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NALCO Disinvestment: Government raises Rs 1200 crore

The Central Government has raised Rs. 1,200 crore by divesting 9.2% of paid-up capital in National Aluminum Company Ltd. (NALCO). With this disinvestment, Government’s shareholding in NALCO has become 65.37%.

Disinvestment involves the sale of Government’s share in the Public Sector Undertakings. In disinvestment, the government sells only a part of the equity which is essentially less than 51% so that ownership and management rights can be possessed by the Government itself.

Department of Investment and Public Asset Management (DIPAM), Ministry of Finance, has set a record target of Rs. 72,500 crore to be realized through disinvestment in this fiscal. This target follows the 2016-17 all-time high achievement of Rs. 46,247 crore.

For the fourth time in a row, retail investors out-performed institutional investors. It shows that retail investor backs disinvestments of CPSEs. In fact it satisfies one of the objectives of disinvestment policy of the government which aims to make PSU shareholding as broad-based as possible so that nation’s wealth is shared by its citizens. In this disinvestment exercise, the government for the first time has used the green shoe option (over-subscription option) since the modified OFS procedure has been put in place by SEBI in 2016. DIPAM exercised the green shoe option owing to the overwhelming response from the market.

Greenshoe option is a special provision in an IPO prospectus. Green shoe option permits the underwriters to sell more share to the investors than originally planned by the issuer. This option is exercised if the demand for a security issue is higher than the expected.

DIPAM

The Department of Disinvestment was set up as a separate Department on 10th December 1999 and functions as one of the Departments under the Ministry of Finance since 2004. In 2016, the Department of Disinvestment was renamed as Department of Investment and Public Asset Management (DIPAM). DIPAM advises the Union Government in the matters of the financial restructuring of PSUs and also for attracting investment through capital markets. It deals with all matters relating to the sale of Union Government’s equity through private placement or offer for sale or any other mode in the erstwhile Central PSUs.

NALCO

National Aluminium Company Limited (NALCO) is a Navratna CPSE functioning under Ministry of Mines. It was established on 7th January 1981. It has integrated and diversified operations in mining, metal and power.

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Global economy to grow 3.5% in 2017: IMF

The IMF has predicted that the global economy would grow at 3.5% in 2017, up from 3.1 % last year, and 3.6% in 2018. This year’s projection of IMF is marginally higher than what was stated in their last update. The improvement in this year’s projection springs up from good economic news in Europe and Asia, notably from China and Japan. As per IMF, momentum in the global economy has been building up since the middle of the last year making it reaffirm its previous forecasts of higher growth for this year and next year.

However, it has warned that despite these signs of strength, many countries are likely to continue to struggle this year as well. IMF has warned that weather conditions and civil unrest would threaten the low-income countries with mass starvation. Particularly, in Sub-Saharan Africa, IMF expects the income levels to fall slightly. Further, commodity exporters in the Middle East, Africa, and Latin America are likely to struggle with low levels of commodity prices since early 2016.

Way forward

IMF has suggested that policy interventions must address these disparities to ensure the stability of an open, collaborative trading system that benefits all countries. It has called for the need of credible strategies in many countries to place public debt on a sustainable path. It has asked the World to make a renewed multilateral effort to tackle common challenges in an integrated global economy.

IMF

IMF came into existence on December 27, 1945. The IMF works to improve the economies of its member countries. IMF was established to promote international economic cooperation, international trade, employment, and exchange rate stability. It also makes its resources available to member countries to meet the balance of payments needs. Its headquarters is in Washington, D.C.

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India’s GDP to grow 7.2% in 2017-18: World Bank Report

In a new World Bank report titled Globalization Backlash, the agency expects India’s gross domestic product to spike to 7.2% in the financial year 2017-18 from 6.8% the previous fiscal. It has also forecasted that the ‘fiscal, inflation and external conditions’ in the country to remain stable and India’s economic growth to rise gradually to 7.7% in 2019-20, “underpinned by a recovery in private investments”.

The agency has stated that despite renewed weakness in private investment and sluggish external demand, India continued to grow robustly until ‘demonetisation’ slowed the growth, albeit modestly. It expects that inflation would stabilise with the support of favourable investment climate and structural reforms.

The agency, however, has warned India against significant risks to its favourable growth outlook. Among them, it has underlined uncertainties in the external environment, not-so clear picture of the impact of demonetisation on small and informal firms, obstacles to private investment and rapid hikes in the prices of oil and other commodities.

South Asia

The agency’s report focuses on the economic climate in South Asia and maintains that South Asia will remain as the fastest growing region in the world. It has observed that strong performance of the region’s eastern part particularly India, Bhutan and Bangladesh has defied disappointing world growth in 2016. It has further stated that the current globalization backlash should not prevent South Asian countries from having a stronger outward orientation.

World Bank

World Bank is one of five institutions created at the Breton Woods Conference in 1944. World Bank is part of the United Nations system, but its governance structure is different. World Bank’s headquarter is situated at Washington DC. World Bank’s official goal is to reduce poverty. It provides loans to developing countries for capital programmes.

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