The answer to the above question is (d).
All the statements are true.
1. Overseas Direct Investment (ODI) is what Indian residents are investing abroad. This is opposite of FDI. So, this is basically in shares and hence its asset for us but liability on foreign residents.
2. Reserve Assets means the Foreign currencies that RBI is holding. Again this is also an asset for us but liability for other countries
3. Our Portfolio Investments abroad means Indian residents investing in shares and bonds abroad. This is opposite of FPI. If we have purchased bonds and shares of abroad companies then its asset for us.
All the statements are true.
1. Overseas Direct Investment (ODI) is what Indian residents are investing abroad. This is opposite of FDI. So, this is basically in shares and hence its asset for us but liability on foreign residents.
2. Reserve Assets means the Foreign currencies that RBI is holding. Again this is also an asset for us but liability for other countries
3. Our Portfolio Investments abroad means Indian residents investing in shares and bonds abroad. This is opposite of FPI. If we have purchased bonds and shares of abroad companies then its asset for us.
Nothing relevant in news for economy these days.
You should focus on revising the complete economy and I will be releasing the ECO MCQ/Notes in end Feb which will cover last 2/3 years of issues thoroughly.
You should focus on revising the complete economy and I will be releasing the ECO MCQ/Notes in end Feb which will cover last 2/3 years of issues thoroughly.
The above is article from Indian Express. Following are some relevant points.
1. 'Sovereign Green Bonds' will be auctioned by RBI to raise funds to finance green/clean infrastructure projects.
2. Govt. of India will receive the money which will be provided for public sector projects like solar, wind, hydro etc.
3. These bonds will be a debt on Govt. of India and will be reflected in Capital Receipts in the Budget.
4. 'Green Financing Working Committee' headed by Chief Economic Advisor will select the projects from those submitted by different departments
5. The banks who will be purchasing these bonds can use under SLR securities
Auctioning Process: 'Uniform Price Auction'
RBI will auction the bonds where the bidders (banks/FIs) will have to quote the price (price here means interest rate). The lowest bid (interest rate) is the first considered and then each progressively higher bid is considered until the auctioneer (RBI) decides on an appropriate price/interest rate. The price/interest rate that is decided is the ‘uniform price’/interest rate at which all bonds will be sold. Participants who made a bid of the uniform price or lower are the winning bidders of the auction.
So basically all the bonds will be issued at the same interest rate to the winning bidders.
1. 'Sovereign Green Bonds' will be auctioned by RBI to raise funds to finance green/clean infrastructure projects.
2. Govt. of India will receive the money which will be provided for public sector projects like solar, wind, hydro etc.
3. These bonds will be a debt on Govt. of India and will be reflected in Capital Receipts in the Budget.
4. 'Green Financing Working Committee' headed by Chief Economic Advisor will select the projects from those submitted by different departments
5. The banks who will be purchasing these bonds can use under SLR securities
Auctioning Process: 'Uniform Price Auction'
RBI will auction the bonds where the bidders (banks/FIs) will have to quote the price (price here means interest rate). The lowest bid (interest rate) is the first considered and then each progressively higher bid is considered until the auctioneer (RBI) decides on an appropriate price/interest rate. The price/interest rate that is decided is the ‘uniform price’/interest rate at which all bonds will be sold. Participants who made a bid of the uniform price or lower are the winning bidders of the auction.
So basically all the bonds will be issued at the same interest rate to the winning bidders.
As per the Financial Stability Report (published by RBI biannually) of Dec 2022, The gross non-performing asset (GNPA) ratio of scheduled commercial banks (SCBs) fell to a seven-year low of 5.0 per cent
Question of the Day
As per the 'Agreement on Fisheries Subsidy' as agreed in the 12th MC of WTO held in June 2022 in Geneva, Consider the following statements:
1. The Agreement will enter into force upon acceptance of its legal instrument by half of the members
2. For a period of 2 years, from the date of this Agreement comes into force, subsidies granted by Developing and Least Developed countries within the Exclusive Economic Zones will be exempt from actions
3. A funding mechanism will be established to provide technical assistance to Developing and Least Developed countries
As per the 'Agreement on Fisheries Subsidy' as agreed in the 12th MC of WTO held in June 2022 in Geneva, Consider the following statements:
1. The Agreement will enter into force upon acceptance of its legal instrument by half of the members
2. For a period of 2 years, from the date of this Agreement comes into force, subsidies granted by Developing and Least Developed countries within the Exclusive Economic Zones will be exempt from actions
3. A funding mechanism will be established to provide technical assistance to Developing and Least Developed countries
Select the Correct Code:
Final Results
6%
(a) 1 only
38%
(b) 2 and 3 only
21%
(c) 1 and 3 only
35%
(d) All of the above
The answer to the above question is (b)
In the 12th MC of WTO, members have forged an ‘Agreement on Fisheries Subsidies’ which sets new global rules to curb harmful subsidies and protect global fish stocks. The following are some important aspects of the Agreement
1. The Agreement will enter into force upon acceptance of its legal instrument by two-thirds of the members
2. The agreement prohibits support for illegal, unreported and unregulated (IUU) fishing.
3. It bans support for fishing in overfished stocks.
4. And it takes a first but significant step forward to curb subsidies for overcapacity and overfishing by ending subsidies for fishing on the unregulated high seas
5. For a period of 2 years from the date of entry into force of this Agreement, subsidies granted or maintained by developing country Members, including LDC Members, up to and within the Exclusive Economic Zones (EEZ) shall be exempt from actions
6. A Member shall exercise due restraint in raising matters involving an LDC Member
7. Developing country members including LDC members shall be provided targeted technical assistance for the purpose of implementation of the various measures in the agreement. For this a voluntary WTO funding mechanism shall be established in cooperation with relevant international organizations such as the Food and Agriculture Organization of the United Nations (FAO) and International Fund for Agricultural Development
In the 12th MC of WTO, members have forged an ‘Agreement on Fisheries Subsidies’ which sets new global rules to curb harmful subsidies and protect global fish stocks. The following are some important aspects of the Agreement
1. The Agreement will enter into force upon acceptance of its legal instrument by two-thirds of the members
2. The agreement prohibits support for illegal, unreported and unregulated (IUU) fishing.
3. It bans support for fishing in overfished stocks.
4. And it takes a first but significant step forward to curb subsidies for overcapacity and overfishing by ending subsidies for fishing on the unregulated high seas
5. For a period of 2 years from the date of entry into force of this Agreement, subsidies granted or maintained by developing country Members, including LDC Members, up to and within the Exclusive Economic Zones (EEZ) shall be exempt from actions
6. A Member shall exercise due restraint in raising matters involving an LDC Member
7. Developing country members including LDC members shall be provided targeted technical assistance for the purpose of implementation of the various measures in the agreement. For this a voluntary WTO funding mechanism shall be established in cooperation with relevant international organizations such as the Food and Agriculture Organization of the United Nations (FAO) and International Fund for Agricultural Development
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As per SEBI, minimum 'Public Shareholding' (the shares which are traded on the stock exchange) for listed companies is:
Final Results
15%
(a) 5%
40%
(b) 10%
37%
(c) 25%
8%
(d) 35%
The answer to the above question is (c)
Explanation:
When a company is first time getting listed on the stock exchange then it should release 10% of the shares for trading i.e. Public Shareholding. But within 3 years of listing, the public shareholding should be increased to 25%. Govt. had planned to increase the public shareholding in the listed companies to 35% but was not done. So present rule is Public shareholding should be at least 25% in listed companies.
Explanation:
When a company is first time getting listed on the stock exchange then it should release 10% of the shares for trading i.e. Public Shareholding. But within 3 years of listing, the public shareholding should be increased to 25%. Govt. had planned to increase the public shareholding in the listed companies to 35% but was not done. So present rule is Public shareholding should be at least 25% in listed companies.
Above is article from Indian Express. A very good article on the present economic situation regarding inflation and growth. Most of the things you can understand on your own but few points I would like to elaborate.
1) First Para: The inflation here is imported inflation. Higher imported inflation resulted in more trade deficit (imports) which reduced our purchasing power resulting in less domestic demand.
2) In the last two months (headline) inflation has come down below 6% because of the lower fuel and food prices. But 'core inflation' (which excludes volatile components like food and fuel) which is more broad based is still above 6% and it takes time for core inflation to come down as it moves up and down gradually.
3) Economic Growth is a worry: Over the past 2 decades (basically post LPG reforms of 1991), the India's growth cycle has got increasingly synchronized with that of advanced economies. And these advance economies are slowing down, so they will demand/purchase less output from India.
Example: Out of our total GDP, around 21% is exports. So, our GDP growth will slow to the extent of the impact on this 21% of the output which is demanded by outsiders.
1) First Para: The inflation here is imported inflation. Higher imported inflation resulted in more trade deficit (imports) which reduced our purchasing power resulting in less domestic demand.
2) In the last two months (headline) inflation has come down below 6% because of the lower fuel and food prices. But 'core inflation' (which excludes volatile components like food and fuel) which is more broad based is still above 6% and it takes time for core inflation to come down as it moves up and down gradually.
3) Economic Growth is a worry: Over the past 2 decades (basically post LPG reforms of 1991), the India's growth cycle has got increasingly synchronized with that of advanced economies. And these advance economies are slowing down, so they will demand/purchase less output from India.
Example: Out of our total GDP, around 21% is exports. So, our GDP growth will slow to the extent of the impact on this 21% of the output which is demanded by outsiders.
Warehousing Development Regulatory Authority (WDRA) under Ministry of Consumer Affairs, Food and Public Distribution has signed Memorandum of Understanding (MoU) with State Bank of India for a new loan product called 'Produce Marketing Loan'. Relevant features of this loan product are:
1. It will be exclusively given against Electronic Negotiable Warehouse Receipts (e-NWR).
2. Attractive/cheaper interest rate, Nil processing fee and No additional collateral (other than e-NWR)
As after the harvest, farmers have to sell their produce at a lower price because of lack of storage facility. So, now farmers can keep their produce in warehouses registered with WDRA and WDRA will issue e-NWRs which the farmers can keep as collateral (pledge) with bank and can raise loan. This will provide liquidity to farmers in the post harvest period and farmers can stock the produce in warehouses. Few months after the harvest, when prices will move up, then farmers can sell the produce and in this way their income will increase.
1. It will be exclusively given against Electronic Negotiable Warehouse Receipts (e-NWR).
2. Attractive/cheaper interest rate, Nil processing fee and No additional collateral (other than e-NWR)
As after the harvest, farmers have to sell their produce at a lower price because of lack of storage facility. So, now farmers can keep their produce in warehouses registered with WDRA and WDRA will issue e-NWRs which the farmers can keep as collateral (pledge) with bank and can raise loan. This will provide liquidity to farmers in the post harvest period and farmers can stock the produce in warehouses. Few months after the harvest, when prices will move up, then farmers can sell the produce and in this way their income will increase.
ECO MCQ/NOTES PDF for 2023 EXAM COVERING LAST 2/3 YEARS ISSUES:
Will be released in first week of March
INDIAN ECONOMY BOOK 7th edition for 2024 EXAM:
Will be released in first week of April
Will be released in first week of March
INDIAN ECONOMY BOOK 7th edition for 2024 EXAM:
Will be released in first week of April
General information on Productivity
Productivity is defined as Output/Input. When output increases without an increase in input OR when output increases more as compared to increase in input then it implies that productivity has increased.
[As per RBI monthly bulletin of Jan 2023] Productivity growth can be achieved either through: Resource reallocation, or Technological progress.
Resource reallocation means when labour (resource) is moving from agriculture to industry or when farmers are cultivating fruits and vegetables rather than rice/wheat on their land (resource).
Technological progress (u understand well) example is use of new machines/technology to increase output.
As per RBI monthly bulletin of Jan 2023, reallocation of resources from low to high productive sectors accounted for 63 per cent of aggregate productivity growth during 2001-2019
In India, there exist large productivity differences across sectors. Agriculture, which employs the largest number of workers (around 43%) is one of the lowest productive sectors – around 0.67 times lower than average productivity of the economy.
Productivity is defined as Output/Input. When output increases without an increase in input OR when output increases more as compared to increase in input then it implies that productivity has increased.
[As per RBI monthly bulletin of Jan 2023] Productivity growth can be achieved either through: Resource reallocation, or Technological progress.
Resource reallocation means when labour (resource) is moving from agriculture to industry or when farmers are cultivating fruits and vegetables rather than rice/wheat on their land (resource).
Technological progress (u understand well) example is use of new machines/technology to increase output.
As per RBI monthly bulletin of Jan 2023, reallocation of resources from low to high productive sectors accounted for 63 per cent of aggregate productivity growth during 2001-2019
In India, there exist large productivity differences across sectors. Agriculture, which employs the largest number of workers (around 43%) is one of the lowest productive sectors – around 0.67 times lower than average productivity of the economy.
Additional Tier 1 Bonds (AT-1) bonds have several unusual features, which make them very different from normal bonds.
1. These bonds are perpetual and carry no maturity date. Instead, they carry call options that allow banks/issuers to redeem them after five or 10 years. But banks are not obliged to use this call (redeem) option and can opt to pay only interest on these bonds for eternity.
2. Banks issuing AT-1 bonds can skip interest payments for a particular year or even reduce the bonds’ face value, provided their capital ratios fall below certain threshold levels. These thresholds are specified in their offer terms.
3. If the RBI feels that a bank is tottering on the brink (called point of non-viability) and needs a rescue, it can simply ask the bank to cancel (write off) its outstanding AT-1 bonds without consulting its investors.
AT-1 bonds are risky but people invest as it offers higher interest rate. In case of Yes Bank crisis, AT-1 bonds worth Rs. 8400 were written down in March 2020. (This means now investors will not get any interest or principal in future on these bonds).
In the recent judgement, Bombay High Court quashed the 'write-off' of AT1 bonds because these bonds were meant for 'Institutional Investors' and were sold to 'Retail Investors' by the Yes Bank in the guise of 'Super Fixed deposit' or 'as safe as Fixed Deposit' without telling the risks of this bond.
In the Basel Norms, these bonds are treated as 'Tier 1' Capital because they are quite risky and have some features of equity and are junior/subordinate to all the debt and senior to only common equity/shares. This means that if a company goes bankrupt then first other debt will be paid and then only the the priority of 'AT1' bonds will come and then common equity.
Banks, to raise capital and meet Basel III norms issue Additional Tier 1 bonds. After issuance of these bonds Banks 'Capital Adequacy Ratio (CAR)' will increase
1. These bonds are perpetual and carry no maturity date. Instead, they carry call options that allow banks/issuers to redeem them after five or 10 years. But banks are not obliged to use this call (redeem) option and can opt to pay only interest on these bonds for eternity.
2. Banks issuing AT-1 bonds can skip interest payments for a particular year or even reduce the bonds’ face value, provided their capital ratios fall below certain threshold levels. These thresholds are specified in their offer terms.
3. If the RBI feels that a bank is tottering on the brink (called point of non-viability) and needs a rescue, it can simply ask the bank to cancel (write off) its outstanding AT-1 bonds without consulting its investors.
AT-1 bonds are risky but people invest as it offers higher interest rate. In case of Yes Bank crisis, AT-1 bonds worth Rs. 8400 were written down in March 2020. (This means now investors will not get any interest or principal in future on these bonds).
In the recent judgement, Bombay High Court quashed the 'write-off' of AT1 bonds because these bonds were meant for 'Institutional Investors' and were sold to 'Retail Investors' by the Yes Bank in the guise of 'Super Fixed deposit' or 'as safe as Fixed Deposit' without telling the risks of this bond.
In the Basel Norms, these bonds are treated as 'Tier 1' Capital because they are quite risky and have some features of equity and are junior/subordinate to all the debt and senior to only common equity/shares. This means that if a company goes bankrupt then first other debt will be paid and then only the the priority of 'AT1' bonds will come and then common equity.
Banks, to raise capital and meet Basel III norms issue Additional Tier 1 bonds. After issuance of these bonds Banks 'Capital Adequacy Ratio (CAR)' will increase