Economy This Week (6th Aug to 12th Aug 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 6th Aug to 12th Aug 2022 is given below. Business news is essential for IAS exam preparation.

TABLE OF CONTENTS

1. RBI targets unfair methods in digital lending with new norms (TH 11/8/22)
2. Govt may ban Chinese mobile brands (LM 9/8/22)
3. Income tax payees cannot join APY from October 1 (BS 12/8/22)
4. To boost spending, centre releases ₹ 1.6 lakh Cr to states (TH 11/8/22)
5. Centre launches portal to register for rations (TH 6/8/22)
6. RBI raises rates (TH 6/8/22)
7. SEBI proposes blue bonds (BL 9/8/22)
8. Youth employment has declined in India - ILO (TH 12/8/22)

1. RBI targets unfair methods in digital lending with new norms (TH 11/8/22)

• In order to curtail the unfair lending practices, RBI has issued the first set of guidelines.
  • There have been concerns over mis-selling, breach of data privacy, unfair business conduct, exorbitant interest rates, unethical recovery, etc.
• As per the new norms:
  • The loan disbursals and repayments will be required to be made through bank accounts of the borrower and regulated entities (RE) – banks, NBFCs – without any passthrough or pool account of Lending Service Providers or any third party.
  • A standardized key fact statement (KFS) must be provided to the borrower before executing the loan contract.
  • A cooling-off period in which borrowers can exit loans by paying principal and proportionate annual percentage rate (APR) sans penalty.

2. Govt may ban Chinese mobile brands (LM 9/8/22)

• Govt is considering barring Chinese smartphone makers from selling devices cheaper than ₹ 12000 and rather promote the domestic manufacturers.
• This will push out Chinese manufacturers from the second-largest mobile market.
• This is after many concerns were raised over Chinese companies undercutting the domestic/local manufacturers.
• If done, this would be hurting Chinese companies which have been using India to drive their growth with their home markets going through the pandemic.
• For the quarter through June 2022, the smartphones sold under ₹ 12000 accounted for over a third, and Chinese companies accounted for over 80% of those shipments.

3. Income tax payees cannot join APY from October 1 (BS 12/8/22)

• The central govt will bar income taxpayers from availing of Atal Pension Yojana (APY) from the 1st of October.
• This has been done to ensure that the benefits will reach the underprivileged.
• APY:
  • Was launched in 2015
  • Is available for citizens in the age group of 18 to 40 years
  • Contributions to the scheme can be monthly, quarterly or half yearly
  • Subscribers, based on the contribution, get a guaranteed monthly pension of ₹ 1000 to ₹ 5000 per month on turning 60 years
  • On the death of the person, the spouse would receive the pension and on death of both, the nominee will receive the corpus
  • Government incurs a certain amount of subsidy under this. Lower interest rates in future would mean the centre has to bear a higher burden
  • It is primarily aimed at covering the unorganized sector and does not seek any income tax exemption. The subscribers already have to make a declaration if they pay income tax
• The subscribers who join after 1st October and are IT payers, then their accounts will be closed and the accumulated wealth would be given to subscribers

4. To boost spending, centre releases ₹ 1.6 lakh Cr to states (TH 11/8/22)

• The Centre has released over ₹ 1.16 lakh Cr equal to two monthly instalments of tax devolution upfront to boost the capital expenditure of the states.
  • As against the normal devolution of ₹ 58332 Cr, the devolution done here is ₹ 1.16 lakh Cr.
• This is on the heels of the states demanding more funds from the centre as their resources are dwindling.
• The tax revenues have been buoyant, which means it is a good move by the centre to provide incentives for the states to push discretionary spending. In the last two years such expenditure has been held by the states as their committed expenses (interest, salaries, pensions, etc.) have been high.

5. Centre launches portal to register for rations (TH 6/8/22)

• The Centre has launched a common facility to register names on ration cards on a pilot basis for 11 states and UTs.
• This facility – Ration Mitr – has been developed by the National Informatics Centre (NIC) and will allow the states to identify and verify eligible beneficiaries for coverage under the NFSA.

6. RBI raises rates (TH 6/8/22)

• The Monetary Policy Committee (MPC) has hiked the policy rate by 50 bps to 5.4%.
  • This is the third straight hike by RBI since May.
  • In May, it was increased by 40 bps, followed by a 50 bps hike in June.
• The inflation rate is expected to be above 6%.
  • The retail inflation for the month of June was 7.01%.
• RBI would also be focused on the withdrawal of the accommodation to ensure that inflation remains within the target.
• There have been two black swan events (pandemic and Russian invasion of Ukraine), but despite these, the economic growth has remained resilient.

7. SEBI proposes blue bonds (BL 9/8/22)

• SEBI has proposed blue bonds for sustainable financing of blue economy-related activities such as oceanic resource mining, sustainable fishing, national offshore wind energy policy, blue flag beach ecotourism model, etc.
  • India has a coastline of over 7500 km and a 14500 km length of navigable inland waters
  • The blue economy accounts for 4.1% of GDP
• It has also suggested strengthening the framework for green bonds by amplifying the definition of green debt securities and enhancing disclosures.
  • The proposals are aimed at aligning with the updated Green Bond Principles (GBP) published by the International Capital Market Association (ICMA)
  • SEBI defined green debt securities as those issued for raising the funds that are to be utilized for specific types of projects
• SEBI has proposed that
  • The issuer should inform the investors about the intended types of temporary placement for the balance of unallocated net proceeds
  • The utilization of the proceeds from each issuer should be tracked and disclosed separately
  • The issuer should disclose any taxonomies, green standards or certifications if referenced in project selection

8. Youth employment has declined in India – ILO (TH 12/8/22)

• International Labour Organization (ILO) has released the Global Employment Trends for Youth 2022 report.
• As per this report:
  • India has experienced severe losses in working hours and employment in 2020 and 2021.
  • Indian youth employment deteriorated in 2021 compared to 2020.
  • The recovery in youth employment is lagging globally.
  • The report has confirmed that covid has affected the youth more than any other age group.
    • The youth in the age group of 15 to 24 years has experienced a very high loss of jobs than adult unemployment.
    • As per the CMIE report, the youth employment participation rate has declined by 0.9 percentage points over the first nine months of 2021 compared to the same period in 2020.
  • Schools and education
    • School closures lasted 18 months and among the 24 crore school-going children, only 8% of such children in rural areas and 23% in urban areas had adequate access to online education.
    • As there is unequal access to online resources, the children from socio-economically disadvantaged families had almost no access to education.
    • The school closures prevented children from new learning and led to the phenomenon of “learning regression” – children forgetting what they had learned earlier.
  • MGNREGA played an important role in providing paid employment, particularly for women and also carbon sequestration because of the act’s focus on natural resources such as land, water, trees which provide adaptation benefits.

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