Starting 2nd April – APSIP Essay Course with K Siddhartha
Target 140+ | Click to see how & register for the module
The risks associated with bitcoins:
This newscard is a reminder to revise basics on Bitcoins (click here). Though the risks are bit detailed, they are easy to understand and can be asked as a question in prelims or mains.
Q. With reference to ‘Bitcoins’, sometimes seen in the news, which of the following statements is/are correct? [Prelims 2016]
1. Bitcoins are tracked by the Central Banks of the countries.
2. Anyone with a Bitcoin address can send and receive Bitcoins from anyone else with a Bitcoin address.
3. Online payments can be sent without either side knowing the identity of the other.
Select the correct answer using the code given below.
(a) 1 and 2 only
(b) 2 and 3 only
(c) 3 only
(d) 1, 2 and 3
Not very important. May be a minor tit-bit in prelims.
Shift in RBI Policy:
Cause of Concern:
The op-ed is important for an understanding of the current situation of the economy.
Note4students: All 3 points are prelims worthy.
1. The RBI publishes the Financial Stability Report (FSR). It is a biannual publication and the thirteenth in the series. It reflects the overall assessment on the stability of India’s financial system and its resilience to risks emanating from global and domestic factors. Besides, the Report also discusses issues relating to development and regulation of the financial sector.
2. The Global Financial Stability Report (GFSR) is published by the IMF. For an extensive list of reports and their organisations, click here.
All govt committees are important for mains. In fact, this year UPSC has started asking committee names in prelims also. Hence, the name of the committee, its purpose and its recommendations are all important.
If your economics basics are clear, then you should be able to understand all terms and the mechanism of interest rates mentioned here. It is also important to know about the monetary policy committee and inflation targets of RBI.
The Monetary Policy Committee (MPC) is a committee of the RBI, headed by its Governor. It was set up by amending the RBI Act after the govt and RBI agreed to task RBI with the responsibility for price stability and inflation targeting. The RBI and the govt signed the Monetary Policy Framework Agreement on Feb 20, 2015.
The MPC is entrusted with the task of fixing the benchmark policy interest rate (repo rate) to contain inflation within the target level.
This news is of minor importance, just make sure you understand terms such as bonds and market stabilisation scheme.
The MSS scheme was launched in April 2004 to strengthen the RBI’s ability to conduct exchange rate and monetary management. The bills/bonds issued under the MSS would have all the attributes of the existing treasury bills and dated securities. However, unlike regular bonds, these are not issued to meet the government’s expenditure and the funds raised are kept in a separate cash account. As a result, their issuance will have a negligible impact on the fiscal deficit of the government.
Going ahead in 2016-17, RBI said growth is expected to strengthen gradually, notwithstanding significant headwinds and projected the GVA growth for the next fiscal at 7.6 per cent.
During global turmoil, macroeconomic stability should not be risked.
New GDP series, in effect for a year now, has been criticised by economists.
Asset sales are the way for government to protect credibility while avoiding procyclical fiscal stance .
RBI has also issued guidelines to detect frauds related to loan accounts.
The ‘tight fiscal, easy monetary’ policy mix can better address problems that plague private investment.
The government must do away with the interest subvention scheme and plough back the subsidy into a universal crop insurance scheme for small and marginal farmers.
RBI has taken this decision in consultation with Union Government to appease NRIs.
The real policy rate in India is close to the neutral real interest rate, reinforces the view that RBI will desist from further rate cuts until the end of next year
Why is it important?
As Nomura economists point out, summing up observations from a recent RBI staff working paper, if projected inflation is higher than the inflation target, then the actual real rates must be higher than the neutral real rate to ensure than monetary policy is anti-inflationary.
For the last two years, the RBI has made no transfers to its Contingency Fund or its Asset Development Fund.
Let’s check what purpose served by RBI’s CF and ADF?