Economic dysfunction and indemnity

Why in discussion

The intervention by the government to improve credit availability for micro, small and medium enterprises (MSMEs) is a welcome move, which can be helpful in economic growth. It is an acceptable fact that the micro, small and medium enterprises (MSMEs) have been severely affected by Demonetisation, as well as laws such as the Goods and Services Tax (GST).

Important point

• Demonetisation raised the problem of getting cash payments and credits to the workers in front of these units, which was largely through informal channels.
• Similarly, the commodity and service tax (GST) has increased the compliance cost, depriving them of the inherent benefits of doing business in cash, free of paperwork.
• The fact is that the outstanding gross bank credit of MSMEs has actually reduced from Rs 4.71 lakh crore to Rs 4.69 crore between September 2014 and September 2018. In spite of refinance schemes like the Prime Minister Money Scheme, the formal lending institutions were unable to speed up economic procrastination.
• This is a concern because MSME sector holds about 30 percent of the country's gross domestic product, 45 percent of manufacturing production and 40 percent of trade exports.
• Given the fact that MSME sector has made the least contribution to the crisis of non-executed assets of the banking system, even while facing the laws like GST and monopolization, the moral responsibility of the government is to be made that the area should be assisted.
• Recently the facility of loan has been provided to the micro, small and medium enterprises (MSMEs) by the Central Government. There will be no need for circulating, cumbersome and complex paperwork for the banks this week.
• The central government has also launched a website which will get business loan up to Rs 1 crore in just 59 minutes.
• This scheme is going to be very effective for small entrepreneurs and it will get loan approval in just 59 minutes instead of 20-25 days. After approval, the loan will be distributed in about a week.
• The official loan from 10 lakh to 1 crore has got theoretical approval in less than an hour on this official website.
• The situation of non-banking finance companies (NBFCs) is also a matter of concern, in which the total formal credit limit in MSMEs has gone up to 10 percent in March 2018 compared to 5.5 percent in December 2015.
• Such institutions are now facing the lack of liquidity themselves, such as not getting the loan of IL & FS.

Such measures that speed up the different sectors of the economy that are loosening are welcome. Apart from this, there is a need to adopt strategic measures for sustainable economic growth, which will be able to provide momentum while sitting together in all areas of the economy.

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Why in the discussion?

India and Iran have set new rules for continuing their business in crude oil, India has obtained temporary exemption from the United States after banning the Persian Gulf countries due to the disputed nuclear program.

key points

• It is noteworthy that the US had told India and other countries to cut oil imports from Iran by November 4 and to be ready to end or face restrictions.
• Deficit of Shipwrecks and Cargo Insurance, Saudi Arabia and Iraq, after India's third largest supplier, will damage Iran's imports.
• In order to overcome this obstacle, the Ministry of Shipping has amended an important shipping rule mandated by the Government to purchase crude oil through state-run oil refiners.
• According to this rule, in order to cover Iran's tankers bringing crude oil to the country along with an equal liability limit extended by the London-based global insurance group, the ministry has provided two Iranian ship underwriters - Kish P & I Club and QITA P & I Club Has been allowed for February 2020.
• This move is expected to help in continuing supply of oil from the affected country.
• According to this rule, India will pay Iran for rupee purchase in rupees, which Iran will use to import goods from India.
• It is noteworthy that state-run oil refineries, including IOCL, MRPL, BPCL and HPCL had signed the annual term contract with Iran, before the US was able to get out of a nuclear agreement signed with Iran in May 2016 this year. After the ban was decided to re-apply. After this decision, more than half of the refineries left these contracts.
• After the implementation of the new restrictions, the remaining amount contracted with Iran on FOB basis is required to be converted into cost, insurance and freight CIF import. Therefore, permission has been given by the Ministry of Shipping for this.
• It is worth mentioning that the cost, insurance and freight (CIF) is a cost basis, which means that the system of ship and insurance vendor, while the Free on Board (FOB) is a business term that indicates that the seller or buyer Whether damaged or damaged during shipping, is responsible for the goods.
• There is a flagship policy designed to provide cargo support to Indian ships which is necessary for purchase of all government owned / controlled cargoes on FOB basis, in which the Indian buyer has to finalize the shipping system.
• It also indicates that Indian Refineries will be in a position to buy more American oil, which is available mostly on CIF basis, it will help to compensate for the loss of oil supply from Iran.