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Vivek Singh

Economics

Timeline

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14-Jul-2020 13:36:24 PM

Special Liquidity Scheme"

This news was there in Express.

Special Liquidity Scheme is to provide liquidity support to NBFCs/HFCs/MFIs which are finding it difficult to raise money in the debt market. This is a Rs. 30,000 crore scheme by Govt. of India. Under this scheme a Special Purpose Vehicle (SPVs are entities created to implement specific projects) will issue (special) securities which will be purchased by RBI and guaranteed by Govt. of India. The proceeds/money from issuance of such securities will be used by the SPV to purchase short-term debt papers of NBFCs/HFCs/MFIs.

Even if the scheme is funded by Govt. of India, there is no financial implication for the Government until the Guarantee involved is invoked. If NBFCs/HFCs/MFIs default on their debt papers i.e. they will not pay to the SPV (on maturity of the debt paper) then the SPV will not be able to pay to RBI and then RBI can invoke the guarantee whose maximum ceiling limit is Rs. 30,000 crores.

NBFCs: Non-Banking Financial Companies
HFCs: Housing Finance Companies
MFIs: Micro Financial Institutions
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11-Jul-2020 14:03:43 PM

Aatamanirbhar Skilled Employee Employer Mapping (ASEEM)

In an endeavour to improve the information flow and bridge the demand-supply gap in the skilled workforce market, the Ministry of Skill Development and Entrepreneurship (MSDE)  on 10th July 2020 launched ‘Aatamanirbhar Skilled Employee Employer Mapping (ASEEM)’ portal (https://smis.nsdcindia.org/) to help skilled people find sustainable livelihood opportunities. ASEEM is an AI-based digital platform to bridge demand-supply gap of skilled workforce across sectors. The portal will map details of workers based on regions and local industry demands.

ASEEM will be used as a match-making engine to map skilled workers with the jobs available. The portal and App will have provision for registration and data upload for workers across job roles, sectors and geographies. The skilled workforce can register their profiles on the app and can search for employment opportunities in their neighbourhood. Through ASEEM, employers, agencies and job aggregators looking for skilled workforce in specific sectors will also have the required details at their fingertips. It will also enable policymakers take more objective view of various sectors.
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06-Jul-2020 22:18:55 PM

Compulsory Licenses

Generic Drugs: A generic drug is a medication that has exactly the same active ingredient as the brand name drug and yields the same therapeutic effect. It is the same in dosing, safety, strength, quality, the way it works, the way it is taken, and the way it should be used. Generic drugs do not need to contain the same inactive ingredients as the brand name product, say colour or taste can be different.

However, a generic drug is generally marketed after the brand name drug's patent has expired, which may take up to 20 years. So, during the protection period of 20 years, the patent owner tries to recover its cost which it has spent on research and development and the drug is quite costly during this time as it is produced only by the patent owner under its brand name and others can’t manufacture and sell. After the protection period is over, any company can sell the generic versions of the drug and there is fierce competitive which ultimately reduces the price of the drug.

But the (Indian Patent Act 1970) patent laws provide a remedy to the high price issue of branded drugs in the form of licenses to the generic manufacturers even during the protection period of 20 years. This remedy is available in the form of voluntary and compulsory licensing of the drug.

1. Voluntary License: Under this arrangement, a patent holder may give license (on its own) to the third party to manufacture, import and distribute generic versions of the pharmaceutical product and much more. The licensee of the patent will act as an agent of the company. The terms in a voluntary license may set price ranges, royalty from the distribution of the sales etc. [There is no legal provision given under Patent Act 1970 as this license access is done through mutual contractual agreement.]

2. Compulsory License: If the patent owner is exploiting its monopoly position and not manufacturing and supplying the branded drugs in the market or if the drug is not being made available at a reasonably affordable price in the market then government can give compulsory licenses in two ways:

(a) If a manufacturer himself approaches the government that he can produce the drug (generic versions) at a very cheap price, but only after the negotiation between patent owner and manufacturer has failed for voluntary license. [Section 84 of Patent Act 1970]

(b) In case of National emergency (pandemic like Covid-19) or extreme urgency, Govt can give notification that it will give compulsory licenses to any manufacturer who wants to manufacture generic versions of the drug with such terms and conditions. [Section 92 of Patent Act 1970]

But in both the cases of compulsory license mentioned above, the manufacturer (the compulsory license holder) will have to pay royalty to the patent owner as decided by the government.
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05-Jul-2020 21:48:18 PM

Emergency Credit Line Guarantee (ECLG) Scheme

Emergency Credit Line Guarantee (ECLG) scheme is a loan facility for which 100% guarantee would be provided by National Credit Guarantee Trustee Company (NCGTC) to Banks/NBFCs/Financial Institutions for lending to MSMEs. 

2.It will be extended in the form of additional working capital/term loan facility to MSMEs/Business Enterprises/Pradhan Mantri Mudra Yojana borrowers. (Govt. is planning to include those individual entrepreneurs who have borrowed in their individual capacity/name for the purpose of their business but not in the name of business as these types of businesses are large in number out of total MSMEs)

3.This facility will be available to those who have already borrowed (till 29th Feb 2020) but have not been able to repay and their outstanding (yet to be paid) loan is less than Rs. 25 crore and their Turnover (annual sales) is less than 100 crores. The maximum the businessmen can borrow is up to 20% of the outstanding loan. (For ex, if some business had borrowed Rs. 50 crore and the amount that is yet to be repaid is Rs. 20 crores then they can borrow Rs. 4 crores (20% of Rs. 20 crore). The scheme will be applicable from May 23rd 2020 to 31st Oct 2020.
4.The scheme is a specific response to the unprecedented crisis resulting from Covid-19, which has impacted the small business the most and thereby enabling MSMEs to meet their operational liabilities and restart their business. The main objective of the scheme is to provide an incentive to Banks/NBFCs/FIs to increase access to and enable availability of additional funding facility to MSME/business borrowers. 

5.The total loan that will be given through this scheme by Banks/NBFCs/FIs would be up to Rs. 3 lakh crore. Government will pay Rs. 41,600 crore to NCGTC to provide guarantee on loans worth maximum Rs. 3 lakh crore (as all the loans will not be default, so Rs. 41,600 crore may be sufficient to provide guarantee for Rs. 3 lakh crore). NCGTC will not charge anything from lending institutions to provide guarantee

6.It is a pre-approved loan (you will be asked to take loan and if u don’t want you can opt out) and hence no processing charges and no collateral will be required from the borrowers. It is a 100% credit guarantee scheme which means the total amount of loan given under the scheme will be guaranteed by NCGTC.

7.The interest rate charged by Banks/NBFCs/FIs will be capped under the scheme 

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04-Jul-2020 09:46:06 AM

GST Council Members and Voting Structure

GST Council (which is a constitutional body) which takes decisions regarding GST rates and others has the following members:

(a) Union Finance Minister (he/she is the Chairman also of the GST Council)
(b) Union Minister of State in charge of Revenue/Finance
(c) Minister in charge of Finance or Taxation or any other Minister nominated by each State Government (and UT with Assembly)

So, Central Govt. has 2 Members
All states and UTs (with assembly) have = 28 + 3 = 31 Members (including J&K)

Voting Structure (votes casted)
#Central Govt has 1/3 weight (33.33%)
#States (&UTs) will have 2/3 weight (66.66%)
#Decisions shall be taken by a majority of not less than 3/4 (75%) 

Example: Suppose a decision has to be taken regarding increasing the GST rates on some product

Now suppose, Central govt's two members voted in favour, so it will constitute 33.33%* (2/2) = 33.33% vote in favour

Out of the 31 members of states 25 voted in favour and 6 voted against it
So, their vote in favour = 66.66% * (25/31) = 53.75%

So, total weights in favour = 33.33% + 53.75% = 87%

Since in favour votes are more than 75%, So the decision is in favour of increasing the GST rate
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29-Jun-2020 20:44:34 PM

NITI Aayog Annual Report

This is the annual report of Niti Aayog for FY 2019-20. You can use this as a reference document for pre and mains both.


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 on 04-Jul-2020 14:15:05 PM
Sir Please explain how to use this report?

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 on 04-Jul-2020 09:47:52 AM
yes

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28-Jun-2020 13:59:20 PM

The following are the features of new Floating Rate Savings Bonds, 2020 (Taxable) Scheme.


1) The bonds will be issued by RBI on behalf of Govt. of India
2) The interest rate on the bonds will be taxable and the interest rate will be floating (earlier was fixed). Govt. will revise the interest rate after every 6 months as per market fluctuations. The market interest rate has come down after RBI reduced the repo rate after COVID-19, so it was costly for govt to pay higher interest rate of 7.75% on previous scheme, hence, govt may have scrapped the old scheme and launched new one of floating interest rate.
3) The maturity period is 7 years. The sale of bonds will start from 1st July and for the first 6 months period, the interest has been decided at 7.15%. The interest will not be paid cumulatively (which means it will not get added in the principal to calculate interest further rather every 6 months govt will pay out the interest)
4) The bonds can be purchased by persons resident in India
5) The bonds will not be tradable or transferable
6) You will have to hold the bond till maturity, exceptions is there for senior citizens, who can redeem it before maturity (redeem means they can surrender the bond to govt and govt will pay the money)
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19-Jun-2020 19:53:21 PM

Issues in India's manufacturing

1) India's imports from China is $65 billion and exports is $16 billion, making it a total trade between India and China worth $ 81 billion 2) Our imports is getting localized/concentrated mostly from China (and few other countries). And India imports wide variety of things from China, from capital goods, machinery, machinery, consumer goods etc. 3) China started industrializing in 1990s (reforms initiated in 1978)...........by moving its surplus labour from Agriculture to Industries (labour i

useful link: https://www.thehindu.com/opinion/op-ed/can-india-decouple-itself-from-chinese-manufacturing/article31864821.ece

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13-Jun-2020 10:50:49 AM

GST Council

When Central govt was planning to introduce GST, states were worried that after implementation of GST the tax revenue of States may fall and they will not have the freedom under GST regime to impose extra taxes. So, government of India........... calculated the tax revenue growth of State's indirect taxes from 2012-13 to 2013-14, 2013-14 to 2014-15 and 2014-15 to 2015-16......... i.e. for three years and there was on an average growth of 14% compounded annually. So, Govt. of India promised Sta

useful link: https://indianexpress.com/article/business/economy/gst-council-states-covid-19-indian-economy-6456308/#:~:text=In%202020%2D21%2C%20the%20combined,estimate%20and%20states'%20protected%20revenue.&text=Instead%20of%20funds%20for%20the,the%20GST%20Council%20could%20borrow.

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05-Jun-2020 10:40:15 AM

PLSF SURVEY 2018-19

the above news relates to the PLFS survey done for the period July 2018 - June 2019 and its report released in June first week of 2020. And as per this survey for 2018-19: *Unemployment Rate = 5.8% *Labour Force Participation Rate = 37.5% *Women's Unemployment Rate = 5.2% *Male's Unemployment Rate = 6% *Urban Unemployment Rate = 7.7% *Rural Unemployment Rate = 5% It is to be noted that there is improvement in all the above

useful link: https://www.thehindu.com/news/national/indias-unemployment-rate-saw-a-small-dip-in-2018-19-says-survey/article31752146.ece

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03-Jun-2020 21:38:28 PM

1st June Cabinet Meet Decisions regarding MSMEs, Street Vendors and Farmers

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19-May-2020 21:21:01 PM

Aatmanirbhar Bharat Part 3 - 15.05.2020

Aatmanirbhar Bharat Part 3 - Agriculture and Allied sectors


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16-May-2020 12:35:08 PM

Aatmanirbhar Bharat Part II 14.05.2020

Economic Stimulus package for Poor, Migrants and farmers


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15-May-2020 13:19:38 PM

Aatmanirbhar Bharat Part I 13.05.2020

The Economic Stimulus Package in the name of "Aatmanirbhar Bharat" is worth Rs. 20 lakh crore (which is 10% of GDP of 2019-20 i.e. Rs. 200 lakh crore). The measures/package announced yesterday is just one part of the total package which means there will be further announcements in the days to come. Rather than reading this package from various newspapers, you can refer the above PDF directly (which is from govt. source i.e. PIB). Ofcourse its impact and analysis you can read from the different


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06-May-2020 20:31:14 PM

https://www.livemint.com/industry/energy/how-much-tax-you-pay-on-petrol-diesel-after-the-excise-duty-hike-11588733424363.html

Petroleum products (Petrol, Diesel, LPG etc.) are out of GST which means GST is not imposed on them rather these products are used to be taxed as per the previous regime.  So, on Petrol and Diesel Central Govt. imposes "Basic Excise Duty", "Special Additional Excise Duty" and "Road and Infrastructure Cess". And State Govt imposes its own VAT rate.

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30-Apr-2020 01:12:38 AM

https://indianexpress.com/article/opinion/columns/india-coronavirus-covid-19-lockdown-economy-urjit-patel-6381996/

The article talks about how RBI, in the last few months, has bypassed the MPC in setting the interest rate in the market by using other tools like OMO, FOREX SWAP, OPERATION TWIST and LTRO

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22-Apr-2020 14:16:52 PM

https://www.thehindu.com/business/regulator-sweetens-tltro-deal-for-banks-lending-to-nbfcs/article31399658.ece

The above is news from HINDU. Some relevant points.

1) The Rs. 50,000 crore LTRO funds which RBI will provide to Banks for lending to NBFCs will be excluded from the restriction of Priority Sector Lending (PSL) calculations. i.e. For example Banks had funds worth Rs. 1,00,000 crore which they lend and out of this (40%) Rs, 40,000 crore should be given to PSL. Now, if banks got Rs 50,000 crore from LTRO, then this fund they can lend to NBFCs and no PSL rule will be applicable.

2) And RBI has also asked banks to lend this LTRO funds within 30 days or RBI will charge 2% extra
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19-Apr-2020 12:13:38 PM

https://pib.gov.in/PressReleseDetailm.aspx?PRID=1615711

The above is a circular from Ministry of Commerce (taken from PIB) regarding regarding change in FDI policy to avoid opportunistic takeovers (or Hostile Takeover).

Earlier, all the FDI coming from Bangladesh or Pakistan was allowed only through "Government Approval Route". Now this has been extended to all the countries sharing land border with India. So, now all the FDI coming from Bangladesh, Pakistan, Afghanistan, China, Nepal, Bhutan, Myanmar will be only through "Government Approval Route"
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29-Mar-2020 17:56:35 PM

Force Majeure

In view of the COVID-19 pandemic, a word which is frequently being used is "Force Majeure". Let us understand this as it is now relevant for your exam.

Force Majeure is a French phrase that means a ‘superior force’. 

The law relating to Force Majeure is embodied under Sections 32 and 56 of the Indian Contract Act, 1872. It is a contractual provision agreed upon between parties. The occurrence of a force majeure event protects a party from liability for its failure to perform a contractual obligation. Typically, force majeure events include an Act of God or natural disasters, war or war-like situations, epidemics, pandemics, etc. The intention of a force majeure clause is to save the performing party from the consequences of something over which it has no control. Force Majeure is an exception to what would otherwise amount to a breach of contract. This term is generally  used in commercial contracts. 

A lot of companies have now already declared/accepted "COVID-19" as a "Force Majeure" event.
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15-Mar-2020 16:25:05 PM

Additional Tier 1 Bonds (Yes Bank Crisis) By - Vivek Singh

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07-Feb-2020 15:43:37 PM

RBI kept repo rate unchanged but used other measures for transmission

useful link: https://www.thehindu.com/business/Economy/rbi-opts-for-long-term-repos-crr-exemption-to-lower-rates/article30755075.ece

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03-Feb-2020 00:01:18 AM

Budget


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29-Jan-2020 09:19:22 AM

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28-Jan-2020 12:06:23 PM

Related Party Transactions

Related party transactions: The transactions which happen between group companies i.e. companies of the same owner. And these transactions should be at market rate which is also called arms length principle.

useful link: https://indianexpress.com/article/business/sebi-panel-proposes-overhaul-of-related-party-transaction-norms-6238541/

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24-Jan-2020 12:48:47 PM

Term of the day : Bail-in and bail-out:

Bail-in and bail-out : A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a institution/ financial institution by external parties, typically government using taxpayers money.


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24-Jan-2020 12:47:01 PM

Term of the day : Fiscal Drag

It is a situation where income growth or inflation moves taxpayers into higher tax brackets. This in effect increases government tax revenue without actually increasing tax rates. The increase in taxes reduces aggregate demand and consumer spending because a larger share of the people’s income now goes into taxes, which leads to deflationary pressures or drag on the economy.


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