19th APRIL 2016
GS II:MONEY LAUNDERING
Mumbai court issues warrant against Mallya
In yet another step to secure the presence of liquor baron Vijay Mallya, the Enforcement Directorate obtained a non-bailable warrant against him from a Special Court here. The Ministry of External Affairs had earlier suspended Mr. Mallya’s passport on the ED’s advice.
Special Judge P.R. Bhavake, hearing a plea by the ED, ordered that the warrant would be issued in a case under the Prevention of Money Laundering Act.
The businessman, who left the country in the midst of efforts by a consortium of banks to recover dues from Kingfisher Airlines, did not appear before the agency in response to summons on three occasions.
A highly placed source in the ED told “The order copy by the court will be ready and signed on April 19, but because that day is a court holiday, the non-bailable warrant against Mr. Mallya will be issued on April 20.”
Advocate Hiten Venegavkar, representing the ED, said Mr. Mallya was summoned thrice for his statement to be recorded, but he repeatedly failed to appear before the ED. Hence, it was seeking a warrant against him.
ED officials said they would seek a Look Out Circular at all airports and ports in India in Mr. Mallya’s name on the basis of the NBW. The ED would also approach Interpol for issue of a Red Notice against him.
The ED’s case is based on the FIR registered by the CBI against Mr. Mallya and other unknown officials of the Mumbai-based IDBI for causing a loss of Rs. 900 crore to the public sector bank.
GS III: ECONOMY
Services corner bulk of FDI inflows
Although India received an all-time high annual foreign direct investment (FDI) in 2015, the surge is led by the inflows into the services sector rather than manufacturing or infrastructure. The ‘Make in India’ initiative has not yet materialised into FDI inflows.
More than half of total FDI inflows in 2015 came into the services sector, comprising software, financial services, trading, hospital and tourism, according to an analysis of the official data by the Department of Industrial Policy and Promotion and Citi Research. In 2014, the sector accounted for about a third of the gross inflows. FDI into the sector in 2015 was 111 per cent higher than in 2014.
Gross inflows are up more than 30 per cent to about $40 billion. Breakdown of the official data shows that the inflows into the manufacturing sector are up 6 per cent in 2015 after the 19 per cent fall in 2014. FDI into infrastructure in 2015 was marginally lower than in 2014.
While inflows rose significantly into some sectors the BJP-led NDA government opened up, including insurance, construction, broadcasting and tourism, the impact of the FDI liberalisation measures in defence, railways and retail is not visible.
Inflows to construction surged 188 per cent from $1527 million to $4,405 million. Insurance received $581 million against $236 million, a 146 per cent jump. FDI in Railways declined 67 per cent to $71 million from $213 million in the previous year. Air transport too saw lower inflows — $50 million against $73 million. For mining the fall was from $666 million to $547 million. The defence sector is yet to receive FDI.
In the 20 months of the NDA government, India has received total FDI of $85 billon compared to $59 billion in a similar period before that. FDI outflows (Indians investing overseas) declined 37 per cent, confirming the change in investor sentiment.
GS III: INFRASTRUCTURE
Government clears 170 stalled investment projects
There’s some good news, peppered with bad, on the investment front for the NDA government that is about to complete two years in office. Since March 2015, it(NDA government) has successfully removed roadblocks facing 170 stalled investment projects worth over Rs 6,00,000 crore, paving the way for their quicker implementation.
Yet, the task of unravelling red tape from such long-delayed projects that are driving up non-performing assets in the banking sector, is proving to be virtually Sisyphean. Over the same period, 260 more held up projects worth almost Rs 7 lakh crore were added to the waiting list of projects seeking government’s intervention to uproot obstacles thwarting them.
As a consequence, 395 stalled investment plans worth Rs 19.7 lakh crore now await an intervention from the project monitoring group in the cabinet secretariat that was set up to facilitate clearances, licences and other policy hurdles holding up large investment projects. The corresponding numbers in March 2015 stood at 305 projects worth Rs 18.84 lakh crore.
“From the time the project monitoring group (PMG) was set up in January 2013 till May 2014, it had managed to enable a resolution of problems facing about 150 projects worth Rs 5.5 lakh crore. By that yardstick, fixing 170 projects worth six lakh crore over the past twelve months or so is commendable,” said a senior official familiar with the functioning of the group.
While the group only facilitates clearances for projects with investments of over Rs 1,000 crore or critical public sector infrastructure projects below that investment threshold, the rise in its pending workload ties in with the assessment of the Centre for Monitoring Indian Economy (CMIE) that the spectre of stalled projects has peaked in March 2016.
“An important measure of the investment climate changing is a fall in the projects stalled. However, such a phenomenon is not seen, as yet. Projects whose implementation was stalled for various reasons peaked in March 2016 (and they are at their highest level in absolute terms) at Rs 11.4 trillion,” CMIE said in a note earlier this month.
According to CMIE, the value of the stock of stalled projects as a proportion of projects under implementation peaked at 12.3 per cent as of March 2016.
The number of stalled projects have also peaked, at 16 per cent of all projects under implementation, the agency noted.
“There is a paradigm shift in the underlying causes for stalling investment plans,” remarked Vinayak Chatterjee, chairman of Feedback Infra Private Limited.
“A lot of historical stock of stalled projects had to do with pending government clearances or permits, bureaucratic and political hand-wringing and sectoral policy hurdles such as gas pricing policy, for instance,” he said.
“By contrast, most projects that are getting stuck now are not over issues pertaining to the central government.
Most of them are getting delayed owing to market-related postponements, driven by low commodity prices in many sectors; promoters facing funding constraints as well as the banking sector turning more tight-fisted,” Mr Chatterjee said.