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FM: To ensure future increases in agriculture output and farmers income by 2022, focus should be on higher agriculture productivity
Nov 19,2016

The Union Finance Minister Shri Arun Jaitley said that in order to ensure future increases in agriculture output and double the farmers income by 2022, focus should be on higher agriculture productivity especially in view of the limitation on expanding crop area,. The Finance Minister said it is possible by leveraging technology-especially for high yielding and resistant variety seeds and efficient utilization of water for irrigation, adapt latest IT to increase resilience to nature by phasing sowing, watering and harvesting among others. He said that in order to increase the price benefits to the farmers, it is necessary that the farmers are provided timely market information and developing software applications, both computer and mobile based, that link farmers to consumers. The Finance Minister Shri Jaitley was speaking at his First Pre -Budget Consultative Meeting with the representatives of Agriculture Groups.

The Finance Minister Shri Arun Jaitley further said along with use of latest technology to raise productivity, there is also need to revisit the incentive structure of farming, to focus to reduce wastages and enhance earnings as well as to improve marketing of farm produce. The Finance Minister said that for efficient implementation of the National Agriculture Market, there is need to integrate the more than 550 regulated Mandis in the country by 2017 for which the States need to reform the APMC Act.

Many suggestions were received from the representatives of different Agriculture Groups. Major suggestions include due to demonitisation, there is urgent need to provide sufficient funds to District Cooperative Banks where most of the farmers have their bank accounts, cargo hubs and dry ports should be encouraged in the production centre of agri-products. Other suggestions include it should be made mandatory for Agriculture Universities to start Agriculture Marketing Research Department, new schemes to bail-out farmers from debt be announced in the forthcoming Budget and banks be directed to implement scheme of differential rate of interest to agriculture sector both in letter and spirit among others.

Other suggestions included announcement of awards for those who do new technological innovations in agriculture sector, cold chain provision for horticulture and minor vegetables, higher allocation in Budget for agriculture in the Budget as 52% of Indias population is based on agriculture and allied sector.

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JNPT Handles Highest Crude Oil at Its Liquid Cargo Terminal
Nov 19,2016

Jawaharlal Nehru Port Trust (JNPT), Indias number one container port, created a major record on November 16, 2016, by loading 80,640 MT of ONGC crude oil on a large vessel MT Desh Bhakta, which was berthed at LB-01 of BPCL-run Liquid Cargo Terminal. This is the highest quantity of crude oil loaded on a vessel at JNPT which has surpassed the previous highest of 80,489 MT loaded on Tanker vessel MT Ratna Urvi in June 2012.

ONGCs crude oil tanker MT Desh Bhakta, which measures LoA of 244.2 meters, arrived at JN Port on November 14, 2016 for loading of crude oil from Mumbai High region to sail ahead for MRPL refinery at New Mangalore through coastal movement with a sailing draught of 12.6 meters. JNPT started operations at 13:54 hrs on 14th November2016 for loading of the crude oil and completed it by 09:12hrs on 16th November 2016. JNPT gave topmost priority to MT Desh Bhakta operations in order to give ease to ONGCs concern of having high stock situation, and carried out quick operations to tide over the issue.

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The percentage of savings in the savings schemes in Post Office as on 31 March 2016 is 14.84% of the deposits in the savings schemes of PSBs
Nov 19,2016

Interest rates on bank deposits are not uniform and vary from bank to bank. Hence, a one-on-one comparison of interest rates may not be possible.

The interest rates on term deposits are deregulated and they are determined by the banks themselves as per their Board approved policies. In contrast interest rates on Small Savings Schemes are administered interest rates linked to G-Sec rate of comparable maturity.

The percentage of savings in the savings schemes in Post Office as on 31 March 2016 is 14.84% of the deposits in the savings schemes of PSBs.

The Government has taken various steps to popularise all the existing schemes by carrying out publicity through print and electronic/Audio Visual media on an all India basis. Jan Dhan Yojana is a scheme of the Government to encourage deposits in banks and promote savings.

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India and UK Sign three Bilateral Advance Pricing Agreements (B- APAs) taking the total number of APAs signed [both- bilateral and unilateral] to 111
Nov 19,2016

The Central Board of Direct Taxes (CBDT) signed three (3) Bilateral Advance Pricing Agreements (APAs) here today taking the total number of APAs signed [both- bilateral and unilateral] so far to 111. These Agreements are a result of the understanding reached with the Competent Authority of United Kingdom (UK) some time ago. The Competent Authorities of India and UK had earlier exchanged mutual agreements amongst them under the Mutual Agreement Procedure (MAP) Article of the India-UK Double Taxation Avoidance Convention (DTAC).

These three (3) Agreements cover international transactions in the nature of payment of intra-group service charges and pertain to the telecom industry. They also have a roll-back provision. With this, India and UK have concluded 5 bilateral APAs and some more would be concluded in the near future. The total number of bilateral APAs concluded so far by the CBDT is 7.

The Advance Pricing Agreement (APA) Programme was introduced by the Finance Act, 2012 with a view to provide a predictable and non-adversarial tax regime and to reduce the litigation in the Indian transfer pricing arena. An APA can be entered into for a maximum of 5 years at a time. Since the notification of the APA scheme on 30.08.2012, a total of about 700 APA applications have been received during the first 4 years of the Programme (Financial Years 2012-13 to 2015-16), which indicates the wide acceptance of the APA programme by the taxpayers. Rollback of APAs was announced in the Budget in July 2014 to provide certainty on the pricing of international transactions for 4 prior years (rollback years) preceding the first year from which APA is to be applicable.

The Indian APA programme has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.

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Revised Double Taxation Avoidance and the Prevention of Fiscal Evasion (DTAA) Agreement signed between India and Cyprus
Nov 19,2016

A revised Agreement between India and Cyprus for the Avoidance of Double Taxation and the Prevention of Fiscal evasion (DTAA) with respect to taxes on income, along with its Protocol, was signed in Nicosia, which will replace the existing DTAA that was signed by two countries on 13th June 1994. The Protocol was signed by Mr. Ravi Bangar, High Commissioner of India to Cyprus on behalf of India and Mr. Harris Georgiades, the Minister of Finance on behalf of Cyprus.

New DTAA provides for source based taxation of capital gains arising from alienation of shares, instead of residence based taxation provided under the existing DTAA. However, a grandfathering clause has been provided for investments made prior to 1st April, 2017, in respect of which capital gains would continue to be taxed in the country of which taxpayer is a resident.

The new Agreement provides for Assistance between the two countries for collection of taxes. The new Agreement also updates the provisions related to Exchange of Information to accepted international standards, which will enable exchange of banking information and allow the use of such information for purposes other than taxation with the prior approval of the Competent Authorities of the country providing the information. The new Agreement expands the scope of permanent establishment and reduces the tax rate on royalty in the country from which payments are made to 10% from the existing rate of 15%, in line with the tax rate under Indian tax laws. It also updates the text of other provisions in accordance with the international standards and consistent policy of India in respect of tax treaties.

Provisions of new DTAA will enter into force after the completion of necessary internal procedures in both countries and is expected to come into effect in India in respect of income derived in fiscal years beginning on or after 1st April, 2017.

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Budget of Rs. 5501.15 crore for Implantation of Pradhan MantriFasalBima Yojana (PMFBY) During 2016-17.
Nov 18,2016

As per provisions of PMFBY, admissible claims are worked out on the basis of yield data generated from Crop Cutting Experiments (CCEs) submitted by concerned State Governments to the insurance companies. Hence, the number of beneficiaries (to whom the claims are paid) are known only thereafter. The cut-off date for receipt of yield data for Kharif 2016 season is one month from the final harvest i.e. 15th December, 2016. Claims are estimated accordingly.

State-wise details of farmers covered under PMFBY/Weather Based Crop Insurance Scheme (WBCIS) are given below:

State-wise details* of loanee and non-loanee farmers covered  under PMFBY and WBCIS (combined) during Kharif 2016

Sl.

No

States/UTsNo. of Farmers Insured (Lakhs)1Assam 0.512Andhra Pradesh15.093Bihar13.984Chhattisgarh13.265Goa0.0076Gujarat11.917Haryana6.968Himachal Pradesh0.979Jharkhand8.4910Karnataka10.5911Kerala0.2212Madhya Pradesh36.5413Maharashtra66.7914ManipurData not available15Meghalaya0.000616Odisha17.4617Rajasthan53.0518Tamil Nadu0.1319Telangana6.5520Tripura0.0221Uttar Pradesh30.0422Uttarakhand1.2823West Bengal32.40Total326.25

  *Provisional.

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686 petrol pumps had started dispensing cash by 4 p.m today against swiping of debit cards
Nov 18,2016

Cash dispensing facility had become operational at 686 retail outlets by 4 p.m today, of which 350 belonged to IOCL, 266 to BPCL and 70 to HPCL. The Public Sector Oil Companies namely Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, in association with State Bank of India, have come forward to ease out some of the challenges being faced by the common public regarding availability of currencies for day to day transactions, post demonetization of Rs. 500 and Rs. 1000 currency notes.

Senior officials of IOCL, BPCL and HPCL, had a meeting with Ms. Arundhati Bhattacharya, Chairman, State Bank of India, yesterday and it was decided that an amount up to Rs. 2000/- per day per person in cash can be dispensed against swiping of debit card from select petrol pumps where POS machines of SBI are already available. POS machines are the machines which are generally used for debit or credit card transactions. It has been decided to start this facility at around 2500 petrol pumps spread across the country including rural areas, where SBI POS machines are provided. The Oil Industry is also in further discussions with SBI and other Banks to extend this facility to over 20,000 petrol pumps gradually.

This facility will be available even after November 24, 2016. It may be noted that petrol pumps have been accepting currency notes of Rs. 500 and Rs. 1000 denominations and will continue to do so till November 24, 2016. There is no shortage of petroleum products at the petrol pumps and consumers can purchase them as per their needs.

Consumers are also advised to use cashless transactions - credit/debit cards, mobile wallets, loyalty programmes etc. for purchase of fuel so that there is no difficulty to consumers which is mainly associated with cash transactions. In this regard, such facilities for cashless transactions are already available with all the Oil Companies to which substantial number of people have already subscribed.

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Five defunct fertilizers plants to be revived
Nov 18,2016

The Government has approved to revive defunct fertilizer units of the Fertilizer Corporation of India (FCIL)/Hindustan Fertilizer Corporation (HFCL) by setting up of new urea plants having capacity of producing 1.27 Million Metric Ton (MMT) Urea per annum at each of the five units namely Talcher, Ramagundam, Gorakhpur and Sindri units of FCIL and Barauni unit of the HFCL. Pre-Project activities for these units are currently going on. In addition to these five urea plants, the Government has also approved to establish a new brownfield Ammonia - Urea Complex in the existing premises of the BVFCL. The capacity of this plant will be 8.646 Lakh Metric Ton Per Annum. Setting up of new urea plants at these locations will help in bridging the gap between demand and production of fertilizers in the country.

Further, Department of Fertilizers had announced New Investment Policy (NIP) - 2012 on 2nd January, 2013 and its amendment thereof on 7th October, 2014 to facilitate fresh investment in urea sector and to reduce import dependency.

The Government has announced New Urea Policy-2015 on 25th May, 2015 for existing 25 gas based urea units, with the objectives of maximizing indigenous urea production; promoting energy efficiency in the urea units; and to rationalize the subsidy burden on the Government.

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Government of India is implementing yield based PMFBY
Nov 18,2016

Government of India is implementing yield based Pradhan Mantri Fasal Bima Yojana (PMFBY) which has replaced the National Agricultural Insurance Scheme (NAIS) & Modified National Agricultural Insurance Scheme (MNAIS), from Kharif 2016 season. Comprehensive risk insurance is provided under PMFBY to cover yield loss due to non-preventable risks viz. natural fire and lightening; Storm, Hailstorm, Cyclone, Typhoon, Tempest, Hurricane, Tornado etc.; Flood, Inundation and Landslide; Drought, Dry Spells; Pests/ Diseases etc. On the other hand, Weather Based Crop Insurance Scheme (WBCIS) provides insurance protection to the farmers against adverse weather incidence, such as deficit and excess rainfall, high or low temperature, humidity etc. which are deemed to impact adversely the crop production.

Crop insurance is a financial tool to insure the crop losses on payment of admissible premium to the insurance company. Further, under the crop insurance schemes, claims are paid to those farmers who insure their crops and pay premium under any of the notified crop/area, notified by the concerned State Govt. Admissible claims are worked out and paid as per the provisions of the respective schemes and not on any other basis like by the representation from the State Govt., team sent by the Government of India, declaration of drought/flood etc. by the State/Central Govt.

Financial assistance is also provided to farmers as per guidelines on the items and norms of assistance from State Disaster Response Fund (SDRF)/ National Disaster Response Fund (NDRF) dated 8th April, 2015 of Ministry of Home Affairs, where assistance is admissible for crop loss of 33% and above due to notified natural calamities viz. Avalanches, Cyclone, Cloud burst, Drought, Earthquake/Tsunami, Fire, Flood, Hailstorm, Landslides, Pest attack, Frost and Cold wave. The norms of relief under SDRF/NDRF are Rs. 6800/- per ha for rainfed areas, Rs.13500/-per ha for assured irrigated areas and Rs.18000/-per ha for all types of perennial crops. Assistance under SDRF/NDRF provided is for immediate relief and not by way of compensation for the loss suffered.

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Foreign tourist arrivals surge 10.4% in October 2016
Nov 18,2016

The Foreign Tourist Arrivals (FTAs) during the Month of October 2016 were 7.54 lakh as compared to FTAs of 6.83 lakh during the month of October 2015 and 6.68 lakh in October 2014. There has been a growth of 10.4% in October 2016 over October 2015.

FTAs during the period January- October 2016 were 69.62 lakh with a growth of 10.5% as compared to the FTAs of 62.98 lakh with a growth of 4.5% in January- October 2015 over January- October 2014.

The Percentage share of Foreign Tourist Arrivals (FTAs) in India during October 2016 among the top 15 source countries was highest from Bangladesh (16.67%) followed by USA (12.83%), UK (11.03%), Canada (3.73%), Australia (3.50%), Sri Lanka (3.45%), Germany (3.38%), Russian Fed (3.20%), France (2.91%), China (2.70%), Malaysia (2.65%), Nepal (2.16%), Japan (2.12%), Singapore (1.54%) and Thailand (1.44%).

The Percentage share of Foreign Tourist Arrivals (FTAs) in India during October 2016 among the top 15 ports was highest at Delhi Airport (34.06%) followed by Mumbai Airport (15.69%), Haridaspur Land check post (9.22%), Chennai Airport (7.19%), Bengaluru Airport (5.50%), Kolkata Airport (4.10%), Hyderabad Airport (3.01%), Goa (2.90%), Cochin Airport (2.72%), Ahmadabad Airport (2.14%), Gede Rail (1.86%), Amritsar Airport (1.71%), Trivandrum Airport (1.28%), Ghojadanga land check post (1.16%) and Gaya Airport (1.03%).

The Foreign Exchange Earnings (FEEs) from Tourism during the month of October 2016 were Rs 12303 crore as compared to Rs 10549 crore in October 2015 and Rs 10041 crore in October 2014.

The growth rate in FEEs in rupee terms during October 2016 over October 2015 was 16.6% as compared to the growth of 5.1% in October 2015 over October 2014.

FEEs from tourism in rupee terms during January- October 2016 were Rs 124371 crore with a growth of 14.7% as compared to the FEE of Rs 108392 crore with a growth of 9.6% during January- October 2015 over January- October 2014.

FEEs in US$ terms during the month of October 2016 were US$ 1.843 billion as compared to FEEs of US$ 1.621 billion during the month of October 2015 and US$ 1.636 billion in October 2014.

The growth rate in FEEs in US$ terms in October 2016 over October 2015 was 13.7% compared to the negative growth of 0.9% in October 2015 over October 2014.

FEE from tourism in US$ terms during January- October 2016 were US$ 18.530 billion with a growth of 8.8% as compared to the US$ 17.033 billion with a growth 4.4% during January-October 2015 over January-October 2014.

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GST Offers Industries an Opportunity to Reboot
Nov 18,2016

India Ratings and Research (Ind-Ra) believes that the four-rate tax slabs of 5%, 12%, 18% and 28% in GST would have a bearing on the profitability of most industries. Further, additional cess on some of the products, if absorbed by the respective businesses, would impact their margins.

GST would benefit industry as it would eliminate the cascading impact of taxes and allow unrestricted flow of input tax credit, and lower the compliance cost through simple tax regime as against the current multiple tax slabs and laws. In general, industries currently subject to taxes at a rate higher than the rates proposed in the GST Act would benefit and see margin expansions and improvements in their working capital, while those subject to a tax rate lower than the GST rates may face challenges on the margin front and increased working capital requirements.

Ind-Ra also believes that the service industries would see an increase in tax rates for most services under the new GST regime, which might have a bearing on the margins and the working capital cycle. Further, factors such as abatements, concessional duty structure, and area-wise exemptions, if not continued under GST, would have a significant bearing on the profitability of many industries.

Industries that would benefit from lower GST tax rates include cement and auto manufacturers, while those that could be impacted negatively due to GST include the cotton and downstream value chain and apparel segment of the textile industry and print media, which are currently either tax exempted or subject to concessional rates of taxes.

Abatement of tax, if not continued under the GST regime, would have a bearing on the profitability of logistics and real estate industries, while the impact on the infrastructure industry with high value contracts spanning across years would have to be assed contract-wise. Within the infrastructure industry, contracts in project phase can face viability issues if they are unable to pass on the increase in cost due to higher taxes or if the government incentives are discontinued under GST.

The central government would compensate for any revenue loss to the state governments during the first five years of the GST regime. The GST council has agreed to factor in the tax exemptions given to the industries in the eight north eastern states and the three hilly states while calculating revenue loss for determining compensation. The governments (both states and central) decision to continue with the area-based exemptions from central and state taxes can also impact the profitability of factories set up in the specified areas based on these exemptions.

The compelling rationale to switch from the current regime to the GST regime is to eliminate the cascading impact of taxes or simply put n++tax on taxn++ which leads to increase in the price of the end product. Other equally important areas which the GST would address are the multiplicity of taxes at central and state levels, leading to cumbersome and cost bearing compliance exercise for businesses, by bringing about uniformity in tax rates and structure.

Since, the input credit would be available only on taxes paid to the central or state government and after an automated reconciliation through an IT infrastructure, users of input supply would insist on tax invoices to claim the input credit, there by plugging the leakage due to non-payment of taxes or n++Kaccha Billsn++ as it is popularly known in India.

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Death Claims to be Processed within 07 Days and Retirement Claims to be Settled on the Day of Retirement
Nov 18,2016

The Prime Minister of India during the PRAGATI review meeting held on 26th October desired that claims related to death cases be prioritized and expedited and retirement claims may be settled on the day of retirement. In accordance, the processes have been reviewed and instructions have been issued to field offices to settle death claims within a period of 07 days from the date of receipt of proposal and retirement claims on the day of retirement. The officials in the facilitation centre of field offices have been instructed to scrutinize the claims and guide the claimant regarding submission of required documents in appropriate shape. An official has been posted in the facilitation centers of EPFO this category of claims.

Employers are now increasingly using internet banking to deposit statutory EPF dues since EPFO made it mandatory to use internet banking as the mode of receipt of EPF dues. 96.03% contributions in October 2016 were received online.

In an important judgment delivered by the High Court of Madras in the matter of writ petition filed by Builders Association of India, Madurai, the High Court dismissed the petition praying non enforcement of EPF & MP Act, 1952 every employee employed in or in connection with the work or that factory or establishment, other than an excluded employee, who has not become a member already shall also be entitled and required to become a member of the Fund from the date of joining the factory or establishment.

To expand the reach of convenience offered to EPF members, EPFO has joined the network of Common Services Centers (CSC). A Memorandum of understanding (MoU) has been signed between EPFO and CSC e-Governance Services India (CSC SPV) on 25th October 2016. The MoU is initially for a period of five years. Every year on 14st November, pensioners were required to submit their life certificates. From this year onward, pensioners can submit digital life certificates via Jeevan Pramaan Patra programme through a large number of points of Presence (PoP) of CSC network in addition to those available at EPFO offices. The pensioners living in remote areas can avoid cost and inconvenience of travelling down to the EPF offices or their banks for filing paper based life certificate through this arrangement.

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E-Tourist Visa issuance jump 86.4% in October 2016
Nov 18,2016

A total of 105268 foreign tourists arrived in October 2016 on e-Tourist Visa as compared to 56477 during the month of September 2015 registering a growth of 86.4%. UK (22.9%) continues to occupy top slot followed by USA (12.1%) and France (6.6%) amongst countries availing e-tourist visa facility During October 2016.

The facility of e-Tourist Visa has been made available by the Government of India to the citizens of 150 countries, arriving at 16 International Airports in India. The number of e-Tourist Visa availed by foreign tourists visiting India during the month of October 2016 has registered a substantial growth rate over the corresponding month of 2015.

During January- October 2016, a total of 780570 tourists arrived on e-Tourist Visa as compared to 258182 during January-October 2015, registering a growth of 202.3%.

This high growth may be attributed to introduction of e-Tourist Visa for 150 countries as against the earlier coverage of 113 countries.

The percentage shares of top 10 source countries availing e-Tourist Visa facilities during October 2016 were as follows: UK (22.9%), USA (12.1%), France (6.6%), China (5.8%), Russian Fed (5.6%), Germany (5.5%), Australia (4.5%), Canada (3.6%), Spain (2.3%) and Netherlands (2.1%).

The percentage shares of top 10 ports in tourist arrivals on e-Tourist Visa during October, 2016 were as follows: New Delhi Airport (51.67%), Mumbai Airport (18.65%), Dabolim (Goa) Airport (6.20%), Bengaluru Airport (5.18%), Chennai Airport (4.97%), Kochi Airport (3.15%), Amritsar Airport (2.42%) Hyderabad Airport (2.18%), Kolkata Airport (2.08%) and Trivandrum Airport (1.28%).

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86.4% Growth in Foreign Tourists Arrival on E-Tourist Visa in October 2016 over the same period in 2015
Nov 18,2016

A total of 1,05,268 foreign tourists arrived in October 2016 on e-Tourist Visa as compared to 56,477 during the month of September 2015 registering a growth of 86.4%. UK (22.9%) continues to occupy top slot followed by USA (12.1%) and France (6.6%) amongst countries availing e-tourist visa facility During October 2016.

The facility of e-Tourist Visa has been made available by the Government of India to the citizens of 150 countries, arriving at 16 International Airports in India. The number of e-Tourist Visa availed by foreign tourists visiting India during the month of October, 2016 has registered a substantial growth rate over the corresponding month of 2015. The salient highlights of e-Tourist Visa for and upto the month of October during 2016 are as follows:-

(i) During the month of October, 2016 a total of 1,05,268 foreign tourists arrived on e-Tourist Visa as compared to 56,477 during the month of October, 2015 registering a growth of 86.4%.

(ii) During January- October 2016, a total of 7,80,570 tourist arrived on e-Tourist Visa as compared to 2,58,182 during January-October 2015, registering a growth of 202.3% .

(iii) This high growth may be attributed to introduction of e-Tourist Visa for 150 countries as against the earlier coverage of 113 countries.

(iv) The percentage shares of top 10 source countries availing e-Tourist Visa facilities during October, 2016 were as follows:

UK (22.9%), USA (12.1%), France (6.6%), China (5.8%), Russian Fed (5.6%), Germany (5.5%), Australia (4.5%), Canada (3.6%), Spain (2.3%) and Netherlands (2.1%).

(v) The percentage shares of top 10 ports in tourist arrivals on e-Tourist Visa during October, 2016 were as follows:-

New Delhi Airport (51.67%), Mumbai Airport (18.65%), Dabolim (Goa) Airport (6.20%), Bengaluru Airport (5.18%), Chennai Airport (4.97%), Kochi Airport (3.15%), Amritsar Airport (2.42%) Hyderabad Airport (2.18%), Kolkata Airport (2.08%) and Trivandrum Airport (1.28%).

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Fitch: Trumps US Election Victory Raises Global Uncertainties
Nov 18,2016

Republican nominee Donald Trumps victory in the US presidential election in November and the uncertainty over aspects of future US policy automatically creates uncertainty for many other sovereigns, to varying degrees, Fitch Ratings says in a new report.

Wide-ranging sovereign rating implications from the election are unlikely to arise in the near term. But shifts in US policy can have global ramifications given the countrys role as the worlds largest economy and its pre-eminent diplomatic and military power. Clarity on how much of Trumps campaign rhetoric will translate into policy will take time to emerge, but his emphasis on greater protectionism and a more unilateral foreign policy highlight two potential sources of spill-over.

President-elect Trumps plan to renegotiate the North American Free Trade Agreement (NAFTA) would have a direct impact on Canada and Mexico. A major shift towards trade protectionism in the US could also have a significant impact on China and on Asian economies that supply intermediate goods to China.

If the new administration pursued more aggressive tariff policies towards China, we would expect China to take counter measures, with adverse consequences for growth and inflation in both countries and potentially RMB depreciation and risk aversion in financial markets that would likely spill over into other emerging markets. However, a sharp increase in protectionism would be resisted by US corporate lobbyists and mainstream Republican legislators, and we think incremental measures, such as bringing trade cases, are more likely.

Trumps campaign rhetoric on foreign policy also lacked detail. He has spoken favourably about Russian President Vladimir Putin, and may take a more accommodative stance towards attempts to extend Russias sphere of influence. Potential US military retrenchment could increase defence spending in Europe, Asia, and the Middle East, adding to pressures for looser fiscal policy. It could also give China an opportunity to expand its regional strategic presence.

The US election outcome highlights the growth of anti-establishment populism, which is also evident in Europe. The Trump phenomenon may boost support for European political leaders and parties outside the traditional centre-left and centre-right. In response, mainstream parties may accelerate fiscal loosening or pull back from structural economic reform.

The reaction in financial and commodity markets could also affect sovereigns outside the US. Some commodity prices rose in anticipation of US fiscal stimulus. But higher US Treasury yields could push up funding costs for other sovereigns, while a stronger dollar may be negative for emerging markets with significant foreign currency debt burdens.

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