Economic Development and Policies

India;s Economic Development and Policies

Allocation to  the most important budget schemes in Union Budget 2018-19

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In the Union Budget Estimate 2018-19, most schemes have been bolstered, but some have been cut.

Pradhan Mantri Krishi Sinchai Yojna

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 7,392 crore Rs 9,429 crore 27.56%

Pradhan Mantri Gram Sadak Yojna

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 16,900 crore Rs 19,000 crore 12.43%

Aimed at providing all weather road connectivity in rural areas of India to improve livelihood opportunities.

Pradhan Mantri Awas Yojna(PMAY)

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 29,043 crore Rs 27,505 crore -5.3%

National Rural Drinking Water Mission

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 7,050 crore Rs 7,000 crore -0.71%

Goal is to provide adequate safe water for drinking, cooking and other domestic needs to rural Indians.

Swachh Bharat Mission

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 19,248 crore Rs 17,843 crore -7.3%

National Health Mission

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 31,292 crore Rs 30,634 crore -2.1%

National Education Mission

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 29,556 crore Rs 32,613 crore 10.34%

National Programme of Mid Day Meal in Schools

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 10,000 crore Rs 10,500 crore 5%

Provides free lunches to primary and upper primary students at government schools.

Umbrella ICDS

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 19,963 crore Rs 23,088 crore 15.65%

Mission for Protection and Empowerment for Women

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 988 crore Rs 1,366 crore 38.26%

National Livelihood Mission – Ajeevika

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 4,699 crore Rs 6,060 crore 28.96%

Jobs and Skill Development

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,905 crore Rs 5,071 crore 74.56%

Aimed at training 40 crore Indians in different skills by 2022.

Environment, Forestry and Wildlife

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 975 crore Rs 1,019 crore 4.51%

Urban Rejuvenation Mission: AMRUT and Smart Cities Mission

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 8,999 crore Rs 12,169 crore 35.23%

Modernisation of Police Forces

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,577 crore Rs 3,157 crore 22.51%

Infrastructure Facilities for Judiciary

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 629 crore Rs 630 crore 0.16%

Provides funding for construction of court buildings and residential complexes for judges.

Border Area Development Programme

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,100 crore Rs 771 crore -29.91%

Scheme to meet special developmental needs of people living in border areas.

Shyama Prasad Mukherjee Rurban Mission

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 600 crore Rs 1,200 crore 100%

Aimed at stimulating local economic development, enhancing basic services and creating well planned Rurban clusters.

Rashtriya Swasthya Bima Yojna Major Central Sector Schemes

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 471 crore Rs 2,000 crore 324.63%

Crop Insurance Scheme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 10,698 crore Rs 13,000 crore 21.52%

Provides insurance cover to food crops, oilseeds and commercial crops with known yielding patters.

Interest Subsidy for Short Term Credit to Farmers

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 14,750 crore Rs 15,000 crore 1.69%

Crop Science

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 400 crore Rs 800 crore 100%

Agricultural Universities and Institutions

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 658 crore Rs 685 crore 4.1%

Regional Connectivity Scheme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 200 crore Rs 1,014 crore 407%

Interest Equalisation Scheme (Department of Commerce)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,000 crore Rs 2,500 crore 25%

National Industrial Corridor Development and Implementation Trust (NICDIT)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 797 crore Rs 1,097 crore 37.64%

Green Revolution

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 11,185 crore Rs 13,909 crore 24.35%

Aimed at increasing agricultural productivity.

White Revolution

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,633 crore Rs 2,220 crore 35.95%

Aimed at increasing milk and dairy production in India.

Blue Revolution

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 302 crore Rs 643 crore 112.91%

Scheme for integrated development and management of fisheries.

Amended Technology Upgradation Fund Scheme(ATUFS)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,956 crore Rs 2,300 crore 17.59%

Biotechnology Research and Development

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,252 crore Rs 1,350 crore 7.83%

Border Infrastructure and Management

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,040 crore Rs 1,750 crore -14.22%

Capacity Building- Panchayat Sashaktikaran Abhiyaan (PSA) / Rashtriya Gram Swaraj Abhiyan (RGSA)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 638 crore Rs 721 crore 13.01%

Central Silk Board

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 600 crore Rs 501 crore -16.5%

Compensation to Service Providers for creation and augmentation of telecom infrastructure-Bharatnet

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 7,000 crore Rs 10,000 crore 42.86%

Credit Support Programme

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,802 crore Rs 700 crore -75.02%

Deen Dayal Upadhyaya Gram Jyoti Yojna

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 5,400 crore Rs 3,800 crore -29.63%

Aimed at strengthening Irural agriculture by providing increasing rural electrification among other steps.

Education of Minorities girl child

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 661 crore Rs 860 crore 30.11%

Employees Pension Scheme, 1995

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 5,111 crore Rs 4,900 crore -4.13%

Equity Capital to Micro Units Development Refinance Agency (MUDRA Bank)

NEW SCHEME

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
N/A Rs 600 crore N/A

Exhibition-Cum-Convention Centre, Dwarka

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 500 crore Rs 700 crore 40%

Green Energy Corridors – Grid Interactive Renewable Power

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 500 crore Rs 600 crore 20%

Higher Education Financing Agency (HEFA)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 250 crore Rs 2,750 crore 1000%

Innovation, Technology Development and Deployment

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 670 crore Rs 720 crore 7.46%

Integrated Development of Tourist Circuits around specific themes (Swadesh Darshan) & PRASAD

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,050 crore Rs 1,250 crore 19.05%

Integrated Power Development Scheme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 4,372 crore Rs 4,935 crore 12.88%

Goal is to strengthen the sub-transmission and distribution system including provisioning of solar panels and IT enablement of distribution sector.

Khelo India

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 350 crore Rs 520 crore 48.57%

Aimed at developing sports infrastructure in both rural and urban areas, identifying and nurturing talent.

LPG Connection to Poor Households

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,252 crore Rs 3,200 crore 42.1%

Provides LPG at subsidized rates.

Member of Parliament Local Area Development Scheme (MPLAD)

UNCHANGED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 3,950 crore Rs 3,950 crore 0%

Metro Projects & MRTS

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 18,000 crore Rs 15,000 crore -16.67%

National River Conservation Programme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 723 crore Rs 770 crore 6.5%

National Seismic Programme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 10 crore Rs 1,300 crore 12900%

North Eastern Industrial and Investment Promotion Policy (NEIPP)

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 783 crore Rs 528 crore -32.57%

Optical Fibre Cable based network for Defence Services

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 3,755 crore Rs 4,500 crore 19.84%

Pardhan Mantri Swasthya Suraksha Yojana

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 3,175 crore Rs 3,825 crore 20.47%

Phulpur Dhamra Haldia Pipeline Project

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 400 crore Rs 1,674 crore 318.5%

Police Infrastructure

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 4,490 crore Rs 4,750 crore 5.79%

Aimed at bolstering state police forces by building secure police stations, providing better training and equipping forces with modern weaponry.

Pradhan Mantri Kisan Sampada Yojana

NEW SCHEME

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
N/A Rs 1,313 crore N/A

Price Stabilisation Fund

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 3,500 crore Rs 1,500 crore -57.14%

Seeks to support market interventions for price control of perishable agri-horticultural commodities like onion, potato etc.

Prime Minister Employment Generation Programme (PMEGP)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,195 crore Rs 1,801 crore 50.71%

Procurement of Cotton by Cotton Corporation under Price Support Scheme

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 303 crore Rs 924 crore 204.95%

Promotion of Digital payment

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 25 crore Rs 596 crore 2284%

Promotion of Electronics and IT HW Manufacturing (MSIPS, EDF and Manufacturing Clusters)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 485 crore Rs 864 crore 78.14%

Refund of Central and Integrated GST to Industrial Units in North Eastern Region and Himalayan States

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,440 crore Rs 1,500 crore 4.17%

Remission of State Levies (ROSL)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,855 crore Rs 2,164 crore 16.66%

Sagarmala

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 480 crore Rs 600 crore 25%

Sahaj Bijli Har Ghar Yojana (Rural)- Saubhagya

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,550 crore Rs 2,750 crore 77.42%

Science and Technology Institutional and Human Capacity Building

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,008 crore Rs 1,109 crore 10.02%

Solar Power – Grid Interactive Renewable Power

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,117 crore Rs 2,045 crore 83.08%

Solar Power – Off-Grid/Distributed and Decentralized Renewable Power

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 985 crore Rs 849 crore -13.81%

Strengthening of Power Systems including Power Sector Development Fund

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,767 crore Rs 1,311 crore -25.81%

Wind Power – Grid Interactive Renewable Power

UNCHANGED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 750 crore Rs 750 crore 0%

Core of the Core Schemes

Mahatma Gandhi National Rural Employment Guarantee Program

UNCHANGED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 55,000 crore Rs 55,000 crore 0%

National Social Assistance Program

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 8,745 crore Rs 9,975 crore 14.07%

Umbrella Programme for Development of Minorities

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 4,075 crore Rs 4,580 crore 12.39%

Umbrella Programme for Development of Other Vulnerable Groups

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 1,630 crore Rs 2,287 crore 40.31%

Umbrella Programme for Development of Scheduled Tribes

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 3,512 crore Rs 3,806 crore 8.37%

Umbrella Scheme for Development of Schedule Castes

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 5,114 crore Rs 5,183 crore 1.35%

National AIDS and STD Control Programme

DECREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,163 crore Rs 2,100 crore -2.91%

Goal is to reduce STD cases and prevent both short and long term morbidity due to STDs.

National Capital Region Transport Corporation

NEW SCHEME

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
N/A Rs 659 crore N/A

National Ganga Plan and Ghat Works

UNCHANGED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 2,300 crore Rs 2,300 crore 0%

National Highways Authority of India including Road Works

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 60,671 crore Rs 70,544 crore 16.27%

National Manufacturing Competitiveness Programme (NMCP)

INCREASED

Revised Estimate, 2017-18 Budget Estimate, 2018-19 Change
Rs 461 crore Rs 1,006 crore 118.22%

 

 

Highlights of RBI’s sixth bi-monthly monetary policy statement

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The Reserve Bank of India announced its 6th bi-monthly monetary and credit policy on January 06, 2018. It kept the key policy rate unchanged at 6 percent for the third consecutive time  in view of firming inflation. The Reserve Bank of India’s monetary policy committee on Wednesday decided to maintain status quo on the policy repo rate as it saw inflationary pressure building up in the economy. The pressure, among others, is likely to arise due to the staggered impact of house rent allowance increases by various States, the possibility of crude oil and commodity prices going up, the impact of an increase in the minimum support price for kharif crops, and fiscal slippage.

The Monetary Policy Committee (MPC), headed by RBI Governor Urjit Patel had last reduced the benchmark lending rate by 0.25 percentage points to 6 percent last August, bringing it to a 6-year low.In its December review, the MPC had kept the benchmark interest rate unchanged on concerns of a possible price rise but had left the door ajar for a rate cut in future. Retail inflation crossed the RBI’s comfort level and rose to 5.21 percent in December on increase in prices of food items. The retail inflation, based on Consumer Price Index (CPI), was 4.88 percent in November. In December 2015, it was 3.41 percent.

Highlights

* Key lending rate (repo) unchanged at 6 percent;

* Reverse repo rate remains at 5.75 percent and marginal standing facility (MSF) rate and Bank Rate at 6.25 percent;

* Monetary policy’s stance neutral;

* Petrol and diesel prices rose sharply in January, reflecting lagged pass-through of past increases in global crude prices;

* Retail inflation estimated at 5.1 percent in Q4 this fiscal and 5.1-5.6 percent in H1 of FY2018-19;

* Inflation likely to ease to 4.5-4.6 percent in H2 of FY19;

* Gross Value Added (GVA) growth for FY18 seen at 6.6 percent;

* GVA growth for 2018-19 projected at 7.2 percent;

* GST stabilising, which augurs well for economic activity;

* Early signs of revival in investment activity;

* RBI seeks pick-up in credit growth due to recapitalisation of PSBs and resolution proceedings under IBC;

* Export growth expected to improve further on account of improving global demand;

* RBI says focus of Union Budget on rural and infrastructure sectors a welcome development;

* Five members voted in favour of status quo in interest rate; one member voted for increase of 0.25 percent;

* Next meeting of the MPC on 4 and 5 April.

As was widely anticipated, the six-member committee (MPC) voted 5:1 to keep the policy repo rate (the interest rate at which banks borrow funds from the RBI to overcome short-term liquidity mismatches) unchanged at 6 per cent in the sixth and last bi-monthly monetary policy review of FY18. It continued with a neutral monetary policy stance. Market players expect the central bank to leave the policy repo rate unchanged in the first bi-monthly monetary policy review for FY2019, scheduled for April 5. “We look at inflation projections longer than what is happening in this quarter,” said Urjit Patel, RBI Governor, at a media briefing. “If you look at our 2018-19 forecast, and if you make adjustments for HRA, going forward the inflation rates are still around 4.5 per cent… In some quarters, some months, they (inflation rates) may be a little high. Taking all that into account, we felt that at this stage, without more data coming, it was not necessary to change the repo rate or the policy stance.”

Indian stock markets crash on global clues; Sensex ends 1,274 points lower, Nifty nosedives 390 points 

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Unprecedented Crash

India’s stock markets fell from its never seen peak on February 06 as panic in global markets triggered a sell-off at Dalal Street with Sensex crashing 1,003 points and Nifty erasing as much as 371.4 points in the opening trades. A market-wide sell-off pattern was observed in the Indian equities as the US benchmark index Dow Jones Industrial Average tumbled as many as 1,175.21 points on February 05, posting its biggest intraday decline in history shedding nearly 1,600 points. BSE Sensex lost 1,003.38 points or 2.89% to open at 33,753.78 whereas NSE Nifty lost 371.4 points or 3.48% to begin at 10,295.15.

NSE Indicators crash

The global indicator of NSE Nifty, SGX Nifty Futures faced a knee-jerk reaction in the early trades on the day. The index plunged as many 394 points or 3.68% at 10,315.5 on the Singapore Stock Exchange on February 06, its lowest since 18 December 2017. This was the biggest intraday percentage drop since 9 November 2016. It all primarily happened as Wall Street’s biggest decline since 2011 took place and as investors’ faith in factors underpinning a bull run in markets began to crumble on February 05.

A massive slide was witnessed in every index be it a broader indicator such as Nifty Next 50 or a sectoral index like Nifty Bank. Among the broader market indices of National Stock Exchange, Nifty Next 50, Nifty 100, Nifty 200, Nifty 500, Nifty Midcap 50, Nifty Sml100 Free and Nifty Mid100 Free shed 2-4.2%. On the other hand, all of the sectoral indices of NSE traded down with Nifty Bank, Nifty Fin Service, Nifty Pvt Bank, Nifty Auto, Nifty Metal, Nifty PSU Bank and Nifty Realty losing the most.

BSE indicators Crash

All the shares of BSE Sensex index were trading in red with stock of Tata Motors, Yes Bank, Axis Bank, Tata Steel, ICICI Bank, State Bank of India, Adani Ports, Asian Paints, HDFC Bank, Maruti Suzuki, Hero MotoCorp, L&T, HUL, IndusInd Bank, Kotak Mahindra Bank, HDFC, Coal India, ONGC, ITC, Dr Reddy’s, NTPC, Sun Pharma, Power Grid, M&M, Reliance Industries, Bajaj Auto, Infosys, Wipro, TCS and Bharti Airtel lost 1-8%. The heavyweight shares of companies such as HDFC Bank, HDFC, ICICI Bank, ITC, Reliance Industries, L&T, Tata Motors, Infosys, Axis Bank, Maruti Suzuki, SBI, Kotak Mahindra Bank, HUL, TCS, Yes Bank, IndusInd Bank and M&M contributed heavily in the Sensex declines. Collectively these 17 shares wiped off as much as 890 points out of the index.

The US Stock Market Crash and ripple Effects on Indian Market

The Indian stock market recorded unprecedented jolt on the back of decline in US capital market indices. Although some indications appeared even yesterday, yet today the decline was deeper and wider in the Indian stock markets. Indian stock markets finished lower on January 05 with the headline indices Sensex and Nifty closing in red for the fifth straight day following the global sell-off in equity markets. BSE Sensex fell as much 309.59 points or 0.88% to end at 34,757.16 and NSE Nifty washed off 94.05 points or 0.87% to settle at 10,666.55. US stocks plunged in highly volatile trading on January 05, with both the S&P 500 and Dow Industrials indices slumping more than 4.0% as the Dow Jones notched its biggest intraday decline in history with a nearly 1,600-point drop and Wall Street erased its gains for the year, Reuters said in a report. The slumps in the benchmark S&P 500 index and the Dow Jones Industrial Average were the biggest single-day percentage drops since August 2011, a period of stock-market volatility marked by the downgrade of the United States’ credit rating and the euro-zone debt crisis.

The Dow Jones Industrial Average fell 1,175.21 points or 4.6% to 24,345.75, the S&P 500 lost 113.19 points or 4.1% to 2,648.94 and the Nasdaq Composite dropped 273.42 points or 3.78% to 6,967.53. On Monday, the S&P 500 ended 7.8% down from its record high achieved on 26 January 2018, with the Dow down 8.5% over that time. The declines come after the Dow and S&P posted their biggest weekly percentage drops since January 2016 last week, and the Nasdaq posted its biggest weekly drop since February 2016. At one point, the Dow fell 6.3 percent or 1,597 points, the biggest one-day points’ loss ever. Even with the sharp declines, stocks finished above their lows touched during the session.

Reasons for crash

  1. Finance Secretary Hasmukh Adhia has pointed fingers to the global markets. “It is very unfortunate that our move came in at wrong time because of global markets also going down. There is a strong connection of all equity markets. The MSCI all country index of equity markets went down by 3.4 per cent in last week, especially on February 1, and February 02. He added, “If the entire world index has gone down by 3.4 per cent, naturally it would have ripple effect on Indian stock market also. It is not LTCG tax effect.”
  2. The indications from the U.S Federal Reserve, that country’s central bank might hike the benchmark interest rates, despite keeping the rates unchanged recently at the last meeting chaired by Janet Yellen. The interest rates are the rates at which the Reserve lends money to the other banks. A jump in the interest rate means that banks may hike interest rates themselves, passing the cost on to the customers. This will make loans and credit cards costlier, affecting companies’ financial performance as they have to pay more as interest costs, while also slowing down investment and expansion.
  3. Higher interest rates also affect stock markets indirectly by reducing consumer spending. The higher rates generally encourage more savings and less borrowing in the economy, which leads to a dip in consumption and lower revenues for companies. Since share prices are directly influenced by how companies perform financially, higher interest rates are generally badly received by stock markets.
  4. A course correction was due both in the US and India. This sudden fall in the markets can also be due to the fact that stock prices have been steadily rising — a nine-year bull run. “The U.S. stock market has climbed to record peaks since President Donald Trump’s election, on the prospect of tax cuts, corporate deregulation and infrastructure spending, and it remains up 23.8 per cent since his victory. A course correction is usually started by a sell off. In this case, the trigger was the rise in U.S. bond yields and the rate of increase of U.S. wages, which in turn “raised an alarm about higher inflation and potentially higher interest rates. In India despite twin balance sheet problem, poor industrial growth, farmers suicide and unemployment share prices in recent times had risen to record highs.
  5. Another proximate reason in case of crash of the Indian stock market is proposal of tax on Long Term Capital Gains (LTCG). In the Indian markets, the decline may also be due to last week’s budget proposal of 10 per cent long-term capital gains (LTCG) tax on equities. LTCG or long-term capital gains refer to the gains made on any class of asset held for a particular period of time. In case of equity shares, it refers to the gains made on stocks held for more than one year.
  6. The inflationary expectations leading to a possible increase in the RBI repo rate to avert fears of inflation might also be one of the reasons.

India’s ‘unwanted’ girls: Economic Survey highlights how preference for sons is hurting daughters

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While an average Indian family prefers to have two children, there are instances where families have more than five children if the last child is not a male.

The Economic Survey has mentioned that the desire for a male child has created 21 million “unwanted” girls in India between 0 and 25 years.

Chapter Seven of the Survey, tabled in Parliament on Monday, deals with gender equality. While India has shown improvement in several parameters related to women’s empowerment, the preference for a son has not diminished. “In some sense, once born, the lives of women are improving but society still appears to want fewer of them to be born,” the Survey stated.

The Survey has taken note of the behavioural pattern of Indian parents who prefer to have children “until the desired number of sons are born.” Calling this the “son meta-preference,” the Survey has found that while an average Indian family prefers to have two children, there are instances where families have more than five children if the last child is not a male.

The biologically determined natural sex ratio at birth is 1050 males per 1000 females. After sex selection was declared illegal in India in 1994, the sex ratio at birth (SRB) began to stabilise. In 1970, the SRB was 1060 males per 1000 females. In 2014, this rose to 1108, contrary to the belief that development would mend the skewed sex ratio.

 The Survey pointed out the missing link by analysing the sex ratio of last child (SRLC). The SRLC in India is biased against females and is lower by 9.5 percentage points in 2015-16 in comparison with other countries.

The sex ratio among families with one child stood at 1.82 i.e., 1820 males per 1000 females. This drops to 1.55 for families with two children and rises to 1.65 for three, and drops to 1.51 and 1.45 for four and five children, respectively. Comparing it with the sex ratio of families where the last child is not a male, it stands at 1.07, 0.86, 0.85, 0.84, 0.88 respectively. This shows the Indian families tend to “stop” having children after a son is born.

The Survey pointed out several reasons behind preferring a male child such as compulsion of a woman to move to her husband’s house post marriage, inheritance of property, rituals performed by sons, and dowry, among others.

Male child preference lowest in Meghalaya

The male child preference is highest in Punjab and Haryana and lowest in Meghalaya. More than 2 million women go missing across age groups every year either due to sex-selective abortion, disease, neglect, or inadequate nutrition, according to the National Family and Health Survey (NFHS).

While more women are educated, employed and earning than 10 years ago, they still do not have control over their earnings and childbirth. Quoting the NFHS, the Survey pointed out that more women tend to quit their employment after marriage or childbirth.

The Survey recommended that the nation must confront the societal preference for male offspring. Noting that schemes such as Beti Bachao, Beti Padhao, Sukanya Samridhi Yojana, enhanced maternity leave and mandatory creches in workplaces are steps in the right direction, the Survey called for a stronger commitment on the gender front similar to the government’s push for Ease of Doing Business.

Highlights of Union Budget 2018-2019

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Finance Minister Arun Jaitley presented his Budget for the year 2018-19 in Parliament on February 1, 2018.  The budget is largely focused on uplift of agricultural sector, along with major push to healthcare and education sectors in the country. The FM claimed that government has worked sincerely, and without weighing the political costs, hoping that benefits are delivered to people at their doorsteps.  This year’s Budget will particularly focus on agriculture. The finance minister also pointed out that India is one of the fastest-growing economies in the world. He said that Indian economy has performed very well since our government took over in May 2014. He also recalled the measures — like GST, FDI, demonetisation, etc. — taken by the NDA government in the past four years that have impacted the economy of the country. Prime Minister Narendra Modi praised his finance minister Arun Jaitley for delivering a budget that is “farmer friendly, common citizen friendly, business environment-friendly and development friendly.”

Major Highlights:

  • PAN to be used as Unique Entity Number for non- individuals from April 1. Govt makes PAN mandatory for any entity entering into a financial transaction of Rs 2.5 lakh or more
  • No changes in personal income tax slabs.
  • FM Jaitley proposes to introduce tax on distributed income by equity oriented mutual funds at 10 per cent.
  • Salaried tax-payers to get a standard deduction of ₹40,000 in lieu of transport allowance and “other medical expenses”.
  • ₹2,000-crore fund for development of agri markets.
  • Companies with turnover of up to Rs 250 crore to be taxed at 25 per cent.
  • Health and education cess has been increased to 4 per cent.
  • Electronic IT assessment will be rolled out across the country, leading to greater efficiency and transparency:
  • All senior citizens will now be able to claim benefit of a deduction of ₹50,000 for any medical insurance.
  • For critical illnesses, the deduction has been increased to ₹1,00,000.
  • Free power connections to 4 crore homes under Saubhagya Yojana.
  • Eight crore free gas connections for poor women through Ujjwala Yojana.
  • to implement minimum support price for all crops; It is hiked to 1.5 times of production costs.
  • FM says governments’s emphasis is on generating higher benefits and productive employment for the farmers:
  • Target of 3 lakh crore for lending under PM Mudra Yojana.
  • Government aims to bring 60 crore bank accounts under the Jan Dhan Yojana.
  • FM says the Direct Benefit Transfer system of India is a success story that is reiterated across the world.
  • Government to contribute 12 per cent of EPF contribution for new employees in all sectors.
  • FM proposes a fiscal deficit of 3.3% of GDP for 2018-19.
  • Govt’s health scheme to cover 10 crore poor families is world’s largest government-funded health protection scheme.
  • New flagship National Health Protection Scheme, providing a health insurance cover of ₹5 lakh per family per year announced.
  • Rs 600 crore allocated to Tuberculosis patients undergoing treatment.
  • 5 lakh WiFi hotspots will be set up in rural areas to provide easy internet access.
  • Eklavya schools to be started for Scheduled Tribe populations.
  • To tackle brain drain, Jaitley announces scheme to identify bright students pursuing B Tech in premiere engineering institutes, and providing them higher-education opportunities in the IITs and IISc. These students will receive handsome fellowships, and will be expected to dedicate a few hours to teach in higher education institutions weekly.
  • FM proposed integrated BEd programme for teachers: “training of teachers during service is essential.” Technology will be the biggest driver in improving the quality of education.
  • Budget allocates money for social security and protection programme for all widows and orphaned children.
  • Govt announces Amrut program to focus on water supply to all households in 500 cities. Water supply contracts for 494 projects worth Rs 19,428 core will be awarded.
  • FM proposes a sum of Rs 500 crore for ‘Operation Green’ on the lines of ‘Operation Flood’.
  • Air pollution in Delhi-NCR has been a cause of concern, govt has proposed subsidised machinery for in-situ management of crop residue in Punjab, Haryana, Uttar Pradesh and NCT Delhi.
  • Govt of India will take necessary measures to put in place measures for the state government to purchase surplus solar power produced by local farmers at sutiable prices.
  • Infrastructure and MSMES ARE the growth driver of economy
  • Railway capex for 2018-19 set at ₹1.48 lakh crore.
  • FM says that 4,000 km of new railway track will be laid down by 2019.
  • All railways stations with footfall more than 25,000 to have escalators.
  • The government will undertake redevelopment of 600 major railway stations across the country.
  • Specialised railway university to be set up at Vadodara.
  • Airport capacity to be hiked to handle 1 billion trips every year.
  • National Heritage City Development Augmentation Scheme has been undertaken to preserve and protect heritage cities in the country.
  • Disinvestment target for 2017-18 has been exceeded and will reach Rs 1 lakh crore. Target for 2018-19 is Rs 80,000 crore.
  • Mobile phones set to become costlier as custom duty on them has been increased to 20 per cent.
  • Finance Minister Arun Jaitley proposes revising emoluments as per the following structure:– Rs 5 lakh for the President of India
    — Rs 4 lakh for the Vice President
    — Rs 3.5 lakh for the Governors
  • Automatic revision of emoluments parliamentarians every five years, pegged to inflation.
  • Government will take all steps to eliminate use of cryptocurrencies which are funding illegitimate transactions.
  • NITI Aayog will establish a national programme to direct our efforts in the area of Artificial Intelligence towards national development.

Economic Survey 2018 Highlights

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  • GDP to grow 7-7.5% in FY19; India to regain fastest growing major economy tag
  • GDP growth to be 6.75% in FY2017-18.
  • NITI Aayog Vice Chairman says that he hopes the government sticks to its 3% fiscal deficit target for FY19 but that it was possible that the deficit could end up being higher than that.
  • Agriculture, education, and employment will be areas of focus in the medium term.
    Economic Survey says private investment is poised for a rebound.
  • Policy vigilance required next fiscal if high oil prices persist or stock prices correct sharply.
  • The Economic Survey says economy management is likely to be challenging in FY19.
  • Policy agenda for next year — support agriculture, privatise Air India, finish bank recapitalization.
  • GST data shows 50% rise in number of indirect taxpayers.
  • Tax collection by states, local governments significantly lower than those in other federal countries.
  • Demonetisation has encouraged financial savings.
  • Insolvency Code being actively used to resolve NPA woes.
  • Retail inflation averaged 3.3% in 2017-18, lowest in last 6 fiscals.
  • India needs to address pendency, delays and backlogs in the appellate and judicial arenas.
  • Urban migration leading to feminisation of farm sector.
  • Economic Survey says that consumption demand is likely to be aided by low real estate.
  • Rs 20,339 cr approved for interest subvention for farmers in current fiscal
  • FDI in services sector rises 15% in 2017-18 on reforms.
  • Fiscal federalism, accountability to help avoid low equilibrium trap.
  • India’s external sector to remain strong on likely improvement in global trade. The biggest source of upside potential is the exports sector.
  • Technology should be used for better enforcement of labour laws.
  • Swachh Bharat initiative improved sanitation coverage in rural areas from 39% in 2014 to 76% in January 2018.
  • Priority to social infrastructure like education, health to promote inclusive growth
  • Centre, states should enhance cooperation to deal with severe air pollution
  • Survey 2017-18 in pink colour to highlight gender issues.
  • The Economic Survey has taken note of the behavioural pattern of Indian parents who prefer to have children “until the desired number of sons are born” calling this the “son meta-preference. The Economic Survey has mentioned that the desire for a male child has created 21 million “unwanted” girls in India between 0 and 25 years. While India has shown improvement in several parameters related to women’s empowerment, the preference for a son has not diminished.

Cabinet approves amendments in FDI policy

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The Union Cabinet chaired by Prime Minister Narendra Modi has given its approval to a number of amendments in the FDI Policy. These are intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country. In turn, it will lead to larger FDI inflows contributing to growth of investment, income and employment.  Government has put in place an investor friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/ activities. the Government has decided to introduce a number of amendments in the FDI Policy.

 Details:

a)      FDI in Single Brand Retail Trading – Government approval no longer required for FDI in Single Brand 

                 Retail Trading (SBRT)

  • Extant FDI policy on SBRT allows 49% FDI under automatic route, and FDI beyond 49% and up to 100% through Government approval route. It has now been decided to permit 100% FDI under automatic route for SBRT.
  • It has been decided to permit single brand retail trading entity to set off its incremental sourcing of goods from India for global operations during initial 5 years, beginning 1st April of the year of the opening of first store against the mandatory sourcing requirement of 30% of purchases from India. For this purpose, incremental sourcing will mean the increase in terms of value of such global sourcing from India for that single brand (in INR terms) in a particular financial year over the preceding financial year, by the non-resident entities undertaking single brand retail trading entity, either directly or through their group companies. After completion of this 5 year period, the SBRT entity shall be required to meet the 30% sourcing norms directly towards its India’s operation, on an annual basis.
  • A non-resident entity or entities, whether owner of the brand or otherwise, is permitted to undertake ‘single brand’ product retail trading in the country for the specific brand, either directly by the brand owner or through a legally tenable agreement executed between the Indian entity undertaking single brand retail trading and the brand owner.
    b)      Civil Aviation

As per the extant policy, foreign airlines are allowed to invest under Government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India. It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that:

  • Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly
  • Substantial ownership and effective control of Air India shall continue to be vested in Indian National.

    c)       Construction Development: Townships, Housing, Built-up Infrastructure and Real Estate Broking Services

It has been decided to clarify that real-estate broking service does not amount to real estate business and is therefore, eligible for 100% FDI under automatic route.

d)      Power Exchanges

Extant policy provides for 49% FDI under automatic route in Power Exchanges registered under the Central Electricity Regulatory Commission (Power Market) Regulations, 2010. However, FII/FPI purchases were restricted to secondary market only. It has now been decided to do away with this provision, thereby allowing FIIs/FPIs to invest in Power Exchanges through primary market as well.

e)      Other Approval Requirements under FDI Policy:

As per the extant FDI policy, issue of equity shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. is permitted under Government approval route. It has now been decided that issue of shares against non-cash considerations like pre-incorporation expenses, import of machinery etc. shall be permitted under automatic route in case of sectors under automatic route.

Foreign investment into an Indian company, engaged only in the activity of investing in the capital of other Indian company/ies/ LLP and in the Core Investing Companies is presently allowed upto 100% with prior Government approval. It has now been decided to align FDI policy on these sectors with FDI policy provisions on Other Financial Services. Thus, if the above activities are regulated by any financial sector regulator, then foreign investment upto 100% under automatic route shall be allowed; and, if they are not regulated by any Financial Sector Regulator or where only part is regulated or where there is doubt regarding the regulatory oversight, foreign investment up to 100% will be allowed under Government approval route, subject to conditions including minimum capitalization requirement, as may be decided by the Government.

f)       Competent Authority for examining FDI proposals from countries of concern

As per the existing procedures, FDI applications involving investments from Countries of Concern, requiring security clearance as per the extant FEMA 20, FDI Policy and security guidelines, amended from time to time, are to be processed by the Ministry of Home Affairs (MHA) for investments falling under automatic route sectors/activities, while cases pertaining to government approval route sectors/activities requiring security clearance are to be processed by the respective Administrative Ministries/Departments, as the case may be. It has now been decided that for investments in automatic route sectors, requiring approval only on the matter of investment being from country of concern, FDI applications would be processed by Department of Industrial Policy & Promotion (DIPP) for Government approval. Cases under the government approval route, also requiring security clearance with respect to countries of concern, will continue to be processed by concerned Administrative Department/Ministry.

g)      Pharmaceuticals:

FDI policy on Pharmaceuticals sector inter-alia provides that definition of medical device as contained in the FDI Policy would be subject to amendment in the Drugs and Cosmetics Act. As the definition as contained in the policy is complete in itself, it has been decided to drop the reference to Drugs and Cosmetics Act from FDI policy. Further, it has also been decided to amend the definition of ‘medical devices’ as contained in the FDI Policy.

h)      Prohibition of restrictive conditions regarding audit firms:

The extant FDI policy does not have any provisions in respect of specification of auditors that can be appointed by the Indian investee companies receiving foreign investments. It has been decided to provide in the FDI policy that wherever the foreign investor wishes to specify a particular auditor/audit firm having international network for the Indian investee company, then audit of such investee companies should be carried out as joint audit wherein one of the auditors should not be part of the same network.

 

 

Consumer price inflation rises, industrial output slows down

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India’s retail inflation unexpectedly accelerated to a 15-month high of 4.88%   in November 2017 while industrial production slowed down to 2.2% in October. Retail inflation, which rose 3.58% in October, rose in the subsequent month mainly on account of rising fuel and food prices. While fuel price inflation accelerated to 7.9%, food price inflation was up 4.4% in November. The inflation data thus revealed the growing downside risk of rising crude oil prices. Reserve Bank of India (RBI) had flagged the upward pressure on inflation including rising fuel prices and the increase in house rent allowance (HRA) to central government employees in its monetary policy review earlier this month, when it kept policy rates unchanged. It had estimated that retail inflation will be around 4.3-4.7% in the third and fourth quarter of 2017-18.

The central bank said that the recent rise in crude oil prices may sustain, especially on account of Organization of the Petroleum Exporting Countries’ decision to maintain production cuts through next year. According to the RBI, any adverse supply shock due to geopolitical developments could push up prices even further. Crude oil prices reached a 30-month high on Tuesday at $65 a barrel, indicating that pressure on inflation, at least on account of fuel, is expected to continue.

 Separate data released by the government showed that India’s factory output, measured by the Index of Industrial Production (IIP), slowed in October 2017 from an upwardly revised 4.14% in September. While mining output was stagnant in October, manufacturing and electricity grew at 2.47% and 3.2%, respectively. Capital goods production, which indicates investment demand in the economy, grew for a third consecutive month in October, by 6.8%. However, consumer durable goods contracted for the second consecutive month at 6.9%.  According to analysts, there was volatility in production data due to implementation of GST. However, it was expected that this would stabilize. If output does not pick up in November and December, the stagnation could continue till March. Only infrastructure, steel and automobiles are doing well. Rest of the sectors are lagging (behind).  The deceleration in factory output suggests the turnaround in investment and demand is yet to resume in earnest.

It needs to be noted that India’s gross domestic product (GDP) growth rebounded to 6.3% in the quarter ended 30 September from 5.7% in the June-ended quarter as activity in the manufacturing sector accelerated. RBI estimates that the Indian economy will grow at 6.7% in 2017-18, which suggests a significant improvement in the second half of this fiscal year.

Reserve Bank of India (RBI) had flagged the upward pressure on inflation including rising fuel prices and the increase in house rent allowance (HRA) to central government employees in its monetary policy review earlier this month, when it kept policy rates unchanged. It had estimated that retail inflation will be around 4.3-4.7% in the third and fourth quarter of 2017-18.

RBI keeps key rates unchanged, raises inflation forecast

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The Reserve Bank of India in its fifth bi-monthly policy review of the fiscal year announced on December 26, 2017 that it is keeping the key interest rates unchanged at 6%. The RBI also maintained its projection for FY18 real GVA (Gross Value Added) growth at 6.7 per cent, saying the risks are evenly balanced. The central bank’s decision to keep REPO rate unchanged was in line with the consensus estimate. A total of 52 of 54 economists surveyed by a Reuters poll had expected a status quo on the policy rate. The policy rate still stands at a seven-year low. The committee had last cut the key lending rate by 25 basis points in August this year.

 The six-member Monetary Policy Committee (MPC), which is headed by RBI Governor Urjit Patel, raised the inflation forecast to 4.3-4.7% in the third and fourth quarters of the current fiscal. Mr. Patel said the MPC took into account the “upward pressure on food and fuel prices”. He noted that there has been significant resource mobilisation in the primary capital market.  He also revealed that the central bank would rationalise merchant discount rates to widen the network of merchants using point-of-sale terminals. The REPO rate is the short-term lending rate. It is notable that 5 of six MPC members voted in favour of a status quo.  MPC member Ravindra H. Dholakia had voted for a policy rate reduction of 25 basis points. The RBI’s policy stance was in line with expectations, maintaining a word of caution on the upside risks emanating from high commodity prices, global financial instability, HRA related increases, rising input costs and fiscal slippages.

Moody’s Investors Service raises India’s sovereign credit rating to Baa2

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Global ratings agency Moody’s Investors Service raised India’s sovereign credit rating to ‘Baa2’ from ‘Baa3’ on November 16, 2017. The credit rating agency asserted that continued progress on economic and institutional reforms will enhance the India’s high growth potential. Moody’s also changed its rating outlook from stable to positive, saying that at the ‘Baa2’ level the risks to India’s credit profile were broadly balanced. It has taken India 26 years to get a credit rating higher than Baa3 from Moody’s. This would give assurance to investors and lenders that the Indian economy is a prospectively a better investment and lending destination than before. Market actually received the news with the expected zeal and enthusiasm. The rupee jumped to 64.63 per dollar after the Moody’s upgrade, against November 16th close of 65.32. The BSE benchmark index Sensex rose more than 400 points to 33,520 while the NSE Nifty surged over 120 points in the opening trade. But any analysis of this upgrade should not be done under irrational exuberance. There are miles to go before India becomes a permanent apple of investors’ eyes.

The agency claimed the initiatives, including demonetisation and Goods and Services Tax (GST), taken up by the government would strengthen India’s credit powers, boost growth prospects and global competitiveness. The reforms would likely contribute to a gradual decline in the general government debt burden over the medium term. Among the reforms Moody’s mentions as responsible for upgrade of India’s credit rating are GST, demonetisation, the inflation-targeting monetary policy framework, the Bankruptcy Act, bank recapitalization, Aadhaar and the Direct Benefits Transfer system. Moody’s believes demonetisation has strengthened institutions by being a part of the government’s efforts to “reduce corruption, formalize economic activity and improve tax collection”. After the agency upgraded the credit ratings on November 17, it received criticism from several quarters on the basis that while India is lacking on the economic growth front and its debt-to-GDP ratio is on the rise, the report gave thumbs up to the economic initiatives taken up by the government. Moody’s explained that current the slowdown in the economic growth – India’s GDP growth slowed to 5.7% in the first quarter from 6.1% in the previous quarter – was the factor it lowered India’s growth forecast to 6.7% in 2017-18. But, Moody’s said, the structural reforms makes the country’s growth potential strong, “stronger than most peers”. “Combined with a large and diversified economy and improving global competitiveness, this boosts economic strength, our view of an economy’s shock absorption capacity, which we assess as “High (+)”, the fourth highest score on our 15-rung sovereign factor score scale.” The agency had earlier posed faith in India’s economic reforms, saying they could improve the business climate, productivity, stimulating foreign and domestic investment, and hence fostering strong and sustainable growth.

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