Fugitive Economic Offender

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Declaration of the Fugitive Economic Offender

  • According to the Fugitive Economic Offenders Act, 2018 a fugitive economic offender is a person against whom an arrest warrant has been issued for his or her involvement in economic offences involving at least Rs. 100 crore or more and has left India to avoid prosecution.
  • The investigating agencies have to file an application in a Special Court under the Prevention of Money-Laundering Act, 2002 containing details of the properties to be confiscated, and any information about the person’s whereabouts.
  • The Special Court will issue a notice for the person to appear at a specified place and date at least six weeks from the issue of notice.
  • Proceedings will be terminated if the person appears. If not the person would be declared as a Fugitive Economic Offender based on the evidence filed by the investigating agencies.
  • The person who is declared as a Fugitive Economic Offender can challenge the proclamation in the High Court within 30 days of such declaration according to the Fugitive Economic Offenders Act, 2018.

Why in news?

  • The  Prevention of Money Laundering (PMLA) court in Mumbai has declared Vijay Mallya as a Fugitive Economic Offender.
  • Vijay Mallya is the first businessman to be charged under the new fugitive economic offender’s act 2018.

Panda Bonds

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  • Panda bonds are Chinese renminbi-denominated bonds from a non-Chinese issuer, sold in the People’s Republic of China. 
  • The first two Panda bonds were issued in October 2005 by the International Finance Corporation and the Asian Development Bank on the same day.
  • The Philippines issued its inaugural Panda bonds in 2018. It was the first ASEAN member to issue Panda bonds.
  • Why in news? Pakistan has decided to issue Panda Bonds.

Consumer Price Index (CPI)

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Consumer Price Index (CPI) is based on the final prices of goods at the retail level.

Because of the wide disparities in the consumption baskets for different segment of consumers, India has adopted four CPIs.

  • CPI (Industrial Workers)
  • CPI (Urban Non- Manual Employees)
  • CPI (Agricultural Labour)
  • CPI (Rural Worker)

In India, RBI uses CPI (combined) released by CSO for inflation purpose with base year as 2012.

The number of items in CPI basket include 448 in rural and 460 in urban.

Wholesale Price Index (WPI)

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Wholesale Price Index (WPI) is based on the price prevailing in the wholesale markets or the price at which bulk  transactions are made.
It includes three components:
  • Manufactured products = 64.2%
  • Primary articles = 22.6%
  • Fuel and power = 13.1% now
Base year has been changed from 2004-05 to 2011-12.
The Wholesale Price Index is released by the Office of Economic Advisor (OEA), Department of Industrial Policy and Promotion, Ministry of Commerce and Industry.

GDP Vs GNP

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  • GDP: Gross Domestic Product (GDP) is the total money value of final goods and services produced in the economic territories of a country in a given year.
  • GDP stands for total value of goods and services produced inside the territory of India irrespective of whom produced it – whether by Indians or foreigners.
  • GNP: Gross National Product (GNP) is the total value of goods and services produced by the people of a country in a given year. It is not territory specific.
  • If we consider the GNP of India, it can be seen that GNP is lesser than GDP.

Share Buyback

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What is share buyback?

  • A buyback is a mechanism through which a listed company buys back shares from the market.
  • A buyback can be done either through open market purchases or through the tender offer route.
  • Under the open market mechanism, the company buys back the shares from the secondary market while under tender offer, shareholders can tender their shares during the buyback offer. Historically, most companies had preferred the open market route.

 

Why does a firm go in for a buyback?

  • Buybacks are typically done when a company has a significant cash reserve and feels that the shares are not fairly valued at the current market price.
  • Since the shares that are bought back are extinguished, the stake of the remaining shareholders rise. Promoters also use this mechanism to tighten their grip on the firm.

 

What are the benefits?

  • Since the bought back shares are extinguished, the earnings per share (EPS) rise by default. Also, since a buyback is usually done at a price higher than the then prevailing market price, shareholders get an attractive exit option, especially when the shares are thinly traded. It is also more tax-efficient than dividends as a way to reward shareholders.

 

How can a company execute a buyback?

  • A company can use a maximum of 25% of the aggregate of its free reserves and paid-up capital for a buyback. A special resolution needs to be passed at a general meeting. However, if the company plans to use less than 10% of its reserves then only a board resolution is required.

 

Can a firm opt for regular buybacks to boost EPS?

A company cannot do a second buyback offer within one year from the date of the closure of the last buyback. Also, there are time-bound limitations on further share issuances like preferential allotment or bonus issue post a buyback. These checks have been put in place so that companies do not misuse the buyback mechanism.

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Participatory Notes (P-notes)

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  • P-notes are offshore/overseas derivative instruments (ODIs) issued by registered foreign portfolio investors (FPIs) to overseas investors who wish to be part of the Indian stock market without registering themselves directly.
  • They, however, need to go through due diligence process.
  • P-Notes are not used within the country but are mainly used outside India for making investments in shares listed in the Indian stock market.
  • SEBI had permitted FIIS to participate and register in the Indian stock market in 1992. 
  • Earlier, investing through P-Notes is very simple and is very popular amongst FPIs, FIIs.
  • Note: Investments through participatory notes (P-notes) into Indian capital markets- equity, debt, and derivatives have plunged to over nine-year low  due to stringent SEBI norms.

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Safeguard Duty

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  • Safeguard Duty is tariff barrier imposed by government on the commodities to ensure that imports in excessive quantities do not harm the domestic industry.
  • It is mainly temporary measure undertaken by government in defence of the domestic industry which is harmed or has potential threat getting hared due to sudden cheap surge in imports.
  • Why in news? India has imposed safeguard duty of 25% on import of solar cells (whether or not assembled in modules or panels) from China and Malaysia. 

 

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GDP deflator

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What is GDP deflator?
  • The GDP deflator, also called implicit price deflator, is a measure of inflation.
  • It is the ratio of the value of goods and services an economy produces in a particular year at current prices to that of prices that prevailed during the base year.
  • This ratio helps show the extent to which the increase in gross domestic product has happened on account of higher prices rather than increase in output.
  • GDP price deflator measures the difference between real GDP and nominal GDP. Nominal GDP differs from real GDP as the later doesn’t include inflation, while the former does.
  • As a result, nominal GDP will most often be higher than real GDP in an expanding economy.
  • The formula to find the GDP price deflator:
  • GDP price deflator = (nominal GDP ÷ real GDP) x 100

 

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Why GDP deflator is a better measure of inflation than CPI / WPI?
  • Since the deflator covers the entire range of goods and services produced in the economy — as against the limited commodity baskets for the wholesale or consumer price indices — it is seen as a more comprehensive measure of inflation.
  • A consumer price index (CPI) measures changes over time in the general level of prices of goods and services that households acquire for the purpose of consumption.
  • However, since CPI is based only a basket of select goods and is calculated on prices included in it, it does not capture inflation across the economy as a whole.
  • The wholesale price index basket has no representation of the services sector and all the constituents are only goods whose prices are captured at the wholesale/producer level.
  • Changes in consumption patterns or introduction of goods and services are automatically reflected in the GDP deflator.
  • This allows the GDP deflator to absorb changes to an economy’s consumption or investment patterns. Often, the trends of the GDP deflator will be similar to that of the CPI.
  • Specifically, for the GDP deflator, the ‘basket’ in each year is the set of all goods that were produced domestically, weighted by the market value of the total consumption of each good.
  • Therefore, new expenditure patterns are allowed to show up in the deflator as people respond to changing prices. The theory behind this approach is that the GDP deflator reflects up-to-date expenditure patterns.
  • Drawback: GDP deflator is available only on a quarterly basis along with GDP estimates, whereas CPI and WPI data are released every month.