Former RBI Governor Bimal Jalan to head the Expenditure Management Commission

The Union Government decided to appoint former RBI governor Bimal Jalan as the head of the Expenditure Management Commission on 12 August 2014. He would be tasked to suggest ways for managing public finances by reducing food, fertiliser and oil subsidies to include fiscal deficit.

Expenditure Management Commission
Union Finance minister Arun Jaitley had announced the setting up of an Expenditure Management Commission in the Union Budget 2014-15 in July 2014. The purpose of setting up the commission is to cut-off the spending and review government expenditure to get maximum output.

The Commission will submit its interim report before the Budget of 2015-16 and its final report before the Budget of 2016-17.

Subsidies on Food, petroleum and fertilisers
In revised estimates for 2013-14, the subsidy bill on food, petroleum and fertilisers was 245451.50 crore rupees. For 2014-15, the subsidy bill is estimated to be 251397.25 crore rupees.

The increase in subsidy bill for 2014-15 is due to the increased allocation for fertiliser sector. The government estimated total fertiliser subsidy bill of 72970.30 crore rupees than the amount of 67970 crore rupees that was proposed in the interim budget.

The government allocated the total amount of 115000 crore rupees which includes a provision of 88500 crore rupees for the implementation of National Food Security Act.

Previous Expenditure Reforms Commission
During the year 1999-2000, Atal Bihari Vajpayee government initiated Expenditure Reforms Commission (ERC) headed by former finance secretary K P Geethakrishnan. This commission recommended for reducing the central government machinery and winding up of some government departments. Certain recommendations of the commission were implemented during the reign of finance minister Yashwant Sinha.

In 2002, UPA government appointed Vijay Kelkar Committee, former finance secretary, for fiscal consolidation plan which included reduction in subsidies. His panel suggested increasing diesel and cooking gas prices gradually. His recommendations are followed today.

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K.V. Chowdary appointed as new Chairman of Central Board of Direct Taxes

Senior IRS officer K V Chowdary appointed as new Chairman of Central Board of Direct Taxes (CBDT). He was apoointed on 1 August 2014.  CBDT is the apex authority of the Income Tax department.

He succeed R K Tewari. He retired on 31 July 2014.

Presently, he is working as the Member (Investigations) in the CBDT and is expected to take over the new charge from 1 August 2014. He will have tenure of three months.

The appointement was confirmed by the Appointments Committee of the Cabinet (ACC) headed by Prime Minister Narendra Modi.

The CBDT has six members apart from the Chairman and is the apex body for framing policy and administrative issues related to direct taxes and the Income Tax department.

Chowdary is one of the longest serving member in the CBDT as he has earlier officiated as the Member (Audit and Judicial) before taking over the investigations charge, a post he occupied after serving as the Director General (Investigations) in the national capital where he was heading a number of high-profile I-T probes.

He has earlier served as the Chief Commissioner of I-T in Vishakhapatnam and Director (Investigations) in Nagpur.

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RBI issued drafted guidelines for implementation of Bharat Bill Payment System

The Reserve Bank of India (RBI) on 7 August 2014 issued draft guidelines for implementation of Bharat Bill Payment System (BPPS), an anytime anywhere bill payment system. The proposed guidelines describe the basic requirements of operating the BBPS.

Bharat Bill Payment System is intended for the implementation of a unified bill payment system across the country. It would enable the customers to pay the bills with the help of agents and getting instant confirmation of the payment made. School fees, municipal taxes and utility bills payments would become easier now.

This integrated bill payment system will comprise of two entities:

• Entity operating at Bharat Bill Payment System (BBPS) will be setting up the standards related to payments, clearance and settlement process
• Second entity would be Bharat Bill Payment Operating Units (BBPOUs). It will be carrying out the operations in adherence to the standards fixed by BBPS.

Authorised entities such as agents, banks, service providers, payment gateways would be the participants at the Bharat Bill Payment System.

Bill Payment in India

Generally, most of the retail transactions are carried out through bill payments. The G. Padmanabhan Committee was formed by RBI to study the Feasibility of Implementation of GIRO-based Payment Systems anticipated that around 30800 million bills amounting to more than 600000 crore rupees are paid each year in 20 Indian cities.

These payments are accepted in both cash and cheque. The existing bill payment systems are secure enough, but they do not address the concerns of the customers completely. The centralized Bharat Bill Payment System would be a appropriate solution for the same.

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CCEA approved sale of 10 million tonnes of wheat in Open Market to Check Prices

The Cabinet Committee on Economic Affairs (CCEA) on 24 July 2014 approved the sale of 10 million tonnes of wheat from the FCI stock in the open market in order to boost domestic supply and check prices. The CCEA was headed by Prime Minister Narendra Modi.

Highlights of the Meeting

The reserve price under OMSS was fixed at 1500 rupees per quintal plus freight charges for old crop and five percent premium for new crop.

It was decided that wheat would be sold through the e-tendering process by the State-run Food Corporation of India (FCI) with an aim to improve domestic supply of wheat and check prices, besides reducing storage pressure on FCI.

The wholesale price of wheat was increased to 19 rupees per kg in the national market in July 2014, from 16.10 rupees per kg in July 2013. Additional release of wheat will ease prices.

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RBI cancelled Certificate of Registration of six NBFCs

The Reserve Bank of India (RBI) on 28 July 2014 cancelled the certificate of registration of six non-banking financial company (NBFCs). With this cancellation, these six NBFCs based in Delhi would not be able to conduct business of non-banking financial institution.

These six non-banking financial company (NBFCs) whose cancellation of registration certificate has been issued are 
• GE Strategic Investments India (GESII) 
• Profound Exports Private Limited
• Two Brothers Holding Limited
• Swank Services Private Limited
• Praxis Consulting and Information Services Private Limited
• Credible Microfinance Ltd. (formerly known as "Credible Securities & Finance Pvt. Ltd.")
However, reason for the cancellation of registration was not disclosed by RBI.

Power granted to RBI to cancel registration certificate of NBFC
The registration certificate of a non-banking financial company can be cancelled by RBI under the powers conferred under Section 45-IA(6) of the Reserve Bank of India Act, 1934. The business of a non-banking financial institution is defined in clause (a) of Section 45-I of the Reserve Bank of India Act, 1934.

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Characteristics of indian economy

The economy of India is the ninth largest in the world by nominal GDP and the fourth largest by Purchasing Power Parity(PPP) . The country’s PPP was $3408 in 2010,
making a lower middle income economy, was then characterized by extensive Indian economy was then characterized by extensive regulation protectionism, public ownership, public ownership, persuasive corruption and slow growth. Since 1991, following the economic reforms, the country’s economic growth progressed at a rapid pace with very high rates of growth and large increases in the incomes of the people. By 2008, India has established itself as the world’s second fastest growing major economy, India’s Gross Domestic Product (GDP) growth rate was recorded at 7.4% in 2009-10 and 8.6%-9% are projected for the financial year 2011-2012.

India’s large service industry accounts for 57.2% of the country’s GDP while the industrial and agricultural sectors contribute 28.6% and 14.6% respectively. Agriculture is the predominant occupation in rural india, accounting for about 52% of employment. The service sector makes up further 34% and industrial sector around 14%.

Major industries includes telecommunications, textiles, chemicals, food processing, steel, transportation equipment, cement, mining , petroleum, machinery , software and pharmaceuticals. Major agricultural products includes rice, wheat oilseed, cotton, jute, tea, sugarcane, potatoes cattle, water buffalo, sheep, goats, poultry and fish, Previously a closed economy, India’s trade and business sector has grown fast. India’s currently accounts for 1.5% of world trade in 2009-10. India’s top five trading partiers are United Arab Emirates, China, United States, Saudi Arabia and Germany.

AGRARIAN ECONOMY ------ Even after 60 years of independence, it dominant the Indian economy. More than 60% of the population is engage in agriculture and allied activities. Based on this, it can be said that Indian economy is still primarily Agrarian Economy.

MIXED ECONOMY ---- After independence, India has opted for mixed economy. Indian Economy is a unique blend of public and private sector i.e. , missed economy.  It allows co-existence of public and private sector.

LOW PER CAPITA INCOME ------- Underdeveloped economy is characterized by low per capita income. Indian per capita income is very low as compared to the developed countries. According to World Development Report, 2010, India’s per capita income was $1070 in 2008, whereas, USA’s per capita income is $4780  and hence India’s per capita income is about one forty fifth of US level of per capita. This trend of difference of per capita income between underdeveloped and developed countries is gradually increasing in present times.

HEAVY POPULATION PRESSURE----- The Indian economy is facing the problem of population explosion. It is second highest populated country, China being the first. All the under developed countries are characterized by high birth rate which stimulates the growth of population. The fast rate of growth of population necessitates a higher rate of economic growth to maintain the same standard of living.

DISPARITIES IN INCOME DISTRIBUTION -------- Inequality of income and wealth is other feature of Indian Economy and the main resources are concentrated in the hands of the few people, 40% of the total assets in concentrated in the hands of top 20% people. According to data shown by NSSO, 39% of rural population possesses only 5% of all the rural areas while, on the other hand, 8% top household possess 46%of total rural assets. Income disparities are somewhat more intensive in urban areas as compared with those of rural areas.

PLANNING PROCESS------- It is also an important feature. As the government has adopted planned developmental economy. Five Year Plans are framed for economic development.

DOMINANCE OF AGRICULTURE AND HEAVY POPULATION PRESSURE ON AGRICULTURE ------  Agriculture and allied sector even today provides livelihood to about 65to70%of the total population but contributes only 15.7% of the GDP.

UNBALANCED ECONOMIC GROWTH India has not achieved the goal of balanced economic growth, According to World Development Report, 2010 about 64% of total labour force is dependent on agriculture and rest about 20% on trade, transport and other services.

LOW RATE OF CAPITAL FORMATION ------- In backward economies like India, the rate of capital formation is also low due to low national income and high consumption expenditure. Gross Domestic Saving in 2009-10 is 33.7% while in the same year, Gross Domestic Capital formation is 36.5%.

LACK OF INDUSTRIALISATION India lacks in large industrialization based on modern and advanced development in the economy. Average annual growth rate of industrial sector was 8.0%in 2009-10.

UNDERUTILIZATION OF RESOURCES India is a poor land so its people remain economically backwards for the lack of utilization of resources of the country.

MARKET IMPERFECTIONS Indian economy faces a number of market imperfections like lack of mobility among production factors from one place to the other and lack of specialisations these market imperfections and their results are important reasons for underdeveloped Indian economy.

UNEMPLOYMENT The larger unemployment and under employment is another feature of Indian economy.

BACKWARD INSTITUTIONS AND SOCIAL FRAMEWORK ----- The social and institutional framework in India is hopelessely backward, which is strong obstacle to any change in the forms of production.

PRICE UNSTABILITY----- In Indian economy, there is always continuous price instability. Shortage of essential commodities and gap between consumption and productions increases the price persistently. Rising trend of price creates a problem to maintain the standard of living of the common people.

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