Cabinet Decisions: Bharat Bond ETF, Six Bills Approved

The Indian government is looking into the issue of unpaid GST compensation to certain states, said Finance Minister Nirmala Sitharaman. Just today she met with finance ministers and representatives of opposition-ruled states who expressed their concern over delay in release of GST compensation which has put them in an acute financial position.

The finance ministers of Delhi, Punjab, Puducherry and Madhya Pradesh and representatives Kerala, Rajasthan, Chattisgarh and West Bengal attended the meeting over delay in payment of compensation.

Speaking to reporters after the meeting, Punjab Finance Minister Manpreet Singh Badal said, August and September compensation has not been released to states.

"We discussed that issue with the Finance Minister. Even the compensation for next period (October-November) will be due now, so August-November. Government is under obligation to pay.

"The Finance Minister assured us that the compensation will be released as early as possible but she did not specify any timeline, " he had said.

So far state have not got compensation for the month of August and September and post Dec. 10, compensation for the period October-November will also be due.

Delhi Deputy Chief Minister Manish Sisodia said it is not that compensation fund does not have adequate money, around Rs 50,000 crore is there through cess collection.

"We thought we will make appeal to Union Finance Minister (Nirmala Sitharaman) saying that she must personally look into this and not violate the constitutional provisions as passed by Parliament of India," Sisodia said after half an hour long meeting.

With inputs from PTI

• Each ETF to have fixed maturity date
• ETF will track underlying index on risk replication basis
• For now, it will have two maturity series: 3 and 10 years

• Will be tradable on exchange
• Unit size Rs 1,000
• Transparent NAV (Periodic live NAV during the day)
• Transparent portfolio (Daily disclosure on website)
• Low cost (0.0005 percent)

The cabinet has given an approval for an umbrella bond exchange trade fund known as the Bharat Bond ETF, said Finance Minister Nirmala Sitharaman, in a bid to diversify the investor base and increase debt option.

India had launched the first equity-based ETF in 2014 and then one in 2017, she pointed out adding that they have both had good reception.

The government is trying to deepen India’s bond market, she said, hoping to make it a way in which public sector undertakings can raise debt.

“In doing this we are giving an option for retail investors. Int hat every retail purchase will give the purchaser - one, the satisfaction that he is participating in the developmental activities of the country, and two, invest his funds not just into banks through fixed deposits,” she said in today’s cabinet briefing.

Each unit will not be more than Rs 1,000 and AAA rated companies to be part of the ETFs, she said.

Investors can buy/sell units of bond ETF using three methods:

• Through exchanges during trading hours
• Route of market maker where market maker will buy/sell units. The market maker will keep an inventory of units worth Rs 1 crore.
• Through AMCs. Large investors can buy/sell through AMCs. Transaction value for such will be Rs 25 crore or more.

AMC will now file the product for approval from the Securities Exchange Board of India after which AMC will discuss borrowing needs of CPSUs, she said. After that the ETF issue will take place and the index will be created, she added.

• Total six bills have been approved by the cabinet
• Cabinet approves Citizenship (Amendment) Bill, extension of reservation for SC/STs.
• Cabinet approves Personal Data Protection Bill
• Bills will be introduced in the Parliament
• A labour bill has been approved where 44 labour legislations will be merged into 4 codes
• Social security code has been approved by cabinet

The Union Cabinet - headed by Prime Minister Narendra Modi - cleared the Citizenship (Amendment) Bill and the Personal Data Protection Bill in a meeting today morning, according to Bloomberg.

A bill to amend the the Citizenship Act, 1955, is likely to be introduced in the Parliament in the next two days, the sources told PTI.

Personal Data Protection Bill

The Personal Data Protection Bill proposes to put restriction on use of personal data without explicit consent of citizen.

The draft of Personal Data Protection Bill, 2018 - which is based on the recommendations of the government-constituted high-level panel headed by Justice BN Srikrishna - restricts and imposes conditions on the cross-border transfer of personal data, and suggests setting up of Data Protection Authority of India to prevent any misuse of personal information. The draft provides for a penalty of Rs 15 crore or 4 percent of the total worldwide turnover of any data collection entity, including the state, for violation of personal data processing provisions.

According to the draft proposal, failure to take prompt action on a data security breach can attract up to Rs 5 crore or 2 percent of turnover, whichever is higher, as a penalty.

Citizenship (Amendment) Bill

The legislation seeks to grant Indian citizenship to Hindus, Jains, Christians, Sikhs, Buddhists and Parsis from Bangladesh, Pakistan and Afghanistan if they have fled their respective country due to religious persecution. Muslims have been excluded from this.

There has been opposition to the bill in Assam and other Northeastern states. Student organisations, political parties and socio-cultural bodies have been protesting on the grounds that it seeks to grant nationality to non-Muslims, mostly Hindus, who have come into India up to Dec. 31, 2014, thereby increasing the deadline from 1971 as per the Assam Accord.

The bill has been championed by Home Minister Amit Shah, more explicitly over the last year.

The Indian economy slowed further in the July-September 2019 quarter, as consumption failed to revive and private investment remained stagnant. Government expenditure, however, picked up pace and helped hold up the economy. Gross domestic product growth came in at 4.5 percent in the second quarter of 2019-20 compared to 5 percent in the first quarter, showed data released by the Central Statistic Office on Friday.

“Excluding government consumption and agriculture growth, GDP growth stood at 3.2 percent—the weakest print in a decade...Barring government spending, no material gains were seen across sectors,” said Rahul Bajoria, chief India economist at Barclays.

Having left much of the stimulus burden to the central bank early this year, Modi has been taking bolder steps to reverse the decline. In recent months, the government has slashed corporate taxes, set up a special real-estate fund, merged banks and announced the biggest privatization drive in more than a decade. However, while authorities are committed to doing more, the policy room may be narrowing.

India’s Union Cabinet headed by Prime Minister Narendra Modi is meeting today starting 9:30 a.m., amid calls for greater fiscal stimulus, privatisation of public sector units and reforms in the labour sector.

Modi had called the meeting last week, before his departure for the BRICS Summit in Brazil.

The cabinet is also likely to approve the controversial Citizenship (Amendment) Bill, championed by Home Minister and Senior Bharatiya Janata Party Leader Amit Shah. The bill is to be re-drafted as the government has decided to incorporate changes in order to address concerns expressed by states in the North-East, Indian Express reported, adding that it is likely to be cleared by the cabinet on Wednesday morning.

The legislation seeks to provide citizenship to Hindus, Sikhs, Buddhists, Jains, Parsis or Christians from Afghanistan, Bangladesh and Pakistan. Muslims are excluded from the list.