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Current Affairs - 12 January 2017

General Affairs 

India Gives Over Rs. 387 Million Aid To Nepal For Embankment Work
  • India on Wednesday provided assistance of about Nepalese Rs. 619.6 million  or Rs. 387.5 million to Nepal's Ministry of Irrigation for construction of embankments on the Kamala, Bagmati and Lalbakaiya rivers.

    These rivers have been creating perennial flood crisis on the Indian side of the border and India has been providing financial assistance since 2008 for the embankments along these rivers.

    India's Ambassador to Nepal Ranjit Rae handed a cheque of the assistance amount to Minister for Irrigation Deepak Giri amidst a programme at his ministry in Kathmandu.

    On the occasion, highlighting various dimensions of the Nepal-India relations, Minister Giri praised the Indian assistance for river control works in Nepal.

    The Indian Ambassador pledged the continuation of the Indian support and assistance in Nepal's development endeavours and efforts to control natural disasters, including the water-induced ones, in the days ahead.

    Construction of embankments is an important activity aimed at flood control and water resources management, which benefit several million people inhabiting the watershed of these rivers, said an Indian Embassy statement.

    With the present assistance, the total grant assistance already disbursed for embankment construction along these rivers stands at over NRs 4.5 billion.

    'Mitron' And 'Achche Din' In Rahul Gandhi's Attack On PM Narendra Modi
    • "Mitron," said Rahul Gandhi in one of the many jibes he took at Prime Minister Narendra Modi in two speeches he made at a day-long meeting of his Congress party, delivering another scathing assessment of the BJP government's notes ban. His parting shot, "The UP elections will be a lot of fun."

      Rahul Gandhi's closing speech wrapped up a day that saw top Congress leaders attack the Modi government. "Like a magician, he said, 'Mitron put your hands in your pocket.' People did as he said...and then he said, 'the money in your pockets are now just pieces of paper,'" Mr Gandhi said, referring to PM Modi's announcement in November of a ban on 500 and 1000 rupee notes in an address to the nation peppered with the salutation "mitron" or friends.  

      Cheered by workers and leaders of his party, Mr Gandhi used another term made famous by PM Modi to attack him when he said, "People keep asking when will Acche Din come. They will come only when the Congress comes back to power in 2019."  

      He described demonetisation as the "worst decision" of India's history and accused PM Modi and the BJP of weakening institutions built over the years. "For the first time India's Prime Minister is being ridiculed the world over...never before every single economist of any repute said that the Prime Minister has taken an ill-conceived decision," Mr Gandhi said adding that, "The notes ban was a personal decision of Modi ji that was forced upon the RBI."

      The BJP's Shahnawaz Hussein dismissed Mr Gandhi's attack saying no one is listening. "He brings PM's name to create his own importance...Rahul Gandhi does per time politics. However he must know that people are with PM Narendra Modi. People have rejected the Congress," the BJP leader said. The BJP says its gains in elections held after the notes ban shows the people support the move, aimed at uprooting corruption and black money.

      In recent weeks, Rahul Gandhi has led an opposition charge against the government's decision and its impact on people amid a severe cash crunch. His next big test is elections next month in five states including Uttar Pradesh.

      The 46-year-old has been steering the party with his mother and party president Sonia Gandhi unwell. Mrs Gandhi did not attend the day-long event at the Talkatora Sports Stadium in Delhi today.

    At Vibrant Gujarat, Arun Jaitley Says 'Excessive Paper Currency Has Its Vices'
    • Union Finance Minister Arun Jaitley today pointed to some unexpected upsides of the currency ban today while addressing a session at Vibrant Gujarat 2017, India's biggest investors' summit, on the progress of the government's flagship Goods and Services Tax or GST.  

      Amid reports of a slowdown in certain sectors in the aftermath of the government's decision to abolish 500 and 1,000 rupee notes, Mr Jaitley said, "Excessive paper currency has its own vices, leads to its own temptations. We have seen its impact in India''.

      "Difficult decisions initially pass through difficult phases. Historic decisions have temporary pain attached to them," the minister further said, referring to the government's November 8 announcement banning 500 and 1000 rupee notes to root out corruption and stop terror financing.

      The landmark GST and the notes ban will "boost growth" and their impact will be seen this year, the finance minister said. "After transient impact, demonetisation will lead to cleaner and larger GDP."

      Economists have slashed growth forecasts to about 6.4 per cent for the new financial year that starts in April -- a slide from the current over 7.5 per cent. Mr Jaitley, however, has dismissed reports of economic disruption, saying tax collection has increased substantially over last year.

      Today, the minister expressed confidence that the contentious issues in the GST, over which the Centre and the states are locked in argument, will be resolved in the next few weeks and the landmark tax reforms will meet the April 1 deadline for rollout.

      "Most of the issues have been sorted out, some critical issues remain and these critical issues over the next few weeks we will try and solve out," Mr Jaitley told investors at the Vibrant Gujarat Summit.

      Reserve Bank Governmor Urjit Patel later attended a session on International financial centres, but refused to touch upon the demonitisation issue. Instead, he focused broadly on how effective international financial centres can be. Prime Minister Narendra Modi had inaugurated the country's first International financial centre few days ago in Gandhinagar.

    China Won't 'Sit With Arms Crossed' If India Sells Missiles To Vietnam: Chinese Media
    • Any moves by India to step-up military ties with Vietnam to counter China will create "disturbance" in the region and Beijing will not "sit with its arms crossed", state media said today, taking exception to a report that New Delhi plans to sell surface-to-air Akash missiles to Hanoi.

      "If the Indian government genuinely treats its enhancement of military relations with Vietnam as a strategic arrangement or even revenge against Beijing, it will only create disturbances in the region and China will hardly sit with its arms crossed," an op-ed in the Global Times said, highlighting China's concerns over reports of supply of Akash surface-to- air missile system to Vietnam.

      The supply of missiles was supposed to be a "normal arms sale, yet was portrayed by the Indian media as a response "to counter the Chinese threat", it said, referring to reports that the missile sale was in response to China blocking India's move to become member of the Nuclear Suppliers Group (NSG) and to block a United Nations ban on Jaish-e-Mohammed terrorist Masood Azhar.

      "There should be no dispute when India decides to intensify its military ties with Vietnam, a crucial member of ASEAN as well as a key pillar of India's Act East Policy. Yet such ties should be built for the sake of peace and stability in the region, rather than stirring up troubles or anxiety for others."

      "However, when India and Vietnam are in talks about possible sales, New Delhi seems to keep taking a sneak peak at Beijing as if the deal is stealthily aimed at China," it said.

      Global Times, which is part of the ruling Communist Party of China's official group of publications, has been carrying articles targeting India almost on daily basis with aggressive and hostile language.

      While striking threatening posture against India over its increasingly close-knit ties with Vietnam, another article in the same daily today warned Hanoi that it must improve ties with China notwithstanding the South China Sea dispute.

      "Aside from its endeavour to improve relations with China, Hanoi must deal with rising nationalism at home intermingled with anti-China and anti-Communism sentiment at times, which is adverse to the CPV's (ruling Communist Party of Vietnam) leadership itself, as well as the development of China-Vietnam relations.

      "Vietnam's leaders must have realised the importance of the issue and they have spared no efforts in developing cooperation with China in politics, economy and culture," it said, referring to the visit of Nguyen Phu Trong, the general secretary of CPV, to Beijing starting tomorrow during which he is scheduled to have talks with top Chinese leaders.

      Vietnam, along with Philippines, Malaysia, Brunei and Taiwan, questions Beijing's claims over almost all of the South China Sea, and China has been seeking to pacify Hanoi, highlighting the fraternal ties between the Communist Party of China and the Communist Party of Vietnam.

      The article on India said "due to geopolitical factors, some nations have been cozying up to India over the years, which to a large extent contributed to India's fruitful development".

      "New Delhi understands that the best strategy for itself is to continue its collaboration with all parties, instead of picking a side and turning hostile to one another. Otherwise, it might not only turn others' troubles to its own puzzles, but also suffer enormous losses of development opportunities."

      "During a short visit Indian Prime Minister Narendra Modi paid to Vietnam in September last year, an expert in India voiced that India can make the same statement in China's backyard that they do in ours. Yet Vietnam is not a backyard to any country. Such a statement only mirrors India's outdated diplomatic mindset."

      "India has a dream to grow into a great power. But under today's international circumstances, it will be extraordinarily hard to achieve the goal on its own. What India needs is more pragmatic cooperation with other countries," the report said.

      "Beijing always emphasises the importance of cooperation with New Delhi and hopes the latter will join the Belt and Road initiative which will help promote the country's infrastructure construction, improve connectivity within the region and may even turn into a push to solve the India-Pakistan contradictions," it said.

      "It is hoped that the hype in the Indian media does not represent the country's government. There are divergences between Beijing and New Delhi, yet there are more common interests that await the two to explore," it added.

    No Probe Into Sahara Diaries Case Against PM Narendra Modi, Others, Says Supreme Court
    • There will be no probe by a Special Investigation Team into the politically sensitive Sahara diaries case - which involves alleged bribes paid to politicians including Prime Minister Narendra Modi when he was the Gujarat Chief Minister -- the Supreme Court has said. The top court has said there is not enough evidence in the case.

      "If investigation is ordered on the basis of inadmissible evidence like this, constitutional functionaries can't function and democracy will not be safe," the court said.

      On November 14, the court had said there was not enough evidence to order a probe into the matter. Another hearing took place today after a fresh affidavit was filed by lawyer-activist Prashant Bhushan, who sought a court-monitored investigation into the case.

      Mr Bhushan argued that though the Sahara-Birla documents do not prove that the politicians named in them received kickbacks, a First Information Report should be filed against the people named and the subsequent investigation would bring out the truth.

      As per a Supreme Court judgment, a First Information Report has to be filed if any crime has been committed, he added.

      Appearing for the government, Attorney General Mukul Rohatgi told the court that there is no evidence to prove that Mr Modi was paid by corporate houses. No one in country would be safe if such documents are accepted as legal evidence, he added.

      The "Sahara diaries" is a collection of papers seized by the Central Bureau of Investigation and the Income Tax department during raids on Sahara-Birla offices in 2013 and 2014.

      The list reportedly contained names of politicians from different parties, along with amounts paid to them as bribes and included the names of Prime Minister Narendra Modi while he was Gujarat Chief Minister and Congress leader Sheila Dikshit.  

      A huge political controversy grew around the matter following the notes ban controversy when Congress vice-president Rahul Gandhi accused PM Modi of "personal corruption". The opposition has alleged that the Prime Minister has been given unwarranted protection by tax officials, who decided not to investigate the Sahara Group.

      The decision to prosecute Sahara, made in August last year, had been overturned in November.

    Business Affairs 

      National Stock Exchange Receives Over 90 Applications For MD & CEO Post
      • More than 90 persons have applied for the post of Managing Director and CEO at the National Stock Exchange (NSE). The country's largest bourse started the selection process after the sudden resignation of Chitra Ramkrishna as MD and CEO on December 2.

        While a four-member search panel is looking for a suitable candidate, senior executive J Ravichandran has been given the interim charge. Sources said the exchange has received over 90 applications for the top job and the last day for applying was today.

        Most of the applicants are from banks and financial institutions while there are also people from non-financial background who have applied, sources added. 

        Public interest directors at NSE -- Dinesh Kanabar and TV Mohandas Pai -- industrialist Anand Mahindra and former RBI Deputy Governor Usha Thorat make up the four-member search panel.

        Consultancy Egon Zehnder has been appointed to help with the hiring process.

        According to sources, NSE is expected to seek approval from capital market regulator Sebi by mid-February.

        Since a new chairman is likely to be in place at the Securities and Exchange Board of India (Sebi) in  March, it is not immediately clear whether approval would be granted by incumbent U K Sinha or his successor.

        The filling up of the top post would also be closely watched by investors as the exchange is preparing for an initial public offer which is expected to be one of the biggest in recent times.

        In a surprise move, Ms Ramkrishna, on December 2, quit with immediate effect presumably over differences with some board members, after having served the premier bourse for over two decades since its inception.

        The exit of 52-year-old Ramkrishna, one of the few women executives heading a leading exchange globally, also came at a time when NSE has been in focus over a new regulatory framework for high frequency trades and co-location facilities, which some believe give undue advantage to some brokers and traders.

        India Tops Domestic Air Traffic Demand, Grows At 22.3% In November
        • India's domestic air passenger traffic grew by 22.3 per cent in November 2016, topping the growth chart worldwide for the 20th straight month while there was little sign of demonetisation having any immediate negative impact on passenger numbers, according to IATA.

          The global grouping of airlines on Wednesday said India continued to witness over 20 per cent growth in domestic air passenger traffic for the 13th consecutive month in November 2016 -- when global passenger traffic too saw the strongest demand in nine months.

          Globally, total revenue passenger kilometres (RPKs) increased 7.6 per cent compared to November 2015 while capacity -- available seat kilometres or ASKs -- went up by 6.5 per cent. 

          ASK for India stood at 20.2 per cent in November 2016.

          The International Air Transport Association (IATA) said domestic India topped the growth chart for the 20th consecutive month.

          Apart from India, only two other countries -- Russia (15.5 per cent) and China (14.9 per cent) clocked double digit growth in November last year, as per IATA data.

          "While there was little sign in the latest passenger data of any immediate negative impact following the demonetisation of bank notes enacted on November 8, the seasonally-adjusted traffic trend has paused in recent months.

          "Nonetheless, the annual growth rate remained above 20 per cent for the 13th month in a row," it said.

          As part of larger efforts to curb black money menace and corruption, the government had cancelled Rs 500 and Rs 1,000 currency notes as legal tenders in November.

          Coming out with the air traffic numbers for November 2016, IATA also said robust growth in India and China is being supported in both cases on multiple fronts, including sizeable increases in real consumer spending and growing options for passengers.

          "Both Indian and Chinese airlines have increased the number of airport-pairs served in 2016 (although average flight frequencies in China have fallen compared to last year).

          "Adding airport-pairs and flight frequencies reduces journey times for passengers and stimulates demand in a similar way to a cut in fares," it added.

          IATA Director General and CEO Alexandre de Juniac said stronger demand for air travel reflects and is supporting a pick-up in the global economic cycle.

          As the stimulus effect of lower oil prices recedes in the rear view mirror, the strength of the economic cycle would play a key role in the pace of demand growth in 2017, he added.

          Out of the worldwide aviation market share, international segment accounts for 63.5 per cent while 36.5 per cent is made up by the domestic sector.

        RBI Chief Urjit Patel Warns On Government Debt Ahead Of Budget

        • Reserve Bank of India governor Urjit Patel on Wednesday urged the government to cut borrowing, just weeks before Finance Minister Arun Jaitley is due to unveil the Budget. The finance minister will outline the government's fiscal deficit target for next fiscal year (2017-18) in the Budget.

          The RBI chief's comments come at a time when many economists expect the government to relax the fiscal deficit target for 2017-18 to support economic growth in the wake of demonetisation.  The World Bank today cut India's growth estimate for 2016-17 to 7 per cent, as compared to the earlier forecast of 7.6 per cent.  For 2016-17, the government had targeted fiscal deficit of 3.5 per cent of the GDP.

          Dr Patel said that higher government debt was taking a toll on India's sovereign credit rating.

          "Our general government deficit (that is borrowing by the center and states combined) is, according to IMF data, amongst the highest in the group of G-20 countries. In conjunction, the level of our general government debt as a ratio to GDP is cited by some as coming in the way of a credit rating upgrade," said Mr Patel at the Vibrant Gujarat Summit in Gandhinagar.

          The government has been pushing hard to get India's credit rating upgraded. But due to high debt to GDP ratio of the country, international ratings agencies like Moody's and S&P have so far refused upgrade India's rankings despite improvement in overall macro-economic numbers.
          While Moody's Investors Service rates India at "Baa3", the lowest investment-grade rating, but with a "positive" outlook, the S&P rates India at "BBB-minus" with a "stable" outlook.

          Dr Patel said "borrowing even more and pre-empting resources from future generations by governments cannot be a short cut to long-lasting higher growth."

          "Instead, structural reforms and reorienting government expenditure towards public infrastructure are key for durable gains on the Indian growth front," he added.

          India's former chief statistician Pronab Sen says the finance minister could settle for a fiscal deficit target of 3.5 per cent for 2017-18. "Demonetisation will impact India's growth negatively and the government would want to be seen doing something to deal with it. The ratings by foreign agencies can be looked at next year," Mr Sen said.

          Bank of America Merrill Lynch economists too expect the government to relax fiscal deficit target. "We expect Finance Minister Arun Jaitley to target a fiscal deficit of 3.5 per cent of GDP  - same as 2016-17 - in 2017-18 in his February 1 Budget, easing the 3 per cent target," BofA-ML said in a recent research report.

          Government On Course To Achieve FY17 Disinvestment Target: Official
          • The Government has already garnered Rs. 23,500 crore by divesting its stakes in PSUs so far in the current fiscal and is hopeful of achieving the FY17 disinvestment target of Rs. 56,500 crore, a Finance Ministry official said on Wednesday.

            "We have already completed disinvestment valued at Rs. 23,500 crore so far in the current fiscal. Thus we are confident of completing the projected disinvestment target of Rs. 56,500 crore for the entire fiscal during the two-and-a- half months left before us," Manish Singh, Joint Secretary, Department of Investment and Public Asset Management (DIPAM) under Ministry of Finance, said.

            He was speaking to reporters on the sidelines of an event here. 

            According to Singh, buyback of shares undertaken for the first time by central public sector enterprises has fetched Rs. 15,000 crore so far in the current fiscal.

            "At a time when the market was not supportive and no new foreign investor was there to buy, buyback was one of the best available options before the Government for disinvestment," he said.

            "We have done minority stake sale and buyback this time. We have a strong pipeline of 40-odd listed companies.

            Still, it will all depend on how does the market behave. I mean if the market supports us and gives windows to divest, we will go ahead with disinvestment task assigned to us."

            December is slow in terms of activity on the capital market as most of the merchant bankers are on leave during the month, Singh said, adding, "So we are relying more on January for disinvestment to pick up."

            Replying to a query, he said earlier it was FPO (follow-on public offer) which used to be the preferred route for divesting stake, but the department has now moved to OFS (offer for sale) model.

            "Now we have moved to OFS so there is no loss to the Government and ETF was one of the instruments which helped us to do that," the Joint Secretary said.

            The Government-owned Specified Undertaking of the Unit Trust of India (SUUTI) in November last year sold a 1.63 per cent stake in L&T through a block deal to raise Rs. 2,100 crore.

            Singh said his department was set to go for strategic sell-off for certain state-owned companies for which the Government has already given in principle approval and work was underway for completing their disinvestment within the stipulated time.

          Demonetisation Impact: World Bank Cuts India Growth Forecast For FY17 To 7%
          • The World Bank today downgraded India's growth estimate for 2016-17 due to demonetisation but said that the country will post a "still robust" growth of 7 per cent. In its first report after demonetisation of Rs. 500 and Rs. 1,000 denomination currency notes in November, the multilateral lender also said the notes ban move could "continue to disrupt business and household economic activities". It had earlier estimated India's GDP or gross domestic product growth at 7.6 per cent.

            "In India, the immediate withdrawal of a large volume of currency in circulation and subsequent replacement with new notes announced by the government in November contributed to slowing growth in 2016," the World Bank said in its latest report.

            Unexpected demonetisation weighed on growth in the third quarter (October to December) of 2016-17, it said. 

            The World Bank noted that as cash accounts for more than 80 per cent of the number of transactions in India, in the short-term, demonetisation "could continue to disrupt business and household economic activities, weighing on growth".

            The World Bank said, "Indian growth is estimated to have decelerated to a still robust 7 per cent (in fiscal 2017 ending on March 31, 2017), with continued tailwinds from low oil prices and solid agricultural output partly offset by challenges associated with the withdrawal of a large volume of currency in circulation and subsequent replacement with new notes."

            Even if India maintains a 7 per cent growth rate for 2016-17, the country will still maintain the distinction of being the fastest growing major economy in the world, bypassing China. The Middle Kingdom is projected to grow at 6.5 per cent in 2016.

            The World Bank also asserted that India would regain growth momentum in the subsequent years, with 7.6 and 7.8 per cent expansion, adding that "various reform initiatives are expected to unlock domestic supply bottlenecks and raise productivity".

            Infrastructure spending should improve the business climate and attract investment in the near-term, the World Bank said.

            "The 'Make in India' campaign may support India's manufacturing sector, backed by domestic demand and further regulatory reforms," it said.

            The World Bank also noted that the benefit of 'demonetisation' in the medium term may be liquidity expansion in the banking system, which may help in lowering lending rates and lifting economic activity.

            However, it cautioned that the challenges encountered in phasing out high value currency notes and replacing them with new ones may pose risks to the pace of other economic reforms such as GST (Goods and Services Tax), and labour and land reforms.

            On global growth, the World Bank said that it would accelerate slightly as recovering oil and commodity prices ease pressures on emerging market commodity exporters and painful recessions in Brazil and Russia come to an end.

            The multilateral lender expects global growth in 2017 to rebound to 2.7 per cent from a post-financial crisis low of 2.3 per cent last year.

            "After years of disappointing global growth, we are encouraged to see stronger economic prospects on the horizon," World Bank Group President Jim Yong Kim said in a statement.

            Meanwhile, Finance Minister Arun Jaitley said the country needs bold reforms to transform its economy.

            He further said the goods and services tax (GST), and demonetisation will boost growth and the impact will be seen this year. "After transient impact, demonetisation will lead to cleaner and larger GDP."

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