Manish Koul :Economy : December, 2014 (Hindu)Date: 06 Dec, 2014 FICCI bats for cigarette companies: Batting for the branded cigarette industry, the Federation of Indian Chambers of Commerce and Industry (FICCI) wants the government to reconsider its order to have pictorial warnings on both sides and covering 85 per cent of the pac! FICCI has said more prominent pictorial warnings will impact the domestic cigarette industry as a large percentage of non"cigarette tobacco products sold in unpacaged and unbranded pacs will escape this regulation! It wants the warnings limited to the current #$ per cent (or %$ per cent of the front panel)! It has argued that in the absence of pictorial warnings on illegal andloosely sold cigarettes, there is an impression that they are not as harmful as the pacaged ones, thereby misleading consumers! It also cautioned that there could be a rise in the consumption of other tobacco products, and illegal cigarettes as they do not carry any warnings and are cheaper on account of ta& evasion!What the WHO says: 'rticle (( of the )*+ Framewor Convention on ,obacco Control ()*+ FC,C) (India is a signatory to it) re-uires .arties to the Convention to implement large, rotating health warnings on all tobacco product pacaging and labelling! /uidelines for 'rticle (( of the )*+ FC,C recommend that .arties should mandate full color pictures or pictograms, in their pacaging and labelling re-uirements!Date: 0 Dec, 2014 ,he current account de0cit widened to ($!( billion dollar or #!( per cent of/1. for the 2eptember -uarter as against (!# per cent in the year"ago period due to higher trade de0cit, the 3eserve Ban said yesterday!Date: 10 Dec, 2014 Drug-makers Sun Pharma and Ranbay !ester"ay got fair trade watchdog CCI#s $Competition Commission of In"ia% appro&a' for their long" pending 421 %"billion merger, but with a condition that they will haveto modify the deal by divesting seven ey products to address monopoly concerns!Date: 11 Dec, 2014 In"ia#s 'argest carmaker (aruti Su)uki has got an order from the Indian 'rmy to supply %,(%( units of its sports utility vehicle /ypsy!Date: 12 Dec, 2014 /lobal economy will grow by more than 5 percent in #$(5 and #$(6 however the growth will be uneven in some regions, predicts the 4nited 7ations! ,he 478s annual economic report said that growth edged up in #$(%at an estimated #!6 percent! ,he 47 is forecasting 5!( percent economic growth in #$(5 and 5!5 percent growth in #$(6! India8s economic growth is e&pected to improve to 6!5 per cent in #$(6 with the country leading economic recovery in 2outh 'sia! Concerned over a number of pon9i operators continuing to collect funds even after being barred to do so, regulator Securities an" *change +oar" of In"ia $S*+I% !ester"ay cautioned investors and general public against dealing with such entities and not be lured by promises of high returns, maes public a list of 5( banned companies! ,he 1elhi *igh Court in an interim order has restrained :iaomi as well as online e"commerce site Flipart from se''ing in In"ia han"sets of the Chinese mobi'e maker that run on the techno'ogy patente" by *ricsson,Date: 1! Dec, 2014 IIP shrinks by 4.2%: ,he factory output, as measured by the Inde& of Industrial .roduction (II.), contracted by %!# per cent in +ctober! )hy; < +n account of de"growth in the manufacturing sector and poor demand for consumer goods!,he factory output had declined by (!# per cent in +ctober last year!IIP: ,he Inde& of Industrial .roduction (II.) is an inde& for India which details out the growth of various sectors in an economy such as mining, electricity and manufacturing! ,he all India II. is a composite indicator that measures the short"term changes in the volume of production of a baset of industrial products during a given period with respect to that in a chosen base period! It is compiled and published monthly by the Central Statistical Organization (CSO) si& wees after the reference month ends! ,he base year is 2004-200! 3ecent revision of II. released by C2+ with #$$%"$5 as the base year comprises !"2 ite#s!Date: 14 Dec, 2014 India8s foreign e&change reserves fell by a massive =(!6% billion to =5(%!66 billion for the wee ended 1ec 5, 3eserve Ban of India (3BI) data showed! 3eserve Ban /overnor 3aghuram 3a>an cautioned the government on .rime ?inister 7arendra ?odi8s @?ae in India8 mantra, suggesting that India would have to loo for regional and domestic demand for growth A tomae in India primarily for India!Date: 16 Dec, 2014 -o&t, proposes ./ per cent 'oca' procurement for foreign 0rms: ,he government has released 1raft 7ational +Bset .olicy (7+.)! It is prepared by the Commerce ?inistry! ,he policy is aimed at boosting manufacturing sector growth!1ccor"ing to the Po'icy: Foreign companies selling goods worth over 3s!5$$ crore to the government or public sector undertaings would have to source part oftheir supplies from domestic manufacturers! ,he minimum value of theoBsets obligation will be 5$ per cent of the estimated cost of the import, meaning the company will have to procure this percentage from local players to boost domestic manufacturing! For smooth operation of the 7+., a ($"member 7ational +Bsets 'uthority (7+') is also proposed! It would be headed by the Cabinet 2ecretary and comprise secretaries of commerce, e&penditure, foreign,economic aBairs and 1irectorate /eneral of Foreign ,rade! 2ectors which will be covered under the 7+. include civil aerospace, power, fertili9er, railways and other transportation, ports and shipyards, mining, medical e-uipment, medicine and telecom! *owever sectors including defence, atomic energy and space would not be covered under the policy,he defence sector has a separate policy while atomic energy and space would pursue oBsets in their contracts independently!Ho2 the po'icy is epecte" to he'p3 It would help in attracting investmentsC ,ransfer and ac-uisition of new technologyC 'c-uisition of raw material and assetsC Improving balance of paymentC Increasing capacity for long"term supply pactsC Dnhancing e&ports! R+I eases re0nancing norms for infrastructure 'oans: ,he 3eserve Ban of India (3BI) recently allowed bans to Ee&ibly structure the e&isting pro>ect loans A to infrastructure and core industries A with the option to periodically re0nance them! Darlier, this option of periodic re0nancing was available only to new loans in these segments!Detai's: +nly term loans to pro>ects, in which the aggregate e&posure of all institutional lenders e&ceeds 3s!5$$ crore, in the infrastructure sector and in the core industries sector will -ualify for such Ee&ible structuring and re0nancing! ,he 3BI said bans were representing this issue, as it would ensure long"term viability of e&isting infrastructureFcore industries sector pro>ects by aligning the debt repayment obligations with cash Eows generated during their economic life! Bans were ased to 0& a fresh loan amorti9ation schedule for the e&isting pro>ect loans once during the life time of the pro>ect, after the date of commencement of commercial operations (1CC+), based on the reassessment of the pro>ect cash Eows, without this being treated as @restructuring8! ,he 3BI said the viability of the pro>ect is re"assessed by the ban and vetted by the Independent Dvaluation Committee! 3BI said that bans could re0nance the pro>ect term loan periodically (say 5 to G years) after the pro>ect has commenced commercial operations! ,he re0nance could be taen up by the same lender or a set of new lenders, or combination of both, or by issue of corporate bond, as re0nancing debt facility, and Hsuch re0nancing may repeat till the end of the fresh loan amorti9ation schedule!I It also said that bans could also provide longer loan amorti9ation as per the Ee&ible structuring of pro>ect loans to e&isting pro>ect loans to infrastructure and core industries pro>ects which are classi0ed as @non"performing assets8 (7.'s)! *owever, the 3BI said, these loans would be treated as @restructuring8 and the assets would continue to be treated as @non"performing asset8!Date: 1" Dec, 2014 Reser&e +ank of In"ia (3BI) has increase" the Rea' 4ime -ross Sett'ement $R4-S% business hours to 56 hours from 8 am to 8 pm on weedays which will come into eBect from #J of this month! 3,/2 system of online fund transfer will be open on 2aturdays from 8 am to 5!5$ pm!Date: 1# Dec, 2014 RBI imposes penalty of Rs 50 lakh on ICICI Bank and Rs 25 lakh on Bank of Baroda for violation of KYC norms. The RBI said that some fraudsters had managed to open fititious aounts in the name of a statutory organisation in these five !anks and operated the aounts mainly for enashing he"ues#demand drafts#postal orders$ of %hih they %ere not the rightful o%ners$ for periods ranging from one month to t%o years$ %ithout !eing deteted !y the !anks. KYC &orms' KLC is an acronym for HKnow your CustomerI, a term used for customer identi0cation process! It involves maing reasonable eBorts to determine true identity and bene0cial ownership of accounts, source of funds, the nature of customer8s business, reasonableness of operations in the account inrelation to the customer8s business, etc which in turn helps the bans to manage their riss prudently! ,he ob>ective of the KLC guidelines is to prevent bans being used, intentionally or unintentionally by criminal elements for money laundering! KLC has got a legal bacing! 3eserve Ban of India has issued guidelines to bans under the Baning 3egulation 'ct, (J%J and .revention of ?oney"Maundering 3ules, #$$5! 'ny contravention thereof or non"compliance shall attract penalties under Baning 3egulation 'ct!KYC has t%o omponents ( Identity and )ddress. *hile identity remains the same$ the address may hange and hene the !anks are re"uired to periodially update their reords. $e%ise& 'or#s: 'ccording to the new norms Customers need to submit only one documentary proof of address A either current or permanent A while opening a ban account or while undergoing periodic updation! In case the address mentioned as per @proof of address8 undergoes a change, fresh proof of address may be submitted to the branch within si& months! 7o separate proof for current address re-uired! 7ow, customers have to furnish only one address proof (current or permanent) for opening a ban account! ' small account can be opened by self"attesting a photograph and giving thumb impression on the application in the presence of a ban employee! ,his is probably the best piece of news for studentswho live away from home and migrant worers!Date: 1 Dec, 2014 Indiahassigneda6#5millioneuroloanagreement with/ermanyfor0nancial assistance to /reen Dnergy Corridors (/DC) pro>ect under Indo"/erman bilateral development cooperation!Date: 20 Dec, 2014 India rans J5rd out of (%6in Forbes list of best nationsfor business!1enmartopped Forbes8 Jthannual raningof theBest CountriesforBusiness, followed by *ong Kong, 7ew Nealand, Ireland and 2weden! C+D4 signs 0rst bi'atera' 1"&ance Pricing 1greement: ,he CentralBoard of 1irect ,a&es (CB1,) recently signed a bilateral 'dvance .ricing'greement ('.') with a Oapanese company! ,he '.' is for 0ve years! 'nadvance pricing agreement ('.') is an ahead of time agreement betweenata&payer andata&ingauthorityonanappropriatetransfer pricingmethodology(,.?) for someset of transactionsat issueover a0&edperiod of time! '.'s will improve the investment climate in the country It is also e&pected to bring about certainty and uniformity intransferpricingmattersof multinational companiesandreducinglitigation! In theconte&tof growing economic tiesbetween Oapan andIndiathe '.' is e&pected to generate positive sentiments amongOapanese investors in India!Date: 22 Dec, 2014 Inmates of 1elhi8s high"security tihar >ail will soon get life and accidentalinsurance cover as the prison administration, in collaboration with IndianBan, has decided to get their accounts opened under .rime ?inister8s Oan1han Lo>na! 's per the scheme, the inmates will come under accidentalinsurancecover of (lahrupees anda lifeinsurancecover of 5$,$$$rupees even while serving their sentence!Date: 2! Dec, 2014 R+Imo"i0es"e0nitionfor non-cooperati&e borro2er< 1efaultingborrowers, who resort to legal and other means such as denying access tosecurities to mae it diPcult for bans to recover dues, will 0nd it harderto raise fresh funds! It will become tougher for bans to continue lendingto such entities! ' sharp rise in stressed assets over the last few years hadprompted 3BI to frame corrective action that lenders can tae to stem badloans! 4nder the new norms< ,herewouldbedisincentives for lenders intheformof higherprovisions if they give additional loans to such entities! ,he framewor includes setting up a >oint lenders8 forum for speci0caccounts even before these slip into the sub"standard category andnarrowing sources of funds for such borrowers by classifying themas non"cooperative borrowers if they are found to be Hdeliberatelystonewalling legitimate eBorts of lenders to recover their duesI! 'ny fresh loan given to those classi0ed as non"cooperativeborrowers will attract higher provisions e-uivalent to that of a sub"standard asset (where the dues are not paid for J$ days) while theaccount can continue to be classi0ed as a standard account! ,heseprovisionsaremuchhigherthanthe5Qprescribedby3BI initsFebruarynoti0cation!Moansclassi0edas substandard attract(5Qprovisions! Banshavetomaethehigherprovisionof (5Qevenforloansgiventoanyother companythat hasdirectorsor promotersofcompanies that are classi0ed as non"cooperative directors! 3BI has set a loan cut"oB limit of 3s 5 crore and said independentdirectorsandgovernment nomineeswill bee&cludedfrombeingclassi0ed as non"cooperative borrowers! 's for business enterprises, noncooperative borrowers wouldinclude persons in charge of and responsible for the management ofthe aBairs of the enterprise!Date: !1 Dec, 2014 *cise concessions for auto sector to go: /overnment is planning toend the e&cise duty concessions given in February! ,he decision could helpthe government raise additional revenue of up to 3s! (,$$$ crore in theremaining three months of the current 0nancial year in a bid to achievethe 0scal de0cit target of %!( per cent of /1.! But the additional yield willdepend on the auto and white goods sales in those three months! Why 2as the concession gi&en3 ,o give a boost to auto and white goods sectors during theeconomic downturn, the previous government had cut e&cise dutyon cars, 24Rs, two"wheelers and consumer durables in the Februaryinterim budget! In Oune, the new government e&tended the e&cise duty concessionsby6months to1ecember 5(, whichis nownot beingfurthere&tended!D&cise 1uty is an indirect ta& levied and collected on the goodsmanufactured in India! /enerally, manufacturer of goods is responsible topay duty to the /overnment! S*+I moots ne2norms for issue of municipa':,o help in the/overnment8s @smart cities8 programme, the2ecurities andD&changeBoardof India(2DBI) hasproposedanewset of normsforlistingandtrading of municipal bonds on stoc e&changes, while channeli9inghousehold investments for urban infrastructure development!7e2 norm: Issuing authorities would need to contribute at least #$ per cent ofthetotal pro>ect cost for whichtheywishtoraisefunds! ,hesemunicipal authoritieswouldneedtohaveastrong0nancial tracrecordandsuchbondsshouldhaveaminimumtenureof threeyears! ,hemunicipal bondswouldaddtoinstrumentswhereprovidentfunds, pensionfundsandinsurancecompaniescanput intheirmoney! ?unicipal authoritieshavingnegativenetworthandthosewhichhave defaulted on payments to 0nancial institutions would bebarredfromissuingthebonds! Corporatemunicipal entityor itsdirectors restrained or prohibited by 2DBI would also be ineligible! ,he minimum subscription limit should not be less than G5 per centof the issue si9e! In the event of non"receipt of minimumsubscription, all applicationmoney receivedinthepublic issueshould be refunded to the applicants, within (# days from the dateof the closure of the issue! )hen there is a delay by the issuer in maing the refund, then ithas to give bac the subscription amount along with interest at ($per cent rate per annum for the delayed period! ,he issuer8s contribution for each pro>ect should be at least #$ percent of thepro>ect costs, whichshall becontributedfromtheirinternal resourcesor grants! 'nissuer, proposingtoissuedebtsecurities shall maintain($$per cent asset cover suPcient todischarge the principal amount at all times for the debt securitiesissued!Conservative Indian investor mainly invests in 0&ed deposits, small savingschemesor gold! Bondsissuedbymunicipalitieshavinggood0nancialtrac record would be an good alternative investment opportunity for suchconservativeinvestors, asit providesreasonablereturnwithlessris,which in turn may accelerate the capital marets!'municipal bond is a bondissuedby a local government, or theiragencies! ?uni bonds8 are very popular among investors in many developednations, especially in the 4!2!, where these have attractedinvestmentstotalingover =5$$billionandareamongpreferredavenues for household savings! ,he Bangalore ?unicipal Corporation was the 0rst municipalcorporation to issue a municipal bond of 3s!(#5 crore with a 2tateguarantee in (JJG! *owever, the access to capital maretcommenced in Oanuary (JJ8, when the 'hmedabad ?unicipalCorporation ('?C) issued the 0rst municipalbonds in the countrywithout 2tategovernment guaranteefor 0nancinginfrastructurepro>ects in the city! '?C raised 3s!($$ crore through its public issue! 'mongothers, *yderabad, 7ashi, Risahapatnam, Chennai and7agpur municipal authorities haveissuedsuchbonds, however,thereisnoprovisionasyetforlistingandsubse-uenttradingofmuni bonds on stoc e&changes in India! ,here is massive capital investment need in municipal infrastructureandfunds fromprogrammes suchas Oawaharlal 7ehru7ational4rban 3enewal ?ission (O7743?) can only partly meet there-uirement! ,herefore, to meet their 0nancing needs, themunicipalities have to see recourse to other means includingissuance of municipal bonds!