General Affairs
To Cut Cost, Railways Turn To Natural Gas
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Railways on Thursday signed a preliminary deal with gas firm GAIL (India) Ltd to use natural gas in some of its operations, part of a drive by the world's third biggest oil consumer to gradually shift to cleaner fuels.
India is building infrastructure, including pipelines and import facilities, to raise the share of gas in its energy mix to 15 percent in next few years from the current level of about 6.5 percent.
Using natural gas will be about 25 per cent cheaper than the alternatives fuels used by the railways at workshops and production units, said Ashwani Lohani, chairman of Indian Railways' board.
He said the company would strive to shift all 54 of its workshops to natural gas by June 2019.
Indian Railways annually consumes about 3 billion litres of diesel, said Chetram, chief administrative officer of Indian Railways Organisation for Alternate fuels.
Only a fraction of that will be replaced by natural gas, he added.
He said Indian Railways can replace 844,027 cubic metres of acetylene, 2.35 million kilograms of liquefied petroleum gas and 140,991 kilograms of cut gases to save 170 million rupees ($2.4 million) a year.
"The objective of this memorandum of understanding is, on a pan-India basis, wherever we have reach, we will be supplying natural gas to the Indian Railways," said B.C. Tripathi, chairman of GAIL India.
India is building infrastructure, including pipelines and import facilities, to raise the share of gas in its energy mix to 15 percent in next few years from the current level of about 6.5 percent.
Using natural gas will be about 25 per cent cheaper than the alternatives fuels used by the railways at workshops and production units, said Ashwani Lohani, chairman of Indian Railways' board.
He said the company would strive to shift all 54 of its workshops to natural gas by June 2019.
Indian Railways annually consumes about 3 billion litres of diesel, said Chetram, chief administrative officer of Indian Railways Organisation for Alternate fuels.
Only a fraction of that will be replaced by natural gas, he added.
He said Indian Railways can replace 844,027 cubic metres of acetylene, 2.35 million kilograms of liquefied petroleum gas and 140,991 kilograms of cut gases to save 170 million rupees ($2.4 million) a year.
"The objective of this memorandum of understanding is, on a pan-India basis, wherever we have reach, we will be supplying natural gas to the Indian Railways," said B.C. Tripathi, chairman of GAIL India.
Information Technology Ministry Issues Advisory Against Momo Challenge
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The IT Ministry has issued an advisory against the deadly 'momo challenge', asking parents and guardians to protect children from the game which lures players into a series of violent acts, ending with a suicide dare.
"The momo challenge consists of a variety of self-harming dares which becomes increasingly risky as the game progresses and it finally ends with suicide challenge," IT Ministry's advisory said.
It noted that the game has gone viral on social media platforms like WhatsApp.
The advisory asks people to watch out for unusual signs and symptoms in children including social withdrawal, low mood, sudden outbursts of anger and loss of interest in routine activities.
It also asks parents to look out for "visible marks like deep cuts or wounds on any part of the body of the child", as warning signs.
The advisory gives over half a dozen tips on shielding children from the game. These include engagement with kids to identify any signs of distress. It also asks parent to monitor children's online and social media activity to ensure they are not indulging in the game. The advisory suggests installing effective cyber and mobile parenting software that can track online activities of children.
"Keep your eyes open for...unusually secretive behaviour, mostly related to their online activity...a sudden increase in the time they spend online, especially social media...their device suddenly has many new phone numbers and email contacts," said the advisory issued earlier this week.
The game lures player, to add unknown contacts on WhatsApp by the name of 'Momo'. Once the contact is added, the image of a terrifying Japanese 'Momo' doll with bulging eyes appears in contact. "The game controller then entices player to perform a series of challenges...," the advisory said..
The deadly game, featuring a grotesque image of a girl with bulging eyes, has made inroads into many countries and is reminiscent of last year's killer 'Blue Whale Challenge', which too had triggered a Government advisory in September 2017.
The West Bengal CID has said it is probing cases of alleged suicide blamed on online game 'Momo Challenge', and Association of Heads of ICSE schools in West Bengal too has asked all member schools to urge parents to keep a watch on their children.
"The momo challenge consists of a variety of self-harming dares which becomes increasingly risky as the game progresses and it finally ends with suicide challenge," IT Ministry's advisory said.
It noted that the game has gone viral on social media platforms like WhatsApp.
The advisory asks people to watch out for unusual signs and symptoms in children including social withdrawal, low mood, sudden outbursts of anger and loss of interest in routine activities.
It also asks parents to look out for "visible marks like deep cuts or wounds on any part of the body of the child", as warning signs.
The advisory gives over half a dozen tips on shielding children from the game. These include engagement with kids to identify any signs of distress. It also asks parent to monitor children's online and social media activity to ensure they are not indulging in the game. The advisory suggests installing effective cyber and mobile parenting software that can track online activities of children.
"Keep your eyes open for...unusually secretive behaviour, mostly related to their online activity...a sudden increase in the time they spend online, especially social media...their device suddenly has many new phone numbers and email contacts," said the advisory issued earlier this week.
The game lures player, to add unknown contacts on WhatsApp by the name of 'Momo'. Once the contact is added, the image of a terrifying Japanese 'Momo' doll with bulging eyes appears in contact. "The game controller then entices player to perform a series of challenges...," the advisory said..
The deadly game, featuring a grotesque image of a girl with bulging eyes, has made inroads into many countries and is reminiscent of last year's killer 'Blue Whale Challenge', which too had triggered a Government advisory in September 2017.
The West Bengal CID has said it is probing cases of alleged suicide blamed on online game 'Momo Challenge', and Association of Heads of ICSE schools in West Bengal too has asked all member schools to urge parents to keep a watch on their children.
On Rafale, Defamation Suits, Rahul Gandhi Baits Anil Ambani, Attacks BJP
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Congress chief Rahul Gandhi continued his attack on the government on the Rafale deal, questioning today who was telling the truth -- Prime Minister Narendra Modi or former President of France Francois Hollande.
"India-France joint statement clearly states the 36 aircraft will be of the same configuration... Should we believe that then man standing next to PM was lying when he was giving this statement... The man (PM Modi) is lying," Mr Gandhi said.
India and France signed a deal worth Euro 7.87 billion (approximately Rs. 59,000 crore) in September 2016 for 36 Rafale jets. The Congress says the UPA deal that was scrapped to form the new one was better, paying one-third the price for 126 aircraft.
A video tweeted by the party said the NDA deal also missed out on side benefits like technology transfer and generation of jobs, in contrast to the UPA deal that involved manufacture of a majority of the planes by the Hindustan Aeronautics Limited in Hyderabad.
The Congress alleges that the government is paying a huge sum for the fighter jets to favour a businessman.
"Anil Ambani has Rs. 45,000 crore debt... He formed the company 10 days before the deal. What is the deal between Anil Ambani and PM Modi?" Mr Gandhi questioned days after the industrialist wrote to him, expressing "deep anguish over continued personal attacks" on him.
In his letter, Mr Ambani said all 36 Rafale jets will be manufactured in France and exported. "Not a single component" will be manufactured by Reliance, the letter had clarified.
"Anil Ambani has filed many defamation cases against us. Keep filing these defamation suits... they will not change the truth," Mr Gandhi said referring to Reliance Group's notice last week, that warned nine Congress leaders against making what it called "false and defamatory statements" on the Rafale deal.
"India-France joint statement clearly states the 36 aircraft will be of the same configuration... Should we believe that then man standing next to PM was lying when he was giving this statement... The man (PM Modi) is lying," Mr Gandhi said.
India and France signed a deal worth Euro 7.87 billion (approximately Rs. 59,000 crore) in September 2016 for 36 Rafale jets. The Congress says the UPA deal that was scrapped to form the new one was better, paying one-third the price for 126 aircraft.
A video tweeted by the party said the NDA deal also missed out on side benefits like technology transfer and generation of jobs, in contrast to the UPA deal that involved manufacture of a majority of the planes by the Hindustan Aeronautics Limited in Hyderabad.
The Congress alleges that the government is paying a huge sum for the fighter jets to favour a businessman.
"Anil Ambani has Rs. 45,000 crore debt... He formed the company 10 days before the deal. What is the deal between Anil Ambani and PM Modi?" Mr Gandhi questioned days after the industrialist wrote to him, expressing "deep anguish over continued personal attacks" on him.
In his letter, Mr Ambani said all 36 Rafale jets will be manufactured in France and exported. "Not a single component" will be manufactured by Reliance, the letter had clarified.
"Anil Ambani has filed many defamation cases against us. Keep filing these defamation suits... they will not change the truth," Mr Gandhi said referring to Reliance Group's notice last week, that warned nine Congress leaders against making what it called "false and defamatory statements" on the Rafale deal.
Court Fines Bihar Exam Board Rs. 5 Lakh Over Reluctance To Rectify 1 Mark
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The Patna High Court yesterday ordered the Bihar School Examination Board to give "one mark" for an unchecked answer in Hindi paper of a girl, who had secured the second rank in the state in matriculation examination last year.
A bench of Justice Chakradhari Sharan Singh also slapped a cost of Rs. 5 lakh on the Board, "which, instead of fairly accepting the claim of petitioner had chosen to invite a verdict from the court".
The bench passed the order on the plea of Bhavya Kumari, a resident of Begusarai district and alumni of a girls' residential school at Simultala in Jamui. She had secured 460 marks out of 500 in the examination, the results of which had been declared in June 2017.
The girl had moved the court after perusing her answer scripts secured through a transparency plea under the Right to Information Act.
The girl had claimed under-evaluation of her Hindi, Sanskrit and Social Sciences papers, seeking a direction to the Board for their re-evaluation, but the court made it clear that it would not interfere with the correctness of the experts' decision in evaluating the paper.
The court, however, took exception to the fact that the Board, despite conceding that one of the questions worth one mark in her Hindi paper had not been evaluated, it "put the blame on the child for not applying for scrutiny of her answer sheets."
"The Board... as a statutory body, has acted in most irresponsible manner while contesting the case of the petitioner," said the bench, while allowing the girl's plea and imposing the "exemplary cost" on the Board.
The court ordered the payment of Rs. 5 lakh to the principal of the girl's school "within three months", stipulating its use for purchasing books and computers for improvement of the school library.
As a parting note, the court also ordered the BSEB for placing on its website "the answer-sheets of all the top ten scorers in the Board examinations for classes 10 and 12 in future "to minimize the scope for recurrence of such controversies".
A bench of Justice Chakradhari Sharan Singh also slapped a cost of Rs. 5 lakh on the Board, "which, instead of fairly accepting the claim of petitioner had chosen to invite a verdict from the court".
The bench passed the order on the plea of Bhavya Kumari, a resident of Begusarai district and alumni of a girls' residential school at Simultala in Jamui. She had secured 460 marks out of 500 in the examination, the results of which had been declared in June 2017.
The girl had moved the court after perusing her answer scripts secured through a transparency plea under the Right to Information Act.
The girl had claimed under-evaluation of her Hindi, Sanskrit and Social Sciences papers, seeking a direction to the Board for their re-evaluation, but the court made it clear that it would not interfere with the correctness of the experts' decision in evaluating the paper.
The court, however, took exception to the fact that the Board, despite conceding that one of the questions worth one mark in her Hindi paper had not been evaluated, it "put the blame on the child for not applying for scrutiny of her answer sheets."
"The Board... as a statutory body, has acted in most irresponsible manner while contesting the case of the petitioner," said the bench, while allowing the girl's plea and imposing the "exemplary cost" on the Board.
The court ordered the payment of Rs. 5 lakh to the principal of the girl's school "within three months", stipulating its use for purchasing books and computers for improvement of the school library.
As a parting note, the court also ordered the BSEB for placing on its website "the answer-sheets of all the top ten scorers in the Board examinations for classes 10 and 12 in future "to minimize the scope for recurrence of such controversies".
India Committed To Work With BIMSTEC Member States: PM Modi
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Making a strong pitch for enhanced regional connectivity, Prime Minister Narendra Modi said today India is committed to work with the BIMSTEC member states in the critical sector and to combat the menace of terrorism and drug trafficking.
"I believe that there is a big opportunity for Connectivity - trade connectivity, economic connectivity, transport connectivity, digital connectivity, and people-to-people connectivity," he said while addressing the inaugural session of the 4th BIMSTEC summit.
The BIMSTEC is a regional grouping comprising India, Bangladesh, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. The grouping accounts for 22 per cent of the global population, and has a combined gross domestic product of USD 2.8 trillion.
"India is committed to work with the BIMSTEC member states to enhance regional connectivity," PM Modi said.
The Prime Minister said this region has become a meeting point for India's Neighbourhood First and Act East policies.
"The Bay of Bengal holds special significance for the security and development of all of us," he said.
"There is no country in the region which has not suffered from terrorism and trans-national crimes such as drug trafficking linked to networks of terrorism," he told the summit which was inaugurated by Nepal Prime Minister K P Sharma Oli.
PM Modi said India is ready to host a conference under BIMSTEC frame-work on narcotics related topics.
"This is not a law and order problem of one country. We must unite to tackle these problems," he said.
The BIMSTEC member states situated between the Himalayas and the Bay of Bengal face frequent natural disasters such as flood, cyclone and earthquake, Modi said and called for "cooperation and coordination" among them in humanitarian assistance and disaster relief efforts.
"As no single country can move alone for attaining peace, prosperity and development, we need to collaborate and cooperate with each other in this interconnected world," he said.
"We need to work together in the areas of trade, economic, transport, digital and people-to-people connectivity for our common benefit," he added.
"We not only have diplomatic relations with all BIMSTEC countries but (we) are strongly connected by civilisation, history, art, language, cuisine and shared culture," the prime minister said.
He also offered to host a conference in the areas of agricultural research and various other initiatives, including for start-ups, for the common benefit of the member states.
For research on art, culture and other subjects in the Bay of Bengal, India would set up a Centre for Bay of Bengal Studies at the Nalanda University, he said.
Prime Minister Modi said India will host International Buddhist Conclave in August 2020 and invited all BIMSTEC leaders to attend the event as guest of honour.
He also said that India is committed to enhance its national knowledge network in the field of digital connectivity in Sri Lanka, Bangladesh, Bhutan and Nepal. India also plans to extend it to Myanmar and Thailand.
PM Modi hoped that the BIMSTEC member states will attend the India Mobile Congress in New Delhi scheduled for October.
He said India's North Eastern states would play key role in enhancing connectivity with the BIMSTEC countries.
Noting that the Science and Technology Interventions in the North Eastern Region is an initiative for the development of the region, he said that it could be extended to BIMSTEC nations.
He said India will also provide scholarships to students, researchers and professionals from the BIMSTEC member states to study in the North Eastern Space Application Centre.
PM Modi offered to hold BIMSTEC Youth Summit and form a BIMSTEC Women Parliamentarians Forum. He also hailed the BIMSTEC Multinational military exercise being held in India next month.
Briefing the media after the inaugural session of the Summit, Foreign Secretary Vijay Gokhale said BIMSTEC fits very well with India's neighbourhood policy and the policy to develop the North-East region.
"It's going to be a landmark summit for the regional grouping as it will set a framework for institutional development of the BIMSTEC," he said.
The ongoing summit will also provide guidelines for strengthening BIMSTEC Secretariat situated in Dhaka, he added.
"Peace and stability in the region is essential for the development and growth of the member states," he said.
The summit was attended by Bangladesh Prime Minister Sheikh Hasina, Sri Lankan President Maithripala Sirisena, Thailand Premier Prayut Chan-o-cha, Myanmar's President Win Myint and Chief Advisor to the Government of Bhutan Gyalpo Tshering Wangchuk.
Addressing the summit, Nepal Prime Minister Oli said BIMSTEC is not a substitute to the SAARC and the two organisations can complement each other.
Mr Oli underlined the need for implementing the BIMSTEC poverty plan as well as Millennium Development Goals for the common benefit of the member states. He stressed on the need for deeper economic integration and collaboration among the member states for speedy development of the region.
"An early conclusion of the agreements on trade in goods, trade in services, investment, mutual assistance in customs matters, dispute settlement and trade facilitation is the need of hour to enable BIMSTEC to effectively move forward," he added.
"I believe that there is a big opportunity for Connectivity - trade connectivity, economic connectivity, transport connectivity, digital connectivity, and people-to-people connectivity," he said while addressing the inaugural session of the 4th BIMSTEC summit.
The BIMSTEC is a regional grouping comprising India, Bangladesh, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. The grouping accounts for 22 per cent of the global population, and has a combined gross domestic product of USD 2.8 trillion.
"India is committed to work with the BIMSTEC member states to enhance regional connectivity," PM Modi said.
The Prime Minister said this region has become a meeting point for India's Neighbourhood First and Act East policies.
"The Bay of Bengal holds special significance for the security and development of all of us," he said.
"There is no country in the region which has not suffered from terrorism and trans-national crimes such as drug trafficking linked to networks of terrorism," he told the summit which was inaugurated by Nepal Prime Minister K P Sharma Oli.
PM Modi said India is ready to host a conference under BIMSTEC frame-work on narcotics related topics.
"This is not a law and order problem of one country. We must unite to tackle these problems," he said.
The BIMSTEC member states situated between the Himalayas and the Bay of Bengal face frequent natural disasters such as flood, cyclone and earthquake, Modi said and called for "cooperation and coordination" among them in humanitarian assistance and disaster relief efforts.
"As no single country can move alone for attaining peace, prosperity and development, we need to collaborate and cooperate with each other in this interconnected world," he said.
"We need to work together in the areas of trade, economic, transport, digital and people-to-people connectivity for our common benefit," he added.
"We not only have diplomatic relations with all BIMSTEC countries but (we) are strongly connected by civilisation, history, art, language, cuisine and shared culture," the prime minister said.
He also offered to host a conference in the areas of agricultural research and various other initiatives, including for start-ups, for the common benefit of the member states.
For research on art, culture and other subjects in the Bay of Bengal, India would set up a Centre for Bay of Bengal Studies at the Nalanda University, he said.
Prime Minister Modi said India will host International Buddhist Conclave in August 2020 and invited all BIMSTEC leaders to attend the event as guest of honour.
He also said that India is committed to enhance its national knowledge network in the field of digital connectivity in Sri Lanka, Bangladesh, Bhutan and Nepal. India also plans to extend it to Myanmar and Thailand.
PM Modi hoped that the BIMSTEC member states will attend the India Mobile Congress in New Delhi scheduled for October.
He said India's North Eastern states would play key role in enhancing connectivity with the BIMSTEC countries.
Noting that the Science and Technology Interventions in the North Eastern Region is an initiative for the development of the region, he said that it could be extended to BIMSTEC nations.
He said India will also provide scholarships to students, researchers and professionals from the BIMSTEC member states to study in the North Eastern Space Application Centre.
PM Modi offered to hold BIMSTEC Youth Summit and form a BIMSTEC Women Parliamentarians Forum. He also hailed the BIMSTEC Multinational military exercise being held in India next month.
Briefing the media after the inaugural session of the Summit, Foreign Secretary Vijay Gokhale said BIMSTEC fits very well with India's neighbourhood policy and the policy to develop the North-East region.
"It's going to be a landmark summit for the regional grouping as it will set a framework for institutional development of the BIMSTEC," he said.
The ongoing summit will also provide guidelines for strengthening BIMSTEC Secretariat situated in Dhaka, he added.
"Peace and stability in the region is essential for the development and growth of the member states," he said.
The summit was attended by Bangladesh Prime Minister Sheikh Hasina, Sri Lankan President Maithripala Sirisena, Thailand Premier Prayut Chan-o-cha, Myanmar's President Win Myint and Chief Advisor to the Government of Bhutan Gyalpo Tshering Wangchuk.
Addressing the summit, Nepal Prime Minister Oli said BIMSTEC is not a substitute to the SAARC and the two organisations can complement each other.
Mr Oli underlined the need for implementing the BIMSTEC poverty plan as well as Millennium Development Goals for the common benefit of the member states. He stressed on the need for deeper economic integration and collaboration among the member states for speedy development of the region.
"An early conclusion of the agreements on trade in goods, trade in services, investment, mutual assistance in customs matters, dispute settlement and trade facilitation is the need of hour to enable BIMSTEC to effectively move forward," he added.
Business Affairs
Arun Jaitley back to business, and his task is cut out
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Last week, country got their regular Finance Minister Arun Jaitley is back in the ministry's North Block, after recovering from a kidney transplant. And his task is cut out. Jaitley requires to bring Reserve Bank of India and officials of his own ministry on the same page.
In last six months, as RBI turned the taps on bad debts, his colleagues Nitin Gadkari, Minister for Road Transport & Highways, Piyush Goyal, Railways Minister, Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, and RK Singh, Power Minister are finding it difficult to find their way out.
The paramount, however, is Jaitley's own ministry. RBI and finance ministry are at loggerheads on the treatment of non-performing assets (NPAs) and ways to improve the credit off-take among the corporate and other entrepreneurs. The Allahabad High Court, while dealing with the petition of the power plant owners, suggested that the government (finance ministry) to use a special dispensation that has never been used before to give directions to the central bank.
There is no doubt that the NPAs are to be dealt with the iron fist, but both Jaitley and Urjit Patel, governor, RBI need to understand it should not squeeze Indian entrepreneurs' appetite for credit. The recent report of the parliamentary committee under M Veerappa Moily indicated that the country has a low credit-to-GDP ratio at 54.5 per cent (December 2017). To put it in context, the similar ratio is 208.7 per cent in China, 170.5 per cent in the UK & 152.2 per cent in the USA. The biggest loser in Indian context continues to be the small and medium entrepreneurs.
Earlier this month, S Gurumurthy, an economist and Satish Marathe, a champion of co-operative movements, were appointed as non-executive directors on the board of RBI. Their appointment is seen as a push to make RBI more sensitive towards need and requirements of small entrepreneurs. Till now, RBI was seen as a constant opponent to government's push for MUDRA refinance plan.
Meanwhile, in the last six months, RBI is seemingly in defiance to take directions from the various ministries, which irritated the respective ministers, including Nitin Gadkari, Piyush Goyal, Suresh Prabhu and RK Singh.
It will be a test for Jaitley to develop consensus on dealing with the crisis in the power sector. Nodal ministers in the power ministry said RBI's circular to end Special drawing rights (SDR) mid way was arbitrary and have only created more problems for the sector. On top of it, power Ministry joined the promoters in moving High Court as Singh believes the 180-day ultimatum given by RBI in its February 12 circular to move bankruptcy tribunal is impractical.
The assets of companies including KSK Energy, Avantha Group, GMR Energy and Jaiprakash Power Ventures are on the chopping board, and the promoters of companies with healthier balance-sheets like Tata Power, JSW Energy, Resurgent Power and Edleweiss ARC are sitting at the fence to bid for these assets. These companies expect a massive haircut from lenders and the asset price might go down to 50 per cent of the project cost. The RBI's deadline is over. Now, Finance Minister Jaitley has 15-day time to look for a win-win situation.
It is equally worrying for Nitin Gadkari. After a series of meetings with the RBI officials and top leadership of country's commercial banks, he has not been able to convince them to fund via debt the new road projects in the 'risk free' hybrid annuity model, or HAM. The bankers complain that there are three big challenges: a) the IRR committed for these projects is less than 10 per cent and is too low, b) the many of the road construction companies are new & c) in certain cases, many construction companies have taken too much on their plate. In absence of the debt from commercial banks, he can't push NHAI to raise bonds for these projects. The government-backed LIC has already subscribed to Rs 4200 crore worth of bond and may buy another set of similar amount. The insurance behemoth can't put much money in one basket, it also has commitment to invest Rs 26,500 crore in the Indian Railway Finance Corporation, or IRFC and remain part of government's strategy of disinvestment of PSUs. The result is 56 projects of NHAI allocated to the entrepreneurs are stuck because of no-financial closure.
Three years ago, Gadkari brought in HAM, as risk-free model for road construction to replace BOT. In this model, the concessionaire gets 40 per cent of the total project cost in five trenches (on pre-fixed milestones) and balance 60 per cent are to be arranged by the developer. HAM expects banks to fund 35-40 per cent of project cost as against 60-80 per cent in the previous BOT model, and there is no risk of traffic and of seeking permissions from departments and regulators.
Other than convincing the RBI and bankers to back the road projects, Jaitley will also have to work with the central bank to develop financial institutions. India has already created National Infrastructure Investment Fund, or NIIF for equity finance, which is getting a moderate response, but the debt for infrastructure projects remain a challenge. The country has seen IDBI and ICICI bank, which started as development financial institutions (DFIs), but later turned into regular commercial banks. The ministers still believe that the RBI's monetary committee was not benign enough to reduce the vital rates and is too much obsessed with the inflation numbers. They believe there are certain segments of economy, which are set for a take-off, and require cheaper access to capital. Solution for them may lie in the DFIs.
Life of finance minister in India is never easy, but the confrontation with the central bank only makes things murkier. Whosoever blinks first, country must stand victorious at the end.
In last six months, as RBI turned the taps on bad debts, his colleagues Nitin Gadkari, Minister for Road Transport & Highways, Piyush Goyal, Railways Minister, Suresh Prabhu, Minister of Commerce & Industry and Civil Aviation, and RK Singh, Power Minister are finding it difficult to find their way out.
The paramount, however, is Jaitley's own ministry. RBI and finance ministry are at loggerheads on the treatment of non-performing assets (NPAs) and ways to improve the credit off-take among the corporate and other entrepreneurs. The Allahabad High Court, while dealing with the petition of the power plant owners, suggested that the government (finance ministry) to use a special dispensation that has never been used before to give directions to the central bank.
There is no doubt that the NPAs are to be dealt with the iron fist, but both Jaitley and Urjit Patel, governor, RBI need to understand it should not squeeze Indian entrepreneurs' appetite for credit. The recent report of the parliamentary committee under M Veerappa Moily indicated that the country has a low credit-to-GDP ratio at 54.5 per cent (December 2017). To put it in context, the similar ratio is 208.7 per cent in China, 170.5 per cent in the UK & 152.2 per cent in the USA. The biggest loser in Indian context continues to be the small and medium entrepreneurs.
Earlier this month, S Gurumurthy, an economist and Satish Marathe, a champion of co-operative movements, were appointed as non-executive directors on the board of RBI. Their appointment is seen as a push to make RBI more sensitive towards need and requirements of small entrepreneurs. Till now, RBI was seen as a constant opponent to government's push for MUDRA refinance plan.
Meanwhile, in the last six months, RBI is seemingly in defiance to take directions from the various ministries, which irritated the respective ministers, including Nitin Gadkari, Piyush Goyal, Suresh Prabhu and RK Singh.
It will be a test for Jaitley to develop consensus on dealing with the crisis in the power sector. Nodal ministers in the power ministry said RBI's circular to end Special drawing rights (SDR) mid way was arbitrary and have only created more problems for the sector. On top of it, power Ministry joined the promoters in moving High Court as Singh believes the 180-day ultimatum given by RBI in its February 12 circular to move bankruptcy tribunal is impractical.
The assets of companies including KSK Energy, Avantha Group, GMR Energy and Jaiprakash Power Ventures are on the chopping board, and the promoters of companies with healthier balance-sheets like Tata Power, JSW Energy, Resurgent Power and Edleweiss ARC are sitting at the fence to bid for these assets. These companies expect a massive haircut from lenders and the asset price might go down to 50 per cent of the project cost. The RBI's deadline is over. Now, Finance Minister Jaitley has 15-day time to look for a win-win situation.
It is equally worrying for Nitin Gadkari. After a series of meetings with the RBI officials and top leadership of country's commercial banks, he has not been able to convince them to fund via debt the new road projects in the 'risk free' hybrid annuity model, or HAM. The bankers complain that there are three big challenges: a) the IRR committed for these projects is less than 10 per cent and is too low, b) the many of the road construction companies are new & c) in certain cases, many construction companies have taken too much on their plate. In absence of the debt from commercial banks, he can't push NHAI to raise bonds for these projects. The government-backed LIC has already subscribed to Rs 4200 crore worth of bond and may buy another set of similar amount. The insurance behemoth can't put much money in one basket, it also has commitment to invest Rs 26,500 crore in the Indian Railway Finance Corporation, or IRFC and remain part of government's strategy of disinvestment of PSUs. The result is 56 projects of NHAI allocated to the entrepreneurs are stuck because of no-financial closure.
Three years ago, Gadkari brought in HAM, as risk-free model for road construction to replace BOT. In this model, the concessionaire gets 40 per cent of the total project cost in five trenches (on pre-fixed milestones) and balance 60 per cent are to be arranged by the developer. HAM expects banks to fund 35-40 per cent of project cost as against 60-80 per cent in the previous BOT model, and there is no risk of traffic and of seeking permissions from departments and regulators.
Other than convincing the RBI and bankers to back the road projects, Jaitley will also have to work with the central bank to develop financial institutions. India has already created National Infrastructure Investment Fund, or NIIF for equity finance, which is getting a moderate response, but the debt for infrastructure projects remain a challenge. The country has seen IDBI and ICICI bank, which started as development financial institutions (DFIs), but later turned into regular commercial banks. The ministers still believe that the RBI's monetary committee was not benign enough to reduce the vital rates and is too much obsessed with the inflation numbers. They believe there are certain segments of economy, which are set for a take-off, and require cheaper access to capital. Solution for them may lie in the DFIs.
Life of finance minister in India is never easy, but the confrontation with the central bank only makes things murkier. Whosoever blinks first, country must stand victorious at the end.
Reliance Infra stock closes 5.54% higher on sale of energy business to Adani Transmission
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A day after Reliance Infra announced the completion of Rs 18,800-crore deal for sale of its energy business in Mumbai to Adani Transmission, its stock closed higher in trade today. The Reliance Infra stock closed 5.54% or 24 points higher at 463.10 level on the BSE. The stock has been gaining for the last four days and clocked 13% returns during the same period.
The stock has fallen 16.37% since the beginning of this year and lost 8.56% during the last one year.
The deal, largest in the power sector, marks the entry of the Gautam Adani group, which thus far has only been into power generation and transmission, into the distribution space. For Reliance Infra, the sale is a big boost to pare its debt which stood at over Rs 22,000 crore.
The deal was announced by the companies in December last year.
RInfra's integrated power business includes the generation units based at Dahanu, transmission network across Mumbai and Maharashtra and the retail distribution network in Mumbai suburbs.
With this deal, Adani Transmission will have 35 grid substations with around 19,300 MVA of transformation capacity across the country, by the end of 2018 with a cumulative transmission network of around 12,540 circuit km, of which around 9,201 circuit km is operational.
The deal includes absorption of about 5,000 employees across three business areas of RInfra, said Anil Sardana, managing director and chief executive of Adani Transmission, and chairman of Adani Electricity Mumbai.
Adani Transmission, which is the largest private sector transmission and power distribution entity, said post-deal the company will be known as Adani Electricity Mumbai, which will be a subsidiary of Adani Transmission. It will serve over three million customers spread across 400 sq km in Mumbai.
Addressing the media to announce the completion of the deal, Ambani said, "With this deal, RInfra has managed to reduce its debt by 65 per cent from Rs 22,000 crore to Rs 7,500 crore. We intend to become debt-free by next year."
Ambani further claimed that with a deal size of Rs 18,800 crore, this is the largest transaction in both infrastructure and power sectors. He also claimed that this deal marks the largest debt reduction in the infrastructure sector.
Ambani further said with this deal, the debt-equity ratio of RInfra will fall and just be in nominal 0.3:1, one of the lowest in the industry. It will bring down the annual interest cost by 70 per cent to Rs 800 crore from Rs 2,600 crore, he said.
The stock has fallen 16.37% since the beginning of this year and lost 8.56% during the last one year.
The deal, largest in the power sector, marks the entry of the Gautam Adani group, which thus far has only been into power generation and transmission, into the distribution space. For Reliance Infra, the sale is a big boost to pare its debt which stood at over Rs 22,000 crore.
The deal was announced by the companies in December last year.
RInfra's integrated power business includes the generation units based at Dahanu, transmission network across Mumbai and Maharashtra and the retail distribution network in Mumbai suburbs.
With this deal, Adani Transmission will have 35 grid substations with around 19,300 MVA of transformation capacity across the country, by the end of 2018 with a cumulative transmission network of around 12,540 circuit km, of which around 9,201 circuit km is operational.
The deal includes absorption of about 5,000 employees across three business areas of RInfra, said Anil Sardana, managing director and chief executive of Adani Transmission, and chairman of Adani Electricity Mumbai.
Adani Transmission, which is the largest private sector transmission and power distribution entity, said post-deal the company will be known as Adani Electricity Mumbai, which will be a subsidiary of Adani Transmission. It will serve over three million customers spread across 400 sq km in Mumbai.
Addressing the media to announce the completion of the deal, Ambani said, "With this deal, RInfra has managed to reduce its debt by 65 per cent from Rs 22,000 crore to Rs 7,500 crore. We intend to become debt-free by next year."
Ambani further claimed that with a deal size of Rs 18,800 crore, this is the largest transaction in both infrastructure and power sectors. He also claimed that this deal marks the largest debt reduction in the infrastructure sector.
Ambani further said with this deal, the debt-equity ratio of RInfra will fall and just be in nominal 0.3:1, one of the lowest in the industry. It will bring down the annual interest cost by 70 per cent to Rs 800 crore from Rs 2,600 crore, he said.
PNB fraud: US bankruptcy court examiner nails Nirav Modi's aides
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A 165-page dossier submitted to the United States Bankruptcy Court Southern District of New York may have finally blown the lid off biggest banking fraud in Indian history. The report is prepared by John J. Carney, an examiner appointed by US bankruptcy court for the three US-based jewellery companies owned by PNB fraud accused Nirav Modi.
While the investigations related to Nirav Modi scam are still ongoing in the country, the new report submitted in the US court may bolster India's efforts to attach assets and properties of Nirav Modi and his associates in the US.
After conducting an intensive 120-day investigation, the examiner has found substantial evidence to support the knowledge and involvement by the Nirav Modi's US-based aides namely Mihir Bhansali (CEO of Firestar Diamond International and Fantasy Inc.) and Ajay Gandhi (CFO of all Firestar U.S. entities, including FDI, FI and A. Jaffe) in the PNB fraud.
In February, soon after India's biggest banking scam was unearthed at PNB's Brady House branch in Mumbai, Nirav Modi controlled Firestar Diamond, Inc., Fantasy Inc., A. Jaffe Inc. had filed for bankruptcy in the US.
On April 13, the court appointed the examiner to determine if the three US corporations indirectly owned by Nirav Modi and their officers and directors were involved in the criminal conduct alleged in India. The examiner was assisted by Alvarez & Marsal Disputes and Investigations, led by retired FBI special agent William B. Waldie. Indian forensic auditors BDO India, hired by PNB for internal audit after Nirav Modi scam, had later joined the investigation.
Nirav Modi's US-based companies were in the business of selling finished jewellery to major retailers, including Costco, J.C. Penny, Army/Navy Stores, Macy's and Zales, among others.
The examiner identified tens of millions of dollars of purported diamond sales by the Nirav Modi's US companies to various shadow entities, where payment can be traced to proceeds from the PNB fraud, the report said.
The examiner's investigation further confirmed that criminally derived proceeds from these sales flowed from India into the US and in numerous instances were returned to India or used to fund US operations, including making payments on loans made by banks, it added.
The investigation has also indicated that a large chunk of money was diverted in real estate in US after Nirav Modi left India. The dossier stated that money from shell companies was used to purchase an approximately $6 million apartment on Central Park South for the sole use of Modi and his family in the US.
The investigators interviewed 45 people and analysed 1.8 Terabytes of data recovered from various sources. It concluded that Nirav Modi linked firms (including those in US) were involved in running shell companies, overpricing, round-tripping of diamonds and were beneficiaries of illegal LoUs.
The US investigators have identified more than 20 shadow entities belonging to fugitive Nirav Modi. The report said that "diamonds sold to or purchased from shadow entities were routinely shipped out the same day or within days after arrival, without ever being opened or inspected by employees to ascertain the contents of the packets, in contrast to shipments that were made to or received from non-Shadow Entities."
While the investigations related to Nirav Modi scam are still ongoing in the country, the new report submitted in the US court may bolster India's efforts to attach assets and properties of Nirav Modi and his associates in the US.
After conducting an intensive 120-day investigation, the examiner has found substantial evidence to support the knowledge and involvement by the Nirav Modi's US-based aides namely Mihir Bhansali (CEO of Firestar Diamond International and Fantasy Inc.) and Ajay Gandhi (CFO of all Firestar U.S. entities, including FDI, FI and A. Jaffe) in the PNB fraud.
In February, soon after India's biggest banking scam was unearthed at PNB's Brady House branch in Mumbai, Nirav Modi controlled Firestar Diamond, Inc., Fantasy Inc., A. Jaffe Inc. had filed for bankruptcy in the US.
On April 13, the court appointed the examiner to determine if the three US corporations indirectly owned by Nirav Modi and their officers and directors were involved in the criminal conduct alleged in India. The examiner was assisted by Alvarez & Marsal Disputes and Investigations, led by retired FBI special agent William B. Waldie. Indian forensic auditors BDO India, hired by PNB for internal audit after Nirav Modi scam, had later joined the investigation.
Nirav Modi's US-based companies were in the business of selling finished jewellery to major retailers, including Costco, J.C. Penny, Army/Navy Stores, Macy's and Zales, among others.
The examiner identified tens of millions of dollars of purported diamond sales by the Nirav Modi's US companies to various shadow entities, where payment can be traced to proceeds from the PNB fraud, the report said.
The examiner's investigation further confirmed that criminally derived proceeds from these sales flowed from India into the US and in numerous instances were returned to India or used to fund US operations, including making payments on loans made by banks, it added.
The investigation has also indicated that a large chunk of money was diverted in real estate in US after Nirav Modi left India. The dossier stated that money from shell companies was used to purchase an approximately $6 million apartment on Central Park South for the sole use of Modi and his family in the US.
The investigators interviewed 45 people and analysed 1.8 Terabytes of data recovered from various sources. It concluded that Nirav Modi linked firms (including those in US) were involved in running shell companies, overpricing, round-tripping of diamonds and were beneficiaries of illegal LoUs.
The US investigators have identified more than 20 shadow entities belonging to fugitive Nirav Modi. The report said that "diamonds sold to or purchased from shadow entities were routinely shipped out the same day or within days after arrival, without ever being opened or inspected by employees to ascertain the contents of the packets, in contrast to shipments that were made to or received from non-Shadow Entities."
Govt to give free coaching for students preparing for IIT-JEE, NEET
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Private coaching centres charge a huge sum for preparing students for entrance exams like IIT-JEE, NEET, and UGC-NET. But now the government is planning to coach students for free. The plan is to convert about 2,600 test practising centres of the National Testing Agency (NTA), a testing organisation to conduct entrance examinations for admission in higher educational institutions, into teaching centres where students will get free coaching from May 2019.
The government will start mock test sessions at these NTA centres as early as September 8 but teaching classes will likely start from May 2019. This would certainly hurt the business of private coaching centres mushrooming across the country. However, the scheme would also attract more students who are planning to appear for these highly competitive exams to avail this coaching.
"The plan is to take these centres beyond just practice tests and turn them into teaching centres. They will not charge any fees and so will be especially helpful for talented students from sections where aspirations are high but private coaching is impossible due to financial constraints," Times of India quoted an HRD official as saying.
The scheme would immensely help those from rural areas. As per the plan, candidates will first be allowed to take mock tests for these exams this year, while teaching sessions will start next year.
Those who wish to avail the free mock test facility will have to register on NTA's mobile app or website, which will be launched on September 1. Students can register for these sessions at their nearest test centre till September 30. They can choose test slots at nearest centres in their area. They will also get expert help in analysing their tests, which will help them improve their score. A ministry official said that initially mock tests will be held for JEE mains only but later the scheme would be rolled out for other competitive exams as well.
The government will start mock test sessions at these NTA centres as early as September 8 but teaching classes will likely start from May 2019. This would certainly hurt the business of private coaching centres mushrooming across the country. However, the scheme would also attract more students who are planning to appear for these highly competitive exams to avail this coaching.
"The plan is to take these centres beyond just practice tests and turn them into teaching centres. They will not charge any fees and so will be especially helpful for talented students from sections where aspirations are high but private coaching is impossible due to financial constraints," Times of India quoted an HRD official as saying.
The scheme would immensely help those from rural areas. As per the plan, candidates will first be allowed to take mock tests for these exams this year, while teaching sessions will start next year.
Those who wish to avail the free mock test facility will have to register on NTA's mobile app or website, which will be launched on September 1. Students can register for these sessions at their nearest test centre till September 30. They can choose test slots at nearest centres in their area. They will also get expert help in analysing their tests, which will help them improve their score. A ministry official said that initially mock tests will be held for JEE mains only but later the scheme would be rolled out for other competitive exams as well.
Amazon on a buying spree in India! Spencer's added to cart with Future Retail, More
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Amazon is gunning for a hat-trick to take on the escalating omnichannel competition in India. Apart from a 10% stake in Kishore Biyani's Future Retail Limited (FRL) and joining a consortium to buy out Kumar Mangalam Birla's food and grocery supermarket chain More, the world's largest online retailer is now reportedly eyeing a minority stake in Spencer's Retail.
"Talks with Spencer's on valuation and structure are currently ongoing," an executive with knowledge of the matter told The Economic Times. "They are preliminary in nature, so we can't be sure that the deal will go through."
Amazon's two-pronged move into the grocery space makes sense since its ambitions of being the first foreign e-tailer to sell food items directly to customers have been a non-starter due to policy ambiguities. To remind you, last year, Amazon was granted permission by the Indian government to invest $500 million in a wholly-owned venture to sell local produces and packaged food items through online and offline mediums. Though Bezos has reportedly invested about Rs 100 crore ($14 million) in that business - under Amazon Retail India Pvt - things are yet to gain traction.
Citing sources, the daily added that Amazon has realised it will take time for the above venture to develop since it's a difficult business to make profitable without a presence in other categories. So while the Seattle-based ecommerce giant bides time, such strategic investments in top brick-and-mortar chains are sure to come handy. "Without the support of brick-and-mortar chains that already have stores in all cities including the tier II and III markets, it will be difficult for Amazon to expand its play in food and grocery retail across the country," said an executive. In addition, the move will help Amazon save on margins.
According to Knowledge@Wharton, it's not just the size of the grocery pie that is attractive to e-tailers - expected to grow to $3-5 billion in the next three to four years - but also the stickiness. Groceries and fresh produce are an essential purchase for every household. They are bought frequently and with a high repeat rate.
"If FDI rules on multi-brand retail get liberalised, Amazon will look at full ownership in some of the chains," an executive told the daily, adding that it has made a similar offer to Spencer's Retail and others.
In the meantime, the strategy is reportedly likely to unfold through Amazon's Prime Now, which promises two-hour to same-day delivery of food and grocery. The hyperlocal platform is currently present in four cities, Mumbai, Delhi, Hyderabad and Bengaluru.
A stake in Spencer's Retail, India's third largest hypermarket retailer, will give Amazon access to its 128 stores - 58 large ones and 70 smaller ones - across 30 cities. What's more, in an investor presentation in March, the company announced plans to roll out around 40 hypermarket stores over next four years. In the last fiscal, the company reported revenue of Rs 2,091 crore while net loss dropped to Rs 30 crore, down from a loss of Rs 129 crore in 2016-17. The company hopes to break even in the current fiscal.
Spencer's Retail is a subsidiary of RP-Sanjiv Goenka group's flagship company, CESC Ltd. The latter recently got the green light from the National Company Law Tribunal (NCLT) for the demerger of the business into four entities. Sources told the daily that Spencer's Retail - which will then become a separate listed company - has plans to raise funds subsequently, with the promoters looking to dilute a minority stake.
If Amazon successfully closes all three deals it will reportedly have a stake in over 1,700 stores as well as access to a mine of data to further its business in India. Both factors will help it compete effectively against rivals like Walmart-Flipkart and Reliance Retail. Moreover, Alibaba, which has invested heavily in India in the payment and retail space through Paytm and BigBasket, is also seeking local retail partners in top domestic conglomerates.
"Talks with Spencer's on valuation and structure are currently ongoing," an executive with knowledge of the matter told The Economic Times. "They are preliminary in nature, so we can't be sure that the deal will go through."
Amazon's two-pronged move into the grocery space makes sense since its ambitions of being the first foreign e-tailer to sell food items directly to customers have been a non-starter due to policy ambiguities. To remind you, last year, Amazon was granted permission by the Indian government to invest $500 million in a wholly-owned venture to sell local produces and packaged food items through online and offline mediums. Though Bezos has reportedly invested about Rs 100 crore ($14 million) in that business - under Amazon Retail India Pvt - things are yet to gain traction.
Citing sources, the daily added that Amazon has realised it will take time for the above venture to develop since it's a difficult business to make profitable without a presence in other categories. So while the Seattle-based ecommerce giant bides time, such strategic investments in top brick-and-mortar chains are sure to come handy. "Without the support of brick-and-mortar chains that already have stores in all cities including the tier II and III markets, it will be difficult for Amazon to expand its play in food and grocery retail across the country," said an executive. In addition, the move will help Amazon save on margins.
According to Knowledge@Wharton, it's not just the size of the grocery pie that is attractive to e-tailers - expected to grow to $3-5 billion in the next three to four years - but also the stickiness. Groceries and fresh produce are an essential purchase for every household. They are bought frequently and with a high repeat rate.
"If FDI rules on multi-brand retail get liberalised, Amazon will look at full ownership in some of the chains," an executive told the daily, adding that it has made a similar offer to Spencer's Retail and others.
In the meantime, the strategy is reportedly likely to unfold through Amazon's Prime Now, which promises two-hour to same-day delivery of food and grocery. The hyperlocal platform is currently present in four cities, Mumbai, Delhi, Hyderabad and Bengaluru.
A stake in Spencer's Retail, India's third largest hypermarket retailer, will give Amazon access to its 128 stores - 58 large ones and 70 smaller ones - across 30 cities. What's more, in an investor presentation in March, the company announced plans to roll out around 40 hypermarket stores over next four years. In the last fiscal, the company reported revenue of Rs 2,091 crore while net loss dropped to Rs 30 crore, down from a loss of Rs 129 crore in 2016-17. The company hopes to break even in the current fiscal.
Spencer's Retail is a subsidiary of RP-Sanjiv Goenka group's flagship company, CESC Ltd. The latter recently got the green light from the National Company Law Tribunal (NCLT) for the demerger of the business into four entities. Sources told the daily that Spencer's Retail - which will then become a separate listed company - has plans to raise funds subsequently, with the promoters looking to dilute a minority stake.
If Amazon successfully closes all three deals it will reportedly have a stake in over 1,700 stores as well as access to a mine of data to further its business in India. Both factors will help it compete effectively against rivals like Walmart-Flipkart and Reliance Retail. Moreover, Alibaba, which has invested heavily in India in the payment and retail space through Paytm and BigBasket, is also seeking local retail partners in top domestic conglomerates.
General Awareness
Barriers to cashless economy
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What to study?
For Prelims: Nothing much.
For Mains: Rationale behind and outcomes of demonetization, significance, need and challenges for cashless economy.
Context: The Reserve Bank of India’s second annual report shows that since demonetisation cash transactions have increased.
Nearly two years after demonetization, about 99.3% of the notes sucked out of circulation has been returned. Besides, the value of bank notes in circulation has increased by 37.7% over the year, reaching Rs 18,037 lakh crore by the end of March 2018.
Outcomes of demonetization:
Over the last two years, at least three of major claims of demonetization have collapsed.
First, it was supposed to flush out black money and end corruption. The government predicted that Rs 3 lakh crore in currency would not return to the banks. This has proved to be false, as most of the cash has returned.
Second, demonetisation was to help detect fake currency, which apparently funded terror and distorted the economy. The government claimed that at any point of time, there was Rs 400 crore in fake currency notes floating in the economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in fake currency had been detected. Now, the Reserve Bank reports a huge jump in fake Rs 2,000 notes, which were introduced after demonetisation.
Third, demonetisation was to pave the way to a cashless economy and the gleaming new world of digital India. Two years later, the amount of cash with the public has reached a record high, the bank has claimed.
Background:
On November 8, 2016, Prime Minister Narendra Modi announced that all Rs 500 and Rs 1000 notes, comprising 86% of the total value of the currency in circulation at that time, would no longer be recognised as legal tender.
What is a cashless economy?
It is a situation in which the flow of cash within an economy is non-existent and all transactions have to be through electronic channels such as direct debit, credit and debit cards, electronic clearing, payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer and Real Time Gross Settlement.
Benefits of a cashless economy:
Usage of cashless mechanisms would ensure that loopholes in public systems get plugged, and the intended beneficiaries are able to avail the benefits due to them. It also leads to increased efficiency in welfare programmes as money is wired directly into the accounts of recipients.
Efficiency gains can also be seen as transaction costs across the economy come down. It also provides an on-ramp to financial inclusion and enables e-commerce growth.
Reducing use of cash would also strangulate the grey economy, prevent money laundering and even increase tax compliance, which will ultimately benefit the customers at large.
Benefits for individuals:
No need for queues outside ATMs.
No cashout during long holidays.
No waiting for a deposited cheque to be credited.
No risk of carrying currency notes in the wallet.
What perpetuates use of cash in India?
A high propensity to save in and use cash.
Cash intensive supply chains require many merchants to transact in cash.
A large shadow and remittance based economy is also to be blamed for the situation.
Gender imbalance in use of digital payments has further aggravated the problem. This is due to insufficient focus on financial literacy.
Also, costs of point-of-sale terminals and operating costs are still high in India.
What to study?
For Prelims: Nothing much.
For Mains: Rationale behind and outcomes of demonetization, significance, need and challenges for cashless economy.
Context: The Reserve Bank of India’s second annual report shows that since demonetisation cash transactions have increased.
Nearly two years after demonetization, about 99.3% of the notes sucked out of circulation has been returned. Besides, the value of bank notes in circulation has increased by 37.7% over the year, reaching Rs 18,037 lakh crore by the end of March 2018.
Outcomes of demonetization:
Over the last two years, at least three of major claims of demonetization have collapsed.
First, it was supposed to flush out black money and end corruption. The government predicted that Rs 3 lakh crore in currency would not return to the banks. This has proved to be false, as most of the cash has returned.
Second, demonetisation was to help detect fake currency, which apparently funded terror and distorted the economy. The government claimed that at any point of time, there was Rs 400 crore in fake currency notes floating in the economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in fake currency had been detected. Now, the Reserve Bank reports a huge jump in fake Rs 2,000 notes, which were introduced after demonetisation.
Third, demonetisation was to pave the way to a cashless economy and the gleaming new world of digital India. Two years later, the amount of cash with the public has reached a record high, the bank has claimed.
Background:
On November 8, 2016, Prime Minister Narendra Modi announced that all Rs 500 and Rs 1000 notes, comprising 86% of the total value of the currency in circulation at that time, would no longer be recognised as legal tender.
What is a cashless economy?
It is a situation in which the flow of cash within an economy is non-existent and all transactions have to be through electronic channels such as direct debit, credit and debit cards, electronic clearing, payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer and Real Time Gross Settlement.
Benefits of a cashless economy:
Usage of cashless mechanisms would ensure that loopholes in public systems get plugged, and the intended beneficiaries are able to avail the benefits due to them. It also leads to increased efficiency in welfare programmes as money is wired directly into the accounts of recipients.
Efficiency gains can also be seen as transaction costs across the economy come down. It also provides an on-ramp to financial inclusion and enables e-commerce growth.
Reducing use of cash would also strangulate the grey economy, prevent money laundering and even increase tax compliance, which will ultimately benefit the customers at large.
Benefits for individuals:
No need for queues outside ATMs.
No cashout during long holidays.
No waiting for a deposited cheque to be credited.
No risk of carrying currency notes in the wallet.
What perpetuates use of cash in India?
A high propensity to save in and use cash.
Cash intensive supply chains require many merchants to transact in cash.
A large shadow and remittance based economy is also to be blamed for the situation.
Gender imbalance in use of digital payments has further aggravated the problem. This is due to insufficient focus on financial literacy.
Also, costs of point-of-sale terminals and operating costs are still high in India.
For Prelims: Nothing much.
For Mains: Rationale behind and outcomes of demonetization, significance, need and challenges for cashless economy.
Context: The Reserve Bank of India’s second annual report shows that since demonetisation cash transactions have increased.
Nearly two years after demonetization, about 99.3% of the notes sucked out of circulation has been returned. Besides, the value of bank notes in circulation has increased by 37.7% over the year, reaching Rs 18,037 lakh crore by the end of March 2018.
Outcomes of demonetization:
Over the last two years, at least three of major claims of demonetization have collapsed.
First, it was supposed to flush out black money and end corruption. The government predicted that Rs 3 lakh crore in currency would not return to the banks. This has proved to be false, as most of the cash has returned.
Second, demonetisation was to help detect fake currency, which apparently funded terror and distorted the economy. The government claimed that at any point of time, there was Rs 400 crore in fake currency notes floating in the economy. Nine months after demonetisation, it was claimed that Rs 11.23 crore in fake currency had been detected. Now, the Reserve Bank reports a huge jump in fake Rs 2,000 notes, which were introduced after demonetisation.
Third, demonetisation was to pave the way to a cashless economy and the gleaming new world of digital India. Two years later, the amount of cash with the public has reached a record high, the bank has claimed.
Background:
On November 8, 2016, Prime Minister Narendra Modi announced that all Rs 500 and Rs 1000 notes, comprising 86% of the total value of the currency in circulation at that time, would no longer be recognised as legal tender.
What is a cashless economy?
It is a situation in which the flow of cash within an economy is non-existent and all transactions have to be through electronic channels such as direct debit, credit and debit cards, electronic clearing, payment systems such as Immediate Payment Service (IMPS), National Electronic Funds Transfer and Real Time Gross Settlement.
Benefits of a cashless economy:
Usage of cashless mechanisms would ensure that loopholes in public systems get plugged, and the intended beneficiaries are able to avail the benefits due to them. It also leads to increased efficiency in welfare programmes as money is wired directly into the accounts of recipients.
Efficiency gains can also be seen as transaction costs across the economy come down. It also provides an on-ramp to financial inclusion and enables e-commerce growth.
Reducing use of cash would also strangulate the grey economy, prevent money laundering and even increase tax compliance, which will ultimately benefit the customers at large.
Benefits for individuals:
No need for queues outside ATMs.
No cashout during long holidays.
No waiting for a deposited cheque to be credited.
No risk of carrying currency notes in the wallet.
What perpetuates use of cash in India?
A high propensity to save in and use cash.
Cash intensive supply chains require many merchants to transact in cash.
A large shadow and remittance based economy is also to be blamed for the situation.
Gender imbalance in use of digital payments has further aggravated the problem. This is due to insufficient focus on financial literacy.
Also, costs of point-of-sale terminals and operating costs are still high in India.
