Updates on Indian and Global Economy

1. The Regional Comprehensive Economic Partnership (RCEP) is a mega trade bloc comprising 15 countries led by China. It came into existence 15th November 2020. The RCEP comprises the 10 ASEAN members and Australia, China, Japan, South Korea and New Zealand. 

The China-backed group is expected to represent at least 30% of the global GDP and will emerge as the largest free trade agreement in the world. The mega trade bloc is a landmark initiative, which is expected to boost commerce among the member-countries spread across the Asia-Pacific region. Experts are interpreting the beginning of RCEP as a major development that will help China and trade in the Asia-Pacific region in the post-COVID-19 scenario. India is yet to rejoin the group. 

Australia & Japan are also members of QUAD (quadrilateral security dialogue) of which India and the United States of America are members.

2. Inflation scenario in India

India’s wholesale price inflation quickened to the highest level in eight months, reaching 1.48% in October 2020 as per provisional data, compared with 0% in October 2019 and 1.32% in September this year.

The WPI Food Index inflation slowed from 6.92% in September 2020 to 5.78% in October 2020, with vegetables inflation cooling down to 25.23% from 36.5% in September. 

Inflation in potato prices touched 107.7%, while onions registered 8.5% inflation in October.

3. Global forecasting firm Oxford Economics on Thursday revised downwards its India growth forecast over the medium term to an average 4.5% over 2020-25, from its pre-pandemic projection of 6.5%.

4. Moody’s Investors Service has revised its GDP projection for India in 2020-21 to a 10.6% contraction compared with a 11.5% drop it had estimated. The rating agency also marginally raised its forecast for 2021-22 GDP growth to 10.8%, from 10.6%.

Notes: 

* The Association of Southeast Asian Nations (ASEAN) is a regional intergovernmental organization comprising ten countries in Southeast Asia, which promotes intergovernmental cooperation and facilitates economic, political, security, military, educational, and sociocultural integration among its members and other countries in Asia.

* The Quadrilateral Security Dialogue (QSD, also known as the Quad) is an informal strategic forum between the United States, Japan, Australia and India that is maintained by semi-regular summits, information exchanges and military drills between member countries. The forum was initiated as a dialogue in 2007 by Prime Minister Shinzo Abe of Japan, with the support of Vice President Dick Cheney of the US, Prime Minister John Howard of Australia and Prime Minister Manmohan Singh of India. 

* Wholesale Price Index meaning: WPI measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. To put it simply, the WPI tracks prices at the factory gate before the retail level.

Wholesale Price Index, or WPI, measures the changes in the prices of goods sold and traded in bulk by wholesale businesses to other businesses. WPI is unlike the Consumer Price Index (CPI), which tracks the prices of goods and services purchased by consumers. 

* Out of the revision index (2011-12), a new WPI food index has been designed out of the food articles. The new index was launched on 12 May 2017. Already, a Food Price Index was there with WPI and this index is now restructured.

The WPI food index shows price changes in food items with price quotations from producers. On the other hand, the CPI Food Price Index uses price quotations from retailers. The WPI Food Index takes commodities from ‘Food Products’ of Manufactured Goods and ‘Food Articles’ from Primary Articles group.

Updates on Indian Economy

1. The gross tax revenues of the government for the period between April-September are down 21.6% to ₹7.21 trillion. 

2. Of the total disinvestment target of ₹2.1 trillion for 2020-21, the government has earned only around ₹5,781 crore or just 2.75% of the entire target. 

3. Dividends given by the central public sector enterprises (PSEs) peaked at 0.33% of the gross domestic product (GDP) in 2009-10 and have largely been falling since 2011-12. A decade later in 2019-20, the dividends stood at 0.24% of GDP. The reason behind this is the overall net profit of PSEs has fallen from 1.45% of the GDP in 2009-10 to 0.75% of the GDP in 2018-19, the last year for which data is available. In 2018-19, 70 out of the 249 operating PSEs incurred losses. 

4. According to reports by the Press Trust of India, Indian markets have seen investments worth Rs 35,109 crore from Foreign portfolio investors (FPIs) so far in November. According to the depositories data, overseas investors invested a net sum of Rs 29,436 crore into equities and Rs 5,673 crore into debt segment between November 2-13.

5. October’s retail inflation print is the ninth monthly one above the flexible inflation target of 2-6% given to the Reserve Bank of India (RBI) by law. In 2020 so far, inflation has been below 6% only in March. India’s economy is a rare spot in the world where inflation is rising despite a recession. It not only complicates policy but also threatens potential growth.

6. The labour participation rate (LPR) or the ratio of the labour force to the population above 15 years of age, has been falling since February. On 23 February, the labour participation rate stood at 43.2%, and fell to a low of 35.37% on 26 April, before rising to 39.54% on 15 November. 

7. India’s unemployment rate started climbing, peaking at 27.11% on 3 May. It has fallen since then to 5.45% on 15 November, even lower than the pre-covid levels. 

Notes:

*Gross tax revenue is the total amount of levy collected by the Government in the form of direct and indirect taxes from public.

*Disinvestment is the action of an organization or government selling or liquidating an asset or subsidiary. Absent the sale of an asset, disinvestment also refers to capital expenditure (CapEx) reductions, which can facilitate the re-allocation of resources to more productive areas within an organization or government-funded project.

*A dividend is a distribution of profits by a corporation to its shareholders. When a corporation earns a profit or surplus, it is able to pay a proportion of the profit as a dividend to shareholders. Any amount not distributed is taken to be re-invested in the business (called retained earnings). 

*A state-owned enterprise in India is called a Public Sector Undertaking (PSU) or a Public Sector Enterprise. These companies are owned by the union government of India or one of the many state or territorial governments or both together in parts. The company stock is majority-owned by the government in a PSU. PSUs are classified as central public sector enterprises (CPSUs, CPSEs) or state level public enterprises (SLPEs). In 1951, there were just 5 enterprises in the public sector in India, but in March 2019 this had increased to 348.

*Foreign portfolio investment (FPI) consists of securities and other financial assets held by investors in another country. It does not provide the investor with direct ownership of a company's assets and is relatively liquid depending on the volatility of the market. Along with foreign direct investment (FDI), FPI is one of the common ways to invest in an overseas economy. FDI and FPI are both important sources of funding for most economies.

A foreign portfolio investment is a grouping of assets such as stocks, bonds, and cash equivalents. Portfolio investments are held directly by an investor or managed by financial professionals. In economics, foreign portfolio investment is the entry of funds into a country where foreigners deposit money in a country's bank or make purchases in the country's stock and bond markets, sometimes for speculation.

*The labor force is the number of people who are employed plus the unemployed who are looking for work. The labor pool does not include the jobless who aren't looking for work.

For example, stay-at-home moms, retirees, and students are not part of the labor force. Discouraged workers who would like a job but have given up looking are not in the labor force either. To be considered part of the labor force, you must be available, willing to work, and have looked for a job recently. The official unemployment rate measures the jobless who are still in the labor force.

*Labour force participation rate is defined as the section of working population in the age group of 16-64 in the economy currently employed or seeking employment. People who are still undergoing studies, housewives and persons above the age of 64 are not reckoned in the labour force.

The labour force participation rate is the measure to evaluate working-age population in an economy. The participation rate refers to the total number of people or individuals who are currently employed or in search of a job. People who are not looking for a job such as full-time students, homemakers, individuals above the age of 64 etc. will not be a part of the data set. This is an important metric when the economy is not growing or is in the phase of recession.

*The unemployment rate is the percent of the labor force that is jobless. To calculate the unemployment rate, the number of unemployed people is divided by the number of people in the labor force, which consists of all employed and unemployed people. The ratio is expressed as a percentage.

Different Rates of RBI

 Current Rates of RBI 

Policy Rates

 (as on 14th Nov 2020)

1. Repo Rate

Repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) lends money to commercial banks in the event of any shortfall of funds. Repo rate is used by monetary authorities to control inflation.

Description: In the event of inflation, central banks increase repo rate as this acts as a disincentive for banks to borrow from the central bank. This ultimately reduces the money supply in the economy and thus helps in arresting inflation.

The central bank takes the contrary position in the event of a fall in inflationary pressures. Repo and reverse repo rates form a part of the liquidity adjustment facility.

2. Reverse Repo Rate

Reverse repo rate is the rate at which the central bank of a country (Reserve Bank of India in case of India) borrows money from commercial banks within the country. It is a monetary policy instrument which can be used to control the money supply in the country.

Description: An increase in the reverse repo rate will decrease the money supply and vice-versa, other thinags remaining constant. An increase in reverse repo rate means that commercial banks will get more incentives to park their funds with the RBI, thereby decreasing the supply of money in the market.

3. Marginal standing facility (MSF) Rate

Marginal standing facility (MSF) is a window for banks to borrow from the Reserve Bank of India in an emergency situation when inter-bank liquidity dries up completely.

Description: Banks borrow from the central bank by pledging government securities at a rate higher than the repo rate under liquidity adjustment facility or LAF in short. The MSF rate is pegged 100 basis points or a percentage point above the repo rate. Under MSF, banks can borrow funds up to one percentage of their net demand and time liabilities (NDTL).

4. Bank Rate

Bank rate is the rate charged by the central bank for lending funds to commercial banks.

Description: Bank rates influence lending rates of commercial banks. Higher bank rate will translate to higher lending rates by the banks. In order to curb liquidity, the central bank can resort to raising the bank rate and vice versa.

Key differences between Repo Rate vs Bank Rate

Though Repo Rate and Bank Rate have few similarities like both is fixed by the central bank and used to monitor and control the cash flow in the market, they have some prominent differences too. Take a look at the differences between Repo Rate and Bank Rate below.

• Bank Rate is charged against loans offered by the central bank to commercial banks, whereas, Repo Rate is charged for repurchasing the securities sold by the commercial banks to the central bank.
• No collateral is involved while charging Bank Rate but securities, bonds, agreements and collateral is involved when Repo Rate is charged.
• Repo Rate is always lower than the Bank Rate.
• Increase in Bank Rate directly affects the lending rates offered to the customer, restricting people to avail loans and damages the overall economic growth, whereas Increase in Repo Rate is usually handled by the banks and doesn’t affect customers directly.
• Comparatively, Bank Rate caters to long term financial requirements of commercial banks whereas Repo Rate focuses on short term financial needs.

Though Bank Rate and Repo Rate have its own differences, both are used by RBI to control liquidity and inflation in the market. In a nutshell, the central bank uses these two powerful tools to introduce and monitor the liquidity rate, inflation rate and money supply in the market.

Reserve Ratios

 (as on 14th Nov 2020)

1. Cash Reserve Ratio (CRR)

Cash Reserve Ratio (CRR) is a specified minimum fraction of the total deposits of customers, which commercial banks have to hold as reserves either in cash or as deposits with the central bank. CRR is set according to the guidelines of the central bank of a country.

Description: The amount specified as the CRR is held in cash and cash equivalents, is stored in bank vaults or parked with the Reserve Bank of India. The aim here is to ensure that banks do not run out of cash to meet the payment demands of their depositors. CRR is a crucial monetary policy tool and is used for controlling money supply in an economy.

2. Statutory Liquidity Ratio (SLR)

The ratio of liquid assets to net demand and time liabilities (NDTL) is called statutory liquidity ratio (SLR).

Description: Apart from Cash Reserve Ratio (CRR), banks have to maintain a stipulated proportion of their net demand and time liabilities in the form of liquid assets like cash, gold and unencumbered securities. Treasury bills, dated securities issued under market borrowing programme and market stabilisation schemes (MSS), etc also form part of the SLR. Banks have to report to the RBI every alternate Friday their SLR maintenance, and pay penalties for failing to maintain SLR as mandated.

Exchange Rate

Exchange rate is the price of one currency in terms of another currency.

Description: Exchange rates can be either fixed or floating. Fixed exchange rates are decided by central banks of a country whereas floating exchange rates are decided by the mechanism of market demand and supply.

INR/1USD ---- 74.6713

INR/1GBP ---- 98.0036

INR/1EUR ---- 88.1515

INR/100JPY  ---- 71.16

 (as on 13th Nov 2020)

Lending / Deposit  Rates

 (as on 14th Nov 2020)

1. Base Rate

Base rate is the minimum rate set by the Reserve Bank of India below which banks are not allowed to lend to its customers.

Description: Base rate is decided in order to enhance transparency in the credit market and ensure that banks pass on the lower cost of fund to their customers. Loan pricing will be done by adding base rate and a suitable spread depending on the credit risk premium.

2. MCLR 

The marginal cost of funds based lending rate (MCLR) refers to the minimum interest rate of a bank below which it cannot lend, except in some cases allowed by the RBI. It is an internal benchmark or reference rate for the bank.

MCLR actually describes the method by which the minimum interest rate for loans is determined by a bank - on the basis of marginal cost or the additional or incremental cost of arranging one more rupee to the prospective borrower.

The MCLR methodology for fixing interest rates for advances was introduced by the Reserve Bank of India with effect from April 1, 2016. This new methodology replaces the base rate system introduced in July 2010. In other words, all rupee loans sanctioned and credit limits renewed w.e.f. April 1, 2016 would be priced with reference to the Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark (means a reference rate determined internally by the bank) for such purposes.

Existing loans and credit limits linked to the Base Rate (internal benchmark rate used to determine interest rates uptill 31 March 2016) or Benchmark Prime Lending Rate (BPLR or the internal benchmark rate used to determine the interest rates on advances/loans sanctioned upto June 30, 2010.) would continue till repayment or renewal, as the case may be. However, existing borrowers will have the option to move to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at mutually acceptable terms.

Reasons for introducing MCLR

RBI decided to shift from base rate to MCLR because the rates based on marginal cost of funds are more sensitive to changes in the policy rates. This is very essential for the effective implementation of monetary policy. Prior to MCLR system, different banks were following different methodology for calculation of base rate /minimum rate – that is either on the basis of average cost of funds or marginal cost of funds or blended cost of funds. Thus, MCLR aims

• To improve the transmission of policy rates into the lending rates of banks.
• To bring transparency in the methodology followed by banks for determining interest rates on advances.
• To ensure availability of bank credit at interest rates which are fair to borrowers as well as banks.
• To enable banks to become more competitive and enhance their long run value and contribution to economic growth.

The MCLR comprises of the following:

a) Marginal cost of funds

b) Negative carry on account of' Cash reserve ratio (CRR)

c) Operating Cost associated with providing the loan product

d) Tenor Premium

Banks may publish every month the internal benchmark/ MCLR for the following maturities:

• Overnight MCLR,
• One-month MCLR,
• Three-month MCLR,
• Six-month MCLR,
• One year MCLR.
• MCLR for any other maturity which the bank considers fit

3. Saving Deposit rate

Savings accounts earn a rather low rate of interest, but cash deposited in certain other account types are also paid a deposit rate by banks and financial institutions. In essence, the Saving Deposit Rate is the interest rate that a bank pays the depositor for the use of their money for the time period that the money is on deposit. Deposit interest rates can be either fixed for a certain period of time with a minimum amount of money on deposit, or it can be variable, which fluctuates and is not usually subject to early withdrawal penalties.

4. Term Deposit rate

A term deposit is a fixed-term investment that includes the deposit of money into an account at a financial institution. Term deposit investments usually carry short-term maturities ranging from one month to a few years and will have varying levels of required minimum deposits.

The investor must understand when buying a term deposit that they can withdraw their funds only after the term ends. In some cases, the account holder may allow the investor early termination—or withdrawal—if they give several days notification. Also, there will be a penalty assessed for early termination.

Typically, term deposits offer higher interest rates than traditional liquid savings accounts, whereby customers can withdraw their money at any time.

Market Trends

Money Market

Call Rates

Call money rate is the rate at which short term funds are borrowed and lent in the money market.
Description: The duration of the call money loan is 1 day. Banks resort to these type of loans to fill the asset-liability mismatch, comply with the statutory CRR and SLR requirements and to meet the sudden demand of funds. RBI, banks, primary dealers etc are the participants of the call money market. Demand and supply of liquidity affect the call money rate. A tight liquidity condition leads to a rise in call money rate and vice versa.

Government Securities Market

Government Securities Market in India .

What is a Bond?

A bond is a debt instrument in which an investor loans money to an entity (typically corporate or government) which borrows the funds for a defined period of time at a variable or fixed interest rate. Bonds are used by companies, municipalities, states and sovereign governments to raise money to finance a variety of projects and activities. Owners of bonds are debt holders, or creditors, of the issuer.

What is a Government Security (G-Sec)?

A Government Security (G-Sec) is a tradeable instrument issued by the Central Government or the State Governments. It acknowledges the Government’s debt obligation. Such securities are short term (usually called treasury bills, with original maturities of less than one year) or long term (usually called Government bonds or dated securities with original maturity of one year or more). In India, the Central Government issues both, treasury bills and bonds or dated securities while the State Governments issue only bonds or dated securities, which are called the State Development Loans (SDLs). G-Secs carry practically no risk of default and, hence, are called risk-free gilt-edged instruments.

a. Treasury Bills (T-bills)

Treasury bills or T-bills, which are money market instruments, are short term debt instruments issued by the Government of India and are presently issued in three tenors, namely, 91 day, 182 day and 364 day. Treasury bills are zero coupon securities and pay no interest. Instead, they are issued at a discount and redeemed at the face value at maturity. For example, a 91 day Treasury bill of ₹100/- (face value) may be issued at say ₹ 98.20, that is, at a discount of say, ₹1.80 and would be redeemed at the face value of ₹100/-. The return to the investors is the difference between the maturity value or the face value (that is ₹100) and the issue price.

Four types of treasury bills are auctioned. The primary distinction for these treasury bills tbills is their holding period.

 14-day Treasury bill

These bills complete their maturity on 14 days from the date of issue. They are auctioned on Wednesday, and the payment is made on the following Friday. The auction occurs every week. These bills are sold in the multiples of Rs.1lakh and the minimum amount to invest is also Rs.1 lakh.

 91-day Treasury bill

These bills complete their maturity on 91 days from the date of issue.  They are auctioned on Wednesday, and the payment is made on the following Friday. They are auctioned every week. These bills are sold in the multiples of Rs.25000 and the minimum amount to invest is also Rs.25000.

182-day Treasury bill

These bills complete their maturity on 182 days from the date of issue.  They are auctioned on Wednesday, and the payment is made on the following Friday when the term expires. They are auctioned every alternate week. These bills are sold in the multiples of Rs.25000 and the minimum amount to invest is also Rs.25000.

364-day Treasury bill

These bills complete their maturity  364 days from the date of issue. They are auctioned on Wednesday, and the payment is made on the following Friday when the term expires. They are auctioned every alternate week. These bills are sold in the multiples of Rs.25000 and the minimum amount to invest is also Rs.25000.

As mentioned above, the holding period for each bill remains constant. However, the face value and the discount rates of treasury bills can change periodically. This depends on the funding requirements and monetary policy of RBI along with total bids received.

Also, The Reserve Bank of India issues treasury bills calendar for auction. It announces the exact date of the auction, the amount to be auctioned and the maturity dates before every auction.

b. Cash Management Bills (CMBs)

In 2010, Government of India, in consultation with RBI introduced a new short-term instrument, known as Cash Management Bills (CMBs), to meet the temporary mismatches in the cash flow of the Government of India. The CMBs have the generic character of T-bills but are issued for maturities less than 91 days.

c. Dated G-Secs

Dated G-Secs are securities which carry a fixed or floating coupon (interest rate) which is paid on the face value, on half-yearly basis. Generally, the tenor of dated securities ranges from 5 years to 40 years.

The Public Debt Office (PDO) of the Reserve Bank of India acts as the registry/depository of G-Secs and deals with the issue, interest payment and repayment of principal at maturity. Most of the dated securities are fixed coupon securities.

Capital Market

Capital market is a market where buyers and sellers engage in trade of financial securities like bonds, stocks, etc. The buying/selling is undertaken by participants such as individuals and institutions.
Description: Capital markets help channelise surplus funds from savers to institutions which then invest them into productive use. Generally, this market trades mostly in long-term securities.
Capital market consists of primary markets and secondary markets. Primary markets deal with trade of new issues of stocks and other securities, whereas secondary market deals with the exchange of existing or previously-issued securities. Another important division in the capital market is made on the basis of the nature of security traded, i.e. stock market and bond market.

S&P Bombay Stock Exchange Sensitive Index

The BSE SENSEX (also known as the S&P Bombay Stock Exchange Sensitive Index or simply the SENSEX) is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange. The 30 constituent companies which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX was taken as 100 on 1 April 1979 and its base year as 1978–79. On 25 July 2001 BSE launched DOLLEX-30, a dollar-linked version of the SENSEX.

The normal trading time for equity market is between 9:15 am to 03:30 pm, Monday to Friday.

Nifty 50

The NIFTY 50 is a benchmark Indian stock market index that represents the weighted average of 50 of the largest Indian companies listed on the National Stock Exchange. It is one of the two main stock indices used in India, the other being the BSE SENSEX.

Nifty 50 is owned and managed by NSE Indices (previously known as India Index Services & Products Limited), which is a wholly-owned subsidiary of the NSE Strategic Investment Corporation Limited. NSE Indices had a marketing and licensing agreement with Standard & Poor's for co-branding equity indices until 2013. The Nifty 50 index was launched on 22 April 1996, and is one of the many stock indices of Nifty.

Updates on Indian Economy

Updates on Indian Economy

1. The total assets of (non-banking financial companies) NBFCs has been soaring over the years. Between 31 March 2009 and 31 March 2019, the total assets of NBFCs grew at 18.6% per year on an average, reaching ₹51.47 trillion, including assets of housing finance companies (HFCs). During the same period, the assets of banks grew at 10.7% per year.

2. Banks' lending to NBFCs has been rising over the years which contributed towards their assets expansion. Between 31 March 2008 and 31 March 2020, banks’ lending to NBFCs jumped from ₹78,938 crore to over ₹8.07 trillion, growing at 21.4% per year. Banks’ lending to NBFCs picked up post-March 2017, when it had stood at ₹3.91 trillion, and by March 2020, it had increased at the rate of 27.3% per year. 

Between 30 September 2018 and 31 March 2020, banks loaned more than ₹2.6 trillion to NBFCs, helping them ride their asset-liability mismatch. 

3. India’s Union cabinet on 11th November 2020 approved production-linked incentives for 10 sectors, including pharmaceuticals, food products and white goods, with the biggest chunk earmarked for our auto industry. Over five years, it could receive ₹57,000 crores of the proposed package worth ₹1.46 trillion.

4. The central government on 12th November 2020 announced a ₹2.65 trillion stimulus package focused on job creation, access to credit and farm support, aimed at nurturing the economic recovery. The total of all the relief measures announced by the Centre and the Reserve Bank of India (RBI) amounts to ₹29.87 trillion, or 15% of the gross domestic product (GDP)

Union finance minister Nirmala Sitharaman, who announced the package, cited a host of economic indicators, including goods and services tax (GST) collections, energy consumption, railway freight loading, bank credit flow and foreign direct investments, to claim that a strong economic recovery was underway.

The stimulus package, termed as Aatmanirbhar Bharat 3.0, includes ₹1.45 trillion production-linked incentives for 10 sectors. The stimulus may help underpin a nascent recovery after the economy slumped 23.9% in the June quarter as India implemented one of the world’s most stringent lockdowns to contain the spread of coronavirus.

5. India’s retail inflation remained above 7% in October for a second straight month as vegetable prices stayed at elevated levels, worrying policymakers, who are struggling to pull Asia’s third-largest economy from a deep slump. It was 7.27% in September. Retail inflation has remained above 4%, the middle-point of the Reserve Bank of India’s (RBI) target of 2%-6%, for more than a year.

6. PUBG is set to make a comeback in the country with PUBG Corp. on 12th November 2020 announcing it was preparing to unveil PUBG Mobile India and that it would invest $100 million in India. In September, the Centre had blocked 118 mobile apps, including PUBG, terming them prejudicial to the sovereignty of the nation.

7. The economy of Bihar

The per capita income of Bihar is a third of the national average. This shows a lack of economic activity in the state. The state’s literacy rate is the third-lowest in the country. In 2019-20, the per capita income of Bihar stood at ₹31,287. This was around 33% of the national per capita income of ₹94,954 (in constant terms, adjusted for inflation). This gap, more than anything else, shows the lack of economic activity in the state.

In 2018-19, commercial banks raised deposits worth ₹3,53,279 crore in Bihar, but they were able to lend only ₹1,20,287 crore. This means that the credit deposit ratio of Bihar was just 34%, against an all India average of 78.2%. States like Tamil Nadu and Maharashtra had credit deposit ratios of 109.7% and 106.5%, respectively, signifying that banks lent more money in these states than they borrowed in the form of deposits from it. 

The literacy rate or the percentage of literate persons among people aged 7 years and above in Bihar, stands at 70.9%, the third-lowest in the country. Among women, the rate stands at 60.5%, which means that two out of five women in Bihar, on an average, can’t read or write. This explains the extremely low female labour force participation (LFP) in Bihar. The rate is at 6.4% and 3.9%, in urban and rural areas, respectively. The all India female LFP rate is at 20.4% and 24.6%, for urban and rural areas, respectively.

Notes:

*A non-banking financial institution (NBFI) or non-bank financial company (NBFC) is a financial institution that does not have a full banking license or is not supervised by a national or international banking regulatory agency. NBFI facilitate bank-related financial services, such as investment, risk pooling, contractual savings, and market brokering. Examples of these include insurance firms, pawnshops, cashier's check issuers, check cashing locations, payday lending, currency exchanges, and microloan organizations.

*Retail inflation means the increase in prices of certain products or commodities compared to a base price. In India, retail inflation is linked to the Consumer Price Index(CPI) which is managed by the Ministry of Statistics. CPI numbers are widely used as a macroeconomic indicator of inflation, as a tool by governments and central banks.

*White goods are large electrical goods used domestically such as refrigerators and washing machines, typically white in colour.

Updates on Indian and Global Economy

1. WhatsApp unveiled payments services in India following approval by the National Payments Corporation of India (NPCI). It will, however, be allowed to expand its payments user base to only 20 million users in the first phase and WhatsApp has almost 40 million users in India. 

The NPCI also imposed a cap of 30% of the total volume of transactions processed in UPI, applicable to all third-party app providers, effective January 1, 2021. WhatsApp, owned by Facebook, had started testing its UPI-based payments system in 2018 and would now compete with players such as Paytm, Google Pay, Amazon Pay and PhonePe.

2. Finance Minister Nirmala Sitharaman on 10th November 2020 has urged banks not to shy away from lending, especially when the economy is facing major challenges. Lenders should also offer all Indian customers the Rupay card first, discourage non-digital payments, and link every account with the customer’s Aadhaar number by March 31, 2021.

3. Wipro founder Azim Premji topped the EdelGive Hurun India list of ‘India’s most generous’, with donations of ₹7,904 crore in 2019-20, surpassing Shiv Nadar and Mukesh Ambani. That sum was a 17-fold jump from the ₹453 crore, Mr. Premji donated in FY19. 

4. The Securities and Exchange Board of India (SEBI) on 10th November 2020 has proposed extending the requirement of constituting a risk management committee to the top 1,000 listed entities from 500 at present. 

The risk management committee should also meet at least twice a year from the current practice of minimum one meeting. Considering the multitude of risks faced by listed entities, the regulator said risk management had emerged as a very important function of the board.

Notes:

*The National Payments Corporation of India (NPCI) is an umbrella organisation for operating retail payments and settlement systems in India. Founded in 2008, the NPCI is a not-for-profit organisation registered under Section 8 of the Companies Act 2013, established by the Reserve Bank of India and Indian Banks' Association. The organisation is owned by a consortium of major banks and has been promoted by the country's central bank, the Reserve Bank of India. 

*The Securities and Exchange Board of India (SEBI) which is the regulator of the securities and commodity market in India owned by the Government of India. 

Updates on Indian and Global Economy

1.In order to reiterate India’s attractiveness as an investment destination, Prime Minister Narendra Modi will chair a virtual meeting with 20 large global investors managing assets of more than $6 trillion, on 5th November 2020. According to Economic Affairs Secretary Tarun Bajaj, virtual conference with the investors, which include several sovereign wealth funds and pension funds, will be followed by one-on-one interactions for each of them with the PM over the next two weeks.

Some of the prominent funds that have confirmed attendance are CDPQ, CPP Investments, GIC, Japan Bank for International Co-operation, Mubadala, New York Life, Qatar Investment Authority, Temasek and U.S. International Development Finance Corporation.

2. India’S FMCG market is expected to get a push in the coming years, driven by rural demand. 

Fast-moving consumer goods (FMCG), also known as consumer packaged goods (CPG), are products that are sold quickly and at a relatively low cost. Examples include non-durable household goods such as packaged foods, beverages, toiletries, candies, cosmetics, over-the-counter drugs, dry goods, and other consumables.

3. Online retailing or shopping is gaining salience in India. Online retail penetration in India is just 3.4% compared to 25% in China and 20% in UK. However, low penetration rate indicates growth potential, and covid-19 has caused an inflection point in e-commerce penetration globally, driven by consumers’ need for safety and convenience.

Online shopping or online retailing is a form of electronic commerce which allows consumers to directly buy goods or services from a seller over the Internet using a web browser. It is a process that allows the customers to search, select and purchase the products, services and information remotely over the Internet.

Updates on Indian Economy

Updates on Indian and Global Economy:

1. India’s eight core industry output has been contracted since March 2020. However, the eight-core industry shrank just (-) 0.8% in September 2020 on a year-on-year basis. The growth rate of Index of Eight Core Industries for June 2020 was (-) 12.4% and August 2020 had recorded a (-) 7.3% dip in the index.

# The Office of the Economic Adviser in the Department for Promotion of Industry and Internal Trade compiles the Index of Eight Core Industries. The eight core industries included are- Coal, Crude oil, Natural Gas, Petroleum refinery products, Fertilizer, Cement, Steel, and Electricity generation. 

2. According to the data released by the World Gold Council, the demand for gold in India declined 30% to 86.6 tonnes in the July-September (3rd) quarter as compared with 123.9 tonnes a year earlier due to COVID-19 disruptions and record-high prices.

3. As per data from the Comptroller General of Accounts, the fiscal deficit continued to rise rapidly in September 2020 to reach ₹9.1 lakh crore, or almost 115% of the budget target of ₹7.96 lakh crore for 2020-21. The revenue deficit hit 125.2% in the first half of the year, with revenue receipts continuing to suffer in view of lower economic activity due to COVID-19. The monthly expenditure trends revealed a discordant sharp contraction in both revenue and capital expenditure in September 2020.

# The difference between total revenue and total expenditure of the government is termed as fiscal deficit. It is an indication of the total borrowings needed by the government. While calculating the total revenue, borrowings are not included.

# Revenue deficit arises when the government’s revenue expenditure exceeds the total revenue receipts. Revenue deficit includes those transactions that have a direct impact on a government’s current income and expenditure.

# Revenue Expenditure is that part of government expenditure that does not result in the creation of assets. Payment of salaries, wages, pensions, subsidies and interest fall in this category as revenue expenditure examples. Also, note that revenue expenses are incurred by the government for its operational needs.

# Capital expenditure or capital expense (capex or CAPEX) is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land. It is considered a capital expenditure when the asset is newly purchased or when money is used towards extending the useful life of an existing asset, such as repairing the roof. Capital expenditures contrast with operating expenses (OPEX), which are ongoing expenses that are inherent to the operation of the asset. Opex includes items like electricity or cleaning.