[Current] March-Week3-Part2: Economy, Diplomacy related: RFPI Investors, CPSE Exchange Traded Funds, GSDP, Rohingya Migrants, ICANN control, OTBA schemeDevendra Vishwakarma
- [Act 4] Economy Related
- E1: RBI: RFPI = FII + QFI
- E2: RBI: more banks can import gold under 80/20 rule
- E3: CPSE-ETF Exchange Traded Funds
- E4: State GSDP: Chindu feels something fishy
- E5: Gas Pricing postponed on EC order
- [Act 5] Diplomacy / International relation (IR) related
- D1: Indo-China: Economic Dialogue and IT Pact
- D2: Rohingya illegal migrants in India
- D3: USA hands over ICANN to world
- [Act 6] Misc:
- M1: OTBA scheme
- M2: Sports-New format of Hockey
- Mock MCQs
Part 1: deals with history, culture, EnB and Polity.(click me)
Part 2: deals with Economy, IR/Diplomacy and MCQs. (you’re on this page)
[Act 4] Economy Related
Five topics: RFPI, 80/20 rule, GSDP, CPSE-ETF, Gas pricing delayed
E1: RBI: RFPI = FII + QFI
|Until now||After RBI’s reform in Mar.’14|
|Two type of Foreign portfolio investors
||Now just one: REFI. Registered Foreign Portfolio Investor (RFPI)|
REFI: Salient features?
- Can buy and sell desi shares and debentures (via broker)
- Can participate in disinvestment. (= can buy PSU shares of government- be it State or Central)
- Can buy/sell Government bonds and Corporate bonds. (as per investment limits decided by authorities)
|Government bonds||Upto 25 billion USD|
|Corporate bonds||Upto 51 billion.|
- These limits donot apply for NRIs.
- Scheme Will become effective from 1/April/2014.
- This Simplification will attract more capital inflows in India. (earlier there were separate limitations and registrations for FII vs QFI = headache, redtape)
- More capital inflow=indirectly immunize our economy against the negative impact of American Fed Tapering.
- Important: under Balance of Payment (BoP): the REFI investment will count undeR capital account (inflow.) BUT the profit/interest/dividend earned by such people will be considered as Current account outflow.
|Current account||Capital account|
|Profit interest dividend (outgoing).||REFI investment (incoming)|
E2: RBI: more banks can import gold under 80/20 rule
- 2012-13: Current Account deficit (CAD) went as high as 88 Billion USD.
- To decrease this CAD, Government increased import duty on gold to 10% [so that import decreases]
- August 2013: RBI launched 80:20 scheme. Under this scheme, an entity can import gold on condition that 20% of it will be exported back (=80% left for domestic use).
- Until now only six banks were permitted to import gold under this.
- RBI permitted some private banks to import gold under this scheme. (Axis, Kotak, Indus and Yes bank)
- Will help gold jewelry exporters.
- Will it raise CAD? Not much because our CAD for 2013-14 will be ~45 billion USD. (so it’s not that big 88 billion dollars in 2012. hence relaxation can be made.)
E3: CPSE-ETF Exchange Traded Funds
- Think of EFT is one basket.
- In this basket, Government puts its shares of 10 public sector understakings (PSUs) or Central Public Sector Enterprises (CPSE) e.g. ONC, GAIL, BEL.
- Fund manager Goldman Sachs takes a knife and cut this ETF basket into smaller pieces worth Rs.10 each.
- These small pieces are put on sale at stock exchange so, aam-juntaa can buy it. (minimum order has to be Rs.5000)
- Hence called CPSE-ETF (Exchange traded funds)
- @Aam Juntaa: First time investor will get tax benefit under Rajiv Gandhi Equity Savings Scheme.(upto Rs.50k)
- @Government : this is one type of “disinvestment”, government’s shares are being sold to private players. CPSE-ETF will help government fetch around ~16 crore rupees.
E4: State GSDP: Chindu feels something fishy
- GSDP= Gross State Domestic Product. (= in other words State’s GDP)
- Central Statistics Office (CSO) calculates this.
- National GDP will be higher than GSDP of States. Because it also counts output from sectors that donot belong to States. (e.g. Bombay high)
- ~90% of national GDP is madeup of States’ GSDP.
- Ya but why in news? Because Chindu suspects th at some states deliberately send exaggerated data to CSO to show their state’s GDP is awesome.
- Therefore, Chindu has ordered CSO to cross check the data as soon as possible.
E5: Gas Pricing postponed on EC order
Rangarajan formula explained Long time ago
- Government wanted to implement Ranga’s formula from 1/April/2014 (would have doubled the prices)
- According to Ranga’s system, gas rates will be changed four times a year (=in each quarter). Pricing will be based on 12-month average of global rates and LNG import prices.
- But EC denied.
- Criticism: sends a wrong signal to the global investor community about the policy framework
[Act 5] Diplomacy / International relation (IR) related
Three Topics: Indochina Economic Dialogue, Rohingya Migrants In India, USA-ICANN Control
D1: Indo-China: Economic Dialogue and IT Pact
Q. Write a note on Sino-India Strategic economic dialogue. (200 words)