Sep-16Eco Flashcards
Sep-16Eco-Index
3.1. Budgetary Reforms
3.2. India’s First Coastal Economic Corridor
3.3. India Improves in Global Competitiveness Index
3.4. PSU Reforms: Disinvestment Policy
3.5. Infrastructure Funding
3.6. Languishing Road Projects
3.7. Economic Freedom Index
3.8. Urban-Rural Disparity in Growth of Microfinance
Institutions
3.9. Aadhar Based Biometric Authentication in PDS
3.10. Pulses Crises
3.11. Project Saksham
3.12. Regulation of Direct Selling Firms
3.13. Current Account Moves into Surplus
3.1. BUDGETARY REFORMS
About
The Union Cabinet has approved the proposals of Ministry of Finance on certain landmark budgetary reforms as given below. All these changes will be put into effect simultaneously from the Budget 2017-18.
Merger of Railway Budget
The presentation of separate Railway budget started in the year 1924, and has continued after independence as a convention rather than under Constitutional provisions.
Benefits
The merger was warranted so as to save the annual dividend liability of railways which runs to about Rs. 10,000 crores.
This is a colonial practice which does not seem to rightly fit in the changed conditions. No other country has a similar practice today.
The practice is mainly used by politicians for populist reasons without sound economic rationale.
Over the years the general budget expenditures have been more than the railways and several ministries like defence have more expenditures than railways.
The presentation of a unified budget will bring the affairs of the Railways to centre stage and present a holistic picture of the financial position of the Government.
The merger is also expected to reduce the procedural requirements and instead bring into focus, the aspects of delivery and good governance.
Consequent to the merger, the appropriations for Railways will form part of the main Appropriation Bill.
Advancement of Budget Date
Benefits
This would pave the way for early completion of Budget cycle and enable Ministries and Departments to ensure better planning and execution of schemes from the beginning of the financial year.
It would lead to utilization of the full working seasons including the first quarter.
This will also preclude the need for seeking appropriation through ‘Vote on Account’ and enable implementation of the legislative changes in tax laws for new taxation measures from the beginning of the financial year.
This would synchronize the transfer of funds to states with their own state budgets.
However, this will lead to less expenditure by various ministries in the current fiscal year, which can be a deterrent for growth.
Merger of Plan and Non-Plan classification
Benefits
The Plan/Non-Plan bifurcation of expenditure has led to a fragmented view of resource allocation to various schemes, making it difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes.
The bias in favour of Plan expenditure by Centre as well as the State Governments has led to a neglect of essential expenditures on maintenance of assets and other establishment related expenditures for providing essential social services.
The system is based on past commitments and requirements and residual resources allocated to Plan budget. This has resulted in reduced flexibility in allocation within the Plan budget.
The distinction was important earlier as Planning Commission used to play an important role in determining the quantum of plan expenditure. However, with the abolition of the Planning Commission, the relevance of plan and non-plan expenditure is lost.
A better indicator of productive and general expenditure will be a distinction under the heads of revenue and capital. The merger is expected to provide appropriate budgetary framework having focus on the revenue, and capital expenditure.
3.2. INDIA’S FIRST COASTAL ECONOMIC CORRIDOR
About
India has planned to build its first Eastern Coast
Economic Corridor (ECEC) from West Bengal to
Tuticorin in Tamil Nadu.
As part of the project, recently, the Asian Development
Bank approved a $631 million loan for the construction
of industrial corridor between Vishakhapatnam and
Chennai (VCIC).
The fund will help develop the first key 800-km section
of the planned 2,500-km East Coast Economic Corridor.
The remaining $215 million will be funded by the Andhra Pradesh government.
The idea is to not just build new ports or upgrade old ones but raise entire industrial ecosystems that encompass several such ports.
The ADB loan will help the government build state-of-the art industrial clusters, roads, efficient transport, and reliable water and power supplies with a skilled workforce and good business policies.
Significance
The new industrial corridor is expected to spur growth by augmenting existing investment in world-class transport networks, infrastructure, and industrial and urban clusters.
VCIC will also be an important component of the government’s Make in India campaign to attract foreign investors and encourage the creation of manufacturing hubs in the country. According to ADB’s projections, automobile and electronic manufacturing will grow 24% a year over the next two decades along the coastal corridor districts.
By linking areas that are lagging in development with dynamic industrial and urban clusters, VCIC will create employment opportunities that alleviate poverty and reduce inequality. This is particularly significant for the Eastern region as it lags behind other regions of the country.
It can help unify the large domestic market. The Visakhapatnam-Chennai corridor, for example, will link four economic hubs and nine industrial clusters.
It will integrate the Indian economy with the dynamic global value chains of Asia and drive India’s Act East policy. Greater connectivity and economic integration between South Asia and the rest of Asia is likely to contribute significantly to development and foster regional cooperation as well.
As a coastal corridor, VCIC can provide multiple access points to international gateways.
It is in line with the trade reforms needed in the evolving global trade landscape.
Maritime Clusters and CEZ
Maritime clusters are to be one of focal points for economic development along India’s coastline, according to a draft report prepared under Sagarmala Programme of the Ministry of Shipping.
The report on port-led-industrial development of the coastal economic clusters identifies two major maritime clusters in Tamil Nadu and Gujarat as areas with potential
Need
Globally, the shipbuilding market is dominated by China, Korea and Japan, which cumulatively account for 90 per cent of the world’s shipbuilding capacity.
According to the report, India currently accounts for only 0.45 per cent of the global shipbuilding market and could target 3–4 mn DWT of the global shipbuilding capacity by 2025.
The report also states that India can target to achieve a 0.2 per cent share of maritime services in overall GDP by 2025.
INR 5,000 crore worth ancillaries market for maritime cluster can prove to be a huge opportunity for the Indian economy with engineering, fabrication and machining offering the greatest potential by 2025.
The report further captures overall opportunity of port-led industrial development for the country through 14 CEZs proposed along the maritime states and industrial clusters under Sagarmala.
The competitive location of these CEZs will help reduce logistics costs, thus, enabling Indian trade to be more competitive globally.
These proposed CEZs have been envisioned to tap synergies from the industrial corridors to provide a thrust to manufacturing and industrialization under the ‘Make in India’ initiative of the Government of India.
Box–Coastal Economic Zones
Coastal location allows companies to operate in the world markets unhindered by the poor infrastructure in the hinterland. This was successfully done in China.
The NITI Ayog, thus, suggests that India should also work on building a coastal economic zone. This becomes further attractive in the light of Sagarmala initiative.
3.3. INDIA IMPROVES IN GLOBAL COMPETITIVENESS INDEX
Why in news
India’s position improved to 39th rank in the World Economic Forum’s latest Global Competitiveness Index.
Key facts
India improved 16 places to 39, making it the fastest riser up the ranks among 138 countries surveyed.
India’s competitiveness improved across the board, particularly in goods market efficiency (60), business sophistication (35) and innovation (29).
India is also the second most competitive country among BRICS nations (China on 28th).
Recent reform efforts by the government that help improve rank are
Improving public institutions (up 16 places).
Opening the economy to foreign investors and international trade (up 4).
Increasing transparency in the financial system (up 15).
WEF observed that India still needs to tackle problems like
Labour market deficiencies,
large public enterprises that reduce economic efficiency,
the financial market,
Lack of infrastructure.
–Fig–
3.4. PSU REFORMS: DISINVESTMENT POLICY
Why in News
Recently, the PMO has given approval to NITI Ayog’s proposal for strategic sales in about 22 public sector companies. It is aimed at reducing government ownership to below 51 per cent.
It has further approved the Ayog’s recommendations of closing certain loss-making PSUs as part of its PSU reforms measures.
The government had earlier renamed the Department of Disinvestment as the Department of Investment and Public Asset Management (DIPAM).
Background
The disinvestment policy of India has undergone several changes. The policy of the present NDA government focuses on three points:
Public Sector Undertakings are the wealth of the Nation and to ensure this wealth rests in the hands of the people, promote public ownership of CPSEs
While pursuing disinvestment through minority stake sale in listed CPSEs, the Government will retain majority shareholding, i.e. at least 51 per cent of the shareholding and management control of the Public Sector Undertakings; and Strategic disinvestment by way of sale of substantial portion of Government shareholding in identified CPSEs up to 50 per cent or more, along with transfer of management control.
The Finance Minister in this year’s budget speech had promised strategic disinvestment worth Rs.41,000 crores.
Significance
The move is aimed at not just meeting the fiscal needs of the government but pursuing the larger aim of managing the public investment more effectively.
This is part of the long-term process of PSU reforms.
The involvement of NITI Ayog streamlines the process.
3.5. INFRASTRUCTURE FUNDING
Long term irrigation fund
The National Bank of Agriculture and Rural Development (NABARD) will raise in phases over Rs 77,000 crore from the market.
Raised money will fund around 100 prioritised irrigation projects, including 56 in drought-prone areas, under the Pradhan Mantri Krishi Sinchayee Yojana (PMKYS) over the next four years.
The government will irrigate an estimated area of 76.03 lakh hectares with more focus on increasing irrigation potential utilisation.
Of the total projects, 26 will be completed in Maharashtra, 14 in Madhya Pradesh and 11 in Telangana.
Benefits of the fund
Focus will be on convergence of investments in irrigation at the field level and expansion of cultivable area under irrigation
Enhance the adoption of water saving technologies and attract private investment to cover this aspect of agriculture
Sports Sector Gets the Infrastructure Status
Ministry of Finance after discussions with different agencies including RBI have decided that sports infrastructure will be included under the Harmonized Master List of Infrastructure Subsectors.
It includes the provision of Sports Stadia and Infrastructure for Academies for Training / Research in Sports and Sports-related activities.
Benefits
It will now be eligible for obtaining long term financial support from banks and other financial institutions.
It will encourage private investment in a public good which has socio-economic externalities.
It will bolster investment in sports infrastructure sector which will contribute to the economy, promote health and fitness and will provide opportunities for employment.
The country can become a sporting power in future.
Extra Budgetary Resources for Infrastructure
The Union Cabinet has given its approval for raising a total of Rs. 31,300 crore in the financial year 2016-17 to augment infrastructure spending
The move is intended to supplement the efforts of the Government to improve infrastructure spending and to improve the revenue-capital mix of the expenditure for a more sustainable growth.
Importance of the sector
Infrastructure spending is one of the key parameters to judge the sustainability of growth in a country.
The proportion of Capital expenditure to the total expenditure is the yardstick to measure this
The announcement has been made in the lines of this approach.
Railways India Development Fund
Railways are setting up a Rs 30,000 crores fund, first-of-its-kind for the national transporter, for implementation of remunerative projects across the country.
Investors like World Bank, National Infrastructure Investment Fund, pension and insurance fund and other institutional investors are expected to be part of the RIDF.
However, the RIDF will invest only on those rail projects having higher rate of returns with minimum rates ranging between 14 per cent and 16 per cent.
RIDF will focus on new lines for freight movement or redevelopment of stations and will not invest in non-remunerative projects.
Since freight lines are more remunerative than passenger line, RIFD will focus on goods movement.
Currently, Railways has undertaken many new projects which are socially desirable but economically non-viable.
3.6. LANGUISHING ROAD PROJECTS
Why in news?
As per the data submitted by Ministry of Road Transport and Highways before the Parliamentary standing committee)
There are 46 projects which have been identified by NHAI as languishing with a total length of these projects is 4,860 km. covering a total project cost of Rs 51,338 crore.
Out of 46, issues have been resolved in 27 cases whereas issues on 19 projects are yet to be sorted out.
Reasons responsible for project delays
Lack of equity with the concessionaire: it leads to delay in completion date. So bankers not disbursing even the sanctioned loan.
Diversion of funds: Physical progress of work not commensurate with the financial progress. It results into concessionaires are finding it difficult to bring back the funds so diverted.
Problems in getting various clearances like land acquisition, environment /forest clearance /utility shifting /RoB issues.
Refusal of banks to accept right of NHAI on toll/annuity: For any languishing highway project in BOT (toll/annuity) mode that has achieved at least 50 per cent physical completion, NHAI will provide financial assistance to complete the project subject to first charge on the toll/annuity receivables of these projects. However, the banks have refused to accept the first charge of NHAI and therefore no progress in implementation of this policy to complete languishing projects is being achieved.
Long period of revenue collection: Revenue streams spread over 20 to 30 years, but project debt having tenure of 10 to 15 years, is unsustainable.
High cost of interest during construction (IDC): The cost of construction in case of delay, whether due to concessionaire or the Authority, results in increase in the cost of debt which turns the project unviable.
Difficulty in obtaining additional debt in stalled projects
Overleveraged balance sheet of the developers
Stress on the existing road infrastructure loan portfolios of FIs.
Steps taken by Government
High-level committee under the chairmanship of K Kasturirangan to look into the unresolved issues impacting the sector.
Introduced hybrid annuity model.
Those awarded projects can reschedule the premium they had committed during the bidding process.
A policy that allows substitution of any concessionaire in a financially stressed project with another in a harmonious manner.
De-linked environment clearance from forest clearance.
A policy that permits 100% divestment by the company which has won the contract 2 years after the construction is completed. This is applicable to all projects under the build-operate-transfer (BOT) model irrespective of the year the project was awarded.
The government is also focusing on having regular consultations with all stake-holders to discuss challenges they face and work out a practical way forward.
3.7. ECONOMIC FREEDOM INDEX
Why in News
The 2016 report of the Economic Freedom of the World has placed India at 112th position out of 159 countries, a slip of 10 positions from previous year.
What is it?
A classic definition of economic freedom for individuals is when the ‘rightly acquired economic property of people is protected and the people are free to use, exchange, or give their property as long as their actions do not violate the identical rights of others’.
Thus, essentially, economic freedom is dependent on the following broad dimensions: Security of privately-owned property, levels of personal choice, ability to enter markets and the rule of law.
Economic Freedom Index basically tries to measure this freedom and ranks countries accordingly.
Such indexes are usually produced by economic think tanks. For example, the present index is produced by the U.S.-based Heritage Foundation in conjunction with the Wall Street Journal.
The index is a measure of economic prosperity on per capita GDP basis.
Significance of the Index
Within the five broad areas, India’s rank is best for the size of the government (8), while it performs poorly on regulation (132) and freedom to trade internationally (144).
The poor performance on exports is due to global economic sluggishness and India’s own delays in infrastructural projects.
Similarly, too many regulations have hampered the prospects of economic growth. The government has done well to identify and weed out key laws and regulations that are not in accordance with the present times.
Better regulations along with laws like GST, Bankruptcy code, Labour law reforms, etc will help in improvement along the regulation dimension of the Index.
3.8. URBAN-RURAL DISPARITY IN GROWTH OF MICROFINANCE INSTITUTIONS
About
As per the recent report by Sa-Dhan, the self-regulatory body of MFIs, the growth of MFIs has been faster in
urban areas than rural areas.
The annual increase in loan disbursement in rural areas has
been just 14% as compared to 27% in urban areas.
Urban and semi-urban areas already account for about 72%
of the loan portfolio of MFIs. The rural ratio has decreased
from 30% to 28% in last year.
Barring the two old-generation MFIs- Bandhan and SKS-the
next four top MFIs have nearly 70 per cent of their portfolio
focused on urban areas.
Reasons for the trend
The MFIs are looking to cut their operation costs as they cannot charge more than 10% over the cost of loans taken from banks. Big slums in cities turn out to be cost-effective markets over small villages in far-flung locations in terms of office spaces, human resources.
Demand for rural credit is mainly for agricultural loans, which under Centre’s various ‘krishi’ schemes are better catered by banks at a lower interest rate.
It points towards the larger trend that banks in India are reluctant to engage in rural areas.
Demand for rural loaning is of low volume
Migration to urban areas is fast and many of these migrants are also microfinance clients.
Phenomenal growth of a few urban-focused MFIs
Box–MFIs are intended to provide financial help to low-income groups, the bulk of which resides in rural areas.
The heavy inclination towards urban areas, thus, points towards non-fulfillment of objectives of MFIs.
MFIs have proved to be an important source of empowerment of vulnerable sections of society especially women and also SC/STs. They are, thus, needed more in rural areas.
3.9. AADHAR BASED BIOMETRIC AUTHENTICATION IN PDS
Issue
A study led by Jean Dreze in nine PDS states– Andhra Pradesh, Bihar, Chhattisgarh, Himachal Pradesh, Jharkhand, Odisha, Rajasthan, Tamil Nadu and Uttar Pradesh found that the system was working reasonably well for “below poverty line” (BPL) households. On average, they were receiving 84 per cent of their food grain entitlements from the PDS.
However, high leakages continued in the “above poverty line” (APL) quota, which tended to be used by the Central government at that time as a dumping ground for excess food stocks.
Installation of “Point of Sale” (PoS) machines at PDS shops, and verifying the identity of cardholders by matching their fingerprints against the Aadhaar database over the Internet has led to inefficiencies in states like Jharkhand and Rajasthan.
This system requires multiple fragile technologies to work at the same time: the PoS machine, the biometrics, the Internet connection, remote servers, and often other elements such as the local mobile network.
Further, it requires at least some household members to have an Aadhaar number, correctly seeded in the PDS database.
The Central government continues to push for compulsory Aadhaar-based biometric authentication in the PDS. This is a violation of the Supreme Court orders, as the Court did not make Aadhar compulsory for PDS users.
The main vulnerability today, is not identity fraud (e.g. bogus cards), but quantity fraud: PDS dealers often give people less than what they are entitled to, and pocket the rest.
Moreover, PoS machines are ineffective in preventing quantity fraud. They may help in reducing identity fraud, such as it is, but that does not justify depriving people of their food entitlements when the technology fails.
Analysis of the PDS system
India’s Public Distribution System (PDS) has improved steadily during the last 10 years.
Initially, the system was ineffective and corruption-ridden, with leakages of around 50 per cent at the national level, going up to 80 or 90 per cent in some States.
Around 2007, Chhattisgarh took the lead in reforming the PDS — making it more inclusive, methodical and transparent. Within a few years, the system was overhauled.
Today, most rural households in Chhattisgarh have a ration card, and are able to secure their entitlements (typically 7 kg of rice per person per month) on time every month.
Many other States also initiated Chhattisgarh-style PDS reforms: broad coverage, clear entitlements, de-privatisation of PDS shops, separation of transport agencies from distribution agencies, computerisation, fixed distribution schedules, tight monitoring.
Way forward
An end-to-end technology solution for the digitisation of the vast Public Distribution System is required that can track discrepancies and prevent leakages.
3.10. PULSES CRISES
Why in News
India has been in the grip of a pulses crisis, or rather crises, in the last few years. The proximate problem is last two years of poor pulses production in the wake of weak monsoons, resulting in excess demand, rising imports and price rise.
In recent months however, scarcity has ceded to surplus leading to plummeting of prices. This volatility, which alternates between adversely impacting consumers and farmers, creates dilemmas for public policy.
Earlier this year, the government had constituted an expert panel under CEA Arvind Subramanian to look into the problem. The panel submitted its report this month.
Key Recommendation
A strong case for increasing domestic production
From a consumption perspective, pulses are going to be increasingly important in the dietary habits of the average Indian consumer. Normatively, this is desirable because the average Indian under-consumes protein and pulses offer a cheap source of protein.
The demand-supply mismatch cannot be fixed by imports as India is already one of the biggest importers of pulses in the world.
The foreign supplies are correlated with domestic production and thus food security in pulses can be achieved only by boosting domestic production.
Pulses, in contrast to cereals, are grown by small and marginal farmers in dryland areas. High MSPs that raise the incomes of pulse-growing farmers can help create a new constituency that lobbies for policies favoring pulses.
Need for Remunerative MSP for pulses
Higher MSPs in pulses are necessary not only to incentivize the farmers to produce more pulses but also increase the bargaining powers of small and marginal farmers.
Remunerative MSPs alone will not be sufficient to induce farmers to switch to pulses production. They have to be backed up by price support/procurement operations to ensure that market prices do not fall precipitously and then deter farmers from cultivating pulses in the following season. Thus, the MSP must act as a floor on market price.
Other recommendations
High level committee to be constituted to monitor procurement.
Need to increase yield in pulses. Indian productivity in pulses is almost half of other pulses producing countries like Myanmar. Need to encourage development of GM technologies. Grant expeditious approval to indigenously developed new varieties of pulses.
Encourage states to delist pulses from their APMCs
Review Essential Commodities Act,1955 and futures trading of agricultural commodities with a view to preserving objectives but finding more effective and less costly instruments for achieving them
Create a new institution as a Public Private Partnership (PPP) to compete with and complement existing institutions to procure, stock and dispose pulses
Concerns
General equilibrium effect on production of crops that compete with pulses. This can be minimized in three ways:
First, in the medium term pulses production must be incentivized in the irrigated areas of Punjab because some reduction in paddy production is socially desirable here: paddy stocks are high and paddy cultivation has large negative externalities in this region.
Second, pulses production should also be encouraged in the fallows of eastern India.
Third, a focus on increasing productivity and yields both in pulses and in competing crops such as cotton can also help minimize the adverse consequences.
Higher inflation: The Panel rules out this effect as unlike in the case of cereals, the MSP in pulses is envisaged as price support. Thus, procurement will kick in only in adverse state.
3.10.1. GOVERNMENT RAISES BUFFER STOCK OF PULSES
Why in news
Cabinet Committee on Economic Affairs approved decision to more than double the buffer stock limit from 800,000 tonnes to 2 million tonnes.
Significance
Will help government to intervene and control spikes in retail prices of pulses and address recurring gaps between demand and supply.
Will increase buffer stocks to at least 10% of domestic consumption.
Will encourage domestic farmers to increase production of pulses.
Will also deter hoarders to hold stock, thus, preventing artificial hike in prices. Mechanism Funding through ‘Price Stabilization Fund’ scheme. Procurement by Central agencies (FCI, NAFED and SFAC) or State governments. Procurement at prevailing market prices or Minimum Support Prices (MSP) whichever is higher
Buffer stock of 2 million tonnes will comprise domestic procurement of 1 million tonnes and rest will be arranged via government-to-government contracts with other countries and spot purchases from the global market.
3.11. PROJECT SAKSHAM
Why in news
Cabinet committee cleared the Rs 2,256 crore back-end information technology (IT) project for the indirect tax department (CBEC).
Significance
CBEC’s IT structure needs to integrate
with Goods and Service Tax Network
(GSTN) for processing of registration,
payment and returns data sent
to CBEC as well as act as a front-end for
other modules like audit, appeal and
investigation.
This IT infrastructure is also urgently
required for
Continuation of CBEC’s e-services in
Customs, central excise and service
tax.
Implementation of taxpayer services
such as scanned document upload
facility.
Extension of Indian Customs SWIFT initiative and
Integration with government initiatives such as e-Nivesh, e-Taal and e-Sign. Key facts
This new indirect tax network (systems integration) called Project Saksham will help in smooth roll-out of goods and services (GST) tax from April 1, 2017.
It will be developed with the help of Wipro, whereas GSTN is developed by Infosys. Project Shaksham is back-end IT infrastructure of CBEC. GST Network (GSTN), a private body, is developing the front-end infra with the help of Infosys.
Box–Goods and Services Tax Network (GSTN)
It is a not for profit, non-Government, private limited company incorporated in 2013. The Government of India holds 24.5% equity in GSTN All States including NCT of Delhi and Puducherry, and the Empowered Committee of State Finance Ministers (EC), together hold another 24.5%. Balance 51% equity is with non-Government financial institutions. The Company has been set up primarily to provide IT infrastructure and services to the Central and State Governments, tax payers and other stakeholders for implementation of the Goods and Services Tax (GST). After rolling out of GST, the Revenue Model of GSTN shall consist of User Charge to be paid by stakeholders who will use the system and thus it will be a self-sustaining organization.
3.12. REGULATION OF DIRECT SELLING FIRMS
Why in News
The Center has issued model guidelines for State
governments to regulate the business of direct selling
and multi-level marketing with an aim to protect the
consumers from Ponzi schemes.
Need for Regulation
Many fraudulent schemes especially in the nature of
pyramid schemes and money circulation schemes have
been in circulation. Their processes are similar to these
direct selling firms and this creates a problem for not only
gullible customers but also put the legitimate direct selling
firms in bad light.
The arrest of William Pinckney, MD and CEO of the
country’s largest direct selling company Amway for unethical circulation of money under the Prize Chits and Money Circulation Schemes (Banning) Act, 1978 two years ago had put the spotlight on this.
Further, there is a need to protect the agents and customers from any kind of exploitation due to the special nature of direct selling.
Model Guidelines: Key Points
Protection from fraud:
The framework defines legitimate direct selling and differentiates it from pyramid and money circulation schemes to help investigating agencies identify fraudulent players.
The guidelines list out conditions for the set up of a direct selling business, including that such a firm should be a registered legal entity.
Interest of agents:
These entities will have to enter into a contract with direct sellers or agents, and give full refund or buy-back guarantee for goods and services sold to them.
They bar companies from charging any entry fee from agents or compelling them to buy back unsold stocks.
It lays down a remuneration system.
Consumer interest
It mandates to constitute a grievance redressal committee.
Conclusion
The guidelines are being welcomed by all the stakeholders. The norms have the potential to weed out fraudulent players, help serious companies grow, protect consumers along with agents and entrepreneurs.
Box–Direct selling: A marketing, distribution and sale of goods or providing of services as a part of network of direct selling. Pyramid scheme or Money Circulation scheme: It involves an unsustainable business which rewards people for enrolling others into a business that offers a non-existent or worthless product. Ponzi scheme: It is a fraudulent investing scam promising high rates of return with little risk to investors. Pyramid schemes are banned under Chits and Money Circulation Schemes (Banning) Act, 1978
3.13. CURRENT ACCOUNT MOVES INTO SURPLUS
Why in news?
India’s current account moved in to surplus in the April-June quarter of the current fiscal year after a gap of 9 years.
Analysis
The major contributor to India’s Current
Account Deficit (CAD) has been imports of Gold and Crude Oil.
Sustained period of CAD has led to currency depreciation, high rates of inflation which further effects the incoming foreign investment.
Fall in gold imports and lower oil import bill in recent time led to shrinkage in the deficit.
A current account surplus means an economy is exporting a greater value of goods and services than it is importing.
There is no hard and fast rule about what will happen if a country has a current account surplus. It depends on the size of the current account and the reasons for the current account surplus.
In the case of India, slow growth in imports, reflecting the persisting weakness in the investment sentiment, is the prominent reason behind this.
The current account was in surplus last in the January-March quarter in the year 2007.
Box–Concerns
A surplus is expected to bolster the rupee, which could render India’s already subdued exports less competitive.
For a developing economy like India slow import growth is a negative sign, as it reflects weak investment demand because Indian firms need to buy capital goods and machinery from abroad.
