Economy This Week (16th July to 22nd July 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 16th July to 22nd July 2022 is given below. Business news is essential for IAS exam preparation.

TABLE OF CONTENTS

1. Banks seek special DRTs for high value debt assets (BL 20/7/22)
2. Centre reins in debt at 56% of GDP in FY22 (BS 22/7/22)
3. RBI opts for 4 tier regulatory framework for UCBs (IE 20/7/22)
4. Remittances from advanced nations beat flows from gulf nations (BL 18/7/22)
5. Allow us to export grains from public stocks (TH 16/7/22)
6. Zero coupon zero principal bonds get securities status (BL 18/7/22)
7. Indonesia removes palm oil export levy until Aug 31 (FE 18/7/22)
8. Panel on MSP, natural farming set up (TH 19/7/22)

1. Banks seek special DRTs for high value debt assets (BL 20/7/22)

• The banking sector has asked the finance ministry to set up special Debt Recovery Tribunals (DRTs) and Debt Recovery Appellate Tribunals (DRATs) for speedy adjudication and recovery of high-value cases of ₹ 100 Cr and above.
• The number of pending cases in 39 DRTs and 5 DRATs is very high – 1,61,034 cases.
• The DRTs are set up under The Recovery of Debts Due to Banks and Financial Institutions Act 1993, and specifies dealing with an application as quickly as possible and making every effort to complete the proceedings in two hearings and dispose of the application in 6 months (or 180 days).

2. Centre reins in debt at 56% of GDP in FY22 (BS 22/7/22)

• The central govt has controlled the debt to GDP ratio for FY22 to 56.29% compared to 59.9% as projected in revised estimates (RE) of the budget.
  • Part of it was due to the revision in GDP.
  • Another reason was that market borrowings done were lower by ₹ 78000 Cr during 2021-22.
    • This is also due to the fiscal deficit of the centre turning out to be 6.7% compared to 6.9% under revised estimates.
• RBI’s latest Financial Stability Report has raised concerns over the higher debt to GDP ratio.
  • The overall (centre + states) debt has reached a peak level of 89.4% at the end of FY21 and is expected to be at higher levels till FY26.

3. RBI opts for 4 tier regulatory framework for UCBs (IE 20/7/22)

• RBI has decided to adopt a 4-tiered regulatory framework with differentiated regulatory prescriptions aimed at strengthening urban cooperative banks (UCBs).
• It has stipulated a minimum net worth of ₹ 2 Cr for tier 1 UCBs operating in a single district and ₹ 5 Cr for all other UCBs.
• The UCBs that do not meet the requirement will be given a glide path of 5 years.
• The decision of RBI is based on the recommendations given by N Viswanathan Committee.
• CRAR for Tier 1 banks is retained at 9% and for Tier2, Tier 3 and Tier 4 it has been changed to 12%.

4. Remittances from advanced nations beat flows from gulf nations (BL 18/7/22)

• The remittances from advanced economies (AEs) – US, UK, Singapore, etc. – have emerged as a key source of inward remittances by beating the remittances from the Gulf Cooperation Council (GCC) region.
• The share of the GCC region in India’s inward remittances is estimated to have declined from more than 50% in 2016-17 to around 30% in 2020-21 (for this year the AEs have accounted for 36% share).
• US has surpassed UAE as a top source accounting for 23%.
  • As per a World Bank report, the recovery in the USA is one of the important drivers.
  • Reducing wage differentials, changing occupational patterns in these states with increasing white-collar migrant workers to the GCC, and entry of low-wage semi-skilled workers from other states and Asian countries may have led to a compositional shift.
  • The inward remittances into traditional recipient states such as Kerala, Tamil Nadu and Karnataka have halved and these account for just 25% of total inward remittances.
  • Maharashtra has emerged as the top inward remitted with a 35% share.

5. Allow us to export grains from public stocks (TH 16/7/22)

• Finance Minister has asked WTO to allow the WTO (World Trade Organisation) to allow India to export food grains from its public stockholding to the nations facing a food crisis.
  • Because of the ongoing war between Russia and Ukraine, there is a shortage of food grains in the global market and many countries are facing issues of food security.
• As per the WTO guidelines, countries are not allowed to export food grains as they are procuring these food grains at subsidised rates.

6. Zero coupon zero principal bonds get securities status (BL 18/7/22)

• The Ministry of Finance has designated Zero Coupon Zero Principal (ZCZP) bonds as securities.
  • These neither provide any interest nor any principal.
  • These are registered with social stock exchanges (SSEs) according to the regulations made by SEBI.
  • With this, the ZCZP will join other instruments such as shares, scrips, stocks, bonds, debentures, derivatives, security receipts, mutual funds, etc.
  • All of these are recognised under the Securities Contracts (Regulation) Act, 1956.
• This is expected to help organisations utilise their funds earmarked for social responsibility programmes and also help the non-profit organisations to get the funds in a transparent way.
• This will benefit the corporates invest in social projects under corporate social responsibility (CSR).
• These bonds will carry tenure equal to the tenure of the project and at maturity will be written off in the investee’s books.
• However, the flip side to this is that the social benefit that the NPO is seeking to achieve may not be achieved and that’s why the SSE will be key to direct these funds into credible NPOs.
  • SSE will require the NPOs to report on the social impact in a standardised format.
• SEBI has set up a working group to look into this. The group apart from the above recommendation also has recommended that the investors be given tax breaks. SEBI has proposed that the minimum issue be ₹ 1 Cr and the minimum participation of the application size be ₹ 2 lakh.

7. Indonesia removes palm oil export levy until Aug 31 (FE 18/7/22)

• The Govt of Indonesia has scrapped the export levy for all palm oil products until August 31.
• This is expected to boost exports and also ease the high inventories, which have piled up since the country imposed a ban on exports to reduce cooking oil prices.
• This is expected to further reduce the prices in the global market, which have fallen by 50% since late April.
• Since the lifting of the ban, the govt has implemented rules on mandatory sales in the domestic market – Domestic Market Obligation (DMO).

8. Panel on MSP, natural farming set up (TH 19/7/22)

• The Centre has constituted a committee headed by Sanjay Agrawal to look into MSP for agricultural produce.
• Govt had announced setting up the committee while repealing the farm laws. The committee would be set up –
  • To promote zero-budget natural farming
  • To change crop patterns keeping in mind the changing needs
  • To make MSP more effective and transparent

Economy This Week (16th July to 22nd July 2022):- Download PPT Here

ETW 16th July to 22nd July 2022:- Download PDF Here