NEWS PAPER ANALYSIS FOR COMPETITIVE EXAM

• NEWS PAPER ANALYSIS
7 TH AUGUST TO 9TH THE AUGUST
THE HINDU AND ECONOMIC TIMES

•    FOR COMPETITIVE EXAM

•    DR. SHASHI AGGARWAL

•    CONSUMER PROTECTION BILLS GETS RS GREEN LIGHT ( THE HINDU 7 TH AUGUST ,2019)

1.       THE RAJYA SABHA PASSED THE CONSUMER PROTECTION BILL 2019 THAT PROVIDES FOR THE ESTABLISHMENT OF THE AUTHORITIES FOR THE TMELY AND EFFECTIVE ADMINISTRATION ANS SETTLEMENT OF CONSUMER DISPUTE

2.       SEEKS TO STRENGTHS THE RIGHTS OF CONSUMERS AND PROVIDE A MECHANISM FOR REDRESSAL OF COMPLAINTS REGARDING DEFECTS IN GOODS AND DEFICIENCY IN SERVICES

3.       THE BILL WILL REPLACE THE CONSUMER PROTECTION ACT.1986 AND DROPPED HEALTH CARE

•    HEADWINDS FROM US CHINA STAND OFF ( THE EDIT PAGE)

1.       THE US INITIATED TRADE WAR WITH CHINA AND MUCH OF THE REST OF THE WORLD WAR HAS ENTERED INTO A NEW PHASE OF FARM

2.       THE US LABELLED CHINA A CURRENCY MANIPULATOR AND STOCKS PLUNGED AROUND THE WORLD AND CHINESE CENTRAL BANK RESPONDED BY SETTING A STRONG THAN EXPECTED EXCHANGE RATE BUT THESE ARE SHORT TERM RELIEF.

3.       TWO THINGS HAVE PUSHED THE YUAN DOWN.

1.       THE FED CUTS POLICY RATE BY 25 BASIS POINT

2.       THE PRESIDENT DONALD TRUMP IMPOSED AN ADDITIONAL 10% TARIFF ON $ 300 BILLION WORTH OF IMPORT FROM CHINA

•    ITS IMPACT ON THE GLOBAL TRADE

1.       WILL MAKE THE DOLLAR STRONG AND THE YUAN AND OTHER CURRENCY WILL GET WEAKEN

2.       CHINESE WILL ALSO RETALIATE BY IMPOSING TARIFF ON IMPORT FROM AMERICA

3.       VICIOUS CYCLE WOULD TURN,DEPRESSING GLOBAL TRADE AND GROWTH FURTHER

4.       INDIA WILL HAVE TO RELY EVEN MORE ON THE DOMESTIC MARKET FOR GROWTH

5.       A SLOWING WORLD ECONOMY WOULD ALSO WEAKEN COMMODITY PRICES INCLUDE CRUDE PRICES

6.       INDIA HAS TO FIND THE WAYS TO FUELING DOMESTIC GROWTH

7.       MACRO ECONOMIC STABILITY BECOMES THE MAIN FOCUS

•    BOOST INVESTMENT NIX SECTORAL SOPS ( EDIT PAGE)

•    FINANCE MINISTER SITHARAMAN REPORTED READINESS TO LISTEN TO INDUSTRY TO WAYS TO REVIVE GROWTH IS WELCOME

•    BAD NEWS :

1.       SLOW DOWN OF CORE SECTOR GROWTH

2.       PUBLIC AND PRIVATE INVESTMENTS

3.       EXPORTS AND CAR SALES REVEAL

4.       SLOW DOWN IN THE ECONOMY

THE GOVERNMENT MUST TAKE GENERAL MEASURE TO STIMULATE DEMAND BECAUSE SECTOR SPECIFIC SOPS WOULD DRAIN RESOURCES WITHOUT CREATING SUSTAINED MOMENTUM

•    IMPACT

1.       FUNCTIONAL MECHANISM TO MEDIATE SAVING TO INVESTMENT

2.       NOT SUFFICIENT THE MEASURE OF RBI RATE CUT

3.       LIQUIDITY OF BANKS SUFFER DUE TO PILING OF BAD LOANS

4.       ACTIVATING OF BOND MARKET WITH A BOND GUARANTEE FUND AMONG OTHER THINGS TO FINANCE THE LONG GESTATION PROJECTS

5.       THE INFRASTRUCTURE SECTOR CAN ABSORB HUGE AMOUNT OF INVESTMENT  DUE TO URBANIZATION

6.       BUILDING OF ROADS,HIGHWAYS,RAILWAYS TRACKS AND REAL ESTATE WILL CREATE THE DEMAND TO PROPEL INDUSTRY TO EXPAND CAPACITY

7.       SENSIBLE  PUBLIC AND PRIVATE PARTNERSHIP

•    RBI SPRINGS A SURPRISE CUTS REPO RATE BY 35 BPS ( THE ECONOMIC TIMES ) 8 TH AUGUST,2019

1.       OPTED TO BREAK CONVENTION BY REDUCING THE KEY POLICY RATE THE REPO RATE BY 35 BASIS POINT TO 5.4% AS IT FOCUSED ON MONETARY POLICY MEASURES TO TACKLE A DEEPENING ECONOMIC SLOW DOWN

2.       FIRST TIME RBI HAS MOVED RATES BY A FIGURE THAT IS NOT MULTIPLE OF 25 BPS

3.       REASON : BASED ON DEMAND CONDITIONS 25 BPS CUT WAS INADEQUATE WHILE 50 BPS WAS EXCESSIVE

•    VIEWS OF RBI GOVERNOR SHAKTIKANT DAS
( THE HINDUS)

1.       SLOW DOWN IN DEMAND AND INVESTMENT BOTH HAS DAMPENING EFFECT ON GROWTH

2.       REDUCED THE PROJECTION TO 6.9 %

3.       CYCLICAL SLOWDOWN NOT REALLY DEEP STRUCTURAL SLOW DOWN

4.        BANKS GET MORE HEADROOM FOR LENDING TO NBFCS

5.       DUE TO LIQUIDITY CRUNCH FACED BY NON BANKING FINANCE COMPANIES

6.       THE CENTRAL BANK DECIDED TO INCREASE THE CAP ON A BANK’S EXPOSURE TO A SINGLE NBFC TO 20% TO A SINGLE NBFC TO 20% ITS TIER 1 CAPITAL FROM 15%

7.       DECIDED TO GIVE PRIORITY SECTOR TAG FOR BANKS LENDING TO NBFCS FOR ON LENDING TO FARM,SMALL AND MEDIUM ENTERPRISES AND HOUSING SECTOR

8.       BANKS HAVE BEEN ALLOWED TO LEND TO THE NBFCS FOR ON LENDING TO THE AGRICULTURE SECTOR UP TO 10 LACS UP TO 20 LACS TO MICRO AND SMALL ENTERPRISES AND FOR HOUSING UP TO RS 20 LACS PER BORROWER

9.       CLASSIFIED AS PRIORITY SECTOR LENDING

•    IMPACT

1.       IMPROVE THE AVAILABLE SOURCES OF FUNDING ESPECIALLY FOR NEW AGE MID AND SMALL SIZED NBFCS AT LOWER COST

2.       ALSO IMPROVE BANKS ABILITY TO MEET THEIR PRIORITY SECTORS LENDING TARGETS

3.       PERMITTING BANKS TO ON LENDING THROUGH NBFCS FOR PRIORITY SECTOR WOULD MAKE THE TRANSMISSION FASTER AND MORE EFFICIENT

•    ECONOMIC MILE STONE AND A POIGANT ANNIVERSARY ( THE HINDU ) 9 TH AUGUST

•    BY R. RAMAKUMAR NABARD CHAIR PROFESSOR

1.       THE NATIONALISATION OF BANKS IN 1969 WAS A WATERSHED MOMENT IN THE HISTORY OF INDIAN BANKING. FROM JUL 19 ,1969,14 PRIVATE BANKS WERE NATIONALIZED

2.       ANOTHER SIX BANKS ( PRIVATE ) WERE NATIONALIZED IN 1980

3.       AT THE TIME OF INDEPENDENCE,INDIA ‘S RURAL FINANCIAL SYSTEM WAS MARKED BY THE DOMINATION OF LANDLORDS,TRADERS AND MONEY LENDERS AND PRIVATE BANKING SYSTEM FAILED TO MEET THE CREDIT NEEDS OF THE RURAL SECTOR

4.       ECONOMIC MILE STONE AND A POIGNANT ANNIVERSARY ( THE HINDU ) 9 TH AUGUST

5.       INDIA’S BANKING POLICY AFTER 1969,FOLLOWED A MULTI AGENCY APPROACH

6.       AS A PART OF NEW BRANCH LICENSING POLICY,BANKING WERE TOLD THAT FOR EVERY BRANCH THEY OPENED IN METROPOLITAN OR PORT AREA,FOUR NEW BRANCHES HAS TO BE OPENED IN UNBAKED RURAL AREA. ( RURAL BRANCHES FROM 1833 IN 1969 TO 35,206 IN 1991)

7.       THE CONCEPT OF PRIORITY SECTOR LENDING WAS INTRODUCED. ALL BANKS,HAD TO COMPULSORILY SET ASIDE 40% OF THEIR NET BANK CREDIT FOR AGRICULTURE,MICRO AND SMALL ENTERPRISE,HOUSING,EDUCATION AND WEAKER SECTIONS.

8.       ECONOMIC MILE STONE AND A POIGNANT ANNIVERSARY ( THE HINDU ) 9 TH AUGUST

9.       THIRD DIFFERENTIAL INTEREST RATE SCHEME WAS INTRODUCED IN 1974. THE LOANS WERE PROVIDED AT A LOW INTEREST RATE TO THE WEAKEST AMONG THE WEAKEST SECTIONS OF THE SOCIETY

10.   FOURTH THE LEAD BANK SCHEME WAS INTRODUCED IN 1969. EACH DISTRICT WAS ASSIGNED TO ONE BANK

11.   REGIONAL RURAL BANKING WERE ESTABLISHED IN 1975 TO ENLARGE THE SUPPLY OF INSTITUTIONAL CREDIT TO THE RURAL AREAS

12.   THE NATIONAL BANK FOR AGRICULTURE AND RURAL DEVELOPMENT WAS CONSTITUTED IN 1982 TO REGULATE AND SUPERVISE THE FUNCTIONING OF COOPERATIVE BANKS AND RRBS

·         OUTCOME

1.       THE SAHRE OF INSTITUTIONAL SOURCES IN THE OUTSTANDING DEBT OF THE RURAL HOUSEHOLD INCREASED FROM JUST 16.9 % TO 64% IN 1992

2.       MAINSTREAM ECONOMISTS ‘S ARGUMENT WAS ADMINISTERED INTEREST RATE CAUSE FINANICAL REPRESSION WHICH MEANS SAVING RATE WOULD ALSO DECLINE AND LEADING TO THE RATIONING OF INVESTMENTS

•     BUT INDIA’S NATIONALIZATION LED TO AN IMPRESSIVE GROWTH OF FINANCIAL INTERMEDIATION.

1.       SHARE OF BANK DEPOSITS TO GDP ROSE FROM 13% IN 1969 TO 38% IN 1991

2.       GROSS SAVING RATE FROM 12.8% IN 1969 TO 21.7% IN 1990

3.       GROSS INVESTMENT ROSE FROM 13.9% IN 1969 TO 24.1% IN 1990

4.       FURTHERING THE REDISTRIBUTIONAL GOALS

•    ARGUMENT IN FAVOUR OF FINANCIAL LIBERALISATION AFTER 1991 WERE BASED ON THE THEORY OF FINANCIAL REPRESSION

•    THE NARAISMHAM COMMITTEE OF 1991 RECOMMENDED THAT MONETARY POLICY SHOULD BE DIVORCED FROM REDISTRIBUTIONIST GOALS. BANKS SHOULD BE FREE TO PRACTICE COMMERCIAL MODES OF OPERATION WITH PROFITABILITY AS OF THE PRIMARY GOALS

•    THE OUTCOME WAS THAT MORE THAN 900 RURAL BANKS BRANCHES WERE CLOSED DOWN

1.       THE RATE OF GROWTH OF AGRICULTURE CREDIT FELL SHARPLY FROM AROUND 7% PER ANNUM IN 1980 TO 2% IN 1990

2.       IN 2005,THE RBI QUIETLY BROUGHT IN A NEW BRANCH AUTHORIZATION SCHEME. PERMISSION OF NEW BRANCH BY RBI AFTER SATISFYING BANKS HAD PLAN TO SERVE UNDER BANKED AREA

3.       BY 2011,FURTHER TIGHTENING BY RBI

4.       AT LEAST 25% OF NEW BRANCHES WERE TO BE COMPLETELY LOCATED IN BACKWARD AREA

5.       NUMBER OF RURAL BANK BRANCHES ROSE FROM 30646 IN 2005 TO 33967 IN 2011 AND 48536 IN 2015

6.       THE ANNUAL GROWTH OF REAL AGRICULTURE CREDIT FROM 2% TO 18% BETWEEN 2001-2015