12th Sep Current Affairs News Analysis | Prelims & Mains 2020

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Dear Aspirants
IASbhai Current Affairs News Analysis | Prelims & Mains 2020 is an initiative to dilute major articles from leading Newspapers in India which are most relevant to UPSC preparation –‘THE HINDU, LIVEMINT , INDIAN EXPRESS’ and help millions of readers who find difficulty in answer writing and making notes everyday. Hence we choose articles on daily basis and analyse them with respect to UPSC PRELIMS 2020.
HIGHLIGHT INFO:

ORANGE COLOUR: Important for Prelims.

RED COLOUR: Important for Mains.

BLACK COLOUR: Must Read !

BLUE COLOUR : Important Links/Survey.

PINK COLOUR: Reports/Themes/Summits.

12th Sep Current Affairs News Analysis | Prelims & Mains 2020

Today's Must Read Articles : Today's Must Read Articles :

CSCAF 2.0

PESTICIDES MANAGEMENT BILL 2020

STATES START UP RANKING REPORT

Fiscal Deficit

      HEADLINES:

India, being one the hardest hit major economy due to Covid-19, faces the challenge of managing its fiscal deficit.

      WHY IN NEWS:

Borrowing more and monetizing the deficit are the options being considered by the government and Reserve Bank of India (RBI) to finance the fiscal deficit.

MINISTRY? :- Ministry of Finance
SYLLABUS COVERED: GS 2 : 3 : Fiscal Deficit

      ISSUE: 

STATE OF INDIAN ECONOMY

  • As per the official data, the Centre’s fiscal deficit for the first three months of fiscal 2020-21 (April-June) was Rs. 6.62 lakh crore, which is 83% of the budgeted target for the whole year.
  • As per the economists, the fiscal deficit may end up as high as 8% of the Gross Domestic Product (GDP), far exceeding the budget’s goal of 3.5%.
  • The GDP contracted by 23.9% in the first (April-June) quarter of 2020 compared to the same period (April-June) in 2019.
  • The manufacturing sector is also contracting.
  • The output of eight core industries contracted for the fourth consecutive month – shrinking by 15% in June 2020.
  • The Financial Stability Report from RBI also shows an increase in bad loans and Non-Performing Assets (NPA).

METHODS OF BRIDGING THE FISCAL DEFICIT

MARKET BORROWINGS

  • The government has already raised its gross market borrowing target for the current financial year by more than 50%, owing to the pandemic.

DISADVANTAGE

  • HIGH DEBT : An increased borrowing programme means that the public debt will go up.
  • HIGHER INTEREST RATES: Higher borrowing can push up interest rates because markets are nervous about the government’s ability to repay.
  • INCREASE IN TAXES: It may also necessitate an increase in taxes. This may burden the common people and also lead to less spending and saving by the public, leading to a stalled market.
  • CROWDING OUT: When the government borrows from the private sector by selling bonds, the private sector is left with less money to spend and invest.

MONETISATION OF THE DEFICIT

  • Monetising deficit means RBI purchases government bonds in the primary market and prints more money to finance the debt.
  • This is resorted to only when the government cannot borrow from the market (Banks and other Financial Institutions like LIC).

The money printed by the RBI is called high powered money or reserve money or monetary base.

  • RBI also conducts indirect monetization of deficit through Open Market Operations (OMOs).
  • OMOs are market operations conducted by RBI by way of sale/purchase of government securities to/from the market with an objective to adjust the rupee liquidity conditions in the market on a durable basis.
  • Recently, RBI decided to infuse Rs. 10,000 crore liquidity in the banking system by buying government securities through OMOs.

      IASbhai WINDUP: 

Necessary monetary infusion is needed from RBI at this stage .

     SOURCES: PIB | 12th Sep Current Affairs News Analysis

Sonamura-Daudkandi IWR

      HEADLINES:

Sonamura-Daudkandi inland waterway route

      WHY IN NEWS:

Recently, Sonamura-Daudkandi inland waterway route between India and Bangladesh was operationalised.

SYLLABUS COVERED: GS 3:Health:Diseases

      ISSUE: 

Daudkandi is in Bangladesh, while Sonamura is in Tripura, India.

SONAMURA-DAUDKANDI ROUTE

  • The inland waterway route over river Gumati was included in the list of Indo-Bangla Protocol (IBP) routes in May 2020.
  • It connects Tripura with the National Waterways of India through Bangladesh.

SIGNIFICANCE

  • It will improve the connectivity of Tripura and the adjoining States with Indian and Bangladesh’s economic centers and will help the hinterland of both the countries.
  • It will open up new avenues for economic development in both the countries.

      IASbhai WINDUP: 

PROTOCOL ON TRANSIT AND TRADE

Bangladesh and India have a long standing and time-tested Protocol on Transit and Trade through inland waterways. 

  • It provides inland waterways connectivity between the two countries, particularly with the North Eastern Region of India and also enhances bilateral trade.
  • This Protocol was first signed in 1972.
  • It was last renewed in for five years with a provision for its automatic renewal for a further period of five years.
     SOURCES: PIB | 12th Sep Current Affairs News Analysis

 

DISCOVER MORE : Important Daily Current Affairs for UPSC PRELIMS 2020

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