Category Archives: ECONOMY

How Demonetization will benefit Indian Economy in the Long Run

demonetization-black-money-digital-economy
Demonetization was introduced with the objective of curbing black money, terror financing and counterfeit currency.

Demonetization was introduced with the objective of curbing black money, terror financing and counterfeit currency. No one knows the exact measure of our black economy but as per certain estimates the black economy is large as 3 times our GDP imposing an immense drain on our resources. All over the world the countries that have experimented with demonetization of high denomination currency have met with varying degrees of success. But in none of the countries a measure of this magnitude had been introduced as was the case with India where almost 85% of currency was rendered illegal with a single stroke. This move came at a time when the government had initiated several measures in the preceding months to curb black money including the Black Money Bill, Real Estate (Regulation and Development) Act, 2016, Income disclosure scheme etc.

Although the move might impact the economy negatively in the very short run owing to liquidity crunch and excessive dependence on cash transactions in real estate, jewellery, retail, logistics, consumer durables, cement and some segments in MSMEs which may get deferred, but in the long run the benefits are going to far exceed the costs.

Firstly, there are significant costs to cash economy and cashless economy would help to eliminate those costs. Hard currency transactions involve the cost of time and shoe-leather cost involved in approaching the bank or ATM to withdraw cash. Also there are significant costs of printing currency, logistics involved in maintaining currency chests that can be avoided with greater use of digital transactions. Moreover cash transactions are anonymous while digital transactions ensure greater accountability and transparency.

Secondly, this move will severely dent terror financing which thrives on counterfeit currency and high denomination notes. Greater transparency in transactions will deter smuggling of arms.

Thirdly, it will boost tax revenues of the government as the black and unaccounted income gets converted to white. It is a shocking fact that in a country with 1.2 billion population, only 24 lakh persons declared their annual income to be above Rs. 10 lakhs. There is serious under-reporting of income to evade taxes causing significant loss to the exchequer.

Fourthly, going cashless will improve financial inclusion in remote areas where bank branches are far and unviable. The move has shifted behaviour of the people to move towards cashless transactions.

Demonetization is also expected to reducing liability of the RBI. It is expected approximately Rs. 5 Lakh Crore may come to the government in the form of extinguished RBI Liability, Taxes and Penalties, an amount that is enough to meet entire Fiscal Deficit for a year. Recent figures released suggest that only Rs. 1 to 2 lakh crore may actually come to the government from the money not drawn back into the system. However the final estimates would only be known after penalties on unaccounted income are realized by the Income tax department.

More importantly, in the long run, policy rates are expected to come down as bank deposits increase and NPAs decline which would further boost overall investment in the economy. Also higher tax revenues arising from better compliance would offer scope to reduce rates over the long term which will boost consumption demand.

Although there are immense opportunities for economy to grow in the long-run from demonetization, few threats remain in the short-run. The liquidity crunch caused by demonetization will negatively impact sectors with high level cash transactions. Also there will be added costs of replacement of currency. Moreover it will be a big challenge to turn the society cashless where more than 50% population is not well versed with card transactions and mobile wallets and do not possess smart phones or internet.

The Government is however making all efforts to ease the liquidity crunch and encouraging cashless transactions. The central government started the “Lucky Grahak Yojana” and “Digi Dhan Vyapar Yojana” to incentivize digital transactions so that the e-payments are adopted by the poor as well. The government also launched the digital payments BHIM app (Bharat Interface for Money)- after Babasaheb Dr Bhimrao Ambedkar, to support Aadhar-based transactions using fingerprint. To make the demonetization move a success, efforts on the digital India campaign also need to be intensified.

Overall demonetization is a progressive step shaped by the right idea, intention and initiative and like any other shock will have negative impact in the short run but will be instrumental in a positive transformation of the economy in the long run.

New Civil aviation policy: Airline required 0 years and 20 aicrafts for international operations

vistara-new-civil-aviation-policy
Decade old 5/20 rule was abolished and 0/20 rule was implemented.

Government has unveiled a new civil aviation policy to boost domestic airline sector. Government has abolished 5/20 rule in the new civil aviation policy. Abolition of 5/20 rule is a shot in the arm for new carriers like Vistara and Air Asia who wants to start their international operations but were not able due to 5/20 rule.

5/20 rule says Airlines Carrier should have five years of domestic operations and should have 20 aircrafts in it’s fleet to start it’s international operations.

In new Civil Aviation policy 5/20 rule has been replaced with 0/20 rule. It means if an Airline company have 20 aircrafts in it’s fleet they can start international operations.

So Airline companies having 0 years of domestic experience but having at least 20 aircrafts or 20% of their total fleet of aircraft, whichever is higher, allocated for domestic sector can start their international operations without any hindrance.

Older airlines like IndiGo, Spice Jet, Go Air and Jet Airways are not happy over the decision to abolish the 5/20 rule.

“This is to ensure that any new airlines starting business in India should essentially serve the remote parts of the country,” a ministry official said.

India Unveils its First National Intellectual Property Rights Policy

The Indian Government today unveiled the first National Intellectual Property Rights Policy (IPR) with an aim to foster innovation and R&D culture in the country. While stressing on improving the Ease of Doing business in the country, the policy aims to bring in “A Creative India, An Innovative India”.

The Department of Industrial Policy & Promotion (DIPP) will be the nodal department responsible for coordinating, guiding and overseeing implementation and development of IPRs in India. As per the policy, there will be no changes to compulsory licenses issued to pharma companies and no amendments to evergreening of patents. India’s first IPR policy is said to be WTO-complaint by the Finance Minister Arun Jaitley.

The policy would protect products of human intelligence through copyrights, patents and trademarks and it will cover music, industrial designs, cinema besides publishing. The new policy will make the trademark registration process easier and faster. While earlier it took years to get a trademark registered, the policy aims to reduce this time to only a month.

It remains to be seen how well the new IPR policy will be implemented and how the global and local pharmaceutical industries will respond to the policy.

Make in India : Aviation manufacturing sector will create 50000 jobs says Manohar Parrikar.

Aviation manufacturing sector will create 50000 jobs says Manohar Parrikar.
Manohar Parrikar urged defense firms to invest in skill development and groom talent as per their requirement.

According to a news report by PTI,Defence Minister Manohar Parrikar said aviation manufacturing sector will create 50,000 high-skilled jobs  in the next 2-3 years.

Manohar Parrikar urged defense firms to invest in skill development and groom talent as per their requirement.

Manohar Parikar was speaking at an event organised by Wadhwani Foundation.

World’s top aviation firms are competing to setup manufacturing bases in India.

These includes Boeing and Lockheed Martin of the US, Saab of Sweden, Dassault Aviation of France and Eurofighter.

These companies have also offered transfer of technology if their fighter aircraft was selected for Indian Air Force.

 

12 Nations signed one of the biggest multinational trade deals ever in Auckland

After five years of negotiation,12 Nations The Trans Pacific Partnership in Auckland despite oppositions from several quarters. Share of TTP partner nations’ in world economy is around 40%.Due to this fact this deal is going to be one of the biggest multinational trade deal.

TTP Members have 2 years to ratify or reject the pact. This deal will facilitate trade among the member’s nation and

The TPP involves the US, Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru.

 

US President Barack Obama said “Partnership would give the United States an advantage over other leading economies, namely China,”

He further said “TPP allows America – and not countries like China – to write the rules of the road in the 21st Century, which is especially important in a region as dynamic as the Asia-Pacific,”

US economy is going to receive approximately $100bn (£68.5bn) per year and that is goig to play vital role in US growth.

Could the BRICS New Development Bank usher a New Bipolar Financial World Order?

Brics-bank

With the emergence of the New Development Bank, formerly known as the BRICS Development Bank, and the AIIB (Asian Infrastructure Investment Bank), the world is increasingly becoming Bipolar, with China and India together growing as the ‘Eastern power Bloc’ challenging dominance of the Western powers led by the United States. The Bank was created with an idea to counter the dominance of European countries and the U.S. in global financial institutions such as the World Bank and IMF.

Infrastructure is needed in much of still emerging Asia, and by providing the funding to construct it, China and India make stride towards achieving economic and political status at par with the United States. BRICS countries have also created a $100 billion Contingency Reserve Arrangement (CRA), meant to provide additional liquidity protection to member countries during balance of payments problems. The CRA, unlike the pool of contributed capital to the BRICS bank, which is equally shared, is being funded 41% by China, 18% from Brazil, India, and Russia, and 5% from South Africa.

China and India are among the fastest growing Economies in the world. The economies of the five BRICS nations account for almost 30% of global GDP and 40% of the world’s population. BRICS countries produce a third of the world’s industrial products and half of all agricultural goods. Trade between BRICS countries has increased by 70% since the group was established in 2009. Noone can deny the ubiquitous presence of both India and China in the world stage.

Besides, China has recently proposed the IMF to add its currency Renminbi as a reserve currency as part of the Special Drawing Rights (SDRs).This move has the potential to shift the global economy toward a bipolar order with two dominant reserve currencies-the U.S. Dollar and the Chinese Renminbi.

In the past IMF has been accused of practicing ‘one-size-fits-all’ approach and imposing liberalization indiscriminately even on those countries where financial institutions were not well-developed. IMF conditionalities allegedly ruined several developing economies. The World Bank along with the WTO has advocated protectionism against industries of the developing countries while protecting interests of the developed countries, such as the recent Agreement on Agriculture, which stipulates reduction of export subsidies on agricultural produce on which livelihoods of the poor in the developing countries depend.

Emergence of this new ‘Eastern power Bloc’ will motivate the IMF and the World Bank to function more normatively, democratically, and efficiently, in order to promote the reforms of international financial system as well as it will lead to democratization of international relations.

China is also undertaking ambitious project to build Maritime Silk Route connecting all major ports across South, South-East and Central Asia through land and sea to boost its trade and gain strategic importance. The initiative will push each economy to advance toward the goal of setting up deep integration of markets, multi-level communication, efficient network of land, sea and air passages, and closer cultural exchanges.

Recently India has also been accorded full membership of the Shanghai Cooperation Organisation (SCO) along with Pakistan at its Ufa summit held in Russia. SCO membership to India will have significant benefits from Economic point of view. It will open up trade, energy sector and strategic transit routes between India and Russia, Central Asia, China. As Iran has observer status in the SCO, it will serve as a platform for India to boost trade through the Iranian ports of Bandar Abbas and Chabahar. These ports are considered as India’s gateway to Central Asia through International North-South Transport Corridor (INSTC).

Thus, in this politically polarized world, SCO will play an important role in counter-balancing India’s perceived tilt on security issues towards U.S. and its allies. It can help to maintain full balance of India’s relations with the western powers.

Regional stability is the basis of the economic collaboration and economic development boosts regional stability. Therefore, both the BRICS and the SCO will jointly and effectively promote stability and prosperity in Asia and counter the hegemony of global institutions such as World Bank and IMF.

Unlocking the Greece Crisis: Is the world tilting towards socialism the wrong way?

grexit
Greek Debt Crises

The Greek crises is interesting, not just because it points to how bad government policies can bring a state on the brink of its own failure but also because it points to a much a deeper crisis within capitalism. Capitalism as a system has its inherent weakness in generation of excess capacity from overproduction of goods and services arising from the two of its own major tenets viz. competition and maximization of self-interest. When market forces fail to match demand with supply, it leads to unemployment and depression. This was the main reason for Great Depression in the free-market US Economy of the 1930s. In the 1930s Keynes gave a new lease of life to Capitalism with the ‘General Theory of Employment ,Output and Money’ wherein Government’s intervention through fiscal policies was advocated to raise aggregate demand and pull an economy out of depression. Hence State assumed a greater importance only after the world realized market forces are only invisible, and they need to be regulated and directed with State’s intervention.  But, isn’t this exactly what the Greeks did? Perhaps they over-did it.

In the years preceeding the US Financial Crises of 2007, the Greek Government had doled out huge pension plans and socialist schemes, the cost of which they could never meet. For years they had been fudging their fiscal accounts and understating their debt inorder to be able to borrow more and more money to finance their excessively costly socialist schemes. With years and years of mounting Debt, Greece ultimately had to be bailed out by the IMF and ECB in 2013 with a package of almost 200 bn$, further adding to their debt. The IMF in return had imposed its usual conditionalities on the borrowing state in the form of fiscal austerity measures. In the years that followed, Greece was pushed to a deeper recession with spending cuts and steep hike in taxes which lowered aggregate demand of the economy and led to deeper unemployment and humanitarian crises in the country.

In the normal course of action, an economy would seek to recover by devaluing its’ currency or lowering its’ interest rates to boost investment. But unfortunately, Greece being part of a Currency Union EU does not have that leverage of pursuing an independent Monetary Policy.  If Greece defaults on its sovereign debt and chooses to exit the EU i.e. a ‘Grexit’ then it may trigger a whiplash effect throughout EU as most of the major banks spread across Germany, Italy, Iceland, Spain, Portugal that are holding Greece debt may go bankrupt, leading to a recession of a wider magnitude. This may eventually threaten the very existence of EU.

Greece is totally stuck, and there seems to be no way it can get out. A ‘Grexit’ will only make things worse. It clearly will never be able to repay all that mountain of debt. It should rather focus on restructuring its fiscal policies and building stronger and transparent institutions to prevent recurrence of such a calamity in the future.

 

Economic Survey endorses Modi’s Vision of “Achhe Din”, forecasts GDP growth at 8%

India will grow at 8% GDP
Achhe Din here?

The Economic Survey for 2014-15 forecasts around 8.5% growth in FY16 for India, which would make it one of the fastest growing economies, surpassing China. The survey emphasizes more on the small effective policies which can have impact in the long–run as opposed to any “Big-Bang” reforms. The government should shift its spending from public consumption to public investment which can trigger private investment. The survey lays down roadmap to kickstart stalled projects worth Rs. 8.8 Lakh crores including converting Land Ordinance into the Bill to boost investor’s confidence and lowering Debt-overhang plaguing the private sector.

The survey forecasts inflation of 5-5.5% and Current Account Deficit to be at 1%, suggesting headroom for the RBI to ease the monetary policy in the short-run in the light of declining global oil prices. However the government needs to be cautious in its spending as the Survey advises fiscal consolidation and targeting Fiscal deficit of 3% of GDP by 2017-18.The Government needs to control expenditure and eliminate subsidy leakages. To eliminate subsidy leakages and ensure efficient delivery of public resources to the needy, the government will use the Jan-Dhan Yojana, Aadhar and Mobile Banking for Cash-Based transfer.

To boost the “Make-In-India” programme of the government, the survey advocates special subsidies to SEZs, lowering corporate taxes and removing the negative protectionism surrounding the industry. To boost agricultural sector, the survey suggests investing in technology and irrigation systems along with liberalizing agricultural markets and opening them to the private sector. Foreign investment (FDI) in Retail infrastructure like warehousing and cold storage can fill infrastructure deficit which results in supply chain inefficiencies. Eliminating middlemen will also help lower prices for consumers and raising prices for farmers.  The government should aim to establish a unified agricultural market to deal with price fluctuations and demand-supply imbalances.

Meanwhile, the government will have to tackle some of the challenges including low employment growth, enacting the GST legislation and passing the Land Amendment Bill in the near future to put the growth on track.

India records slowest growth in a decade: FY 2012-13 at a glance

indian-economy-slowdown-2013
Despite government efforts to revive the slowing economy after a burst of pro-market reforms at the end of last year, most independent analysts see continuing slack in aggregate demand.

Indian economy grew by only 5.0% in FY 2012-13, its slowest pace in a decade, according to figures revealed by the Ministry of Statistics today. Low investor confidence, slumping investment, high inflation and weak export demand were blamed for the economy’s dismal performance. Gross Domestic Product (GDP) grew at 4.8 percent in the quarter ending March 31st. The manufacturing sector grew an annual 2.6 percent during the quarter while farm output rose just 1.4 percent. The economy in contrast had grown by 6.2 percent in FY 2011-12.The economy has clearly not been able to sustain the booming growth rates of the last decade which hovered around 10 percent.

Global ratings agency Standard and Poor’s warned earlier this month that India faces at least “a one-in-three” chance of losing its prized sovereign grade rating amid new threats to economic growth and reforms.

The Organisation for Economic Cooperation and Development (OECD) this week lowered its projection of India’s GDP to 5.3% in 2013, from 5.9% earlier, yet said India might be the third largest economy by now after US and China.

Despite government efforts to revive the slowing economy after a burst of pro-market reforms at the end of last year, most independent analysts see continuing slack in aggregate demand. The UPA government has been surrounded by corruption scandals during its second term in office which has had a detrimental effect on investor sentiments. Few of the reforms which government had initiated last year included opening up of retail and aviation sectors to foreign direct investment (FDI) and partial deregulation of fuel prices to ease the subsidy bill. But it has failed on various fronts such as on passing legislation to open up the insurance and pension sectors or a long-delayed law to simplify land acquisition.

On the other hand, the fiscal deficit figures for FY 2012-13 were impressive at 4.89% of GDP, owing to higher revenues. Lower levels of inflation which the economy is currently facing can be linked to the lower fiscal deficit. India’s wholesale inflation dropped last month to a surprise 41-month low of 4.89%. But the consumer price index is at 9.39%, led mainly by high food and beverage prices.

Government pressure has mounted on the RBI to ease borrowing costs to encourage investment. The RBI had raised interest rates aggressively in 2010 and 2011 to combat double-digit inflation. However, RBI governor Duvvuri Subbarao has said the bank has “limited space” to ease monetary policy further due to the risk of inflation flaring up again.The persistent decline in rupee is also a cause of concern. Depreciation leads to imports becoming costlier which is a worry for India as it meets most of its oil demand via imports. The depreciating rupee will add further pressure on the overall domestic inflation and since India is structurally an import intensive country, as reflected in the high and persistent current account deficits month after month, the domestic costs will rise on account of rupee depreciation.

The Sensex and Nifty came under tremendous selling pressure on Friday, while the rupee hit an 11-month low. Reserve Bank of India (RBI) governor D Subbarao on Thursday said inflation was still high and current account gap remained a concern for the Indian economy.

Mr Subbarao’s comments dented rate cut hopes. Traders, who had been certain the central bank would cut rates by another 0.25 per cent at its June 17 review, hit the panic button on their terminals.The Sensex traded 461 points or 2.3 per cent lower at 19,755, while the Nifty shed 141 points to 5,983 as of 3.10 p.m. The rupee extended losses to 56.73 against the dollar.

 

With depreciating rupee and mounting CA Deficits, the automatic stabilization through rise in inflation due to mounting import bills could lower the interest rates and boost investment. The rise in investment can help revive the economy and sustain higher growth rates in the long run. It however remains to be seen how the government plans to improve the investor confidence and speed up the pending policy reforms to remove investment bottlenecks.

iGATE sacks CEO Phaneesh Murthy on sexual harassment charge

igate-sacks-ceo-phaneesh-murthy
iGATE sacks CEO Phaneesh Murthy on sexual harassment charge.

Board of directors of iGate has terminated its president and CEO Phaneesh Murthy on sexual harassment charges by a subordinate employee.

Gerhard Watzinger has been appointed as interim president and CEO.

Sunil Wadhwani, co-founder and co-chairman of the board of iGate has acknowledged Muthy’s immense contribution in iGate’s success. He further said since Phaneesh has violated iGate’s policy so board has asked him to step down.

“The Board deliberated extensively on this matter,” said Sunil Wadhwani, co-founder and co-chairman of the board of iGate. “We recognize the significant contributions Murthy has provided over the past ten years in helping to establish iGate as a leader in the IT industry. He has worked hard to improve the value of iGate, and we greatly appreciate his efforts. However, as a result of this violation of iGate policy, we asked Murthy to step down.”
This is second time when Phaneesh faced sexual harassment case. Before this former Infosys employee Rekha Maximovitch had filed a sexual harassment case against Murthy.
This decision is not going to hamper iGate performance as company is focused towards its strategy of providing quality services to shareholder.This has been explained by iGate.

“iGate has great resources and a deep bench of talent from which to draw upon to further create shareholder value,” said Watzinger. “We have a clear strategy that has put us in this strong position to maintain our successes into the future. Continuing to execute this strategy is our top priority.”

iGate has constituted a search committee within the board of directors which will oversee the process for the identification and selection of a new president and CEO.

Reliance and Aircel joins hand to provide roaming free 2g services

realiance-2g-roaming-aircel-deal
Reliance Communications Ltd has tied up with Aircel to provide roaming free services to its customers. After the deal Reliance’s 2G GSM customers can enjoy hassle-free service in roaming without paying anything

Reliance Communications Ltd has tied up with Aircel to provide roaming free services to its customers. After the deal Reliance’s 2G GSM customers can enjoy hassle-free service in roaming without paying anything.

According to the deal the two companies will offer the 2G ICR advantage to its customers in some key circles, with the agreement being periodically expanded.

Reliance is in talks with other partners to extend this privilege to its customers.

“We are already in advanced stages of talks with several operators across the country to put these agreements in place,” Gurdeep Singh, President and Chief Executive Officer (Wireless),Reliance Communications, said.
Once in place, RCOM’s 2G GSM customers will be able to roam seamlessly on all partner networks, free of any additional cost.

“All agreements with existing telecom operators are likely to be completed by the end of the second quarter of the ongoing financial year,” RCOM said in a statement.

“This agreement will expand RCOM’s network footprint at no upfront cost—a ‘pay as you use’ model—and improve both service quality and operational efficiencies,” Mr. Singh added.

Aircel has welcomed the move as it will be cost effective for both companies and they can focus on other areas to expand .

“The telecom industry is at a stage where players are faced with high operational costs, be it energy, infrastructure, sales or distribution.Given this dynamic nature of the industry, it is inevitable for operators to consider such arrangements with each other to offer continued and seamless mobile services to customers,” Aircel Chief Operating Officer Kaizad Heerjee told reporters.

Reliance, Vodafone joins global carries to build international submarine cable network

reliance-undersea-cable-network
Reliance Jio Infocomm has joined hands with UK’s Vodafone Group Plc to build a submarine cable system.

Reliance Industries’ telecom arm, Reliance Jio Infocomm has joined hands with UK’s Vodafone Group Plc and other global carriers like Telekom Malaysia Bhd, Omantel, Etisalat and Sri Lanka-based Dialog Axiata to build a submarine cable system.

This submarine cable system is going to link Southeast Asia and Middle East.Later on this network will extend across Europe, Africa and Far East through interconnections with other existing and newly built cable systems.

This step taken by Reliance is an attempt to realize its long-term broadband ambitions and making its presence felt in soon to be launched 4G services.

Reliance has seen the huge potential in this business segment as next generations internet applications will required high bandwidth and current infrastructure is not able to meet the requirement.

“It will serve as an extraordinary opportunity for business growth as it will help supporting current and future high (bandwidth) capacity requirements from surrounding areas of the region as well as nextgen Internet applications. The markets are expected to see strong growth with the continuous efforts in embracing broadband technologies and infrastructure expansion ” RIL said.

Reliance will build a submarine cable system with UK’s Vodafone to link Southeast Asia and Middle East.Reliance Jio is also the only telecom operator from India to participate in the submarine cable system consortium.

The cable system is slated to carry commercial traffic by end-2014, the company said.
This is the second cable deal by Reliance Jio.RIL has recently joined hands with Bharti Airtel for bandwidth on Airtel’s submarine cable system.

“The 8,000-km Bay of Bengal Gateway or “BBG” undersea cable system linking Malaysia and Singapore with the Middle East will have connections reaching out to India and Sri Lanka,” RIL said on Tuesday.

Sugar sector reforms: How sweet they are ?

government-decontrol-sugar-sector

The Cabinet Committee on Economic Affairs, headed by Prime Minister Manmohan Singh, gave its approval to decontrol Sugar sector based on Rangarajan committee.

Rangarajan committee had recommended to decontrol sugar industry. Size of the industry is around $15.5 billion (Rs. 80,000 crore).
“There will be no levy on sugar for two years .There will be no change in the PDS price of sugar. There will be no burden on the consumer,” food and consumer affairs minister KV Thomas told reporters after the Cabinet Committee on Economic Affairs (CCEA).
Thomas further said that government tried to protect the interests of farmers and consumers.
“There was a huge burden on the government to see that farmers and consumers’ interests are protected and we have managed to balance that,” he said
India is the world’s second largest producer of sugar (Brazil is at first position) at nearly 340 million tonnes and the annual output is worth around Rs. 80,000 crore (around $15.5 billion).

Abolition of the levy sugar mechanism and dismantling of quota system

According to new policy sugar mills will no longer be forced to sll 10 % of their output for PDS at discount price. Currently sugar mills have to provide 10% of their output at subsidized rate for Public Distribution system where government provides sugar and other commodities to poors at nominal rates.
This step will be a shot in the arm for Sugar mills because now they can sell sugar at market price.
Sugar industry can save Rs 3000 per year due to the levy sugar abolition.

Sugar Politics

Even though India started liberalization in 1991 but Sugar sector is still the most controlled sector in India. There are political reasons or compulsions behind this. Sugar sector provides direct employment to 500,000 people directly in 500 sugar mills and 50 million farmers depends on Sugar Sector for their livelihood.
Sugar politics plays a vital role in big states like Uttarpradesh and Maharashtra. Political leaders always used Sugarcane prices to woo farmers in their favors. Sugar cane prices remains an important part in the manifesto of all political parties.

No change in the PDS price of sugar

PDS Consumers will get sugar at subsidized rate through PDS system but the cost will be incurred by states. State governments will buy sugar at market price from Sugar mills and will sell at subsidized rates to poor people through PDS system.
Later on Central government will reimburse the cost to State government. Central government have to spend 53 billion rupees ($972 million) a year as subsidy.

Sugar industry is on cloud nine

Sugar industry has expressed happiness on the decision. Now sugar mills can sell 2.4 million tonnes of stock at market price. Currently Sugar mills were selling sugar’s (10% of their output ) to government below market price.This will reduce the loss of Sugar mills.
This decision will reduce our inventories and ensure better cash flows,” said Abinash Verma, director-general of the Indian Sugar Mills Association.
“Removal of the burden of levy sugar will give the industry an annual savings of Rs 3,000 crore.” Abinash said.
Image credit commons.wikimedia.org

Prime minister says Indian economy is facing temporary downturn due to Global slowdown and high inflation

Manmohan_Singh_CII_Annal_meeting
Prime Minister Manmohan Singh said that India’s economy grew at 8 per cent in the last 10 years. But currently Indian economy is facing temporary downturn but he is hopeful that 8% growth rate can be achieved in medium term.

Prime Minister Manmohan Singh said that India’s economy grew at 8 per cent in the last 10 years. But currently Indian economy is facing temporary downturn but he is hopeful that 8% growth rate can be achieved in medium term.

Global slowdown and high inflation is the reason for slowdown in India’s economy. Government needs to control Inflation rate.

Prime Minister Manmohan Singh today inaugurated a two-day annual general meeting of the Confederation of Indian Industry. India’s top business leaders are participating in this Meeting.

Prime Minister shared the current state of Indian economy and told that government is doing everything to create conducive investment environment for business.

Prime minister urged business leaders to play their social role constructively.

Prime minister said “Growth has slowed to 5 per cent, which is clearly disappointing … We are seeing temporary downturn, partly due to global factors.

We can get back to 8 per cent growth rate. We are determined to do everything possible to achieve the fiscal deficit target”

Prime minister accepted that there is delay in decision making due to inter ministerial differences and to solve this problem Cabinet Committee on Investments is formed.

He further said Temporary downturn happens from time to time and we can not control global slowdown.

“If the business mood was unduly optimistic in 2007, I think it is unduly pessimistic today,” he said.

Image credit commons.wikimedia.org 

How SC verdict on Novartis’ patent plea brings relief to cancer patients

novartis-lost-patent-battle-for-glivec
The Supreme Court on Monday rejected Swiss firm Novartis’ patent plea for its cancer drug Glivec

The Supreme Court on Monday rejected Swiss firm Novartis’ patent plea for its cancer drug Glivec. A bench of justices Aftab Alam and Ranjana Prakash Desai rejected Novartis’ patent plea.

This historic decision given by Supreme Court of India is a victory for cancer patients. Due to this decision cancers drugs will be available at affordable prices. Big MNC’s can no longer arm twist patients as competitive players in the same domain will help to bring down the prices of life saving drugs.

Since India’s domestic drugs market is the 14th-largest market in the world, growing at 13-14% annually,  India is in better position to put it’s stand firmly.

Novartis expressed its disappointment over the decision. “Clearly, we are disappointed with the decision, Glivec is one of the most innovative products. It’s changed the way research in cancer will be done in the future forever.” Novartis said.

Novartis has decided not to invest in India in research and development though it will continue to launch new products.This has been announced in a press conference in Mumbai by Novartis India Ltd Vice-Chairman and Managing Director, Ranjit Shahani.

“We will continue with our investments in India even though cautiously, new products which we launched, we will ask for patents for these products and we hope that the ecosystem for intellectual property in the country improves.”, Shahani told mediapersons in Mumbai.

“The intellectual property ecosystem in India is not very encouraging.The decision shows that Indian law offers ‘limited intellectual property protection”, he further added.

Novartis was fighting since 2006 to win patent protection  for its cancer drug Glivec. The Indian Patent Office had rejected the patent application of Novartis in 2006.

Novartis had appealed against the decision by ‘The Indian Patent Office’ before the Intellectual Property Appellate Board (IPAB) in 2007, but the appeal was dismissed in 2009.

Later on Novartis approached the Supreme Court but has now lost here also. It is a major setback for Novartis.

Cipla Ltd and Natco Pharma Ltd is going to benefit from this decision as they sell  ‘generic’ Glivec in India at around one-tenth of the price of the branded drug.

YK Hamied, Chairman of Cipla  has welcomed the decision in a talk with Economic Times . YK Hamied said, “It appears to be a victory for India. There is nothing personal. It is for the patients of India and I only hope that this type of verdict will help the country get cancer drugs at affordable prices and it is actually a victory for patients and for access to medicines at affordable prices. That is all I can tell you at this moment.”

Union Commerce and Industry Minister Anand Sharma also hailed the Supreme Court’s verdict .

Amazon acquired book lovers social networking site Goodreads

Summary of News : Amazon.com ‘s acquisition of Goodreads  will help Amazon to expand its ebook empire.

This deal will be a catalyst for online reading and digital publishing as Goodreads now have adequate resources to expand itself.

This deal will give an advantage to Amazon’s ebook reader Kindle.Kindle will have access to 16 million members of good reads.

Amazon.com has acquired Goodreads, a site for voracious readers having 16 million members and 530 million  books.

amazon-acquired-booklovers-site-goodreads-2
Amazon.com ‘s acquisition of Goodreads will help Amazon to expand its ebook empire.
This deal will be a catalyst for online reading and digital publishing as Goodreads now have adequate resources to expand itself.

Amazon Vice President, Kindle Content has confirmed this. “Amazon and Goodreads share a passion for reinventing reading. Goodreads has helped change how we discover and discuss books and, with Kindle, Amazon has helped expand reading around the world.

In addition, both Amazon and Goodreads have helped thousands of authors reach a wider audience and make a better living at their craft. Together we intend to build many new ways to delight readers and authors alike”

Good reads was started by Otis Chandler and  Elizabeth in  2007.Goodreads is world’s largest site for readers and book recommendations.Goodreads has 16 million members and 530 million  books.

Goodreads CEO and co-founder Otis Chandler has said in a statement “Books – and the stories and ideas captured inside them – are part of our social fabric.People love to talk about ideas and share their passion for the stories they read. I’m incredibly excited about the opportunity to partner with Amazon and Kindle.

We’re now going to be able to move faster in bringing the Goodreads experience to millions of readers around the world.

We’re looking forward to inspiring greater literary discussion and helping more readers find great books, whether they read in print or digitally.”

This deal is going to strengthen Amazon’s ebook reader Kindle as with this acquitions amazon will get access to 16 million book loving users and 30,000 books club from good reads.

Good reads and Amzon has not disclosed how much amount has been paid to good reads and what are the terms of this deal.