Online Learning Portal
Monthly DNA
02 Jan, 2020
28 Min Read
Prelims and Mains focus: on the proposed India-Mauritius FTA and its significance; India-Mauritius economic relations
News: India is close to finalising a proposed free trade agreement (FTA) with Mauritius, with several rounds of negotiations to improve market access between the two countries having been completed, the Ministry of Commerce and Industry said on Wednesday.
Background
Seven rounds of India-Mauritius CECPA negotiations have been held till now. During these rounds, negotiations focussed on various aspects including trade in goods, trade in services, rules of origin, technical barriers to trade and sanitary and phytosanitary (SPS) measures, trade remedies and dispute settlement.
About the proposed FTA
Why do countries opt for FTA?
Countries enter into FTAs to make it easier to exchange goods and services between them. This is usually done by reducing or eliminating trade barriers like tariffs and quotas that these countries would have imposed on these goods and services.
India-Mauritius economic relations
Way ahead
Source: Indian Express
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims and Mains focus: About the RBI’s Operation Twist; its need and impact
News: Recently, the Reserve Bank of India (RBI) decided to undertake its own version of Operation Twist to bring down 10-year yields of government securities (G-Secs) and drive monetary transmission.
Why is Operation Twist so important?
Operation Twist is a move in which a central bank decides to simultaneously buy long-dated securities while selling short-term securities. The objective behind such an operation is management of the yield curve. Other central banks, including the US Federal Reserve, have used similar measures. This is the first time RBI has undertaken such an unconventional policy measure with the aim of flattening the yield curve by lowering longer rates to boost lending and growth. On Monday, RBI undertook its second round of open market operations (OMOs), the first round of which was undertaken on 23 October.
Did RBI buy, sell bonds of the same amounts?
A conventional Operation Twist involves a central bank buying and selling securities of the same amounts. The purchase of securities pushes down the yields of long-dated securities, while the sale of short-term bonds drives up their yield. This transaction is undertaken as it effectively reduces the term premia. But in the case of RBI’s recent move, on 23 October, the central bank bought a net of Rs.10,000 crore of 10-year bonds and sold one-year bonds of Rs.6,825 crore. On 30 December, RBI again bought 10-year bonds worth Rs.10,000 crore while selling one-year bonds worth Rs.8,501 crore.
So did the move have an impact on bond yields?
The recent Operation Twist impacted bond yields that had shot up to 6.705% on 18 December. The move was announced on 19 December 2019 and yields moderated to 6.501% on 1 January 2020. Ending uncertainty on fiscal deficit numbers for 2019-20 and 2020-21 and a credible long-term fiscal consolidation path will help moderate bond yields.
Why did 10-year yields rise after 30 Dec?
In the past, RBI had ruled out its desire to get into yield curve management. But by undertaking Operation Twist, it has provided strong signals to markets that could be well on the cards. Despite this, the second Operation Twist on 30 December didn’t pare yields as investors are jittery due to concerns regarding the FY20 fiscal deficit. RBI also released the calendar for state borrowings of Rs.2 trillion for the Q4 FY20. Operation Twist is likely to have subdued the impact of these developments on the yield curve.
Can we expect more such operations?
Over the last few months there has been a call for OMOs to drive monetary transmission. More such operations are possible as RBI tries to improve transmission and the monetary policy panel continues with an accommodative stand. A countercyclical fiscal policy is warranted due to the growth slowdown and is factored in by investors. Thus, by revising deficit targets and creating a credible medium-term consolidation path, the Centre can send bond markets a positive signal, which would supplement RBI’s Operation Twist.
Source: mint
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims and Mains focus: About GST; reasons for delays in compensation to states
News: Goods and services tax (GST) collections exceeded the Rs.1 trillion mark for the second straight month in December, bringing some relief to policymakers fighting to boost consumption and liquidity in a slowing economy.
Background
GST collections across states and UTs
Among major states and Union territories (UTs) that recorded a substantial jump in gross domestic GST collections are Assam (33%), Maharashtra (22%), Tamil Nadu (19%), Gujarat (18%), Delhi (18%), Kerala (17%), West Bengal (16%) and Madhya Pradesh (16%). The under-performers include Jharkhand (-3%), Odisha (2%), Goa (6%) and Rajasthan (10%).
Way ahead
Source: mint
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims and Mains focus: About the liquidity crisis in the NBFC sectors and efforts of RBI to improve the liquidity situation
News: The Reserve Bank of India (RBI) has extended by six months existing relaxations for the securitization of assets by non-banking financial companies (NBFCs).
Aim of the move
The move is aimed at providing NBFCs with some more breathing space to repair their balance sheets by selling assets and improving liquidity.
Background
What is MHP?
The minimum holding period is the duration for which an NBFC is required to hold the loans on its book before selling them.
Efforts made by the RBI to improve liquidity in NBFCs
About NBFCs
Non-Banking Financial Companies (NBFCs) are the financial institutions that offer banking services but do not comply with the legal definition of a bank, i.e. it does not hold a bank license.
Both banks and NBFCs are financial intermediaries. NBFCs can lend and make investments. Hence, their activities are akin to that of banks.
However, there are a few differences between NBFCs and banks:
Significance of NBFCs
Non-banking finance companies (NBFCs) are a fundamental part of the Indian financial system playing a significant role in nation-building and financial inclusion. It plays a complementary role to the banking system in promoting financial inclusion. There are multiple varieties of NBFCs and so the sector demands a well-coordinated response from all stakeholders keeping in mind the differential contextual requirements of different categories of NBFCs.
Source: mint
Syllabus subtopic: Science and Technology- developments and their applications and effects in everyday life Achievements of Indians in science & technology; indigenization of technology and developing new technology.
Prelims and Mains focus: about Gaganyaan; Chandrayaan-3: their significance
Context: Four pilots from the Indian Air Force (IAF) will leave for Russia this month to receive training as astronauts of Gaganyaan, the first Indian crewed flight to space.
About Gaganyaan
Chandrayaan-3 on the anvil
A new launch port for ISRO
The Tamil Nadu government has started acquiring 2,300 acres of land in Thoothukudi district for ISRO’s second launch port. Thoothukudi offers a locational advantage to launch towards India’s South.
Lunar mission with Japan
Another lunar mission is being discussed with Japanese space agency JAXA ( Japan Aeronautics Exploration Agency) but its elements have not been finalised.
Source: The Hindu
Syllabus subtopic: Conservation, environmental pollution and degradation, environmental impact assessment
Prelims and Mains focus: about Senna Spectabilis: threat posed by it and measures taken to check its spread
News: The Kerala Forest and Wildlife department is gearing up to adopt comprehensive steps to arrest the rampant growth of invasive alien plants, especially tree species like ‘Senna Spectabilis’, in the forest areas of the Nilgiri Biosphere Reserve (NBR), including the Wayanad wildlife sanctuary.
Threats by invasive species (Senna Spectabilis)
How does it hampers the growth of other plant species?
Measures taken up to prevent it from spreading
Source: The Hindu
Syllabus subtopic: Science and Technology- developments and their applications and effects in everyday life Achievements of Indians in science & technology; indigenization of technology and developing new technology.
Prelims and Mains focus: About the MANI app and its significance
News: The Reserve Bank of India (RBI) on Wednesday launched the Mobile Aided Note Identifier (MANI), a mobile application for aiding visually impaired persons to identify the denomination of Indian banknotes.
Features of MANI app
Significance
Technological progress has opened up new opportunities for making Indian banknotes more accessible for the visually impaired, thereby facilitating their day to day transactions.
Source: Indian Express
FM unveils Rs.102 tn infra push to reignite growth Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the government’s move to boost infrastructure investments and the role of NIP;
Core sectors shrink for the fourth straight month Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about the eight core sectors of the Indian Economy and their performance; Index
Syllabus subtopic: Awareness in the fields of IT, Space, Computers, robotics, nano-technology, bio-technology and issues relating to intellectual property rights. Prelims and Mains focus: about 5G; its advantages and significance in development of various sectors News: The
The current account deficit narrows to 0.9% of GDP Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about the Current Account Deficit (CAD) and the reasons for it narrowing down
Taiwan passes a law to combat China's influence Syllabus subtopic: Effect of policies and politics of developed and developing countries on India's interests, Indian diaspora. Prelims and Mains focus: about the bill passed by Taiwan; China-Taiwan dispute; difference between One China p
Syllabus subtopic: Modern Indian history from about the middle of the eighteenth century until the present- significant events, personalities, issues Prelims and Mains focus: About the Bhima Koregaon conflict; its outcome and significane News: Lakhs of devotees, neo-Buddhists, members of Ambed
Syllabus subtopic: Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources. Prelims and Mains focus: about the findings of RTF regarding malnutrition among tribes in Odisha; about juanga and Paudi Bhuyan tribe N
A fiscal stimulus in the budget has to get balance right Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about the ongoing economic slowdown what should the next year’s bu
Syllabus subtopic: Statutory, regulatory and various quasi-judicial bodies. Prelims and Mains focus: About NITI Aayog’s SDG India Index and performance of various states News: Kerala tops the States in progress towards the UN’s Sustainable Development Goals (SDG
AFSPA extended in Nagaland for six months Syllabus subtopic: Security challenges and their management in border areas; linkages of organized crime with terrorism Prelims and Mains focus AFSPA- features, draconian provisions, misuses and need for review. News: The Ministry of Home Affai
Syllabus subtopic: Conservation, environmental pollution and degradation, environmental impact assessment Prelims and Mains focus: about the key findings of ISFR-2019 and its significance; efforts taken by the govt. to improve forest cover in the country News: The forest co
Syllabus subtopic: Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and bodies constituted for the protection and betterment of these vulnerable sections Prelims and Mains focus: about
Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation Prelims and Mains focus: about the significance of the govt.’s move to waive carbon tax on coal News: Prime Minister&r
Syllabus subtopic: Government policies and interventions for development in various sectors and issues arising out of their design and implementation Prelims and Mains focus: About the SDG India Index report 2019 and its significance; NITI Aayog and its composition News: Go
Our Popular Courses
Module wise Prelims Batches
Mains Batches
Test Series