November, 2015

New FDI norms

The government has relaxed foreign direct investment (FDI) norms in 15
sectors, allowing 100% FDI in sectors such as completed construction
projects, some plantation sectors, cable networks, direct-to-home (DTH)
services and some air transport activities.

Fifteen areas and 32 investment points will benefit from the

liberalisation.
Highlights:

Foreign direct investment up to 49% will now be allowed in the

defence sector under the automatic route. Currently, FDI up to 49% is
allowed in the defence sector but under the government approval route.

The government has allowed 100% FDI in completed construction

projects. It has also removed restrictions on minimum floor area or
minimum capitalisation.

In the broadcast sector, FDI limit in news channels has been hiked
from 26% to 49%. In the non-news category, now FDI up to 100% has
been allowed without the governments approval.

The FDI limit in DTH (direct-to-home) and cable networks has been
increased to 100%. Earlier, the limit was 74% in DTH services.

The government has opened plantation activities in coffee, rubber,

cardamom, palm oil tree and olive oil tree to 100% FDI. Right now, only
tea plantations are open to foreign investment.

Single-brand retail firms also have been allowed to sell products

through e-commerce, subject to government approval.

Manufacturers have been permitted to sell their products through

wholesale/retail including through e-commerce. Also, a single entity

has also been allowed to carry out business in wholesale/cash & carry
and single-brand retail.

For private banks, the government has removed the distinction

between different categories of foreign investment. Accordingly, foreign
institutional investors, foreign portfolio investors and qualified foreign
investors can now invest up to 74% in the sector.

Regional air transport service (RSOP) will now be eligible for foreign
investment up to 49% under automatic route. The FDI cap in nonscheduled air transport service and ground handling services has been
increased to 100% from 74%.

The Foreign Investment Promotion Board (FIPB) can now clear

proposals up to Rs 5,000 crore from the earlier limit of Rs 3,000 crore
under single-window clearance.
The crux of these reforms is to further ease, rationalize and simplify the
process of foreign investments in the country and to put more and more
FDI proposals on automatic route instead of government route where
time and energy of the investors is wasted.

Seventh Pay Commission

The seventh Pay Commission, headed by Justice AK Mathur, has
submitted its report to the union finance ministry.

The recommendations, once cleared by the Cabinet, will lead to a

substantial hike in salaries of central government employees and
pensioners with effect from January 1, 2016.
Major recommendations:

An overall increase of 23.55% in pay, allowances, and pension for

government employees.

The minimum pay in govt is recommended to be set at Rs 18,000

per month.

Maximum pay is recommended as Rs 2,25,000 per month for Apex

scale and Rs 2,50,000 per month for Cabinet Secretary and others at the
same level.

The rate of annual increment retained at 3%.

One Rank One Pension proposed for civilian government employees

on line of OROP for armed forces.

Military Service Pay (MSP), which is a compensation for the various

aspects of military service, will be admissible to the defence forces
personnel only.

Short service commissioned officers will be allowed to exit the

armed forces at any point in time between 7 to 10 years of service.

A status quo on the retirement age of Central government

employees. Retirement age for staff of Central government is 60 years.
Implications, if these recommendations are implemented:

An increase of 0.65% points in the ratio of expenditure on to GDP.

Financial impact will be Rs 1.02 lakh crore Rs 73,650 crore to be

borne by Central Budget and Rs 28,450 crore by Railway Budget.

The salary hikes are expected to boost sales of affordable homes

and consumer durables, which in turn will drive demand in the economy.

Recommendations will impact 47 lakh serving govt employees, 52

lakh pensioners, including defence personnel.
However, it should be noted that the 16% hike in basic salary is much
lower than the 35% hike employees got in the Sixth Pay Commission

Bamboo state
Union Minister of State for Development of North Eastern Region
(DoNER), Dr Jitendra Singh recently told that the government is

committed to develop Mizoram as the Bamboo State of India. The

State of Mizoram is blessed with very high production of bamboo, which
can be turned into a major source, not only for furniture but also for
paper supply to the rest of the country. This could, not only generate
revenue for the State, but also create opportunities for youth outside
India. In this regard, an effort to reinforce Bamboo Development Board
of India has already been initiated by the government.