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India becomes one of 8 countries to get waiver on Trump’s Iran sanctions; here’s how

India has become one of the eight countries to get a waiver on the sanctions re-imposed on Iran by the Donald Trump administration. United States secretary of state Michael Pompeo on Friday said that eight governments that have taken “important moves” towards reducing Iranian oil imports to zero are going to receive temporary waivers.

To get the waiver India agreed to cut imports and escrow payments from Iran. As per news agency PTI, India told the US that it was willing to restrict monthly oil purchase from Iran from 22.6 million tonnes (452,000 barrels per day) to 1.25 million tonnes or 15 million tonnes in a year.

In May, US President Donald Trump announced that the US will be re-imposing economic sanctions on Iran by withdrawing the 2015 nuclear accord. The sanctions partially kicked-in in August and will kick-in fully including oil trades on November 5.

RBI vs govt, again! peace moves go for toss after Finmin Barb, reserve bank gets in another shot

The fragile peace between the finance ministry and the central bank was ruptured on Friday when economic affairs secretary Subhash Chandra Garg took a pot shot at Reserve Bank of India (RBI) deputy governor Viral Acharya’s stern warning last week that governments that make incursion into central banks’ autonomous regulatory space would incur “wrath of the markets”

By the evening, RBI deputy governor NS Vishwanathan had come back with his own ripsote, to explain why the regulator’s capital adequacy norms must not be diluted.

In a tweet, Garg said: “Rupee trading at less than 73 to a dollar, Brent crude below $73 a barrel, markets up by over 4% during the week and bond yields below 7.8%. Wrath of the markets?”

In response to the government saying CRAR (Capital to Risk Weighted Assets Ratio) norms were too high — higher than Basel norms — Vishwanathan said, “We

must guard against any push for dilution of standards in the name of aligning them with international benchmarks because that will be cherry-picking and will result in our banks being strong in a make-believe sense and not in reality.”On Wednesday, the finance ministry had said the government has “nurtured and respected” the central bank’s autonomy as an essential and accepted governance requirement, in remarks widely seen as the finance ministry’s willingness to make peace with the RBI. Even that statement was, however, not completely devoid of rancour.

The ministry reminded the RBI that it has never made public the details of consultations with the central bank and only final decisions have been communicated to the outer world. Meanwhile, the International Monetary Fund (IMF) has said it was monitoring the reported rift between the RBI and the finance ministry, and stressed its usual opposition to any move that compromises the independence of central banks anywhere in the world. When asked about the row, IMF director of communications Gerry Rice said: “Just stepping back, as a general principal, and we’ve said this before…that we support clear lines of responsibility and accountability.” “And, international best practice is that there should be no government or industry interference that compromises the independence of the central bank and financial supervisor.”

Outreach programme: gst-hit msmes get 12-piece diwali gift set from prime minister

Bogged down by the twin blows of demonetisation and the goods and services tax (GST), the country’s micro, small and medium enterprises (MSMEs) on Friday received a shot in the arm, with the Prime Minister Narendra Modi unveiling 12 steps to support these employment-intensive units. Modi announced 59-minute loan sanctions, relaxation in labour laws, easier compliance with environmental rules and changes in company laws for the benefit of MSMEs.

GST-registered MSMEs will now be sanctioned loan up to Rs 1 crore in just 59 minutes through a new portal (more than 72,000 such MSME loan requests have already been approved); interest rates on loans taken by such MSMEs will be 2% lower than market rates for fresh and incremental loans up to Rs 1 crore. Also, MSME exporters availing loans during the pre-shipment and post-shipment period will get interest rebate of 5% instead of 3% earlier. Besides, it will now be mandatory for all government entities and PSUs to have 25% procurement from MSMEs, against 20% now and 3% sourcing by PSUs would have to be done from MSMEs run by women.

To rid the sector of inspector raj, Modi announced that inspections of MSME factories will be sanctioned only through a computerised random allotment to avoid discretion.

Further, inspectors will have to upload reports on a portal within 48 hours. “No inspector can now go anywhere (without the allotment). He will be asked why he went to a factory,” Modi said. MSMEs will now need a single air and water clearance and just one consent to establish a factory.

Among other relaxations, MSMEs will have to file just one annual return (instaed of two at present) on eight labour laws and 10 central rules. An ordinance will be promulgated to simplify levy of penalties for minor offences under the Companies Act. Also, all central public sector enterprises will have to take membership of the Government e-Marketplace (GeM) to facilitate online procurement of common use goods and services by various government departments and organisations.

The prime minister also announced `6,000 crore for creation of 20 hubs and 100 tool rooms for technology upgradation. Clusters for MSMEs in the pharma sector will be created to boost production in the sector. All companies with a turnover of more than Rs 500 crore would have to now come on the Trade Receivables e-Discounting System (TReDS) platform so that there is no cash flow problem for MSMEs.

MSMEs are critical to the Indian economy, contributing nearly 30% of the gross domestic product. Over 6 crore such units provide employment to about 11 crore people (NSSO, 2016). According to a recent Reserve Bank of India study, contractual labour in both the wearing apparel and gems & jewellery sectors suffered as payments from employers became constrained after demonetisation. Similarly, the introduction of GST led to increase in compliance costs and other operating costs for MSMEs as most of them were brought into the tax net, the central bank noted.

 

Procurement of moong, urad picks up pace in Maharashtra

Moong (green gram) and urad (black gram) procurement in Maharashtra at minimum support price (MSP) is slowly gathering pace. Some 6,581.847 quintals of moong have been procured from 1,164 farmers by the procurement agencies appointed by the government. Around 4,651.88 quintals of urad have been procured from 744 farmers, figures released by the agriculture department said. As on date, some 43,075 urad farmers have registered online for MSP purchase and 30,120 farmers have registered for moong. Some 59,427 soybean farmers have registered online for MSP operations. According to senior officials, although the soybean procurement has commenced from November 1, no figures have been obtained from the procurement centres as yet. The MSP for moong is Rs 6,975, for urad Rs 5,575 and soybean Rs 3,390 per quintal. Moong prices are currently trading in the range of Rs 5,800 per quintal to RS 6,000 per quintal, urad at Rs 5,700 per quintal to Rs 5,800 per quintal and soybean between Rs 3,100 per quintal to Rs 3,400 per quintal.

The government of Maharashtra has targeted procurement of 3.5 lakh quintals of moong, 4 lakh quintals of urad and 25 lakh quintals of soybean. Lalitbhai Shah, chairman, Latur agriculture produce market committee (APMC) — one of the key pulse-growing regions in the state, said that procurement has not commenced yet and may pick up pace after Diwali. Several soybean farmers, however, have taken advantage of the agricultural pledge financing scheme run by the government and nearly 425 farmers have pledged some 15,000 quintals of soybean with the mandi, he said. These farmers can sell their commodities when the prices get healthier, he said. In Maharashtra, the production of moong is slated to touch 14.7 lakh quintals, urad 14.7 lakh quintals and 450 lakh quintals of soybean. Soybean and cotton crops in Marathwada have suffered due to lower rainfall. With production of the rabi crop in doubt, farm distress in this region of Maharashtra is expected to increase. The government has declared severe drought in 112 talukas and medium drought in 39 talukas. In addition, another 250 mandals have been identified for drought relief measures. At present, the Centre has approved proposals from nine states for the procurement of pulses and oilseeds on the basis of minimum support price in the kharif marketing year beginning October. The Centre has granted permission to nine states to procure pulses and oilseeds under the price support scheme.

Modi’s ‘unwavering commitment’ led to huge jump in ease of doing business: world bank chief Jim Yong Kim

As India jumped 23 ranks on Ease of Doing Business index, World Bank chief Jim Yong Kim praised Prime Minister Narendra Modi. News agency ANI reported that Kim made a telephone call to Modi and said that India’s jump in Doing Business was remarkable and due to the “unwavering commitment” of Modi.

India on Wednesday continued its winning streak for the second year in a row by jumping 23 places to secure 77th rank on World Bank’s Ease of Doing Business index. With this, India became the topper among South Asia nations, leaving Bhutan behind. Last year, India had jumped 30 places to make to top 100 for the first time on the list of 190 nations.

Kim said it was remarkable that a nation of over 1.25 billion people achieved a rise of 65 ranks in a short period of 4 years and added that it has been made possible, in large measure, due to unwavering commitment and leadership of the prime minister, the new agency reported.

After coming to power in 2014, Modi had set the target to make it to the top 50 on the list. Speaking at an event earlier on Friday, Modi said that now breaking into top 50 rank is not far away. Modi said in four years his government has achieved what many did not believe, and what no other nation has done — leaping from 142nd rank in 2014 to 77th position.

Cross-border capital flows source of financial fragility, says Raghuram Rajan

Cross-border capital flows have been a source of financial fragility, former RBI governor and top economist Raghuram Rajan has said as he underscored that countries should see how best they can benefit from cross-border flows, without incurring the costs. In his ‘Mundell-Fleming Lecture’ at the International Monetary Fund headquarters Rajan argued that even if countries at either end of the flows follow reasonable policies, the nature of the expansion in liquidity in the up-cycle may, by increasing leverage and reducing pledgeability, set the stage for a costly downturn.

“Cross-border capital flows, whether pushed by sending countries or pulled by receiving countries, have been a source of financial fragility,” Rajan, who now is the Katherine Dusak Miller Distinguished Service Professor of Finance, at University of Chicago’s Booth School of Business, said on Thursday.

“In a world where nationalism is on the rise, such spillovers create an environment that is prone to misunderstanding and potential conflict,” he said in his lecture held during the 19th Jacques Polak Annual Research Conference on ‘International Spillovers and Cooperation’, of the IMF.

“Sending countries may see reserve build-up in receiving countries as unfair exchange rate manipulation, while receiving countries may feel indignant that they have to assume full responsibility for managing the collateral effects of industrial country monetary policies,” Rajan said.

Rather than blaming each other, countries should see how best they can benefit from cross-border flows, without incurring the costs, said the top world economist. Previously he was the chief economist of the IMF from 2003 to 2007 and India’s chief economic advisor in 2012-2013 before becoming RBI governor.

In his paper, Rajan said that when monetary policy in source countries tightens, receiving-country exchange rates depreciate, and liquidity dries up in their corporate sector even if country prospects are sound. Since pledgeability has been neglected, debt capacity plummets, leading to a sudden stop in funding and subsequent financial distress, it noted. And to avoid such booms and busts, authorities in receiving countries often try to smooth exchange rate volatility by leaning against abrupt appreciations and depreciations.

“Exchange rate intervention in this view is not an attempt by receiving countries to gain competitive advantage but a macro-prudential tool to mitigate adverse monetary policy spillovers from source countries,” Rajan said in his paper.

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