Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
FDI norms, subsidies & more - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Aug 8, 2008

    FDI norms, subsidies & more

    Inflation hits 13-year high
    Wholesale price based inflation numbers for the week ended July 26, 2008 rose to 12.01%. This is the first time the number has breached the 12% mark in 13 years on the back of soaring food and non-food article prices. However, as indicated by policymakers from the Reserve Bank of India (RBI) and economists, it is expected that lower crude prices and monsoons will lessen inflation going forward bringing the number down by the end of the year. It may be noted that last week the RBI had raised its key lending rates - the repo rate and cash reserve ratio - to 9% each with a view to keep inflation expectations and rising prices in check.

  • Also read - RBI doesn't give up

    Heightened security to affect FDI norms
    Foreign direct investment (FDI) in sensitive sectors such as airports and ports is likely to be screened from the standpoint of national security going forward. Currently, 100% FDI in greenfield airport projects and 74% FDI in existing projects is allowed under the automatic route, while 100% FDI in all port projects get a similar approval. As per the home ministry, FDI in these sectors in the future will not get automatic approvals and will have to be screened under the National Security Exception Act. This act is said to be modeled on the Exxon-Florio provision in the US, under which foreign companies can be denied ownership of local assets if it compromises on internal security.

    While several ministries were earlier apprehensive of such a law, they are now having second thoughts on the back of heightened security concerns. The main concern is not about the infrastructure building, but the flow of money from tax havens like Mauritius. However, the finance ministry is against the enactment of new laws. It feels that strengthening existing laws and better enforcement is a better option as new laws send out negative signals to potential investors.

  • Also read - Not FIIs, but FDIs are coming in

    Oil subsidy has a close cousin
    And that is the subsidy that the government provides on fertilisers. The subsidy burden on fertiliser is pegged at around Rs 1,200 bn for FY09 on the back of a spike in the international prices of urea and other inputs, which have to be imported. It may be noted that this is equivalent to about 50% of the amount of gross under-recoveries suffered by the oil companies. Interestingly, the government has sanctioned only Rs 310 bn in the Union Budget on fertiliser subsidy. Just as the selling prices of petroleum products in India are kept low, fertiliser prices are also artificially subdued. The ministry of chemicals and fertilisers has assured the fertiliser manufacturers that even if the subsidy burden crosses the Rs 1,200 bn mark, they will still be compensated fully, most likely in cash. While the farming community does need inputs at affordable prices, we wonder whether the time has come for direct cash assistance to the needy rather than indirect subsidies. Such subsidies have the undesirable effect of distorting price signals and also make life difficult for manufacturers.



    Equitymaster requests your view! Post a comment on "FDI norms, subsidies & more". Click here!


    More Views on News

    How to Ride Alongside India's Best Fund Managers (The 5 Minute Wrapup)

    Jun 10, 2017

    Forty Indian investing gurus, as worthy of imitation as the legendary Peter Lynch, can help you get rich in the stock market.

    Dear PM Modi, India is Already Land of Self-Employed, and It Ain't Working (Vivek Kaul's Diary)

    Aug 21, 2017

    Most Indians who cannot find jobs, look at becoming self-employed.

    The Key Factor Pushing Gold Up These Days (Outside View)

    Aug 21, 2017

    PersonalFN explains the chief factor pushing gold prices up of late.

    How Unique Are the Companies You Invest In? (The 5 Minute Wrapup)

    Aug 21, 2017

    One of the hallmarks of successful investing is to look out for companies that have a unique and enduring moat.

    You've Heard of Timeless Books... Ever Heard of Timeless Stocks? (The 5 Minute Wrapup)

    Aug 19, 2017

    Ever heard of Lindy Effect? Find out how you can use it to pick timeless stocks.

    More Views on News

    Most Popular

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    The Most Profitable Investment in the History of the World(Vivek Kaul's Diary)

    Aug 8, 2017

    'Yes, it looks like a bubble. And, yes, it's like buying a lottery ticket. But there's something happening that has never happened before. It's an evolutionary leap in money itself.'

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    Bitcoin Continues Stellar Rise(Chart Of The Day)

    Aug 10, 2017

    Bitcoin hits an all-time high, is there more upside left?

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 21, 2017 (Close)