Economy
Parliament nod needed on FEMA rules for implementing FDI: CAIT

According to the Confederation of All India Traders, the union government's notification on FDI in multi-brand retail will be valid only if amendments made by the RBI in FEMA rules

 
New Delhi: The foreign direct investment (FDI) notification on multi- brand retail by the government will be valid only if amendments made by the Reserve Bank of India (RBI) in the Foreign Exchange Management Act 1999 (FEMA) rules are approved by Parliament, the Confederation of All India Traders (CAIT) has said, reports PTI.
 
"The FDI notification can be valid and effective only if the amendments made by RBI in rules and regulations of Foreign Exchange Management Act,1999 (FEMA) are approved by "each house" of Parliament which is an inherited provision in Section 48 of the FEMA Act," CAIT Secretary General Praveen Khandelwal said in a statement.
 
He added that the said provision is explicit and does not have ambiguity or discretion.
 
"The government is terming it merely as an executive order which does not need approval of Parliament is factually a distortion of facts," Khandelwal said.
 
The statement said that CAIT in a communication to all Parliamentary Party Leaders has drawn their attention to the provision of Section 48 under which such amendments must be passed within 30 days from the date of its introduction in Parliament.
 
As per parliamentary procedure any such amendment will go to Committee on Subordinate legislation of each house which will scrutinise the same and will submit its report to Presiding Officer of their respective house and then house will decide the issue, it said.
 
Khandelwal said that calling the notification an enabling policy for the states to decide whether to implement the same or not is misleading.
 
The statement said that the GATS agreement under WTO and 82 Bilateral Investment Promotion Treaties signed binds the Government to provide "national treatment" to foreign investor which implies that no discrimination can be made between a domestic company and the foreign investor.
 
"Therefore, the states have no choice," it added.
 

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Allowing banks to buy back gold could curb imports: SBI head

Banks are not allowed to trade on the commodities market, including gold, as the regulator and the government fear that their entry could spike inflation that too when all banks are selling gold, but are not allowed to buy back the same

 
Mumbai: The Reserve Bank of India (RBI) should relook at the ban on banks buying back gold as such a move could improve liquidity in the system, increase supply of the metal and bring down imports, said Pratip Chaudhuri, chairman of State Bank of India (SBI).
 
Banks are not allowed to trade on the commodities market, including gold, as the regulator and the government fear that their entry could spike inflation.
 
"The existing ban is impeding the liquidity of gold holdings in the country. Today all banks sell gold, but the RBI does not allow them to buy back their own gold. Suppose, somebody has taken gold from my bank and the same gold, even without opening the seal comes back to me, I cannot buy it back", Chaudhuri said, addressing a panel discussion on gold imports at the second day of the national banking summit Bancon.
 
"What could be the underlying thought? Don't you think it is impeding the liquidity of gold holdings in the country," Chaudhuri asked RBI deputy governor Subir Gokarn, to which he responded that the RBI could revisit the subject once the BKU Rao report on the subject is submitted.
 
"Obviously, we have to reconcile to the existing regulatory barriers. Once we have feedback on the points, we will come for debate," he said, adding that the RBI panel would shortly elaborate on ways to deal with the problem arising from high gold imports on the macroeconomic front, in the from of balance of payments.
 
Experts blame rising gold demand, price rise and the resulting surge in imports to hoarding by jewellers and other market participants.
 
Gokarn called for dematerialisation of gold to arrest rising gold demand, as rising imports of the metal has been blamed for the high current account deficit feared to touch new record highs this year.
 
The current account deficit or CAD has been rising on the back of record trade deficits, which in October jumped to a 12-year high of $21 billion on the back of rising crude oil and gold imports.
 
He said while global gold output has stayed stable at around 4,000 tonne per year, domestic consumption of the yellow metal doubled to 1,000 tonne annually since 1999, despite a massive rally in prices.
 
As gold imports touched a record high last year, pushing up the current account deficit to a historic high of 4.2% in the year, the RBI unveiled a slew of curbs on gold purchase and financing.
 
Last fiscal, there was a 39% rise in gold imports and in gross terms, it constituted for 80% of the current account deficit, which reached an all time high of 4.2%, Gokarn said, adding that net gold imports constitute for 1.8-2.4%t of GDP.
 

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Nifty, Sensex may see an upmove: Weekly Market Report

A close above 5,665 on the Nifty on Monday may see the upmove gaining strength, possibly to 5,710

 
The market gained around a percent mainly on international support as global indicators point to a gradual improvement in the economies across the world. However, the domestic gains were capped towards the end of the week as the first two days of the Winter Session of Parliament was a washout due to opposition to FDI in multi-brand retail and the issue of scheduled castes and scheduled tribes promotions. Parliament proceeding and the expiry of the November F&O contract will keep the market volatile next week.
 
The Sensex closed the week at 18,507, up 197 points (1.08%) and the Nifty finished 53 points (0.94%) higher at 5,627. A strong close above 5,665 may bring more momentum to the uptrend and may see the index reach to the level of 5,710. However, Friday’s low continues to be the crucial level to watch.
 
The market settled flat with a mixed bias on Monday after remaining listless for a major part of the session. Selling pressure in realty, oil & gas and metal stocks saw the benchmarks paring their gains and ending flat on Tuesday. Hopes of the government’s reforms being approved by Parliament in the Winter Session pushed the market higher on Wednesday.
 
Opposition to the government’s reforms marred Parliament proceedings on Thursday resulting in the benchmarks closing flat. The market settled flat to negative on Friday as the second day of the Winter Session also proved to be a washout.
 
BSE Fast Moving Consumer Goods (up 3%) and BSE Auto (up 2%) were the key sectoral gainers while BSE PSU and BSE Power (down 1% each) were the main losers.
 
Among Sensex stocks, Mahindra & Mahindra (up 7%), ITC, HDFC Bank, Sun Pharmaceutical Industries and Maruti Suzuki (up 4% each) were the chief gainers. NTPC (down 4%), BHEL, GAIL India, ONGC and Tata Motors (down 2% each) settled at the bottom of the index.
 
The key Nifty toppers were M&M (up 7%), HCL Technologies (up 5%), ITC, HDFC Bank and Sun Pharma (up 4% each). The major losers on the index in the week were Ranbaxy Laboratories (down 5%), NTPC (down 4%), Lupin, ONGC (down 3% each) and BHEL (down 2%).
 
Kick-starting the disinvestment process of this year, the government on Friday sold 5.58% stake in Hindustan Copper for about Rs808 crore at an average price of Rs156.56 apiece, with bulk of the bids coming from LIC and PSU banks. 
 
Encouraged by the response to the first stake sale in the current financial year, finance minister P Chidambaram expressed the hope that government would able to garner the targeted Rs30,000 crore in 2012-13 through disinvestment.
 
The government on Thursday cleared the National Pharmaceutical Pricing Policy that will bring 348 essential drugs under price control, leading to reduction in prices. The pricing now would be based on simple average of rates of all brands which have more than 1% market share. While drug companies may declare that it will impact their profit margins for some drugs, they must have sighed a relief that cost-based model is scrapped. MBP will legitimise overpricing of life-saving drugs.
 
Reports of a possible agreement with the Congress on the US budget and positive economic data from across the world helped the US markets close the week at their best since June. Meanwhile, Greece said the International Monetary Fund had made some concessions in the debt-cutting target for the country, suggesting lenders were closer to a deal for a vital aid tranche to be paid.
 

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