ECONOMY by VIVEK SINGH

2021-09-03 10:21:39 The following are the important points from the above news.

When any country becomes member of IMF, a QUOTA is assigned (expressed in SDRs) to every member country based on Country's size/GDP (and few other parameters). Based on the quota, four things are decided:

(i) How much a member country needs to contribute to IMF resources.
(ii) How much resources (expressed in SDRs) will be allocated to member country [It will act as debt for the member country. And every member country is bound to get this once it becomes member of IMF.]
(iii) Voting power
(iv) Maximum amount of financing (borrowing) a member can obtain from IMF

The SDRs which IMF allocates to member countries are international reserve and can be used by the member country for exchange with other currencies. These SDRs work as international liquidity and will increase the global liquidity in the backdrop of covid19. In Aug 2021, IMF has created 456 billion more SDRs and allocated to the member countries. Earlier there were 477 billion SDRs already created. India's share in SDR allocation is 2.75% and its voting power in IMF is 2.63%.

Those who want more details can refer the book. Open / Comment

2021-09-02 06:48:20 Source: Indian Express
It will be explained tomorrow. Open / Comment

2021-09-01 20:27:04 India's real GDP grew by 20.1% in the quarter April-June 2021-22 as compared from the same quarter in 2020-21. This is one of the highest quarterly growth but not because of our great performance but because of the low base effect. Even if the growth is so high in April-June 2021-22, we have not been able to achieve the level of output/GDP that we produced in quarter April-June 2019-20. Open / Comment

2021-08-31 06:32:18 Term of the day: "Rights Issue"
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. This type of issue gives existing shareholders securities called rights. With the rights, the shareholder can purchase new shares at a discount to the market price on a stated future date. The company is giving shareholders a chance to increase their exposure to the stocks/shares of the company at a discount price.

A rights issue is one way for a cash-strapped company to raise capital often to pay down debt. Through rights issue, the number of shares of the company (issued) will increase and the company gets more capital and through this new capital, the company can reduce/pay its debt. Open / Comment

2021-08-30 05:21:25 Term of the day: Tokenisation

Tokenization is the process of turning sensitive data into non-sensitive data called "tokens" that can be used in a database or internal system without bringing it into scope. Tokenization can be used to secure sensitive data by replacing the original data with an unrelated value of the same length and format. The tokens are then sent to an organization’s internal systems for use, and the original data is stored in a secure token vault.

The purpose of tokenization is to swap out sensitive data—typically payment card or bank account numbers—with a randomized number in the same format but with no intrinsic value of its own. This differs from encryption, where a number is mathematically changed, but its original pattern is still stored within the new code—known as format-preserving encryption.

Tokenization is the process of removing sensitive data from your business systems by replacing it with an undecipherable token and storing the original data in a secure cloud data vault. Encrypted numbers can be decrypted with the appropriate key. Tokens, however, cannot be reversed, because there is no mathematical relationship between the token and its original number.

Earlier when we used to make payments through cards (debit/credit) from a PoS machine or any merchant website (amazon/flipkart) then these merchants used to store our card information for further processing of data. But now with tokenization allowed by RBI, when we will submit our card details on the merchant website then a token will be generated by the card networks (VISA/MASTERCARD) and it will be sent to our mobile and this token then we will enter on the merchant website and the merchant website will not be allowed to store our exact card details. Open / Comment

2021-08-29 06:56:05 A note for Students for 10th Oct. Prelims:

I released ECO 550 MCQ PDF on 22nd April Covering all the conceptual and current events till that day assuming the exam to be held on 27th June, but then it got postponed to 10th Oct. 2021. May/June had mostly Covid related news in the newspapers. I personally believe that the prelims paper is finalized well in advance before the exam, and so I am not releasing any additional set of MCQs. I think ECO 550 is sufficient for your practise. If still someone wants updates then they can just go through the news items posted on the channel in the last 2/3 months.

There is no relevant news in the newspapers today. There is an article on asset monetization in Hindu, which has already been covered in detail on this channel. Open / Comment

2021-08-28 06:42:28 For quite some time this term 'asset monetization' and 'unlocking the value' of 'Govt. under utilized projects' are in the news. Long days back I struggled with this term 'unlocking the value'. So, on a lighter note, let me just give u an example from my own life.

When I pushed myself from "A bad (IIT) engineer" to " A normal business manager" to "A better teacher" then by doing this I have "unlocked my value' in terms of producing more output for the economy and in terms of maximising my monetary returns and in terms of students benefit also. So, to all my dear students, there is no one else who is going to 'unlock your value', its only you who can do it. So, Put your effort in the right direction and you will see good results. Open / Comment

2021-08-28 06:27:47 The above is an article from Hindu. A good analysis but quite deep for many of you to handle. So, those who want can read otherwise just follow the last column "The Pathway" and read my analysis below. (And I do not agree with all the views of the author)

1) If I am expected to get Rs. 100 after one year and interest rate is 7% then its "Present Value" can be calculated as Rs.100/1.07 This means that Rs.100 after one year is equivalent to Rs. 93.5 (100/1.07) today. Now, if Govt. is getting annual revenues from any particular project then it can calculate its Present Value of what the Govt. would have got in the next 30 years and based on that value it can give the project to the private party for the next 30 years for one time 'Lump Sum' payment under 'National Monetization Pipeline (NMP).

2) If under utilized assets are monetized then the private player markets the project will and increases it utilization through some development and there is efficiency gain in the project. The private player gets its return from the efficiency gain (in terms of money) and Govt. also gets better value for the under-utilized assets. But in case of those assets which are already utilized in a better way by the Govt., in that case there may not be efficiency gain by the private player and the private player will try to make its profit/return from the revenues/cashflow which Govt. could have already earned by operating the project on its own. So, monetization of better utilized assets may not pay off to the Govt. But what I personally believe is practically there is always a chance of improvement and Govt. has said that under NMP it is going to monetize "under-utilized" assets.

3) Private players will prefer better utilized assets and would try to avoid the risk. This only time will tell what happens.

4) The cost of capital/debt is cheaper for Govt. than private entity. This means that Govt. entity can raise debt at cheaper rate than private entity. So, Govt. can operate the assets in less cost. But what I personally feel is there is very slight difference in cost of capital/debt but more difference in the operating cost of projects by private and public

5) When a project is given to private party then it generally happens that when the traffic increases then the private party makes windfall gain and when traffic decreases then the private party pressurized the Govt to increase the tariffs/charges (from the users). But this can be put in the contract that there will not be any increase in tariffs (or only linked to inflation) during the contract period. So, if the traffic increases more then the private party will benefit and if the traffic goes down then Govt. will benefit because Govt. would get the money one time 'Lump sum'

6) Monetization through InvITs are better than PPPs. That is true to a certain extent because Govt. will always retain some ownership in the InvITs as sponsor and Govt. will get annual dividends and in case of increase or decrease of return from the project Govt. revenues will get impacted.

7) Govt. should create a 'Asset Monetization Monitoring Authority' : This is perfectly fine.. we should have a dedicated institution for asset monetization as there are going to be lot of issues in executing the NMP.

So, the author has supported asset monetization but execution is the key. And let me tell you "execution" has always been the key everywhere. Open / Comment

2021-08-28 05:47:27 Open / Comment

2021-08-27 05:43:57 Important features of 'e-SHRAM Portal'

1) Presently our labour force is around 55 crore out of which around 14 crore are farmers (who own agricultural land). Out of the remaining labour force i.e. 55 crore - 14 crore = 41 crore, around 90% are unorganized/informal labour force which is equal to 0.9*41 crore = 37 crore. So, this 38 crore (or approx. 37 crore) unorganized workers will be registered on the e-SHRAM portal.

2) These unorganized workers are basically construction workers, migrant workers, street vendors, domestic workers, milkmen, truck drivers, Fishermen, Agriculture workers (nor farmers) and similar other workers.

3) The workers will be issued an e-Shram card containing a 12 digit unique number [Universal Account Number (UAN)], which will be valid throughout the country and going ahead, will help in including them in social security schemes

4) A worker can register on the portal using his/her Aadhaar card number and bank account details, apart from filling other necessary details like date of birth, home town, mobile number and social category.The registration of workers on the portal will be coordinated by the Labour Ministry, state governments, trade unions and Common Service Centres (CSCs) and it is totally free for workers.

5) For the first time in the history of India, a system is being made to register 38 crore unorganised workers. It will not only register them but would also be helpful in delivering various social security schemes (being implemented by the Central and state governments) anywhere anytime.

6) Central Govt. has sanctioned Rs 2.0 Lakh Accidental Insurance cover on death or permanent disability (and Rs 1.0 lakh on partial disability) to every registered unorganised worker on e-SHRAM Portal.

7) The e-SHRAM Portal will help build a comprehensive National Database of Unorganized Workers (NDUW) in the country.

Unorganized/Informal workers are those workers who do not have any permanent job OR who do not pay any tax OR who do not receive any regular salary in their bank accounts or who are not registered under EPFO scheme etc. There is no standard definition of unorganized/informal workers. Open / Comment