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2011 December Economic Issues

The changes in the foreign direct investment regime for the pharmaceuticals sector approved by the union cabinet was notified in early December 2011. The department of industrial policy and promotion notified the changes through Press Note 3 of 2011.

Under the new regime, all FDI into Indian pharmaceuticals companies will have to be approved by the government. The greenfield foreign investment in the sector, however will continue to be on the approval route.

The overall FDI limit in this sector is to remain at 100%. The government had made these changes following fears that largescale takeover of Indian drug companies by multinationals will make medicine expensive.

India’s largest private lender by assets, ICICI Bank and IDBI Bank, the seventh largest public sector bank in India together launched India’s first credit default swap (CDS) on 7 December 2011. CDS was launched seven days after the product was cleared by the Reserve Bank of India on 30 November 2011. Public sector undertaking Rural Electrification Corporation (REC) bought the CDS cover for its Rs 5 crore loan from ICICI Bank.

The launch of the CDS was a landmark transaction for the domestic corporate debt market and marked the formal introduction of local currency CDS market in India.

The inauguration of the first state-of-the-art ATDC-SMART (Skill for Manufacturing Apparels through Research and Training) in Egmore, Chennai, the Integrated Skill Development Scheme (ISDC) for the textile and apparel sector was launched by the Ministry of Textiles.

The Ministry launched the project in association with the Apparel Training & Design Centre (ATDC), which was selected as a nodal agency for the project. The project aims to impart training to a workforce of about 256000 in the next two years.

The ATDC-SMART project worth Rs 23 billion focuses on the core workforce requirements of the garment industry located across India. The importance of the Scheme can be judged from the fact that the apparel industry is the second largest employment provider in the country after agriculture.

According to the assessment by Cotton Advisory Board (CAB), total demand of cotton for 2011-12 is estimated to be marginally lower at 250 lakh bales as compared to the demand for 253 lakh bales for 2010. The domestic demand for cotton is expected to decline due to slowdown in the global and domestic markets.

The demand for the natural fibre stood at 253 lakh bales (one bale equal to 170 kg) during the 2010-11 cotton season (October - September).

The Coal Ministry on 6 December 2011 turned down Coal India’s (CIL) plea for scaling down current fiscal 2011-12 ‘s output target to 448 million tonnes (MT) from 452 MT.

Fearing that it will not be able to make up the slippage in output that occurred during the first half of 2011-12, CIL which accounts for 81 per cent of domestic production had asked the coal ministry to revise the target.
CIL was instructed to surpass the target, which was possible and required given the paucity of coal.

Bank lending to the priority sector grew at a mere 10 % in October 2011 on an annual basis due to lower offtake by agriculture and MSME segments as well as decline in micro credit. Credit offtake by the priority sector had grown by 19.9 per cent during October 2010.

Credit disbursement to the priority sector stood at Rs 12.48 lakh crore in October 2011 compared to Rs 11.35 lakh crore in October 2010.

Bank disbursements to agriculture and allied activities in October 2011went up by a mere 7.1 per cent to Rs 4.35 lakh crore. In October 2010, credit disbursement to the segment had gone up by 20.4 per cent on an annual basis.

The Centre for Development of Telematics (C-DoT) on 5 December 2011 transferred indigenously-developed Gigabit Passive Optical Network (GPON) technology to seven telecom equipment manufacturers, including private players. The GPON technology was transferred to the telecom equipment manufacturers to give the much-needed push to broadband penetration in India.

The GPON technology is a pivotal component required for broadband connectivity over optical fibre.
C-DOT indigenously designed and developed GPON technology, which can be used to provide triple play (voice, video and data) through fibre-based networks. The present GPON standards specify 2.5 Gbps (Gigabit per second) downstream and 1.25 Gbps upstream data capability to customer premise.

The GPON technology was tested, validated, field-evaluated and made operational in BSNL's network in Ajmer (Rajasthan). The technology will help fulfil requirements of major national programmes like the National Optical Fibre Network and the State Wide Area Network.

The number of corporate debt restructuring (CDR) cases rose sharply to 35 in the first half of 2011-12 as compared to 22 in the first six months of 2010-11.

The corresponding amount of loan referred also increased by nearly seven times to Rs 34560 crore in the first half of 2011-12 as compared to Rs 5180 crore in 2010-11. The amount of loan referred was the highest amount in the last eight years.

According to government data released on 25 Novevember 2011, Indian refiners processed 2.8 percent less oil in October 2011 from a year ago, the first decline since November 2010. The country's crude oil output in October declined 0.9 percent to about 760000 bpd.

The annual rate of growth declined in October due to maintenance shutdown at refiners of Indian Oil Corp, Mangalore Refinery and Petrochemicals and Essar Oil. Units at IOC's 160000 Mathura plant in northern India were shut for maintenance in October 2011.

Government set up Expert Group to Suggest Restructuring of Power Utilities of Seven States, including Tamil Nadu and Uttar Pradesh with an objective to push through power reforms and unlock the power sector. The government is to initiate a major reform in the shape of open access allowing consumers of above 1 MW to choose their preferred electricity supplier.

The plan for reforms follows a recent government report that revealed that the accumulated losses of the power utilities across the country ran into Rs.1.50-lakh crore and annual losses were around Rs.55.000 crore.

30% Sourcing under FDI in Multi-brand Retail made Mandatory from Indian MSEs Only. The government highlighted that the 30 per cent obligation before the global players is limited to India. The government’s explanation came amidst protests from the opposition and the micro and small enterprises (MSEs).

The government’s assertion however was found to be in total contrast to the note issued earlier which stated that the 30 per cent sourcing by global retailers can be done from anywhere in the world and is not India-specific. The provision for procurement from small units would not violate the WTO obligations.

According to the quarterly public debt management report released by the Finance Ministry on 28 November 2011, the Indian government's internal debt rose during the second quarter (July-September) of 2011-12. The government had to pay higher interest to raise funds. The internal debt to GDP ratio increased to 32.3% of GDP during second quarter of 2011-12 from 31.4% in the April-June quarter.

The flatter yield curve, indicating small difference between short term and long term rates, made more sense to raise longer tenure funds. The average maturity of outstanding government securities increased to 9.68 years during the Junuary-September quarter in 2011 from 9.58 years during the October-December quarter of 2010. The bonds maturing in one year also reduced to 4.25% during the second quarter of 2011-12 fiscal from 5.33% in the previous quarter.

Centre for Monitoring Indian Economy (CMIE) in November 2011 scaled down India’s GDP forecast to 7.8% for 2011-12 from the earlier forecast of 7.9%.

Downward revision in the forecast for the mining index from 4.4% to 3.2%, manufacturing sector from 7.5% to 6.9% and electricity from 9 to 8.7% led to a further decline in GDP forecast for this fiscal. the Reserve Bank had also reduced its forecast for real GDP growth sharply from 8 to 7.6%. The rating agency Crisil had revised its growth estimate from 7.7-8% to 7.6%.

The index of industrial production growth slowed down to 2-4% and the wholesale price index-based inflation growth remained riveted to 9.5% despite sustained efforts by the RBI to rein in inflation by raising interest rates.
The lack of availability of coal in 2011-12 pulled down the mining index and led to delay of thermal projects. As a result the electricity generation forecast was revised.

Indian e-commerce Market Estimated to Grow to $24 billion by 2015 from the Current $6.3 billion. According to the study titled Indian Digital Consumer Industry by financial services firm Avendus, the number of people transacting online is expected to touch 39 million by 2015. The estimated online transaction will further boost the Indian e-commerce market which is estimated to grow to $24 billion by 2015 from the current $6.3 billion.

Currently 8-10 million people in India transact online, which is about 11% of the 80 million internet users in the country, which represents a penetration of 7% of the population and 17% of the urban population.

Mobile Subscriber Base in India increased to 881.4 million by October 2011 from 873.61 million. The overall teledensity (telephones per 100 people) in India reached 76.03%.

Telecom operators added 7.79 million mobile subscribers in October 2011, taking the total number of telephone users in the country to 914.59 million.

The number of active mobile subscribers, according to the visitor location register (VLR) data, during the month of was 626.18 million. VLR numbers provide details on active customers at any given point of time, excluding switched-off and out-of-the-coverage area customers.

As per the governement data released on 8 December 2011, food inflation dropped to almost a three-and-a-half-year-low of 6.6% for the week ended 26 November 2011. It is the lowest rate of food inflation, as measured by the Wholesale Price Index, since 9 August 2008, when it stood at 6.19 per cent. Food inflation stood at 8 per cent in the previous week ended 19 November 2011.

The sharp fall in food inflation was attributed to good harvest that reduced vegetable prices further, thereby raising hopes that the stubborn inflation will finally ease. Food articles have a 14.3% weight in the wholesale price index. Vegetable prices were 1.25 per cent cheaper than twelve months earlier in December 2010 while cereals, milk, eggs, meat and fish grew dearer at a slower rate.

The coal ministry decided to auction 54 blocks on upfront payment basis. The ministry however might not offer mines to power companies. The ministry is currently considering a proposal to earmark blocks to states that can call competitive bids for power supply.

The coal ministry also decided that blocks will not be given free to government companies. Though competitive bidding route would not be applicable to centre and state government projects, PSUs will have to pay reserve price for coal blocks. Preference would be given to companies setting up end use projects in the state that hosts the coal block and agree to match the highest bid.

The blocks lie in the coal belts of seven states of Chhattisgarh, Jharkhand, Maharashtra, West Bengal, Orissa, Madhya Pradesh and Andhra Pradesh.

According to the data released by the Commerce Ministry, exports registered a meagre 10.8 per cent growth at $19.8 billion in October2011. Demand contraction in traditional markets such as Europe and the US coupled with Indian government’s policies resulted in the dip in export. The growth rate was the lowest since October 2009 when it contracted by 6.6 per cent.

Imports soared in October 2011 rising by 21.7 per cent at $39.5 billion, leaving a trade deficit of $19.6 billion. The trade deficit was the highest ever in any month in the last four years. The trade imbalance was attributed to expensive crude oil and vegetable oils.

Securities and Exchange Board of India (SEBI) put forth the regulations for uniform Know Your Client KYC Registration Agency (KRA) on 2 December 2011. The move is expected to benefit investors as it would save them the trouble of repeating the KYC process while investing in various financial products.

The regulator allowed stock exchanges, depositories or any other Self Regulatory Organisation (SRO) to form wholly-owned subsidiaries that could be registered as a KRA. SEBI will consider applications to grant certificates of initial registration to a wholly owned subsidiary of a recognised stock exchange that have a nation-wide network of trading terminals, a wholly owned subsidiary of a depository or any other intermediary registered with the Board.

The Reserve Bank of India (RBI) on 2 December 2011 approved the creation of a separate category of non-banking financial companies for the microfinance institution (MFI) sector. The central bank also specified that such institutions need to have a minimum net owned fund of Rs 5 crore.

An RBI-appointed panel headed by YH Malegam had earlier recommended setting up of a special category of NBFCs operating in the micro finance sector. The panel had suggested a minimum net worth of 15 crore for an entity to qualify as an NBFC-MFI.

The RBI highlighted that the NBFC-MFIs should have a minimum net worth of Rs 5 crore. However, for those operating in the North-Eastern states, the slab was kept at Rs 2 crore.

State-owned Oil and Natural Gas Corp (ONGC) on 1 December 2011 announced two significant oil discoveries.

ONGC discovered oil in North Kadi area of Gujarat’s Mehsana district, which is the company’s major production centre. The discovery is a new layer, called play in industry parlance, and will add to the company’s output. ONGC also made another strike in the Panna area, 40 km from its Mumbai offshore field. This discovery will make incremental addition to the output from a cluster that the company is developing.

ONGC is to invest Rs 25000 crore in bringing to production nearly a dozen marginal oil and gas fields by 2014.

According to government’s data released on 1 December 2011, food-price inflation slowed to 8 per cent in the week ended 19 November 2011 from 9.01 per cent a week ended 12 November. Slower growth in food prices will likely help headline inflation to settle between 6 and 7 per cent before the end of the financial year in March 2012.

Prices of vegetable and cereals slowed but costs of fruits, milk, eggs, fish and meat did dip. the Wholesale Price Index (WPI) published on 1 December 2011 showed that vegetables were 5.13 per cent dearer year-on-year during the week under review. Onions became cheaper by 40.65 per cent year-on-year in the week ended 19 November, while potato prices were down by 10.98 per cent.

The Cabinet Committee on Economic Affairs (CCEA) approved a proposal for additional funds under the interest subsidy scheme to the tune of over 2000 crore rupees. This scheme has been extended for the small and medium enterprises until March 2012. It also covers handicrafts, handloom and carpet sector.

Approximately, 1654 crore rupees were released by the Reserve Bank of India as the interest subsidy claims so far. In another decision, the CCEA approved 1645 crore rupees proposal by Japan International Cooperation Agency, assisted Yamuna Action Plan Phase III project at Delhi.

The Insurance Regulatory and Development Authority (IRDA) announced two online initiatives to safeguard the interest of insurance-seekers. 

The first of the two online initiatives is the extensive guidelines pertainining to web aggregators and the second one relates to the launch of a mobile application to compare unitlinked insurance policies (ULIPS) from various companies and their premium rates.

According to the UNAIDS report, drafted jointly with the UNICEF and the World Health Organisation (WHO) and released on 30 November 2011, India houses half of Asia's HIV patients and is way ahead of China in disease burden. India also featured in the list of 22 countries prioritised for preventing mother to child transmission infection.

The report was titled- Global HIV/AIDS response – Epidemic update and health sector progress towards universal access: progress report 2011.

The government’s three oil marketing companies (OMCs) on 29 November 2011 cut petrol prices by Rs 0.78 per litre. It would now cost Rs 65.64 in Delhi against Rs 66.34 earlier. Earlier in November 2011 there was a cut of Rs 3.2 per cent in petrol prices.

Losses on retail sale of diesel, kerosene and LPG was moved up.The petrol cut is the second since the fuel’s price was decontrolled in June 2010.

As per the data released by the government on 30 November 2011, Gross domestic product (GDP) growth in the first half (April-September) of financial year 2011-12 moderated to 7.3 per cent from 8.6 per cent in the first six months of 2010-11. 

The economic growth for the July-September quarter slowed to an annualised 6.9 per cent, due to two years of progressive monetary tightening, low domestic business confidence and a retreat of foreign capital.

The Reserve Bank of India on 16 December 2011 left its policy rate unchanged at a three-year high of 8.5 per cent. RBI paused the hike after 13 consecutive rate hikes since March 2010.

The Reserve Bank of India kept its policy repo rate unchanged at 8.5 percent at its mid-quarter review two days after data showed November wholesale price index inflation at 9.11 percent, far lower than the 9.73 percent clocked in October.

The RBI also left the cash reserve ratio unchanged at 6 percent, despite market specualtion that it might cut the ratio in order to boost market liquidity.

Non-food credit grew 17.8% to over Rs 43.66 lakh crore in the 12 months ending 2 December 2011 according to data released by the Reserve Bank of India. The offtake had stood at Rs 37.04 lakh crore during the 12 months to 3 December 2010. For the second consecutive fortnight when the annualised credit growth stayed below 18%.

A per the experts, slowdown in credit growth is on account of the high interest rate regime, which was increased 13 times since March 2010 with a view to reining in high inflation. Deposits rose to Rs 58.69 lakh crore as on 2 December 2011 as against Rs 49.89 lakh crore as of 3 December 2010 marking a growth of 17.6%.

Market regulator SEBI on 15 December 2011 directed intermediaries not to outsource their core business activities and compliance functions.

According to SEBI, core business activities may include execution of orders and monitoring of trading activities of clients in case of stock brokers, dematerialisation of securities in case of depositary participants, investment-related activities in case of mutual funds and portfolio managers.

A committee on mutual funds, constituted by SEBI in December 2011 recommended to the regulator’s board to break down the bifurcation within the fee structure known as expense ratio.

According to the committee the measure will allow mutual funds to manage their expenses better and possibly improve their profits. In the absence of bifurcations within the expense ratio, fund houses will try to reduce recurring expenses which, in turn, will increase their profitability.

Currently mutual funds are allowed to charge up to 2.25% as expense ratio. Of the 2.25% charged as expense ratio, fund houses are allowed to accept only 1.25% as asset management charges. The remaining 1% has to be mandatorily used to meet recurring expenses, which include payment of annual trail fees, auditor & registrar charges and dealing charges to empanelled brokers.

The world's largest coal miner Coal India Ltd (CIL's) board on 14 December 2011 approved a proposal to acquire stakes in unlisted firms overseas, provided the offers were valid. The proposal was approved in the wake of Finance Ministry’s approval for the public sector firm to proceed with its plan to acquire unlisted firms overseas.

CIL plans to take up three offers - in Australia, Indonesia and the US. The PSU put together a war-chest of Rs.6,000 crore for acquisition of mines. b CIL sought clarifications from the Finance Ministry before entering into discussions with owners, having received proposals offering an IRR between 9 percent and 12 percent.

The Reserve Bank of India announced non-direct intervention measures in the wake of steady weakening of the rupee against the dollar. The non-direct intervention measures are aimed at curbing speculative positions in the foreign exchange market.

Re-booking cancelled forward contracts, whatever the type and tenor of the underlying exposure, by resident and foreign institutional investors has been disallowed. Forward contracts booked to hedge current account transactions regardless of the tenor were allowed to be cancelled and rebooked. Such facility was also available to hedge capital account transactions that were falling due within one year.

The apex bank through the new measures made it clear that forward contracts once cancelled cannot be rebooked.

Food inflation fell to nearly a four-year low at 4.35 per cent for the week ended 3 December 2012 due to significant fall in prices of wheat and vegetable owing to seasonal factors. Onions became cheaper by 46.03 per cent year-on-year during the week under review, while potato prices were down by 33.28 per cent.

While vegetables, on the whole turned cheaper by 12.28 per cent, prices of kitchen staples such as onions and potatoes slumped by 46.03 per cent and 33.28 per cent on a year-on-year basis. What prices also eased by 4.43 per cent.

The WPI (wholesale price index) food inflation moderated from 6.6 per cent in the week ended 26 November. food inflation was at 10.78 per cent in the same week of 2010. However headline inflation in November 2011 remained unacceptably high at 9.11 per cent.

A parliamentary committee on 13 December 2011 rejected almost all the key changes proposed in the Insurance Laws (Amendment) Bill 2008, including the key reform to allow 49% foreign direct investment in the sector.

The the Insurance Laws (Amendment) Bill was introduced in the Rajya Sabha in December 2008 to bring about improvement and revision of laws pertaining to the insurance sector in the changed scenario of private sector participation and was subsequently referred to the standing committee.

The government waived about Rs 3521 crore loan of handloom weavers in India to help revive the sector. Minister of State for Textiles Panabaka Lakshmi declared that the loan waiver is one of the components of the scheme of Revival, Reform and Restructuring Package for Handloom Sector.

The government’s initiative is likely to benefit 15000 handloom weaver's cooperative societies and approximately 3 lakh individual handloom weavers across India. Kerala topped the list with Rs 557.16 crore loan waiver, followed by Tamil Nadu with Rs 548.35 crore, Andhra Pradesh Rs 506.64 crore and West Bengal Rs 420.66 crore.

The coal ministry decided to bar captive coal miners from raising production beyond the approved level, rejecting industry demands and the proposal from the Planning Commission to allow excess output to ease fuel scarcity.

The coal ministry prepared a policy, under the policy, surplus coal should be sold to state-run Coal India Ltd at price lower than production cost.

According to the ministry, the Coal Mines Nationalisation Act of 1973 allows coal from captive block to be used exclusively for specified end use project and production of surplus coal should not be allowed to result in any undue advantage to captive block owner. The policy said coal so transferred to Coal India Ltd should disposed by e-auction.

According to data from research body All India Organisation of Chemists and Druggists (AIOCD), domestic drugmakers posted sales of Rs 4912 crore in November 2011 compared with Rs 4668 crore in October.

Indian drugmakers posted 21% month-on-month growth in sales of November 2011 which was the highest in the past 14 months. The growth in sales was driven by an increase in demand for respiratory anti-infective drugs.

CRISIL Research released its report on profitability of textile companies on 14 December 2011. According to the research firm, profitability of cotton yarn and man-made fibre (MMF) players are expected to improve over the next few quarters on account of decline in input costs and moderate demand growth.

During the first quarter of 2011-12, the textiles companies witnessed severe profitability pressures which led to significant erosion in their market capitalisation. cotton yarn and MMF players have registered a negative return of 48% and 37%, respectively in the past one year.

The Cabinet Committee on Economic Affairs( CCEA) on 13 December 2011 approved national electricity fund to provide subsidy of 8466 crore rupees for projects of electricity distribution sector for a period of 14 years. The fund will be operational within a period of six months to one year. The fund is being set up to provide interest subsidy on loans to be disbursed to the distribution companies both in the private and the public sector.

The objective is to improve the distribution network for areas not covered by Rajiv Gandhi Gramin Vidyutikaran Yojna (RGGVY) and Restructured Accelerated Power Development and Reforms Programme (R-APDRP) project areas.

According to official data released here on 22 December 2011, food inflation dropped sharply to an almost four-year low of 1.81 per cent during the week ended 10 December indicating an overall easing of prices. It stood at 4.35 per cent in the week ended 3 December. The fall was attributed to decline in prices of essential commodities such as onion and potato.

The food inflation figure for the week ended 10 December are the lowest since the week ended 9 February 2008, when it stood at 2.26 per cent.

The first pan-India satellite survey jointly commissioned by Indian Sugar Mills Association (ISMA) and the National Federation of Co-operative Sugar Factories Ltd (NFCSF) pegged the cane area for 2011-12 crop year starting October at 51.82 lakh hectares (lh). For the first time the survey was carried out State-wise and district-wise for the area under sugarcane, through satellite mapping on such a large-scale.

Satellite images of the cane area procured from the National Remote Sensing Agency, Hyderabad, were analysed using the Geographical Information Systems software by South India-based firm.

India's telecom ministry on 22 December 2011 informed mobile phone operators that they must scrap illegal mutual roaming agreements that allow them to provide seamless nationwide 3G services. 

As per the ministry, the pacts that let the operators offer 3G services outside their licensed zones are in violation of terms and conditions of their licences.

Credit rating agency Moody's on 21 December 2011 upgraded the credit rating of the Indian government's bonds from the speculative to investment grade. 

According to a release issued by the Finance Ministry, Moody's unified India's local and foreign currency bond ratings at Baa3. The ratings agency initially had separate rating for investors who choose to buy bonds in foreign currency and separate rating for those who have a rupee exposure. the ratings agency had a Baa3 foreign currency rating and a Ba1 local currency rating till September 2011.

The Union government directed cash rich PSUs to issue bonus shares to bring about a proper balance between paid up capital and accumulated reserves. The move is aimed at improving market image of state run firms.

The Department of Public Enterprises (DPE) in an internal note mentioned that there are a number of Central Public Sector Enterprises (CPSEs) which have reserves and surpluses more than three times of their paid up capital.

As per a joint study by the Federation of Indian Chambers of Commerce and Industry ( FICCI) and consultancy firm Ernst and Young, India's energy security is under severe pressure due to reasons like increasing dependence on imported oil, regulatory uncertainty and natural gas pricing policies.

As per the Integrated Energy Policy of the Government, India's requirement of primary commercial energy is projected to increase from 551 million tonne of oil equivalent in 2011-12 to 1823 mt of oil equivalent in 2031-32.

The directorate general of hydrocarbons (DGH), the technical arm of the oil ministry approved Cairn India’s proposal to commence production from Bhagyam, the second-largest oil field in the Rajasthan block. The company, which currently operates the block with a 70% stake, waited for a year to obtain approvals to start production.

The DGH gave its approvals to commence production from Bhagyam, along with both the management committee and the operations committee. The management committee comprises Cairn India, ONGC and representatives of the DGH and the petroleum minister while the OC is composed of only JV partners Cairn India and ONGC.

According to the International Data Corporation's (IDC) Quarter 3 2011 Mobile Phone Tracker release, the Indian mobile phone market grew 12% in units shipped in the July-September quarter of 2011 to clock 47.07 million units. Year-on-year too, there was a shipment growth of 13.8%.

The shipments were propelled by the dual-SIM handsets, which grew by 25.2 per cent over the previous quarter (April-June).

Diesel consumption in Delhi declined by a startling 26% in 2010-11 compared to 2009-10. Delhi was however found to have used 2.24% more petrol in the same period. 

As per the latest Delhi government figures, the consumption of diesel in the city was 8.11 lakh metric tonnes in 2010-2011 as against 10.98 lakh metric tonnes the year before.

According to data released on 29 December 2011, food inflation fell to its lowest level in six years at 0.42 per cent for the week ended 17 December with a sharp decline in prices of essential items like onions and potatoes. The fall is likely to prompt the RBI to cut interest rates at its policy review in January 2012. Food inflation declined to below 1 per cent, the lowest since April 2006.

Food inflation was in double digits in early November 2011. It stood at 1.81 per cent in the previous week ended 10 December 2011. Experts attributed the fall to a good kharif harvest as well as a high base.

The Board for Reconstruction of Public Sector Enterprises (BRPSE) recommended a financial package of Rs 257 crore to revive the sick newsprint unit NEPA. The initiative was taken after the government shelved its plan to divest majority stake in the company and revive it through a joint venture with the private sector.

The government holds 97.75% in NEPA. BRPSE also favoured the waiving off NEPA's interest and statutory dues worth Rs 304 crore.

The Board for Reconstruction of Public Sector Enterprises suggestion was made to NEPA's administrative ministry, the Department of Heavy Industry.

The Union government quadrupled (four times) the limits on loans that a bank’s internal committee can approve. The giovernment’s move is expected to quicken credit clearance at 26 state-run banks, including the Bank of Baroda and Punjab National Bank.

The government directed banks to set up a credit approval committee — comprising chairman, executive directors and three chief general managers who is to handle credit, finance and risk management functions.

The group can approve credit proposals up to Rs 400 crore. Currently, any loan above Rs 100 crore has to be vetted by the management committee of the board, which meet once a month, or 20 days. Under the old regime, a management committee of the board, which included a Reserve Bank of India nominee and two independent directors appointed by rotation, the bank’s chairman and managing director and executive directors, took these decisions.

Telecom Commission, the decision-making body of the Department of Telecommunications recommended a uniform licence fee of 8 per cent of adjusted gross revenues (AGR). 

Uniform license fee of 8 % was recommended as against the prevalent rate of 6-8 per cent depending upon the type of service and circle a firm is operating. The Commission’s move will put more financial pressure on telecom operators.

The Reserve Bank on 27 December 2011 directed all banks to issue cheques conforming to Cheque Truncation System (CTS) 2010 standard with uniform features from 1 April 2012 onwards.

All banks providing cheque facility to their customers were advised to issue only CTS-2010 standard cheques not later than 1 April 2012 on priority basis in northern and southern region. The two- northern and southern region will be part of the northern and southern CTS grids respectively. CTS-2010 standard cheques are to be issued by banks across the country by 30 September 2012 through a time bound action plan.

The Indian Banks Association ( IBA) and National Payment Corporation of India ( NPCI) were vested with the responsibility of coordinating and implementing the uniform cheque standard across the country by all participating banks.

The Securities and Exchange Board of India (SEBI) proposed new rules for investment advisors under which the advisors would be required to be registered with a self-regulatory organisation (SRO) before undertaking such a role (role of an advisor). 

The proposed framework was proposed with an objective to regulate investment advisory services in various forms, including independent financial advisors, banks, distributors and fund managers.

The Reserve Bank on 26 December 2011 tightened the prudential norms for the non-banking financial companies (NBFCs) under which the NBFCs will have to account for risks towards off-balance sheet items while computing capital adequacy requirement.

The NBFCs can thus participate in the credit default swap market only as users. As users, the NBFCs would be permitted only to hedge their credit risk on corporate bonds they hold.

According to the Tea Board data released in December 2011, tea imports declined by 14 per cent to 9.91 million kg in the April-October period of 2011. Imports of the brew fell by 15% to 14.15 million kg from 16.57 million kg in January-October 2010.

The country had imported 11.55 million kg of tea in same period in 2010.

India, the world's largest consumer of tea imports tea leaves solely for re-export to other countries. The dip in imports therefore signals lower re-exports.

India is the second-biggest producer of tea in the world and accounts for about 28% of global output and 14% of trade. There are around 1600 tea estates in India and the industry employs more than two million people.

The finance ministry in December 2011 directed state-run banks to do away with their separate promotion policies. The ministry's move was strongly opposed by the officer's union.

The fresh guidelines from the Finance Ministry aim at removing the anomalies across public sector banks and addressing severe manpower shortage by creating a common pool of managers. The initiative is likely to mark an end of fasttrack and super fast-track promotions at managerial levels in some public sector banks, including the country's largest lender, State Bank of India.

The information technology (IT) sector led by the top three listed companies, TCS, Infosys and Wipro, created the most jobs in the five years ending 2011 compared with other sectors. Increased employment in the sector was boosted by an over two-fold jump in aggregate revenue.

The data is based on the hiring trend of a sample of 600 listed companies that reported annual financials along with headcount information since 2006.

According to the RBI data, India's foreign exchange reserves fell by a steep $4.67 billion to $302.1 billion during the week ended 16 December 2011 on account of a fall in foreign currency assets. The dip marked the lowest in nine months. 

The forex reserves registered a fall for the sixth of the last seven weeks. The reserves declined by over $18 billion in the last seven weeks and are currently at their lowest level since March 2011.



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