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Reverse-flipping According to the Economic Survey 2022–23, Indian start–up businesses are considering "reverse flipping." What is reversing a flip? Flipping is the process of giving a foreign corporation complete ownership of an Indian business. Every piece of intellectual property and data that belongs to an Indian company is often transferred along with it. Reverse flipping is the process of moving a company's domicile back to India after an earlier flip. Due to easy access to finance from private equity and venture capital, modifications to the round-tripping laws, and the maturing of India's capital market, businesses reversal flip. Why do businesses…
02 February, 2023
Terminology
Finfluencers The Securities and Exchange Board of India (SEBI) is drafting regulations for "finfluencers," as they are also referred to. Finfluencers are persons who use open social media platforms to share their personal stories and recommendations regarding money and stock investments. Their films offer advice on setting a budget, investing, purchasing real estate, using cryptocurrencies, and monitoring market trends. What is the purpose of the rules? There are now significantly more "unregistered" investment advisors offering unasked-for "stock" suggestions on social media networks. Additionally, several businesses employed finfluencers to increase the value of their stock using social media sites. There is…
25 November, 2022
Terminology
Doom Loop There is a chance that the British economy will get stuck in a "doom loop." What is Doom Loop? The doom loop is a circle of vulnerability where a country's banking system can be badly harmed by price volatility in the sovereign bonds they hold as reserves, leading to a contraction in lending given by the banks. As a result of the domestic economy slowing down as a result of the credit contraction, the price of the sovereign's bond issues continues to decline. This is because the government is being compelled to increase borrowing in order to maintain…
11 October, 2022
Terminology
Hedge Fund A hedge fund is a limited partnership of private investors whose capital is managed by experienced fund managers. These managers employ a variety of tactics, such as borrowing money or trading in non-traditional assets, to generate returns on investments that are higher than average. Investment in hedge funds is frequently viewed as a dangerous alternative investment option since it typically has a high minimum investment requirement or net worth requirement and frequently targets wealthy clientele. Regulatory specifications There is no requirement for hedge funds in India except register with the Securities and Exchange Board of India. Several types…
21 September, 2022
Terminology
Shrinkflation Companies employ ‘shrinkflation’ as Inflation that continues to impact the buying power of consumers. About Shrinkflation: It refers to the tampering with a product while maintaining retail price It is when a product downsizes its quantity while keeping the price the same. For example, reducing the scoops of ice cream in a container or reducing the number of chips in a packet would count as shrinkflation. Cause: It occurs when materials or ingredients used to make products become more expensive and when there is intense competition in the market. As a result, instead of raising prices, they might just…
23 July, 2022
Terminology
Dr V Anantha Nageswaran: New Chief Economic Advisor About Chief Economic Advisor The Chief Economic Adviser (CEA) is a post in the Government of India and is equivalent to the rank of Secretary to the Government of India. The CEA is head of the Economic Division of the Department of Economic Affairs, Ministry of Finance, Government of India. The CEA is the ex-officio cadre controlling authority of the Indian Economic Service. Until 2009, the CEA’s position was a Union Public Service Commission appointment and until the 1970s almost all CEAs were members of the Indian Economic Service. Role of a…
29 January, 2022
Terminology
K shaped recovery vs V shaped recovery in India What is a K-shaped recovery? A K-shaped recovery is a post-recession scenario in which one segment of the economy begins to climb back upward while another segment continues to suffer. If illustrated, the economic growth would roughly resemble the two diverging diagonal lines of the letter "K" - hence the name. This is quite unusual. Traditionally, when the economy dips, it's felt throughout every industry and demographic, and vice-versa when the economy eventually recovers. Of course, the impact is often greater on some than on others. But overall, nations and people…
30 July, 2021
Terminology
Major Committees – Indian Banking system Committee Purpose Banking and Financial Sector Reforms Basel Committee Banking Supervision Bimal Jalan For New Bank Licenses Raghuram Rajan Committee For Financial Sector Reforms For Banking Sector Reforms Sukhmoy Chakravarty Committee to Review Working of Monetary System For Reforms Relating To Non-Banking Financial Companies (NBFC) Marathe Licensing of New Banks A K Khandelwal Issues Of Public Sector Banks Investigate Frauds & Malpractices Ghosh Frauds & Malpractices In India Janakiraman To Investigate The Security Transactions Of The Bank Justice M B Shah Commission On Black Money R. Jilani Inspection…
10 April, 2021
Terminology
Rule Curve of a Dam The Supreme Court ordered the Tamil Nadu govt. to give information on the ‘rule curve’ for the Mullaperiyar dam. What is Rule Curve? The ‘rule curve’ in a dam decides the fluctuating storage levels in a reservoir. The gate opening schedule of a dam is based on the ‘rule curve’. It is part of the “core safety” mechanism in a dam. Rules curves are used to guarantee the safety of the reservoir as well as water security. About Mullaperiyar Dam: The Mullaperiyar dam is located on the confluence of the Mullayar and Periyar rivers in Kerala’s…
18 March, 2021
Terminology
Agglomeration Effect Agglomeration Economies: A localized economy in which a large number of companies, services, and industries exist in close proximity to one another and benefit from the cost reductions and gains in efficiency that result from this proximity. If an area specialises in the production of a certain type of good, all firms can benefit from various factors such as: Good supply networks Supply of trained workers Infrastructure built specifically for the industry Good transport links
15 March, 2021
Terminology
Remote Work Models Introduction The first known remote worker was an employee of NASA in the early 70s. In 1996, the National Telecommuting Initiative was launched in the U.S. to promote remote work within the government. As a result, Congress approved the use of telecommuting in Federal agencies. Type-1: Centralized Office + Occasional Work-from-Home With this model, employees are required to work primarily from the office, but with the occasional work-from-home option. This model is attractive to just about anyone, but maybe especially beneficial for busy parents or those who live further away from the office. The number of remote…
09 March, 2021
Terminology
Liquidity Coverage Ratio Liquidity Coverage Ratio (LCR) indicates the proportion of highly liquid assets held by banks to ensure their ability to meet short-term obligations. This ratio is essentially a generic stress test that aims to make sure that financial institutions possess suitable capital to ride out any short-term liquidity disruptions. How to Calculate the Liquidity Coverage Ratio? The LCR is calculated by dividing a bank's high-quality liquid assets by its total net cash flows, over a 30-day stress period. The high-quality liquid assets include only those with a high potential to be converted easily and quickly into cash.
18 February, 2021
Terminology
Interest Rate Growth Differential "If the interest rate paid by the government is less than the growth rate, then the intertemporal budget constraint facing the government no longer binds."- economist Olivier Blanchard. The “intertemporal budget constraint” means that any debt outstanding today must be offset by future primary surpluses. If the Interest Rate-Growth Differential (IRGD), the difference between the interest rate and growth rate, becomes negative, the governments need not worry about deficits since the growth would take care of the interest payment obligations. This would ensure the sustainability of public debts. The Economic Survey argues that in India, the…
03 February, 2021
Terminology
GDP to contract by 7.7% this year India’s real GDP (Gross Domestic Product) is estimated to contract by 7.7% in 2020-21, with GVA (Gross Valued added) shrinking by 7.2%, advance estimates released by the National Statistical Office show. India’s economy had expanded 4.2% in 2019-20, but entered a recessionary phase with two successive quarters of sharp contraction triggered by the COVID-19 lockdowns. Following a 23.9% collapse in the economy in the April-June period, the GDP shrank by 7.5% in the second quarter — leading to a real GDP contraction of 15.7% in the first half of 2020-21. The economy will…
08 January, 2021
Terminology
India’s Fiscal Deficit to exceed 7% India’s fiscal deficit for the year ending in March is likely to exceed 7% of gross domestic product, three sources told Reuters, as revenue collections suffered from a lockdown and restrictions to rein in the spread of COVID-19. The government had in February projected a deficit of 3.5% for the current year. It estimated government borrowing of Rs. 7.8 trillion, later revised to Rs. 12 trillion, to provide relief to millions of people and businesses hurt by the pandemic. “The fiscal deficit will be bigger than what is estimated by some ... our revenue…
08 January, 2021
Terminology
World food price index by FAO World food prices rose for a seventh consecutive month in December, with all the major categories, barring sugar, posting gains last month, the United Nations food agency said. The Food and Agriculture Organization’s (FAO) food price index, which measures monthly changes for a basket of cereals, oilseeds, dairy products, meat and sugar, averaged 107.5 points last month versus 105.2 in November. For the whole of 2020, the benchmark index averaged 97.9 points, a three-year high and a 3.1% increase from 2019. It was still down more than 25% from its historical peak in 2011.…
08 January, 2021
Terminology
Walter Scheidel’s Analysis Walter Scheidel, the Austrian economic historian, argues that throughout human history, there have been four types of catastrophic events that have led to greater economic equality: pandemic, war, revolution and state collapse. In Scheidel’s analysis, the decline in inequality is a result of excess mortality that raises the price of labour.
22 August, 2020
Terminology
What Is Severance Pay? Severance pay is the compensation and/or benefits an employer provides to an employee after employment is over. Severance packages may include extended benefits, such as health insurance and outplacement assistance to help an employee secure a new position. It is given under Industrial Disputes Act,1947 if a worker is employed for a period of 248 days. Employers offer packages to employees who are laid off, whose jobs are eliminated because of downsizing, or who retire. Some employees who resign or are fired may also receive a severance package. Severance pay can be a goodwill gesture on…
06 August, 2020
Terminology
Current Account The current account measures the flow of goods, services, and investments into and out of the country. It represents a country’s foreign transactions and, like the capital account, is a component of a country’s Balance of Payments (BOP). A nation’s current account maintains a record of the country’s transactions with other nations that includes net income, including interest and dividends, and transfers, like foreign aid. It comprises of following components - Visible trade - Export and import of goods, Invisible trade - Export and import of services Unilateral transfers Investment - Income from factors such as land or foreign…
11 July, 2020
Terminology
Index Numbers of Wholesale Price in India for the month of May 2020 The Office of the Economic Adviser, Department for Promotion of Industry and Internal Trade is releasing index numbers of wholesale prices in India for the month of May 2020 (Provisional) and for the month of March 2020 (Final). Provisional figures of the Wholesale Price Index (WPI) are released on the 14th of every month (or the next working day) with a time lag of two weeks of the reference month. Wholesale Price Index for 'All Commodities' (Base: 2011-12=100) for the month of May 2020 declined by (-2.24%) to 117.7…
16 June, 2020
Terminology
What is Gross Value Added, and how is it relevant when growth is announced in GDP terms? THE HINDU Explained Part of: GS-III- Economic DATA (PT-MAINS-PERSONALITY TEST) Why are the GVA figures in focus now? How is the GVA data relevant when economic growth is announced in GDP terms? BackGROUND The National Statistical Office (NSO), on May 29, released its provisional estimates of national income for the financial year 2019-20. As per the NSO, real GDP (Gross Domestic Product) in the full fiscal year was estimated to have expanded by 4.2% from a year earlier, the slowest pace of growth…
07 June, 2020
Terminology
Morgan Stanley Capital International (MSCI) MSCI is the world’s biggest index compiler, with more than $10 trillion in assets benchmarked to its products. Recently it said, China’s local currency shares referred to as China ‘A’ shares would be added to the index. MSCI is closely tracked by global investors and the inclusion of china’s shares will open up investment interest from foreign investors and adds financial credibility. If china continues to gain more weightage on the index, more money could flow out of India.
12 May, 2020
Terminology
Foreign Currency Assets (FCA) FCAs are assets that are valued based on a currency other than the country's own currency. FCA is the largest component of the forex reserve. It is expressed in dollar terms. The FCAs include the effect of appreciation or depreciation of non-US units like the euro, pound and yen held in the foreign exchange reserves. Special drawing rights (SDR) The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. The SDR is neither a currency nor a claim on the IMF. Rather, it is a potential claim on the freely usable currencies…
04 May, 2020
Terminology
Angel Funds Part of: GS Prelims and GS-III- Economy-tax Angel funds refer to a money pool created by high-net-worth individuals or companies (generally called angel investors), for investing in business start-ups. They are a sub-category of venture capital funds with a strict focus on startups, while venture capital funds generally invest at a later stage of the development of the investee company. In India, the term Angel Funds is defined in SEBI (Alternative Investment Funds) (Amendment) Regulations, 2013. Here, an Angel fund is defined as a sub-category of Venture Capital Fund under Category I- Alternative Investment Fund (AIF) (pt) that raises…
10 April, 2020
Terminology
Gadgil-Mukherjee Formula Up to the 3rd Five Year Plan (FYP) [1961-66] and during Plan Holiday (1966-69), allocation of Central Plan Assistance was schematic and no formula was in use. The Gadgil Formula comprising (i) Population [60%] (ii) Per Capita Income (PCI) [10%] (iii) Tax Effort [10%] (iv) On-going Irrigation & Power Projects [10%] and (v) Special Problems [10%] was used during 4th FYP (1969-74) and 5th FYP (1974-78). However, since item (iv) was perceived as being weighted in favour of rich states, the formula was modified by raising the weightage of PCI to 20%. The National Development Council (NDC) approved…
10 April, 2020
Terminology
GDP deflator The Gross Domestic Product (GDP) deflator is a measure of general price inflation. It is calculated by dividing nominal GDP by real GDP and then multiplying by 100. Nominal GDP is the market value of goods and services produced in an economy, unadjusted for inflation (It is the GDP measured at current prices). Real GDP is nominal GDP, adjusted for inflation to reflect changes in real output (It is the GDP measured at constant prices). GDP Deflator = Nominal GDP x 100 Real GDP Importance of GDP Deflator There are other measures of inflation too like Consumer Price Index (CPI) and Wholesale Price Index (or WPI); however GDP…
10 April, 2020
Terminology
Financial Intelligence Unit-India FIU-IND is a central, national agency responsible for receiving, processing, analyzing and disseminating information relating to suspect financial transactions to enforcement agencies and foreign FIUs. It was set up in 2004. It is an independent body reporting directly to the Economic Intelligence Council (EIC) headed by the Finance Minister.
08 April, 2020
Terminology
National Securities Depository Limited PT PICKUPS The enactment of the Depositories Act in August 1996 paved the way for the establishment of NSDL in August 1996. It handles most of the securities held and settled in dematerialized form in the Indian capital market. NSDL works to support the investors and brokers in the capital market of the country. It aims at ensuring the safety and soundness of Indian marketplaces by developing settlement solutions that increase efficiency, minimize risk and reduce costs. Domestic institutional investors DIIs are those institutional investors who undertake investment in securities and other financial assets of the country they…
05 April, 2020
Terminology
Exchange Traded Fund An Exchange-Traded Fund (ETF) is a basket of securities that trade on an exchange, just like a stock. ETF reflects the composition of an Index, like BSE Sensex. Its trading value is based on the Net Asset Value (NAV) of the underlying stocks (such as shares) that it represents. ETF share prices fluctuate all day as it is bought and sold. This is different from mutual funds which only trade once a day after the market closes. An ETF can own hundreds or thousands of stocks across various industries, or it could be isolated to one particular industry or sector.
01 April, 2020
Terminology
Volatility index Part of: GS Prelims and GS-III- Econo VIX (Volatility index) is an index used to measure the near term volatility expectations of the markets. Volatility signifies the rate and magnitude of change in the stock price or index value. The movement in the VIX index reflects the overall market volatility expectations over the next 30 days. Given the nature of the index, it is also known as ‘fear gauge’ or ‘fear index’. The VIX index was first created by the Chicago Board Options Exchange (CBOE) and introduced in 1993 based on the prices of S&P 500 index. India VIX The India VIX was launched by National Stock Exchange (NSE) in…
30 March, 2020
Terminology
Rebate of State and Central Taxes and Levies (RoSCTL) The Union Cabinet has given its approval for the continuation of the Rebate of State and Central Taxes and Levies (RoSCTL) from 1st April 2020 onward until it is merged with the Remission of Duties and Taxes on Exported Products (RoDTEP). Continuation of RoSCTL beyond 31st March 2020 is expected to make the textile sector competitive by rebating all taxes/levies which are currently not being rebated under any other mechanism. Announced on 7th March, 2019, RoSCTL was offered for embedded state and central duties and taxes that are not refunded through Goods and Services Tax. It was available only for garments…
26 March, 2020
Terminology
Currency swap agreement Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth. Prelims and Mains focus: on the currency swap agreement and its significance News: Reserve Bank of India (RBI) governor made a case for international multilateral agencies like the International Monetary Fund (IMF) to launch currency swaps for countries affected by the spread of COVID-19, also known as coronavirus. Need A swap line was critical from the point of view of preserving global financial stability. The global economy has been hit hard by COVID-19. According to IMF projections, the…
07 March, 2020
Terminology
Limited Liability Partnerships (LLPs) Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: about the scheme and its benefits; about LLPs and their advantages News: The government is set to introduce an amnesty scheme for Limited Liability Partnership (LLP) firms for delays in mandatory filings which could benefit 20-25 per cent of the 1.25 lakh LLPs registered in the country. Aim: The move is aimed at bringing non-compliant LLPs into the legal fold. Background The government had in January extended a provision in the Companies Act to LLPs…
04 March, 2020
Terminology
Consumer Price Index (CPI) Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: on CPI and its significance; on inflation targeting News: The RBI governor has stressed the need to review the monetary policy framework. An inflation targeting framework is effective when the measure of inflation is accurate. But there are concerns about CPI’s composition. What is CPI and how is it computed? The consumer price index (CPI) measures the changes in the prices of goods and services that are consumed by households. The rural CPI index…
21 February, 2020
Terminology
Force Majeure Clause Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: on the move and its implications; on the force majeure clause News: The government said supply chain disruptions caused by the novel coronavirus (Covid-19) outbreak in China would allow companies to invoke the force majeure clause Background The announcement comes a day after Finance Minister met several industry representatives to take stock of the situation, announcing the government would “speedily” formulate measures to minimise its impact on sectors. The Department of Expenditure in a notification…
20 February, 2020
Terminology
Sovereign Credit Rating Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: on the sovereign credit ratings and their significance News: Global rating agency Standard and Poor’s affirmed India’s sovereign rating at ‘BBB-’ with a stable outlook. Reason According to S&P, despite a notable deceleration in India’s economy in recent quarters, its structural growth outperformance remains intact. Real GDP growth is therefore likely to gradually recover toward longer-term trend rates over the next two to three years. It expects the economic growth rate to improve to…
14 February, 2020
Terminology
RBI to set up a new umbrella entity (NUE) Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: on the functions and eligibility criteria for setting up of NUEs; other guidelines issued by RBI News: The Reserve Bank of India (RBI) has proposed to set up a new pan-India new umbrella entity (NUE) or entities focussing on retail payment systems with a minimum paid-up capital of Rs 500 crore. Functions of the new entity The proposed entity will set up, manage and operate new payment systems especially in…
12 February, 2020
Terminology
GST rates to be revised yearly Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: about the move and its benefits; about inverted duty structure; about GST; GST Council News: GST Council, the federal indirect tax body, is set to make changes in tax rates of goods and services a yearly affair, moving away from frequent rate revisions to remove ‘uncertainty’ for businesses and the government. The reason behind the move Rate revision every three months brings in uncertainty. Frequent changes in GST rates have led to an…
10 February, 2020
Terminology
Declining Savings Rate Syllabus subtopic: Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment Prelims and Mains focus: on the declining savings rate in India and its causes Context: India has been witnessing a slowdown in consumption as well as savings for a while now, raising questions over the growth of real income in the economy. Why are savings so important? People can use their money for either consumption or savings. Savings are an important tool to help people smoothen out consumption. That is, they can use the savings for a rainy day.…
05 February, 2020
Terminology
Anti-dumping duty Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth. Prelims and Mains focus: on the move to abolish duties and its significance; on dumping News: The government’s decision to abolish anti-dumping duties on Purified Terephthalic Acid (PTA) will bring down manufacturing cost and potentially boost exports. Background The anti-dumping duties, first imposed around July 2014, levied additional charges between $27 to $160 per metric tonne for those wishing to import PTA. Data from the Commerce Ministry shows exports of some products made with PTA like polyester staple…
03 February, 2020
Terminology
Foreign Portfolio Investors ( FPIs) Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth. Government Budgeting. Prelims and Mains focus: About steps taken to boost private investment; associated terms and their meaning News: Finance minister took several measures to woo foreign portfolio investors (FPIs) after the misstep last year of imposing a surcharge on investors who were registered as a trust. What are the steps to be taken? withholding tax rate of 5% for FPIs investing in the bond market eliminating the dividend distribution tax (DDT) letting FPIs…
03 February, 2020
Terminology
Air India's privatization Syllabus subtopic: Effects of Liberalization on the Economy, Changes in Industrial Policy and their Effects on Industrial Growth. Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment. Prelims and Mains focus: about the details of the deal and its significance; about types of disinvestment News: The Union government invited bids for a 100% stake sale of Air India (AI) and transfer of management control along with its complete share in two subsidiaries — lowcost international carrier Air India Express and groundhandling arm AISATS. Background This is the second attempt…
28 January, 2020
Terminology
Recession and Stagflation Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the two terms and their significance in determining the status of the economy News: The Indian economy is going through tough times with the advance estimates for the rate of growth for the real gross domestic product (GDP) for 2019-20 being pegged at 5% compared to 6.9% in 2018-19. What has been the trend so far? The GDP growth for the second quarter of 2019-20 came in at 4.5% against 7.1% in the second quarter…
22 January, 2020
Terminology
India’s import substitution policy Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the import substitution policy and its benefits and how it impacts domestic industries and the overall growth of an economy Context: The recent wave of protectionism and the US-China trade war point to a need to re-evaluate India’s trade policy. The argument in favour of higher tariffs or import substitution is that ‘infant’ domestic industries need to be protected. The benefit of a low-tariff regime India’s GDP growth rate has largely gone…
21 January, 2020
Terminology
Current Account Deficit (CAD) Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the current account deficit and its significance; reasons for its contraction; balance of payments; OPEC News: Data released by the Reserve Bank of India (RBI) shows India’s current account deficit (CAD) reduced to 0.9% of GDP in the second quarter of 2019-20 from 2% in the first, primarily due to a lower trade deficit. Is it a reason to cheer? India’s CAD shrunk in the second quarter as imports contracted, while exports posted modest…
17 January, 2020
Terminology
National Anti-profiteering Authority (NAA) Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about the malpractices in passing on GST rate cuts to the customers and the role played by NAA in curbing it; NAA: mission and functions News: A wave of orders is expected from the National Anti-profiteering Authority (NAA) in the next three months, with the Centre stepping up a goods and services tax (GST) compliance drive. Background This comes amid concern among policymakers that businesses have pocketed part of the Rs.1 trillion worth of GST…
15 January, 2020
Terminology
Retail Inflation Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the spike in retail inflation; its causes and implications News: Retail inflation soared to a five-and-a-half-year high of 7.35% in December 2019, with the shortage of onions driving the surge. Background The last time retail inflation was this high was the 7.39% recorded in July 2014, just after PM Modi began his first term in office. What led to this spike in retail inflation? According to information released by the National Statistical Office on…
14 January, 2020
Terminology
Index of Industrial Production (IIP) Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: About the economic slowdown in the Indian economy and its recovery; about IIP, CSO News: India’s industrial production recovered from three months of contraction to expand by 1.8% in November, signalling an early but weak improvement in the economy. Background Manufacturing output had been shrinking for the past three months with a 2.1% contraction in October. It had seen a 0.7% contraction last November. What contributed to this recovery in…
11 January, 2020
Terminology
Productivity has a big role in India’s $5 in GDP dream Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on India’s aim of becoming a $5 trillion economy; TFP and how it impacts the economy News: The slowdown has revived interest in India’s growth rate as it aspires to become a $5 trillion economy. This would require growing at 8% in real terms, along with a 0.7% rise in total factor productivity (TFP). What are the factors for economic growth? Economic growth is…
08 January, 2020
Terminology
Statistics panel on economic data holds 1st meet Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about SCES: mandate and significance; About IIP News: The newly constituted Standing Committee on Economic Statistics (SCES), chaired by former Chief Statistician of India Pronab Sen, in its first meeting on Tuesday decided to form three sub-groups. What are the functions of the three sub-groups? One sub-group will look into the details of the Periodic Labour Force Survey and time use survey; the second group will look into the Index of…
08 January, 2020
Terminology
Govt. may cut spending to curb the deficit Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on the govt’s move to cut expenditure and its implications on the economy; on fiscal deficit News: The government is likely to cut spending for the current fiscal by as much as Rs.2 trillion (Rs. 2 lakh crore) as it faces one of the biggest tax shortfalls in recent years. Background Economic growth slowed for six consecutive quarters to 4.5% in JulySeptember, despite a 135basispoint cut in interest rates by the…
08 January, 2020
Terminology
How automation affects global FDI flows Syllabus subtopic: Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth. Prelims and Mains focus: on automation: its advantages and impact on the economy News: Across the world, the rise of automation has raised concerns over its impact on employment, especially in poor countries. Is automation a threat? New research, however, suggests that these fears may be overblown. While automation will disrupt the flow of capital from rich to poorer countries, the poorest countries could actually gain from automation. A World Bank study uses…
07 January, 2020
Terminology
Relief for govt as GST collections remain above Rs.1 trillion mark 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. Central and state governments together collected Rs.1.03 trillion in December, 9% more than what was collected in the year earlier. With an improvement in…
02 January, 2020
Terminology
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 this fiscal: about External Commercial Borrowings (ECBs) News: India’s current account deficit (CAD) narrowed to 0.9% of GDP, or $6.3 billion, in the September 2019 quarter, on account of a lower trade deficit. It had stood at 2.9% of the gross domestic product (GDP), or $19 billion, in the corresponding quarter of 2018-19. On a sequential…
01 January, 2020
Terminology
The strong case for and against fiscal expansion Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: About fiscal deficit and its significance in determining economic status of a country; types of deficits Context: Several economists have called for a proactive fiscal response to the current slowdown. However, others, such as Gita Gopinath and Arvind Subramanian, have advised against fiscal expansion. Why is the fiscal deficit so important? One of the reasons fiscal deficit is so important is that it gives us the extent of…
26 December, 2019
Terminology
GST may need an overhaul to plug a revenue shortfall Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about GST and its significance; Why is GST still a contentious issue? News: Fifteenth Finance Commission (FFC) chairman N.K. Singh has said GST should be redrafted. Too many changes to GST rules and several items being exempted could be blamed for the Rs. 63,200 crore shortfall in compensation cess for FY20. What is the Finance Commission saying? According to data compiled by the Fifteenth Finance Commission,…
25 December, 2019
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India should be wary of middle-income trap Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: about Middle Income Trap; why is India facing it; about GNI News: Many economists believe that countries that grow from low-income to middle-income levels tend to get stuck in a trap that prevents them from graduating to high-income status. India runs the risk of getting caught in that trap. What is the middle-income trap? World Bank defines a middle-income country as one with a gross national income (GNI) per…
20 December, 2019
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Disinflation may be a concern for India in the new year Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims and Mains focus: on CPI and WPI, disinflation, stagflation and their role in determining economic performance News: Consumer Price Index (CPI) inflation for November was at 5.5%, while core CPI was at 3.26%. The CPI print, along with the low growth rate, suggests the possibility of sustained high inflation next year. What is disinflation and why is it bad? A general reduction in inflation is often termed disinflation. Central…
19 December, 2019
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Non-GST tax revenue is subdued in the current fiscal Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Prelims and Mains focus: key findings of the report; reasons for sluggish non-GST revenues and their impact on the fiscal health of the Indian economy; measures to be taken to address them News: Even as the government struggles to shore up the GST revenue, the collection of non-GST tax revenue too seems to be subdued at a…
18 December, 2019
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Govt’s steps showing some results, says FM Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims focus: NBFC, Capital expenditure, Alternative Investment Funds Mains focus: about the recent slowdown in the economy and measures taken by the govt. to check it News: A series of measures taken by the government in the last few months to revive growth has started showing some results and the Centre will continue to support the industry and intervene as and when required, finance minister Nirmala Sitharaman said. Background: India’s economic downturn had deepened in the September quarter…
14 December, 2019
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IIP shrinks again, inflation accelerates Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims focus: Terms like inflation, stagflation, IIP and CPI Mains focus: the impact of the recent slowdown on various sectors of the economy and the efforts to check it News: Industrial activity contracted for the third consecutive month in October by 3.8%, driven by a fall in activity across sectors. Inflation and Contraction data Retail inflation had surged to a 40-month high of 5.54% in November, driven by rising food inflation. The Index of Industrial Production (IIP) had…
13 December, 2019
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A fiscal deficit may not matter much during a slowdown Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Prelims focus: About fiscal deficit, revenue deficit, primary deficit, FRBM Act Mains focus: on the impact of fiscal deficit on inflation, and different steps taken by the govt. to check inflation Context: India’s economic slowdown has led to a severe revenue shortfall in direct and indirect taxes. As expenditure expands while revenue falls short of budgeted expectations, the fiscal deficit will rise. What exactly is a government deficit? Government finances are adequately…
11 December, 2019
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India’s forex reserves cross $450 billion for the first time Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. News: The country’s foreign exchange reserves crossed the $450billion mark for the first time ever on the back of strong inflows which enabled the central bank to buy dollars from the market, thus checking any sharp appreciation of the rupee. Prelims and Mains focus: About quantitative easing, forex reserve, its composition and significance Background During the taper tantrums of 2013, (or the collective reactionary panic after the U.S. Federal Reserve said…
06 December, 2019
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RBI likely to cut rates by 25bps as growth, credit offtake declines Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. News: The reserve Bank of India (RBI) is expected to cut rates further by 25 basis points, after the 135-basis-point cut in its policy rate, at this week’s monetary policy review in the backdrop of the deepening slowdown and projections of a sub-5 per cent growth this fiscal year. Prelims and Mains focus: about the recent credit slowdown and the efforts to check it, performance of various sectors, about credit…
02 December, 2019
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Sovereign Credit Ratings Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. News: Global ratings agency Moody’s Investors Service has cut its outlook on the Government of India’s ratings to negative from stable, but affirmed the Baa2 foreign-currency and local-currency long-term issuer ratings. Prelims focus: About sovereign ratings Mains focus: What does the downgrade mean for India? Implications and what needs to be done? Moody’s also affirmed India’s Baa2 local-currency senior unsecured rating and its P-2 another short-term local-currency rating. Implications for India The decision to change the outlook to negative reflects increasing risks that economic…
08 November, 2019
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A FIX FOR GROWTH GAIN FROM FISCAL PAIN Context: With euphoria over the corporate tax cut fading, the government needs to address fundamental to the economy. Advantaged of corporate tax rate cuts: # Increase in FDI in the Indian economy # Solution to twin balance sheet problem # Attractive Indian market in the background of US-China trade wars # Stimulus to Make in India # Stock market going bullish # Incrase in private investment and increase in employment opportunities Demerits of corporate tax rate cuts : 1. Loss of around 1.5 lack crores to the Government. 2. Decrease in the…
22 October, 2019
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GS-III: Bharat 22 ETF. News The Further Fund Offer 2 (FFO 2) of Bharat 22 Exchange-Traded Fund (ETF), which is part of the government’s divestment programme, will be open for subscription for investors. Bharat 22 Bharat 22 is an ETF that will track the performance of 22 stocks, which the government plans to disinvest. The ETF unit represents a slice of the fund, issued units are listed on exchanges for anyone to buy or sell at the quoted price. The B22 will span six sectors, such as basic materials, energy, finance, FMCG, industrials and utilities. Besides public sector banks, miners,…
03 October, 2019
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GS-III: Institutions weakened, economy crippled. News The credibility of the RBI, the CSO and the NITI AAYOG has taken a beating in recent times due to political interference. Why are the ambitions of economic development practitioners and reformers so often disappointed? Institutions weakened: The slowdown in GDP growth rate has been dissected digressed and disowned by analysts, commentators and policymakers. However the diagnosis is far from complete and the growth engine is running out of fuel. Both the demand and supply side factors have been central in all the analyses but the crucial role of institutions in shaping the outcomes…
27 September, 2019
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GS-III: A Deep Cut. News Tax cuts have enthused Corporate India, but there is a fiscal problem to deal with. Finance Minster announced of deep cut of corporate taxes and roll back some market unfriendly proposals in the budget she presented in July. Corporate Tax Cut: Finance Minister Sitharaman’s announcement to cut corporate tax rates was a welcome surprise for the Indian economy which has been struggling with growth deceleration. The government has cut the corporate tax rate for domestic companies to 22 per cent (inclusive of all cesses and surcharges) for domestic companies from the existing 30 per cent.…
21 September, 2019
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GS-III: Why India’s growth figures are off the mark. News During the global financial crisis it was said that the experts were behind the curve. The IMF and financial sector experts continued to predict till October 2008 that the global economy would grow rather than shrink. Explaining the markdown: The economic growth rate (quarterly) has been sliding for the last ?ve quarters from 8% to 7% to 6.6% to 5.8% and now to 5%. The Economic Survey in July talked of a growth rate of 7% for the current year. The Reserve Bank of India (RBI), in its August policy statement, talked of a slowdown to 6.9%, from the 7% predicted in June and 7.2% predicted before that. The Asian Development Bank cut its growth forecast from 7.2% to 7% in April 2019. Similar is the case with the IMF which cut its forecast for the year from 7.3% to 7%.…
16 September, 2019
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GS-III: Putting the pedal to the medal News The automobile industry is cyclical. It is also a lead indicator for economic growth. And it has been experiencing signs of a slowdown. The decline began in the last quarter of the calendar year 2018 and intensified with the passage of every month in 2019. Background Though the industry goes through cycles of ups and downs the current slowdown is something to worry about seriously. The current downturn is like nothing that the industry has seen in a long, time in terms of depth, scale, and character. Commercial vehicles – Revision in…
06 September, 2019
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GS-III: Revised FDI Norms News Recently, the Union Cabinet has approved the proposal for the review of Foreign Direct Investment in various sectors. This will result in making India a more attractive FDI destination, leading to benefits of increased investments, employment and growth. Revised Norms 100% FDI under automatic route is permitted for the sale of coal, for coal mining activities including associated processing infrastructure. The government has allowed 100% FDI through the automatic route for contract manufacturing. It will augment the Make in India initiative and will attract global companies in India looking to establish alternative manufacturing hubs. Easing…
30 August, 2019
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GS-III: Nirmala Sitharaman’s stimulus plan falls short of vision Context Indian economy is slowing down. In this context, the Finance Minister offered a stimulus package. What does it offer? It rolled back the tax surcharge on overseas investors imposed in the budget. The angel tax on startups has been removed. The government will buy more cars for its fleet. Injection of 700 billion rupees of additional capital into state-run banks.Analysis It gives global banks a break on derivatives they trade in India while denying the same tax benefit to local hedge funds. This can be called unfair discrimination against a…
26 August, 2019
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GS-III: Special Data Dissemination Standards (SDDS) of IMF Context India failed to comply with multiple requirements prescribed in the Special Data Dissemination Standard (SDDS) mandatory for all IMF members. Special Data Dissemination Standard The Special Data Dissemination Standard (SDDS) was established by the IMF for member countries that have or that might seek access to international capital markets, to guide them in providing their economic and financial data to the public. Although subscription is voluntary, the subscribing member needs to be committed to observing the standard and provide information about its data and data dissemination practices (metadata). The metadata are…
26 August, 2019
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GS-III: What ails the existing microcredit model Context Microcredit has gained much traction as a tool for ensuring the welfare of the most impoverished in society and boosting development alongside. What is Microcredit? Microcredit refers to the granting of very small loans to impoverished borrowers, with the aim of enabling the borrowers to use that capital to become self-employed and strengthen their businesses. Loans given as microcredit are often given to people who may lack collateral, and credit history. Microcredit agreements frequently do not require any sort of collateral, and sometimes may not even involve a written agreement, as many…
21 August, 2019
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GS-III: Making CSR work On Companies Act amendments Context Amendments to the relevant sections of the Companies Act in the last session of Parliament have now made non-compliance with CSR norms a jailable offence for key officers of the company, apart from hefty fines up to 25 lakh on the company and 5 lakh on the officer in default. Corporate Social Responsibility (CSR): Corporate Social Responsibility is defined as the voluntary integration of a company’s social and ecological concerns into its business activities and its relationships with its stakeholders. Being socially responsible means not only fully satisfying the applicable legal…
17 August, 2019
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GS-III: Regulatory Sandbox News The Insurance Regulatory and Development Authority of India (IRDAI) will soon allow the use of a regulatory sandbox (RS) to promote new, innovative products and processes in the industry. Regulatory Sandbox A sandbox approach provides a secure environment for fintech firms to experiment with products under supervision of a regulator. It is an infrastructure that helps fintech players live test their products or solutions, before getting the necessary regulatory approvals for a mass launch, saving start-ups time and cost. The concept of a regulatory sandbox or innovation hub for fintech firms was mooted by a committee…
01 August, 2019
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