Content:

1. GAIL, OVL to take stake in China pipeline

2. Govt to release monthly data on outward investments

3. RBI introduces new category of NBFCs

Brief Description:
GAIL, OVL to take stake in China pipeline

• The Union Cabinet approved the proposal of ONGC Videsh Ltd. (OVL) and GAIL (India)
Ltd. to pick up 12.5 per cent stake in the China pipeline project in Myanmar.

• It also allowed the two entities to invest $1 billion more in fields that will provide gas to be
shipped to China through the pipeline.

• the pipeline being constructed by China National Petroleum Corporation (CNPC) to

transport gas found in block A-1 and A-3 off the Myanmar coast.

• CNPC is building the $2.01-billion pipeline to ship gas from these blocks, where OVL and
GAIL hold 17 per cent and 8.5 per cent stake, respectively.

• CNPC had offered 49 per cent stake to the consortium developing gas the said
fields. South Korea's Daewoo Corporation holds 51 per cent stake each in Block A-1 and
A-3, while OVL has 17 per cent stake. GAIL and Korea Gas Corp have 8.5 per cent
each while the remaining 15 per cent is with Myanmar's Myanma Oil and Gas
Enterprise (MOGE).

Govt to release monthly data on outward investments

• With India Inc emerging as an important player in the global merger and acquisition market,
the government has decided to release the data on outward investments every month
from next fiscal.

• The Department of Industrial Policy and Promotion (DIPP) is closely working with the Reserve
Bank of India.

• At present, the government releases detailed foreign direct investment inflows to India
on a monthly basis.

• DIPP was working with a committee headed by RBI Deputy Governor Shyamala
Gopinath regarding this. The committee has devised a format for detail collection of
outward fund flows.

RBI introduces new category of NBFCs

• The Reserve Bank of India (RBI) issued a notification introducing a new category of Non-
Banking Finance Companies (NBFCs) as “Infrastructure Finance Companies (IFCs)”.

• The existing categories of NBFCs are Asset Finance Companies (AFCs), Loan
Companies (LCs) and Investment Companies (ICs).

• Further with a view to encouraging larger flow of funds to infrastructure, the exposure of a
bank to infrastructure finance companies has been enhanced up to 20 per cent of its capital
funds.
 • The IFCs should deploy a minimum of 75 per cent of its total assets in infrastructure loans.

• Net owned funds of Rs. 300 crore or above with a minimum credit rating ‘A’ or equivalent of
Crisil, Fitch, CARE, ICRA or equivalent rating by any other accrediting rating agencies could
enter infrastructure financing.

Air India to get equity infusion of Rs. 800 crore

• The Centre approved the proposal for release of equity infusion of Rs.800 crore in two
equal monthly instalments toNational Aviation Company of India Ltd (NACIL), the
holding company of Air India.

• NACIL is now facing severe financial losses. Costly legacy assets, weakening revenue
stream and high cost structure also result in rising liabilities. The equity infusion will help the
troubled Air India tide over its cash flow problem and finance fleet acquisition plans.

• The airline had posted a loss of about Rs.7,200 crore in the last two fiscal years.

Mahindra Tractors reaches milestone

• Mahindra & Mahindra (M&M) announced that Mahindra Tractors has sold one-lakh tractors in
2009-10, setting a benchmark for sales in the Indian tractor industry.

• Anjanikumar Choudhari, President, Farm Equipment Sector, Mahindra & Mahindra.

U.K. tea company enters India

• U.K.-based premium tea company Newby Teas entered the Indian branded tea market.

tata, Agusta set up joint venture

• Tata Sons and Italian defence major AgustaWestland signed an agreement for formation
of a joint venture company, which will establish a final assembly line for AW-119 helicopters
for the Indian Army and the global market.

Tata Power ties up with Korea East West Power

• Tata Power Company and Korea East West Power Company (EWP), one of the largest
generation utilities of Korea signed a memorandum of understanding (MoU) to identify and
execute O&M (operation and maintenance) opportunities relating to third party generation
assets in Asia, West Asia and Africa.

• Under the MoU, both companies have initiated a technical cooperation in the field of operation
and maintenance of the generation assets.

Europe a growth market for outsourcing

• Europe could be a smaller but growing market for outsourcing for Indian IT companies
perturbed by the U.S. government’s stated antipathy towards outsourcing.

• While Asia Pacific, including Japan, is the most interesting market for India, several members
of the European Union can be outsourcing partners. But, Indian IT service companies need to
understand the cultural and business needs of individual countries.

• While Asia Pacific, including Japan, is the most interesting market for India, several members
of the European Union can be outsourcing partners. But, Indian IT service companies need to
understand the cultural and business needs of individual countries.
 • The U.K. was still a strong market, followed by the Nordik/ Scandinavian nations like Sweden
and Denmark the Benelux (Belgium, the Netherlands and Luxembourg) grouping, each with
varying market growth

• While some Indian companies such as HCL and TCS already had a footprint in the Nordik
countries, others need to make their presence felt and cultivate potential clients who no longer
look at only call centres but look for value-added services.

Reforming our agriculture sector

• With only 100 million hectares of agricultural land, China produces 400 million
tonnes of grain while India averages only 108 million tonnes of food from 146
million hectares of agricultural land.

• The fact is that most farmers and cultivators cannot make the sort of investments needed.
Yet, small farms produce 41% of the country’s total grain and over 50% of total fruit and
vegetables.

• India produces over 600 million tonnes of food products annually, is the second
largest rice and wheat producer, and the largest producer of pulses and
milk. However, only about 2% of India’s fruit and vegetable output is processed. Compare
this with 70% in Brazil and 60-70% in developed countries. In the foods segment,
processed foods account for a mere 2% of the total production. About 30% of farm
produce is wasted every year for want of storage, transportation, cold chain and other
infrastructure facilities.

RBI platinum jubilee

• West Bengal Finance Minister Asim Dasgupta flags off the Financial Literacy Tram in Kolkata.

• It will feature a display panel on various facets of the Reserve Bank of India, which was
founded in the city on April 1, 1935.

• The Financial Literacy campaign was launched as part of the RBI’s platinum jubilee
celebrations.

U.K. investor pulls out of Vedanta

• In a blow to mining firm Vedanta, a fourth European investor has sold its multi-million
pound stake in the company, citing “serious concerns about its approach to human
rights and the environment.”

• The company has been slammed for its plan to mine the Niyamgiri Hills of Orissa, home
to the Kondh tribals, many of whom have opposed the plan.

• The decision of the United Kingdom-based Joseph Rowntree Charitable Trust to sell a
£2.2 million stake (along with other investors who follow its ethical policy) in Vedanta
follows the Church of England’s decision to sell its £2.1 million stake last week.
The Norwegian government’s pension fund had been the first high-profile withdrawal,
selling its $13 million stake in 2007, while the Martin Currie Investment sold its £2.3 million
stake last year.

Courtesy:- Dialogue India and Career Plus

 Economy Issues
Contents:

• Core group to be set up for tackling price rise

• Ceiling raised for FIPB clearance

Brief Description:
Core group to be set up for tackling price rise

• The government decided to set up a high-profile Standing Core Group to suggest

measures to deal with price rise and propose steps for improving public distribution system,
procurement of foodgrains and production of agriculture produce.

• The Group will comprise the Union Finance Minister, the Union Agriculture Minister, Chief
Ministers of Andhra Pradesh, Assam, Punjab, Haryana, Bihar, West Bengal, Gujarat, Madhya
Pradesh, Chhattisgarh and Tamil Nadu; Deputy Chairman of Planning Commission and the
Chairman of Prime Minister’s Economic Advisory Council.

• The Group will suggest measures for increasing agricultural production and productivity
including long-term policies for sustained agricultural growth; to reduce the gap
between farm gate prices and retail prices and for better implementation of and
amendment of the Essential Commodities Act.

Ceiling raised for FIPB clearance

• In a significant move aimed at expediting flow of foreign investment into the country,
the Union Cabinet liberalised the foreign direct investment (FDI) policy further by
allowing the Foreign Investment Promotion Board (FIPB) to clear proposals from
overseas entities worth up to Rs. 1,200 crore, against the existing limit of Rs. 600
crore.

• proposals involving total foreign equity inflow of more than Rs. 1,200 crore would be placed
for consideration of theCabinet Committee on Economic Affairs (CCEA).

GDP growth pegged at 7.2 %

• The Government pegged economic growth at 7.2 per cent in 2009-10, which was short of
the optimistic projections of the Reserve Bank of India (RBI), Prime Minister Manmohan Singh
and the Finance Ministry, although it was higher than 6.7 per cent recorded a year ago.

• Interestingly, according to advance Gross Domestic Product (GDP) estimates released

by the Central Statistical Organisation, farm output is estimated to contract by 0.2
per cent and services to record a moderate growth.Manufacturing is estimated to
grow by a robust 8.9 per cent this fiscal.
 • According to the CSO, farm and allied activities are expected to shrink by 0.2 per cent this
fiscal against 1.6 per cent growth a year ago. The estimated growth this fiscal is estimated to
be driven by robust expansion of the manufacturing sector against 3.2 per cent in 2008-09.

RBI to introduce new base rate in place of PLR for banks from April 2010

• The RBI is reportedly coming out with guidelines on the concept of 'base rate' for lending by
banks. This will be the rate below which a bank will not be permitted to lend.

• At the same time banks are also being given freedom to price loans below Rs. 2 lakhs so that
they can compete with MFIs in lending to the financial excluded.

• Some of the highlights of the move include:

• Each bank to set its own base rate which will be linked to cost of funds

• Deposits cost, cost of maintaining CRR and SLR and operating expenses to be factored
in for arriving at the base rate

• Banks can now compete with microfinance companies for small loans

• Floating rate loans will automatically come down when cost of funds for a bank
declines

• Credit pricing set to become more transparent

Black economy

• Black money has long been regarded the bane of our development process. It results in

1. huge wastage of resources,

2. lowers the rate of growth,

3. leads to criminalization in society

4. breakdown of institutions,

5. undermines the capacity of Indian businesses to face the challenge of globalization,

6. jeopardizes our security,

7. Leads to poor governance.

Divestment figures touch decent figures; government aims high

• The 2009-10 Budget had estimated that disinvestment proceeds would fetch around Rs 1,120
crore.

• The recent follow-on public offer (FPO) of National Thermal Power Corporation (NTPC) is
expected to bring the government at least Rs 8,300 crore.

• The other two remaining FPOs in the fiscal — Rural Electrification Corporation and NMDC —
are likely to bring in another Rs 20,000 crore.

S.R. Mani Ayer passes away

• S.R. Mani Ayer, a veteran in the advertising field, passed away after a brief illness.

Strong criticism about carry trade

 • Foreign exchange carry trades — where speculators borrow in a low interest rate
currency and then lend or invest in another currency for profit — are increasingly being
seen to pose a major risk to international financial stability.

• It is common knowledge that the Yen carry trade and more recently, the dollar carry trade
have helped speculators create asset bubbles, especially in the developing world.

On French auctions

• The ongoing NTPC follow on public offering is reportedly being offered on French auction
basis to investors.

• In this method, the firm announces a minimum (reserve) price. Investors place sealed
bids for quantity and price. When the bids are in, the firm negotiates a minimum and
maximum price with the market regulator. Any bid above the maximum price is eliminated as
a virtual market order.

• The bidders who bid between the minimum and maximum price are awarded shares on a pro
rata basis, each paying the minimum price. In the event that demand for the stock is too high,
the IPO may be changed to fixed-price offering.

Parikh panel recommends flat tax on diesel cars

• The Kirit Parikh Committee proposal for imposing a flat tax of Rs. 81,000 on diesel cars,
including sedans and gas guzzlers SUVs and MUVs, may be worrying the big names in the
industry, but environmentalists who have campaigned against ‘dieselisation’ of personal
transport say the plan is too little and too late.

OVL consortium bags 40 per cent stake in Venezuelan block

• ONGC Videsh Limited (OVL)-led consortium announced that it had bagged 40 per cent stake in
a $19-billion project to develop a major crude oil block in Venezuela.

• OVL, Indian Oil Corporation (IOC) and Oil India Limited (OIL) along with Spain’s Repsol YPF SA
and Malaysia’s Petroliam Nasional Bdh won rights to develop the Carabobo-1 block in
Venezuela’s Orinoco Belt, according to a statement issued here.

GST set to be levied at 16%, goods may cost less

• The long-awaited reform of India’s indirect taxes system is set to get a fillip, with a broad
consensus forming within the finance ministry on a rate of 16% for the proposed Goods
and Services Tax (GST) for both Centre and states combined.

• To be levied on all companies and traders with annual turnover of Rs 10 lakh and above,
this would provide a tax base of 40-45 lakh assessees and ensure that neither the Centre nor
states suffer any revenue loss.

• Sources said rates for both the Centre and states on GST could be 8% each.

Centre wants alcohol, petro products under GST

• The law ministry is believed to have sent a detailed response on the suggestions sought by the
department of revenue towards finalisation of draft Constitutional amendment of the indirect
tax reforms.
 • The proposed GST was initially scheduled to be implemented from April 1, 2010. However,
lack of consensus between states and the Centre on a uniform tax structure and their inability
to carry out necessary legislative amendments led to its postponement by another six
months.

Centre wants alcohol, petro products under GST

• The law ministry is believed to have sent a detailed response on the suggestions sought by the
department of revenue towards finalisation of draft Constitutional amendment of the indirect
tax reforms.

• The proposed GST was initially scheduled to be implemented from April 1, 2010. However,
lack of consensus between states and the Centre on a uniform tax structure and their inability
to carry out necessary legislative amendments led to its postponement by another six
months.

Relook at OVL’s Qatar exit plan’

• The Cabinet Secretariat has sought a fresh round of inter-ministerial consultations for seeking
Cabinet approval to have a relook at ONGC Videsh Ltd’s earlier decision to relinquish an
offshore acreage in Qatar that the company had won in March 2005.

• ONGC Videsh had in 2008 taken a decision to relinquish the prospect, Najwat Najem, located
in the Arabian Gulf.

• The decision was taken after the company found that the reserves in the block were not
enough to be commercially viable. The company had also decided to give up the rig it had
acquired for drilling in the acreage.

• An empowered committee of secretaries had on June 24, 2009 made its recommendations and
cleared the ONGC proposal to give up the acreage. The Cabinet Secretariat, however, has now
returned the oil ministry note for seeking Cabinet approval. It has asked the ministry to seek
comments from other pertinent ministries before seeking Cabinet's approval on the ground
that the secretaries panel did not have authority to decide issues of acquisition or
relinquishment.

Pre-consultation paper on 4G spectrum issued

• While the country awaits the auction of spectrum for the full-fledged launch of 3G mobile
services, the Telecom Regulatory Authority of India (TRAI) issued a pre-consultation paper
on 4G (fourth generation) telecom services which will provideultra-broadband Internet
access.

• The new 4G networks will allow users to stream mobile multimedia, such as TV broadcasts and
online games, at up to 10 times the speed of 3G (third-generation) networks.

• 4G mobile networks have already been commercially launched in Sweden and

Norway,Operators in other countries like the U.S., Korea and Japan are gearing up to
launch 4G mobile wireless broadband services.

• The 3G services in India are now likely to be available only in 2011...if the auction of 3G
spectrum is held in August or September 2010. India will thus be lagging behind a large
number of countries in the world.
Courtesy:- Dialogue India and Career Plus

CAG Weekly
(Current Affairs & GK)
By Om Prakash (goldy sir)
The task force report on micro, small and medium enterprises (MSME)

• headed T.K.A. Nair, Principal Secretary to the Prime Minister.

• The report of the task force on micro, small and medium enterprises (MSME) that has
recommended changes in policies to help growth of the sector.

• also recommended a road map for the development and promotion of the sector crucial
for economic growth and employment generation.

• The task force has called for an agenda for immediate action to provide relief and
incentives to MSMEs, especially in the aftermath of the recent economic slowdown,
accompanied by institutional changes and detailing of programmes, to be achieved in a time-
bound manner.

• It has also suggested setting up of appropriate legal and regulatory structures to create a
conducive environment for entrepreneurship and growth of MSMEs.

• The MSME task force has recommended extension of the stimulus package for the sector
for one more year, besides suggesting a procurement policy and creation of separate
fund for the industry.

• It has suggested that a standing review committee under Planning

Commission Member Arun Maira be set up to monitor flow of credit to the MSME sector.

• It has also called for setting up an independent body at the national level for promoting
MSMEs, which may provide financial and managerial support to set up industrial estates in
partnership with the private sector.

• Small, medium units need Rs. 5,500 crore succor to help it recover from the aftermath of
the global economic slowdown that has hit the sector hard.

• the MSME sector, which employs 4.2-crore people and contributes about 45 per cent to
the total manufactured outputand 40 per cent to our export.

SEBI acts tough on multi-class share entities

• SEBI has reportedly put on hold registration of close to 50 investors who are organised as
‘multi-class share entities’ in tax havens like Mauritius.

• A multi-class share entity is Similar to a mutual fund, a multi-class structure allows

distinct pools of investments — just like the various schemes of an MF — under an umbrella
 asset management company. The investors putting money in the various pools, which are
referred to as cells by market participants, can have different fund managers pursuing
different investment strategies.

• Tough action is due to the fear that while the umbrella firm gets registered as an FII or a
sub-account — a special purpose vehicle formed in Mauritius to access Indian stock exchanges
— the regulator may have no control over the different pools or cells under the firm.
And once a multi-class share entity is registered, it can go on adding new cells which, outside
the regulatory radar, can be the conduits for round-tripping.

• It is worthwhile to note that SEBI had banned PCC (Protected Cell Company) structures
in ’99-00; but foreign investors can set up multi-class structures which, as legal entities, are
a little different from PCCs.

Difference between PCC & multi-class share entities-

• The similarity between the two is that each cell has separate accounts and losses suffered by
one pool cannot be recovered from another. The key difference is: in a PCC, each cell is legally
ring fenced and bankruptcy faced by one cell will not impact the other cells; but in a multiclass
share entity anyone suing a cell has to sue the entire company and not the share class.

Third quarter review of monetary policy

• RBI pitches for recovery with price stability

• In its third quarter review of its monetary policy the Reserve Bank of India has retained
the policy interest rates, the repo and the reverse repo, at 4.75 and 3.25 per cent,
respectively.

• But hiked the cash reserve ratio by a substantial 0.75 percentage point to 5.75 per
cent in two stages. The hike is expected to impound Rs.36, 000 crore.

• The Bank Rate, which has not been used for quite some time now, remains at 6 per cent.

• Through these measures the central bank expects to drain excess liquidity and thereby
anchor inflationary expectationsand support the recovery process without compromising on
price stability. The calibrated exit will align policy statements with the current and evolving
state of the economy.

• It raised the GDP growth estimates from 6% to 7.5% for the current year.

Much ado about tea logo

• GOI called for a replacement for the tea plucker logo introduced back in 1976 to represent
and certify tea made in the country.

• India, the largest producer of tea, has been brewing the drink since the time of Valmiki and is
mentioned in Ramayana.

• India exported 169.3 million kg of tea and had earned a foreign exchange of Rs 2311.13 crore
in the first 11 months of 2009.

Change in base year

• Govt has done the revision in the base year for national accounts from 1999-2000 to
2004-05,
 • This change will lead fiscal deficit for the current year is likely to drop to 6.5%, other things
being equal.with this upward revision in the country’s income under the new series has
brought down the fiscal deficit relative to the GDP.

World Economic Forum - Davos

• Amid the multiplicity of voices, opinions and often conflicting viewpoints, the vague contours
of a new world order emerged.

• The new shape on economic recovery is LUV — the L-shaped recovery of other developed
nations, U-shaped recovery of the US, and the V-shaped recovery of the emerging nations.

Subir Raha

• This former CMD of ONGC (2001-2006) died of cancer in New Delhi.

20 Indian banks make it to the list of big banks by brand value

• SBI’s brand value more than tripled to $4,551 million, up from $1,448 million in 2009 helping
it grab the 36th spot in the list.

• ICICI Bank, the country’s largest private bank, joined it in the Top 100 list with a 130%
jump in its brand value at $2,164 million.

Coco

• It stands for contingent convertible capital.

• It is a debt that converts into equity when banks run into trouble.

What is DSGE?

• It stands for Dynamic Stochastic General Equilibrium.

• It is a methodology reportedly used for the first time by IMF to model various
‘macrofinancial’ linkages, such as the exchange rate and inflation, in the conduct of
monetary policy in India.

• Broadly speaking, the idea is to analyse activities in the ‘micro’ domain to explain aggregate
economic phenomena, such as growth, business cycles, and the effects of monetary and fiscal
policy.

• Besides, DSGE models are dynamic, looking at how the economy evolves over time.
Also, they are stochastic, taking into account how the economy is affected by random shocks
such as sub-optimal policy design, oil price spikes and technological change etc. The plan is to
use a few key variables for more accuracy in models.

BioAsia-2010

• The four-day ‘BioAsia-2010’ was inaugurated at HYDERABAD

• Leading companies proposed to invest Rs.1, 000 crore to create infrastructure of plug-and-
play lab space in the third phase of Biotech Park near here.

Sen’s cautious path to stimulus rolls back

• Even as the Reserve Bank of India has given adequate feelers to the government to start the
process of rolling back the stimulus measures, Chief Statistician Pronab Sen felt that a
decision on this crucial issue should be taken on the basis of the actual growth scenario which
 would be available in May when the GDP (gross domestic product) data for the current fiscal is
slated for release.

National awards for Power Grid

• The Power Grid Corporation of India has been conferred three gold shields and one
silver shield in the national awards for meritorious performance in the power sector
during 2008-09.

• The awards were presented by Union Power Minister Sushilkumar Shinde to Power Grid
Chairman and Managing Director S. K. Chaturvedi at a function in the Capital.

• The gold shields went to Power Grid Corporation’s Western Region-I transmission system and
the North-Eastern Region transmission system, and to the 220 kV D/C Pul-e-Khumri to Kabul
Transmission Line in Afghanistan.

Time of iPad

• Apple Computer’s iconic Chief Executive Officer Steve Jobs has made another bid to
create digital history.

• Following months of speculation, he unveiled the iPad, a 24.64 cm (9.7 inch) touch-screen
tablet. This device, he proclaimed, lets people hold the internet in their hands. Mr. Jobs hopes
to make the same game-changing impact on the digital world that he did with the iPod, which
has sold 250 million units, and the iPhone.

Apple’s nifty new creation is posit ioned as a “third category” mobile device — between the laptop and
the smartphone.
NABARD’s Managing Director- K.G. Karmakar
Courtesy:- Dialogue India

CAG Weekly
(Current Affairs & GK)
By Om Prakash (goldy sir)
Rising rupee not an unmixed blessing
On January 11 the rupee closed at a 16-month high of 45.34 to the dollar in the inter-bank
currency market. At the end of last year (December 31) it was at 46.54. A dollar would have fetched
Rs.1.20 less in ten days. In other words, fewer rupees would be needed to acquire dollars.
The rupee has been appreciating since April 2009, but the trend has become more pronounced
recently. In the New Year, the appreciation has been particularly sharp, by 2.6 per cent in 10 days.
Reasons-

• The rupee’s strength is more due to the weakness of the dollar over a fairly long period.
the American currency has recently been under pressure in relation to most Asian currencies.
The Korean won, the Thai baht and the Malaysian ringgit have all appreciated against the
dollar recently. This phenomenon is attributed to the fact that these Asian economies have
rebounded sharply in the post-recession period.The U.S. economy, on the other hand, has had
an uneven performance. More to the point, the Indian economy seems capable of growing
 by about 7 per cent this year. That rate will be one of the highest posted by any country and
will be second only to that of China.

• Currently, the major factor influencing exchange rates is the large flow of foreign
institutional investment into Indian stock markets. Last year FII flows were estimated at
$17.5 billion and their main motivation seems to be the prospect of higher returns in India and
other emerging markets as compared to the U.S.

Implications-

• Exporters will be hard hit as their competitiveness will be eroded in the global markets.

• Importers, on the other hand, stand to gain by the strengthening rupee. However, the
petroleum import bill, forming a significant part of the overall import bill, may not see a
sizable saving: high petroleum prices may offset the advantage in foreign exchange rates.

• While the FIIs’ confidence in the Indian capital market is welcome, the flood of dollars coming
in may not be an unmixed blessing. Such flows are not stable. In the recent past these
investors have pulled out of India en masse, causing a sharp drop in the stock markets.

• Any mop up of dollars will add to reserves and increase domestic liquidity exponentially,
thereby fuelling inflation.Sterilisation measures _ to suck out excess rupees in the system
— will be expensive in the current context of abundant liquidity. In its forthcoming policy
statement, the RBI is expected to announce measures impounding a portion of domestic
liquidity.

• Finally, any talk of discouraging FII inflows — through, for instance, a Brazil type Tobin tax —
will have to reckon with the crucial role they play in shoring up the balance of payments.

What's wrong with the existing system of taxation of goods

• The current system taxes production whereas the GST will aim to tax consumption.

• Indeed, the current law levies taxes on movement of goods from one state to another —
effectively creating borders within borders.

• It distorts the allocation of resources and inhibits productivity growth. The transition to GST
will be an important milestone from a macro perspective.

• team after the cancellation of an Indian cricket tour in the aftermath of the Mumbai attacks.

Carry trade in US$

• The dollar beginning to harden against currencies like the euro. The strengthening of the dollar
is confirmed by a rise inDXY - the currency index that measures the relative value of
the dollar to a basket of currencies — by 2.48% since January 14 at around 78.525
levels. Currencies in the basket include the euro, yen, pound, Canadian dollar,
Swedish krona and Swiss franc. The index is viewed as the barometer of the greenback
against major currencies in the world.

• The carry transaction /dollar carry trade is where global fund managers borrowed
dollar and converted it into currencies of countries they chose to invest in.

• As the carry currency turns more expensive, markets begin to fear that investors will start to
sell some of the stocks to pay back the loan which no longer looks cheap.
NTPC plans to set up arm for acquiring coal assets abroad

• NTPC, the world’s second-largest independent power producer (IPP), plans to set up a
new entity for acquiring coal assets abroad to secure fuel supplies for its coal-based plants.

Mauritius government comes hard on round-tripping

• The Financial Services Commission of Mauritius has imposed a stringent set of conditions on
Mauritius-based companies investing in India in a bid to allay fears about round-tripping of
funds.

• In round tripping, domestic funds/companies go out and come back again through circuitous
routes from Mauritius or other tax havens, to save taxes.

• The Mauritian government has also warned that licences of entities investing in India would be
revoked if they source funds from India.

• The move provides a new turn to the lingering debate over allegations of Indian corporates
using the Mauritius route to escape capital gains tax.

Teaser rate

• This is an offer by lenders where customers seeking homes loans are extended an
attractive interest rate — at a substantial discount to market rates. These rates,
normally an introductory offer, last only for a few months or sometimes only during the initial
year or two of a mortgage loan. Subsequently, the rate is adjusted to the market rate after
the special offer period is over.

• In India, the concept is relatively new with many banks offering a low interest rate for the first
2-3 years of the maturity of the loan. State Bank of India — the country’s largest bank —
queered the pitch in early 2009 in an attempt to woo home borrowers and revive the sagging
demand for loans, following the global economic crisis.

• The Reserve Bank of India has, however, expressed its concern relating to banks indulging in
this practice, keeping in mind the impact on bank balance sheets.

Carrefour set to enter India's retail scene?

• Carrefour, Europe’s biggest retail chain, is reportedly close to a deal with Kishore Biyani
of Pantaloon Retail to set up franchisee stores in India.

• The Carrefour franchise stores will be aimed at affluent customers, pitting them against the
Raheja group’s HyperCity, which operates four stores in three cities.

• Currently, Indian rules permit foreign direct investment in the cashand-carry

wholesale business to supply to other retailers, but not directly to customers. Foreign
investment is barred in case of multi-brand retail stores, while single-brand retailers such as
Nike and Reebok can be foreign owned up to 51%. Multi-brand international retailers are also
allowed to operate, but only through the franchisee route.

China records 8.7 per cent growth

• A year after suffering one of its worst declines in decades, China's economy has rebounded
strongly, recording 8.7 per cent growth in 2009.
 • The Chinese government's official growth figures for last year, released have exceeded earlier
forecasts: the economy registered an unexpectedly high 10.7 per cent growth between
October and December, largely on the back of record government spending on infrastructure
projects.

• China is now on course to overtake Japan as the world's second-largest economy, though
confirmation of that development will have to wait until next month, when Japan's official GDP
figures are released.

Currency futures permitted in euro, pound, yen

• Exchange-traded currency futures will now be expanded to the euro, pound sterling and yen
pairing with the rupee, giving investors more flexibility to hedge their risks against volatility in
exchange rates.

• At present, currency futures are allowed only in the dollar-rupee contracts.

SNC-Lavalin still a player

• SNC-Lavalin Energy Control Systems (ECS), a subsidiary of the SNC-Lavalin Group, which
is the ninth accused in a charge-sheet filed by the CBI, has bid its way into a list of 14
empanelled implementation agencies for the Union Power Ministry’s flagship scheme, the
Rs.50,000-crore Re-structured Accelerated Power Development and Reforms
Programme (R-APDRP).

• The R-APDRP, launched during the 11th Five Year Plan, with Power Finance Corporation
Limited (PFCL) as the nodal agency, aims to reduce the aggregate Technical and
Commercial (AT&C) losses to 15 per cent in power utilities in States including Kerala.

Restructuring NABARD

• Boston Consulting Group (BCG), a management consulting firm, will soon begin consultations
aimed at restructuring the National Bank for Agriculture and Rural Development (NABARD).

• NABARD Chairman Umesh Chandra Sarangi .

• NABARD has undergone a change from being a development finance institution to a

development facilitating and financing institution.

• On the implementation of the Vaidyanathan Committee report on cooperatives, Mr.

Sarangi said Rs. 7,400 crore had been disbursed for strengthening cooperatives.

On a strong wicket

• The rupee touched a 16-month high of Rs.45.34 against the dollar on Monday, January 10.

• The trend of rupee appreciation that began in March-April 2009 has accelerated in the new
year.

• The rupee gained almost three per cent in less than 10 working days.

• In India, the recent gains by the rupee are attributed to a spurt in foreign institutional
investment (FII). During 2009, FII flows were estimated at around $17.5 billion.

• the Malaysian ringgit and the Thai baht.

Bharti Airtel to acquire 70 % in Warid Telecom

 • Bharti Airtel would acquire 70 per cent stake in Bangladesh’s Warid Telecom, a wholly-
owned subsidiary of the Dhabi Group. Under the agreement, Bharti Airtel will have
management and board control of Warid Telecom and make a fresh investment of $300 million
to expand its operations in Bangladesh, making it the largest investment by any Indian
company in Bangladesh.

• The Dhabi Group will continue as a strategic partner, retaining 30 per cent shareholding and
have its nominees on the company’s board.

• Interestingly, this is Bharti’s first international buyout since its failed multi-billion
dollar bid for South Africa’s MTN last year.

Lakshmi Narayanan, Kochhar on ISB board

• Three new directors — ICICI Bank CEO Chanda Kochhar, Citigroup South Asia head Mark
Robinson, and Cognizant Vice Chairman Lakshmi Narayanan — have joined the board of
the Indian School of Business (ISB). With the new appointments, the tally of total number of
directors on the ISB executive board reached 33, according to information available on its
website.

• The decision of appointing new members on its board was taken at ISB’s board meeting held
on January 8 in Mumbai.

India poised for strong recovery — ADB

• In its study titled ‘Impact and policy responses-India’, the Manila-based multilateral
lending agency said that the Indian economy had emerged from the crisis relatively unscathed
and quickly regained growth momentum, thanks to its own stimulus actions, past reforms,
banks’ limited exposure to troubled parts of the global financial system, as well as the nation’s
robust domestic consumption.

Anil Ambani eyes MGM

• Anil Ambani plans a takeover of the Metro-Goldwyn-Meyer Hollywood studio (which owns
the James Bond franchise) in an attempt to become one of the world’s most powerful film
bosses.

• Anil Ambani already owns a controlling stake in Steven Spielberg’s DreamWorks

studio and has struck a series of deals with stars including Brad Pitt, Jim Carrey, Julia Roberts
and George Clooney to develop their films.

• Anil Ambani-led Reliance Big Pictures produced two most successful films last year while its
current blockbuster ‘The 3 Idiots’ has broken Indian box office records.

Courtesy:- Dialogue India and Career Plus