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January 2017 Indian Economy


Economy

Indian Skill Development Service
The Ministry of Skill Development and Entrepreneurship (MSDE) has issued the notification of setting up of Indian Skill Development Services (ISDS). 

This service has been created for the Training Directorate of the Ministry of Skill Development and Entrepreneurship.

Background
The step of instituting a formal service in Group ‘A’ category was started around two years back when the MSDE came into being and the Centre gave its green signal for its creation on October 7, 2015.

About ISDS

  • ISDS will be a Group ‘A’ service where induction will take place through Indian Engineering Service Examination conducted by UPSC. It is an attempt to attract young and talented administrators for Skill Development.
  • The knowledge acquired by the engineers recruited will give new impetus to the initiative of the government to the skill development and also efficient and effective implementation of the schemes.
  •  This is a step forward to meet the target of skilling 500 million people by 2022.
  •  The Training Directorate is involved in implementation of various schemes like Craftsmen Training Scheme (CTS) , Apprenticeship Training Scheme (ATS) and Skill Development Initiative Scheme (SDIS) for the Modular Employable Skill (MES).
  • The Indian Skill Development Service (ISDS) will have 263 all India posts. 
  • The Academy for training of the cadre will be National Institute of Skill Development.

Central Board of Direct Taxes signs three more Advance Pricing Agreements pertaining to the Engineering Goods and Shipping sectors

The Central Board of Direct Taxes (CBDT) has started the year 2017 by entering into three unilateral Advance Pricing Agreements (APAs).

With this, the total number of APAs entered into by the CBDT has reached 120 which includes 7 bilateral APAs and 113 Unilateral APAs. A total of 56 APAs (4 bilateral APAs and 52 unilateral APAs) have been entered into in the current financial year till date.

About APA:

  • The APA Scheme was introduced in the Income-tax Act in 2012 and the “Rollback” provisions were introduced in 2014. 
  • The scheme endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. 
  • Since its inception, the APA scheme has evinced a lot of interest from taxpayers and that has resulted in more than 700 applications (both unilateral and bilateral) being filed in just four years.
  • The progress of the APA Scheme strengthens the Government’s resolve of fostering a non-adversarial tax regime. 
  • The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

Transfer Pricing

  • A transfer price is the price at which divisions of a company transact with each other, such as the trade of supplies or labour between departments. 
  • Transfer prices are used when individual entities of a larger multi-entity firm are treated and measured as separately run entities.

Google introduces tools for small businesses in India
Google India announced key initiatives for the small and medium businesses in India, including a new tool that would help them create an online presence, besides a digital training programme.

These initiatives are — My Business ,Digital Unlocked and Primer — which have been introduced in India first.

Background:
India has 51 million small and medium businesses (SMBs) today that contribute 37% to India’s GDP. Out of these, only 32% are online or are leveraging the power of the digital. It is the balance 68% that Google India wants to digitally empower in 2017.

Digital Unlocked

  • To address the offline 68% SMBs, Google launched  Digital Unlocked, a training program for business owners in India that will empower them with essential digital skills to help them get online and start using the internet to grow their business.
  • The programme is built across the different formats of online, offline and mobile.
  • The offline training is being conducted in partnership with FICCI and over the next three years, 5,000 workshops will be held across 40 Indian cities. 
  • The online training comprises a set of 90 self-paced video tutorials,  curated specifically for India and is available free of charge. 
  •  The tutorials cover a comprehensive set of topics ranging from building a web presence and driving online growth to reaching customers over mobile and video.

My Business

  • It will be launched later this year. Called ‘My Business Website’, this will help SMBs create a free, mobile optimised website. 
  • This new feature will provide simple, templated, editable websites for small businesses created from their data and photos on Google Maps and will be available in 9 Indic languages.

Primer

  • A free mobile app designed to teach digital marketing skills in a quick, easy and interactive way. Available for download through the Google Play and IOS app store. 
  • Primer also works offline and is currently available in English and Hindi with Tamil, Telugu and Marathi versions coming shortly.

India better placed amidst fragile world economy: FSDC in its 16th meeting

About FSDC
Financial Stability and Development Council is an apex-level body constituted to create such a super regulatory body .

  • The idea was first mooted by the Raghuram Rajan Committee in 2008. 
  • Finally in 2010, the then Finance Minister of India, Pranab Mukherjee, decided to set up such an autonomous body. .
  • It is chaired by Union Finance Minister and include Finance Secretary,Secretary(Department of Financial Services),RBI Governor, Chief Economic Advisor,Chairman of SEBI,IRDA,PFRDA and other person as Chairperson deemed necessary.

Responsibilities
•    Financial Stability
•    Financial Sector Development
•    Inter-Regulatory Coordination
•    Financial Literacy
•    Financial Inclusion
•    Macro prudential supervision of the economy including the functioning of large financial conglomerates
•   Coordinating India's international interface with financial sector bodies like the Financial Action Task Force (FATF), Financial Stability Board (FSB)and any such body as may be decided by the Finance Minister from time to time.

Anti-avoidance tax rule to kick in from April 2017

The Central Board of Direct Taxes has announced that tax anti-avoidance rule GAAR will kick in from April 1, 2017.

What is GAAR

  •  General Anti-Avoidance Rule (GAAR) was part of the 2012-13 Budget speech to check tax evasion and avoidance.
  •   However, its implementation was repeatedly postponed because of the apprehensions expressed by foreign investors.
  •  GAAR, which was originally to be implemented from April 1, 2014, will now come into effect from April 1, 2017 (Assessment Year 2018-19).
  • It empowers officials to deny the tax benefits on transactions or arrangements which do not have any commercial substance or consideration other than achieving tax benefit. It contains a provision allowing the government to retroactively tax overseas deals involving local assets (like Vodafone).

Implications

  •  GAAR could give powers to the tax department to deny double taxation treaty benefits to foreign funds based out of tax-havens like Mauritius. India has a Double Taxation Avoidance Agreement with Mauritius. 
  • Overseas portfolio investors, routing their investments via countries like Mauritius, currently do not pay any tax on short-term capital gains. 
  •  There have been fears that the government may use it to target P-Notes. Through the use of GAAR, government may try to tax P-Notes as indirect investments, which could attract a tax rate of up to 15 per cent, experts say.
  • To avoid tax altogether under GAAR, an investor may have to prove that P-Notes were not set up specifically to avoid paying taxes.

Modi inaugurates India's first international stock exchange- India INX at GIFT city
Prime Minister Narendra Modi inaugurated India's first international exchange -- India INX -- at the International Financial Service Centre (IFSC) of GIFT City. here, 

  • It will enable Indian firms to compete on equal footing with offshore firms.
  • A subsidiary of Bombay Stock Exchange, India INX is one of the world's most advanced technology platforms with a turn-around-time of 4 micro seconds which will operate for 22 hours a day, allowing international investors and NRIs to trade from anywhere across the globe.
  • INX will trade initially in equity derivatives, currency derivatives, commodity derivatives including index and stocks. It plans to offer depository receipts and bonds later.
  • This has been done with a view to enable Indian firms to compete on an equal footing with offshore financial centres

About GIFT city

  • Gujarat International Finance Tec-City or GIFT is an under-construction central business district between Ahmedabad and Gandhi Nagar in the Indian state of Gujarat.
  • Its main purpose is to provide high quality physical infrastructure (electricity, water, gas, district cooling, roads, telecoms and broadband), so that finance and tech firms can relocate their operations there from  Mumbai,  Bangalore,  Gurgaon etc, where infrastructure is either inadequate or very expensive.
  • It will have a special economic zone (SEZ), international education zone, integrated townships, an entertainment zone, hotels, a convention center, an international techno park, Software Technology Parks of India (STPI) units, shopping malls, stock exchanges and service units

Unemployment in India to increase marginally in 2017-18: Report
Unemployment in India is projected to witness marginal increase between 2017 and 2018, signalling stagnation in job creation in the country, according to a UN labour report.

Major Highlights

  • The United Nations International Labour Organisation (ILO) released its 2017 World Employment and Social Outlook report , which finds economic growth trends lagging behind employment needs and predicts both rising unemployment and worsening social inequality throughout 2017.
  • Unemployment in India is projected to increase from 17.7 million last year to 17.8 million in 2017 and 18 million next year. In percentage terms, unemployment rate will remain at 3.4 per cent in 2017-18.
  •  India had performed slightly well in terms of job creation in 2016, when a “majority” of the 13.4 million new employment created in Southern Asia happened in the country. 
  • The report also acknowledged that India’s 7.6 per cent growth in 2016 helped Southern Asia achieve 6.8 per cent growth that year.
  • Manufacturing growth has underpinned India’s recent economic performance, which may help buffer demand for the region’s commodity exporters.
  • We are facing the twin challenge of repairing the damage caused by the global economic and social crisis and creating quality jobs for the tens of millions of new labour market entrants every year.
  •  In contrast, unemployment is expected to fall in 2017 in developed countries (by 670,000), bringing the rate down to 6.2 per cent from 6.3 per cent in 2016.
  • The ILO advocates policy approaches that address root causes of secular stagnation as well as structural impediments to growth.

India Signs Financing Agreement with World Bank for US$ 48 Million for “Nagaland Health Project”.
A financing agreement for IDA credit of US$ 48 million (equivalent) for the ‘Nagaland Health Project’ was signed with the World Bank.

About Project

  • The Objectives of the project are to improve health services and increase their utilization by communities in targeted locations in Nagaland. 
  • Communities in targeted locations will benefit from project activities at the community and health facility levels while the population of the state as a whole will benefit from improvements in higher-level facilities as well as system-wide investments. 
  •  The project will directly benefit about 600,000 people. It will support and complement existing systems and mechanisms involving communities under the National Health Mission. 
  • The closing date of Nagaland health Project is 31st March, 2023. 

Cabinet gives approval to the package for supporting MSEs - Augmentation of Corpus of CGTMSE

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given ex-post facto approval to the package for supporting Micro and Small Enterprises (MSEs) - Augmentation of the Corpus of Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE).

The proposal entails the following:

  •   Augmentation of the corpus of the Trust from Rs. 2,500 crore to Rs. 7,500 crore, to be fully funded by the GoI
  •  To increase coverage of the loans covered under the credit guarantee scheme from Rs. 1 crore to Rs. 2 crore
  • To increase coverage of the credit guarantee scheme for loans being extended to micro and small enterprises by NBFCs also. This would enable the Trust to enhance the quantum

The measures would result in the following benefits:

  •   Lowering the level of leverage
  •   Improving sustainability of the Fund
  •   Enable the Trust to enhance the quantum of credit guarantee to larger number of MSEs
  •   Improving financial management
  •  Limit the unfunded contingent liabilities.
  •  As the scheme provides credit without collateral and third-party guarantee, the start-ups would be encouraged to set up enterprises based on innovation  and new ideas.
  •  Every operation is online and therefore, the system ensures public accountability.

Cabinet approves amendment in Modified Special Incentive Package Scheme 
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval for amendment in the Modified Special Incentive Package Scheme (M-SIPS) to further incentivize investments in Electronic Sector and moving towards the goal of ‘ Net Zero imports’ in electronics by 2020.
Besides expediting investments into the Electronics System Design and Manufacturing (ESDM) sector in India, the amendments in M-SIPS are expected to create employment opportunities and reduce dependence on imports.

About M-SIPS

  •  The Cabinet had, in July, 2012 approved the M-SIPS to provide a special incentive package to promote large scale manufacturing in the Electronic System Design and Manufacturing (ESDM) sector. 
  •  The scheme provides subsidy for capital expenditure - 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. 
  •  The   Scheme was amended in August, 2015   for scope enhancement and simplification of procedure. 
  • The M-SIPS has been able to create positive impact on investment in electronics sector.

Cabinet approves the exclusion of States from the investments of National Small Savings Fund
The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has given its approval to exclude State Governments States/UTs (with Legislature) except Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh from National Small Savings Fund (NSSF) investments from 01.04.2016.

  •  NSSF in the future shall, with the approval of Finance Minister, invest on items the expenditure of which is ultimately borne by Government of India and the repayment of principal and interest thereto would be borne from the Union budget.
  •  Once states are excluded from NSSF investments, the investible funds of NSSF with GOI will increase.  Increased availability of the NSSF loan to GOI may reduce the GOI's market borrowings.
  • Arunachal Pradesh, Delhi, Kerala and Madhya Pradesh will continue availing of NSSF loans, 26 other States and Pondicherry who are eligible to borrow from the market have preferred to stop taking loans from the NSSF.

Background
The Fourteenth Finance Commission (FFC) recommended that State Governments be excluded from the investment operations of the NSSF. The NSSF loans come at an extra cost to the State Government as the market rates are considerably lower. The Union Cabinet in its meeting held on 22nd February, 2015, accepted that this recommendation.

About NSSF

  • A “National Small Savings Fund” (NSSF) in the Public Account of India has been established with effect from 1.4.1999. A new sub sector has been introduced called “National Small Savings Fund” in the list of Major and Minor Heads of Government Accounts.
  •  All small savings collections are credited to this Fund. Similarly, all withdrawals under small savings schemes by the depositors are made out of the accumulations in this Fund. 
  • The balance in the Fund is invested in Central and State Government Securities. The investment pattern is as per norms decided from time to time by the Government of India.
  • The Fund is administered by the Government of India, Ministry of Finance (Department of Economic Affairs) under National Small Savings Fund (Custody and Investment) Rules, 2001, framed by the President under Article 283(1) of the Constitution. 
  • The objective of NSSF is to de-link small savings transactions from the Consolidated Fund of India and ensure their operation in a transparent and self-sustaining manner. 
  • Since NSSF operates in the public account, its transactions do not impact the fiscal deficit of the Centre directly.
  • As an instrument in the public account, the balances under NSSF are direct liabilities and constitute a part of the outstanding liabilities of the Centre.

India Innovation Index to measure performance of Indian states

The World Economic Forum, NITI Aayog, the World Intellectual Property Organization and the Cornell University will work together to develop an India Innovation Index that will provide impetus to Indian states to drive the innovative spirit. 

Competitive and cooperative federalism is key to India's progress. This index will encourage states to compete with each other and, in turn, lead to better policies for inclusive growth.

About Index

  • Each partnering organisation will nominate a working group member to work on the index. The first ranking is expected to be released at the India Economic Summit in New Delhi on October 4-6, 2017. 
  • The index will measure and rank the innovation performance of all Indian states with the aim of moving India towards an innovation-driven economy. 
  • The index will be based on key pillars of innovation and sub-indices that together will assist in tailoring policies that promote inclusive growth.
  • The pillars include 
  1.  Strength of institutions
  2.     Capacity of human capital and research
  3.    Supporting infrastructure 
  4.     The level of business sophistication

FIPB clears 6 FDI proposals 
Inter-ministerial body FIPB today approved six investment proposals,, envisaging foreign investments of Rs 1,186.5 crore. 

FDI in India grew by 29 per cent to $40 billion in 2015-16 as against $30.94 billion in the previous financial year. 

About FDI approval

  • FDI is regulated through various norms. A minimum lock in period, minimum capital for investment, sectoral limits and most importantly regulation of entry into approval/automatic route are the important regulations.
  •  In the case of entry regulations, FDI entry is made under two categories – automatic route and approval route. 
  • Approval from the government is mandatory for some type of investment. For this, approval institutions/bodies are created.
  • The Foreign Investment Promotion Board is the most important approval body as it can consider FDI below Rs 5000 Crore.  Above this amount, the Cabinet Committee on Economic Affairs is the approval authority.
  • FIPB is located in the Department of Economic Affairs, Ministry of Finance and the Finance Minister is in charge of the FIPB. 
  • Functions of FIPB

               1.    To quickly approve the foreign investment proposals
              2.    To review the FDI polices and to communicate with other agencies such as the Administrative Ministries in order to set up                                  guidelines that are transparent and which encourage FDI into the various sectors.
              3.    To look over the implementation of the various proposals those have been approved by it.
             4.    To take up such activities that encourage FDI into the country such as establishing contracts with international companies and                            also inviting them to invest in India.
             5.    To communicate with government, non-government and industry in order to increase the flow of FDI onto the country.
             6.    To identify the various sectors that requires FDI.


Centre shifts disinvestment advice to new department
In keeping with its ongoing efforts to streamline the disinvestment process, the government transferred the role of advising the government on how to utilise the proceeds from disinvestment from the Department of Investment and Public Asset Management (DIPAM) to the Department of Economic Affairs.
With this move the Department of Economic Affairs in the Finance Ministry will now be in charge of “financial policy in regard to the utilisation of the proceeds of disinvestment channelized into the National Investment Fund.”

Background

  • It seems to be streamlining the process because the Department of Economic Affairs is in charge of budget-making, which includes deciding what to do with the proceeds from disinvestment.
  • During his Budget speech 2016-17, Finance Minister Arun Jaitley had announced renaming the previously known Department of Investment as DIPAM.

National Investment Fund

  • The cabinet Committee on Economic Affairs (CCEA) in 2005 had approved the constitution of a National Investment Fund (NIF). 
  • The Purpose of the fund was to receive disinvestment proceeds of central public sector enterprises and to invest the same to generate earnings without depleting the corpus.
  • The earnings of the Fund were to be used for selected Central social welfare Schemes. This fund was kept outside the consolidated fund of India.
  • In 2013, CCEA restructured the NIF and decided to do away with the management of the disinvestment proceeds by the Fund Managers of NIF. It was decided by CCEA that the entire disinvestment proceeds from 01.04.2013 will be credited to the existing ‘Public Account’ under the head NIF and they would remain there until withdrawn/invested for the approved purpose. The allocations out of the NIF will be decided in the annual Government Budget.

Draft steel policy to enable Rs.10 lakh Crore investments
The Steel Ministry  has released new draft National Steel Policy of 2017.

Major highlights

  • Ministry has proposed setting up Greenfield steel plants along India’s coastline to tap cheap imported raw materials such as coking coal and export the output in a more cost-effective manner
  •   The policy, envisages to more than double India’s domestic steel production capacity to 300 million tonnes by 2030-31.
  •  It anticipates a requirement of 10 lakh crore of fresh investments to meet that goal and expects at least 11 lakh new jobs being created in the process.
  •  The draft policy lays out two alternatives of its vision — “to create a globally competitive steel industry that promotes inter-sectoral growth” or “to create a self-sufficient steel industry that is technologically advanced, globally competitive and promotes inclusive growth.”
  •  To cut down reliance on expensive imports of coking coal, the policy has mooted gas-based steel plants and technologies such as electric furnaces to bring down the use of coking coal in blast furnaces.
  •  According to the policy, Public sector firms in the steel sector should aim for economies of scale and will be encouraged to divest their non-core assets through mergers and restructuring.
  • Establishment of steel plants along the coast under the aegis of Sagarmala project will be undertaken. Such plants would be based on the idea of importing scarce raw materials and exporting steel products.

About Sagarmala

  • Sagar Mala project is a strategic and customer-oriented initiative of the Government of India to modernize India's Ports so that port-led development can be augmented and coastlines can be developed to contribute in India's growth. 
  • It looks towards transforming the existing Ports into modern world class Ports and integrate the development of the Ports, the Industrial clusters and hinterland and efficient evacuation systems through road, rail, inland and coastal waterways resulting in Ports becoming the drivers of economic activity in coastal areas.
  • The project was launched by Ministry of Shipping (the nodal ministry for this initiative) in Karnataka on 31 July 2015.
  • A National Sagarmala Apex Committee (NSAC), composed of the Minister in charge of Shipping, with Cabinet Ministers from stakeholder Ministries and Chief Ministers / Ministers in charge of ports of maritime states as members, will provide policy direction and guidance for the initiative’s implementation, shall approve the overall National Perspective Plan (NPP) and review the progress of implementation of these plans.

Panel submits report on FRBM Act
 The N.K. Singh panel submitted its report on revising the Fiscal Responsibility and Budget Management Act to Finance Minister.

About the committee

  • The five-member committee — including Reserve Bank of India Governor Urjit Patel was constituted in May 2016 following Mr. Jaitley’s announcement, in Budget 2016-17, of the creation of a panel to review the Fiscal Responsibility and Budget Management Act.
  • In the terms of reference drawn up for the committee, the finance ministry asked it to examine the need and feasibility of aligning fiscal expansion or contraction with credit contraction or expansion, respectively, in the economy.
  • It also sought to examine the need and feasibility of having a “fiscal deficit range” in place of the existing fixed numbers (percentage of GDP) as a fiscal deficit target.

About FRBM

  •  FRBM was enacted to institutionalize financial discipline, reduce India's fiscal deficit, improve macroeconomic management and the overall management of the public funds by moving towards a balanced budget.
  • The main purpose was to eliminate revenue deficit of the country (building revenue surplus thereafter) and bring down the fiscal deficit to a manageable 3% of the GDP by March 2008
  • Subsequent to the enactment of the FRBMA, the following targets and fiscal indicators were agreed by the Central government:

            1.    Revenue deficit
                   a.    Date of elimination – 31 March 2009 (postponed from 31 March 2008)
                   b.    Minimum Annual reduction – 0.5% of GDP

            2.    Fiscal Deficit
                   a.    Ceiling – 3% of the GDP by 31 Mar 2008
                   b.    Minimum Annual reduction – 0.3% of GDP
            3.    Total Debt – 9% of the GDP (a target increased from the original 6% requirement in 2004–05)
                    a.    Annual Reduction – 1% of GDP
            4.    RBI purchase of Government bonds – to cease from 1 April 2006

India rejects attempts by EU, Canada for global investment agreement

India, along with Brazil, Argentina and some other nations, has rejected an informal attempt by the European Union (EU) and Canada to work towards a global investment agreement at the World Trade Organisation (WTO)-level that would incorporate a contentious Investor-State Dispute Settlement (ISDS) mechanism.

Background
The EU and Canada have inked an investment pact that has incorporated the contentious ISDS. At the meeting (of trade ministers of select countries held on the sidelines of the recently held World Economic Forum in Switzerland), they wanted the investment pact to be the template for a similar multilateral agreement.

What India has to say

  •  The ISDS mechanism has become contentious as it permits companies to drag governments to international arbitration without exhausting the local remedies and claim huge amounts as compensation citing losses they suffered due to reasons, including policy changes.
  • Only after all local options have been exhausted for settling disputes between a corporate and a government, then only it would be good to permit issues to be taken up in international arbitration tribunals

RBI prohibits investments in 'non-cooperative countries' 
Reserve Bank today prohibited Indian entities from making direct investments in any entity located in 'non co-operative countries and territories', as identified by the inter-governmental body FATF. 

The prohibition on investment is "in order to align" instructions under FEMA with the objectives of the FATF. 

Non Cooperative Countries and Territories
Financial Action Task Force since 2000 is issuing the list of countries which it judges to be non-cooperative in the global fight against money laundering  and terrorist financing, calling them "Non-Cooperative Countries or Territories".

FATF

  • The Financial Action Task Force (on Money Laundering) (FATFis an intergovernmental organization founded in 1989 on the initiative of the G7 to develop policies to combat money laundering. 
  • In 2001 the purpose expanded to act on terrorism financing. It monitors countries' progress in implementing the FATF Recommendations by ‘peer reviews’ (‘mutual evaluations’) of member countries. The FATF Secretariat is housed at the headquarters of the OECD in Paris.
  • The Financial Action Task Force (FATF) currently comprises two regional organisations and 35 member jurisdictions, including India, US, UK, China and the European Commission. 

India-UAE strategic oil reserves deal 
India's quest for energy security got a major push, after a pact with the United Arab Emirates (UAE) that will flow in as much as one sixth of the India's total emergency oil reserve.

Major highlights of deal

  •  It allows the Gulf OPEC country to fill half of an underground crude oil storage facility at Mangalore, Karnataka. 
  •  The deal is part of New Delhi's strategic petroleum reserve system, an emergency underground storage of 36.87 million barrels of crude oil which can supply about 10 days of the country's average daily oil demand. 
  • UAE's Abu Dhabi National Oil Co (ADNOC) will store about 6 million barrels of oil at Mangalore, taking up about half of the site's capacity. 
  • This is the second agreement signed between Indian Strategic Petroleum Reserves Limited and ADNOC in the area of storage and management of oil at strategic facilities in India. Crude oil supplies from ADNOC will begin in the last quarter of 2017 
  • In 2014 India began talks to lease part of its strategic storage to ADNOC. Under those discussions, India was to have first rights to the stored crude oil in case of an emergency. 

Other key facts

  • Strategic petroleum reserves have become indispensable to safeguard the economy and to help maintain national security in the event of an energy crisis. These crude oil inventories (or stockpiles) can be held by the government of a particular country, as well as by private industry 
  • India has already filled the other half of the Mangalore storage facility with 6 million barrels of Iranian oil. The country has another storage site in Vizag, Andhra Pradesh with 7.55 million barrels of Iraqi oil and a third such facility in Karnataka's Paduran, with a storage capacity 18.3 million barrels. 
  • The US has the world's largest reported Strategic Petroleum Reserve with a total capacity of 727 million barrels. If completely filled, the US reserves could theoretically replace about 60 days of oil imports.

India Post gets payments bank licence to start services
India Post has received payments bank licence from the Reserve Bank of India to start rollout of banking operations commercially under the permit.

It will be set up as a differentiated bank and will confine its activities to acceptance of demand deposits, remittance services, Internet banking and other specified services.

India Post Payments Bank is the third entity to receive payments bank permit after Bharti Airtel and Paytm.

Background

  • In 2015, RBI had granted ‘in-principle’ approval to 11 entities, including Department of Posts, to set up payments banks and proposed to give such licences ‘on tap’ basis in future.
  • However, Tech Mahindra, a consortium of Sun Pharmaceutical Industries Ltd promoter Dilip Shanghvi, IDFC Bank Ltd and Telenor Financial Services and Cholamandalam Investment and Finance Co. backed have dropped their plan to roll out payments bank.
  • Out of eight companies in fray - Airtel has launched its commercial operation across India with an investment of Rs 3,000 crore offering interest rate of 7.25 per cent on deposits, free money transfer from Airtel to Airtel numbers within Airtel Bank, money transfer to any bank account in the country.
  • Paytm, promoted by Vijay Shekhar Sharma and backed by Chinese e-commerce major Alibaba, plans to roll out payments bank within initial investment of about Rs 400 crore.
  • Others are — Aditya Birla Nuvo, Fino PayTech, National Securities Depository, Reliance Industries Ltd nd Vodafone m-pesa.

Payment Bank

  • Payments banks are a new model of banks conceptualised by the Reserve Bank of India (RBI). These banks can accept a restricted deposit which is currently limited to INR 1 lakh per customer and may be increased further. 
  • These banks cannot issue loans and credit cards. Both current account and savings accounts can be operated by such banks. Payments banks can issue services like ATM cards, debit cards, online banking and mobile banking.
  • The minimum capital requirement is 100 crore. For the first five years, the stake of the promoter should be 40% minimum. 
  •  Foreign share holding will be allowed in these banks as per the rules for FDI in private banks in India.
  •  The voting rights will be regulated by the Banking Regulation Act, 1949.  
  •  Airtel has launched India's first live payments bank.

Economic Survey 2016-17 Highlights
The Economic Survey 2017, tabled in Parliament projected that the country’s gross domestic product (GDP) will grow by 6.75 per cent to 7.5 per cent in in 2017-18.
 
Here are  highlights of the Economic Survey 2017:
 
 Demonetisation impact: The government says the adverse impact of demonetisation on GDP growth will be transitional. Real GDP growth in 2017-18 is projected to be in the range of 6.75 – 7.5 per cent, once the cash supply is replenished.
 
Industrial growth to cool: Growth rate of the industrial sector estimated to moderate to 5.2 per cent in 2016-17 from 7.4% last fiscal. The agriculture sector to grow at 4.1 per cent in the current year up from 1.2 per cent in 2015-16
 
 Per-capita GSDP: Real per capita GSDP between 1983 and 2014 has shown across-the-board improvement

Remonetisation: The Economic Survey 2017 has suggested quick remonetisation, push for digitisation, bringing land and real estate under GST ambit, reduction in taxes and stamp duties and an improved tax administration system as key reform measures to ensure long term economic benefits.
 
States’ performance: 

  • There has been an improvement in the financial position of states over the last few years. The average revenue deficit has been eliminated, while the average fiscal deficit was curbed to less than 3 percent of GSDP. 
  • The average debt to GSDP ratio has also fallen.   Centre’s Fiscal Responsibility and Budget Management (FRBM) Act,  mirrored by Fiscal Responsibility Legislations (FRL) adopted in the States.

 NPAs: 

As per the Survey, gross NPAs has climbed to almost 12 per cent of gross advances for public sector banks at end-September 2016. At this level, India’s NPA ratio is higher than any other major emerging market, with the exception of Russia. 

  • The consequent squeeze of banks has led them to slow credit growth to crucial sectors-especially to industry and medium and small scale enterprises (MSMEs)-to levels unseen over the past two decades.
  •  As this has occurred, growth in private and overall investment has turned negative . A decisive resolution is urgently needed

Asset rehabilitation: Survey suggests setting up of a centralised Public Sector Asset Rehabilitation Agency that will look after the largest, most difficult Cases, and make Politically Tough Decisions to reduce Debt .
 
 Poor targeting: 

  • According to the Survey, redistribution by the government is far from efficient in targeting the poor.
  • The Survey points out that the capacity of the State in delivering essential services such as health and education is weak due to low capacity, with high levels of corruption, clientelism, rules and red tape. 
  • At the level of the states, competitive populism is more in evidence than competitive service delivery.

Universal Basic Income:

  • The Survey has advocated the concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an effort to reduce poverty.  
  • The Survey points out that the two pre-requisites for a successful UBI are: (a) functional JAM (Jan Dhan, Aadhar and Mobile) system as it ensures that the cash transfer goes directly into the account of a beneficiary and (b) Centre-State negotiations on cost sharing for the programme.

Property tax: A study done for the Survey shows that property tax potential is large and can be tapped to generate additional revenue at city level. Satellite imagery can be a useful tool for improving urban governance by facilitating better property tax compliance.

Job creation: The Survey says Apparel and Leather industry are key to generation of formal and productive jobs:  recommends reforms in labour and tax policies to make the Apparel and Leather sector globally competitive.  The Survey adds that these sectors provide immense opportunities for creation of jobs for the weaker sections, especially for women, and can become vehicles for broader social transformation in the country.
 
Labour migration:

  • New estimates of labour migration in India have revealed that inter-state labour mobility is significantly higher than previous estimates. 
  • Relatively poorer states such as Bihar and Uttar Pradesh have high net out-migration. 
  • Seven states take positive CMM values reflecting net in-migration: Goa, Delhi, Maharashtra, Gujarat, Tamil Nadu, Kerala and Karnataka.  
  • Policy actions to sustain and maximise the benefits of migration include: ensuring portability of food security benefits, providing healthcare and a basic social security framework for migrants – potentially through an inter-state self-registration process.

Sample Questions
Q1.Consider the following statements regarding Indian Skill Development Service.
1.    Under this service induction will take place through Indian Civil Service Examination conducted by UPSC
2.    The Academy for training of the cadre will be National Institute of Skill Development
Choose the correct option
a)Only1                    b)Only 2
c)Both                       d)None


Q2. Financial Stability and Development Council is chaired by
a)    Prime Minister
b)    Finance Minister
c)    Chief Economic Adviser
d)    Niti Ayog VC


Q3.Which of the following is/are correct regarding General Anti-Avoidance Rule (GAAR).
1.    It empowers officials to deny the tax benefits on transactions which do not have any commercial substance other than achieving tax benefit.
2.    GAAR could give powers to the tax department to deny double taxation treaty benefits to foreign funds based out of tax-havens
Choose the correct option
a)Only 1           b)Only 2
c)Both               d)None


Q4.Consider the following statements regarding National Small Savings Fund.
1.    All small savings collections are credited to this Fund.
2.    The balance in the Fund is invested in Central and State Government Securities.
3.    The balances under NSSF are direct liabilities and constitute a part of the outstanding liabilities of the Centre.
Choose the following option
a)Only 1               b)Only 1,2
c)Only 2,3            d)All


Q5.Consider the following statements regarding Payment Banks
1.    Payments banks can issue services like ATM cards, debit cards, online banking and mobile banking but not credit cards
2.    Airtel has launched India's first live payments bank
Choose the following statements
a)Only 1           b)Only 2
c)Both              d)None

Answers
Q1.b      Q2.b    Q3.c      Q4.d      Q5.c