Welcome to Daily Banking Digest, your premier source for the latest news and insights on March 20, 2024, focusing on banking, the economy, and finance. Our platform offers a comprehensive overview of the day’s most critical financial stories, market trends, and economic developments. Whether you’re a professional in the financial sector, an investor monitoring market movement, or someone interested in staying informed about the economic landscape, Daily Banking Digest provides reliable, up-to-date information.

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Government e-Marketplace (GeM) Aims to Enhance Startup Participation and Relaunch Lending Program

The Government e Marketplace (GeM) aims to attract more start-ups and small businesses as sellers. Since its launch, 23,000 start-ups have joined the platform, contributing significantly to its growth. GeM offers various incentives and support to start-ups, including exemption from certain listing requirements and access to a revamped lending platform, GeM Sahay 2.0.

Key Points:

Start-up Participation: – 23,000 DPIIT-recognized start-ups have registered as sellers on GeM. – Start-ups fulfilled 84,000 orders worth ₹9,725 crore in the past year.

GeM’s Success: – GeM has witnessed significant growth, with an expected GMV of ₹4 lakh crore this year. – It has 1.5 lakh buyers and 21 lakh sellers, including a large number of small and micro enterprises.

Support for Start-ups: – GeM exempts start-ups from certain listing requirements. – GeM Sahay 2.0 will provide collateral-free loans of up to ₹10 lakh at interest rates of up to 10%. – The “Start-up Runway” initiative offers direct visibility to buyers.

India’s Export Target Projected at $450 Billion for Current Fiscal Year: FIEO President

Despite geopolitical challenges, India’s merchandise exports are projected to reach $450 billion by the end of the fiscal year. The Federation of Indian Export Organisations (FIEO) emphasizes the need to address the Red Sea crisis, provide support to MSMEs, and conclude free trade agreements to boost exports.

Key Points:

Export Target: – Merchandise exports expected to reach $450 billion by fiscal end.

Challenges: – Red Sea crisis impacting marine insurance and freight charges.

Support for MSMEs: – Easy and low-cost credit, marketing support needed for MSMEs.

Free Trade Agreements: – Early conclusion of FTAs with UK and Oman will enhance exports.

Focus on MSMEs: – MSMEs play a crucial role in achieving the $1 trillion export target by 2030.

Exploration of New Markets: – FIEO exploring opportunities for exporters in Latin America and Africa.

Export Growth: – Exports rose 12% in February to $41.40 billion. – April-February 2023-24 exports reached $395 billion.

Resilience of Exporters: – Export growth despite challenges like the Red Sea crisis, monetary tightening, and falling commodity prices.

Main Export Drivers: – Engineering goods, electronic goods, chemicals, drugs, pharmaceuticals, and petroleum products.

UK Duty Benefits: DGFT Outlines New Compliance Requirements for Indian Exporters

Indian exporters must adhere to the new UK Developing Countries Trading Scheme (DCTS) rules from January 1, 2024, to avail duty concessions on shipments to the UK. The DCTS replaces the previous Generalised Scheme of Preferences (GSP) origin declaration process.

Key Points:

New UK DCTS Rules: – Indian exporters must follow the new DCTS rules to claim concessional import duty rates on exports to the UK. – Goods meeting the UK DCTS Rules of Origin (RoO) are eligible for duty concessions. – Exporters must self-certify the origin of goods to meet RoO requirements.

Transition Period: – The transition period for the change from GSP to DCTS ended on December 31, 2023.

Benefits of DCTS: – DCTS benefits 65 developing countries, including India. – Reduced tariffs on many products from India. – Easier process to qualify for lower tariffs with clear origin rules.

Exporters Can Use Materials from Multiple DCTS Countries: – Exporters can use materials from various DCTS countries and still get duty-free access to the UK.

India’s Category in DCTS: – India is in the “Standard Preferences” category, enjoying benefits but not as much as the “Comprehensive Preferences” given to the poorest countries.

Export Limits: – Products from India that exceed a certain limit in exports to the UK don’t get the lower tariffs and are removed from the scheme. – The new limit is set at 6% of the UK’s total imports for most goods, affecting some Indian products like textiles.

Government Considers Legal Action to Recover FAME Subsidies from Companies.

The Indian government is considering legal action against Hero Electric, Okinawa Autotech, and Benling India for failing to repay subsidies they allegedly received under the FAME scheme. The government estimates that these companies owe a combined ₹330 crore, and may seek assistance from investigative agencies to probe potential criminal intent.

Indian Flag — Complete Daily Banking Digest – 20 March 2024 6

Key Points:

Recovery Suit: – The government may file a recovery suit against Hero Electric, Okinawa Autotech, and Benling India for unpaid subsidies.

Unpaid Subsidies: – Hero Electric owes an estimated ₹155 crore, Okinawa ₹125 crore, and Benling ₹50 crore.

Investigation: – The government may seek assistance from the CBI or Enforcement Directorate to investigate the alleged subsidy pilferage.

Other Defaulters: – Ampere EV, Revolt Motors, Lohia Auto, and AMO Mobility have settled their subsidy issues by refunding the amounts with interest.

Future Subsidies: – Companies that fail to repay subsidies will be barred from receiving future subsidies.

Benling India’s Response: – Benling India claims to have complied with FAME II guidelines and received subsidy payments for only a portion of the vehicles sold.

Hero Electric’s Response: – Hero Electric has been engaged in discussions with the government and has proposed solutions for an amicable settlement.

Okinawa Autotech’s Response: – Okinawa Autotech states that the matter is sub judice and awaits further instructions from the court.

FAME Scheme: – FAME I was launched in 2015 with a budget of ₹895 crore. – FAME II was rolled out in 2019 with an outlay of ₹10,000 crore. – The scheme aimed to support the sale of electric vehicles made in India. – Companies allegedly sought subsidies without adhering to the phased manufacturing programme, defeating the scheme’s intent.

NARCL to Acquire Wind World (India) Debt, Lenders to Recover 18% of Dues

The National Asset Reconstruction Company (NARCL) has emerged as the winning bidder for a majority of the debt owed by Wind World (India) in an uncontested Swiss challenge auction. NARCL’s offer of Rs 670 crore represents an 18% recovery for lenders, with 15% in cash and the balance in security receipts.

Key Points:

Winning Bidder: – NARCL declared the winning bidder for Wind World (India) debt.

Offer Details: – NARCL offered Rs 670 crore for Rs 3763 crore debt, equating to an 18% recovery. – Offer structure: 15% cash, 85% security receipts.

Other Bidders: – Omkara ARC did not bid, despite an earlier offer of Rs 550 crore in cash. – JC Flowers ARC evaluated the company but did not submit a bid.

Lenders Involved: – IDBI Bank, State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Bank of India, Central Bank of India, and Axis Bank are among the lenders selling their loans to NARCL.

Insolvency and Resolution Process: – Wind World (India) admitted for corporate insolvency in 2018. – Resolution process delayed due to litigation and COVID-19 lockdown. – Consortium led by Suraksha ARC withdrew their winning bid, which was challenged by lenders.

Claims and Disputes: – Rs 6,147 crore claims admitted by resolution professional. – State Bank of India filed the highest claim of Rs 1,209 crore. – Dispute between joint venture partners Enercon GmbH and Wind World (India) brothers led to financial crisis.

Tax-Saving Allowances in the New Tax Regime: Reduce Your Taxable Income

The government has introduced a new tax regime to simplify the tax filing process by eliminating deductions and exemptions and offering reduced tax rates. However, certain exemptions and allowances are still available under the new regime.

Key Points:

Standard Deduction: – Replaces several deductions available under the old regime. – Offers a standard deduction of Rs. 50,000 to all taxpayers.

Retirement Benefits: – Gratuity and leave encashment received upon retirement remain non-taxable.

Employer Contributions to NPS/PF: – Contributions made by employers towards NPS or PF are not taxed under the new regime.

Long-Term Capital Gains (LTCG): – Taxpayers can still avail themselves of the deduction on LTCG from the sale of equity shares or equity-oriented mutual funds, up to a limit of Rs. 1 lakh.

Other Allowances and Exemptions: – Transport allowances for specially-abled persons. – Conveyance allowance for employment-related expenses. – Compensation for travel on tour or transfer. – Daily allowance for expenses incurred due to absence from regular duty. – Perquisites for official purposes. – Exemption on voluntary retirement, gratuity, and leave encashment. – Interest on home loan on let-out property. – Gifts up to Rs. 50,000. – Deduction for additional employee cost.

Exclusions: – Section 80C deductions are not available under the new tax regime. – HRA exemption is not allowed under the new tax regime.

India’s Antitrust Landscape Transformed: Competition Law 2.0 Ushers in a New Era

The Competition Commission of India (CCI) is investigating Google’s Play Store billing policy for imposing unfair fees on app developers. This investigation is a test case for the new provisions of the Competition Amendment Act 2023. The law includes mechanisms for settlement and commitment, leniency plus, and a deal-value threshold for approving mergers and acquisitions. While the amendments are seen as progressive, experts emphasize the need for the law to adapt to the specific challenges of the Indian market. Balancing innovation and regulation remains a challenge for CCI, which faces a triple mandate and staffing shortages.

Key Points:

Investigation of Google’s Play Store Policy:

CCI is investigating Google’s billing policy for imposing unfair fees on app developers.
This investigation is a test case for the new provisions of the Competition Amendment Act 2023.

New Provisions of the Competition Amendment Act 2023:

Settlement and commitment scheme allows companies to resolve antitrust violations without admitting guilt.
Leniency plus mechanism provides additional penalty reduction for cartelists who disclose the existence of other cartels.
Deal-value threshold for approving mergers and acquisitions.

Adaptation to Indian Market:

Competition law in India is based on the specific requirements and challenges of the domestic markets.
It is not possible to have a global competition treaty or convention due to varying market conditions.

Business-Friendly Changes:

Companies can opt for settlement or commitment without admitting guilt.
Leniency plus provides incentives for cartelists to cooperate with CCI.
Flexibility for CCI and market participants to correct anti-competitive practices.

Regulation vs. Innovation:

The Digital Competition Bill has not received full support from all stakeholders, with concerns about stifling innovation.
Lawmakers need to balance innovation and regulation to ensure India remains competitive in technology.

Challenges for CCI:

Triple mandate of implementing the Competition Act, National Anti-Profiteering Act, and Digital Competition Bill.
Staffing shortages with 70 of 195 vacancies remaining unfilled.
Time-consuming nature of investigation and enforcement proceedings.

Income Tax Department Collects Rs 73,500 Crore in Outstanding Dues for Fiscal Year 2024

The Income Tax Department has recovered a significant amount of Rs 73,500 crore in pending dues for the financial year 2023-24, marking a substantial increase compared to the previous year. This recovery is part of a focused plan to enhance the collection of outstanding tax arrears.

Key Points:

Recovery Amount: – Total recovered amount: Rs 73,500 crore – Corporate tax dues: Rs 56,000 crore – Personal income tax: Rs 16,500 crore – Undisclosed income from foreign assets: Rs 50 crore

Collection Increase: – Collection has increased from 8% of annual outstanding in 2021-22 to 17% in the current financial year.

Pending Tax Arrears: – Pending tax arrears have surpassed Rs 21.94 trillion as of January 31, 2023.

Database Update: – Efforts are underway to update the database to ensure accuracy in tax payments.

Taxation Regime Continuity: – Revenue Secretary Sanjay Malhotra highlighted the continuity in the taxation regime.

Personal Income Tax Buoyancy: – Personal income tax has shown substantial buoyancy due to benefits provided to taxpayers.

Taxpayer Services Improvement: – The government is committed to improving taxpayer services through rationalisation, simplification, and trust-based taxation.

Concessional Tax Regime for Corporates: – The concessional tax regime for corporates will not be extended beyond March 31, 2024.

India’s Increased Oil Imports from the US Amidst Russian Sanctions

Indian oil refiners are increasing their purchases of American crude oil, with the largest monthly volume expected since May. This shift is driven by tighter US sanctions on Russian oil, which have disrupted trade and narrowed discounts. India has also increased purchases from Saudi Arabia.

Key Points:

Increased US Crude Purchases: – Indian refiners have purchased about 7 million barrels of April-loading US crude so far this month. – This would be the largest monthly volume since May.

Impact of US Sanctions on Russian Oil: – Tighter US sanctions have stranded Russian cargoes and narrowed discounts. – Russian Sokol oil, comparable to WTI Midland, has been most affected.

Advantages of WTI Midland: – WTI Midland produces more gasoline and diesel, which are expected to see higher consumption in coming months. – It is a light-sweet alternative to Russian Sokol.

Historical Context: – US crude accounted for 10% of India’s imports in 2021 but declined to 4% in recent years due to Russia’s market share expansion.

Current Market Share: – Russia remains the largest supplier of oil to India, with a 39% market share in 2023. – India’s imports of Russian crude last month were around 40 million barrels, or 30% of its overall oil purchases.

NHAI Concludes Third Round of InvIT Monetization, Raising Rs. 16,000 Crore

National Highways Infra Trust (NHIT) has completed its third round of funding, raising a total of Rs. 16,272 crore through equity and debt. The funds will be used to acquire 10 National Highway stretches, expanding NHIT’s portfolio to 15 operating toll roads with a total length of 1,525 km. This transaction marks a significant milestone in the government’s asset monetization program, bringing the total private investment in road infrastructure to Rs. 42,334 crore.

Key Points:

Funding: – NHIT raised Rs. 7272 crore in equity and Rs. 9000 crore in debt. – Units were subscribed at a premium over the current NAV.

Acquired Assets: – 10 National Highway stretches were acquired, including Chichira-Kharagpur and Hubli-Haveri.

Portfolio: – NHIT now holds a diversified portfolio of 15 operating toll roads with a total length of 1,525 km. – Concession periods range from 20 to 30 years.

Investors: – Canada Pension Plan Investment Board and Ontario Teachers’ Pension Plan Board subscribed to the maximum limit of 25% each. – Existing domestic investors include pension funds, insurance companies, and mutual funds.

Government’s Asset Monetization Program: – NHIT’s third round of funding is part of the government’s asset monetization program. – The program has brought in Rs. 42,334 crore in private investment through TOT and Rs. 42,000 crore in debt through securitization of toll revenues.

CBIC Prohibits Importation of 24 Dog Breeds, Including Pit Bulls

The Central Board of Indirect Taxes and Customs (CBIC) has banned the import, breeding, and sale of 24 dog breeds deemed dangerous to human life. This decision follows a recommendation from the Department of Animal Husbandry and Dairying and a petition from PETA India. The ban aims to address the increasing incidents of dog bites and rabies cases in India.

Key Points:

Breed Ban:

24 dog breeds, including pit bulls, Rottweilers, and terriers, are banned from import, breeding, and sale.
Mixed and cross-breeds of these breeds are also included in the ban.

Reason for Ban:

The breeds have been identified as ferocious and dangerous to human life.

PETA Petition:

PETA India filed a writ petition in Delhi High Court and appealed to the Ministry of Fisheries, Animal Husbandry, and Dairying to protect dogs and humans.
The Ministry urged states and Union territories to prohibit the sale, breeding, and keeping of aggressive dog breeds.

Government Response:

CBIC received a letter from the Department of Animal Husbandry and Dairying and is acting accordingly.
States have been asked to sensitize officers about the ban.

Dog Bite Incidents:

Dog bite incidents in India have surged over 26.5% in 2023.
The government is stepping up surveillance by asking states to record bites by strays and pets separately.

Surge in Bank Certificate of Deposit Issuances by 25%

Banks in India have significantly increased their fund mobilization through Certificate of Deposit (CD) issuances, with a 25% year-over-year surge to ₹7.89 lakh crore during the current financial year. This growth is driven by the need to meet rising credit demand, which has outpaced deposit growth.

Key Points

Fund Mobilization through CDs – CD issuances surged 25% to ₹7.89 lakh crore during the financial year so far. – Banks used CDs to meet credit demand amid lagging deposit growth.

Certificate of Deposit (CD) – CD is a negotiable, unsecured money market instrument issued by banks. – Minimum denomination is ₹5 lakh, with multiples of ₹5 lakh thereafter.

Credit and Deposit Growth – Scheduled banks reported credit growth of 20.10% and deposit growth of 12.89% year-on-year as of February 23, 2024. – Incremental credit-deposit ratio stood at 96.9%, indicating deposits have been able to fund credit demand.

Deposit Base Supplementation – Statutory requirements for CRR and SLR left around 77% of deposits available for credit expansion. – CD issuances supplemented the deposit base.

Term Deposit Interest Rates – Share of term deposits offering 7% and above interest rates increased to 61.4% in December 2023. – This has increased the attractiveness of term deposits compared to savings deposits.

Commercial Paper (CP) Issuances – CP issuances remained steady at ₹12.2 lakh crore during the financial year so far. – Corporates, primary dealers, and all-India financial institutions can raise short-term resources through CPs.

Bank of Japan Abandons Negative Interest Rates, Marking a Shift in Monetary Policy

The Bank of Japan (BOJ) has ended eight years of negative interest rates, marking a historic shift away from its ultra-loose monetary policy. While this is Japan’s first interest rate hike in 17 years, rates remain near zero due to concerns about a fragile economic recovery. The move makes Japan the last central bank to exit negative rates, ending an era of unconventional monetary tools aimed at stimulating growth.

Key Points:

End of Negative Interest Rates: – BOJ has discontinued its policy of charging 0.1% on excess reserves held by financial institutions.

New Policy Rate: – The overnight call rate has been set as the new policy rate, guided within a range of 0-0.1%.

Symbolic Significance: – The rate hike is the first in 17 years, carrying symbolic importance.

Limited Economic Impact: – The actual impact on the economy is expected to be minimal, as the BOJ intends to maintain loose monetary conditions.

Inflation Concerns: – Inflation has exceeded the BOJ’s 2% target for over a year, prompting the end of negative rates.

Global Financial Market Impact: – The end of cheap funds in Japan could jolt global financial markets as Japanese investors repatriate funds.

Asset-Buying Program: – The BOJ deployed a large asset-buying program in 2013 to stimulate inflation.

Yield Curve Control (YCC): – Negative rates and YCC were introduced in 2016 to enhance the effectiveness of monetary stimulus.

YCC Adjustment: – The BOJ relaxed its grip on long-term rates last year to address the yen’s sharp falls and public criticism of ultra-low interest rates.

JPMorgan Dismisses Allegations of Adani Bribery in Energy Project Approvals

JP Morgan maintains its positive view on the Adani Group despite reports of a US investigation into potential bribery allegations. The brokerage believes that the scope for corruption in the group’s renewable energy projects is unlikely due to the high level of transparency in India’s tendering process.

Key Points:

JP Morgan’s View on Adani Group:

Maintains positive view on the conglomerate.
Scope for corruption in renewable energy projects considered highly unlikely.

Investigation Details:

US prosecutors investigating Adani Group entity and Azure Power Global.
Potential bribery allegations related to a 12GW solar energy project.
Project remains under construction and not part of restricted group bonds.

US Foreign Corrupt Practices Act (FCPA):

Anti-bribery provisions can lead to fines or imprisonment.
JP Morgan believes material financial impact is unlikely even if investigation leads to prosecution.

Adani Group’s Response:

Denies allegations and claims no notice received from US Department of Justice.
Stock prices of Adani entities have been negatively impacted by the report.

RBI Highlights Diverging Demand Patterns in FMCG Sector: Premium Products Gaining Traction Amidst Income Shifts

The Reserve Bank of India (RBI) predicts a moderation in the domestic FMCG sector over the next six months, while demand for premium consumer goods remains strong. The RBI also highlights significant per capita income shifts in India and the need for new investments across sectors. Despite global economic headwinds, the RBI believes India’s economy is well-positioned for sustained growth.

Key Points:

Domestic Economy:

FMCG sector expected to moderate in the next six months.
Demand for premium consumer goods remains robust.
Significant per capita income shifts underway.
Capacity utilization levels indicate the need for new investments.

Global Economy:

Global economy losing steam, with growth slowing in resilient economies.
High frequency indicators point to further leveling.
Geopolitical risks index at a 19-month high.

Indian Economy:

Conducive macroeconomic configuration for growth.
GDP growth rate averaged over 8% from 2021-24.
Fundamentals indicate sustained and higher growth potential.
Core inflation declining, but food price pressures hinder headline inflation target.

RBI Penalizes DCB Bank and Tamilnad Mercantile Bank

The Reserve Bank of India (RBI) has imposed penalties on DCB Bank and Tamilnad Mercantile Bank for non-compliance with regulations related to interest rates on advances. DCB Bank has been fined Rs 63.6 lakh, while Tamilnad Mercantile Bank has been fined Rs 1.31 crore. The penalties are based on deficiencies in regulatory compliance and do not imply any judgment on the validity of transactions or agreements between the banks and their customers.

Key Points:

Penalty on DCB Bank:
- Amount: Rs 63.6 lakh
- Reason: Non-compliance with directions on interest rate on advances
Penalty on Tamilnad Mercantile Bank:
- Amount: Rs 1.31 crore
- Reason: Non-compliance with directions on interest rate on advances and Central Repository of Information on Large Credits (CRILC) reporting
Nature of Penalties:
- Based on deficiencies in regulatory compliance
- Do not imply judgment on transactions or agreements with customers

Electric Vehicle Policy Aims to Foster Production of High-End Electric Cars: Audi Executive

The Indian government’s new electric vehicle policy aims to promote local production of premium electric cars, according to Audi AG’s Vice-President of Sales Overseas. The policy offers import duty concessions to companies investing in manufacturing facilities in India, potentially accelerating the adoption of EVs in the country.

Key Points:

Government Commitment to Sustainability: The Indian government is committed to promoting electric vehicles and sustainability.
Focus on Premium Electric Cars: India is the first market with specific regulations targeting premium electric cars.
Import Duty Concessions: Companies setting up manufacturing units in India with a minimum investment of $500 million will receive import duty concessions.
Limited Import Allowance: Companies can import a limited number of cars at a lower customs duty of 15% for five years.
Strategic Importance of Indian Market: Audi considers India a strategic market with potential for significant growth in the premium segment.
Flexible Approach: Audi will offer both internal combustion engine models and battery electric vehicles to meet market demand.
Evaluation of Local Manufacturing: Audi is evaluating the possibility of local manufacturing of battery electric cars in India.
Current EV Imports: Audi currently imports its entire EV range into India.
Target for EV Sales: Audi aims for 50% of its sales in India to come from electric vehicles by 2030.
Global Commitment to Electric Vehicles: Audi plans to become a fully electric vehicle manufacturer globally from 2033 onwards.

State Government Bond Yields Surge Amidst Unprecedented Issuance.

State government securities witnessed a surge in yields as 17 states borrowed a record Rs 50,206 crore at the weekly auction. The cut-off yield for 10-year papers ranged from 7.44% to 7.75%, higher than the previous auction. The borrowing amount exceeded the calendar amount and was the second-highest in a single auction. Market participants anticipate higher borrowing and yields in the upcoming auction.

Key Points:

Yield Rise: – Yield on state government securities rose due to record borrowing of Rs 50,206 crore by 17 states.

Cut-off Yield: – Cut-off yield on 10-year papers ranged from 7.44% to 7.75%, higher than the previous auction’s 7.36% to 7.41%.

Borrowing Amount: – The borrowing amount was significantly higher than the calendar amount of Rs 27,810 crore.

Demand: – There was demand from investors and banks for state government securities.

Anticipated Higher Borrowing: – Market participants expect higher borrowing in the next auction.

Supply in Last Auction: – Supply in the last auction of the quarter may be higher, leading to further yield rise.

Final Auction: – States will participate in the final auction of the current financial year next week, with an expected borrowing of Rs 29,399 crore.

Government Bond Yields: – Government bond yields remained steady due to caution ahead of the US Federal Reserve meeting.

Direct Tax Revenue Surges 20% to Rs 18.90 Trillion by March 17

The net direct tax collection in India has witnessed a significant growth of 19.88% to over Rs 18.90 trillion as of March 17, 2024. This includes both Corporation Tax (CIT) and Personal Income Tax (PIT), with refunds amounting to Rs 3.37 trillion issued during the current fiscal year. The gross direct tax collection, before adjusting refunds, stands at Rs 22.27 trillion, reflecting an 18.74% growth over the previous year.

Key Points:

Net Direct Tax Collection: Rs 18,90,259 crore (as of March 17), an increase of 19.88% compared to the previous year.
Corporation Tax (CIT): Rs 9,14,469 crore (net of refund).
Personal Income Tax (PIT): Rs 9,72,224 crore (net of refund), including Securities Transaction Tax (STT).
Refunds: Rs 3.37 trillion issued till March 17.
Gross Direct Tax Collection: Rs 22.27 trillion, an 18.74% growth over the previous year.
Revised Estimates: Government’s revised estimates for direct tax collection for the full fiscal (April-March) were set at Rs 19.45 trillion.

Surge in Outward Remittances under RBI’s LRS by 27% in April-January

Outward remittances under the Reserve Bank of India’s Liberalised Remittance Scheme (LRS) witnessed a significant increase of 24% year-on-year to $27.42 billion in the April-January period of FY24. The growth was primarily driven by increased spending on international travel, maintenance of close relatives, and overseas education.

Key Points:

1. Outward Remittances: – Increased by 24% to $27.42 billion in April-January FY24. – January 2024 remittances stood at $2.62 billion, a 9% increase from December 2023.

2. International Travel: – Rose to $14.95 billion in April-January FY24, a 30.67% increase.

3. Maintenance of Close Relatives: – Stood at $3.95 billion in April-January FY24. – In January, Indians spent $267.02 million on maintenance of close relatives.

4. Overseas Education: – Reached $3.04 billion in April-January FY24. – In January, Indians remitted $449.46 million for overseas education.

5. LRS Scheme: – Introduced in 2004, allows resident individuals to remit up to $250,000 per financial year. – Limit was initially $25,000 and has been gradually revised.

Climate Finance Needs Projected to Exceed $10 Trillion Annually by 2050

Climate financing is crucial for addressing climate change and its socio-economic impacts. The annual climate finance requirements are projected to exceed $10 trillion by 2050. Failure to meet these demands will exacerbate climate-related disasters and their consequences.

Key Points:

1. Climate Financing Requirements: – Annual climate finance needs are estimated to reach over $10 trillion by 2050.

2. Consequences of Inadequate Financing: – Failure to meet climate finance demands will intensify global temperatures and socio-economic consequences of climate-related disasters.

3. Urgency for Action: – The stark difference between the costs of inaction and the benefits of timely investments in low-carbon and climate-resilient pathways emphasizes the need for immediate action.

4. Seminar on Climate Financing: – The seminar aimed to unravel the complexities of climate finance and assess its current state through an audit perspective.

5. Dialogue and Knowledge Sharing: – The conference provided a platform for dialogue on climate financing, sharing knowledge and experience among experts.

RBI Report Highlights Persistent Inflation and Risk Mitigation Focus

The Reserve Bank of India’s State of the Economy report highlights the need for continued risk-minimizing monetary policy to guide inflation towards the 4% target. Despite a decline in core inflation, recurring food price pressures have hindered a more rapid decline in headline inflation. The report also notes an upward trend in per capita income, indicating a robust demand outlook for premium consumer businesses.

Key Points

Inflation – Headline inflation momentum turned positive in February 2024, offsetting a favorable base effect. – Food price pressures have been capped by core disinflation, which has been broad-based. – Monetary policy must remain in a risk-minimization mode to guide inflation towards the target.

Demand – Private final consumption expenditure remained low in the third quarter. – Per capita spending on durables and discretionary products has been rising in both rural and urban markets. – Aggregate demand in the third quarter was driven by investment, with signs of a revival in the private capex cycle.

Economic Growth – Real GDP expanded at a six-quarter high rate in October-December 2023. – Economic growth is predicted closer to 8% for the current financial year. – GDP growth is likely to remain robust at 7.4% during 2024-25.

Other Observations – The winter easing of vegetable prices has been shallow and short-lived. – Real per capita income has increased by 1.5 times since 2011-12. – The current financial year will likely see the highest ever length of four-lane roads being constructed. – CPI inflation is projected to average 4.4% during 2024-25.

Indian Rupee Declines to One-Month Low in Anticipation of US Federal Reserve Decision

The Indian rupee depreciated to its lowest point against the US dollar in over a month due to rising crude oil prices and caution ahead of the US Federal Reserve’s meeting outcome. The rupee settled at Rs 83.04, the lowest since February 16.

Key Points:

Rupee Depreciation: The rupee depreciated to Rs 83.04 against the dollar due to rising crude oil prices and caution ahead of the Fed meeting.
Fed Meeting Jitters: Market participants expressed concerns about the Fed meeting, which could sound hawkish and lead to short covering.
Dollar Index Surge: The dollar index surged to 104.01, indicating the strength of the greenback against major currencies.
India’s Foreign Exchange Reserves: India’s foreign exchange reserves increased by $57.6 billion this financial year, the second-highest among major countries.
RBI’s Dollar Purchases: The RBI bought a net $1.95 billion in January, injecting rupee liquidity into the market.
Forward Purchases: Net outstanding forward purchases stood at $9.9 billion by the end of January, the highest since August 2023.
Rupee Performance: The rupee appreciated by 0.2% in January but has depreciated by 1% this financial year.