Daily Prelims Newsletter for upsc 07 May 2022

Daily Prelims Newsletter For UPSC
| RaghukulCS

07 May 2022-Saturday

Table Of Contents

Table of Contents

The Reserve Bank of India has raised the repo rate and the cash reserve ratio (CRR).

Why is this newsworthy?

The Monetary Policy Committee (MPC) of the Reserve Bank of India has lifted the policy repo rate by 40 basis points to 4.40 percent, effective immediately, and the cash reserve ratio (CRR) of banks by 50 basis points to 4.5 percent of net demand and time liabilities (NDTL).

RBI has raised the policy repo rate for the first time since May 2020.

What is the Monetary Policy Committee, and what does it do?

The Reserve Bank of India Act, 1934, established a statutory and institutionalised framework for maintaining price stability while pursuing the goal of expansion.

The RBI Governor serves as the committee’s ex-officio Chairman.

The MPC determines the required policy interest rate (repo rate) to meet the inflation target (4 percent ).In 2014, the Monetary Policy Group was recommended by an RBI-appointed committee led by then-deputy governor Urjit Patel.

What are the Current Rates?

Policy 4.40 percent repo rate

The repo rate is the rate at which a country’s central bank (in India, the Reserve Bank of India) loans money to commercial banks in the event of a cash shortage. The central bank buys the security here.

4.15 percent for the Standing Deposit Facility (SDF).

The SDF is a liquidity window through which the RBI will allow banks to deposit excess money.

It differs from the reverse repo facility in that banks do not have to offer collateral while parking funds.

4.65 percent marginal standing facility rate

MSF is an emergency borrowing window for scheduled banks to borrow overnight from the RBI when interbank liquidity is entirely depleted.

Interbank lending is when banks lend money to one another for a set period of time.

4.65 percent bank rate

It’s the rate at which the RBI lends money to commercial banks.

4.50 percent CRR (Effective as of May 21, 2022)

Commercial banks are required to retain a specific minimum amount of deposit (NDTL) as reserves with the central bank under the CRR.

The minimal percentage of deposits that a commercial bank must retain in the form of liquid cash, gold, or other securities is known as the Statutory Liquidity Ratio, or SLR.

Why has the RBI increased the repo rate and the CRR?

The decision was made in light of the worldwide situation, which has seen a substantial increase in inflation as a result of present geopolitical concerns.

Inflation in major economies has reached its highest level in three to four decades, with global crude oil prices staying volatile and above USD 100 per barrel.

The increase in the repo rate and CRR is intended to combat rising inflation in the wake of the Ukraine conflict.

The RBI wanted to control and monitor money flow into the banking sector while keeping inflation – which is currently close to 7% – at a desired level.

There has also been an increase in the cost of fertiliser and other inputs, which has a direct impact on India’s food prices.

In March 2022, the headline CPI (Consumer Price Index) inflation rate reached 6.95 percent.

If inflation stays at these levels for too long, there is a risk of collateral damage.

Collateral Risk: The risk of loss resulting from mistakes in the nature, quantity, pricing, or features of collateral used to secure a credit risk transaction.

A valuable item is used as collateral to secure a loan (credit).

What effect would an increase in the repo rate and the CRR have?

It is projected that the Repo Rate will raise interest rates in the banking sector. Home, vehicle, and other personal and corporate loans’ Equated Monthly Installments (EMIs) are set to rise.

Deposit rates, particularly fixed-term rates, are expected to climb as well.

The increase in the Repo rate may have an impact on consumption and demand.

The increase in the CRR will drain Rs 87,000 crore from the banking system. As a result, banks’ lendable resources will decrease.

It also means that the cost of money will rise, putting pressure on banks’ net interest margins.

The difference between the interest revenue received by a bank or other financial institution and the interest it pays out to its lenders (for example, depositors) in relation to the amount of their assets that earn interest is known as the net interest margin (NIM).

Index of Purchasing Managers

Why is this newsworthy?

According to the S&P Global India Manufacturing Purchasing Managers’ Index (PMI), new orders and output in India’s manufacturing sector increased slightly in April 2022, rising to 54.7 from 54 in March 2022.

What are the Index’s Key Highlights?

Following the first contraction in nine months in March, fresh export orders rebounded in April.

In economics, contraction refers to a period in the business cycle when the economy is in decline.

A contraction happens when the business cycle reaches its peak but before it reaches its low.

Meanwhile, increased commodity prices, the Russia-Ukraine conflict, and higher transportation expenses exacerbated inflationary pressures.

Input costs rose at their quickest rate in five months, while output charge inflation soared to a 12-month high.

Energy price volatility, global input shortages, and the conflict in Ukraine all contributed to an increase in inflationary pressures, according to the latest statistics.

In terms of employment, there was just a minor gain in April 2022.

What exactly is the PMI?

It is a survey-based metric that inquires about changes in respondents’ perceptions of important business variables during the previous month. It is a measure of the current state of industrial and service sector economic trends.

The PMI’s mission is to inform firm decision makers, analysts, and investors about present and prospective business conditions.

It is calculated individually for the manufacturing and services sectors before being combined to form a composite index.

The PMI is a scale that ranges from 0 to 100.

A score of more than 50 indicates expansion, whereas a score of less than 50 indicates contraction.

A value of 50 shows that nothing has changed.

When the previous month’s PMI is greater than the current month’s PMI, it indicates that the economy is contracting.

It is normally published at the beginning of each month. As a result, it is regarded as a good leading predictor of economic activity.

IHS Markit compiles PMI for more than 40 economies throughout the world.

IHS Markit is a global leader in data, analytics, and solutions for the sectors and markets that drive economies throughout the world.

S&P Global includes IHS Markit.

PMI assists in making informed judgments at an earlier stage because official data on industrial output, manufacturing, and GDP growth comes much later.

It is not to be confused with the Index of Industrial Production (IIP), which measures the level of economic activity.

In comparison to PMI, IIP covers the whole industrial sector.

In comparison to a normal industrial production index, the PMI is more dynamic.

What Is PMI and What Does It Mean?

Provides a Reliable Economic Expectation:

The PMI is quickly becoming one of the most closely watched indices of global business activity.

It provides an accurate forecast of how an economy as a whole, and manufacturing in particular, is performing.

Economic Activity Indicator:

It is a good indicator of economic booms and busts, and it is actively monitored by investors, businesses, traders, and financial experts, in addition to economists.

Because it is released at the start of each month, the PMI is also considered a leading indication of economic activity.

It comes ahead of official figures for industrial output, core manufacturing, and GDP growth.

Central banks utilise the PMI to establish interest rates, which aids decision-making.

PMI announcements have an impact on bond and currency markets in addition to impacting equities market movements.

Enhances The desirability of an economy in comparison to other competing economies is enhanced by a positive PMI reading.

Suppliers can set prices based on PMI fluctuations.

PMFME Scheme

Why is this newsworthy?

Under the Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme, the Ministry of Food Processing Industries and NAFED (National Agricultural Cooperative Marketing Federation of India Limited) recently introduced three One District One Product (ODOP) brands.

Under the branding and marketing component of the PMFME scheme, the Ministry of Food Processing Industries has inked a deal with NAFED to develop 10 trademarks of selected 20 ODOPs.

What is the PMFME Scheme, exactly?

About: The Atmanirbhar Abhiyan (launched in 2020) aims to improve the competitiveness of existing individual micro-enterprises in the unorganised food processing industry, promote formalisation of the sector, and provide support to Farmer Producer Organizations, Self Help Groups, and Producers Cooperatives throughout their entire value chain.

The project uses the One District One Product (ODOP) model to achieve economies of scale in terms of input procurement, shared services, and product marketing.

From 2020-21 to 2024-25, it will be implemented over a five-year period.

Features:

The One District, One Product (ODOP) approach would see states identify food products for districts based on existing clusters and raw material availability.

The ODOP could be a perishable product, grain, or food item that is widely produced in a region. Mango, potato, pickle, millet-based products, fishery, poultry, and so on are examples.

Waste to Wealth Products, Minor Forest Products, and Aspirational Districts are some of the other focus areas.

Training of units, product development, proper packaging, and machinery for micro units will be supported by academic and research institutes within the MoFPI, as well as State Level Technical Institutions.

Individual micro food processing units that wish to upgrade their units can receive a credit-linked capital subsidy of up to 35 percent of the eligible project cost, up to a maximum of Rs.10 lakh per unit.

Credit linked grants worth 35 percent would be offered to FPOs/SHGs/cooperatives, state-owned agencies, or private enterprise to create shared infrastructure, such as a common processing facility, lab, warehouse, and so on.

For operating money and the acquisition of minor tools, each Self Help Group (SHG) member will receive Rs. 40,000 in seed cash (first finance).

It is a government-sponsored scheme with a budget of Rs 10,000 crore.

The scheme’s budget would be split 60:40 between the Central and State governments, 90:10 between the North Eastern and Himalayan States, 60:40 between UTs with legislatures, and 100% by the Centre for other UTs.

What is the Scheme’s Purpose?

The unorganised food processing sector, which employs almost 25 lakh people, accounts for 74% of all food processing jobs.

Nearly 66 percent of these units are in rural areas, and about 80 percent of them are family-owned businesses that support rural people’ livelihoods and reduce migration to cities.

These businesses are mostly classified as micro-businesses.

The unorganised food processing industry has a number of obstacles that impede its performance and expansion. Lack of access to modern technology and equipment, training, institutional finance, basic awareness of product quality control, and branding and marketing skills, to name a few issues.

What exactly is NAFED?

It is India’s apex organisation for marketing agricultural produce cooperatives.

It was established on October 2, 1958, and is governed by the Multi-State Co-operative Societies Act of 2002.

NAFED is one of India’s leading agricultural product procurement and marketing organisations.

Organize, promote, and improve agricultural, horticultural, and forest produce marketing, processing, and storage.

Distribute agricultural machinery, tools, and other inputs, as well as engage in interstate, import, and export trading, either wholesale or retail.

To provide technical assistance in agricultural production for the benefit of its members, partners, affiliates, and cooperative marketing, processing, and supply groups in India.

Other’s News

World Press Freedom Index 2022

The World Press Freedom Index (WPFI) 2022 was recently published in its 20th edition.

Since 2002, it has been published by Reporters Without Borders or Reporters Sans Frontieres (RSF), a global media watchdog.

It assigns a ranking to countries and areas based on the level of media freedom enjoyed by journalists.

It is based on a media freedom assessment that takes into account pluralism, media independence, media environment and self-censorship, transparency, the legal framework, and journalist safety.

It also depends on the quality of the infrastructure that enables news and information production.

It offers indicators of the severity of violations of media freedom in each location.

The Index’s ranking is based on a score awarded to each country or territory that ranges from 0 to 100.

The best possible score (the highest possible amount of press freedom) is 100, and the worst possible score is 0.

Five contextual factors are used to assess countries: political environment, legal framework, economic context, socio-cultural setting, and safety.

Findings – India has dropped to 150th place out of 180 countries in the World Press Freedom Index for 2022.

Country

Rank in World Press Freedom Index 2022

Norway

1

Denmark

2

Sweden

3

India

150 (142 in the year 2021)

North Korea

180

                                             

In terms of global trends, the analysis identifies a two-fold rise in polarisation, exacerbated by information disorder.

Polarization in the media is fueling internal country divisions as well as worldwide polarisation.

According to the research, “violence against journalists, politically partisan media, and media ownership concentration all suggest that press freedom is in jeopardy” in India.

It lists India as one of the most dangerous countries for journalists in the world.

Journalists are subjected to a wide range of physical assaults, including police violence, ambushes by political activists, and lethal reprisals by criminal gangs or corrupt local officials, according to the report.

“Supporters of Hindutva, the ideology that gave rise to the Hindu far right, engage all-out internet attacks on any ideas that contradict their beliefs,” it says.

Mission for National Film Heritage

The world’s largest film restoration project, including around 2,200 films, is poised to begin in full swing at the National Film Archive of India under the National Film Heritage Mission (NFHM) (NFAI).

The Ministry of Information and Broadcasting (I&B) has launched the National Film Legacy Mission to preserve and safeguard the country’s cinematic heritage.

NFHM was established in 2017 as the Government of India’s renowned mission for the protection, conservation, digitalization, and restoration of the country’s rich cinematic history.

The National Film Heritage Mission also includes ongoing preservation operations such as film condition assessment, preventive conservation, and digitization, in addition to restoration.

The National Film Archive of India (NFAI) is the project’s main organisation.

India’s National Film Archive

It began as a media entity of the Ministry of Information and Broadcasting in 1964.

The NFAI’s principal goal is to acquire and preserve India’s film legacy.

This comprises celluloid, stills, glass slides, posters, lobby cards, scripts, and song booklets, among other types of film and non-film material.

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