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Narendra Modi's Ninth (9th) week in Office Analysis

Narendra Modi's Ninth (9th) week in Office Analysis

This week saw some good news for the airlines industry even as India stuck to its stand regarding the Trade Facilitation Agreement at the G20 meet in Sydney.

Work done in week 9 of Modi Government.

----------------------------------------------------------------------------------------------------------------------------------Six New Airlines to take up to the Sky

With the government liberally clearing the aviation licenses, new airlines are all set to take to the skies. Civil aviation minister Ashok Gajapathi Raju has awarded no-objection certificates to six airlines. These applications have been awaiting approval for a long time and the clearances pave way for three new airlines - Air One Aviation Pvt Ltd, Zexus Air and Premier Air - to ply the national route and another three airlines - Turbo Megha, Air Carnival and Zav Airways - to operate in the regional route.

The earlier United Progressive Alliance (UPA) government was selective in granting the licenses and was even contemplating on tightening the criteria meant for new permits so as to limit the number of domestic airlines. However, with this move the National Democratic Alliance (NDA) government opens the market for new players, which in turn will encourage competition, lead to better connectivity across the country and of course lower fares for the consumers.

Currently, India has eight airlines - Air India, IndiGo, SpiceJet, Jet Airways, Go Air, Air Costa, Jet Lite, and Air Asia India. It was in 2005-06 that four new airlines - Go Air, Kingfisher Airlines, Indigo and re-launched SpiceJet began their operations in India. It is now after a span of nearly 10 years that India will have new airlines. Everyone seems to welcome this news, especially the tourism sector. The tour operators have enthusiastically hailed this move and are eagerly awaiting the growth and competition that is set to follow.

With the no-objection certificate at their disposal, the new airlines will now approach the aviation regulator Directorate General of Civil Aviation (DGCA) for the licence. This process is likely to take about three months.

India at G20 Meet

India was represented by Commerce Minister Nirmala Sitharaman at the meeting of trade ministers of the Group of Twenty (G20) nations in Sydney this week.

India continued with its opposition of the Trade Facilitation Agreement (TFA). The TFA is supposed to be formally adopted by the World Trade Organization (WTO) members by 31st July and is scheduled to come into force by 30th July 2015.

The TFA aims to promote free trade by adopting simple customs procedures, facilitating speedy release of goods from ports and cutting transaction costs. However, developing countries believe that the TFA is more beneficial to wealthy nations than them. India has been opposing the TFA as it feels the discussions around zeroing down a permanent solution on the issue of food security and public stockholding is not progressing the way it should have been.

However at the G20 Meet, India’s opposition was not given much heed. The Australian trade and investment minister Andrew Robb in his capacity as the chairman said in a message that everyone present at the Meet undertook to show leadership in their support for the full implementation of all elements of the Bali outcome agreed at the 9th WTO Ministerial Conference in December 2013, including the Agreement on Trade Facilitation, as per the agreed timelines. This message, which completely ignored India’s opposition, was put up on the website after the G20 Meet. This is a clear indication that India is finding itself completely isolated on the issue of food security and public stockholding on the global arena. Food security is a critical issue for India and it should soon find allies for support if it wants to push it through.

India Takes a Stand on TFA

India decided that it would not buckle under the pressure of developed countries and stick to its stand regarding WTO’s Trade Facilitation Agreement.

This proved a major road block in the implementation of the TFA at the General Council of the 160-member WTO meeting in Geneva. The decisions at WTO are reached based on consensus and India’s opposition did not allow the other countries to adopt the TFA.

What is India looking for? India wants a permanent solution for its public stockholding issues before it adopts the TFA protocol. The existing WTO norms limit the value of food subsidies at 10 percent of the value of food grain produced. However, the prices are not calculated on current prices but on prices that are very old. India is asking for a change in the base year. India is also worried that TFA norms may hamper its programmes of feeding the poor.

Those who support the TFA believe that the deal can bring in about 1 trillion to global domestic product and generate about 21 million jobs.

Government Raises FD cap in Insurance to 49 percent

Considered to be the new NDA government’s first major economic reform, the Cabinet Committee on Economic Affairs (CCEA) approved the raising of Foreign Direct Investment (FDI) cap in insurance from 26 percent to 49 percent. This will ensure more capital inflows into the insurance sector. Even as the investment cap is raised to 49 percent, the full management control will remain with Indian entity.

With a view to arrest the rise in food inflation that may be triggered by weak monsoons, the Cabinet has approved to divert government-procured food grains to the open market. Speaking after the meeting, Food Minister Ram Vials Paswan said that the grains will be sold from reserves of about 39.8 million tonnes and the state-run Food Corporation of India will be selling wheat through e-tendering process.

The Cabinet also cleared a Bill that is intended to give more powers to Securities and Exchange Board of India (Sebi) to come down heavily on illegal collective investment schemes.

With the Cabinet approval in place, the Insurance (Amendment) Bill and the Securities Laws (Amendment) Bill will be tabled in the Parliament during the ongoing budget session or later in the winter session.


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Last Updated on July 26, 2014, 11:00 am