Businesses are gradually recognizing that ethics means good business. It is believed that well-run and trustworthy companies are more likely to attract greater investment opportunities, which enables them to innovate and expand, and generate wealth and jobs. Good corporate governance practices are regarded as providing an 'extra' edge to companies to enhance their image and stay ahead in an intensely competitive business environment. This would help them imbibe universally accepted values of ethics and good governance—accountability, transparency, responsibility and responsiveness to stake holders. Besides, it would also mean looking beyond achieving mere economic sustainability to include social and environmental sustainability as well. Many corporates are adhering to sustainable business practices and many more are likely to follow suit in the time to come. On the domestic front, CII expects economic growth to bounce back to 7.3-7.7 per cent in FY19 from the estimated 6.6 per cent in FY18. The prognosis of improved rural consumption and a recovery in private investment will support growth, even as the debilitating effects of demonetisation and GSTimplementation will fade away

1. Ethics for
Economic Growth
Inside This Issue
ECONOMY MATTERS
MAY 2018
Volume 22 No. 03
Focus of the Month: Ethics for Economic Growth
Articles by:
Mr. Shailesh Haribhakti, Member, CII National Council on Corporate Governance and
Chairman, Haribhakti & Co. LLP
Ms. Tejal Patil, Member, Committee on Integrity and Transparency in Governance and
General Counsel, GE
Domestic Trends
State of the States
Global Trends
Policy Focus

3. ECONOMY
MATTERS
MAY2018
FOREWORD
ChandrajitBanerjee
Director General, CII
Businesses are gradually recognizing that ethics means good business. It is believed that well-run and trustworthy
companies are more likely to attract greater investment opportunities, which enables them to innovate and expand, and
generate wealth and jobs. Good corporate governance practices are regarded as providing an 'extra' edge to companies
to enhance their image and stay ahead in an intensely competitive business environment. This would help them imbibe
universally accepted values of ethics and good governance—accountability, transparency, responsibility and
responsiveness to stake holders. Besides, it would also mean looking beyond achieving mere economic sustainability to
include social and environmental sustainability as well. Many corporates are adhering to sustainable business practices
andmanymorearelikelytofollowsuitinthetimetocome.
On the domestic front, CII expects economic growth to bounce back to 7.3-7.7 per cent in FY19 from the estimated 6.6
per cent in FY18. The prognosis of improved rural consumption and a recovery in private investment will support
growth, even as the debilitating effects of demonetisation and GSTimplementation will fade away.The high-frequency
data reveals that industrial production slowed down in March 2018 after having grown by over 7 per cent, in the
previous four months. What is worrisome is the de-growth in capital goods during the month, but at this point, we think
this is a blip rather than a change in trend. Core inflation meanwhile, is gaining some steam which is indicative of rising
demand-side pressures in the economy and might pose upside risks to inflation going forward. On the fiscal front, there
is some encouraging news, as the final fiscal deficit number for FY18 now stands at 3.42 per cent of GDPas opposed to
3.5 per cent estimated earlier in the Union Budget. The commitment to curtail unnecessary expenditure together with a
jump in GST revenues, is likely to help rein in fiscal deficit below the budgeted estimate of 3.3 per cent of GDP in the
currentfiscal.
The global economic recovery that started around mid-2016 has gained traction and become broader. Policymakers
should grab this opportunity to support growth, make it more durable and prepare their governments better to counter
the next downturn. The US economy has bounced back in the first quarter of 2018 after a tepid last few quarters
cushioned mainly by tax cuts. With growth returning to the US, the Federal Reserve has started the process of policy
normalization by increasing the Fed rate from its near zero levels in end-2015. More Central Banks are expected to
follow suit as growth continues to gain traction. But with the US expected to lead in terms of growth, the dollar has
strengthenedagainstmostcurrencies.
Chandrajit Banerjee
Director General, CII
Mr. Chandrajit Banerjee
Director General, CII
3

5. Contents
ECONOMY
MATTERS
MAY2018
5
KEYMONTHLYDEVELOPMENTS
FOCUSOFTHEMONTH
DOMESTICTRENDS
STATEOFTHESTATES
GLOBALTRENDS
POLICYFOCUS
06
07
13
24
27
31

6. ECONOMY
MATTERS
MAY2018
KEYMONTHLYDEVELOPMENTS
n Industrial Production: Headline industrial
production growth slowed sharply to 4.4 per cent in
March 2018 from 7.0 per cent in February 2018,
driven by lacklustre manufacturing growth and
contraction in the capital goods sector. For the full year
FY18, industrial growth stood at 4.3 per cent as
comparedto4.6percentinFY17.
n Inflation: Higher core inflation pushed both CPI and
WPI-based inflation indicators higher in April 2018,
indicating higher input costs in the economy. Going
forward, upside risks to CPI inflation exist mainly
from the firming up of crude oil prices, while food
inflation will remain in check on the expectation of
normalmonsoon.
n RBI policy: Given the upside risks to inflation, RBI
has chosen to stay pat on the key interest rates inApril
2018. It is hoped that going forward, the RBI would
continue to maintain a steady monetary policy stance
which would take cognisance of the nascent green
shoots of recovery even while negotiating the growth-
inflationdynamics.
n Fiscal scenario: As per the latest estimates, fiscal
deficit has been contained at 3.42 per cent of GDP in
FY18 as opposed to 3.5 per cent of GDP estimated
when the Union Budget was presented in February
2018. This has been possible due to the upward
revision in nominal GDP in the second advance
estimate and reduction in expenditure from the RE
levels.
n Trade: On the external front, merchandise exports
growth moved into the positive territory inApril 2018,
while merchandise imports growth moderated due to
lower gold imports. Going forward, export growth is
likely to be supported by the ensuing global recovery,
while the downside risks arise from the intensification
ofprotectionismintheadvancedworld.
n Exchange rate: Rupee is under pressure due to net FII
outflows and a deteriorating balance of payments
picture, as oil prices remain elevated. To be sure, in the
current fiscal year-to-date, the rupee has depreciated
by close to 3.5 per cent against the US dollar. In the
near term, the depreciationbias on the rupee is likely to
persist.
DOMESTIC
n Global scenario: On the global front, the major
advanced economies are inching towards staging a
solid but slow recovery aided by domestic polices and
supportivelowinterestrateenvironment.
n GDP growth: The US economy entered 2018 with a
strong GDP growth in the first quarter. Though the
Euro area, UK and Japan grew at a lower rate in 1Q18
as compared to the previous quarter, going forward,
theirgrowthprospectsremainreasonablybright.
n Policy rate: In view of growth returning to the US, the
Federal Reserve hiked the key policy rate in March
GLOBAL
2018 and is likely to announce two more rate hikes for
the remaining year. China's Central Bank too followed
suit to prevent the interest rate differential from
widening.
n Crude prices: The global crude oil prices are trading
at their highest levels since December 2014 due
to escalated geo-political tensions and a strong
commitment by the oil cartel to rebalance markets
aided by other supply outages. More recently,WTI has
st
crossed the US$72/barrel mark (as on 21 May, 2018),
whileBrentistradingneartheUS$80/barrelmark.
6

7. ECONOMY
MATTERS
MAY2018
FOCUSOFTHEMONTH
A
t this current critical juncture of India's
development journey, wherein economic
progress is intrinsically linked with the quest to
achieve inclusive, equitable and sustainable growth, the
role of ethics and efficient governance systems, in both
corporate and public sectors, assume special significance.
In fact, there is an inalienable link between growth and
ethical practices. Both are looked upon as processes that
facilitate and reinforce one another to achieve our long-
term objective of creating a New India which would bring
economic prosperity to one and all. Good ethical
practices, which encompass a wide sphere of actions-
economic, social and human, involving the consumer,
labour, society and the government- are seen to instill
vibrancy to our economic expansion process while paving
theway for achieving8-9percentgrowth.
However, ethical behavior per se cannot be looked at in
isolation; it is heavily influenced by the overall
governance eco-system. In this context, the recent
economic reforms have opened new vistas of opportunity
for businesses to base their activity on good governance
practices. The reforms in the ease of doing business, a
fillip to digitization and regulatory reforms are
minimizing the scope for discretion and reducing the
scope for unethical behavior. Industry is looking at more
such reforms which would bring transparency to the
system. It is hoped that going forward an enduring
partnership would emerge between government and
business which would assure that being ethical is
beneficial for business and a prerequisite for achieving
inclusive economic growth. In this month's Focus of the
Month, experts present their insights into this crucial
topic.
ETHICSFORECONOMICGROWTH
7

8. ECONOMY
MATTERS
MAY2018
C
orporate governance in India is going through a
transformation. Boards are getting better endured
and engaged while the right balance between
regulation and voluntary action is being practiced. Good
governancewillleadtobetterethicsandexcellence.
The vectors along which innovation is being attempted are
– domain, ownership pattern, public interest, geography
and investor preferences. Companies in emerging markets
like India that have grown and globalized need to comply
with regulations in other jurisdictions in which they
operate. New rules should achieve an optimal balance
between strategy and performance. Boards are moving
from a compliance-governance mindset to a capital
allocation, efficiency, succession, challenge of disruption
andcybersecurityissues.
Challenging strategy, ensuring investor engagement and
executive succession planning are all creating great value
adds. Vigil mechanisms are being installed to create an
enabling culture driven environment of compliance.
There is continued focus on the composition of the board.
Particular attention is being paid to directors' skill profiles,
diversity and the making of a robust mechanism for board
refreshmentthatgoesbeyondabox-tickingexercise.
Boards are increasingly expected to play a more active
role in risk management, particularly cyber security risks.
Stakeholders are monitoring companies to check if they
are adept in responding to cyber security threats. Markets
are giving greater weightage to companies that provide
sustained value creation and are treating all stakeholders
with the respect they deserve. It is important for
companies not to compromise long-term interests for
short-term priorities. There is greater focus on
environmental, social and governance issues. Companies
are increasingly feeling pressure from socially conscious
investors who are measuring the sustainability and ethical
impact of their investments. It is apparent that corporate
governance is a complex subject that requires the smooth
synchronisation of various functions, which need to work
together in harmony. 'Integrated Reporting' is entering the
lexicononenlightenedboards.
In India, companies are striving to implement policies and
processes as directed by the CompaniesAct, 2013 and the
SEBI (Listing Obligations and Disclosure Requirements)
Regulations, 2015. The SEBI committee under the
Chairmanship of Shri Uday Kotak, Executive Vice
Chairman and Managing Director of Kotak Mahindra
Bank released its report last year to advise on issues
relating to corporate governance. The committee was
mandated to make recommendations to SEBI with the aim
of improving standards of corporate governance of listed
companies in India. The committee deliberated on
parameters relating to ensuring independence in spirit of
independent directors and their active participation in the
functioning of the company; improving safeguards and
disclosures pertaining to related party transactions;
accounting and auditing practices by listed companies;
improving effectiveness of board evaluation practices;
addressing issues faced by investors on voting and
participation in general meetings; and disclosure and
transparencyrelatedissues.
After detailed deliberations, the committee made
recommendations in its very comprehensive report. It is
encouraging to see that SEBI has notified for
implementation many recommendations of the
committee. Some of the recommendations are being
accepted with modifications while some have been
referred to other agencies. The recommendations
accepted without any modifications include reduction in
the maximum number of listed entity directorships from
10 to 7 in a phased manner; expanding the eligibility
criteria for independent directors; enhancing the role of
the audit committee, nomination and remuneration
committeeandriskmanagementcommittee.
Focusing on enhanced disclosures, SEBI has accepted
recommendations relating to disclosure of utilization of
funds from QIP/preferential issue; disclosures of auditor
credentials, audit fee, reasons for resignation of auditors;
disclosure of expertise/skills of directors and enhanced
FocusoftheMonth
Mr. Shailesh Haribhakti
Member, CII National Council on Corporate Governance and
Chairman, Haribhakti & Co. LLP
CorporateGovernanceEqualsBusinessEthics&Excellence
8

9. ECONOMY
MATTERS
MAY2018
disclosure of related party transactions (RPTs). Related
parties will now be permitted to vote against RPTs.
Mandatory disclosure of consolidated quarterly results is
now in place. Enhanced obligations on listed entities with
respect to subsidiaries have been covered and secretarial
audit will become mandatory for listed entities and their
material unlisted subsidiaries under SEBI LODR
Regulations.
SEBI has now implemented these recommendations by
way of SEBI (Listing Obligations and Disclosure
Requirements) Regulations, 2015 vide notification dated
May 9, 2018. A few recommendations as accepted by the
board, have been implemented through issue of a circular
covering board evaluation; group governance policy and
strategy.
Recent events in the governance domain have brought to
the forefront some more issues that need to be addressed.
More than at any other time in history, boardroom
discussions are focused on issues of ethics, disruption,
digitization, threat intelligence, accountability and
disclosures. The voice of shareholder activism has never
been louder and the focus of regulators has never been so
intense.
I feel among the constituents of governance, having a
wholesome, high performing board is relevant to all of us
as individual board members. Different schools of thought
have put it differently whereby some say it is an outcome
of several carefully crafted actions, while others feel the
choice of members charged with constructing/
reconstructing the board is paramount. In my view a
wholesome board would be one which is of the
appropriate size, having a combination of skills, diversity,
experience and expertise.Awholesome board would have
a balanced mix of executive directors and non-executive
directors,includingindependentdirectors.
Nowadays the role of the audit committee is replete with
varied constituents covering risk management; controls;
fraud prevention; related party transactions; technology
and data analytics etc in addition to the conventional role
of accounting and auditing. This gives an enormous need
on directing the role of the audit committee to be more
focused, ensure better quality and be in harmony with the
board and its strategy. This evolution of the audit
committee, strengthened by regulatory force, makes it
imperative for boards to reset operating standards,
optimize key focus areas and evolve a responsive vigil
mechanism so as to provide basis for handling challenges
inthecurrentenvironment.
I feel that introducing the concept of a 'lead independent
director' on company boards will improve accountability
and resolve matters of conflict. Conflict resolution is
important. When there is a conflict between the
chairperson and directors, it is important to have a lead
independent director. Every company must have a lead
independent director, as in the west. This is present in
India, but in a small and yet to be formalized way. In
addition, the chairperson of a company should speak to
independent directors outside the boardroom. This
ensuresthateveryonecanexpresstheirviewsfrankly.
'Trust but verify' has become the new motto for
institutional investors as they seek to monitor their
investments in listed companies. The issue is not how to
prevent dishonesty but how to make dishonesty
accountable in a timely and meaningful manner. These are
the constituents that will make India tread the global path
andreachtheheightsofbestgovernance.
FocusoftheMonth
9

10. ECONOMY
MATTERS
MAY2018
The ability to be corrupt is enhanced by the
opportunity given by discretion. While some
measures like abolition of interviews for certain
categories of central government jobs, e-procurement,
channeling direct payment of subsidies are meant to
minimize discretion, general absence of clear rules and
timelines coupled with lack of accountability and
perpetrated by poor enforcement continue to allow for
loopholesandvariedinterpretation.
Or isitjusthumangreed…
It has been really interesting to observe how each of the
public and private sector blames the other for the
corruption in our country. The government
representatives would say "companies want things done
faster, without following the rules, their paperwork is not
correct…" and the private players cry victim to the whims
andfanciesofthebureaucrat.
We can play the blame game but the truth is that
compliance can only emerge with a collective will and a
true partnership between business and government. Each
needs to take a step forward believing that being ethical is,
infact,beneficialandnotdetrimentaltobusiness.
Valuation of the cost of non-compliance through
quantitative finance is merely one aspect of evaluation.
The failure of compliance controls can not only lead to
illicit transactions and financial penalties but also be a
competitive disadvantage in building sustainable business
bases. A compliance control failure could impact an
organization's reputation adversely and compromise its
market position and viability. There have been many
examples of large companies getting it wrong and
disappearing from existence while others are still
recovering from its impact, both financially and
reputationally.
Conversely, the real reward for compliance rests on the
long-term culture building sustainability and also
financial reward. Surveys have shown that companies
with a good compliance program demonstrate higher
revenues, higher profits, higher customer and employee
satisfaction. In fact, increasingly ethical companies are
encouraged to participate in business opportunities to
ensurelegitimacyoftheprocess.
One can hardly expect the start-ups, the small and medium
enterprise who have eked out meager borrowings to be
able to take the onslaught of the time and cost of
corruption. To keep a vibrant entrepreneurship led
economy, while the government has tremendous focus on
the ease of starting a business, the efforts for ease of doing
(operating) business should double, to enable these
enterprises to grow and flourish. On the other hand,
smaller enterprises, while remaining fiercely competitive
should leverage their eco-system to collectively combat
petty corruption (for eg. would it be a different impact if all
factories in an industrial park refused to bribe the
inspector rather than the lone ranger who stands out to
protest).
The larger established companies have an obligation to
lead the charge within and outside their organizations to
manageandpromotecompliance.
Organizations should start with "a will to do the right
thing" and adopt a code of conduct, reflecting the identity
and values of their organization, their commitment to
integrity, to be responsible and compliant, to abide by the
law and to have high ethical and moral standards. (Refer to
CII Model Code of Conduct launched by the CII National
Committee on Integrity and Transparency in Governance
in 2015). Recognizing that the code of conduct is a
journey, both industry and government should provide
training, helpdesks and assistance to the companies on this
path.
Knowing how to build a strong compliance culture is not
intuitive. There will always be "bad apples" and
"ignorance" despite the best ideals. Creating awareness,
building policies and processes linked to the risk profile of
a company which mapped accurately based on variables
such as its scale, areas of operations and the stakeholders it
interacts with, can yield the best results. The Compliance
FocusoftheMonth
Ms. Tejal Patil
Member, Committee on Integrity and Transparency in Governance and
General Counsel, GE
CultureofCompliance
10

11. ECONOMY
MATTERS
MAY2018
Management Program, another "one of a kind" initiative
by the CII (National Committee on Integrity and
Transparency in Governance in partnership with General
Electric and Indian School of Business) is an executive
educationcourseforprofessionalsto:
(i) Learntobuildaneffectivecomplianceprogram
(ii) Understand nuances of prevention, detection and
response tools, and the legal landscape governing
thesame
(iii) Position and enable compliance to be a strategic
business partner by understanding compliance in
thecontextofbusiness /operationsand
(iv) Gain leadership and communication skills to push
thecomplianceagendainternally
The International Organisation of Standards (ISO) has
established the first certifiable global anti-bribery
management standard (ISO 37001) which provides the
requirements and guidance for establishing,
implementing, maintaining and improving an anti-bribery
management system. Some multinational companies are
intheprocessofobtainingsuchcertification.
We have seen great strides in technological interventions
to take away the "human element" in services, removing
discretion and the ability to manipulate.This has benefited
the common man in delivery of basic services like gas
connections, passport issuance, social security and the
like. We need to be mindful that digitizing the manual
system, while a great start, will not end corruption in India
and in fact, can also create newer and more discovery
proof avenues for fraud as there will be less traces of what
is going on unless and until such systems are built around
well-definedrulesandsecurityaspects.
Prevention must be followed by strong detection and
response mechanisms. Humans are complex creatures and
cannot be managed by only a carrot or stick approach and
the balance must be kept for sustainable change. Coupled
with strong anti-bribery legislation and effective and
prompt judicial redressal, organizations must also be
provided incentives for good behavior and due
consideration given to their ability to demonstrate that
they have put in place adequate procedures to prevent
persons associatedwiththemfromundertakingbribery.
The World Bank estimates that over USD 1 trillion is paid
in bribes each year, with disastrous impacts such as
eroding political stability, increasing the cost of business
and contributing to poverty. India has been ranked 81st in
the global corruption perception index for 2017, released
by Transparency International. One can attempt to defend
the low standing noting that many of the countries on top
of the list have populations smaller than the state of
Rajasthan and by size, scale and complexity are easier to
manage. However, India would need to beat the odds and
silence the skeptics, not because we are on high moral
ground, but because it's the need of the hour if we want our
youthtobeemployedandourindustrytoflourish.
Moving and changing 1.2 billion citizens and hundreds of
years of shifting ethical standards requires a holistic and
multi-pronged approach founded on a conviction that
"good ethicsisgoodbusiness".
FocusoftheMonth
11

12. ECONOMY
MATTERS
MAY2018
INFOGRAPHICS DigitalIndia
Amount of UPI Transactions (Rs billion)
Source: NPCI
131.7
155.7
191.3
241.7
Dec-17 Jan-18 Feb-18 Mar-18
Rising Volume of UPI Transactions (in Crores)
14.56 15.18
17.14 17.81
Dec-17 Jan-18 Feb-18 Mar-18
Source: NPCI
Number of Banks Live on UPI
21
97
Aug-16 May-18
`
`
`
`
`
`
`
`
Broadband
Highways
Universal
Access to
Mobile
Connectivity
Public
Internet Access
Programme
e-Governance-
Reforming
Government
through
Technology
Information
for All
eKranti-
Electronic Delivery
of Services
Electronics
Manufacturing
IT for Jobs
Early Harvest
Programmes
The Digital India programme is a flagship
programme of the Government of India
with a vision to transform India into a
digitally empowered society and
knowledge economy.
368.9
1073.9
1566.9
9990
11354
14064
16848
2014-15 2015-16 2016-17 2017-18
633.6
Volume (in crores) RHS Value (in Rs 10,000 crore)
Note: * Includes RTGS, Retail Electronic Clearing, Cards (Credit and Debit PoS), PPI Source: RBI
SamvardhitBharat-SamparkitBharat
12
`
PAYMENT
Sharp jump seen in
Banks which have gone
live on UPI platform
The National Optical Fibre Network (NOFN) to
connect all the 250,000 gram panchayats
DigiGaon initiative to be launched to provide
tele-medicine, education and skills through
digital technology
500,000 Wi-Fi hotspots to provide internet
connectivity to over 5 million rural citizens.
By end of 2017-18, high speed optical fibre
broadband connectivity will be available in more
than 1,50,000 gram panchayats, under Bharat Net
RE-BUILDINGINDIA:DIGITALINDIA
INDIA ADOPTING DIGITAL PAYMENTS* LIKE NEVER BEFORE
Number of transactions have increased by more than 4 times since 2014-15
DIGITALPAYMENTSONARISE
UPIREGISTERSSTRONGGROWTH HOWDIGITALINDIAWILLBEREALIZED:
PILLARSOFDIGITALINDIA

13. ECONOMY
MATTERS
MAY2018
DOMESTICTRENDS
The domestic macro-indicators showed a mixed
picture during the month. While industrial
production growth printed a lower number in
March 2018, NIKKIE manufacturing PMI expanded
during the month. Industrial output slowed due to
headwinds from the manufacturing and capital goods
sector. However, it is heartening to note that the
seasonally-adjusted IIPseries stayed robust during March
2018. Going forward, industrial output is expected to gain
traction on the back of positive reforms momentum
coupled with low interest rate regime. To be sure, the data
from Capex database reveals that the value of projects
under implementation has continued to rise, which augurs
well for the investment trends in the economy. Coming to
inflation, CPI-based inflation showed an upswing inApril
2018, pushed higher by core inflation. Going forward,
upside risks to CPI inflation remain in the form of
uncertainty over the proposed MSP increase, possible
second-round impact of HRA and firming of crude oil
prices. However, the prognosis of a normal monsoon this
yearby theIMD willhelpintaminginflation.
In view of the upside risks to inflation, the RBI has
maintained a status-quo on key policy rates since August
2017 along with continuing with the neutral stance. It has
also reiterated its commitment to achieving the medium-
term target for headline inflation of 4 per cent on a durable
basis. Going forward, CII is hopeful that the RBI would
continue to maintain a steady monetary policy stance
which would strike a fine balance between maintaining
the growth momentum while reining in inflation. On the
fiscal front, the government has done well to keep the
fiscal deficit down to 3.42 per cent of GDP for FY18 as
compared to the earlier estimated 3.5 per cent of GDP. On
the external front, merchandise exports were back in the
positive territory in April 2018, while merchandise
imports slowed down due to lower gold imports during the
month. The depreciation bias on the rupee against the US
dollar is expected to persist on account of investment
outflows and a deteriorating balance of payments picture,
as oilpricesremainelevated.
On balance, in FY19, we expect India to grow at a healthy
rate of 7.3-7.7 per cent as compared to an estimated 6.6 per
cent growth posted in FY18, cushioned by improved rural
consumptionandamodestriseinprivateinvestment.
13

14. Note: AE- Advance estimates, F- Forecast
ECONOMY
MATTERS
MAY2018
Macroeconomic Outlook for India: CII Projections
2017-18 2018-19 F Rationale
GDP (y-o-y%) 6.6%
nd
(2 AE)
7.3-7.7% In FY19, we expect India to grow at a healthy rate of 7.3-7.7 per cent as
compared to an estimated 6.6 per cent growth posted in FY18. Improved rural
consumption and a modest rise in private investment will support growth,
even as the debilitating effects of demonetisation and GST implementation
willdissipate
Agriculture Growth
(y-o-y%)
3.0%
nd
(2 AE)
2.5-3.5% Agriculture sector outlook is premised on the expectation of a normal
monsoonthisyearasindicatedby IMD's recentmonsoon forecast.
Industry Growth
(y-o-y%)
4.8%
nd
(2 AE)
7.2-7.5% We expect an upturn in industrial sector growth cushioned by a pick-up in
demand and a low base of last year. The advance indicators also point to a
general improvement in manufacturing activity which in turn will support
overallindustrialgrowth inthecurrentyear.
Services Growth
(y-o-y%)
8.3%
nd
(2 AE)
8.4-8.7% Services sector growth will be aided by the effective implementation of big-
ticket reforms such as GST, RERA, banking sector re-capitalisation plan
amongst others.As in the past, services sector will be the flag-bearer of growth
fromthedemand-side.
Private
Consumption
(y-o-y %)
6.1%
nd
(2 AE)
7.5% Economic rebound and the improving rural wages are expected to spur private
consumption growth. Private consumption growth will continue to remain the
keydriverofgrowth, goingforward as well.
Gross Fixed Capital
Formation (y-o-y%)
7.6%
nd
(2 AE)
8.6% Investments bottomed out in FY18 and are expected to show an up-tick in
FY19 asfresh investmentsshow aupward movement.
Industrial
Production
(y-o-y%)
4.3% 5.2% Industrial growth is expected to accelerate marginally in FY19 on account of
the strengthening of the manufacturing sector which is expected to bounce
back from GST-related glitches and could be on track to reap the benefits of
domesticandglobalgrowthrecovery.
CPI inflation
(average)
3.6% 5.0% CPI inflation is expected to quicken in FY19 mainly on account of rising
consumption demand, impact of house rent allowance revisions on housing
inflationandhigherglobalcrudeoilprices.
Comparison of India Outlook
Real GDP, annual % change
2018-19 Latest forecast
date
RBI 7.4 Apr-18
IMF 7.4 Apr-18
ADB 7.3 Apr-18
NITI Aayog 7.5 Apr-18
RBI Professional Forecasters' Survey 7.3 Apr-18
World Bank 7.3 Mar-18
DomesticTrends
14

15. ECONOMY
MATTERS
MAY2018
Ÿ Industrial production growth lost
some steam as it slowed down to
4.4 per cent in March 2018 after
growing by an impressive 7 per
cent plus in the previous four
months. This was mainly on
account of a contraction in
capital goods production and
subdued performance by the
manufacturingsector.
Ÿ However, on a seasonally-
adjusted basis, industrial
production stayed robust during
themonth.
Industrial production sluggish; however likely to show an uptick going forward
Growth in Index of Industrial Production (y-o-y%)
Index of Industrial Production (IIP) IIP, Seasonally-Adjusted (y-o-y%)
-2.0
0.0
4.0
6.0
8.0
10.0
5.5
4.4
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jun-17
Sep-17
Nov-17
Jan-18
Mar-18
2.0
Ÿ Among the broad components of
i n d u s t r i a l p r o d u c t i o n ,
manufacturing output growth
moderated to a 5-month low of
4.4 per cent in March 2018.
However, both mining and
electricity sectors clocked higher
growthrateduringthemonth.
Ÿ We expect industrial output to
grow at 5.2 per cent in FY19
aided by the positive reforms
momemtum and the support
from the streamlining of GST
relatedglitches.
Broad Components of Industrial Production
Manufacturing output halves; while improved coal output pushes up mining growth
Growth, y-o-y%
Overall Manufacturing Mining Electricity IIP-3 MA
Mar-17 4.1 2.8 10.1 6.2 2.6
Jul-17 1.0 -0.1 4.5 6.6 1.2
Aug-17 4.8 3.8 9.3 8.3 1.8
Sep-17 4.1 3.8 7.6 3.4 3.3
Oct-17 1.8 2.0 -0.2 3.2 3.6
Nov-17 8.5 10.4 1.4 3.9 4.8
Dec-17 7.3 8.7 1.2 4.4 5.9
Jan-18 7.4 8.6 0.2 7.6 7.7
Feb-18 7.0 8.5 -0.4 4.5 7.2
Mar-18 4.4 4.4 2.8 5.9 6.2
FY18 4.3 4.5 2.3 5.4 4.2
Ÿ Capital goods output clocked the
first de-growth in 8 months,
printing at -1.8 per cent in March
2018. This could be attributed to
an adverse base effect which may
reverseintheprintforApril.
Ÿ Consumer durables slowed
sharply in March 2018 due to the
slowdown in passenger vehicles
and two-wheeler sales over the
past three months, which might
have affected this segment.
Meanwhile, the consumer non-
durables segment out performed
yet again, aided by improving
ruralconsumption.
De-growth in capital goods is worrisome for the investment prospects
Use-based Classification of Industrial Production
Growth, y-o-y%
Primary Capital Inter- Infras- Consumer Consumer
mediate tructure Durables Non-Durables
Mar-17 5.8 10.0 3.0 1.1 -3.2 7.1
Jul-17 2.2 -1.1 -2.8 4.3 -2.4 4.1
Aug-17 7.1 7.3 -0.5 2.7 4.3 7.2
Sep-17 6.6 8.7 2.1 0.5 -4.1 10.5
Oct-17 2.4 3.5 0.2 5.8 -9.0 8.2
Nov-17 3.3 5.7 6.5 13.7 3.1 23.7
Dec-17 3.8 13.2 7.5 6.5 2.1 16.8
Jan-18 5.8 12.8 4.9 7.0 7.8 11.0
Feb-18 3.7 19.5 3.2 12.6 7.5 7.3
Mar-18 2.9 -1.8 2.1 8.8 2.9 10.9
FY18 3.7 4.4 2.2 5.5 0.6 10.3
Source: Central Statistics Office (CSO) and CII estimates
DomesticTrends
15

16. ECONOMY
MATTERS
MAY2018
Source: Markit Economics and Office of Economic Advisor
DomesticTrends
Ÿ At the sectoral front, positive
changes in the core sector have
largely been driven by healthy
output of coal and stability across
steel and electricity sectors that
bodeswellforindustryoutput
Ÿ Core sector has a weight of 40.27
per cent in overall IIP. Hence, it is
an important leading indicator
forindustrialoutput.
Broad Components of Core Sector Output (y-o-y%)
Coal sector growth outperforms; while crude and petroleum refinery growth remains tepid
Ÿ Manufacturing conditions, as
depicted by the NIKKIE's
Manufacturing PMI, improved
in April 2018 as compared to the
previous month, supported by
faster expansion in output and
new orders on account of
favourabledemandconditions.
Ÿ The improvement in the index is
i n d i c a t i v e o f a f a s t e r
improvement in the health of
India’s manufacturing economy
than in the prior month and
augurs well for the IIP growth of
April2018.
NIKKIE India Manufacturing Purchasing
Manager's Index (PMI)
PMI index expands in April 2018; boding well for future industrial growth
50.4 50.7
52.5 52.5
51.6
50.9
47.9
51.2 51.2
50.3
52.6
54.7
52.4 52.1
51.0 51.6
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
Coal Crude Natural Petroleum Fertilizers Steel Cement Electricity
Oil Gas Refinery
Mar-17 10.6 0.9 9.7 2.0 -3.0 11.0 -6.8 6.2
Jul-17 0.6 -0.6 6.6 -2.6 0.2 9.4 1.1 6.6
Aug-17 15.4 -1.6 4.4 2.4 -0.7 2.1 0.7 8.3
Sep-17 10.4 0.1 6.3 8.1 -7.7 3.7 0.1 3.4
Oct-17 3.9 -0.4 2.9 7.5 3.0 8.6 -1.3 3.2
Nov-17 0.8 0.2 2.4 8.2 0.3 14.5 16.9 3.9
Dec-17 0.4 -2.1 1.1 6.6 3.0 0.4 17.7 4.4
Jan-18 3.2 -3.2 -1.0 11.0 -1.6 1.7 19.6 7.7
Feb-18 1.3 -2.4 -1.5 7.8 5.1 5.0 23.0 4.6
Mar-18 9.1 -1.6 1.3 1.0 3.2 4.7 13.0 4.5
FY18 2.5 -0.9 2.9 4.6 0.03 5.6 6.3 5.2
Ÿ Although the output of the eight
core sectors eased to 4.1 per cent
in March 2018 from the previous
month, it remains healthy on an
average. The dip in core sector
output could be attributed to the
high base of last year. For FY18
as a whole, core sector growth
stoodat4.2percent.
Ÿ Going forward, we expect the
core sector to inch higher in
FY19, piggybacking on the
positivereformsprocess.
Notwithstanding the recent slowdown, core sector output on average remains healthy
Core Sector Growth (y-o-y%)
7.7
4.1
0.0
2.0
4.0
6.0
8.0
10.0
Mar-16
May-16
Jul-16
Sep-16
Nov-16
Jan-17
Mar-17
May-17
Jul-17
Sep-17
Nov-17
Jan-17
Mar-18
16

17. ECONOMY
MATTERS
MAY2018
Ÿ After a long time, core inflation
has been the primary mover of
inflation trajectory as it pushed
both CPI and WPI inflation
higher in April 2018 indicating
the prevalence of firmer input
prices.
Ÿ Going forward, upside risks to
CPI inflation remain in the form
of uncertainty over the proposed
MSP increase, possible second-
round impact of HRA and
firming of crude oil prices.
However, the prognosis of a
normal monsoon this year by the
IMD will help in taming
inflation.
Ÿ As per the latest round of RBI’s
s u r v e y o f p r o f e s s i o n a l
st
forecasters (51 round), CPI
inflation will move higher to 5.1
per cent in 1QFY19 and then
continue to moderate in Q2 and
Q3.
Ÿ The survey showed that core
inflation is likely to remain above
5.0 per cent till 2QFY19
implying that the domestic
demand conditons are on an
upswing.
Core inflation surprises on the upside; pushes CPI and WPI inflation higher
RBI's survey indicates upward pressure on CPI inflation in 1QFY19, which is liklely to abate later
Consumer Price (CPI) and Wholesale Price
(WPI) Inflation (y-o-y%)
WPI Inflation CPI Inflation
-1.1
3.2
5.5
4.6
0.0
2.0
4.0
6.0
8.0
10.0
Apr-16
Jul-16
Oct-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
RBI's Professional Forecasters
Inflationary Expectations of CPI (y-o-y%)
DomesticTrends
st
Source: Central Statistics Office (CSO), RBI's Professional Forecasters Survey 51 Round and CII estimates
Ÿ Amongst the various segments of
CPI, food inflation remained
stable while prices of clothing &
footwear and pan & tobacco
showed an uptick during April
2018.
Ÿ Core CPI rose by 60 bps to 5.8
per cent in April 2018 as
compared to the previous month,
on the back of an upward
movement recorded in clothing
& footwear, miscellaneous
services and housing index,
indicating that the impact of state
HRA might also be coming into
play.
Components of CPI Inflation
Food inflation remains stable; while healthcare & education services push CPI higher
Overall Food Food and Pan, Tob- Clothing Fuel Miscell- Core
CPI Beverages acco and and Foot and aneous CPI
(FB) Intoxicants wear (CF) Light
Apr-17 3.0 0.6 1.3 6.1 4.6 6.1 4.3 4.4
Jul-17 2.4 -0.4 0.4 6.4 4.2 4.9 3.3 4.2
Aug-17 3.3 1.5 2.0 6.8 4.6 5.0 3.8 4.4
Sep-17 3.3 1.2 1.8 7.0 4.6 5.6 3.8 4.6
Oct-17 3.6 1.9 2.3 6.9 4.7 6.4 3.5 4.5
Nov-17 4.9 4.4 4.4 7.9 5.0 8.2 3.7 4.9
Dec-17 5.2 5.0 4.9 7.8 4.9 7.9 3.8 5.1
Jan-18 5.1 4.7 4.6 7.6 4.9 7.7 3.8 5.0
Feb-18 4.4 3.3 3.5 7.3 4.9 6.9 3.8 5.0
Mar-18 4.3 2.8 3.1 7.7 4.9 5.7 4.2 5.2
Apr-18 4.6 2.8 3.0 7.9 5.1 5.2 5.0 5.8
FY18 3.6 1.8 2.2 6.9 4.7 6.2 3.8 4.6
4.7
5.1
4.7
4.0
4.3
3.0
4.0
5.0
6.0
4QFY18 1QFY19 2QFY19 3QFY19 4QFY19
17

18. ECONOMY
MATTERS
MAY2018
*Net Injection (+)/Net Absorption (-)
Source: RBI Note: G-sec yields are as of end of the month
DomesticTrends
Ÿ Treading on expected lines,
Reserve Bank of India (RBI)
chose to maintain a status-quo on
the key interest rates in its first bi-
monthly monetary policy
th
meetingheldon5 April2018.
Ÿ The RBI’s decision to maintain a
status-quo in policy rates, even
with a neutral stance, is
welcome. Going forward, RBI is
likely to maintain the 'neutral'
policystance.
Ÿ Excess liquidity rose in mid-March
2018 as additional liquidity of Rs 1
trillion got released into the system
through the redemption of treasury
bills issued under the Market
Stabilisation Scheme (MSS) in
April and May 2017. However, in
April 2018, excess liqudity was
reducedconsiderably.
Ÿ Going forward, the recent Open
Market Operations (OMOs) of RBI
coupled with the recent measures
taken to allow foreign investors to
pick up any security they want
without any maturity restriction are
expected to support liquidity in the
system.
RBI’s move to maintain status-quo is welcome; expected to maintain neutral stance
Excess liquidity in the banking system recedes in April 2018; RBI's OMOs to support liquidity
RBI's Interest Rates
Liquidity in the Banking System (Net LAF, Rs billion)
5.00
8.00
6.00
7.00
5.75
6.00
7.00
8.00
9.00
Repo Reverse Repo
Ÿ The 10-year G-sec yield
moderated in Mar-Apr 2018,
coming down from the highs
posted in February 2018 as the
government announced some
key changes in its borrowing
programmeforFY19.
Ÿ The yield across the shorter end
of maturity curve dipped,
reflecting excess liquidity in the
system. As a result, the yield
curve remained flatttish during
themonth.
Government Bond Yield (%)
G-sec yields remain high; though temporary softening seen due to surplus liquidity
10-year G-sec 1-year G-sec
6.0
7.0
8.0
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
18
Apr-14
Oct-14
Apr-15
Oct-15
Apr-16
Oct-16
Apr-17
Oct-17
Jun-14
Aug-14
Dec-14
Feb-15
Jun-15
Aug-15
Dec-15
Feb-16
Jun-16
Aug-16
Dec-16
Feb-17
Jun-17
Aug-17
Dec-17
Feb-18
Apr-18
-1000.0
-800.0
-600.0
-400.0
-200.0
0.0
200.0
1-Mar-18
3-Mar-18
5-Mar-18
7-Mar-18
9-Mar-18
11-Mar-18
13-Mar-18
15-Mar-18
17-Mar-18
19-Mar-18
21-Mar-18
23-Mar-18
25-Mar-18
27-Mar-18
29-Mar-18
31-Mar-18
2-Apr-18
4-Apr-18
6-Apr-18
8-Apr-18
10-Apr-18
12-Apr-18
14-Apr-18
16-Apr-18
18-Apr-18
20-Apr-18
22-Apr-18
24-Apr-18
26-Apr-18
28-Apr-18
30-Apr-18

19. ECONOMY
MATTERS
MAY2018
DomesticTrends
Source: Various issues of Union Budget and Ministry of Finance Note: RE- Revised estimates, BE- Budget estimates
Ÿ Fiscal deficit has been contained
at 3.42 per cent of GDP in FY18,
down from the 3.5 per cent
estimated when the Budget was
presented. A marginal upward
revision in nominal GDP in the
second advance estimate and
reduction in expenditure from
the RE levels allowed the
governmenttocurbthedeficit.
Ÿ Revenue deficit stood at 2.6 per
cent of GDP in FY18 as
compared to 2.1 per cent in
FY17.
Trajectory of Gross Fiscal Deficits
Fiscal deficit contained below the RE levels; thanks to expenditure cut and higher GDP
Ÿ Revenue expenditure jumped to
11.6 per cent of GDP in FY18
from 11.0 per cent in the previous
year, while capital expenditure
moderatedinFY18.
Ÿ Going forward, it is hoped that
the expenditure mix would be
carefully balanced between
revenue and capital expenditure,
with bulk of the spending
focussed on capex spending as it
helps in the creation of
productiveassets.
Quality of Expenditure (%)
The quality of spending has suffered; focus to be given to capex spending
Ÿ The monthly goods and services
tax (GST) collections crossed Rs
1 lakh crore for the first time in
April 2018, indicating that the
indirect tax regime was
stabilising and that economic
revivalwas pickinguppace.
Ÿ With the improved economic
climate, introduction of e-way
bill and better GST compliance,
GST collections would continue
to show a positive trend, going
forward.
Improved GST revenue bodes well for the overall economic activity
GST Revenue (Rs billion)
935.9 930.3 951.3
859.3 837.2
889.3 880.5 892.6
1034.6
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18RE
2018-19BE
2.5
6.0
6.5
4.8
5.9
4.9
4.5
4.1 3.9 3.5 3.4 3.3
1.1
4.5
5.2
3.3
4.5
3.6 3.2
2.9 2.5
2.1
2.6
2.2
Fiscal deficit (as a % of GDP) Revenue deficit (as a % of GDP)
11.9
14.1 14.1 13.4 13.1 12.5 12.2 11.7 11.3 11.0 11.6 11.4
2.4 1.6 1.7 2.0 1.8 1.7 1.7 1.6 1.9 1.9 1.6
1.6
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
2014-15
2015-16
2016-17
2017-18RE
2018-19BE
Revenue expenditure (% of GDP) Capital expenditure (% of GDP)
19

20. ECONOMY
MATTERS
MAY2018
Source: RBI
DomesticTrends
Credit and Deposit Growth (y-o-y%)
Ÿ Credit growth has begun to re-
gain momentum in recent
months as domestic economic
activity has gained currency.
Deposit growth is also rising
from the low it had touched in
Nov-17 duetodemonetisation.
Ÿ Banking credit in FY19 will be
s u p p o r t e d b y i m p r o v e d
economic growth, domestic
demand and capital inflow for
publicsectorbanks.
Banking credit picks up in line with economic recovery, healthy growth likely to continue
Ÿ Mining & quarrying has seen the
highest deployment of credit in
recent months, while industries
such as basic metal has seen tepid
growthincreditoff-take.
Ÿ Credit growth has also picked
up in industries such as
infrastructure and construction
which is critical for laying the
foundation of a concrete path for
economicrecovery.
Mining & quarrying sees a healthy pick-up in credit off-take
Industry-wise Sectoral Deployment (y-o-y%)
Ÿ Non-food credit growth has
shown an uptick since August
2017 in line with economic
recovery which is currently
underway.
Ÿ Credit-deposit ratio has risen to
75.5 per cent in March 2018 from
74.7 per cent posted in February
2018.
Non-Food Credit Growth and CD Ratio
Non-food credit is growing at a steady rate; a trend which is likely to continue
(y-o-y% growth) Nov-17 Dec-17 Jan-18 Feb-18 Mar-18
Mining & quarrying -5.2 -2.3 5.1 16.9 19.7
Food processing 9.9 11.6 9.2 11.4 6.8
Basic Metal & 1.0 0.1 0.0 -1.0 -1.2
Metal Product
All engineering 4.6 7.6 9.5 7.9 6.9
Gems & jewellery 2.3 3.0 2.2 2.4 3.8
Construction 1.0 0.6 2.1 0.3 5.4
Infrastructure 8.9 9.0 9.0 4.8 9.6
Aggregate deposits Bank Credit
Credit-Deposit ratio, % (RHS) Non-food credit (y-o-y%)
20
6.2
10.0
10.9
4.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
75.9 75.5
8.9 10.2
64.0
66.0
68.0
70.0
72.0
74.0
76.0
78.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Mar18

21. ECONOMY
MATTERS
MAY2018
Ÿ Merchandise exports grew by 5.2
per cent inApril 2018 on the back
of a good show by sectors like
engineering, pharmaceuticals
andchemicals.
Ÿ Merchandise imports moderated
to 4.6 per cent in April 2018 on
lower gold imports during the
month. Import growth, going
forward, will be supported by
higher consumption spending
and hardening of global crude
prices.
Ÿ Oil imports firmed up and rose by
41.5 per cent during the month as
global Brent prices increased by
35.2 per cent in April 2018. In
contrast, non-oil imports declined
by 4.3 per cent as gold imports
contracted despite Akshay Tritiya
demand.
Ÿ Going forward, exports growth is
expected to be cushioned by the
streamlining of glitches arising out
of GST implementation. However,
upside risks remain due to geo-
political uncertainties and
protectionist policies by the
advancedcountries.
Ÿ Merchandise trade deficit
widened slightly to US$13.72
billion in April 2018 from
US$13.25 billionayearago.
Ÿ On account of the widening of
trade deficit, current account
deficit increased to 2 per cent of
GDP in 3QFY18 from 1.4 per
cent of GDP in the same quarter
lastyear.
Snapshot of the Trade Performance
Exports bounce back; imports moderate on low gold imports
Oil imports show an uptick as crude prices harden; expected to remain elevated
Widening trade deficit puts pressure on current account deficit
Merchandise Trade Growth (y-o-y%)
Snapshot of the Deficits
DomesticTrends
Source: Ministry of Commerce, RBI Note: Data for 4QFY18 for CAD is not available yet
April-Mar
Apr-17 Mar-18 Apr-18 FY17 FY18
(US$ billion)
Exports 24.6 29.1 25.9 275.9 302.8
Imports 37.9 42.8 39.6 384.4 459.6
Oil Imports 7.4 11.1 10.4 87.0 109.1
Non-oil Imports 30.5 31.7 29.2 297.4 350.6
Trade deficit 13.3 13.7 13.7 108.5 156.8
(y-o-y%)
Exports 18.1 -0.6 5.2 4.0 9.8
Imports 47.5 7.1 4.6 -0.2 19.6
Oil Imports 29.4 14.4 41.5 4.8 25.5
Non-oil Imports 53.7 5.8 -4.3 -0.3 17.9
Trade deficit 180.2 28.5 1.5 -8.6 44.5
-5.8
5.2
-23.3
4.6
-40.0
-20.0
0.0
20.0
40.0
60.0
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
Merchandise Exports growth Merchandise Imports growth
19.0
24.4
35.1
30.1
41.3
34.4
43.2
41.4
0.4
3.5
8.0
3.5
14.3
7.2
13.5
1QFY17 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18
Merchandise Trade Deficit (US$ bn) Current Account Deficit (US$ bn)
21

22. ECONOMY
MATTERS
MAY2018
DomesticTrends
Ÿ Rupee depreciated against the
US dollar by close to 0.9 per cent
on m-o-m basis in April 2018 as
there was a net FII outflow
duringthemonth.
Ÿ Given the current environment of
rising crude oil prices and
increased protectionism, we can
s e e t h e U S D / I N R p a i r
depreciating further in the near-
term. The RBI could step-up
intervention to ensure that
depreciationisnotdisorderly.
Ÿ FDI and ECB flows have
remained robust as per the latest
available data. FY18 on a whole
saw a healthy inflow of FDI and
ECB flows, boding well for the
stability of the external sector in
India.
Ÿ F D I a n d E C B fl o w s a r e
traditionally considered as more
stable flows as compared to the
more volatile FII flows, hence
their healthy inflow bodes well
fortheeconomy.
Ÿ Foreign exchange reserves had
crossed the crucial US$400
billion mark in Nov-17 and have
remained in excess of that level
postthat.
Ÿ Healthy accretion to forex
reserves has been aided by a
sharp rise in foreign currency
assets, mainly huge inflows
t h r o u g h f o r e i g n d i r e c t
investments in projects and
portfolioinvestment.
Other Foreign Inflows
Net FII outflows increase the depreciation bias on the Rupee; bias likely to persist
In contrast, FDI and ECB flows remain healthy, auguring well for the external sector stability
Forex reserves stay healthy; helped by sharp rise in foreign currency assets
Net FII Inflows and Average Monthly Exchange Rate
Foreign Exchange Reserves (US$ bn)
-8.0
-4.0
0.0
4.0
8.0
12.0
60.0
62.0
64.0
66.0
68.0
70.0
Apr-16
Jun-16
Aug-16
Oct-16
Dec-16
Feb-17
Apr-17
Jun-17
Aug-17
Oct-17
Dec-17
Feb-18
Apr-18
Rs/US$ Net FII inflow, US$ bn (RHS)
3.1
5.1
0.0
2.0
4.0
6.0
8.0
10.0
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
FDI flows* (US$ bn) ECB flows (US$ bn)
363.1
420.4
0.0
100.0
200.0
300.0
400.0
500.0
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
22
Source: RBI, DIPP
Note: The monthly figures of FDI inflow reflect the equity component only,. * Latest data for FDI is available for Feb-18

23. Source: CapEx database and CII estimates
Note: * Stalling rate is calculated as the value of projects stalled as a proportion of the overall value of capex projects under implementation.
ECONOMY
MATTERS
MAY2018
DomesticTrends
Ÿ Notwithstanding the moderation
seen in the recent quarters, the
v a l u e o f p r o j e c t s u n d e r
implementation has seen a
healthy rise from the levels seen
in1QFY15.
Ÿ In contrast, the year-on-year
growth in the value of new
project announcements which
began towards the latter half
o f 3 Q F Y 1 7 d u e t o t h e
demonetisation exercise has
continuedunabated.
Quarterly CapEx Overview
Projects under implementation have seen a jump over the years
Ÿ The proportion of stalled private
sector projects rose to a high
of 24.6 per cent 3QFY18,
moderating marginally to 23.6
per cent in 4QFY18 even as fresh
project announcements saw
tepidgrowth.
Ÿ The stalling rate in the public
sector has come down in the
recent months but public sector
projects form only a small
fractionoftheoverallcapexpie.
Widening gap between private and government stalling rates
Stalling Rate* on Ownership Basis (%)
Ÿ The share of stalled projects
across all the broad sectors saw a
sharp rise in the 4QFY18, which
is a worrying sign for the
economy.
Ÿ Two sectors—manufacturing
and electricity—account for
more than 40 per cent of
all the stalled projects. These
two sectors have witnessed
persistently high stalling rates for
severalquartersinarow.
Stalling Rate* on Sectoral Basis (%)
Manufacturing and power account for bulk of the stalled projects
86306
102525
0
20000
40000
60000
80000
100000
120000
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
Value of projects announced
(Rs bn)
Value of projects under implemention
(Rs bn)
5.6
3.6
16.9
23.6
0.0
5.0
10.0
15.0
20.0
25.0
1QFY15
2QFY15
3QFY15
4QFY15
1QFY16
2QFY16
3QFY16
4QFY16
1QY17
2QFY17
3QFY17
4QFY17
1QFY18
2QFY18
3QFY18
4QFY18
Proportion of projects stalled in
Government sector (%)
Proportion of projects stalled in
Private sector (%)
0.0
2.0
4.0
6.0
8.0
1QFY15
4QFY15
3QFY16
2QFY17
1QFY18
4QFY18
3QFY15
2QFY16
1QY17
4QFY17
3QFY18
2QFY15
1QFY16
4QFY16
3QFY17
2QFY18
1QFY15
4QFY15
3QFY16
2QFY17
1QFY18
4QFY18
Manufacturing Electricity Services (other
than financial)
Construction &
real estate
23

24. ECONOMY
MATTERS
MAY2018
STATEOFTHESTATES
The study of the economic performance of the
states is important for ensuring that there is
equitable economic development. There are wide
divergences in state-level performance which require
attention from the policy makers. Moreover, the states
have the main responsibility for carrying out reforms in
areas such as land and labour laws which in turn exert a
positive influence on the overall macroeconomic
performance of the country. Details on these get buried in
aggregatenationalstatistics.
For the year 2016-17, the fastest growing states were
Madhya Pradesh (MP) and Andhra Pradesh (AP), while
Rajasthan, Chhattisgarh and Punjab were among the
laggard states. Both MPandAPgrew at a much faster pace
than the national average rate of 7.1 per cent during the
year. Led largely by an agricultural boost and expansion
by the services sector, Madhya Pradesh has surged to the
top. The state has been showing a strong growth of above
9.0 per cent since 2009-10. In contrast, Punjab is at the
bottom among states in terms of macro-economic
performance, having evidenced 5.9 per cent growth
during the year. Coming to other macro-economic
indicators such as inflation, except for Kerala and Tamil
Nadu, CPI inflation has moderated in all the other states
for the year FY18. On the fiscal front, Goa and Rajasthan
have recorded high fiscal deficits in the year FY17,
while states such as Maharashtra, West Bengal and
Gujarat among others have seen lowest fiscal deficits
amongthestates.
In this issue, the 'State in Focus' is Andhra Pradesh,
which is among the top performers in economic growth.
The state grew at a robust average rate of 9.5 per cent in
the period FY14-FY17. Among the sectors, the service
sector has the highest share in GDP in the state while
agriculture has seen a rise in share over the years. The
industrial state has also seen a rise in investment flows,
with its ease of doing business rank seeing a sharp jump
overtheyears.
24

25. ECONOMY
MATTERS
MAY2018
StateoftheStates
Source: Various Issues of RBI State Finances Report, CSO Note: # Estimated over the BE for FY17
Ÿ Madhya Pradesh and Andhra
Pradesh were the fastest-
growing states in FY17.
Bringing up the bottom were
Rajasthan, Chattisgarh and
Punjab.
Ÿ The industrial states of Gujarat
and Maharashtra grew at an
impressive rate in FY17, much
higher than the national rate of
7.1percent.
Real GSDP (at factor cost) Growth (y-o-y%) in FY17
Madhya Pradesh and Andhra Pradesh among the leaders in GDP growtth
Ÿ CPI inflation accelerated in
states such as Kerala and Tamil
Nadu in FY18 as compared to
FY17, while in other states it
registeredamoderation.
Ÿ Gujarat, Odisha, Telengana,
Uttar Pradesh and Rajasthan
were amongst the states which
saw the maximum moderation in
CPI inflation in FY18 relative to
FY17.
Kerala and Tamil Nadu witness high CPI inflation in FY18 as compared to FY17
Ÿ Goa and Rajasthan recorded the
highest fiscal deficit in FY17
w h i l e We s t B e n g a l a n d
Maharashtra were at the other
end of the spectrum.The states
that successfully managed high
growth levels while keeping their
fiscal deficits below 3 per cent
w e r e A n d h r a P r a d e s h ,
MaharashtraandGujarat.
Ÿ On the contrary, states which
have lower growth rates despite
their fiscal deficits overshooting
the 3 per cent target in FY17 are
Kerala, Rajasthan and Uttar
Pradesh.
Picture amongst the states is mixed on the fiscal front
14.0
11.6 11.5
10.4 10.3 10.2 10.1
9.4 8.7
7.7 7.5 7.4 7.4 7.3 7.1
5.9
MadhyaPradesh
AndhraPradesh
Goa*
Odisha
Bihar
Telangana
Gujarat
Maharashtra
Haryana
Jharkhand
Karnataka
TamilNadu
Kerala
Rajasthan
Chattisgarh
Punjab
Consumer Price Inflation (CPI), y-o-y%
0.0
2.0
4.0
6.0
8.0
AndhraPradesh
Bihar
Chattisgarh
Goa
Gujarat
Haryana
Jharkhand
Karnataka
Kerala
MadhyaPradesh
Maharashtra
Odisha
Punjab
Rajasthan
TamilNadu
Telangana
UttarPradesh
2016-17 2017-18
#
State's Fiscal Deficit (% of GSDP) FY176.8
5.6
4.6
3.9 3.9 3.8
3.5 3.4 3.6
3.0 3.0 2.9 2.9 2.8
2.2 2.1 2.2 2.0
1.6
Goa
Rajasthan
Haryana
UttarPradesh
MadhyaPradesh
Orissa
Kerala
Bihar
Telangana
TamilNadu
Allstates
Punjab
AndhraPradesh
Chhattisgarh
Karnataka
Jharkhand
Gujarat
WestBengal
Maharashtra
25

26. ECONOMY
MATTERS
MAY2018
Ÿ Andhra Pradesh grew at a robust
average rate of 9.5 per cent in the
period FY14-FY17, which is
higher than the national average
o f 7 . 1 p e r c e n t f o r t h e
comparableperiod.
Ÿ Agriculture sector staged a
remarkable recovery from a low
of 3.9 per cent in FY15 to 14.0
per cent in FY17. Industrial and
service sector growth too has
been in double-digits since
FY16.
Ÿ Service sector has the highest
share in GDP, while agriculture
has the second highest share.
Agriculture is the main source of
livelihood for 60 per cent of the
state'spopulation
Ÿ Andhra Pradesh has been one
of the foremost states which
has formulated various sector-
specific policies. The formation
of industrial clusters and
developing industry-friendly
infrastructure such as biotech
parks, textile parks and hardware
parks has been the state's main
strategy to attract investments in
variousindustries.
Ÿ Gross fixed capital formation in
Andhra Pradesh has grown at an
attractive CAGR of 12.8 per cent
for the period FY13-FY16,
which has boded well for the
overall economic growth of the
state.
Ÿ As per the latest statistics (as of
Feb-18), the state has secured the
numero-uno position in the ease
of doing business rankings of
DIPP.Afact validated by the FDI
inflows of US$14.3 billion
b e t w e e n A p r i l 2 0 0 0 t o
September2017inthestate.
Andhra Pradesh amongst the top performers in economic growth
Service sector has the highest share; while agri share is higher than national average
Robust FDI flows have contributed to healthy growth of investment in the state
StateinFocus:AndhraPradesh
Real Gross State Value Added by Economic
Activity, (y-o-y%)
10.8
3.9
8.1
14.0
2.0
8.3
10.3 10.1
7.8
11.2 11.1
10.2
7.0
8.5
11.0
11.6
2013-14
2014-15
2015-16
2016-17
2013-14
2014-15
2015-16
2016-17
2013-14
2014-15
2015-16
2016-17
2013-14
2014-15
2015-16
2016-17
Agri Indi Serv Overall
Sectoral Shares in Gross State Value Added (%)
in 2016-17
26.9%
32.2%
40.9%
2011-12
Serv
Ind
Agri
27.9%
26.2%
45.9%
2016-17
Investment Scenario
FDI Equity Inflows (US$ bn)Gross Fixed Capital Formation (Rs, bn)
0.7
1.4
1.6
2.2
0.8
2013-14
2014-15
2015-16
2016-17
2017-18*
Source: RBI's Handbook of Statistics of Indian States (2018), IBEF
Note: * (Apr 17-Dec 17)
26
2012-13
2013-14
2014-15
2015-16
14013
137462
151732
227272

27. ECONOMY
MATTERS
MAY2018
GLOBALTRENDS
The global economic recovery that began around
mid-2016 has gained traction and become
broader. The US economy which witnessed tepid
growth in 2017 appears to have bounced back in the first
quarter of the current year aided by tax cuts, government
spending and low unemployment. In the Euro area, the
growth in the 1Q18 has slowed down underpinned by a
moderation in consumer spending and factory activity due
to the strengthening of the Euro, but falling
unemployment rate and elevated consumer confidence
continue to support the economy. The Japanese economy
entered 2018 on a lower momentum with weak machinery
orders and an easing manufacturing Purchasing
Manager's Index (PMI) in February-March 2018.
Encouragingly, the CPI inflation in the key global
economies has continued to remain within the respective
Central Bank's target range. However, upside risks exist
fromthehardeningof crudeoilprices.
In some worrisome news for the economy, global crude
prices are trading at their highest levels since December
2014, due to escalated geo-political tensions, strong
commitment by the oil cartel to rebalance markets aided
by other supply outages. More recently, WTI has crossed
st
the US$72/barrel mark (as on 21 May, 2018), while Brent
is trading near the US$80/barrel mark. The current rally is
driven mainly by short-term shocks. However, the upside
risks to crude oil prices will be capped by the rising output
of US shalegasproduction.
With growth returning to the US, the Federal Reserve has
started the process of policy normalization by increasing
the Fed rate from its near zero levels in end-2015. The
recentratehikeby 25 bps was effectedinmid-march2018.
The rate hike was premised on the fact that the labour
market has continued to strengthen and that economic
activity has been rising at a moderate pace with inflation
rate remaining benign so far. The Fed continues to see two
more policy hikes for the remaining of 2018. Chinese
central bank also followed suit and hiked its key policy
rate by 5 bps in a bid to prevent the interest rate differential
withUS wideninganyfurther.
27

28. ECONOMY
MATTERS
MAY2018
GlobalTrends
Ÿ The US economy entered 2018
with stronger momentum,
growing by 2.9 per cent in 1Q18
aided by tax cuts, government
spending and low unemploy-
ment.
Ÿ Euro area, UK and Japan grew at
a lower pace in 1Q18 as
compared to the previous quarter
due to broad overall sectoral
weakness.
Ÿ CPI inflation in the key global
economies has continued to
remain within the respective
Central Bank's target range.
However, upside risks exist from
thehardeningofcrudeoilprices.
Ÿ CPI inflation marginally
increased in April 2018, which
was the highest rate since
February 2017. Higher gasoline
and shelter prices were the key
factors which pushed CPI
inflation higher during the
month.
Ÿ The US Federal Reserve hiked
the key policy rate in March 2018
by 25 bps on strengthening of the
labour market, strong economic
recovery underway along with
benign inflation outlook. China
also raised its key short-term
interest rate by 5 bps following
theUS Fed's move.
Ÿ The benign inflation trajectory
has given more leg-room to
central banks to start the process
o f m o n e t a r y p o l i c y
normalisation.
Global economies moving towards posting a strong recovery
Inflation trajectory remains benign; though upside risks still hovering
Central banks across the globe stay on pat; except for US and China
2.3
2.6
2.9 2.7 2.8
2.5
1.8
1.4 1.2
1.9 1.8
0.9
6.8 6.8 6.8
US Euro area UK Japan China
3Q17
4Q17
1Q18
3Q17
4Q17
1Q18
3Q17
4Q17
1Q18
3Q17
4Q17
1Q18
3Q17
4Q17
1Q18
2.5
1.2
2.5
1.1
1.8
0
1
2
3
4
US Euro area UK Japan China
Jan-18
Feb-18
Mar-18
Apr-18
Jan-18
Feb-18
Mar-18
Apr-18
Jan-18
Feb-18
Mar-18
Apr-18
Jan-18
Feb-18
Mar-18
Apr-18
Jan-18
Feb-18
Mar-18
Apr-18
Policy Interest Rates (End of the Month, %)
Source: Statistical Bureau, Respective countries
Note: CPI data for UK and Japan is available only till Mar-18
Dec-17 Jan-18 Feb-18 Mar-18 Apr-18
US 1.25-1.50 1.25-1.50 1.25-1.50 1.50-1.75 1.50-1.75
Euro area 0.00 0.00 0.00 0.00 0.00
UK 0.50 0.50 0.50 0.50 0.50
Japan -0.1 -0.1 -0.1 -0.1 -0.1
China 2.50 2.50 2.50 2.55 2.55
Real GDP Growth, (y-o-y%)
Consumer Price Inflation (y-o-y%)
28

29. ECONOMY
MATTERS
MAY2018
GlobalTrends
Ÿ On the external front, key global
economies present a mixed
picture, with the exports growth
in China plunging in March 2018
after posting a large uptick in
February2018.
Ÿ Notably, China's trade surplus
with the US surged in March
2 0 1 8 w i t h w i d e s p r e a d
speculation that exporters were
rushing out shipments to get
ahead of threatened tariffs that
are stoking fears of rising
protectionism among the
advancedeconomies.
Global Exports tread on a mixed territory; with Chinese exports seeing a sharp decline
Ÿ TheWorld Bank forecasts global
economic growth to edge up to
3.1 per cent in 2018 after a much
stronger-than-expected 2017, as
the recovery in investment,
manufacturing and trade
continues.
Ÿ Growth in US is expected to
accelerate in 2018 on stronger
private investment, while it is
expected to moderate in Euro
area, UK, Japan and China as per
thelatestWorldBankforecast.
Global growth on firm territory as per the World Bank latest forecasts
Ÿ Crude prices are trading at their
highest levels since December
2014, due to escalated geo-
political tensions, strong
commitment by the oil cartel to
rebalance markets aided by other
supplyoutages.
Ÿ Recently, WTI has crossed the
US$72/barrel mark (as on 21st
May, 2018), while Brent is
trading near the US$80/barrel
mark. The current rally is driven
mainlybyshort-termshocks.
Crude oil prices have hardened in the recent months on various factors; upside risks remain
Exports Growth (y-o-y%)
9.8
3.0 3.5 2.1
-3.6
-10
0
10
20
30
40
50
US Euro area UK Japan China
Dec-17
Jan-18
Feb-18
Mar-18
Dec-17
Jan-18
Feb-18
Mar-18
Dec-17
Jan-18
Feb-18
Mar-18
Dec-17
Jan-18
Feb-18
Mar-18
Dec-17
Jan-18
Feb-18
Mar-18
World Bank Global Growth Prospects (y-o-y%)
2.3 2.4 1.6 6.8 3.0
0
2
4
6
8
US Euro area UK Japan China World
2017e 2018f
1.7
Crude Oil Movements (US$/barrel)
WTI Europe Brent
Source: Statistical Bureau, Respective countries, World Bank and Energy Information Administration (EIA)
Note: e- estimate, f-forecast, * Monthly avg till 21st May, 2018
29
70.3
76.8
30
40
50
60
70
80
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Jan-17
Feb-17
Mar-17
Apr-17
May-17
Jun-17
Jul-17
Aug-17
Sep-17
Oct-17
Nov-17
Dec-17
Jan-18
Feb-18
Mar-18
Apr-18
May-18

31. ECONOMY
MATTERS
MAY2018
PolicyFocus
31
POLICYFOCUS
S. No Area Policy Announcement(s) Likely Impact
1). Banking
&
Finance
The RBI has relaxed the existing ECB framework through the following
measures:
1. Rationalization of all-in-cost for ECB under all tracks and
Rupee denominated bonds
2. Increase in the ECB Liability to Equity Ratio, from direct foreign
equity holder under the automatic route, to 7:1
3. Expansion of Eligible Borrowers' list for ECB Rationalization of end
use provisions for ECBs by having only a negative list for all tracks of
end-use list
Liberalization and
rationalization of ECB
policy will make it easier
for corporates to meet
their capital needs.
2). Banking
&
Finance
The RBI has announced changes to operational aspects of foreign portfolio
(FPI) investments in debt which include:
1. Revision of minimum residual maturity requirement
2. Revision of security-wise limit
3. Utilization of FPI limits to be monitored online after June 1, 2018
4. Concentration limits assigned to investment by any FPI Single/Group
investor-wise limit for FPI investment in corporate bonds
The revised framework
will streamline FPI
investments in debt.
3). Banking
&
Finance
Ÿ The RBI has revised the guidelines for lending to Priority Sector for
Primary (Urban) Co-operative Banks (UCBs). As per the revised
guidelines, target of 7.5 per cent of Adjusted Net Bank Credit (ANBC) or
credit equivalent of off-balance sheet exposure, whichever is higher, has
been prescribed for Micro Enterprises, while the target for lending to total
priority sector and weaker section remains the same.
Ÿ The distinction between direct and indirect agriculture and the distinction
between loans for education in India and abroad has been removed.
This will further
streamline the priority
sector lending of UCBs
and will promote
achievement of priority
sector lending targets by
the banks.
4). Telecom The Department of Telecommunications (DoT) has released a draft of new
Telecom policy – National Digital Communications Policy, 2018 - which
seeks to use digital communications networks to bring about digital
empowerment and improve the well-being of the people of India. The draft
policy aims to accomplish the following Strategic Objectives by 2022:
1. Provisioning of Broadband for All
2. Creating 4 million additional jobs in the Digital Communications
sector
3. Enhancing the contribution of the Digital Communications sector to 8
per cent of India's GDP from ~ 6 per cent in 2017
4. Propelling India to the top 50 Nations in the ICT Development Index
of ITU from 134 in 2017
5. Enhancing India's contribution to Global Value Chains Ensuring
Digital Sovereignty
It is hoped that this policy
will facilitate the
unleashing of the creative
energies of citizens,
enterprises and
institutions in India; and
play a seminal role in
fulfilling the aspirations
of all Indians for a better
quality of life.
5). GST Ÿ The GST council has approved a new comprehensive but simple GST
returns mechanism. The new system will be implemented in three phases
and will be fully operational till next year.
Ÿ Additionally, as per the new GST return system, taxpayers, except
composition dealers and dealers having nil transactions, will be required to
file one monthly return.
The move will further
streamline the GST
system and make it easier
to file returns.
The important policy announcements made by the Government/RBI in the month ofApril-May 2018 are covered in this
month's Policy Focus. Our endeavour through this section is to keep our readers abreast of the latest happenings on the
policyfrontso thattheycantakeaninformeddecisionaccordingly.

32. PolicyFocus
ECONOMY
MATTERS
MAY2018
32
S. No Area Policy Announcement(s) Likely Impact
Ÿ The Council has also approved change in the ownership structure of
GSTN, the IT backbone of GST, to convert it into a fully owned
government entity, with equal ownership of states and Centre.
6). Financial
Market
Ÿ SEBI has issued guidelines for issuance of debt securities by Real Estate
Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs).
The trusts would need a registered debenture trustee in addition to a
financial disclosure to the stock exchanges.
Ÿ The trusts also needs to disclose asset cover available, net worth, debt-
equity ratio, debt service coverage ratio and interest service coverage ratio.
REITs and InvITs will
become more attractive to
investors as the trusts are
now allowed to raise
funds by issuing debt
securities.
7). Financial
Market
SEBI has permitted stock exchanges to set their trading hours in the Equity
Derivatives Segment between 9:00 AM and 11:55 PM (from the current 9.15
am till 3.30 pm), similar to the trading hours for Commodity Derivatives
Segment which are presently fixed between 10:00 AM and 11:55 PM,
provided that the Stock Exchange and its Clearing Corporation(s) have in
place the risk management system and infrastructure commensurate to the
trading hours.
It will enable integration
of trading of various
segments of securities
market at the level of
exchanges.
8). Financial
Market
Ÿ SEBI has asked listed companies to split the post of chairman and
managing director and have at least six independent directors, including a
woman, on the board. It has set a deadline of April 1, 2019 regarding the
independent directors while for splitting the CMD post, SEBI has granted
more time to companies till April 1, 2020.
Ÿ The regulator has also enhanced disclosure of related-party transactions
and made secretarial audits mandatory for listed entities and their
subsidiaries, while also asking top 100 listed companies to webcast their
annual general meetings.
The splitting of the CMD
post will remove the
conflict of interest that
could arise as the two
positions (Chairman cum
Managing Director)
overlap the board and
management in some
cases.
9). Foreign
Policy
Ÿ India and Myanmar have signed seven agreements as India's External
Affairs Minister Sushma Swaraj met Myanmar's State Counsellor Aung
San Suu Kyi, on a two day visit to Myanmar.
Ÿ These agreements include one on land border crossing, a MoU on
restoration and preservation of earthquake damaged pagodas in Bagan and
other MoUs on technical assistance and capacity building reflect India's
continuing support to Myanmar.
The MoU's would
strengthen the bilateral
relations between the two
countries across different
sectors.
10). Social
security
Ÿ The cabinet has approved to double the investment limit under the
Pradhan Mantri Vaya Vandan Yojana (PMVVY) to Rs 15 lakh, from Rs
7.5 lakh at present, so as to provide increased social security cover to
senior citizens. It will enable up to Rs 10,000 pension per month for senior
citizens.
Ÿ Also, the time limit for subscription has been extended from May 4, 2018
to March 31, 2020 as part of government's commitment for financial
inclusion and social security.
The increase in the
investment limit further
strengthens the PMVVY
scheme that aims to
provide social security
during old age and protect
elderly persons aged 60
years. It will also provide
security against a future
fall in their interest
income due to uncertain
market conditions.

33. ECONOMY
MATTERS
MAY2018
PolicyFocus
33
S. No Area Policy Announcement(s) Likely Impact
11). Energy The Union Cabinet, chaired by the Prime Minister has approved a National
Policy on Biofuels – 2018. The salient features of the Policy are as
follows:
1. It expands the scope of raw material for ethanol production
2. Allows use of surplus food grains for production of ethanol for
blending with petrol
3. It categorises biofuels as "Basic Biofuels” and “Advanced Biofuels”
4. It encourages setting up of supply chain mechanisms for biodiesel
production from non-edible oilseeds, used cooking oil etc
The new policy will help in
reducing our import
dependency on conventional
oil, contribute towards a
cleaner environment, help in
infrastructure investment in
rural areas and promote
employment generation.
12). Energy Ministry of New and Renewable Energy has issued a National Wind-Solar
Hybrid Policy to promote new hybrid projects as well as hybridization of
existing wind and solar projects. The objective of the policy is to provide a
framework for promotion of large grid connected wind-solar PV hybrid
system for the efficient utilization of transmission infrastructure and land.
Renewable power generation
will get a boost through
promotion of new projects
and hybridization of existing
ones. Hybridization will also
reduce variability in
renewable power generation
and help in achieving better
grid stability.
13). Public
Enterpris
es
Ÿ The Union Cabinet has approved the strengthening of the mechanism
for resolution of commercial disputes of Central Public-Sector
Enterprises (CPSEs) inter se and also between CPSEs and other
Government Departments/Organizations.
Ÿ A new two-tier mechanism will be put in place of the existing
Permanent Machinery of Arbitration (PMA) mechanism to resolve
commercial disputes (excluding disputes concerning the Railways,
Income Tax, Custom & Excise Departments) between CPSEs inter se
and CPSEs and Government Departments/Organizations, outside the
Courts of law.
The new mechanism will
promote equity through
mutual/collective efforts to
resolve commercial disputes
thereby reducing the number
of litigations regarding
commercial disputes in the
Court of Law and also avoid
wastage of public money.
14). Agricult
ure
The Cabinet Committee on Economic Affairs has approved an initial
Corpus of Rs 5,000 crore for the setting up of a dedicated “Micro
Irrigation Fund” (MIF) with NABARD under the Pradhan Mantri Krishi
Sinchayee Yojana (PMKSY).
The dedicated Micro
Irrigation Fund would
supplement the efforts of Per
Drop More Crop Component
(PDMC) of PMKSY in an
effective and timely manner.

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