Repo Rate Current Affairs - 2020

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.

Group of Ministers submitted draft proposal on Employment and Skill Development

The Group of Ministers Committee formed under the leadership of Social Justice and Empowerment Minister recently submitted its draft proposals on employment and skill development.

Proposals made

The following proposals were made by the draft

  • The draft has proposed “The Land Pooling Model”. The model is being used in greenfield airports. The proposal suggests to use the model in agriculture to enable corporatization. This will increase the demand for skilled labours
  • Also, the draft suggests to merge MNREGA (Mahatma Gandhi National Rural Employment Guarantee Act) along with the skill development programmes. This will expand MNREGA to industries and MSMEs. By this cost of wages shall be made competitive creating local employment wave.
  • It suggests the Reserve Bank of India to cut reverse repo rate to 0%. This when done for a few months will incentivize banks.
  • A National Electronic Employment Exchange has been proposed. This will help the migrated workers at larger extent. It also suggests to establish a Migrant Worker Welfare Fund.
  • It suggests to provide cottage industry status to the food processing industries that are spread all over the country.

Pradhan Mantri Jan Arogya Yojana

The draft has suggested to enroll every migrant worker under the programme. This will help him get access to cashless medical facilities. It is to be noted that the Pradhan Mantri Jan Arogya Yojana has been involved in the COVID-19 fight.

Pradhan Mantri Kaushal Vikas Yojana

The proposal has suggested to leverage the potential of Pradhan Mantri Kaushal Vikas Yojana. This will help create a balance between the farming and non-farming activities.