What is it? The extent to which states should have flexibility in spending funds received under the Centrally Sponsored Schemes (CSS) according to state chief ministers in a Niti Aayog report.
Why is it important? That’s up 15 percentage points, to a quarter from a tenth now. Higher share of flexi-fund within CSS, which are largely funded by centre but implemented by the states, can help in meeting the local needs.
Tell me more: Review of CSS was being done after the fourteenth Finance Commission devolved 42% of net tax collected by centre to the states, as against 32%. Post-this, central government was looking to rationalize its support for CSS by cutting down number of schemes and reduce support to others.
What is it? The jump up in India’s global ranking in ease of doing business in last one year till June 2015.
Why is it important? At 130, India is still at the bottom of the pack. Yet, it might help. This ranking acts as a barometer of doing business in India. An improvement here will positively impact ‘Make in India’ campaign by government that aims to attract large foreign investment to set up factories locally.
Tell me more: An amendment in Companies Act that did away with the requirement to deposit Rs 100,000 to start a company, along with Delhi power utility doing away inspection of internal wiring contributed to India’s ranking moving up by four places.
Rs 1,200 crore
What is it? The amount Indian Railways will received as the first installment from Life Insurance Corporation (LIC) as part of the Rs 150,000 crore long term loan from India’s largest insurance company over the next five years to improve infrastructure.
Why is it important? It’s a win-win solution. Railways was not having enough money to invest to improve its infrastructure and was not getting adequate financial support from the central government. Money from LIC at reasonable rate at longer tenure will improve its infrastructure. For LIC, it will help them match their deployment of funds with their promise of securing life over a long period.
Tell me more: LIC will charge 30 basis points (one basis point is one-hundredth of a percentage point) above 10-year benchmark yield of government securities. The tenure is 30 years, with no repayment for first five years. Then only interest payment from the sixth to tenth year. From the eleventh year, money has to be repaid in yearly installments. Railways has set an investment target of Rs 8.5 trillion by 2019, out of which Rs 1.5 trillion will be met by borrowing from LIC.
Why is it important? Shows Indian companies are preferring to borrow locally. The shift towards domestic bond market is due to volatile foreign exchange market that has made overseas borrowing costlier by pushing up hedging costs. Domestic borrowing via corporate bonds has increased by two-thirds in the first six months of current fiscal to Rs 2.4 lakh crore. During the same time, ECBs fell to a five-year low of $ 11.8 billion.
Tell me more: Central bank is now debating a proposal to allow Indian firms to borrow for a longer tenure of 10 years, as against 5 years now under ECBs.
What is it? India’s largest carmaker Maruti Suzuki’s maximum target royalty payment as a percentage of its net sales in four years. It’s 6% now.
Why is it important? In last fifteen years, the royalty per car sold has increased by 6.5 times, even as sales realization increased by only 1.6 times in the same period. This was questioned by Institutional Investor Advisory Services, a proxy advisory firm, in a recent report as local Research and Development is contributing significantly in new models. Less royalty means more profit margins.
Tell me more: Maruti, which sells 1.2 million cars a year, account for a third of its parent revenue.