Feb 27, 2016: Economic Survey 2015-16, Twin Balance Sheet problem and their redressal

Feb 27, 2016: Economic Survey 2015-16, Twin Balance Sheet problem and their redressal

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 27, 2016)

Economic Survey 2015-16:

Projected GDP growth in 2016-17	7-7.75%
Estimated GDP growth for 2015-16	7.6%
Fiscal deficit target can be achieved for FY 2016	3.9% of GDP
Twin Balance Sheet (TBS) problem	·         the impaired financial positions of public sector banks which are burdened with high non-performing assets ·          some large corporate houses under financial stress due to slow down in demand internationally
4 R’s to address TBS	·         Recognition ·         Recapitalization ·         Resolution ·         Reform
4 R’s	·         Recognition: Banks must value their asset as far as possible close to true value ·         Recapitalization: Banks capital position must be safeguarded via infusions of equity ·         Resolution: Underlying stressed assets in corporate sector must be sold or rehabilitated ·         Reform: Future incentives for private sectors and corporates must be set-right

Source: http://economictimes.indiatimes.com/markets/stocks/news/economic-survey-prescribes-4-rs-to-address-problems-at-public-sector-banks/articleshow/51152458.cms

TPP and Make in India:

Trans Pacific Pact (TPP)	US led mega regional free trade pact
India’s decision to join TPP at a future date may have adverse effect on the Make in India Initiative
TPP would prevent the Indian government from using state-owned enterprises and government procurement  as vehicle for achieving social and economic objectives, including employment generation, thereby have to compromise on the Make in India Initiative policy

Source: Survey outlines step to boost Make in India by Arun S, Feb 27, 2016, The Hindu

Feb 26, 2016: Perspective view of Railway Budget 2016

Feb 26, 2016: Perspective view of Railway Budget 2016

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 26, 2016)

Objective of Rail Budget 2016: Transforming Indian Railways into a first-rate service provider while growing into a customer friendly organization

Strategy:

•         New Revenues (monetizing all possible sources of Revenue)
•               New norms (incorporating best international practices including ‘zero-based budgeting approach’)
•              New structures (revisiting all process and organizational structure)

(Source: Rail Budget 2016: Some reformist moves, but worrying math, Live Mint)

•             New Revenues (monetizing all possible sources of Revenue): The Minister plans to step up efforts to monetize various assets, including land, boost non-fare revenue, use the private –public-partnership model more extensively, and work jointly with State governments to both formulate and fund regions-or-city specific projects 

•        New norms (incorporating best international practices including ‘zero-based budgeting approach’):
• 
  “Zero-based budgeting (ZBB) is a method of budgeting in which all expenses must be justified for each new period. Zero-based budgeting starts from a "zero base" and every function within an organization is analyzed for its needs and costs.Budgets are then built around what is needed for the upcoming period, regardless of whether the budget is higher or lower than the previous one.

( http://www.investopedia.com/terms/z/zbb.asp#ixzz41HfqsCAp)”

       “See, first obviously what we did was we started a zero budgeting exercise. So, we told general managers of all divisions to go through each and every cost…..

         Why not go through all the components of that cost? As a result of that we started from the grassroots because zero budgeting cannot happen at the board level. We started it from the grassroots and that has resulted into one big component of saving.”

http://www.livemint.com/Politics/FsjyLE5vmiyTpwiZKlt82N/Weve-created-a-new-atmosphere-of-accountability-Suresh-Pra.html

(From Railway Minister's Interview to DD News)

•            New structures (revisiting all process and organizational structure): The Railway Board is to be reorganized along business lines with cross-functional teams focused on areas such as non-fare revenues, speed enhancement and information technology

Mission:

1. Mission 25 Tonne

2. Mission Zero-accident

3. Mission PACE (Procurement and Consumption Efficiency)

4. Mission Raftaar

5. Mission Hundred

6. Mission beyond Book-keeping

7. Mission Capacity Utilization 

(Transformation of Indian Railways through Avataran - seven Mission mode activities )

Passenger traffic estimate shortfall: 50 crore shortfall (estimated 860 crore passengers for 2015-16 but expected to carry 810 crore passengers)

Capital outlay of Rs. 1.21 lakh crore for 2016-17, a jump of 21 per cent over this year

4.        

Operating ratio target (ratio of working expenses to gross earnings): 92% (realistic in view of implementation of 7^th Pay Commission recommendation as compared to unachieved 88.5% target)

Gross traffic receipts fell by 8.6% from the budgeted estimates.

Freight earnings—the breadwinner of Indian Railways—declined by almost 8% “on account of low demand from the core sector”. 

1

Source: Rail Budget 2016: Some reformist moves, but worrying math, Live Mint
http://www.livemint.com/Opinion/eDE3tE6MdBsXt5Q8rrcLfN/Some-reformist-moves-but-worrying-math.html 

&

Marshalling resources to stay on track, Feb 26, 2016, The Hindu

Feb 25, 2016: MoUs between India and Nepal

Feb 25, 2016: MoUs between India and Nepal

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 25, 2016)

 MoUs between India and Nepal:

7 MoUs signed between India and Nepal during recent visit of Nepal’s PM K.P. Oli. Some of them are:

·         On taking forward reconstruction assistance that India has promised (four sectors i.e. housing,  health, education and cultural heritage have been identified) ·         Strengthening of road infrastructure in the Trai area of Nepal ·         Easing travel and transit of goods (Modalities for traffic of goods between Nepal and Bangladesh while transiting through India, and, transit facilities for Nepal through Vishakhapatnam port) ·         Enhancing power transmission

Restoring goodwill with Kathmandu

Source: Restoring goodwill with Kathmandu, Feb 25, 2016, The Hindu

Direct Benefit Transfer:

Time for plan to roll out Direct Benefit Transfer (DBT) for fertiliser subsidies Source: by  Ajay S. Shriram, Feb 25, The Hindu

DBT for LPG subsidy has resulted in considerable savings for the government. Pilferage still remains a problem. Source: Pilferage remains a problem for LPG subsidy scheme, by TCA Sharad Raghavan, Feb 25, The Hindu

Topic to read for understanding critically:

C. Rangarajan Committee:

Feb 24, 2016: IPR policy likely in a fortnight, PSU stake sale policy soon & NTPC stake sale

Feb 24, 2016: IPR policy likely in a fortnight, PSU stake sale policy soon & NTPC stake sale

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 24, 2016)

IPR policy likely in a fortnight:

Nature of coming IPR policy in India	Entirely compliant with the World Trade Related aspects of IPRs (TRIPS)
Thrust of this IPR policy	·         Awareness generation and effective enforcements of IPRs ·         Encouragement of IP commercialization through various incentives
IPR Policy vs Indian IPR law	No change in the existing Indian IPR laws or other related practice

Source: Government to unveil IPR policy in a fortnight by Arun S, Feb 24, The Hindu

NTPC stake sale oversubscribed:

Government’s 5 % stake sale in NTPC	Two days Offer For Sale (OFS): ·         First day of OFS called ‘T’ day for FIIs and Institutional Buyers ·         T+1 day i.e. second day of OFS for Retail Investor (20% share for retail investors reserved)
NTPC’s OFS on ‘T’ day oversubscribed	·         FII: 23% of the bids
Government’s stake in NTPC after this divestment	69.96%

Source: NTPC stake sale oversubscribed, Feb 24, The Hindu

&

FAQ about Offer for Sale (OFS):

 http://www.bseindia.com/downloads1/RI_FAQ.pdf

PSU stake sale policy soon:

Government likely to come with policy on strategic sale of state-owned companies
The strategic sale is that government is selling the equity of the company along with the controlling management

Source: PSU stake sale policy soon, Feb 24, 2014, The Hindu

Feb 23, 2016: Kudremukh National Park in the Western Ghats

Feb 23, 2016: Kudremukh National Park in the Western Ghats

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 23, 2016)

Kudremukh National Park in the Western Ghats:

Kudremukh National Park in the Western Ghats	·         A part of the world’s 38 ‘hottest hotspots’ of biological diversity ·         A UNESCO world heritage site
The park is home to:	Endangered biodiversity including lion-taled macaques, tigers, Mallabar civets and great pied hornbills
Rivers originating from oark	Tunga, Bhadra and Netravati

Source: Disappearing forests of Kudremukh by Suman Jumani & D.V.Girish, Feb 23, 2016, The Hindu

Some important topics that require attention:

Fiscal Deficit target vs stimulating growth (by increasing Government expenditure):

Kelkar committee’s report:

Fiscal Responsibility and Budget Management Act 2003:

Some facts:

Aggregate tax to GDP Ratio in India	About 17 per cent
Gross tax collection at the Union level	A little over 10 per cent
After devolution, Union government gets	About 6.5 per cent
Non-tax revenue collection	About 2.5 per cent
Total Revenue available to the Union Govt	Less than 10 per cent

Source: A fine balance on the Budget by M. Govinda Rao, Feb 23, The Hindu

Feb 22, 2016: Market Economy Status (MES) for China likely

Feb 22, 2016: Market Economy Status (MES) for China likely

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 22, 2016)

Market Economy Status (MES) for China likely:

Market Economy Status (MES) for China as per the 2001 agreement (Protocol on the accession of China to the WTO)	China likely to be granted “Market Economy Status” under World Trade Organization (WTO) norms from December 2016
Implication for India	It will severely limit India’s ability to resort to anti-dumping as the authorities (Directorate General of Anti-Dumping and Allied Duties, DGAD) will have to accept the production costs and selling price in China as the benchmark
Present Practice in anti-dumping duty	A country can calculate the ‘dumping margin’ on the basis of a comparable export price to an appropriate third country and by ‘constructing’ the production cost with ‘reasonable’ additions {ignoring selling price and production costs in China}
What is Dumping?	Dumping is an unfair trade practice of exporting goods to another country at a price lesser than what is paid in the exporting nation or their normal production cost, thereby distorting international trade and causing injury to the domestic manufacturers of the goods in the importing country
Countries recognizing China’s MES	China is recognised as a market economy by Russia, Brazil, New Zealand, Switzerland and Australia
Countries supporting/likely to support China’s MES	The UK, The Netherlands, and Nordic countries support China’s market economy status. Germany is, in principle, supportive, but is interested in safeguards for sensitive industries, while Italy is strongly opposed

Source: India studying impact of market economy status for China by Arun S, Feb 22, The Hindu
& https://euobserver.com/eu-china/131801

Further reading on Anti-dumping and WTO: https://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm

Understanding WTO:

https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact2_e.htm

Feb 21, 2016: G20 must focus on policy spillovers, says Lagarde

Feb 21, 2016: G20 must focus on policy spillovers, says Lagarde

General Studies: Daily Capsule

Curtain Raiser –News Update (Feb 21, 2016)

G20 must focus on policy spillovers, says Lagarde:

G20 finance ministers and central bank governors will meet in Shanghai on Feb 25 and 26
·         IMF Managing Director Christine Lagarde said that G20 finance ministers and central bank governors should focus on global economic spillovers from their policy decisions when they meet in Shanghai ·         She also said that G20 ministers should examine the interactions of their countries' fiscal policies and structural reform moves
·         The G20 Summit in 2016 will be held on September 4 th and 5 th in Hangzhou, China ·         four meetings will be held for Finance Ministers and Central Bank Governors ·          six for finance deputies ( including one for communique drafting) to move forward the financial agenda Source: http://www.g20.org/English/China2016/G202016/201512/P020151210392071823168.pdf
·         G20 was initiated in 1999 and consists of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Republic of Korea, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union (EU) ·         The first G20 Leaders' Summit was held in 2008. Source: http://www.g20.org/English/aboutg20/AboutG20/201511/t20151127_1609.html
·         The Logo for the 2016 G20 Summit incorporates a stylized bridge consisting of 20 layered lines, symbolizing the 20 members of the Group, the pattern of “G20 2016 CHINA” and a seal with the characters “中国” (“China”) in traditional Chinese font. ·         The bridge signifies that the G20 is a bridge for global economic growth, international cooperation and a win-win future. ·          The layered lines are reminiscent of fiber-optic cables, representing an inter-connected world in the information age. ·         The letter “O” highlighted in the image of “G20” embodies unity and coordination among G20 members. ·         The seal is a representation of traditional Chinese culture and matches the English word “CHINA”. Source: http://www.g20.org/English/China2016/Logo/index.html

Source: G20 must focus on policy spillovers, says Lagarde, Feb 21, 2016, The Hindu

Fiscal Responsibility and Budget Management Act 2003:

XIV Finance Commission: