Economy This Week (2nd to 8th 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 2nd July to 8th July 2022 is given below. Business news is essential for IAS exam preparation.

TABLE OF CONTENTS

1. RBI eases FPI, NRI deposit norms
2. Govt hikes duty on gold imports
3. Street vendors have a good record of repaying PM SVANidhi Loans
4. Gujarat and Karnataka - best in startup ecosystem
5. Hotels, restaurants cannot levy service charge - CCPA
6. RBI nudges govt to ask Brics Bank to issue rupee bonds
7. India misses 5th largest economy tag
8. In a first, RBI to write to FinMin if inflation target missed

1. RBI eases FPI, NRI deposit norms

• RBI in order to shore up the forex reserves and stabilise rupee value has taken certain measures
  • Doubled the overseas borrowing limit for corporates
  • Removed the interest rate ceilings for NRIs foreign currency deposits
  • Allowed the banks to temporarily raise foreign currency non-resident bank – FCNR (B) and non-resident external (NRE) deposits without reference to the current regulations on interest rates
    • Incremental FCNR (B) and NRE deposits will be exempt from maintenance of CRR and SLR
  • Investments by the FPIs in govt securities and corporate debt made till 31st October 2022 will be exempted from the short term limit
  • FPIs can invest in corporate money market instruments such as commercial paper and non-convertible debentures with maturity up to 1 year
  • The limit under the ECB route has also been increased from $750 mn to $1.5 bn
• Rupee has depreciated by 4.1% in current year against US dollar with FPIs pulling out ₹ 2.32 lakh Cr in six months and forex reserves depleting by $50 bn in the last nine months
• The forex reserves were $593.3 bn on 24th June and the new measures are expected to boost dollar inflows as India’s external debt of $621 bn will be coming up for repayment in the coming months.

2. Govt hikes duty on gold imports

• Govt has increased duty on imports from 10.75% to 15% and fresh taxes on import of gold to cushion rupee .
  • In may 107 tonnes were imported and it has been significant in June as well .
• With this the CAD is expected to be brought under control .
• A cess of ₹ 23250 per tonne has been imposed on the crude oil on the domestic producers who were selling the oil at international prices (the global prices have been rising up) .
• Additional excise duty of ₹ 6 per litre has been imposed on exports of petroleum products and ATF;  and ₹ 13 per litre on diesel as exports have become more attractive for more domestic refineries .
• The exporters will have to guarantee that 50% of the outbound quantity of fuel has been or will be supplied in domestic market in the current fiscal.

3. Street vendors have a good record of repaying PM SVANidhi Loans

• Street vendors have been repaying the loans taken under PM SVANidhi scheme (PM Street Vendors Atmanirbhar Nidhi) .
• The loan disbursals are around ₹ 3600 Cr and the NPAs are around 12 to 13% .
• Around 12 lakh people have repaid the loans and 3 lakh are at various stages of repayment.
• The repayments are incentivised at 7% interest subsidy .
• The scheme also promotes using the digital transactions by providing cash backs of up to ₹ 100 per month .
• The scheme allows street vendors to borrow ₹ 10000 for one year and upon repayment will be allowed to borrow up to ₹ 20000 (2nd tranche) and upon repayment of this will become eligible for third tranche – ₹ 50000 and there is no requirement of collateral under his scheme.

4. Gujarat and Karnataka – best in startup ecosystem

• Commerce Ministry has released – The States’ Startup Rankings 2021 – based on them developing startup ecosystem for entrepreneurs .
• As per the report – Gujarat, Karnataka and Meghalaya are best performers .
• 24 states and 7 UTs were evaluated under seven reform areas and 26 action points – institutional support, access to market, incubation support, funding support, mentoring support etc

5. Hotels, restaurants cannot levy service charge – CCPA

• Central Consumer Protection Authority (CCPA) has barred hotels and restaurants from adding service charge either automatically or by default in the food bill
• The service charge is voluntary, optional and at consumer’s discretion
• The CCPA has stated that the component of service is already accounted for in prices fixed for food and beverages offered by the restaurants. If the hotels charge on anything other than what is given in the menu then it will tantamount to be unfair trade practice
• The decision to pay a tip or gratuity by a consumer does not arise merely by entering a restaurant and placing an order and hence the service charge cannot be added involuntarily
• If the hotel adds service charges then the customer can ask the hotel to remove it and in case it does not do it then the customer can seek redressal by filing a complaint
  • The customer can lodge a complaint on the National Consumer Helpline by calling 1915 or through NCH mobile app

6. RBI nudges govt to ask Brics Bank to issue rupee bonds

• RBI has asked the govt to approach BRICS bank to sell rupee denominated bonds in overseas market
• This will help govt to tap the foreign savings and also currently the yield rates in the domestic market are rising. In addition to this borrowing in rupees will also protect as rupee is depreciating
• The centre and states are set to borrow a record amount from the market which will increase the interest rates and crowd out the private companies and this may in turn slow the economic growth
• The govt will be able to borrow at lower interest rate if it goes through the bank (which is AAA rated and India is just one notch above junk) will help to borrow at lower rates

7. India misses 5th largest economy tag

• Indian economy is the 6th largest (5th largest – UK) in 2021
• India’s economy was worth $3.17 tn in 2021
• In PPP terms India continued to be 3rd largest in 2021 – $10.22 tn

8. In a first, RBI to write to FinMin if inflation target missed

• If by the end of September, the rate of inflation does not come below 6% then RBI governor will be writing to the finance ministry, as for three consecutive quarters the rate would be above 6%
• The finance minister will further decide whether to place that communication in the parliament. Such communication from RBI is unprecedented
• CPI has remained over 6% since January this year and is expected to remain over 6% till end of December
• Section 45ZN of the act notes that in case RBI fails to maintain inflation target it shall provide information on following
  • Reasons for failure to achieve the target
  • Remedial actions proposed to be taken by the bank
  • Estimate of time period within which inflation target shall be achieved pursuant to timely implementation of proposed remedial actions

Download the PPT of the video lecture from the link below:

Economy This Week (2nd July to 8th July 2022):- Download PPT Here

ETW 2nd – 8th July 2022:- Download PDF Here