[Current] March-Week3-Part2: Economy, Diplomacy related: RFPI Investors, CPSE Exchange Traded Funds, GSDP, Rohingya Migrants, ICANN control, OTBA scheme

Rohingyas migration map

[Current] March-Week3-Part2: Economy, Diplomacy related: RFPI Investors, CPSE Exchange Traded Funds, GSDP, Rohingya Migrants, ICANN control, OTBA scheme

  1. [Act 4] Economy Related
    1. E1: RBI: RFPI = FII + QFI
    2. E2: RBI: more banks can import gold under 80/20 rule
    3. E3: CPSE-ETF Exchange Traded Funds
    4. E4: State GSDP: Chindu feels something fishy
    5. E5: Gas Pricing postponed on EC order
  2. [Act 5] Diplomacy / International relation (IR) related
    1. D1: Indo-China: Economic Dialogue and IT Pact
    2. D2: Rohingya illegal migrants in India
    3. D3: USA hands over ICANN to world
  3. [Act 6] Misc:
    1. M1: OTBA scheme
    2. M2: Sports-New format of Hockey
    3. 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 

  1. FII: Foreign institutional investor
  2. QFI: Qualified Foreign Investor
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.

Benefits?

  • 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

Background:

  • 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).

March 2014:

  • 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)

Result?

  • 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)

Benefit

  • @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)

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