Economy & Banking Current Affairs

Business, Economy and Banking in Current Affairs 2019 with latest news and current affairs in Agriculture, Industry, Banking, Capital Markets, Import and Export and Government schemes in commercial sector.

Status Paper on Government Debt released

On May 22, 2020, the Ministry of Finance released Status Paper on Government Debt 2018-19. According to the report, the overall debt of centres and states declined by 68.7% in March 2018 to 68.6% in 2019.

Highlights

The Status Paper on Government Debt is being produced by the Ministry of Finance since 2010. Current debt of India stands at Rs 1.3 crore crore.

Key Findings of paper

The debt of central government dropped marginally from 45.8% in 2017-18 to 45.7% in 2019, The external debt was 2.7% of GDP. The Average Interest Cost of the centre remained unchanged in the year 2018 to 2019. Around 94% of centre’s liabilities were of domestic debts.

The tenure of the longest security was 37 years.

Government Debt

The Government Debts are classified as internal debt and external debt. The Internal Debts include non-marketable and marketable debt. External debt refers to debt borrowed from all the sources outside the country.

Government Liabilities are classified into liabilities in public account and debt contracted against Consolidated Funds of India.

Monetary Policy Committee meets: Repo rate reduces to 4%

On May 22, 2020, the policy committee met in an emergency meeting to review the current economic outlook and impacts of COVID-19.

Highlights

The RBI has reduced the repo rate from 4.4% to 4%. It has reduced the reverse repo rate to 3.35%. The RBI also announced that the reduction in policy rate is to be provided as long as the economic growth in the country is to be mitigated.

Current Economic Scenario

The global trade is declining and the world is heading towards recession. The Indian Economic growth is also slowing down to a great extent in spite of GoI trying to infuse liquidity in to the market. The top six industrialized states that account to 60% of industrial production in the country now falls in red zone. This will affect India’s growth further as economic activities in red zones are not being operationalized to its fullest.

Challenges

The rural and urban demand has been falling down. The manufacturing activity in the country has fallen down by 21% post COVID-19. Also, the output from core industries has fell by 6.5%.

Measures of RBI

RBI has announced 4 major economic measures to boost the economy. This includes measures to improve functioning of markets, measures to ease financial stress, measures to support exports and imports and measures to ease financial constraints faced by the state governments.

The measures are as follows

  • RBI will provide another 90-day extension to offer loan facilities.
  • Rs 15,000 crore line of credit allocated to EXIM banks
  • RBI has increased export credit period from 12 months to 15 months.
  • The term loan moratium has been extended till August 31.
  • The group exposure limit of the banks has increased from 25% to 30%.
  • The rules of Consolidated Sinking Funds have been relaxed. This will enable states to meet 45% of redemption of their market borrowing.