Date 18.11.

2013
Economy
One of the first promises that Raghuram Rajan made when he assumed office as Goernor of the
Resere !an" of #ndia $R!#% was to enhance transparency and communication &y the centra'
&an".
()the pu&'ic shou'd hae a c'ear framewor" as to where we are going* and understand how our
po'icy actions fit into that framewor". +ey to a'' this is communication* and # want to underscore
communication with this statement on my first day in office*, Dr. Rajan said the day he assumed
office.
the R!# has a'ways said that it is on'y concerned with o'ati'ity and not with setting a direction for
the currency. -o* was this a departure in po'icy.
/ new dea' for foreign &an"s
0. R. 1. 2arasimhan
Een whi'e the issue of granting &an" 'icences to a few priate &an"s is gaining traction* the
Resere !an" of #ndia $R!#% has re'eased important guide'ines for foreign &an"s to participate in
the #ndian financia' sector in a &igger way than what has &een possi&'e so far.
3he two dee'opments hae one common o&jectie 4 they are meant to deepen the financia'
sector. #f a'' goes we''* a few new priate sector &an"s wi'' adent in ear'y 2015. /t the moment*
there are 26 app'icants* who hae met the stiff e'igi&i'ity criteria* and are &eing etted &y an
independent committee of e7perts headed &y former R!# Goernor !ima' 8a'an.
/warding 'icences to corporates has &een the most contentious issue in the new 'icensing po'icy*
&ut once the decision was made* a few of the #ndia9s &iggest companies hae put in their
app'ications.
3he major theme
3he framewor" for foreign &an"s has one major theme 4 the formation of who''y:owned
su&sidiaries $;O-% for furthering their &usiness in #ndia. 3he R!# guide'ines ma"e it c'ear that the
;O- mode' is what the regu'ator wou'd prefer the foreign &an"s to hae. -uita&'e incenties are
&eing gien to new as we'' as e7isting p'ayers operating through their &ranches in #ndia to adopt
the su&sidiary route and incorporate 'oca''y.
Origin of po'icy
1i"e the new priate &an" 'icensing po'icy* the framewor" for foreign &an"s has passed through
seera' stages.
3he origin of the new po'icy is to &e traced to the year 2005 when the goernment re'a7ed the
foreign direct inestment $<D#% 'imits to =5 per cent in priate sector &an"s. -imu'taneous'y*
foreign &an"s were permitted to set up a 100 per cent who''y:owned su&sidiary in #ndia su&ject to
certain conditions. / detai'ed roadmap for operationa'ising the <D# guide'ines* in two stages* was
issued su&se>uent'y. 3hen* as now* the o&jectie was to encourage foreign &an"s to ta"e the ;O-
route. !ut in the a&sence of any incenties* no &an" came forward to set up or conert their
&ranches into ;O-.
#f the 'atest po'icy is to succeed and attract new foreign &an"s in the ;O- route* the type of
incenties natura''y matter. Great significance is attached to the proiso that a 'oca''y incorporated
;O- wi'' &e gien near:nationa' treatment* which* for a'' purposes* wi'' p'ace them on a par with
#ndian &an"s.
<or instance* they can open &ranches anywhere in the country $e7cept in sensitie areas where
R!# prior approa' wi'' &e re>uired%. #t is e7pected that foreign &an"s a'ready operating &ranches
in #ndia wi'' a'so see in the nationa' treatment a &ig adantage and conert themse'es into ;O-
and participate in a'' financia' sector actiities. 3he ;O- wi'' hae a minimum paid:up capita' of
Rs.?00 crore* which is what has &een stipu'ated for the new priate &an"s.
0orporate guide'ines for the ;O- inc'ude a proiso that not 'ess than ?0 per cent of the directors
shou'd &e #ndian nationa's@2R#s@A#Os.
<urther* not 'ess than two:thirds of the directors shou'd &e non:e7ecutie directors and a minimum
of one:third of the directors shou'd &e independent of the su&sidiary.
3he fear of foreign &an"s ta"ing oer the #ndian financia' sector has &een there eer since the <D#
ru'es were 'i&era'ised.
3o assuage such apprehensions* restrictions wou'd &e p'aced on further entry of new ;O- of
foreign &an"s@capita' infusion* when the capita' and reseres of foreign &an"s and their who''y:
owned su&sidiaries e7ceed 20 per cent of the capita' and reseres of the &an"ing system*
3his stipu'ation is un'i"e'y to satisfy either the foreign &an"s or those who want the R!# to spe''
out a more wor"a&'e system of restraining them.
On the foreign &an"s ta"ing oer sma'' priate &an"s* the guide'ines are circumspect. 3he R!#
wou'd wait and watch &efore a''owing mergers and ac>uisitions.
Eident'y* how foreign &an"s fare in the new dispensation wi'' matter.
3hat* in fact* is something eeryone wou'd &e interested in. -ome of the foreign &an"s hae had a
'ong association with #ndia.
Bet* in terms of o'ume of &usiness and &a'ance sheet e7pansion* een the wor'd9s 'argest &an"s
hae &een 'aggards. ;hi'e in the past they cou'd &'ame restrictie po'icies* they pro&a&'y hae a
more conducie enironment now.
Coweer* it is too simp'istic to assume that they wou'd rush in and ma"e a &ig impact anytime
soon. #f the new po'icy is to succeed* the type of incenties natura''y matter
Date 2=.11.2013
Restore investor trust, EU tells India
(3he prospect of growth is &etter in #ndia. 3he mar"et and prospects wi'' &e much &igger ten years
from now. /mong inestors from ED* there is positie sense on #ndia9s medium:to:'ong term
future*, Er. 0rainho added. Ce was addressing se'ect journa'ists here on 3uesday.
Ce said the &iggest concern among ED inestors was the uncertainty under which they operated in
#ndia. (3he uncertainty of the tax regime here is deastating. 3here is uncertainty with regard to
licensing. 3hese uncertainties rea''y frighten the European inestors. 3he time the courts take
here to resolve disputes is a real deterrent for investment,, he added.
Date 3.12.2013
CAD to remain within limit Chidam!aram
Expresses confidence that the econom" will expand !" # $
Encouraged &y &etter:than:e7pected growth in the 8u'y:-eptem&er >uarter* <inance Einister A.
0hidam&aram* on Eonday* e7pressed confidence that the economy wou'd e7pand &y ? per cent*
and the fisca' and current account deficits wou'd remain within 'imits* notwithstanding the present
stress.
(;e are going through a period of stress* &ut there is a ground for optimism... ;e hope things wi''
&ecome &etter in the second ha'f of the current fisca' $2013:15%. ;e hope to achiee a growth rate
of ? per cent*, he to'd reporters.
Er. 0hidam&aram &ased his optimism on seera' factors such as improement in the current
account deficit $0/D%* output of the serices sector and recoery of e7ports.
3he Resere !an" of #ndia data showed on Eonday that dec'ine in go'd imports and turnaround in
e7ports he'ped narrow 0/D sharp'y to F?.2 &i''ion* or 1.2 per cent of GDA* in the 8u'y:-eptem&er
>uarter of the current fisca'.
(;e are satisfied with 5.8 per cent growth in G2 ersus 5.5 per cent in G1 $/pri':8une%. ;e are
'oo"ing forward to &etter performance in G3 and G5*, Er. 0hidam&aram said.
3he economic growth had s'ipped to decade9s 'ow of ? per cent in 2012:13* and during the first
>uarter of the current fisca'* it was 5.5 per cent.
-eera' g'o&a' institutions* inc'uding the ;or'd !an"* the #nternationa' Eonetary <und $#E<% and
the /sian Dee'opment !an" $/D!%* as we'' as independent e7perts hae projected growth rate of
&e'ow ? per cent for 2013:15.
Er. 0hidam&aram said that with the recent improement in some important sectors such as
manufacturing* &etter performance of e7ports as we'' as certain steps ta"en &y the goernment* the
economy cou'd &e e7pected to show further improement.
Ce a'so e7pressed confidence that goernment wou'd &e a&'e to achiee the disinestment target
of Rs.50*000 crore and contain the fisca' deficit within 5.8 per cent of the GDA. (3he fisca' deficit
at the end of any month does not gie a true picture as e7penditure is front:'oaded and reenues
are usua''y &ac":'oaded. ;e wi'' contain fisca' deficit at 5.8 per cent*, he said.
#n the first seen months $/pri':Octo&er% of 2013:15* the fisca' deficit* which is the difference
&etween earning and spending of the goernment* was a'ready at 85.5 per cent of the fu'':year
!udget Estimate $!E%.
Er. 0hidam&aram saidH (;e are sti'' on target. ;e are on course for disinestment. ;e are sti'' on
trac" to achiee Rs.50*000 crore target.,
Ce said A'an e7penditure at the end of Octo&er was 58.3 per cent of !E* compared to 'ast year9s
53.2 per cent. 2et ta7 and non:ta7 reenues up to Octo&er were 53.2 per cent of !E* e7act'y the
same as 'ast year* he added.
(3here is some momentum in the &eginning of the second ha'f. ;e wi'' push for ta7 co''ections to
speed up* and once reenue co''ections speed up* we are confident that we wi'' contain the fisca'
deficit*, Er. 0hidam&aram said.
3he goernment wi'' garner 'itt'e more from the sa'e of spectrum than the !udget target of
Rs.50*000 crore* he added.
On cut in A'an e7penditure* Er. 0hidam&aram saidH (;e don9t cut A'an e7penditure. Einistries*
departments are usua''y oer:&udgeted at the &eginning of year* and in eery year &y the time we
enter the month of Decem&er* we "now that they cannot spend the entire &udgeted amount.,
Rep'ying to >ueries on inf'ation* Er. 0hidam&aram said the principa' responsi&i'ity of taming
food inf'ation and a'' instruments for that 'ies with -tate goernments.
(<or years* -tate goernments hae simp'y shrugged their responsi&i'ity and &'amed the 0entra'
Goernment... 3hey $-tate goernments% must ta"e action against hoarding and profiteering. 3hey
must ta"e action on remoing the &arriers to trade... 3hey must encourage peop'e to improe
supp'y change to &ring produce to she'es*, he said.
3he retai' inf'ation swe''ed to 10.0I per cent in Octo&er* main'y on account of high food prices.
Date =.12.2013
%in&in pushes for revenue'sharing norm for
oil sector
3he <inance Einistry has as"ed the Aetro'eum and 2atura' Gas Einistry to formu'ate a proposa'
for inter:Einisteria' consu'tations on the reenue sharing arrangement suggested &y the
Rangarajan 0ommittee for the oi' and gas sector.
#t may &e reca''ed that <inance Einister A. 0hidam&aram had* in his 2013 !udget -peech* stated
that oi' and gas e7p'oration contracts wou'd &e awarded on a reenue:sharing &asis* shifting from
the current profit:sharing one.
3he 0omptro''er and /uditor Genera' $0/G%* in its report in 2012* had strong'y pitched for
shifting to a reenue:sharing formu'a* stating that the current production:sharing contracts $A-0s%
proided for e7p'orers to first recoer a'' of their capita' and operating e7penditure &efore sharing
profits with the goernment under a specific formu'a. Coweer* gas producers hae strong'y
opposed to the new formu'a. !ut the <inance Einistry is "een that the new formu'a shou'd &e
adopted for the oi' and gas &'oc"s offering under 2ew E7p'oration 1icensing Ao'icy $2E1A%
Round J* e7pected ear'y ne7t year.
3he 0/G had* in its report* criticised the Aetro'eum Einistry and the Directorate:Genera' of
Cydrocar&ons for haing fai'ed to protect the goernment9s financia' interests* and had ca''ed for
structura' changes in the present A-0s for the management of hydrocar&on e7p'oration and
production* ino'ing the priate sector.
(3he Aetro'eum Einistry is actie'y 'oo"ing into the Rangarajan 0ommittee recommendations on
this issue* and is e7pecting to comp'ete the e7ercise short'y*99 a senior Aetro'eum Einistry officia'
stated.
Dnder the reenue:sharing mode'* there is no e'ement of cost:recoery* and the goernment and
the operator wi'' share reenues according to a pre:determined formu'a.
Rs. (,#))'cr. interest'free loan for sugar mills
*o clear arrears pa"a!le to cane farmers+ loan can !e repaid
in # "ears with a moratorium of , "ears
#n a major initiatie to end the face:off &etween the sugar industry and farmers* an informa' Group
of Einisters $GoE% headed &y /gricu'ture Einister -harad Aawar on <riday recommended a
financia' pac"age to mi''ers* which inc'udes an interest:free 'oan of Rs. =*?00 crore to pay off
arrears. 3he 'oan can &e repaid in fie years with a moratorium of two years.
/ccording to sources in the industry* the arrears stood at Rs. ?*065 crore in 2012:13.
/fter a two:hour meeting with inited 0hief Einisters of major sugar:growing -tates* the GoE
agreed on interest su&ention of 12 per cent on the Rs. =*?00:crore 'oan. Of this* ? per cent wi'' &e
&orne &y the 0entre and = per cent wi'' come from the -ugar Dee'opment <und under the
Einistry of <ood. Each mi'' can aai' itse'f of a 'oan under this arrangement e>uia'ent to the
aerage e7cise duty paid &y it.
Other measures inc'ude incenties for production of 5 mi''ion tonnes of raw sugar* restructuring of
'oans as per the Resere !an" of #ndia guide'ines and dou&'ing of ethano' &'ending in petro' to 10
per cent. /n inter:departmenta' pane' wi'' &e set up to coordinate with oi' mar"eting companies
and sugar mi''s for ethano' &'ending.
<or now* there wi'' &e no increase in duty on sugar imports.
On the mi''ers9 demand for the creation of a &uffer stoc" on goernment account* the <inance
Einistry wou'd come up on the financia' &urden this wou'd create on the e7che>uer. 3he -tates
hae &een as"ed to e7amine different moda'ities for sugarcane pricing* inc'uding the reenue:
sharing mode' $suggested &y the 0. Rangarajan pane'%* Er. Aawar to'd journa'ists after the
meeting.
(Our effort is to he'p &oth* the farmers and the industry*, he said adding that the crushing of
sugarcane had &egun in a'' parts of the country.
3he recommendations wi'' &e p'aced &efore the Dnion 0a&inet for approa'.
<inance Einister A. 0hidam&aram* Aetro'eum Einister E. Keerappa Eoi'y* 0ii' /iation
Einister /jit -ingh and <ood Einister +.K. 3homas were present. 3he 0hief Einisters of
+arnata"a $-iddaramaiah%* Eaharashtra $Arithiraj 0haan% and Dttar Aradesh $/"hi'esh Bada%
participated in the meeting* whi'e 3ami' 2adu was represented &y 0hief -ecretary -hee'a
!a'a"rishnan.
0oming out of the meeting* Er. Bada and Er. -iddaramaiah saidH (-ome measures are &eing
wor"ed out*, and Er. 0haan pointed out that (it is a process.,
3he industry* represented &y the #ndian -ugar Ei''s /ssociation $#-E/%* we'comed the initiaties*
saying it wi'' he'p in c'earing the cane arrears. (3he proposed measures wi'' a'so he'p the industry
enture into production of new product Lraw sugar9 and gra& opportunities wheneer they are
aai'a&'e*, #-E/ Director:Genera' /&hinash Kerma said.
#n the 'ast few wee"s* mi''ers had dec'ined to crush cane in the ongoing season* saying it was
financia''y unia&'e for them to do so. 3hey cited higher production of sugar and dec'ine in sugar
price as the reasons for their agony. <armers* on the other hand* sought higher cane price oer 'ast
year as input costs had gone up* 'eading to the formation of the GoE &y the Arime Einister to
reso'e the matter.
Date I.12.2013
-arger messages from economic data
3he 0entra' -tatistics Office recent'y re'eased GDA data for the second >uarter $8u'y:-eptem&er%
of the current fisca'. 3he economy grew &y 5.8 per cent* up from the 5.5 per cent c'oc"ed in the
first >uarter $/pri':8une%* &ut &e'ow the ? per cent* the rate for the who'e of 2012:13.
1ast year9s growth rate was the 'owest in a decade* and the growth for the first >uarter in the
current year was at a four year 'ow. 3he economy* which had comforta&'y cruised at 8 per cent and
a&oe for a num&er of years* has hit a trough more recent'y. E7tricating the economy from its 'ow
'ee's is the &iggest cha''enge for po'icyma"ers.
3he economy fared &etter in the second >uarter than in the first >uarter. Despite this* the aerage
growth rate for the first:ha'f of the year is on'y 5.6. <or the economy to grow &y at 'east ? per cent
for the who'e of current fisca'* the rate of growth* on an aerage* shou'd &e at 'east ?.? per cent
during the remaining two >uarters of this fisca'. 3his* is anyway the e7pectation of the
goernment. ;i'' it &e met. 3o get an answer* one has to ana'yse the performance of arious
sectors that form the GDA.
Agriculture does well
/gricu'ture grew &y 5.6 per cent in the second >uarter as against 2.= in the first >uarter. 3his sharp
upturn in the farm sector is primari'y responsi&'e for the higher growth rate of 5.8 per cent. Gien
the good monsoons* it is hoped that the farm sector wou'd do een &etter during the remaining
period of the year a'so* and &e in the forefront of the 'ong e7pected recoery.
Coweer* agricu'ture has a re'atie'y sma'' share in the GDA* and it is the other two 4 industry
and serices 4 that one shou'd 'oo" to.
3here was a mi'd upturn in industry* increasing &y 2.5 per cent in the second >uarter* up from a
mere 0.2 per cent in the first >uarter. 3here was an improement in core sectors* mining* uti'ities
and construction. E'ectricity grew &y =.= per cent* its fastest pace on eight >uarters. ;e'come as
these figures are* it wi'' &e hasty to conc'ude that they wi'' maintain at 'east this tempo during the
remaining months of the year.
3wo other points merit attention. Eining* whose growth is sti'' in the negatie territory* remains
&ogged down &y enironmenta' and 'ega' issues. 3his has had some de'eterious conse>uences $for
instance* the need to import coa' when there are a&undant domestic stoc"s waiting to &e
e7p'oited%.
Eanufacturing* a critica' component of the #nde7 of #ndustria' Aroduction* staged a recoery of
sorts 4 growing &y 1.1 per cent from an a'most simi'ar dec'ine in the first >uarter. -trong e7port
performance has he'ped. Coweer* high'y suscepti&'e to interest rate changes* manufacturing
cannot possi&'y 'oo" to the R!# for an easier stance at 'east for the ne7t few >uarters. 3his is
&ecause inf'ation remains high. 3he second point is that the data re'ating to industry 4 the ##A
num&ers especia''y hae often &een fau'ted for their inconsistency.
3he serices sector* norma''y the star performer* was down in the second >uarter* growing &y just
?.I per cent. /n important su&:sector 4 community* socia' and persona' serices 4 s'owed
significant'y to 5.2 per cent from I.5 per cent in the preious >uarter. 0onsidered to &e a pro7y for
goernment spending* this su&:sector of serices wi'' remain in sharp focus for the rest of the year.
3his is &ecause the fisca' deficit has a'ready reached more than 80 per cent of the &udgeted figure*
and the goernment faces an acute di'emma of haing to rein in the deficit to 5.8 per cent of the
GDA and simu'taneous'y maintain a reasona&'e 'ee' of pu&'ic spending to support growth.
<rom the foregoing* it may &e difficu't to say with certainty that a recoery is we'' and tru'y under
way. Other important data such as &a'ance of payments $!OA%* re'eased we'' ahead of its schedu'e
on Decem&er 1* do &righten the picture. #t shows a sharp decrease in the current account deficit
during the second >uarter.
IIP
For administrators, planners and policy makers in the Government, it is important to
understand how the economy works at the macro level and what the status of the national
economy at any given time is. Official measures of economic aggregates form the
foundation for sound management of governmental functions and decision-making
relating to the national economy, with information being the key factor deciding the
quality of decisions.
Index Numbers
Lets consider the industrial sector. here are several products and each product is
measured in a definite unit. e.g. while production of clothes is e!pressed in
meters"thousand meters or lakh meters#, the production of coal is e!pressed in
tonnes"$illion tonnes, billion tonnes, etc.#, the production of natural gas is e!pressed in
cubic meters and the production of oil in litres"gallons, barrels, etc.#. %ndividual
indicators of production are e!pressed in different units and tell about that particular
product of the economy. For an overall assessment of all the activities of the industrial
sector or the entire economy, it is essential to combine the various individual indicators
into a summary or composite measure, which is free of the units of measurement.
/n #nde7 2um&er* is such a composite aria&'e which measures the short:term changes in a
aria&'e or a group of aria&'es during a particu'ar period with reference to a chosen &ase period.
##A is one such inde7. Other inde7es are 0A#* ;A# etc
Index of Industrial Production - IIP
he all %ndia %%& is a composite indicator that measures the short-term changes in
the volume of production of a representative basket of industrial products during
a given period with respect to that in a chosen base period. %%& is a statistical device
which enables us to arrive at a single representative figure to measure the general level
of industrial activity in the economy.
%%& is compiled and published monthly by the Central Statistics Office
(CSO)with the time lag of si! weeks from the reference month.
For %%& preparation we take data from following industries
' $ining
( $anufacturing
3 )lectricity
5
Data for ##A comes from fo''owing source
M2oteH #f you remem&er ##A figures for 8an 2012. #t was in news &ecause the initia' figure of 6.8N
was 'ater reised@correct to 1.1N. 3his reision was seere'y criticiOed &y R!#* <inance Einistry
etc. 1ater it was found that the cu'prit was $2% Directorate of -ugar* which had reported wrong
sugar production o'ume.P
%%& characteristics
' For %%& we take a ratio of the volume of commodities produced within a specified
group of industries in a given time period to the volume produced in the same group of
industries in a specified base period "(**+-*,#.
2 ##A num&ers do not inc'ude /gricu'ture Q /''ied serices and -erices sector data.
3 %ndustrial production in %%& refers to the outputs of all industria' actiities within the
&oundary of the country.
5 %%& is a composite@summary indicator which does not hae any units.
? -ase period of %%& is revised on a regular basis.0urrent &ase period is 2005:0?
' -ase period revision is necessary in order to capture the changes in the structure and
composition of the industry over time due to technological changes, economic reforms
and consumption pattern.
%%& .s &$% "&urchasing $anagers %nde!#
' %%& continues to be a very volatile measure making it difficult to draw any meaningful
analysis from it. /-% Governor himself remarked that %%& data continues to be
0analytically bewildering1.
( %%& 2ata has not been very reliable
R
he &$% gained importance in %ndia after the /-% began taking cogni3ance of it.
Globally too, &$% is considered an important macroeconomic indicator.
R
-----------------
4ith above understanding of %%&, lets now understand the %%& data as released by 56O.
he notification can be accessed hereR.
6o it says the indices of %ndustrial &roduction for the $ining, $anufacturing and
)lectricity sectors for the month of 6eptember (*'( stand at ''+.7, '8+.8 and '+9.8
respectively, with the corresponding growth rates of ,.,:, "-#'.,: and ;.9: as compared
to 6eptember (*''.
M2oteH O&sere there are no units to these indices. /'so it is comparing with 1 year o'd data and
hence its ca''ed year:on:year$y:o:y%
<lso, the General %nde! for the month of 6eptember (*'( stands at '=;.=, which is *.+:
lower as compared to the level in the month of 6eptember (*''"when it was '=+.=#.
----------------
Other indexes produced by ovt! of India
Consumer Price Indices (CPI) measure changes over time in general level of prices
of goods and services that households acquire for the purpose of consumption.
Uses:
5&% numbers are widely used as a macroeconomic indicator of inflation
ool by governments and central banks for inflation targeting and for monitoring
price stability
2eflators in the national accounts "used in G2&>G?& calculations to distinguish
b>w changes brought by price to that by physical output#
%nde!ing dearness allowance to employees for increase in prices
CPI Indices@
5&%"%4#, 5&%"<L#, 5&%"/L# A 5ompiled by Labour -ureau in the $inistry of
Labour and )mployment
5&%"B?$) -Brban ?on-$anual )mployees# is complied by 56O "$in of
6tatistics C &rog. %mplementation#
5&% is published monthly.
Wholesale Price Index (WPI) is published weekly by Office of the )conomic <dviser
"O<)# in the $inistry of 5ommerce C %ndustry.
Date 10.12.2013
.as allocation E.o& to review priorit"
ranking
/ali !urden
*he Indian ExpressAosted on'ineH 3ue Dec 10 2013* 03H0= hrs
Keeping the WTO process alive is important. But the same cant be said for the distorting farm
subsidies
Gien that #ndia has sta"es in the success of mu'ti'atera'ism* the 'ac" of an agreement at the !a'i
summit wou'd hae &een a disaster. #t has to &e said* then* that #ndia9s hard&a'' tactics wor"ed.
!a'i did not fai' whi'e #ndia 'arge'y got what it was fighting for 4 the right to hi"e its food
su&sidies ti'' such time that arious distortions in the g'o&a' su&sidy agreement aren9t fi7ed. <or
instance* su&sidy ca'cu'ations are &ased on 1I86:88 prices whi'e g'o&a' wheat prices hae more
than dou&'ed since. ;hi'e dee'oped countries were wi''ing to offer a ceasefire for four years*
#ndia managed to e7tend this ti'' the time an agreement is reached. During this period* no country
can ta"e #ndia to the ;3O9s dispute sett'ement &oard $D-!% arguing that its food su&sidies are
e7cessie.
!ut caeats need to &e added* and a 'arger e7amination must &e made to ascertain whether #ndian
agricu'ture wi'' &enefit from this in the 'ong run. <irst* the caeat. 2o country can ta"e #ndia to the
D-! as 'ong as its food su&sidies* under the <ood -ecurity /ct* for instance* do not distort g'o&a'
trade. !ut in a situation where the <ood 0orporation of #ndia has e7cessie foodgrain stoc"s and
these are 'i>uidated at prices 'ower than what it costs the <0#* this can &e construed as trade:
distorting and can inite action &y the ;3O.
3he 'arger issue re'ates to #ndia9s gains. Right now* #ndia wants to &e free to offer farmers
whateer minimum support prices $E-As% it wants to &uy their crops. !ut gien that too much of
wheat and rice is &eing grown re'atie to other crops* and that too in states where it shou'd not &e
grown 4 #ndia wou'd sae a 'ot of water if cu'tiation of these crops shifted to states 'i"e !ihar
and ;est !enga' 4 farmers need to &e incentiised different'y. 3he !a'i win means E-As can
simp'y &e hi"ed for other crops* &ut how do you incentiise farmers in !ihar and ;est !enga' to
moe to wheat and rice if the <0# does 'itt'e procurement there. 3his is where the D#D/# comes
in. #ndia now has a system in p'ace that can de'ier income support direct'y 4 in "eeping with
farm acreage* for instance 4 which wi'' ma"e farming more efficient and* under the ;3O system*
is not considered trade:distortie. 3he win at !a'i means #ndia is free to e7pand its inefficient
system of su&sidies ti'' a fisca' &rea"down. / pyrrhic ictory* at &est.
Date 13.12.2013
/ 'ot of hard wor" 'ies ahead for the ;3O* and Er. /Oeedo has ac"now'edged this. 3rade
negotiators need to carry forward the positie momentum &ui't up at !a'i as they see" to push
through the Doha Round agenda. 3his wi'' not &e easy though* as negotiators wi'' hae to contend
with regiona' groupings such as the 3rans:Aacific Aartnership* which ino'es the D.-.* 8apan and
ten other Aacific Rim countries* and the powerfu' trans:/t'antic a''iance &etween the D.-. and the
European Dnion* negotiations for which are now on
Date 12.12.2013
0E/I panel prescri!es stricter norms on
insider trading
Regulations to!ring greater clarit" on 1unpu!lished price
sensitive information2
3he -ecurities and E7change !oard of #ndia$-E!#% pane'* headed &y former chief justice of #ndia
2. +. -odhi* has suggested that trades &y promoters* emp'oyees* directors and their immediate
re'aties wou'd need to &e disc'osed interna''y to the company.
3he pane' on insider trading a'so recommended that trades within a ca'endar >uarter of a a'ue
&eyond Rs. 10 'a"h $or such other amount as the capita' mar"et regu'ator may specify% wou'd &e
re>uired to &e disc'osed to the stoc" e7changes.
Code of fair disclosure
(Eery entity that has issued securities which are 'isted on a stoc" e7change or which are intended
to &e 'isted wou'd &e re>uired to formu'ate and pu&'ish a code of fair disc'osure goerning
disc'osure of eents and circumstances that wou'd impact price discoery of its securities*, said
-E!# in a press re'ease on ;ednesday.
3he 8ustice -odhi 0ommittee on #nsider 3rading Regu'ations has made a range of
recommendations to the 'ega' framewor" for prohi&ition of insider trading in #ndia and has
focused on ma"ing this area of regu'ation more predicta&'e* precise and c'ear &y suggesting a
com&ination of princip'es:&ased regu'ations and ru'es that are &ac"ed &y princip'es.
3he 0ommittee has a'so suggested that each regu'atory proision may &e &ac"ed &y a note on
'egis'atie intent.
;hi'e en'arging the definition of (insider,* the term (connected person, has &een defined more
c'ear'y and immediate re'aties are presumed to &e connected persons* with a right to re&ut the
presumption. 3he term (immediate re'atie, wou'd coer c'ose re'aties who are either financia''y
dependent or consu't an insider in connection with trading in securities.
Clarit" on U30I
<urther the regu'ations wou'd &ring greater c'arity on what constitutes (unpu&'ished price
sensitie information, $DA-#% &y defining what constitutes (genera''y aai'a&'e information,*
essentia''y* information to which non:discriminatory pu&'ic access wou'd &e aai'a&'e. / 'ist of
types of information that may ordinari'y &e regarded as price sensitie information has a'so &een
proided.
#nsiders wou'd &e prohi&ited from communicating* proiding or a''owing access to DA-# un'ess
re>uired for discharge of duties or for comp'iance with 'aw.
3rading in 'isted securities when in possession of DA-# wou'd &e prohi&ited e7cept in certain
situations proided in the regu'ations.
#nsiders* who are 'ia&'e to possess DA-# a'' round the year* wou'd hae the option to formu'ate
pre:schedu'ed trading p'ans. #n such cases* the new DA-# that may come into their possession
without haing &een with them when formu'ating the p'an wou'd not impede their a&i'ity to trade.
(3rading p'ans wou'd* howeer* &e re>uired to &e disc'osed to the stoc" e7changes and hae to &e
strict'y adhered to.,
0onducting due di'igence on 'isted companies wou'd &e permissi&'e for purposes of transactions
entai'ing an o&'igation to ma"e an open offer under the 3a"eoer Regu'ations* it said.
Due diligence
#n a'' other cases* due di'igence wou'd &e permissi&'e su&ject to ma"ing the di'igence findings that
constitute DA-# genera''y aai'a&'e prior to the proposed trading. #n a'' cases* the &oard of
directors wou'd need to opine that permitting the conduct of due di'igence is in the &est interests
of the company* and wou'd a'so hae to ensure e7ecution of non:disc'osure and non:dea'ing
agreements.
Code of conduct
3he 0ommittee suggested that eery 'isted company and mar"et intermediary is re>uired to
formu'ate a 0ode of 0onduct to regu'ate* monitor and report trading in securities &y its emp'oyees
and other connected persons. /'' other persons such as auditors* 'aw firms* accountancy firms*
ana'ysts and consu'tants who hand'e DA-# in the course of &usiness operations may formu'ate a
code of conduct and the e7istence of such a code wou'd eidence the seriousness with which the
organiOation treats comp'iance re>uirements.
0ompanies wou'd &e entit'ed to re>uire third:party connected persons who are not emp'oyees to
disc'ose their trading and ho'dings in securities of the company.
-E!# has a'so inited pu&'ic comments on this report* which shou'd reach -E!# office &y
Decem&er 31. 2013.
Insiders would be prohibited from communicating, providing or allowing access to UPSI
Each regulatory provision may be backed by a note on legislative intent
Date 1?.12.2013
3eople must shun gold, sa"s %&
Rising volume of trade in rupee a ma4or concern
A. 0hidam&aram
Dnion <inance Einister A. 0hidam&aram* on -aturday* ca''ed for high 'ee' of pro&ity among
financia' institutions to &ui'd a ro&ust capita' mar"et.
(#t is important that a'' our institutions maintain the highest ethics and highest standards of
pro&ity. /n ethics deficit can &ring down the entire financia' system* as we hae seen in the past*,
said Er. 0hidam&aram whi'e de'iering his commemoratie address at the 20th anniersary
function of the 2ationa' -toc" E7change $2-E% here.
3he <inance Einister further said the domestic capita' mar"ets were facing many concerns*
inc'uding 'ow 'ee' of inestor participation* 'ac" of financia' 'iteracy and financia' inc'usion.
Ce o&sered that een though the househo'd saings ratio is &etween 30 and 38 per cent of the
GDA* ery 'itt'e of it gets channe'ised into financia' inestments. Ce said #ndians sti'' preferred to
inest in go'd and rea' estate* and there was an urgent need to address this issue.
(#nestors* at 21 mi''ion* account for just 2 per cent of the popu'ation. 3he degree of ris" aersion
is e7treme'y high. ;e need to ma"e peop'e shy away from go'd and induce them to inest in
financia' products*, he added.
3he <inance Einister a'so said that the rising o'ume of trade in rupee in the offshore non:
de'iera&'e forward $2D<% mar"et was a major concern.
3he rising o'ume of trade in #ndian currency wou'd affect the a'ue of the rupee aderse'y in the
domestic mar"et he added.
Er. 0hidam&aram said financia' inc'usion had &een a high priority area for the goernment* and*
therefore* the 0entre had initiated seera' measures to e7pand the financia' sector.
#t had a'so 'aunched an e7tensie inestor education programme through arious mar"et regu'ators
and other institutions to create awareness a&out different financia' products and their &enefits.
Er. 0hidam&aram hoped that with the Aension <und Regu'atory and Dee'opment /uthority
$A<RD/% &ecoming a statutory &ody* there wou'd &e a spurt in the pension fund mar"et.
Ce said (innoation shou'd &e the watch word of what we do in the capita' mar"et.,
Cos" ties !etween
!anks and corporates
E7pressing concern oer the under:dee'oped corporate &ond mar"et* Er. 0hidam&aram said
(&an"s and corporates hae entered into a cosy re'ationship. 3he day* &an"s refuse funds*
corporates wi'' &e forced to tap the mar"et sources to raise money.,
Referring to the recommendations of the <inancia' -ector 1egis'atie Reforms 0ommission
$<-1R0%* Er. 0hidam&aram said passing 'egis'ation on the recommendations made in the report
wou'd ta"e time* and* hence* the goernment had decided to imp'ement non:'egis'atie
recommendations in the interim. (Ea"ing 'aws in #ndia has &ecome comp'e7. Eany of you wou'd
not understand the trauma we go through in getting a &i'' passed in Aar'iament*, said the <inance
Einister whi'e participating in a pane' discussion on L3wo decades of financia' reforms9.
Ce said (whi'e the goernment is committed to financia' reforms* the e7ecutie has &een
constrained &y mu'tip'e causes* inc'uding the para'ysis of Aar'iament and increased judicia'
actiism.,
Ear'ier spea"ing at the anniersary eent* -ecurities and E7change !oard of #ndia $-E!#%
0hairman D. +. -inha said the 2-E* which was conceptua'ised &y the goernment and
imp'emented &y the pu&'ic sector financia' institutions* had great'y e7panded the e>uity cu'ture in
the country &y &rea"ing the geographic &arriers.
3itching for limiting Reserve /ank of India
functions
-tating that <inancia' -ector 1egis'atie Reforms 0ommission $<-1R0%* headed &y 8ustice !. 2.
-ri"rishna* has made simi'ar recommendations* Er. 0hidam&aram drew on the g'o&a' e7perience
and said the R!# did much more wor" than other centra' &an"s.
the R!#9s charter inc'udes responsi&i'ities such as issuing currency* &eing &an"er to the
goernment* contro''er of credit and custodian of fore7 reseres* among others.
Date 16.12.2013
A mission to secure currenc" for !itcoin
It2s stored in electronic wallets, can !e traded on online
exchanges and converted into cash
;ith #ndia9s first &itcoin e7change gearing up to start operations hopefu''y &y ne7t Earch*
hundreds of inestors* enthusiasts and &an"ing officia's gathered here on -unday* on a mission to
conince the goernment that the irtua' currency is enduring and serious.
-tarted in 2008* &itcoin is the most prominent amongst a group of digita' currencies 4 money that
e7ists in the form of computer code 4that do not hae a centra' issuing authority. 3hese irtua'
currencies are stored in e'ectronic wa''ets and can &e traded on on'ine e7changes and conerted
into cash.
/t #ndia9s first &itcoin conference 4 organised &y digita' currency awareness organisation
0oinEon"4 the top issue was how to conince the goernment and regu'ators that the &itcoin
ecosystem wou'd &e a a'ua&'e economic innoation and not the currency of choice for money
'aundering and i''ega' drug purchases.
-eera' #ndian companies* whether they are on'ine e7changes* trading p'atforms or &itcoin
Lmining start:ups*9 hae a'ready started hiring 'awyers and 'o&&yists to ma"e their case to arious
goernment agencies and to demonstrate to potentia' &an"ing partners that they ta"e regu'ators
serious'y.
1Remittance tool2
(#n #ndia* &itcoin can he'p so'e the pro&'ems of the un&an"ed rura' popu'ation. #t is a'so a
potentia' remittance too'. ;e are wor"ing with 'awyers to draft possi&'e po'icies that we cou'd
present to the R!# and other goernment agencies &y ne7t month*, said -unny Ray* Director of
!usiness Dee'opment at !uttercoin* a free &itcoin e7change that is &ac"ed &y inestors inc'uding
Goog'e Kentures.
!uttercoin hopes to tentatie'y start its #ndia operations &y ne7t Earch* which wou'd ma"e it the
first domestic e7change.
3he Resere !an" of #ndia* which has so far maintained si'ence apart from issuing a statement
that it is adopting a Lwait and watch9 stance on &itcoin* had a few o&serers at the conference.
3hey* howeer* refused to spea" to the media.
<or the team that is dee'oping #ndia9s ery own digita' currency* du&&ed L'a7micoin*9 the R!# has
&een unresponsie.
(;e need a 'oca' digita' currency to he'p 'oca' &usinesses. 3hat9s how 'a7micoin started. ;e sent
them MR!#P >ueries and proposa's awhi'e ago and are waiting to hear from them in order to start
the 'aunch of 'a7micoin*, said Deepa" Eantwa'* a founding mem&er of the 8aipur:&ased
1a7micoin team.
<or many others* the !anga'ore conference was a step forward in the eentua' creation of a &itcoin
trade group or association that cou'd protect the rights of users and entrepreneurs.
(;e don9t want &an"s or the goernment to shut down e7changes and other companies that thrie
on the &itcoin system just &ecause it9s scary. 0'ose to Rs. 1.20 crore worth of &itcoin transactions
are done from #ndia eery month. ;e need to figure out a way we can a'' e7ist*, said +arthi"
8eyraj* a &itcoin enthusiast and researcher.
RBI adopting wait and watch stance observers present at Bitcoin
Regulators tune in to /itcoin !u55 for policies
on virtual mone"
6ohnson *AAosted on'ineH Eon Dec 16 2013* 02H?6 hrs
Economists ca'' it an asset &u&&'e. -ome thin" its anonymity ma"es it usefu' on'y as money for
crimina' transactions or money 'aundering. 3here is ast amounts of gray area sti'' surrounding the
uti'ity and nature of the #nternet crypto currency !itcoin een among its most ardent ear'y
adopters from the information techno'ogy and financia' communities.
<inancia' regu'ators around the wor'd are p'aying it &y ear on po'icies regarding !itcoin and
whether the anonymous peer:to:peer transaction ena&'er* a"in to a &arter system* is a financia'
instrument with pitfa''s attached to it or a p'ain techno'ogica' innoation that can redefine one of
the pi''ars of human society 4 the monetary system.
Euch of the churning and uncertainty in the !itcoin wor'd that has caught g'o&a' attention in the
past few wee"s after the irtua' currency of one !itcoin was a'ued at oer F1*000 was eident at
a G'o&a' !itcoin 0onference* the first eer in #ndia* that was he'd in !anga'ore on -unday.
<inancia' start ups p'aying with !itcoin in the specu'atie mar"ets* #3 start ups trying to create
powerfu' computer mining too's for !itcoin* peop'e just trying to understand what the fuss is a''
a&out S a'' cared from the strong tech community in !anga'ore* were part of the eent.
(<or oer 5*000 years* money and re'igion hae &een among the pi''ars of society that hae &een
centra''y contro''ed. # am curious to "now if a decentra'ised system 'i"e !itcoin is going to sha"e
up the system*99 said !ha"tha +eshaachar* co:founder and 03O of EOetap a tech start:up in
!anga'ore which is offering mo&i'e so'utions for regu'ar monetary transactions.
1i"e the printing press and the #nternet* !itcoin is a techno'ogy of trust that cou'd return human
society to a natura' order that is outside of the centra'ised contro' of the state and the church*
8ohann Geers* the co founder and 0EO of the D- start:up Eonetas said. !itcoin is a return to a
(peop'e:&ased system that a''ows for a decentra'ised society on a 'arge sca'e,* he said.
(!itcoin is a techno'ogy. #t is a 'i"e a "nife 4 it can &e a murder weapon or a 'ife saer in a
surgeon9s hands. Bou can use it for many things. #t is fundamenta''y a decentra'ised consensus
instrument*99 Geers said. 3he !itcoin system is a wor":in:progress and re>uires 'arge amounts of
infrastructure inc'uding energy and computing power and there are of a 'ot of issues surrounding
security* forgery* trust* speed of transactions* he said.
/ccording to 8osh Ter'an* operations manager for !utterf'y 1a&s* one of the "ey ma"ers of
computing too's to derie !itcoins* the #nternet currency system is def'ationary in nature
compared to the <iat currency systems around the wor'd. #t wou'd ena&'e transactions in 'ow
denominations of currency as we'' which is not possi&'e in inf'ationary systems* he said.
3he ma7imum amount of !itcoins that wi'' &e aai'a&'e is on'y 21 mi''ion and 12 mi''ion of this
has &een created since the currency appeared on the #nternet in 200I. On'y 50 per cent of the 21
mi''ion which wi'' &e created &y the year 2152 wi'' &e in circu'ation* Ter'an said. 3he mar"et cap
for the 12 mi''ion !itcoins in e7istence was estimated to &e F=.2 &i''ion in 2oem&er this year.
/ccording to estimates there are oer 11 mi''ion g'o&a' !itcoin users with around ?0*000 in #ndia.
2ear'y ?0 per cent of !itcoin currency is reported'y ested with around 1000 indiidua's.
;hi'e !itcoin mining has unti' now &een an (art for adanced software techno'ogists99 with the
hardcore techies jumping on&oard first* efforts are now on to ma"e it accessi&'e for een ordinary
#nternet users to mine for !itcoins* said Gangesh Ganesan founder and 0EO of the -an <rancisco
&ased !itcoin start:up Cigh !it 0oin.
#n #ndia* !itcoin is used primari'y for specu'ation &y comparing it with the do''ar* for inestment
and hedging with financia' instruments* says Eahin Gupta* a former software engineer and
founder of &uyse''&itco.in* the first company in #ndia to trade using !itcoin.
(2o one wants to understand the intrinsic a'ue of !itcoin in #ndia. #t is undera'ued. Bou ta'" to
anyone and they wi'' compare the a'ue of !itcoin to the do''ar*99 Gupta said. /ccording to Gupta
one of the "ey concerns of peop'e dea'ing with !itcoin as a financia' instrument is that there is no
c'ear'y defined regu'atory process in #ndia oer !itcoin transactions &y the R!# or any other
agency.
(#f there was some "ind of adisory from regu'atory authorities on !itcoin transactions there
wou'd &e more c'arity. Regu'atory authorities are a'so sti'' trying to 'earn. 3here are a 'ot of
entrepreneurs who want to get in &ut they are "ept &ac" &y the 'ac" of po'icy*99 Gupta said.
(#t wou'd &e a mista"e for regu'ators to c'assify it. 3hey shou'd not &o7 it. 3here are mi''ions of
things you can do with it. Regu'ators shou'd not ma"e new 'aws they shou'd app'y e7isting 'aws
otherwise they wi'' 'imit innoation. #n -witOer'and it is treated as foreign currency* in Germany it
is a unit of account*99 Geers said.
DA*E ,).7,.,)78
Ca!inet nod for %*A in trade and services
with Asean