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Daily Financial News Analysis – 13th Nov’19 – Free PDF Download

 

Linking Pay to Performance

  • RBI’s recent mandate
  1. to link at least half of the salary of private bank chiefs to their performance
  2. put a cap on their variable pay
  • The intention of RBI through this  mandate is
  1. to motivate the top management
  2. make it more responsible
  • RBI in a circular issued last week had capped the total variable pay of CEOs at 300% of their fixed pay.
  • The new rules are applicable to
  1. Private sector banks
  2. Including local area banks
  3. Small finance banks
  4. Payments banks
  • From April 1, 2020
  • Experts: this may make it difficult for the sector to attract talent.
  • It may instead end up reducing the lure of banking sector among domestic and global professionals.
  • “There is already a dearth of talent at the CEO level and the cap will make it even more difficult.”

FY20 growth  may slip to around 5%

  • Growth in the July-September period may have dropped to 4.2% from 5% in the first quarter.
  • Official GDP data for the second quarter will be released on November 29 and the first full-year estimate will be available in January.
  • The second-quarter GDP growth rate is likely to slip to 4.2%.
  • The SBI report pegged full-year growth at 5%, down from 6.1% it had estimated earlier.
  • SBI expects “larger rate cuts” from RBI in the December monetary policy review.
  • Kotak Mahindra: expected second-quarter growth at 4.7% and full-year growth at 5%.
  • After a disappointing start to 1QFY20 amid a consumption and investment-led slowdown, high-frequency indicators suggest that economic activity has worsened in 2QFY20, despite a pickup in government spending.
  • The weakness in the real estate and financial sectors are feeding into each other, said Crisil chief economist DK Joshi, pegging July-September growth at below 5%.
  • “A more aggressive fiscal and monetary response is needed to arrest the downturn,” Edelweiss said.
  • The government has unveiled a series of measures, including a cut in the corporate tax rate to 15% and a Rs 25,000 crore special window for stalled real estate projects to help revive the economy.

IBC proceeds formula may be reworked

  • The government is considering a formula for distributing the proceeds of insolvency resolution among financial and operational creditors in a fixed proportion.
  • The goal is to protect the interests of operational creditors and reduce delays due to litigation, ensuring that the objective of the Insolvency and Bankruptcy Code (IBC) is preserved.
  • Distribution of resolution proceeds has emerged as one of the key factors behind the extended litigation, delaying major insolvency cases.
  • Dissatisfied operational creditors have been the source of such cases in some instances.
  • The Supreme Court is currently deciding on the distribution of proceeds in the case of Essar Steel.
  • Distribution of proceeds is currently decided by the committee of creditors (CoC) consisting of financial creditors.
  • The committees typically set aside about 5% of resolution proceeds for operational creditors, which have 6-7% of total claims against insolvent companies on average, according to a government official.
  • Government will have to come up with a balanced formulation.
  • The waterfall mechanism under the IBC outlines the order of priority for repayment to creditors in the event of liquidation.
  • Under this, secured creditors have to be paid fully before any payments can be made to unsecured financial creditors who in turn have priority over operational creditors.

10,000 farmer producer organisations

  • The government will form 10,000 farmer producer organisations.
  • To ensure that farmers get the correct price for their produce.
  • The finance minister urged states to dismantle Agriculture Produce Marketing Committees (APMC) and switch to National Agriculture Market (eNAM)
  • FM also asked farmers to produce oilseeds in place of other crops as India particularly imports edible oil and palm oil.
  • The minister also said the central government is making efforts to push sustainable and renewable energy sources in rural areas in order to provide farmers.
  • “I want anna daata (food provider) to be urja daata (energy giver) also.”

An article by HM Amit Shah

  • November 4, 2019 shall go down as an historic milestone for India’s bold decision to stay away from the Regional Comprehensive Economic Partnership (RCEP).
  • Country that is rock solid in its resolve to not only protect its own interests, but also to boldly ward off any attempts to being arm-twisted.
  • India’s not joining RCEP was summed up by the PM himself: ‘Whenever I try and gauge India’s interest in light of her joining RCEP, I do not get an answer in the affirmative; neither Gandhiji’s policy of self-reliance nor my wisdom allows me to join RCEP.’
  • PM can go to any extent to safeguard the interests of farmers, small and medium enterprises (SMEs), textile, dairy and manufacturing, medicine, steel and chemical industries.
  • India should not be party to any such international treaty that’s one-sided & against the interests of our farmers and entrepreneurs.
  • In 2007, it had already begun thinking of engaging in a regional trade agreement (RTA) with China. How this affected India’s trade with China is borne out by the fact that during UPA’s tenure, India’s trade losses with China grew 23 times — from $1.9 billion in 2005 to $44.8 billion in 2014.
  • An example of Congress’ history of compromising with India’s interests is the 2013 Bali Agreement.
  • While participating in the WTO conference, then commerce minister Anand Sharma had weakened India’s stand on its provisions for agriculture subsidy and support prices to farmers.
  • This could have created havoc for farmers, but for the timely intervention of the PM in 2014.
  • In its original form, other than 10 Asean countries, only China, Japan and South Korea were to join RCEP.
  • The UPA government agreed to become part of RCEP.
  • India did not share favourable terms of trade with other countries of the bloc.
  • Congress had also compromised India’s interests in the Asean free trade agreement (FTA).
  • Even as countries like Indonesia and Vietnam decided to open only 50% and 69% of their market share for India, New Delhi decided to open 74% of India’s commodities for trade.
  • Decisions like these caused India enormous loss in its trades with RCEP countries — from $7 billion in 2004 to $78 billion in 2014.
  • Since 2014, in RCEP dialogues, GoI has aggressively protected India’s interests and worked with member countries to agree to favourable conditions, such as opening up the services sector for the first time for India, higher exports from India, etc.
  • At one point during the dialogue, out of the 70 agenda items, around 50 were of concern to India
  • GoI has begun to evaluate Asean and the Comprehensive Economic Partnership Agreement (CEPA) with South Korea.
  • It is working on getting into trade relations with Japan, the US, EU countries, and other developed nations that shall help in making India a $5 trillion economy.
  • Considering India’s growing stature, RCEP members can’t afford to ignore it for long, and will come around to agree to GoI’s terms.
  • Meanwhile, India has maintained successful economic relations with Asean by the means of FTA.
  • By rejecting RCEP, India has firmly protected its industries from any adverse effects that Chinese interests could have caused.
  • For us, India remains first, and foremost.

Q 1. What is the rank of India in the latest Speedtest Global Index by Ookla on mobile broadband speed.

  1. 99
  2. 128
  3. 101
  4. 20

Q 2. Name the chairman of High-Level Advisory Group

  1. Surjit Bhalla
  2. Bibek Debroy
  3. Amitabh Kant
  4. Ajay Bhushan Pandey

 

 

 

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