Department of Economic Affairs (DEA), Ministry of Finance has gone through the year with a number of achievements to its credit, here are some of them
The Department of Economic Affairs (DEA), Ministry of Finance has gone through the year with a number of achievements to its credit. From Gold Monetization Scheme, Gold Coin, monetary policy and more, here are the top 8 highlights:
1. Introduction of Gold Monetization Scheme: The scheme was announced in Budget 2015-16 with the aim of mobilizing the gold lying idle with households and trusts and deploying it for productive use. The scheme was launched by the Prime Minister of India on 5th November, 2015. The scheme will benefit the manufacturers of gold jewellery who are largely small and medium scale enterprises, by making gold available to them. It will also benefit the common man by allowing him/her to earn interest on their holdings of gold.
2. Introduction of Sovereign Gold Bond Scheme: The scheme was announced in Budget 2015-16 with the view to provide a new financial instrument of investment to public at large and for reducing the demand for physical gold. The scheme was launched by the Prime Minister of India on 5th November, 2015. In the long-run, this scheme will help in reducing the country’s demand for import of gold, to a large extent. In the first tranche issuance of the bonds which was open from 6th November, 2015 to 30thNovember, 2015 approximately 250 crore worth SGBs were subscribed to.
3. Introduction of Indian Gold Coin: The scheme was announced in Budget 2015-16 with the view to promote indigenously minted national gold coins. The scheme is aligned with the ‘Make in India’ programme of the Government. The scheme was launched by the Prime Minister of India on 5th November, 2015.
4. Inflation: Wholesale Price Index (WPI) has declined from 6.0 per cent in 2013-14 to 2.0 per cent in 2014-15 and -3.5 per cent during April to October 2015. WPI has been negative since November 2014 and is placed at -3.8 per cent in October 2015. WPI Food inflation has also shown steady decline from 6.0 per cent in January 2015 to 1.7 per cent in October 2015. Inflation in Fuel & power stood at -16.3 per cent in October 2015 compared to -17.7 per cent in the previous month and -11.0 in January 2015. Inflation for Manufactured products decreased to -1.7 per cent in October 2015 as compared to 1.0 per cent in January 2015. Consumer Price Indices (CPIs): CPI-New Series inflation for 2014-15 declined to 5.9 per cent from 9.5 per cent in 2013-14, has remained below 5.5 per cent since January 2015. During 2015-16 (Apr-Oct), average CPI inflation was 4.7 percent and stood at 5.0 per cent in October 2015. Inflation in terms of Consumer Food Price Index (CFPI) has come down to 5.2 per cent in October 2015 from a high of 6.9 per cent as reported in February 2015. Inflation based on CPI-Industrial Workers for September 2015 stood at 5.1 per cent as compared to 7.2 reported in January 2015. Inflation based on CPI-Agricultural Labour and CPI-Rural Labour declined to 3.5 per cent and 3.7 per cent respectively in September 2015 as compared to 6.2 per cent and 6.5 per cent in January 2015.
5. Monetary policy: During 2015, policy (Repo) rate has been cut by 125 basis points, signalling a period of easing of monetary policy. Taking into account the continuous decline in inflation and with a view to spur growth, the last cut in the policy rates by 50 basis points to 6.75 percent was undertaken by the RBI on September 29, 2015.Overall, the RBI stance continues to be accommodative. Government of India and RBI have signed a Monetary Policy Framework agreement in February 2015. The objective of this framework is to primarily maintain price stability, while keeping in mind the objective of growth. As per the agreement, RBI would set the policy interest rates and would aim to bring inflation below 6 percent by January 2016 and within a band of 4 percent with (+/-) 2 percent for 2016-17 and all subsequent years. The agreement has brought in an element of certainty for the market with regard to action by the RBI in managing inflation.
6. Banking: Permission has been accorded by RBI for setting up Payment Banks and Small Finance Banks to improve financial inclusion. RBI has accorded in principle approval to 11entities to form Payment Banks in August 2015 to 10 entities to form ‘Small Finance Banks’ in September 2015. The minimum paid-up equity capital for Payments Banks shall be Rs. 100 crore, of which the promoter’s contribution would be minimum 40 percent of paid-up equity capital for the first 5 years of commencement of the business.
7. Tax free bonds: Government of India has allowed the issuance of Tax-free bonds of Rs 40000 crore during the Financial Year 2015-16, by Central Public Sector Enterprise (CPSE) such as National Highways Authority of India (NHAI), Indian Railways Finance Corporation (IRFC), Housing and Urban Development Corporation (HUDCO), Indian Renewable Energy Development Agency (IREDA), Power Finance Corporation Limited (PFC), Rural Electrification Corporation Limited (REC), National Thermal Power Corporation Limited (NTPC).The following categories of investors can subscribe to these Bonds:
Retail Individual Investors (RIIs),Qualified Institutional Buyers (QIBs),Corporates (including statutory corporations), trusts, partnership firms, Limited Liability Partnerships, co-operative banks, regional rural Banks and other legal entities, subject to compliance with their respective Acts, and High Networth Individuals (HNIs).These Bonds are issued for ten (10) or fifteen (15) or twenty (20) years.
8. Establishment of New Development Bank: NDB has been established by BRICS countries in Shanghai, China. The Bank will mobilize resources for infrastructure and sustainable development projects in BRICS countries, other emerging economies and developing countries. It will complement the existing efforts of multilateral and regional financial institutions. Mr. K.V. Kamath, has taken over as the first President of the Bank. NDB is expected to make its first lending by April, 2016.