Yaxhpal's List: Economy and Business

• Focussing on attracting foreign direct investment (FDI), in line with the Union government’s policy, the State government proposes to set up four help desks in Japan, Taiwan, U.S.A and Germany
• A new textile policy, a world-class Textile Park in Yadgir, a special package for the welfare of handicraft artisans and a loan waiver facility for weavers are the other proposals.

• FATF is an inter-governmental body that sets standards and promotes policies to combat money laundering and terrorist financing for countries across the world
• the Financial Action Task Force (FATF) on Wednesday said the country has substantially addressed the deficiencies in its regulatory framework and has become largely compliant with global standards in this regard
• FATF has also decided to remove the country from its regular follow-up process for determining its compliance to anti-money laundering and countering financing of terrorism (AML/CFT) regulations
• The move would help India get greater support from international authorities in its fight against black money and check the illicit flow of funds from and to the country.
• India was earlier placed in the regular follow-up process for mutual evaluation purposes because of partially compliant (PC) ratings on certain core and key recommendations.
• India has rectified “nearly all of the technical deficiencies identified with respect to the criminalisation of money laundering and terrorist financing and the implementation of effective confiscation and provisional measures”
• India has substantially addressed the technical deficiencies identified in relation to customer due diligence and other preventive measures, FATF said
• India has also further enhanced “its outreach programme to provide guidance to the financial sector on the suspicious transaction reporting obligations and engaging in extensive compliance monitoring, and has brought several of the Designated Non-Financial Businesses and Professions (DNFBPs) within the scope of its preventive AML/CFT measures
• Besides, various designated non-financial businesses and professions (DNFBPs) have been brought within the scope of Prevention of Money Laundering Act (PMLA), such as casinos; real estate agents, sub-registrars in charge of registering property; dealers in precious metals/stones; dealers in high-value goods; and safe deposit keepers

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• To curb money laundering and terror financing activities, the international panel on banking supervision on Thursday came out with suggestions, including stronger due diligence and clear policies by banks
• banks should have a thorough understanding about inherent money laundering or terror funding risks across customer bases, products and services
• Inadequacy or absence of sound ML/FT risk management can increase the exposure of banks to serious risks, especially reputational, operational, compliance and concentration risks
• The consultative document titled ‘Sound management of risks related to money laundering and financing of terrorism
• proposed that identity of customers, beneficial owners, as well as persons acting on behalf of customers, should be properly verified
• panel said these costs and damage could probably have been avoided had the banks maintained effective risk-based AML/CFT policies and procedures.
• there are primarily three lines of defence against money laundering and terror funding
• first line of defence, policies and procedures should be clearly specified in writing, and communicated to all personnel,
• the chief officer in charge of keeping a tab on money laundering and terror funding activities should ensure bank’s compliance
• the third line of defence, internal audit, plays an important role

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• decided to enhance steel production capacity to 300 million tonnes
• increase export of textiles by 30 per cent this year
• decisions were taken at a meeting chaired by Prime Minister Manmohan Singh to review the manufacturing activity
• giving a push towards creating domestic manufacturing capabilities in advanced materials, alloys and composites
• to build an indigenous 90-seater aircrafthas been in the pipeline for years
• steel production this year is expected to be 120 million tonnes
• In the last fiscal, textiles exports stood at about $34 billion
• Clearance was also given to preparation of a pilot project for electric vehicles — three-wheelers, taxis and buses — in Delhi

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• The continuing slide in the rupee against dollar has raised many questions.
• Rupee was the worst performing Asian currency
• a depreciating rupee can stoke inflation further
• only positive from the U.S. Federal Reserve’s plans to roll back the stimulus plan will be a fall in commodity prices, including gold, which could help to bring down India’s high current account deficit (CAD)
• An estimated $90 billion is required to fund the gap in India’s balance of payments (BoP) for the current financial year 2013-14
• large withdrawals of FII funds from the debt markets have hit the rupee hardest because India runs a large CAD
• rupee depreciation also has manifold effect
• Indian corporates that have large overseas debt burden
• they could suffer increased MTM (mark-to-market) losses as the rupee weakens further

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• to attract a larger number of foreign investors
• SEBI on Tuesday approved wide-ranging changes
• approved merging different classes of investors such as FIIs, their Sub Accounts and Qualified Foreign Investors (QFIs) into a new category
• Foreign Portfolio Investors (FPIs)
• Committee on Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments
• Chairmanship of former Cabinet Secretary K M Chandrasekhar
• any portfolio investments would be defined as investment by any single investor or investor group, which shall not exceed 10 per cent of the equity of an Indian company
• Any investment beyond the threshold of 10 per cent shall be considered as Foreign Direct Investment (FDI)
• SEBI has also approved doing away with the current practice of FIIs and their sub-accounts requiring a prior direct registration of the regulator to operate in Indian markets
• SEBI would adopt a risk-based KYC (Know Your Client) approach in dealing with the overseas investors
• FPIs would be categorised into three categories — low-risk (for multi-lateral agencies, government and other sovereign entities), moderate risk (for banks, asset management companies, investment trusts, insurers, pension funds and university funds) and high-risk (all the FPIs not included in the first two categories)
• The third-category FPIs would not be allowed to issue Participatory Notes
• KYC requirements would be simplest for the first category and most stringent for the third class
• require some changes in the provisions of the Prevention of Money Laundering Act
• QFI route has not been a big success because of the taxation responsibility on the Depository Participants and therefore SEBI wants to make the FPIs getting this responsibility through banks under the new regime

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• Climate change is creating more frequent and more unpredictable extreme weather events, forcing insurers to change their assessment criteria for the risk of natural disasters hitting a specific area
• Traditional approaches, which are solely based on analysing historical data, increasingly fail to estimate today’s hazard probabilities
• UN report last month, natural disasters have cost the world $2.5 trillion so far this century, which is far higher than previously estimated
• key to understanding current changes in the distribution, frequency and intensity of global extreme events relevant to the insurance industry, such as tropical cyclones, flash floods or extra-tropical winter storms
• best way to ensure that “ambiguous risks” remain insurable, the study said, was for the insurance industry to raise awareness of risk and climate change through ‘’risk education and disseminating high-quality risk information

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• The point is that a strengthening U.S economy ought to be a positive factor for India and its markets. But the exactly opposite reaction is most certainly due to the fear — partly materialised — of short-term flows fleeing the markets, dragging down the rupee and stock indices, which brings us to the serious weakness of India’s external sector and its abject dependence on short-term flows to fund the balance of payments

• Users of the RBI-backed payment network can now use it on select websites for e-commerce
• RuPay, which is widely seen as a domestic alternative to MasterCard and Visa, has been quietly rolled out for e-commerce use by the National Payments Corporation of India (NPCI)
• will provide another payment option for customers with several websites starting to accept RuPay payments
• RuPay, which was launched last March, was initially backed by four public sector banks—State Bank of India, Bank of Baroda, Bank of India and Union Bank of India

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• The rupee is at a historic low of 58.2-to-the dollar

• UNESCO’s World Heritage Committee on Tuesday increased pressure on the Australian government to conserve the Great Barrier Reef
• listed as a World Heritage site since 1981
• The situation is “complicated,” he said, and the natural resources in the area are an “obstacle” to its conservation

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• Finance Minister Launches Maiden infrastructure Debt fund (IDF) Scheme of IIFCL Mutual Fund for Catalysing Investment in Infrastructure Sector
• try to mobilise resources from insurance and pension sectors as these funds are available for long term horizon
• an immense need for financial products such as IDFs, Takeout Finance and Credit Enhancement to fill the financial gap in the infrastructure sector
• IIFCL Mutual Fund (IDF) has launched its maiden Infrastructure Debt Fund scheme with the support of investors viz. Canara Bank and HUDCO being the Strategic Investors and Corporation Bank, Oriental Bank of Commerce & IIFCL being the other investors
• scheme will mainly undertake investment in debt securities or securitized debt instruments of infrastructure companies, infrastructure capital companies or infrastructure projects, SPV, Bank Loans etc

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• The continuous fall in the rupee since the middle of the previous week had set new records each day
• The gyrations in the rupee last week are due to a number of factors
• In India, the stock exchanges, too, crashed in tandem with the rupee
• Sentiment
• sentiment is something very difficult to influence
• herd mentality among market participants
• exporters hold on to their dollars hoping for an even better exchange rate
• Importers who lose out when the rupee weakens rush to cover, that is buy dollars
• biggest limitation for the RBI has been the size of the external reserves
• reduces the quantum of ammunition in the hands of the RBI
• It’s not rupee weakness but …
• Almost all emerging market currencies are under pressure too
• not the rupee’s weakness so much as the dollar’s strength that is behind the currency depreciation
• ollar has also gained on the belief that the American Federal Reserve that had unleashed an unprecedented quantitative easing programme might end it sooner than expected
• The programme essentially targeted the floundering domestic economy by making available plenty of cheap money. Some of it flowed to countries such as India. If the programme ends, there is every likelihood of the capital flows going back to the U.S. to fund the revival
• both the debt market and the equities have witnessed a reverse flow of money
• India’s external reserves, now $290 billion, are not export earnings but dollars accumulated by the RBI when it mopped up dollars coming in through short-term flows. Therefore, bulk of the reserves is in the nature of debt and do not “belong” to the country
• will have to be treated with lot more circumspection than in the past when a portion of the reserves were, quite controversially, used as seed money for infrastructure funds
• Short sightedness
• extreme short sightedness of the UPA II
• encouraging short-term external commercial borrowing by companies on the mistaken belief that the surfeit of money and the very low interest rates will prevail indefinitely
• the government had blithely ignored the most obvious risks arising out of currencies and asset-liability mismatche

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• They did not adhere to the KYC norms for walk—in customers for sale of third party products and failed to file cash transaction reports in respect of some cash transactions and sale of gold coins for cash beyond Rs 50,000
• The violation also include non—adherence to instructions on import of gold on consignment basis, limits on remittances under Liberalised Remittance Scheme and repatriation of funds from non—resident ordinary (NRO) account.
• RBI had launched the investigation into the working of banks following the expose by Cobrapost which purportedly showed some bankers giving suggestions to customers on ways to bypass regulatory norms.

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• Defence, Insurance and telecom sectors big beneficiaries
• government hiked limits and relaxed rules for Foreign Direct Investment in key sectors including defence, telecom, insurance, commodity exchanges and power exchanges

• gave more powers to market regulator SEBI to crackdown on ponzi schemes, access phone call records to check insider trading and carry out search and seizure operations
• would give SEBI the legal backing to clamp down on unscrupulous entities that are using newer methods to take gullible investors for a ride
• As per the amended law, SEBI can regulate any money pooling scheme worth Rs.100 crore or more and attach assets in cases of non-compliance

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• Becomes the biggest U.S. city to file for bankruptcy with its finances ravaged and neighbourhoods hollowed out by a long, slow decline in population and auto manufacturing
• will hurt Detroit’s image for years
• They don’t have to pay anyone they don’t want to. And no one can sue them.
• It took decades of decay to bring down the industrial giant that put the world on wheels
• The city grew to 1.8 million people in the 1950s, luring them with plentiful jobs and paid good wages to stamp out automobile for sale across the globe
• Detroit’s fall began late that decade as developers started building suburbs
• Detroit lost a quarter-million residents between 2000 and 2010
• Government corruption under former Mayor Kwame Kilpatrick only made things worse

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• Rangarajan formula raising concerns
• about windfall gains to corporate houses
• Parliamentary Standing Committee on Finance
• The Power and Fertilizer Ministries have already expressed concern over the hike in gas prices and their adverse impact on power tariffs and fertilizer cost
• draft report, “Economic Impact of Revision of Natural Gas Price,”
• Committee strongly recommends that the government review forthwith its decision
• resh pricing “which is more balanced and holistic and closely related to the audited cost of production and a reasonable return on the capital invested. Arms length pricing cannot be construed to mean logic-less pricing.”
• government must ensure that the contractor responsible for delivering the major chunk of gas from KG D6 gasfield makes good the shortfall as per the agreement at the old price of $ 4.2 mbtu, rather than getting the benefit of the new price for previous commitments.
• important recommendation of the Rangarajan panel of moving to a revenue sharing arrangement with gas producers should be considered
• model should be evolved that will do away with incentives to control production and manipulating investments, while assuring reasonable returns to the producers

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• Media houses are increasingly moving towards integrated newsrooms, with journalists reporting across platforms, languages, themes, in real time. But this may not be smooth and uncontested
• idea of ‘integrated newsrooms’ is picking momentum in an unprecedented manner
• Newspapers and channels, belonging to the same network, have been brought together in common office spaces for greater ‘synergy’
• ‘web-first’ philosophy – whereby reporters are first told to file a story for the net, before sending a longer one for the print edition or TV
• Two factors are driving the change.
• The first, all industry veterans admit, is ‘cost-cutting’ at a time when media houses are feeling the pressure in an ultra-competitive environment, a sluggish economy, and with many networks facing severe financial crises
• The second is technological, and recognition that people are already shifting to consuming news online
• The fact that the future is digital is now a truism
• The greatest impact on journalists, of course, is they have to be multi-faceted. You do a piece-to-camera in English and Hindi, write for the group’s publications, tweet in real-time, post short video-blogs, and may even need to do your own camera-work,

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• the 500 MWe Prototype Fast Breeder Reactor (PFBR),  is almost ready and  it would go critical by September next year
• Indira Gandhi Centre for Atomic Research (IGCAR)
• Pointing out that the country would face a power deficit of 412 GWe by 2050 and 1.6 billion tonnes of coal would be required to fill the gap, he said India had no option but to go for a combination of nuclear, solar and wind energy
• As India had the world’s highest thorium resource, it could be used for generating power for the next 600 years
• However, the thorium had to be converted into a different form, which could be burnt in reactors, he said adding that the fast reactors could convert thorium into uranium 233 and that would enable to build more reactors
• fast reactors were important for realising sustainable nuclear energy. The use of plutonium in fast reactor fuels, operation of the fuel at high temperatures, use of liquid sodium as coolant and enriched boron carbide as the control material were examples of features of fast reactors that pose a challenge to the chemists,
• The safe operation of reactor, reduction in the generation of nuclear waste and similar objectivities can all be met only through a sustained R&D programme in chemistry exploiting the knowledge base and expertise available in various academic and research institutions
• Future challenges with respect to fast reactors would include the use of pyro-processing schemes for reprocessing the metallic fuels

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