Current Affairs - 6 April 2016

General Affairs 

Poor Honest, Generous; Rich Try To Evade Repaying Loan: PM Modi

• NOIDA:  In a veiled dig at large corporate defaulters like Vijay Mallya, Prime Minister Narendra Modi today said while poor people are generous and honest some rich borrowers look for ways to flee after taking loans.
  
  Addressing a function to launch government's financial inclusion programme Stand Up India, he said under the Prime Minister's Jan Dhan Yojana poor people were encouraged to zero balance account but they deposited Rs 35,000 crore.
  

  "This nation has seen the generosity of poor. Rich borrowers look for ways to run away after borrowing money from banks. The poor people were required to open zero balance account under the Jan Dhan scheme."
  
  "Look at their honesty, their self respect. They opted to put money into their accounts... Rs 50, 100, 200. The deposits exceeded Rs 35,000 crore. This is the generosity of our poor people," PM Modi said.
  
  He, however, did not name liquor baron Mr Mallya whose group company owes over Rs 9,000 crore to 17 banks, had left the country on March 2 and currently is in the UK.
  
  Mr Mallya's financial dealings are being probed by several investigative agencies, including CBI, Enforcement Directorate and tax department.

Piyush Goyal Attacks West For Its 'Double Standards' On Climate Change

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  NEW DELHI:  Attacking the Western world for its "double standards" in tackling climate change, Power Minister Piyush Goyal today said there is a "gap" in what the "West" says and what it does on climate change.
  
  "My concern is that there is a lot of gap in what is being said by the West and what is being delivered. There is no denying for the fact that for last 150 years, the West has enjoyed low-cost fossil fuels and developed their economies," Mr Goyal said.
  
  Most of the western world survived on coal. The coal consumption in the US, in per capita terms, is as much as India consumes in 2016. Today, in absolute numbers also, with one-fourth of population of India, the US consumes over 2-2.5 times more coal than the world's largest democracy, he added.
  
  "So, it is not as if the inconvenient truth came out very late. We knew this truth 50 years ago also. New South Wales University started developing solar technologies 45 years ago.
  
  "So, I think the reality is that West waited till it found cheaper sources of energy. Till shale gas become affordable, it kept talking about the inconvenient truth," he said at an event jointly organised by World Bank's International Finance Corporation, Exim Bank, NSE and Institute of International Finance in New Delhi.
  
  Mr Goyal, who also handles the portfolio of New and Renewable Energy and Coal, said the US keeps talking about the inconvenient truth, while at the same time India was doing convenient action.
  
  "I would still urge the people of the US to recognise that when you talk about the world's two biggest challenges being terrorism and climate change, I think they need to go that extra mile to demonstrate their commitment," Mr Goyal said.
       
  He further said: "I appealed to the US, when negotiations were going on, that we can keep renewable energy out of the WTO framework. After all we decided in Singapore that no country will put import duties on renewable energy, on solar products.
  
  "I don't see any reason why the West could not show some magnanimity and keep renewables out of the WTO framework, particularly when Indian manufacturers had such a large heart and had withdrawn the anti-dumping request, which had been ruled in their (manufacturers) favour and could have imposed huge anti-dumping duties on the US."
  
  Today, there are 16 state-run programmes in the US where the domestic industry is protected in solar equipment procurement and this "double standard" has to stop someday, the minister said.

Dilli Haat To Have Permanent Memorial To Kalam: Delhi Culture Minister

• NEW DELHI:  Delhi government has decided to build a permanent memorial to APJ Abdul Kalam at a famous market in New Delhi where belongings of the former President including his books and musical instruments would be on display.
  
  "I am visiting Rameswaram tomorrow to bring back APJ Kalam's belongings to Delhi. At his family home, there are several of his belongings of the former President including books, veena and spectacles," Delhi Culture Minister Kapil Mishra said today.
  

  Dr Kalam's possessions from his residence at 10, Rajaji Marg in the national capital, had been sent to Rameswaram in Tamil Nadu by the Centre, after his death.
  
  "The belongings will be taken to Delhi from Rameswaram through trucks. They will be kept inside the Delhi Assembly till July 27 and thereafter, they will be permanently placed at Dilli Haat, INA where his memorial would be constructed," Mr Mishra told reporters in New Delhi.
  
  The Delhi government will also have a permanent exhibition on Dr Kalam at Delhi Haat where his books will be displayed and used for research and other purposes.
  
  Mr Mishra had criticised the Centre's move to allot Mr Kalam's official residence at 10, Rajaji Marg to Union Culture Minister Mahesh Sharma after the former President's death.

42 Candidates In Second Phase Of Assam Elections Have Criminal Cases

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  NEW DELHI:  Forty-two of the 523 candidates contesting in the second phase of Assam Assembly polls have criminal cases and 32 of them face serious offences like murder, kidnapping and crime against women, according to an analysis by two think thanks.
  
  The All India United Democratic Front tops the list with 10 (21 per cent) out of 47 candidates fielded by it have declared criminal cases followed by BJP's five (14 per cent) out of 35 nominees, as per the report by Assam Election Watch and Association for Democratic Reforms (ADR).
  
  Five (9 per cent) out of 57 candidates given tickets by Congress have declared criminal background while CPI and CPI(M) have fielded one candidate each with criminal background.
  
  A total of 525 candidates are contesting in 61 constituencies in the second phase on April 11. Polling in the first phase for 65 seats had taken place yesterday.
  
  Assam Election Watch and ADR said they analysed self-sworn affidavits of 523 candidates out of 525 who are contesting the second phase of the polls.
  
  "Three (5 per cent) out of 57 candidates from Congress, 4 (11 per cent) out of 35 candidates from BJP, 8 (17 per cent) out of 47 candidates from AIDUF, 1 (11 per cent) out of 9 candidates fielded by CPI-M and 12 (6 per cent) out of 216 Independent candidates have declared criminal cases against themselves," the analysis said.
  
  It said two candidates have declared cases related to murder while two other have said they are facing cases of attempt to murder.
  
  Similarly two candidates have declared cases relating to kidnapping while two others have said they were facing charges relating to assaulting and outraging modesty of women.

France Puts Panama Back On Tax Haven Blacklist

• PARIS:  France will put Panama back on its blacklist of uncooperative tax jurisdictions, its finance minister said on Tuesday after media revelations about a Panamanian law firm specialised in setting up offshore firms.
  
  "Panama is a country that wanted us to believe that it could respect the main international tax principles and thus it was taken off the tax haven blacklist," Michel Sapin told lawmakers during question time in parliament.
  

  "France has decided to add Panama back on the list of uncooperative countries with all of the consequences that that will have for those who have dealings with Panama," he added.
  
  Panama is a far bigger financial centre than the other jurisdictions on France's tax haven list, which currently includes Botswana, Brunei, Guatemala, Nauru, Niue and the Marshall Islands.
  
  Panama has come under fire from the Paris-based Organisation for Economic Cooperation and Development for back-tracking on a commitment to automatically share tax information with other countries.
  
  The country increasingly stands out for its failure to push ahead with automatic tax information exchange since all other major offshore financial centres having committed to it in the coming two years.
  
  Of the 7,800 tax regularisation cases French authorities dealt with last year, 515 involved a shell company registered in Panama, the Finance Ministry said on Monday.
  
  Following a massive leak about clients of Panama law firm Mossack Fonseca, France's financial prosecutors opened a preliminary investigation into aggravated tax fraud to establish whether French taxpayers are concerned.
  
  The leak could prove to be a boon for the Socialist government in the midst of a tax evasion clampdown that netted over 12 billion euros ($13.6 billion) last year.

Business Affairs 

Sensex slips 516 points, Nifty at 7,603 as RBI policy disappoints, Bank Nifty down 3%

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  The S&P BSE Sensex tanked 516 points in trade on Tuesday, while broader CNX Nifty ended just a tad above its key 7,600-mark as Reserve Bank of India's first bi-monthly monetary policy review for fiscal year 2016-17 disappointed the Dalal Street.

  The headline indices skidded after RBI governor Raghuram Rajan cut repurchase (repo) rate by merely 25 basis points against the market expectations of 50 bps rate cut. However, the RBI dangled the prospect of another cut later this year if inflation trends stay benign.

  The 30-share index ended the day at 24,883, down 516.06 points, while broad-based 50-share index quoted 7,603, down 155.60 points at close.

  Market breadth turned fairly negative with 29 of the 30 Sensex components ending the day in red.

  Adani Ports was the worst performing stock on both the benchmark indices and lost over 6 per cent on the Bombay Stock Exchange (BSE).

  Bank Nifty, which had surged 15.7 per cent in March, were off 3.06 per cent. State Bank of India fell 5.69 per cent, while ICICI Bank lost 5.37 per cent.

  Traders welcomed other measures announced in the policy review, including reducing the cash proportion of banks' reserve requirements that must kept with the central bank, while also pledging to inject more long-term liquidity.
  

  But they also felt these moves would play out in the longer term and said the 25 bps price cut had already been priced into markets.

  "We feel the measures taken would tantamount to more than a 25 bps repo rate cut. But this would take time to sink into the markets," Arun Gopalan, Vice President, Research, Systematix.

  "This leaves little to celebrate in the immediate term, therefore the markets would offer a tepid reception to the policy. But we feel the measures would allow better transmission and so it would reflect in the markets over time."

  The negative trend seen in Asian markets which were pressured by slumping crude oil prices and mixed messages from Fed policymakers on the outlook for US interest rate rises also contributed to losses.

  Among Asian markets, Japan's Nikkei settled the day 2.42 per cent lower, Hong Kong's Hang Seng index shed 1.57 per cent, while China's Shanghai Composite bucked the trend to gain 1.45 per cent.

  A lowdown on markets today

  11:35 am

  Sensex at 25,084, down 314.68 points

  Nifty at 7,661, down 97.05 points

  09:20 am

  Sensex at 25,307, down 92.29 points

  Nifty at 7,729, down 28.95 points

RBI cuts repo rate to five-year low of 6.5%; raises reverse repo

• 
  

  The Reserve Bank of India governor Raghuram Rajan on Tuesday cut repurchase (repo) rate by 25 basis points to five-year low of 6.5 per cent in its first bi-monthly monetary policy review for 2016-17.

  Repo rate is the discount rate at which the banks borrow funds from the central bank.

  The RBI left the Cash Reserve Ratio (CRR) rate unchanged at 4 per cent, but in a surprise move, it raised the reverse repo - or the rates lenders charge to the central bank - by 25 basis points to 6.0 per cent, while taking measures to ensure more availability of cash in the banking system.

  The RBI had cut its repo rate by 125 basis points last year, and most analysts had anticipated a further reduction as inflation has slowed and the Budget 2016 kept borrowing and spending in check.

  But banks, complaining of tight cash conditions, have only lowered their lending rates by around 60 bps, preventing the RBI's rate cuts from feeding through to the broader economy.

Five key takeaways from RBI monetary policy

• 
  

  Continuing with the accommodative stance, RBI Governor Raghuram Rajan on Tuesday reduced the repo rate by 25 basis points to 6.50 per cent. In a media interaction, Rajan responded on a range of issues:

  • Rate cuts: Conditions for More Rate Cuts in Future Monetary policy stance remains accommodative. Going forward , we  would be looking for further monetary room  in  signs of  good monsoon, further reading of low headline inflation, indication of softening in core inflation  and  further evidence of transmission of interest rates cut.
  • Transmission of interest rates: We hope to see  significant transmission in the next few months. We have already made 150 basis points cut in the repo rate since  January last  year. There is already a 25-50 basis points reduction that has come about from new marginal cost of funding method. It has happened  before the policy. It is a significant change from the base year which was in operation earlier. Don't look at today's 25 basis points cut in isolation. Look at it as a composite  reduction. The banks now also have liquidity to transmit more to borrowers.
  • More cash in the system: The cash with the public has increased quite a bit. It is Rs 50-60,000 crore in excess than what we were estimating.  We have to figure out. We are trying to understand it. The cash does increase during election time.  You see not just in the state going to election and also neighbouring state. We need to understand it.
  • Panama investigations: We are obviously part of the investigating team that  is going to look into this  matter. It is important to note that there also legitimate reasons to have accounts outside.  We have to see what is legitimate and what is not legitimate. That is the process of investigation (to find out).
  • Reasons for not making NPA defaulter list public: The regulator doesn't make a loan. At a time when economy was getting into trouble , RBI decided to give forbearance in 2010 based on certain assumptions. In the Kingfisher case , it was based on estimates of whether industry will recover or not. Similarly, there were letters from the airline industry and others that the industry will recover. The act of default happens in business  because of variety of reasons. We have no problem in publishing the wilful defaulters list. In fact , some courts have also prevented banks from publishing such list.

Credit Suisse, HSBC dismiss 'Panama Papers' tax avoidance allegations

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  Credit Suisse and HSBC, two of the world's largest wealth managers, dismissed on Tuesday suggestions they were actively using offshore structures to help clients cheat on their taxes.

  Their comments came a day after a leak of four decades of documents from a Panamanian law firm that specialises in setting up offshore companies showed widespread use of those instruments by global banks on behalf of their clients and triggered a raft of government investigations across the world.

  The so-called "Panama Papers ", revealed through an investigation by the International Consortium of Investigative Journalists (ICIJ), exposed financial arrangements of politicians and public figures including friends of Russian President Vladimir Putin, relatives of the prime ministers of Britain, Iceland and Pakistan, and the president of Ukraine.

  Credit Suisse CEO Tidjane Thiam, who is aggressively targeting Asia's wealthiest for growth, said his bank was only after lawful assets.

  "We as a company, as a bank only encourage the use of structures when there is a legitimate economic purpose," Thiam, who took the helm at Switzerland's second-largest bank last year, told a media briefing.

  Separately, HSBC said the documents pre-dated a thorough reform of its business model.

  "The allegations are historical, in some cases dating back 20 years, predating our significant, well-publicized reforms implemented over the last few years," said Gareth Hewett, a Hong Kong-based spokesman for HSBC.

  HSBC and Credit Suisse were named among the banks that helped set up complex structures that make it hard for tax collectors and investigators to track the flow of money from one place to another, according to ICIJ, which based its reports on the leaked documents from the Panamanian law firm, Mossack Fonseca.

  More than 500 banks, their subsidiaries and branches registered nearly 15,600 shell companies with Mossack Fonseca, according to ICIJ's analysis of the records. The vast majority of them were created since the 1990s, ICIJ said on its website.

  Thiam, in Hong Kong to attend Credit Suisse's annual Asian Investment Conference, acknowledged the Swiss wealth manager does use offshore financial structures, but only for very wealthy customers with assets in multiple jurisdictions, and it did not support their use for tax avoidance or allow them without knowing the identities of all those concerned.

  "We do not condone structures for tax avoidance," he said. "Whenever there is a structure with a third party beneficiary we insist to know the identity of that beneficiary."

  Credit Suisse agreed in May 2014 to pay a $2.5 billion fine in the United States for helping rich Americans evade taxes. Several Swiss-based wealth managers, including cross town rival UBS Group AG, also had to pay large fines in the United States for the same reason.

  HSBC, which also had wealth management operations in Switzerland, agreed in 2012 to pay $1.92 billion in U.S. fines, mainly for allowing itself to be used to launder drug money flowing out of Mexico.

  The tax spat with the United States critically undermined traditional Swiss banking privacy laws and resulted in a radical overhaul of Swiss private banking, a tightening of global tax compliance standards as well as massive outflows from Swiss bank accounts.

FIIs back with a bang! India all set to beat EM peers in next 6 months, say analysts

• 
  

  The domestic stock market may have trailed behind other emerging markets (EMs) in the first quarter of calendar year 2016, experts believe, there is no reason to writeoff India story in the EM space as yet.
  
  Data suggested that the benchmark S&P BSE Sensex has lost a bit over 3 per cent so far this calendar year, in stark contrast to up to 16 per cent rise in emerging markets such as Brazil, Russia, Taiwan and South Korea during the same period.
  

  

  
  

  Nonetheless, independent market analyst Sudip Bandhopadhyay finds it incorrect to deduce that India is not finding as much FII interest as others. He noted that stock markets across Brazil and Russia have recovered from significantly lower levels, which they tested last year on commodity price slump.
  
  "Markets in Brazil and Russia had crashed last year on account of drastic drop in commodity prices, coupled with other corruption and governance issues. From those significantly lower levels, the markets in Brazil and Russia have recovered marginally, predominantly on the back of crude oil moving up from below $30 per barrel to around $40 per barrel. There are still significant problems in those markets and FIIs will not be favouring them over India," said Bandhopadhyay.
  
  Umesh Mehta, Head of Research, SAMCO Securities said, "Markets like Brazil were drowned in severe multi-year bear market phase and, therefore, they could stage a strong comeback now. While India witnessed a long-running bull market phase at that time and couldn't showcase similar jump the way its emerging peers did."
  
  "There cannot be apples to apples comparison. If you compare global stock markets in a larger perspective, you would see each market has its own cycle. Domestic market witnessed selling pressure only because these were costlier in terms of relative valuation, but it continues to offer a lot of value to foreign institutional investors (FIIs)," said Mehta.
  
  Crackdown in the Chinese markets, crash in oil prices and the US Federal Reserve's flip-flop on interest rate hike cycle pushed global markets including India significantly lower as the year 2016 kicked off. However, post such correction, the domestic market did recover in March 2016 and attracted significant FII investments.
  
  Data available with NSDL showed that FIIs invested to the tune of Rs 21,143 crore in the Indian equities in March 2016. This is in comparison with Rs 16,647 crore outflows that the domestic market witnessed in January and February combined. FIIs have poured in over Rs 4500 crore in just two trading sessions in the month of April.
  
  Bandhopadhyay expects the domestic market will continue to attract FII investment and will outperform the EM block in the next three-six months.
  
  "However, for this to happen, Indian interest rates need to start coming down and monsoon has to be good. Once these factors are taken care of, corporate results in India will start improving, leading to future valuation becoming more attractive," said the expert.
  
  Mehta of SAMCO Securities also said a lot of money is expected in the Indian shores as valuations are reasonable, He added that Indian markets will stand out in the next three-six months, and the momentum will continue.

General Awareness

India’s first semi-high speed train ‘Gatimaan Express’ flagged off

• • 
    

    Railways Minister Suresh Prabhuflagged off the Gatimaan Express from Delhi’s Hazrat Nizamuddin station, Gatimaan Express, India’s first high speed train, crossed its maiden trip of 188 Kms in 101 minutes.

    • The train runs at a speed of 160 km per hour, covering the 184 kilometre distance between Delhi and Agra in 105-110 minutes. Gatimaan Express which is India’s first semi-high speed train.
    • The Train coaches have been made at Kapurthala Railway Coach Factory in the Punjab and bio-toilets developed by the Defence Research and Development Organisation (DRDO).
    • There will be two sets of menu for vegetarian and non-vegetarian passengers apart from cakes and wafers.

    Facts that you should know about Gatimaan:  

    • The cost of train is around Rs 50 crore.
    • The train is equipped with a 5,400 Horse Power (HP) electric locomotive engine.
    • The fare for the AC chair car of Gatimaan Express car750and for the executive class, Rs.1,500.
    • The Express will have Executive Class and Chair Car category of seats and also catering facility.
    • The train features extra advance facilities like automatic fire alarm, emergency braking system along with the passenger information system and sliding doors inside the coaches.

    Slowest Train India:

    The Nilgiri Mountain Express with an average speed of 10 kmphhas the distinction of being India’s slowest in India.

    Longest Train in India:

    Vivek Express is the longest route on the Indian Railways network, in terms of distance it covers 4,233 km and time, and is the 9th longest in the world.