Reports & Indices Current Affairs - 2019

This category comprises Current Affairs 2019-2020 related to various reports and indexes / indices by National and International Bodies and organizations such as World, Bank, World Economic Forum, NITI Aayog and various other educational and research organizations. We also place report highlights of various committees and commissions in this category.

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High trading costs impact liquidity of Indian equities: World Bank

As per latest study by World Bank, the turnover ratio of Indian stock market has fallen significantly by 60% in past 10 years. The turnover ratio fall has been higher in India in comparison to some of the other leading markets of world.

Key Highlights of Study

Turnover ratio of Indian stock market had fallen from 143 in 2008 to 58 in 2018 which means a fall of nearly 60% between 2008-2018 decade.

Although the ratio had managed to move up in last 5 years but it is still quite low when compared with earlier highs.

The fall had been highest among most leading markets of world, except United States (US) and European Union (EU).

Other Countries: Between 2008 and 2018, China’s turnover ratio fell less than 6% in last 10 years; Brazil (12.85%) and South Korea (31.12%), Japan and Hong Kong saw ratio dip between 40-50%.

Significance: Key analysis by WB study assumes significance as market participants have been lobbying hard with central government to reduce overall cost of trading in equities in India, which, they feel, is adversely affecting investors’ interest in stock market.

Background

In 2007-08, central government stopped treating Securities Transaction Tax (STT) as tax paid and rather treated it as an expense that led to double taxation for gains assessed under business income. Moreover, while introducing STT in 2004 the Long-Term Capital Gains (LTCG) tax was made nil but STT was not done away with when LTCG was reintroduced in 2018.

Way Forward for India

The capital market participants had sought rationalisation of STT apart from bringing back certain exemption benefits that were available earlier.

What is Turnover Ratio?

It is a universally accepted parameter to measure trading volumes. It is the total value of shares traded in a specific period divided by average market capitalisation of that period. It indicates how easy, or difficult, it is to sell shares of a particular stock on capital market.

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Government to constitute working group for revision of Wholesale Price Index

Central Government has constituted Working Group for the revision of the current series of Wholesale Price Index (Base 2011-12). It will be chaired by Prof. Ramesh Chand, Member, NITI Aayog. Office of Economic Adviser, Department for Promotion of Industry & Internal Trade will be nodal office for Working Group. It will process report / recommendation of this Working Group for further necessary action.

Terms of Reference of the Working Group are:

  • It will select most appropriate Base Year for preparation of new official series Wholesale Price Index (WPI) and Producer Price Index (PPI) in India.
  • It will review existing commodity basket of current series of WPI and suggest additions and deletions of commodities in light of structural changes witnessed in economy since 2011-12.
  • It will also review existing price collection system for manufacturing sector and suggest changes for improvement. It will also decide on computational methodology to be adopted for monthly WPI/PPI.
  • It will examine existing Technical Advisory Committee on Series of Prices and Cost of Living approved compilation methodology of PPI approved and suggest further improvement in compilation and presentation.
  • It may also recommend roadmap for switch over from WPI to PPI. It will also examine method of computing linking factor adopted so far and suggest appropriate changes in method of computing linking factor.
  • It will suggest any other improvements as may be necessary for enhancing reliability of the official series of WPI / PPI.

Background

The current series of Wholesale Price Index (WPI) with 2011-12 as base year was introduced by Government in May 2017.  However, since 2011-12, significant structural changes have taken place in the economy. Therefore considering these factors it has become necessary to examine coverage of commodities, their weighting diagram and related issues pertaining to existing series of index numbers of WPI.

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