Business Current Affairs - 2020

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National Startup Advisory Council setup to boost Startups and Innovations

On January 22, 2020, the Union Ministry of Commerce and Industry has setup National Startup Advisory Council. The council will suggest ways to build strong start ups in the country. It is being set up to reduce the time spent on tax compliance to less than one-hour a month and to boost the availability of domestic and global capital.

India ranks 136 in World Bank’s “Starting a Business” ranking. The council is being set up to improve India’s rank globally.

Composition of the Council

The council is to be chaired by the Minister of Commerce and Industry. The Council will have non-official members nominated by the Union Government. The non-official members will hold office for two years.

The members will be selected from different categories such as founders of successful startups, persons capable of representing interests of accelerators and incubators, etc.

The council will also include Ex-officio members. According to the ministry, they will be of the rank of Joint Secretary. The DPIIT (Department of Promotion of Industries and Trade) will be the convener of the council.

Functions of the council

The Council will suggest measures to spread culture of innovation among all the citizens and students. This will help to promote innovation among all sectors of the economy widely. It will also recommend measures to facilitate public organisations. This will help to deliver better governance, promote creation and commercialize intellectual property rights.

The Council will also suggest ways to make the process of starting, operating and exiting a business simpler. It will also mobilize investments in startup sector and will provide access of the startups to the global markets.

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Government to launch first fixed income ETF of bluechip PSUs

Union Government will launch India’s first fixed income Exchange Traded Fund (ETF) comprising debt securities of large central public sector enterprises (PSUs) by mid-December 2019. It will comprise only AAA-rated papers of the PSU companies. It is expected to have a size of Rs 15,000 crore to Rs 20,000 crore. It is expected to improve liquidity in corporate bond market, smoothen borrowing plans of the participating state-owned companies and enhance investor base.

About India’s 1st fixed income ETF

The proposed debt ETF will be first large fund in India that will provide retail investors convenience to invest in fixed income product comprising a basket of securities, without need to study individual bond issues.

It may be comprising of corporate debt securities in the form of bonds, debentures, credit-linked note, promissory notes as underlying instruments. Large PSUs are expected to participate in the maiden debt ETF.

Department of Investment and Public Asset Management (DIPAM) has appointed Edelweiss Asset Management as the asset manager for this proposed debt ETF. The tax treatment of this debt ETF will be same as that of debt mutual funds.

Benefits of this debt ETF: It will provide safe investment option, alongside high liquidity. It will also help in deepening the corporate bond market and will allow PSUs to borrow from the market. As these ETF units will be listed on exchanges, it will provide new options to investors to own securities of government-owned PSUs along with facility of overnight liquidity. Moreover, it will provide investors higher yield than on fixed deposits. Compared with bank fixed deposits that generate a post-tax return of around 5.5%, this debt ETF can provide return of over 7% for the investors.

Background

In the 2018-19 Union Budget, Union Government had announced that DIPAM is planning to come out with debt ETF, which will help PSUs better plan their borrowing needs and capital expenditure. At present there are number of gold and equity ETFs in markets, but there are no debt ETFs, barring two government securities-based ETF that have not generated much investor interest. In 2018-19, Union Government had launched Bharat-22 ETF and CPSE ETF comprising stake sale in a basket of 22 and 11 government companies, respectively. These were used by government to divest its equity in state-owned companies. It had helped government to raise Rs 10,000 crore through CPSE-ETF and another Rs 4,368 crore through Bharat-22 ETF.

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