How GST Amendment Bill could reinvigorate India

Indian truck drivers clock an average of 280 km per day, much below the world average of 400 km per day and far below the 700 km the average truck driver in the US does every day. The underperformance of Indian truckers has less to do with bad roads and less fancy trucks and more about prevailing archaic laws.
Truck drivers in India spend 60 per cent of their time off roads negotiating check posts and toll plazas, says UBS Securities, which has also found that there are 650-odd check posts in the country and 11 categories of taxes on the road transport sector.
Since road traffic accounts for 60 per cent of freight traffic in India, the slow movement of trucks across states leads to productivity loss. According to UBS, if the distance covered goes up by 20 per cent per day, Indian truck productivity would improve by 12 per cent.
Higher productivity would cut the need for buffer stocks; reduce the loss of perishable goods, cut down the need for many warehouses, etc.
Analysts say the implementation of the goods and services tax (GST) could provide the kind of productivity boost illustrated above. Gautam Chhaochharia, head of India Research of UBS Securities, explains the benefits of GST,
1) Unified market: The GST will cut down the large number of taxes imposed by the central government (eg. central VAT or excise duty, services tax, central sales tax on inter-state sales, etc.) and states (VAT on sales, entertainment tax, luxury tax and octroi and entry taxes levied by municipalities). This will lead to the creation of a unified market, which would facilitate seamless movement of goods across states and reduce the transaction cost of businesses.
2) Lower incentive to evade tax: Currently, companies have to pay taxes on entire underlying value of the product/service, but under GST, companies in a chain will have to pay tax only on the value-addition. So, the actual tax paid will likely be small and reduce the incentive for evasion.
3) Widen tax base: GST will give credits for all taxes paid earlier in the goods/services chain incentivising tax-paying firms to source inputs from other registered dealers. This will bring in additional revenues to the government as the unorganised sector, which is not part of the value chain, would be drawn into the tax net. Besides, states will be allowed to tax services (as opposed to only the central government) under the GST.
According to the National Council of Applied Economic Research, government's tax revenue will increase by about 0.2 per cent because of GST implementation, while GDP growth could go up by 0.9-1.7 per cent. Exports will also get a boost as they are zero-rated for taxes and also because the fall in cost of manufactured goods and services under GST will increase the competitiveness of Indian goods and services in the international market, UBS says.
Finance Minister Arun Jaitley on Friday said that ensuring the passage of the constitutional amendment Bill in Parliamentary will be a priority for the government. The government will also need the consent of 50 per cent of states to implement GST by April 2016.
However, a consensus is still missing on the final GST tax rates and recommendations vary from 16 per cent to 27 per cent.

Finance ministry officials are now hopeful of introducing the bill in the current session of Parliament.


The change in stance came after Jaitley assured state finance ministers that the Centre would take care of any revenue loss due to the rollout of GST. However, he rejected their demand for excluding petroleum and tobacco from the ambit of the new tax regime. States were clearly told that the Constitution gave the right to tax tobacco to the Centre.
In case of petroleum, which accounts for as much as a quarter of the revenue for some states, the finance ministry is learnt to have dug out minutes of an empowered committee meeting that took place in February where states had agreed to keep oil products within GST.
On the second concern related to providing for compensation for five years after GST rollout, the Centre appeared to go along with the states. The Centre is also willing to address the concern related to including the compensation provision in the bill.

The finance ministry is also working out a solution to deal with the worries of revenue loss to "manufacturing" states such as Gujarat and Maharashtra.
It is not clear how the Centre plans to deal with the issue of entry tax, which the states want to be retained, citing revenue implications.
While Rather said that a solution will be found within a week, a finance ministry official said "a week is too long in politics" and the government would try to introduce the bill in the current session of Parliament.

States such as West Bengal are, however, still not on board. "GST cannot be introduced at the cost of loss of state revenue meant for development of people," said state finance minister Amit Mitra.
Although Gujarat is one of the major protestors, the Modi government is confident of getting the state on board. Its calculations to push the GST legislation hinge on control in several states where it is in power. In addition, it is banking on support from Punjab and Andhra Pradesh along with consuming states such as Bihar and Uttar Pradesh, which stand to gain from the introduction of GST. The government also believes that it has support from Kerala and Karnataka, two Congress-ruled states.

In an action packed evening, Jaitley proposed a formula to break the impasse and urged states to reconsider their stand, while staying firm on the states demands for exemptions.
In a bid to bridge the trust deficit between the states and the Centre, Jaitley had approved the release of Rs 11,000 crore as compensation for loss on account of central sales tax which had been pending since 2010. He had also vowed to pay the pending amount as he moved to ensure that the states come on board for rolling out the tax reform measure which has the potential to add significantly to government revenues and overall economic growth.

Prime Minister Narendra Modi (left) with finance minister Arun Jaitley. The Modi-led NDA government had been pushing for GST since it came to power in May year.
Implementing GST, the most ambitious indirect tax reform, is a centrepiece of the Narendra Modi government's reform agenda. The government is hopeful of introducing the constitutional amendment bill which will pave the way for rolling out GST in the current winter session of Parliament. The tax reform measure has missed several rollout dates in the past.

 

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Rupee slides as RBI prepares for battle

Raghuram Rajan came into office in September 2013 just when the rupee was fighting one of its toughest battles.
The currency had sunk to a lifetime low of 68 to the US dollar, when it was trading at 54 five months back. The new RBI chief had then waded straight into the battle: bringing about several financial reforms right off the bat as well as taking innovative steps to attract US dollars from abroad.
Within a few months, the rupee came and stabilized at around 60-61 levels where it has hovered since – and the RBI chief then got busy fighting another battle, this time with prices.
But having largely put the inflation genie back into the battle, it appears Rajan will again have to shift his focus back to the rupee, after the currency fell to a 10-month low in trade to 62.33.
Unlike the story back then, when at least partially the rupee fall could be attributed to local macro economic factors – weak economic growth, ballooning deficits and high inflation – this time it appears the story is of US dollar strength rather than rupee weakness.
This has been driven by a resurgent US economy, which has led to the Fed start to unwind its ultraloose monetary policy, and overall weakness in other developed countries, as well as in China.
The US dollar index, which tracks the greenback’s strength against a basket of six major currencies, has risen about 13.5 percent since bottoming out in May this year but the rupee has fallen only 7.3 percent in that time.
The rupee’s relative strength has been because of dollar inflows into the country, thanks to the fact that global investors are again looking at India as a great place to invest, Jamal Mecklai of Mecklai Financial Services told CNBC-TV18 yesterday.
So while inflows are currently blunting the broad dollar strength, it appears the RBI is busy preparing for a rainy day.
"If we are faced with a globally strengthening dollar, then I do not really think the RBI will be putting in too much ammunition in defending the rupee,” LIC Nomura MF debt fund manager Killol Pandya told the Economic Times recently. “It probably let the currency slide a little more before it draws a fresh defence line for the currency.”
And drawing a fresh defence line it is, since March this year, the RBI has been busy buying US dollars from the open market in billions. In July, for instance, it purchased as much as $ 5.45 billion, while most other months too, it has been a net purchaser. The central bank’s foreign exchange reserves are near an all-time high of $318 billion.
The most RBI has done is come into the market to sell US dollars when it was seeing volatility rise, such as yesterday. In short, it is saving up on its bullets.
The larger plan is obvious here.As long as the rupee slides gradually and without much volatility, the RBI will not mind it, and it would also help exporters , Federal Bank treasury president Ashutosh Khajuria told the Business Standard.
Time and again, the RBI chief has warned of a steep reversal in flows should the US start to reverse its monetary policy stance in a big way. The resultant currency volatility could seriously harm emerging economies.
In fact, it was this very point – that the Fed should be mindful of the effect its policies may have on emerging economies – that saw Rajan get into a minor war of words with former Federal Reserve chief Ben Bernanke (who was sitting in the audience during a discussion among top central bankers around the world). Bernanke, along with a former colleague in the Fed, essentially responded by saying the Fed’s prerogative lied with the US economy and other nations are on their own.
It appears, that on his own, Rajan is preparing for a big fight in 2015.

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What is TVR's?

TVRs (Television Viewer Ratings) are the standard buying currency for television advertising in the UK. Television ratings are expressed as a percentage of the potential TV audience viewing at any given time. It Measures the popularity of a program or advert by comparing the number of target audience viewers who watched against the total available as a whole. One TVR is equivalent to 1% of a target audience. If an ad in any afternoon show gets a Housewives TVR of 20, that means that 20% of all Housewives viewed the ad. TVR=Reach x Time Spent

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What is SWF and why India needs Russia's coherance

DEFINITION of 'Sovereign Wealth Fund - SWF'

Pools of money derived from a country's reserves, which are set aside for investment purposes that will benefit the country's economy and citizens. The funding for a sovereign wealth fund (SWF) comes from central bank reserves that accumulate as a result of budget and trade surpluses, and even from revenue generated from the exports of natural resources. The types of acceptable investments included in each SWF vary from country to country; countries with liquidity concerns limit investments to only very liquid public debt instruments.
Some countries have created SWFs to diversify their revenue streams. For example, the United Arab Emirates (UAE) relies on oil exports for its wealth. Therefore, it devotes a portion of its reserves to an SWF that invests in other types of assets that can act as a shield against oil-related risk.
The amount of money in these SWF is substantial. As of May 2007, the UAE's fund was worth more than $875 billion. The estimated value of all SWFs is pegged at $2.5 trillion.

India needs SWF'S to boost investment-

Swiss brokerage Credit Suisse today said the robust foreign inflows into the country's debt and equities markets will halve to USD 18-20 billion next year on a slowdown in the sovereign wealth funds' (SWFs) play. "The FII (foreign institutional investors) inflows into the domestic markets will come down to USD 18-20 billion in the next 12 months, which is half of the current inflows," managing director for equity research Neelkanth Mishra told reporters here. He attributed this primarily to a possible slowdown in pumping in money by the SWFs. SWFs are short on allocatable resources due to the fall in the crude oil prices, Mishra said. FIIs hold as much as 27 percent in the over USD 1.6 trillion Sensex market capitalisation as of the September quarter, which is at a historic high. Currently, the inflows are almost evenly split between debt and equities, (as there is a USD 25 billion cap on FIIs' holdings in government bonds, though there is a huge demand for more) and Mishra pointed to his in-house research which said around 40-50 per cent of the inflows into domestic equities come from SWFs. It can be noted that oil prices have slid to a five-year low of USD 66-67 to a barrel. Since June, there has been a massive 35 percent fall in the Indian basket of Brent crude. Many of the countries in the Middle East like the UAE and Oman have very active SWFs. Even though the policy-makers sometimes blame such flows to be "fickle", the FII inflows are important for funding the current account gap and reducing the overall deficit, which surged up to 2.1 percent in the second quarter as against 1.2 percent a year-ago.

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Time to rekindle India's ties with Russia

Let us get to the big picture on India-Russia bilateral relations upfront at a time when Russian President Vladimir Putin holds the 15th Indo-Russian annual summit with Prime Minister Narendra Modi in New Delhi on Thursday.
First, let us look at the plus points.
Since 1971, no foreign country has been as helpful and as crucial for India as Russia has been. If India won the 1971 War with Pakistan that led to dismemberment of Pakistan and creation of Bangladesh, the credit goes to the then Prime Minister Indira Gandhi and her game changer of a treaty with the then Soviet Union.
The most important clause of the 20-year Indo-Soviet treaty was that an attack on India will be treated as an attack on the Soviet Union and vice versa.
It was mainly because of this treaty that India was eventually able to dismember Pakistan and give birth to a new nation Bangladesh, the erstwhile East Pakistan.
Imagine the consequences of an undivided Pakistan for India! Had Bangladesh not been liberated it would have led to India’s own dismemberment given the fact that much of India’s northeast is Bangladesh/East Pakistan-locked.
India under Indira Gandhi was able to pull it off because of the friendship treaty with the Soviet Union despite the Americans deploying their seventh fleet on the Indian shores in an intimidating fashion.
The Russian pluses for India do not stop here. The Russians bailed out Indians after the two Pokhran nuclear tests in 1974 and 1998. They gave India the cryogenic engines at the right time and sustained Indian nuclear energy as well as strategic programmes running.
The Russians helped Indians with weaponry and technology at a time when the US-led international community had cracked down on India after its nuclear tests in 1974 and 1998. They helped India in a big way in the crucial space sector also. Of course, the Russians did so at a price but their support to India was invaluable at a time when India was completely isolated by the US-led international community.
Now let us come to the minuses in the Indo-Russian relationship.
From a stage to contributing over 90 per cent of weapon systems in Indian arsenal, the Russians today have slipped to just 60 per cent. The United States has already overtaken Russia as India’s biggest arms exporter. Israel is threatening to push Russia even further down to the number three spot anytime soon.
Why has this happened? Russia alone is to be responsible for this sad state of affairs mainly because of its repeated delays in completing projects, cost-overruns and supply of inferior defence equipment.
This has been happening for years. The exasperated Indian officials complained to their Russian counterparts about this but the Russians did not amend their ways.
In the meanwhile, India changed its defence procurement policy several times, each time making the competition for defence imports stiffer and the Russians could not simply cope with the new policies promulgated by India.
This was the biggest let down from Russia as far as the Indians were concerned.
The next big undoing in the India-Russia discourse has been Russia’s dalliances with Pakistan, India’s arch-rival. India understands the strategic needs of Russia in getting more friendly with Pakistan in view of the Russian concerns over Afghanistan in the coming months when American/NATO troops thin down their presence in Afghanistan.
But where was the need for Russia to sell attack helicopters to Pakistan? Yes, the Russians have sold such weapons to Pakistan earlier but that was way back in the 60’s!
Moreover, even if Russia was to sell attack helicopters to Pakistan it could have made it a one-off gesture. Where was the need for Russia to formalize a defence pact with Pakistan?
The Russian actions are viewed by India as ill-timed and do not inspire much confidence in New Delhi.
However, in this writer’s view Russia is enormously important for India and needless to say India too is equally important for Russia. The two age-old strategic partners must not allow their bilateral ties to go astray.
This is despite the fact that Russia is fast getting into the Chinese orbit, thanks largely to the western sanctions. This is not a welcome sign for India.
India would like to see a strong and stable Russia. It would be in India’s strategic interests to see Russia regaining its past glory and emerge as a strong and effective counterfoil to the West.
Russia is waging several big ticket battles simultaneously on the economic, political, diplomatic and military fronts. But today’s strategic calculus is forcing Russia to be dependent on China increasingly.
It is a worrying sign for India. Russia’s tilt towards China is largely because of economic considerations.
It would be in India’s long-term strategic interest to contribute its might to bolster the Russian economy which is in the grip of recession and western sanctions

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Deflation - Its definition and examples from today

When the overall price level decreases so that inflation rate becomes negative, it is called deflation. It is the opposite of inflation.
Definition: When the overall price level decreases so that inflation rate becomes negative, it is called deflation. It is the opposite of the often-encountered inflation.
Description: A reduction in money supply or credit availability is the reason for deflation in most cases. Reduced investment spending by government or individuals may also lead to this situation. Deflation leads to a problem of increased unemployment due to slack in demand.
Central banks aim to keep the overall price level stable by avoiding situations of severe deflation/inflation. They may infuse a higher money supply into the economy to counter- balance the deflationary impact. In most cases, a depression occurs when the supply of goods is more than that of money.

Deflation is different from disinflation as the latter implies decrease in the level of inflation whereas on the other hand deflation implies negative inflation.
In economics, deflation is a decrease in the general price level of goods and services.[1] Deflation occurs when the inflation rate falls below 0% (a negative inflation rate). This should not be confused with disinflation, a slow-down in the inflation rate (i.e., when inflation declines to lower levels).[2] Inflation reduces the real value of money over time; conversely, deflation increases the real value of money –- the currency of a national or regional economy. This allows one to buy more goods with the same amount of money over time.
Economists generally believe that deflation is a problem in a modern economy because it increases the real value of debt, and may aggravate recessions and lead to a deflationary spiral.[3] Historically not all episodes of deflation correspond with periods of poor economic growth.[4] Deflation occurred periodically in the U.S. during the 19th century (the most important exception was during the Civil War). This deflation was at times caused by technological progress that created significant economic growth, but at other times it was triggered by financial crises — notably the Panic of 1837 which caused deflation through 1844, and the Panic of 1873 which triggered the Long Depression that lasted until 1879.[5][6][7] These deflationary periods preceded the establishment of the U.S. Federal Reserve System and its active management of monetary matters. However, episodes of deflation have been rare and brief since the Federal Reserve was created (a notable exception being the Great Depression) while American economic progress has been unprecedented.
Although the values of capital assets are often casually said to "deflate" when they decline, this should not be confused with deflation as a defined term; a more accurate description for a decrease in the value of a capital asset is economic depreciation
Deflation started in the early 1990s in Japan. The Bank of Japan and the government tried to eliminate it by reducing interest rates and 'quantitative easing', but did not create a sustained increase in broad money and deflation persisted. In July 2006, the zero-rate policy was ended.
Systemic reasons for deflation in Japan can be said to include:
• Tight monetary conditions. The Bank of Japan kept monetary policy loose only when inflation was below zero, tightening whenever deflation ends.[34]
• Unfavorable demographics. Japan has an aging population (22.6% over age 65) that is not growing and will soon start a long decline. The Japanese death rate recently exceeded its birth rate.
• Fallen asset prices. In the case of Japan asset price deflation was a mean reversion or correction back to the price level that prevailed before the asset bubble. There was a rather large price bubble in stocks and especially real estate in Japan in the 1980s (peaking in late 1989).
• Insolvent companies: Banks lent to companies and individuals that invested in real estate. When real estate values dropped, these loans could not be paid. The banks could try to collect on the collateral (land), but this wouldn't pay off the loan. Banks delayed that decision, hoping asset prices would improve. These delays were allowed by national banking regulators. Some banks made even more loans to these companies that are used to service the debt they already had. This continuing process is known as maintaining an "unrealized loss", and until the assets are completely revalued and/or sold off (and the loss realized), it will continue to be a deflationary force in the economy. Improving bankruptcy law, land transfer law, and tax law have been suggested (by The Economist) as methods to speed this process and thus end the deflation.
• Insolvent banks: Banks with a larger percentage of their loans which are "non-performing", that is to say, they are not receiving payments on them, but have not yet written them off, cannot lend more money; they must increase their cash reserves to cover the bad loans.
• Fear of insolvent banks: Japanese people are afraid that banks will collapse so they prefer to buy (United States or Japanese) Treasury bonds instead of saving their money in a bank account. This likewise means the money is not available for lending and therefore economic growth. This means that the savings rate depresses consumption, but does not appear in the economy in an efficient form to spur new investment. People also save by owning real estate, further slowing growth, since it inflates land prices.
• Imported deflation: Japan imports Chinese and other countries' inexpensive consumable goods (due to lower wages and fast growth in those countries) and inexpensive raw materials, many of which reached all time real price minimums in the early 2000s. Thus, prices of imported products are decreasing. Domestic producers must match these prices in order to remain competitive. This decreases prices for many things in the economy, and thus is deflationary.
• Stimulus Spending: According to both Austrian and Monetarist economic theory, Keynesian 'stimulus' spending actually has a depressing effect. This is because the government is competing against private industry, and usurping private investment dollars.[35] In 1998, for example, Japan produced a 'stimulus' package of more than 16 trillion Yen, over half of it public works that would have a quashing effect on an equivalent amount of private, wealth-creating economic activity.[36]

Overall, Japan's 'stimulus' packages added up to over one hundred trillion Yen, and yet they failed. According to these economic schools, that 'stimulus' money actually perpetuated the problem it was intended to cure.
In November 2009 Japan has returned to deflation, according to the Wall Street Journal. Bloomberg L.P. reports that consumer prices fell in October 2009 by a near-record 2.2%


Eurozone is believed to be plunging into deflation as japan. The interest rates are kept low by ECB to improve influx of money into market. Value of debt increases . Suppose you had a debt of 100 Euro. Inflation means after some time it becomes smaller unit. Deflation means it becomes larger unit.  Hence debt market is affected most. That’s the turmoil in Greece now. The largest return on bond after india is Greece. The problem is that due to deflaton, the value of money of debt has increased. So when you get return after maturity, the value of money is more because of deflation. Hence if you exchange it,  the exchange money you get is more!!! Egs 100 euros bond you purchased. If you getting returns it after 1 year , due to deflation you get more rupees  after exchange.
The ECB is relying on a weaker euro as its main defence against deflation but Japan’s travails shows that this is a risky strategy without powerful action to back it up. Stephen Jen from SLJ Macro Partners said it will take very large outflows of capital to offset the eurozone’s current account surplus of €230bn, and then to push the exchange rate down to €1.20 against the dollar, the minimum level needed to kick start a recovery. “If the ECB’s actions are too weak, the euro could perversely appreciate, just as the yen did from 1990 to 2012,” he said.
The Greek government-debt crisis is part of the ongoing European debt crisis, being triggered by the turmoil of the Great Recession, and believed to have been directly caused locally in Greece by a combination of structural weaknesses of the Greek economy along with a decade long pre-existence of overly high structural deficits and debt-to-GDP levels on public accounts. In late 2009, fears of a sovereign debt crisis developed among investors concerning Greece's ability to meet its debt obligations, due to a reported strong increase in government debt levels along with continued existence of high structural deficits.  This led to a crisis of confidence, indicated by a widening of bond yield spreads and the cost of risk insurance on credit default swaps compared to the other countries in the Eurozone, most importantly Germany.

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Has US overtaken Russia and Saudi as largest Oil producer?

Surpassing Saudi

U.S. oil output will surge to 13.1 million barrels a day in 2019 and plateau thereafter, according to the IEA, a Paris-based adviser to 29 nations. The country will lose its top-producer ranking at the start of the 2030s, the agency said in its World Energy Outlook in November.

“It’s very likely the U.S. stays as No. 1 producer for the rest of the year” as output is set to increase in the second half, Blanch said. Production growth outside the U.S. has been lower than the bank anticipated, keeping global oil prices high, he said.

Partly as a result of the shale boom, WTI futures on the New York Mercantile Exchange remain at a discount of about $7 a barrel to their European counterpart, the Brent contract on ICE Futures Europe’s London-based exchange. WTI was at $103.74 a barrel as of 4:13 p.m. London time.

Islamist Insurgency

“The shale production story is bigger than Iraqi production, but it hasn’t made the impact on prices you would expect,” said Blanch. “Typically such a large energy supply growth should bring prices lower, but in fact we’re not seeing that because the whole geopolitical situation outside the U.S. is dreadful.”

Territorial gains in northern Iraq by a group calling itself the Islamic State has spurred concerns that oil flows could be disrupted in the second-largest producer in the Organization of Petroleum Exporting Countries after Saudi Arabia. Exports from Libya have been reduced by protests, while Nigeria’s production is crimped by oil theft and sabotage.

Libya will resume exports as soon as possible from two oil ports in the country’s east after taking back control from rebels who blocked crude shipments for the past year, Mohamed Elharari, spokesman for the state-run National Oil Corp., said by phone yesterday from Tripoli.

The U.S. will consolidate its position as the world’s biggest producer in the coming months if returning Libyan supply limits the need for Saudi barrels, said Julian Lee, an oil strategist who writes for Bloomberg News First Word. The observations he makes are his own.

Record Investment

“There’s a very strong linkage between oil production growth, economic growth and wage growth across a range of U.S. states,” Blanch said. Annual investment in oil and gas in the country is at a record $200 billion, reaching 20 percent of the country’s total private fixed-structure spending for the first time, he said.

A U.S. Commerce Department decision to allow the overseas shipment of processed ultra-light oil called condensate has fanned speculation the nation may ease its four-decade ban on most crude exports. Pioneer Natural Resources Co. and Enterprise Products Partners LP will be allowed to export condensate, provided it is first subject to preliminary distillation, the companies said June 25.

The decision was “a positive first step” to dispersing the build-up of crude supply in North America, Bank of America said in a report on June 27. The U.S. could potentially have daily exports of 1 million barrels of crude, including 300,000 of condensate, by the end of the year, according to a June 25 report from Citigroup Inc.

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What are the US-EU sanctions on Russia?

The EU sanctions announced on 12 September targeted Russia's state finances, energy and arms sectors. These are sectors managed by the powerful elite around President Vladimir Putin.
Russian state banks are now excluded from raising long-term loans in the EU, exports of dual-use equipment for military use in Russia are banned, future EU-Russia arms deals are banned and the EU will not export a wide range of oil industry technology.
Three major state oil firms are targeted: Rosneft, Transneft and Gazprom Neft, the oil unit of gas giant Gazprom.
But the gas industry, space technology and nuclear energy are excluded from sanctions.
Dozens of senior Russian officials and separatist leaders are now subject to Western asset freezes and travel bans.
The targets are those considered "materially or financially supporting actions undermining or threatening Ukraine's sovereignty, territorial integrity and independence".
The EU has also followed the US lead in targeting more individuals in President Putin's inner circle, as well as some major companies.
An important target is Bank Rossiya, described as the "personal bank" for senior Russian officials. Its biggest shareholders - Yuri Kovalchuk and Nikolai Shamalov - are blacklisted. They were also co-founders of the mysterious Ozero Dacha Co-operative, a housing community on the shore of Lake Komsomolsk founded in 1996, whose members accumulated massive fortunes under Mr Putin.
An asset freeze affects not only bank accounts and shares but also economic resources such as property. So those on the list are not allowed to buy or sell their assets in the EU, once the freeze is in force.
The travel ban means being prevented from entering an EU country, even if a person is in transit. They would be placed on a visa blacklist
Germany has appeared especially reluctant to ratchet up sanctions. That is not surprising, as German exports to Russia totalled 38bn euros (£30bn; $51bn) in 2013 - the highest in the EU.
More importantly, Germany gets more than 30% of its oil and gas from Russia. Italy is also highly dependent on Russian energy and some of Russia's former Soviet bloc neighbours rely 100% on its gas deliveries.
The EU's trade with Russia - worth nearly 270bn euros in 2012 - dwarfs US-Russia trade.
Food exporters are already facing losses after Russia announced an immediate embargo on a wide range of food imported from the EU, US, Norway, Canada and Australia. It was announced as a response to the Western sanctions.
Fresh fruit and vegetables, meat, dairy produce and various other foods are affected by the Russian ban, which will last at least a year.

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Are Recession and Depression the same?

A recession is a contraction phase of the business cycle,when GDP declines for two consecutive quarters is usually called a recession. The U.S. based National Bureau of Economic Research (NBER) defines a recession more broadly as "a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales." American newspapers often quote the rule of thumb that a recession occurs when real gross domestic product (GDP) growth is negative for two or more consecutive quarters. This measure fails to
register several official (NBER defined) US recessions.
A depression refers to a sustained downturn in one or more national economies. A severe recession with a 10% decline in GDP is usually called a depression. It is more severe than a recession (which is seen as a normal downturn in the business cycle). There is no official definition for a depression, even though some have been proposed. In the United States the National Bureau of Economic Research determines contractions and expansions in the business cycle, but does not declare depressions. A GDP decline of such magnitude has not happened in the United States since the 1930s.

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Balance of Payments , Current Account Deficit and Trade Deficit

Balance of Payments
The balance of payments (BOP) is the place where countries record their monetary transactions with the rest of the world. Transactions are either marked as a credit or a debit. Within the BOP there are three separate categories under which different transactions are categorized: the current account, the capital account and the financial account. In the current account, goods, services, income and current transfers are recorded. In the capital account, physical assets such as a building or a factory are recorded. And in the financial account, assets pertaining to international monetary flows of, for example, business or portfolio investments, are noted. In this article, we will focus on analyzing the current account and how it reflects an economy's overall position.
The Current Account
The balance of the current account tells us if a country has a deficit or a surplus. If there is a deficit, does that mean the economy is weak? Does a surplus automatically mean that the economy is strong? Not necessarily. But to understand the significance of this part of the BOP, we should start by looking at the components of the current account: goods, services, income and current transfers.
1. Goods - These are movable and physical in nature, and in order for a transaction to be recorded under "goods", a change of ownership from/to a resident (of the local country) to/from a non-resident (in a foreign country) has to take place. Movable goods include general merchandise, goods used for processing other goods, and non-monetary gold. An export is marked as a credit (money coming in) and an import is noted as a debit (money going out).
2. Services - These transactions result from an intangible action such as transportation, business services, tourism, royalties or licensing. If money is being paid for a service it is recorded like an import (a debit), and if money is received it is recorded like an export (credit).
3. Income - Income is money going in (credit) or out (debit) of a country from salaries, portfolio investments (in the form of dividends, for example), direct investments or any other type of investment. Together, goods, services and income provide an economy with fuel to function. This means that items under these categories are actual resources that are transferred to and from a country for economic production.
4. Current Transfers - Current transfers are unilateral transfers with nothing received in return. These include workers' remittances, donations, aids and grants, official assistance and pensions. Due to their nature, current transfers are not considered real resources that affect economic production.
Now that we have covered the four basic components, we need to look at the mathematical equation that allows us to determine whether the current account is in deficit or surplus (whether it has more credit or debit). This will help us understand where any discrepancies may stem from, and how resources may be restructured in order to allow for a better functioning economy.

Current Account Deficit
A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports. The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports. The current account is a calculation of a country’s foreign transactions, and along with the capital account is a component of a country’s balance of payment.
A current account deficit represents a negative net sales abroad. Developed countries, such as the United States, often run current account deficits, while emerging economies often run current account surpluses. Countries that are very poor tend to run current account deficits.
A country can reduce its current account deficit by increasing the value of its exports relative to the value of imports. It can place restrictions on imports, such as tariffs or quotas, or it can emphasize policies that promote exports, such as import substitution industrialization or policies that improve domestic companies' global competitiveness. The country can also use monetary policy to improve the domestic currency’s valuation relative to other currencies through devaluation, since this makes a country’s exports less expensive.
While a current account deficit can be considered akin to a country living “outside of its means," having a current account deficit is not inherently bad. If a country uses external debt to finance investments that have a higher return than the interest rate on the debt, it can remain solvent while running a current account deficit. If a country is unlikely to cover current debt levels with future revenue streams, it may become insolvent

Trade Deficit
Trade deficit - Let's say there are 2 nations in the world: nation A and nation B. If nation A sells 100 dollars worth of stuff to nation B, but buys 110 dollars worth of stuff from nation B at the same time, then nation A is said to have a trade deficit of 10 dollars: it's buying more goods and services from abroad than it is selling.
Current account deficit - this is a deficit in the current account. The current account is a broader measure than the trade deficit. It's one of the components of the balance of payments <------ balance of payments just shows all financial transactions between one country and the rest of the world. The current account deficit is equal to the trade balance (whether it's a surplus or deficit) + factor income (this is simply earnings on foreign investments by the citizens of the country subtracted from payments going to foreigners who have investments in the country) + cash transfers (like remittances from workers in the country to their families abroad).
So the difference is that the trade deficit (or surplus) is a component of the current account. The current account is a much broader measure. When the current account is in deficit, it simply means that a country's total import of goods and services, payments to foreigners on investments they hold in the country, and cash transfers from workers in the country is GREATER than its exports, factor income, and inflows of cash from abroad.

 

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