Govt raises 10k cr via rarely used tool, Bond St surprised

The government on 10TH Nov. surprised bond dealers and economists alike by raising Rs 10,000 crore from the market through cash management bills (CMBs), a rarely used instrument that it resorts to only when the exchequer faces a short-term liquidity mismatch.
Bond dealers warned that given that the exchequer has a cash shortage, if the government's expenses are not controlled at this stage or divestments don't pick up pace, there could be slippages leading to a higher deficit figure than the budgeted 4.1%. However, economists said there is leeway for the government to control expenditure and generate revenues for the exchequer.
Under the Ways and Means Advance (WMA) facility of the Reserve Bank of India (RBI), the government can borrow up to Rs 20,000 crore till March 2015 to meet such short-term frictional cash shortfall at the repo rate, currently at 8%. If the government borrows anything above that limit, it will have to pay an interest of two percentage points above the repo rate - 10% given the current repo rate. However, if the government mobilizes funds through CMB, it usually pays a lower rate of interest. In Monday's 42-day CMB auction, it paid the rate of 8.25% per annum, savings of 1.75 percentage points for the exchequer.

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Issuance of Government of India Cash Management Bills


The Government of India, in consultation with the Reserve Bank of India, has decided to issue a new short-term instrument, known as Cash Management Bills, to meet the temporary cash flow mismatches of the Government. The Cash Management Bills will be non-standard, discounted instruments issued for maturities less than 91 days.
The Cash Management Bills will have the generic character of Treasury Bills and their sale will be subject to the terms and conditions specified in the General Notification No. F.2 (12)-W&M/97 dated 31st March 1998 issued by Government of India and as amended from time to time.
The Cash Management Bills will have the following features.
a) The tenure, notified amount and date of issue of the proposed Cash Management Bills will depend upon the temporary cash requirement of the Government. However, the tenure of the proposed Bills will be less than 91 days.
b) The proposed Bills will be issued at discount to the face value through auctions, as in the case of the Treasury Bills.
c) The announcement of the auction of the proposed Bills will be made by the Reserve Bank of India through separate Press Release to be issued one day prior to the date of auction.
d) The settlement of the auction will be on T+1 basis.
e) The Non-Competitive Bidding Scheme for Treasury Bills will not be extended to the Cash Management Bills.
f) The proposed Bills will be tradable and qualify for ready forward facility. Investment in the proposed Bills will be reckoned as an eligible investment in Government Securities by banks for SLR purpose under Section 24 of the Banking Regulation Act, 1949.
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NCAER lowers India GDP growth forecast to 5%

“The fundamentals of the economy remain weak with uncertainties prevail. The only redeeming feature is the weakening of inflation and FDI inflows”

The National Council of Applied Economic Research has lowered India’s GDP growth forecast to 5 per cent in the current financial year on weak economical fundamentals and uncertainties in growth prospects.
The economic think-tank in its earlier projection had suggested that the Indian economy was likely to grow at 5.7 per cent in 2014-15.
“NCAER is predicting a slower growth for the economy unlike other forecasts. The fundamentals of the economy remain weak with uncertainties prevail. The only redeeming feature is the weakening of inflation and FDI inflows.
“Whether that will help us revive our growth prospects will depend on a number of factors including revival of the external economy and the extent of damage on agriculture due to deficit rainfall,” it said in a release on Tuesday.
The NCAER said that the overall economy is looking weak with uncertain growth prospects. “The economy is giving mixed signals. On one hand, we had the Sensex reaching record levels partly driven by record foreign institutional investment and FDI.”
However, the business confidence index is showing rise in sentiments on the back of a stable political regime with the new government, it said.
Weakening of prices due to cheaper food and fuel inflation is also positive, but agricultural growth is predicted to be lower than last year as there was deficit rainfall with uneven spatial and temporal patterns.
“The pace of growth shows signs of slowing down in the services sector. Not surprisingly, bank credit to the commercial sector has not picked pace and continues to languish.
“Further, the slowdown in the external economy, except the United States, shows little growth prospects for the external sector even though exports grew in the first quarter,” it said.
Therefore, while inflation has weakened significantly and sentiments have improved, the fundamentals of the economy continue to be weak, said NCAER. 

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627 names on list; SIT probe is next

A day after the Supreme Court rapped the Centre for “providing a protective umbrella to foreign bank account holders,” the Union government on Wednesday submitted, in a sealed cover, a list of 627 Indians holding black money abroad. The Centre also gave a status report on the investigations against such account holders.
A Bench comprising Chief Justice H.L. Dattu and Justices Ranjana Desai and Madan B. Lokur made it clear to Attorney-General Mukul Rohatgi that it did not intend to open the envelopes, and asked the Registry to send them to the Special Investigation Team. It directed that the envelopes be opened only by the SIT chairman, Justice M.B. Shah, and vice-chairman, Justice Arijit Pasayat, to conduct a further investigation.
The Bench empowered the SIT to evolve its own procedure after hearing the Centre’s stand on India’s tax treaties and the submissions of petitioner, Ram Jethmalani. The Bench asked the SIT to submit a status report on its investigation by November 30 and posted the matter for further hearing on December 3.
Earlier, Mr. Rohatgi submitted that the first list contained details of correspondence, treaties and agreements that India had signed with France and other nations where the illegal money was said to be stashed. He said the second list contained all the 627 names and the third gave the status report on the probe in these cases. Mr. Rohatgi said more than half the people on the list of 627 were Indian nationals, while the rest were NRIs. He said most of them had accounts with the HSBC Bank, Geneva.

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Insurance Amendment Bill may be cleared in winter session

The Narendra Modi government has an ambitious agenda for the winter session of Parliament for which the Cabinet Committee on Parliamentary Affairs (CCPA) has recommended 22 sittings, starting November 24 and concluding on December 23.
The government hopes to clear over 30 bills that are likely to include the long-pending Insurance Amendment Bill, the Constitution Amendment Bills relating to national Goods and Services Tax (GST) and the Land Border Agreement (LBA) with Bangladesh.
At Monday’s CCPA meeting, convened by Union Home Minister Rajnath Singh, who heads the committee, the 67 Bills pending in both the Houses were discussed. Later, Union Parliamentary Affairs Minister M. Venkaiah Naidu was asked to circulate the list to all Ministries concerned and seek their response within a week.
Interestingly, when the UPA government was in power, the BJP had blocked the LBA Bill citing reservations of its State units in Assam and West Bengal, which share a border with Bangladesh, while some BJP-ruled States, including Gujarat (the Bill requires ratification by at least half the States), had objected to the GST Bill.
The government also hopes to bring the Small Factories (Regulation of Employment and Condition of Services) Bill, 2014 to govern small factories employing less than 40 workers.
Short of majority
The key issue as far as Constitution Amendment Bills are concerned is that the NDA is well short of a majority in the Rajya Sabha, and the upcoming 11 biennial elections for Uttar Pradesh and Uttarakhand announced on Monday will not change the composition in the NDA’s favour.
The government will also have to convert the two ordinances it had promulgated since the last session into law. The first sought to shield the National Textile Corporation from rent control laws that have been used to evict its sick textile units from prime land in several cities and restore the NTC’s rights over leased property lost to the original landlord in court battles due to expiry of the lease period.
The other is the 27-page ordinance that paves the way for commercial mining of coal by private firms or participating in auctions. The ordinance was promulgated to tackle the crisis affecting the sector after the Supreme Court in September this year cancelled almost all coal mine allocations.
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SoftBank of Japan to invest $10 b in India

It will look for opportunities in telecom and the fast-growing e-commerce sector 

Prime Minister Narendra Modi with SoftBank Corporation CEO Masayoshi Son in New Delhi on Monday.

Telecom giant SoftBank has pledged an investment of $10 billion (over Rs.60,000 crore) in India’s IT and communications space, one of the biggest investment commitments from a Japanese firm after Prime Minister Narendra Modi’s visit to that country.
Softbank — one of the major telecom and internet corporations of Japan — will look for opportunities in telecom and the fast-growing e-commerce sector in India.
The proposed investment was committed by Softbank Chairman and CEO Masayoshi Son in a meeting with Telecom Minister Ravi Shankar Prasad, an official statement said on Monday.
“Mr. Son today assured the Minister that SoftBank would like to invest about $10 billion in India in the coming years. He placed it on record that India is the top most priority for SoftBank,” the Telecom Ministry statement said.
Mr. Son told Mr. Prasad that the visit of the Prime Minister to Japan had created a climate of hope and optimism about greater economic cooperation between the two countries, it added.
With a market cap of $92 billion, SoftBank has operations in broadband, fixed line telecom, e-commerce, finance, media and marketing. SoftBank already has made investments in Indian companies, including InMobi and Hike.
“He (Mr. Son) further expressed immense faith in the great e-commerce potential of India. He estimated it to become a $0.5 trillion business in the next ten years,” the statement said.
Sources said SoftBank had plans to invest in e-commerce firm Snapdeal. However, Softbank and Snapdeal did not immediately respond to queries on the matter.
SoftBank Chairman also asked Mr. Prasad to develop a robust mobile phone infrastructure and resolve spectrum issues.
Mr. Prasad shared the Prime Minister’s ideas and informed Mr. Son about the incentives such as electronic manufacturing clusters and the package scheme that the government was providing to boost electronic manufacturing in India, the statement said.
“The Minister also informed Mr. Son about the vision of the government to transform India into an IT product nation,” it added.
Besides, Mr. Prasad discussed the smart city project of the new government for which Rs.7,060 crore had been earmarked in the current year’s Budget.
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Free Trade Agreements haven't widened trade deficit: Commerce Ministry


India's Free Trade Agreements (FTA) with major partners such as Japan, Malaysia, South Korea and the ASEAN bloc have not contributed to an increase in the country's trade deficit, initial findings of a Government study on the impact of FTAs has concluded.
“Though preferential imports have been increasing from the period 2009-2010 to 2013-14, they are still not significant ranging from 3.4 per cent of total imports under the FTA with Malaysia to 22.4 per cent of total imports under the India-Japan FTA,” according to an official release by the Commerce Ministry.
The FTAs have also not resulted in any increase in consumer goods imports and only an “insignificant”' rise in automotives imports, the Commerce Ministry study said.
Imports have been low under the preferential tariff route offered under the FTA because of tough Rules Of Origin (ROO) norms, which call for high value addition for imported products to qualify for FTA benefits, an official said.
The Commerce Ministry, however, doesn't have data on exports through the preferential route as it is awaiting data from partner countries. 

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