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06:50
Insights IAS Revision Through MCQ (RTMs) July 2020 PDF
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Friday, August 07, 2020
Gist of IDSA Magazine, July 2020 PDF Download
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06:46
Gist of IDSA Magazine, July 2020
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Shankar IAS Monthly Prestorming July 2020 PDF
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06:43
Shankar IAS Monthly Prestorming July 2020 PDF
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Thursday, August 06, 2020
RBI’s 2nd Bi-Monthly Monetary Policy Statement 2020-21 Released
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20:16
Repo rate has been kept unchanged at 4.00%. Check the complete details of second Monetary Policy Statement 2020-21. RBI has released monetary policy today.
Also, for the year 2020-21, as a whole, real GDP growth is expected to be negative.
The key decisions taken in the Monetary Policy Committee meeting are:
oThe repo rate under the liquidity adjustment facility (LAF) has been kept unchanged at 4.00%.
oThe reverse repo rate under the LAF has been kept unchanged at 3.35%.
oThe marginal standing facility (MSF) rate and the Bank Rate have been kept unchanged at 4.25%.
About Monetary policy:
What is Monetary policy?
Monetary Policy is the central bank’s policy which uses the monetary instruments like Repo rate, Reverse repo rate, Liquidity Adjustment Facility and many others, to achieve the goals stated in the Act. In India, the Reserve Bank of India (RBI) has been given the responsibility of conducting monetary policy as mandated under the Reserve Bank of India Act, 1934.
Objectives of monetary policy?
oThe monetary policy has the prime objective of maintaining the price stability in India along with the objective of growth. Price stability is stated as a necessary precondition to achieve the sustainable growth.
oThe Reserve Bank of India is also given the task of flexible inflation targeting framework along the Government of India as per the amendment in the Reserve Bank of India (RBI) Act, 1934 which was done in May 2016. This is done once in every five years. Government of India has notified the 4 per cent Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016 to March 31, 2021 in the Official Gazette. The target is stated with the upper tolerance limit of 6 per cent and the lower tolerance limit of 2 per cent.
The Monetary Policy Framework:
The amendment in the Reserve Bank of India (RBI) Act, 1934 provides the Reserve Bank of India a legislative mandate to operate the monetary policy framework of the country. This framework aims to set the policy (repo) rate after the assessment of the current and evolving macroeconomic situation, and modulation of liquidity conditions to anchor money market rates at or around the repo rate.
What is the Composition of the Monetary Policy Committee?
The Central Government has constituted the six-member monetary policy committee (MPC) in September 2016, according to the Section 45ZB of the amended RBI Act, 1934.
The composition of the Monetary Policy Committee is as follows:
1. Governor of the Reserve Bank of India – Chairperson, ex officio: Shri Shaktikanta Das
2. Deputy Governor of the Reserve Bank of India, in charge of Monetary Policy– Member, ex officio: Dr. Michael Debabrata Patra
3. One officer of the Reserve Bank of India to be nominated by the Central Board – Member, ex officio: Dr. Mridul K. Saggar
4. Dr. Chetan Ghate, Professor, Indian Statistical Institute (ISI): Member
5. Dr. Pami Dua, Director, Delhi School of Economics: Member
6. Dr. Ravindra H. Dholakia, Professor, Indian Institute of Management, Ahmedabad: Member.
Some important instruments of Monetary Policy:
The RBI’s Monetary Policy has several direct and indirect instruments which is used for implementing the monetary policy. Some important instruments of Monetary Policy are as follows:
oRepo Rate: It is the (fixed) interest rate at which banks can borrow overnight liquidity from the Reserve Bank of India against the collateral of government and other approved securities under the liquidity adjustment facility (LAF).
oReverse Repo Rate: It is the (fixed) interest rate at which the Reserve Bank of India can absorb liquidity from banks on an overnight basis, against the collateral of eligible government securities under the LAF.
oLiquidity Adjustment Facility (LAF): The LAF has overnight as well as term repo auctions under it. The term repo helps in the development of the inter-bank term money market. This market sets the benchmarks for pricing of loans and deposits. This helps in improving the transmission of monetary policy. As per the evolving market conditions, the Reserve Bank of India also conducts variable interest rate reverse repo auctions.
oMarginal Standing Facility (MSF): MSF is a provision which enables the scheduled commercial banks to borrow additional amount of overnight money from the Reserve Bank of India. Bank can do this by dipping into their Statutory Liquidity Ratio (SLR) portfolio up to a limit at a penal rate of interest. This helps the banks to sustain the unanticipated liquidity shocks faced by them.
Accommodative stance of RBI’s Monetary Policy Statement:
Accommodative stance is taken by the RBI’s Monetary Policy Committee to expand the overall money supply to boost the economy when the growth is slowing down.
Daily Current Affairs, 06th August 2020
VisionIAS
20:10
1) Hiroshima Day: 6th August
2) India-UN Development Partnership Fund: India contributes USD 15.46 mn
•The cheque was handed over by India’s Permanent Representative to the UN Ambassador T S Tirumurti to the United Nations Office for South-South Cooperation (UNOSSC) Director Jorge Chediek.
3) C”garh govt launches social security scheme for tendu leaf collectors
4) Manoj Sinha appointed as new LG of Jammu and Kashmir
•Sinha has represented the parliamentary constituency of Ghazipur in eastern Uttar Pradesh thrice in the Lok Sabha. Sinha has also served as junior railways minister.
5) Ajay Tyagi gets 18 Months extension as SEBI Chairman
•Mr Tyagi, a 1984 batch IAS (retired) officer of Himachal Pradesh cadre, was appointed as the SEBI chairman in March 2017 for three years. He was in March this year given a six-month extension till August.
6) A book titled ‘RAW: A History of India’s Covert Operations’ authored by Yatish Yadav
The HINDU Notes – 06th August 2020
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20:00
📰 How to pay for the stimulus
Money financing is a viable route to take us back to pre-COVID-19 levels of output
•Former Prime Minister Dr. Manmohan Singh and his Congress party colleague Praveen Chakravarty have, in these pages, written on the appropriate policy response to the currently depressed state of the economy. Given Dr. Singh’s deep understanding of the subject, this is in the nature of invaluable counsel. Unlike the dispensation in power, he and his colleague are for government intervention to revive the economy. They present greater public spending as the sine qua non of such a revival, and they are absolutely correct in this diagnosis. They also present the options available and rank them, in the sense of recommending the order in which they ought to be considered for use.
•Greater public spending will increase the fiscal deficit and this expansion has to be financed. Theoretically it can be financed by higher taxes. However, when the economy is in a recession, this is usually not in the reckoning even though the balanced-budget multiplier is one, i.e., output expands by exactly the same amount as the increase in government spending.
Debt vs. money financing
•So, what are the options? They are: issuing debt to the public, and borrowing from the Reserve Bank of India (RBI), termed ‘money financing’ as it increases the money supply. Dr. Singh and Mr. Chakravarty plump for increased debt. While they do not rule out of court money financing, they suggest that it may be imprudent to do so. Instead, they recommend borrowing from the World Bank and the International Monetary Fund (IMF). However, it is not clear that this is a superior strategy.
•The media has recently reported some economists responding to the suggestion of money financing with the Friedman-esque quip “there ain’t no free lunch”. But it may be mentioned that there is no free lunch in the case of debt financing either. Not only have the moneys to be repaid, they will have to be paid back in hard currency. This would involve India having to earn hard currency by stepping up exports. If a stimulus of approximately 10% of the GDP is envisaged, with exports at 25% of the GDP, it would imply stepping up exports by close to 50%. This would be a herculean task under present circumstances. Indian exports have been faring poorly since 2014. Since then, there have been multiple shocks to global output and trade.
•Three more issues are relevant when considering borrowing from the World Bank and the IMF. First, there is the issue of conditionalities. There is no reason to oppose conditionalities on principle but it is not obvious what conditionalities will come along with the loan. Second, a loan is bound to take some time to be negotiated, taxing the energies of a government that ought to be engaged in the day to day battle with COVID-19. Third, external debt is truly national which, arguably, government bonds held by the country’s private sector are not.
A taboo subject
•When money financing is proposed, it elicits a negative response from some quarters with something akin to a taboo being invoked against the idea. But invoking taboo is not serious economics which would require that a good reason be given for opposing the use of money financing to expand public spending at present. Dr. Singh and Mr. Chakravarty speak of “high intangible and institutional costs” associated with it but do not expand on this. The standard economic argument against money financing is that it is inflationary. However, whether a fiscal expansion is inflationary or not is related more to the state of the economy than the medium of its financing. When resources are unemployed, output may be expected to expand without inflation. As COVID-19 has shocked output downwards, unemployed resources must now exist. There is no reasoned case for denying ourselves the option of money financing to take us back to pre-COVID-19 levels of output and employment.
📰 The urban migrant and the ‘ritual’ tug of home
GS Score Weekly Current Affairs August 2020 Week 01 PDF
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08:40
GS Score Weekly Current Affairs August 2020 Week 01 PDF
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IFos Forestry Notes PDF Download
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07:19
IFos Forestry Notes PDF Download
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UPSC Topper 2019: Aishwarya Sheoran (AIR 93) - Check Her Journey From Miss India Finalist To CSE Topper
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07:07
From winning Delhi Fresh Face 2015 title to being a finalist in Miss India Contest and walking the most renowned ramps, UPSC Civil Services 2019 AIR 93 Aishwarya Sheoran is an inspiration for the youth of today!
With Union Public Service Commission (UPSC) Civil Services 2019 final result declared, a few names are repetitively seen in the headlines. One such successful candidate is AIR 93, Aishwarya Shearon. A Femina Miss India 2016 Finalist, Aishwarya has cracked the Civil Services 2019 exam in her first attempt. However, this career transition was not a sudden step as the topper claims to have dreamt of being an IAS officer since the very beginning.
THE HINDU NEWSPAPER IMPORTANT ARTICLES 06.08.2020
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06:49
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