Green Bonds

• issue Sovereign Green Bonds (SgrBs) worth Rs 16,000 crore.
• issued by any sovereign entity, inter-governmental groups or alliances and corporates with the aim that the proceeds of the bonds are utilised for projects classified as environmentally sustainable.
• Framework issued by the government on November 9, 2022.

Index For Industrial Production (IIP)

• data released by the National Statistical Office (NSO) 
• The base year for ‘Index For Industrial Production (IIP) was changed to 2011-12 from 2004-05 in the year 2017.

Sector of Economy

The real sector of an economy is the key section as activities of this sector persuade economic output and is represented by those economic segments that are essential for the progress of the GDP of the economy. For instance, farmers harvesting their crops or textile mills converting raw cotton into fabrics ensure the increase of economic output and in turn progress of GDP. The sector is crucial for the sustainability of the economy because of its productive capability to meet nations’ aggregate demand.

The financial sector is a section of the economy made up of firms and institutions that provide financial services to commercial and retail customers. The financial sector generates a good portion of its revenue from loans and mortgages. This sector comprises a broad range of industries including banks, investment companies, insurance companies, and real estate firms. Thus, a commercial bank lending money to a trading company or a corporate body issuing rupee-denominated bonds overseas constitutes  financial sector activities and not real sector activities.

Source: Vision IAS

Consumer Protection (E-Commerce) Rules, 2020

The e-commerce entity (also foreign-owned) is any person who owns, operates or manages a digital or electronic facility or platform for electronic commerce, but does not include a seller offering his goods or services for sale on a marketplace e-commerce entity.

Marketplace based model of e -commerce means providing an IT platform by an e-commerce other hands entity on a digital & electronic network to act as a facilitator between buyer and seller. On other hand, Inventory based model of e-commerce means an e-commerce activity where an inventory of goods and services is owned by an e-commerce entity and is sold to the consumers directly. However, FDI is not permitted in an inventory based model of e-commerce marketplace-based

 

According to guidelines for FDI (Foreign Direct Investment) on E-Commerce, an E-commerce entity providing a marketplace will not exercise ownership or control over the inventory i.e. goods purported to be sold. Such ownership or control over the inventory will render the business into the inventory-based model. Inventory of a vendor will be deemed to be controlled by an e-commerce marketplace entity if more than 25% of purchases of such vendor are from the marketplace entity or its group companies.

Source:  Vision IAS

Inflation-indexed bonds

the Inflation-indexed bonds in India were issued by the Reserve Bank of India (RBI) in 2013 and were benchmarked to Wholesale Price Index (WPI).

Inflation-indexed bonds are financial instruments that attempt to protect the bonds' purchasing power by tying interest and principal payments to an index of price changes.

Indexed bonds include two types of compensation, a real rate of return plus compensation for the erosion of purchasing power. The inflation component on the principal will not be paid with interest but the same would be adjusted in the principal by multiplying the the principal with index ratio (IR). At the time of redemption, the adjusted principal or the face, whichever is higher, would be paid. The interest rate will be provided protection against inflation by paying fixed coupon rate on the principal adjusted against inflation. 

Economists have argued that inflation-indexed bonds could reduce government borrowing costs. If the market overestimates future inflation, the government will reduce borrowing costs by issuing inflation-indexed bonds rather than nominal bonds. This may occur because, for example, investors• expectations are not completely forward-looking or rational. Alternatively, the government, because it is able to influence inflation through its policies, may have better information about the future course of inflation, or perhaps has more faith in its commitment to contain it than the public does. In these cases a treasury can lower its costs by issuing indexed bonds.

The government can reduce the coupon rates on its borrowing by way of IIBs by reducing inflationary trends.

Extant tax provisions will be applicable on interest payments and capital gains on IIBs. There will be no special tax treatment for these bonds.

Intervention by RBI

A central bank such as the Reserve Bank of India (RBI), periodically intervenes in the debt market to influence the interest rates and rate of inflation in the economy. 

If RBI feels inflation is too high, it will sell government securities, and suck money out of the system. This act will push up interest rates in the economy, and businesses will cut back on capital expenditure financed by loans, reducing the demand for money.

Central banks also intervene periodically in foreign exchange markets.

If the rupee is rapidly depreciating, RBI will sell dollars in the market. This will increase the supply of dollars and the demand for rupees, causing the rupee price of the dollar to come down. 

On the contrary, if the rupee is rapidly appreciating, RBI will buy dollars and inject rupees into the economy. This will increase the demand for dollars and the supply of rupees, thereby leading to an increase in the rupee price of the dollar.

If interest rates in the US or the EU were to fall, FIIs (Foreign Institutional Investors) will ramp up investments in India. The resultant demand for rupees will cause the rupee to appreciate. In response, RBI will buy dollars and inject rupees into the system.

Source: VisionIAS

Exchange Rate

A nominal Effective Exchange Rate (NEER) is a measure of the value of a currency against a weighted average of several foreign currencies. 

• The nominal exchange rate is the amount of domestic currency needed to purchase foreign currency. 
• If a domestic currency increases against a basket of other currencies inside a floating exchange rate regime, NEER is said to appreciate. 
• If the domestic currency falls against the basket, the NEER depreciates..
• An increase in NEER indicates an appreciation of the local currency against the weighted basket of currencies of its trading partners. 

The real effective Exchange Rate (REER) is the real effective exchange rate (a measure of the value of a currency against a weighted average of several foreign currencies) divided by a price deflator or index of costs. 

In simple words, a nation's nominal effective exchange rate (NEER), adjusted for inflation in the home country, equals its real effective exchange rate (REER).

An increase in REER implies that exports become more expensive and imports become cheaper; therefore, an increase indicates a loss in trade competitiveness.

If inflation is in an increasing trend in domestic nation relative to inflation in other countries, there is likely to cause an increasing divergence between NEER and REER.

Source: VisionIAS

World Bank

The Bretton Woods Conference, officially known as the United Nations Monetary and Financial Conference, was a gathering of delegates from 44 nations that met from July 1 to 22, 1944 in Bretton Woods, New Hampshire (USA), to agree upon a series of new rules for international financial and monetary order after the conclusion of World War II.

The World Bank Group consists of five development institutions. 

1. International Bank for Reconstruction and Development (IBRD) provides loans, credits, and grants. 
2. International Development Association (IDA) provides low- or no-interest loans to low-income countries. 
3. The International Finance Corporation (IFC) provides investment, advice, and asset management to companies and governments.
4.  The Multilateral Guarantee Agency (MIGA) insures lenders and investors against political risks such as war. 
5. The International Centre for the Settlement of Investment Disputes (ICSID) settles investment disputes between investors and countries. 

• India was one of the forty-four original signatories to the agreements reached at Bretton Woods that established the International Bank for Reconstruction and Development (IBRD) and the International Monetary Fund (IMF). 
• It was also one of the founding members of the IFC in 1956 and the IDA in 1960. 
• India later became a member of the MIGA in January 1994. 
• India is not a member of ICSID.

Reports

• Ease of Doing Business 
• Human Capital Index.
• World Development Report.

**

The World Bank launched a “Toolkit on Enabling Gender Responsive Urban Mobility and Public Spaces in India” with the aim of suggesting ways to make public transport in Indian cities more inclusive of women’s traveling requirements.

International Monetary Fund (IMF)

• The formation of the IMF was initiated in 1944 at the Bretton Woods Conference. IMF came into operation on 27th December 1945.

Special Drawing Rights (SDRs) 

They are the IMF’s unit of account and not a currency.

The currency value of the SDR is determined by summing the values in U.S. dollars, based on market exchange rates, of a SDR basket of currencies

SDR basket of currencies includes the

• S. dollar,
• Euro,
• Japanese yen,
• pound sterling and
• Chinese renminbi (included in 2016).

The SDR currency value is calculated daily (except on IMF holidays or whenever the IMF is closed for business) and the valuation basket is reviewed and adjusted every five years.

Reports

Global Financial Stability Report

• It is released twice per year, in April and October.

World Economic Outlook

• It is a survey by the IMF that is usually published twice a year in April and October.

PYQs

Global Financial Stability Report’ is prepared by the (2016)

(a) European Central Bank
(b) International Monetary Fund
(c) International Bank for Reconstruction and Development
(d) Organization for Economic Cooperation and Development

Asian Development Bank

• Asian Development Bank ADB is a regional development bank established in 1966. 
• It has 68 members. 
• India is a founding member. 49 are from within Asia and the Pacific and 19 outside. 
• It aims to promote social and economic development in Asia and the Pacific. 
• As of 31st December 2019, ADB’s five largest shareholders are Japan and the United States (each with 15.6% of total shares), the People’s Republic of China (6.4%), India (6.3%), and Australia (5.8%). 
• It is headquartered in Manila, Philippines.

Price Indices: CPI and WPI

  The inflation rates in the country are the year-on-year

1. Wholesale price index (WPI) based inflation rate
2. Consumer price index (CPI) based inflation rate

• The CPI-based inflation data is compiled by the Ministry of Statistics and Programme Implementation (or MoSPI) and 
• the WPI-based inflation data is put together by the Department for Promotion of Industry and Internal Trade (or DPIIT).

Difference

• WPI does not take into account the change in prices of services.
• If services such as transport, education, recreation and amusement, personal care, etc. get significantly costlier, then retail inflation will rise but there will be no impact on wholesale price inflation.

Repo Rate, Reverse repo rate, Cash Reserve Ratio (CRR) Rate

The interest rate that the RBI charges when commercial banks borrow money from it is called the repo rate.

• when the RBI wants to encourage economic activity in the economy, it reduces the repo rates. This indicates to people spend money.

Reverse repo rate

• The interest rate that the RBI pays commercial banks when they park their excess cash with the central bank.

 The repo rate is higher than the reverse repo rate.

Cash Reserve Ratio (CRR) Rate

• The Cash reserve ratio is a certain percentage of cash that all banks have to keep with the RBI as a deposit.

MGNREGA

• It provides a legal guarantee for 100 days of unskilled manual employment in every financial year of any rural household.
• Funded by the Central government
• Social Audit has to be done by the Gram Sabha

The Competition Act, 2002

• It should be noted that on the recommendations of the Raghavan committee, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002.
• The Competition Act, 2002, as amended by the Competition (Amendment) Act, 2007
• In accordance with the provisions of the Amendment Act, the Competition Commission of India and the Competition Appellate Tribunal have been established
• he government of India replaced Competition Appellate Tribunal (COMPAT) with the National Company Law Appellate Tribunal (NCLAT) in 2017.
• The provisions of the Competition Act relating to anti-competitive agreements and abuse of dominant position were notified on May 20, 2009

Source: The Indian Express

Competition Commission of India

• It is a quasi-judicial body.
• within the Ministry of Corporate Affairs
• established to enforce the competition law under the Competition Act, 2002
• recommendations of the Raghavan committee, the Monopolies and Restrictive Trade Practices Act, 1969 (MRTP Act) was repealed and replaced by the Competition Act, 2002.

Commission consists of a Chairperson and not more than 6 Members appointed by the Central Government.

VISION 

To promote and sustain an enabling competition culture through engagement and enforcement that would inspire businesses to be fair, competitive, and innovative; enhance consumer welfare, and support economic growth.

MISSION

 The Competition Commission of India aims to establish a robust competitive environment through:

• Proactive engagement with all stakeholders, including consumers, industry, government, and international jurisdictions.
• Being a knowledge-intensive organization with high competence level.
• Professionalism, transparency, resolve, and wisdom in enforcement.

Source: The Indian Express

Inflation

 Causes of the current Inflation

• Fiscal Deficit
• Current Account Deficit
• Interest Rate
• Monetary Policy
• Supply Side
• Tax Policy

Micro, Small and Medium Enterprises (MSME)

 Definition

• MSME definition was announced in the Atmnirbhar Bharat package on 13th May, 2020. 
• As per this announcement, the definition of Micromanufacturing and services units was increased to Rs. 1 Crore of investment and Rs. 5 Crore of turnover. 
• The limit of the small unit was increased to Rs. 10 Crore of investment and Rs 50 Crore of turnover. 
• Similarly, the limit of the medium unit was increased to Rs. 20 Crore of investment and Rs. 100 Crore of turnover.
• For medium Enterprises, now it will be Rs. 50 Crore of investment and Rs. 250 Crore of turnover.

Ministry of MSME has reiterated that it has put in place a very strong handholding mechanism for MSMEs and new entrepreneurs in the name of Champions (www.champions.gov.in) which was recently launched by the Prime Minister.

Source:

• https://msme.gov.in
  

FINANCIAL Services Institutions Bureau (FSIB)

The body formed by the government to select the CEOs and Directors of public sector banks, insurance companies, and financial institutions will select top officials of banks via a grooming process under a leadership development programme.

• Replaced with Banks Board Bureau.

Gig Economy

Reference:

1. https://www.techtarget.com/whatis/definition/gig-economy

Fertilizers

The Indian Express

Source:The Indian Express