GDP Current Affairs - 2020

Finanance Commission: N K Singh Committee for a new Fiscal Consolidation Road Map

On March 19, 2020, the Finance Commission Constituted a committee under Shri N K Singh in order to build a fiscal consolidation road map for the centre and the states.

Highlights

The Finance Commission had submitted its first report to the GoI in February 2020. The Commission will submit its final report covering the financial years 2021-22 to 2025-26 by October 30. The N K Singh committee will recommend definition of deficit and debt. It will also define contingent liabilities of the public sector undertakings.

Fiscal Consolidation

Fiscal Consolidation is the policy adopted by the Government to reduce the deficits. It mainly aims to reduce administrative costs of the Government. In simple words, the policies undertaken by the Government to reduce debt stocks and deficits.

The Fiscal Responsibility and Budget Management Act, 2003 (FRBMA) is the best example for the Fiscal Consolidation measure of GoI

FRBMA act

The act aimed to reduce fiscal deficit by 3% of GDP. It aimed to eliminate the deficit by 2006 by avoiding borrowings from RBI. However, it couldn’t be achieved due to International Financial Crisis. Later, a review committee was set up in 2016 to suggest changes of the act under N k Singh then as well.

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Corona Virus: US Federal Reserve reduces interest rate to 0%

On February 16, 2020, the United States Reserve Bank announced that the key interest rates are to be slashed to 0% to 0.25%. This is being done in response to growing impact of Corona Virus.

Highlights

This is the second emergency cut by the reserve bank in less than two weeks. Similar rate cuts were made by the bank earlier only during 2008 global financial crisis.

Global Impacts of Corona Virus

The Global Economy has been badly hi due to Corona Virus. With countries imposing travel ban and business meets and industrial summits being postponed, the global market is hit badly. After China, Spain has shut down its communication with the external world.

Global Economic Slow Down

The Organization of Economic Cooperation and Development downgraded world GDP growth. Earlier its was predicted that GDP growth for the year 2020 will be 3%. Now it has been reduced to 2.5%

Manufacturing Sector

The Purchasers Managers Index that was between 45 and 55 for the global powers has reduced to 40 and 50. Of all the China’s manufacturing powers were hit hard. This has affected Vietnam, South Korea and Singapore.

Oil Prices

With OPEC’s unable to succeed its deal in cutting oil production, the oil prices have lowered. This has hit oil industries greatly.

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