Insights Daily Current Events, 16 January 2015
World record in swimming
Ms. Bhakti Sharma has set a world record by swimming 1.4 miles in 52 minutes in the Antarctic Ocean at a temperature of one degree Celsius.
- She is the world’s youngest and the first Asian girl to achieve this feat.
- She has been pursuing open water swimming for the last 10 years. She has now conquered all the five oceans of the world.
Manipur Councillors call on MoS (DoNER)
A deputation of Manipur Autonomous District Councils called on Union Minister of State of the Ministry of Development of North Eastern Region (DoNER) recently and demanded that provisions of the Sixth Schedule of the Indian Constitution be extended to Manipur which, according to them, would give them more powers and pave the way for a viable lasting solution to the long standing problems of the region.
- The six District Councils in the State of Manipur were established four decades ago following the passage of Manipur Hill Areas District Autonomous Councils Act 1971.
What is the issue?
- The district councils are still controlled by the State Government, and have been denied adequate empowerment because of the non-implementation of the Sixth Schedule of the Indian Constitution.
- It is also alleged that the State Government is deliberately trying to keep them deprived of the Sixth Schedule even though its provisions had already been extended to the neighbouring States of Meghalaya, Mizoram, Assam and Tripura.
- The Sixth Schedule of the Indian Constitution provides for greater financial power and direct funding of District Councils from the Centre.
- It also enables appropriate judicial and legislative powers conducive to the tradition of the region and the tribals.
Households’ inflation expectations ease: RBI survey
The Reserve Bank of India (RBI)’s quarterly survey on inflation showed households expect a much lower rate of consumer inflation, validating the central bank’s unexpected decision to cut interest rates.
- The fall in households’ inflation expectations likely was a possible adaptive response to the decline in headline inflation in recent months.
- The survey showed households expected consumer inflation of 8.9 per cent in the October-December quarter in the year ahead period, down sharply from 16 per cent in the previous quarter.
- The survey also showed 79.8 per cent of respondents expect prices to increase over a one-year period, lower than the 90 per cent respondents in the previous quarter.
- For the three-month ahead period, 72.4 per cent of respondents expected prices to rise compared with 86.4 per cent of respondents in the September quarter.
Moody’s says India rating upgrade to depend on fiscal consolidation
Moody’s has said that India needed to improve its fiscal position to earn a ratings upgrade and warned that even if policy action was taken now it would likely take a while for the impact to be reflected on government finances.
Other observations made:
- India’s fiscal consolidation would also need an improvement on similarly-rated countries. For a rating upgrade, the fiscal position has to improve materially or there should be evidence that it’s going to improve materially not only with respect to itself, but comparable to similarly-rated countries.
- The government’s moves to improve the financial position would have a bigger impact on India’s credit than any policy action by the central bank.
- Moody’s currently rates India at “Baa3”, the lowest investment-grade rating, with a “stable” outlook.
Opec downgrades demand for oil
The Organization of the Petroleum Exporting Countries has issued a report that downgraded demand for its crude oil for 2015, while also predicting slower oil-production growth in the United States.
Details of the report:
- The demand for Opec crude oil would be 28.8 million barrels a day this year, 100,000 barrels a day less than it forecast in its previous monthly market report, in December.
- The report said that demand for Opec’s crude oil would average less than 28 million barrels a day in the first half of this year.
What has the Opec said?
- Opec has said that the slump in prices since June was beginning to have an impact on production in the United States, where the shale oil industry has been the main source of the new supplies, which have put pressure on prices.
- The group has said that it expected lower prices, reduced drilling and other factors to trim oil production growth in the United States by almost half compared with 2014, to about 950,000 barrels a day compared with an increase of about 1.6 million barrels a day in 2014.
- OPEC leaders have said that production cuts should come from higher-cost producers like shale oil companies in the United States rather than from OPEC members, whose production costs are often low.
Opec, a group of 12 oil-producing nations with Saudi Arabia as the linchpin, showed no sign of cutting production from the average of about 30 million barrels a day in 2014. Its forecasts imply an oversupply of more than 2 million barrels a day in the first half of this year.
Sebi notifies stringent insider trading norms
Market regulator Sebi has notified a stricter set of insider trading norms.
- The new norms will
Revamp nearly two-decade old regulations on insider trading and come into effect after four months, and would also ensure that genuine trades are not impacted.
Why it was necessary:
- The current regulations have many loopholes.
- The current framework is considered heavily skewed in favour of minority shareholders and, therefore, promoters say taking a company private is extremely difficult.
- New norms will check illicit transactions in shares of listed firms by management personnel and ‘connected persons’.
According to the New norms:
- The definition of ‘insider’ has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI). Directors, employees and all other persons in the deeming category covered under 1992 regulations would continue to be covered.
- Insider will also include a person who is in possession or has access to UPSI. Now, “immediate relatives will be presumed to be connected persons, with a right to rebut the presumption.” In 1992 regulations, definition of connected person was largely position based.
- In the case of connected persons the onus of establishing, that they were not in possession of UPSI, shall be on such connected persons.
- A provision of ‘Trading Plans’ on the lines of the U.S. has been introduced for insiders with necessary safeguards. Such a plan has to be for bonafide transactions and has to be disclosed on stock exchange platform in advance.
- The definition of UPSI has been strengthened by “providing a test to identify price sensitive information, aligning it with listing agreement and providing platform of disclosure”.
- Earlier, the definition of price sensitive information had reference to company only, now it has reference to both a company and securities.
- Companies by law would be entitled to require third-party connected persons to disclose their trading and holdings in securities of the company.
- The regulator has decided to remove the requirement for repeated disclosures and ease compliance burden. To protect the interest of investors, companies would be now mandatorily be required to disclose UPSI at least two days prior to trading in case of permitted communication of such information. Besides, communication of such information is prohibited except in instances of legitimate purposes or discharge of legal obligations.
- In line with the new Companies Act, prohibition on derivative trading by directors and key managerial personnel on securities of the company has been provided.
- Disclosure of UPSI in public domain has been made mandatory before trading, so as to rule out asymmetry of information in the market.
- To provide clarity, generally available information has been defined as information that is accessible to public on a non-discriminatory platform such as stock exchange.
- Among others, principle-based Code of Fair Disclosure and Code of Conduct has been prescribed.
Insider trading refers to dealing in securities after having access to unpublished price sensitive information and such practices provide unfair advantage to the entity who has privy to such details.
The latest norms have been prepared after taking into consideration recommendations of Sodhi panel and suggestions from various other quarters.
RBI cuts repo rate by 25 basis points, adjusts reverse repo rate to 6.75%
The Reserve Bank of India (RBI) has decided to cut the benchmark interest rate by 0.25 per cent to 7.75 per cent with a view to boost growth, encouraged by softening inflation.
- The RBI has been keeping the benchmark interest rate at elevated level at 8 per cent since January 2014.
- The RBI, however, has decided to keep the cash reserve ratio (CRR), the portion of deposits which the banks are required to have in cash with the central bank, unchanged at 4.0 per cent.
- Following reduction in the repo rate, the reverse repo rate has been adjusted to 6.75 per cent and the marginal standing facility (MSF) rate and Bank Rate to 8.75 per cent.
Cash reserve Ratio (CRR) is the amount of funds that the banks have to keep with the RBI. If the central bank decides to increase the CRR, the available amount with the banks comes down. The RBI uses the CRR to drain out excessive money from the system.
Reverse Repo rate is the rate at which the RBI borrows money from commercial banks. An increase in reverse repo rate can prompt banks to park more funds with the RBI to earn higher returns on idle cash. It is also a tool which can be used by the RBI to drain excess money out of the banking system.
Repo Rate is the rate at which the RBI lends money to commercial banks. It is an instrument of monetary policy. Whenever banks have any shortage of funds they can borrow from the RBI. A reduction in the repo rate helps banks get money at a cheaper rate and vice versa. The repo rate in India is similar to the discount rate in the US.