May 2012 Economic Affairs

The Competition Commission of India (CCI) formed an Eminent Persons Advisory Group (EPAG) on 7 May 2012. The group is constituted to give advice to CCI, on issues impacting markets and competition. The group comprise Infosys founder N.R. Narayana Murthy, former Comptroller and Auditor General V.N. Kaul, former Deputy Governor of Reserve Bank of India Rakesh Mohan, Biocon Chairman and MD Kiran Mazumdar-Shaw, former Director, of IIM-Ahmedabad Bakul Dholakia, former Chairman of CERC S.L Rao, former Vice-Chancellor of NLSIU, Bangalore N.L Mitra. The Group will have interaction/meetings with the Commission two to three times a year.

60 per cent of rural India lives on less than Rs 35 a day

About 60 per cent of India's rural population lives on less than Rs 35 a day and nearly as many in cities live on Rs 66 a day, reveals a government survey on income and expenditure.

"In terms of average per capita daily expenditure, it comes out to be about Rs 35 in rural and Rs 66 in urban India. About 60 per cent of the population live with these expenditures or less in rural and urban areas," said Director General of National Sample Survey Organisation (NSSO) J Dash in his preface to the report.

According to the 66th round of National Sample Survey (NSS) carried out between July 2009 and June 2010, all India average monthly per capita consumer expenditure (MPCE) in rural areas was Rs 1,054 and urban areas Rs 1,984.

India, South Africa trade can reach $15 billion by 2015: Pratibha Patil

President Pratibha Patil said she is confident that trade between India and South Africa will reach USD 15 billion by 2015 as the two have become important trading partners.

Patil and South African President Jacob Zuma appreciated businesses in both the countries for having reached the earlier target of USD 10 billion by 2012, a year ahead of the schedule.

Meanwhile, the two sides also called for various steps to facilitate business including easier visa regime for Indian ICT companies and greater transparency for South African businesses in the Indian market.

Minister of State for Communications and IT Sachin Pilot, who is accompanying patil, called for a change in the South African visa regime to allow easier entry. He said Indian ICT companies consider Africa as an important market.

April 2012 Economic Affairs

The International Monetary Fund (IMF) on 27 April 2012 lowered India’s growth projection to 6.9 per cent for 2012. The multilateral agency in January projected Indian economy to grow to by 7 per cent for 2012. The slashed growth projection is broadly attributed to the country’s poor performance on the front of economic reforms and slowing investment.

Standard & Poor's downgraded credit rating outlook for India to negative from stable on 25 April 2012. The cut in credit rating is the reflection of India's widening fiscal and current account deficits. India’s fiscal deficit widened to 5.9% of gross domestic product in the fiscal year 2011-12, which is higher than the government's target of 4.6%. The country is performing equally bad on the front of foreign institutional investment as it witnessed a sharp decline in the FII over the past few months. India has drawn nearly 171.8 million dollar FII so far in April 2012 against more than 5 billion dollar in February 2012.The credit rating downgrading indicates that the government will now have to contemplate seriously over the long-pending economic reforms and push them through as soon as possible.

March 2012 Economic Affairs

The R B I on 26 March 2012 restructured the fair practices code (FPC) to be adopted by non-banking finance companies (NBFCs) while doing lending business. The guidelines issued by the central bank covered general principles on adequate disclosures on the terms and conditions of a loan and also adopting a non-coercive recovery method. The modified FPC is required to be put in place by all NBFCs with the approval of their boards within one month from the date of issue of this circular (26 March 2012). Also RBI directed that the FPC should be published on the web-site of the company for public information. The NBFCs were directed not to resort to undue harassment such as persistently bothering the borrowers at odd hours and use of muscle power with respect to loan recovery. In 2006, the RBI had issued FPC norms for all NBFCs to be adopted by them while doing the lending business

February 2012 Economic Affairs

The Reserve Bank of India (RBI) panel on priority sector lending headed by M. V. Nair, Chairman, Union Bank of India ,on 21 February 2012 proposed increment in the target (priority sector) for foreign banks to 40% of net bank credit from the current level of 32 per cent with sub-targets of 15 per cent for exports and 15 per cent for the MSE sector. The target of domestic scheduled commercial banks for lending to the priority sector is to be retained at 40 per cent of net bank credit.

January 2012 Economic Affairs

The Union government on 31 January 2012 revised the economic growth rate for 2010-2011 financial year to 8.4 percent in comparison to the previous estimate of 8.5 percent.The Indian economy, Asia’s third-largest slowed in recent quarters due to the impact of the global slowdown, high inflation and high interest rates.

The Reserve Bank of India (RBI) on 24 January 2012 cut the cash reserve ratio (CRR) by 50 basis points from 6 per cent to 5.5 percent with effect from 28 January 2012. RBI thus released Rs 32000 crore to banks. The RBI kept the repo rate unchanged at 8.50 per cent for the second consecutive time after raising it 13 times between March 2010 and October 2011. It also kept Reverse Repo Rate unchanged.

RBI lays down road map to make banks safer, avoid crisis repeat under Basel Committee recommendations

The Reserve Bank of India has laid out a six-year road map to make Indian banks safer and avoid recurrence of the 2008 crisis, but it will need an estimated Rs 1.5 lakh crore in capital at a time it is scarce.

The central bank has raised the equity component in overall capital and restricted dividend or bonus payouts when capital ratios fall close to mandated levels. It has also addressed banks' leverage ratios, which will shrink off-balance sheet businesses and investments in subsidiaries, to reduce risk.

The banking regulator also aims to reduce systemic risk by eliminating some dodgy entries in the books of accounts and explaining the cross-holdings of capital instruments among banks, which exposed many of them during the credit crisis.