Monthly Summary for Cabinet June 2022

No. A-45O 1 1 / 3 I 2022- Admn.tll Government of Indla Minlstry of Flasnce (Department of Economlc AIIairs) *** New Delhi, 22nd Atgost, 2022 OFFICE MEMORANDUM The undersigned is directed to circulate herewittt the unclassified portion of Monthly Sr-*.ry on important policy decisions in respect of 'O"p"tt-""t of Economic Affairs for the Month of June' 2022 der Director (Ad.IV & Coordination) Tel No. 23O9-5244 To 1. All Members of the Union Council of Ministers' Government of India' New Delhi. 2. Vi"" Ct.i.-"tt, Niti Aayog, Yojna Bhawan' New Delhi' ;. C"Uit et Secretary, CaUinet Secretariat, Rashtrapati Bhavan' New Delhi. 4. Secretary to the President of India, Rashtrapati Bhavan' New Delhi' 5. S""."t .y to the Vice-President of India' 6' Maulana Azad Road' New Delhi. 6. Principal Secretary to the Prime Minister' PMO' South Block' New Delhi 7. ct,.l..',,, Union Public Service Commission, Dholpur House, New Delhi' 8. eft U"-U"." of Niti Aayog, Yojna Bhawan' New Delhi' g. Secretaries to all the friti"ttit"TOepartments' Government of India' New Delhi. 10. PS to MOS (F), PPS to Finance Secretary' PPS to Secretary (EA)' PPS to Secretary (Revenue), PPS to Secretary (Expenditure)' PPS to Secretary (DIPAM). 11. Shri V. inantha Nageswaran, Chief Economic Adviser' DEA' t2. eiaiai."J Secretaryl Cabinet Secretariat, Rashtrapati Bhavan' New Delhi. 13. Shri Manoj SahaY, AS&FA(Finance)' stri a"nii, Vachhani, Joint Secretary (Budget)'.DEA' 14. 15. aiiff".a" of Divisions in Department of Economic Affairs' and Sr economicAdviser(C&C/FSLR/FS&CS)/JS(C&C 16 O-6rraili)l l/ ;s [i( :r .p "p r/ i. lS M(I aS hD o) # a/J ,S r(I in cv ) t ir/ aA all c lA , d Mvi /s oe r Fs i/ n C aA ncA eA ' - N- orth Block' New Delhi. t7. Guard File - 2022.lll No. A-45O1 1 / 3 I 2O22-Admn. Ministry of Finance Department of Economic Affairs Subject: Monthly Summary on important policy decisions pertaining to Department of Economic Affairs (DEAI for the month ol June'2O22 I. Important policy decisions taken and major achievements during the month: Macroeconomic Overview: ThemonthofJune2o22sawFederalReserveoftheUSraisingthepolicyratebyTS basis points. RBI also increased the repo rate by 50 basis points While financial market anarysts had arready factored in rate hikes, the unexpectedly large size of it .f""rfyr".r"gedthatthecentlalbanksareprioritisinginflationcontrolover economicgrovrrth.TheFederalReserveandtheRBlhavealsoconveyedthatfurther tightening lf monetary policy is both inevitable and imperative' Economic growth in lndia however appears to be on course to achieve a near 8 per cent growth as seen in the robustness of high frequency indicators in Ql of FY 2022- 23.PMlManufacturingandPMlservicescontinuetobeintheexpansionaryzone. The steady groMh of e way bill in both volume and value terms is a further reflection of sustained revels of economic activity. with Googre mobirity index continuing to rise, the Service Sector, accounting for more than 50 per cent of GDP, appears to have become the growth engine, at least for now in the current financial year' Q4datafor2o21-22alsobecameavailableinJune2022forlhecorporateand financialsectorshowingincreaseintheirprofitsatyearclosing'highlightingtheir preparedness to support economic growth in the FY 2022-23' Financial sector appears to have turned a corner with bank credit growing 13 1 per cent year-on-year U"if i, the fortnight ending June 3' the highest in the past three years Private equity and venture capital iniestment in Q1 of 2022-23 have risen above their levels in the corresponding period of the previous year' On the other hand' the corporate sectorstrengtheningisseenintheshareoftheprivatesectorrisingto35percentof total investment in Q1 of 22-23, from 63 per cent' the average of the 4 preceding quarters. Revival of tUonsoons and increase in Kharif sowing also bodes well for yet anotherrecordlevelofagriculturaloutputinthecurrentyear. The second half of FY 2022-23 may begin to see a slowing of growth as high inflation and monetary tight"ning '""ui"' by RBI begin to restrain demand ' *JuX"n ai demand is restrained and global commodity lnflation may eventuallyprices further soften with monetary tightening in several countries. However, in net commodity import dependent countries like lndia, a signiflcant de-escalation of crude oil prices is also necessary to contain the widening of current account deficit (cAD)' and ever more so as exports weaken with world-wide recession getting triggered by monetary tightening. The cAD is also feeding into depreciation and in turn getting fedbyitresultinginaviciousspirallingupofCADdeteriorationandrupee depreciation. RupeedepreciationisalsobeingtriggeredbyflightofFPlcapitalasFederalReserve continues to raise rates and the Russia-ukraine crisis makes cautious investors pull outcapitalfromEmergingMarketandDevelopmentEconomieslikelndia'However, sustained growth of FDI and recent measures taken by RBI to attract dollar inflows into the country may bring in offsetting amounts of capital' Acriticalchallengefacingthegovernmentistorestrainfiscaldeficitotherwiseit wouldleadtofurtherwideningofCADgivingrisetotheproblemoftwindeficits'that notonlymakescountry,sfinancesunsustainablebutalsoweakensgrowth.The challengewillbestifferaSononehandrisinginflationmaymakeadditionaldemands on revenue expenditure while capital expenditure cannot be curtailed given its negative impact on g rowth Fiscal deficit is also challenged from the revenue side as reintty imposed windfall taxes and export duties may not recover in entirety the tax losses iollowing from excise duty cuts on petrol and diesel in the month of May. The economic situation in the year ahead may take a more revealing shape by end ofSeptemberquarter.However,theprojectionsofgrowthrateandinflationbythe RBI in its forthcoming meeting of MPC may shed some light on the macroeconomic situation anticipated for the balance of the current year' 2. lmPortantDeveloPments: i. A new e-Tracking and Remote Administration (NETRA) website and^ Mobile App for lndian Development and Economic Assistance Scheme (IDEAS)' were launched during the iconic week celebrations under Azadi ka Amrit Mahotsav' ii. A special series of circulatory coins of {1' {2' t5' t10 and t20 having theme of logoofAzadikaAmritMahotsav(AKAM)notifiedvideGSRTS3(E) to celebrate 75 years of lndia's lndependence was released' iii. Gazette Notification GSR 478 (E) dated 27th June' 2022lor lssue of a commemorative .oin - "t zstn year of lndian lnstitute of Technology' Roorkee" has been issued. 3 Ex Officio Members to lnternational Financial Services Centre Authority iv. (IFSCA) were notified by Gazette Notification i Cr"nt Agreement for Euro 20 million between DEA and KFW-German o"*top*"it Bank for the project 'lndo-German Global Academy for Agro ecology Research and Learning vi. in"iirro*hg line of credit(Loci; frave been extended during this month:- a. Line of credit (LoC) to Govt of Sri Lanka for an amount of USD 55 million for procurement of Urea fertilizer'b Line of Credit to Govt. of Cuba for amount of USD 100 million for export of rice from lndia. Following capacity building programmes have been organized during this month:- a. Online Program on Project Finance for lnfrastructure Projects by lndian lnstitute of Banking & Finance. b. Training programme on PPP and lnfrastructure Development held at llM Kozhikode. c. Management Development Programme on Public-Private Partnership (PPP) held at Arun Jaitley National lnstitute of Financial Management (AJNTFM). v Hon'ble FM participated in the Second meeting of BRICS Finance Ministers and t Central Bank Governors under the Chinese Presidency. tx Following meetings at the official level were held or attended: a) 42nd meeting of Empowered Committee (EC) to consider the proposal for "Development of Vizhinjam lnternational Multipurpose Seaport" proposed by Government of Kerala, for "Final Approval" under the viability gap funding (VGF) Scheme b) 'l29th meeting of the DEA Screening Committee for consideration of proposals seeking financing from Multilateral Development Banks/ Bilateral Agencies. c) 1"t lndia-Japan Finance Dialogue on the macroeconomic situation, financial system, financial digitalization and investment environment in both countries. They agreed to continue work closely together as they hold presidency of G20 and G7 next year. d) Second meeting of the working group on transition finance under the lnternational Platform on sustainable Finance (IPSF) to discuss a draft report on transition finance which would go as an input paper in G20's Sustainable Finance Working GrouP. e) Third meeting oi the Sustainable Finance Working Group (SFWG) of the G20 and Policy levers Forum under G20 lndonesian Presidency to discuss issues, related to transition finance, enhancing accessibility and affordability of finance for sustainable projects and various policy options for achievement of climate transition. 0 Plenary meeting of Financial Stability Board (FSB) to discuss the financial stability outlook, Covid-19 exit measures, progress report on climate roadmap, Risks from Crypto-assets, etc. s) Steering Committee Meeting of the Financial Stability Board to discuss the risks from Crypto-assets. h) 12th round of negotiations between lndia and UAE on Bilateral lnvestment Treaty (BlT) to discuss the outstanding issues held in New Delhi. i) 4th iound of negotiations between lndia and UK on Bilateral lnvestment Treaty (BlT)/lnvestment Chapter held in London, UK. i) First iound of negotiations between lndia and EU on BIT was held in New Delhi. k) Asian lnfrastructure lnvestment Bank (AllB) Board of Directors meeting to consider various policy issues and investment operation. The Board approved the Assam Secondary Road Network lmprovement project for financing USD 320 million. New Development Bank (NDB) Board of Directors meeting to discuss the r) various policy issues including lending rates and membership expansion of NDB.Minimum Government, Maximum Governance 3 The use of ICT in submission of information is being encouraged' 4. Non-Compliance of ACC directions/orders Nil 5. Details of FDI proposals cleared during the month and status of FDI proposals awaiting approval in the Department: Number of ProPosals cleared 03 Awaiting Approval in the Department 07