ECONOMY by VIVEK SINGH

2021-04-13 08:23:22 https://indianexpress.com/article/cities/chandigarh/punjab-farmers-allege-arhtiyas-demanding-signed-blank-cheques-to-facilitate-wheat-procurement-7270721/

Read in continuation of yesterday's article. Open / Comment

2021-04-12 08:36:18 https://indianexpress.com/article/explained/explained-how-punjab-government-is-trying-to-involve-arhtiyas-in-direct-payment-to-farmers-7269018/

Please read the complete article till end. The issue is except Punjab all states had implemented DBT and FCI was directly paying to farmers for procurement of wheat and rice in APMC mandis. This time Centre became adamant and asked Punjab to directly transfer the MSP (which FCI pays) to farmers account which now Punjab Govt. has agreed to implement. The arhtiyas provide various services during procurement like loading, cleaning, weighing, filling etc. They are very part of the production chain also and provide loan to farmers and other inputs. Open / Comment

2021-04-11 07:59:25 Nothing relevant today in newspapers for Economy. Let us take this opportunity to clarify certain terms: These terms I earlier thought is not very much relevant but NOW in changing circumstances and covid-19 situation these terms are being used more frequently in the newspapers and by RBI also, hence it becomes important.

Repo Rate: Banks can borrow whenever they want from RBI for overnight up to 0.25% of NDTL. If banks want to borrow more then they can borrow at MSF rate (repo + 0.25%) up to a certain limit. If banks further want money then they can borrow from money market or capital/bond market.

It is up to RBI (discretion) that if RBI wants to increase/provide liquidity in the economy then it can conduct Long Term Repo Operation (LTRO) for any specified amount at either repo rate (rarely) or above repo rate generally (called variable term repo operation) through auction. In case of variable LTRO banks are selected through auction and that bank will be selected for providing liquidity/money by RBI which will quote maximum interest rate above repo rate.



As you know the opposite of 'repo rate' is called 'reverse repo rate' at which banks can deposit money with RBI whenever they want up to any amount. (generally unlimited amount can be deposited but sometimes RBI may limit this also)

And it is up to RBI (discretion) that if RBI wants to suck out excess liquidity then it can conduct 'variable rate reverse repo' auction of any specified amount in which banks can deposit money with RBI at above 'reverse repo rate' but below 'repo rate' and the rate will be discovered through auction. The banks quoting minimum rate (of course above reverse repo) will be selected selected to park money with RBI.



RBI can conduct OMO also to change the liquidity position in the economy. And RBI uses both repo/reverse repo operations and OMO but both have limitations. For example the limitation of OMO is how much govt. securities are there with RBI and in the system and the limitation of repo/reverse repo is that RBI cannot change these rates beyond certain point due to inflation and the interest rates linked to it. Open / Comment

2021-04-10 07:22:24 Nothing relevant for Economy in today's Hindu/Express/FE/PIB. Open / Comment

2021-04-09 08:31:29 The above is an article from Hindu editorial page. I do not agree with all the points. You can look at the below points:

1) I agree that agriculture cannot be totally left to the market and Govt. presence is required to a certain extent.

2) He says that demand for food crops is price inelastic which means that even if price changes the demand does not change. So, in case of bumper crop production when prices fall then there is not enough increase in demand to lift the prices up.
But in case of drought, the prices move up and poor consumers/rural people are starved.

My suggestion is Govt. should keep a buffer stock of foodgrains (which it does) and distribute it to the poor in case of any crisis like it did in Covid times. But for every normal year, Govt. may not distribute through PDS rather it can provide DBT. So, every year Govt. procurement of food crops will not be required. The Govt. just need to stock the foodgrains for any bad year.

3) The author is saying that "we need to greatly expand the basket of public procurement to include more crops, more regions and more farmers". Rather than expansion of public procurement I would say that Govt. should shift to other crops (millets) and may shift to other areas which has remained poor like odisha, jharkhand, eastern UP. And Govt. should stop subsidizing wheat, rice and sugarcane as it has totally disturbed the whole agri ecosystem. Rather govt. should free up the fertilizer prices and give subsidy in DBT form which will motivate farmers to grow other crops.

4) In 1965 when FCI was established it may be possible that the idea was to procure the surplus foodgrains at MSP but as of today this idea is not working. Today we need a diversification in crops which can be done by freeing up the agricultural markets and letting the farmers produce as per the demand and giving them cash directly into their account. This has many advantages: firstly it will resolve the problem of water wastage, secondly, farmers will diversify crops which will have a salutory/healthy impact on soil and environment, thirdly the wastage in Govt. procurement will get resolved, fourthly the Govt. subsidy burden will get reduced and fifth it will be more inclusive in terms that it will benefit more the poor farmers as compared to the present system of benefitting the rich farmers/traders.

5) Govt. can take effort in providing rural infrastructure, roads, electricity, development of mandi infrastructure, establishment of FPOs, testing labs, soil health cards, better seeds through research and development etc. Open / Comment

2021-04-09 08:13:00 Open / Comment

2021-04-09 07:56:42 Source: RBI
Earlier Payment Banks were allowed to maximum accept deposit of Rs. 1 lakh per person/customer which has now been increased to Rs. 2 lakhs. Open / Comment

2021-04-08 08:15:30 The above is news from HINDU. Some relevant points:

1) To increase liquidity in the economy, RBI will provide Rs. 50,000 crore of funds at repo rate to NABARD, NHB and SIDBI. These funds will then be used by these institutions for onward lending to other Commercial and Cooperative banks, NBFCs, Micro Financial Institutions etc. which then will provide it to the actual person/entity who requires funds for agriculture/housing/small businesses etc.

2) NABARD/NHB/SIDBI act generally as refinance institutions and they do not give direct loan to individuals rather provide loans through other banks/NBFCs etc.

3) On-Lending Model for Priority Sector
Banks (and not NBFCs) are required to provide 40% of the lending to priority sectors. Under on-lending model RBI has given banks flexibility that even if you provide loan to NBFCs and then these NBFCs provide the loan to priority sectors like agri,housing etc. then it will be counted in lending to priority sectors by banks. But this is allowed only up to 5% of the lending. This will help in achieving the target of priority sector by banks. Open / Comment

2021-04-08 08:03:52 Open / Comment

2021-04-07 06:59:26 Nothing relevant in the newspapers today for Economy.
Seeing the changing pattern of UPSC, you need to focus more on the standard books and revising it repeatedly and devote only limited time on newspapers.
The ECO MCQ 500 pdf will be released on 20th April which will include MCQs on basic, concepts, current issues, budget, FC, Economic Survey. But till that time you revise the book several times. Open / Comment