ORANGE COLOUR: Important for Prelims.
RED COLOUR: Important for Mains.
BLACK COLOUR: Must Read !
BLUE COLOUR : Important Links/Survey.
PINK COLOUR: Reports/Themes/Summits.
Page Contents:
12th Sep Current Affairs News Analysis | Prelims & Mains 2020
Today's Must Read Articles :Fiscal Deficit
HEADLINES:
India, being one the hardest hit major economy due to Covid-19, faces the challenge of managing its fiscal deficit.
WHY IN NEWS:
Borrowing more and monetizing the deficit are the options being considered by the government and Reserve Bank of India (RBI) to finance the fiscal deficit.
SYLLABUS COVERED: GS 2 : 3 : Fiscal Deficit
ISSUE:
STATE OF INDIAN ECONOMY
- As per the official data, the Centre’s fiscal deficit for the first three months of fiscal 2020-21 (April-June) was Rs. 6.62 lakh crore, which is 83% of the budgeted target for the whole year.
- As per the economists, the fiscal deficit may end up as high as 8% of the Gross Domestic Product (GDP), far exceeding the budget’s goal of 3.5%.
- The GDP contracted by 23.9% in the first (April-June) quarter of 2020 compared to the same period (April-June) in 2019.
- The manufacturing sector is also contracting.
- The output of eight core industries contracted for the fourth consecutive month – shrinking by 15% in June 2020.
- The Financial Stability Report from RBI also shows an increase in bad loans and Non-Performing Assets (NPA).
METHODS OF BRIDGING THE FISCAL DEFICIT
MARKET BORROWINGS
- The government has already raised its gross market borrowing target for the current financial year by more than 50%, owing to the pandemic.
DISADVANTAGE
- HIGH DEBT : An increased borrowing programme means that the public debt will go up.
- HIGHER INTEREST RATES: Higher borrowing can push up interest rates because markets are nervous about the government’s ability to repay.
- INCREASE IN TAXES: It may also necessitate an increase in taxes. This may burden the common people and also lead to less spending and saving by the public, leading to a stalled market.
- CROWDING OUT: When the government borrows from the private sector by selling bonds, the private sector is left with less money to spend and invest.
MONETISATION OF THE DEFICIT
- Monetising deficit means RBI purchases government bonds in the primary market and prints more money to finance the debt.
- This is resorted to only when the government cannot borrow from the market (Banks and other Financial Institutions like LIC).
- RBI also conducts indirect monetization of deficit through Open Market Operations (OMOs).
- OMOs are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
- Recently, RBI decided to infuse Rs. 10,000 crore liquidity in the banking system by buying government securities through OMOs.
IASbhai WINDUP:
Necessary monetary infusion is needed from RBI at this stage .
SOURCES: PIB | 12th Sep Current Affairs News Analysis
Sonamura-Daudkandi IWR
HEADLINES:
Sonamura-Daudkandi inland waterway route
WHY IN NEWS:
Recently, Sonamura-Daudkandi inland waterway route between India and Bangladesh was operationalised.
SYLLABUS COVERED: GS 3:Health:Diseases
ISSUE:
SONAMURA-DAUDKANDI ROUTE
- The inland waterway route over river Gumati was included in the list of Indo-Bangla Protocol (IBP) routes in May 2020.
- It connects Tripura with the National Waterways of India through Bangladesh.
SIGNIFICANCE
- It will improve the connectivity of Tripura and the adjoining States with Indian and Bangladesh’s economic centers and will help the hinterland of both the countries.
- It will open up new avenues for economic development in both the countries.
IASbhai WINDUP:
PROTOCOL ON TRANSIT AND TRADE
- It provides inland waterways connectivity between the two countries, particularly with the North Eastern Region of India and also enhances bilateral trade.
- This Protocol was first signed in 1972.
- It was last renewed in for five years with a provision for its automatic renewal for a further period of five years.
SOURCES: PIB | 12th Sep Current Affairs News Analysis
DISCOVER MORE : Important Daily Current Affairs for UPSC PRELIMS 2020
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