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Simplified Central Excise norms for Jewellery Sector notified
Jul 29,2016

In this years Budget, central excise duty of 1% without input and capital goods tax credit or 12.5% with credit was imposed on articles of jewellery falling under heading 7113 of the First Schedule to the Central Excise Tariff 1985. Subsequent to that, the Government had set up a Sub-Committee of the High Level Committee, headed by Dr. Ashok Lahiri to interact with Trade & Industry on issues relating to procedure and compliance relating to excise duty of articles of jewellery.

The Sub-Committee has given its report on 23 June 2016, which has been accepted by the Government. In this connection, the Central Government has issued following notifications and circulars to give effect to the Sub-Committees recommendations:

A.        Notifications issued:

Notification No.Gist of notifications26/2016 - Central Excise

 

Seeks to amend notification No. 12/2012-Central Excise so as to prescribe 1% excise duty (without input and capital goods credit) on parts of articles of jewellery falling under heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986), and to prescribe a criteria for classification of an articles of jewellery or part of articles of jewellery or both as that of a particular precious metal.

27/2016 - Central Excise

 

Seeks to partially exempt Central Excise duty on articles of jewellery falling under heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986) manufactured by:

(a)    re-conversion of jewellery given by the retail customer, or

(b)     mounting of precious stone given by the retail customer.

28/2016 - Central Excise

Seeks to amend notification No. 8/2003-Central Excise dated 1st March, 2003, so as to increase for articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986):

(a)         the SSI Exemption limit from Rs. 6 crore to Rs. 10 crore; and

(b)        the SSI Eligibility limit from Rs. 12 crore to Rs. 15 crore.

29/2016 - Central Excise

Seeks to amend notification No. 17/2011-Central Excise, dated the 1st March, 2011, so as to exclude handicrafts falling under heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986), from the purview of excise duty exemption for handicrafts.

 

33/2016 - Central Excise (N.T.)

Seeks to notify, for articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986),

(a)    for articles of jewellery or parts of articles of jewellery or both (other than those which are   manufactured from the precious metal provided by the retail customer), the first sale value, that is the value at which such articles of jewellery or parts of articles of jewellery or both, are sold for the first time, as the tariff value;

(b)   for articles of jewellery or parts of articles of jewellery or both manufactured from the precious metal provided by the retail customer, the value which is sum of,-

i.        the cost of additional materials used by the manufacturer or principal manufacturer, as the case may be, for making such articles of jewellery;

ii.      the labour charges charged by the manufacturer or principal manufacturer, as the case may be, from the retail customer; and

iii.    the value of precious metal provided by the retail customer,as the tariff value.

34/2016 - Central Excise (N.T.)

Seeks to notify the Articles of Jewellery (Collection of Duty) Rules, 2016, applicable to articles of jewellery or parts of articles of jewellery or both falling under heading 7113 of the Central Excise Tariff Act, 1985 (5 of 1986). These rules, inter-alia, provide manner of payment of Central Excise duty on articles of jewellery or parts of articles of jewellery or both, including an optional scheme for payment of such Excise duty.

35/2016 - Central Excise (N.T.)

Seeks to amend the Central Excise Rules, 2002 in relation to articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), so as to:

i.        provide that the quarterly return (ER.8) will also apply to the manufacturers or principal manufacturers of parts of articles of jewellery, falling under heading 7113;

ii.      prescribe that the date of submission of quarterly return, for manufacturers or principal manufacturers of articles of jewellery or parts of articles of jewellery or both, falling under heading 7113, for quarter ending on 31st March, 2016, and quarter ending on 30th June, 2016, shall be the 10th August, 2016; and

iii.    as separate rules are being prescribed for articles of jewellery or parts of articles of jewellery or both falling under heading 7113 of the said Schedule to the said Tariff Act, applicability of Rule 12AA is being restricted to articles of precious metals falling under heading 7114.

36/2016 - Central Excise (N.T.)

Seeks to amend the CENVAT Credit Rules, 2004 in relation to articles of jewellery or parts of articles of jewellery or both, falling under heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986), so as to include a principal manufacturer of articles of jewellery or parts of articles of jewellery or both as manufacturer for the purposes of the CENVAT Credit Rules, 2004.

37/2016 - Central Excise (N.T.)

Seeks to provide a modified format for quarterly return, ER-8, for return of excisable goods cleared at the Central Excise duty rate of 1% [including articles of jewellery or parts of articles of jewellery or both, falling under heading 7113] or 2%.

38/2016 - Central Excise (N.T.)

Seeks to amend notification No. 35/2001-Central Excise (N.T.) so as to:

(i)            provide that a person engaged in the manufacture of articles of jewellery or parts of articles of jewellery or both, falling under chapter heading 7113 of the First Schedule to the Central Excise Tariff Act, 1985 (5 of 198

Compensatory Afforestation Fund Bill, 2016 Passed by Rajya Sabha
Jul 29,2016

Rajya Sabha passed The Compensatory Afforestation Fund Bill, 2016. The Bill had earlier been passed by Lok Sabha in May 2016.

Replying to the discussion on the Bill today, Minister of State (Independent Charge) of Environment, Forest and Climate Change, Shri Anil Madhav Dave, said that it is a good bill and the money is for the country. He said that the Parliamentary process has now been completed.

Shri Dave assured the House that if there are any concerns with the rules on consultation with Gram Sabhas in the Bill, the same will be reviewed after one year.

MPs from various political parties participated in the discussion on the Bill.

Background to Compensatory Afforestation Bill, 2016

The passing of the Bill has ended the long era of ad-hocism and will help the Centre and State Governments to utilise these amounts in a planned manner. It will facilitate make available more than Rs. 6,000 crores per annum to the States/UTs for conservation, protection, improvement and expansion of forest and wildlife resources of the country. Availability of these amounts will not only help the States/UTs and local communities to ensure better management of their forest resources but will also result in creation of more than 15 crores man-days of direct employment. A major part of these amounts will be used to restock and improve quality of degraded forests, which constitutes more than 40 % of the total forest cover of the country. Rules to be framed by the Central Government in consultation with the States/ UTs will provides for use of native species in afforestation activities to be undertaken from these funds. Majority of the employment will be generated in tribal dominated and backward areas of the country. Apart from creation of direct employment, utilisation of these amounts will result in increased availability of timber and various other non-timber forest products, and will thus help in improvement of the overall living standards of the forest dependent communities.

The Bill provides for establishment of a permanent institutional framework at the Central at each State and Union territory to ensure utilization of these funds in an expeditious and transparent manner. The Bill also seeks to transfer these amounts to dedicated, non-lapsable interest bearing funds under public account of the Union of India and each State so as to bring these funds within the overall oversight and control of the Parliament and the State legislatures, without impairing easy availability of these funds to utilise the same for the purpose for which it has been realised. The Bill also seeks to provide for constitution of a multi-disciplinary Monitoring Group to monitor activities undertaken from these funds. The Bill also provides for annual audit of the accounts by the C&AG.

The Bill provides for transfer of 90 % of the accumulated amounts, which presently is of the order of Rs. 40,000 crorers (excluding about Rs. 2000 crorers of interest already accrued on amounts presently being kept as FDs.) to the States for creation and maintenance of compensatory afforestation and execution of other activities for conservation, protection, improvement and expansion of forest and wildlife resources of the country. All fresh amounts to be realised by the States in lieu of forest land to be diverted for non-forest purpose will be deposited directly into the funds to be created under public account of the respective State. State-wise details of funds likely to be made available to each State/UT is enclosed.

The remaining 10 % Amounts to be retained at the National level will be used for monitoring and evaluation of activities to be undertaken by the States/UTs and Central Government from these funds and to provide, research and technical support to the States so as to ensure that these amounts are used in the technically best possible manner.

Central Government while according prior approval under the Forest (Conservation) Act, 1980 for diversion of forest land for non-forest purpose stipulates conditions to the effect that the State Government shall realize funds from the user agency for compensatory afforestation, catchment area treatment plan, wildlife management plan etc. to mitigate impact of diversion of forest land. In most of the States, funds received from the user-agencies were deposited in consolidated fund as revenue receipts which were made available to the Forest Department through budgetary provisions.

The Central Government in exercise of powers conferred under Section 3 (3) of the Environment (Protection) Act, 1986 constituted Compensatory Afforestation Fund Management and Planning Authority (CAMPA). However, the CAMPA could not be operationalized.

In 2008 Central Government formulated the Compensatory Afforestation Fund Bill, 2008. The Bill was passed by the Lok Sabha on 23rd December, 2008. However, the Bill could not be taken up for discussion in Rajya Sabha. On dissolution of the 14th Lok Sabha, the Bill lapsed.

C & AG in his D.O. letter dated March, 4, 2013 requested the then Finance Minister to examine the entire issue of maintaining a fund outside Government Accounting System. The C & AG in his said D.O. letter also suggested to move the Supreme Court for review of its decision with regard to Ad-hoc CAMPA fund so that it can be transferred into Public Account of India.

In compliance of the suggestions of the C&AG, and in exercise of powers conferred under section 3 (3) of the Environment (Protection) Act, 1986, the MoEF formulated a draft CAMPA Order, 2014 for establishment of separate funds under public account of Union of India and each State and constitution of authorities at Union of India and each State for management of these funds and placed the same before the Supreme Court for approval. The approval of the Supreme Court to the draft Order is still awaited.

To ensure safety, security and expeditious & efficient utilization of accumulated funds which are presently managed by the ad-hoc CAMPA, consisting of only three officials and one representative of the CEC, without having any full time regular staff and administrative support; and to ensure harmonization between the original CAMPA notification dated 23rd April 2004 and the State CAMPA Guidelines, as approved by the Supreme Court in July 2007, and also to provide statutory back up to the State CAMPAs, the Central Government introduced the Compensatory Afforestation Fund, Bill, 2015 in Lok Sabha.

On 13th May, 2015 Lok Sabha referred the Bill to the Department Related Parliamentary Standing Committee on Science & Technology, Environment & Forests. The Committee held extensive consultations with the States/UTs and various other stakeholders. The committee submitted its report containing 26 recommendations. The Central Government accepted 20 recommendations. Based on recommendations of the Committee and further examination of the Bill, the Central Government moved 49 official amendments.

 

Details of Amounts Available with the Ad-hoc CAMPA As on 31.03.2016
(Rupees in Crore)

Sl. No

 

State/UT

Total Amount as on 31.03.2016Distribution Between centre and StatePrincipalInterestTotalCentreStateAmt.%

Amount provided for Startups and Innovation Industries
Jul 29,2016

Several Government organisations like Department of Science & Technology (DST), Department of Scientific and Industrial Research (DSIR), Department of Biotechnology (DBT), Department of Electronics and Information Technology (DeiTY), have been supporting startups and innovation industries.

During over last two decades, DST has provided over 250 crores in setting up of specialised institutional mechanisms spread across the country i.e Science and Technology Entrepreneurs Park (STEP) and Technology Business Incubators(TBIs). The STEPs and TBIs are engaged in nurturing startups and since the year 2008, few of them have also been provided support totaling to about Rs.60 crores to implement the seed support system (SSS) for startups in Incubators. DSIR has provided a support of over Rs.225 crores to industries for development and demonstration of innovative technologies, since 1992 and a support of over Rs.25 crores to individual innovators, since 1998. Biotechnology Industry Research Assessments Council (BIRAC) under DBT has provided funding of Rs.677 crores to entrepreneurs, startups, SMEs and translational organisations since 2012. DeiTY under a scheme for Technology Incubation and Development of Entrepreneurs (TIDE), supports 27 TIDE centres up to March 2017 in the area of Electronics & ICT to strengthen the technology incubation centres at the institutions of higher learning. The outlay for each TIDE centre is Rs.55 lakhs for the entire duration. Rs.32.12 crores have been released to TIDE centres till now. The support certainly needs to be scaled up to bring in more and more state-of-the-art and affordable innovations into the market for the benefit of society.

DST has introduced several new schemes namely National Initiative for Developing and Harnessing Innovations (NIDHI), New Generation Innovation and Entrepreneurship Development Centre (NewGen IEDC), Grand Challenges and Competitions for Scouting Innovations (GCC), Promoting and Acclerating Young and Aspiring Innovators and Startups (PRAYAS), Entrepreneur-In-Residence (EIR), Start up NIDHI, Technology Business Incubator (TBI), Seed Support System (SSS), Accelerator, Centers of Excellence (CoE).

The Government over the last two years has taken initiatives to promote innovations, such as announcement of AIM, SETU, Start-up/Stand-up India, IMPRINT, Uchhatar Aavishkar Yojana etc. DSIR on its part has a scheme which provides common research facilities including research, testing and quality control equipment in public funded institutions for the benefit of micro and small enterprises. BIRAC has initiated several flagship programmes such as BIG, SBIRI, BIPP, SPARSH, CRS and BioNEST that bridge the gap in the biotechnology innovation pipeline. In addition to this, Department of Industrial Policy & Promotion has initiated a start-up fund of Rs. 10,000 crores.

During 2016-17, DSIR has provided an amount of Rs 27 crore, DeiTY has provided Rs 3 crores and the budget of BIRAC is Rs 120 crores for the startup and innovation industries. DST has also earmarked a budget of Rs 180 crores to promote innovation and enterpreneurship.

The Government has identified 10 themes under the IMPRINT scheme to promote innovations and DSIR has been identified to pursue innovations in the areas of manufacturing technology and water resources. BIRAC has identified the areas of Biopharma including vaccines, bio-agriculture, bio-industrial and bio-informatics for building the national biotechnology capabilities and has initiated several new awards to promote innovations such as SITARE (BIRAC-SRISTI GYTI Awards), BIRAC Hackathons, BIRAC Technology Day Award and BIRAC Innovator Awards. Under the existing scheme of National Manufacturing Competitiveness Programme (NMCP) of MSME, there is a component namely, Support for Entrepreneurial & Managerial Development of Small & Micro Enterprises through Incubators. Financial assistance (up to Rs.6.25 lakh per idea subject to a maximum of 10 ideas in each financial year) is given to the innovators for incubating innovative ideas that can be converted into business activities through Host Institutes i.e. engineering colleges, IITs, NITs, etc. in this scheme.

MSME gives National Award annually to Micro, Small and Medium Enterprises to promote innovations. Six awards, comprising three awards (first, second & third) to Micro & Small enterprises and three awards (first, second & third) to Medium enterprises are given. The first, second and third award carries a cash prize of Rs.3 lakhs, 2 lakh & Rs.1.5 lakh respectively including a trophy and certificate.

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Energy and Water Conservation Measures at Airports
Jul 29,2016

Airports Authority of India (AAI) has taken measures to generate solar energy for airports. AAI has signed MoU with SECI and completed 6.8 MWp roof top solar projects at 16 different airports/ units across India. AAI further awarded another 2.9 MWp solar roof top plants & 19.8 MWp solar ground mounted works at 14 airports.

Energy audit has been conducted at 42 airports in the year 2015-16 and 14 more airports are being taken up for energy audit in the year 2016-17. 15 airports were identified and taken up for replacement of conventional lights with energy efficient LED lights during the year 2015-16 and water conservation measures have been taken at 37 airports.

Solar Power Plants: Solar power plants have been installed at 15 airports and also in the Rajiv Gandhi Bhawan at Safdarjung Airport. The 16 solar projects completed have a total energy generation capacity of 6800 KWp. Further 14 solar power projects with a capacity of 22700 KWp have been taken up. The solar power project of Ranchi Airport has already been commissioned with a capacity of 250 KWp. Airports Authority of India (AAI) has already initiated action for installation of Ground Mounted Solar Power Plants at available land at Kolkata (15000 KWp), Jaipur (1800 KWp) and Chandigarh (3000 KWp) airports.

Recycled water is used for horticulture/firefighting/air-conditioning at 30 airports.

GRIHA

AAI is following GRIHA (Green Rating for Integrated Habitat Assessment) system for sustainable and environment friendly design. All the new buildings are constructed as per the ECBC (Energy Conservation Building Code) norms and obtain 4 star GRIHA rating. New Terminal Building at Chandigarh Airport has already obtained 4 star GRIHA rating.

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OPEN SKY POLICY Agreement with SAARC Countries
Jul 29,2016

As per National Civil Aviation Policy 2016, Government has planned to enter into an Open Sky Air Service Agreement on a reciprocal basis with SAARC countries and countries with territory located entirely beyond a 5000 km radius from New Delhi. Unlimited flights above the existing bilateral rights will be allowed directly to and from major airports within the country as notified by the Government time to time. However, the points of call at other airports under the existing Air Service Agreement will continue to be honoured till the same are renegotiated.

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33029.39 MU Wind Power & 7447.92 MU Solar Power Generated During 2015-16
Jul 28,2016

Shri Piyush Goyal, Minister of State (IC) for Power, Coal, New & Renewable Energy and Mines informed that as per information received from the Central Electricity Authority (CEA), the quantum of electricity generated during 2015-16 through Wind and Solar sources was 33029.39 MU and 7447.92 MU respectively. He further said that during last two years i.e. 2014-15 and 2015-16, a total capacity of 5735 MW and 4131 MW have been installed for wind and solar energy respectively.

The Minister also told that a capacity addition target of 4000 MW and 12000 MW has been proposed for generation of electricity by wind and solar respectively during 2016-17 and a total of 315 MW have been installed under Solar Roof top Scheme. Power generated from these projects is being used for both domestic and captive use.

Shri Piyush Goyal stated tenders for 20766 MW Solar Power projects have been issued. He also said that the wind power projects are mainly developed by private sector under various modes including PPA, REC, captive use, third party sale etc. No Union Government project is under construction in wind energy sector.

Shri Goyal also mentioned that Ministry is implementing several schemes to promote generation of solar and wind energy. These are Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects, scheme for Development of Solar PV Power Plants on Canal Banks/ Canal Tops, scheme for setting up 300 MW of Grid connected Solar PV Power Projects by Defence Establishments under Ministry of Defense and Para Military Forces with Viability Gap Funding (VGF) under Batch-IV of Phase-II/III of JNNSM. (Jawharlal Nehru National Solar Mission), scheme of setting up 1000 MW of Grid- Connected Solar PV Power Projects by CPSUs with VGF under Batch-V of Phase-II of JNNSM, scheme for Setting up of 15000 MW of Grid connected Solar PV Power Projects under Batch II of Phase II of National Solar Mission (by NTPC/NVVN), (Setting up of 2000 MW Grid connected solar power with VGF through Solar Energy Corporation of India (SECI), generation based incentive scheme for promotion of wind power.

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High Speed Train between Mumbai Ahmedabad Corridor already sanctioned and under implementation
Jul 28,2016

Indian Railways is working on a multi pronged strategy for running of high speed trains (with a speed of 300 kmph+), semi high speed trains (with a speed of 160 kmph+ - 200kmph), running of existing trains with increased speeds and introduction of faster trains and faster train sets.

A high speed train (300 kmph+) has already been sanctioned on Mumbai - Ahmedabad high speed corridor with financial and technical assistance from Government of Japan. This train is based on Japanese Shinkansen high speed technology. A company for the implementation of this project with the name National High Speed Rail Corporation Limited has already been formed. The implementation of this project has already begun and is now targeted for commissioning in 2023-24. The study for this high speed train popularly referred to as Bullet Train has been done by JICA. Government of Japan is providing financial assistance in the form of loan upto 81% of the project cost at a very nominal interest rate of 0.1% per annum to be repaid in 50 years with a 15 year moratorium.

In addition to Mumbai - Ahmedabad high speed (300 kmph+) corridor, five more corridors covering sides of diamond quadrilaterals and semi diagonals in the country are being explored and Consultants have been appointed to undertake feasibility studies as per details given below: -

S.NHigh Speed CorridorConsultants undertaking feasibility study1

Delhi-Mumbai

Consortium of M/s.  The Third Railway Survey and Design Institute Group Corporation (Chinese Consultant) and Lahmeyer International (India) Private Limited, India. Interim report 1 received. Interim report 2 expected in November, 2016. Final Report expected in January, 2017.

2

Mumbai-Chennai 

Consortium of M/s. SYSTRA (French Consultants), RITES and  Ernst and Young LLP. Interim report 1 received. Interim report 2 expected in November, 2016. Final Report expected in January, 2017.

3

Delhi-Kolkata

Consortium of M/s. INECO- M/s. TYPSA- M/s. Intercontinental Consultants and Technocrats Private Limited (Spanish Consultants). Interim report 1 & 2 received. Final Report expected in January, 2017.

4

Delhi-Nagpur

Government to Government cooperation with Chinese Railway Company. Inception report received.

5

Mumbai-Nagpur

Government to Government cooperation with Spanish Railway companies. Interim report 1 received. Interim report 2 expected in November, 2016. Final Report expected in January, 2017.

Railways has also taken up a programme of running of semi high speed trains (160 kmph+ - 200kmph) in a big way. It has already started running such a train with the name Gatimaan Express between Hazrat Nizammuddin to Agra Cantt Station w.e.f. 05.04.2016 with a maximum speed of 160 kmph. In addition to this Delhi -Agra semi high speed corridor, Indian Railways have also identified eight more corridors for feasibility of semi high speed rail, Zone wise details are as under:

 

 S.N

CorridorZonal RailwaysStatus1

Delhi-Chandigarh

Northern

Feasibility-cum implementation study awarded to SNCF (France) on cost sharing basis.

2

Chennai-Bengaluru-Mysore

Southern, South Western

Feasibility Study for upgradation of speed awarded to ERYUAN Group of Chinese Railways at their cost.

3

Delhi-Kanpur

Northern, North Central

 

 

Quantum of Technical inputs required for upgradation of speed to 160 Kmph have been identified by the concerned Zonal Railways and KONKAN Railway.

4

Nagpur-Bilaspur

South East Central

5

Mumbai-Goa

Central, South Western, Konkan Railway

6

Mumbai-Ahmedabad

Western

7

Chennai- Hyderabad

Southern, South Central

8

Nagpur - Secunderabad

Central, South Central

          Indian Railways is also currently undertaking field trials for assessing savings in transit time by using special type Spanish Talgo Coaches on existing New Delhi-Mumbai corridor. These are faster trains which may run at around 200 kmph.

          Indian Railways is also working on a proposal to acquire modern electrical EMU train sets which will have a good average speed thereby saving travel time substantially. 

            With a view to increasing speed of existing trains in Indian Railways, Mission Raftaar has been announced in the Railway Budget 2016-17.  The mission envisages a target of doubling of average speed of freight trains and increasing the average speed of all non-suburban passenger trains by 25 kilometre per hour (kmph) in next 5 years.  The present level of average speeds in Indian Railways for non-suburban passenger trains is 46.3 kmph and for freight trains the average speeds is 24.2 kmph. In order to implement this, a cross-functional mission directorate has been created in Railway Board. 

Action Plan for improving mobility and increasing average speed of trains, inter-alia, includes removal of speed restrictions, construction of road over bridges (ROBs) and road under bridges (RUBs), right powering of trains, introduction of twin-pipe brake system in wagons, and replacement of conventional loco hauled commuter trains by Main Line Electric M

External Debt Private Sector Debt Drives Broad-Based Build-Up of Emerging Markets External Vulnerability Risks
Jul 28,2016

Following the painful experience of the Asian financial crisis of 1997-98, the Russian crisis of 1998-99 and the Argentinean crisis of 2001-02, external risks receded in most emerging market countries for several years. Strong economic growth and the increase in foreign exchange revenues resulting from the commodity super-cycle were accompanied by improved macroeconomic management, strong build-up of foreign exchange reserves, and lengthening of debt maturities. In addition, the deepening of domestic debt markets allowed governments to rebalance their funding towards local currency debt, further decreasing external vulnerability.

Post-2011, this trend has reversed and external vulnerability risks are now on the rise:

External vulnerability has increased significantly in about 75% of emerging economies globally

External debt has almost tripled in the last decade and over the last five years has generally grown faster than GDP and foreign exchange reserves. As a result, the average emerging markets external debt to GDP ratio increased from its decade-low of 40% in 2008 to 54% in 2015, and the average external debt to reserves ratio rose from 251% in 2007 to 353% in 2015. This is despite a slowing of the external debt growth rate from 14.2% a year during 2006-2010 to 7.1% a year during 2011-2015.

The rise in external debt has stemmed mainly from the private sector

Since 2005, private sector external debt has grown at an annual rate of 14.3% compared to 5.9% growth rate for public sector debt. As a result, the share of private sector debt in total external debt has risen from 51% in 2005 to 68% in 2015.

Vulnerability differs by region

Emerging Europe remains the region with the highest external vulnerability, followed by Latin America and the Caribbean and Asia Pacific. The Middle East and Africa region on average has the lowest external vulnerability.

The Asia ex-China region experienced the largest change over the last five years

For a decade, Asia had significantly lower external vulnerability metrics than the other regions, characterized by both lower levels of external debt and higher reserve holdings. That advantage has now disappeared, with the average external vulnerability of the Asia ex-China region being close to that of Latin America, although developments differ by country.

As of end-2015, emerging markets vulnerability to external debt crises is still less than in the early 2000s

Despite the deterioration in the past five years, average external vulnerability ratios as of 2015 are still around their 2005 levels: the average external debt to GDP across the 83 countries in our sample was at 54% in 2015 compared to 49% in 2005, average external debt to reserves was at 353% in 2015 compared to 348% in 2005, and the average External Vulnerability Indicator (EVI)1 was at 78% in 2015 compared to 91% in 2005.

Further, several macroeconomic factors are better-positioned than during the crises of the end-1990s

Most emerging markets today have flexible exchange rate regimes versus the currency pegs of the past. Inflation pressures are better contained, monetary policy is generally considered more successful in managing shocks, and banking systems are generally healthier. Local capital markets are deeper and better developed in a number of countries and can provide more of a cushion in the event of nonresident investor withdrawal. Finally, sovereign balance sheets in many countries are healthier and less-dependent on external financing than in the late 1990s. It is these factors that are contributing to the current resiliency of emerging markets to the post-2010 slow-down in net capital inflows, which the IMF estimates to be of the size and breadth of the major capital inflow slow-downs of the 1980s and 1990s.

However, going forward, many of the challenges will persist or exacerbate

Economic growth will remain sluggish for the medium term. We expect commodity prices to remain low for several years going forward, which will affect foreign exchange revenues and reserve accumulation in commodity exporters. US interest rates will continue towards normalization, albeit on a very gradual path, which could put further pressure on emerging market currencies. Finally, if continued, the slowdown in capital flows to emerging markets and tightening liquidity would lead to shortening of debt maturities and thus an increase in the proportion of short-term debt. All of these forces will lead to continued deterioration in external vulnerability metrics, and if prolonged, eventually to increased systemic crisis susceptibility.

Further, the fact that private sector external debt is now much larger than government debt not only increases external vulnerability risk but also the potential for materialization of contingent liabilities for the sovereign - an example of which is the current support of sovereigns for stressed major oil-exporting companies.

Finally, while this report focuses exclusively on external debt, domestic debt in the state-owned and private sectors has grown dramatically as well in many countries recently and represents additional financial risks in an environment of low growth, rising interest rates, and low commodity prices. It also represents additional potential contingent liability for government balance sheets and a constraint on future growth if high leverage curbs corporate investment.

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Comments of some Organisations on Child Labour Amendment Bill ill founded, Asserts Labour Ministry
Jul 28,2016

The Ministry of Labour and Employment has expressed serious concern over comments of some organisations on some provisions of the Child Labour (Prohibition and Regulation) Amendment Bill, 2016, passed by the Parliament on Tuesday this week. It said such comments were ill-informed and misleading reflecting inadequate understanding of the provisions and implications of the original, The Child Labour (Prohibition and Regulation ) Act,1986 and of the Amendment Bill,2016.

The Ministry asserted that the Amendment Bill clearly seeks to protect the Right to Education of children of below 14 years of age by remedying the defective provisions of the original Act, contrary to the comments that it adversely impacts the schooling and learning of poor children. In addition, the Amendment Bill, 2016 provides for the first time protection to adolescents of 14 - 18 years of age.

The following is the Statement of the Ministry of Labour and Employment in the matter:

n++The comments by some organisations as reported in some sections of the media on some provisions of the Child Labour (Prohibition and Regulation) Amendment Bill, 2016 passed by the Parliament this week were far from the truth and were based on inadequate understanding of the provisions and implications of the original Act of 1986 and the Amendment Bill, 2016.

2. Those comments have created an impression that the Amendment Bill,2016 allows for the first time employment of children of below 14 years of age in family enterprises while no such provision was there in the original Act of 1986, there by adversely impacting their schooling and learning. The fact of the matter is that Section (3) of the original Act of 1986 while prohibiting employment of children in certain occupations only provides clearly that n++nothing in this section shall apply to any workshop where in any process is carried on by the occupier (owner) with the aid of his family or to any school established by, or receiving assistance or recognition from, Governmentn++. This goes to prove that the original Act of 1986 clearly allowed children to be employed or engaged in all kinds of family enterprises without any restrictions.

3. There is no provision at all in the original Act prohibiting children from being employed or engaged in family enterprises including hazardous occupations and even during school hours. On the contrary, while stipulating that Children of 14 years of age should not be employed between 7 p.m and 8 a.m (Section 7), the original Act of 1986 exempted family enterprises and schools from the applicability of this provision. This exemption, read in conjunction with the provisions of the original Act of 1986 granting blanket permission for engaging children in family enterprises without any references to school hours, has the potential for children to be allowed to work in family enterprises round the clock, severely impacting their schooling, learning and health.

4. The Amendment Bill, 2016 on the contrary clearly stipulates total and complete prohibition on employment of children below 14 years. However, taking into consideration the socio-economic conditions prevailing in the country and the prevailing practice in many parts of the world where the children help in their family enterprise, the Amendment Bill provides that children can help their families only in non-hazardous occupations and that too only after school hours or during vacations, there by restricting engagement of children in family enterprises. This clearly ensures their schooling as per the provisions of the Right to Education Act, 2009. Due care has been taken to ensure that this help is not at the cost of the education of the child.

5. While the original Act prohibited children from being employed only in certain occupations, the Amendment Bill prohibits their employment in all kinds of occupations.

6. Going beyond protecting the interests of children of 14 years of age including ensuring their right to education, the Amendment Bill,2016 offers protection for the first time to adolescents in the age group of 14-18 years by prohibiting their employment in hazardous occupations and permitting their engagement in only certain occupations to be specified in due course.

7. The Amendment Bill, 2016 provides for very stringent provisions for the enforcement as against the original Act. Any violation of the rights of children is made a cognizable offence under which a person accused of violation could be arrested without any arrest warrant while such a violation under the original Act was only a non-cognizable offence under which permission of a Magistrate is required to arrest an accused. District Collectors are made responsible to enforce the provisions of the amended law while it was left to only Inspectors under the original Act. Stringent penalties are proposed in the new law by doubling the period of imprisonment and fines for violations.

8. Regarding the list of hazardous occupations/processes, it is clarified that the list of 18 occupations and 65 processes mentioned in the original Act is not a list of hazardous practices but only a category of certain occupations/ processes in which employment of children is prohibited. The Amendment Bill on the contrary, expanded the scope of prohibition to all occupations/processes for children below 14 years of age. In respect of adolescents, the Amendment Bill indicates a Schedule of 3 broad categories of hazardous occupations/ processes which would be elaborated/ expanded in due course.

9. While there was no provision at all in the original Act for rehabilitation of children rescued from prohibited employment, the Amendment Bill specifically provides for a Rehabilitation Fund for the benefit of both the children and adolescents. Remittances to this fund which includes fine collected from violators and contribution from States at the rate of Rs.15000/- per child and adolescent will be used for their welfare including education.

10. The provisions of the Amendment Bill,2016 are hence meant for protecting the interests including the right to education of the children below 14 years and of adolescents of 14-18 years age in a more focused, rigorous and stringent manner. Such comments based on inadequate understanding of the provisions and implications of the original Act of 1986 and the Amendment Bill, 2016 could mislead the people and needs to be avoidedn++.

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Asian Growth Steady Despite Weak Global Prospects, Brexit
Jul 28,2016

Growth in Asia and the Pacifics developing economies for 2016 and 2017 will remain solid as firm performances from South Asia, East Asia and Southeast Asia help offset softness from the US economy, and near-term market shocks from the Brexit vote, says a new Asian Development Bank (ADB) report.

In a supplement to its Asian Development Outlook 2016 (ADO 2016) report, released last March, ADB now forecasts 2016 growth for the developing economies at 5.6%, below its previous projection of 5.7%. For 2017, growth is seen unchanged at 5.7%.

n++Although the Brexit vote has affected developing Asias currency and stock markets, its impact on the real economy in the short term is expected to be small,n++ said Shang-Jin Wei ADBs Chief Economist. n++However, in light of the tepid growth prospects in the major industrial economies, policy makers should remain vigilant and be prepared to respond to external shocks to ensure growth in the region remains robust.n++

Growth in 2016 and 2017, the report notes, is led by South Asia, and India in particular, which continues to expand strongly, while the Peoples Republic of China (PRC) is on track to meet earlier growth projections.

In East Asia, despite muted activity in Hong Kong, China and the Republic of Korea, growth forecasts are unchanged at 5.7% in 2016 and 5.6% in 2017, with the worlds second largest economy, the PRC, on track to meet projected growth of 6.5% in 2016 and 6.3% in 2017. To support its targets, the PRC government is expected to continue using fiscal and monetary stimulus measures.

South Asia, meanwhile is expected to be the fastest growing subregion, led by India, whose economy has shrugged off global headwinds and is on track to meet ADBs March fiscal year 2016 (year to March 2017) projected growth target of 7.4%, supported by brisk consumer spending and an uptick in the rural economy. In Pakistan, further improvements in energy supply, higher infrastructure investments, and an improved security environment will help push up growth in 2016 and 2017 the report said, while the Bangladesh economy will remain robust on the strength of its garments sector.

In Southeast Asia, growth projections for the subregion in 2016 and 2017 remain unchanged at 4.5% and 4.8%, with solid performances by most economies in the first half of 2016 driven by private consumption. The exception was Viet Nam where the economy came under pressure from a worsening drought that caused a contraction in the agriculture sector.

Continued soft commodity prices and the recession in the Russian Federation have further dampened the growth outlook for Central Asia, with the earlier 2016 forecast of 2.1% trimmed to 1.7%, and 2017 cut to 2.7% from 2.8%. The slump in revenues from hydrocarbon exports are affecting fiscal consolidation efforts in Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan, while lower remittances, particularly from the Russian Federation, continue to hurt domestic consumption in the subregion.

In the Pacific, growth for 2016 is expected to moderate to 3.9% in 2016 from 7.1% in 2015, with the Fijian economy reeling from Cyclone Winston. However there are some bright spots with stronger-than-expected tourism receipts aiding the Cook Islands and Samoa, while Vanuatus economy is being boosted by the rollout of post-cyclone reconstruction work and other major infrastructure projects.

The report now projects inflation for developing Asia to come in at 2.8% for 2016 and 3.0% for 2017n++a 0.3 percentage point rise for each year from the previous forecasts. The rise is due largely to a recovery in oil and food prices. Oil prices rebounded from early-year lows and food prices rose nearly 9% in June 2016 from the year earlier, marking the fifth consecutive month the index has risen in value.

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Fitch Raises Corporate Oil Price Assumption for 2016 to USD42
Jul 28,2016

Fitch Ratings has raised the 2016 oil price assumptions it uses when rating energy-sector corporates, but expects record high inventories to slow any further price increases.

We assume Brent and WTI will average USD42 a barrel in 2016, up from our USD35/bbl base case in February. The increase follows evidence that the market will come into balance in the second half of 2016, which has already been reflected in a year-to-date average price of USD41/40 for Brent/WTI.

However, we do not believe that the rapid price recovery seen in the first half of 2016 will continue. The sub-USD30 prices at the start of the year approached cash costs for many producers and were unsustainable in all but the very short term. Prices in the USD40-USD50 range allow most producers to break even on a cash basis, if not to cover sunk costs.

We believe that record high inventories - OECD stocks are still more than 10% higher than normal - and market expectations that US shale production will begin to rebound at prices above USD50, will keep prices below that level until a supply deficit has eroded some of the inventory overhang.

We have therefore left our 2017 and 2018 price assumptions unchanged at USD45 and USD55 respectively. Our long-term expectations for both Brent and WTI are unchanged at USD65, reflecting our view on the long-run marginal cost of supply.

Our natural gas expectations have also changed, with price assumptions for US Henry Hub rising and UK National Balancing Point (NBP) falling. In the US, the market has begun to work through the excess inventory build-up associated with last years El Nino winter. Slower production growth in key shale plays has also helped. For NBP, increased US gas exports have contributed to a medium-term LNG glut, which we expect to put pressure on international spot prices.

Our Henry Hub price assumptions are USD2.35/mcf in 2016, rising to USD2.75 in 2017, USD3.00 in 2018 and USD3.25 in the long term. For NBP we assume a price of USD5.00/mcf for 2016, USD5.50 in 2017, USD6.00 in 2018 and USD6.50 in the long term.

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Patent Acquisition and Collaborative Research And Technology Development policy
Jul 28,2016

The Government proposes to address the issues of less number of patents and low research share, of the country, in the world by encouraging industries to increase technology depth and value addition so as to manufacture products based on indigenous patents. The Government is already providing excise duty waiver on goods based on patented technology. Government has also promoted the setting up of technology incubators which will enable a large number of entrepreneurs to establish start-ups and take up research and development. The Government is already working towards a target to raise the national R&D expenditure from the current level of around 1% of GDP to 2% of GDP with 50% contribution by industry.

The Patent Acquisition and Collaborative Research and Technology Development Policy, (PACE) Scheme of DSIR, lays down the pre-condition of one and one third times, the loan amount as bank guarantee for loans and not 1:33 times.

The reason behind the pre-condition of furnishing a bank guarantee equivalent to one and one third times the loan amount provided to industries under the Patent Acquisition and Collaborative Research and Technology Development (PACE) Scheme of DSIR is the General Financial Rule 225 of the Government, according to which this is a security against loans provided by the Government.

This stringent condition of furnishing a bank guarantee equivalent to one and one third times the loan amount has not only resulted in lesser number of proposals for consideration of the Technical Advisory Committee (TAC) of the PACE scheme, but also withdrawal of many proposals submitted by the applicant industries.

The PACE scheme has been approved based on the General Financial Rules and therefore, the Government is not in a position to relax the policy in the present scheme.

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CVC discussion paper seeking suggestions for alternate tender system other than L1 to be soon put in public domain: K.V. Chowdary
Jul 28,2016

The Central Vigilance Commission will soon put out a discussion paper on its website to invite suggestions for an alternate tender system other than the lowest-bidder-wins (L1) policy, Chief Vigilance Commissioner (CVC), Mr K.V. Chowdary said at an ASSOCHAM event held in New Delhi today.

n++By and large we do substantiate the view that L1 is the best way to do the kind of a procurement but there are several issues in this regard which the Commission is also seized of because the PSUs have brought it to our notice, even some private sector people, so we have also constituted a committee to have some kind of a discussion paper,n++ said Mr Chowdary while inaugurating an ASSOCHAM Public Procurement Summit.

n++We would like to get as many suggestions from you as possible because we are in the process of taking out a discussion paper which we would like to put on the public domain, take your opinions,n++ said the CVC.

He said that in a situation of procurement of goods of the nature of a commodity where there are no variations or there are not likely to be many variations with reference to quality and others, probably L1 could be the best way but there are issues which are connected with quality, alternate designs.

n++While L1 is a good thumb rule, we need to look at and devise methods as to how and when L1 should not be the best method in the interest of the person who is issuing the tender,n++ said Mr Chowdary.

n++Whether it could be quality, delivery standard or it could be anything, probably we need to work more on how to get an alternative decision mechanism other than L1 and subject to qualification,n++ he added.

Highlighting that a lot of people find difficulty on L1 issue in particular, Mr Chowdary said, n++There are several issues that come which we need to kind of a have a scientific way in which we evaluate them and then build it to the theme.n++

n++So the major thing that we need to keep in mind is how do you draft or build your NIT, if I have not build all these possible issues in my NIT then I am open to a lot of discussion, debate and allegations, so my suggestion is that you as a tenderer please look at the NITs very carefully as that ultimately determines your consequences, profits-losses, your obligations,n++ said the CVC.

n++The one who is issuing needs to see how transparently/openly he puts it so that he gets more and more number of bids and he gets the best discovered price and also it does not get into litigation,n++ further said Mr Chowdary.

On the issue of e-tender, e-procurement, e-sales and others, he said that these have brought in a lot of transparency and have made things easy to an extent but one needs to be equally cautious in seeing how this process is working.

n++You need to build very robust audit and inspection mechanisms otherwise it is much easier to fool people in a e-process because others cannot even see what is being filed, unless these trails are really followed and they are verified you are likely to be fooled either,n++ he said.

In his address at the ASSOCHAM summit, Air Vice-Marshal M. Baladitya, VSM, ACAS (Procurement), Air Headquarters said, n++We need to build upon our negotiation skills and we are working on that as are trying to work out courses for enhancing negotiation skills of all those who are dealing with procurement.n++

n++We are very strongly considering a green-channel procedure for dealing with established vendors and are considering very seriously with the government for doing away with any kind of inspection in between, it will only be self-certification and there would be a penalty clause in case there is a qualitative or quantitative discrepancy in the supplies,n++ he said.

n++This I think will be a major step in ensuring ease of doing business and speeding up the procurement process,n++ he added.

Stressing upon the need to increase the confidence level in the field, he said that it will not only help in getting better value for money but the kind of infrastructure India has in various fields can help in getting much better products and achieve governments dream of Make in India in a big way.

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Conference on Implementation of National Pension System (NPS) in Central Autonomous Bodies (CABs)
Jul 28,2016

A conference on implementation of National Pension System (NPS) in Central Autonomous Bodies (CABs) was organized by PFRDA on 27th July 2016. The prime objective of the conference was to understand and address the concerns of the Central Autonomous Bodies who have not yet registered for NPS.

Shri Hemant Contractor, Chairman, PFRDA in his key note address stressed on the need for a regular and steady source of income for old age income security. He informed the participants that it was mandatory for all CABs which had offered CPF to its employees earlier to switch to NPS, but some CABs had not done so, and he urged them to adopt NPS without further delay, in view of the benefits of doing so, apart from the mandatory requirement. He gave the example of State Governments which had voluntarily adopted NPS in view of its merits. He further mentioned that it was important for CABs to offer a pension benefit to their employees in view of the many advantages, which could never be matched by lump sum payments such as CPF payment. He urged the CABs to comply with the Government directives and join NPS at the earliest so that the employees could get the benefit of pension under NPS for their old age income security.

Dr. B. S. Bhandari, Whole Time Member (Economics), PFRDA, while speaking on the occasion highlighted on the introduction of NPS for all Central Government Employees (except armed forces) joining services on or after 01st January 2004 and also informed the participants about the various notifications issued by Government for implementation of NPS in the Central Autonomous Bodies. He also briefed about the basic operational aspects of the NPS, investment pattern & NPS architecture. He also illustrated the benefit of higher return under NPS and power of compounding on this higher return resulting to better yield in comparison to other superannuation benefits.

Shri R V Verma, Whole Time Member (Finance) PFRDA, also urged to all the CABs present in the conference to be part of NPS and said that there is no reason why CABs have not implemented despite all the benefits in NPS. He informed that though the scheme is mandatory for all Central Autonomous Bodies having contributory Provident fund, many of the CABs are yet to join NPS. He expressed PFRDA is confident that this conference will help the participating CABs to understand NPS in a better way and will help them to join NPS at the earliest without further delay.

Currently, NPS has more than 1.30 crore subscribers with total Asset Under Management (AUM) of more than Rs.1.37 lakh crores.

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Cabinet approves Revised Cost Estimate for NATRIP Project
Jul 28,2016

The Union Cabinet chaired by the Prime Minister Shri Narendra Modi has approved the revised cost estimate for Rs. 3727.30 crore for the National Automotive Testing and R&D Infrastructure Project (NATRIP). This approval ensures completion of the projects under NATRIP which is an important Initiative by the Government of India for the establishment of the global test centres in India. This will address the R&D requirements of the automotive industry, full-fledged testing and homologation centres. The places are within the Northern auto-cluster at ICAT-Manesar, Haryana and Southern auto-cluster at GARC-Oragadam, Chennai, Tamil Nadu and up-gradation of existing centers at ARAI- Pune and VRDE-Ahmednagar in Maharashtra for Western auto-cluster.

The NATRIP project is required:

n++ To adopt global best practices to ensure road safety, environmental protection etc. in design, manufacture, testing and operation of motor vehicles in India since India is signatory to UN Regulation on Harmonisation of Vehicle Specifications under WP-29 of 1998.

n++ To support Automotive Mission Plan 2016-26 sets the Indian automotive & component manufacturers for becoming globally competitive for export with aim to scale up exports to the extent of 35-40% of its overall output over the next 10 years

n++ To make Indian vehicles comply with global standard of safety (in line with UN Brasilia resolution) to reduce the high number of casualities and road accidents (i.e. 1.46 and 5.01 lakhs respectively in the year 2015).

n++ To help the MSMEs for development and certification of auto-components, both for OEMs and after sale parts.

The essential components include world class labs for Powertrain, Passive Safety Tests l (including crash tests), Tracks for proving technology (including the High Speed Track at Indore), fatigue and certification, Electro-magnetic Compatibility tests, Noise Vibration & Harshness tests, CAD & CME and Infotronics. Many of the labs are already operational. These infrastructure will also enable the vehicle and component manufacturers to develop and get certificates in the country, for automotive products which confirm to the world standards thus implementing the Make in India objective.

The following is the summary of the automotive client base and services offered, in order to make NATRiP centres locally and globally competitive and to make them fully integrated with the established Auto Hubs so that Indian industry is world class and export competitive by giving impetus to the n++Make in Indian++ program as well.

(a) Categories of customers served:

Four wheeler manufacturers/Commercial vehicle manufacturers/ Three wheeler Manufacturers/ Two wheeler Manufacturers/Construction equipment vehicle manufacturers/ Agriculture equipment (Tractors) manufacturers/E-Rickshaw manufacturers/ Bus body Manufacturers/ CNG-LPG kit retrofitters/Automotive & Non-Automotive engine Manufacturers/DG set manufacturers/Automotive Component Manufacturers.

(b) Services offered:

i. Certification of various vehicle categories, including HEV/EV/Diesel/Gasoline/CNG/LPG etc. as per CMVR-1989.

ii. Certification of notified components of vehicle as per CMVR-1989 and related IS/AIS.

iii. Export certification for vehicles and components for Europe/South Africa/Malaysia/ Indonesia/Brazil etc. for Indian manufacturers, in collaboration with other authorized agencies.

iv. Developmental testing for the automotive industry, OEMs and components both, for their product development needs.

v. Execution of specific product development projects for the automotive industry.

vi. Developmental vehicle/fleet testing, performance evaluation and endurance testing.

vii. Technology development and R&D projects

viii. Data collection for new regulations framing.

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