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Government orders to merge NSEL to parent firm FTIL


The Central Government has passed an order to merge NSEL (National Spot Exchange Ltd.) with FTIL (Financial Technologies India Ltd)

Public interest

The order has been passed by the Ministry of Corporate Affairs. According to Section 396 of the Companies Act, 1956, the central government can order the merger of two companies if it is essential in public interest. The clause has been rarely used by the government. However, in this case, since the subsidiary is cash-strapped and has no funds to pay its dues, the government has ordered the merger. The merger with the financially viable FTIL will facilitate the recovery of dues for creditors of the NSEL.

Challenge by stakeholders

According to the law, submissions can be made to the Ministry of Corporate Affairs within 60 days of the order. The shareholders and stakeholders of FTIL are expected to file submissions with the Ministry opposing the merger. Through the merger will benefit the victims of the scam perpetrated by NSEL, it will also dilute the assets of FTIL and affect the investments of the shareholders and stakeholders of FTIL.

Inflation drops to 2.38% , five-year low

According to provisional estimates for the month of September 2014, WPI (Wholesale Price Index) based inflation has fallen to 2.38% which is a five year low.  This is mainly attributed to the decline in food and fuel prices.  Also, the decline was far greater than the 3.2% that was forecast by analysts.

Breakdown of Inflation for the month of September

inflation-in-indiaFood inflation has fallen to nearly two and a half year low of 3.52%. Inflation in vegetables has fallen to 14.98%. Inflation in milk, eggs, meat and fish and showed a market decline. The food basket has been on a declining trend since May itself. However, in September, the prices of fruits and potatoes rose. Inflation in manufactured products fell to 2.84%. Overall WPI inflation has been declining for the fourth straight month. Inflation in fuel and power declined to 1.33%

Comparison with inflation of previous months and years

The 2.38% inflation rate is the lowest since 1.78% in October 2009. Wholesale price inflation stood at 3.74% in August and 7.05% in September 2013. Inflation in manufactured products and fuel and power segment stood at 3.54% and 4.54% in August 2014.

Change in rate by RBI

The RBI has maintained its key interest rate at the earlier level due to inflationary pressures. It is unclear whether this record low WPI inflation level will elicit a change in interest rate. The RBI primarily factors in the CPI (Consumer Price Index) rates while determining policy rates and even that saw a marked decline to 6.46% in September. Experts say that RBI’s CPI based inflation target of 6% to be achieved by January 2016, looks like it is possible if the current trend of declining inflation continues.  RBI’s next bi-monthly monetary policy announcement is expected on the 2nd of December.

India’s Current Foreign Exchange Reserves: $311.427 billion

India’s forex reserves continued their downward journey for the fifth consecutive week, India’s foreign exchange reserves plunged by $2.754 billion to $311.427 billion in the week to October 3. The largest fall is seen in US currency assets which make a big component of the overall reserves. During the last quarter under review, this drop in forex was basically due to drop in valuation of Indian rupee on the back of a stronger US currency against other global currencies and talks of withdrawal of quantitative easing by the US. The Federal Reserve has now deferred its tightening programme to next year, helping rupee to regain some of its lost ground this week.

The foreign currency assets, incorporate the effect of both appreciation and depreciation of many non-US currencies also, which are held in reserves.
Even the gold reserves showed a negative trend after being stable for weeks. The reserves fell by $919.7 million. Other components include special drawing rights and India’s reserve position in the IMF which decreased by $22.8 million and $8.2 million to $4.284 billion and 1.540 billion, respectively.

Components of Foreign Reserves

The components of Foreign Reserves in decreasing order are Foreign Currency Assets, Gold, SDRs (Special Drawing Rights) and Reserve Position in IMF Trench.