RBI cuts rates but IMF cautions on global growth
Reserve Bank of India(RBI) cut the repo rate by 0.25% or 25 basis points to 6.5 per cent. The move was factored in by the markets and on expected lines. RBI Governor also promised to maintain the “accommodative†monetary policy stance.
The rate cut could help lower the cost of loans for consumers, including automobile and home buyers. As the retail inflation eased to 5.18% in February the RBI pointed government’s effective supply side measures keeping a check on food prices, and the government’s commendable commitment to fiscal consolidation.
The latest rate cut should be seen in the backdrop of banks reducing lending rates by 25 to 50 bps since adopting a new loan pricing mechanism – the marginal cost of funds based lending rate — in the first week of April, according to the RBI Governor.
Interestingly RBI has reduced the policy rate corridor to 0.50 per cent from the earlier 1 percentage point, which resulted in the reverse repo rate – at which banks can park excess funds with the RBI – being reset at 6 per cent. The daily requirement for maintaining cash reserve ratio has been reduced to 90 per cent from 95 per cent from April 16, the marginal standing facility rate (the penal rate at which banks borrow from the RBI) was cut by 75 basis points.
RBI also proposed to redefine bank branches and permissible methods of outreach. It will also issue a discussion paper to go ahead on the differentiated banking and look into the introduction of custodian banks and wholesale banks, the policy document said.
On Growth – RBI also retained its GDP growth forecast at 7.6 per cent, on the assumption of a normal monsoon and a boost to consumption through the implementation of the Seventh Pay panel recommendations. But stocks declined in Asia and Europe as oil fell and the IMF warned that the global economy was losing momentum.
Analysis
What is RBI’s policy review? – RBI conducts bi-monthly(once in two months) policy reviews to notify changes in its monetary policy stance. It also comes  with a commentary on the effectiveness of monetary policy in the economy.
What is the relationship between repo and reverse repo rate? – RBI has reduced the corridor between repo and reverse repo rate to 0.50%.
Repo and reverse repo rates were announced separately till the monetary policy statement in 3.5.2011. In this monetary policy statement, it has been decided that the reverse repo rate would not be announced separately but will be linked to repo rate. The reverse repo rate will be 100 basis points below repo rate. The liquidity adjustment facility corridor, that is the excess of repo rate over reverse repo, has varied between 100 to 300 basis points. The period between April 2001 to March 2004 and June 2008 to early November 2008 saw a broader corridor ranging from 150–250 and 200–300 basis points respectively. During March 2004 to June 2008 the corridor was narrow with the rates ranging from 100–175 basis points. A narrow LAF corridor is reflected from November 2008 onwards.
Source: TheHindu, Wikipedia
India’s fastest semi-high speed train launched
India launched its fastest train Gatimaan Express on 5th April Tuesday. The semi-high speed train with with a 5,400 horsepower electric locomotive and top speed of 160 kmph covered a distance of 200 kilometres in 100 minutes.
It is, however, only slightly faster than the Bhopal Shatabdi launched 28 years ago, which takes 117 minutes to reach Agra but also takes a longer route, starting from the New Delhi Railway station.
Analysis
What is the semi-high speed train initiative? – As part of India’s two pronged strategy there is a focus on upgradation of existing railway system to semi high speed links parallely with bullet train project launch between Ahmedabad and Mumbai in the high speed corridor.
Indian Railways aims to increase the speed of passenger trains to 160–200 km/h on dedicated conventional tracks. They intend to improve their existing conventional lines to handle speeds of up to 160 km/h, with a goal of speeds above 200 km/h on new tracks with improved technology.
What could be the issues with semi-high speed network? – There is serious question raised about the safety of the passengers as the infrastructure on which semi-high speed trains are proposed to run may not be able to run at such high speeds, for example it is preferred to run these trains on 60 kilogram tracks but some of them are being tested on 52 kilogram tracks.
What are other similar projects? – Recently France’s SNCF has begun working with Indian Railways on a one-year project to study the feasibility of upgrading the 245 km New Delhi – Chandigarh line to permit the operation of ‘semi high speed’ trains at up to 200 km/h, and has agreed to support the pilot projects for a station modernisation programme.
Source: TheHindu
Alcohol ban in Bihar
The Bihar government on 5th April Tuesday declared Bihar a dry State while imposing total prohibition on the sale and consumption of liquor, both country-made and Indian-Made Foreign Liquor, with immediate effect. Earlier, the Bihar government had banned sale and consumption of country-made liquor across the State from April 1. However, Army cantonment areas would be exempt as they regulate sale and consumption of alcohol in their own way.
Liquor companies and factories in the State can continue to manufacture “but cannot trade in it within the State.†They can use digital lock system and GPS monitoring equipment in vehicles transporting the liquor manufactured in Bihar to places outside the State for sale.
Analysis
What is the status of alcohol prohibition in India? – Alcohol prohibition in India is in force in the states of Gujarat, Nagaland and parts of Manipur; as well as in the Union Territory of Lakshadweep. Kerala has been implementing prohibition in a phased manner since 2014. Bihar banned alcohol sale on 5 April 2016. All other Indian states and union territories permit the sale of alcohol.
Is the ban aligned with the constitution? – Although there is no central law banning alcohol consumption in India Article 47 (DPSP) of our Constitution provides that “…the State shall endeavour to bring about prohibition of the consumption except for medicinal purposes of intoxicating drinks and of drugs which are injurious to health.â€
Source: TheHindu, Wikipedia
Stand Up India Scheme Launched
Prime Minister Narendra Modi on 6th April Tuesday unveiled the ‘Stand-up India’ scheme to promote entrepreneurship among women, scheduled castes and tribes by enabling them secure easier loan.
Under the scheme, SC/ST and women entrepreneurs will be provided loans of between Rs.10 lakh and Rs.1 crore for setting up new enterprises. Mr. Modi also distributed 5,100 e-rickshaws under the scheme and 151 women were among those who received the vehicles, using the Bhartiya Micro Credit (BMC) under the Pradhan Mantri Mudra Yojana scheme.
The broad features of the scheme are as under:-
1) Composite loan between Rs. 10 lakh and upto Rs.100 lakh, inclusive of working capital component for setting up any new enterprise.
2) Debit Card (RuPay) for drawal of working capital.
3)Â Credit history of borrower to be developed.
4) Refinance window through Small Industries Development Bank of India (SIDBI) with an initial amount of Rs.10,000 crore.
5) Creation of a corpus of Rs. 5,000 crore for credit guarantee through NCGTC.
6) Handholding support for borrowers with comprehensive support for pre loan training needs, facilitating loan, factoring, marketing etc.
7) Web Portal for online registration and support services.
The process would be led by SIDBI with involvement of Dalit Indian Chamber of Commerce and Industry (DICCI) and various sector – specific institutions all over the country. The offices of SIDBI and National Bank for Agriculture and Rural Development (NABARD) shall be designated Stand Up Connect Centres (SUCC).
Analysis
What is the benefit of these schemes? – The stand up India scheme will provide support to dalit entrepreneurs without taking the reservation route in jobs. Dalit Indian Chamber of Commerce and Industry (DICCI) founded on 14 April 2005 rejects job reservation as a means to Dalit emancipation as they feel quotas have added yet another (negative) stereotype to the Dalits. Instead of depending on the state to provide Dalits decent jobs, DICCI has adopted as its mission statement “be job givers, not job seekersâ€, exhorting members of the Dalit community in India to become entrepreneurs.
DICCI focuses on entrepreneurship, as it believes that “Dalit Capitalism†will help Dalits rise to the top of the social pyramid, and will pave the way for the end of the caste system.
Source: LiveMint, TheHindu, PIB
New rules on Waste Management
The Environment Ministry has notified rules making it incumbent on a wide range of groups – hotels, residential colonies, bulk producers of consumer goods, ports, railway stations, airports and pilgrimage spots – to ensure that the solid waste generated in their facilities are treated and recycled.
The responsibility of generators has been introduced to segregate waste into three categories – Wet, Dry and Hazardous Waste.  He added that the generator will have to pay ‘User Fee’ to the waste collector and a ‘Spot Fine’ for littering and non-segregation, the quantum of which will be decided by the local bodies. Integration of waste pickers/ ragpickers and waste dealers/ Kabadiwalas in the formal system should be done by State Governments, and Self Help Group, or any other group to be formed.
The bio-degradable waste should be processed, treated and disposed of through composting or bio-methanation within the premises as far as possible. The residual waste shall be given to the waste collectors or agency as directed by the local authority.
Though these rules would take effect from April 6, there would be a “transition period†of two to five years, beyond which fines would be imposed.
Analysis
What is the status of solid waste management in India? – Only about 75- 80% of the municipal waste gets collected and out of this only 22-28 % is processed and treated and remaining is disposed of indiscriminately at dump yards.
It is projected that by the year 2031 the MSW generation shall increase to 165 million tonnes and to 436 million tons by 2050. Â If cities continue to dump the waste at present rate without treatment, it will need 1240 hectares of land per year and with projected generation of 165 million tons of waste by 2031, the requirement of setting up of land fill for 20 years of 10 meters height will require 66,000 hectares of land.
As per the Report of the Task Force of erstwhile Planning Commission, the untapped waste has a potential of generating 439 MW of power from 32,890 TPD of combustible wastes including Refuse Derived Fuel (RDF), 1.3 million cubic metre of biogas per day, or 72 MW of electricity from biogas and 5.4 million metric tonnes of compost annually to support agriculture.
Source: PIB
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