Economy This Week (10th to 23rd Dec 2022)

Economy is an important part of the UPSC prelims and mains exams; this series titled ‘Economy This Week’ has been initiated to address the need to read and analyse economic articles in various business-related newspapers. The round-up of the Economy/Business section news for 10th to 23rd Dec 2022 2022 is given below. Business news is essential for IAS exam preparation.

TABLE OF CONTENTS

1. Agri futures trading ban (BL 22/12/22)
2. IMF approves $3 bn support deal to Egypt (FE 18/12/22)
3. SEBI - share buyback through stock exchanges to be phased out (BS 21/12/22)
4. Steepest slowdown - World Bank (BS 21/12/22)
5. No tariff walls (IE 21/12/22)
6. First bullion bourse struggles to shine (BL 21/12/22)
7. Exports to UAE surge after FTA (FE 20/12/22)
8. China starts WTO dispute against US (ET 14/12/22)
9. Only a fourth of sanctioned projects have taken off (TH 14/12/22)
10. Govt could tap into NSSF for extra funds (FE 11/12/22)
11. Law does not allow refund of NPS funds to states (BL 13/12/22)
12. Few takers for the CBDC-R (BL 12/12/22)

1. Agri futures trading ban (BL 22/12/22)

• SEBI has decided to continue the ban on futures trading of 7 agriculture commodities by another year 
• The continuation is over the concern that lifting the ban will lead to inflation 
• This will deprive the value chain participants and farmers producers organizations of a tool to manage the price risks 
• There are concerns that speculation is drinking up the prices and in recent times the cotton is an example of this. The rice and wheat prices have increased by 7.5% and 15.5% in the past year and allowing the futures trading in these may further add to inflationary trends

2. IMF approves $3 bn support deal to Egypt (FE 18/12/22)

• International Monetary Fund (IMF) has approved a deal that will provide $3 bn support package to Egypt 
  • This will be provided for a period of over 4 years 
  • The deal is known as Extended Fund Facility (EFF) Arrangement 
  • Will give the govt immediate access to $347 mn 
  • Will help addressing the issue of BoP 
• The Egyptian economy 
  • Has been hit by the pandemic 
  • War between Russia and Ukraine (raising the oil and food prices). Egypt is the largest importer of wheat  
• The deal 
  • Is an outcome after the preliminary agreement was signed in October after the central banker increased the interest rates 
  • Will lead to shift in flexible exchange rate
  • Have a monetary policy that will reduce inflation
  • Change the balance in the economy to ensure that there is a level playing field between private and state  
• This is expected to bring in additional $14 bn of financing from the middle eastern countries 

3. SEBI – share buyback through stock exchanges to be phased out (BS 21/12/22)

• Securities and Exchange Board of India (SEBI) has approved phasing out of buyback through stock exchanges 
• It is of the viewpoint that tender route is more equitable for buyback and the stock exchange is vulnerable to favouritism as except few nobody else knows when the buyback is going to happen in the market 
• The route will be phased out by March 2025  

4. Steepest slowdown – World Bank (BS 21/12/22)

• A report by World Bank – 2022 in Nine Charts – has stated that 
  • 7% of world population – 574 mn – would be living in extreme poverty in 2030 
  • By the end of 2022 there would be 685 mn people living in extreme poverty. This would make 2022 second worst year poverty reduction in the past two decades
  • The factors slowing down poverty reduction are 
    • Rising food and energy prices 
    • These are increasing on account of climate shocks, Russia-Ukraine war etc 
• The debt crisis in developing countries has intensified 
  • Around 60% of the poorest countries are either in debt distress or at the risk of it 
  • Because of higher debt, these countries are unable to make critical investments in economic reforms, health climate action, education etc 
• Shocks in the energy market in the first half of 2022 has slowed the progress to provide universal access to affordable energy by 2030 
• 733 mn currently do not have access to electricity and by 2030 there will be around 670 mn (World Bank had projected 660 mn in 2021)

5. No tariff walls (IE 21/12/22)

• Govt is considering increasing the tariffs on the non-essential items 
  • Non-essential would cover those items for which there is already a sufficient domestic manufacturing capacity 
• The individual ministries would be identifying the goods and the tariffs would be hiked on these 
• The proposal is akin to the earlier protectionist norms such as infant industry protection but the issue here is that these companies unlike earlier situation are not new-borns 
• Apart from the infant industry, another policy tool used was import substitution
  • Between 1991-92 to 2007-08, India’s peak customs duty on non-agricultural imports were reduced from 150% to 10% 
  • This trend is reversing. Between 2013-14 to 2021, the average tariffs imposed have increased from 13.5% to 18.3% 
• Apart from this the govt has also been adopting a granular approach. The issue with such approach is that it favours one industry over another 
  • Input of industry could be output for another
  • The one that lobbied better would get benefitted    

6. First bullion bourse struggles to shine (BL 21/12/22)

• India’s first international bullion platform – IIBX – has started working from July this year at the premises of IFSC (International Financial Services Centre) in Gujarat 
• Since its launch the gold trading has been meagre. Between July 29 to 16th December, the total trade volumes has been reported at 532 Kgs with average daily volumes at 6.57 kgs 
• There has been a lack of marketing the platform to stakeholders and hence the lower trading. There are hardly any Qualified Suppliers (QS) on the exchange  

7. Exports to UAE surge after FTA (FE 20/12/22)

• 6 months after the FTA with UAE came into force, the merchandise exports from India have risen by 13.5% from a year earlier
  • The exports have increased to $15.39 bn between May and October (compared to $13.56 bn a year earlier) 
• This is higher than the overall 10.3% increase in merchandise exports 
• The goods imports on the other hand have increased by 32.6% to $27 bn during this period 
• Though this is a very short duration to conclude whether the deal is beneficial or not, the signs are encouraging 
• The Comprehensive Economic Partnership Agreement (CEPA) is an important one as it is the first one signed over a decade by the Indian government  

8. China starts WTO dispute against US (ET 14/12/22)

• USA in October has passed a set of regulations which will have an impact on the semiconductor industry in China  
• Citing this, China has launched a trade dispute against the USA over its chip export control measures 
• The first step in the dispute resolution is to hold consultations 

9. Only a fourth of sanctioned projects have taken off (TH 14/12/22)

• Central government has sanctioned 39285 MW of solar projects and only a fourth of these projects have been commissioned so far 
• Govt under Scheme for Development of Solar Parks and Ultra Mega Solar Power Projects has approved a total of 57 solar projects with an aggregate capacity of 39285 MW until the end of November but so far projects of only 10027 MW have been commissioned 
• Reasons 
  • Some projects have been cancelled because of slow progress   
  • Acquiring land with clear titles 
  • Environmental issues 
  • Covid pandemic etc 

10. Govt could tap into NSSF for extra funds (FE 11/12/22)

• Centre has proposed net additional expenditure of ₹ 3.26 tn for current fiscal and could tap into the NSSF for more funds if needed 
  • The BE is ₹ 39.4 tn 
  • The govt has sought parliament approval for gross additional spending of ₹ 4.36 tn 
    • Additional fertilizer subsidy – ₹ 1.09 tn 
    • Food subsidy – ₹ 80348 Cr 
    • Grant to OMCs for under recoveries on cooking gas and Ujjwala Scheme – ₹ 24944 Cr  
• The extra tax revenues compared to the budget estimates, savings in various schemes, higher nominal GDP growth would help keep the fiscal deficit within the FY23BE of 6.4% 

11. Law does not allow refund of NPS funds to states (BL 13/12/22)

• Finance Ministry has informed Lok Sabha that the states reverting back to the Old Pension Scheme (OPS) would not be getting back the funds which were deposited under the NPS (New Pension Scheme)  
  • The PFRDA has already informed the same to the state governments  
• It also clarified that it does not have any plans to go back to the OPS  
• Earlier this year, Rajasthan was the first state government to revert back to OPS for its state government employees 

12. Few takers for the CBDC-R (BL 12/12/22)

• The usage of the CBDC-R is less than expected because there are doubts whether transactions are anonymous 
  • Though RBI has said that these are anonymous, the on ground implementation is not clear on this front 
• Currently whenever the transactions are done using the e₹, SMS are issued to both – sender and receiver 
• When the banks are issuing the messages, it creates a trail
• The RBI is working on addressing some of these concerns    

Economy This Week (10th to 23rd Dec 2022):- Download PPT Here

ETW (10th to 23rd Dec 2022):- Download PDF Here