[Economy] Bills and Acts Pertaining to Black Money

Introduction :

Central government has introduced bills and made amendments to existing acts pertaining to black money initiative, So here we discuss some of the important bills include

Indian Black Money: 

In India, black money refers to funds earned on the black market, on which income and other taxes have not been paid. The total amount of black money deposited in foreign banks by Indians is unknown. Some reports claim a total of US$1.06 trillion is held illegally in Switzerland Other reports, including those reported by the Swiss Bankers Association and the Government of Switzerland, claim these reports are false and fabricated, and the total amount held in all Swiss bank accounts by citizens of India is about US$2 billion.

In February 2012, the director of India's Central Bureau of Investigation said that Indians have US$500 billion of illegal funds in foreign tax havens, more than any other country. In March 2012, the government of India clarified in its parliament that the CBI director's statement on $500 billion of illegal money was an estimate based on a statement made to India's Supreme Court in July 2011.

In a televised address on 8 November 2016 by Indian Prime Minister Narendra Modi announced that banknotes of ₹500 and ₹1000 would cease to be legal tender from midnight. Automatic teller machines at some places were closed on 9 and 10 November. Government organisations have brought out new notes. The Govt of India had accepted the proposal of RBI in bringing out ₹2000 banknotes and a new version of the ₹500. The old notes are being removed from circulation.

Undisclosed Foreign Income and Assets (Imposition of Tax) Bill :

• Finance Minister Mr. Arun Jaitley introduced the bill in Lok Sabha on March 20, 2015 

• Passed by both Lok Sabha and Rajya Sabha Income Tax (IT) Act, 1961 replaced to tax foreign incomeApplies to all Indian residents 

• Tax evasion and hiding foreign income to be treated as Criminal cases 

• Punishment will be 3 to 10 years imprisonment with a fine amount for willful tax evasion 

• Fine imposed will be three times the tax on undisclosed amount with a 30 percent addition 

• Failure to pay tax returns on foreign assets leads to imprisonment from 6 months to 7 years with a fine 

• Fine will be 10 lac for not paying tax on foreign income 

• No fine for assets or income worth 5 lacs or less 

Prevention of Money Laundering Act, 2002

This act was enacted to curb the global menace of money laundering across the globe. 

Some of the salient features of the act include :

• Act introduced in Lok Sabha by then Finance Minister Mr. Pranab Mukherjee 

• Bill amendment made on 2011 to include India as one of the key members of Financial Action Task Force (FATF) 

• Act provides provisions of Indian laws to comply with international laws regarding money laundering 

• Concealment, possession and acquisition of foreign assets without paying tax are defined as offence in this law 

• Fine up to 5 lacs 

• Individual property confiscation for a period not extending up to 180 days if proven offensive 

• Financial Action Task Force (FATF) 

• Inter governmental body with its origin in Paris G-7 Summit, 1989 

• Main purpose is to set standards globally on anti money laundering 

• Combating the financing of terrorist activities or terror financing 

• India joined FATF in 2010 as 34 th member nation 

• Anti money laundering conventions 

• Countering measures on terror financing with cooperation of nations 

Negotiable Instruments Bill :

• Negotiable instruments Act was introduced in 1882 

• The Act was amended on 13 th May 2015 

• Passed in the Lok Sabha 

• Explanation of promissory notes, cheque and bills of exchange amended with digital signature 

• Main aim is to create penalties for bouncing of cheques 

• Bounced Cheque issuer will be penalized by withdrawing a penalty amount from their bank accounts and also will have to pay penalty on the receiver end 

• In case of more than one instance of bouncing cheques, cases will be transferred to the appropriate courts coming under the jurisdiction 

• Bill withdrawn on 24 th July to make further instruments 

• Foreign Exchange Management Act (FEMA), 1999 

• All foreign exchange related transactions regulated by FEMA in India 

• FEMA replaced strict and restrictive control provisions of FERA, 1973 

• Ensure proper utilization of foreign transactions 

• Conserve the Forex transactions 

• Violation implies civil imprisonment if fine not paid within 90 days 

• RBI administers FEMA implementation 

• Act allows only authorized persons to deal in foreign exchange 

• Objectives of the act include external trade facilitation, promotion of foreign exchange and payments 

• RBI monitors business conduct of Indian companies outside India 

• Recently, Indian companies established abroad especially in Tax havens were taxed by RBI 

• All imports and export-related transactions come under the purview of this act 

• Functions as a watch dog mechanism in foreign exchange for India 

The Benami Transactions Bill :

• Amendment of Benami Transactions Act, 1988

• Passed in Lok Sabha by Finance Minister Mr. Arun Jaitley

• Description of Benamidar revised

• Penalty for giving false information through Benamis leads to imprisonment of 6 months to 5 years

• Fine up to 10 percent of the benami property market value

Four main authorities established to investigate or conduct inquiries : 

1. Initiating officer
2. Approving officer 
3. Administrator and 
4. Adjudicating officer 

Emerging Issues :

• Strong and quick implementation of the acts 
• Political Interference 
• Corrupt officers 
• Willful defaulters on the rise – Mr. Subroto Roy, Mr. Vijay Mallya etc. 
• Participatory notes are the main source of terror financing 
• No mention on Participatory notes in the amendments and bills introduced so far 
• Havala scandal cases 
• Illegal trading activities
• Stock market scandals 
• Smuggling and money transfer 
• Counterfeit currency 
• Bank Scandals 

The above issues indicate the urgent need for the empowerment of strong, powerful, autonomous and independent regulatory bodies like RBI, SEBI etc.

[Economy] The building of the BRICS bank

India named veteran banker K.V. Kamath to be the first President of the New Development Bank, popular as the BRICS bank. The focus of this bank will be to invest in infrastructure. Mr. Kamath, 67, is a veteran banker, who was credited with developing ICICI Bank into India’s second-largest lender. He headed the bank for 13 years until 2009 and is now its Non-Executive Chairman. He is also Non-Executive Chairman of India’s second-biggest software services exporter Infosys.

What is BRICS?

• In 2001, the then Goldman Sachs Group economist Jim O’Neill coined the term BRIC to describe the growing prominence of Brazil, Russia, India and China in the global economy. Not yet considered developed countries, the four were grouped together for being at the same stage of economic development.

• BRIC country leaders started meeting as a bloc in 2009. South Africa joined them later, though there was some scepticism that as a country of less than 50 million people it is too small to join the group. So, BRIC is now BRICS.

What is BRICS bank?

• It is how the New Development Bank is better known as. Last July, the BRICS countries agreed to set up a development bank, whose purpose, according to its articles, is to “mobilise resources for infrastructure and sustainable development projects” not just in BRICS countries but also in other emerging economies. It seeks to do so by supporting public and private projects through loans, guarantees and equity.

But doesn’t the world already have enough institutions to do that — the IMF/World Bank, for instance?

• True. It’s clear their presence hasn’t been ignored in the creation of the New Development Bank. The articles of the bank do say that its creation is to complement “the existing efforts or multilateral and regional financial institutions.” But, in a sense, the BRICS bank was born because the countries that represent this have long realised they need an alternative system to IMF/World Bank, one in which they have greater say.

How will the New Development Bank be different?

• So, BRICS account for about 40 per cent of the world’s population and a combined economy of about $16 trillion. Although they account for over one-fifth of the global economy, together they garner only 11 per cent of votes at IMF. On the other hand, developed countries such as the U.S., Japan, Germany, the U.K. and France hold 40 per cent of the voting power. In the BRICS bank, the founding members have equal voting rights.

Is there more to its founding?

• Definitely! Hongying Wang, senior fellow at global think-tank Centre for International Governance Innovation, reckons dissatisfaction toward traditional multilateral financial institutions to be just one of the three reasons.

• One of the other reasons is that the creation of a joint development bank is a milestone in the evolution of the BRICS. That is, it turns the informal co-operation among those countries into a concrete institution. Finally, the bank seeks to fill the enormous hole that exists in infrastructure financing in many developing countries.

• The last point assumes significance because the traditional development banks have reduced funding for infrastructure in recent decades while private investors have been reluctant to take on long-term projects of this kind. The infrastructure financing deficit in developing countries is estimated to be $1 trillion annually. BRICS countries, especially China, have accumulated financial resources that enable them to fill the gap to some degree.

How will the bank be structured and run?

• The bank will begin with a subscribed capital of $50 billion, divided equally between its five founders, with an initial total of $10 billion put in cash over the next seven years and $40 billion in guarantees.

• The group has also agreed to a $100 billion currency exchange reserve, which member-countries can tap during balance of payment problems. China, the biggest foreign exchange reserve-holder amongst them, will contribute the major portion of the currency pool. Brazil, India and Russia will contribute $18 billion each while South Africa will chip in with $5 billion.

• In a crisis, China will be eligible to ask for half its contribution, South Africa for double its contribution while the others can get back what they put in.

• The bank will be based in Shanghai. After a five-year term at the helm by an Indian, the President’s post would by turn go to a Brazilian and then to a Russian.

• The bank can add more members. Media reports suggest Russia has invited Greece, which has a huge economic battle on its hands, to be a member. Even if more members are added, the capital share of BRICS can’t drop below 55 per cent.

How does the bank’s creation play out for each of its member-countries?

• Hongying Wang says, for China, this is an opportunity to export its infrastructure over-capacity. China can reduce its mammoth reserves and improve financial returns on its external assets while at the same time learn to play a leading role among the developing countries. For India and South Africa, this promises to be a welcome source of much-needed infrastructure financing. For Russia, the benefit at the moment is largely seen to be political, given that the country has been isolated in the international arena over the Ukraine issue. For Brazil, the new development bank could bring financing for its oil exploration projects.

What would be the challenges?

• Raj M. Desai, Non-resident Senior Fellow, Global Economy and Development, Brookings, says the main challenges will be in setting up and operating a bank in which shares are equally divided among countries that do not have much in common, apart from their distrust of the current global governance system.

• Hongying Wang has a similar view. The differences are many, as amplified by their political systems (example: China and Russia v. India, Brazil and South Africa), economic interests (example: commodity exporters v. importers), and enormous power discrepancies (China’s economy, trade, and foreign reserves being much larger than the rest combined).

• Dr. Pallavi Roy, who teaches at the University of London, points out that one of the threats could, interestingly, be another development bank incubated by China. The Asian Infrastructure Investment Bank (AIIB), backed by China, has more capital and members than the BRICS Bank.

Can the BRICS bank take on IMF, World Bank?

• Brookings’ Desai points out that the capital base of the World Bank and the ADB combined is about $400 billion, so it would take the participation of several other middle-income countries for the BRICS bank to be able to compete with those institutions.

• But the contingency reserve account also proposed as part of the BRICS effort may provide an alternative source of stabilisation support. In this, it could potentially compete with the IMF, which has had very few takers from BRICS economies on this front in recent years.

By: Sanjay Vijayakumar

Source: The Hindu

[Part 2] Useful Image Collection of 2015

Part 1 Link: Click Here

15. Black Money Bill

16. India and China

17. In India Tourism Friendly?

18. Outcomes of Recent Budget Session

19. Child Labour Law

20. India and China the states of play

21. One 'Great Quake' in year, and it hasn't Come yet

22. PM visit China

23. Eye on China

24. RBI plans retail push in T-Bill

25. Creativity is an integral part of everone's life

26. Asia Voice will be stronger in India and China speak in ONE voice

27. Who vs who in Yemen

28. In the Name of Ganga

29. Meaning oney Bill

30. Constitution Amendment

Source: Wiki, Indian Express, The Hindu,BT & Our Teamwork

[Part 1] Useful Image Collection of 2015

1. PBD (9th January 2015):Major Concentrations of Indian Dispora around the World:

2. National Girl Child Day (24 January 2015):

3. Obama's India visit Some of the key demands from each side:

4. Millennium Development Goals:

5. Rail Budget:

6. Economic Survey 2013-2014

7. The National Judicial Appointments Commission in other Countries:

8. Kyasanur Forest Disease:

9. Earthquake: India Map of Seismiczone

Earthquake Scale

10. 304 Section Apply in Salman case:

11. UK Elections:

12. About larks:

13. Siachin Glacier:

14. New 3 Schemes:

Source: The Hindu,Wiki,ET,AIR,Teamwork

Notes on Regulatory Bodies – SEBI, IRDA, CCI, TRAI

Securities and Exchange Board of India (SEBI)

The Securities and Exchange Board of India (SEBI) is the regulator for securities market in India. It was established on 12th April 1992 through the SEBI Act, 1992. SEBI has to be responsive to the needs of three groups, which constitute the market: the issuers of securities; the investors; the market intermediaries.

Powers: For the discharge of its functions efficiently, SEBI has been vested with the following powers:

• To approve by-laws of stock exchanges
• To require the stock exchanges to amend their by-laws.
• Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
• Inspect the books of accounts of financial intermediaries.
• Compel certain companies to list their shares in one or more stock exchanges.
• Levy fees and other charges on the intermediaries for performing its functions.
• Grant license to any person for the purpose of dealing in certain areas.
• Delegate powers exercisable by it.
• Prosecute and judge directly the violation of certain provisions of the companies Act.
• Power to impose monetary penalties.

An Appraisal: Successful cases of grievance redressal by SEBI have been rising rapidly. However, a survey shows that most of the investors find the redresser ineffective. Moreover, SEBI is not able to do much about ‘fly by night’ or ‘sign-board’ companies who vanish after collecting huge money. SEBI has been too busy in framing rules and regulation giving rise to complex and cumbersome framework, which leaves scope for discretionary interpretation. It failed to punish those who caused abnormal fluctuations in the market. Due to this, small investors are losing confidence in investing. The autonomy of SEBI has been compromised as it, more or less, functions as a branch of the Union Finance Ministry.

Insurance Regulatory and Development Authority (IRDA)
Insurance Regulatory and Development Authority (IRDA) is an autonomous apex statutory body, which regulates and develops the insurance industry in India. It was constituted by Insurance Regulatory and Development Authority Act, 1999.
Powers and functions:

• Issue to the applicant a certificate of registration and suspend or cancel such registration;
• Protection of the interests of the policy holders in matters concerning assigning of policy, nomination by policy holders, insurable interest, settlement of insurance claim, surrender value of policy and other terms and conditions of contracts of insurance;
• Specifying requisite qualifications, code of conduct and practical training for intermediary or insurance intermediaries and agents;
• Promoting efficiency in the conduct of insurance business;
• Calling for information from, undertaking inspection of, conducting enquiries and investigations including audit of the insurers, intermediaries, insurance intermediaries and other organizations connected with the insurance business;
• Control and regulation of the rates, advantages, terms and conditions that may be offered by insurers in respect of general insurance business not so controlled and regulated by the Tariff Advisory Committee;
• Regulating investment of funds by insurance companies;
• Adjudication of disputes between insurers and intermediaries or insurance intermediaries.

Competition Commission of India (CCI)

Competition Commission of India is a body of the Government of India responsible for enforcing the Competition Act, 2002 throughout India and to prevent activities that have an adverse effect on competition in India. The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007, follows the philosophy of modern competition laws. The Act prohibits anti-competitive agreements, abuse of dominant position by enterprises and regulates combinations (acquisition, acquiring of control and Merger and acquisition), which causes or are likely to cause an appreciable adverse effect on competition within India.
Function and Responsibilities:

• Make the markets work for the benefit and welfare of consumers.
• Ensure fair and healthy competition in economic activities in the country for faster and inclusive growth and development of economy.
• Implement competition policies with an aim to effectuate the most efficient utilization of economic resources.
• Develop and nurture effective relations and interactions with sectoral regulators to ensure smooth alignment of sectoral regulatory laws in tandem with the competition law.
• Effectively carry out competition advocacy and spread the information on benefits of competition among all stakeholders to establish and nurture competition culture in Indian economy.

Telecom Regulatory Authority of India (TRAI)
The Telecom Regulatory Authority of India (TRAI) is the independent regulator of the telecommunications business in India.
Powers and Functions:

• Recommend the need and timing for introduction of new service provider;
• Recommend the terms and conditions of licence to a service provider;
• Ensure technical compatibility and effective inter-connection between different service providers;
• Ensure compliance of terms and conditions of licence;
• Facilitate competition and promote efficiency in the operation of telecommunication services so as to facilitate growth in such services;
• Protect the interest of the consumers of telecommunication service;
• Inspect the equipment used in the network and recommend the type of equipment to be used by the service providers;
• Settle disputes between service providers.

[Indian Economy] RBI prepares Roadmap for 20 years for Financial Inlcusion

What is Financial Inclusion

• Defination: Financial inclusion may be defined as the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost (according to the Committee on Financial Inclusion).

• The Government of India and the Reserve Bank of India have been making concerted efforts to promote financial inclusion as one of the important national objectives of the country. Some of the major efforts made in the last five decades include - nationalization of banks, building up of robust branch network of scheduled commercial banks, co-operatives and regional rural banks, introduction of mandated priority sector lending targets, lead bank scheme, formation of self-help groups, permitting BCs/BFs to be appointed by banks to provide door step delivery of banking services, zero balance BSBD accounts, etc. The fundamental objective of all these initiatives is to reach the large sections of the hitherto financially excluded Indian population.

• The essence of financial inclusion is to ensure delivery of financial services which include - bank accounts for savings and transactional purposes, low cost credit for productive, personal and other purposes, financial advisory services, insurance facilities (life and non-life)

The extent of Financial Inclusion/Sources of Financial Inclusion:

Financial Inclusion is based on the study from the five different sources like..

1. NSSO 59th Round Survey Results
2. Government of India Population Census 2011,
3. CRISIL-Inclusix
4. RBI Working Paper Series Study on ‘Financial Inclusion in India: A Case-study of West Bengal’
5. World Bank ‘Financial Access Survey’ Results

Results : NSSO

• 51.4% of farmer households are financially excluded from both formal/ informal sources.
• Of the total farmer households, only 27% access formal sources of credit; one third of this group also borrowed from non-formal sources.
• Overall, 73% of farmer households have no access to formal sources of credit.
• Across regions, financial exclusion is more acute in Central, Eastern and North-Eastern regions. All three regions together accounted for 64% of all financially excluded farmer households in the country. Overall indebtedness to formal sources of finance of these three regions accounted for only 19.66%.
• However, over the period of five decades, there has been overall improvement in access to formal sources4 of credit by the rural households

Financial Inclusion: RBI Policy Initiatives

1. Advised all banks to open Basic Saving Bank Deposit (BSBD) accounts with minimum common facilities [no minimum balance, deposit and withdrawal of cash at bank branch and ATMs, receipt/ credit of money through electronic payment channels, facility of providing ATM card.]
2. Relaxed and simplified KYC norms to facilitate easy opening of bank accounts,
3. Simplified Branch Authorization Policy, to address the issue of uneven spread bank branches,
4. Compulsory Requirement of Opening Branches in Un-banked Villages, banks are directed to allocate at least 25% of the total number of branches
5. Opening of intermediate brick and mortar structure, for effective cash management, documentation, redressal of customer grievances and close supervision of BC operations
6. Public and private sector banks had been advised to submit board approved three year Financial Inclusion Plan (FIP) starting from April 2010.
7. Banks have been advised that their FIPs should be disaggregated and percolated down up to the branch level. This would ensure the involvement of all stakeholders in the financial inclusion efforts.
8. Revised guidelines on Financial Literacy Centres (FLCs), through conduct of outdoor Financial Literacy Camps at least once a month,
9. Banks have been advised to issue KCCs to small farmers for meeting their credit requirements
10. The total number of ATMs in rural India witnessed a CAGR of 30.6% during March 2010 to March 2013.
11. MSME sector which has large employment potential of 59.7 million persons over 26.1 million enterprises, is considered as an engine for economic growth and promoting financial inclusion in rural areas.
12. SHG-- This model helps in bringing more people under sustainable development in a cost effective manner within a short span of time.

In the NEWS: Prime Minister Narendra Modi on Thursday asked the Reserve Bank to prepare a 20-year road map for financial inclusion and nudged banks to be considerate in giving loans to the poor as also while making recoveries from them, especially farmers. RBI will be completing 100 years in 2035...it will be appropriate for the central bank to work on the theme of financial inclusion and prepare a road map for achieving it,

The other milestones for achieving financial inclusion could be 150th birth anniversary of Mahatma Gandhi in 2019, 75th year of Independence in 2022, 90th anniversary of RBI in 2025 and 100 years of RBI in 2035, the Prime Minister said. The Prime Minister also called upon the bankers to extend credit to resource rich eastern states.
Source: The Hindu

[Indian Economy] Indian Dairy Model – Problems, Challenges, Suggestions and China Dairy Model

The Indian dairy sector, largest milk producer in the world, is now facing challenges to meet the growing gap between the demand and supply. The sub-optimal milk yield thus has been a cause of concern of late.

Based on this some experts had suggested India follow the Chinese model of Milk and Dairy products. However, before going into details, we need to have an analysis regarding both the Chinese model and its Chinese counterpart.

The Chinese Model:

• Grew on a different set of problems and situations.
• A milk scandal erupted in China in 2008 when the industrial chemical melamine was found in dairy products nationwide.
• Supported by township and country governments.
• Farmers are grouped into a farm model in which all the cows are milked by machine.
• A local investor/builder constructs the dairy facility, supplying all the capital. The village director settled the debt with the builder by identifying individual producers to purchase stall space within the barn.
• While the operation is run by a village committee, individuals own the stall space and assume full management of their cows, including feeding.
• Milking machines, however, are owned by the company, in the China case, the New Hope Dairy Cattle Company.
• A member of the collective supervises the milking and keeps records of the amount of milk produced by each cow.
• A local company collects the milk. Best example is provided by Dairy United, which is presently the biggest farm in China. This is also related to be sustained during the era of Chinese Milk Crisis, as discussed above.
• Dairy United is one of the fastest-growing and most innovative Chinese dairy producers. Unlike most corporate and cooperative dairies that purchase cows on the market, Dairy United leases dairy cows from local farmers, giving it access to its primary asset without a large up-front investment, and letting the firm grow its dairy herds with new borns. In return, farmers receive fixed payments biannually, but relinquish control rights and residual claims to the firm. Thus, Dairy United’s leasing is helping transform Chinese milk production from a backyard, labour-intensive activity to a more industrialized mode of farming.

Difficulties in the Model: One of the obvious constraints to extending this type of operation are geographical access to facilities.

The Indian Model:
In India the dairy cooperative model has been perceived to be central to the development of its dairy industry, the largest in the world and one that has been based on integrating small and marginal farmers into a business environment.
However, while successful in numerous states, in particular the Amul cooperative in Gujarat, not all have flourished.
In many other areas of India, the cooperative movement has been less successful in empowering farmers and transforming dairying into a means of development for rural people.

Thus the cause of concern for the Dairy industry in India is as follows:

• High cost of production and low productivity of animals
• Lack of Production; processing and marketing infrastructure
• Import of value-added products and export of lower value products
• Poor financing of small co-operatives
• Competition with the Private sector
• Delayed payments and dividends among other issues

In this situation, replicating the Chinese model in the India scenario has manifold cultural, socio-economic constraints. There lies the critical need of democratically selected model and in aprticular the need to avoid state managements. Unlike China, India does not have an equally strict regulatory authority in this sector, which can watch over the stability of prices and provision of regular salary to the farmers who will be leasing their cows.

What India needs to:
1. Expansion of co-operatives as they form the base of our dairy industry
2. Financing self-help groups to take up dairying
3. Also employing more female workers into the industry
4. Meeting the demand for fodder whose cost is raising
5. Focus on buffalo milk based specialty
6. Increasing the process of milk which is negligible right now.
7. Focus on better health services to the cows,
8. Adequate credit to the dairy farmers at easier terms, so that they can maintain more cows and giving education to dairy farmers to provide healthier food to cows, so as to increase their yield.

Also, comprehensive strategy for producing quality and safe dairy products should be formulated with suitable legal backup.

The 12th FYP also focuses on the dairy sector and there is a need to boost this sector through a “specific approach” rather than replicating the Chinese model.