ECONOMY by VIVEK SINGH

2021-07-17 08:33:56 Source: Indian Express
Self Explanatory Open / Comment

2021-07-17 06:21:38 The answer to the above question is (c).
Explanation:

When DPIIT started the new series of WPI with base year 2011-12, then it measured/calculated the "Net traded value" of the 697 different items.
Net traded value = Domestic production plus imports minus exports
Net traded value = Domestic production plus Net imports

Imports minus Exports is also called Net Imports.
Exports minus Imports is also called Net Exports.

So, the weights of the 697 different items in the WPI basket is based on "Domestic production of that item plus Net imports" which is also called "Net traded value". And this weight is kept constant. And every month only the price change of 697 different items will be measured in the wholesale mandis/markets and the Index will be calculated. Because it is very cumbersome process to measure the "Net traded Value" every month or year and revise the weights...........and anyway the "Net traded Value"....does not change much year wise in proportion............so weights are kept constant till the revision of base year. Now let us say base year is changed to 2021-22 then again the "Net traded Value" will be measured in 2021-22 and new weights will be assigned.

All the 697 items are divided into three groups

Primary Articles = overall weight 22.62%
Fuel and Power = overall weight 13.15%
Manufactured Products = overall weight 64.23% Open / Comment

2021-07-16 08:20:57 Question of the day:
Consider the following statements regarding the current "Wholesale Price Index (WPI)" series with base year 2011-12:

(i) The weights of the commodities in WPI basket are fixed till the revision/change in base year

(ii) The weights of the commodities in WPI basket are determined based on domestic production plus net of exports

(iii) The weights of the commodities in WPI basket are determined based on domestic production plus net of imports

(iv) "Manufactured Products" have the highest weight in WPI basket Open / Comment

2021-07-15 13:56:48 The above article is from HINDU. The following are some important points.

1) The Wholesale Price Index (WPI) is calculated on a monthly basis and the data is published with a lag/delay of 14 days. So yesterday the WPI data came for the month of June 2021.

2) The WPI data is published by Office of Economic Advisor under DPIIT, Ministry of Commerce and Industry.

3) As we cannot measure the price change of all the commodities on a monthly basis, so we have selected a basket of commodities which are traded in the wholesale markets in major scale. The WPI basket consists of 697 items. And even in these items different commodities are traded in different volume/scale, so different weights have been assigned to these 697 different commodities depending on the value of trade. The base year for WPI series is 2011-12. This means that the 697 items were fixed (and their weights fixed) and every month the price change in these items are measured in the wholesale mandis and the figure is reported in the newspapers.

4) June WPI is 12.07% which means the prices increased by 12.07% from June 2020 to June 2021. This is called year on year (y-o-y) increase. Generally the y-o-y data is published by default, which means if nothing is written then it is basically y-o-y basis. But the sequential (month-on-month) data is also calculated. For example, prices increased (i.e. indexed moved up) by 0.75% from May 2021 to June 2021.

5) The main reason for increase in June 2021 WPI is base effect and and the rise in prices of petrol, diesel, naptha and ATF, as well as basic metals and food products.

6) Core inflation means inflation in various commodities except the volatile ones like food and fuel. And headline inflation means including food and fuel. Both Headline and Core inflation is calculated for both CPI and WPI. So, we have "Headline WPI", "Core WPI", "Headline CPI", "Core CPI"... Open / Comment

2021-07-15 13:29:23 Open / Comment

2021-07-14 17:11:43 Term of the Day:

Write-Off: It is an accounting term In banking and finance. Loans are assets for banks and bank expect that it will receive interest and principal back. When banks don't receive either interest or principal on the due date (say 29th April, the interest and principal is due and the bank did not receive on 29th April), then immediately bank declares it 'DEFAULT'. If the bank does not receive interest or principal for 90 days then it declares the loan paper as Non Performing Asset (NPA).

But even if the loan paper has turned NPA, it does not mean that bank will not receive its money in future. There may be chance that in future the project turns profitable and the bank gets entire money back OR it may be the case that bank is able to get only 40% of the loan OR it may be possible that bank don't get anything. But till there is HOPE, banks keep on trying to recover the NPA amount through various means and it remains on the Account Books of the Bank.

If the bank has exhausted all its attempts/measures and it has lost all hopes regarding getting the loaned amount back then generally it "WRITES-OFF" that loan amount. So, Suppose the bank had lent Rs. 1000 crore to a debtor, which is an asset on bank's balance sheet. So, first it will become NPA and then, in case of WRITE OFF, the bank may reduce the loan amount (asset) to zero (and removing the NPA from the Account Books) and it will show this Rs. 1000 crore amount as an expense/cost for the bank and adjust the balance sheet of the bank.

But, it does not mean that the borrower has been pardoned or got exempted from payment. (in future, the borrower may return the money then the balance sheet may get adjusted again but practically never happens ) Open / Comment

2021-07-13 13:10:13 The above is news from Indian Express. The following are some relevant points.

1) When Govt issues its securities first time (Primary Market) then certain authorized (by RBI) institutions are allowed purchase Govt.securities. These institutions are called Primary dealers but these are basically banks and finance related companies. [Govt. security market either primary or secondary is managed by RBI]

2) Once these authorized institutions have purchased the Govt. securities in the primary market then other institutions are allowed to purchase these securities in the secondary market like RBI, Banks, NBFCs and any other institutions. (RBI is not allowed in primary market)

3) Few years back RBI allowed individuals (retail investors) to participate in primary market as well as secondary market but not directly rather through other institutions.

4) In Feb 2021, RBI allowed individuals (retail investors) to participate in the primary as well as secondary market DIRECTLY. You can refer this link for that news https://t.me/VivekSingh_Economy/2799). To facilitate this now, RBI has launched "RBI Retail Direct Scheme", where in individuals can open account with RBI for trading Govt. securities directly on their own.

5) Till now, Govt. securities was traded in a lot size of minimum Rs. 5 crore and by the institutional investors (banks, NBFCs etc., RBI) but now with the participation of retail investors, this lot size will be reduced and retail investors will be able to buy/sell govt. securities easily. If a retail investor is able to sell his govt. securities easily (even of small value)........that means more and better liquidity facility. Open / Comment

2021-07-13 12:53:16 Open / Comment

2021-07-11 09:08:13 Quote of the day - "Capitalism without competition isn't capitalism. It's exploitation". Open / Comment