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Here Are The Major Economic Reforms In India Since 1947

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Here Are The Major Economic Reforms In India Since 1947

‘Economic reform’ usually refers to changes brought to the existing Laws and economic policies; it is an economic reform. Since India’s independence, the economy has undergone considerable changes in its financial system. On entering the 74th Independence Day of ‘Incredible India,’ let’s look into a few of the significant ‘major economic reforms’:-

  • Banking Reforms, 1969

Banking Reform refers to the nationalization of banks. The only female Prime Minister of India, Indira Gandhi, took a significant step by nationalizing 14 banks to keep up with the growing demand to nationalize banks in 1969. The reason for the nationalization was two, and they are as follows:-

  1. Unavailability of sufficient credit;
  2. Sluggish functioning of the banking sector.

As a result, banks are able to operate efficiently, and the public’s confidence in banks has increased. Additionally, several Non-Banking Financial Institutions (NBFCs) and Banking Financial Institutions (BFIs) have sprung up in this sector.

  • Abolishing ‘Privy Purse,’ 1971

‘Privy Purse’ was a payment to the royal families of the princely states, which had to be merged with newly formed India in 1947. In 1971, Indira Gandhi advocated for its abolition based on ‘equal rights’ of all citizens and the need to reduce the Government’s revenue deficit. It was a massive blow to the Indian royalties as they were also required to pay taxes and were no longer invisible from the Law.

  • Stopping the ‘License Raj,’ 1991

The ‘License Raj’ or ‘Permit Raj’ is the elaborate system of licenses, regulations and accompanying red tape required to set up and run businesses in India between 1947 and 1990. A firm needed approval from 80 agencies before a license to produce something could be obtained.

Even after receiving the license, the firms had to undergo a complex set of compliance rules. After introducing the reforms since 1991, the firms and other business houses could function appropriately without having to worry about ‘red-tapism.’ Dr. Manmohan Singh, the then Finance Minister, played a crucial role in freeing India from the License Raj.

  • New Economic Policy, 1991

There were three major components to the New Economic Policy, 1991:-

  1. Liberalization;
  2. Privatization;
  3. Globalization.

The New Economic Policy led to many benefits to the Indian businesses, a few of which are:-

  1. Increasing Competition;
  2. More demanding customers;
  3. Adoption of new technology;
  4. Initiative to develop human resources and skills;
  5. Provision of Market Orientation.

Since the Liberalization process, the Indian markets opened itself to both private and public sector companies. Steadily, the nation started carrying out those businesses that had foreign organizations too.

  • Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015

It is an Act by the Parliament of India which aims to curb black money, undisclosed foreign assets and income, also imposes tax and penalty on such income. The Lok Sabha enacted it on May 11, 2015, and the Rajya Sabha on May 13, 2015. This Law seeks to bring back the income and assets held abroad back to the country. Failure to comply with the Act’s requirements leads to severe consequences in the form of penalties and possible imprisonments.

  • Foreign Direct Investment (FDI) in various Sectors

FDI is a significant source of finance for the development of businesses and the economy in India. When foreign companies invest directly in Indian businesses, it improves the name and reputation of the latter.

On July 22, 2020, the Indian Prime Minister, Narendra Modi, had stated that ‘India had managed to attract 20 per cent more FDI than it did in 2019’ at the ‘India ideas’ summit, which was an Indo-US trade summit organized by the US-India Business Council (USIBC). He went on to add that ‘Every year, we are reaching record highs in FDI. FDI inflows in India in 2019-2020 were 74 billion dollars, an increase of 20 per cent compared to the previous year.

The following table shows a brief analysis of the sectors where we can expect an inflow of the FDI:-

Sector

Analysis

Healthcare

Growing faster than 22 per cent each year
Insurance

Increased up to 49 per cent

Defense

Increasing up to 74 per cent

While inviting investments, the Prime Minister further stated that the Indian economy is evolving into a gas-based economy wherein we build houses, roads, and ports.

  • Goods and Services Tax (GST)

Prime Minister Narendra Modi finally launched GST into operation on July 1, 2017, after nearly 20 years of its introduction under the Vajpayee Government. The benefits of GST, which continue its positive effects even today, are as follows:-

  1. Creation of a unified national market;
  2. A push towards the ‘Make in India’ initiative;
  3. Enhanced investment and employment;
  4. A simplified tax structure;
  5. Ease in carrying out business;
  6. Automated procedures, with greater use of Information Technology;
  7. Reduction in compliance costs;
  8. Benefits to the agriculture, trade and industries;
  9. Mitigation of the ill-effects of cascading or ‘tax on tax’;
  10. Benefits to small traders and entrepreneurs.
  11. Although GST has received criticisms, its advantages outweigh its disadvantages.
  • Demonetization, 2016

The announcement made by Narendra Modi on November 8, 2017, of demonetizing all Rs. 500/- and Rs. 1,000/- banknotes, took the entire nation by surprise. The objectives for making such an announcement are as follows:-

  1. Decrease the usage of black money;
  2. Increase cash in the banking system up to the extent possible;
  3. Stop the handling of fake currencies;
  4. Reduce all the possible funds that could be used for terrorism.

Many restrictions were imposed to affect the Government’s initiative. Several problems were encountered by the common people to meet up with the requirements on such short notice. As per the latest reports, even though digital payments and cashless transactions became popular, India is ‘still recovering’ from the demonetization shock.

  • Introduction of the National Institute for Transforming India (NITI) Aayog

On May 24, 2014, Narendra Modi had replaced the long-standing Planning Commission with NITI Aayog. The main aim of this was to serve the needs and aspirations of the Indian citizens in a better manner. The NITI Aayog is the premier policy ‘Think Tank’ of the Indian Government, providing directional and policy inputs.

  • Considering ‘start-ups’ as a new business model.

The ‘Start-Up India’ Scheme is an initiative by the Indian Government to generate employment opportunities and the creation of wealth in the country. Narendra Modi launched this scheme on January 16, 2016, with the following benefits:-

  1. Simplification of work;
  2. Financial support;
  3. Easy access to Government tenders;
  4. Bigger Networking opportunities.

Narendra Modi had also mentioned during the ‘India Ideas’ summit that ‘During the last six years, we have made many efforts to make our economy more open and reform-oriented. Reforms have ensured increased competitiveness, enhanced transparency, expanded digitization, greater innovation, and more policy stability.’ With the ongoing changes and developments taking place at a rapid speed, one can only hope that the Indian economy and the land continues to thrive in the years to come.

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How SEBI’s New Margin Rule Is Affecting Retail Traders?

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SEBI Margin Rule | News Aur Chai

Securities and Exchange Board of India has introduced new margin rules for traders. Traders and Brokers are not happy with the new regulations because they will have to invest a large amount of cash in fulfilling margin requirements for trade.

SEBI had introduced the new margin rule in the year 2020 for intraday traders. It is being implemented in a phased manner. Traders were supposed to maintain 25 per cent of the peak margin in the first phase; the margin was raised by 50 per cent in the second phase. In the third phase, as per the new margin rule, intraday traders will have to pay a 100 per cent upfront margin. According to new norms, the margin requirements will be calculated four times during every trading session because the money margin must be greater than the need.

As per the new rule, brokers must collect margin from investors for any purchase or sale, and if they fail to do so, they will have to pay the penalty. Thus, brokers will not receive power of attorney. Brokers cannot use power of attorney for pledging anymore.

Those investors who want to make use of margin will have to create margin pledges separately. As per the new rule, investors will have to pay at least a 30 per cent margin upfront to avail a margin loan. Shares brought today cannot be sold tomorrow. Funds from shares sold today cannot be used for new trades on the same day.

The market experts said that there must be proper adjustments for implementing new rules, or it may create chaos, trouble and disturbance to the market participants. The CEO and founder of Zerodha broking firm, Nithin Kamath tweeted that, “the day when the new rules came into effect was the dreaded day for brokers, exchanges, intraday traders”.

Traders Are Not Happy:

Changes in rules have evoked strong reactions from traders because they will have to invest a large amount of cash in fulfilling margin requirements for trades as per new margin rules. Even the trading in futures and options will become more expensive. Traders are disappointed because they will have to pay up more money to bet in stock markets. As per new margin rules, Traders are also liable for the penalty if the rules are not followed during the trading session. If a trader wants to buy Nifty worth Rs 10 lakh, he will have to pay a 20 per cent margin of around 2 lakh. If the margin of the trader does not meet the need, he will be penalized. Traders will have to pay the minimum amount for opening the Multilateral Trading facility account, and they have to maintain a minor balance at all times.

Why Gas SEBI Introduced A New Margin Rule?

SEBI has introduced new rules to protect retail investors from purchasing difficulty. The intended goal of SEBI behind new margin rules is to bring down the difficult market situation and avoid huge fluctuation in stock markets during extreme stress. The new margin rules are likely to bring transparency to the market; it is expected to strengthen the market’s safety.

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Maya Global Education Society Acquires GIAP Journals

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GIAP MGES Journals | News Aur Chai

Gyandhara International Academic Publications (GIAP Journals), headquarter at Mira Road, Thane, Maharashtra, has been completely acquired by Maya Global Education Society (MGES), Prayagraj, India, with effect from 25th August 2021. Maya Global Education Society is an emerging confluence of academicians to cater to challenges in the educational and research domain in the post-pandemic world. Its headquarter is at Prayagraj, India.

According to our trusted sources value of this acquisition is around 50,000 USD. MGES claimed that their core activity is developing an online research-based education and training system that will reach all parts of the society irrespective of their economic status.

MGES aims to delve into the following activities:
* Training to academicians on tools and systems to improve students’ engagement in an online environment.
* Training to early researchers on research tools, software, and methodology.
* Training to early professionals and graduates to meet the skills demand of Industrial Revolution 4.0 (based on World Economic Forum suggestions).
* Publication of open access research journals and books (Recently acquired GIAP Journals).
* Distribution of scholarly content to Universities and higher education institutions.

GIAP cofounder and CEO Mrs. Rajni told us in an exclusive interview that the journey of GIAP was like a dream come true. It started in 2012 with loans on personal jewelry. After serving in the academic fraternity for the last 9 years, it was a timely decision for all journals and books to grow under the able guidance of pure academicians and researchers.

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Kitex’s Stock Surged 46% In A Week Post Tussle With Kerala Government

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Kitex Vs Pinarayi Vijayan & Kerala Government 2021 | News Aur Chai

The stock of Kitex Garments, the world’s second-largest manufacturer of kids’ garments, based in Kerala, saw a secular uptrend recently, after the company’s announcement that it will relocate to Telangana following a squabble with the Kerala government. The group withdrew a 3,500-crore investment project from Kerala and is planning to move to Telangana with a 1000 crore worth investment project.

Sabu M Jacob, the chairperson and managing director of the Kitex Group, stated his morality forbids him from ever investing a single rupee in Kerala, his native state. The comment brings the confrontation between the Kerala government and the homegrown firm to a close.

What is at the root of the clash?

Kitex has been subjected to repeated inspections by various Kerala government authorities in recent weeks, with group chairperson Sabu Jacob publicly accusing Pinarayi Vijayan’s Left administration of hounding the firm.

The inspections, Jacob said, were intended to “harass” businesses like him and “push him into a corner.” The authorities who came down to examine the firm, he claimed, seemed as though they were on the lookout for thieves and criminals.

P Rajeev, the state’s Industries Minister, emphasized that the government had not conducted any Suo Motu inspections of the firm. While the industries department did not conduct any searches, he said the health and labour agencies did so in response to orders from the Kerala High Court and the National Human Rights Commission based on individual complaints. The accusations are allegedly related to the company’s treatment of employees and the contamination of a nearby river due to wastewater discharge.

A Congress MP and a Congress MLA, and a female employee filed charges against the organization. The charges ranged from polluting a local waterway to harassing employees and violating minimum wage laws.

The Kerala government has denied targeting Kitex on purpose. The inspections were carried out in response to complaints and directives from courts and the state’s human rights commission; according to state industries minister P. Rajeev, he said his government stands for “responsible investment”, and the state would be a hub for such investments in a few years. He added, “The LDF Govt. ensures that sustainable and innovative industries thrive here,”

What was the aftermath of the inspections?

Even though the final findings of the official inspections are still pending, Jacob escalated his feud with the government by announcing that he was cancelling investments worth Rs 3,500 crores that were announced during the ASCEND conference in January 2020. By 2025, the investments were intended at establishing an apparel park and industrial parks along the proposed economic corridor in Kochi, Thiruvananthapuram, and Palakkad, resulting in the creation of thousands of employment opportunities.

Without identifying anyone in the state administration, Jacob said that the state lacked a business-friendly environment. While he did not want to relinquish the intended investments in Kerala, he said he was compelled to do so due to political and bureaucratic persecution. He said that although other states in the country were gradually improving their economic environment, Kerala was still 50 years behind.

Jacob and a few Kitex officials went to Hyderabad last week on a private plane supplied by the Telangana government, where they met with a team led by the state’s Industries Minister, KT Rama Rao. The business revealed intentions to spend Rs 1,000 crore in an apparel park at the Kakatiya Mega Textile Park in Warangal after two days of negotiations.

The political consequences of the experiment

Jacob, the founder of the Kitex Group, is an industrialist who has also dabbled in politics. Jacob launched Twenty 20, a one-of-a-kind political experiment that won seats in panchayat elections in 2015 and then built on that success in the 2020 elections by winning seats in new panchayats.
This corporate-driven panchayat model has resulted in a lot of growth in tiny villages, putting both the Congress and the Communist Party of India in danger (Marxist).

Kerala’s rating in terms of ease of doing business

Kerala ranks worse than many other states and union territories when it comes to the ease of doing business. Based on improvements that states were asked to adopt in 2019, it was placed 28th out of 36 states and UTs in the ease of doing business rankings.

Kerala was judged to have failed to implement some labour reforms, such as single-window clearance and measures to ensure simple information flow and transparency.
Following the Kitex withdrawal, however, several groups that had thrived in the state for years came out openly in favour of the state administration.

RPG Enterprise’s chairperson Harsh Goenka publicly tweeted in support of the administration. He stated, “We are the largest employers in Kerala. We find the local government very supportive,”

Where does the company stand in the share market?

With the decision to invest in Telangana, Kitex’s shares were once again trapped in the upper circuit. On Wednesday, the stock soared almost 10%, reaching a record high of Rs 204.05.

Within a week, the stock price of the children’s clothing company rose by almost 85 percent. The stock price increased from Rs 110.05 to Rs 204.05, reaching its highest level in three years. The company’s market capitalization increased to Rs 1,357 crore from Rs 732 crore as a result of this.

Because it controls 55 percent of the firm, the promoter entity, which includes Kitex Managing Director Sabu Jacob, profited Rs 347 crore. Sabu Jacob’s entire share value increased to Rs 754 crore.

Meanwhile, the BSE pressed Kitex for an explanation for the sharp increase in share prices, which the firm attributed to a Rs 1,000 crore investment plan in Telangana.

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