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Govt to phase out licensing requirement for businesses: Report

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The government is looking to phase out the licensing requirement of businesses in an attempt to reach the top 50 in the World Bank’s “ease of doing business” ranking, according to a report by Business Standard.

According to the report, the Department for the Promotion of Industry and Internal Trade (DPIIT) has given a draft Cabinet note on a policy proposed for inter-ministerial consultation.

It will assess whether the licensing should be scrapped or replaced by a registration process. If licenses cannot be scrapped in some cases, the renewal obligation can be done away with, the draft suggested.

or start-ups, the draft states that the compliance burden needs to be capped to an hour a month. "Ministries would need to come out with a plan on how they would reduce the compliance burden in terms of cost and time," an official with the knowledge said to the paper.

Other measures in the draft suggest reforms for self-certification and random checks. This will work in cases where first-time violators will receive advisory while repeated violators may be penalised.

With the unemployment rate at a 45-year high and economy in a slump, this move may boost the business sentiment and create employment. It is also expected to increase Foreign Direct Investment (FDI) which fell for the first time in six years by one percent to $44.4 billion.

The union cabinet is likely to deliberate on the policy in July.

Piyush Goyal takes stock of draft National Logistics Policy

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Minister of Commerce and Industry and Railways, Piyush Goyal, on June 27, reviewed the draft National Logistics Policy.

The minister proposed an action plan for the implementation of the policy prepared by the Department of Logistics, which comes under the Commerce Ministry.

"The draft policy has been prepared in consultation with the ministries of railways, road transport and highways, shipping, and civil aviation. Forty-six partnering government agencies (PGAs) inputs were analysed in detail for consideration in the policy," the commerce ministry said in a statement.

Goyal has asked these four ministries to work with each other to bring down India's logistics costs from the current 14 percent of the gross domestic product (GDP) to 9 percent.

"In the meeting, all aspects of logistics related to railways, civil aviation, shipping and inland waterways, road transport, ropeways warehousing and cold chain were discussed in detail," the release said.

The minister also directed line ministries to ensure that foodgrains, fruits and vegetables reach from farm to market with a minimum wastage of time.

He also said that a central scheme for cold chain across the country, especially for fruits, vegetables and perishables, may be made part of the action plan of the draft logistics policy so that it improves efficiency and reduces the loss of farmer's produce.

"During the review meeting issues relating to rail freight rationalization and freight policy for dedicated freight corridor, having immediate implications for modal shift, were discussed at length," the release said.

Goyal also directed that the logistics department must be a part of consultation process whenever any new road, railway, airport and shipping port project is being considered to ensure holistic planning.

India’s logistics sector is highly fragmented, and the aim is to reduce the logistics cost from the present 14 percent of the GDP to less than 10 percent by 2022.

As per the Economic Survey 2017-18, the Indian logistics sector provides livelihood to more than 22 million people, and improving the sector will facilitate a 10 percent decrease in indirect logistics cost, leading to a growth of 5 to 8 percent in exports.

Further, the survey estimated that the worth of Indian logistics market would be around $215 billion in next two years compared to about $160 billion currently.

"The commerce and industry ministry is formulating the logistics policy so that India’s trade competitiveness grows, more jobs are created, India’s performance in global rankings improves and paves the way for India to become a logistics hub," the release said.

Budget 2019: 'Tax-Free bonds, innovative PPP models needed to boost infra sector'

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With the NDA government being re-elected, expectations have been high for big economic reforms by the government in the upcoming Budget 2019. All eyes are on the government to take measures to stimulate the economy and focus on job creation.

Infrastructure is one of the sectors where several measures are expected from the budget to push investments and develop the infrastructure in the country.

Infrastructure today is one of the key drivers for the Indian economy and includes several sub-sectors like roads, railways, power and urban infrastructure to name a few.

As per reports, India needs investment to the tune of Rs 50 lakh crore in the infrastructure sector by 2022 to have sustainable development in the country.

To achieve this, large investments are expected towards key segments like roads, railways, waterways, etc. The investments are expected to come through budgetary support and through raising external resources.

One of the biggest deterrents of spending has been the lack of funding options. With stress in the banking system, funding towards the sector has been affected.

To reduce the dependence on budgetary allocation, raising funds through other means have become crucial. Asset monetization is one such funding avenue which the government is likely to significantly focus on.

The launch of the first Toll-Operate-Transfer model for roads has been very successful and similar model may be replicated in other sectors within the sector as well.

The government may also consider the reintroduction of tax-free bonds to raise funds that would be directly utilised to boost infrastructure investment.

Additionally, the introduction of an innovative PPP model like hybrid annuity or raising foreign capital through investment trusts are steps that can be taken to revive investments.

Investments in key infra segments:

As far as the road sector is concerned, the government in FY18 launched the Bharatmala program that would entail Rs 7 lakh crore of cumulative investment from FY18-22.

In the Interim Budget in February 2019, the government provided for ~Rs 1.5 lakh crore including internal and external budgetary resources (IEBR) for road sector in FY20.

We expect the allocation to be at similar levels in the budget, in line with the annual investments envisaged under the Bharatmala program.

In the interim budget, total allocation towards railways rose to Rs 1.58 lakh crore, the highest ever. We expect the budget to maintain the elevated allocation as railways revenues have been lower than targets.

Fresh investments are therefore required to improve the revenues and support the expected pickup in the economy.

Similarly, we expect a strong focus on other infrastructure segments like irrigation, aviation, rural roads, and metros. The funding for these segments is likely to remain robust.

Viral Acharya's resignation: A look at the reasons why RBI and govt have been at loggerheads

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With the resignation of RBI Deputy Governor Viral Acharya, the central bank has seen its second key exit in recent times.

Acharya's decision to step down comes six months before his tenure ends.

This is not the first time in the recent past that an RBI senior official has quit before the expiry of their term. In December 2018, RBI Governor Urjit Patel had resigned nine months before his term ended.

The rift between RBI and the government came out in the open in 2014 with differences over composition of the MPC.

The government's original draft bill had suggested that four out of seven members of the MPC would be appointed by the government. A central bank panel had later recommended a five-member panel where three would be from the RBI.

It was finally agreed that the MPC would have three members from the RBI – the Governor, Deputy Governor and another official – and three government-appointed members. The Governor gets the deciding vote in case of a tie.

In 2016, the then RBI Governor Raghuram Rajan was at the receiving end of comments from BJP MP Subramanian Swamy over the former's policies on inflation.

Swamy had even written a letter to Prime Minister Narendra Modi seeking Rajan removal from the post. Swamy accused Rajan of an "apparently deliberate attempt to wreck the Indian economy," and called him "mentally not fully Indian."

Rajan became the first RBI Governor in two decades who was not offered a second term. Urjit Patel took over as the central bank’s chief in September 2016.

Shortly after Patel took over, the government announced demonetisation.

Initially it was believed that the RBI was in favour of the disruptive move. But the minutes of an RBI meeting eventually revealed that the central bank had warned of demonetisation's short-term effects and said it would not have material impact on curbing black money.

In August 2018, an RBI report said almost 99.3 percent of the banned notes came back into the system.

The trouble began again when the government asked for capital from the central bank’s excess reserves. The government had even threatened to use Section 7 of the RBI Act, which would give it more power to instruct the RBI.

Acharya had in October 2018 highlighted the importance of the independence of central banks, and said government interference negates its functional autonomy.

After Patel's unexpected resignation, there was speculation that Acharya’s exit would follow. Though Patel had cited “personal reasons” for his stepdown, the backdrop made it appear as a sign of protest.

Though this was not the first time the RBI and the government have clashed over independence, this was a rare occasion when the rift was made public.

You can buy a standalone ‘own damage’ motor insurance from September 1

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In less than three months from now, motor vehicle owners would be able to buy a standalone annual “own damage” cover. This will be applicable for cars and two-wheelers, both old and new. This means that buying a package policy of motor third-party and own-damage insurance will no longer be compulsory.

However, details of the third party policy taken will have to be provided to the insurance company. The own damage cover will protect against vehicle repairs, theft and fire.

Insurance Regulatory and Development Authority of India (IRDAI) said that insurers would have the option to offer package policies, in addition to stand-alone OD and TP policies. However, it clarified that long term stand-alone own damage policy would not be permitted for the present.

Onkar Kothari, Company Secretary and Compliance Officer – Bajaj Allianz General Insurance, said that the This circular from IRDAI had provided much-needed clarity in terms of insurer's approach for standalone motor OD policy, its pricing and duration.

“It is going to be an annual policy. It has also made it mandatory for insurers to ensure that no vehicle should be insured only for OD cover and the insurer needs to mention start and end date of TP policy and name of its issuer while giving standalone OD policy,” he added.

IRDAI said that policyholders would have the option to renew the own damage component of a bundled cover falling due on or after September 1 with the same insurer or a different insurer. This can be done on an annual basis.

Here, the pricing of a stand-alone OD policy will be the same as that being offered for the OD component of a package policy.

Motor “own damage” policies are optional while the third party cover is mandatory for all vehicles running on Indian roads.

Jagan Mohan Reddy, Devendra Fadnavis by his side, K Chandrasekhar Rao inaugurates Rs 80,000 crore mega irrigation project

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The Kaleshwaram project, touted as the world's largest multi-stage lift irrigation scheme and boon to Telangana, was inaugurated by Chief Minister K Chandrasekhar Rao at Medigadda in Jayashankar-Bhupalpally district on Friday.

Telangana and Andhra Pradesh Governor E S L Narasimhan, Maharashtra Chief Minister Devendra Fadnavis and Y S Jagan Mohan Reddy of Andhra Pradesh were present on the occasion when the Medigadda barrage was opened.

The estimated Rs 80,000 crore project was built on Godavari river, which originates in Maharashtra, flows through Telangana before merging with the sea in Andhra Pradesh.

Rao and his wife participated in 'Jala Sankalpa Mahotsava Yagam' at the Medigadda barrage earlier.

The scheme would provide irrigation facility to 45 lakh acres for two crops, according to the state government, which said that it would also provide water to the ambitious Mission Bhagiratha drinking water supply project.

The project would also help in supplying drinking water to one crore population in Greater Hyderabad on a daily basis, as also 16 TMC of water to thousands of industries in the state, it said.

Tricks of trade | There is life beyond the US-China fight. And India must seize it

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India, it seems, is trying to pick up the tricks of global trade fast. Amid the ongoing and escalating tariff tension between the US and China, India, like a true trade opportunist, is weighing moves to increase its market share in both the countries. To this effect, a detailed study has been carried out to spot items whose exports can be jacked up.

The commerce ministry, in a recent study, has identified over 350 such products, of which 203 items are those whose exports could be increased to the US, replacing Chinese goods, and 151 items where exports to China could bestepped up.

India’s eagerness to cash in on the ongoing trade spat between the two super powers is understandable as the country, in recent years, has been struggling to raise its exports of goods and services. While 2018-19 had been tad better for merchandise exports at $331 billion, the country is way behind its target of achieving $900 billion in goods and services exports by 2020 (for 2018-19, exports of goods and services stood at around $535 billion).

According to the commerce ministry analysis, for 203 items India has the potential to replace Chinese exports to the US as it already has market access for these items and is a competitor of China. Since the US has increased tariffs for China on these items, India could find it easy to increase exports. These items include electrical machinery, rubber and graphite electrodes. The US imports of these items from China are worth around $30.6 billion, while India’s exports to the US are only worth $2.4 billion. On the other hand, India’s total exports of these items to the world are worth $22.2 billion, implying that there is a scope to ratchet up such exports to the US.

The study further reveals that of the 774 American items on which China has imposed extra duties, India can ship out more and replace the US, especially in 151 items. In these 774 items, China’s imports from the US stand at an annual $20.4 billion. However, while India exports these items worth $32.8 billion to the world, it ships out only $2.9 billion to China. This means there is a huge scope for India to replace the US.

While the number crunching may look enticing, it has to be kept in mind that the benefits to India are contingent on greater competitiveness as well as its ability to scale up production to meet higher demand. In this context, the opinion of an exporter of organic and inorganic chemicals, perhaps, is worth noting. According to the exporter, there is potential to export more xylene and  benzene to China. But these are bulk chemicals in liquid form. So logistical support is crucial to increase exports. High cost of freight and electricity too is an issue that needs to be resolved.

The relevance of the exporter’s view is that while the opportunity to make the best of an adverse situation may exist, challenges are also big. It is extremely difficult to change the composition of an export basket overnight. Moreover, given the huge trade deficit that India has with China ($53.5 billion in 2018-19), it is perhaps pertinent to have an estimate of how much this  trade imbalance can be corrected if we manage to ship more of the items that the US exports to China.

There is also a need to look into the larger global picture. The World Trade Organisation (WTO) has cut global trade forecast to 2.6 per cent in 2019 from 3 per cent in 2018. “World trade will continue to face strong headwinds in 2019 and 2020 after growing more slowly than expected in 2018 due to rising trade tensions and increased economic uncertainty,” the WTO has said. The warning should not be missed and, instead of a myopic view, India needs to craft a holistic strategy to increase it share in world trade, which currently stands below 2 per cent against China’s share of over 12 per cent.

According to The Economist, “the lesson of the past decade is that stable trade relations between countries require them to have much in common — including a shared sense of how commerce should work and a commitment to enforcing rules. The world now features two super powers with opposing economic visions, growing geopolitical rivalry and deep mutual suspicion. Regardless of whether today’s trade war is settled, that is not about to change”.

If such internecine tension between the super powers does persist, India will do well to look far beyond the tariff tussle between Washington and Beijing to consolidate its position in world trade.

WPI inflation at nearly 2-year low at 2.45% in May

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Wholesale price-based inflation slipped to 22-month low at 2.45 per cent in May helped by falling prices of food articles, fuel and power items, according to an official data released on Friday.

The Wholesale Price Index (WPI)-based inflation was at 3.07 per cent in April. It was 4.78 per cent in May 2018.

Inflation in food articles basket was 6.99 per cent, down from 7.37 per cent in April.

However, onion prices spiked during the month with inflation at 15.89 per cent, as against (-) 3.43 per cent in April.

Vegetables inflation eased to 33.15 per cent in May, down from 40.65 per cent in the previous month. Inflation in potato was (-) 23.36 per cent, against (-) 17.15 per cent in April.

WPI inflation in May is the lowest in 22 months, since July 2017, when it was at 1.88 per cent

Inflation in 'fuel and power' category cooled to 0.98 per cent, from 3.84 per cent last month. Manufactured items too saw decline in prices with inflation at 1.28 per cent in May, against 1.72 per cent in April.

WPI inflation data for March has been revised downwards to 3.10 per cent from provisional 3.18 per cent.

Data released earlier this week showed retail inflation spiked to a 7-month high of 3.05 per cent in May on costlier vegetables, and protein-rich items.

The Reserve Bank, which mainly factors in retail inflation for monetary policy decision, on June 6, lowered its benchmark lending rate to a nearly 9-year low of 5.75 per cent, even as it upped its inflation projection to 3-3.1 per cent for the first half of 2019-20.

Flagging uncertain monsoon, unseasonal spike in vegetable prices, crude oil prices, financial market volatility and fiscal scenario as risks to inflation, the RBI projected upward bias in food inflation in near term.

India's retail inflation inches up to 3.05% in May

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India’s retail inflation for May inched up to 3.05 percent from 2.92 percent in April, driven by an increase in vegetable prices.

The latest price data released by the Central Statistics Office showed that consumer price index (CPI)-based inflation, which measures changes in shop-end prices, remained comfortably within the Reserve Bank of India's target level of 4 percent.

Food prices, a gauge to measure changes in kitchen budgets, grew 1.83 percent in May compared to 1.1 percent in April. The inflation rate in cereals and products stood at 1.24 percent in May as against 1.17 percent in April. The vegetables inflation stood at 5.46 percent in May versus 2.87 percent in April.

“Vegetable inflation at 5.5 percent was at 11-month high and pulses witnessed inflation after a gap of 29 months. While vegetable inflation is mainly due to summer seasons and are cyclical in nature, Ind-Ra believes due to base effect inflation in pulses is likely to inch up to moderate levels,” Sunil Kumar Sinha, Director - Public Finance & Principal Economist, India Ratings & Research said.

Pulses inflation for May stood at 2.13 percent as against a contraction of 0.89 percent in April. Housing inflation was seen at 4.82 percent in May against 4.76 percent in April. Clothing and footwear inflation for May was at 1.80 percent against 2.01 percent in April.

“A decline in core-core inflation (excluding food, fuel and light, and transport and communications) to 23 months low at 4.37 percent indicates that demand conditions have weakened considerably. Even services inflation, a major driver of retail inflation in 2HFY19 (second half) has slowed down considerably,” Sinha said.

India is in the throes of an economic slowdown. According to the official data released on May 31, India's gross domestic product (GDP) grew 5.8 percent in January-March, which confirmed fears of a slowdown. "Real" or inflation-adjusted GDP grew 6.8 percent in 2018-19, lower than previous year's 7.2 percent, data released by the Central Statistics Office (CSO) showed.

Moody’s places Yes Bank's ratings under review for downgrade

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Rating agency Moody's Investors Service has placed Yes Bank's foreign currency issuer rating of Ba1 under review for a potential downgrade. It has also placed the bank's long-term foreign and local currency bank deposit ratings of Ba1, foreign currency senior unsecured MTN programme rating of (P)Ba1, among other instruments under review.

It has affirmed the bank's short-term foreign and local currency bank deposit rating of NP.

The review for downgrade takes into account its expectation that the ongoing liquidity pressures will negatively impact the credit profile of Yes Bank, given the bank's sizeable exposure to weaker companies in the sector.

At the end of March, the bank’s exposure to housing finance companies (HFC) and non-bank finance companies (NBFC) represented 6.4 percent of its total exposure. “Yes Bank had a seven percent direct exposure to the commercial and residential real estate sector as of the same date, which is also under pressure, because liquidity conditions have worsened for the real estate sector, just like with the HFCs and NBFCs,” it stated.

Going forward, Moody's expects significant pressure on the bank's asset quality and therefore profitability and capital position. “In April, the bank classified about Rs 10,000 crore of its exposures, representing 4.1 percent of its total loans under watch-list, which could translate into non-performing loans over the next 12 months. Nevertheless, the impact will be somewhat cushioned by the bank's proactive loan loss provisioning for anticipated stress,” it explained.

The review notice takes into account Yes Bank’s fund raising plans of $1 billion. But cautions that a failure to do so would result in the bank’s loss absorbing capacity and therefore financial profile coming under pressure.

The rating agency has said it could downgrade Yes Bank's ratings if: 1) There is a sustained deterioration in impaired loans or loan-loss reserves, or if the rate of new nonperforming loan formation is significantly higher than previously experienced; or 2) Capital ratios decline because of its inability to raise new capital, or both.

In related news, Lt Gen Mukesh Sabharwal has resigned as Non-Executive Independent Director, the bank said in an exchange filing. It added that Sabharwal wants to spend time on academic pursuits.

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