02 Jan, 2017
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January 2, 2017
ND has initiated a new section of daily news, where our news desk compiles the latest news on the Indian economy, to keep our readers abreast and updated on daily economic state of affairs.
The economy news compilations bring business news reports that are relevant today and tomorrow, based on the new pattern of current affairs, and for English awareness. This gives vital inputs on the various sectors of the Indian Industry and trade.
Banking – Loan Rates
SBI, Union Bank and IDBI slash lending rates
HT Business: January 02, 2017
New Delhi: The State Bank of India (SBI), the country’s largest bank, on Sunday slashed its loan rates sharply by 0.90 percentage points across all tenure loans in one of the steepest cuts since the 2008 global economic crisis.
After the move, the so-called overnight marginal cost of lending rates (MCLR) fell to 7.75% from 8.65%.
The rate for one-year loans now stands at 8% (against the previous 8.90%), 8.10% for two-year loans and 8.15% for three-year loans.
Besides this, SBI’s women customers will be able to avail home loans at interest rates of 8.20% while others can avail it at 8.25%.
Helped by the substantial surge in deposits, the interest rate cut is expected to boost sentiments dampened by the government’s demonetisation move. The new loans rates came into effect from January 1.
Similarly, the Union Bank of India reduced its one-year MCLR by 65 basis points, or 0.65%, to 8.65%.
IDBI bank and the State Bank of Travancore had also announced a cut in lending rates on Friday. IDBI bank borrowers seeking three-year loans will be charged 9.30% — down 0.40% — while six-month loans have been pegged at 8.90%, down 0.35%.
IDBI bank will charge 9.15% on one-year loans against the current rate of 9.30%.
An estimated Rs 14.9 lakh crore was injected into banks through deposits in the days following Prime Minister Narendra Modi’s announcement scrapping old Rs 500 and Rs 1,000 currency notes on November 8. This raised expectations that banks would cut lending rates to boost credit growth, and spark a revival in private investments.
Lower lending rates will be welcomed by the Reserve Bank of India, which cut the policy rate by 175 bps or 1.75% since the start of 2015 but felt that banks were being too slow in passing the benefits to customers.
Modi on Saturday asked banks to keep the interests of the public in mind and do their best to uplift the poor, the lower middle class and the middle class.
DTAA – Double Taxation Avoidance Agreement
India, Singapore revise tax treaty
Business Standard: January 02, 2017
New Delhi: The government signed a pact with its Singapore counterpart on Friday, amending their decade-old tax treaty, gaining taxation rights over capital gains. This is the third double taxation avoidance agreement (DTAA) amended so far this financial year with a zero or low tax jurisdiction. The other two were with Mauritius and Cyprus. According to tax consultants, Mauritius would be the most attractive source of investments into India for debt funds and Singapore for equity investments.
Mirroring the revised India-Mauritius DTAA, the government has some grandfathering provisions (having the old rule continuing to apply for some existing situations, with the new one for all future cases) and a two-year transition benefit to investments from Singapore. The revised pact will take effect from April 1, 2017. For two years from that date, capital gains tax will be imposed at 50 per cent of the prevailing domestic rate. The short-term rate is 15 per cent at present. The full rate will apply from April 1, 2019.
“2016 has been historic, with all three tax treaties amended… The treaties were misused to round-trip domestic black money and bring it back to India through these routes. There has been a significant battle by India against black money. It is a happy coincidence that by amending these treaties, there has been a burial to the black money route that existed,” said Finance Minister Arun Jaitley on the revised DTAA.
Mauritius and Singapore are the top two sources for foreign direct investment to India, about half of the total direct flow. Total FDI from Mauritius over the past decade and a half is $95.9 billion. That from Singapore is $45.8 bn
The concessional rate of 50 per cent would be subject to fulfilment of conditions of Limitation of Benefit (LOB), an expenditure of at least Rs 50 lakh in Singapore in the previous financial year. It is Rs 27 lakh in the case of Mauritius.
“The Singapore route was widely used for treaty shopping. Investors were used to create shell companies, claiming it to be a resident of Singapore. This loophole has been plugged, to cover for revenue loss and black money via this route,” said Rakesh Bhargava, Director, Taxmann.
The rate of withholding tax on interest for Singapore has been retained at 15 per cent, as against 7.5 per cent in the case of Mauritius, making the latter a preferred source of investment into India by debt funds.
BHIM – launched
Aadhaar-based app launched to simplify digital payments
Business Standard: January 02, 2017
New Delhi: Prime Minister Narendra Modi on Friday launched an Aadhaar-based mobile payment application called BHIM (Bharat Interface for Money).
On day 50 of the window provided by the government to citizens to exchange or deposit old currency notes of Rs 500 and Rs 1,000 denominations, the Prime Minister at a ‘Digi Dhan Mela’ event in the capital, asked citizens to make at least five digital transactions, so as to understand the concept behind e-payments, and then use it extensively.
“Download it on a smartphone or on a feature phone. It is not necessary to have the internet for this app. In the next two weeks, one more work is being done, which will increase the power of BHIM so much that you would be able to withdraw money even with your fingerprints,” he said.
BHIM is a biometric and rebranded version of UPI (Unified Payment Interface) and USSD (Unstructured Supplementary Service Data). It is expected to minimise the role of plastic cards and point-of-sale machines, once believed essential for a less-cash society.
“In two weeks, we will make one more accomplishment; its security is being worked on. It will empower BHIM; you’ll only require your thumb to pay,” said Modi. He added this app would empower the poorest of the poor, with the thumb becoming the new identity.
The app is supposed to aid in digital payments of people who have a bank account but either do not have debit or credit cards or are unable to use these. At present, it is available only on the Android mobile operating system. It can be downloaded by merchants and used with a biometric reader, currently available for Rs 2,000. A customer only needs to use his or her fingerprint to pay from an Aadhaar-linked account.
The app would eliminate the fee payments for service providers like card companies such as MasterCard or Visa.
Jump in digital payments
Digital payment channels, such as mobile wallets, USSD and RuPay, have seen a massive uptake and rise in transactions with the demonetisation drive.
According to government data, the number of USSD transactions saw a 5,135 per cent jump, from 97 such deals a day on November 8 to 5,078 on December 25. The value of transactions on USSD — mobile short code message, used mainly for banking services on feature phones — during the same period grew 4,061 per cent, from Rs 1 crore a day to Rs 46 crore on December 25.
Foreign Affairs – INDO NEPAL
India to double power trade with Nepal
Livemint: January 02, 2017
New Delhi: India is laying more power transmission lines to Nepal to more than double its 320 mega watt (MW) power sales to Kathmandu and will look at importing power from there after some of its ongoing hydel projects lead to surplus capacity, the power ministry said.
Adding transmission infrastructure in neighbouring countries like Bangladesh, Bhutan, Myanmar and Nepal is part of India’s efforts to increase cross-border electricity trade and energy security.
A power ministry statement said Power Grid Corp. of India Ltd had assisted Nepal in preparing its short-to-long term electricity plan and accordingly, a number of high-capacity cross-border lines are being drawn.
“Initially, these interconnections would be utilized to transfer power from India to Nepal and later with the development of hydro projects in Nepal, these links would be utilized for transferring surplus power from Nepal to India,” said the statement.
From 1 January 2017 India will supply an extra 80MW to Nepal through the Muzaffarpur-Dhalkebar transmission line, taking its total supply to 400 MW. Expected opening of substations in Dhalkebar will lead to increase in power transfer to Nepal initially by 150 MW and subsequently by 300-400 MW, said the statement. Earlier this month India notified guidelines for cross-border power trading.
The Swedish newspaper was recently asked it to delete the reference made by President Pranab Mukherjee to the Bofors scam in an interview to it, as a claim protested by the Indian Government on 27 May 2015. India has expressed disappointment over the disrespect shown to the President, the newspaper has defended its right to publish what was said during the interview.
Know, who is Vijay Kelkar and what is PPP !
Vijay Kelkar is a renowned economist and a former Finance Secretary. He was appointed head of newly constituted committee to give recommendations to recast the model of Public-Private-Partnership (PPP) model in India. India is one of the largest PPP market with over 900 projects. The Kelkar committee will review the PPP policy, suggest a better risk-sharing mechanism between private developers and the government after analysing such projects.
Know, who is Yaduveer Krishnadatta Chamaraja Wadiyar !
Yaduveer Krishnadatta Chamaraja Wadiyar was crowned as the new Maharaja of of Mysuru (Mysore) royal family. He is the 23-year old grandson of Princess Gayathri Devi, who was the eldest daughter of the last Maharaja of Mysore, Sri Jayachamarajendra Wadiyar. The coronation was held at Mysuru’s famous Amba Vilas Palace, which was decked up for the occasion.
Know about Sepp Blatter!
Swpp Blatter, was re-elected as FIFA president for a fifth term at the 65th Annual Congress of FIFA held at Zurich for four year term.
Prince Ali bin al-Hussein of Jordan stood against Blatter in this election. It is worth mentioning that FIFA is going through a major controversy regarding corruption in the organisation with two FIFA vice presidents and a recently elected FIFA executive committee member still in custody.