News in numbers | ECBs fall 19% to $2.6 billion in September3 min read . Updated: 28 Oct 2015, 12:49 PM IST
India moves up in ease of doing business rankings
What is it? The extent of flexibility states should have in spending funds received under centrally-sponsored schemes (CSS), according to state chief ministers in a Niti Aayog report.
Why is it important? That’s up 15 percentage points from 10% now. Higher share of flexi-fund within CSS, which are largely funded by the Centre but implemented by the states, can help in meeting local needs.
Tell me more: Review of CSS was being done after the 14th Finance Commission devolved 42% of net tax collected by the Centre to the states, from the previous 32%. After this, the Central government was looking to rationalize its support for CSS by cutting down the number of schemes and reduce support to others.
What is it? The jump in India’s global ranking in ease of doing business in the last one year till June 2015.
Why is it important? At 130, India is still at the bottom of the pack. Yet, it might help. This ranking acts as a barometer of doing business in India. An improvement here will positively impact the government’s Make in India campaign that aims to attract large foreign investment to set up factories locally.
Tell me more: An amendment in the Companies Act that did away with the requirement to deposit ₹ 100,000 to start a company, along with the Delhi power utility doing away inspection of internal wiring, contributed to India’s ranking moving up by four places.
₹ 1,200 crore
What is it? The amount the Indian Railways will receive as the first instalment from Life Insurance Corporation (LIC) of India as part of the ₹ 150,000 crore long-term loan over the next five years to improve infrastructure.
Why is it important? It’s a win-win solution. Railways did not have enough money to invest to improve its infrastructure and was not getting adequate financial support from the central government. Money from LIC at reasonable rate for a longer tenure will improve its infrastructure. For LIC, it will help match deployment of funds with the promise of securing life over a long period.
Tell me more: LIC will charge 30 basis points (one basis point is one-hundredth of a percentage point) above the 10-year benchmark yield of government securities. The tenure is 30 years, with no repayment for the first five years. Only interest is payable from the sixth to tenth year. From the 11th year, money has to be repaid in yearly instalments. Railways has set an investment target of ₹ 8.5 trillion by 2019, out of which ₹ 1.5 trillion will be met by borrowing from LIC.
What is it? The percentage by which external commercial borrowings (ECBs) fell in September 2015. It stood at $2.6 billion.
Why is it important? It shows that Indian companies are preferring to borrow locally. The shift towards domestic bond market is due to volatile foreign exchange market that has made overseas borrowing costlier by pushing up hedging costs. Domestic borrowing via corporate bonds increased by two-thirds in the first six months of the current fiscal to ₹ 2.4 lakh crore. During the same time, ECBs fell to a five-year low of $ 11.8 billion.
Tell me more: The central bank is now debating a proposal to allow Indian firms to borrow for a longer tenure of 10 years, as against five years under ECBs now.
What is it? India’s largest carmaker Maruti Suzuki’s maximum target royalty payment as a percentage of its net sales in four years. It’s 6% now.
Why is it important? In the last 15 years, the royalty per car sold has increased by 6.5 times, even as sales realization increased by only 1.6 times in the same period. This was questioned by Institutional Investor Advisory Services, a proxy advisory firm, in a recent report as local research and development is contributing significantly in new models. Less royalty means more profit margins.
Tell me more: Maruti, which sells 1.2 million cars a year, accounts for a third of its parent’s revenue.
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