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Economy Compilation

The document provides details on 75 topics related to economics that were covered in prelims exams from January 2019 to October 2019. Some of the key topics discussed include guidelines issued by RBI on tokenization of card transactions to enhance security, Bharatmala taxable bonds being issued by NHAI to raise funds, and a committee constituted by RBI on deepening digital payments chaired by Nandan Nilekani and its recommendations. It also mentions the formation of the National Bench of Goods and Services Tax Appellate Tribunal as the common forum for resolving GST disputes between the central and state governments.

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0% found this document useful (0 votes)

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Economy Compilation

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Kailash Khali

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ECONOMICS

Economic Prelims 365 from Jan 2019 to October 2019.

1. Tokenisation of card transactions by RBI
2. Bharatmala Taxable bonds
3. Committee on Deeping of Digital Payments
4. National Bench of Goods and services tax
5. National Rural Economic Transformation Project
6. Women Livelihood Bond (WLB)
7. Agri-Market Infrastructure Fund
8. Ombudsman Scheme for Digital Transactions
9. Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs)
10. Real Estate Investment Trust
11. Generalised System of Preferences (GSP)
12. TMA for Specified Agriculture Products
13. Core Industries
14. Shadow Banking
15. The Investor Education and Protection Fund (IEPF) Authority
16. Advance Pricing Agreement of Government of India
17. Purchasing Manager’s Index
18. Ways and Means Advances (WMA)
19. 7th Economic Census
20. Merger of NSSO and CSO
21. MCA 21
22. LIBRA Currency
23. Elephant Bonds
24. Financial Stability and Development Council
25. UK Sinha panel on MSME
26. Multilateral convention to prevent base erosion and profit shifting
27. Participatory Guarantee Scheme (PGS)
28. India-Switzerland Automatic Exchange of Information
29. Teaser loans
30. Foreign Funding of the NGOs
31. NIRVIK (Niryat Rin Vikas Yojna) scheme
32. Partial Credit Guarantee Scheme to PSBs
33. Negative Rate Policy
34. Debenture Redemption Reserve
35. Currency Manipulation Issues
36. IMF standards for Data Dissemination
37. Urban Haats
38. Utkarsh 2022
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39. Banking Regulations in India Stricter Than Basel Norms

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40. Free Trade and Warehousing Zones

Bharatmala Taxable bonds

 The National Highways Authority of India (NHAI) plans to raise Rs10,000 crore through
Bharatmala Taxable Bonds in the ongoing financial year. It will have maturity period of
3,5 and 10years. There is no lock-in period in the case of NHAI quasi-judicial bonds and
investors can sell these bonds in the secondary market after allotment.
 BharatmalaPariyojana is a new umbrella program forthe highways sector that focuses on
optimizing efficiency of freight and passenger movement across the country by bridging
critical infrastructure gaps through effective interventions like development of Economic
Corridors, Inter Corridors and Feeder Routes, National Corridor Efficiency Improvement,
Border and International connectivity roads, Coastal and Port connectivity roads and
Green-field expressways.
 It includes development of about 65,000 km of border roads, international connectivity
roads, coastal roads, port connectivity roads, ring roads, among others.
 Ministry of Road Transport & Highways

Committee on Deepening of Digital Payments

With a view to encourage digitisation of payments and enhance financial inclusion through
digitisation. RBI has constituted a High-Level 5 member committee on Deepening of Digital
Payments under the chairmanship of Shri Nandan Nilekani (Former Chairman, Unique
Identification Authority ofIndia).
Major Recommendations of the committee
 The Committee recommended that the MDR should be subsidised by the government and
interchange fee on card payments should be reduced by 15 basis points to incentivise
digital payments. It also recommended that RBI setup a committee to review the MDR on
a periodic basis. Further, it noted that high value payment systems are currently not
available round the clock, which should be addressed.
 To improve the acceptance of digital payments, the Committee recommended removal of
import duties from point-of-sale (POS) devices and waiving GST on Immediate Payment
Service (for transaction charges upto Rs 5000). Further, it recommended that use of high-
volume, low-cost usage cards such as the National Common Mobility Card, be permitted
at POS devices.
 The Committee recommended that the government departments must ensure that all pay-
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outs are through digital means, including payments for goods and services procured,
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Direct Benefit Transfer, salaries and pensions. A e-wallets can be issued for crediting
small value payments, refunds, rebates or loyalty bonus for digital transactions. Further,
DELHI: VIJAY NAGAR 9717380832 & OLD RAJENDER NAGAR 9811293743 | JAIPUR: 8290800441
BENGALURU: KORMANGALA 7619166663 & CHANDRA LAYOUT 7619136662 | BHOPAL: 7509975361
PATNA: 7463950774 | INDORE: 7314977441 | RANCHI: 9939982007 | www.ksgindia.com
ECONOMICS
citizens and businesses should have choices of digital pay instruments for government
payments.
 The Committee recommended that existing rules need to be modified to recognise valid
documents that are digitally signed by the customer to simplify KYC process. Users
should be allowed to withdraw small amounts of cash at POS devices at a low, ad valorem
cost. GST of amount upto Rs 10,000 can be received in cash currently, which should be
brought down. Further, to increase customer confidence, technical and business declines
in digital payments must be reduced by 25% each year.

National Bench of Goods and services tax

 Goods and Services Tax Appellate Tribunal (GSTAT) is the forum of second appeal in GST
laws and the common forum of dispute resolution between Centre and States.The appeals
against the orders in first appeals issued by the Appellate Authorities under the Central
and State GST Acts lie before the GST Appellate Tribunal, which is common under the
Central as well as State GST Acts.
 Being a common forum, GST Appellate Tribunal will ensure that there is uniformity in
redressal of disputes arising under GST, and therefore, in implementation of GST across
the country.
 Composition: GSTAT shall be presided over by its President and shall consist of one
Technical Member (Centre) and one Technical Member (State).
 Reasons Behind its formation:Since GST was launched in July 2017, the state level
authorities of advance ruling (AAR) gave divergent orderson applications dealing with the
same provision of the GST Act. Besides, some of the rulings have upended conventional
tax principles established in the earlier regimes.

National Rural Economic Transformation Project

The World Bank and the Government of India signed a $250 Million Agreement for the National
Rural Economic Transformation Project (NRETP), which will help women in rural households
shift to a new generation of economic initiatives by developing viable enterprise for farm and non-
farm products. The $250 Million Loan from the International Bank for Reconstruction and
Development (IBRD), has a 5-year grace period, and a final maturity of 20 years.

 A Key Focus of the Project will be to promote women-owned and women-led farm and
nonfarm enterprises across value chains; enablethem to build businesses that help
them accessfinance, markets and networks; and generateemployment.
 The NERTP will support enterprise development programs for rural poor women and youth
by creating a platform to access finance including start-up financing options to build
theirindividual and/or collectively owned and managed enterprises.
 The other key component of the project includes developing financial products using
digital financial services to help small producer collectives scale-up and engage with the
market.
 It will also support youth skills development, in coordination with the
DeenDayalUpadyaya Grameen Kaushalya Yojana. Peer to peer learning across States
and across communities was a successful strategy under the NRLP and will also continue
to be used in this project.
 The Project will continue to give technical assistance, skills building and investment
support to strengthen women-owned and women-led producer collectives diversify into
high value farm and non-farm commodities such as commercial crops and livestock
products, and fisheries.
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 This project aspires to transform the economic participation of SHGs and rural women
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entrepreneurs by helping them engage on a strong footing with formal private financing,

Women Livelihood Bond (WLB)

 World Bank, UN Women and Small Industries Development Bank of India (SIDBI), along
with some ten leading wealth managers and corporates, came together to launch a new
social impact bond – women’s livelihood bondsthat will help rural women in some of
India‘s poorest states to set up or scale-up their own enterprises.
 The bonds will be raised by SIDBI with the support of the World Bank and the UNWomen.
SIDBI will act as the Financial Intermediary and channel funds to women‘sentrepreneurs
through Participating Financial Intermediaries.
 The WLB will be unsecured, unlisted bonds with a fixed coupon rate of 3 percent per
annum and a five-year tenure. They will bebacked by a corpus fund to be mobilised
through Corporate Social Responsibility(CSR) contributions and through grant support
from UK‘s Department forInternational Development (DFID).The Corpus Fund will monitor
and track the program. The Corpus guarantee cover will enable women entrepreneurs to
access credit at much lower rates of interest.

Agri-Market Infrastructure Fund

 The Cabinet Committee of Economic Affairs recently gave its approval for thecreation of a
corpus of Rs. 2000 crore for Agri-Market InfrastructureFund (AMIF) to be created with
NABARD for development and up-gradation of agricultural marketing infrastructure in
Grameen Agricultural Markets and Regulated Wholesale Markets.
 The Agri-Market Infrastructure Fund was announced in 2018 Budget for developing
andupgrading agricultural marketing infrastructure in the 22,000 GrAMs and 585 APMCs.
 AMIF will provide the State/UT Governments subsidized loan for their proposal for
developing marketing infrastructure in 585 Agriculture Produce Market Committees
(APMCs) and 10,000 Grameen Agricultural Markets (GrAMs).
 States may also access AMIF for innovative integrated market infrastructure projects
including Hub and Spoke mode and in Public Private Partnership mode. The Scheme
being demand driven, its progress is subject to the demands from the States and
proposals received from them.
 The rural markets, named as GrAMs, will be eligible to avail loan from this fund at
cheaper interest rates for creation of necessary facilities in the market complex.

Ombudsman Scheme for Digital Transactions

The Reserve Bank of India recently launched the Ombudsman Scheme for Digital Transactions. It
was earlier announced in the Monetary PolicyStatement.
Details of the Scheme
The Scheme was launched under Section 18 of the Payment and Settlement Systems Act, 2007
and came into force from 31st January, 2019. It will provide a cost-free and expeditious
complaintredressal mechanism relating to deficiency in customer services in digital transactions
conducted through non-bank entities regulated by RBI.
Complaints relating to digital transactions conducted through banks will continue to be handled
under the Banking Ombudsman Scheme. The offices of Ombudsman for Digital Transactions will
function from the existing 21 offices of the Banking Ombudsman and will handle complaints of
customers from their respective territorial jurisdiction.
The Scheme provides for an Appellate mechanism under which the complainant / System
5

Participant has the option to appeal against the decision of the Ombudsman before the Appellate
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Authority within 30 days.

Voluntary Retention Route (VRR) for Foreign Portfolio Investors (FPIs)

Reserve Bank of India has introduced the VRR for investment by FPIs. This new investment route
was proposed in 2018 by the centralbank by the central bank at a time the rupee was weakening
against thedollar very sharply.RBI‘s decision to infuse rupee liquidity through long term foreign
exchange swap, a first of its kind in liquidity management policy, is likely to boost investments by
FPIs.Investments under VRR (by all FPIs taken together) are capped at ₹40,000 crore
forgovernment securities and ₹35,000 crore for corporate debt securities.
What is VRR?
 It is a new channel of investment available to FPIs to encourage them to invest in debt
markets in India over and above their investments through the regular route.
 The objective is to attract long-term and stable FPI investments into debt markets while
providing FPIs with operational flexibility to manage their investments.
 Investments through VRR will be free of the macro-prudential and other
regulatoryprescriptions applicable to FPI investments in debt markets, provided FPIs
voluntarilycommit to retain a required minimum percentage of their investments in India
for a periodof their choice. But the minimum retention period shall be three years, or as
decided byRBI.
 Any entity registered as a foreign portfolio investor with SEBI is eligible to participate
through VRR.
What is Foreign Portfolio Investment?
It is investment by non-residents in Indian securities including shares, government bonds,
corporate bonds, convertible securities, infrastructure securities etc. The class of investors who
make investment in these securities are known as Foreign Portfolio Investors. FPI is influenced by
differences in equity price scenario, bond yield, growth prospects, interest rate, dividends or rate
of return on capital in India‘s financial assets.
The criteria for FPI according to SEBI is, any equity investment by non-residentswhich is less
than or equalto 10% of capital in a company is portfolio investment. While above this the
investment will be counted as Foreign Direct Investment (FDI).All FPI taken together cannot
acquire more than 24 per cent of the paid upcapital of an Indian Company. As perSEBI
regulations, FPIs are not allowed to invest in unlisted shares and investment in unlisted entities
will be treated as FDI.

Real Estate Investment Trust

The first REIT initial public offering (IPO) by Embassy Office Parks, a Bangalore-based real estate
developer backed by Blackstone Group LP, a global private equity firm, is open for investment.
India‘s first REIT will soon be a reality. While REITs have been a popular product worldwide for
many decades, guidelines in India were formalized only recently by the market regulator SEBI.
What are REITs?
REITs are securities linked to real estate that can be traded on stock exchanges once they get
listed.The structure of REITs is similar to that of a mutual fund.Just like mutual funds, there are
sponsors, trustees, fund managers and unit holders in REITs. However, unlike mutual funds,
where the underlying asset is bonds, stocks and gold,REITs invest in physical real estate.
The money collected is deployed in income-generating real estate. This income gets distributed
among the unit holders. Besides regular income from rents and leases, gains from capital
appreciation of real estate also form an income for the unit holders. One can invest in REITs in
primary and secondary market and exit any time. But they will have a minimum investment
requirement of Rs 2 lakh. Also, the minimum offer size of an REIT is Rs 250 crore.
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TMA for Specified Agriculture Products

Department of Commerce of the Ministry of Commerce & Industry has notified a scheme for
Transport and Marketing Assistance (TMA) for Specified Agriculture Products.
Aim
The ―Transport and Marketing Assistance‖ (TMA) for specified agriculture products scheme aims
to provide assistance for the international component of freight and marketing of agricultural
produce which is likely to mitigate disadvantage of higher cost of transportation of export of
specified agriculture products due to trans-shipment and to promote brand recognition for Indian
agricultural products in the specified overseas markets.

All exporters, duly registered with relevant Export Promotion Council as per Foreign Trade Policy,
of eligible agriculture products shall be covered under this scheme. The assistance, at notified
rates, will be available for export of eligible agriculture products to the permissible countries, as
specified from time to time. Assistance under TMA would be provided in cash through direct bank
transfer as part reimbursement of freight paid. FOB supplies where no freight is paid by Indian
exporters are not covered under this scheme.The scheme shall be admissible for exports made
through EDI (Electronic Data Interchange) ports only.
The scheme covers freight and marketingassistance for export by air as well as by sea. The
assistance is available for most agricultural product exports with some exceptions. Products
which will not avail these benefits include whey, rice, wheat, cane or beet sugar and raw sugar,
molasses, gums, resins, butter and other fats, live animals meat products of animal origin like
milk, cream, curd, butter, buttermilk,, beverages, spirits and vinegar, garlic and tobacco and
manufactured tobacco substitutes.

Core Industries
The Eight Core Industries comprise 40.27% of the weight of items included in the Index of
Industrial Production (IIP). The eight core industries are Coal, Crude Oil, Refinery Products,
Natural Gas, Fertilizers, Steel, Cement and Electricity.For industrialisation to take place, the
presence of certain industries is essential. These are known by various names like core industries
or core sector or basic industries. These industries require high level of capital, technology, skilled
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manpower and articulation in entrepreneurship. Among the core industries, refinery products
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have maximum weightage while fertilisers have minimum weightage.

Shadow Banking
In the aftermath of IL&FS crises, shadow banks are struggling to raise funds. They are facing high
borrowing costs and a shortage of liquidity in India‘s money markets. These banks are now
pitching bonds with high coupon rates to the public, paving way for another financial crises
which will have a deeper negative impact on the economy.
What is Shadow Banking System?
The term Shadow Banking was coined by Economist PaulMcCulley in 2007. These are financial
intermediaries who performs banking functions but are notsubject to regulatoryoversight as they
don‘t takedeposits like traditionalbanks. These includes hedge funds, special purpose entities,
structured investment vehicles etc.
These systems earn by acting as an intermediary between large borrowers and large lenders. They
earn their revenue from interest rate spreads and fees they charge. According to Financial
Stability Board, Shadow banking accounts for a 25-30% of global financialsystem.
Concern with Shadow Banking System
They provide lack of disclosure and information about the value of the assets they hold.There is
opaque governance and ownership structures between banks and shadow banks. There is little
regulatory or supervisory oversight of the type associated with traditional banks. This increase
their risk-taking capacity. Hence though it makes good times better, but it also makes bad times
worse. They have virtually no loss-absorbing capital orcash for redemptions. A lack of access to
formal liquidity support tohelp prevent fire sales.

The Investor Education and Protection Fund (IEPF) Authority

The Investor Education and Protection Fund (IEPF) Authority has been able to force The Peerless
General Finance and Investment Company Ltd to transfer deposits worth about Rs 1,514 crore to
the IEPF.
Background
Depositor‘s money was pending with the company for the last 15 years. This amount was taken
by the company by issuing about 1.49 crore Deposit Certificates to more than 1 crore individual
investors. Most of these investors are common citizens belonging to the lower and middle-income
group, including daily wage earners.
About IEPF Authority
 It was established under the provisions of section 125 of the Companies Act, 2013. The
Authority is entrusted with the responsibility of administration of the Investor Education
Protection Fund (IEPF), make refunds of shares, unclaimed dividends, matured
deposits/debentures etc. to investors and to promote awareness among investors.
 It does the promotion of investors‘ education, awareness and protection.
 Secretary of the Ministry of Corporate Affairs is the chairperson of the authority.
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 IEPF is in the process of commissioning an online facility to collect primaryinformation

directly from retail investors about deposits that have matured and are still pending with
DELHI: VIJAY NAGAR 9717380832 & OLD RAJENDER NAGAR 9811293743 | JAIPUR: 8290800441
BENGALURU: KORMANGALA 7619166663 & CHANDRA LAYOUT 7619136662 | BHOPAL: 7509975361
PATNA: 7463950774 | INDORE: 7314977441 | RANCHI: 9939982007 | www.ksgindia.com
ECONOMICS
various entities for repayment or payment of interest. The online report will capture only
essential fields, with various drop-down options.
 The Authority may take various steps to make all such companies and other entities
comply with provisions of the Companies Act or other allied related legal provisions.

Advance Pricing Agreement of Government of India

The Central Board of Direct Taxes (CBDT) recently entered into various Advance Pricing
Agreements (APAs) which involved both unilateral and bilateral agreements.
What is APA?
An APA is an agreement between the taxpayer and the tax authority on the pricing of future
intercompany transactions. In case of a roll-back, it would also include past years.The taxpayer
and tax authority mutually agree on the transfer pricing methodology (TPM) tobe applied and its
application for a certain period of time for covered transactions (subjectto fulfilment of critical
assumptions).An APA may be unilateral, bilateral or multilateral. APA is an effective tool used in
several countries with established transfer pricing regimes to avoidpotential disputes in
acooperative manner.

Unilateral: APA entered into between a taxpayer and the tax administration of the country
where it is subject to taxation.
Bilateral:APA entered into between the taxpayers, the tax administration of the host country
and the foreign tax administration.
Multilateral:APA entered into between the taxpayers, the tax administration of the host
country and more than one foreign tax administrations.

Purchasing Manager’s Index

PMI or a Purchasing Managers‘ Index (PMI) is an indicator of business activity -- both in the
manufacturing and services sectors. It is based on a monthly survey of supply chainmanagers
that asks the respondents about changes in their perception of some key businessvariables from
the month before. It is calculated separately for the manufacturing andservices sectors and then a
composite index is constructed.A figure above 50 denotes expansion in business activity.
Anything below 50 denotes contraction. Higher is the difference from this mid-point greater is the
expansion orcontraction.
PMI is considered a good leading indicator of the attractiveness of an economy based on key
indicators such as output, new orders, business expectations and employment. The purpose of
the PMI is to provide information aboutcurrent and future business conditions to company
decision makers, analysts, and investors. Central banks of many countries also use the index to
help make decisions on interest rates. The PMI also gives an indication of corporate earnings and
is closely watched by investors as well as the bond markets.

Ways and Means Advances (WMA)

Recently the Reserve Bank of India, in consultation with the Government of India, has raised the
limits for Ways and Means Advances (WMA) for the first half of the financial year 2019-20 at Rs
75000 crore. The Reserve Bank may trigger fresh floatation of market loans when the Government
of India utilizes 75% of the WMA limit.

WMA scheme for Central Government

 The WMA scheme for the Centre was introduced in 1997, abolishing the four decade old
9

system of adhoc Treasury Bills to finance the Central Government deficit.This facility can
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7th Economic Census

The 7th economic census is under process and is being conducted by Ministry of Statistics and
Planning Implementation (MoSPI). Conducting periodic Economic census has been means of
measuring the diversity of non-farm economic activities in all its major dimensions. In the 7th
EC, an IT based digital platform for data capture, validation, report generation and dissemination
will be used. The ministry is also introducing geo tagging which will help to find out the
distribution of economic activity in a certain place

About Economic Census

It is the complete count of all establishment boundary of India. The Economic Census provides
disaggregated information on variousoperational and structural variables of all establishments of
the country.It also provides valuable insight into geographical spread/clusters of
economicactivities, ownership pattern, persons engaged, etc. of all economic establishments inthe
country.
The information collected during Economic Census are useful for socio developmental planning at
state and district levels.The Census provides an update undertaken for detailed and
comprehensive analysis of all establishments in the country.
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Merger of NSSO and CSO

To streamline and strengthen the statistical system, the government has decided to merge the
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Central Statistical Organisation (CSO) and the National Sample Survey Office (NSSO) to form a

MCA 21
What is MCA 21?
MCA 21 is a project being implemented by Ministry of Corporate Affairs, GoI (previously
Department of Company Affairs, MoF, and GoI). It is an e-Governance initiative which enables an
easy and secure access of the MCA services to the corporate entities, professionals and citizens of
India. National Institute for Smart Governance (NISG) is assisting the MCA in operation and
maintenance of the project.
It is an IT-driven and forward looking mission mode project under the Government of India's
National e-Governance plan.It has put the Ministry of Company Affairs on track to meet
stakeholder needs in the 21st century.MCA21 is envisioned to provide anytime and anywhere
services to businesses by Ministry of Company Affairs. It is the first mission mode e governance
project undertaken in the country.
Why has it Been Designed?
The MCA21 application is designed to fully automate all processes related to the proactive
enforcement and compliance of the legal requirements under the Companies Act, 1956, New
Companies Act, 2013 and Limited Liability PartnershipAct, 2008. This will help the business
community to meet their statutory obligations
The MCA21 application offers the following
1. Enables the business community to register a company and file statutory documents quickly
and easily.
2. Provides easy access of public documents
3. Helps faster and effective resolution of public grievances
4. Helps registration and verification of charges easily
5. Ensures proactive and effective compliance with relevant laws and corporate governance
6. Enables the MCA employees to deliver best of breed services

LIBRA Currency
There‘s a new cryptocurrency called Libra, courtesy of Facebook and the entire network will be
rolled out by 2020. Libra will be controlled by the Libra Association, which is a non-profit based
in Geneva, Switzerland. Facebook also announced a dedicated wallet app called Calibra, which
will be built into WhatsApp and Messenger as well, to let users store and use these Libra coins.
Libra is a cryptocurrency built on a block chain network, though Facebook was quick to insist
that it will respect user privacy and transactions will in no way to be linked to the user‘s real
world identity. Calibra is a separate subsidiary company and the data will not be shared with
Facebook.

What are Masala Bonds?

Elephant Bonds Masala Bonds are rupee borrowings issued by
A high-level advisory group chaired by Dr Indian entities in overseas markets. Masala
Surjit S Bhalla and constituted by the means spices and the term was used by
government in 2018 for suggestions to International Finance Corporation (IFC) to
improve India‘s trade performance, has popularise the culture and cuisine of India on
come up with a significant foreign platforms. The objective of Masala
recommendation to tackle the menace of Bonds is to fund infrastructure projects in
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black money in the country. The India, fuel internal growth via borrowings and
committee has asked the government to internationalise the Indian currency.
Page

allow people to declare their ‗undisclosed

Financial Stability and Development Council

There are different regulators for various segments of financial sectors viz. the RBI for commercial
banks and NBFCs, SEBI for capital market etc. It is indispensable to have coordination among
these financial regulators to ensure better efficiency and avoiding any overlap in the functions.
The tussle between SEBI and IRDA (Insurance Regulatory and Development Authority) on the
regulations of ULIPs (Unit Linked Insurance Plan) was the triggering point for the establishment
of FSDC.
About FSDC
FSDC is non statutory, autonomous, super regulatory body tasked with maintaining financial
stability, enhancing inter regulatory coordination, promoting financial literacy and inclusion.
It coordinates financial and economic regulator through consultations of the heads of the various
regulatory organizations. The council is chaired by finance minister and its members include the
heads of financial sector regulators.
FSDC Sub-committee
It is chaired by the Governor of RBI. It meets more often than the full Council. All the members of
the FSDC are also the members of the committee. Additionally, all four Deputy Governors of the
RBI and Additional Secretary, DEA, in charge of FSDC, are also members of the
Sub Committee.

UK Sinha panel on MSME

The RBI constituted an ‗Expert Committee on Micro, Small and Medium Enterprises‘ under the
chairmanship of former Securities and Exchange Bureau of India (Sebi) chairman U K Sinha in
January 2019 to suggest long-term measures for the economic and financial sustainability of the
MSME sector. The eight-member Sinha committee submitted its report to the Governor of the
Reserve Bank of India in June 2019.
 The committee also suggested forming a government-sponsored Fund of Funds of ₹10,000
crore to support venture capital and private equity firms investing in MSMEs.
 The U K Sinha committee on micro, small and medium enterprises (MSMEs) has proposed
doubling the limit on collateral-free loans to Rs 20 lakh from the current level of Rs 10
lakh to boost the fund requirement of the MSME sector.
 The committee has also recommended for the creation of a distressed asset fund, with a
corpus of ₹5,000 crore, structured to assist units in clusters where a change in the
external environment. The committee said such a fund could work in tandem with RBI-
mandated restructuring schemes or bank-led NPA revival solutions for MSMEs.

Multilateral convention to prevent base erosion and profit shifting

The Union Cabinet has approved the ratification of the Multilateral Convention to Implement Tax
12

Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI). The Multilateral
Convention is an outcome of the OECD / G20 Project to tackle Base Erosion and Profit Shifting
Page

(the "BEPS Project") i.e., tax planning strategies that exploit gaps and mismatches in tax rules to

Participatory Guarantee Scheme (PGS)

PGS-India (Participatory Guarantee System of India) is a quality assurance initiative that is locally
relevant, emphasize the participation of stakeholders, including producers and consumers and
operate outside the frame of third-party certification. It is a process of certifying organic products
quality standards according with aid down standard procedures. It ensures that production has
been done according to set of standards.
The certification is in the form of a documented logo or a statement. This scheme is available only
for farmers or communities that can organize and perform organic farming activities as a group
within a village or in cluster of villages. It is applicable only to farm related activities such as crop
production, processing, and livestock rearing, and off-farm processing. Individual farmer or group
of farmers smaller than five members are not covered under PGS. PGS India system is based on
participatory approach, a shared vision, transparency and trust. In addition, it gives PGS
movement a National recognition and institutional structure.
India-Switzerland Automatic Exchange of Information
Banking details of Indians with accounts in Switzerland will be available to tax authorities as the
automatic exchange of information regime kicks off between the two countries. Under this
mechanism, India will start receiving information on all financial accounts held by Indian
residents in Switzerland, for the year 2018. This automatic information exchange will increase
transparency and prevent cross-border tax evasion. Under AEIO agreement, India will get all
financial account details of Indian citizen in Switzerland. It has been carried out under the
common reporting standard (CRS) that has been developed by orgnisation of economic
cooperation and development (OCED). CRS is a global reporting standard which takes care of
aspects such as confidentiality and data safeguards.
Teaser loans
State Bank of India planned to offer teaser loans and is likely to hit a regulatory hurdle as the
Reserve Bank of India (RBI) is not in favour of launching the same.
What are Teaser Loans?
Teaser loans are those loans that offer comparatively lower interest of rates in the first few years
and after that the rates are increased that‘s why they are known as fixed cum floating home
loans. This term is known as teaser loan scheme by market players because it lures the borrower
with low rates in the initial years, only to bump up the rates later. Teaser loan exposes banks
and lenders to a high incidence of default.
Teaser products are not banned by the regulator but the standard asset provisioning requirement
is higher for such loans. For normal home loans, the standard asset provisioning is 0.4% but for
teaser loans it is 2%. High provisioning discourages banks from offering from such products.
Foreign Funding of the NGOs
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Union home ministry amended the rules governing Foreign Contribution (Regulation) Act, 1976
(FCRA) in 2019.
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NIRVIK (Niryat Rin Vikas Yojna) scheme

Union Ministry of Commerce & Industry through Export Credit Guarantee Corporation (ECGC)
has introduced a new Export Credit Insurance Scheme (ECIS) called NIRVIK to enhance loan
availability and ease the lending process for small, medium and large exporters.

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Negative Rate Policy

In recent time, Negative rate policy - once considered only for economies with chronically low
inflation such as Europe and Japan - is becoming amore attractive option for some other central
banks to counterunwelcome rises in their currencies.A negative interest rate means the central
bank charges negative interest on deposits made by commercial banks with the central bank.
Here, instead of receiving money on deposits, commercial banks must pay the interest to the
central bank.
When negative interest rate policy is adopted? How it works?
The policy is adopted to escape from deflation. During adverse economic conditions households
and businesspeople wait for long to see the economy recovering. Butthis withholding of spending
itself will make things worse.Lack of spending will reduce investment and jobs, leadingto steep
deflation and recession. For this, more loansshould be given. An extremely low interest rate near
tonegative interest rate will encourage people to borrow andspend.
Negative interest rate policy adopted by central bank doesn‘t necessarily mean that negative
interest rate for loan takers from commercial banks. Rather theywill charge a low and much
reduced rate of interest. If the banks are parking their money withthe central bank there is
negative interest rate. Hence, they will try giving it to public. To dothis, banks will lower the
interest rate further to negligible levels.

Debenture Redemption Reserve

The Ministry of Corporate Affairs has amended the Companies (Share Capital & Debentures)
Rules by removing Debenture Redemption Reserve requirement for Listed Companies, NCFCs and
HFCs. It is one of the measures taken by the government to boost the fear-ridden bond market
was the decision to do away with the requirement for all listed companies, NBFC and housing
finance companies (HFCs) to create a Debenture Redemption Reserve (DRR) for their outstanding
bonds.Through these amendments, the provisions relating to creation of Debenture Redemption
Reserve (DRR) have been revised with the objective of;
a. Removing the requirement for creation of a DRR of 25% of the value of outstanding
debentures in respect of listed companies, NBFCs registered with RBI and for Housing
Finance Companies registered with National Housing Bank (NHB) both for public issue as
well as private placements;
b. Reduction in DRR for unlisted companies from the present level of 25% to 10% of the
outstanding debentures.
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What is debenture?
A debenture is a debt instrument which is not backed by any specific security; instead the
credit of the company issuing the same is theunderlying security.Corporate treasury uses
this as a tool to raise medium- to long-term funds. The funds raised become part of the
capital structure but not share capital of the company.Bonds however, in India are typically
issued by financial institutions, government undertakings and large companies. The
interest rate is assured and is paid at a fixed interval (i.e. on an annual or semi-annual
basis). On maturity, the principal is repaid. Bond is a form of loan. The holder of the bond
is the lender and the issuer of the bond is the borrower.

Financial Institutions on the other, which are already exempted from DRR.
The measure has been taken by the Government with a view to reducing the cost of the capital
raised by companies through issue of debentures and is expected to significantly deepen the Bond
Market.
Currency Manipulation Issues
The U.S.A. has officially labelled China a currency manipulator, accusing it of using yuan to gain
―unfair competitive advantage‖ in trade, a move that could further escalate the tense trade
relations between the world‘s two largest economies. It is alleged that China has a long-standing
practice of intervening in the markets to suppress the value of the yuan. The Chinese central
bank routinely bought dollars and sold yuan, causing the yuan to be worth less than it otherwise
would be.
What is Currency Manipulation?
The practice of weakening one‘s own currency to improve trade balances by making exports
cheaper and imports more expensive. Currency manipulation is a policy used by governments
and central banks of some of America‘s largest trading partners to artificially lower the value of
their currency (in turn lowering the cost of their exports) to gain an unfair competitive advantage.
IMF standards for Data Dissemination
According to the IMF's "Annual Observance Report of the Special Data Dissemination Standard
for 2018", India failed to comply with prescribed Special Data Dissemination Standard (SDDS) - a
practice mandatory forall International Monetary Fund (IMF) members to guide them inproviding
their economic and financial data to the public.
Pre-Connect
The IMF‘s Data Standards Initiatives are designed to promote the dissemination of timely and
comprehensive statistics, contributing to the formulation of sound macroeconomicpolicies and the
efficient functioning of financial markets.Currently, there are three tiers under the Initiatives:
 The Special Data Dissemination Standard (SDDS), established in 1996
 The SDDS Plus, established in 2012
 The General Data Dissemination System (GDDS), established in 1997, which was
superseded by the enhanced GDDS (e-GDDS) in 2015
 India subscribed to the SDDS in 1996 and met all SDDS requirements in 2001.

The purpose of the SDDS is to guide member countries in the dissemination of comprehensive,
timely, accessible, and reliable economic and financial statistical data in the context of increasing
16

economic and financial integration.

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Utkarsh 2022
The Reserve Bank of India (RBI) board recently finalized a three year roadmap ―Utkarsh 2022‖to
improve regulation and supervision, among other functions of the central bank. Utkarsh 2022 is
a medium term strategy in line with the global central banks, plan to strengthen the regulatory
and supervisory mechanism of the Central Bank.

The idea behind Utkarsh 2022 is that the central bank plays a proactive role and takes pre-
emptive action to avoid any crisis like IL&FS. An internal committee was formed under the
chairmanship of former Deputy Governor Viral Acharya, to identify issues that needed to be
addressed over the next three years. Other matters discussed by the committee included issues
relating to currency management and payment systems.

Banking Regulations in India Stricter Than Basel Norms

The Regulatory Consistency Assessment Programme (RCAP), Basel committee, has found Indian
banking regulations stricter than theBasel III norms.Basel accords are set of banking regulations
set up by resolution formed in 1974. The accords are designed to ensure that financial
institutions have enough capital on account to meet obligations and absorb unexpected losses.
Indian banks have already adopted the BASEL II norms.
RBI has given deadline to all the banks to adhere to Basel III norms by March 2020. Under Basel
III, a bank's tier 1 and tier 2 capital must be a minimum of 8% of its risk weighted holdings. The
minimum capital adequacy ratio, also including the capital conservation buffer, is 10.5%.Capital
adequacy is a measure of a bank‘s financial strength expressed as a ratio of capital to risk-
weighted assets.
Free Trade and Warehousing Zones
Free Trade Warehousing Zone is a Special Economic Zone wherein mainly trading and
warehousing and other activities related thereto are carried on. It is a deemed foreign
territorywithin the geography of India for the purpose of tariff and trade.
The Special Economic Zones Act, 2005 and the Special Economic Zones Rules, 2006 are the legal
framework for FTWZ. Instructions are also issued by the Ministry of Commerce& Industries from
time to time to clarify various operational aspects of FTWZ.The FTWZs will provide significant
impetus to the import and export markets as they provide necessary support to the markets.
Having warehouses in each zone will make it easier to get Customs clearances to dispatch
imported goods to retail outlets across India.

Overseas Bond and India

India to raise a part of its gross borrowing in overseas market through overseas bond. India has
so far generated its borrowing only from the domestic markets. India‘s sovereign external debt to
GDP ratio is among the lowest around the world at less than 5%.More than 85% of government
17

borrowings are from the domestic markets. This low external borrowing helped India manage its
economy during the 2008 global economic crisis.For the first time the government has decided to
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explore the external sector borrowing.

One Nation One FASTag

Minister of Road Transport and Highways inaugurated the ―One Nation One FASTag scheme at
the Indian Mobile Congress in New Delhi. The plan aims to integrate the collection of tolls digitally
and ensure seamless mobility of vehiclesacross India.
What is One Nation One FASTag?
FASTag, affixed on the windscreen of a vehicle can be used to pay toll across all toll plazas in the
country. MoU was signed between IHMCL (Indian Highways Management Corp Ltd) and GST
Network(GSTN) for integrating E-Way Bill system with FASTag in order to overcome the existing
challenge in track and trace mechanism for GST E-Way Bill (EWB) System and enhance the
efficiency in its monitoring.
The Scheme offers participating state authorities/agencies shorter turnaround time by allowing
them to be a part of the robust FASTag solution architecture which already supports approx. 6
million tags with approximately daily 10 lakh transactions. At present, National Payments
Corporation of India (NPCI) is functioning as the Central Clearing House and 23 Public and
Private sector banks are issuing FASTag.

Significance of the Move

Under the National Electronic Toll Collection program of the Ministry, toll collection at national
highways toll plazas is done through RFID based FASTags either manually or through other tags.
This leads to inconvenience for the road users. One Nation One FASTag will allow for more
efficient track and trace system for the GST EWay Bill System and check the leakage of revenue
at the toll plazas. With this integration revenue authorities will be able to track the goods vehicles
to see whether they are actually travelling to the specified destination. The supplier/ transporter
will also be able to track their vehicles through SMS alerts generated at each toll plaza.

PRAKASH Portal
Recently, Ministry of Power and Ministry of Coal jointly launched PRAKASH Portal(Power Rail
Koyla Availability through Supply Harmony).
Existing Mechanism: An inter-ministerial group which has officials from Ministries of Power,
Coal, Railways, CEA, power utilities and coal companies. It was observed that this mechanism
faced several issues such as scattered information, correctness of data from different
organizations, timely availability of data etc. This often led to difficulties in decision making
PRAKASH Portal is developed by NTPC and sources data from different stakeholders such as
Central Electricity Authority (CEA), Centre for Railway Information System (CRIS) and coal
companies. The Portal will make available four reports- Daily Power Plant Status, Periodic Power
PlantStatus, Plant Exception Report, and Coal Dispatch Report.
Significance of the PRAKASH Portal
It is being considered as an important step in ensuring adequate availability and optimum
utilization of coal at thermal power plants. The Portal will help in mapping and monitoring entire
coal supply chain for power plants, viz – Coal Stock at supply end (mines), coal availability at
power generation stations, coal quantities in transit etc. Portal will bring benefits to various
stakeholders (Coal companies, Indian Railways, Power Stations in making information available
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on a single platform.
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Key Highlights of the Meet

 Need for the revival of 204 minor ports which have been the centres of maritime activity
in the past was expressed.It was agreed that synergy between the Major and Minor ports is
essential so that together they can bring port led development in the country.
 Ministry will consider making a national grid of ports so that cargo or agricultural
produce located near the non-major ports can be shipped to major ports.It was decided to
carry out extensive study for revival of each port, identifying the specific cargo linked to it
and the downstream industry.
 The Ministry of Shipping is planning expansion of port capacity through the
implementation of well-conceived infrastructure development projects, increasing the
efficiency of port operations through the implementation of a package of recommendations
to cut time and cost, digitization of processes to reduce and finally eliminate human
interface and to strongly address environment related concerns.
 The conference also discussed issues like developing common and comprehensive
guidelines for inland waterways barges so that barges of different states can move
seamlessly in coastal waters.Port security which includes security of both major and
minor ports was also discussed at length. It was decided that international levels of
security would be ensured at every port in the country.

OECD Proposal- Unified Approach

The Organisation of Economic Co-operation and Development (OECD), the global grouping of 36
mostly high-income, free-market economies, has recently released a consultation paper proposing
changes in the rules for taxing Internet giants such as Facebook, Apple, Google, Amazon, and
Netflix.In essence, the proposal, called ―UnifiedApproach‖, aims to shift the standard of taxation
from physical presence to sales in a particular market.
Why New Taxation Laws?
 There is an ongoing global battle over how to tax the digital economy. As of now, ―highly
digitalised businesses‖ can operate remotely and have high profits. Many companies have
moved their source of profits to countries with low tax rates, such as Ireland. The proposal
would give new taxing rights to countries with many users of such business models.
 India is among countries that rely on a ―significanteconomic presence model‖. The
Income-Tax Department proposed new taxing norms for MNCs, with a different weightage
for digital companies, incorporating the number of users in India.
What is the "Unified Approach"?
 The Secretariat Proposal for a "Unified Approach" would focus on "consumer-facing
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businesses", which would cover highly digitalised business models and other highly
profitablebusiness models that interact with consumers.It proposes a new nexus, distinct
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and separate from the existing concept of the permanent establishment, which would

Eastern Economic Forum (EEF) and India-Russia Annual Summit

Russia organized the 5th edition of Eastern Economic Forum at Vladivostok in which Indian PM
was invited as the Chief Guest. This happened alongside the 20th edition of India-Russia Annual
Summit.
Development of Russian Far East (RFE) is among the top priority of Russian Government. The
RFE is twice as size of India and roughly half of the population of Delhi/NCR region. REF region
is extended between Lake Baikal(world's largest freshwater lake and deepest lake) and the Pacific
Ocean. Realizing, its geostrategic significance, India opened a consulate in Vladivostok in 1992.
India was the first country to have a resident consulate in Vladivostok. Russian Far East is a
resource rich region in a hostile climate. It is rich in oil, natural gas, timber, gold and diamond
among other resources. India requires all of them.
The EEF was set up in 2015 with the mandate of economic development of Russia‘s Far East and
to expand Russia‘s international cooperation in the Asia-Pacific region. Since then, it has focused
on attracting investment from China, Japan, South Korea, ASEAN and India for the RFE. India
too has in recent years shown interest in expanding its presence here for achieving the twin goals
of improving bilateral economic ties and pursuing strategic interests with an eye on China and
the broader Indo-Pacific.
India launched ―Act Far East‟policy to boost its engagement with RFE. India will provide a line of
credit worth US$ 1 Billion for the development of RFE. India and Russia agreed for a sea link
between Vladivostok, the capital of Russian Far East and Chennai. Both nations decided to
increase bilateral trade to $30 billion by 2025. Strengthening the instrument of mutual
settlements of payments in national currencies. Speeding up of the India-Russia
Intergovernmental Agreement on Promotion and Mutual Protection of Investments. Both sides
will work to eliminate trade barriers through proposed Trading Agreement between the Eurasian
Economic Union (EAEU) and the Republic of India. Focus will be on geological exploration and
joint development of oil and gas fields in Russia and India, including offshore fields.
India-ASEAN FTA
The Association of Southeast Asian Nations (ASEAN) has agreed to India‘s long-pending demand
to review the free trade agreement (FTA) between the two sides. The objective is to make the FTA
―more user-friendly, simple and trade facilitative.
Why ASEAN is important for India?
ASEAN is an inevitable partner for India if it has to become a major Indo-Pacific power. ASEAN
also acts as a central piece of India‘s Act East Policy.
Economic Importance
 The ASEAN-India Plan of Action for the period 2016-20 identifies economic cooperation as
one of the key pillars of association. Several connectivity projects that India has
undertaken in alliance with ASEAN countries are also aimed at improving trade ties with
the Southeast Asian region. ASEAN is a recognized production base, with most of its
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members witnessing upward growth for the last couple of years.

 Asian Development Bank (ADB) also estimates that ASEAN Five (Indonesia, Malaysia,
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Thailand, Philippines and Vietnam) will witness remarkable growth in their export trade.

National Maritime Awareness Project

Recently, Defence Minister was briefed by the Indian Navy about the futuristic steps to be taken
at the Gurugram-based Information Management & Analysis Centre (IMAC) with regard to
maritime intelligence in theIndian Ocean.
 Government inaugurated the Indian Navy and Coast Guard‘s joint operations facility,
called the Information Management and Analysis Centre (IMAC), at Gurugram in 2014.
 The defence minister in 2018 inaugurated the Information Fusion Centre – Indian
OceanRegion (IOR) at IMAC.
 The IFC-IOR will serve as the hub of information sharing and analysis with a number of
countries who have white shipping information exchange agreements with India.
 National Maritime Domain Awareness Project (NMDA): It was launched in accordance with
the vision of Prime Minister on SAGAR (Security and Growth for All in the Region).
Significance
 IMAC monitors movement of more than 120,000 ships passing through the Indian
Ocean.The cargo carried by these ships account for 66 % of world crude oil, 50 % of
container traffic and 33 % of bulk cargo. Thus, IMAC performs a very crucial role in
collecting shipping information, ensure maritime safety, analysing traffic patterns and
sharing the inputs with the user agencies.
 The IMAC gathers information through various systems through interaction with friendly
countries about ship movements in the Indian Ocean as a coastal security measure to
ensure no unknown or dubious vessel passes in the region. Its capabilities will be
improved under the National Maritime Domain Awareness (NMDA) project.

RBI panel on Economic Capital Framework

RBI, in consultation with the Government of India, had constituted an Expert Committee to
Review the Extant Economic Capital Framework of the Reserve Bank of India (it was chaired by
Dr. Bimal Jalan). The Committee submitted its report to the Governor of the RBI and all the
recommendations were accepted by RBI‘s central board. The Government and the RBI under
previous governor Urjit Patel had been at loggerheads over the ₹9-lakh crore surplus capital with
the central bank. The finance ministry was of the view that the buffer of 28 per cent of gross
assets maintained by the RBI is well above the global norm of around 14 per cent. Following this,
the RBI board in its meeting in last year decided to constitute a panel to examine ECF.

Sankalp Project
Ministry of Skill Development & Entrepreneurship has recently reviewed the World Bank loan
assisted ―Skills Acquisition and Knowledge Awareness for Livelihood Promotion (SANKALP)‖
programme.
21

About the project

The SANKALP project aims to implement the mandate of the National Skill Development
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One Nation One Grid

One nation one grid was proposed in the union budget 2019-20. With 100 per cent electrification
target being achieved government's focus is now to provide consistent electricity at affordable
rates.In the past any schemes such as the UDAY scheme, Pradhan Mantri sahajbijli har
gharYojnaetc have been implemented for this purpose. The Indian Power system for planning and
operational purposes is divided into five regional grids.
The concept of one national grid was established in nineties where the five regional grids were to
be interconnected. Therefore the national grid was created with the plan to exchange surplus
power.This will be implemented under thesaubhagya scheme also known as Pradhan MantriSahaj
Bijili har gharyojna. The policy will have provisions for imposing penalty on discoms resorting to
gratuitous load-shedding instead of buying more power from producers.

Special Economic Zones (SEZ)

A bill to amend the special economic zones law passed by the Parliament. As per the latest
ordinance passed by Union Cabinet to amend the provisions of Special Economic Zones Act, 2005
(28 of2005) and to include a trust, to enable the setting up of a unit in a Special Economic Zone
by a trust, as also to provide flexibility to the Central Government to include in this definition of a
person, any entity that the Central Government may notify from time to time.
After this amendment, a trust or any entity notified by the central government will be eligible to
be considered for grant of permission to set up a unit in these zones, which enjoy certain tax and
other incentives.As per the SEZ act 2005, a Special Economic Zone may be established either
jointly or severally by the Central Government, State Government, or any person for manufacture
of goods or rendering services or for both.
SEZs are major export hubs in the country as the government provides several incentives and
single-window clearance system.The developers and units of these zones enjoy certain fiscal and
non-fiscal incentives such as no licence requirement for import; full freedom for subcontracting;
and no routine examination by customs authorities of export/import cargo. They also enjoy direct
and indirect tax benefits.
Economic Advisory Council
The EAC-PM is an independent body to give advice on economic and related issues to the
Government of India, specifically to the Prime Minister. It is an advisory body that can give policy
advice to the Prime Minister. Its main function is to analyze any issue either economic importance
or other that is referred to it by Prime Minister and advise him on the issues. It also present time
to time reports on ―macroeconomic developments and issues with implications for economic policy
to the PM. Its suggestion is advisory in nature nothing is binding on government.
Merchant Discount Rate (MDR)
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Merchant Discount Rate (alternatively referred to as the Transaction Discount Rate or TDR) is the
sum total of all the charges and taxes that a digital payment entails. For instance, the MDR
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includes bank charges, which a bank charges customers and merchants for allowing payments to

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ECONOMICS
be made digitally. Similarly, MDR also includes the processing charges that a payments
aggregator has to pay to online or mobile wallets or indeed to banks for their service. It is decided
by RBI.
The Code on Wages, 2019
According to Code on Wages Act, 2019,which seeks to define the norms for fixing minimum wages
that will be applicable to workers of organised and unorganised sectors, except government
employees and MNREGA workers. The code ensures minimum wages along with timely payment
of wages to all employees and workers. Many unorganised sector workers like agricultural
workers, painters, persons working in restaurants and dhabas and chowkidars, who were outside
the ambit of minimum wages, will get legislative protection of minimum wages.
As per the act, minimum wages will be linked only to factors such as skills and geographical
regions. At present, minimum wages are fixed on the basis of categories such as skilled,
unskilled, semi-skilled, high skilled, geographical regions, and nature of work such as mining and
are applicable for 45 scheduled employments in the central sphere and 1709 scheduled
employments in states
It also ensures that employees getting a monthly salary are paid by the 7th of the following
month. Those working on a weekly basis will be paid on the last day of the week and daily wagers
should get them on the same day. The Code on Wages will amalgamate the Payment of Wages Act,
1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965, and the Equal
Remuneration Act, 1976.
Zero Budget Natural Farming (ZBNF)
Zero budget farming a Vedic type of farming without use of any chemicals and pesticides. Due
non use of chemicals product, reduces the cost of farming. Farmers depend upon the natural
resources like cow dung, urine, tree leaves, water etc. It is helpful in increasing soil fertility also
increases crop productivity. Under ZBNF, neither fertilizer nor pesticide is used and only 10 per
cent of water is to be used for irrigation as compared to traditional farming technique. Farmers
use only local seeds and produce their own seeds.
The concept behind ZBNF is that over 98 per cent of the nutrients required by crops for
photosynthesis — carbon dioxide, nitrogen, water, and solar energy — are already available ―free‖
from the air, rain, and Sun.Only the remaining 1.5 per cent to 2 per cent nutrients need to be
taken from the soil, and converted from ―non-available‖ to ―available‖ form (for intake by the roots)
through the action of microorganisms.
To help the microorganisms act, farmers must apply ‗Jiwamrita‘ (microbial culture) and
‗Bijamrita‘ (seed treatment solution), and take up ‗mulching‘ (covering plants with a layer of dried
straw or fallen leaves) and ‗waaphasa‘ (giving water outside the plant‘s canopy) to maintain the
right balance of soil temperature, moisture, and air.To manage insects and pests, ZBNF
recommends the use of ‗Agniastra‘, ‗Brahmastra‘ and ‗Neemastra‘, which, like ‗Jiwamrita‘ and
‗Bijamrita‘, are based mainly on urine and dung of Indian cow breeds.

The Financial Action Task Force (FATF)

FATF is an inter-governmental organization established in 1989 at the behest of the G7 and is
headquartered in Paris. Its main objectives are to set standards and promote effective
implementation of legal, regulatory and operational measures for combating money laundering,
terrorist financing and other related threats to the global financial system. Decisions of the FATF
is not binding in nature. It is generally a policy making body.
Members of the Financial Action Task Force
As of 2018, there were 37 members of the Financial Action Task Force, including the European
Commission and the Gulf Cooperation Council. To become a member, a country must be
considered strategically important (large population, large GDP, developed banking and insurance
sector, etc.), must adhere to globally accepted financial standards, and be a participant in other
23

important international organizations.

Once a member, a country or organization must endorse and support the most recent FATF
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recommendations, commit to being evaluated by (and evaluating) other members, and work with

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ECONOMICS
the FATF in the development of future recommendations. A large number of international
organizations participate in the FATF as observers, each of which has some involvement in anti-
money laundering activities. These organizations include Interpol, the International Monetary
Fund (IMF), the Organization for Economic Cooperation and Development (OECD), and the World
Bank.
Development banks
Development banks are financial institutions that provide long-term credit for capital-intensive
investments spread over a long period and yielding low rates of return, such as urban
infrastructure, mining and heavy industry, and irrigation systems. Such banks often lend at low
and stable rates of interest to promote long-term investments with considerable social benefits.
Development banks are also known as term-lending institutions or development finance
institutions.
To lend for long term, development banks require correspondingly long-term sources of finance,
usually obtained by issuing long-dated securities in capital market, subscribed by long-term
savings institutions such as pension and life insurance funds and post office deposits.
Considering the social benefits of such investments, and uncertainties associated with them,
development banks are often supported by governments or international institutions. Such
support can be in the form of tax incentives and administrative mandates for private sector banks
and financial institutions to invest in securities issued by development banks. Development
banks are different from commercial banks which mobilise short to medium term deposit and
lend for similar maturities to avoid a maturity mismatch. The capital market complements
commercial banks in providing long term finance.
Corporate Bond
A corporate bond is a type of debt security that is issued by a firm and sold to investors. The
company gets the capital it needs and in return the investor is paid a pre-established number of
interest payments at either a fixed or variable interest rate. When the bond expires, or "reaches
maturity," the payments cease and the original investment is returned.The backing for the bond
is generally the ability of the company to repay, which depends on its prospects for future
revenues and profitability. In some cases, the company's physical assets may be used
as collateral.
An investor who buys a corporate bond is effectively lending money to the company in return for a
series of interest payments, but these bonds may also actively trade on the secondary
market.Corporate bonds are typically seen as somewhat riskier than U.S. government bonds, so
they usually have higher interest rates to compensate for this additional risk.The highest quality
(and safest, lower yielding) bonds are commonly referred to as "Triple-A" bonds, while the least
creditworthy are termed "junk".
Municipal bonds
Municipal bonds are also referred to as ‗muni bonds‘. The urban local government and agencies
issue these bonds. Municipal bonds are issued when a government body wants to raise funds for
projects such as infra-related, roads, airports, railway stations, schools, and so on. The Securities
and Exchange Board of India (SEBI) circulated detailed guidelines in 2015 for the urban local
bodies to raise funds by issuing municipal bonds.
Municipal bonds exist in India since the year 1997. Bangalore Municipal Corporation is the first
urban local body to issue municipal bonds in India. Ahmedabad followed Bangalore in the
succeeding years. The municipal bonds lost the ground after the initial investors‘ attraction it
received and failed to raise the desired amount of funds. To revive the municipal bonds, the
market watchdog SEBI came up with guidelines for the issue of municipal bonds in 2015.
A municipality should meet the following eligibility criteria to issue municipal bonds in
India:
 The municipality must not have a negative net worth in each of the three previous years.
24

 The municipality must have no default in the repayment of debt securities and loans
availed from the banks or non-banking financial companies in the last year.
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 The municipality, promoter and directors must not be enlisted in the wilful defaulters
published by the Reserve Bank of India (RBI). The municipality should have no record of
default in the payment of interest and repayment of principal with respect to debt
instruments.
The municipal bonds in India enjoy tax-free status if the investors adhere to rules, and the
interest rate depends on how the markets fair. Bonds can be issued on public or the private
basis. The SEBI let urban local bodies raise money for the developmental works by issuing
revenue bonds. Revenue bonds are those bonds from whose revenue is used for one specific
project. The revenues generated from the project is used to pay out the bond investors.

Minimum Support Price

What and Why?
Minimum Support Price (MSP) is a form of market intervention by the Government of India to
insure agricultural producers against any sharp fall in farm prices.
The major objectives are to support the farmers from distress sales and to procure food grains for
public distribution.
When?
The minimum support prices are announced by the Government of India at the beginning of the
sowing season for certain crops.
Who declares and who prepares it?
The Cabinet Committee on Economic Affairs (CCEA), Government of India, determines the
Minimum Support Prices (MSP) of various agricultural commodities in India based on the
recommendations of the Commission for Agricultural Cost and Prices (CACP).
How is it calculated?
According to the formula prescribed by the Swaminathan Committee, there are three variables
that determine production cost: A2, A2+FL, and C2.
 A2- Includes out-of-pocket expenses borne by farmers, such as term loans for machinery,
fertilizers, fuel, irrigation, cost of hired labour and leasing land.
 A2+FL, takes into account the imputed value of unpaid labour on the part of family members,
in addition to the paid-out cost.
 (C2) -The Comprehensive Cost (C2) is more reflective of the actual cost of production since it
takes it accounts for rent and interest foregone on owned land and machinery, over and above
the A2+FL rate.
The ideal formula according the Committee would be: MSP = C2+ 50% of C2.
MSP is announced for which products?
Government announces minimum support prices (MSPs) for 22 mandated crops and fair and
remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the kharif season, 6
rabi crops and two other commercial crops. In addition, the MSPs of toria and de-husked coconut
are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively. The list of crops
are as follows.
 Cereals (7) - paddy, wheat, barley, jowar, bajra, maize and ragi
 Pulses (5) - gram, arhar/tur, moong, urad and lentil
 Oilseeds (8) - groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum,
safflower seed and nigerseed
 Raw cotton
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 Raw jute
 Copra
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 De-husked coconut

 Sugarcane (Fair and remunerative price)

 Virginia flu cured (VFC) tobacco
International Budget Partnership (IBP)
What?
It is an independent non-profit corporation, formerly a project of the Center on Budget and Policy
Priorities. It focuses on government budgets because they are at the core of development.
What is The Open Budget Survey
The Open Budget Survey is part of the International Budget Partnership's Open Budget Initiative,
a global research and advocacy program to promote public access to budget information and the
adoption of accountable budget systems.
 The survey, covering 117 countries, rates the level of budget transparency across
countries on a scale of 0-100, based on several normative, internationally comparable
indicators.
 India's Union Budget process a transparency score of 49 out of 100, which is higher
than the global average of 45.
 New Zealand tops the chart with a score 87.
 It recommends that the Union Government should also publish a Pre-Budget Statement,
which can be scrutinized by the legislators and the public at large before the annual
budget is presented.

Digital Currency
 Digital currency is a form of currency that is available only in digital or electronic form,
and not in physical form.
 Digital currencies can be considered a superset of virtual currencies and cryptocurrencies.
 If issued by a central bank of a country in a regulated form, it is called the ―Central Bank
Digital Currency (CBDC).
 Along with the regulated CBDC, a digital currency can also exist in an unregulated form.
In the latter case, it qualifies for being called a virtual currency.
 A cryptocurrency is another form of digital currency which uses cryptography to secure
and verify transactions and to manage and control the creation of new currency
units. Bitcoin and ethereum are the most popular cryptocurrencies.
 All cryptocurrencies are digital currencies, but not all digital currencies are crypto.
 Libra is a digital currency by Facebook.
 China is testing its own digital currency.
 The Reserve Bank of India has said it had not banned cryptocurrencies such as Bitcoin in
India, but only ring-fenced regulated entities like banks from risks associated with trading
of such virtual instruments.

Voluntary retention route

 It is a new channel of investment available to FPIs to encourage them to invest in debt
markets in India over and above their investments through the regular route.
 The objective is to attract long-term and stable FPI investments into debt markets while
providing FPIs with operational flexibility to manage their investments.
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 Foreign portfolio investment (FPI) involves holding financial assets from a country outside
of the investor's own.
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 Along with foreign direct investment (FDI), FPI is one of the common ways for investors to
participate in an overseas economy, especially retail investors.
 Unlike FDI, FPI consists of passive ownership; investors have no control over ventures or
direct ownership of property or a stake in a company.
 FDI implies investment by foreign investors directly in the productive assets of another
nation. FPI means investing in financial assets, such as stocks and bonds of entities
located in another country.

National Infrastructure Pipeline (NIP)

 NIP is a first-of-its-kind, whole-of-government exercise to provide world-class
infrastructure across the country, and improve the quality of life for all citizens.
 It aims to improve project preparation, attract investments (both domestic and foreign)
into infrastructure, and will be crucial for target of becoming a $5 trillion economy by FY
2025.
 Sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to
around 71% of the projected infrastructure investments in India.
 The Centre (39%) and States (40%) are expected to have almost equal share in
implementing the NIP in India, followed by the private sector (21%).

Deposit Insurance and Credit Guarantee Corporation (DICGC)

 It is a wholly owned subsidiary of Reserve Bank of India.
 It was established on 15 July 1978 under the Deposit Insurance and Credit
Guarantee Corporation Act, 1961 for the purpose of providing insurance of deposits
and guaranteeing of credit facilities.
 Union Finance Minister Nirmala Sitharaman in her budget speech 2020 has
proposed to hike the bank deposit insurance in scheduled commercial banks to Rs
5 lakh per depositor from the current Rs 1 lakh.

New Development Bank (NDB)

 During the sixth BRICS Summit in Fortaleza (2014), the leaders signed the Agreement
establishing the New Development Bank (NDB).
 Headquarter: Shanghai, China
 Bank‘s Articles of Agreement specify that all members of the United Nations could be
members of the bank, however the share of the BRICS nations can never be less than 55% of
voting power.
 Currently all BRICS nations have equal share holding and voting power.
 The First President of the Bank was from India.

Payment Infrastructure Development Fund

 Created by Reserve Bank of India (RBI).
 To encourage acquirers to deploy Points of Sale (PoS) infrastructure — both physical and
digital modes.
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GAFA Tax and Equalisation Levy

 GAFA is an acronym for Google, Apple, Facebook and Amazon. France first proposed to
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levy digital tax called as GAFA tax on these digital giants.

 If approved, these internet giants will now pay taxes to the government based on the services
they provide.
 Digital economy is characterized by a unique system of value creation resulting from a
combination of factors such as sales functions, algorithms and personal information of users.
This type of value creation is outside the ambit of traditional taxation system. Hence the need
of GAFA Tax.
 Equalisation Levywas introduced in India in 2016, with the intention of taxing the digital
transactions i.e. the income accruing to foreign e-commerce companies from India. It is aimed
at taxing business to business transactions.
o It is a direct tax, which is withheld at the time of payment by the service recipient.
o The payment should have been made to a non-resident service provider;
o Any provision for digital advertising space or facilities/ service for the purpose of online
advertisement are is liable to pay Equalisation levy.
Purchasing Power Parity
 PPP is an economic theory that compares different countries' currencies through a "basket
of goods" approach.
 According to this concept, two currencies are in equilibrium—known as the currencies
being at par—when a basket of goods is priced the same in both countries, taking into
account the exchange rates.
 India is the third largest economy as per PPP.

Border Adjustment Tax

 NITI Aayog favored imposing a border adjustment tax (BAT) on imports to provide a level-
playing field to domestic industries.
 Border adjustment tax is a short name for a proposed destination-based cash flow tax
(DBCFT).
 It is a value-added tax on imported goods and is also referred to as a border-adjusted tax,
destination tax or border tax adjustment.
 Exported goods are exempt from tax while imported goods sold are subject to the tax.
 BAT levies a tax depending on where a good is consumed rather than where it is
produced.

Indian Gas Exchange (IGX)

 It is the India‘s first gas exchange.
 It will deal only with imported gas.
 The exchange is expected to facilitate transparent price discovery in natural gas, and
facilitate the growth of the share of natural gas in India‘s energy basket.
 Domestically produced natural gas will not be bought and sold on the exchange.
 The price of domestically produced natural gas is decided by the government. It will not be
sold on the gas exchange.

Active Pharmaceutical Ingredients

 API is the term used to refer to the biologically active component of a drug product (e.g. tablet,
28

capsule). Drug products are usually composed of several components.

 The API is the primary ingredient.
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 For example: Paracetamol, also known as acetaminophen, is an API used in medicines to treat
pain and fever.
 With the availability of cheaper APIs from China, the pharmaceutical industry relies heavily
on imports.

Export Preparedness Index (EPI)

 NITI Aayog in partnership with the Institute of Competitivenesshas released the first Export
Preparedness Index (EPI) that is EPI 2020 to examine export preparedness and performance of
Indian states.
 The Export Preparedness Index is a data-driven effort to identify the core areas crucial for
export promotion at the sub-national level.
 Overall, most of the Coastal States are the best performers. Gujarat, Maharashtra and Tamil
Nadu occupy the top three ranks, respectively.
 The structure of the EPI includes 4 pillars –
1) Policy: A comprehensive trade policy provides a strategic direction for exports and
imports.
2) Business Ecosystem: An efficient business ecosystem can help states attract investments
and create an enabling infrastructure for individuals to initiate start-ups.
3) Export Ecosystem: This pillar aims to assess the business environment, which is specific
to exports.
4) Export Performance: This is the only output-based pillar and examines the reach of
export footprints of States and Union Territories.

P-Notes or Participatory Notes

 They are Overseas Derivative Instruments that have Indian stocks as their underlying
assets.
 They allow foreign investors to buy stocks listed on Indian exchanges without being
registered.
 The instrument gained popularity as FIIs, to avoid the formalities of registering and to
remain anonymous, started betting on stocks through this route.
 What are govt & regulator’s concerns? The primary reason why P-Notes are worrying is
because of the anonymous nature of the instrument as these investors could be beyond
the reach of Indian regulators. Further, there is a view that it is being used in money
laundering with wealthy Indians, like the promoters of companies, using it to bring back
unaccounted funds and to manipulate their stock prices.
 From January 2011, FIIs have had to follow KYC norms and submit details of
transactions. In 2014, new rules on foreign portfolio investors (FPIs) made it mandatory
for those issuing P-Notes to submit a monthly report disclosing their portfolios.
29
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Indian Banking Sector

News Excerpt
The Reserve Bank of India (RBI) had placed the financially troubled Yes Bank under a
moratorium (temporary suspension).
Highlights
 The bank moratorium means Yes Bank was not allowed to pay any depositor more than
Rs 50,000 without written permission from the RBI during the period of moratorium. Yes
Bank was also not be able to grant or renew any loan or advance, make any investment,
incur any liability or agree to disburse any payment.
 The financial position of Yes Bank Ltd. (the bank) had undergone a steady decline in last
two years, largely due to inability of the bank to raise capital to address potential loan
losses and resultant downgrades, triggering invocation of bond covenants by investors,
and withdrawal of deposits. The bank had also experienced serious governance issues and
practices in the recent years which have led to its steady decline.
 As on 30 September, Yes Bank‗s total deposits stood at Rs. 2.09 trillion.
 The Gross Non-Performing Assets (NPA) of YES Bank was 7.4% of the gross advances at
the end of September 2019. It became 18.87 per cent of the bank‗s total loan book (Rs
40,709.20 crore) at the end of December 2019.
 The overall capital adequacy ratio (CAR) dropped to 4.2 per cent from 16.3 per cent in the
preceding quarter
 Yes Bank illustrates the widening damage from India‗s shadow banking crisis, which has
left the Bank with a growing pile of bad loans.
 Its newest investors are the State Bank of India—the largest public lender—housing
finance firm HDFC and six private banks: ICICI Bank, Axis Bank, Kotak Mahindra Bank,
Bandhan Bank, Federal Bank and IDFC First Bank.
 The public-private partnership model to support Yes Bank suggests that authorities prefer
to spread the burden of a bank rescue with the private sector rather than just impose the
responsibility on PSBs as it has in the past.

Shadow Banking System

A shadow banking system is the group of financial intermediaries facilitating the creation of credit
across the financial system but whose members are not subject to regulatory oversight. The
shadow banking system also refers to unregulated activities by regulated institutions.
Examples of intermediaries not subject to regulation include hedge funds, unlisted derivatives,
and other unlisted instruments, while examples of unregulated activities by regulated institutions
include credit default swaps

Additional tier 1 (AT1) bonds

News Excerpt
Private lender YES Bank additional tier 1 (AT1) bonds worth Rs 8,415 crore have been written
down to zero, the company informed stock exchanges.
AT-1 bonds
 AT-1 bonds are unsecured perpetual bonds — with no maturity — issued by banks to
shore up their capital base to meet Basel III requirements, but carry higher coupon due to
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the risk involved.

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ECONOMICS
 As per RBI rules based on the Basel-III framework, AT-1 bonds have principal loss
absorption features, which can cause a full write-down or conversion to equity on breach
of a pre-specified trigger of common Tier 1 capital ratio falling below 6.125 per cent.
 Under the Based III framework, banks‘ regulatory capital is divided into Tier 1 and Tier 2
capital. Tier 1 capital is subdivided into Common Equity (CET) and Additional Capital
(AT1).
 In simple terms, equity and preference capital is classified as CET and perpetual bonds
are classified as AT1. Together, CET and AT1 are called Common Equity.
 Under Basel III norms, minimum requirement for Common Equity Capital has been
defined. By nature, CET is the equity capital of the bank, where returns are linked to the
banks‘ performance and therefore the performance of the share price.
 However, AT1 bonds are in the nature of debt instruments, which carry a fixed coupon
payable annually from past or present profits of the bank. These AT1 bonds have no
maturity and are therefore called perpetual bonds. However, normally these bonds have a
―call feature‖, which enables the bank to recall these bonds at the end of five years.
 Tier 2 capital consists of subordinated debt with an original maturity of at least five years.
Both AT1 and Tier 2 capital are subordinated debt instruments and are ranked lower than
deposits, secured and unsecured creditors in the order of liquidation. Tier 1 capital
ordinarily ranks higher than common equity holders.
 Apart from the tenor, the other key feature of AT1 bonds is that these instruments have
principal loss absorption feature at an objective pre-specified trigger point through either
(i) conversion into common shares or (ii) a write-down mechanism which allocates losses
to these instruments.
 The loss absorption through conversion / write-down of AT 1 instruments is triggered
when CET falls below a pre-determined threshold of Risk Weighted Assets (RWAs). When
this trigger is activated, the RBI can direct the bank to take necessary action as per the
severity of the issue, which could mean write off, conversion into equity or both.
Point of Non-Viability Trigger’ (PONV)
The RBI has also added an additional trigger in Indian regulations, called the ‗Point of Non-
Viability Trigger‘ (PONV). In a situation where a bank faces severe losses leading to erosion of
regulatory capital, the RBI can decide if the bank has reached a situation wherein it is no longer
viable. The RBI can then activate a PONV trigger and assume executive powers. By doing so, the
RBI can do whatever is required to get the bank on track, including superseding the existing
management, forcing the bank to raise additional capital and so on. However, activating PONV is
followed by a write down of the AT1 bonds, as determined by the RBI. These are covered in detail
under sections 44 and 45 of the Banking Regulation Act, 1949

Insolvency Bankruptcy Board of India (IBBI)

News Excerpt
In order to deal with COVID-19 pandemic,Insolvency Bankruptcy Board of India (IBBI) has, vide
notification dated March 29, 2020, amended the Insolvency and Bankruptcy Board of
India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 granting certain
relaxations.This amendment is effective from March 29, 2020
Pre-Connect
The IBC Code, conceived in 2016, has undergone four legislative amendments and interference
from courts.
Highlights
 Increase in amount of minimum default for initiating CIRP from one lakh to one crore to
31

prevent the initiation of CIRP at a large scale and to avoid any frivolous filings due to
Pandemic.
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The Insolvency and Bankruptcy Code (Amendment) Act, 2020 (notified on March 13, 2020),
with retrospective effect from December 28, 2019
Prior to the aforementioned amendments in response to COVID-19, the IBC was revamped vide
Amendment Act, to make the resolution process more effective and to promote ease of doing
business.
Key insights on the Amendment Act have been summarised below:
 It aims to provide protection to new owners of a loan defaulter company against
prosecution for misdeeds of previous owners.
 According to amendment in section 5(15), any debt notified by the central government can
also be included in the definition of interim finance.
 According to the amendment to Section 7 of the Code, in the case of real estate allottees and
security or deposit holders represented by a trustee or agent, the insolvency application
should be filed jointly by at least 100 such creditors or 10 per cent of their total number,
whichever is less.

New Guidelines for Payment Aggregators

News Excerpt
The Reserve Bank of India has reduced the capital requirements for payment aggregators to Rs 15
crore at the time of application for the license from Rs 100 crore it had proposed earlier.
Highlights
 RBI said that the payment aggregator (PAs) (entities that facilitate e-commerce sites and
merchants to accept various payment instruments) should be a company incorporated in
India under the Companies Act, 1956 / 2013.
 It also said that non-bank entities offering payment aggregator services would have to
apply for authorization on or before June 30, 2021.
 While both payment aggregators (PAs) & Payment Gateways (PGs) are intermediaries
playing an essential function in facilitating payments in the online space, the new
guidelines differentiate them both. The current guidelines are, however, aimed at PAs.
 The central bank said that applicants need to have Rs 15 crore of net worth, which needs
to be increased to Rs 25 crore within three years of operations.
 Payments Council of India (PCI) is the industry body of payment aggregators and acquirers
Payment Aggregators (PAs)
These are entities that facilitate e-commerce sites and merchants to accept various payment
instruments from the customers for completion of their payment obligations without the need for
merchants to create a separate payment integration system of their own. PAs facilitate merchants
to connect with acquirers. In the process, they receive payments from customers, pool, and
transfer them on to the merchants after a while. Example: Paytm, PayU, Instamojo, etc.
Payment Gateways (PGs)
These are entities that provide technology infrastructure to route and facilitate the processing of
an online payment transaction without any involvement in the handling of funds. Examples:
32

Billdesk, CCAvenue, Firstdata, Ingenico Payments, amongst others.

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LLP Settlement Scheme, 2020‖

News Excerpt
In order to provide relief to law-abiding companies and Limited Liability Partnerships (LLPs), the
Ministry of Corporate Affairs (MCA), has introduced the ―Companies Fresh Start Scheme, 2020‖
and revised the ―LLP Settlement Scheme, 2020‖.
Companies Fresh Start Scheme, 2020 (CFSS)
 To facilitate Indian companies to make a fresh start, MCA has taken certain alleviative
measures for the benefit of all companies by exercising its power under the Companies
Act, 2013 and introduces the scheme ―(CFSS-2020)‖ with effect from 1st April 2020 to
30th September 2020.
 Companies Act 2013 mandates all companies to make statutory compliance by filing
Annual Return and Financial Statements along with various other documents on MCA21
electronic registry within the prescribed time limit.
 Under this scheme, stakeholders are granted with one-time opportunity to complete their
pending compliances including annual filings without any additional fees on account of
any delay. It also grants immunity for any prosecution or proceeding against the company
for imposing any penalty on account of delay in filing documents.
 The Scheme also provides an opportunity to the inactive company to convert into a
dormant company under section 455 of companies act, 2013
LLP Settlement Scheme, 2020
 In March, 2020, the Ministry of Corporate Affairs (MCA) has introduced a scheme namely
―LLP Settlement Scheme, 2020‖ for limited liability partnership (LLPs) by allowing a one-
time condonation of delay in filing statutorily required documents with the Registrar of
Office (ROC).
 The scheme provided a window from 16th March, 2020 to 30th September 2020to LLPs for
completing overdue or delayed filings of four forms which were due for filing till 31st
October, 2019. Also, the additional fee on these forms is reduced to Rs. 10 from Rs. 100
per day of delay with upper cap of Rs. 5,000 per form.
 It should be noted that the Scheme will be applicable to LLP, which is registered under the
Limited Liability Partnership Act, 2008 which has made a default in filing of documents on
the due date(s) specified under the LLP Act, 2008.
 The defaulting LLPs, which have filed their pending documents till 13th June 2020 shall
not be subjected to prosecution by Registrars of Companies (ROC) for such defaults

Limited liability Partnership (LLP)

LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership.
The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the
partners is limited to their agreed contribution in the LLP

Recapitalisation of Regional Rural Banks

News Excerpt
 The Cabinet Committee on Economic Affairs (CCEA) has given its approval for continuation of
the process of recapitalization of Regional Rural Banks (RRBs) by providing minimum
regulatory capital to RRBs for another year (up to 2020-21) for those RRBs which are unable
33

to maintain minimum Capital to Risk weighted Assets Ratio (CRAR) of 9%, as per the
regulatory norms prescribed by the Reserve Bank of India.
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 The CCEA also approved utilization of Rs.670 crores as central government share for the
scheme of Recapitalization of RRBs (i.e. 50% of the total recapitalization support of Rs.1340
crores).
Pre-Connect
 The Regional Rural Banks (RRBs) were established in 1975 under the provisions of the
Ordinance promulgated on 26th September, 1975 and Regional Rural Banks Act, 1976 on
recommendation of Narasimham committee 1975.
 They are scheduled commercial banks (Government banks). The RRBs were owned by three
entities i.e. Central govt., State govt. and Sponsor Bank in proportion of 50:15:35.
 The area of operation of RRBs is limited to the area as notified by Government of India
covering one or more districts in the State.
 On recommendation of K C Chakrabarty committee, cabinet in 2011 approved the
recapitalisation of RRBs.
Analytica
 Now, Regional Rural Banks with improved CRAR will enable them to meet the credit
requirement in the rural areas.
 As under RBI guidelines the RRBs have to provide 75% of their total credit under PSL.
 Identification of RRB requiring recapitalisation is done by NABARD (National Bank for
agriculture and rural development.

Country-by-Country (CbC) Report

News Excerpt
With Central Board of Direct Taxes(CBDT) notifying rules for furnishing "Country-by-Country
Report" (CbC) specifying information pertaining to all large multinational enterprises (MNEs), the
Finance Ministry said that Joint Director of Income-tax (Risk Assessment-1) has been designated
as the Income-tax Authority before whom particulars of the parent entity and alternate reporting
entity would be notified
Pre-Connect
 The lack of quality data on corporate taxation has been a major limitation to measuring the
fiscal and economic effects of tax avoidance, making it difficult for authorities to carry out
transfer pricing assessments on transactions between linked companies and even more
difficult to carry out audits.
 The BEPS Action 13 report provides a template for multinational enterprises (MNEs) to report
annually and for each tax jurisdiction in which they do business the information set out
therein. This report is called the Country-by Country (CbC) Report.
Base erosion and profit shifting (BEPS)
It refers to tax planning strategies used by MNEs that exploit gaps and mismatches in tax rules to
avoid paying tax. BEPS practices cost countries USD 100-240 billion in lost revenue annually.
Working together within OECD/G20 Inclusive Framework on BEPS, over 135 countries and
jurisdictions are collaborating on the implementation of measures to tackle tax avoidance,
improve the coherence of international tax rules and ensure a more transparent tax environment.

Highlights
 Under BEPS Action 13, all large MNEs are required to prepare a country-by-country (CbC)
report with aggregate data on the global allocation of income, profit, taxes paid and
economic activity among tax jurisdictions in which it operates.
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 A CbC report provides local tax authorities visibility to revenue, income, tax paid and
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accrued, employment, capital, retained earnings, tangible assets and activities of the
concerned MNE.

Trade in Cryptocurrencies
News Excerpt
The Supreme Court set aside a circular of the Reserve Bank of India (RBI) (issued in 2018)
prohibiting banks and entities regulated by it from providing services in relation to virtual
currencies (VCs).
Pre-Connect
 The RBI order had banned trading of all virtual currencies in India. The Internet and Mobile
Association of India (IAMAI) was the petitioner in this case on behalf of all the virtual currency
trading companies
 From a permissive draft bill, the Inter-Ministerial Committee went on to recommend a ―total
ban‖ on private crypto-currencies through a proposed legislation called ‗Banning of Crypto-
currency and Regulation of Official Digital Currency Act‘ in February 2019. This proposed law
contemplated the creation of a digital rupee as official currency and a legal tender by the
central government in consultation with RBI.
Highlights
 The court held that the ban did not pass the ―proportionality‖ test. The test of proportionality
of any action by the government, the court held, must pass the test of Article 19(1)(g), which
states that all citizens of the country will have the right to practice any profession, or carry on
any occupation or trade and business.
 It also pointed out the contradiction in the RBI‗s stand where it insisted that virtual
currencies are not banned in India, but the circular had then gone on to ban all trading
around them.

Virtual currency, or virtual money, is a type of digital currency (mostly unregulated), which is
issued and usually controlled by its developers and used and accepted among the members of a
specific virtual community. Virtual currencies are mostly created, distributed and accepted in
local virtual networks.
Crypto-currencies, on the other hand, have an extra layer of security, in the form of encryption
35

algorithms. Cryptographic methods are used to make the currency as well as the network on
which they are being traded, secure. Most crypto-currencies now operate on the block-chain or
Page

distributed ledger technology, which allows everyone on the network to keep track of the
transactions occurring globally.
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ECONOMICS

Distributed ledger technology (DLT) is a digital system for recording the transaction of assets in
which the transactions and their details are recorded in multiple places at the same time. Unlike
traditional databases, distributed ledgers have no central data store or administration
functionality.

Why did the RBI ban virtual currencies?

Owing to the lack of any underlying fiat, episodes of excessive volatility in their value, and their
anonymous nature which goes against global money-laundering rules, the RBI initially flagged its
concerns on trade and use of the currency. Risks and concerns about data security and
consumer protection on the one hand, and far-reaching potential impact on the effectiveness of
monetary policy itself on the other hand, also had the RBI worried about virtual currencies.
Inter-Ministerial Committee on Virtual Currencies
 The committee headed by finance secretary SubhashChandra Garg has proposed a draft bill
―Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019".
 The Committee highlighted the positive aspect of distributed-ledger technology (DLT) and
suggested various applications, especially in financial services, for use of DLT in India.
 The DLT-based systems can be used by banks and otherfinancial firms for processes such as
loan-issuance tracking, collateral management, fraud detection and claims management in
insurance, and reconciliation systems in the securities market.
 The Group has also proposed that the Government keepsan open mind on official digital
currency.

Finance Bill
News Excerpt
Finance bill passed ahead of coronavirus lockdown. The bill was hurriedly passed as the country
headed for a lockdown to fight the coronavirus crisis.
Highlights
 The amendments moved in the finance bill covered the taxation of petrol and diesel,
definition of tax residence and clarifications related to dividend distribution tax (DDT).
 They allow the government to raise special additional excise duty, when needed, on petrol
and on diesel. The intention to raise the taxes on auto fuel comes at a time when the
government is looking for resources to announce a financial package to fight the impact of
the coronavirus crisis.
 In direct taxes, a key amendment was to relax the provision relating to tax residence. The
original Finance Bill had proposed to reduce the time Indian citizens or persons of Indian
origin needed to spend in India to qualify as Indian tax resident, from 182 days to 120
days in the previous year. ―The amended Bill now provides that the lower 120 day rule will
not apply if the Indian-sourced income of such persons is less than ₹15 lakh in the
relevant financial year.
 The bill also gave tax relief to shareholders who receive dividends. The earlier version of
the bill had abolished dividend distribution tax on companies and made dividends taxable
in the hands of the recipient. The amendments now clarify that dividends received by the
shareholders after 1 April shall not be taxed if DDT has been paid as per the earlier law
 The Finance Bill also widens the ambit of the ―equalisation levy" introduced in 2016 on
payments made to non-resident service providers for online advertisements or digital
advertising space or facilities. This is expanded to include supply of services including
online sale of goods, services or both by e-commerce operators.
36

 The Finance Bill also proposed a more progressive personal income tax rate for people who
do not avail of any tax incentives.
Page

Finance Bill
As per Article 110 of the Constitution of India, the Finance Bill is a Money Bill. The Finance Bill is
a part of the Union Budget, stipulating all the legal amendments required for the changes in
taxation proposed by the Finance Minister
For instance, a Union Budget‘s proposed tax changes may require amending the various sections
of the Income Tax law, Stamp Act, Money Laundering law, etc. The Finance Bill overrides and
makes changes in the existing laws wherever required.

Fully Accessible Route

News Excerpt
The Reserve Bank of India (RBI) has introduced a separate channel, namely ‗Fully Accessible
Route‘ (FAR), to enable non-residents and domestic investors to invest in specified government
bonds with effect from April 1.
Highlights
 The move follows the Union Budget announcement that certain specified categories of
government bonds would be opened fully for non-resident investors without any
restrictions. However, Domestic investors are also eligible to invest in these securities.
 These special securities will attract no foreign portfolio investor (FPI) limits until maturity
and are the first step towards Indian G-Secs being listed on global bond indices as the
Centre looks to attract access cheap liquidity in the overseas markets.
 ―Eligible investors can invest in specified government securities without being subject to
any investment ceilings. This scheme shall operate along with the two existing routes, viz.,
the Medium Term Framework (MTF) and the Voluntary Retention Route (VRR).
 The RBI said all new issuances of G-secs of 5-year, 10-year, and 30-year tenors from FY21
will be eligible for investment as ―specified securities‖.
 The RBI also raised upwards the FPI limits for corporate bonds to 15 per cent, from 9 per
cent, for 2020-21. However, ―The limits for FPI investment in Government securities (G-
secs) and State Development Loans (SDLs) shall remain unchanged at 6% and 2%,
respectively, of outstanding stocks of securities for FY 2020-21‖.Although absolute
investment limits will be higher as bond sales every year increases the outstanding stock.
 This will substantially ease access of non-residents to Indian government securities
markets and facilitate inclusion in global bond indices.
Government security (G-Sec)
 A government security (G-Sec) is a tradeable instrument issued by the central government or
state governments. It acknowledges the government‘s debt obligations.
Such securities are short term — called treasury bills — with original maturities of less than
one year, or long term — called government bonds or dated securities — with original
maturity of one year or more.
 Major players in the G-Secs market include commercial banks and primary dealers (PDs)
besides institutional investors like insurance companies.

Schemes for Electronic Manufacturing

News Excerpt
The Union Cabinet has approved three schemes to enable large scale electronics manufacturing
and attract fresh investments worth at least ₹50,000 crore in the sector.
Aim
37

India hopes to replace China in Asia‘s supply chain, given that the outbreak in that country has
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led Beijing to order shutting down of factories, ports and such and putting cities under lockdown

DELHI: VIJAY NAGAR 9717380832 & OLD RAJENDER NAGAR 9811293743 | JAIPUR: 8290800441
BENGALURU: KORMANGALA 7619166663 & CHANDRA LAYOUT 7619136662 | BHOPAL: 7509975361
PATNA: 7463950774 | INDORE: 7314977441 | RANCHI: 9939982007 | www.ksgindia.com
ECONOMICS
to contain the spread of the pandemic. Electronics goods weigh heavily on the country‘s trade
deficit and are one of the top three items imported in India.
Schemes:
1. Production-Linked Incentive Manufacturing Scheme- has been approved to boost
domestic production and attract investment in mobile phone manufacturing, specified
electronic components, including assembly, testing, marking and packaging (ATMP) units.
The scheme shall extend an incentive of 4% to 6% on incremental sales (over base year) of
goods manufactured in India and covered under target segments, to eligible companies, for
a period of five years subsequent to the base year as defined," a government statement said.
The ₹40,995 crore funds allocated are to be used over five years.
2. Scheme for Promotion of Manufacturing of Electronics Components and
Semiconductors (SPECS)- a ₹3,285 crore scheme will give financial incentive of 25% on
capital expenditure for the identified list of electronic goods -all of which involve high value
added manufacturing.
SPECS will be applicable on investments in new units and expansion of capacity and
diversification of existing units. ―The scheme will be open for applications initially for 3
years from the date of its notification. The incentives will be available for investment made
within 5 years from the date of acknowledgement of application. The funds allocated will be
spread over eight years.
3. Electronics Manufacturing Clusters (EMC) 2.0 -was also approved to create infrastructure
along with industry specific facilities. Towards this scheme, the government has allocated
Rs. 3,762.25 crore for a period of 8 years.
―The scheme will provide financial assistance up to 50% of the project cost subject to ceiling
of ₹70 crore per 100 acres of land for setting up of Electronics Manufacturing Cluster projects.
For Common Facility Centre (CFC), financial assistance of 75% of the project cost subject to a
ceiling of ₹75 crore will be provided".
National Policy on Electronics, 2019
The Policy envisions positioning India as a global hub for Electronics System Design and
Manufacturing - (ESDM) by encouraging and driving capabilities in the country for developing
core components, including chipsets, and creating an enabling environment for the industry to
compete globally.
 Provide incentives and support for manufacturing of core electronic components.
 Promoting domestic manufacturing and export in the entire value-chain of ESDM.
 Formulate suitable schemes and incentive mechanisms to encourage new units and
expansion of existing units.
 Promote Industry-led R&D and innovation in all sub-sectors of electronics.
 Special thrust on Fabless Chip Design Industry, Medical Electronic Devices Industry,
Automotive Electronics Industry and Power Electronics for Mobility and Strategic Electronics
Industry.
 Create Sovereign Patent Fund (SPF) to promote the development and acquisition of IPs in
ESDM sector.
 Promote trusted electronics value chain initiatives to improve national cyber security profile.

New Provisions for Equalisation Levy

News Excerpt
Vide the Finance Act 2020, a new provision providing for equalisation levy on revenues generated
38

by e-commerce operators was introduced. The new provision significantly widens the scope of
equalisation levy, which provides that consideration received/ receivable by a non-resident e-
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commerce operator, from the online sale of goods or online provision of services or a combination
of both, shall be subject to 2 per cent equalisation levy with effect from April 1, 2020.

February, 2019
USTR removes India from developing status
News Excerpt
Recently, the U.S. removed more than a dozen countries, including India, from its list of countries
that are classified as ―developing‖ for trade purposes. These countries will now be classified
instead as ―developed‖ economies, thus stripping them of various trade benefits.
Pre-Connect
 The Office of the U.S. Trade Representative (USTR) is responsible for developing and
coordinating U.S. international trade, commodity, and direct investment policy, and
overseeing negotiations with other countries.
 USTR removed India, along with several other countries, from the list of beneficiaries of trade
subsidy preference under the US countervailing duty (CVD) laws.
 CVDs are tariffs levied on imported goods to offset subsidies made to producers of these goods
in the exporting country.
 The preferential treatment with respect to CVDs investigations falls under the US‗Generalized
System of Preferences (GSP)‘ scheme.
Developing Country Status
 The WTO doesn‘t define countries as ‗developing‘ or ‗developed‘. Member nations themselves
39

are required to declare which category they fall under. However, these declarations can be
challenged by other member nations.Over two-thirds of WTO‘s 164 member countries are
developing countries.
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Special and Differential Treatment Provisions-

Impact
 CVD laws allow the US to hold an investigation into the trade policies of other countries to
determine whether they are harming the US trade. With India no longer in the list of
beneficiaries, the US can now hold an investigation.
 If the investigation finds that India‘s policies allow exporters to sell their products in the US at
a lower rate and consequently harm the domestic traders there, the US can impose
countervailing duty, a form of import tax, to make the Indian goods more expensive in the US
markets.

Cooperative Banks under RBI

News Excerpt
The Union Cabinet recently approved an amendment to the Banking Regulation Act to bring
multi-state cooperative banks under the watch of the central bank and prevent a repeat of Punjab
and Maharashtra Cooperative (PMC) Bank-like crisis.
Pre-Connect
 Cooperative Societies is a State Subject under Entry 32 of the State List of Seventh Schedule
of the Constitution of India.
 Cooperatives Banks are registered under the Cooperative Societies Act, 1912. These are
regulated by the Reserve Bank of India (RBI) and National Bank for Agriculture and Rural
Development (NABARD) under the Banking Regulation Act, 1949 and Banking Laws
(Application to Cooperative Societies) Act, 1965.
R. Gandhi panel on reforms for the cooperative banking sector.
Some of recommendations are as follows-
 Greater control and supervision of RBI upon the cooperative banks.
40

 Creation of umbrella organisation for supervising and coordinating the activities of all
cooperatives. Such an organisation should be over and above the board of directors and
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should be reporting directly to RBI so as to bring it under better control.

 Amendment of the Banking Regulation Act to give more powers to the RBI over cooperative
banks, empowering the RBI to wind up and liquidate banks independent of other regulators
under the cooperative societies' laws, and allowing urban cooperative banks to be converted
into small finance banks under the RBI's supervision.

Recent Government Initiatives

 Government Amended Banking Regulation Act to bring multi-state cooperative banks under
the watch of the central bank. The amendments will apply to all urban co-operative banks and
multi-state cooperative banks
 Reserve Bank to have control over Cooperative banks.
 Now, Cooperative banks will be audited as per RBI rules. Prior nod from RBI will be required
for CEO appointment.
 The move will ensure greater accountability and transparency in the functioning of
cooperative banks.

Ease 3.0 for tech enabled banking

News Excerpt
Union Minister for Finance & Corporate Affairs recently unveiled EASE 3.0, the Public Sector
Bank (PSB) Reforms Agenda 2020-21 for smart, tech-enabled banking
Pre-Connect
 PSB Reforms EASE (Enhanced Access and Service Excellence) Agenda is a common reform
agenda for PSBs aimed at institutionalizing clean and smart banking.
 It was launched in 2018, and the subsequent edition of the program ― EASE 2.0 built on the
foundation laid in EASE 1.0 and furthered the progress on reforms.
 The government in EASE 2.0, had proposed pushing liquidity in the public sector banks,
reconstituting the management committee and possible mergers among the ideal partners in
the Indian banking sector.
Analytica
 Some of the new features that customers of public sector banks may experience under EASE
3.0 reforms agenda include facilities like Palm Banking for ―End-to-end digital delivery of
financial service‖, ―Banking on Go‖ via EASE banking outlets at frequently visited spots like
malls, stations, complexes and campuses.
 Within this, the Ministry‘s idea is to establish paperless and digitally-enabled banking at
places where people visit the most.
 The government aims are to focus on digitalisation in the Public Sector Banks (PSBs) among
themes that include responsible banking, customer responsiveness, PSBs as Udyami Mitra,
credit take-off and deep financial inclusions. Therefore, EASE 3.0 seeks to enhance ease of
banking in all customer experiences, using technology, FinTech, alternate data and analytics.

Dividend Distribution Tax

News Excerpt
In order to increase the attractiveness of the Indian Equity Market, to provide relief to a large
class of investors and to make India an attractive destination for investment, the Union Budget
2020-21 proposed to remove the Dividend Distribution Tax.
Pre-Connect
41

 The Dividend Distribution Tax (DDT) is a tax levied on dividends that a company pays to its
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shareholders out of its profits.

 It is taxable at source, and is deducted at the time of the company distributing dividends. The
dividend is the part of profits that the company shares with its shareholders.
Analytica
 The government‗s proposed move to scrap the DDT and instead tax dividends only in the
hands of the investor at the rate applicable to the investor‗s income bracket is sensible. It will
encourage higher dividend distribution, leaving money with shareholders and making India an
attractive destination for investment.
 According to the finance minister, levying DDT results in an increase in tax burden for
investors and especially those who are liable to pay tax less than the rate of DDT, had the
dividend income been included in their income. Foreign investors, too, don‗t end up getting
credit on the Indian withholding tax against tax payable in their home country, and this
lowers the rate of return on equity capital.
 Companies at present pay a DDT at the rate of 20.56%. This is paid in addition to income tax.
Individuals who receive dividend income in excess of Rs 10 lakhs pay a dividend tax of 10%.
So, dividends bear a tax of 25% at most.
When is the Dividend Distribution Tax paid?
 The tax has to be paid to the government within 14 days of the dividend declaration,
distribution or payment whichever is earliest.
 The income tax law doesn‗t provide for any deduction or credit to the firm for paying the DDT
 Similarly, a taxpayer gets no deduction with respect to any expenditure or allowance or setoff
of loss under the Act in calculating the income through dividends

Protected Special Agricultural Zone

News Excerpt
Tamil Nadu Chief Minister recently introduced a Bill in the Legislative Assembly seeking to
declare the Cauvery delta region a Protected Special Agriculture Zone (PSAZ).
Pre-Connect
 The Cauvery Delta region is considered to be the rice bowl of Tamil Nadu. It also accounts for
a large part of the production of food-grain and other agricultural produce in the state.
 Cauvery Delta Zone (CDZ) lies in the eastern part of Tamil Nadu. It is bounded by the Bay of
Bengal on the east and the Palk strait on the south.
 The decision comes after a sustained protest was waged by farmers, youth, political and civil
society organizations, as the farmers were facing severe issues due to continuous oil spillages,
water, air and soil pollution.
Highlights
 The bill is proposed to protect agriculture and prohibit certain activities in the region as non-
farming activities are adversely affecting agriculture and threatening state‗s food security.
 The proposed agriculture zone, as per the bill, includes Thanjavur, Thirvarur, Nagapattinam
and five blocks in Cuddalore and Pudukottai.
 The bill fails to include Tiruchirappalli, Ariyalur and Karur which are geographically included
in the Cauvery Delta.
 Zinc smelter, iron ore process plants, copper smelter, aluminium smelter tannery and ship
breaking industries are prohibited in the agriculture zone as it will affect agriculture
developments in the region.
 Any ongoing projects would not be disturbed. Infrastructure development projects like port
development, laying of pipelines, road, telecommunication lines, power and water supply
42

facilities will not be banned.

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Farmers Producer Organisation (FPO)

News Excerpt
The Cabinet Committee on Economic Affairs, chaired by the Prime Minister, has recently given
approval for 10,000 FPOs to be formed in a five years period from 2019-20 to 2023-24 to
ensure economies of scale for farmers. Support to each FPO to be continued for 5 years from
its year of inception.
Pre-Connect
 FPO is one type of Producer Company (PO) where the members are farmers. Small Farmer‘s
Agribusiness Consortium (SFAC) is providing support for promotion of FPOs. PO is a
generic name for an organization of producers of any product, e.g., agricultural, non-farm
products, artisan products, etc.
 In the Union Budget 2019-20, Government has announced creation of 10,000 new FPOs,
for which a dedicated supporting and holistic scheme as Central Sector Scheme is
proposed for targeted development of FPOs and its sustainability.
Highlights
 Initially there will be three implementing Agencies to form and promote FPOs, namely
Small Farmers Agribusiness Consortium (SFAC), National Cooperative Development
Corporation (NCDC) and National Bank for Agriculture and Rural Development (NABARD).
 FPOs will be formed and promoted through Cluster Based Business Organizations
(CBBOs) engaged at the State/Cluster level by implementing agencies.
 There will be a National Project Management Agency (NPMA) at SFAC for providing overall
project guidance, data compilation and maintenance through integrated portal and
Information management and monitoring.
 Initially the minimum number of members in FPO will be 300 in plain area and 100 in
North East & hilly areas.
 Priority will be given for formation of FPOs in aspirational districts in the country with at
least one FPO in each block of aspirational districts
 FPOs will be promoted under "One District One Product" cluster to promote specialization
and better processing, marketing, branding & export by FPOs.
 There will be a provision of Equity Grant for strengthening equity base of FPOs.
 There will be a Credit Guarantee Fund of up to Rs. 1,000 crores in NABARD with equal
contribution by DAC&FW and NABARD.
Advantages
 Through formation of FPOs, farmers will have better collective strength for better access
to quality input, technology, credit and better marketing access through economies of
scale for better realization of income.
 Government is providing various assistance such as Equity Grant Scheme, Credit
Guarantee Fund Scheme through SFAC, to encourage more farmers to set up FPOs.

Vadhavan port
News Excerpt
43

The government on Wednesday approved the setting up of a port at Vadhavan in Maharashtra at

a cost of ₹65,544.54 crore, which is part of the ₹100 trillion investment in infrastructure.
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Highlights

Decline of Participatory Notes

News Excerpt
Investments in the Indian capital market through participatory notes (P-notes) continue to decline
and hit a nearly 11-year low of Rs 64,537 crore till the end of December 2019. The fund inflow
through P-notes in December was the lowest since February 2009, when the cumulative value of
such investments stood at Rs 60,948 crore
Participatory Notes
P-notes are issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to
be part of the Indian stock market without registering themselves directly. They, however, need to
go through a due diligence process.
Reasons for Decline of Participatory Notes
 Market experts believe that liberalised norm for foreign portfolio investors (FPIs) by the
regulator Sebi is impacting investment through P-notes route.Over the years, progressive
market-entry liberalisation has led to a decline in P-note issuances.
 Operating cost for FPIs has also gone down with greater efficiencies being introduced in the
market.
 The SEBI simplified KYC requirements and registration process for FPIs. Besides, the
regulator broad-based the classification of such investors.Under the new rules, FPIs have
been divided into two categories and around 80 per cent falls under Category-I and investors
planning to set up shop as Category-I is required a simple application form.
 Also, with certain rule changes, for example, prohibition of issuance of ODIs (offshore
derivative instruments) referencing derivatives without a one-toone hedge, the relevance of P-
notes for Indian security markets is expected to further reduce over time.

CRR Exemption to Banks

News Excerpt
In a bid to spur credit growth and boost demand, the Reserve Bank of India (RBI) has offered
banks Cash Reserve Ratio (CRR) exemption for five years for incremental credit disbursed to
automobiles, residential housing, and micro, small and medium enterprises (MSMEs) between 31
Jan-31 July, 2020.
Highlights
 According to RBI statement, banks are allowed to deduct the equivalent amount of
incremental credit disbursed by them as retail loans to automobiles, residential housing, and
loans to micro, small and medium enterprises (MSMEs), over and above the outstanding level
of credit to these segments as at the end of the fortnight ended January 31, 2020 from their
net demand and time liabilities (NDTL) for maintenance of CRR.
44

 This means that banks will not be needed to make additional cash reserve ratio against any
incremental loans disbursed to the targeted segments.
Page

Rise in Digital Payments

News Excerpt
With 'cash is king, but digital is divine' motto, the Reserve Bank on Monday said its endeavour
will be to make digital payments a divine experience for the users after being buoyed by over Rs
3.5 lakh crore reduction in the notes in circulation (NIC) post demonetisation.
Highlights
 Overall, the digital payments in the country have witnessed a growth (CAGR) of 61 per cent
and 19 per cent in terms of volume and value, respectively over the past five years,
demonstrating a steep shift towards digital payments.
 Cash still rules but is increasingly seen as a way to store value as an economic asset rather
than to make payments
 The study further said that it is assumed that having high currency in circulation CIC relative
to GDP indicates that cash is highly preferred as a payment instrument.
 Demonetisation and an active growth in GDP brought down the cash in circulation as a
percentage of GDP to 8.7 per cent in 2016-17.This increased to 10.70 per cent in 2017-18 and
to 11.2 per cent in 2018-19 which, however, is less than the pre-demonetisation level of 12.1
per cent in 2015-16. The rate of increase is lower indicating a perceptible shift away from cash
 The RBI said a large population of the country historically lacked access to personal bank
accounts and credit lines.
 Digital payment methods have played a large role in helping them manage their personal
finances leading to their being financially included.
 Speed, convenience and competition are shaping the future of payments.
 Increasing acceptance and convenience of digital payments vis-à-vis cash is also reflected in
decrease in average value per digital payment transaction

Interest Subvention for Dairy Farmers raised to 2.5 pc

News Excerpt
The government has increased the interest subvention or subsidy on loans given under the
scheme Dairy processing and Infrastructure Development Fund (DIDF) to the dairy sector from 2
per cent to 2.5 per cent, a move aimed at taking the white revolution to the next level.
Upward revision in the interest subvention would benefit 95 lakh farmers spread over 50,000
villages.
Pre-Connect
 Union Budget 2020: Providing a big push to the country‘s dairy industry, the Finance
Minister announced that the government aims to take India‘s milk processing capacity to
45

double the current levels. While the country processes 53.5 million metric tonnes currently,
the same will be scaled up to 108 million metric tonnes by 2025. With this, India‘s per capita
milk availability will also increase by about 394 grams per day.
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 India has already multiplied its milk production by more than 10 times since 1950, following
the White Revolution brought in by Dr VergheseKurien.
Highlights
 Under DIDF, the central government will provide an interest subvention up to 2.5 per cent to
Nabard from 2019-20 (with effect from July 30, 2019) to 2030-31 and in case there is any
further increase in the cost of funds, it would be borne by the end borrowers themselves.
 Under DIDF, the central government will provide an interest subvention up to 2.5 per cent to
Nabard from 2019-20 (with effect from July 30, 2019) to 2030-31 and in case there is any
further increase in the cost of funds, it would be borne by the end borrowers themselves.
 Besides, 28,000 bulk milk coolers with 140 lakh litres per day as additional milk chilling
capacity will be established.
 There will also be creation of additional 210 tonnes per day milk drying capacity,
modernisation, expansion and creation of milk processing capacity of 12.6 tonneslitres a day.

ADB’s Masala Bonds

News Excerpt
Asian Development Bank (ADB) has listed its 10-year masala bonds worth Rs 850 crore on the
global debt listing platform of India INX. The proceeds would be used to support local currency
lending and investment in India.
Highlights
 This is the first time a foreign issuer and a supranational is doing a primary listing with India
INX
 ADB's masala bonds are listed on both Luxembourg exchange and India INX.
 India INX is the country's first international exchange, located at International Financial
Services Centre, GIFT City in Gujarat.
ADB's bonds were distributed to investors in the Americas (21 per cent) and Europe (79 per
cent) with 28 per cent placed with banks and 72 per cent with fund managers
Masala Bonds
 Masala bonds are bonds issued outside India by an Indian entity or corporate. These bonds
are issued in Indian currency than local currency.
 The objective of Masala Bonds is to fund infrastructure projects in India, fuel internal growth
via borrowings and internationalise the Indian currency.
 RBI mandates that the money raised through such bonds cannot be used for real estate
activities other than for development of integrated township or affordable housing projects. It
also can‘t be used for investing in capital markets, purchase of land and on-lending to other
entities for such activities as stated above.
 The Rupee denominated bonds can only be issued in a country and subscribed by a resident
of such country that is a member of financial action task force and whose securities market
regulator is a member of International Organisation of Securities Commission.
 According to RBI, the minimum maturity period for Masala Bonds raised up to Rupee
equivalent of USD 50 million in a financial year should be 3 years and for bonds raised above
USD 50 million equivalent in INR per financial year should be 5 years.

GOCO Model
News Excerpt
46

To improve operational efficiency the Indian Army has decided to implement the Government
Owned Contractor Operated (GOCO) model for its base workshops and ordnance depots.
Page

Mission Purvodaya
News Excerpt
Recently, the Ministry of Petroleum and Natural Gas & Steel has launched Mission PURVODAYA:
Accelerated development of eastern India through integrated steel hub in Kolkata, West Bengal.
Pre-Connect
 Despite being endowed with natural resources, Eastern India region has lagged behind in
socio-economic development as compared to some other parts of the country.
 Eastern states of India (Odisha, Jharkhand, Chhattisgarh, West Bengal) and Northern part of
Andhra Pradesh collectively hold -80% of the country‗s iron ore, -100% of coking coal and a
significant portion of chromite, bauxite and dolomite reserves.
 There is presence of major ports such as Paradip, Haldia, Vizag, Kolkata etc., with >30% of
India‗s major port capacity.
 This Eastern belt has the potential to add more than 75% of the country‗s incremental steel
capacity envisioned by the National Steel Policy. It is expected that out of the 300 MT capacity
by 2030-31, over 200 MT can come from this region alone, driven by Industry 4.0.

Highlights of Mission Purvodaya

Purvodaya in the steel sector is aimed at driving accelerated development of Eastern India
through the establishment of an integrated steel hub. The proposed Integrated Steel Hub,
encompassing Odisha, Jharkhand, Chhattisgarh, West Bengal and Northern Andhra Pradesh,
would serve as a torchbearer for socio-economic growth of Eastern India
The objective-
To enable swift capacity addition and improve the overall competitiveness of steel producers, both
in terms of cost and quality
3 key focus elements:
1. Capacity addition through easing the setup of Greenfield steel plants
2. Development of steel clusters near integrated steel plants as well as demand centres.
3. Transformation of logistics and utility infrastructure which would change the socio-economic
47

landscape in the East.

Page

National Strategy for Financial Inclusion 2019-2024

News Excerpt
The Reserve Bank of India (RBI) has chalked out an ambitious strategy for financial inclusion till
2024, in which it aims to strengthen the ecosystem for various modes of digital financial services
in all Tier-II to Tier VI centres to create the necessary infrastructure to move towards a less-cash
society by March 2022.
Highlights
 The strategy was prepared by the RBI with inputs from the central government and financial
sector regulators (SEBI, IRDAI and PFRDA).
 Financial inclusion is increasingly being recognised as a key driver of economic growth and
poverty alleviation the world over.‖
 The plan is also to make the Public Credit Registry (PCR) fully operational by March 2022 so
that authorised financial entities could leverage the same for assessing credit proposals from
all citizens.
 Further, it noted that the bank-led model of financial inclusion adopted by the RBI through
issuance of differentiated banking licenses (small finance banks and payments banks) and the
launch of Indian Post Payments Bank in September 2018 has helped bridge the gap in last
mile connectivity.
 However, certain critical gaps remain an impediment for financial inclusion, such as:
inadequate infrastructure (in parts of rural hinterland, far flung areas in Himalayan and north-
eastern region), (ii) poor tele and internet connectivity in rural hinterland, (iii) socio-cultural
barriers, and (iv) lack of market players in payment product space.
Targets set to be achieved-
a) providing banking access to every village (or hamlet of 500 households in hilly areas) within a
five km radius by March 2020,
(b) strengthening digital financial services to create infrastructure to move towards a cash less
society by March 2022, and
(c) ensuring that every adult has access to a financial service provider through a mobile device by
March 2024.
Measurement of financial inclusion-
RBI recommended that financial inclusion should be measured through parameters across three
key indicators. These include parameters to:
(i) measure access, such as number of bank branches or ATMs for a specified population,
(ii) measure usage, such as percentage of adults with a saving account, insurance or pension
policy, and
(iii) measure quality of services, such as grievance redressal (through number of complaints
received and addressed).

Reportof the 15th Finance Commission for FY 2020-21

News Excerpt
The 15th Finance Commission (Chair: Mr N. K. Singh) was required to submit two reports. The
first report, consisting of recommendations for the financial year 2020-21, was tabled in
Parliament on February 1, 2020. The final report with recommendations for the 2021-26 period
will be submitted by October 30, 2020.
Finance Commission
48

The Finance Commission is a constitutional body that determines the method and formula for
distributing the tax proceeds between the Centre and states, and among the states as per the
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constitutional arrangement and present requirements.

Criteria for devolution (2020-21)

14th FC 15th FC
Criteria
2015-20 2020-21

Income Distance 50.0 45.0

Population (1971) 17.5 -

Population (2011) 10.0 15.0

Area 15.0 15.0

Forest Cover 7.5 -

Forest and Ecology - 10.0

Demographic
- 12.5
Performance
49

Tax Effort - 2.5

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Total 100 100

Revised Supervisory Action Framework (SAF)

News Excerpt
The Reserve Bank of India (RBI) has decided to impose restrictions on urban cooperative banks
(UCBs) for deterioration of financial position, in line with the prompt corrective action (PCA)
framework that is imposed on commercial banks.
Pre-Connect
Punjab and Maharashtra Co-operative (PMC) Bank collapsed due to its huge exposure to Housing
Development and Infrastructure Group companies, totaling Rs 6,226.01 crore. The central bank
had earlier found irregularities in PMC Bank, including major financial violations, failure of
internal controls and systems, wrongdoing and under-reporting of its lending exposure.
Revised Supervisory Action Framework (SAF)
 Under this revised Supervisory Action Framework (SAF), UCBs will face restrictions for
worsening of three parameters: when net non-performing assets exceed 6% of net advances,
when they incur losses for two consecutive financial years or have accumulated losses on
their balance sheets, and if capital adequacy ratio falls below 9%.
 To halt failing asset quality, the RBI may prescribe steps like reduction in exposure limits for
fresh loans and advances, restriction on fresh loans and advances carrying risk-weights more
than 100 per cent. There would also be curtailment of sanction and renewal of credit facilities
to sectors having high proportion of NPAs/defaults. The regulator may place restriction on
declaration or payment of dividend/donation without prior approval of RBI.
 For tackling with losses and accumulated losses on balance, the RBI may restrict
ailing banks from incurring capital expenditure beyond a specified limit. The RBI will also
have discretion to ask banks to take measures to reduce interest and operating or
administrative expenses.

Middle Income Trap

News Excerpt
Advance data released by India‘s Central Statistics Office on January 7 suggests that GDP growth
in the current financial year will fall to 5%, the slowest since the 2008 crisis. The current
slowdown, which comes after a period of strong growth, signals that India risks falling into a
middle-income trap, as many economists have warned.
Pre-Connect
In May last year, Rathin Roy, then a member of Prime Minister economic advisory
council, warned that India‘s growth is faltering at lower-middle-income levels, per capita income
between $1,000 and $3,800. ―No country which has been in [a middle-income trap] has been able
to come out of it.‖
Middle Income Trap
Coined in 2006 by World Bank economists Indermit Gill and HomiKharas, the term refers to a
sustained economic slowdown following a period of strong growth.
Probable Causes
 India‘s economy grew at its slowest pace in over six years in the June quarter following a
sharp deceleration in consumer demand and tepid investment.
 India‘s factory output contracted for three consecutive months from August to October last
year and rural wages plunged by 3.8% in September. Many economists have said that India‘s
economy is facing a structural slowdown.
 India failed to create a robust manufacturing sector, which today accounts for less than
50

17% of the economic output. There was no mass shift from farm to factories.
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NHAI’s InvIT
News Excerpt
The Nationwide Highways Authority of India (NHAI) targets to mobilise₹15,000-20,000 crore
through its maiden Infrastructure Investment Trust ( InvIT) offering and eventually scale up this
funding model based on the response received from the investors
Pre-Connect
 The Union cabinet cleared NHAI‘s plans to launch an InvIT. NHAI has received cabinet
approval to raise long-term financing from banks against future toll revenue, a fundraising
programme called toll securitization.
 Earlier this month, finance minister unveiled a ₹1 trillion National Infrastructure Pipeline for
the next five years.
Infrastructure Investment Trust ( InvIT)
InvITs are trusts, similar to mutual funds listed on a stock exchange, which raise funds from
investors, acquire income yielding infrastructure assets, manage such assets and distribute
regular yields to investors. InvIT is highly likely to attract the interest of foreign investors
especially pension funds, sovereign wealth funds and insurance companies.
Highlights
 The trust will enable the NHAI to monetise completed national highways with toll collection
record of at least one year.In addition to mobilising funds through the InvIT route.
 NHAI‘s InvIT offer is part of the government‘s plans to tap alternative sources of financing to
boost public spending in the roads and infrastructure sector amid declining private sector
interest in the build, operate and transfer model, where the entire initial cost is borne by
them.
 By monetising existing road infrastructure through InvIT route, NHAI can channelise new
investments to greenfields projects like BharatmalaPariyojana, the flagship highway
development programme of Government of India, that aims to develop 24,800 km of roads for
a total investment of Rs. 5,35,000 crore.
 InvIT as an instrument provides greater flexibility to investors and is expected to lead to the
creation of specialised O&M (operation and maintenance) concessionaires and attract patient
capital (for say 20-30 years) to the Indian highway market, as these investors are averse to
risk and are interested in investing in assets which provide long-term stable returns

North East Natural Gas Pipeline Grid

News Excerpt
The Cabinet Committee on Economic Affairs has approved a Capital Grant as the Viability Gap
Funding to Indradhanush Gas Grid Ltd for setting up the North East Natural Gas Pipeline Grid.
Highlights
 This viability gap funding would be capped at 60 per cent of the estimated cost of ₹9,265 crore
(including interest during construction) for the project. Total length of pipeline is 1656 KM.
51

 As per the plan, Gas Pipeline Grid would be developed in the eight states of the North-Eastern
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region i.e. Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and
Tripura.

Operation Twist
News Excerpt
RBI recently conducted three rounds of simultaneous purchase and sale of government securities
of different maturities.
Operation Twist
 Operation Twist is the ―Special Open Market Operation‖ by Reserve Bank of India, which
means purchase of long term securities and simultaneous sale of short term securities helped
bring down the yield slightly on 10 year G-Secs. This is expected to bring down the term
premium by reducing the differential between the long and short term bond yields.
 The yield of a bond is directly proportional to its supply in the system. So, when RBI buys long
term securities the supply of these securities decreases and thus the yields are expected to
decrease.
 The same happens when it sells short-term paper which banks buy that, in turn, increases
the yield as supply increases
Open Market Operations (OMOs)
Open Market Operations (OMOs) are the outright sale and purchase of government securities
(Gsecs) in the open market (open market essentially means banks and other financial institutions)
by the RBI in order to influence the quantum of money and credit in the economy.
Benefits
 Operation Twist normally leads to lower longer-term yields, which will help boost the economy
by making loans less expensive for those looking to buy homes, cars and finance projects,
while saving becomes less desirable because it doesn‘t pay as much interest.
 It can address the problem of Monetary Policy Transmission.
 Similar such steps can help in attracting foreign investments in bond market as yield of bonds
is still much higher in India as compared to Western economies.
 By doing this RBI has become a decisive player in the market and moves rates without
changing the overall liquidity in the system but altering the liquidity in specific securities.
 Due to SLR conditions, banks are required to hold short term bonds. Now since the yield of
short-term bonds is expected to increase their position will also improve.
Issues –
The first round of sale and purchase worth `10,000 crore was done on December 23, 2019. The
second and third round was on December 30, 2019 and January 6, 2020 respectively for the
same amount. This led to a slight decline in the yield of 10-year G-Sec. The 10-year benchmark
bond (6.45% GS 2020) yield closed at 6.8 per cent on December 16, 2019 and declined to 6.6 per
cent on December 20, 2019 and 6.5 per cent on January 2, 2020. However, the yield on 10-year
52

benchmark bond drifted up again and stood at 6.63 per cent on January 15, 2020.
Due to more borrowings by government, private investment may get crowded out.
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Partial Credit Guarantee Scheme for NBFCs

News Excerpt
The Union Cabinet approved a partial credit guarantee scheme for non-banking financial
companies (NBFCs) and housing finance companies (HFCs). This will allow public
sector banks (PSBs) to buy pooled assets from financially sound entities.
Pre-Connect
 The non-banking financial companies are facing the liquidity crunch. It is likely to result in
increasing bad loans risks for banks both from these shadow banks as well as from
companies relying on such lenders for funding.
 Owing to liquidity crisis, NBFCs are forced to reduce lending, leading to funding constraints
for borrowers relying on nonbank lenders.
 This increases the risk of loan losses for NBFCs, and as a result, they will continue to have
difficulty in obtaining funding.
 Keeping this in mind, the government has allowed public sector banks to purchase high-rated
pooled assets.
Highlights
 The Objective is to address the liquidity or cash flow mismatch issue of otherwise solvent
NBFCs or HFCs
 The scheme would cover NBFCs / HFCs that may have slipped into SMA0 category during
the one- year period prior to 1.8.2018, and asset pools rated "BBB+" or higher.
 The amount of overall guarantee is limited to first loss of up to 10% of fair value of assets
being purchased by the banks under the Scheme, or Rs. 10,000 crores, whichever is
lower, as agreed by Department of Economic Affairs (DEA).
Special Mention Account (SMA)-0 means accounts in which principal or interest payment is not
overdue for more than 30 days but account showing signs of incipient stress.

GST on Lotteries
News Excerpt
GST Council in its 38th meeting decided to impose a single rate of 28% on state-run and
authorised lottery. Also, GST Council departed from its practice of consensus-based decision-
making, opting to vote for the first time to settle differences among states over the taxation of
lotteries.
Impact of the Move
 As of now, there is no blanket ban on lotteries in India. According to 2017 data, out of 29
states, 16 states have banned lotteries.
 There is fear that the move may lead to a sharp surge in illegal lottery trade. This will cause
leakage of government revenue from the lottery industry.
The Status of Lottery in India
 The legislative field with respect to lotteries organized by the Government of India or the
Government of a State falls in Entry 40 of the Union List and that of betting and gambling in
Entry 34 of the State List.
 Under clause (1) of Article 246 of the Constitution, Parliament is competent to make law qua
lotteries organized by the Government of India or the Government of a State; and under clause
(3) thereof a State Legislature is competent to make law qua betting and gambling within the
State.
53

 A State Legislature is also competent to make law qua taxes on betting and gambling under
Entry 62 of the State List.
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Bharat Bond ETF

New Excerpt
The Union Cabinet has recently approved launching a bond ETF (Exchange Traded Fund) called
the Bharat Bond ETF. The ETF will invest in a portfolio of AAA-rated bonds of public sector
entities in two investment options for fixed maturity periods of three years and 10 years (2023
series and 2030 series).
Exchange Traded Fund (ETF)
An ETF is a fund that comprises a group of stocks that are listed on an exchange and can be
simply traded like any other listed security.
Bharat Bond ETF
 The ETF will invest in constituents of the Nifty Bharat Bond Indices, consisting of public
sector companies. It will be tradable on the stock exchange
 Bharat Bond is India's first corporate bond issued by state-run companies to be traded on
bourses. It is aimed at strengthening the corporate bond market and reducing the cost of
borrowing.
 Bond ETF will provide safety (underlying bonds are issued by CPSEs and other Government
owned entities), liquidity (tradability on exchange) and predictable tax efficient returns.
 Apart from the interest, investors can make capital gains on their units in the secondary
market in a falling interest rate regime.
 For bonds that are held till maturity there is no risk of capital loss or gain.
 However, as compared to fixed deposits, this instrument is tax efficient as bond ETFs are
taxed with the benefit of indexation, which reduces the tax on capital gains for investor.
 The ETF will be launched every six months and the index will be constructed by the National
Stock Exchange (NSE) as an independent index provider.
 Bharat Bond Funds of Funds (FOF) is also being launched for investors who do not have
demat accounts. Investments made in Bharat bond ETF will be taxed similar to debt funds.

Rewari-Madar section of Western Dedicated Freight Corridor

News Excerpt
A trial run of a freight train on the newly-completed 306-km-long section, from Madar in
Rajasthan to KishangarhBalawas in Haryana, of the Western Dedicated Freight Corridor (WDFC)
was carried out at the New Sakhun railway station.
Dedicated Freight Corridor Project
 The 3,373-km DFC, a flagship project of the Railways, aims to augment rail transport capacity
to meet the growing requirement of movement of goods by segregating freight from passenger
54

traffic.
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‘On Tap’ licensing of Small Finance Banks (SFB)

News Excerpt
The Reserve Bank of India (RBI) recently issued final guidelines for ‗on tap‘ licensing of Small
Finance Banks (SFB) in the private sector that would give them the status of scheduled bank
once they begin operations.
Pre-Connect
The Reserve Bank of India (RBI) had last issued guidelines for licensing of Small Finance Banks in
the private sector on 27 November 2014.
Small Finance Bank (SFB)
 The Small Finance Bank (SFB) is a private financial institution intended to further the
objective of financial inclusion by primarily undertaking basic banking activities of acceptance
of deposits and lending to un-served and underserved sections but without any restriction in
the area of operations, unlike Regional Rural Banks or Local Area Banks.
 SFBs are full fledged banks and are subject to all prudential norms and regulations of RBI.
 The concept of small finance banks was also one of the recommendations in the 2009 Report -
A Hundred Small Steps - of the Committee on Financial Sector Reforms headed by Dr. Raghu
Ram Rajan.
Highlights
 Minimum paid-up voting equity capital/net worth requirement will be Rs 200 crore.
 However, for SFBs, which have transited from UCBs, NBFCs, MFIs and payments banks, the
minimum net worth would be ₹100 crore from the date of commencement of business, which
55

will have to be increased to ₹200 crore within five years of operations.

 Resident individuals and professionals, with at least 10 years of experience in banking and
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finance at a senior level and private sector companies and societies owned by Indian residents

Deposit Insurance and Credit Guarantee Corporation

News Excerpt
With a view to providing a greater measure of protection to depositors in banks the Deposit
Insurance and Credit Guarantee Corporation (DICGC), a wholly owned subsidiary of the Reserve
Bank of India, has raised the limit of insurance cover for depositors in insured banks from the
present level of Rs 1 lakh to Rs 5 lakh per depositor with effect from 4 February 2020 with the
approval of Government of India.
Pre-Connect
 The clamour for higher cover for bank deposits grew stronger following the Punjab and
Maharashtra Cooperative Bank crisis, where depositors are facing restrictions on deposit
withdrawals.
 This is the first time since 1993 that the deposit insurance cover has been raised.
 Deposit insurance is a protection cover for deposit holders in a bank when the bank fails and
does not have money to pay its depositors.

Deposit Insurance and Credit Guarantee Corporation (DICGC)

 The Deposit Insurance and Credit Guarantee Corporation (DICGC) is governed by the
provisions of the DICGC Act of 1961 and the DICGC General Regulations of 1961 framed by
the Reserve Bank of India
 The DICGC insures all bank deposits such as savings, fixed, current and recurring. DICGC
covers depositors of all commercial banks and foreign banks operating in India, state, central
and urban co-operative banks, local area banks and regional rural banks provided the bank
has bought the cover from DICGC.
 Deposits not covered by the Corporation include those of foreign governments and of Central/
State governments, deposits of State Land Development Banks with State cooperative banks,
inter-bank deposits, deposits received outside India and those specifically exempted by the
DICGC with the prior approval of the banking regulator.
 Primary Cooperative Societies are also not covered under DICGC.
 The increase on deposit insurance to ₹5 lakh will increase bank premia costs to these
institutions. The present premium rate is 10 paise for a deposit of ₹100.
 As of FY19, DICGC had insured deposits worth ₹33.7 trillion in 2,098 banks, most of them
being cooperative banks (1,941) and the rest commercial (106) and regional rural banks (51).
While commercial banks paid a premium of ₹11,190 crore on deposits, cooperative banks
paid ₹850 crore in FY19.
56
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Merger of NSSO with CSO

News Excerpt
The government has approved the merger of National Sample Survey Office (NSSO) with the
Central Statistics Office (CSO) under the Ministry of Statistics and Programme Implementation
(MoSPI).
Pre-Connect
 The restructuring is in line with the proposed National Policy on Official Statistics which was
floated last year.
 The policy is based on the report of the National Statistical Commission, headed by former
Reserve Bank of India governor C Rangarajan.
National Statistical Office (NSO)
The National Statistical Office (NSO) headed by a Director General is responsible for conduct of
large scale sample surveys in diverse fields on All India basis. Primarily data are collected through
nation-wide household surveys on various socio-economic subjects, Annual Survey of Industries
(ASI), etc. Besides these surveys, NSO collects data on rural and urban prices and plays a
significant role in the improvement of crop statistics through supervision of the area enumeration
and crop estimation surveys of the State agencies. It also maintains a frame of urban area units
for use in sample surveys in urban areas.
The NSO has four Divisions:
Survey Design and Research Division (SDRD)
Field Operations Division (FOD)
Data Processing Division (DPD)
Survey Coordination Division (SCD)

National Statistical Commission

News Excerpt
The government released a draft bill aimed at empowering the National Statistical Commission
(NSC) to become the nodal body for all core statistics in the country. Core statistics include
national income statistics like GDP, jobs data, industry data and budgetary transactions data.
Pre-Connect
The NSC was envisaged as the empowered body for all core statistical activities — on the
suggestion of a committee headed by former Reserve Bank of India governor C. Rangarajan. It was
constituted in 2005 but never got any statutory powers to give it teeth.
National Statistical Commission Bill
 The National Statistical Commission Bill says the body will be constituted to ―regulate,
develop, and strengthen the official statistical system of the country in order to promote
public confidence, ensuring timeliness and reliability and professionalism, adopting best
statistical practices, achieving independence and integrity of official statistics…‖
 It also proposes that the NSC should have the RBI deputy governor and the chief economic
adviser as members, besides a chairman, five full-time members and the chief statistician of
India.

Fugitive Economic Offenders (FEO)

News Excerpt
57

A Mumbai PMLA judge declared jeweller Nirav Modi, key accused in the Punjab National Bank
(PNB) fraud case, a ―fugitive economic offender‖ (FEO) on a plea by the Enforcement Directorate
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(ED).

BIS report roots for India’s Digital Financial infrastructure

News Excerpt
India‘s digital financial infrastructure, designed and used as a public good, could be a leading
example for other emerging markets and economies, according to a paper released by the Bank
for International Settlements (BIS)
Highlights
 The design of digital financial infrastructure: lessons from India‘ has detailed the three major
advantages of the system in India — giving a unique identity, enabling digital payments and
providing data privacy to large sections of the population.
The monthly volume of UPI digital retail transactions has risen seven-fold since the beginning
of 2018 and in November 2019, there were more than a billion transactions, totaling around
$27 billion in value. For the six months through September 2019, payments via UPI
accounted for 25% of the volume of all digital retail payments.
 The paper suggests that India demonstrates how ―a central bank can be proactive and equal
partners with private sector counterparts when it comes to fostering technological innovation
in finance
 With regards to data privacy, the paper said that in 2016 the Reserve Bank of India (RBI)
established the legal framework for a class of regulated data fiduciary entities, called account
aggregators, which enable customer data to be shared within the regulated financial system
with the customer‘s knowledge and consent.
 The paper makes a case for the adoption of India‘s digital financial infrastructure on a global
58

scale. Recorded remittances today exceed foreign direct investment flows and official
development assistance. Yet, the cost of these remittances, averaging some 7%, is prohibitive
and falls on migrant workers who can afford it the least.
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Alternative Investment Fund for Housing Projects

News Excerpt
The Finance Minister has recently declared that the government would set up an alternative
investment fund (AIF) worth Rs 25,000 crore to provide relief to developers with unfinished
projects to ensure delivery of homes to buyers.
Highlights
 Life Insurance Corporation of India and State Bank of India would also infuse money along
with other such institutions.
 The fund is not capped at ₹25,000 crore and will likely grow as a lot of sovereign funds have
shown interest.
 Only those projects will be considered for funding, where unit price is less than Rs2 crore in
case of Mumbai, units price are less than Rs1.5 crore in case of cities like Delhi, Kolkata,
Pune, Hyderabad and units price are less than Rs1 crore for all other cities.
 The project has to be registered under Real estate (regulation and development) Act.
 Even those projects which had been declared non-performing assets (NPAs) will get funded.
 Around 4.58 lakh housing units are stuck in India with over 1,600 realty projects stalled.
 The AIF will provide relief to developers with unfinished projects and ensure delivery of homes
to buyers.
Alternative Investment Fund
It refers to any privately pooled investment fund, (whether from Indian or foreign sources), in the
form of a trust or a company or a body corporate or a Limited Liability Partnership (LLP).
Hence, in India, AIFs are private funds which are otherwise not coming under the jurisdiction of
any regulatory agency in India.
Categories of AIF:
Category I: Mainly invests in start- ups, SME's or any other sector which Govt. considers
economically and socially viable. Ex. Venture Capital Funds, SME Funds.
Category II: These include Alternative Investment Funds such as private equity funds or debt
funds for which no specific incentives or concessions are given by the government or any other
Regulator. The AIF for housing projects announced by the GOI is a category II AIF.
Category III: These funds trade with a view to make short term returns or such other funds
which are open ended and for which no specific incentives or concessions are given by the
government or any other Regulator. Ex- Hedge Funds.

Credit linked Subsidy Services Awas Portal

News Excerpt
Minister for Housing and Urban Affairs has recently launched Credit-linked Subsidy Services
Awas Portal, CLAP.
Highlights
 The portal provides a transparent and robust real-time web-based monitoring system for
credit-linked Subsidy Services (CLSS) and beneficiaries.
 Through CLAP, people seeking to avail housing subsidy under the Pradhan Mantri AwasYojna
(PMAY)-Urban will be able to track their application.
What is CLSS?
 The PMAY CLSS was launched with the objective of ‗Housing for All‘ wherein eligible borrower
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is able to get a home loan from banks and housing finance companies at a subsided interest
rate.
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LCR Norms for NBFCs

News Excerpt
The Reserve Bank of India (RBI) introduced its liquidity management framework for cash-
strapped non-banking financial companies (NBFCs).
Liquidity Coverage Ratio (LCR)
 The liquidity coverage ratio (LCR) refers to the proportion of highly liquid assets held by
financial institutions, to ensure their ongoing ability to meet short-term obligations.
 LCR is a requirement under Basel III whereby banks are required to hold an amount of high-
quality liquid assets that's enough to fund cash outflows for 30 days.
 The LCR applies to all banking institutions that have more than $250 billion in total
consolidated assets or more than $10 billion in on-balance sheet foreign exposure. Such
banks are also referred to as ―Systematically Important Financial Institutions‖ (SIFIs).
 SIFIs are required to maintain a 100% LCR, which means holding an amount of highly liquid
assets that are equal or greater than its net cash flow, over a 30-day stress period. Highly
liquid assets can include cash, Treasury bonds or corporate debt.
Highlights
 The LCR requirement will be binding on NBFCs from December 1, 2020, with the minimum
HQLAs to be held being 50% of the LCR, progressively reaching up to the required level of
100% by December 1, 2024.
 According to RBI, NBFCs with assets of ₹10,000 crore and above will have to maintain a
minimum of 50% of LCR as high quality liquid assets (HQLA), while those with assets of
₹5000-10,000 crore will have to maintain 30% LCR.
 Core Investment Companies, Type 1 NBFC-NDs, Non-Operating Financial Holding Companies
and Standalone Primary Dealers are exempt from the applicability of LCR norms.

Stricter Rules for Core Investment Companies

News Excerpt
A working group set up by the Reserve Bank of India (RBI) has recently submitted its
recommendations for the regulation of core investment companies. The group is led by former
60

Corporate Affairs Secretary Tapan Ray.

Pre-Connect
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 Experts have been seeking a review of CIC guidelines ever since defaults by Infrastructure
Leasing and Financial Services Ltd (IL&FS), a large systemically important core investment
company.
 Currently, corporate governance guidelines are not explicitly made applicable to CICs.
Core investment companies (CICs)
 Core investment companies are non-banking financial companies (NBFCs) holding not less
than 90% of their net assets in the form of investment in equity shares, preference shares,
bonds, debentures, debt or loans in group companies.
 It is now decided by RBI that only those CICs having an asset size of Rs.100 crore and above
would be treated as systemically important core investment companies.
Highlights
 To strengthen the governance practices, the working group recommends constitution of board
level committees viz. audit committee, nomination and remuneration committee and group
risk management committee.
 The committee also recommended preparing consolidated financial statement and ring-fencing
the boards of CICs by excluding employees or executive directors of group companies from its
board.
 Capital contribution by a CIC in a step-down CIC, over and above 10% of its owned funds,
should be deducted from its Adjusted Net worth, as applicable to other NBFCs. Further, step-
down CICs may not be permitted to invest in any other CIC, while allowing them to invest
freely in other group companies;
 The committee recommended that off-site returns may be designed by RBI and prescribed for
CICs on the lines of other NBFCs. Currently, CICs are not required to submit off-site returns
or statutory auditors‘ certificate (SAC). Off-site returns or statutory auditors‘ certificate are
submitted to RBI by NBFCs where the auditor certifies that the company continues to operate
as an NBFC.
 The number of layers of CICs in a group should be restricted to two. As such, any CIC within
a group shall not make investment through more than a total of two layers of CICs, including
itself.

Moody’s Ratings
News Excerpt
Moody‘s Investors Service revised downward its growth projection for India to 0% for FY21 and
cautioned that the country‘s sovereign rating could be downgraded if its fiscal metrics weaken
materially. This follows similar warning from Fitch Ratings.
Pre-Connect
 India currently has a sovereign rating of BBB- with a ‗stable‘ outlook from S&P and Fitch – a
grade above the junk category, while Moody‘s rates it at the equivalent of one notch above, at
Baa2. However, Moody's had changed India‘s outlook to ‗negative‘ in November 2019. It was
downgraded due to the high projected fiscal deficit, financial crunch of NBFCs and economic
slowdown.
Credit Rating Agencies
 Credit ratings agencies rate on a scale the financials and business models of companies, as
well as economic management by sovereign governments, after analysing official and other
data and interacting with government officials, business leaders, and economists.
 These agencies then rate instruments such as bonds, debentures, commercial papers,
deposits, and other debt offerings of companies or governments to help investors make
61

informed decisions.
 From a company‗s or a government‗s perspective, a better rating helps raise funds at a
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cheaper rate.

Adjusted Gross Revenue

News Excerpt
Recently, the Supreme Court upheld the Department of Telecommunications (DoT) definition of
adjusted gross revenue (AGR)and ordered the telecom companies to pay Rs 92000 crores to the
government within three months.
What is AGR?
Telecom operators are required to pay license fee and spectrum charges in the form of ‗revenue
share‘ to the Centre. The revenue amount used to calculate this revenue share is termed as the
AGR.
Pre-Connect
 The contest between DoT and the telecom companies has been on since 2005, when the
Cellular Operators Association of India — the lobby group for players such as Airtel and
Vodafone Idea — challenged the DoT‘s definition for AGR calculation.
 According to the DoT, the calculations should incorporate all revenues earned by a telecom
company – including from non-telecom sources such as deposit interests and sale of assets.
Impact of Supreme Court’s verdict
 The apex court's ruling took a toll on the telcos' balance sheets.
 Two of India‗s only three remaining private sector telcos -- Vodafone Idea and Bharti Airtel -
posted their highest-ever quarterly losses since inception.
 Telecom operators have hiked mobile tariffs by up to 42%in an attempt to increase revenue
following the recent SC AGR verdict.
 The impact of the Supreme Court order on the definition of adjusted gross revenue (AGR) may
not be restricted to telecom companies. It could also have an impact on any entity that has
taken telecom service licence, such as internet service providers (ISPs), satellite
communications providers, cable operators, etc.

Tamil Nadu’s Contract Farming Law

News Excerpt
Tamil Nadu has become the first State to enact a law on contract farming, based on the lines of a
model legislation put out by the Ministry of Agriculture & Farmers‘ Welfare in May 2018. Known
as the Tamil Nadu Agricultural Produce and Livestock Contract Farming and Services (Promotion
and Facilitation) Act, 2019.
Pre-Connect
 The Central government, as early as in 2003, formulated a model law on the Agricultural
Produce Marketing Committee, which provided for ―direct sale of farm produce to contract
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farming sponsors.‖
Contract Farming
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Strategic Disinvestment of PSUs

News Excerpt
The Union Cabinet approved the new process of strategic disinvestment with a view to expediting
privatisation of select PSUs under which the Department of Investment and Public Asset
Management (DIPAM) under the Ministry of Finance has been made the nodal department for the
strategic stake sale.
Pre-Connect
 In 2019, several big-ticket divestments (BPCL, Shipping Corporation of India and Container
Corporation of India) have been placed on the agenda. Subsequently five PSUs
－NeelachalIspat Nigam, MMTC, NMDC, MECON and BHEL － have got in-principle approval
from Cabinet for SDs.
 Disinvestment proceeds are critical for the government to stick to its target of keeping fiscal
deficit in limit.
Highlights
 DIPAM and NITI Aayog will now jointly identify PSUs for strategic disinvestment.
 DIPAM secretary would now co-chair the inter-minister group on disinvestment, along with
the secretary of administrative ministries concerned.
 Strategic sale may involve two-stage bidding beginning with an expression of interest (EoI) or a
preliminary intent showing bid, and a final financial bid.
Current Target for Disinvestment
 A major highlight of the government‘s disinvestment proposal, setting an ambitious target of
Rs.2.1 trillion this year, is the sale of minority stake in LIC through an initial public offer. The
disinvestment target for 2020-21 includes Rs 90,000 crore from public sector banks and
financial institutions.
 Besides LIC, the government is looking to sell its remaining stake in IDBI Bank. ―The Rs
90,000 crore for financial sector disinvestment will come from LIC and IDBI Bank.
Current Challenges
 The pressure on lockdown-hit central public sector enterprises (PSEs) to finance the
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government‘s growing expenditure on fighting COVID-19 pandemic resulting in large budget

deficit is mounting. This is despite the fact that most PSEs are highly financially stressed
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following the global as well as local economic downturn since last February.

The Mines and Mineral Laws (Amendment) Bill

News Excerpt
In a move that could give a big leg-up to the mining sector that has been stagnating, amidst
ruckus from Opposition benches, cleared the Mines and Mineral Laws (Amendment) Bill.
Pre-Connect
The Mineral Laws (Amendment) Ordinance, 2020, which was cleared by the cabinet in January
this year, had brought amendments to the Mines and Minerals (Development and Regulation) Act,
1957, and the Coal Mines (Special Provisions) Act, 2015.
Highlights
 The bill will open up the coal sector for commercial mining and allow domestic as well as
global companies to invest.
 Once enacted, the bill will pave the way for the central government to go ahead with the
auction of coal mines for commercial purposes by even allowing companies, which do not
possess any prior coal mining experience in India, but are financially strong and or have
mining experience in other minerals or in other countries to participate in auction of
coal/lignite blocks.
 This would also allow the implementation of the 100 per cent foreign direct investment
through automatic route for sale of coal.
 The amendments also removed the current end-use restrictions that are in place for
those participating in auctions.
 Removing the restrictions will allow a successful bidder or allottee to utilise mined coal for
own consumption, sale or for any other purpose specified by the government, thereby allowing
for wider participation and competition in auction.
 The bill, once it is passed by the Rajya Sabha, will replace the Mineral Laws (Amendment)
Ordinance, 2020.

Steel Scrap Recycling Policy

News Excerpt
The government has notified a Steel Scrap Recycling Policy (SSRP) to provide for a framework to
facilitate and promote establishment of metal scrapping centers in India for scientific processing
and recycling.
Highlights
The policy framework provides standard guidelines for collection, dismantling and shredding
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
activities in an organised, safe and environmentally sound manner.
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Railway Restructuring
News Excerpt
The Union Cabinet has approved a transformational organisational restructuring of the Indian
Railways. This historic reform will go a long way in achieving Government‘s vision of making
Indian Railways the growth engine of India's vikas yatra.
Pre-Connect
 Unification of services has been recommended by various committees for reforming Railways
including - the Prakash Tandon Committee (1994), Rakesh Mohan Committee (2001), Sam
Pitroda Committee (2012) and Bibek Debroy Committee (2015).
 Railways has an ambitious programme to modernise and provide the highest standards of
safety, speed and services to the passengers with a proposed investment of Rs. 50 lakh crore
over the next 12 years.
The reforms include:
 Unification of the existing eight Group A services of the Railways into a Central Service called
Indian Railway Management Service (/RMS). Now, any eligible officer could occupy any post,
including Board Member posts, irrespective of training and specialisation, since they will all
belong to IRMS.
 Re-organisation of Railway Board on functional lines headed by CRB with four Members and
some Independent Members. From nine, the Board will now have only five Members.
 The existing service of Indian Railway Medical Service (IRMS) to be consequently renamed as
Indian Railway Health Service (IRHS)

India’s Railways’ corporate train model

News Excerpt
The Kashi Mahakal Express is the country‘s third ‗corporate‘ train after the two Tejas Express
trains between Delhi-Lucknow and Mumbai-Ahmedabad started over the past few months.
Pre-Connect
 Report of the Expert Group for Modernization of Indian Railways(2012) headed by Sam Pitroda
suggested that modernization of railways requires political will, organizational / management
support, substantial funding, new direction, new thinking, mobilization of resources,
innovative PPP and new business models, and a lot more.
 Bibek Debroy Committee 2015 on mobilization of resources and restructuring of Indian
Railways advocated liberalization (not privatization) for entry of new operators into the railway
operations.
Highlights
 This is a new model being actively pushed by Indian Railways to ‗outsource‘ the running of
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regular passengers trains to its PSU, the Indian Railway Catering and Tourism Corporation
(IRCTC).
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Insurance Penetration
News Excerpt
The insurance density of the life insurance sector in 2018 was $55, unchanged from the life
insurance density of the previous year, the annual report of the Insurance Regulatory and
Development Authority of India (IRDAI) for 2018-19 released, shows.
Pre-Connect
 The IRDAI report notes that the insurance density of the life insurance sector rose steadily
from $9.1 in 2001 to $55.70 in 2010, and thereafter fell for three years to reach $41 in 2013
before rising again.
 Life insurance penetration increased from 2.15% in 2001 to 4.60% in 2009, and has
thereafter showed a generally decreasing trend.
Highlights
 Life insurance penetration for 2018 was 2.74%, slightly lower than the 2.76% of 2017.
 Insurance density and insurance penetration indicate the level of development of the
insurance sector.
 Insurance density is measured as the ratio of premium (in US dollars) to the total population.
 Insurance penetration is measured as the ratio of premium (in US$) to GDP (in US$).

National Technical Textiles Mission

News Excerpt
The Cabinet Committee on Economic Affairs, has given its approval to set up a National Technical
Textiles Mission with a total outlay of Rs 1480 Crore, with a view to position the country as a
global leader in Technical Textiles. The Mission would have a four year implementation period
from FY 2020-21 to 2023-24.
Technical Textiles
Technical Textiles are futuristic and nice segment of textiles, which are used for various
applications ranging from agriculture, roads, railway tracks, sportswear, health on one end to
bullet proof jacket, fire proof jackets, high altitude combat gear and space applications on other
end of spectrum.
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The Mission will have four components:

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Component -l (Research, Innovation and Development)

External Benchmark Lending rate

News Excerpt
The banking regulator had asked the banks to move to an external benchmark for loan pricing
from April 1, a move expected to improve monetary transmission as lenders had, in the past, been
found reluctant to reduce lending rate.
Pre-Connect
 The marginal cost of fund based lending rate (MCLR) is currently the benchmark for all loan
rates. Banks typically add a spread to the MCLR while pricing loans for homes and
automobiles
 It has been observed that due to various reasons, the transmission of policy rate changes to
the lending rate of banks under the current MCLR framework has not been satisfactory.
 The RBI had issued a circular making it mandatory for banks to link all new floating rate
personal or retail loans and floating rate loans to MSMEs to an external benchmark effective
October 1, 2019.‖
Highlights
 Banks had four options from which to choose the external benchmark: the repo rate, the 91-
day treasury bill, the 182-day T-bill or any other benchmark interest rate produced by the
Financial Benchmarks India Private Ltd (FBIL).
 For the new benchmark, the central bank has mandated that the spread over the benchmark
rate — to be decided by banks at the inception of the loan — should remain unchanged
through the life of the loan, unless the borrower‘s credit assessment undergoes a substantial
change and as agreed upon in the loan contract.
MCLR and RLLR in a Nutshell

S.No. Parameters MCLR RLLR

External (RBI Repo

1. Benchmark Link Internal mechanism of bank
Rate)

6 or 12 months, depending on the

2. Reset Period 3 months
bank

Faster
3. Transmission Rate Relatively slower
transmission

Monetary Policy Transmission

News Excerpt
The Weighted Average Lending Rate (WALR) of SCBs has not declined at all in 2019 despite
reduction of repo rate by 135 bps since January 2019.
Monetary Policy Transmission
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The transmission of monetary policy describes how changes made by the Reserve Bank to the
cash rate – the ‗instrument‘ of monetary policy – flow through to economic activity and inflation.
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Multimodal Terminal
News Excerpt
Prime Minister has inaugurated India's second multi-modal terminal built at Sahibganj in
Jharkhand.
Pre-Connect
 The JMVP is being implemented with the technical assistance and investment support of the
World Bank, at an estimated cost of Rs. 5,369 crores on a 50:50 sharing basis between
Government of India and the World Bank. The objective behind the scheme is to promote
inland waterways, primarily for cargo movement.
 India has about 14,500 km of navigable waterways which include rivers, canals, backwaters,
creeks, etc.
Highlights
 This is the second of the three Multi Modal Terminals (MMTs) being constructed on river
Ganga under Jal Marg Vikas Project (JMVP). Two other Terminals are in Varanasi and Haldia
respectively.
 The Rs 290 crore-multi-modal terminal at Sahibganj implemented by Inland Waterways
Authority of India (IWAI) will open up industries of Jharkhand and Bihar to the global market
and provide Indo-Nepal cargo connectivity through waterways route
 It will play an important role in transportation of domestic coal from the local mines in
Rajmahal area to various thermal power plants located along National Waterway-1
 While the current capacity of the terminal is 30 lakh tonnes per annum, the government has
planned an investment of Rs 376 crores for capacity enhancement in Phase-II to 54.8 lakh
tonnes per annum. The development in Phase II will be entirely made by the private
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concessionaire, under the public-private partnership mode.

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Core Industries
News Excerpt
Nationwide lockdown to combat the spread of COVID-19 stalled the economy and caused major
contraction in core sector industries.
Pre-Connect

 The eight core industries constitute 40.27 percent of the weight of items included in the Index
of Industrial Production (IIP).
 Index of Industrial Production (IIP) is released by Central Statistics Office (CSO) on the
monthly basis.
 IIP's current base year is 2011-12 since May 2017.

Market Intervention Scheme

News Excerpt
The Central government has directed all the States and Union Territories to implement
the Market Intervention Scheme to ensure reasonable prices for perishable crops.

Pre-Connect
 Market Intervention Scheme (MIS) is a price support mechanism implemented on the
request of State Governments for procurement of perishable and horticultural
commodities in the event of a fall in market prices.
 The Scheme is implemented when there is at least 10% increase in production or 10%
decrease in the ruling rates over the previous normal year.
 Market Intervention Scheme works in a similar fashion to Minimum Support Price based
procurement mechanism for food grains, but is an adhoc mechanism.
 Its objective is to protect the growers of these horticultural/agricultural commodities from
making distress sale in the event of bumper crop during the peak arrival period when
prices fall to very low level. Thus it provides remunerative prices to the farmers in case of
glut in production and fall in prices.
 Proposal of MIS is approved on the specific request of State/Union Territory (UT)
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Government, if the State/UT Government is ready to bear 50% loss (25% in case of North-
Eastern States), if any, incurred on its implementation.
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 The Department of Agriculture & Cooperation is implementing the scheme.

 Under MIS, funds are not allocated to the States. Instead, central share of losses as per
the guidelines of MIS is released to the State Governments/UTs, for which MIS has been
approved, based on specific proposals received from them.
 Under the Scheme, in accordance with MIS guidelines, a pre-determined quantity at a
fixed Market Intervention Price (MIP) is procured by National Agricultural Cooperative
Marketing Federation of India Ltd.(NAFED) as the Central agency and the agencies
designated by the state government for a fixed period or till the prices are stabilized above
the MIP whichever is earlier. The area of operation is restricted to the concerned state
only.

National Agricultural Cooperative Marketing Federation of India Ltd.(NAFED)

 NAFED is registered under the Multi State Co-operative Societies Act.
 NAFED was set up with the objective to promote Cooperative marketing of Agricultural
Produce to benefit the farmers.
 Agricultural farmers are the main members of NAFED, who have the authority to say in
the form of members of the General Body.

FRBM - ESCAPE CLAUSE

News Excerpt
On April 24, 2020, the Finance Commission (FC) has advised the state governments to use the
escape clauses of FRBM (Fiscal Responsibility) Act in order to raise additional resources to fight
the Covid-19 pandemic.

Pre-Connect
The Centre and States have their own FRBM Acts, respectively. However, there are two
similarities.
 The limit for the fiscal deficit is 3 percent and,
 There is an escape clause to raise the deficit up to 50 basis points in exceptional situations.
―Using the escape clause will give expeditious process‖.

What is Escape Clause:

 Escape clauses provide flexibility to governments to overshoot fiscal deficit targets in times
of need, enabling them to respond to economic shocks.
 To ensure escape clauses are not misused, they are generally allowed only in exceptional
circumstances, and with a check on the quantum of deviation.
 In 2018, the FRBM Act was amended to specify three conditions upon which the escape
clause can be invoked.
 First, over-riding considerations of national security, acts of war, and calamities of
national proportion and collapse of agriculture severely affecting farm output and
incomes.
 Second, far-reaching structural reforms in the economy with unanticipated fiscal
implications.
 Three, a sharp decline in real output growth of at least 3 percentage points below
the average for the previous four quarters. The FRBM amendments also mentioned
that the deviation from the stipulated fiscal deficit target must not exceed 0.5
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percentage points in a year.

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Long Term Repo Operation (LTRO)

News Excerpt
the Reserve Bank of India (RBI) introduced a tool called long-term repo operation (LTRO) to inject
liquidity in the system, as well as to ensure transmission of rates.
Pre-Connect
 Under LTRO, RBI provides longer term (one- to three-year) loans to banks at the prevailing
repo rate.
 As banks get long-term funds at lower rates, their cost of funds falls. In turn, they reduce
interest rates for borrowers. LTRO helped RBI ensure that banks reduce their marginal cost of
funds-based lending rate, without reducing policy rates.
 These new measures coupled with RBI‘s earlier introduced ‗Operation Twist‘ are an attempt by
the central bank to manage bond yields and push transmission of earlier rate cuts.
Marginal Standing Facility
 It is an overnight liquidity support provided by RBI to commercial banks with a higher
interest rate over the repo rate (Repo + 1).
 MSF can be used by a bank after it exhausts its eligible security holdings for borrowing under
other options like the LAF repo.
 Under MSF, banks can borrow funds from the RBI by pledging government securities within
the limits of the SLR.
 Significance of MSF is that it can be availed even if the latter doesn‘t have the required eligible
securities above the SLR limit.

Marginal Cost of Fund Based Lending Rate (MCLR)

News Excerpt
The Central Bank of India has reduced its marginal cost of funds-based lending rate (MCLR) on
loans by 40 basis points (bps) across all tenors. (1 bps = 0.01 percent).
Pre-Connect
 The marginal cost of funds-based lending rate (MCLR) refers to the minimum interest rate of a
bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal
benchmark or reference rate for the bank
 MCLR is a tenor-linked internal benchmark, which means the rate is determined internally
by the bank (Beware!! Not by RBI. RBI has only detailed the methodology) depending on the
period left for the repayment of a loan.
 By improving transparency in how lending rates are calculated, it encourages more
individuals and entrepreneurs to rely on the country's banking system for their
credit needs.

Monetary Policy Committee (MPC)

News Excerpt
The RBI governor-headed Monetary Policy Committee will meet for five times during the financial
year 2020-21.
Pre-Connect
 The Monetary Policy Committee (MPC) is a committee of the Reserve Bank of India, headed by
the Governor, which is entrusted with the task of fixing the benchmark policy interest rate
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(repo rate) to contain inflation within the specified target level.

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 Under the Monetary Policy Framework Agreement, the RBI will be responsible for containing
inflation targets at 4% (with a standard deviation of 2%) in the medium term.

 The Central Government determines the inflation target in terms of the Consumer Price Index,
once in every five years in consultation with the RBI. This target would be notified in
the Official Gazette.
 The newly designed statutory framework would mean that the RBI would have to give an
explanation in the form of a report to the Central Government, if it failed to reach the specified
inflation targets.
Composition of the MPC
 MPC will have six members, - the RBI Governor (Chairperson), the RBI Deputy Governor in
charge of monetary policy, one official nominated by the RBI Board and the remaining three
members would represent the Government of India.
 These Government of India nominees are appointed by the Central Government based on the
recommendations of a search cum selection committee consisting of the cabinet secretary
(Chairperson), the RBI Governor, the secretary of the Department of Economic Affairs,
Ministry of Finance, and three experts in the field of economics or banking as nominated by
the central government.
 The three central government nominees of the MPC appointed by the search cum selection
committee will hold office for a period of four years and will not be eligible for re-appointment.
Decision Making at MPC
 The proceedings of MPC are confidential and the quorum for a meeting shall be four Members,
at least one of whom shall be the Governor and, in his absence, the Deputy Governor who is
the Member of the MPC.
 The MPC takes decisions based on majority vote (by those who are present and voting). In
case of a tie, the RBI governor will have the second or casting vote. The decision of the
Committee would be binding on the RBI.

Ways and Means Advances (WMA)

News Excerpt
India‘s Central bank recently announced an increase in the Ways and Means Advances (WMA)
limits to States.
Pre-Connect

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 It is a facility for both the Centre and states to borrow from the RBI.
 These borrowings are meant purely to help them to tide over temporary mismatches in
cash flows of their receipts and expenditures. In that sense, they aren‘t a source of finance
per se.
 Borrowings through WMA are to be repaid within three months and usually offered at the
repo rate.

Business Correspondents (BC)

News Excerpt
State-owned Bank of Baroda said it will provide an ex-gratia payment of Rs 10 lakh to the next of
kin of business correspondents (BCs) in case of loss of life due to COVID-19. It will also provide
health insurance cover of Rs 60,000 to the BCs.

Pre-Connect
 Banking Correspondents (BCs) are individuals/entities engaged by a bank (commercial
banks, Regional Rural Banks (RRBs) and Local Area Banks (LABs)) for providing banking
services in unbanked / under-banked geographical territories.
 A banking correspondent works as an agent of the bank and substitutes for the brick and
mortar branch of the bank.
 This arrangement has been made to improve financial inclusion.
 While a BC can be a BC for more than one bank, at the point of customer interface, a
retail outlet or a sub-agent of a BC shall represent and provide banking services of only
one bank.
 The banks will be fully responsible for the actions of the BCs and their retail outlets / sub
agents.

Helicopter Money
News Excerpt
Authorities all over the world are going back to the drawing board to find strategies to deal with
Covid-19 nightmare. One such strategy doing the rounds is 'Helicopter Money'.

Pre-Connect
 It basically means non-repayable money transfer from the central bank to the government.
It seeks to goad people into spending more and thereby boost the sagging economy.
 This is an unconventional monetary policy tool aimed at bringing a flagging economy back
on track. It involves printing large sums of money and distributing it to the public.

Quantitative easing (QE)

 When short-term interest rates are either at or approaching zero, the normal open market
operations of a central bank, which target interest rates, are no longer effective.
 Instead, a central bank can target specified amounts of assets to purchase.
 Quantitative easing increases the money supply by purchasing assets with newly-created
bank reserves in order to provide banks with more liquidity.
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 It is a form of unconventional monetary policy in which a central bank purchases longer-

term securities from the open market in order to increase the money supply and
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encourage lending and investment.

 Buying these securities adds new money to the economy, and also serves to lower interest
rates by bidding up fixed-income securities. It also expands the central bank's balance
sheet.
Counter Cyclical Capital Buffer (CCyB)
News Excerpt
Based on the analysis of CCyB indicators, the apex bank has decided that it is not necessary to
activate CCyB for one year or earlier.

Pre-Connect
 It is the mandatory capital to be kept by a bank to meet business cycle related risks in
addition to other minimum capital requirements. It is aimed to protect the banking sector
against losses from changes in economic conditions.
 Banks may face difficulties in phases like recession when the loan amount doesn‘t return.
To meet such situations, banks should have their own additional capital.
 This is an important theme of the Basel III norms.

GAAR and Round Tripping

Pre-Connect
Round Tripping
 Round tripping refers to money that leaves the country though various channels and
makes its way back into the country often as foreign investment. This mostly involves
black money and is allegedly often used for stock price manipulation.
 It could be invested in offshore funds that in turn invest in Indian assets. The Global
Depository Receipts (GDR) and Participatory Notes (P-Notes) are some of the other routes
that have been used in the past.
GAAR
 GAAR is set of rules under the Income Tax Act (under the proposed Direct Tax Code)
which empowers the revenue authorities to deny tax benefits transactions or
arrangements which do not have any commercial substance or consideration other
than achieving the tax benefit.
 GAAR usually consists of a set of broad rules which are based on general principles to
check the potential avoidance of the tax in general.

Minimum Support Price

Pre-Connect
 It is the price at which government purchases crops from the farmers, whatever may be
the price for the crops.
 Minimum Support Price is an important part of India‘s agricultural price policy.
 Who declares and who prepares it?The Cabinet Committee on Economic Affairs (CCEA),
Government of India, determines the Minimum Support Prices (MSP) of various
agricultural commodities in India based on the recommendations of the Commission for
Agricultural Cost and Prices (CACP).
How is it calculated?
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According to the formula prescribed by the Swaminathan Committee, there are three variables
that determine production cost: A2, A2+FL, and C2.
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 A2- Includes out-of-pocket expenses borne by farmers, such as term loans for machinery,
fertilizers, fuel, irrigation, cost of hired labour and leasing land.
DELHI: VIJAY NAGAR 9717380832 & OLD RAJENDER NAGAR 9811293743 | JAIPUR: 8290800441
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ECONOMICS
 A2+FL, takes into account the imputed value of unpaid labour on the part of family members,
in addition to the paid-out cost.
 (C2) -The Comprehensive Cost (C2) is more reflective of the actual cost of production since it
takes it accounts for rent and interest foregone on owned land and machinery, over and above
the A2+FL rate.
The ideal formula according the Committee would be: MSP = C2+ 50% of C2.
MSP is announced for which products?
Government announces minimum support prices (MSPs) for 22 mandated crops and fair and
remunerative price (FRP) for sugarcane. The mandated crops are 14 crops of the kharif season, 6
rabi crops and two other commercial crops. In addition, the MSPs of toria and de-husked coconut
are fixed on the basis of the MSPs of rapeseed/mustard and copra, respectively. The list of crops
are as follows.
 Cereals (7) - paddy, wheat, barley, jowar, bajra, maize and ragi
 Pulses (5) - gram, arhar/tur, moong, urad and lentil
 Oilseeds (8) - groundnut, rapeseed/mustard, toria, soyabean, sunflower seed, sesamum,
safflower seed and nigerseed
 Raw cotton
 Raw jute
 Copra
 De-husked coconut
 Sugarcane (Fair and remunerative price)
 Virginia flu cured (VFC) tobacco

Open Budget Survey by IBP

News Excerpt
India has been placed at 53rd position among 117 nations in terms of budget transparency and
accountability, according to Open Budget Survey conducted by International Budget Partnership
(IBP).

Pre-Connect
 International Budget Partnership (IBP) is an independent non-profit corporation, formerly
a project of the Center on Budget and Policy Priorities. It focuses on government budgets
because they are at the core of development.
 India's Union Budget process a transparency score of 49 out of 100, which is higher
than the global average of 45.
 The survey observed that absence of a published Pre-Budget Statement and not bringing
out a Mid-Year Review in 2018-19 pulled down the transparency score for the Union
Budget of India.

Scheme for Formalisation of Micro Food Processing Enterprises

News Excerpt
The Union Cabinet has given its approval to a new Centrally Sponsored Scheme - "Scheme for
formalisation of Micro food processing Enterprises (FME)" for the Unorganized Sector on All
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India basis with an outlay of Rs.10,000 crore.

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Salient features Objectives

 Centrally Sponsored Scheme.  Increase in access to finance by micro

 Expenditure to be shared by food processing units.
Government of India and States at  Increase in revenues of target
60:40. enterprises.
 2,00,000 micro-enterprises are to  Enhanced compliance with food quality
be assisted with credit linked and safety standards.
subsidy.
 Strengthening capacities of support
 Scheme will be implemented over
systems.
a 5 year period from 2020-21 to
2024-25.  Transition from the unorganized sector
 Cluster approach. to the formal sector.
 Focus on perishables.  Special focus on women
entrepreneurs and Aspirational
districts.
 Encourage Waste to Wealth activities.
 Focus on minor forest produce in
Tribal Districts

Support to Individual micro units Support to

FPOs/SHGs/Cooperatives

 Micro enterprises will get credit  Seed capital to SHGs for loan to
linked subsidy @ 35% of the members for working capital and
eligible project cost with ceiling of small tools.
Rs.10 lakh.  Grant for backward/ forward
 Beneficiary contribution will be linkages, common infrastructure,
minimum 10% and balance from packaging, marketing &
loan. branding.
 On-site skill training &  Skill training & Handholding
Handholding for DPR and support.
technical upgradation.  Credit linked capital subsidy

Voluntary Retention Route

News Excerpt
Foreign portfolio investors (FPIs) significantly reduced the pace of outflows in April, after a record
net outflow of Rs 1,18,203 crore in March 2020. In April, FPIs pulled out a net of Rs 14,858 crore
from equity and debt markets.

Pre-Connect
76

 Voluntary retention route (VRR) channel is aimed at attracting long-term and stable FPI
investments into debt markets, while providing FPIs with operational flexibility to manage
Page

their investments.

 Foreign portfolio investment (FPI) involves holding financial assets from a country outside of
the investor's own.
 FPI holdings can include stocks, ADRs, GDRs, bonds, mutual funds, and exchange traded
funds.
 Along with foreign direct investment (FDI), FPI is one of the common ways for investors to
participate in an overseas economy, especially retail investors.
 Unlike FDI, FPI consists of passive ownership; investors have no control over ventures or
direct ownership of property or a stake in a company.

National Infrastructure Pipeline

News Excerpt
The Task Force on National Infrastructure Pipeline (NIP) submitted its Final Report on NIP for FY
2019-25 to the Union Minister for Finance & Corporate Affairs.
Pre-Connect
Need of NIP
 NIP is a first-of-its-kind, government exercise to provide world-class infrastructure across the
country, and improve the quality of life for all citizens.
 It aims to improve project preparation, attract investments (both domestic and foreign) into
infrastructure, and will be crucial for target of becoming a $5 trillion economy by FY 2025.
 Out of the total expected capital expenditure of Rs. 111 lakh crore, projects worth Rs 44 lakh
crore (40% of NIP) are under implementation, projects worth Rs 33 lakh crore (30%) are at
conceptual stage and projects worth Rs 22 lakh crore (20%) are under development.
 Sectors such as energy (24%), roads (18%), urban (17%) and railways (12%) amount to
around 71% of the projected infrastructure investments in India.
 The Centre (39%) and States (40%) are expected to have almost equal share in implementing
the NIP in India, followed by the private sector (21%).

Emergency Credit Line Guarantee Scheme

News Excerpt
The Union Cabinet, has given the approval for Emergency Credit Line Guarantee Scheme.

Pre-Connect
 The Emergency Credit Line Guarantee Scheme (ECLGS) has been formulated as a specific
response to the unprecedented situation caused by COVID-19 and the consequent lockdown,
which has severely impacted manufacturing and other activities in the MSME sector.
 The Scheme aims at mitigating the economic distress being faced by MSMEs by providing
them additional funding of up to Rs. 3 lakh crore in the form of a fully guaranteed emergency
credit line.
 Under the Scheme, 100% guarantee coverage to be provided by National Credit Guarantee
Trustee Company Limited (NCGTC) in the form of a Guaranteed Emergency Credit Line
(GECL) facility.

National Credit Guarantee Trustee Company Ltd (NCGTC)

 It is a private limited company incorporated under the Companies Act 1956 on March 28,
2014 Ministry of Finance, as a wholly owned company of the Government of India, to act
Page

as a common trustee company for multiple credit guarantee funds.

 Credit guarantee programmes are designed to share the lending risk of the lenders and in
turn, facilitate access to finance for the prospective borrowers

New Development Bank

News Excerpt
Union Minister of Finance & Corporate Affairs attended the 5th Annual Meeting of Board of
Governors of New Development Bank through video-conference in New Delhi.

Pre-Connect
 During the sixth BRICS Summit in Fortaleza (2014), the leaders signed the Agreement
establishing the New Development Bank (NDB).
 Headquarter: Shanghai, China
 Bank‘s Articles of Agreement specify that all members of the United Nations could be
members of the bank, however the share of the BRICS nations can never be less than 55% of
voting power.
 Currently all BRICS nations have equal share holding and voting power.
 The First President of the Bank was from India.

Payment Infrastructure Development Fund

News Excerpt
RBI has announced the creation of a Rs. 500-crore Payments Infrastructure Development Fund
(PIDF).

Pre-Connect
 The RBI has created a Payments Infrastructure Development Fund (PIDF) to encourage
acquirers to deploy Points of Sale (PoS) infrastructure — both physical and digital modes.

GAFA Tax
News Excerpt
France and the U.S. locked horns over taxing digital giants such as Google and Facebook, after
Washington said it was breaking off talks aimed at establishing a global framework for making
the companies pay larger levies where they operate.
Pre Connect
 GAFA is an acronym for Google, Apple, Facebook and Amazon. France first proposed to
levy digital tax called as GAFA tax on these digital giants.
 The rationale behind devising a separate framework to tax online service providers is that
the existing tax norms that are framed envisaging brick and mortar business models are
not suitable to regulate online services.
 Digital economy is characterized by a unique system of value creation resulting from a
combination of factors such as sales functions, algorithms and personal information of
users.
 Due to this anomaly, the GAFA tax and other proposals floated in the EU, UK and France
impose an approximate digital tax of 3% on the revenue generated by entities that operate
78

in the digital economy above a certain threshold.

Page

Border Adjustment Tax

News Excerpt
NITI Aayog favored imposing a border adjustment tax (BAT) on imports to provide a level-playing
field to domestic industries.

Pre Connect
 Border adjustment tax is a short name for a proposed destination-based cash flow tax
(DBCFT).
 It is a value-added tax on imported goods and is also referred to as a border-adjusted tax,
destination tax or border tax adjustment.
 Exported goods are exempt from tax while imported goods sold are subject to the tax.
 BAT levies a tax depending on where a good is consumed rather than where it is produced.
 The concept was first introduced in 1997 by economist Alan J. Auerbach, who believed that
the tax system would be in line with business goals and the national interest.

Indian Gas Exchange (IGX)

News Excerpt
Indian Gas Exchange (IGX) is the India‘s first gas exchange. The exchange is expected to facilitate
transparent price discovery in natural gas, and facilitate the growth of the share of natural gas in
India‘s energy basket.

Pre Connect
 The IGX is a digital trading platform that will allow buyers and sellers of natural gas to trade
both in the spot market and in the forward market for imported natural gas across three hubs
Dahej and Hazira in Gujarat, and Kakinada in Andhra Pradesh.
 Imported Liquified Natural Gas (LNG) will be regassified and sold to buyers through the
exchange, removing the requirement for buyers and sellers to find each other.
 This will mean that buyers do not have to contact multiple dealers to ensure they find a fair
price.
79

 The exchange also allows much shorter contracts – for delivery on the next day, and up to a
month – while ordinarily contracts for natural gas supply are as long as six months to a year.
Page

This will allow buyers and sellers greater flexibility.

 Will domestically produce natural gas also be bought and sold on the exchange?No. The
price of domestically produced natural gas is decided by the government. It will not be sold on
the gas exchange.

HELP Vs NELP

 Hydrocarbon Exploration and Licensing Policy (HELP): Current Policy

 HELP was approved by government in March 2016 replacing New Exploration Licensing
Policy (NELP).

The Consumer Protection Act, 2019

News Excerpt
The Consumer Protection Act, 2019 came into force from July 2020. The new Act will empower
consumers and help them in protecting their rights through its various notified Rules and
provisions like Consumer Protection Councils, Consumer Disputes Redressal Commissions,
Mediation, Product Liability and punishment for manufacture or sale of products containing
adulterant / spurious goods.

Pre Connect
 The new Act broadens the definition of consumer, by recognising those engaged in offline
as well as online multi-level and telemarketing transactions, which will protect those
rendered vulnerable in the wake of rapidly-developing technology.
 The Act establishes the Central Consumer Protection Authority (CCPA) to promote, protect
and enforce the rights of consumers.
 The rules for prevention of unfair trade practice by e-commerce platforms will also be
covered under this Act.
80

 Consumers can now institute a complaint from where they reside or work.
Page

 Parties can be allowed to settle the disputes through mediation.

 The Act has also provision for the Central Consumer Protection Council, an advisory
body on consumer issues, headed by the Union Minister of Consumer Affairs, Food and
Public Distribution with the Minister of State as Vice Chairperson and 34 other members
from different fields. The Council will have three-year tenure.

Government e-Marketplace (GeM) 4.0

News Excerpt
The new version of the government procurement platform Government e-Marketplace (GeM)
will be launched by September with the portal having powerful features and availability of "big
ticket" items to attract large buyers like PSUs, Railways and Defence.

Pre Connect
 It is a one-stop National Public Procurement Portal to facilitate online procurement of
common use Goods & Services required by various Central and State Government
Departments / Organizations /Public Sector Undertakings (PSUs).
 MSMEs, DPIIT recognised startups and other private companies can register on GeM as
sellers and sell their products and services directly to government entities.
 The portal was launched in August 2016 by the Commerce & Industry Minister.
 GeM aims to uplift the marginalised and underprivileged sections of society and be part of
their growth story with a special focus on MSMEs, self-help groups, artisans, weavers,
craftsmen and TRIFED products.
81
Page

Export Preparedness Index

News Excerpt
Recently, NITI Aayog in partnership with the Institute of Competitiveness has released the first
Export Preparedness Index (EPI) that is EPI 2020 to examine export preparedness and
performance of Indian states.

Pre-Connect
 EPI intends to identify challenges and opportunities; enhance the effectiveness of government
policies; and encourage a facilitative regulatory framework.
 The structure of the EPI includes 4 pillars –
5) Policy: A comprehensive trade policy provides a strategic direction for exports and
imports.
6) Business Ecosystem: An efficient business ecosystem can help states attract investments
and create an enabling infrastructure for individuals to initiate start-ups.
7) Export Ecosystem: This pillar aims to assess the business environment, which is specific
to exports.
8) Export Performance: This is the only output-based pillar and examines the reach of
export footprints of States and Union Territories.
 It also has 11 sub-pillars –Export Promotion Policy; Institutional Framework; Business
Environment; Infrastructure; Transport Connectivity; Access to Finance; Export
Infrastructure; Trade Support; R&D Infrastructure; Export Diversification; and Growth
Orientation.

82
Page

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