[ mrunal]
Overview of Economy related Affairs during 1-7 Feb 2014. Total three parts:

(you’re here) Part 1 of 3: fiscal policy, macroeconomics issue, subsidies, banking sector.
Part 2 of 3: FDI, regulatory bodies and infrastructure.
Part 3 of 3: bilateral, poverty-hunger-HRD, Agriculture-food processing and Persons in News (PIN).

[Act I] Government side: Fiscal Policy, Macroeconomics

Topics: GDP, Fiscal deficit, Interim Budget, Subsidy raj, Spectrum auction and NELP X.

India’s bogus GDP growth rate

GDP growth rate : CSO calculation/estimates	year
4.5% (earlier thought it’d be 5%)	2012-13
4.9%	2013-14

CSO: other observations/analysis for FY13.

GDP will be 1.7 trillion US dollars. important: DONOT confuse GDP (absolute number in rupees or dollars) vs GDP growth Rate (percentage)
Per capita income will be ~75,500 rupees.
>4% growth in Agro and allied sector
Negative growth in Manufacturing, mining sector.
Household savings have decreased. (Because of inflation, people are able to save less money.)
Corporate savings have also decreased (meaning their profitability has decreased)
gross fixed capital formation (GFCF) has also decreased. (Meaning less money going towards investment in business.)
Cost of energy has increased. Because desi coal mining projects stalled by environment ministry and SC orders. As a result, we had to import ~25% of our coal requirements from abroad. + adding insult to injury, heavy floods in Australia last year= their own coal output delinked= coal prices increased.

Solution

@Government: Fast track clearance to infra-projects; decrease the excist duty; relax the strict environment rules over coal mining
@RBI: Reduce the cost of borrowing (=decrease Repo rate); relax the rules for ECB (External commercial borrowing from foreign countries)

Fiscal deficit 4.8% target = Mission impossible #6?

What is fiscal deficit, why is it bad? We just saw in last article of Urjit Patel Committee.

Year	Fiscal deficit as % of GDP
FY2012	4.9%
FY2013	Target 4.8% (this mean nearly 5.4 lakh crore rupees)

Why in news? Because we’ve already reached 95% of the limit in till December 2013.
Who calculated? Controller General of Account. (and not CAG).

Is it good or is it bad?

Imagine you’ve fixed a target “I’ll try to contain my household Expenditure to Rs.1 lakh for the FY13.” but you already spent Rs.95000 so far.
Then, for Jan, Feb, March= you can spend only Rs.5000 [if you want to stay within the target.] This is difficult especially during election year- subsidy bonanzas.

Why fiscal deficit is problem?

Even now, India’s fiscal deficit = highest among BRICS [Brazil, Rus, India, China and S.Africa]
If we cannot keep the 4.8% target, then S&P, Moody etc. will definitely cut down our rating to junk level=less FDI, FII= high CAD =weak rupee= inflation, and more economic problems.

Can we keep with 4.8% target? Is it possible?

Not possible (because of these outgoing money)

Possible (because of this incoming money)

LPG subsidized cylinders increased
LPG distribution policy changed
Fertilize subsidy to be increased
Interest subvention for Women SHG.
NELP X(10) postponed (=money not coming)
In fact food-fuel-fertilizer subsidy alone costs near 3 trillion rupees for FY13 [our target was to keep it less than 2.3 trillion]
Government wanted to sell shares of a PSU called “Engineers India ltd.” but investors did not pay sufficient price for chillar company. (=less income than expected)
Gold import duty =10%; =>smuggling, government lost Revenue worth Rs.1 billion. (=less income than expected)

Income from Spectrum auction (>55k crores)
Dividend from Coal India (~15k crores)
Government decided to postpone the purchase of Rafael jets (~60k crore saved, for now.)

G-Sec auction cancelled

When government wants to borrow money, they release government securities (g-sec), with help of RBI.
Government was planning to borrow 15k crore rupees, through this. But Spectrum-2014 auction and selling the shares of Engineers India ltd. = Government has got sufficient money, for now. Hence decided to postpone the G-sec auction.

CAD & gold

FY12	>88 Billion USD = rupee starts weakening against dollar. To reduce this deficit, Chindu increased gold import duty to 10%. RBI also imposed various restrictions on gold imports.
FY13	(expected) <50 Billion USD. Chindu says I’ll think about reducing gold duty after March 2014.

FY13: 200 tonnes of gold came in through the black market. Government has lost ~$1 billion (6,200 crore) worth taxes because of this smuggling.
Government raised import duty on gold from 8% to 10%. (mind it: import duty, NOT excise duty).
Reserve Bank of India made it mandatory for jewelers to export 20 per cent of their gold jewelry before placing orders for fresh gold imports. (also known as 80:20 rule)

Related topic

FATF: Desi Diamonds = Money laundering

FATF= Financial Action Task Force (HQ : Paris)
inter-governmental body to fight money laundering.
Their latest report says Indian diamond trade is used for money laundering. How? The agents will overvalue the prices of low quality diamonds

Incoming diamonds	Outgoing diamonds
Low quality diamond from Africa=>UAE=>Indian businessman deliberately pays higher price.=>his (or someone else’s) black money goes from India to UAE then its invested in UAE/Swiz. Etc. Money sent to Hong Kong and China also in the same way.	Indian trader will export low quality diamond @high prices=>foreigner sends more money=>black money comes back. => sent to “original” owner, via hawala operators.

Even terrorist financing is done via such overvaluation of bogus diamonds. After all UAE=>Paki=>Dawood & Co.
By the way, if diamonds are super-high quality then trades don’t import it officially (else they’ve to pay high taxes). In case of high quality diamonds, they’re smuggled through Belgium.

Anyways, this is just an overview, you should prepare it in detail for GS Mains Paper 3 topic ” money-laundering and its prevention.”
Back to our original topic of fiscal policy cum firefighting cum subsidy-raj (=Chindunomics)

Interim budget/Vote on Account?

interim budget is presented when Government cannot present full budget (=Annual financial statement under Article 112)
This happens during General Election / extreme situation like War.
Interim budget =called “Vote on account”.
2014: Interim budget will come on 17th Feb.
In Interim budget, Finance minister will only say following:
- List their government’s “Glorious” achievements from last year (FY13)
- Seek parliamentary approval to spend money -for four months (till next government comes in power and presents a full budget.)
- Normally, no significant tax proposals or economic policy decisions are announced in the interim budget.
- Next government will present full budget after election.

Interim budget in past

Year	FM	What did he do?	Budget speech
2004	Yashwant	Gave quite a few schemes and tax-benefits. (Despite the fact that it was a ‘vote’ on account.)	12 page
2009	Pranab	Did not announce any new taxes or schemes. (perhaps because he was confident that UPA will be re-elected).	18 page
2014	Chindu	Most likely he’ll announce some schemes/tax-benefits (with last hopes of winning some vote bank.).	?? Bookies are taking bets on how long it’ll be!

Experts believe, Interim budget 2014, will contain following

Government will allot more money to certain schemes (NREGA, pension etc.)
reduce excise duties on certain consumer goods, automobiles etc.
May announce some disinvestment of shares from PSU (to get more money for allotting to schemes)
Announce some tax benefits. Previously excise duty exemption given to the industry in states such as Himachal Pradesh and J&K. They’ll expire in May 2014. FM will renew them in Interim budget. = more job creation (or at least congress can make claim in election speeches).

Important:

Changes in indirect tax rates don’t require Parliament’s assent (Government only needs to notify and place before Parliament).
Changes in Direct tax = need parliament’s assent.

[Subsidy] LPG: nau se baara (9 to 12)

LPG Cylinder	Price	Who decides?	2012	2013	2014
Subsidized	400+	Oil Ministry.	Every connection holder gets 6 subsidized LPG cylinders per year	9	12
Non-subsidized	1200+	PSU oil companies. 1st of every month. They use formula of Average imported cost and rupee dollar rate during last month.		You’ll have to buy additional cylinders @this market priceprice.

Subsidy payment

initially	2013	After Rahulbaba (2014)
Government would pay the subsidy directly to Public sector Oil marketing companies.	Government would pay subsidy to beneficiary’s bank account via DBT (Direct benefit transfer)	Cancelled DBT plan. Meaning, subsidy will be paid to those PSU oil companies.**

Direct Benefit transfer (LPG)

Started in 2013, in selected districts
Government would transfer 435 rupees in beneficiary’s account, then he’ll have to purchase cylinder @market rate.
>2k crore transferred to 60+ million consumers this way.

Problems / Challenges in DBT for LPG

To enlist in this scheme, you’ve to link three things (your Aadhar number-LPG connection number-Bank account number)
Problem= not everyone has aadhar number, not everyone has bank account number (Census 2011: only 54% rural and 67% urban families have bank accounts]
Supreme court said Aadhar card is not mandatory to claim benefits under government schemes.

**given above reasons, government has postponed the DBT plan in LPG.
But Oil minister Moily is not accepting the #EPICFAIL of DBT, he says “We are quiet proud and happy that this programme has gone on very well. Even if there is a marginal error, we need to correct it.”
Critiques: why 12 subsidized LPG cylinders= bad idea sir-ji?

89% families can survive with 9 cylinders per year. Only very big families need 12 cylinders. So if you give 12 cylinders= you’re covering almost 97% of the families.
Subsidy money doesn’t fall from sky, you arrange money through direct/indirect taxes on the same families.
So in a way, you first collect taxes from those 97% families and then give them subsidized LPG= idiotic. Let the juntaa themselves purchase it @market rate (after all they’re indirectly paying for the subsidy through taxes)
This will increase black marketing activity [diverting household cylinders to restaurants, because most families can survive on 9 cylinders, they'll sell away those three additional cylinders to restaurants, chai-walla.]
You’ve cancelled DBT plan= more black marketing and leakage.
Imprudent consumption [because government giving subsidy, so people don't try to save / use LPG consciously.]

FY13	Rs. (Crores)
Oil subsidy	>1.5 lakh crores
Out of ^that, LPG subsidy	40k [+5k because of 3 extra-cylinders]
DBT could have saved subsidy leakage worth	Rs.60k crore [but now Government cancelled DBT for LPG]

Government also started DBT scheme f or Kerosene subsidy, But it’s in pilot stage in a few district.
[Allocation] CNG reduced by Rs.15 per kg: how and Why?
DONOT confuse this topic with 9 to 12 LPG cylinders.
Background:

Government had ordered gas companies to allot only 80% of domestic gas for “retail” purpose (City gas entities- CNG stations, cooking gas pipeline companies).
Remaining 20% exclusive for industrial purpose.
As a result, many cities had to rely on imported CNG, LNG = prices expensive.

Mumbai	Got all its gas supply from domestic field.
Delhi, Ahmedabad	Not all of their requirements met to desi gas. They had to rely on imported gas “regasified-liquid natural gas (RLNG)” This RLNG cost 4x times more then desi LNG. That’s why CNG, pipeline cooking gas was expensive all these years.

For example, Delhi’s Indraprastha Gas supplies arranges 80% LNP+PNG from desi source and 20% from abroad.

After Kejirwal went to SC

Delhi Government (Kejriwal) goes to SC against this above policy.
UPA doesn’t want negative publicity in election year therefore, Oil ministry has made new rule: from domestic gas fields, 100% allocation to city gas entities.

Result?

	Cheaper by Rs./kg
CNG	15
Piped cooking gas	5

So, is it good/bad?

Observe that desi-gas allocation to ‘retail’ sector has increased from 80%=>100%,
where does the 20% gas come? Government arranged this by cutting the gas supply to petrochemicals, steel and refineries. (meaning those companies will have to buy gas @market prices=> their input cost increases=> in long term this will lead to inflation in many products, declined in IIP and GDP.)

By the way

Gas source	Pricing mechanism
Domestic gas	administered pricing mechanism (APM).
Imported gas	Rangarajan formula

Gas based power plant

Gas based power plants in India, they don’t get sufficient gas supply from KG D6 basin.
As a result, they’re running barely 27-30% of their full capacity.
Reliance, Torrent, GMR Essar – all making losses. Cannot sell electricity @cheap prices.
Power ministry wants state government to provide subsidy to them. (cost ~25k crores)

that leads to next topic

Kejriwal vs electricity companies vs NTPC

Daily three page newspaper column and five hours TV news coverage given on this as if akhkhaa India lives in Delhi only. Anyways, Gist of the matter is:

NTPC= produces electricity, and sells it to distributor companies.
Distributor companies (Discom) sell this electricity to “retail” customers (households and business firms).
Anil Ambani’s (electricity) distributor companies (BSES, BYPL) = they supply electricity to 70% of Delhi.

NTPC	(To Anil) Pay our money, else we stop supplying electricity to you.
Anil	But I don’t have enough money to pay your past bills! (To Delhi CM Kejriwal) Give me some sort of subsidy/bailout package from tax payer’s money, so I can pay to NTPC and get out of this mess. AND Permit me to increase electricity bills of customers, so this mess doesn’t repeat next month.
Kerjiwal	I won’t do that. And if you try stopping electricity supply in Delhi, I’ll ask Delhi Electricity Regulatory Commission (DERC) to cancel your license under Electricity Act 2003 or even take over these distribution companies! (the present joint venture partnership=Anil:Delhi Government=51:49%)
Anil	But I desperately need money to make payments to NTPC!!
Kerjiwal	Then goto bank and take a loan.
Anil	Already tried. Banks are reluctant to give loans to any private electricity companies in Delhi (thanks to your Kejrinomics, those bankers think electricty-business will definitely shut down in a few months!)
Anil	(To Supreme Court) Maai baap, please help me out.
SC order	@Anil, pay Rs.50 crores NTPC asap. @NTPC, donot cut his supply until next hearing.

Some more Kejrinomics:

If inflation increases, rickshaw fares would then be hiked. If inflation declines, auto fares would be reduced by the government.
Previously rickshaw walla had to install GPS+Meters (=Rs.17k). Kejrinomics: only install GPS first.

[Subsidy] Fertilizer Subsidy

Who gives Fertilizer subsidy? Department of Fertilizer. (and not agro ministry or rural development ministry.)
Under what mechanism? New Pricing Scheme (NPS) III

Department has fixed the maximum retail price of urea at Rs.5,360/-
But cost of production is higher than this. So, Department pays the price difference to companies to cover their losses= that is fertilizer subsidy.
For FY13, fertilizer subsidy cost >65k crores.
Now fertilizer ministry + Agro ministry agreed that subsidy should be increased, given the rise in cost of production=> this will increase subsidy burden by ye another 900 crore rupees per year.
Important: we’re not 100% self-dependent on urea. >25% of demand met through imports.

Now let’s check two auctions: Spectrum and NELP-X. Both Need a mile long separate articles. Here I’m only covering the overview

[Auction] Spectrum 2014

Frequency	What?
~100Mhz	FM radio stations.
800Mhz	Not auctioned this time. TRAI and Government yet to sort out its pricing formula.
900 Mhz	Being auctioned in Feb 2014. only for three circle= Delhi, Mumbai and Kolkata. Airtel, Vodafone already own this spectrum but their license expiring soon, government is not renewing it. Companies went to TDSAT and SC, but did not get relief. Hence they’re again bidding for this 900Mhz spectrum.
1800 Mhz	Ideal for voice/telephonic conversation. In USA and S.Korea- even 4G service run in 1800 Mhz. Being auctioned in Feb 2014. For all 22 telecom circles in India.
1900-2100 Mhz	Ideal for 3G internet. Not auctioned this time. But most likely in FY15.
2300 Mhz	Ideal for 4G internet. Not auctioned this time. Mukesh Ambani’s Reliance Jio already owns it from past auction.

In spectrum game, higher the number = more data can transferred per second.
2300Mhz=superfast= ideal for 4G internet.
Mukesh bhai already owns this. But he tries to sell only 4G connection (without voice/phone call function)=> hard to get customers throughout India.
Therefore, Mukesh Ambani interested in buying 1800 Mhz (=good for simple voice/calling services). Then he can first sell phone numbers for such cheap voice calling plans, and try to lure customers to upgrade to 4G connection – especially in metro cities.

Players	what
TRAI	Recommends policy, and dispute resolution.
SMRA	Simultaneous Multiple Rounds Ascending (SMRA). This is the “e-auction” method used by government for auctioning spectrum.
Bidders	8 companies: Bharti Airtel, Vodafone, Idea Cellular, Reliance Jio (Mukesh), Reliance Communications (Anil), Aircel, Tata Teleservices, Telewings (Uninor)
Kapil Sibbal	His Department of Telecommunications (DoT) is doing this auction. [Not electronics Department] DoT falls under Ministry of communication & Information Technology [TRAI/TDSAT doesn’t do the auction- do not confuse jurisdictions. that’s the easiest trap in MCQs]

Reserve price

In auction, it means “we’ll not sell below this price.” (for example: you put “used iphone4″ on ebay.in and declare its reserve price Rs.14k.)
The reserve prices for 2014′s auction are as following

800 Mhz	Not auctioned because Government and TRAI are yet to fix its reserve price.
900 Mhz Delhi	360 Cr. Per Mhz
900 Mhz Mumbai	328 cr. Per Mhz
900 Mhz Kolkata	125 cr. Per Mhz
1800 Mhz (all India)	1765 cr. Per Mhz

Absolute numbers not important, but you can see 1800 Mhz spectrum is kept more expensive than 900 Mhz. why? Obviously because it can transfer more data per second.
If all the spectrum was sold @this reserve prices (meaning no company bids higher price than above), then government would have earned 48000 crores.
But companies bid higher amounts in auction (because every company wants pan-India presence). Result: government will earn more than 55000 crores from this auction.
Good news for UPA, because they can launch a few more schemes named after “you know who”, using this ca$h, before EC’s model code of conduct comes in force.
Bad news for we the customers, because companies will soon raise mobile/2g/3g prices to recover their investment.

Payment for the spectrum?

Auction Winner Company will have to arrange cash by itself.
They can also pay it in installments (with interest rate)
They are allowed to borrow as much as USD 750 million (>4500 crore rupees) from abroad every year to make these “installment” payments.

2010	CAG reveals 2G scam. 1.76 lakh crores.
2012	Supreme court cancels 122 spectrum licenses given to companies.
2014, Feb	Spectrum auction for 900 Mhz and 1800 Mhz

[Auction] NELP X (10) delayed

New Exploration Licensing Policy (NELP) X

As per the Constitution of India, Union government owns all the hydrocarbon resources in India (both offshore and inland)
Hence only union can ‘auction’ the exploration rights to private companies.
This is done by New Exploration Licensing Policy (NELP). Total nine rounds since 1999.
2014: NELP X will be done under the Uniform Licensing Policy regime=> explorers can hunt for all kinds of resources: oil, gas, coal-bed methane or shale. Without have to get separate license for each work.

NELP-10 is delayed because:

upcoming general elections. Planning commission advised the oil ministry to postpone.
Ministries have different opinions about how to earn revenue from this?

Committee	Recommendation on revenue sharing	Good/bad?
Kelkar	The contractor will first recover his investment by selling the oil/gas. Then he will start sharing part of the profit with government.	Difficulty. Because contractor will always try to show high cost, to delay sharing revenue with government.
Rangarajan	Production linked system. Contractor need to start sharing profit with government as per productions immediately. It doesn’t matter when his ‘investment’ is recovered’.	More transparent. And NELP-X will be done in this method.

Related topic:
Mines-mineral development Bill 2011

Will not be introduced in Lok Sabha this time (Budget 2014 session)
Private companies are opposed to it because bill requires them to share profit with the local people/communities. (In case of coal companies- have to share ~26% of the profit)
You can dig more details from prsindia.org

ATF: Aviation turbine fuel

How its pricing determined?
Every month three players meet

Indian Oil Corp,
Hindustan Petroleum Corp Ltd (HPCL)
BPCL

They decide the ATF fuel prices based on avg. international prices (in the previous month.)

In news: because recently they reduced the prices by ~2000 rupees per kiloliter.
ATF fuel makesup >40% of operational cost.
ATF cost will be different in every state. Why? Because of local sales tax and VAT.
Vijay Mallya and others have been demanding reduction/abolition of taxes on this fuel, to reduce their operational costs.

Enough of government side, let’s move to

[Act II] RBI, Banking, Monetary policy related

#1: Fed Tapering

Lengthy Topic, requires a separate article.
Basic idea is following

You’re aware of subprime crisis. American banks gave loans to people with no “aukaat” to repay money=>investment bankers took those loan files and issued “mortgage backed securities”. =>people default on loan=>those securities become paper-junk=> system collapses.
To fix this problem, US feds (American RBI) decided two things
- buy those Mortgage backed securities (=to rescue the troubled banks)
- Follow “cheap” money policy, give loans to banks at very low interest rate (US Feds buy government bonds from those banks @cheap prices….recall how “repo rate” system works- with bonds as a collateral!)
- Result? Money supply increased=> cheaper loans for customers and businessmen=> economy starts bouncing back.
That’s quantitative easing.=> more dollars=>more investment in India and elsewhere.
But now, US Feds decided to reduce purchase of those securities and bonds=> this is known as fed tapering.

US feds	Purchased securities worth ___ billion USD per month
Earlier	75
Now	65

You can see, US feds reduced the purchase by (75-65)=$10 billion USD.
That’s called fed tapering.
Result? Less money supply=>loans become expensive for American businessmen (=less import from India), less investment to India + rupee would weaken further (=petrol, diesel expensive for Indians).
Financial Stability and Development Council (FSDC) = Chindu the chairman, + RBI, SEBI etc all financial sector regulators. This council met and deliberated on Fed tapering.
They say “we don’t have to worry much. We’ve taken precautionary steps”. [will be discussed in a separate article later.]
Although Rajan is bit unhappy, “USA should also worry about the (negative) impact on other countries before running such (Stupid) schemes.”

#2: Rajan Wisdom on Monetary policy

Hawk= someone who believes inflation can be fought by raising interest rates (via monetary policy/repo rate.)
In January 2014, I did increase the repo rate from 7.75 to 8%
But I’m not a hawk, I’m an “owl”. Owl is vigilant when others are resting.
I won’t have any wonder tool to fight inflation. I’ll be using the same old monetary policy tools (mainly repo rate) to fight inflation just like the previous RBI governors.
Corporate houses are complain to me that loan interests are too high and I should decrease my repo rate.
But, right now CPI is >9%. Banks pay maximum ~9% to depositors (in FD). Therefore, even if I reduce repo rate, they won’t decrease their loan interest rates. (Because their main source of cash comes from those deposits and not from my repo window)
I’ve done everything in my hands to fight inflation. Now the ball is in government’s court: they must clear pending infra/business/FDI files quickly and reduce their fiscal deficit.

#3: Microfinance: RBI changes loan rate formula

2010: high interest rates charged by microfinance companies. Many poor in Andhra commit suicide because of Microfinance loan-recovery agents.
2011: RBI creates new category under NBFC: “NBFC-MFI”
Then RBI order that MFI cannot have more than 12% profit margin on their loan products.
2014: Rajan comes up with new formula for MFI-loan rates

First get two figures

Cost of fund (i.e. how much did it cost to the MFI, to arrange that loan money) + margin (12%)
Average base rate of five largest commercial banks (like SBI,ICICI etCc) multiplied with 2.75%

Now find minimum between (a, b)
That’ll be the Maximum interest rate, an MFI can charge on her borrower.
System will be effective from FY14 (i.e. 1st April, 2014.)
Related topic:
Micro Finance Institutions (Development and Regulation) Bill, 2012.
Criticism:

Against the federal principles
Doesn’t help in financial inclusion
Gives supervisory powers to RBI but RBI already overburned with so many things. Therefore, Microfinance matter should be completely handed over to SIDBI or NABARD.

Result: Parliament’s standing committee on finance is going to reject this bill.
Women SHG- interest subvention

Scheme: National Rural Livelihoods Mission (NRLM)
Women Self-help groups (SHG) under this scheme, will get interest subvention

Mechanism:

All banks have to give them loan @7% (upto 3 lakhs)
Government (Rural development Ministry) will give interest subvention of 3% (meaning government will pay that much interest to bank, on SHG’s behalf)
Women SHG will have to pay only 7 minus 3 = 4% interest only.

#3: Housing Start Up Index (HSUI)

Housing sector contributes ~10% GDP, critical indicator of macro-economic growth for banking (loans), labour, steel, cement, and paint business.
Housing start up index = Joint initiative by RBI + national building organization.
To measure housing growth in various cities of India. It found that
- Housing declined in big cities like Kolkata, Chennai and Bangalore
- But picked up growth in small cities like Dehradun, Bhopal and Hubli.
It’ll help both public and private sector to design their economic activities accordingly.
We are not the first country to develop HSUI.
Six countries already using it: Canada, US, Japan, France, Australia and New Zealand

#4: Mobile Banking: new Committee

RBI’s Committee on Mobile Banking (Chairman =B. Sambamurthy)
Main Recommendations

>85 crore mobile subscribers in India=mobile banking is an great tool for financial inclusion.
All mobile phone operators should load a single mobile banking app in all mobile phones.
Government should order mobile mfg. companies to pre-install mobile banking app. In their phones.
customers should not be required to visit the bank branch to register his mobile for mobile-banking Usage.

#5: Banking Ombudsmen conference

Discussed following:

In savings account, if customer doesn’t maintain minimum balance, then don’t charge penalty on him, simply convert his account to No frills account. [Basic Savings Bank Deposit accounts]
In e-banking, if there is any scam, and customer was not negligent, then onus should fall on bank itself.
For ATM: banks say we want to charge our own customers for ATM use (After 5 free transactions per month.) Then we can earn some additional commission =>use it for installing more securities guards.
RBI Deputy Governor opposes this idea. Bank should not charge its own customers for ATM Usages.
practice of levying a penalty for non-maintenance of a minimum balance in ordinary savings bank accounts was also discussed at the conference.

#6: Banking: Misc./Chillar topics

Common Demat account	Investors need DEMAT account to trade in sharemarket, mutual funds, commodities market, even exchange traded funds. During the meeting of FSDC (Financial Sector Development Council), FM urged the regulators to offer Common demat account= financial inclusion.
RIDF	When desi commericial banks (and foreign banks with 20+ branches) cannot meet their priority sector lending targets, they’ve to deposit money in rural infrastructure development fund under NABARD. Why in news? Because NABARD gave loan to Gujarat government to further develop Narmada Canal from this RIDF fund.
RuPay Card	Alternative to visa and master card. By National Payments Corporation of India (NPCI). Launched in 2012, Reached 25 million subscribers in Feb 2014. that’s why in news.
White label ATM	Topic already covered in earlier article. White label is in news because RBI has finanally given ‘certificate of authorisation’ to four White label companies viz. Tata, Muthoot, Prizm a nd Veakrangee.
Plastic notes	Rs.10 plastic notes will be circulated on a trial basis in five cities — Kochi, Mysore, Jaipur, Shimla and Bhubaneswar. From second half of 2014.
Stress Test	Stress test= one type of statistical analysis tool. Where experts will check does the bank have sufficient money to handle unforseen events. A study indicates that most Indian banks don’t even have 20 people looking into this subject. = poses a danger of sub-prime crisis like event.
Third party norm	RBI simplified the forms and rules for importers and exporters, related to third party payments.

RBI related Numbers

As of January end 2014

MSF	9%
Repo	8% (earlier it was 7.75), Rajan increased to 8% =dear money / hawk.
Reverse repo	7%
SLR	23%
CRR	4%
PSL	40%
Forex Reserve	290+ billion dollars

Overview of Economy related Affairs during 1-7 Feb 2014. Total three parts

Part 1 of 3: fiscal and monetary policy
(you’re here) Part 2 of 3: FDI, regulatory bodies and infrastructure.
Part 3 of 3: bilateral, poverty-hunger-HRD, Agriculture-food processing and Persons in News (PIN).

[Act III] FDI related current affairs [2014FebWeek1]

Important basics:

FDI matters are handled by Department of Industrial Policy and Promotion (DIPP), under Commerce Ministry.
They release the FDI policy notification. (and not under Finance ministry or home ministry or corporate affairs ministry or external affairs ministry)
There are two types of FDIs : automatic approval vs non-automatic (i.e. where government permission necessary).
Where government permission is necessary, two things can happen:

Investment upto Rs.1200 crore	Investment above Rs.1200 crore
You need to get permission from FIPB Foreign Investment Promotion Board.	Need permission from Cabinet Committee on Economic Affairs (CCEA).
FIPB headed by Secretary of Department of Economic Affairs. (=IAS working in finance ministry=> meaning, the real “Boss” behind the curtains is Finance minister.)	CCEA is headed by Prime Minister. (although we all know who is the “real boss” behind the curtains.)

Other bodies related FDI

CCI	Cabinet commission on Investment (Boss: PM) Project worth Rs.1000 crore or more. But cannot override decision of Environment ministry.
CCI (infra)	Cabinet Committee on infrastructure. No longer exists. It is merged with Cabinet Committee on Economic Affairs (CCEA)
PMG	Project monitoring group. Attached with Cabinet Secretariat. (and not PMO) For fast track clearance to the stalled investment projects. Of 1000 crore or more. Claimed to be India’s first completely “file-less government office”- works entirly via web-platform. In news because: Has cleared 70000 MW worth coal projects in last few months.

[FDI] Multi brand Retail: “Gaddari” by Delhi & Rajasthan

2012	Government permits 51% FDI in Multibrand retail.
2013	Total 12 states/UT permit FDI in Multibrand retail. Including Rajasthan and Delhi (Congi government in both states)
2013, Dec	Congi lost Rajasthan to BJP and Delhi to AAP UK company “TESCO” becomes the first MNC to give 51% FDI in multi-brand retail. They tie up with TATA to open malls in India.
2014	New state governments of Delhi and Rajasthan, write letter to DIPP saying “we want to cancel the permission given to FDI-multibrand, by the previous Congi governments.”

Union government is upset because

Delhi Rajasthan’s move will create negative impression among foreign investors- “India has an unpredictable policy environment”.
So far 12 state/UT has permitted. MINUS Delhi, Rajasthan = only 10 state/UT left where MNC can open multibrand shopping malls. = Market not “Big enough” to attract investors.
Therefore, Union asks Attorney-General “can state governments revoke such permission after change in political regime?”
Experts say “yes”. Besides even if Union gets some relief from Supreme court, still AAP/BJP state governments could refuse to give building permission etc. to those MNC to open shopping malls.

[FDI] Lobbying by Walmart and Amazon

Lobbying= when private companies try to influence the politicians, to make favourable policy/act for them.
American companies spend truckload of cash on lobbying- both within US and outside. But as per American laws, they’ve to submit report of their expenditure on lobbying (even if done in foreign countries.)
So, from such disclosure reports, it was found that

2012	Walmart spent crores to lobby for FDI-multibrand retail in India
2013	Government (Corporate affairs ministry) forms a commission to look into this allegation. (only one man army: retired Justice Mukul Mudgal)
2013	Amazon spent crores to lobby for FDI in E-commerce in India. (and simultenously government releases a “Whitepaper” on FDI in E-commerce. If you join the dots, then it’s obvious government is influence by Amazon lobbying.
2014	Justice Mukul Mudgal gives his report to Government (Corporate affairs ministry.)

Limitations:

Mukul Mudgal panel was not formed under “commission of Inquiry act” => he did not have the power to summon documents/witnesses.
Walmart executives did not cooperate with him, refused to give detailed breakup of account/expenses in India.
Walmart maintains that company did not spend money to lobby in India. Only some individual executives of walmart spend money from their own salary. So we as a “Company” have not broken any Indian law.

[FDI] Railways: FM, HM oppose Chinese FDI

DIPP: Department of Industrial Policy & Promotion wants to liberalizing FDI in Railways. here is their recommendation:

permit FDI in	Don’t permit FDI in
high-speed tracks Railway freight lines connecting ports, mines and power installations Railway corridors in sub-urban areas.	existing passenger rail network Existing freight network operations

DIPP gave this note to Cabinet for consideration. But Home Minister and finance minister say Chinese FDI shouldn’t be allowed in railway sector because:

China is India’s main rival on the economic and military fronts,
We have unresolved border disputes with China.
Recently Chinese company Huawei was accused of hacking into BSNL network.
Therefore, Chinese investment in core sectors such as Railways= Dangerous from National security POV. (Point of view).
Even if Non-Chinese players are allowed thru FDI window, all issues related to security, safety and quality control should vest with the Indian Railways.

[FDI] Drugs Pharmaceuticals

Present status	What DIPP wants
FDI in New projects= 100% automatic route (don’t need permission from Government/FIPB/CCI)	This system is right.
FDI in existing pharma companies =100% but ned permission from FIPB (Foreign Investment Promotion Board) approval.	Not good. FDI in existing Indian companies should be reduced to 49% (from 100%)**

**why? Why does DIPP want to reduce FDI in existing desi-pharma companies?

Because if desi pharma cos are 100% owned by Foreign MNC giants, it’ll impact the availability of affordable/cheap drugs in India.
And in the worst case scenario: Pfizer /Novartis may simply buy out desi companies and make them produce only the patented expensive drugs only (and not the cheap generic drugs.)

Latest clearance: US company Mylan to acquire desi drug company Agila.

[FDI] Vodafone: fully foreign owned

Vodafone India’s parent company is located in Mauritius, owns >60% shares in Vodafone India.
The parent firm wanted to buy all shares from Indian shareholders, to have 100% ownership of shares.

Dec 2013	FIPB approves
Feb 2014	Cabinet also approves

Thus, Vodafone India=First telecom company in India that is 100% fully owned by Foreigners.

[FDI] Andhra favorite despite Telengana protests

Andhra CM says that despite the political turmoil (about Telengana), Andra pradesh is still favorite destination for foreign investors. – MNCs like Johnson and Johnson, Proctor and Gamble are setting up plants worth crores of rupees.

Why?

John D Rockefeller (American oil tycoon)- he was richer than Bill Gates, Steve Job and Mark Zuckerburg.
His business mantra: “The way to make money is to buy when blood is running in the streets.” He used to buy firms, factories, land, shares and bonds – during riot/war/famine/depression like situation – because at that time businessmen in distress would sell their assets at throwaway prices.
Perhaps same is happening behind the curtains in Andhra. That’s why favorite destination for MNCs.

IFC Rupee bonds

IFC= International finance corporation, it’s a member of the World Bank Group.
They’ve released IFC Rupee bonds.
Foreign investors buy such bond (by paying dollars to IFC). Who are these clients? Asset companies, Private banks, insurance cos, even central banks of Asia, Europe and US.
IFC convert these dollars into rupees and invests in India- particularly in the areas of low-growth states.
They earn money (in Rupees), covert it into dollars.
Then principle/interest paid to you in (dollars), and IFC keeps some part as commission.
IFC also doing same with Brazilian real, Chinese renminbi, the Nigeria naira, Russia ruble etc. They convert dollars into local currency and invest.

So, is this FDI or FII? If we go by the Chindu definition (less than 10% investment in a company=FII and >10%=FDI, then rupee bonds is mostly FII).

[FDI] Defense

Needs a separate article. Just a few point here:

DefExpo

2014 Held in Noida (UP);
by Defense ministry
Biennial event. (Every second year)

At present FDI limit in Defense= 29%. Latest clearance….

Joint venture	ownership
Thales (UK firm)	26%
BEL (Desi)	74%
Product	Main focus= Radar production in India.

Defense procurement procedure 2013

Wants to boost Indian defense industry (Both public + private sector)
In Defense purchases, it gives preferences to Buy (Indian), Buy and Make (Indian) category of products.
India wants to procure 70% of its defense requirement from domestic players (both public + private) – but difficult given the low limit in FDI.

Some tie-ups between Foreign and Desi brands:

Sensor	MicroObserver Unattended Ground Sensor (UGS) for securities agencies. By Bharat electronics + an American company
UAV	SQ-4 Recon= new brand of Unmanned Aerial Vehicle (UAV). India based OIS-AeroSpace + a UK company.
Vehicle	Light armoured high mobility vehicle (LAMV) By TATA and a UK company.

Related topic
Rafael jets=purchase delayed (kyoki apni hesiyat nahi)

2012	We decide to buy 126 Rafael fighter jets from a French company Dassault. Cost: ~60k crore rupees. They’re MMRCA= medium multi-role combat aircraft Negotiations start.
2014	Defense Minister says we don’t have enough ca$H at the moment for FY13 (ends @31st March 2014). If we borrow money to buy these planes then fiscal deficit target will not be achieved (4.8% of GDP) So, we Will have to postpone this purchase- perhaps to FY15.

[FDI] Environment clearances

Old story, Needs a separate elaborate article. Just an overview.
December 2013: Moily becomes Environment minister. But he simultaneously holding charge a petroleum minister.= one is pollution controlling ministry, one is pollution creating ministry. = incompatible jobs. Should be done by two separate ministers.
Moily giving fast clearances = to attract investors, improve IIP and show that he is also “pro-business” like Modi.

POSCO	S.Korean company. Steel plant. $12bn USD. Odisha.	cleared
Vedanta	bauxite mining project in in the Niyamgiri hills of Odisha Moily Says local gram sabhas are opposed to it, so I can’t approve.	Not cleared
Tawang	Arunanchal Pradesh	Cleared
Ennore	Coal based powerplant, TN	cleared
Chennai	Petroleum pipeline	cleared
Teesta	Sikkim hydroelectricity project. (NHPC)	cleared
Coal Mines	Allowed some of them to increase output without requiring new permissions.	Cleared.
Hinduja	Coal power station @Vishakhapatnam, Andhra	Cleared

[FDI] flows in last eight months (from highest to lowest)

sector	From country
Service sector Automobile Construction Chemical	Mauritius** Singapore UK Netherlands

** it doesn’t mean Mauritian people are very rich. These investors are mostly American/European tycoons who setup post-office companies in Mauritius to get tax benefits. [Recall Vodafone/Hutch controversy.]

[FDI] declined in India: says UNCTAD

UN Conference on Trade and Development (UNCTAD) report.
FDI destinations:

Year	India’s position
2012	15
2013	16 (meaning incoming FDI has declined.)

[Act IV] Regulatory bodies (Truckload of)

#1: DGH: need statutory status

Directorate General of Hydrocarbons (DGH).

Present status	What Finance ministry wants
DGH falls under Oil Ministry.	Should be given Statutory status. Because DGH implements New Exploraton Licensing Policy (NELP), matters related to Production Sharing Contracts for oil exploration fields etc. = it must have autonomous status.
funded by the Oil Industry Development Board (OIDB)	Should get ca$h from consolidated fund of India (from Budget).
Top officer from ONGC and Oil India, get posted here.	No, should have independent staff.
Not under direct CAG audit.	No. Once DGH starts getting funds from budget, then CAG will audit it.

By the way, what’s the situation in other bodies? Where do they arrange cash?

SEBI, IRDA, FMC	Charge fees on the licensees.
TRAI	Gets funding from government. TRAI wants commission from the spectrum licensing, but government doesn’t agree to share the maal.
RBI	It’s the central bank. Central Banks earn money from “seigniorage”. We learned about it in Nachiket Committee article. + income through OMO, repo, MSF, license fees.

#2: PNGRB- koi hum ko bhi puchho yaar

It is a statutory body setup under Petroleum and Natural Gas Regulatory Board (PNGRB) Act 2006.
You need to get its permission before setting up city gas distribution network (cooking gas lines, CNG station).

2013	GAIL wants to setup its own CNG gas stations Oil Ministry says, ok go ahead, you don’t need permission from PNGRB to setup CNG stations in cities.
2014	Oil Ministry makes a U-turn. Tells GAIL to get permission from PNGRB.

#3: Civil Aviation Authority= no country for non-IAS

Statutory body.
Problem: this boss (DG) is mostly a serving/retired IAS => CAA has become an inefficient bureaucratic organization. = lazy approach => USA downgraded India’s aviation safety rating.
Now Ministry of Civil aviation proposing a bill, to ensure only professional person is appointed as DG. (and not some serving/retired IAS). And he must be given security of 3 years’ tenure.
Problem: cabinet not clearing this bill.

#4: Rail fare regulator: I’m Useless without statutory status

Cross subsidization = railway sells passenger tickets cheap (=~25k crore loss per year), but recovers that loss by keeping freight charges high. (=”ticket” prices for transporting non-human things cements,coal etc.)
Result= not making optimum profits. Bogus food, bogus toilets, bogus security.
Government finally notified to setup a new Rail Tarrif authority. (Feb 2014)
It’ll suggest pricing in such way that railway generates healthy profit.
Problem=Executive body. Recommendations not binding to rail ministry.
If you want to make it statutory body, then need to amend Railway act ’89 = but that’s unlikely in the current budget session.

#5: Desi Drug regulator: I want Firangi powers despite staff shortage

USA has FDA (Food and drug administration)
Similarly India has CDSCO- Central Drugs Standard Control Organization
CDSCO’s boss is called “Drugs Controller General of India”. (DGCI)
CDSCO Falls under Ministry of Health (mind it: Drugs/Pharmaceutical falls under Chemical ministry)

Anyways, why in News?

USFDA even monitors the desi-plants of desi pharma companies (e.g they banned Ranbaxy’s Toansa (Punjab) plant from manufacturing medical products for the US market.
So CDSCO feeling envy, “we also want similar powers” – to inspect the foreign plants of foreign companies- who supply drugs to India.
Problem: CDSCO doesn’t even have enough staff to supervise desi drug companies. They asked Union government to increase budget – so we can hire 5000 more people. But no positive response. After all funding to drug supervision =not as important as MNREGA.

#6: 14th Finance Commission: homework abhi baaki hai

Constitutional body, setup in Jan 2013.
Boss = Ex RBI governor Governor YV Reddy
His recommendations will be effective from 1/5/2015, for a period of five years
Apart from the usual terms of reference, 14th FC also has to make recommendations about:

Pricing of public utilities such as electricity and water in an independent manner
issues like disinvestment, GST and subsidies.

Why in News

It was to submit report by 31/10/2014.
But things are moving slow, Finance commission will take long time to meet all state government and process the data and demands. + issue related to compensation to Seemandhra from mega Polavaram project from Telangana and so on.
Finance commission is seeking an extension of 3 months (i..e up to Jan 2015)
This is not the first time in history though. 13th FC (under Kelkar) they also submitted their report in December 2009 (instead of original deadline in Oct 2009)

#7: 7th Central Pay commission

Chief= Justice Ashok Kumar Mathur
Member= Vivek Rae full time (IAS) + Rathin Roy part time (economist) + Meena Agarwal (Secretary, IRAS)
Target audience= 50 lakh Central government employees, including the Railways and Defense. +30 lakh pensioners.
Deadline= submit report in two years.
Implemented from January 1, 2016. [6th PC's recommendations from January 1, 2006.]
Criticism:
- 6th PC cost us more than 20k crore rupees= fiscal deficit + and blamed to be one of the factors for inflation (Because money increased in babu-log’s hands without subsequent increase in their productivity.)
- Timing before the general election.

#8: EPFO- I want to stay in news everyday

From aspirant’s point of view, EPFO= most bogus of all public entities. Because they create new current affairs on almost daily basis – or just keep coming in news for no reason.
Anyways what did they do in Feb. 2014, first week?
For anyone earning upto Rs.15000 = EPF contribution is must. = this will enroll 50 lakh more employees in the EPFO game.
Minimum Rs.1000 pension to retired people.
(did not implement) minimum age to get pension: raise from 58 to 60 years.

#9: IRDA- I also want to stay in news every day

Just like EPFO, ye IRDA walla also keep doing something new every day to stay in the news. Anyways why in news?

Broker model for Bancassurance
Allowed common service centres (CSCs) to sell life insurance products. CSC are setup under National e-governance plan.
Norms/guidelines for Micro-insurance products (for rural/poor people). Allowed RRB, Coop. Banks, SHG, Banking BCA etc to sell such micro-insurance products.
Asked companies to general insurance companies should increase their focus on agricultural insurance, disaster Management products.

[Act V] Infrastructure related

Important fact: that the 12th plan envisages $1 trillion for infra development
GS3 (Mains): Infrastructure: Energy, Ports, Roads, Airports, Railways etc.
Let’s check

communication	spectrum auction
Energy	NELP, LPG, Electricity = given in part1
airport	aviation safety sucks =given in part 3
Railways	FDI given above, Monorail given below

#1: Monorail @Mumbai

Monorail runs on a single rail. This rail may be located either above or beneath the railway cars. Observe the photo

Mumbai Monorail was setup by Mumbai Metropolitan Region Development Authority (MMRDA) + L&T Engineering.
None of our neighboring countries have Monorail (except China).
First phase: ~9km from shootout @Wadala to Chembur.
Minimum fare: Rs.5

When entire project is completed:

it’ll have ~19km length.
7000 passengers per hour
Cost: Rs. 3000 crores

Ranking	Monorail in
1	Osaka, Japan
2	Mumbai, India (when entire project completed)
3	Tama, (Tokyo), Japan
4	Kuala Lumpur

#2: Metro @Mumbai BOT Problem

Being developed by Anil Ambani’s Reliance infra
PPP Project under BOT model (build–operate–transfer).
But dispute with Maharashtra government about pricing of metro rail tickets.
CM asks union government to setup a dispute redressal mechanism at the national level to resolve disputes in such BOT projects.

Railway Misc.

Kolar	New rail coach factory here. (will build passenger coaches) Rail minister + Karnataka State government will share cost.
Delhi-Amritsar Bullet train	Bids invited
Chennai Metro	Under testing. manufactured in Brazil.

#3: North East: hydro, manpower potential

Truckload of schemes and issues, only listing new points happened in Feb2014 week#1, related to economy:
Planning commission says

North Eastern states can earn ~650 crores per year by hydroelectricity.
12th FYP wants to add 88000 MW electricity generation. And out of them North East can generate ~3000MW
5000 crore spent on developing airports @North East. Asks state governments to hasten the land acquisition

Modi says:

Youngsters in the North Eastern states are generally tech-savvy with good command over English
= Suitable for digital outsourcing/IT jobs. But at present they’ve to migrate to Bangalore and Hyderabad.
Government should create such job opportunities within their own villages in North Eastern States.

Related issue: Arunanchal boy Nido Taniam murdered in Delhi in a racial hate-crime.

#4: [Summit] 101st Indian Science Congress

\Not an economy topic as such but Mohan said “we must spend atleast 2% GDP on science tech,” hence making a passing reference here (else separate discussion in S&T compilation later on)

Where? Jammu
Theme? ‘Innovations in Science and Technology for Inclusive Development’.

Major Points/Achievements listed by Mohan

Neutrino-based Observatory @TN
India joins CERN as associate member
ISRO’s missions to Mars and moon
Can issue Tsunami alert within 13 minutes
Setup new dept for Health Education and Research
A Rota Virus vaccine, a new drug for malaria, CSIR discovering new drug for TB
We should not succumb to unscientific prejudices against genetically modified (GM) crops.

#5: Exhibition upgrades

India Trade Promotion Organisation (ITPO)- government owned company. It has planned to spend crores of rupees to upgrade following venues

Pragati Maidan, New Delhi.
Vigyan Bhavan
Kochi (for coffee, tea, spcies exhibition).
Karnataka: wan to setup a venue for IT-related fares and exibitions.

Some notable expos in 2014:

Expo-2014	Venue
Auto	Pragati Maidan, New Delhi
Defense	Noida (UP); organized by Defense ministry.
Petro-Tech	Noida (UP)

#6: Infrastructure Misc./chillar topics

Pharma

You’re aware of the mega food parks – In mega food parks, the companies have ‘common facilities’ for packaging, weighing etc. = operation cost reduced.
Chemical ministry launching similar scheme for Pharma companies.
In SEZ/industrial locations, Government will give them financial assistance to setup common infrastructure for setting up effluent plants, R&D labs, training centers etc.

Toll Tax

Fall under State list (entry 59)
As per National Highway Authority of India (NHAI) — minimum distance between toll booths should be 80 km.
But in Maharashtra toll booths are setup even at distance of every 20-30 kms
The toll collection money is supposed to be used for road-repair, but it’s not done.
Traders allege bribery and irregularity by toll booth operators. Road contractors have ‘recovered’ their original investment, yet toll tax still collected.
Shiv Sena and MNS have ordered their troops to attack and vandalize toll-booths.

Steel industry: we ar unhappy

Goa used to be India’s top Iron-Ore exporter. But declined after SC ban on illegal mining. = less supply= input cost increased.
government imposed a 5% tax on the export of iron ore pellets
Jindal Steel says Karnataka-walla miners have formed a cartel = steel industries suffer.
Inflation = automobile sales declined, therefore demand of steel decline.Overview of Economy related Affairs during 1-7 Feb 2014. Total three parts
Part 1 of 3: fiscal and monetary policy
Part 2 of 3: FDI, regulatory bodies and infrastructure.
Part 3 of 3: bilateral, poverty-hunger-HRD, Agriculture-food processing and Persons in News (PIN).

[Act 6] Bilateral/Policy affecting Indian Interests

IR topics can run miles long, but only cursory points here- of those related to Economy/trade.

#1: Visa on Arrival for 180 countries

Mechanism for (Tourist) Visa on Arrival (applicable from Sep’14)

Foreigner has to apply online (3 days before arriving to India)
When he reaches India, pays 60$ fees, goes through biometric identification and gets the (Tourist) Visa.
Validity: 30 days, Cannot be renewed. He must leave after that.

But Why should India give Visa on Arrival?

Will boost tourism and business
Can help us earn >40 billion USD by 2017
Challenges: women security, bad infrastructure, unhygienic places.

Before 2014	from Sep.2014
~40 countries eligible for visa on arrival.	Visa on arrival facility available to tourists from 180 countries. Including US (Despite Devyani!) China (Despite Dushmani!) UK UAE Bangladesh
Not eligible for Visa on Arrival [security reason] Pakistan Sudan Afghanistan Iran Iraq Nigeria Somalia Sri Lanka Tourists from these countries need to apply for visa through Indian embassies in their country.	Same continued.

By the way, India is not the first country in the world to have “Visa on arrival” facility. Following countries already offer this facility: Japan, Finland, Singapore, Indonesia, Luxembourg, New Zealand, Cambodia, Vietnam, the Philippines, Laos and Myanmar.

#2: [USA] Dushmani with Indian pharma cos.

US Food and Drug Administration (FDA) commissioner is coming India
To inspect quality of Ranbaxy, Wockhardt and other companies. (+Spices processing companies in Kochi).
They’ve already banned production in Ranbaxy’s factory in Toansa, Punjab.

Why? (Conspiracy theories)

American wants to teach us a “lesson” for the Devyani issue.
Other foreign pharma companies have lobbied /bribed USFDA to teach us a “lesson”.

American/European MNC hate Desi companies because

We’re largest producer generic drugs. (=cheaper copy of the foreign drugs, whose patent has expired.)
We’re second largest drug supplier to US and Canada
We’re major supplier of low cost medicines for Cancer, AIDS and Malaria to Africa and Latin America= Those foreign MNCs are loosing business.

#3: [USA] India’s Aviation safety sucks

US Federal Aviation Administration (FAA)
They reduced India’s safety rating from Status #1 to Status #2; meaning we’re as bogus as Ghana and Bangladesh. Infact even Pakistani Airlines are more safer than India!
Main reasons

India doesn’t have sufficient number of Flight operation inspectors.
India’s aviation regulator Directorate General of Civil Aviation (DGCA) does not meet the safety standards set by ICAO. [as we saw earlier this post has become retirement house for IAS.]
(conspiracy theory) America intentionally downgraded the safety rating to “teach” us a lesson for the Devyani Khobragade controversy.

Consequences:

When Indian flights go to USA, their officers will do more safety checking = more time will be wasted, inconvenience to Desi passengers.
Jet airways’ share prices fell down.
Domino effect: Singapore’s aviation authority also started inspecting Indian aircrafts.
The aviation regulators of EU, Japan, UAE will also reduce our rating.

Related topic: “Policy of USA affecting Indian interests” = Obama has urged the house to pass immigration reform bill, that’ll give legal citizenship for illegal immigrants (=indians will be benefited) so, it’s not like Obama wants to “teach” us a lesson everywhere.
Anyways, moving on:

#4: Pakistan- MFN status for India (hum nahi Denge)

Pakistan has still banned import of 1000 Indian items, including automobiles, pharmaceuticals, agriculture and chemicals.
Only when Pakistan permits their import, we can say “India got Most-favored nation (MFN) status in India.”
Then our bilateral trade will increase to $10 billion USD.
Commerce Minister wrote a letter to pakis about this, but they didn’t reply, so it seems he will cancel his plans to visit Pakistan.

#6: India and Morocco (Ibn Batuta)

Our Foreign minister had gone to visit 3 North African countries (Morocco, Tunisia, Sudan)- “Look Middle East” policy.
Morocco significant supplier of Phosphate to India= fertilizer, food security.
14th Century: famous traveller Ibn Batuta came from Morocco to India
Morocco supports India’s demand to get Permanent seat in UNSC.
During this visit, many agreements on Environment coop, HRD, IT training.

#7: India-Fiji DTAA

India and Fiji- Signed DTAA: double taxation avoidance agreement (DTAA).
From Indian businessman’s point of view:

If he has permanent business in Fiji, then his business profit will be t axed in Fiji only. And not in India.
If he makes capital gains in Fiji, he’ll have to pay taxes to Fiji only (and not in India). Recall Vodafone/Hutch controversy.
If his airline’s HQ in India, then India will tax (and not Fiji).
Dividends, interest, royalty and fees for services will be taxed both in the countries (India and Fiji).
+ both countries agreed to exchange of banking information.

#8: India-Mauritius

Mauritian authorizes have urged Indian investors to come in their country because:

Low tax regime
In doing business index (of World bank) = Mauritius rank 19th all over world, and 1st in Africa
Possible to start business in three working days
Indian entrepreneurs can setup base in Mauritius and focus on EU, Africa and West Asia.
IOCL already started Aviation fuel business here.
Potential areas: Seafood, IT, movie production.

#9: Misc./Chillar developments

Germany	German President Joachim Gauck visit to India. 1 Billion Euro worth agreement for green energy project.
NZ	UGC and its NZ counterpart signed agreement for research collaboration and education exchange
Japan	JICA gives loan to Bihar road upgrade in NH82
UK	Our small cars (nano, Alto etc.) have failed safety tests conducted by a UK-based body that tests car safety worldwide. Car companies make excuses but fact is, none of these cars have airbags (because desi std. don’t require airbags). Consequences= negative publicity= decline in sales in rich foreign countries.
ONGC	Rosneft = World’s largest oil company (by output). HQ: Russia They’ve offered stakes to ONGC for exploration blocks- in Barents Sea and Black sea. ONGC Videsh Ltd (OVL) and GAIL India also looking f or gas exploration opportunities in Tanzania.

[Act 7] Issues related to Poverty, Hunger, HRD

#1: DTH = DBT v2.0

DBT= Direct benefit transfer (to beneficiary’s bank account)
Now, Rural development minister (Jairam) came up with a new idea
DTH= Direct to Home (benefit transfer)
Women, disabled, widows, elderly and students will not have to go to banks or post offices to get their entitlement.
DTH system will transfer money to beneficiary via Micro-ATM and Mobile banking.
Pilot project in Andhra Pradesh

#2: UIDAI is against Indian Constitution

Petition in SC, by a group of retired judges and army officers.
They say UIDAI violates Indian Constitution because
UIDAI has no statutory powers. Its functioning under an executive order.
Even UIDAI was a statutory body (like SEBI) still, this project violates fundamental rights under Art. 14 and 21. Because project is putting a surveillance mechanism over humans = right to privacy, right to dignity violated.
Public funds given to private companies without parliamentary oversight.
Biometric= unreliable technology, privacy can be compromised.

#3: Both UIDAI+RGI to focus on 4 states

2009	UIDAI setup. They were mandated to give Unique ID number to residents in 18 states + Union territories.
	In the other states this work is done by Registrar General of India, under National Population Register (NPR) process.
2013 end	>55 crore Aadhar numbers generated.
2014	Government orders both UIDAI + Registrar General of India (RGI). To enroll people in Uttar Pradesh, Bihar, Chhattisgarh and Uttarakhand

Why? This will help fully implement Direct Benefits Transfer schemes in these States as well= some vote bank benefit.
At present, the DBT scheme covers 28 Centrally-sponsored schemes in 121 districts.

#4: NSSO survey: Poverty Declined because its election year

Planning Commission is the nodal agency for estimation of poverty at the national and state levels (with help of NSSO)
NSSO carries survey on quinquennial basis. (Every five years)
Poverty line is measured on Monthly Per Capita Consumption Expenditure
- Rs. 447 (rural)
- Rs. 579 (urban)
This method designed by Suresh Tendulkar Committee (2005)
2012: Planning commission sets up a new Committee under C.Rangarajan to review this poverty estimation n method.
2014: latest NSSO survey found that Poverty declined under Congress government (!)

FY11	~40 crores poor people
FY14	~27 crore poor people

For more, refer to Frontline Data card: click me

#5: Gujarat: Earning >11 Rs. = not poor kyoki Lakdawalla says so

1993	Lakdawalla Committee to determine poverty status. He suggested calorie intake method.
2004	Union government asks state governments to implement Lakdawalla’s Calorie intake method. Accordingly, Gujarat = people earning more than Rs.10.80 per day=are not poor.
2005	Suresh Tendulkar Committee setup to review the poverty determination method.
2009	Tendulkar gave report
2011	Planning commission and Union government accepted Tendulkar method. Poverty line= 32 rupees (Urban); 26 Rupees (Rural).
2012	Rangarajan Committee (by Planning commission)
2014	Gujarat State government website mentions the old figure based on Lakdawalla (10.80 Rupees=poor). Hence the controversy.

BJP defends saying:

this is based on Union government’s 2004 notification (Lakdawalla), and since Union did not update it, hence outdated number in our website”.
Btw, we did accept Tendulkar, and for Gujarat, the official poverty line is Rs.38.40 (Urban) and Rs.31.06 (rural).

#6: Women SHG- interest subvention

Scheme: National Rural Livelihoods Mission (NRLM)
Women Self-help groups (SHG) under this scheme, will get interest subvention

Mechanism:

All banks have to give them loan @7% (upto 3 lakhs)
Government (Rural development Ministry) will give interest subvention of 3% (meaning government will pay that much interest to bank, on SHG’s behalf)
Women SHG will have to pay only 7 minus 3 = 4% interest only.

#7: Contract workers

Among the employed people in India, ~40% are contract workers. (as per Assocham survey)
Is it good / bad? It is Bad because:

They don’t get Job security
They don’t get medical aid, gratuity, provident fund, educational funds, pension and health insurance and leaves benefits,”
Regular worker gets >3 times salary for doing the same job.
Given the oversaturated labor market, mushrooming self-financed colleges with overqualified people= even scientists, doctors, MBA and Engineers are also serving as contractor workers in private companies/hospitals.

#8: NSDC

National Skill development Corporation.

Ownership	%
Private sector	51%
Finance Ministry	49%

Target: give skill training to 150 million Indians by 2022.
Why in news: signed MoU with some state government. Anyways that happen every now and them, Important thing for MCQ= above table and target.

#9: DSDS 2014: Desi liquor=sustainable livelihood

DSelhi Sustainable Development Summit 2014
Theme/ Focus: “Attaining Energy, Water, and Food Security for All”.
Location: Delhi
By Who? The Energy and Resource Institute (TERI). DG=RK Pachauri.
In the summit, Guests made lengthy speeches to give fodder points for essay/interview. Not covering here because article will run mile long.

#10: IMF: Inequality is growing (ya like we don’t it!)

Nothing that you don’t know already. Just some fodder points:

Chief=Christine Lagarde
Their report says: in last 15 years, the income of Indian billionaires increased by 12 times.
These Indian billionaires have enough money to eliminate India’s poverty TWICE!
In the coming decades, India’s population will surpass China; Nigeria’s population will surpass the United States.
Income inequality rising in the entire world.
Richest 85 people in the world own the same amount of wealth as the bottom half of the world’s population.
In the Asia-Pacific region, 1.7 billion people lack access to sanitation and 680 million are without electricity.

[Act 8] Agriculture/food processing/Export industries

Some fodder points from Feb Week#1, 2014:

Indian Industry	Potential	Challenges
Soybean	non-genetically modified (GM) nature. Hence diet conscious rich foreigners prefer it. When USA had imposed various sanctions on Iran, they used to buy Soybeans from India @high prices.	Large harvest in South America (Brazil, Argentina). Hence foreigners not making inquiry to Indian exporters. In India, majority production comes from Central India- but excess rain destroyed the crops MP, Rajasthan farmers are also holding back the soybeans, in hope of fetching higher prices (which is not going to happen because of South America) Result: Desi food processing industries that Soybean= suffering losses.
Spices	Many	USFDA chief is making visit to Kochi, to inspect the charges that Indian spices are “Contaminated”.
Textiles	Textile ministry believes we have export potential of >40 Billion USD.	Export oriented Textile factories concentrated in South India, particularly TN. But cotton production concentrated in Gujarat, MH = transport cost. Transport cost increased (Because of hike in diesel prices) Cotton cultivation price increased (labor shortage MNREGA) Gujarat cotton farmers are holding back the cotton bales. (Because cotton non-perishable, and want higher prices to coverup those labor costs.) Factory cost increased due to electricity shortage.
Rubber	90% of production comes from Kerala.	Union government allows import of rubber= foreign competition destroying desi farmers. (Solution: Kerala government started directly buying Rubber from farmers, @prices higher than Rubber board of India) VAT needs to be reduced.
Cardamom		Dry weather condition hurting harvest Bumper production in Guatemala, they’re selling @cheaper price.
Rose	High demands from Singapore, NZ, Australia and Europe during valentine day. Our competitors are China and Africa- but their rose-production declined due to adverse climate. Good production around Bangalore (Karn.) and Hosur (TN) Russia also permitted rose import.	Some of these countries rejected our rose exports for phytosanitary issues. (mites in the roses)
Coir		Factories in Kerala, but shortage of raw material. Majority of the coir supplied from Tamilnadu. (Because Keralite grow coconuts as household activity, while Tamils do as a plantation= economies of scale, bigger production.)
seafood	Main ports from where seafood is exported: Vizag, Chennai, Tuticorin and Mangalore	Only marginal increase in export, compared to last year (except Kochi)

El Nino

Needs separate article. Just a cursory mention here:

Central & East Pacific gets warm
Western Pacific gets cold.
Result: less rainfall in India.
Experts believe 2014=El Nino year= less rainfall, desi farmers will suffer.

[Act 9] Persons in News (PIN): Feb Week#1 (2014)

List can go long, only the major names related to business/economy and been in news during 1st Week of Feb 2014.

#1: India

DG of Hydrocarbons	BN Talukdar (newly appointed, FM wants to give him statutory status)
Secy, Economic Affairs	Arvind Mayaram (makes statements on daily basis. He has to give new definitions FDI, FII)
Drug Controller General of India	GN Singh (wants firgani powers like USFDA, but doesn’t have staff)
IRDA	TS Vijayan (wants Broker model for bancassurance)
TRAI	Rahul Khullar (doesn’t fully agree with Sibal on Spectrum auction)
UTI	Leo Puri (golden jubilee of UTI)
LIC	SK Roy (passing comments about IRDA guidelines)
EPFO	Labour minister (Oscar Fernandes) =Chairman of the Central board of Trustee of EPFO. 16k max for compulsory EPF, 1k min for pension.
7^th Pay commission	Justice Ashok Kumar Mathur
Walmart lobbying	Justice Mukul Mudgal gave report
14^th Finance commission	YV Reddy, cannot finish report on time.

#2: Abroad

S.Jaishankar	Indian Ambassador to USA.
Vivek Lall	aerospace and cyber security expert. He became appointed special advisor to United Nations
Satya Nadella	Hyderabad born CEO of Microsoft. Replaced Steve Ballmer. Microsoft has seen only three CEOs so far Gates, Ballmer, Nadella.
Germany	Prez. Joachim Gauck. Recently visited India. 1 billion Euro worth green energy deal. Note: Angela Markel is “Chancellor” and not the “President” of Germany.
US Feds (American RBI)	Ms. Janet Yellen replaced Ben Bernanke as the chief of US Feds.
USFDA	Margaret A Hamburg, commissioner, she is coming to India to inspect our pharma cos and spices factories.
IMF	Christine Lagarde. Says income inequality rising in the world.

#3: Women entrepreneurs: Fortune Top 50

Notable Companies	chief
General motors	Mary Barra
IBM	Ginni Rometty
Lockheed Martin (fightjets)	Marillyn Hewson
Facebook	Sheryl Sandberg (COO)
Yahoo	Marissa Mayer
Pepsico	Indra Nooyi (too clichéd)
ICICI	Chanda Kochhar (too clichéd)

Epilogue

Q. Where are the mock questions?
Separately, when sufficient content is generated (perhaps at the end of entire Feb).
Q. Will you release the same Week#2 (i.e. 8 to 14 February 2014?)
Yes.
Q. does it mean I should stop maintaining notes from newspaper?
of course not. This is merely a reference point to crosscheck you did not miss any important development. Mrunal.org is no substitute for newspapers and standard reference books.
Q. what about current affairs on polity?
Refer to prsindia.org + [Hindu/IE]
Q. What about IR/diplomacy
Refer to idsa.in + official site of MEA. + [Hindu/IE]
Q. When are you going to release Hindu Sci-Tech compilation?
Somewhere in March or may be April. The way things rolled in Prelim and Mains 2013, Hindu Sci-tech compilations were mostly useless hence not in my priority list right now.
Q. When are you going to finish the pending articles in the land reform, world geography, and world history?
Ya I’ll finish those loops but next Mains is in December 2014, hence those pending articles are not in my priority list right now.
Q. When are you going to release PIN-2014 compilation?
Had plans to release it before CDS2014 and IBPS Specialist office exams (Feb2014) but after Nov’13, there weren’t many high profile PIN developments (Padma, Bharat Ratna is too clichéd). other than that, very few new noteworthy appointments/sports winners between Nov’13 to Jan’14. Hence dropped the idea. Now PIN-2014 =In April 2014, before SSC starts.
Q. will you release answer key for CDS(I) 2014?
Yes. Ofcourse.
Q. When are you going to release the remaining answerkeys for Mains 2013?
World history answerkey most likely in Feb-end, and remaining in March.
Q. What about ethics answer keys for GS Mains?
Once UPSC declares final result of CSE-2013, I’ll be interviewing the toppers and request them to share their answers of GS4, its case studies and strategy.
Q. What about strategy for xyz optional subject?
Same as above.