"Once you are here, I assure you that I will personally hold your hands to see that your berthing is safe, secure and satisfactory,"he added.

India is haven of macro-economic stability, beacon of hope: Modi

Prime Minister Narendra Modi said on Saturday that India was a haven of macro-economic stability and a beacon of hope, dynamism and opportunity and asserted that it could contribute to Asian prosperity and development by being economically strong.
Asia a ray of hope for global economic recovery: Modi
Prime Minister Narendra Modi today said that India was a haven of macro-economic stability and a beacon of hope, dynamism and opportunity and asserted that it could contribute to Asian prosperity and development by being economically strong.
"We all want Asia to succeed," he said in his inaugural address at the conference on "Advancing Asia: Investing for the Future" organised here by the Ministry of Finance and the International Monetary Fund (IMF) here.
He noted that IMF Managing Director Christine Lagarde had referred to India as the "bright spot" in the global economy and said he viewed this as a great privilege and, at the same time, a major responsibility.
Outlining India's achievements in the last few months and its priorities for the period ahead, Mr. Modi said the country had recorded major gains in macro-economic stability. "A durable reduction in inflation, steady fiscal consolidation, a comfortable balance of payments position and build-up of foreign exchange reserves are the highlights," he said.
The Prime Minister said that, in a difficult external environment and despite a second successive year of weak rainfall, India had increased its growth rate to 7.6 per cent, the highest among major economies in the world. 
"We have improved our economic governance. Corruption and interference in the decisions of banks and regulators are now behind us," he said.
He said the Government had undertaken a highly successful financial inclusion programme, bringing over two hundred million unbanked people into the banking system within a span of a few months. Thanks to this, it now had the world’s largest and most successful programme of direct benefit transfers, in cooking gas. The Government planned to extend it to other sectors such as food, kerosene, and fertilizers. This has improved targeting and the quality of public expenditure, he said.
Mr. Modi said the Government had opened up nearly all sectors of the economy to foreign direct investment (FDI). He said India achieved the highest ever rank in the World Bank Doing Business indicators and reached an all-time high in many physical indicators in 2015, including the production of coal, electricity, urea, fertilizer and motor vehicles. He said these indicators also included cargo handled at major ports and the fastest turnaround time in ports; and award of new highway kilometers; software export.
He said entrepreneurship is booming, following a series of steps we have taken. India is now fourth in the world in the number of technical start-ups, after USA, Britain and Israel. The Economist magazine has called India the new frontier for E-Commerce, he said.
Mr. Modi said the Government did not intend to rest on these  achievements because his agenda of “reform-to-transform” still needsed to be finished. 
"Our recent budget provides a roadmap for our future plans and ambitions. Our underlying philosophy is clear: To create the climate for wealth generation and for that wealth to be spread to all Indians, especially the poor, vulnerable, farmers, and disadvantaged communities," he said.
He said the Government had increased investment in the rural and agriculture sector, because that was where a majority of India still lived. 
"But our help to the farmers is not based on giving hand-outs. We aim to double farmer incomes by increasing irrigation, better water management, creating rural assets, boosting productivity, improving marketing, reducing margins of middlemen, and avoiding income shocks. 
"We are introducing reforms in agricultural marketing and have launched a major crop insurance programme," he said.
Mr. Modi said that, in addition to agriculture, the Government had increased public investment in roads and railways, which would improve the productivity of the economy and the connectivity of  people. Public investment is also essential at a time when private investment remains weak, he said.
He said the Government had also made other reforms that would help create wealth and economic opportunity. "Given the enormous entrepreneurial potential in the country, my motto is Start Up India and Stand Up India. The budget has provided a further boost to the ecosystem for start-ups,' he said.
He said ensuring employability of the youth was essential for the success of the Government's Make-in-India campaign. 
"The Government of India has an ambitious agenda for skilling our labour force. Skill creation of the magnitude that we have envisaged, involves institution building, which we have undertaken. Now, we have a skill development programme that cuts across twenty-nine sectors and with a nation-wide coverage," he said.
Mr. Modi also provided details of India's plans to reduce the emission intensity of its GDP by 33 percent between now and 2030.
"India has moved from a regime of significant carbon subsidy to one of carbon taxes. India is one of the few countries to have a carbon tax in the form of a cess on coal. The coal cess has been doubled in the Budget of 2016-17," he said.
Mr. Modi expressed happiness that the long pending quota revisions agreed in 2010 have finally come into effect in the IMF. 
"The quotas of emerging countries will now better reflect their weight in the world economy. This will give them more say in collective decisions in the IMF," he said.
"I am sure, the IMF will be able to build on this success. Reform of global institutions has to be an on-going process. It must reflect changes in the global economy, and the rising share of emerging economies. Even now, IMF quotas do not reflect the global economic realities. Change in quotas is not an issue of increasing the ‘power’ of certain countries. It is an issue of fairness and legitimacy. The belief that quotas can be changed, is essential for the fairness of the system. For poor nations to respect the legitimacy of such institutions, they must be able to aspire and to hope. I am, therefore, very happy that the IMF has decided to finalize the next round of quota changes by October 2017," he said.
Mr. Modi stressed that India had always had great faith in multilateralism and that it believe that, as the world became more complex, the role of multilateral institutions would increase.
He recalled that India was represented at the Bretton Woods Conference in 1944, which gave birth to the IMF. India’s delegate was Mr. R.K. Shanmukham Chetty, who later became independent India’s first Finance Minister. 
"Our ties, therefore, are more than seventy years old. We are a Founding Member of the Asian Infrastructure Investment Bank and the New Development Bank. We are confident that these banks will play an important role in the development of Asia. The Fund has built up an immense stock of economic expertise. All its members should take advantage of this. All of us need to pursue policies that provide a stable macro economy, enhance growth and further inclusion. The Fund can be of great assistance in this," he said.
He said that, apart from advice, the IMF could help in building capacity for policy making.
"I am happy to announce a new partnership with Bangladesh, Bhutan, Maldives, Nepal, Sri Lanka, India and the IMF. We have agreed to set up the South Asia Regional Training and Technical Assistance Centre. The centre will provide training to government and public sector employees. It will enhance their skills and improve the quality of their policy inputs. It will also provide technical assistance to governments and public institutions," he said.
On the theme of the conference, Mr. Modi touched on two issues:  firstly, “Why Asia?” And secondly, “How India”? 
"Why is Asia so important, and how can India contribute?" he asked.
Mr. Modi pointed out that three out of every five people in the world lived in Asia and its share in global output and trade was now close to one-third. Its share in global foreign direct investment is about forty percent. It has also been one of the world’s most dynamic regions. 
"Although Asia has slowed down, it is still growing at a rate three times greater than that of the advanced countries. It is, therefore, the ray of hope for global economic recovery," he said.
He said many Asian countries had relied more on developmental financial institutions and banks than on capital markets. This provides an alternative model for the financial sector, he said.
"Social stability built on strong family values is another feature of Asia’s development. Asians tend to leave things behind for the next generation," he pointed out.
Mr. Modi spoke of India's special place in Asia and underlined that it had dispelled the myth that democracy and rapid economic growth could not go together. 
"India has also shown that a large, diverse country can be managed in a way that can promote economic growth and maintain social stability. One way in which we are doing this is through cooperative and competitive federalism. The states and the Centre come together to pursue common objectives. States which pursue good policies and deliver essential services for the poor, induce others to follow. 
"Our rapid economic growth is also very distinct in Asia. We have never tried to gain in trade at the expense of our partners. We do not follow 'beggar thy neighbour' macro-economic policies. We have never undervalued our exchange rate. We add to world and Asian demand by running current account deficits. We are therefore good Asian and good global economic citizens, and a source of demand to our trading partners," he said.
Mr. Modi listed the various cooperative initiatives taken by India in Asia and dwelt at length on its "Act East Policy".
"Our approach to cooperation is based on flexible geometry. We have integrated in different ways and at different speeds with our neighbours in South Asia, our partners in ASEAN, and our partners in Singapore, Japan, and Korea. We intend to continue doing so. 
"My dream is of a Transformed India. I lay this dream alongside our common dream of an Advanced Asia – an Asia where more than half of the global population can live with happiness and fulfillment. Our joint heritage and mutual respect, our common goals and similar policies, can and must create sustainable growth and shared prosperity," he added.

RBI cuts repo rate by 25 bps to 7.25%, keeps CRR unchanged at 4%

The Reserve Bank of India on Tuesday reduced its policy repo rate by 25 basis points from 7.5 per cent to 7.25 per cent with immediate effect and kept the cash reserve ratio of scheduled banks unchanged at 4.0 per cent, saying there was a case for a cut in the rate.
RBI cuts repo rate by 25 bps to 7.25%
The Reserve Bank of India (RBI) today reduced its policy repo rate by 25 basis points (bps) from 7.5 per cent to 7.25 per cent with immediate effect and kept the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent, saying there was a case for a cut in the key rate.
"With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today," RBI Governor Raghuram G. Rajan said in his Second Bi-Monthly Monetary Policy Statement 2015-16 here.
He also said that banks should pass through the sequence of rate cuts into lending rates.
Dr Rajan said the central bank would continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term repos of up to 0.75 per cent of NDTL of the banking system through auctions.
It would also continue with overnight/term variable rate repos and reverse repos to smooth liquidity, he said.
Consequently, the reverse repo rate under the LAF stood adjusted to 6.25 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.25 per cent.
Dr Rajan noted that banks had started passing through some of the past rate cuts into their lending rates, headline inflation had evolved along the projected path, the impact of unseasonal rains had been moderate so far, administered price increases remained muted, and the timing of normalisation of US monetary policy seemed to have been pushed back. 
"With low domestic capacity utilization, still mixed indicators of recovery, and subdued investment and credit growth, there is a case for a cut in the policy rate today," he said.
"Yet, of the risks to inflation identified in April, three still cloud the picture. First, some forecasters, notably the IMD, predict a below-normal southwest monsoon. Astute food management is needed to mitigate possible inflationary effects. 
"Second, crude prices have been firming amidst considerable volatility, and geo-political risks are ever present. Third, volatility in the external environment could impact inflation. 
"Therefore, a conservative strategy would be to wait, especially for more certainty on both the monsoon outturn as well as the effects of government responses if it turns out to be weak. With still weak investment and the need to reduce supply constraints over the medium term to stay on the proposed disinflationary path (to 4 per cent in early 2018), however, a more appropriate stance is to front-load a rate cut today and then wait for data that clarify uncertainty," he said.
"Assuming reasonable food management, inflation is expected to be pulled down by base effects till August but to start rising thereafter to about 6.0 per cent by January 2016 – slightly higher than the projections in April. Putting more weight on the IMD’s monsoon projections than the more optimistic projections of private forecasters as well as accounting for the possible inflationary effects of the increases in the service tax rate to 14 per cent, the risks to the central trajectory are tilted to the upside," he said.
"Reflecting the balance of risks and the downward revision to GVA estimates for 2014-15, the projection for output growth for 2015-16 has been marked down from 7.8 per cent in April to 7.6 per cent with a downward bias to reflect the uncertainties surrounding these various risks," he noted.
Dr Rajan said strong food policy and management would be important to help keep inflation and inflationary expectations contained over the near term. 
"Furthermore, monetary easing can only create the enabling conditions for a fuller government policy thrust that hinges around a step up in public investment in several areas that can also crowd in private investment. This will be important to relieve supply constraints and aid disinflation over the medium term. A targeted infusion of bank capital into scheduled public sector commercial banks, especially those that implement concerted strategies to clean up stressed assets, is also warranted so that adequate credit flows to the productive sectors as investment picks up," he said.
The statement said that, since the first bi-monthly monetary policy statement of 2015-16 issued in April 2015, incoming data suggested that the global recovery was still slow and getting increasingly differentiated across regions. 
It said global financial markets had also been volatile, with risk-on risk-off shifts induced by changing perceptions of monetary policies in the advanced economies. Global currency markets continue to be dominated by the strength of the US dollar, with the G3 currencies reflecting the asynchronicity of their monetary policy stances. 
The statement noted that, as anticipated, the Central Statistics Office had revised downwards its estimate of India’s gross value added (GVA) at basic prices for 2014-15 by 30 bps from the advance estimates. 
"Domestic economic activity remains moderate in Q1 of 2015-16. Agricultural activity was adversely affected by unseasonal rains and hailstorms in north India during March 2015, impinging on an estimated 94 lakh hectares of area sown under the rabi crop. Reflecting this, the third advance estimates of the Ministry of Agriculture indicate a contraction in foodgrains production by more than 5 per cent in relation to the preceding year’s level," it said.
The statement said successive estimates have been pointing to a worsening of the situation, with the damage to crops like pulses and oilseeds – where buffer foodstocks are not available in the central pool – posing an upside risk to food inflation. 
It said that, for the kharif season, the outlook is clouded by the first estimates of the India Meteorological Department (IMD), predicting that the southwest monsoon will be 7 per cent below the long period average. This has been exacerbated by the confirmation of the onset of El Nino by the Australian Bureau of Meteorology, it said.
"What is clear is that contingency plans for food management, including storage of adequate quantity of seeds and fertilisers for timely supply, crop insurance schemes, credit facilities, timely release of food stocks and the repair of disruptions in food supply chains, including through imports and de-hoarding, need to be in place to manage the impact of low production on inflation. Inflation control will also be helped by limiting the increase in agricultural support prices," it said.
The statement said industrial production had been recovering, albeit unevenly. The sustained weakness of consumption spending, especially in rural areas as indicated in the slowdown in sales of two-wheelers and tractors, continued to operate as a drag. Corporate sales have contracted. 
"The disappointing earnings performance could have been worse if not for the decline in input costs. Capacity utilisation has been falling in several industries, indicative of the slack in the economy. While an upturn in capital goods production seems underway, clear evidence of a revival in investment demand will need to build on the tentative indications of unclogging of stalled investment projects, stabilising of private new investment intentions and improving sales of commercial vehicles," it said.
The statement said that, in April, output from core industries constituting 38 per cent of the index of industrial production declined across the board, barring coal production. 
"The sustained revival of coal output augurs well for electricity generation and mining and quarrying, going forward. There is some optimism on gas pricing and availability. The resolution of power purchase processes has to be expedited and power distribution companies’ financial stress has to be addressed on a priority basis. Some public sector banks will need more capital to clean up their balance sheets and support lending as investment revives," it said.
The RBI said leading indicators of services sector activity were emitting mixed signals. 
"A pick-up in service tax collections, sales of trucks, railway freight, domestic air passenger and air freight traffic could augur well for transport and communication and trade. On the other hand, the slowdown in tourist arrivals, railway traffic and international air passenger and freight traffic could affect hotels, restaurants and some constituents of transportation services adversely. The services PMI declined in April 2015, mainly on account of slowdown in new business orders. Community and personal services are likely to be held back by the ongoing fiscal consolidation," it said.
In April, retail inflation measured by the consumer price index (CPI) decelerated for the second month in a row, supported by favourable base effects [of about (-) 0.8 per cent] that moderated the rise in the price index for the fourth successive month. 
"Food inflation softened to a contra-seasonal four-month low, with the impact of unseasonal rains yet to show up. Vegetables inflation continued to ease, along with that of other sub-groups such as cereals, oil, sugar and spices. On the other hand, protein items, especially milk and pulses, continued to impart upward inflationary pressures," it said.
It also said fuel inflation rose for the fourth successive month to a twelve-month high, driven by prices of electricity and firewood. 
"Inflation in these components was accentuated by base effects – the recent price uptick coming on top of muted increases a year ago. Inflation excluding food and fuel rose marginally. House rent, education, medical and transport expenses were among the major drivers of inflation in this category. Rural wage growth, although still moderate, picked up. Inflation expectations remain in high single digits, although they may adapt further to current low inflation. Yet, both input and output price pressures remain muted as reflected in the Reserve Bank’s industrial outlook survey," it said.
The statement said merchandise export growth had weakened steadily since July 2014 and entered into contraction from January 2015 through April, with a recent shrinking of even volumes exported. 
"The deterioration in export performance affected economies across Asia as global demand fell and the fall in commodity prices impacted terms of trade for commodity exporters. From December 2014 onwards, merchandise import growth also turned negative, led by a sharp decline in the volume of oil imports as inventory build-up by refineries subsided. 
"Gold imports spiked in the month of March and remained elevated in April owing to festival demand and regulatory relaxations. Notably, the volume of imports has been recording increases, despite the value decline. Given these developments, the reduction in the current account deficit resulting from the sharp decline in oil prices has begun to reverse, though the size of the deficit is expected to be contained to about 1.5 per cent of GDP this year. 
"Net exports are, therefore, unlikely to contribute as much to growth going forward as they did in the past financial year. Consequently growth will depend more on a strengthening of domestic final demand. While portfolio and direct foreign investment flows were buoyant during 2014-15, with net foreign direct investment to India at US$ 36.6 billion and net portfolio inflows at US$ 41 billion, the year 2015-16 has begun with net portfolio outflows in the wake of a reduction in global portfolio allocations to India. Foreign exchange reserves are around US$ 350 billion, providing a strong second line of defence to good macroeconomic policies if external markets turn significantly volatile," the statement added.

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Modi urges RBI to set targets for financial inclusion for banks, FIs

Prime Minister Narendra Modi on Thursday urged the Reserve Bank of India to take the lead in encouraging financial institutions to set concrete targets for financial inclusion over the next 20 years, to help transform the quality of life of the poor.
Prime Minister Narendra Modi addressing the Financial Inclusion Conference organised by the Reserve Bank of India, in Mumbai on April 2, 2015.
Prime Minister Narendra Modi addressing the Financial Inclusion Conference organised by the Reserve Bank of India, in Mumbai on April 2, 2015.
Prime Minister Narendra Modi today urged the Reserve Bank of India (RBI) to take the lead in encouraging financial institutions to set concrete targets for financial inclusion over the next 20 years, to help transform the quality of life of the poor. 
"I come as a representative of the poor, underprivileged, marginalized and tribals; I am one among them; I seek on their behalf and trust you will not disappoint me," he said at the RBI Conference on Financial Inclusion here, which also marked the completion of 80 years of the central bank.
Mr Modi encouraged RBI to set goals on intermediate targets: of 2019, when the country will celebrate the 150th birth anniversary of Mahatma Gandhi; 2022, 75 years of independence; 2025, 90 years of RBI, and 2035, 100 years of RBI. 
He said the success of the Pradhan Mantri Jan Dhan Yojana (PMJDY) and the Direct Benefit Transfer of LPG subsidy (DBTL), had shown the potential of the enormous role that the banking sector can play in ensuring financial inclusion. 
Calling for making financial inclusion a "habit", Mr Modi asked banks to take inspiration from the success of women self-help groups. He asked banks to keep in mind the requirement of youth who needed either knowledge or skills. He also gave the example of the soon-to-be-launched Micro Units Development Refinance Agency (MUDRA) Bank in this regard and urged banks to come up with creative financial inclusion instruments to help prevent farmer suicides. 
The Prime Minister said that, along with economic and social parameters, there was need to think of a geographical parameter as well for financial inclusion. He said eastern India had immense economic potential, and the banking sector should recognize and plan for this. 
Appreciating the role played by RBI over the last 80 years, the Prime Minister complimented the RBI Governor Raghuram Rajan for his grasp and clarity on economic issues. 
As part of the Make in India initiative, the Prime Minister urged RBI to take the lead in ensuring that India starts to manufacture the paper and ink that are used to print currency notes. 
Apart from Dr Rajan, Maharashtra Governor C. Vidyasagar Rao, Chief Minister Devendra Fadnavis and Union Finance Minister Arun Jaitley were amongst those present on the occasion.

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RBI cuts repo rate by 25 bps to 7.5%, keeps CRR unchanged at 4%

Acting for the second time within two months outside the policy review cycle, the Reserve Bank of India on Wednesday, in a surprise move, reduced the key policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points from 7.75 per cent to 7.5 per cent with immediate effect.
Acting for the second time within two months outside the policy review cycle, the Reserve Bank of India (RBI) today, in a surprise move, reduced the key policy repo rate under the liquidity adjustment facility (LAF) by 25 basis points (bps) from 7.75 per cent to 7.5 per cent with immediate effect.
RBI Governor Raghuram Rajan said in a statement on monetary policy that the central bank had also decided to keep the cash reserve ratio (CRR) of scheduled banks unchanged at 4.0 per cent of net demand and time liabilities (NDTL).
He said the RBI would continue to provide liquidity under overnight repos at 0.25 per cent of bank-wise NDTL at the LAF repo rate and liquidity under 7-day and 14-day term repos of up to 0.75 per cent of NDTL of the banking system through auctions.
He said it would continue with daily variable rate repos and reverse repos to smooth liquidity.
Consequently, the reverse repo rate under the LAF stood adjusted to 6.5 per cent, and the marginal standing facility (MSF) rate and the Bank Rate to 8.5 per cent with immediate effect, he said.
The RBI had, on January 15 this year, reduced the repo rate by 25 basis points to 7.75 per cent, stating then that the momentum of inflation had significantly reduced.
However, in its Sixth Bi-Monthly Monetary Policy Statement 2014-15 on February 3, the RBI decided to keep the repo rate unchanged at 7.75 per cent, saying there had been no substantial new developments on the disinflationary process or on the fiscal outlook since January 15.
Today's decision has come just four days after Finance Minister Arun Jaitley presented his General Budget for 2015-16 to Parliament on February 28.
On February 20, the Central Government and the Reserve Bank of India (RBI) had signed a landmark agreement on Monetary Policy Framework under which the RBI will aim to bring inflation below 6 per cent by January 2016.
The target for financial year 2016-17 and all subsequent years shall be 4 per cent, with a band of +/- 2 per cent.
The agreement, made public on March 2, is a shift towards inflation targeting that Dr Rajan had been advocating for some time.
Dr Rajan said in his statement today that the need to act outside the policy review cycle was prompted by two factors.
"First, while the next bi-monthly policy statement will be issued on April 7, 2015 the still weak state of certain sectors of the economy as well as the global trend towards easing suggests that any policy action should be anticipatory once sufficient data support the policy stance. Second, with the release of the agreement on the monetary policy framework, it is appropriate for the Reserve Bank to offer guidance on how it will implement the mandate," he said.
He said that, going forward, the RBI would seek to bring the inflation rate to the mid-point of the band of 4 +/- 2 per cent provided for in the agreement with the Governmnt, that is, to 4 per cent by the end of a two-year period starting fiscal year 2016-17.
He said the guidance on policy action given in the fifth-bi-monthly monetary policy statement of December 2014 was largely unchanged. 
"Further monetary actions will be conditioned by incoming data, especially on the easing of supply constraints, improved availability of key inputs such as power, land, minerals and infrastructure, continuing progress on high-quality fiscal consolidation, the pass through of past rate cuts into lending rates, the monsoon outturn and developments in the international environment," he said.
Dr Rajan recalled that, in its statement on monetary policy of January 15, 2015, the RBI had reduced the policy repo rate by 25 basis points and indicated that “Key to further easing are data that confirm continuing disinflationary pressures. Also critical would be sustained high quality fiscal consolidation…”.
"While maintaining the interest rate stance in its sixth bi-monthly monetary policy statement of February 3 in the absence of new developments on inflation or on the fiscal outlook till then, the Reserve Bank indicated that it will keenly monitor the revision in the consumer price index (CPI) with regard to the path of inflation in 2015-16 as well as the Union Budget for 2015-16," he said.
The statement said the new CPI, rebased to 2012, was released on February 12. Inflation in January 2015 at 5.1 per cent as measured by the new index was well within the target of 8 per cent for January 2015. 
"Prices of vegetables declined and, hearteningly, inflation excluding food and fuel moderated in a broad-based manner to a new low. Thus, disinflation is evolving along the path set out by the Reserve Bank in January 2014 and, in fact, at a faster pace than earlier envisaged," it said.
"The uncertainties surrounding any inflation projection are, however, not insignificant. Oil prices have firmed up in recent weeks, and significant further strengthening, perhaps as a result of unanticipated geo-political events, will alter the inflation outlook. Other international commodity prices are expected to remain benign, given still-sluggish global demand conditions. Food prices will be affected by the seasonal upturn that typically occurs ahead of the south-west monsoon and, therefore, steps the government takes on food management will be critical in determining the inflation outlook. Finally, the possible spill over of volatility from international financial markets through exchange rate and asset prices channels is also still a significant risk," it said.
The RBI said that, perhaps, the most significant influences on near-term inflation would be the strength of aggregate demand relative to available capacity. Two recent developments pertaining to the demand-supply balance are the recently-released GDP estimates and the Union Budget for 2015-16.
"The Central Statistical Organisation is to be commended on the changes it has made to the methodology of estimating GDP, bringing India up to international best practice. Yet the picture it presents of a robust economy, with growth having picked up significantly over the last three years, is at odds with still-low direct measures of growth of production, credit, imports and capacity utilisation as well as with anecdotal evidence on the state of the economic cycle. Nevertheless, the picture of a steadily recovering economy appears right," Dr Rajan said.
"The fiscal impulses in the Union Budget then assume importance. There are many important and valuable structural reforms embedded in this Budget, which will help improve supply over the medium term. In the short run, however, the postponement of fiscal consolidation to the 3 per cent target by one year will add to aggregate demand. At a time of accelerating economic recovery, this is, prima facie, a source for concern from the standpoint of aggregate demand management, especially with large borrowings intended for public sector enterprises," he said.
"Some factors mitigate the concern. The government has emphasized its desire to clean up legacy issues which gave a misleading picture of the true extent of fiscal rectitude, and has also moderated the optimism in its projections. To this extent, the true quantum of fiscal consolidation may be higher than in the headline numbers. Also, the government is transferring a significantly larger amount to the states, without entirely devolving responsibility for funding central programmes. To the extent that state budget deficits narrow, the general fiscal deficit will be lower. 
"Furthermore, supported by lower international energy prices, there is a welcome intent to shift from spending on subsidies to spending on infrastructure, and to better target and further reduce subsidies through direct transfers. Finally, the central government has signed a memorandum with the Reserve Bank setting out clear inflation objectives for the latter. This makes explicit what was implicit before – that the government and the Reserve Bank have common objectives and that fiscal and monetary policy will work in a complementary way. In sum, then, the government intends to compensate for the delay in fiscal consolidation with a commitment to an improvement in the quality of adjustment," he said.
Dr Rajan noted that all these mitigating factors had a fair component of intent. The realised net fiscal impulse will depend on both central and state government actions going forward, he said.
"Finally, the rupee has remained strong relative to peer countries. While an excessively strong rupee is undesirable, it too creates disinflationary impulses. It bears repeating here that the Reserve Bank does not target a level for the exchange rate, nor does it have an overall target for foreign exchange reserves. It does intervene on occasion, in both directions, to reduce avoidable volatility in the exchange rate. Any reserve build-up is a residual consequence of such actions rather than a direct objective," he said.
The RBI said that softer readings on inflation are expected to come in through the first half of 2015-16 before firming up to below 6 per cent in the second half. 
"The fiscal consolidation programme, while delayed, may compensate in quality, especially if state governments are cooperative. Given low capacity utilisation and still-weak indicators of production and credit off-take, it is appropriate for the Reserve Bank to be pre-emptive in its policy action to utilise available space for monetary accommodation," it added.

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Govt., RBI sign agreement on Monetary Policy Framework in shift to inflation targeting

The Central Government and the Reserve Bank of India have signed a landmark agreement on Monetary Policy Framework under which the RBI will aim to bring inflation below 6 per cent by January 2016.
The Central Government and the Reserve Bank of India (RBI) have signed a landmark agreement on Monetary Policy Framework under which the RBI will aim to bring inflation below 6 per cent by January 2016.
The target for financial year 2016-17 and all subsequent years shall be 4 per cent, with a band of +/- 2 per cent.
The agreeent, signed on February 20 and made public yesterday, is a shift towards inflation targeting that RBI Governor Raghuram Rajan has been advocating for some time.
Signed by Dr Rajan and Finance Secretary Rajiv Mehrishi, the agreement stressed it was essential to have a monetary police framework to meet the challenge of an increasingly complex economy.
"The objective of monetary policy is to primarily maintain price stability, while keeping in mind the objective of growth," it said.
The agreement said the monetary policy framework shall be operated by the RBI. The Governor, and in his absence the Deputy Governor in charge of monetary policy, shall determine the Policy Rate, as well as any other monetary measures, to achieve the target.
The Reserve Bank shall publish the operating target(s) and establish an Operating Procedure of Monetary Policy through which the Operating Target will be achieved. Any change in the operating target(s) and the operating procedure  in response to evolving macro-financial conditions shall also be published.
Once every six months, the Reserve Bank shall publish a document explaining the souces of inflation and forecasts of inflation for the period between six to 18 months from the date of the  publication of the document.
According to the agreement, the RBI shall be seen to have failed to meet the target if inflation is more than 6 per cent for three consecutive quarters for the financial 2015-16 and all subsequent years or less than 2 per cent for three consecutive quarters in 2016-17 and all subsequent years.
If the Reserve Bank fails to meet the target it shall set out in a report to the Central Government the reasons for its failure to achieve the target, the remedial actions proposed to be taken by it, and an estimate of the time period within which the target would be achieved pursuant to timely implementation of proposed remedial actions.

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Personal tax rates unchanged, wealth tax abolished, corporate tax to come down to 25%

Finance Minister Arun Jaitley kept personal income tax rates unchanged while offering individual tax payers several concessions, proposed to reduce corporate tax from 30% to 25% over the next four years and abolished wealth tax in his General Budget for 2015-16 presented to the Lok Sabha on Saturday.
Union Minister for Finance Arun Jaitley arriving at Parliament House to present the General Budget 2015-16, in New Delhi on February 28, 2015.
Union Minister for Finance Arun Jaitley arriving at Parliament House to present the General Budget 2015-16, in New Delhi on February 28, 2015.
Finance Minister Arun Jaitley kept personal income tax rates unchanged while offering individual tax payers several concessions, proposed to reduce corporate tax from 30% to 25% over the next four years beginning next year and abolished wealth tax in his General Budget for 2015-16 presented to the Lok Sabha today.
Mr Jaitley also proposed several measures aimed at fostering "cooperative federalism", empowering the States and meeting five major challenges faced by the economy: agricultural income under stress, weak private sector investment in infrastructure, decline in manufacturing, resource crunch in view of higher devolution in taxes to states and maintaining fiscal discipline.
He declared that the fight against the scourge of black money would continue and announced that a new law would be put in place to tackle the evil. 
He also said taxation was an instrument of social and economic engineering and listed steps aimed at fostering a stable taxation policy and non-adversarial tax administration.
Mr Jaitley said the Goods and Services Tax (GST) introduced in the last session of Parliament would play a transformative role in the way the economy functioned and felt this transformative piece of legislation in indirect taxation needed to be matched with transformative measures in direct taxation.  
In this regard, he proposed the reduction in corporate tax from 30% to 25% over the next four years and said this would lead to higher level of investment, higher growth and more jobs. 
He said the broad principles adopted in finalizing the tax proposals included measures to curb black money; job creation through revival of growth and investment and promotion of domestic manufacturing and ‘Make in India’; minimum government and maximum governance to improve the ease of doing business; benefits to middle class taxpayers; improving the quality of life and public health through Swachch Bharat initiatives; and stand alone proposals to maximize benefits to the economy.
He said the proposed new law on black money would specifically deal with illegal wealth stashed abroad and that the Bill in this regard would be introduced in the current session of Parliament.
The key features of the Bill will include punishment of rigorous imprisonment upto ten years for concealment of income and assets and evasion of tax in relation to foreign assets.  This offence will be made non-compoundable and offenders will not be permitted to approach the Settlement Commission.  Penalty for such concealment of income and assets at the rate of 300 per cent of tax shall be levied.  Non-filing of return or filing of return with inadequate disclosure of foreign assets will be punishable with rigorous imprisonment up to seven years, he said.
Mr Jaitley said that, to curb domestic black money, a new and more comprehensive Benami Transactions (Prohibition) Bill would be introduced in the current session of Parliament.  He said this law would enable confiscation of benami property and provide for prosecution, thus, blocking a major avenue for generation and holding of black money in the form of benami property, especially in real estate.  
Quoting of PAN will be made mandatory for any purchase or sale exceeding the value of Rs.1 lakh.  To improve enforcement, the Central Board of Direct Taxes (CBDT) and the Central Board of Excise and Customs (CBEC) would leverage technology and have access to information in each other’s data-base, he said.
He said job creation would be encouraged through revival of growth and investment and promotion of domestic manufacturing and "Make in India".
The tax "pass through" is proposed to be allowed to both Category-1 and Category-2 alternative investment fund so that tax is levied on the investors in these funds and not on the funds per se. 
To rationalize the capital gain regime for the sponsors  exiting at the time of listing of the units of Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs) subject to payment of Securities Transaction Tax (STT) is proposed, he said. 
He said the Permanent Establishment (PE) norm will be modified to encourage fund managers to relocate to India. 
He said the General Anti Avoidance Rule (GAAR) would be deferred by two years. It will apply to investments made on or after 01-04-2017, when implemented.  
Corporate tax to be cut to 25% in four years:Budget
In order to facilitate young entrepreneurs, the rate of income tax on royalty and fees for technical services will be reduced from 25 per cent to 10 per cent. To generate greater employment opportunities the benefit of deduction for employment of new regular workman to all business entities will be extended. The eligibility threshold of minimum 100 regular workmen will be reduced to 50.
Recognizing the importance of indirect taxes in the context of promotion of domestic manufacturing and Make in India, the Finance Minister said basic custom duty on certain inputs, raw materials, intermediates and components in 22 items was proposed to be reduced to minimize the impact of duty evasion. All goods, except populated printed circuit boards for use in manufacture of ITA bound items are proposed to be exempted from SAD.  Subject to actual user condition, SAD will be reduced on import of certain other imports and raw materials. 
Mr Jaitley the wealth tax would be replaced with an additional surcharge of 2 per cent on the "super rich" with taxable income of more than Rs 1 crore. This is expected to yield Rs 9000 crore against the Rs 1008 crore generated currently by wealth tax.
To eliminate the scope for discretionary exercise of power and provide a hassle-free structure to the tax payers, he proposed to increase the threshold limit for domestic transfer pricing from Rs.5 crore to Rs. 20 crore.
In order to rationalize the minimum advance tax (MAT) provisions for foreign institutional investors (FIIs), profits corresponding to their income from capital gains on transactions in securities which are liable to tax at a lower rate, shall not be subject to MAT, he said.
The education cess and the secondary and higher education cess is proposed to be subsumed in central excise duty.  The general rate of central excise duty of 12.36 per cent, including the cesses will be rounded off to 12.5 per cent.  
The ad-valorem rates of excise duty lower than 12 per cent and those higher than 12 per cent with a few exceptions are not proposed to be increased. Excise duty on footwears with leather uppers and having retail price of more than Rs.1,000 per pair is proposed to be reduced to 6 per cent.  
Mr Jaitley said online central excise and service tax registration will be done in two working days.  As a measure of business facilitation, the time limit for CENVAT credit on inputs and input services will be increased from 6 months to one year.  Service tax plus education cess is proposed to be increased from 12.36 per cent to 14 per cent to facilitate transaction to GST. 
He proposed 100 percent deduction for contributions made, other than by way of corporate social responsibility (CSR) contributions, to the Swachh Bharat Kosh. Similar tax treatment has been proposed for the Clean Ganga Fund.
He proposed an increase in clean energy cess from Rs.100 to Rs.200 per metric tonne of coal, etc. to finance clean environment initiatives.   
He said excise duty on sacks and bags of polymers of ethylene other than for industrial use is proposed to be increased from 12 per cent to 15 per cent.  He also mentioned an enabling provision to levy Swachh Bharat Cess at the rate of 2 per cent or less on all or certain services, if the need arises. 
Mr Jaitley said that services by common effluent treatment plant will be exempt from service tax.  He also proposed the extension of concessions on customs and excise duty available to electrically operated vehicles and hybrid vehicles upto 31-03-2016.
He proposed no change in the rate of personal income tax and rate of tax for companies in respect of income earned in the finance year 2015-16, assessable in Assessment Year 2016-17. 
Mr Jaitley proposed to levy a surcharge @ 12 per cent on individuals, HUFs, AOPs, BOIs, artificial juridical persons, firms, cooperative societies and local authorities having income exceeding Rs.1 crore.  
Surcharge in the case of domestic companies having income exceeding Rs.1 crore and up to Rs.10 Crore is proposed to be levied @ 7 per cent and surcharge @ 12 per cent is proposed to be levied on domestic companies having income exceeding Rs.10 crore.
He  proposed that in the case of foreign companies the surcharge will continue to be levied @ 2 per cent if the income exceeds Rs.1 crore and is up to Rs. 10 Crore, and @ 5 per cent if the income exceeds Rs.10 crore.
He also proposed to levy a surcharge @ 12 per cent as against current rate of 10 per cent on additional income tax payable by companies on distribution of dividends and buyback of shares, or by mutual funds and securitization trusts on distribution of income.
The education cess on income tax @ 2 per cent for fulfilment of the commitment of the Government to provide and finance universalized quality based education and 1 per cent of additional surcharge called ‘Secondary and Higher Education Cess’ on tax and surcharge is proposed to be continued for the financial year 2015-16 for all taxpayers, he said.
Describing the extension of benefits to middle class tax payers as the priority of the government, Mr Jaitley proposed the following concessions for them:
A.     Increase in the limit of deduction in respect of health insurance premium from Rs.15,000 to Rs.25,000.
(1)   For senior citizens the limit will stand increased to Rs.30,000 from the existing Rs.20,000.
(2)   For very senior citizens of the age of 80 years or more, who are not covered by health insurance, deduction of Rs.30,000 towards expenditure incurred on the treatment will allowed.
B.     The deduction limit of Rs.60,000 towards expenditure on account of specified diseases of serious nature is proposed to be enhanced to Rs.80,000 in case of very senior citizens.
C.     Additional deduction of Rs.25,000 will be allowed for differently abled persons under Section 80DD and Section 80U of the Income Tax Act.
D.     The limit on deduction on account of contribution to a pension fund and the New Pension Scheme is proposed to be increased from Rs.1 lakh to Rs.1.5 lakh.
E.      To provide social safety net and the facility of pension to individuals and additional deduction of Rs. 50,000 is proposed to be provided for contribution to the New Pension Scheme under Section 80 CCD.  This will enable India to become a pensioned society instead of a pensionless society.
F.      Investments in Sukanya Samriddhi Scheme are already eligible for deduction under Section 80C.  All payments to the beneficiaries including interest payment on deposit will also be fully exempt.
G.     Transport allowance exemption is being increased from Rs. 800 to Rs. 1,600 per month.
H.     For the benefit of senior citizens, service tax exemption will be provided on Varishta Bima Yojana.
Mr Jaitley said these concessions had been given to individual taxpayers despite inadequae fiscal space.
"After taking into account the tax concession given to middle class tax payers in my last Budget and this Budget, today an individual tax payer will get tax benefit of Rs 4,44,200. As and when my fiscal capacity improves, individual taxpayers will have a lot to look forward to," he said.
Other taxation proposals include conversion of existing excise duty on petrol and diesel to the extent of Rs 4 per litre into Road Cess to fund investment in roads and other infrastructure.  An additional sum of Rs 40,000 crore will be made available through this measure for these sectors. 
In service tax, exemption is being extended to certain pre- cold storage services in relation to fruits and vegetables so as to incentivise value addition in this crucial sector.  The Negative List under service tax is being slightly pruned and certain other exemptions are being withdrawn to widen the tax base. 
Yoga wil be included within the ambit of charitable purpose under Section 2(15) of the Income-tax Act.  
Further, to mitigate the problem being faced by many genuine charitable institutions, the Budget proposed to modify the ceiling on receipts from activities in the nature of trade, commerce or business to 20% of the total receipts from the existing ceiling of Rs25 lakh.  A national database of non profit organisations is also being developed, he said.
Mr Jaitley said most of the provisions of the proposed Direct Taxes Code (DTC) had already been included in the Income-tax Act.  Among the very few aspects of DTC which were left out, some issues had been addressed in today's Budget.
"Further, the jurisprudence under the Income-tax Act is well evolved. Considering all these aspects, there is no great merit in going ahead with the Direct Tax Code as it exists today," he said.
Mr Jaitley said his direct tax proposals would result in revenue loss of Rs 8,315 crore, whereas the proposals in indirect taxes are expected to yield Rs 23,383 crore.  Thus, the net impact of all tax proposals would be a revenue gain of Rs15,068 crore, he said.
Mr Jaitley began his Budget Speech by saying that the economy had turned aorund dramatically in the last nine months, since the Narendra Modi took over on May 26, 2014, with the real gross domestic product (GDP) growth expected to accelerate to 7.4 per cent, making India the fastest growing large economy in the world.
He said macro-economic stability had been restored and conditions had been created for sustainable poverty elimination, job creation and durable double digit economic growth.
He listed the Jan Dhan Yojana, which brought over 12.5 crore families into the financial mainstream in just 100 days, transparent coal block auctions to augment resources of the States and ‘Swachh Bharat’, the cleanliness mission, as the key achievements of the government.
He said India had now embarked on two more game-changing reforms -- the GST and the JAM Trinity - Jan Dhan, Aadhar and Mobile -- to implement direct transfer of benefits. 
He said GST would put in place a state-of-the art indirect tax system by 1st April 2016 while the JAM Trinity would allow transfer benefits in a leakage-proof, targetted and cashless manner.
Mr Jaitley said the declining inflation rate was one of the major achievements of the Government and said this represented a structural shift. He said consumer price index (CPI) inflation was expected to remain at close to 5% by the end of the year, which would allow further easing of monetary policy. 
He said a Monetary Policy Framework Agreement had been concluded with the Reserve Bank of India (RBI) to keep inflation below 6%.
He said that, based on the new series, the estimated GDP growth for 2014-15 is 7.4%, which is expected to go up to between 8 and 8.5 per cent in the next financial year, making double-digit growth seem feasible very soon.
He mentioned the Government's plan for Housing for All by 2022, and said this would require the construction of two crore houses in urban areas and four crore in rural areas. He said the vision included power supply for each house and means of livelihood for at least one member of each family, substantial reduction in poverty, electrification of the remaining 20,000 villages, including off-grid solar power by 2020, connecting each of the 1,78,000 unconnected habitation, providing medical services in each village and city, and ensuring a Senior Secondary School within 5 km of every child.
He said this also involved strengthening rural economy, increasing irrigated area, ensuring communication connectivity to all villages, to make India, the manufacturing hub of the world through Skill India and the Make in India Programmes, encouraging and growing the spirit of entrepreneurship and development of Eastern and North Eastern regions on par with the rest of the country.
Mr Jaitley assured the House that the country would meet the challenging fiscal deficit target of 4.1% of GDP set by the previous government. He said the Government was firm on achieving a fiscal deficit target of 3% within three years.
He stressed the need for a well targeted system of subsidy delivery and reduction in leakages. He said the Government was committed to the rationalization of subsidies. He said the direct transfer of benefits (DBT), started mostly in scholarship schemes, would be further expanded to increase the number of beneficiaries from the present 1 crore to 10.3 crore.
He proposed to fully support the Agriculture Ministry’s organic farming scheme – “Paramparagat Krishi Vikas Yojana”. He also proposed an allocation of Rs 5,300 crore for the Pradhan Mantri Gram Sinchai Yojana, an irrigation scheme.
In order to support the agriculture sector with the help of effective agriculture credit and focus on small and marginal farmers, he proposed to allocate Rs. 25,000 crore to the corpus of the Rural Infrastructure Development fund (RIDF) set up in NABARD, Rs. 15,000 crore for Long Term Rural Credit Fund; Rs. 45,000 crore for Short Term Cooperative Rural Credit Refinance Fund; and Rs. 15,000 crore for Short Term RRB Refinance Fund. 
He said that the Government had set an ambitious target of Rs. 8.5 lakh crore of agricultural credit. Stating the Government’s commitment to supporting employment through the Mahatma Gandhi National Rural Employment Guarantee Scheme (MGNREGA), he proposed an initial allocation of Rs. 34,699 crore for the programme.
Mr Jaitley proposed to create a Micro Units Development Refinance Agency (MUDRA) Bank, with a corpus of Rs. 20,000 crore, and credit guarantee corpus of 3,000 crore, which will refinance Micro-Finance Institutions through a Pradhan Mantri Mudra Yojana,. He added that priority would be given to Scheduled Castes (SC) and Scheduled Tribes (ST) enterprises in lending.
Expressing concern over the large proportion of India’s population that is without any kind of insurance, he said that the soon-to-be- launched Pradhan Mantri Suraksha Bima Yojana would cover accidental death risk of Rs. 2 lakh for a premium of just Rs. 12 per year. 
Similarly, the Government will launch the Atal Pension Yojana, which will provide a defined pension, depending on the contribution, and its period. To encourage people to join this scheme, the Government will contribute 50% of the beneficiaries’ premium limited to Rs. 1,000 each year, for five years, in the new accounts opened before 31st December, 2015. 
He also announced the Pradhan Mantri Jeevan Jyoti Bima Yojana which covers both natural and accidental death risk of Rs. 2 lakhs. The premium will be Rs. 330 per year, or less than one rupee per day, for the age group 18-50, he said.
Referring to the unclaimed deposits of about Rs. 3,000 crore in the Public Provident Fund (PPF) and approximately Rs. 6,000 crore in the Employees Provident Fund (EPF) corpus, the Minister said that the amounts would be appropriated to a corpus, which will be used to subsidize the premia on these social security schemes through creation of a Senior Citizen Welfare fund in the Finance Bill. 
He reiterated the Government’s commitment to the ongoing schemes for the welfare of SCs, STs and women.
Underlining the need to increase public investment in infrastructure, Mr Jaitley proposed increased outlays for roads and the gross budgetary support to the railways, by Rs. 14,031 crore and Rs. 10,050 crore, respectively. 
He said the capital expenditure of the public sector undertakings (PSUs) was expected to be Rs. 3,17,889 crore, an increase of approximately Rs. 80,844 crore over the Revised Estimates (RE) 2014-15. 
He also proposed to establish a National Investment and Infrastructure Fund (NIIF) with an annual flow of Rs. 20,000 crore.  
He said that he also intended to permit tax free infrastructure bonds for the projects in the rail, road and irrigation sector. He said the public private partnership (PPP) mode of infrastructure development had to be revisited and revitalized.
Mr Jaitley proposed to establish the Atal Innovation Mission (AIM) in the NITI Aayog, which will provide an Innovation Promotion Platform involving academiciansand draw upon national and international experiences. A sum of Rs. 150 crore is proposed to be earmarked for the mission.
He said the Government establishing a mechanism, to be known as SETU (Self-Employment and Talent Utilisation), which will support all aspects of start-up businesses, and other self-employment activities, particularly in technology-driven areas. An amount of Rs. 1,000 crore has been initially earmarked in NITI Aayog, the body which has replaced the Planning Commission, for the purpose.
Mr Jaitley said the Government also proposed to set up five new Ultra Mega Power Projects (UMPPs), each of 4000 MW, in the plug-and-play mode.
To promote investment in the country, he proposed to set up a Public Debt Management Agency (PDMA) which will bring both India’s external borrowings and domestic debt under one roof. 
He also proposed to merge the Forwards Markets Commission with the Securities and Exchange Board of India (SEBI) to strengthen regulation of commodity forward markets and reduce wild speculation. He said enabling legislation, amending the Government Securities Act and the RBI Act was proposed in the Finance Bill, 2015.
Regarding the Employees Provident Fund (EPF), the Minister said the employees need to be provided two options, EPF or the New Pension Scheme (NPS). He said, for employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution.
Noting that India is one of the largest consumers of gold in the world, Mr Jaitley proposed to introduce a Gold Monetisation Scheme, which will replace both the present Gold Deposit and Gold Metal Loan Schemes. The new scheme will allow the depositors of gold to earn interest in their metal accounts and the jewelers to obtain loans in their metal account.  Banks/other dealers would also be able to monetize this gold. He also proposed a Sovereign Gold Bond, as an alternative to purchasing metal gold. 
He also announced commencement of work on developing Indian Gold Coin, which will carry the Ashok Chakra on its face.
Highlighting need for increasing investments from all sources, the Finance Minister proposed to allow foreign investments in Alternate Investment Funds. He said that, in order to catalyze investments from the Indian private sector  in South East Asia, a Project Development Company will set up manufacturing hubs  in Cambodia, Myanmar, Laos and Vietnam.
In order to support programmes for women's security, advocacy and awareness, the Minister proposed to provide another Rs. 1,000 crore to the Nirbhaya Fund.
He said resources would be provided to start work on landscape restoration, signage and interpretation centres, parking, access for the differently abled, visitors’ amenities, including security and toilets, illumination and plans for benefiting communities around them at various heritage sites in the country.
Expressing concern over environmental degradation, Mr Jaitley said that the target of renewable energy capacity had been revised to 1,75,000 MW till 2022. He said the Government was also launching a scheme for Faster Adoption and manufacturing of Electric Vehicles (FAME) with an initial outlay of Rs. 75 crore.
He said the Government would soon launch a National Skills Mission which will consolidate skill initiatives spread across several Ministries. He said Rs. 1,500 crore has been set apart for the Deen Dayal Upadhyay Gramin Kaushal Yojana, a skills programme for rural youth.
He proposed to set up a fully IT based Student Financial Aid Authority to administer and monitor scholarships and educational loan schemes, through the Pradhan Mantri Vidya Lakshmi Karyakram.
Mr Jaitley said a new Indian Institute of Technology (IIT) would be set up in Karnataka and the Indian School of Mines, Dhanbad would be upgraded into a full-fledged IIT.
New All India Institutes of Medical Sciences (AIIMS) will be set up in Jammu & Kashmir (J&K), Punjab, Tamil Nadu, Himachal Pradesh and Assam. Another AIIMS-like institution will be set up in Bihar.
A Post-Graduate Institute of Horticulture Research & Education will be set up in Amritsar, Punjab, three new National Institutes of Pharmaceutical Education and Research (NIPERs) will be set up in Maharashtra, Rajasthan and Chattisgarh and one Institute of Science and Education Research will be set up in Nagaland and Odisha each. 
Two Indian Institutes of Management (IIMs) will be set up in J&K and Andhra Pradesh, he said.
Mr Jaitley said the National Optical Fibre Network Programme (NOFNP) of 7.5 lakh kms networking 2.5 lakh villages would be  further speeded up by allowing willing States to undertake its execution.
He said that, inspite of the large increase in the devolution to states, adequate provision was being made for the schemes for the poor with allocation of Rs. 68,968 crore to the education sector including mid-day meals, Rs. 33,152 crore to the health sector and Rs. 79,526 crore for rural development activities including MGNREGA, Rs. 22,407 crore for housing and urban development, Rs. 10,351 crore for women and child development, and Rs. 4,173 crore for Water Resources and Namami Gange. 
The Minister said that adequate funds had been provided for the needs of the armed forces. As against likely expenditure in this year of Rs. 2,22,370 crore, the budget allocation for 2015-16 is Rs. 2,46,727 crore, he said.
He said the Non-Plan expenditure for 2015-16 was estimated at Rs  13,12,220 crore. Plan expenditure is estimated to be Rs. 4,65,277 crore, which is very near to the R.E. of 2014-15. 
The total expenditure has accordingly been estimated at Rs. 17,77,477 crore. Gross tax receipts are estimated to be Rs. 14,49,490 crore. Devolution to the States is estimated to at Rs. 5,23,958 crore. Share of Central Government will be Rs. 9,19,842 crore. 
Non-tax revenues for the next fiscal are estimated to be Rs. 2,21,733 crore. 
He said that, with these estimates, the fiscal deficit would be 3.9 percent of GDP and the revenue deficit would be 2.8 percent of GDP.
Mr Jaitley said the Government was committed to change, growth, jobs and genuine effective upliftment of the poor and the under-privileged. He also reaffirmed its commitment to the Constitutional principles of equality and justice for all without concern for caste, creed or religion.

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Economic Survey predicts 8.1-8.5% growth in 2015-16, says double digit trajectory possible

The Economic Survey 2014-15 presented by Finance Minister Arun Jaitley to the Lok Sabha on Friday, a day ahead of his Budget for the coming fiscal year, said that the economy was poised for a growth of 8.1 to 8.5 percent at market prices in 2015-16.
The Economic Survey 2014-15 presented by Finance Minister Arun Jaitley to the Lok Sabha today, a day ahead of his Budget for the coming fiscal year, said that the economy was poised for a growth of 8.1 to 8.5 percent at market prices in 2015-16.
Asserting that the economy was looking up, with brighter prospects amongst the world's major economies today, the survey said that the clear political mandate for reform and a benign external environment now was expected to propel India onto a double digit trajectory.
It said that the economy appeared to have now gone past the economic slowdown, persistent inflation, elevated fiscal deficit, slackening domestic demand, external account imbalances and oscillating value of the rupee.
The survey took into consideration of the recent change of base year  by the Central Statistics Office of the National Accounts series from 2004-05 to 2011-12 while projecting its growth estimate for 2015-16.
It said the growth rate in GDP at constant (2011-12) market prices in 2012-13 was 5.1 per cent, which increased to 6.9 percent in 2013-14 and it is expected to further increase to 7.4 per cent in 2014-15 (according to advanced estimates). 
The change in methodology by the Central Statistics Office has also introduced the concept of Gross Value Added (GVA) at the aggregate and various sectoral levels, it noted.
According to the survey, the expectation for such a growth rate is also due to a number of reforms that have already been undertaken and more that are being planned for.  
It mentioned some of these reform measures such as deregulation of diesel price, taxing energy products, replacing cooking gas subsidy by direct transfer on national scale, issuance of an ordinance to reform the coal sector via auctions and increasing the foreign direct investment (FDI) caps in defence.
The document also commended the far-reaching changes brought about on the issue of sharing of revenues between the Centre and States as recommended by the 14th Finance Commission.
The report said the decline in inflation by over 6 percentage points since late 2013 and the reduction of the current account deficit (CAD) from a peak of 6.7 per cent of GDP in the third quarter of 2012-13 to about one per cent in the coming fiscal year had made India an attractive investment destination well above most other countries.
The expected high growth rate in the coming year in the favourable economic environment has created a historic moment of opportunity to propel India onto a double-digit growth trajectory to attain the fundamental objective of  “wiping every tear from every eye” of the vulnerable and  poor people of the country, it said.
The survey said this also provided an opportunity to the increasingly young, middle-class and aspirational India to realize its full potential. As the new Government is to present its first full year budget, the Economic Survey said that it appeared that India had reached a "sweet spot" and that there was a scope for "big bang reforms" now.
The report said the growth estimates of over 8 per cent for the coming year was based on expectations that the monsoon would be favourable,  as it was forecast to be normal, compared to last year. 
However the growth rate in Gross Value Added (GVA) at basic prices in agriculture is projected to decline from 3.7 per cent in 2013-14, an exceptionally good previous year from the point of view of rainfall, to 1.1 per cent in 2014-15, the current year with not-so-favourable monsoon.   
The survey drew attention to certain other "stagnating or declining elements" of the economy in the recent past.
It said that the growth in 2014-15 was largely driven by domestic demand. "There is hardly any external support to growth in 2014-15, as the growth in exports is projected to be only 0.9 per cent and the growth rate of imports, around (-) 0.5 per cent. The deceleration in imports owe substantially to the sharp decline in international oil prices in the current year that compressed the oil import bill," it said.
The survey also said that there had been a decline in the rate of gross domestic saving, from 33.9 per cent of the GDP in 2011-12 to 31.8 per cent in 2012-13 and further to 30.6 per cent in 2013-14, caused majorly by the sharp decline in the rate of household physical savings.
It said that the investment rate over the past years, as measured by gross capital formation (GCF) as a percentage of GDP, declined from 38.2 per cent in 2011-12 to 36.6 per cent in 2012-13 and further to 32.3 per cent in 2013-14.
On investments, the document said that, while private investment must remain the primary engine of long-run growth, the public investment, especially in the railways, would have to play an important role, at least in the interim, to revive growth and to deepen physical connectivity.
The report prescribed what it called a golden rule of fiscal policy, saying that governments are expected to borrow over the cycle only to finance investment and not to fund current expenditures. It urged the government to aim at bringing down the centre’s fiscal deficit down to 3 per cent of GDP.
The survey said price subsidies did not appear to have had a transformative effect on the living standards of the poor, though they have helped poor households to weather inflation and price volatility.   
It said that a close look at price subsidies, which are estimated to be about Rs 3,78,000 crore, about 4.24 per cent of GDP, revealed that they may not be the government’s best weapon for fighting poverty.  
Dwelling upon various subsidies to the poor, the survey stated that price subsidies were often regressive. It said an analysis of the current subsidy scheme indicated that rich households benefit more from the subsidy than poor households. 
Among various examples, it said that the subsidy on electricity, for example, could only benefit the relatively rich.
At the same time, it said that eliminating or phasing out subsidies was neither feasible nor desirable.
It said that adoption of the "JAM Number Trinity" -- Jan Dhan Yojana, Aadhaar and Mobile numbers --- would allow the State to deliver the subsidies to the poor in a targeted and less distorted manner.
The document expressed serious concern that several projects had been stalled and that this tendency had increased over the past years. It, however, expressed happiness that such stalling of projects seemed to have plateaued.  It suggested revitalizing public private partnership model of investment.
On the manufacturing vs services debate, the survey said both were equally important for the growth of the economy in the Indian context.
Similarly, “Skilling India” is no less important and deserved an equal attention as the other important goal of “Make in India “, it said
In a chapter on a Common National Market for Agricultural Commodities, the survey, without drawing any conclusions, suggested that there may be a Constitutional provision used to regulate trading in specified agricultural commodities to create a National Common Market.
In an exclusive chapter on the Fourteenth Finance Commission (FFC), the survey quoted both Jawahar Lal Nehru, the first Prime Minister of the country and current Prime Minister Narendra Modi and said that adoption of the recommendations of the FFC and the creation of Niti Aayog earlier would further take forward the Government’s vision of cooperative and competitive federalism.

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Modi writes to CMs, says Govt. has accepted recommendations of 14th Finance Commission

Prime Minister Narendra Modi has written to Chief Ministers of all States, informing them of the Government`s decision to wholeheartedly accept the recommendations of the 14th Finance Commission (FC), although it would put a tremendous strain on the Centre's finances.
Prime Minister Narendra Modi has written to Chief Ministers of all States, informing them of the Government`s decision to wholeheartedly accept the recommendations of the 14th Finance Commission (FC), although it would put a tremendous strain on the Centre's finances.
The 14th FC has recommended a record increase of 10% in the devolution of the divisible pool of resources to states. This compares with the marginal increases made by previous Finance Commissions, he said.
"The total devolution to states in 2015-16 will be significantly higher than in 2014-15. This naturally leaves far less money with the Central Government. However, we have taken the recommendations of the 14th FC in a positive spirit as they strengthen your hand in designing and implementing schemes as per your priorities and needs," he said.
Mr Modi said that, in making its recommendations, the 14th FC had made a fundamental shift in the pattern of financing revenue expenditures. It has assumed all central assistance to State Plan Revenue expenditure to be part of the states’s revenue burden and determined devolution on this basis. 
"Para 7.43 of its report explains this. The dominant view of states too has been that a majority of the resources should flow as tax devolution and the number of CSS should be reduced as the 14th FC states in Paras 8.6 & 8.7," he said.
"Therefore, there is a shift from scheme and grant based support from the Central Government to a devolution based support. Hence, the devolution of 42% of divisible resources," he said.
Mr Modi said that, therefore, as per the 14th FC, all State Plan Revenue expenditure had to be met from the resources being devolved to states. In spite of this large devolution, the Centre had decided to continue with some support to topmost areas of national priority such as poverty elimination, MNREGA, education, health, rural development, agriculture and a few other areas. 
"You will appreciate that, following the acceptance of the 14th FC recommendations, we are moving away from rigid centralised planning, forcing a ‘One size fits all’ approach on states. States have always been voicing their opposition to this philosophy for years. Accepting these long standing concerns and long-felt lacunae in the country’s planning process, our Government has decided to devolve maximum money to states and allow them the required freedom to plan the course of states’ development. The additional 10% of resources being devolved will give you this freedom," he said.
"In this overall context when you are flush with resources, I would like you to have a fresh look at some of the erstwhile schemes and programmes supported by the centre. States are free to continue or change these schemes and programmes as per their discretion and requirement. In all these, the Union Government, particularly the NITI Aayog, will support states in developing a strategy and in its execution through ideas, knowledge and technology," he said.
Mr Modi said this was all towards the fulfilment of his promise of co-operative federalism. 
"As you have already seen, we have decided to involve states in discussing and planning national priorities. This is being done so as to maximise the outcome from every rupee spent either at the centre or the state. It was with this spirit of Team India that all Chief Ministers have been made equal partners in the Governing Council of NITI Aayog. This is our strategy to take the country to a faster and yet inclusive growth trajectory through co-operative federalism which is real and true federalism," he said.
"We are happy with our decision and that resources are going to the right place. Resources are going to states to ensure that poverty is eliminated, jobs are created; houses, drinking water, roads, schools, hospitals and electricity are provided. This has never happened in this country before," he said.
Mr Modi said that, in addition, the Government had recently revised the rates of royalty on minerals which benefits many states. The ongoing transparent auction of coal and other minerals will result in flow of over Rs 1 lakh crore of additional funds to mineral and coal bearing states. 
"Eastern India, which is less developed in spite of having immense mineral resources, is an important gainer and this is an opportunity for this part to catch up with the rest of the country," he said.
"Resources, thus, are not and will not be a problem. The issue is the direction and intent of our policies and our capacity to implement. You will agree that money, either at the central or the state level, should be spent to address the key challenges before the Nation. The focus should be the poor, farmers and common men and women, the youth and children. The challenge is to address the factors which inhibit the realisation of their full potential," he said.
Mr Modi pointed that, ever since his Government came into office, he had been working to strengthen the country's federal polity and promote cooperative federalism. 
"The people of the country have high expectations from their governments and do not want to wait. Therefore, since the very beginning, we have been committed to a rapid and inclusive process of growth. Looking to the diversity of the country, we understand that real and functional Federal Governance is the only vehicle to achieve this objective quickly and holistically," he said.
"I sincerely believe that strong states are the foundation of a strong India. Even as Chief Minister, I had been saying that the progress of the country depends on the progress of states. This Government is, therefore, committed to the idea of empowering states in all possible ways. We also believe that states should be allowed to chalk out their programmes and schemes with greater financial strength and autonomy, while observing financial prudence and discipline. We are clear that without this, local development needs cannot be met and marginalised communities and backward regions cannot be brought into the mainstream. 
"With this in mind, we have replaced the Planning Commission with the NITI Aayog with the explicit intent of ensuring that this becomes a common forum for forging a national vision on development. Such a vision and the concrete steps that all of us take will help in realising the development aspirations of our people," he said.
The Prime Minister said this was a golden opportunity in the nation’s economic development process. He said his recent visits across the world had shown that there was a lot of optimism about India and interest in investing in this country. "Everyone wants to partner with India in its growth story. This is not an opportunity for the central government, but an opportunity for India as a whole," he said.
"Let us aim at a quantum leap in the process of our nation’s development. I am writing this to you in order to seek your co-operation and involvement in defining key challenges facing your state and the country and to devote the time, energy and resources to address these. I expect that every state will come up with a plan for its key priorities and deploy resources for this purpose. We should also adopt a rigorous system of evaluation of schemes and projects. I will work with you in this effort. Together, we have to establish benchmarks in terms of quality of works and their speedy execution. 
"Let us work together in this direction. I will be available for any consultation in this regard at any time," he added.

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Modi says defence public sector companies have to perform better

Prime Minister Narendra Modi said on Wednesday that it would no longer be enough for India to buy defence equipment from abroad and simply assemble them in the country and made it clear that the public sector needed to improve its performance in this sector.
Modi inaugurates Aero India-2015, says India reforming defence policies
Prime Minister Narendra Modi today said it would no longer be enough for India to buy defence equipment from abroad and simply assemble them in the country and made it clear that the public sector needed to improve its performance in this sector.
"We have been doing this in the past, without absorbing any technology or developing our own capabilities. In some areas, we are where we were three decades ago," he said in his inaugural address at the 10th edition of Aero India, the international air show here.
"Frankly, our public sector needs to do much better than they are doing now. We have to exploit their huge assets and a vast potential. At the same time, we have to make them accountable," he said.
Mr Modi said his government was focusing on developing the defence industry with a sense of mission in view of the impact it could have on the creation of jobs directly and in the related sectors and of the possible spin-off benefits on other sectors in terms of advanced materials and technologies.
"This is why it is at the heart of our Make in India programme," he said.
"We are reforming our defence procurement policies and procedures. There would be a clear preference for equipment manufactured in India. Our procurement procedures will ensure simplicity, accountability and speedy decision making," he said.
Mr Modi said the government had raised the permitted level of foreign direct investment (FDI) to 49%. This could go higher, if the project brought state-of-the art technology, he said.
He also said the government had permitted investments upto 24% by foreign institutional investors (FIIs) and there was no longer a need to have a single Indian investor with at least a 51% stake. 
"Industrial licensing requirements have been eliminated for a number of items. Where it is needed, the process has been simplified. We are expanding the role of private sector, even for major platforms. Our goal is to provide a level playing field for all. We speak in terms of national capacity, not public sector or private sector," he said.
More than 250 Indian companies and more than 300 foreign firms are participating in Aero India. Defence ministers, senior officials and hundreds of business leaders from around the world are attending the event.
"This is the largest ever Aero India. This reflects a new level of confidence within our country and global interest in India. To many of you, India is a major business opportunity. 
"We have the reputation as the largest importer of defence equipment in the world. That may be music to the ears of some of you here. But, this is one area where we would not like to be Number One!" Mr Modi said.
"Our security challenges are well known. Our international responsibilities are evident. We do need to increase our defence preparedness. We do have to modernize our defence forces. 
"We have to equip ourselves for the needs of the future, where technology will play a major role. As a nation of one billion people, we also have huge requirements for managing internal security. We are increasingly integrating technology and systems into it.  These opportunities make Aero India an important international event," he said.
Mr Modi said Aero India was not just a trade fair for defence equipment but a mega meeting of one of the largest global supply chains, with the most advanced technology and complex equipment  
He said it was a platform to launch India's defence manufacturing sector, stressing that a nation with a strong defence industry would not only be more secure but also reap rich economic benefits. 
"It can boost investment, expand manufacturing, support enterprise, raise the technology level and increase economic growth in the country," he said.
He said that, in India, the defence industry in the government sector alone employed nearly 200,000 workers and thousands of engineers and scientists. They produce an output of nearly 7 billion dollars annually. It also supports a very large pool of small and medium enterprises. 
He said the country's defence industry in private sector wass still small but it already employs thousands of people.
"This is despite the fact that nearly 60% of our defence equipment continues to be imported. And, we are spending tens of billions of dollars on acquisitions from abroad. There are studies that show that even a 20 to 25% reduction in imports could directly create an additional 100,000 to 120,000 highly skilled jobs in India. 
"If we could raise the percentage of domestic procurement from 40% to 70% in the next five years, we would double the output in our defence industry. Imagine the impact in terms of jobs created directly and in the related manufacturing and services sector! Think of the spin off benefits on other sectors in terms of advanced materials and technologies!" he said.
Mr Modi said the offsets system was a crucial instrument to develop and upgrade our defence industry. 
"We have introduced significant reforms in our offsets policy. I am acutely aware that it still needs a lot of improvements. We will pursue them in consultation with domestic industry and our foreign partners. I want our offsets policy not as a means to export low-end products, but to acquire state-of-the art technology and skills in core areas of priority," he said.
He pointed out that government's support for research and development was essential for defence sector. And, it should also be accompanied by a degree of assurance on purchase. 
"We are introducing a scheme to provide up to 80% of funding from the government for development of a prototype in India. And, we are also launching a Technology Development Fund. 
"For too long, our research and development has been confined to government laboratories. We must involve our scientists, soldiers, academia, industry and independent experts more closely in research and development," he said.
Mr Modi said that, while it had made its export policies clearer, simpler and predictable, the government would also abide by the highest standards of export controls and international responsibility. 
"We will expand our exports, but we will ensure that our equipment and technology do not fall into the wrong hands. India's record in this area has been impeccable and it will remain so," he said.
The Prime Minister said he was pleased with the positive impact of the government's policies and noted that the Indian private corporations had responded with enthusiasm.
"There is new excitement in our small and medium scale sector. Many of the biggest global firms are forming strategic partnerships in India. Some of them have already begun using India as part of their global supply chains or engineering services." he said.
He also expressed happiness that the first set of parts from the joint venture set up in September last year by Dynamatic Technologies and its collaborator Boeing, to manufacture critical parts for a Boeing helicopter that is sold globally, was ready for shipment today.
"But, we still need to do more. We have to further reform our acquisition and approval processes. We must indicate a clear roadmap of our future needs. 
This must take into account not only new technology trends, but also the nature of future challenges," he said.
Mr Modi said there was need to pay attention to developing supply chains, with emphasis on innovation and bridge the gap between prototype development and quality of production. 
"We must develop a financing system suited to the special needs of this industry. It is a market where buyers are mainly governments, the capital investments are large and the risks are high. We must ensure that our tax system does not discriminate against domestic manufacture in comparison to imports," he said.
Mr Modi said that, more broadly, the defence industry would succeed more if the manufacturing sector were transformed in India.
"We need great infrastructure, sound business climate, clear investment policies, ease of doing business, stable and predictable tax regime, and easy access to inputs. We need a national industry that produces advanced materials, the most sophisticated electronics and the best engineering products. Over the last eight months, we have worked hard to create that environment for you. 
"Above all, we need a vast pool of highly skilled and qualified human resources for the defence industry. Our aerospace industry alone would need about 200,000 people in another ten years," he said.
He said the government would set up special universities and skill development centres to cater to the defence industry, just as it had done in atomic energy and space. "I have especially invited the State Governments to come here with package of facilities to attract investments in defence manufacturing," he said.
"We want to develop an industry is dynamic. It should constantly stay at the cutting edge of the global industry. I am confident that India will emerge as a major global centre for defence industry. We have the basic building blocks for it in India; and, a large nation requirement. We will build an industry that will have room for everyone – public sector, private sector and foreign firms. 
From sellers, foreign firms must turn into strategic partners," he said.
"We need their technology, skills, systems integration and manufacturing strength. The nature of industry is such that imports will always be there. In turn, they can use India as part of their global supply chain," he said.
He said defence budgets around the world were becoming tighter and India's frugal but sophisticated manufacturing and engineering services sectors could help reduce costs. 
"India can also be a base for export to third countries, especially because of India's growing defence partnerships in Asia and beyond. 
"A strong Indian defence industry will not only make India more secure. It will also make India more prosperous. 
"Aero India can be a catalyst in realizing our goals. That is why I am here today. So, as we look at these wonderful aircraft and enjoy the amazing fly pasts, I also hope we can get some business done. And, sow the seeds of successful new ventures and partnerships – to give our people new opportunities, to make our nations safer, and the world more stable and peaceful," he added.

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Black money: Govt. initiates concealment penalty proceedings in 128 cases

The Government said on Monday it had initiated concealment penalty proceedings, under section 271 (1) (c) of the Income Tax Act, 1961, in almost all 128 cases in which it had completed assessments as part of its investigations into illegal foreign bank accounts held by Indians.
Need evidence to take action against black money account holders: Jaitley
The Government today said it had initiated concealment penalty proceedings, under section 271 (1) (c) of the Income Tax Act, 1961, in almost all 128 cases in which it had completed assessments as part of its investigations into illegal foreign bank accounts held by Indians.
In a statement here, the Ministry of Finance said that information about accounts in HSBC Bank was received from the French authorities in respect of 628 Indian persons/entities.
Out of these 628 cases, 200 were either non-residents or non-traceable, leaving 428 cases of residents which were found actionable, it said.
For these 428 actionable cases the net amount of peak balance was about Rs.4500 crore, it said.
"The Government of India has taken expeditious action in these cases as per law. Upto 31st December 2014, assessments were completed in 128 cases, involving more than 350 assessments. In the remaining cases, assessment proceedings are at advance stage.  Undisclosed income of about Rs.3150 crore was brought to tax on account of deposits made in unreported foreign bank accounts," the statement said.
According to it, about 60 prosecutions have so far been launched for wilful attempt to evade taxes [S/276C(1)] and failure to furnish accounts and documents etc [S/276D]. Show Cause Notices before launching prosecutions have been issued in a large number of other cases wherein further action is underway, it said.
Referring to media reports which today spoke about foreign bank accounts held by 1195 Indians, of which the top 100 names were published by a newspaper, the statement said some of these names already figured in the earlier list availabe with the government. 
"Necessary investigation as per the provisions of law will be taken up in all the new cases, expeditiously," it said.
"Income Tax Department is already in touch with the whistle blower who apparently brought out the names of persons holding undisclosed bank accounts in HSBC, Switzerland.  He has been requested to share information available with him in regard to undisclosed bank accounts of Indians in HSBC, Switzerland and other destinations.  His response is awaited," it said.
The Government said that, during the last six months, it had taken vigorous and pro-active measures to expedite investigations in the cases of Indians holding undisclosed foreign accounts/assets abroad. 
"Useful contacts have been established with foreign governments who might have some further information in this regard.  Based upon credible information of undisclosed foreign bank accounts, fresh references for obtaining further information in more than 600 cases have been made to foreign jurisdictions, under available treaties/agreements. The same are being pursued," it added.

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Rangarajan panel on PSCs says cost recovery system should be dispensed with

The Committee on the Production Sharing Contract Mechanism in Petroleum Industry has proposed that the cost recovery system be dispensed with in favour of sharing of the overall revenues of the contractor with the Government, without setting off any costs.
File photo of Dr C Rangarajan
File photo of Dr C Rangarajan

The Committee on the Production Sharing Contract (PSC) Mechanism in Petroleum Industry has proposed that the cost recovery system be dispensed with in favour of sharing of the overall revenues of the contractor with the Government, without setting off any costs.

The committee, headed by Dr C Rangarajan, Chairman, Economic Advisory Council to the Prime Minister, had been appointed to look into the PSC mechanism. It submitted its report to Prime Minister Manmohan Singh recently.
The existing PSC allows the contractor to recover his cost, before giving the Government its share in the contractor's revenues, in case there is commercial discovery leading to production.
A certain proportion of the balance revenues of the contractor are shared with the Government, based on the value of an investment multiple for each year. These are biddable parameters. This investment multiple is the ratio of cumulative net cash income to cumulative exploration & development cost. Government's share increases as the multiple increases, which happens when cumulative income increases at a rate higher than the rate of increase for cumulative cost.
The committee noted that, under this system, a close scrutiny of costs becomes critical for the Government since there is incentive for contractors to book as costs expenses that do not reflect the true economic cost to the contractor (for example, through transfer pricing). 
"This is perceived by contractors as interference in commercial decision-making, whereas the Government and CAG view it as legitimate and necessary. Since decisions are taken in a joint committee, called Management Committee, having government and private party representatives, decisions get delayed and execution under the contract is hampered," the report said.
"Since cost recovery is at the root of the problems experienced, it is proposed to dispense with it, in favour of sharing of the overall revenues of the contractor, without setting off any costs. The share will be determined through a competitive bid process for future PSCs. The bids will be made in a bid matrix, in which the bidder will offer different percentage revenue shares for different levels of production and price levels. The bids will have to be progressive with respect to both volume of production and price level," the committee said.
It said that this would ensure that, as the contractor earns more, Government gets progressively higher revenue, and will also safeguard government interest in case of a windfall arising from a price surge or a surprise geological find. 
Further, the underlying cause of the Management Committee and audit related problems will be removed, and the Management Committee will no longer go into issues relating to approval of budget or procurement issues. Investor interests should remain unaffected, since investors will be free to bid the Government share, and they will also have a more hassle-free operational environment, the report said.
The committee has also recommended that an extended tax holiday of 10 years, as against 7 years already available for all blocks, be granted for blocks having a substantial portion involving drilling offshore at a depth of more than 1,500 metres, since cost of a single well can be as high as $ 150 million.
Further, the committee has recommended extending the timeframe for exploration in future PSCs for frontier, deep-water (offshore, at more than 400 m depth) and ultra-deep-water (offshore, at more than 1,500 m depth) blocks from eight years currently, to ten years.
Apart from Dr Rangarajan, the other members of the committee were Mr Jagannadha Rao, former Cabinet Secretary B.K. Chaturvedi, Prof. Ramprasad Sengupta, Mr J. M. Mauskar and Mr Joemon Thomas; Dr. K. P. Krishnan was convener, and Mr Giridhar Aramane was secretary to the committee. 
Apart from resolution of problems currently experienced in contract management through the proposed fiscal regime under new PSCs, the committee has suggested two mechanisms for improving progress of exploration and development under existing PSCs.
For policy related issues, it has suggested the setting up of a Secretary-level inter-ministerial committee to suggest policy solutions. 
For issues involving condonation of delay on the part of the contractor in preparing for and seeking approvals, and for minor technical issues, the mandate of the existing Empowered Committee of Secretaries (ECS) can be expanded. The ECS has earlier been empowered, with CCEA approval, to condone delays in the exploration phase only.
Issues currently being raised in audit would no longer arise under the proposed fiscal regime for new PSCs. Apart from this, after consulting the Comptroller and Auditor General (CAG), it has been recommended that the list of blocks be periodically made available to the CAG for selecting those that it would directly audit. CAG would select blocks on the basis of financial materiality, and would focus on blocks in the exploration and development phase, when costs incurred are higher. 
Other blocks would be ordinarily audited by CAG-empanelled auditors, although CAG would continue to have its statutory freedom to directly audit even these. Further, it has been recommended that CAG perform the audit within two years of the financial year under audit, as prescribed under the PSC. Also, for PSCs beyond a high financial threshold, a concurrent audit mechanism may be considered.
On gas price mechanism, the committee noted that, at present, there is administered price mechanism (APM) gas and non-APM gas.
"The difficulty in gas valuation for determining Government's share is that there is no single gas price. India has long-term supply import contracts as well as spot market imports, and the range of prices has significant spread. However, the re-gasification infrastructure limits imports. The domestic gas too does not have adequate transportation infrastructure to enable creation of a domestic market.
"Internationally, gas hubs and balancing points exist in major regional markets, of which US's Henry Hub and UK's National Balancing Point / NBP (which is connected to continental Europe) are the largest. For the Asia-Pacific, Japan's Custom Cleared rate for crude oil is a benchmark rate, although unlike the US and Europe, it represents an import price rather than a producer price," it said.
The committee said the PSC provides for arm's length pricing and prior Government approval of the formula or basis for gas pricing, subject to policy on natural gas pricing. 
"Since no market-determined arm's length price currently obtains domestically and nor is this likely to happen for several more years, a policy on pricing of natural gas has been proposed. The proposed policy would provide for estimation of an unbiased arm's length price based on an average of two prices, which can be interpreted as alternative estimates of an arm's length price for the Indian producer. The relevant price in this context would be the price producers receive in other gas-producing destinations. 
"One price would be derived from the volume-weighted net-back price to producers at the exporting country well-head for Indian imports for the trailing 12 months. The other would be the volume-weighted price of US's Henry Hub, UK's NBP and Japan Custom Cleared (on net-back basis, since it is an importer) prices for the trailing 12 months. The arm's length price thus computed as the average of the two price estimates would apply equally to all sectors, regardless of their prioritisation for supply under the Gas Utilisation Policy," it said.
The report said the suggested formula will apply to pricing decisions made in future, and can be reviewed after five years when the possibility of pricing based on direct gas-on-gas competition may be assessed.

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PM stresses need to revive investor sentiment, address exchange rate, capital flow issues

Prime Minister Manmohan Singh on Wednesday stressed the need to work towards reviving investor sentiment, both domestic and international, and address issues related to the slide in the exchange rate of the rupee and drying up of capital flows

Prime Minister Manmohan Singh today stressed the need to work towards reviving investor sentiment, both domestic and international, and address issues related to the slide in the exchange rate of the rupee and drying up of capital flows

At a meeting with officials of the Ministry of Finance after taking over the portfolio, Dr Singh said the country was passing through challenging times economically.
"The growth rate has taken a dip; the industrial performance is not satisfactory; things are not rosy on the investment front; inflation continues to be a problem," he said.
"On the external front, I am concerned about the way the exchange rate is going. Investor sentiment is down and capital flows are drying up," he said.
"There are some external reasons and we need to work towards making our country resilient in meeting these external challenges. However, there are many domestic reasons as well. We need to address these quickly. We need to work to get the economy going again and restart the India growth story. 
"In the short run, we need to revive investor sentiment, both domestic and international," he said.
Dr Singh has decided to keep the Finance portfolio with himself after Mr Pranab Mukherjee resigned as Finance Minister yesterday to contest the July 19 election for the office of the President as a candidate of the ruling Congress-led United Progressive Alliance (UPA) and several other parties.
He said there have been many factors that have contributed to the general negative mood in the country.
"There are problems on the tax front which need to be addressed. On the financial sector side, we need to see how we can improve matters. There are issues about the mutual funds industry which need to be resolved. The insurance sector has seen a slowing down which is not normal in a country with large unmet insurance needs. This needs to be looked into. I would like you all to work as a team on all these matters. There are some issues we must address in the short run and some in the long run. I am sure you will be able to work on both fronts," he said.
Dr Singh, who had served as Finance Minister during 1991-96, when he had launched the economic reforms, told the officials that, apart from a brief spell in 2008, he had been away from the details and nitty-gritty of Finance for a long time.
"Therefore, I depend on all of you to give me sound advice on not just matters relating to the Finance Ministry but all aspects of the government and the economy as a whole," he said.
He pointed out that the Finance Ministry is an all-encompassing Ministry whose reach extends to every corner of the government and the nation. 
"The way it functions is critical for the future of millions of our countrymen who look up to the government to throw open channels for their progress, prosperity and welfare. Therefore, the Finance Ministry has a vital role in evolving economic policies which are conducive to economic growth and the overall welfare of the nation," he said.
"The Finance Ministry has had a glorious tradition of doing excellent work. I expect the same from you," he added.
Those present at the meeting included Dr Kaushik Basu, Chief Economic Adviser, Mr Pulok Chatterjee, Principal Secretary to the Prime Minister, Finance Secretary R S Gujral and Secretaries in the Finance Ministry R Gopalan, Sumit Bose, D K Mittal and Mohammed Haleem Khan and other senior officials.
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